Tag Archives: Bank of Canada

Roundup: Incoherent housing plans

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We are now on or about day fifty-eight of Russia’s invasion of Ukraine, and Russia has declared victory when it comes to their siege of the strategic city of Mariupol, and has ordered its troops not to storm the last pocket of resistance there. But hey, they’ve “liberated” the city by shelling it to rubble, so good job there. It is estimated that some 2000 Ukrainian troops remain on site, spread out in a network of tunnels and bunkers, along with several thousand civilians. Of course, this also means that Russian forces are likely going to simply try and wait out those remaining troops and civilians as they run out of food and supplies, and trap them inside.

Closer to home, Pierre Poilievre has been unveiling more of his housing platform, but…it’s pretty incoherent, in a lot of ways. There isn’t that much financial leverage that the federal government can wield when it comes to ending NIMBYism and seven decades of market incentives for single-family homes that are unsustainable and which only continue to exacerbate the affordability crisis (not to mention the climate crisis). Oh, and Poilievre is defending his own rental property portfolio, citing that he’s providing affordable rental accommodations to two “deserving families.”

The last point on that list is pretty critical—it would undermine central bank independence, and one imagines could actually create a deflationary spiral in the right circumstances that would create a depression, which is precisely what they were avoiding when they engaged in quantitative easing during the pandemic recession. Jennifer Robson has even more concerns about the incoherence of the plan in this thread. Meanwhile, I would also recommend checking out this thread by Mike Moffatt about just how complex the drivers of the housing situation in Ontario is. It’s not just one thing—it’s a lot of moving parts that got us to where we are now.

https://twitter.com/MikePMoffatt/status/1517214855572320256

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Roundup: Higher inflation than expected

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It is now day fifty-seven (or so) of Russia’s invasion of Ukraine, and hope is waning for the remaining defenders of Mariupol, and the civilians still sheltering there. As the fighting intensifies in the eastern part of the country, there are also concerns that it will devolve into a war of attrition, which Russia has historically been more able to withstand. We have also learned more about what happened when Russian troops occupied Chernobyl, where staff were working at gunpoint, and sleeping three hours a night in order to safeguard the site and ensure that Russians didn’t tamper with any of the equipment there.

Closer to home, the inflation numbers were released yesterday, and they were much higher than expected, as conflict inflation brought on by the aforementioned invasion of Ukraine is hitting. And of course, most media outlets were useless in explaining the causes of it, while the parties were equally useless in their own reactions. The government keeps focusing on their talking points about things like child care and dental care, and the fact that they indexed benefits, rather than actually explaining the drivers. The Conservatives are railing about “printing money” (which, to be clear, nobody is actually doing) and insisting that the government should declare a GST holiday, which would a) do nothing for grocery prices as most groceries are GST-exempt; and b) would have a stimulative effect and just fuel even more inflation, especially as people would be likely to use said GST holiday to buy big-ticket items. And the NDP, predictably, chalk this up to greed and want higher wealth taxes, which again, do very little about the drivers of inflation.

And then there’s the Bank of Canada, who will be forced to respond with higher rate hikes, but the question becomes whether they’ll keep the increases more gradual—another 50 basis points at the next meeting in June—of if they’ll go even higher as a way of demonstrating that they are really taking this seriously and that the system of inflation control that they’ve been responsible for since the 1990s will prevail. It doesn’t directly address the drives, but it could be that the signals are more important than the actual policy at this point, because the bigger worry is the expectation that inflation will continue, which will turn it into a self-fulfilling prophecy—something they are very, very keen to avoid.

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Roundup: Words with meanings and obligations

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We’re now around day fifty of Russia’s invasion of Ukraine, and four European presidents—Poland, Lithuania, Latvia, and Estonia—visited Kyiv to show their support yesterday. (Some photos of Ukraine here). Ukrainian forces also detained one of Putin’s oligarch allies, which has led to a new round of threats from Russia. The other thing that will make Russia angry? The fact that the Ukrainians sank Russia’s flagship for their Black Sea fleet—the same ship that fired upon the border guards at Snake Island. It’s almost poetic justice.

https://twitter.com/dgardner/status/1514397710509559814

Meanwhile, we are getting into a frustrating debate about whether or not to call what’s happening in Ukraine a genocide, and what makes it frustrating is the fact that there are international obligations to do something about it if that’s indeed the case. There is no argument that there are crimes against humanity happening, and those are very, very serious. But “genocide” is a specific legal term with specific intent, and for President Biden to throw the word around and saying that lawyers can sort out the details later isn’t helping, when the term obligates the US to do something about it (which they have danced around in the past because they don’t want to be obligated). And then Justin Trudeau chines in and says it’s “absolutely right” to use the term, which would then obligate Canada to do something about it as well. But we need to stop using the most serious language for things for shock value, because words have meanings, and in this case, obligations as well.

https://twitter.com/dgardner/status/1513890485970116614

https://twitter.com/dgardner/status/1513902439556169733

Closer to home, the Bank of Canada raised its key interest rates by fifty basis points, and has hinted that more rate hikes are on the way, as they have to not only combat inflation with the only tool they have, but they have to fight the perception that they aren’t doing enough to cool inflation (and that latter part is the bigger part of the problem). I’ll be writing more about what’s in the Monetary Policy Report in the coming days, but in the meantime, here are some smart economists giving some reaction.

https://twitter.com/LindsayTedds/status/1514249461857366021

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Roundup: Pronouncements that should be disqualifying

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We are now on or about day forty-one of Russia’s invasion of Ukraine, and the word of the day is “war crimes.” In particular, American president Joe Biden declared that Putin needs to be tried for war crimes…which is odd, because the Americans don’t believe in the International Criminal Court and haven’t signed onto its treaties for fear that they will be hauled before it at some point. So, I’m not sure who Biden thinks will be trying Putin for said war crimes, unless he plans to bring American into the ICC system at long last (though I am dubious that will ever happen). In Ukraine, President Volodymyr Zelenskyy visited Bucha and witnessed the atrocities there for himself, calling Russia’s actions a “genocide” (though there is some debate about the applicability of the term given that it is a crime of specific intent).

Closer to home, there has been some attention being paid to the fact that Pierre Poilievre is trying to promote crypto and Bitcoin, and it’s just so ridiculous how this isn’t automatically being seen as disqualifying. (And it’s not just Poilievre—Michelle Rempel Garner has a private members’ bill in the queue about promoting crypto and blockchain in Canada). Never mind that everything Poilievre is saying is bunk, and his pronouncements about the Central Bank are utterly bonkers. The truth of the matter is that Bitcoin and other cryptocurrencies is that they are nothing more than elaborate Ponzi schemes, and if he can’t see that, then we have a serious problem on our hands.

Meanwhile, here’s the former Governor of the Bank of Canada, Stephen Poloz, eviscerating Poilievre and his nonsense thinking:

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QP: The pre-budget questions have started in earnest

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It was a very unusual Wednesday in that most leaders were once again absent—the prime minister was off at the Williams Lake First Nation, missing his self-imposed Wednesday PMQs for the second week in a row, and missing from QP for over a week now; his deputy was also absent. Candice Bergen has been absent for days (and there has been some chatter that her husband tested positive for COVID), as has Yves-François Blanchet. As well, somewhat unusually for a Wednesday, the benches were emptier than they typically are. And possibly worth noting, Speaker Rota remains away, and his deputy, Chris d’Entremont remains in the big chair. Luc Berthold led off, and lamented that they have a date for the first “NDP budget,” which merited him applause from the NDP benches, and he decried what it would represent. Randy Boissonnault stood up to insist that the Conservatives were talking down the economy, and he recited StatsCan data on GDP growth. Berthold quoted Jean Chrétien about deficits, as though it were still 1995, and Boissonnault made a plea to pass Bill C-8 to buy more rapid tests. Berthold accused Chrystia Freeland of selling her soul for a majority, and Boissonnault listed measures they have taken for Canadians. Dan Albas took over in English to decry inflation and a measure around housing, for which Ahmed Hussen dismissed the concerns as the Conservatives did nothing for affordable housing. Albas spouted a few misleading things about what the Bank of Canada Governor and the Parliamentary Budget Officer said about carbon prices, demanding they not increase, and Randy Boissonnault recited that the carbon rebates were progressive and most will get back more than they pay.

Alain Therrien led for the Bloc, and he decried the policy that seniors aged 75 and older age getting a top-up rather than all seniors, wondering if this was a Conservative or NDP decision, and Darren Fisher responded with a few points about how affordability gets tougher for older seniors. Therrien insisted that inflation meant they were abandoning seniors, and Fisher read some talking points about measures they have taken for seniors to date.

Jagmeet Singh rose in person for the NDP, and accused the government of siding with banks over people. Boissonnault said that while they understand the sentiment of the NDP’s failed supply day notion, they have taken action on taxing the wealthiest. Singh repeated the question in French, and got the same answer.

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Roundup: Buying the F-35s after all

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We are now somewhere around day thirty-four of Russia’s invasion of Ukraine, and there are claims that Ukrainian-forces have retaken a Kyiv suburb as well as another city further east. President Volodymyr Zelenskyy is preparing for another round of peace talks with the Russians and sounds like he is willing to declare the country neutral and give up any hope of future NATO membership in exchange for peace and future security guarantees (NATO membership wouldn’t come so long as there are territorial disputes, meaning so long as Russia occupies Crimea and the Donbas regions, it would be impossible). Zelenskyy also briefed Justin Trudeau on the talks yesterday, because they are keeping each other in the loop.

https://twitter.com/ZelenskyyUa/status/1508520970516058121

Closer to home, the announcement was made that the government will finally be settling on purchasing F-35 fighter jets to replace our aging CF-18 fleet, leading to questions about whether the last seven years were wasted when the previous Conservative sole-sourced contract was cancelled in favour of a new competition. And if you read the 2015 election platform promise about cancelling the purchase, it was because it was sole-sourced for a high price, given that the goal of a competition is to get a better price, so we’ll see if that pans out. It’s still not a done deal—they now get to negotiate directly with Lockheed Martin to get the best deal possible—but we have to remember something of what happened with the previous announcement, particularly that it was done poorly, and the Auditor General called out how opaque it was, and that’s kind of a big deal.

We should also remember that the planes are a much more mature platform now, with many of their flaws having been worked out (though I haven’t heard yet whether the ejection seats will still kill you if you’re below a certain height and weight, because that was a real problem). It does sound increasingly like the biggest consideration was the interoperability with NATO and NORAD fighters, meaning we had to be fairly seamless with the Americans, rather than just the promise of regional job creation programmes (though Canada being a participant in the joint strike fighter programme the whole time means we’ve already had some of those industrial benefits throughout). We’ll have to see what more the government can extract from Lockheed Martin in promises as those negotiations carry on throughout the year to see whether that seven-year delay was worth the wait.

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Roundup: The emergency measures votes were a test

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I believe we are now in day thirty-three of Russia’s invasion of Ukraine, and there are fears in the northern city of Chernihiv that they may become the next Mariupol, as the city undergoes shelling from Russian forces. Meanwhile, those Russian forces seem to be shifting away from trying to encircle Kyiv, and are instead moving toward the eastern Donbas region to try and consolidate gains there, leading to fears that Russia may be trying to split the country. Elsewhere, the International Committee of the Red Cross is asking Canada not to lump its humanitarian promises in with sanctions and military aid, as it threatens the neutrality of their organisation. Here is a look at some more actions the West could be taking to help Ukraine that aren’t a no-fly zone. It has also been announced that Justin Trudeau and European Commission President Ursula von der Leyen will co-host an international pledging event for “Stand Up For Ukraine” on April 9th.

Closer to home, the weekend saw a couple of different versions of the “inside story” of the Liberal and NDP supply and confidence agreement, from both Susan Delacourt and Aaron Wherry. The two recounting largely align, talking about how initial talks post-election quickly ended as everyone was still too raw from the vote, how Trudeau reached out to Singh after the birth of Singh’s daughter, that most of the talks happened virtually and close to the vest to avoid leaks, and that their face-to-face meeting was at Rideau Gate, which usually hosts dignitaries (but was where Julie Payette lived when she was GG rather than in Rideau Hall, along with her Secretary, Assunta DiLorenzo). What was particularly interesting was how the vote on the Emergencies Act became the test for the NDP that they could be trusted in this agreement, and how the Liberals were willing to provide security briefings to secure that support, and that when the NDP proved themselves, the deal could go ahead.

On that note, it’s interesting (but perhaps unsurprising) that Elections Canada said that they got no prior notice about the portions of the agreement that call for the exploration of three days of elections, allowing people to vote at any polling place in the riding, or improving the process of mail-in ballots. Some of those may be unwieldy or impossible, but the agreement’s language does specify that they would “work with Elections Canada to explore ways to expand the ability for people to vote,” so these ideas are not iron-clad. On the reconciliation front, there are hopes that the promise of stability that the agreement provides will help accelerate some timelines toward progress.

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Roundup: A strategic turning point?

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We are in day seventeen of Russia’s invasion of Ukraine, and the bombardment and shelling has intensified not only in Mariupol, but some other cities that have thus far been unaffected. President Volodymyr Zelenskyy says that they have achieved a strategic turning point, that they have lasted four times longer than Russia planned for them to, and asked his people for strength and patience. There are also concerns that Russians are targeting ports and grain silos, which could have a major impact on food supplies in the region as the crisis grows. In the meantime, the BBC has a chilling report out of Kharkiv, and it’s a bit grisly because of the number of Russian corpses just lying there.

https://twitter.com/sommervilletv/status/1502000265490227206

Justin Trudeau concluded his European trip, and announced yet more sanctions against Russian oligarchs including Roman Abramovich, who has interests in a steel company that has operations in Canada, so these sanctions could affect its operations.

Closer to home, Anita Anand addressed the Ottawa Conference on Security and Defence yesterday, and spoke about a “robust package” to modernise NORAD, and said that they have not forgotten about the threats posed by China while the world is focused on Ukraine. At the same conference, a senior CSIS official spoke about the vulnerability posed by cyberspace, which is why they are focusing on protecting critical infrastructure from cyber-attacks.

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Roundup: Fears over a fire at a nuclear plant

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At the start of day nine of Russia’s invasion of Ukraine, there was a lot of tension and drama as Russian forces shelled the nuclear power station at Zaporizhzhia, leading to concerns that a fire could lead to some kind of Fukushima-style meltdown, particularly after firefighters were also fired upon. In the end, it turns out that the fire was a separate building and that the reactor was fine, with no changes to radiation levels, but it was nevertheless a huge concern for a few hours, and which president Volodymyr Zelenskyy to proclaim that Russia has targeted their nuclear reactors as a form of blackmail. It’s really, really a bad situation.

In terms of Canadian contributions, new shipments of lethal aid were announced yesterday morning, along with new punitive measures against Russia and Belarus, removing their “most favoured nation” status (they now join North Korea as the only countries without it), and slapped tariffs of 35 percent on all of their products (though as was pointed out, this is still less than tariffs that our dairy cartel forces upon imports from out allies and trading partners). Canada is leading calls to have Russia’s membership in INTERPOL suspended. On top of this, new streamlined immigration and refugee processes were announced that will take two weeks to fully implement, during which time those wishing to come to Canada can get their biometric data sorted at consulates in countries surrounding Ukraine, as they had beefed up their capabilities ahead of time. Of course, this also raises questions as to why this kind of expedited process hasn’t been made for other refugee groups (though the obvious reply is that Ukrainian refugees are making it to European countries with more resources).

The Toronto Star’s editorial board caught up with Mélanie Joly between her visit to Poland and meetings in Brussels, where she reiterates once again that no, a no-fly zone is not going to happen, particularly because Putin is an irrational actor. Elsewhere, Chrystia Freeland warned that there could be severe consequences if any Canadian heads over to Ukraine to join the fight as it may not be legal to do so (and this is a fight over the international rules-based order), and Anita Anand added that if they want to sign up, they should enlist with the Canadian Forces (which has a 10,000 person shortfall at present).

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Roundup: Zelenskyy speaks with his inspiration, Trudeau

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We are now in day eight of Russia’s invasion of Ukraine, and attacks against hospitals, schools and critical infrastructure continue. Russian casualties are mounting, but Putin shows no sign of stopping, even as we are well into war crimes territory (and Ukraine is also making announcements of policy changes that would also be war crimes, so this is not solely a Russia problem). When it comes to sanctions, Germany has seized the yacht of one of Russia’s oligarchs, and one can expect more seizures to come in the days ahead. Canada has also joined 32 other countries in denouncing Russia’s use of propaganda in its campaign against Ukraine.

While there was no new announcement of sanctions from Canada yesterday, there was a call between Justin Trudeau and Volodymyr Zelenskyy, who apparently thanked Canada for our efforts and stressed the need to keep expanding sanctions (which is happening, but being done in a coordinated fashion with allies). Also, interestingly, an old tweet of Zelenskyy’s was circulating yet again, where he cited Trudeau as one of his inspirations to join politics—which must really burn Trudeau’s critics, who are hailing Zelenskyy for his leadership in a crisis.

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