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Why The Biden Pandemic Stimulus Bill Won’t Help The Economy – Forbes

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President Biden’s proposed stimulus/relief bill won’t help the economy, though it may help some at the expense of others. Neither cold logic nor the numbers support the idea that an additional $1.9 trillion of federal spending will provide any impact to the overall economy.

For the logical experiment, begin with the sectors that are sub-par now: leisure and hospitality, which includes restaurants, bars, hotels, theaters, professional sports, museums and so forth. How much federal money would induce my neighbors and me to go out to dinner? Unless our governor is bribed to allow restaurants to re-open, no amount of money will do the trick. That pretty much holds true for all other weak parts of the economy.

In addition to leisure and hospitality, school employment is down, both for public and private education. Many teachers are working remotely thanks to Zoom and other platforms, but the unused buildings don’t need janitors and the cafeterias don’t need cooks and servers. New federal money won’t will get the schools to reopen.

Some weakness occurs in other industries, but mostly that’s attributable to leisure and hospitality and education. Wholesale trade is down, for example, but that sector includes the people who sell paper products to restaurants and schools. Stimulus won’t get those sectors to expand.

That’s the logical story. The numbers reach the same conclusion through a different path, described recently by Larry Summers. Let’s assume that stimulus would get those activities going, or some substitutes. That is, with enough federal stimulus the unemployed waiters, hotel clerks and school janitors would find work elsewhere. How much stimulus would that take? Even that question assumes that everyone were willing to shift quickly, for a temporary new opportunity. But let’s make the assumption.

At the end of 2020, the economy was running about $0.7 trillion per year short of its potential. Potential GDP is a clear concept, though roughly estimated. The concept is how much our country would produce at full employment of people who wanted to work, and full utilization of factories and offices. Full employment does not mean zero unemployment; rather it means that the time it takes someone to find a job is normal. Similarly, it does not assume that every factory is running three shifts, but that they are running at normal pace, accounting for occasional shutdowns for maintenance and upgrades. The actual estimate is soft but unlikely to be grossly wrong.

So we ended 2020 with a $0.7 trillion shortfall from GDP potential. Then at the end of December, Congress passed and President Trump signed $0.9 trillion of stimulus. That happened too late to affect our final GDP report, so it’s all going into 2021. Consider this: a gap of $0.7 trillion was countered with $0.9 trillion of stimulus in December, and now we are considering another $1.9 trillion.

How will that money be spent? Most discussions focused on $1400 checks, Additional payments to unemployed people, state and local governments and for child care round out the large categories. Most people will use the payments to pay down debt and increase their bank balances—which are already very high. In fact, people in poorer zip codes are now spending much more than they spent a year ago, at the economic peak before Covid-related layoffs and lockdowns. There are some individuals in need of relief, but many laid-off workers received extra unemployment insurance payments that boosted their take-home pay above working wages.

If most people tried to spend their stimulus money, we’d all be fighting to purchase the same things. We’re pretty much producing at full capacity for the open part of the economy, such as grocery stores and online gear. Computer chip shortages plague electronics and automobile producers, illustrating the limits of our productive capability.

Eventually, pushing too much money into people’s hands—when productive capacity cannot match the spending—will prove inflationary. Early signs in inflation may show in 2021 and be clearly evident by the end of 2022 and certainly by 2023. At some point government debts come due, so if people have not paid for the stimulus through inflation reducing the value of their assets, then higher tax rates and higher interest rates will take a toll on the public.

The bottom line for the economy with the stimulus bill is no noticeable change in total spending, production and employment until Covid dies out, and then too many dollars chasing too few goods and services.

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Business

A timeline of events in the bread price-fixing scandal

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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.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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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.

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

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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.

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