As a Canadian business owner, we're super lucky to be in Canada right now, and for the supports that have been put into place for people and businesses alike.
Our company was luckily not hit badly enough to qualify for the 75% support on salaries (we did get a line of credit!), but I know several others who needed it and got the support they needed which is great!
It's not perfect - rent supports for storefronts, restaurants, bars, etc. could be better, for example - and it won't save everyone or every business, but it's made a difference in many lives and helped us stay home and quarantine more effectively without so much worry about making ends meet.
I just hope more Canadians remember it was the NDP fighting for a lot of these supports come election time :)
Yup remember how the NDP is bankrupting your future, the economic damage to giving money away is going to bite the youngest generations in the ass in 5 to 10 years.
This approach isn't "giving money away", it's redistributing our own taxes back to us when we need it. It's sound economic policy. It's also taxable income.
We routinely do the same thing for businesses in the form of grants and tax credits, so I fail to see how this is going to bite us in the ass any more than those investments have failed to tank the Canadian economy.
It really doesn't take much to tell banks to add numbers to people's bank accounts.
What it's really doing is subsidizing everybody that works in or is tied to non-essential face-to-face service industry, by everyone else.
It's really not even that interesting, other than seeing how easily frazzled people are by the slightest calamity - why is non-essential services taking a vacation for a few months at the expense of everyone else supposed to be a major event with long-lasting consequences?
Imagine you have a family and you lose your job. If you have savings for a couple of years, you can take it easy for a while and then go look for a job and find one 6 months later. Was anything other than your ego bruised by the loss of the job? No, not really.
Why doesn't this analogy translate to what's happening with covid? I'm guessing because not only have you lost your job, but you owe tens of millions in gambling debts and spent half your waking hours convincing various factions to give you some extra time to come up with the money.
That's what the economy looks like to me and I find it difficult to be sympathetic - people need a reality check and get back to living a simpler life with less shit being bought and sold all the time. It is within my lifetime that I've gone from owning 2 t-shirts to 20 and I have no idea why. I can go back to wearing 2 and my life will be the same - I just hope others can see the silver lining in all this and not go back to living frivolously.
It's reasonable for individuals to aim for a few months of emergency funds. It's not reasonable to expect main street businesses to have cash on hand to cover many months of near zero revenue. Most small businesses just don't have the margins for that to be viable. If you expect every individual restaurant to be able to weather a period of months when no one goes to restaurants without any kind of assistance, the only restaurants you'll get will be large chains.
Much like running government 'like a business', the analogy of running a business 'like a household' only takes you so far. They're fundamentally different things.
I general, we WANT businesses without revenue for many months (excluding seasonally business that must explicitly manage this either with savings or loans) to fail, their capital be put to more productive use and moral hazard avoided. The outside risks like fire, hurricane, etc ... are best handled by insurance that allows for recuperated lost capital and restarting. What we are seeing now is basically an insurer of last resort type situation where we have the government taking on the role. Going forward, we should strive for pandemic insurance becoming more common, and maybe government back reinsurance or mandatory insurance pools handling the systematic risk inherent in a global or national emergency.
> "we WANT businesses without revenue for many months... to fail, their capital be put to more productive use and moral hazard avoided"
tell that to every startup that spends many months, sometimes years, without revenue, and certainly with negative income.
more directly, it's difficult to boil down misallocation to simply being out of revenue for some months, although econ 101 might indicate so (actually it's price x quantity at the margins, but we'll go with the simplistic interpretation here).
but more interestingly, inefficiencies are actually a key part of markets and capitalism. it takes many, distributed participants doing very similar things to get pricing right. many companies start and fade away. those are in fact inefficiencies in the ruthless game of survival of the fittest. in a perfectly efficient world, you'd only need 1 try to get it right.
the better analysis is to determine which factors in addition to to revenue to use to determine misallocation. if i had to hazard a guess, we probably want, as a policy matter, businesses to be able to weather up to a year of economic shock, not just a few months, without introducing any concerning moral hazard economy-wide, while providing the necessary resilience and stability.
regarding insurance, you're basically saying the businesses should pay for systemic risks, rather than all of us, but that risk is not idiosyncratic to just those businesses. it's systemic, so the system should bear them, i.e., the government (as representative of society as a whole).
How did you arrive at your assessment of what is reasonable?
Mine happens to be different from yours. Does that make me unreasonable? I mean, are there more shades to the world than reasonable/unreasonable, black and white?
I think so and I hope we can discuss the various shades of grey.
I think being responsible and saving for a rainy day applies across all spheres of life - be it government, business or a household. What do you think is fundamentally wrong with such a view, other than that it isn't the way things currently are?
Some businesses barely make enough to pay the bills and bring food on the table. You can decide what's reasonable or not with your budget but you can't project that on every single person or business.
> What do you think is fundamentally wrong with such a view
It simply doesn't work in the real world. It's a nice ideal but it's not a thing for most people.
People on HN tend to forget that we're earning more than the average here. I made more money during one of my uni's internship, it was before getting my bachelor so I didn't even have any kind of degrees at the time, than my mom was making at the peak of her career. So yes I can save 50% of my salary and have 2 years of emergency fund without even trying to save. On the other hand my mom never had that and couldn't have that even if she wanted to, it's the exact same thing for businesses.
After all that's why we live in societies, pay taxes, have insurances, &c.
You made a bunch of normative statements about what people "need" to do, so I don't think it's out of bounds to make a normative comment about the reasonableness of your demands.
>What do you think is fundamentally wrong with such a view, other than that it isn't the way things currently are?
For one, it dramatically increases the capital requirements for starting a new business. Such capital is likely not going to be available to new restaurants or other service oriented small businesses with no real collateral. Or it would come at such a high cost that it would be unprofitable to run the restaurant. All to optimize for a once in a century event.
I think the world where the government backstops these businesses is just a better world than the one that would arise from what you envision. It has more of what I want and less of what I don't.
> You made a bunch of normative statements about what people "need" to do, so I don't think it's out of bounds to make a normative comment about the reasonableness of your demands.
Did I? There is a single sentence with the word 'need' in it in my entire post. My last sentence expresses my hope for others' behaviour. That's two 'normative' statements that really express the same point - we are living in a consumerist culture. I don't think that's at all a controversial position, it is almost a cliche at this point.
I also haven't made a single demand upon anyone.
I'm not sure what motivates you to misrepresent my position in such crude fashion and I wish you'd refrain from replying to me in this manner in the future.
> it dramatically increases the capital requirements for starting a new business.
Help me understand - you think the approach of being responsible and saving for a rainy day, dramatically increases the capital requirements for starting a new business? How?
How does saving profits relate to upstart requirements? As far as I can tell - the two are unrelated.
OK, so you're saying you don't need to have rainy day funds at the start of a new business, but should build them up over time, right? So, that leads to two potential situations. Let's use the restaurant example.
First possibility is the one most restaurants face. If they're lucky and the business is actually viable, they will have a profit margin of 3-5%. For a single location restaurant, that profit will be enough for the proprietor to make a decent living hopefully, but not a whole lot more. Should be enough for them to save up a few months of personal expenses sure. But saving up enough cash to pay rent, suppliers, and staff, for months, with no income... would take forever with those margins. It's just not possible for most businesses of that sort.
But let's also look at the other possibility. Say you've got a real hit restaurant (or another type of business with larger margins) and your margins aren't 3-5, but 15-20%. Now you're saving real money. So yes, you could sock it away under the proverbial mattress. But if you're that successful, it means people really value the product you're providing. Instead of hoarding your profits in case of a pandemic, you could instead invest those profits into opening a second location, allowing twice as many people to benefit from the service you're providing. In the 99% of years when there isn't a black swan event, that option is better not only for the business owner, but for society as a whole. So even for very successful businesses that could afford to keep a large amount of cash around, we're usually better off if they spend that money to do more of what's making them successful in the first place.
Of course occasionally there will indeed be a pandemic, at which point government can help out to prevent both types of businesses from failing, so that when the event passes they can go back to generating value.
From a societal perspective, it is more efficient for capital to be employed in creating value than stashed away as cash for a rainy day. Rather than every entity—individual, family, business, local government—keeping enough rainy day funds to withstand a black swan event like the most serious pandemic in a century, it is far more efficient to put that money into creating things of value, and to rely on the central government as a backstop in those circumstances.
> it is far more efficient to put that money into creating things of value
From my perspective, having enough food, medicine and stability to withstand a pandemic without putting the entire society on the brink of collapse is the most valuable investment we can make, while balancing that with providing human dignity and freedom to pursue simple pleasures for all people worldwide. Once we've provided human dignity and simple pleasures to every human being and ensured that it stays that way even in the case of a pandemic or other calamity, then we can start building luxury yachts for billionaires and trading in the stock market strictly for the purposes of profit.
That's my understanding of value and maybe I'm naive, but I think most people would see this as a worthy goal for us to share planet-wide. I think having a society that shares this belief, would itself produce an incredible amount of good will, motivation and purpose for many that currently feel alienated and disenfranchised.
Do you have a different view of value and what you'd like to see humanity achieve? I'd genuinely like to know.
First of all, I agree with you, but I just don't think it will be feasible ever.
I am called a curmudgeon because I don't believe my government should spend a single cent in arts or any non essential thing while there is a single person without food. Until that point, I am really against over spending.
I also think the main problem of society now a days, not even the rich, is the materialism everyone has. People feel bad for not having the last iPhone or even the last Zara t-shirt, and buying it gives them a dopamine hit, but long term, they enter the hedonistic treadmill.
But the problem is, not everyone thinks like this. Recently talked with an investor saying I would not take investment as I don't believe in the 'startup' path. It goes against my own goals. I was told I was wrong, I was told I was stupid and ignorant. I asked if he would be ok making money with WeWork and Theranos, and he had no problem saying that we would like it, and his words after I asked and how about the ones losing the money at the end, the reply was literally 'Fuck Them! I already have my exit'
While there are people like this (and from small 5 euro situations to billions) no society will achieve that balance as the people attracted to the money/power will find ways to corrupt/control the others.
I am currently battling leaving my job where I am in the top 2-3% of earners in my country and just finding a small house in a fishing village where I can surf and fish all day, grow my own vegetables, and do odd jobs here and there. I am tired of money and materialism and consumption. (Caveat, I know I can have this stand because I have the money/skills to not super worry for the future, I understand someone making 20k a year isn't in the same boat, but they can still make better decisions like not buying the new Xbox and iPhone with 15% interest as I have seen many do around here)
For example, there was a recent article on coronal mass ejections causing issues with the US power grid, bringing the US power grid down for 3-4 months (which is how long it takes to build replacement parts) but two issues came up: the whole world would have the same situation, and it costs about $400M to buy the parts.
Do you think we should invest in this, or just lower taxes so more economic activity can occur?
We should absolutely be investing in that, similar threats like supervolcano eruptions, and, obviously, climate change. Until recently you might put a global pandemic on that list too, actually! Unfortunately both the capitalist and democratic systems are poorly suited to tackling such long-term threats. Climate change is the most immediate and certain of these (outside of pandemic), and even there the response has been pretty poor. But at least there is a response, unlike for these other disasters that will hit someday; we just don't know when.
FWIW I don't think you should be attracting so many downvotes, because while your point of view is apparently unpopular, you do seem to be arguing it in good faith. (Although for what it's worth, bringing yachts and day trading into it seems a bit of a strawman given the conversation was originally about main street businesses.)
I think my answer to another comment of yours above basically outlines what I mean by creating value. The example of the successful restaurant choosing between building up cash and opening a second location. Basically if a business has sufficient profits that they're able to store up a significant cash buffer, it's because they're making something that people are willing to pay for. (Or they're particularly good at regulatory capture or rent seeking or something, sure, but for the most part there is a correlation between earning money and providing something of worth.) Businesses that make popular products and provide popular services—things that people like and are willing to pay for—make more money than those that don't. And these things that people want and are willing to pay for, by definition, have value. So rather than sitting on cash, when possible we would like these businesses to do more of what they're doing.
As another example, say you start a tractor company. You really understand what makes a good tractor, and your tractors are widely considered to be the best available. The only problem is, you only have one small factory, and can only produce a small number of them. You turn a profit on each one, and you want to be responsible, so you're saving most of that profit in case of a natural disaster or other calamitous event. It takes around 10 years to save up enough that you could keep all your staff on, your equipment in good shape, and your rent paid for a year, but you manage it. Unfortunately in the meantime, most of the farmers in the worth need to make do with shittier tractors, because instead of growing your business you're trying to build up a bunch of cash. Wouldn't it be better if you reinvested as much as possible into the business—borrowing even—to scale up your production as quickly as possible? That way more people get to benefit from your awesome tractors and everyone is better off. If a pandemic happens, the government helps you get through, so once it's over you can go back to making and selling these machines that are making farms more productive. And all the added production from that reinvestment is of course also creating jobs, paying more in taxes, and earning you more income as well.
Now sure, your direct competitors won't love your selling a better tractor, but if we scale the example out to the whole economy, the more successful companies are making and doing successful things, the more actual wealth is created for society. And of course, not all companies make useful things, and the things people spend money on aren't always objectively valuable either. But in aggregate it's pretty clear that value is created. Just look at the quality of life people enjoy now compared to say a century ago. There are serious problems (like climate change) that we need to tackle—I'm not at all arguing for unregulated capitalism as a panacea. But I think it's objectively true that if all companies strove to each build large nest-eggs to weather events like this one, far less wealth (meaning tangible stuff of value) would be created than is otherwise the case.
Let's skip small business for now. The economy is structured to leave most of the people with just enough money to buy couple of beers after covering basic expenses. It simply leaves no room for few month worth of savings. And every accident (like a visit to dentist) adds to financial instability.
Not everyone works cushy 6 figures IT job and hangs on HN.
I'd like to see some stats for that - I just did a quick google search and returned a top 10 list from investopedia[1] which has it evenly split between high and low earning countries.
It makes no sense for governments to save money. With negative interests and good ways to spend the money it will pay itself pack in the future. Of course depending on how it is used.
For example improving schools almost always has a positive return.
OK, expecting multiple years of savings is just flat-out unrealistic. Even the more hardcore financial advisers only recommend 9 months.
Plus, who owns 2 t-shirts? Are you doing laundry daily? Hate to break it to you, but that isn't exactly great for the environment either. My father grew up poor as hell on a farm, and even he had 6 shirts. To this day he will comment that they were darned to the point of being patchwork, but owning 20 shirts doesn't seem like a huge extravagance. Even with homemade clothing, that isn't a ridiculous wardrobe.
There is definitely a consumerist culture and people buy stuff they don't need, but in the context of this article & the pandemic the people receiving this aid need it. I don't mean to be negative, but there are 0eople making the decision between paying rent and eating; calling out consumerism for this is in poor taste.
> Imagine you have a family and you lose your job. If you have savings for a couple of years, you can take it easy for a while and then go look for a job and find one 6 months later. Was anything other than your ego bruised by the loss of the job? No, not really.
I lost my job in Germany and got one year of unemployment benefits, no savings needed. Min wage workers have no way to build 6 months of emergency fund and keep the "dignity" you're referencing in later post. If on top of that they also have to build their own medical insurance and retirement fund it's game over from day 1.
> Why doesn't this analogy translate to what's happening with covid?
It's the same thing as unemployment benefits, insurances, &c. in the end, money going where it's needed* to avoid people losing everything to events out of their control. (*which hopefully is small/medium sized businesse, not mega corps avoiding paying tax whenever they can but that's another issue)
> people need a reality check and get back to living a simpler life with less shit being bought and sold all the time.
That's for sure, sadly it doesn't look like we're going in that direction. I'm personally appalled at how some people spend their money but it's part of the game
> I lost my job in Germany and got one year of unemployment benefits, no savings needed.
I'm glad you were able to get those benefits. I think in general it is a good system. You say no savings needed. By that you mean you personally did not need to save that money. But somebody did. Unless the German government is printing money they would have to get that money from somewhere. If they don't have it now they would have gone to the bond markets. In which someone will have to save for it in the future. Again this is not a bad thing. I think it is important to point that someone will have to foot the bill. In some cases it will be a future generation (depending on how much the government is having to borrow). This is usually in the form of taxes. Which presumably many would pay. Including those who did not receive any direct benefit during the crisis. You could argue that it is for the greater good. And many would agree. I personally do think there is something to learn from the position taken by GP. After all in the eurozone we regularly see contrasts between the frugal north (Germany, Netherlands, etc) and the spendthrift south (Italy, Greece, etc). Whether as individuals, companies, nations perhaps we could think about how to best to manage our resources to be able to weather the storms that may come our way.
Of course, that's why I pay tax. I actually had saved money anyway, but the peace of mind you get from getting unemployment money is priceless. At the end, as I said, it's exactly like a car or health insurance. Almost no one can pay for a cancer treatment or a major car accident with no insurance, but not everyone will have to go through that in their life time so we all chip in and make the world a better place. There will always be people gaming the system, we should obviously take care of that in a way but it shouldn't be the focus.
It's always easy to say "I" save, "I'm" frugal. Yeah ok, we're software engineers, project managers, &c. and make 3-10x the minimum wage regardless of the country we live in. We spend dozens of hours every few months on this site debating about how the new $4k macbook keyboard suck while most people wouldn't be able to afford one if they saved for a year... I don't think most of us are equipped for this discussion.
I'm not sure about "the frugal north" vs "the spendthrift south", maybe system wise, but having lived in france, germany, california and greece I can say people as individual mostly live the same life and want the same things.
tbf I think the GP has a point about senseless consumption &c. but the whole "if you saved money you wouldn't need help" is bs on every level. Even I and my, so far, privileged life can see that as an individual things can quickly turn bad and spin out of your control.
> What it's really doing is subsidizing everybody that works in or is tied to non-essential face-to-face service industry, by everyone else.
Not, not really. Canadas bond rates are 0.5% it seems. The country just has to lend a few billions, wait a few decades, and the debt is essentially gone due to inflation alone.
Any analogy between personal finance and macroeconomics is doomed from the start. If I printed money in my basement and I could spend myself out off a slump, then it might be comparable. But I can't.
The problem isn't over consumption [0]. We have the capacity to produce; and unless you are suggesting that society should be hoarding warehouses of miscellaneous goods, production must equal consumption. When some external stress hit, our capacity to produce (and, in this case, consume) goes down for non economic reasons. Fortunately, we have such an overcapacity of productive capabilities that outside of a few goods that saw a sudden demand spike, this loss of productive capacity is nothing more than an inconvenience. If our productive capacity was only that which was essential, not only would we be sacrificing goods and services during the good years; but we would also not have so much slack that we could weather such a drop in capacity without without serious supply shortages. Indeed, there are still parts of the world that do not have are level of "unnecessary" production that are now facing famine.
The problem we in the wealthy world are facing is one of distribution. When we made the policy decision of shutting down non critical production, we also broke a critical component of our resource distribution system (namely, giving people tokens that can be exchanged for resources). Since we don't have a centrally planned economy, no one is really in the position to make this kind of policy decision, so we are left with the option of mainting something like the previous system just giving people those tokens by central fiat.
[0] Unless you want to blame the pandemic on environmental changes and travel consumption. This isn't completely unreasonable, but even in the "natural" state, pandemics happen.
>people need a reality check and get back to living a simpler life with less shit being bought and sold all the time
Who sold them that stuff? Who convinced people that they need to upgrade their phones every single year? Nothing will change until we destroy the marketing/advertising industries that profit off manipulating the most vulnerable people...
> If you have savings for a couple of years, you can take it easy for a while and then go look for a job and find one 6 months later. Was anything other than your ego bruised by the loss of the job? No, not really.
> Why doesn't this analogy translate to what's happening with covid?
Because, as a share of population, approximately no one in the workingn class that makes up the bull of the population has “savings for a couple of years”, and that's not just a transitory situation but a fact that capitalism structurally guarantees.
> why is non-essential services taking a vacation for a few months at the expense of everyone else supposed to be a major event with long-lasting consequences?
That government response is there to help slow the spread of COVID-19 which then results in the saving of many tens of thousand of lives.
If the government didn't step in to help, people are then forced to go to out to work which then helps to spread the virus.
>> I find it difficult to be sympathetic - people need a reality check
I think these are the two key points. And sorry if it gets personal, but the first point one is obvious, and the second one is true - yes, yes you do.
There are people in the world who lack empathy. They don't understand those who are unlucky or in hardship. I mean, intellectually they say they do, but believe there's always a personal failure that's to fault, rather than any impact of environment or circumstances. They also believe their own situation is only due to their good work and thinking, and not due to any external circumstance, and they'd have been that successful in any set of circumstances.
That single mom working 12 hour shifts at Amazon warehouse - well it's her fault that she got pregnant / that father left / that she doesn't have savings. That Ontario auto worker with five kids who lost their job last year due to car industry moving on, and has been using their savings to retrain while looking for another job, it's their fault for running out of runway or not seeing the industry direction earlier. Etc Etc Etc
It's just sociopathic inability to see outside of one's own context and history and internal narrative. To imagine a series of unfortunate events. Sure you own 20 t-shirts. Doesn't mean all people do and/or have "tens of millions of gambling debt". I mean, honestly, the wording in that post is beyond cruelly clueless, it just feels like a troll. Nobody could ACTUALLY be that blind to their own personal privilege.
As I said, this could get a little personal.
CERB is not MEANT for people who gambled or have too many t-shirts. It's for people who work hard and now cannot, and are dis-proportionally impacted. I have a high salary and can obtain it from home - great. It's my luck and blessing and life choices and privilege.
The 21 year old at beginning of their career and no savings and who can NOT work now... is ORDERED to not work... the family running out of food... that's who it's for.
Canadians have overall made a decision (repeatedly) we'd rather help the innocents, at the risk we get a little abused. It's our stereotype. And the reason I live here.
The notion that we'll pay for it, that we're making up numbers, that it's unsustainable - those are all valid points. But the notion that these are all some over-privileged clueless people who are getting free money for no good reason... Jeebus. Somebody is wrong on the internets!
Absolutely. When it happened, a few Canadian friends of mine were impressed with Trudeau but when we walked through the amount and where it would likely go, we realized it was purely to hold up the housing market. Without this, the housing market would have collapsed FEROCIOUSLY. So this was a gift (yet again) to Canadian landlords and homeowners at the expense of the younger generation.
Where do your Canadian friends live? You _do_ realize that CERB payouts are the same nationwide, and if your friends are using the majority of the CERB payment to pay rent, that's a result of living in a high rent area.
The younger generation also benefits from CERB and there are other appropriate programs for youths and students.
How do you become homeless by the 'housing market collapsing'? If the price of housing goes down rapidly (which I guess it what's meant by 'collapse'), that makes it more affordable, not less.
What do you think happens the tenants when the landlord's properties go into foreclosure?
What do you think happens mortgage lending in such a scenario?
What percentage of current renters have a 20% downpayment ready for even something as large as a 50% drop in home values? In Toronto, last I checked it as 1.1m for the average house and about 800k for a reasonable condo. How many current renters do you honestly think have $110k/$80 ready for a downpayment?
A housing market collapse only benefits those with great sums of capital on the sidelines waiting to deploy.
> What do you think happens [to] the tenants when the landlord's properties go into foreclosure
That actually depends on where you live - here in Ontario, we have laws that give tenants the right to stay even if the landlord sells/loses the property. The new owner must allow the tenants to stay, with the same lease terms, even if the new owner is a bank.
Granted, there is a problem of someone doing an "Amazon", but these dangers can all be accounted for and cheap homes would vastly benefit the younger generation. Granted, maybe progressive taxes on property are needed, but I don't see problems.
So 1.1m for a house is probably a problem. What is the alternative to fixing that?
>cheap homes would vastly benefit the younger generation
The USA, Ireland and others have already been through housing busts in the last 10-15 years and it had no effect on home ownership.
>So 1.1m for a house is probably a problem. What is the alternative to fixing that?
Keep in mind we're talking about prices in some of the most attractive places to live in, in North America. Places that are also the target of skilled immigration and migrants with money also.
As you probably know, it might be $1m for a starter condo in NYC, but you can pick up a detached house in a decent area elsewhere for a quarter of that.
The unaffordability of the cities is a function of supply vs demand. If you want to bring down city property prices, simply reduce the need for cities.
There are plenty of megalopolises all over the world where housing values are not nearly as extreme as they are in North America. In ten minutes of searching, I found a 3 bedroom condo in Tokyo marketed to expats for $350,000. With a parking spot. And a balcony.
Is that a function of keeping up with supply by building? And if so, what does Tokyo do structurally that NA cities can't seem to get their act together to manage it? My understanding is that in Japan generally, there is more of a culture of destroying housing stock and rebuilding. I presume that leads to building with greater density if there is more turnover. And presumably, this also helps with keeping up the infrastructure expansion to support density (transit and utilities). Just a hunch, is it true?
It’s a good hunch. I think the biggest thing they do is that planning and zoning isn’t done at a local level, it’s done at a national level. So you can’t get your neighbors together to vote out your representative or throw massive amounts of effort at stymieing development. I think some of it is cultural, too. The Japanese are still dealing with the fallout of the real estate crash in 1992, the Nikkei 225 has still yet to reach the peak value from that time, and they just don’t look at real estate as an asset that will always go up in value indefinitely like we do here in the West, so there’s no political will to maintain that.
You can't fix that in Toronto. You have to build more but the population of Toronto is growing significantly so even if you do it won't fix the issue. If you save $100k the monthly $5500 mortgage won't get paid with the salaries. Two big things that are being discussed by citizen's are restrictions for purchasing by a non citizen and limits on Airbnb renting.
everyone always says this as if housing and the economy are two separate things.
you cannot have a strong economy while housing has crashed.
housing is at the top of the needs hierarchy. when people have money they will put as much as they can into housing. so if the govt gives everyone $10,000, probably 30-50% of that will flow to housing. that doesn't mean that their intention or only goal is to "support the housing market."
You can absolutely have a strong economy when housing has crashed.
Housing crashed = cheaper housing = more labor mobility = labor can spend more money on their "higher level needs" like eating at restaurants or elective medical care or online shopping.
Would you say "you cannot have a strong economy while the food prices have crashed"? Obviously not, lowered food prices would be seen as a good thing by everyone.
> Obviously not, lowered food prices would be seen as a good thing by everyone.
Until the companies providing the food go out of business. Or get bought out by foreign firms with no incentive to provide good food or service, e.g. Tim Hortons (owned by burger king, which is in turn owned by a Brazilian firm).
Why would landlords take a haircut for a pandemic? In most cases, they have mortgages to pay as well.
If you want to cut out the middleman, Canada could’ve paid mortgage bondholders directly through mortgage servicers on behalf of tenants and landlords.
man it sucks. I'm one of those savers and have been waiting for my turn to be able to buy a home for last 5 years. I was hoping the house prices would come down to affordable level, but they are on fire again! What's the point of being responsible when spending and borrowing like there's no tomorrow will guarantee you help from govt?
I'm a saver myself for the most part, but the economy is not designed around saving. Its designed around moving "pending" money towards growth areas.
For example, a bank only agrees to hold onto your money, because it will actually spend it for you.
Whenever you "saved" money, unless it was in your own coffin of gold, you actually just gave it to someone else to spend it with the promise that whenever you want it back they'll have it.
That said, if the market crashes, they won't have it. Because the bank's plan to "have" your money when you ask for it is actually to give you someone's else's. Cause your money has already been spent, either loaned to someone who wanted to buy a house, or start a business, etc.
That means if all those loans defaults, the bank actually won't "have" your money, it'll have lost it.
This is at a high level (from my understanding), why the government always bails out banks and bank related markets like home loans. If the bank go broke, everyone's money is gone.
In that case the economy fails its basic function on the back of young and old people in the interest of risk takers. Although you cannot call it risk anymore since government will save you in times of need.
Yeah, banks are basically like video game servers. Once they shut down the servers all the stuff on the servers is no longer accessible. However, you missed a few things. As long as people don't withdraw cash, the money will always be stuck in the banking system. When you spend borrowed money it just lands in someone else's bank account. Banks basically have a license to print money. As long as a bank doesn't go out of business it will pay it's loans back eventually.
Only issue in your rationale is that the savers are usually the ones who own the "Capital". I'm not in the circle but my boss social economic strata, his type of people are buying Ferraris during Covid. Not sure how can an average household can afford to spend $250K for a car like that now. But there are MANY of those in Canada doing it NOW.
Not trying to insinuate anything here, but I'm giving you some data points to show that it's not just a matter of moving money from spenders to savers, but there are other things involved.
Are you surprised that the wealthy, with the power they wield and the money they have, are much more connected to the levers of power and much more adept at working them giving their connections and wealth?
There has been some talk of support for renters. I'm fairly convinced that this is a bad idea, as any increased will go to the property owners. Bring rental prices down means increasing stock, but I'm not sure anyone has a plan for that.
The state building decent affordable housing on a massive scale to increase the supply and bring down the absurd prices.
The UK managed it post-WW2 when it occurred to the government that hundreds of thousands of well trained, very fit young men who'd been taught to kill where going to need somewhere to live over the next two decades.
At the peak of that in the 60's we built 400,000 council houses (in addition to private housing) per year.
In 2017 we built 160,000 in total.
Also back in the 60's there where strict rules on the size of family council (state) built housing around size - so those 400,000 houses had more generous room sizes on average.
The thing the plan lacks is a plan to get around the fact that home-owners will go ballistic and that government disproportionately listens to them and I say this as someone who will be buying a house in the next couple of years.
Ironically I'll be putting an ex-council house high on my list because a lot of them where built like battleships, had high ceilings and nice room sizes and frequently decent sized gardens.
Oh and to make it worse, Covid has and will decimate the house building industry, it's already an ogliopoly (the top 10 builders account for >50% of all houses built and artificially restrict supply to protect prices) - the remaining small builders are basically knackered at this point.
They really did build some nice ones.
What we really need is people with a bold vision of how to solve the problems, someone like Ebenezer Howard who started the garden city movement in the late victorian era but frankly we don't have them and if we did they likely wouldn't get elected anyway.
It seems like we are stuck on this one way downward spiral when it comes to housing for no sensible reason I can see.
Being in Canada, I think that helped a lot of my friends who had expensive rent to pay in Downtown Toronto. But, it's not clear how the financial aid will help the small businesses; I can see that a lot of the restaurant in Downtown are not going to recover and those people who eventually weaned off from the government support, won't have a job to go back. Expecting that some other business will fill those gaps won't happen suddenly.
There are support for business to pay up to 75% and for small businesses a $40K loan with $10K forgivable. At least in Downtown Toronto, those support won't do much specially because the rent is super expensive. Expensive in the range of $5000 and up for a small restaurant in downtown area. You can also find news from BC, where the rent relief for landlords are not being adopted because landlords are not willing to register for the support and the business tenants are not getting support because of that. News don't say why that is happening but it's something interesting to think about.
Being the son of a Canadian small-mid business owner, I can say that what's unique about CERB is the "limbo" status of it. The employer doesn't need to formally lay off the employee, nor produce an ROE, etc. They basically just stop paying the employee and then the employee claims lost wages and gets (some) reimbursed by the government. The end result is that if those jobs DO come back (some have already), from an employment standpoint it's like the employee never left.
> people who eventually weaned off from the government support
I actually don't think we go back. Two of our parties love giving stuff away in regular times and will gladly use this crisis to bankrupt the country. The next election will basically be a race between who can give the most free stuff away - to a much higher degree than we normally see. This time it will be literal "vote for me and I'll give you $5,000 per month - that's $1,000 more than my opposition!".
The election after that one will be interesting though.
The Liberal Party has different priorities than the Tories, but we're not wild eyed spenders. This year is different, but generally speaking we strike a balance between priorities.
On the other hand though reducing taxes and spending less on services results in the community being impacted. In this case, if Canada hadn't stopped supplying PPE and stock piling it, early on there would have likely been more supplies available for long-term care homes and nurses which would have helped fight the spread and protect the vulnerable early on. Also, in theory going back to 15% GST instead of the 13% HST would bring back a lot of money to offset the CERB payments. It's tough because there doesn't seem to be a correct answer as if we do spend more money on government initiatives it goes to lobbying/bureaucracy/friends and family.
Not sure if I understood your comment, but for sure the employees once having nowhere to go back will be more "available" in the market just like many others in similar situation.
Landlord here. Someone else said it best. We have mortgages to pay too. The province also shut down the possibility to evict in order to pay it (for now). CERB nullifies what would have been an explosive, shitty situation for everyone.
From time to time landlords have to go bankrupt after taking too much leverage.
If landlord’s mortgage is risk-free, it means that the landlord is leveraged at the expense of people who don’t have home — which is rather unfair economically, and leads to more inequality. Wealthy risk-free landlords get passive income and re-invest it into more leveraged assets, poor people pay taxes to bail-out their landlords.
I’m not sure where you are going with this. Are you saying CERB shouldn’t exist? For the inequality issue you mention, what solution would you propose? A socialist state?
The CERB is all the downsides and expenses of UBI without any of the benefits---no incentive to find work, bureaucracy hell, Canada has to worry about and invesigate fraud, doesn't help poor workers working minimum wage jobs (which are almost all essential)
Yes, they've made it highly abusable and pretended this was a "feature", then backloaded all the bureaucracy into the Canadian Revenue Agency (CRA) who will have to determine how many millions of people received aid when they didn't qualify.
It would honestly be better if they just said "free money for everyone, just click here" because the CRA will now have to spend the next decade trying to collect fraudulent benefits. The cost of the entire program would probably be 25% higher if you factor in what this will cost to audit and attempt to collect from fraudulent claimants in the future, plus the lawsuits from tax payers because Canadian leaders literally instructed people to just claim it even if they didn't qualify.
Ah yes, total bureaucratic hell having to spend a total of 30 seconds to sign into the CERB site and confirm your eligibility, then receive payment directly into your bank account in 2 days.
Either they will thoroughly review everyone's eligibility post factum, which will be pretty close to bureaucracy hell, or they will let tons of amateur fraudsters get away with free money.
They promise the former but my money is on the worst-of-both-world combination. That's not how UBI is supposed to work at all.
Regardless of how it turns out, the middle class will end up paying for it as the effective tax burden on the 0.1% remains untouchable.
I hope everyone's enjoying their vacations, at least it's a nice summer.
* Who have stopped working because of reasons related to COVID-19 or are eligible for Employment Insurance regular or sickness benefits or have exhausted their Employment Insurance regular benefits or Employment Insurance fishing benefits between December 29, 2019 and October 3, 2020;
* Who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and
* Who have not quit their job voluntarily.
Because it's not a UBI and government programs have the tendency to multiply like rabbits, we also get the Canada Emergency Student Benefit (CESB) and Canada Emergency Wage Subsidy (CEWS) to cover different groups.
The impact on the debt is already quite shocking, nobody is talking about it 'because pandemic' but it's going to be a really, really long and ugly hangover. For everyone.
Just quintuple (or by some far greater factor) skilled immigration after the pandemic; Canada will still be incredibly attractive to people from around the globe. It's one of the countries I'd be least worried about.
And the skilled jobs those immigrants are supposed to fill will materialize from thin air? There won't be a skilled labour shortage in Canada after the pandemic, quite the opposite - high unemployment as businesses fail to recover - is much more likely. You can't just throw immigrants at every problem.
Longer term. Immediately immigration is literally impossible with borders closed. And no, you can't solve every problem with immigration, I just wouldn't be worried about Canada 5 years from now and one of the reasons is it'll probably be able to afford some of the best talent on the planet, if it invests well.
Canada does not attract talent, it attracts workers.
The USA attracts talent, and workers.
Those that can't get into the US but get into Canada and are reasonably talented, who don't have family ties - eventually go to the US. Two of my staffers, one from India, one from Jordan, just did this. For them, Canada was a temporary layover for a few years until they could go stateside.
Canadian wages are considerably lower than the US for 'talent' so generally, people prefer to go to the US.
Canada doesn't have very many true product, engineering, design jobs wherein the outputs are developed on an international scale, not a lot of things are really 'made here'.
On the high end - Canada imports doctors, software folks to do CRUD, ane engineers that never get to do engineering. One specialization is teaching and research for University, some number of profs are brought in.
But mostly - it's people with education who will never get to use it, and a lot of people to work in retail, coffee shops and Long Term Care homes.
Edit: after reading, this sounds very cynical! Although it is to some extent. Migrants to Canada in the economic class generally have education, like a Uni degree, though this is an only necessary one in the family, not necessarily the spouse, parents, obviously not the kids. Skills are often not very transferrable, and there are surprisingly few jobs wherein one can jump right in with 'technical knowledge' of some kind and Canada does not have the high-tech industrial base to support the need - Canada is almost last among OECD nations in terms of R&D investment, not because of the lack of R&D among individual companies, rather, the lack of the kinds of companies that actually do R&D. The Uni system is very good, tons of good research, but the commercial bits don't happen in Canada.
I wonder how much of this is due to actual structural issues in Canada, or the proximity, and ease of access to the tech-power-house regions in the US. Most US states probably have smaller tech-communities than Canada too. If we look a the US+CA as a group of metro regions does the distribution make more sense (in that for historical reasons with knock-on network effects, you see a power distribution of area with vibrant ecosystems of talent and venture capital) or do you see systematic biases that are acting as rate-limiters? I'd be very curious for any answers to this.
I think you are on to something here, breaking it down by metro regions. In Ontario, it is pretty much GTA vs the rest of the province, as much so that the easing of COVID restrictions as of now proceeds separately for Toronto for example.
I wonder if we see the beginnings of a modern reincarnation of the city-states of ancient past.
I think it's two things, one of which you mentioned:
1) Structural. Canada is a 'large open economy' next to a 'massive open economy' where the economic pyramid is 10x - plus more inequality and they are a global player meaning that everything important in Canada gets consumed by the American system. Bought, put out of business, or talent goes south.
Bombardier is a good example: Trump arbitrarily and totally against NAFTA laid down tariffs which led to the failure of the business and put into the hands of another major power - the EU.
2) Cultural. A lack of focus on exceptionalism, and without very strong cultural foundations, a historical focus on 'equity' and 'stability' (which can be good things of course) Canada cannot play 'asymmetrical jujitsu' like Sweden, Switzerland, Singapore, Hong Kong (pre takeover), Israel. It's a hugely contentious thing to say, but large scale migration - for all its benefits' - also exacerbates the problem, by creating more of an 'economic civility' rather than 'cultural civility'. When PM Trudeau sad Canada is a 'post-nation nation' - what he was saying without realizing is that Canada is simply going to be a 'safe, fair, trading post'. Think of Canada now really as 'The Hudson's Bay Trading Company' like a giant corporate living space, managed by well-meaning functionaries. Absent cultural foundations, then core civic and economic elements come to the fore. Canada can be thought of as 'an international economic zone North of the United States', basically without any real elite or national vision. The strategy is 'build more homes, get people into mortgages from one of 6 nearly identical banks, get them buying every day from Tim Hortons, Starbucks, McDonald's, get them in high-consumption environments near shopping malls full of foreign brands, and making consistent car payments, again, mostly surpluses going to foreign car companies. Working either for the government, a small business, or more likely the local office of a large international firm like KPMG, Ford, Price Waterhouse, etc..
Basically, a massive suburb of 'civic consumers', where it's very safe and placid, but nothing really happens either - no intellectual, creative, operational leadership, nothing to distinguish the situation from an arbitrary, nameless suburb anywhere else in the modern world.
This is happening a lot in the world, but the capital of this is Canada.
When you travel, it's getting harder and harder to 'know where in the world you are' by looking out the window, which is tragic.
I'm a USA-ian in Canada. Married a local, been here a while, work remotely for a US company.
> Canadian wages are considerably lower than the US for 'talent' so generally, people prefer to go to the US.
Easily a difference 40% or more. The CAD is about 27% weaker than the US Dollar, and even after accounting for currency differences the salaries are still lower in an absolute sense. Taxes are also much higher and ramp up much quicker, too, meaning there is less of an incentive to pay you big $$$ since you're going to be losing a much higher % compared to places without state income tax, like WA or TX.
If you spend time on reddit, head over to r/cscareerquestions, and you'll see a ton of "Canadian trying to go to SanFran" type posts. It's not hard to do -- the NAFTA TN visa still works -- and the FAANGM salaries in places like SV, DC, NYC, Seattle, etc. blow most Canadian salaries out of the water.
> On the high end - Canada imports doctors, software folks to do CRUD, ane engineers that never get to do engineering. One specialization is teaching and research for University, some number of profs are brought in.
Literally 5/8 of the apartments in my building are these people, lol (myself included). Imported Uni professors from India, a couple from S. Africa doing medical stuff, and a few foreign IT guy types.
> But mostly - it's people with education who will never get to use it, and a lot of people to work in retail, coffee shops and Long Term Care homes.
I disagree with the former, but the latter part is true -- Canada imports a lot of TFWs to work at Tim Hortons or nursing homes.
There are countless 'Engineers' in Canada, not doing Engineering. It's a 'big thing' right now in government - they're trying to figure out why so many 'credentialed' immigrants are not getting hired in their respective fields.
The government believes 'it must be racism' to the point wherein Ontario gov. has banned requiring 'Canadian experience' for jobs etc..
This is surely, at least partly true. It's a problem. But - overall, the issue is really that 'credentials are not equal', 'credentials may not be relevant' and most importantly 'credentials are only a small part of the job'. There are actually few jobs in Canada wherein someone's 'technical ability' will qualify them for something right away.
Doctors - well there's a pathway for them. Profs if they are hired into Unis. But even in IT - it's not so much one's education that makes one ready, we know in high tech that a lot people don't have technical degrees. Yes, ABC Corp. might be specifically in need of 'materials science' people but that is rare. Companies need people with technical backgrounds that can communicate, manage, problem solve in a North American operating environment, and they also need tons of people in talented areas wherein credentials just don't mean a lot. If you look at any successful tech corp a small minority have technical roles. Sales, Marketing, Product Management, Field Marketing, Sales Support, Branding, Customer Operations etc. etc. these are all communicating jobs wherein people who are more culturally adapted to the environment are better prepared. This is the primary driver of the 'migrant vs local citizen wage gap even among credentialed jobs'. Unsurprisingly, this gap closes over a couple of decades, which makes sense.
In places like Sweden, this problem is exacerbated by the fact that Swedish culture is very specific, the language is hard and so they're really having difficulty getting newcomers into more sophisticated roles. It's inevitable and an inexorable fact of the system. One way to mitigate this would be to make migration a little bit more job-based, in which case employers would be making the decisions as to 'who is employable' which makes much more sense, excepting the ugly scenarios wherein you get wage suppression, which is 100% a reality as well. (The large banks in Canada started dumping call centers in Canada and moving them offshore, which is an example of that kind of thinking)
This tracks with my observations. Perhaps the rise of remote work will move this needle a bit, but what you said has been true for at least a few decades. Canada has excellent execution ability (open secret in the industry) but too few companies to leverage that ability, or at least they're narrowly focused in certain industries like banking and natural resource extraction.
That said, if you roll the dice enough, you get lucky sometimes. Tobi Luetke (Shopify founder/CEO) is an immigrant from Germany. Mike Laziridis (Blackberry founder/CEO) was born in Istanbul of Greek parents. Michael Cowpland (Corel founder/CEO) was an immigrant from the UK.
Many of these outsized successes were low probability, high impact.
Canada does not make any advancements in helicopter design, and unfortunately, may not be contributing to aircraft design anymore if the Bombardier deal goes the way it does.
'Assembling' aircraft and cars for other nations who are doing all the real R&D, design, business and decision making is not 'advanced'.
Canada makes some decent games, but they're mostly driven by EA (USA) an UBisoft (France).
Canada has tons of AI talent coming out of Montreal, but no AI companies. That said, there are very few AI companies, mostly the winners are the FAANGS putting it to good use in their products.
Which will have the effect of depressing wages, increasing housing prices, and increasing social tension since the majority of those immigrants will be culturally alien.
Canada is a high-CO2 nation, more people = more emissions. It should be restricting migration to only other Western countries (where migration flows are likely to be two-way instead of one-way).
Modern day housing market is largely based on interest rate since most people finance their home purchase with mortgage. Just raise the mortgage rate 3 to 4 percentage and you will crash the housing market.
The housing market will never, ever crash again in any western country unless there's an economic turn that is incomparable to even what a 10 times more deadly COVID-19 could do.
As someone who works at a university in Alberta who is on furlough, this worry’s me because they will delay recalling us even longer. Since our provincial government is hell bent on destroying any form of non Christian learning institutions. Post secondaries have the covid front and the government cut front. Multiple people have volunteered for buyouts but the schools can’t afford the union mandated abolishment terms, being in education in Alberta right now is a career death sentence. Anyone worried about the debt from this needs to relax the majority of this money goes right back into the economy for food, clothing and shelter, and They’re clearly not relying on it for their families survival, it’s a tough nut to casually pivot elsewhere right now.
A little more context: What's not mentioned in this article is that the Liberal party, currently in power, has a minority government, and therefore needs the support of either the NDP (left of the Liberal Party) or the Conservatives (right of Liberal Party) to get things done. NDP was pushing for extending the financial aid, which is likely a significant political reason why the liberals chose to extend CERB (in addition to not wanting a massive number of evictions to occur all at once...). Here is some more info on the give-and-take going on: https://www.cbc.ca/news/politics/cerb-bill-impasse-1.5605937
Funny that you should not mention the Bloc Québécois, which was instrumental in supporting the minority government in its early days, and still is lending its support for specific issues. The fact of the matter is, the liberals have three different political parties to play against one another, not merely two.
It's complicated, and it definitely helps the liberals.
You are correct, I did a poor job of summarizing the linked article and should have mentioned the Bloc's role in negotiations as well. Unfortunately I can no longer update my original comment now but am glad you highlighted this, I agree the only point I was trying to make is there is more than one moving part here.
As much as it pains me to say, the liberals are in a relatively strong minority position right now. If there were a non-confidence vote, they would likely come back in a stronger position. The NDP is in about the same position they were before, but the conservatives are in a pretty bad spot. Their leader is stepping down, but no replacement has been chosen yet.
Yeah, the Liberals have gained a ton of support from their handling of the virus. In a normal situation they'd call an election at this point to gain a majority, but that would be an incredibly bad look in the middle of a pandemic, obviously. If the other parties took down the government and forced an election though, most of the blame would fall on them, and I'd expect the Liberals to clean up.
How do you figure? The liberals currently have 157 seats out of 338, they need the support of at least one other party on confidence motions (that party could be the Bloc as well)
The only thing that gets me is that unlike EI, CERB is not taxed up front, so many low-income Canadians claiming it are going to owe taxes on it next year. I would rather it be taxed up front or tax-free for the recipients. People are really going to struggle when it comes back on them.
About the original 4-month term (with 2 additional months at 0.15% tax, $12000 works out to $1800 to pay back):
"A recipient who earns the maximum benefit of $8,000 will have to repay $1,200 at tax time."
I think it's better to have more cashflow during the pandemic and pay the taxes later. Taxes can also be payed in installments. Obviously, all this doesn't matter if someone is not good at managing cashflow.
The regional variance in covid infection rates in Canada is high. Covid has always been at a relatively low level in BC, but severe in Quebec. (15x the death rate).
One wonders if you'll consequently see very difficult economic recoveries in different provinces.
BC is also much younger and healthier than QC; in addition, Western regions of North America are generally doing much better than the Eastern for some reason. It's really difficult to be sure what's going on right now.
82% of the deaths in Canada have been in long term care homes. These people were not economically productive on their own, so the impact should largely come down to the secondary effects their existence produced.
Central banks should be delegated the authority to issue deposit accounts and debit cards to all citizens, but apparently the world hasn’t ended enough for us to do that yet (which would make helicopter money super simple).
Wow, no way. This is way outside the bounds of what central banks do.
Remember that 'helicopter money' from central banks is not actually 'free money giveaway' it's just talked about like that.
When the Federal Government gives away money like this to citizens, it's more literally free money and it has to come from somewhere: either taxpayers or from debt.
The US Federal Reserve is buying individual corporate bonds now (and has already put about $7 trillion [!!!] on its balance sheet). Bank of England is straight up printing pounds, directly financing the deficit, to pay for the U.K. economic support for the COVID response. Remember, fiat is an artificial construct, and we can change the rules and how monetary and fiscal policy works at any time. It’s just a complex spreadsheet and cell formulas with enormous impact.
When a government gives away money, it’s borrowed or taxpayer money. When a central bank does it, it devalues the currency (behold the value of a reserve currency!). Regardless of the hangover, you still do it if it’s necessary.
I digress; central banks can do whatever we need them to as a society. It’s their job to responsibly pull the macroeconomic levers to meet their mandates.
"central banks can do whatever we need them to as a society."
Not really, Central Banks are not part of the government and they can't do things outside the very narrow scope of authority we give them. Especially the Fed, which is a privately owned entity run by the banks themselves.
The Fed is the last place we want to manage social security programs. That job is for the government.
Now, it just so happens as you point out they have some magic levers such as the ability to take on stuff onto their balance sheet, but using that outside the scope of their policy is another thing altogether.
So yes, we can make 'money, financing and banking' do what we want, but if we do - it will absolutely not be 'The Central Bank' - it will be some other new kind of entity, designed differently, with different power structures and different objectives.
"This is where we can modify their mandate at any time through legislation."
We really can't. To would so be a fundamental reconstruction of governance, tantamount to constitutional changes.
The central bank running current accounts for citizens and doling out money in a manner similar to how it tries to manage inflation using purchases on the free market etc. is so far beyond the premise of a 'Central Bank' that it's not a 'Central Bank'.
It makes the entity inherently politicized, as it becomes nary impossible to set 'targets' that aren't political.
So yes, we could dump the Central Bank and create a new entity that does 'Central Banking And Other Things' but there isn't even an intellectual framework for that, let alone some kind of reference anywhere in the world that could be used as a guide.
Putting the power of the printing press that close to 'giving out money' in a populist way is pretty scary anyhow and I wouldn't see the point in doing it at all.
If there are progressive social measures to be made, it might be for example related to how we structure what goes on the Feds balance sheet, and why, etc..
If we want to hand out UBI or something like that, it happens under government & the Treasury, not the central bank.
What value do banks add in this day and age? They arent loaning all the near free money the central bank is offering to sustain commerce, so my feeling they will be cut out at some point soon.
No, most good money is ownership of an asset, like possibly Gold, for example. For Euros, it's ownership of high-grade assets.
In the US, it's ownership of TBonds. Now, yes, TBonds are a form of debt, so there can't be a USD without the US making loans, but, the dollar itself is not debt, it's ownership of debt, which are different things.
Banks #1 job is managing risk. They do the work of determining who is credit worthy, on what terms and not, making the loans and taking on the risk.
Not all loans are guaranteed to be paid back. The interest rates the central banks offer require you to pay every single cent back. Defaults aren't permitted. Conventional banks take on the entire risk of default and they compensate for it by requiring collateral or higher interest rates.
If a bank is in danger of running out of money, then (in the US, where I work in banking) the federal regulators step in and take over the bank. They sell off assets to other banks and pay depositors their money (up to the EXTREMELY generous limits of FDIC insurance). The funds to pay for the losses come from an insurance system ("FDIC") that all banks pay into. (And in case of a widespread collapse of many banks at once, the federal government underwrites the FIDC insurance program.)
How do you think they will force many thousands of poor people to repay money that they don't have, neither in savings nor in income, while holding on to a minority position in government?
They're just lying about being strict on TV to make everyone feel better about it. They don't have the capacity or political willpower to follow through. It's been months, it isn't urgent anymore, if they wanted to devise any sort of eligibility checks they would have done it already. But the only real eligibility requirement is being ballsy / desperate / yolo enough to claim it.
I always had the impression that with these programs that repayment isn't the goal. Yes, the government wants its money back but if say only 10% of the money was "wasted" then you can just consider that money a form of economic stimulus.
If it was a universal stimulus that's be great, but that 10% is a hundred-million-dollar subsidy to dishonest people and outright fraudsters. Such incentives affect people's behaviour and over long term this might even accumulate to a pretty damaging change in culture that will be very hard to fix.
Some people like to complain about regular welfare programs being abused, but at least those have some controls, they're not just a web form with your bank details. Abuse rates will surely be much much higher for CERB, and that was largely preventable.
I’m ok with it - it allowed many of my friends to survive the pandemic with out too much fuss and any controls put it to prevent abuse would have delayed much needed help
My wife works as a professional in the field. She says outright and obvious fraud is criminal code territory, and simple dishonesty (like what most amateurs do, just lying to a government official because they think they can get away with it this week and next week doesn't exist) just gets you a permanent denial of any future payments. That means you're cut off from welfare, for example.
This is how you do a W-shaped recovery , the economic fallout of giving money away will have a secondary recession effect. Can't just print money and give it to your citizens for an extended time, otherwise all economic theory should just be tossed out the window.
Happy to pay for extended vacations for so many... I personally know several people who refuse to go back to work under the guise of “we don’t feel safe” so that they continue to get this free vacation. The debt hole that’s being dug on this fraud is incredible...
So what? Those people aren't hoarding the money, they're circulating it through consumer spending, and they're far, far from a significant minority, let alone a majority of people.
Every system has freeloaders. Keeping freeloaders in business during this crisis has more than enough downstream benefits that we really shouldn't care if some lazy assholes get to be moreso for a few months.
Personal safety is not something to joke with. Those people might be immunocompromised or otherwise have risk factors that would make Covid a potential death sentence.
Our company was luckily not hit badly enough to qualify for the 75% support on salaries (we did get a line of credit!), but I know several others who needed it and got the support they needed which is great!
It's not perfect - rent supports for storefronts, restaurants, bars, etc. could be better, for example - and it won't save everyone or every business, but it's made a difference in many lives and helped us stay home and quarantine more effectively without so much worry about making ends meet.
I just hope more Canadians remember it was the NDP fighting for a lot of these supports come election time :)