I agree - I don’t think dropping NAFTA when the US is in such economic turmoil would be a good idea - not to be too callous to the problems of our southern neighbours, but I don’t have a problem with taking advantage of them when they’re in trouble. It’s not like it’s ever been a level playing field between the US and Canada.
As for the so-called bailout, I read the article, and I still don’t understand what’s going on. They are not bailing out any banks, our mortgages and mortgage-backed securities are still sound, but our banking system needs $25 billion rfn? I need to put an economist on retainer to explain all the stuff going on to me.
Rermember, it wasn’t the stock market collapse that caused the Great Depression. More than anything, it was trade barriers. Read up up the Smoot-Hawley Tariff.
Biggest difference is that the mortgages being purchased here aren’t particularly likely to go bad. The housing market in Canada is soft (in most places, anyways) at the moment, but it hasn’t crashed like it has in the US. The various “exotic” mortgages that were available there have never been available here. It would be rather rare for someone to have negative equity here, and if you don’t have negative equity you have no incentive to default on your mortgage (and even if you do default due to personal financial problems, the bank won’t take a big hit foreclosing). Moreover, the slicing and dicing of mortgages into various investment “products” is much less prevalent here than it is in the US, which means that where no one has any idea what the real values of the so-called “toxic sludge” mortgage-backed investments in the US are, it’s fairly easy to look at a mortgage and determine it’s current expected value, and if that has changed since the mortgage was granted.
In short, the situation here is completely unlike what’s happening in the US. The problems here are due to the international money markets being dysfunctional, and not due to any particular problems with the financial sector in Canada.
None of this is to say that we might not have serious issues here if things really go south down south, but there’s nothing our government can do to fix the American economy.
Could someone explain to me - in really simple terms - what this $25B is for? I can balance my chequing account (mostly) but I’ve never been good with large money. I’m sure that I’m not the only one, either.
I wish I could explain, but I totally don’t get it - on the news this morning, Harper and Jim Flaherty were expressing their disappointment that the banks didn’t pass on the new Bank of Canada rate to consumers, choosing instead to keep .25% for themselves. Then the Conservatives turn around and give them an unnecessary bailout.
The only sense I can see behind this move is that it is intended to bolster confidence in our banks outside the country, but even that doesn’t make sense as it undermines the reports that are showing that we currently have the strongest banks in the world. I’ve no idea what they’re up to, really.
Again, though, they didn’t give the banks any money. They bought mortgages. Banks aren’t being bailed out.
The basic idea (and I’m not saying it’s a great idea, but it’s the idea as it stands) is that by purchasing mortgages the lending industry will have the capital with which to lend money to others, and will be willing to do so. Right now Canadian banks are clamming up and refusing to lend money, since the world economy has gone haywire. As it stands, Canadian banks are unwilling to lend, and can’t raise capital from international markets, because there’s none out there. There’s also a motivation to drive Canadian lending rates down, in order to keep Canadian business positioned to be competitive.
To be honest I’m not totally sold that this was necessary, or that it will work. I’m just passing along the theory.
The timing of it is certainly odd, given that the apparent message it sends runs completely counter to everything the Tories have been saying (“Everything is fine.”) Perhaps it has something to do with the multilateral discussions between G7 nations and the various coordinated efforts like the recent interest rate drop. If so, it hasn’t been presented well.
In completely unrelated news, I heard a Conservative ad on the radio today slagging Layton, for being an out-of-touch Eastern liberal generally and for wanting to ban guns specifically (apparently a position he held in a Toronto mayoral race or something). Now, it’s not like saying those things is particularly surprising. What surprised me is that that was ALL that was said. In provincial politics it would make sense, since taking a vote from the NDP is as good as winning one for the Sask party. But federally there are plenty of Saskatchewan ridings where the Liberals poll ahead of the NDP. And who do you think the voter you just convinced not to vote for the NDP is going to vote for? That’s right. Not the Tory. I don’t get it. I don’t think there’s more than one seat within the broadcast range of the radio station I was listening to with an NDP candidate who’ll finish ahead of the Liberal.
I’m with Rick Jay on this. I started off loathing Harper and his government pretty thoroughly and at this particular moment I hope they do get their (small) majority. Nothing would make me vote NDP as long as Layton is leader, and Dion is largely incomprehensible, so it’s Tory or die, I guess. And anyway, the Tory MP in our riding could cook and eat babies at the crossroads and still get re-elected, it’s that kind of riding.
The loony can go right to 63 cents again, as far as I’m concerned, I sell my goods on the world market in US dollars and the lower the loony is, the more money I make. I like to keep things in perspective, you see.
The cash injection is not a bailout, there was nothing to bail out, but it will, it is hoped, make the banks a little freer with lending.
I understand that to mean that the Federal government will buy $25 billion in fairly secure Canadian mortgages from the CMHC (which we are all probably familiar with from buying our own houses, as they are the mortgage insurance corporation in Canada) in order to inject more liquidity into the banking system who are very gunshy right now and won’t issue credit to anyone, gumming up the financial system in Canada. At least, that’s what I understand - if I am misunderstanding, please correct me. I have to say though, this is kind of underlining one of Stephen Harper’s weaknesses - it may be a very good move right now, but he seems to have a hard time explaining it to people so they understand what the hell he’s doing.
