According to the press, Michael Bachmann candidate for the Republican Party’s presidential nomination said that Canada was doing better than the U.S. and that the Conservative government had not provided any stimulus to the economy.
Now, we know here that in early 2008, the Prime Minister Harper (and his finance minister) where rather keen to provide only minimal stimulus to the economy, but as a minority government they were “forced” to implement a more aggressive package (strike one for Bachmann – but then she’s about as uninformed as can be, a true blowhard!). In retrospect, I suspect that Harper and Flaherty were happy to bend to the demand of the opposition parties.
Canada did in fact implement a $40 billion economic recovery package of governmental spending. In Quebec, where I live, there is no doubt that the participation of the Federal Government in several programs helped greatly (the bulk of Canada’s Federal government spending are indirect). Quebec had long announced (and planned) a huge infrastructure program (literally our bridges were falling down, and killing people!), the impact of all the Federal money was to mute the recession impact in Quebec, to a point where it went almost unnoticed!
There is no doubt that the action of the Canadian Federal government and of the Bank of Canada (which provided liquidity to the Canadian banks) was key in keeping the economy from excessive contraction. However, other factors were more important: (1) Canada’s housing recovered from a short term price dip to reach even higher (bubble) levels, (2) construction and investment reached unprecedented peaks (all segments: commercial, retail and housing). (3) Canadian banks had few bad loans as the economy continued to grow, and (4) “Emerging Economies” continue to demand raw material – a core activity to Canada’s economy.
The reality is that $40 billion in a $1.5 trillion economy is only 3%, and that this money was spent over several years, contributing no more than 0.75% to GDP – helpful, but not the core element to Canada’s success (sofar).
Canada now finds itself in the same position that the U.S. did 4 years ago; excessive mortgage debt, excessive personal borrowing (and income has been rising in Canada). Eventually, like all roller coaster the market would have to return to long term normal. But to say that Canada’s conservative government did not help during the crisis would be wrong.
Today unemployment in Canada stands at 7.4% (May), whereas it stands at 9.1% in the U.S. -- if we compare unemployment the same way as the U.S. it is actually a full 1% lower. Capacity utilization is nearer to the historical average, and strikes are growing in number (Air Canada & Canada Post) as tightness in the labor market is rising. Canada’s economy is very different to that of the U.S. – Just 15 years ago the S&P 500 was a good proxy for the Canadian (TSX60) this is no longer the case. Finally, the Canadian government is looking to achieve a balance budget by 2014! The Bank of Canada withdrew its liquidity support 14 months after the beginning of the crisis (a fact largely unnoticed by bank observers across the world). Canada is far from perfect, we make jokes at the expense of our American neighbors – especially with regards to their inefficient health care system, but we often forget that here in Canada health care costs are rising substantially faster than inflation – and Governments accounts for nearly 100% of all health care expenses. Our housing market is beginning to exhibit all the signs of overheating (frankly in some areas bubbles), and our successes are exogenous – it is the energy buyers, the raw material buyers that have propelled Canada’s economy, the massive advantage of a small open economy, but should China slow down, or the rest of the world see a falling demand for raw materials, and Canada’s fortune would be greatly affected.
That’s our reality
Now, we know here that in early 2008, the Prime Minister Harper (and his finance minister) where rather keen to provide only minimal stimulus to the economy, but as a minority government they were “forced” to implement a more aggressive package (strike one for Bachmann – but then she’s about as uninformed as can be, a true blowhard!). In retrospect, I suspect that Harper and Flaherty were happy to bend to the demand of the opposition parties.
Canada did in fact implement a $40 billion economic recovery package of governmental spending. In Quebec, where I live, there is no doubt that the participation of the Federal Government in several programs helped greatly (the bulk of Canada’s Federal government spending are indirect). Quebec had long announced (and planned) a huge infrastructure program (literally our bridges were falling down, and killing people!), the impact of all the Federal money was to mute the recession impact in Quebec, to a point where it went almost unnoticed!
There is no doubt that the action of the Canadian Federal government and of the Bank of Canada (which provided liquidity to the Canadian banks) was key in keeping the economy from excessive contraction. However, other factors were more important: (1) Canada’s housing recovered from a short term price dip to reach even higher (bubble) levels, (2) construction and investment reached unprecedented peaks (all segments: commercial, retail and housing). (3) Canadian banks had few bad loans as the economy continued to grow, and (4) “Emerging Economies” continue to demand raw material – a core activity to Canada’s economy.
The reality is that $40 billion in a $1.5 trillion economy is only 3%, and that this money was spent over several years, contributing no more than 0.75% to GDP – helpful, but not the core element to Canada’s success (sofar).
Canada now finds itself in the same position that the U.S. did 4 years ago; excessive mortgage debt, excessive personal borrowing (and income has been rising in Canada). Eventually, like all roller coaster the market would have to return to long term normal. But to say that Canada’s conservative government did not help during the crisis would be wrong.
Today unemployment in Canada stands at 7.4% (May), whereas it stands at 9.1% in the U.S. -- if we compare unemployment the same way as the U.S. it is actually a full 1% lower. Capacity utilization is nearer to the historical average, and strikes are growing in number (Air Canada & Canada Post) as tightness in the labor market is rising. Canada’s economy is very different to that of the U.S. – Just 15 years ago the S&P 500 was a good proxy for the Canadian (TSX60) this is no longer the case. Finally, the Canadian government is looking to achieve a balance budget by 2014! The Bank of Canada withdrew its liquidity support 14 months after the beginning of the crisis (a fact largely unnoticed by bank observers across the world). Canada is far from perfect, we make jokes at the expense of our American neighbors – especially with regards to their inefficient health care system, but we often forget that here in Canada health care costs are rising substantially faster than inflation – and Governments accounts for nearly 100% of all health care expenses. Our housing market is beginning to exhibit all the signs of overheating (frankly in some areas bubbles), and our successes are exogenous – it is the energy buyers, the raw material buyers that have propelled Canada’s economy, the massive advantage of a small open economy, but should China slow down, or the rest of the world see a falling demand for raw materials, and Canada’s fortune would be greatly affected.
That’s our reality