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Analysis | The Biggest Threat to the US Economy Is Policy Makers – The Washington Post

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Something still feels off in this economy. It’s booming in many respects, with a strong labor market, healthy corporate and household balance sheets, and a lot of consumption. But some, like JPMorgan Chase & Co. CEO Jamie Dimon, are worried we’re seeing the calm before the storm. There are signs things could get gnarly. Inflation is at a 40-year high, shelves are empty, real wages are shrinking and labor is in short supply.

Government and monetary policy will play an important role in how this works out, but those policies are also the biggest risk to US growth going forward.

In their natural state, economies grow more than they shrink. Humans are remarkable for their ability to innovate and their desire to make their lives better. But growth isn’t guaranteed. Many countries have adopted policies that undermined growth. In the early 20th century, for example, Argentina had the same GDP per capita as Canada; now Canada’s per capita GDP is more than five times Argentina’s, in part because of the South American nation’s feckless fiscal and monetary policies and decades of political instability following the Great Depression. Haiti and the Dominican Republic’s economic fortunes diverged after the 1960s. Rich countries have been fortunate to have the right policies — and some luck — that foster growth. Often policies will change after a big shock like the pandemic. Right now, the US economy has a lot of potential, but much will depend on the policies public officials implement.

In the short run, policy makers need to do something about inflation. It was bad policy, in part, that brought about high Inflation in the first place, including excessive stimulus in 2021. Then the Federal Reserve was too slow to respond.

When faced with inflation in the 20th century, the Fed repeatedly caused recessions by coming in too late and too hard. A mild recession may be unavoidable at this point because the Fed got so far behind the curve this time, too. How it manages rate increases in the next few years will determine the course of inflation and the severity of a downturn, if one occurs. The more the Fed miscalculates, the smaller the bullseye gets: Raise rates too high and the economy contracts; don’t go high enough and prices will keep rising and inject more uncertainty into markets — which can cause a recession, too.

Additional risks are coming from fiscal policy in Washington. President Joe Biden says his inflation strategy consists of letting the Fed do its job, fixing the supply-chain bottlenecks and controlling deficits (how he’ll do the last is unclear, since higher taxes or big spending cuts can slow the economy). There’s a chance these policies could help the economy, depending on how they’re executed. But price controls proposed by Senator Elizabeth Warren would only discourage production and create more shortages. Canceling student debt isn’t going to do anything to help inflation, either.

Though a near-term recession would be painful, core aspects of the economy are robust enough that it shouldn’t be too long or deep. Policies that could undermine longer-term growth are far more worrying. The desire to re-shore production, maintain the former administration’s tariffs — or even add more — along with subsidies for domestic production translates to higher prices and less resiliency because there is less trade, which means fewer goods. It also makes US industry less innovative and efficient since Americans don’t need to compete as much with firms in other countries.

Now add to all this the recent antitrust push. Traditionally, the government has gone after firms whose monopoly power harmed consumers. The new fashion is to target firms that get so big they crush any potential competition. Competition is good for growth, and there are legitimate concerns about unfair practices that regulation should address. But the problem with the new antitrust approach is that it often targets firms (at least in the rhetoric we’ve been hearing) simply for being large.

Big is not necessarily bad. In fact, a more global, tech-driven economy creates greater returns to scale and some bigness may be required. Bigger may be necessary in an economy where access to proprietary data and a lot of users is needed to make products better. Bigger can also mean lower costs. Shrinking American firms and depriving them of scale may be another strike against American competitiveness.

The US economy remains among the most innovative and dynamic in the world. It’s still a top destination for global talent and aspiring entrepreneurs. The enduring popularity of the dollar and dollar-dominated assets reflects an economy that is expected to keep growing. But past performance does not guarantee future growth. The right policies can help dig us out of our current predicament, but after that, policy makers just need to get out of the way.

More From Other Writers at Bloomberg Opinion:

Biden’s Economic Hubris Gives Way to Humility: Karl W. Smith

Don’t Wish for Fed to Pause Rate Hikes: Mohamed A. El-Erian 

Who’s to Blame for a Recession, Biden or Powell?: Daniel Moss

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Allison Schrager is a Bloomberg Opinion columnist covering economics. A senior fellow at the Manhattan Institute, she is author of “An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.”

More stories like this are available on bloomberg.com/opinion

©2022 Bloomberg L.P.

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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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