This isn't anything to panic about? This is the threshold of a potential economic disaster. It is great that Feeland seems to be using an enigma machine to speak to business leaders in the country, but her change of tone might be too little too late. A shift to short term bonds to cover our immediate debt obligations is going to put more upward pressure on interest rates which already have upward pressure without even considering bond sales. Most of my associates do not want to touch bonds right now because of the low interest rates and the potential for inflation. It is only going to get worse as time goes on and we do not have the innovation or foreign investment levels in our economy to deal with the slow down of debt creation. If by "isn't anything to panic about" you mean I shouldn't be setting my hair on fire just yet, well I should never be in a position to feel compelled to do that. The time to panic was months and months ago, I think this is all too little too late now.
I ran across an interesting column by Freeland back in 2011, talking about the damage being done by the slow and grinding recovery in the US from the 2008 financial crash - as well as the need for a credible fiscal plan, but with the date deferred until after full recovery. Given the very similar situation we're in today, where the question is when to start fiscal tightening, it makes for interesting reading. https://www.nytimes.com/2011/08/12/us/12iht-letter12.html
On long-term economic damage, and the importance of getting back to full employment rapidly:
"The sort of metaphors we tend to reach for, to borrow one from the White House, are of the car that was driven into the ditch. It is unpleasant to be stuck in the mud, and pushing it out is hard work, but once we are back on the road it will be full speed ahead.
"The better, but grimmer, comparison is to infant malnutrition. Even if that child grows into a well-fed adult, her early experience of deprivation will do lasting damage.
"That ugly image is particularly apt because the hardest hit will probably be young people. Mr. Peck spoke to Lisa Kahn, a Yale economist, who found that getting your first job during a deep recession meant a starting salary 25 percent lower than during a boom, and an income 10 percent less 17 years later. Even mid-career, the recession generation not only takes home a thinner paycheck, it is lower down the corporate hierarchy and more professionally timorous."
On having a credible fiscal plan:
"Like Mr. Peck, Mr. Rubin believes that an agreed plan to close the deficit in the medium term would actually make a job-creating stimulus program in the short term both more feasible and more effective.
"'You can put in place a serious fiscal program, which would generate job-creating confidence, but defer the implementation date,' he said. 'In that context you could do a fiscal stimulus, and at much less risk of it being materially offset by an adverse effect on confidence.'
"We need to create jobs today — and commit to tightening our belts when the economy starts to recover. It is a simple plan that makes sense to a lot of us. But in the scared, beggar-thy-neighbor world Mr. Peck describes, the public-spirited middle ground this approach embodies may no longer exist."
With every government in the world borrowing at record rates, it was entirely predictable that lenders would start to demand more for their money. It's good to see that at least some of the Liberals are taking notice, although I'm hoping to see some confirmation in the throne speech and budget. Prime Minister Trudeau doesn't always seem to listen to his ministers, and doesn't like taking no for an answer. I'd also hope this will draw attention to the flawed premise of MMT, which posits that it's possible to spend large amounts of money through borrowing without triggering hyperinflation or repelling lenders. Probably not, though.
and as i read this article, tiff macklem is on the screen next to me articulating the end of QE (aka, central bank purchasing of secondary market debt) and signalling higher interest rates (aka, bond yields) early next year...clearly, the BOC has gotten the memo too
This isn't anything to panic about? This is the threshold of a potential economic disaster. It is great that Feeland seems to be using an enigma machine to speak to business leaders in the country, but her change of tone might be too little too late. A shift to short term bonds to cover our immediate debt obligations is going to put more upward pressure on interest rates which already have upward pressure without even considering bond sales. Most of my associates do not want to touch bonds right now because of the low interest rates and the potential for inflation. It is only going to get worse as time goes on and we do not have the innovation or foreign investment levels in our economy to deal with the slow down of debt creation. If by "isn't anything to panic about" you mean I shouldn't be setting my hair on fire just yet, well I should never be in a position to feel compelled to do that. The time to panic was months and months ago, I think this is all too little too late now.
I ran across an interesting column by Freeland back in 2011, talking about the damage being done by the slow and grinding recovery in the US from the 2008 financial crash - as well as the need for a credible fiscal plan, but with the date deferred until after full recovery. Given the very similar situation we're in today, where the question is when to start fiscal tightening, it makes for interesting reading. https://www.nytimes.com/2011/08/12/us/12iht-letter12.html
On long-term economic damage, and the importance of getting back to full employment rapidly:
"The sort of metaphors we tend to reach for, to borrow one from the White House, are of the car that was driven into the ditch. It is unpleasant to be stuck in the mud, and pushing it out is hard work, but once we are back on the road it will be full speed ahead.
"The better, but grimmer, comparison is to infant malnutrition. Even if that child grows into a well-fed adult, her early experience of deprivation will do lasting damage.
"That ugly image is particularly apt because the hardest hit will probably be young people. Mr. Peck spoke to Lisa Kahn, a Yale economist, who found that getting your first job during a deep recession meant a starting salary 25 percent lower than during a boom, and an income 10 percent less 17 years later. Even mid-career, the recession generation not only takes home a thinner paycheck, it is lower down the corporate hierarchy and more professionally timorous."
On having a credible fiscal plan:
"Like Mr. Peck, Mr. Rubin believes that an agreed plan to close the deficit in the medium term would actually make a job-creating stimulus program in the short term both more feasible and more effective.
"'You can put in place a serious fiscal program, which would generate job-creating confidence, but defer the implementation date,' he said. 'In that context you could do a fiscal stimulus, and at much less risk of it being materially offset by an adverse effect on confidence.'
"We need to create jobs today — and commit to tightening our belts when the economy starts to recover. It is a simple plan that makes sense to a lot of us. But in the scared, beggar-thy-neighbor world Mr. Peck describes, the public-spirited middle ground this approach embodies may no longer exist."
With every government in the world borrowing at record rates, it was entirely predictable that lenders would start to demand more for their money. It's good to see that at least some of the Liberals are taking notice, although I'm hoping to see some confirmation in the throne speech and budget. Prime Minister Trudeau doesn't always seem to listen to his ministers, and doesn't like taking no for an answer. I'd also hope this will draw attention to the flawed premise of MMT, which posits that it's possible to spend large amounts of money through borrowing without triggering hyperinflation or repelling lenders. Probably not, though.
Very interesting. Maybe Freeland, if nobody else in that disgusting party, actually remembers Paul Martin. Who wudda thunk it?
I find that people (at least here in SK) consistently underestimate Chrystia Freeland.
Maybe we should ask her to blink twice and glance to the right every 10 seconds if she’s been taken hostage?
and as i read this article, tiff macklem is on the screen next to me articulating the end of QE (aka, central bank purchasing of secondary market debt) and signalling higher interest rates (aka, bond yields) early next year...clearly, the BOC has gotten the memo too
Good call!