Canada can cope with a weaker dollar; in fact the country needs it
We find it rather incredible that the Bank of Canada is so nonchalant when it comes to the state of the Canadian economy. The degree of excess capacity is expanding by the month, inflation has swung to disinflation and the economy (in real output per-capita terms) is contracting at a two per cent annual rate. Yet the folks in Ottawa fiddle as the macro landscape burns.
Advertisement 2
Article content
Business insolvencies have soared 87 per cent over the past year to the highest level since the peak of anxiety in 2008 when the global financial crisis was raging. The number of people entering the labour market without landing a job has practically doubled those who found one over the past year. That has resulted in more than a 20 per cent year-over-year surge in the ranks of the unemployed and it seems amazing to think that Bank of Canada officials are unaware of that statistic.
Article content
Any concerns over a resurrection of the housing bubble should be put to rest by now, with home sales in the once-hot Greater Toronto Area chilling 3.4 per cent month over month in April, losing ground in each of the past three months and down five per cent from year-ago levels. At the same time, new listings have ballooned 47 per cent year over year, and this new demand-supply backdrop has created the conditions for a flattening out in residential real estate prices.
Now that shelter costs are beginning to stabilize in real time, it won’t be long before its inflationary effects fade from the consumer price index data because the headline inflation rate in Canada, absent the housing component, is running at a grand total of 1.5 per cent, melting before our very eyes from 3.9 per cent a year ago and 6.6 per cent two years ago.
Top Stories
Article content
Advertisement 3
Article content
If you don’t think the Bank of Canada can cut rates without help from the United States Federal Reserve, think again. This happened in 1996-1997, 1999 and 2003-2004. How far can it deviate? Well, let’s just say that in early 1997, with the Canadian economy heading into a different orbit than the U.S. under the budget belt tightening by the Jean Chrétien-Paul Martin dynamic duo, the overnight rate in Canada got as low as three per cent while the Fed funds rate was pinned at 5.5 per cent. There is precedent.
As for the Canadian dollar, well, sure, it will depreciate, and in two of those prior periods of monetary policy divergence (1999 and 2003), it took almost $1.50 to buy a U.S. dollar. What of it? The economy needs stimulus and currency depreciation is one key to easing domestic monetary conditions. Besides, we are so damned uncompetitive in this country, with negative productivity growth and no capital deepening at all for well over a decade, that unit labour costs in U.S. dollar terms are running at five per cent year over year, which compares very poorly to the 1.8 per cent trend south of the border.
Advertisement 4
Article content
Even without the Bank of Canada going its own way, the country sadly needs a weaker exchange rate as an ongoing crutch just to realign our cost structure with the U.S. and stem the tide of net direct investment outflows. In other words, we are sure nobody is even aware of the dramatic erosion that has taken place when it comes to net direct investment (this is “bricks and mortar,” not paper securities), but there has been a net outflow of real capital out of the country each and every year since 2014 totalling nearly $400 billion (more than $50 billion alone in 2023).
This is why the Canadian dollar remains in a fundamental bear market and why it is that even in periods when oil and industrial commodities hook up, there is a muted Canadian dollar response. It is not because the “terms of trade” effect is broken as much as it has been weakened by this relentless decay in domestic competitiveness relative to the U.S.
In other words, we have to cut our prices internationally just to protect our share of the global export market, and in the process, the nation is compelled to accept a wage cut, and there was nothing in the recent federal budget to address this chronic shortfall in terms of domestic competitiveness.
Advertisement 5
Article content
It would be funny if it weren’t so sad that economic documents such as the budget turn into political manifestos aimed at buying votes in the name of “fairness” over “growth.”
Recommended from Editorial
How is it that the Liberals are so adept at divvying up the national income pie instead of thinking creatively to expand it. It’s as if the term “productivity” to the politicians, bureaucrats and mandarins in Canada is a dirty 12-letter word. Better to pursue supply-side growth through an unprecedented immigration policy stance (never mind that there has been no economic payback, judging by the continuous contraction in real output and income in per-capita terms) than embark on measures to bolster productivity growth, which is the mother’s milk for future prosperity. But why bother when nobody outside the realm of economics even understands what productivity means, and it’s neither an attention grabber in election campaigns nor a vote getter at the polls.
Brian Mulroney and Michael Wilson got it. Chretien and Martin got it. But Justin Trudeau and Chrystia Freeland? Not so much.
David Rosenberg is founder and president of independent research firm Rosenberg Research & Associates Inc. To receive more of David Rosenberg’s insights and analysis, you can sign up for a complimentary, one-month trial on the Rosenberg Research website.
Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.
Article content
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
The Canadian Press. All rights reserved.
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
The Canadian Press. All rights reserved.
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.
New Brunswick Premier Blaine Higgs expected to call provincial election today
Sutherland House Experts Book Publishing Launches To Empower Quiet Experts
Arch Manning to get first start for No. 1 Texas as Ewers continues recovery from abdomen strain
Canada’s Probate Laws: What You Need to Know about Estate Planning in 2024
New Brunswick Premier Blaine Higgs kicks off provincial election campaign
Quebec won’t fund graphite mine project tied to Pentagon; locals claim ‘victory’
Former Canada captain Atiba Hutchinson tells his story in ‘The Beautiful Dream”
New Brunswick election profile: Progressive Conservative Leader Blaine Higgs
Comments