The Conservatives have been accusing Stephane Dion of "fear-mongering around the economy for his own gain". I used to work in the financial markets and one of the fundamental things you have to know there is that market prices contain information. Nobody has to "fear-monger". Prices in the stock and bond markets make it clear that there is a serious risk of global recession.
Almost everybody is used to following the stock markets, but almost nobody follows something called the interbank offered rate (e.g. LIBOR, the rate set in London). This is the rate that banks use as a benchmark to charge each other for loans. LIBOR is also a reference rate for businesses and consumers borrowing money and is a critical number in the international money markets. What is unprecedented is that difference between ('risky') LIBOR and the interest rate on ('riskless') US treasury securities has exploded and halted a lot of financing of business activity around the world. The stock market drop is nothing compared to what is going on in LIBOR. Do not think that this stock market decline is the same as any other you've seen in your lifetime.
Canada is not the master of its own fate as to the question of whether or not there is a recession. All of that depends mostly on the U.S. economy. Our choice on October 14th is whether or not to acknowledge the possibility of a serious recession, how ready we want to be for it and for protecting our most vulnerable fellow Canadians.
Conservatives have been saying that there is no serious financial crisis amongst Canadian banks. That may be true. But even if the world's financial problems do not impact the Canadian financial system, the slowdown in the world's (especially the U.S.'s) economies will impact (or already have impacted) Canada's economy - and that means job losses. We should be getting ready to take care of each other.
Doing nothing is the risky option. Not admitting the real possibility of a painful recession makes it worse. The choice between a Conservative government and a Liberal government is even clearer.
Monday, October 6, 2008
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5 comments:
http://krugman.blogs.nytimes.com/2008/10/05/the-international-finance-multiplier/
this blog post by paul krugman seems particularly relevant.
And so what, pray tell, do you propose be done???
Yes Leon, nice post on Krugman's blog.
As to Mr. Wudrick (ALW), I think that investing in infrastructure is one thing that can be done. You need to do it anyways (to the tune of roughly $100 billion) so why not do it to mitigate a recession? It's also a good way to pass something of value to the future (and reduce their financial burden). See the Liberal platform.
Progressive income tax cuts (such as those in the Green Shift) are another thing to implement. Coupling them with revenue from taxing pollution and strong incentives to start transforming our energy economy (see the Liberal Party platform) are also good policies.
When we are under fire here from the global financial system's problems, it is not a good idea to stand around and wait and see as the Conservatives seem to be content to do. We can see off in the distance what a sustainable energy economy looks like and I think it would be a good idea to start running in that direction. The Green Shift is the first step.
Hold the phone tedhsu - did you just say say spend $100 billion on infrastructure? Where pray tell is this money come from? Especially since Dion has been claiming he won't raise taxes, and won't go into deficit?
Mr. Wudrick (ALW),
According to the TD Bank report, "Minding the Gap" from a few years ago, Canada may need to spend as much as $125 billion to fix up its aging public infrastructure.
Do you want to have roads, bridges, train tracks, sewage and water treatment, ports, electricity grids, etc.? You can spend the money now, or force your kids to spend it. I'd rather take on that burden myself rather than pass it on to my daughter or my neihgbours' children. Wouldn't you agree?
Of course we are not going to spend it all in one year. We are going to re-arrange priorities, as in the Liberal platform's $70 billion proposal allocated (and costed) for infrastructure over 10 years.
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