Canada’s economy grew by half a percent in the first quarter of 2012, staying on pace for unimpressive annual growth of two percent. The good news is that business investment was strong, at least on a seasonally-adjusted basis. (As usually happens in the first quarter, the actual dollar value of business investment decreased.) Unfortunately, the other major components of GDP […]
Read moreToday, Statistics Canada reported an annual inflation rate of 2%, precisely in line with the Bank of Canada’s target. With inflation under control and renewed risks to the global economy, there is little rationale for the central bank to raise interest rates anytime soon. In fact, the Bank of Canada should now be more concerned about the exchange rate than […]
Read moreIn the context of student protests over Quebec tuition fees, my friend Luan Ngo has just written a very informative blog post on Quebec’s fiscal situation. While I encourage readers to read his full post, I do want to use the present space to make mention of three important points he makes: -On a per capita basis, Quebec spends more […]
Read moreThe most interesting comments from Bank of Canada Governor Mark Carney last week, in releasing the Bank’s semi-annual Monetary Policy Report, dealt with the relationship between the price of oil and the Canadian currency. The Globe and Mail reported Carney as publicly questioning why currency traders automatically presume such a direct link between the loonie and the world oil price. […]
Read moreCanada’s business press has recently been filled with speculation that the Bank of Canada may soon hike interest rates based on its somewhat more optimistic economic outlook. But today’s Consumer Price Index report indicates that there is no need to raise interest rates. Statistics Canada reported that both headline and core inflation fell to 1.9% in March, slightly below the […]
Read moreStatistics Canada reported today that consumer prices decreased in December, lowering the annual inflation rate to 2.3%. The Bank of Canada’s core inflation rate declined to 1.9%. Tame inflation leaves room to lower interest rates. If unemployment continues to rise, the Bank of Canada should reduce interest rates to boost the economy and create jobs. The modest inflation rate still […]
Read moreAs faithful readers of this blog will know, I make only very sporadic contributions to this blog but a substantial fraction of those contributions have made reference to modern monetary theory (MMT), the view (crudely put) that, based on a detailed understanding of the institutional mechanisms behind monetary operations, calls into question our obsession with balancing the budget. Well, after […]
Read moreStatistics Canada reported today that the annual inflation rate remained 2.9% and the Bank of Canada’s core rate remained 2.1% in November. The monthly increase in consumer prices slowed to 0.1% in November from 0.3% in October. The monthly increase in core prices slowed to 0.1% in November from 0.2% in October. Inflation remains modest and should not deter the […]
Read moreMany long-held tenets of neoclassical orthodoxy have fallen by the wayside in the past 3 years, but perhaps one of the biggest dominos that is at least teetering precariously (if not fully tipped over) is the consensus that inflation targeting should be the exclusive focus of monetary policy.
Read moreThat’s the only way out of the deepening crisis of the advanced economies, according to FT economics editor Martin Wolf in his column today. “It is the policy that dare not speak its name: the printing press. The time has come to employ this nuclear option on a grand scale. The alternative is likely to be a lost decade. The […]
Read moreAfter watching Jack Layton’s state funeral, I noticed that Jean-Claude Trichet’s speech from Jackson Hole is online. The European Central Bank president does not seem to get it. Far from acknowledging that last month’s interest-rate hike was premature, he touts “price stability.†His main theme is that the economic divergence between Eurozone countries is comparable to that between American states. […]
Read moreIn an earlier post, Marc Lee mentioned in passing the German hyperinflation episode of the 1920s. It’s remarkable that this event still holds such sway over the popular imagination despite other more recent instances of hyperinflation. Certainly, the imagery is powerful: German citizens pushing wheelbarrows full of worthless paper money around for everyday purchases, banknotes used as wallpaper, or dramatic […]
Read moreArun Dubois’ blog post yesterday on Modern Monetary Theory has prompted me to write my own take on the subject. For those interested, an interesting thumbnail sketch of MMT, essentially functional finance augmented by a full understanding of monetary operations, is explained here. While MMT deals with the details of monetary and fiscal matters, the implications of its analysis are […]
Read moreFriends, I’m concerned. I fear that too often, we on the left retreat when we should attack, surrender when we should vanquish. What do I speak of? Well, I am concerned that too many of us are willing to play in the frame, the box, the straighjacket of modern discourse about fiscal and monetary policy. Obama does it. The NDP […]
Read moreRichard Gilbert’s “Why not print money?” in the Globe’s Economy Lab toys with more radical monetary intervention as a response to the crisis. Desperate times, they say, call for desperate measures. The title (which was perhaps not Gilbert’s at all) is more provocative than the article itself, which is mostly about tolerating higher inflation that could have beneficial impacts for […]
Read moreLess than a month ago, the C. D. Howe Institute released Michael Parkin’s paper, “Overnight Moves: The Bank of Canada Should Start to Raise Interest Rates Now.†The next day, its Monetary Policy Council called on the Bank to increase the overnight interest rate. This call was terrible. The following week, Statistics Canada reported June’s significant drop in inflation – […]
Read moreThe release of today’s Monetary Policy Report from the Bank of Canada follows yesterday’s announcement of no change in interest rates, the latest in a long series.  It reminds me of an English County cricket match in which a batsman is politely applauded – “very well not played, sir!” – for doing absolutely nothing other than watch a potentially dangeous pitch […]
Read moreThe following is the press release of a new initiative to examine the future of monetary policy, based on the core sentiment that growth is not enough. “Dynamic, stable and sustainable” is the goal, for the economy… and monetary policy. Full employment is featured as a key – and largely ignored – objective of central banks. Joseph Stiglitz Leads Progressive […]
Read moreJack Layton unveiled the NDP’s policy platform today. Among other things, it promises to eliminate the deficit (i.e. balance the federal budget) within four years. I’m not sure it should. Several years back, I had the opportunity to take a directed reading course from John Smithin. In addition to being a long-time member of the Progressive Economics Forum, John is […]
Read moreThe Progressive Economics Forum has the following line-up of sessions for this year’s Canadian Economics Association conference on June 3-5 at the University of Ottawa. Thanks very much to Nick Falvo for coordinating our conference activities and putting this schedule together. We are also hosting a summer school the day before and announcing our essay contest winners at the conference. […]
Read moreWorthwhile Canadian Initiative has presented a list of its most viewed posts from 2010. The top post is so worthwhile that it warrants further promotion. The President of the Minneapolis Federal Reserve had warned that unduly low interest rates would cause deflation. Of course, anyone with a handle on basic macroeconomics knows that the risk of leaving interest rates too […]
Read moreThe December 2010 issue of the quarterly Economic Climate for Bargaining publication that I produce is now on CUPE’s website in both English and French. In each issue I summarize developments and trends for the economy, labour markets, inflation and wages, and also include short pieces of 1-2 pages on related topical issues. In this issue, the focus is very much on pre-budget […]
Read moreIt’s always been my understanding that left-of-centre economists, on the whole, like it when real interest rates are low (but not negative). Among other things, this encourages more companies to borrow (and hire more workers), reduces unemployment, reduces debt-servicing costs for government, and increases the power of labour. In July of this year, I blogged over my concern that “important voices among Canada’s […]
Read moreThe Economist  judges that it is working . Long term interest rates have fallen since Bernanke announced the Fed was going to restart the printing press, usefully making the US government deficit a tad easier to finance. The stock market has been juiced, which may have a wealth effect on aggregate demand. And the US dollar has fallen against currencies that […]
Read moreHere’s a new take on bringing economic theory to the masses — a rap battle between Keynes and Hayek. What’s amazing about it is the amount of solid (if not plain nerdy) content this video packs into such a short time. It’s fun to watch for sure (very high production values), but you get that much more out of it […]
Read moreI was disturbed to read this comment on the current state of the US economy in Mark Carney’s speech last week. “The natural rate of (US) unemployment may be increasing sharply. The scale of industry restructuring means that some unemployed workers do not have the skills suitable for the expanding sectors. Other job seekers are tied to their local area, […]
Read moreToday’s Consumer Price Index release told a tale of two inflations. The national rate decreased from 1.8% to 1.7% while Ontario’s inflation rate remained at 2.9%, the highest in Canada. Monetary Policy Of course, monetary policy should reflect the whole country. The national inflation rate decreasing to 1.7% in August begs the question of why the Bank of Canada has […]
Read moreA week ago, Paul Krugman wrote that Japan’s stable if sluggish economy and low unemployment could start looking pretty good compared to the Voodoo economics advocated by US Republicans. The counterintuitive case for Japan as an economic model just became more compelling with the Bank of Japan’s intervention to lower the yen. As reported on the front page of today’s […]
Read moreTotal employment reportedly increased by 36,000 in August. This increase was entirely driven by 68,400 more jobs in educational services, which simply offset a decline of 65,300 in July. In other words, the educators that Statistics Canada counted as being “unemployed†in midsummer are now “employed.†So, today’s Labour Force Survey confirms that July’s release was less bad than it […]
Read more With the US on the brink of a relapse into recession or, at best, a period of very slow growth and rising unemployment, all eyes are on the Federal Reserve. After all, it seems to be the only show in town. The conventional wisdom is that there will be no second round of fiscal stimulus forthcoming from the US […]
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