Liberal Minority Government 2019 - ????

[Altair]

Cause they banned abortions last time they were in power with a majority right? It is never going to happen no matter how much the religious fringe of the party or the liberal attack ad machine may want it.

The fact that the former simply feeds the latter, and effectively at that, is an irony that I hope isn't missed.

 

[Weinie]

You may want to extend your worldview mate.

UK is having massive spending.

France is having massive spending.

Italy is having massive spending.

The USA is having massive spending. (two different administrations as well)

Germany is having massive spending.

Japan is having massive spending.

Spain is having massive spending.

Do I need to go on?

If there is a reckoning coming because of massive spending, it will hit all countries, which means two things.

One, it doesn't matter if Canada spent or not, because if the aforementioned nations are in a economic world of hurt because of massive spending, the ensuing global economic depression would hammer Canada anyways.

And two, if it doesn't, then Canada would be one of the few nations not to engage in economy saving stimulus and as a result everyone else has healthy economies and a post pandemic economic rebound, and Canada is a economic smoking crater in the ground.

And I don't think its a LPC versus CPC thing either. The CPC in 2008 showed that they would open the financial taps to save the economy (or their electoral prospects). The CPC voted for these measures as well, so they own it too. So saying its just the LPC who would do this is disingenuous and you should know that.

So, your rationale is, because many other countries in the G20 and otherwise, did stupid (and massively overreactive) actions that will reverberate for generations, Canada is bound to follow that COA? There be monsters.

 

[Altair]

So, your rationale is, because many other countries in the G20 and otherwise, did stupid (and massively overreactive) actions that will reverberate for generations, Canada is bound to follow that COA. There be monsters

Again, if they all did it and their economies start to suffer, Canada gets walloped regardless of whether we did it or not.

If they did it and Canada didn't and their economies don't suffer, Canada would get walloped.

So risk benefit analysis, scenario 1 Canada "may" get walloped. Scenario 2, Canada "would" get walloped.

 

[hattrick72]

Let me just say, I really appreciate someone who takes their time and writes a well reasoned argument or point. Much better than the talking points or gotchas that are all too common on the internet today.

Very true.

Agreed.

Most metrics come to a very similar number.

This is where we are going to stop agreeing. Printing money doesn't necessarily cause inflation. Case in point, since 2010, the money supply has never been higher. Inflation didn't skyrocket. In the past year, the money supply globally has skyrocketed, inflation to date has not followed the same trajectory.

Why is that right now? Because there is also massive downwards pressure on prices due to recessions. Lower wages, lower spending, large stockpiles of inventory which needs to be sold at a discount, there are factors that counter the effect of printing all this money.

In terms of the Canadian dollar, which can crater if too much is printed, remember, currencies are judged off of each other, based on the underlying economy they represent, interest rates, and scarcity. Interest rates being low, and less scarcity should mean it would be falling, but it isn't. Why? Because currencies are judged off of each other, and every other major currency is doing the same thing. The EURO, the USD, everyone is just printing money like mad right now.

No one should be happy with it, but at the end of this its better that the economy doesn't collapse.

So long as inflation is under control and debt spending isn't insane Canada should be okay. We will need a roadmap to get back on track though, but its hard to do so when still in the crisis that is causing the spending in the first place.

"This is where we are going to stop agreeing. Printing money doesn't necessarily cause inflation. Case in point, since 2010, the money supply has never been higher. Inflation didn't skyrocket. In the past year, the money supply globally has skyrocketed, inflation to date has not followed the same trajectory."

Have you looked at the price of housing their Canada since 2010? I would argue it is the one asset that has inflated the most in Canada. If you look throughout the world, housing is being bought and held onto as a hedge which is driving the price in many other countries. The last statistic I looked at there were 40k houses in London England that were empty in 2012, there are 40k houses in Toronto that are empty etc. Australia is as bad as Canada on this metric. There are other industries that have seen inflation, but nothing like housing. I bring this up because our discretionary spending on a place to live directly impacts what we can consume and what will be created in the economy. I get that the monthly payment has not inflated grossly when compared to the purchase price, although it has grown. The price of rent has lagged and is increasing.

"Why is that right now? Because there is also massive downwards pressure on prices due to recessions. Lower wages, lower spending, large stockpiles of inventory which needs to be sold at a discount, there are factors that counter the effect of printing all this money."

We haven't had a"real" recession because we have printed our way out of them. Government is not allowing the excess fat to be trimmed by the economy. Lower wages, yes, just don't include COVID wage due to distortion. Lower spending, yes, see housing, large stockpiles of inventory, yes and no, silly chains are distorting so I'm not sure. To me the factors are the number of countries printing money to stay afloat.

I agree we are all printing money; however, there isn't another country that is printing as much as Canada per capita (I need to look at some old charts to see if this is the most accurate way to portray it) we are also a large country with provincial debt and can't be compared apples to apples with other countries. Some think provincial debt is a more point, I don't feel that way.

My mindset from the beginning was as long as we maintained spending on the same order as other G20 nations, hopefully we come out with the same clout that we went in with. The US dollar being the world reserve benefits us.

If we raise interest rates, or debt to gdp hurts is badly and it is the only thing that can maintain our dollar with works reserves. I believe we have far less wiggle room for interest rate movement than our G20 brethren. That is what is scary, that is where the inflation threat comes from.

You raise a lot of good points, these are the only counter points I have this late at night.

 

[Altair]

"This is where we are going to stop agreeing. Printing money doesn't necessarily cause inflation. Case in point, since 2010, the money supply has never been higher. Inflation didn't skyrocket. In the past year, the money supply globally has skyrocketed, inflation to date has not followed the same trajectory."

Have you looked at the price of housing their Canada since 2010? I would argue it is the one asset that has inflated the most in Canada. If you look throughout the world, housing is being bought and held onto as a hedge which is driving the price in many other countries. The last statistic I looked at there were 40k houses in London England that were empty in 2012, there are 40k houses in Toronto that are empty etc. Australia is as bad as Canada on this metric. There are other industries that have seen inflation, but nothing like housing. I bring this up because our discretionary spending on a place to live directly impacts what we can consume and what will be created in the economy. I get that the monthly payment has not inflated grossly when compared to the purchase price, although it has grown. The price of rent has lagged and is increasing.

Yes, housing has increased, but that it just one facet of the economy. on a whole, inflation has been around 3-3.5 percent, just slightly higher than the BoC target of 1-3 percent. This is despite tossing WW2 inflation adjusted money at the economy.

"Why is that right now? Because there is also massive downwards pressure on prices due to recessions. Lower wages, lower spending, large stockpiles of inventory which needs to be sold at a discount, there are factors that counter the effect of printing all this money."

We haven't had a"real" recession because we have printed our way out of them. Government is not allowing the excess fat to be trimmed by the economy. Lower wages, yes, just don't include COVID wage due to distortion. Lower spending, yes, see housing, large stockpiles of inventory, yes and no, silly chains are distorting so I'm not sure. To me the factors are the number of countries printing money to stay afloat.

We haven't seen real depressions due to spending our way out of it. We definitely got recessions. Layoffs, business shutdowns, lockdowns, business failures, reduced spending in things other than housing, the economy shrunk 5.4 percent last year. This put a great deal of downward pressure on inflation.

I agree we are all printing money; however, there isn't another country that is printing as much as Canada per capita (I need to look at some old charts to see if this is the most accurate way to portray it) we are also a large country with provincial debt and can't be compared apples to apples with other countries. Some think provincial debt is a more point, I don't feel that way.

It raises the question whether the federal government is the lender of last resort for the provinces. If it isn't, then the feds are fine. If it is, then the feds are in trouble and as a result would want more fiscal say in the budgets of the provinces, akin to the EU central bank.

Lets see what happens in newfoundland, because that canary in the coal mine is a test run for the country.

My mindset from the beginning was as long as we maintained spending on the same order as other G20 nations, hopefully we come out with the same clout that we went in with. The US dollar being the world reserve benefits us.

If we raise interest rates, or debt to gdp hurts is badly and it is the only thing that can maintain our dollar with works reserves. I believe we have far less wiggle room for interest rate movement than our G20 brethren. That is what is scary, that is where the inflation threat comes from.

Correct, we do have a lot less wiggle room than our G20 brethren, but they are facing a lot of the same issues. I doubt anyone is looking at raising interest rates right now. As for spending, we spent more, but our federal debt burden was lower than a lot of them, so we had more room to spend. Again, the main factor here is whether the federal government is a lender of last resort for the provinces, if it is, we need to toss provincial debt on top of federal debt and then things get dicey.

You raise a lot of good points, these are the only counter points I have this late at night.

Good night.

 

[Brad Sallows]

Printing money doesn't necessarily cause inflation. Case in point, since 2010, the money supply has never been higher. Inflation didn't skyrocket. In the past year, the money supply globally has skyrocketed, inflation to date has not followed the same trajectory. Why is that right now? Because there is also massive downwards pressure on prices due to recessions. Lower wages, lower spending, large stockpiles of inventory which needs to be sold at a discount, there are factors that counter the effect of printing all this money.

Or to rephrase, the velocity of money is slow. Price inflation isn't just a function of money supply; it also depends on velocity (the rate at which money changes hands). COVID countermeasures slowed velocity.

As things open up, the expanded money supply and all the money people were unable to spend during COVID restrictions will be in play. The increased demand will prompt people to increase supply, but I'm skeptical supply will keep pace with demand for a while. Thus, a period of price inflation, which is already observed. The countermeasure would be to take money out of the money supply. Good luck with that.

 

[Altair]

Or to rephrase, the velocity of money is slow. Price inflation isn't just a function of money supply; it also depends on velocity (the rate at which money changes hands). COVID countermeasures slowed velocity.

A very fair point, one I didn't consider beyond thinking that a lot of that downward pressure would start to let off.

As things open up, the expanded money supply and all the money people were unable to spend during COVID restrictions will be in play. The increased demand will prompt people to increase supply, but I'm skeptical supply will keep pace with demand for a while. Thus, a period of price inflation, which is already observed. The countermeasure would be to take money out of the money supply. Good luck with that.

So there are a few factors at play. The first being that there will still be some hesitant to fully let loose and return to things pre covid, at least just yet.

Second, it depends on what people will be spending this money on. Recreational things, movies, dinners, concerts etc , or material, cars, tvs, more houses.

You're right about the latter being largely unsustainable, but the former can be buffered more so.

And lastly, how much money are we talking? People I know, (anecdotal) have been using their money to build and buy decks, engage in hobbies that they would not have before, investing. So are we talking about a big wave, spread out over months, or a tsunami crashing ashore in a short time period? I have no idea, I wont pretend to, I'm not an economist. I keep my eye on trends for sure, but I'm no expert.

Interesting times ahead for sure, one way or another. As large a fiscal experiment on a global scale has never been tried before, so everything about this is uncharted waters. Lets see if there are indeed monsters.

 

[Brad Sallows]

And lastly, how much money are we talking?

Roughly, well over half what the federal government normally spends in a year (which is probably near $360B) but not quite as much as what the federal government has additionally spent (which I think has passed $280B).

Example: Remarks back in March by some guy I guess is with BoC, claiming about $180B in additional savings last year ("To summarize, these sizable shifts in income and spending resulted in an unprecedented increase in savings in 2020 of about $180 billion, or roughly $5,800 per Canadian"). Presumably more has accumulated in the first half of this year.

 

[Remius]

There is no doubt that we will have to endure an economic storm at some point. If history is any indicator likely within the next 5 years or so.

How the government will react to it is anybody’s guess.

My guess would be cuts to the public sector and maybe a hike in the GST/PST.

 

[Brad Sallows]

Cuts, I doubt. Usually a 0,0,0 contract, and then a few years down the road, "make up" for the 0,0,0 years.

 

[dapaterson]

Under DRAP there were workforce reductions, and collective agreement increases were absorbed out of existing departmental reference levels (no additional funding).

 

[Altair]

There is no doubt that we will have to endure an economic storm at some point. If history is any indicator likely within the next 5 years or so.

How the government will react to it is anybody’s guess.

My guess would be cuts to the public sector and maybe a hike in the GST/PST.

localized or global?

One is not great, one is devastating.

 

[Remius]

localized or global?

One is not great, one is devastating.

If you lose your job, house or income it’s devastating. Global or localized.

 

[Altair]

If you lose your job, house or income it’s devastating. Global or localized.

Yes, naturally. However if the Canadian economy is struggling and the American one is booming, theirs economy can prop up ours some.

If both are in the dumps, you have a lot more people losing jobs, houses and incomes.

 

[Jarnhamar]

Maybe the Liberals should try to pass a bill that would allow them to tax and spend without Parliament approval (again).

 

[daftandbarmy]

It looks like weak demand will be the biggest problem worldwide:

The coronavirus effect on global economic sentiment​

Despite the overall optimism, the COVID-19 pandemic still looms largest as a risk to economic growth in respondents’ countries. The pandemic is cited most often, followed by unemployment and domestic political conflicts, and is the most common risk in every region but Latin America and India. As in the previous survey, executives in Latin America and in Europe cite unemployment more often than their peers—and this month are followed closely by those in India—although the shares saying so have fallen since January.

For respondents’ own companies, weak demand remains the greatest threat to growth, though increasing industry competition has risen in the ranks. Across sectors, respondents in consumer packaged goods and retail are the most likely among their peers to say so: 41 percent cite it as a risk to company growth, versus 28 percent of those in all other industries.

The coronavirus effect on global economic sentiment

In the latest survey, inflation and geopolitical conflicts remain the top perceived economic risks, while concerns about energy volatility predominate in Europe.

www.mckinsey.com

 

[Altair]

It looks like weak demand will be the biggest problem worldwide:

The coronavirus effect on global economic sentiment​

Despite the overall optimism, the COVID-19 pandemic still looms largest as a risk to economic growth in respondents’ countries. The pandemic is cited most often, followed by unemployment and domestic political conflicts, and is the most common risk in every region but Latin America and India. As in the previous survey, executives in Latin America and in Europe cite unemployment more often than their peers—and this month are followed closely by those in India—although the shares saying so have fallen since January.

For respondents’ own companies, weak demand remains the greatest threat to growth, though increasing industry competition has risen in the ranks. Across sectors, respondents in consumer packaged goods and retail are the most likely among their peers to say so: 41 percent cite it as a risk to company growth, versus 28 percent of those in all other industries.

The coronavirus effect on global economic sentiment

In the latest survey, inflation and geopolitical conflicts remain the top perceived economic risks, while concerns about energy volatility predominate in Europe.

www.mckinsey.com

Ah good.

That will help keep inflation down.

 

[suffolkowner]

Roughly, well over half what the federal government normally spends in a year (which is probably near $360B) but not quite as much as what the federal government has additionally spent (which I think has passed $280B).

Example: Remarks back in March by some guy I guess is with BoC, claiming about $180B in additional savings last year ("To summarize, these sizable shifts in income and spending resulted in an unprecedented increase in savings in 2020 of about $180 billion, or roughly $5,800 per Canadian"). Presumably more has accumulated in the first half of this year.

It says in the article its the Deputy Governor. They've also been saying that 50% of Canadians are within $200 of insolvency, hard to resolve the two

 

[Altair]

It says in the article its the Deputy Governor. They've also been saying that 50% of Canadians are within $200 of insolvency, hard to resolve the two

50 percent of canadians are within 200 dollars of insolvency, 50 percent of canadians have been using this time to bank away a lot of money.

 

[Weinie]

You know this is not true.

Governments are able to offset debt burden by GDP growth. If the debt is growing 2 percent and the economy is growing 5 percent, you know that the debt burden goes down as a result. One can grow their way out of debt, however it does take discipline to make sure your debt isn't growing faster than your GDP.


See, GR66 gets it.

Here is one assessment of what we are now on the hook for.

Opinion: Canadians deserve better than five decades of deficits

The Parliamentary Budget Officer has finally answered the burning question: will Prime Minister Justin Trudeau’s budget balance itself? The answer: yes, it will — but not for another almost 50 years. According to data published by the PBO, under status quo policies the federal government will balance its budget again in the year 2070 .

By then, Ottawa will have added another $2.7 trillion to its debt tab. That’s on top of its current $1 trillion of federal debt.

More deficits mean more debt that Canadian kids and grandkids will need to pay back.

A baby born this year owes more than $26,000 in federal government debt. By the time the budget is balanced a half-century from now, newborns will be on the hook for about $67,000.

You owe Fishbone Jones an apology.