adplus-dvertising
Connect with us

Economy

Opinion: The global economy and financial system must brace for the coming storm – The Globe and Mail

Published

 on


Open this photo in gallery:

The Port of Paramaribo in Paramaribo, Suriname, on May 16. Suriname, a tiny nation ravaged by recession, inflation and impossible debts, saw its relief held up by superpower politics.ADRIANA LOUREIRO FERNANDEZ/The New York Times News Service

Agustín Carstens is general manager at the Bank for International Settlements.

The global economy is at a critical juncture that could weigh on prosperity for years to come. For the first time in decades, we face a combination of high inflation and financial fault lines. To stop these problems from becoming entrenched, it’s time for a reality check on what current policy settings can and cannot achieve.

Global inflation has crept down from its peaks as supply chains normalized, commodity prices fell and central banks embarked on the strongest and most synchronized monetary policy tightening in years. As we report in the latest Bank for International Settlements (BIS) Annual Economic Report, history shows that it typically takes a year for inflation to return to its previous level after surges, even during episodes less acute than the one following the pandemic.

Against this backdrop, there is an emerging sense of hope in some quarters that the global economy will achieve a soft, or soft-ish, landing. But we must be ready to tackle the significant risks that cloud this outlook.

One risk is that high inflation could persist. New price pressures could emerge. In many countries, households’ purchasing power has fallen, as wages have not kept pace with inflation. With tight job markets, workers may seek to redress the balance. Firms have found it easier to raise prices and may pass higher costs on to consumers, creating a vicious cycle. Once this sets in, it is hard to stop.

Meanwhile, risks to financial stability loom. Debt and asset prices exceed those in past periods of interest-rate hikes. So far, there are still buffers from pandemic-era savings and longer loan terms locked in during years of low borrowing costs. But these buffers are depleting. As they exhaust, growth could slow more than currently expected.

The resulting financial strains will likely come through credit losses. Weak banks risk losing their footing. Historically, banking stress often goes in tandem with higher interest rates. High debt, high asset prices and high inflation add to the risks. The current episode ticks all the boxes. Although banks are stronger than before, pockets of vulnerability remain, especially where rules to make banks stronger were not applied to smaller banks. As recent experience has shown, even small institutions can trigger systemic collapses in confidence.

Non-bank financial institutions will also be challenged. These types of investment firms have grown in leaps and bounds since the Great Financial Crisis. They are rife with hidden leverage and liquidity mismatches. Business models that worked in the era of low-for-long rates will face stern tests in a higher-for-longer one.

Shaky government coffers cloud the picture further. Financial instability, if acute enough, forces governments to step in to backstop markets. And it delivers a growth hit that weakens fiscal revenues. This would heighten already high public debt levels. In turn, any doubts about the government’s ability to pay its bills add to financial instability.

How should policy makers respond to these challenges? The task of central banks is clear: They must restore price stability. A shift to permanent high inflation would have enormous costs, especially for the most vulnerable in our societies.

To give central banks more room to fight inflation, extra measures must kick in to ensure the safety and stability of the financial system and institutions. Where gaps exist, new regulations may be required. Working together, central banks and governments should keep macroprudential policies tight, as this can limit the strains higher rates place on banks. And stiffer bank supervision could remedy some of the faults that came to light in recent bank failures. We urge policy makers to implement without further delay Basel III, the international standards for banks set in response to the 2008 financial crisis.

Fiscal policy must consolidate. This too would help in the fight against inflation and bolster financial resiliency. And it would provide badly-needed buffers that could be deployed against future downturns.

Above all, policy needs to take a longer-term view. Monetary and fiscal policies have carried too much of the burden of sustaining economic growth. As a result, they have severely tested the limits of what we call the region of stability – the mix of monetary and fiscal policy that fosters enduring economic and financial stability and defuses the inevitable tensions between them. History shows that overstepping these boundaries can trigger high inflation, economic slumps and banking, currency or sovereign crises.

Policy makers must be realistic about what they can achieve. High inflation and financial instability did not emerge by accident. They were the result of a long journey, reflecting in no small part an overly ambitious view of monetary policy’s ability to hit a small inflation target and a more general belief that macroeconomic policy could support growth indefinitely, without stoking inflation.

Mindsets need to change. They must recognize the shortcomings of repeated emergency action, which stimulates output in downturns but fails to rebuild buffers when growth resumes. To drive long-term economic prosperity, governments need to reinvigorate long-neglected structural reforms.

Without a reality check, we risk losing the trust that society needs to have in policy making. Only price and financial stability can assure wider economic prosperity over the longer term.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

 on

 

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

Published

 on

 

FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

Canadian Coast Guard crew member lost at sea off Newfoundland

Published

 on

 

ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending