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Bank of Canada may cut rates to aid economy sickened by COVID-19: Don Pittis – CBC.ca

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It is becoming increasingly clear that the impact of COVID-19 on the economy is far more than a blip.

Economists’ earlier hopes of a V-shaped recovery —  a sharp rise back to normal after a sharp decline — are fading fast as evidence increases that the global effects of the virus on consumers and businesses are widening.

But just as the Bank of Canada is chewing over whether to cut interest rates tomorrow, the Organization for Economic Co-Operation and Development, sometimes described as the rich countries’ economic think-tank, insisted yesterday that co-ordinated government action is essential to prevent a “worst-case scenario.” And its prescription included lower rates.

Expect to see more co-ordinated planning today following a meeting of G7 finance ministers. In keeping with recommendations to avoid spreading the virus, the meeting is expected to be by conference call.

Return to health

And while a V-shaped recover seems off the table, the OECD says acting to prevent serious financial damage will mean the economy has every chance of bouncing back to very close to expected levels within two years. It’s a sign of the times that this counts as optimism.

As of yesterday, markets were predicting that the Bank of Canada would cut rates by at least one-quarter of a percentage point on Wednesday, with a smaller chance of a half-percentage-point cut.

A rate cut would be unusual but not unprecedented, since the bank is scheduled to make its policy statement with a written release only. In the normal course of events the bank tends to make rate changes on the occasions when the governor, Stephen Poloz, holds a media conference to explain his actions.

But this may well be a time when even the most staid central banker will err on the side of haste.

As well as plenty of pressure from investors for rate cuts as a measure to stop stock market declines, OECD chief economist Laurence Boone yesterday called on governments, including central banks, to act quickly to prevent damage to the wider economy.

In the past, markets have responded to rate cuts with a pop up in share prices, something traders would relish after seven long days of declines. But according to Boone, there is much more at stake.

In a new report titled Coronavirus: The world economy at risk the Paris-based think-tank laid out some worrying scenarios.

“The main question for the economic outlook is how long and how widely the virus will spread, and with it the containment measures,” said Boone.

As others have said, the illness caused by the coronavirus is only the indirect cause of economic damage. Instead, it is the methods governments have used to prevent the spread of COVID-19 that have led to simultaneous supply and demand shocks to the economy.

On the supply side, a quarantined workforce means factories stop production, an effect that can spread around the world as unique parts become unavailable, leading to a shortage of some goods.

On the demand side, inactive factories mean they don’t need things like aluminum and copper. Also, people who stay home to avoid the virus cut back on purchases like airline tickets, movies and restaurant meals.

Bad, worse and worst cases

If the effects were short term, the money not spent now would merely be spent later. But for central bank economists one of the concerns will be that a synchronized decline in supply and demand will mean the economy operates far below capacity. The value that should have been produced by that unused labour and capital is gone for good.

It is not a sure thing rate cuts will fix that problem. If someone does not want to borrow at all, it is not clear lower rates will convince them. Others have worried cuts at this stage, especially by the U.S. Federal Reserve Board, will mean it will be almost impossible to lift rates again during this U.S. election year.

But there may be worse things to worry about. As Boone described it, there were three scenarios in the OECD analysis, each gloomier than the next. Essentially the 0.5 per cent decline in global growth, which Boone described as “the base case,” would occur if the impacts of the disease were largely limited to China.

But if COVID-19 and its resulting containment measures were to spread to most of Asia, to Europe and to North America, the decline in global growth would be closer to 1.5 per cent, cutting world growth in half. But that is still not the worst of it.

What if you gave an auto show and nobody could come? Peugeot won the Car of the Year award at the Geneva Motor Show, but the event was cancelled to avoid spreading the coronavirus disease, now present in Switzerland. (Salvatore di Nolfi/Pool via Reuters)

“I think what I should stress at this stage is that this is not a worst-case scenario,” warned Boone.

There could be a much bleaker result if the wider coronavirus impact led to dangers such as damage to the financial system and a liquidity crisis, where corporate borrowers desperately search for cash and simply cannot find it.

To try to avoid the bleakest case, the OECD proposes that governments must be prepared to take co-ordinated action including such measures as helping ordinary people with health-care spending and cash, delaying tax demands on companies and supporting the broader financial system with increased bank liquidity, public investment and cuts in interest rates.

Boone called for a joint statement by governments on those actions that would reassure all the participants in the global economy, leading to a medium-term recovery.

“I think that would help, with two years, the recovery of nearly all the losses from the downside scenario,” she said.

Follow Don on Twitter @don_pittis

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

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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.

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Canadian Coast Guard crew member lost at sea off Newfoundland

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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.

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