Op-Eds
Banks are often in the political and regulatory crosshairs during times of economic stress, and COVID-19 is no different. Support for the payments system and credit markets can look like support for banks themselves. And supports for businesses are controversial. Few people want to prop up firms with no future and nobody wants government credit or transfer payments to fund executive bonuses or flow to shareholders through share buybacks or unsustainable dividends. Canada’s banks have just reported weak second-quarter earnings. Laurentian Bank just cut its dividend. Should the Office of the Superintendent of Financial Institutions (OSFI) ask other Canadian banks to do the same?
If they did, they would be following a trend. The…
Reopening locked-down economies is not easy. Because governments did the locking down, governments are key to the reopening. How Ontario’s government manages it, given the province’s demographic and economic weight, will have consequences across the country. Ontarians and Canadians could do better if Ontario followed the example of other jurisdictions and published a clearer and more comprehensive reopening plan.
Where can Ontario look for ideas? Its immediate Canadian neighbours, Manitoba and Quebec, are not very helpful examples. Manitoba reopened earlier but it never had a per capita caseload anything like Ontario’s. Quebec still has a worse caseload and had to backtrack on relatively aggressive early reopening plans when its…
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…
The Canadian Emergency Response Benefit (CERB) was an early and critical element in the federal government’s response to the COVID-19 crisis. The government first announced the CERB in late March, promising $2,000 a month for up to four months for workers who have lost their incomes as a result of the pandemic. In mid-April, it expanded eligibility to make the CERB available to people earning up to $1,000 per month and to workers whose EI benefits had run out.
Widely praised for providing immediate income support and helping contain the coronavirus by reducing pressure on lower-income people to work, the CERB made sense in an emergency. With attention increasingly turning to reopening the economy, however, the CERB is becoming a…
Since the COVID-19 crisis began, yield spreads for provincial 10-year bonds over equivalent federal debt have increased by about 100 basis points across all provinces. Some provinces — Newfoundland, for example — are in even worse shape. To ease funding pressures on the governments that are on the front line in health care and social assistance we need a two-pronged approach in which the Bank of Canada addresses disruption in the debt markets, and an overhauled federal fiscal backstop helps provinces still in need.
The Bank of Canada is already providing liquidity to the provinces by purchasing short-term provincial debt, thus helping alleviate rollover concerns. It has also embarked on a large-scale asset purchase program —…
