Once the crisis is over, we will need to let the zombie firms go – Financial Post Op-Ed
COVID-19 has put much of Canada’s economy on life support. As we emerge from the crisis and resume more normal activity, a challenge awaits. We do not want viable businesses to disappear. But we also do not want zombie firms to live on indefinitely.
Early in the crisis, governments reasonably prioritized supporting households and businesses through central banks, government lenders and transfer payments. Going big and broad made sense to help us survive the sudden stop.
We now need to navigate a different problem: letting firms go. In an ordinary year an amazing number of businesses in Canada appear and disappear. In 2017, 143,000 businesses came into existence — about one for every eight that already existed. That…
Kronick, Munn – Ensuring Capital For The Recovery
From: Jeremy M. Kronick and Duncan T. Munn To: Financial Sector Regulators Date: May 11, 2020 Re: Ensuring Capital for the Recovery The COVID-19 crisis has ravaged economies and damaged private sector balance sheets all around the world, Canada included. The Bank of Canada has seen its balance sheet more than triple in the last […] Calibrating Macroprudential Policies for the Canadian Mortgage Market
While the effects of the COVID-19 outbreak on the housing market are yet unknown, a new C.D. Howe Institute report provides a blueprint for policymakers and regulators on the tools and timing of interventions in the housing market to address threats to financial stability. In “Calibrating Macroprudential Policies for the Canadian Mortgage Market,” authors Scott […] Expanded Bank of Canada Balance Sheet Requires Balancing Act: Crisis Working Group on Monetary and Financial Measures
April 23, 2020 – Between early March and mid-April, the Bank of Canada’s balance sheet more than doubled, dwarfing anything seen in 2008. Moreover unlike 2008, this increase has serious implications for future inflation, because the Bank’s increased liabilities are not the result of government deposits, but rather increased “settlement balances” or deposits by financial institutions, which increases the monetary base.
Once the pandemic and economic crisis passes there is no easy solution to the potential inflation problem arising from more money chasing fewer goods and services. Trying to unwind the Bank’s balance sheet by selling longer-term assets is fraught with political risk. Alternatively, while a floor system could help…
Hugh O’reilly – Regional, Economically Important Credit Unions Must Be Included In Stlf
From: Hugh O’Reilly To: Bill Morneau, Minister of Finance Date: April 16, 2020 Re: Regional, Economically Important Credit Unions must be Included in STLF The Bank of Canada has made a series of interventions designed to support Canada’s financial system and ensure the availability of credit during the COVID-19 crisis. These actions are important to ensure that small […] David Powell – Filling The Gap: Support Still Needed For Canada’s Asset-based Finance Sector
To: Department of Finance From: David Powell Date: April 13, 2020 Re: Filling the Gap: support still needed for Canada’s asset-based finance sector The pandemic-induced economic crisis is both unexpected and unique. Otherwise financially viable individuals and businesses may be unable to make their lease or loan payments, which poses the threat of cascading defaults […] David Losier – Government Guaranteed “ready For Business” Cash Flow Loans
To: The Department of Finance From: David Losier Date: April 6, 2020 Re: Government guaranteed “ready for business” cash flow loans Many economists are predicting a V-shaped recession, deep and temporary. Fact is, the V will probably be a lopsided U, a sharp downturn followed by a flat line and a sloping recovery. The longer […] Mark Zelmer – Managing The Economic Consequences Of The Coronavirus Pandemic
From: Mark Zelmer To: Bill Morneau, Minister of Finance Date: April 2, 2020 Re: Managing the Economic Consequences of the Coronavirus Pandemic The social distancing intended to slow the spread of the coronavirus has shut large segments of the Canadian and global economies, disrupting the ability to produce, consume and pay for goods and services. High uncertainty about how […] Time of the Essence for CEBA: Crisis Working Group on Monetary and Financial Measures
April 1, 2020 – The C.D. Howe Institute’s Monetary and Financial Measures Working Group, supported by a group of financial market experts, and co-chaired by former Governor of the Bank of Canada David Dodge and former Deputy Superintendent of OSFI Mark Zelmer, held its second meeting on Monday, March 30, 2020.
The working group agreed that, while there is a need for governments and central banks to monitor the effect of current crisis measures on debt and potential future inflation, these concerns are not a short-run issue and should not come at the expense of the immediate need for large-scale fiscal stimulus. To that end, the Monetary and Financial Measures Working Group recommends the following:
Quickly…Filling the Gap: Emergency Funding Programs and Asset-Based Finance in Times of Economic Crisis
Large-Scale Funding Program Needed to Bolster Asset-Based Finance During Crisis The federal government should have a large-scale funding program in place to bolster asset-based finance during the current crisis, author David Powell argues in his latest research. The asset-based finance (ABF) industry is critical to the functioning of the economy. In 2018, the value of ABF […] David Powell – Filling The Gap: Emergency Funding Programs And Asset-based Finance In Times Of Economic Crisis
To: Department of Finance From: David Powell Date: March 27, 2020 Re: Filling the Gap: Emergency Funding Programs and Asset-Based Finance in Times of Economic Crisis In times of economic crisis, the federal government should have in place a large-scale program for funding asset-based finance intermediaries. No one wants to see a repeat of the […] Enhanced Government Credit Facility Needed: Crisis Working Group on Monetary and Financial Measures
March 25, 2020 – The Institute has established an expert crisis working group for finance and monetary policy, co-chaired by David Dodge, former Governor of the Bank of Canada, and Mark Zelmer, former Deputy Superintendent of OSFI. The group’s first meeting was held on Monday, March 23, 2020.
The crisis working group is calling for an expansive government guaranteed credit facility, in tandem with various fiscal measures, to help Canadians and the business community survive the COVID-19 economic crisis. Possible features of the facility could include:
100% guarantee by the Government of Canada, and available to Canadian firms either through federal and provincially-regulated…