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House of Cards: Interest Rates, Household Debt, and the Housing Crisis
Last week the Bank of Canada increased its overnight interest rate, for the 9th time in little over a year, to 4.75%. In making its announcement, the Bank cited a slight increase in year-over-year headline CPI inflation last month. This, the Bank suggested, was one reason why it abandoned a temporary ‘hold’ on further interest rate increases announced in January. The Bank’s rationale is ironic, because the Bank’s rapid run-up in interest rates was the main cause of that small uptick in inflation
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The Failures of ‘Trickle-Down’ Economics in Alberta
Since its election in 2019, the current provincial government in Alberta has emphasized a classic ‘trickle-down’ economic strategy. It argues that by boosting profits of private business, capital investment will grow, and job-creation, rising incomes, and economic growth will then ‘trickle down’ to the rest of the population.
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Getting Ready for GFC 2.0
One consequence of the unprecedented tightening of monetary policy imposed by central banks in most countries (including Canada) over the past year has been growing fragility in the broader financial system. Banks, near-banks, and other financial players – many of them highly leveraged after 15 years of near-zero interest rates – are now grappling with the impacts of higher interest rates on their investments and balance sheets.
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The Grocery CEOs Visit Parliament
The House of Commons Agriculture and Agri-Food Committee recently invited the CEOs of Canada’s three largest supermarket chains (Loblaws, Sobeys, and Metro – who together control around two-thirds of all food retailing in Canada) to testify as part of their inquiry into food inflation.
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We Need More Goods, not Less Money
In this commentary article, originally published in the Toronto Star, Jim Stanford challenges the adage that inflation results from ‘too much money’ in the economy. In fact, the current inflation – sparked by the repercussions from lockdowns and other supply disruptions during the pandemic – clearly indicates the problem is too few goods. That requires a very different approach to managing rising prices.
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The False Doctrine of the ‘Labour Shortage’
A common argument that Canada faces a severe ‘labour shortage’ is being invoked to justify regressive policies in many areas: including higher interest rates, record-high (but exploitive) immigration programs, and pushing back the normal retirement age. In this column, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford shows that Canada has not ‘run out’ of workers. Forcibly creating a cushion of surplus labour (through policies to compel labour supply or restrict labour demand) will make life easier for corporate HR managers. But they will undermine the life changes of millions. Humans are not Widgets, and we aren’t in ‘Short Supply’ By Jim Stanford Busy people…
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Is the Economy “Hot”? Or is it Cold, and Getting Colder?
The Bank of Canada is widely expected to increase its policy interest rate again this week, for the eighth time in the last 10 months. Media and financial market commentary on its decision has made numerous throwaway references to how Canada’s economy is still “running hot,” and that i why a rate hike is needed. This common claim is surprising, and not consistent with economic evidence. Canada’s economy is not “running hot” by any concrete measure. Here are six: Final domestic demand in Canada has been weakening for over a year, and was shrinking in the third quarter of 2022 (latest data). Were it not for the export sector (with…
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When Will We Learn? Speculation is no Way to Build a Real Economy
History repeated itself last year in financial markets: several high-flying ventures that once generated a frenzy among financial speculators, came crashing back to earth in the face of higher interest rates, fears of recession, and a rush to the exits by more prescient investors. In this commentary, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford reviews five speculative bubbles that popped in 2022. The most dangerous, from a macroeconomic perspective, is the accelerating downturn in Canadian housing prices – as rising debt charges squeeze prospective buyers. A major downturn in housing will have big impacts on real employment and spending. The common lesson from these…
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Economic Outlook for 2023: Soft Landing or Hard Impact?
In this year-in-review column, originally published in the Toronto Star, Centre for Future Work Director Jim Stanford reflects on the turbulent economic events of 2022 – dominated by the rise of global inflation, and a dramatic shift in monetary policy in Canada and many other countries. The outlook for 2023, unfortunately, will likely be determined by the side-effects of that harsh monetary policy medicine. Workers are Being Sacrificed to a Doctrine that Intentionally Keeps Unemployment High by Jim Stanford Economic events during 2022 were dominated by the rise of global inflation, surging to the fastest pace in decades. Economists had thought this spectre was long dead and buried, after years…
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Latest Interest Rate Hike Increases Risk of Recession
On December 7, the Bank of Canada increased its policy interest rate for the seventh time since March, by another super-sized increment of 50 basis points (0.50%). The rate is now set at 4.25%. The Bank of Canada has been among the most aggressive of any OECD central bank in lifting interest rates to slow economic activity. Centre for Future Work Director Jim Stanford was interviewed about the Bank’s decision in numerous media outlets. In this segment on CBC News Network, anchor Andrew Nichols asked about alternatives to higher interest rates for controlling inflation: Another CBC story, by Stephanie Hogan, provided a roundup of differing views (including Jim’s) on the…