Economy

Does the economy need a helicopter rescue to escape COVID-19 disaster?: Don Pittis – CBC.ca

Published

4 years ago

March 24, 2020

As the Canadian government and the U.S. central bank say they will do whatever it takes to get their economies back on track, some experts are recommending a long-discussed weapon.

Known as helicopter money, the concept was proposed as a thought experiment by Nobel Prize-winning American economist Milton Friedman as an alternative to governments borrowing and spending to stimulate the economy.

With growing fears of a wider economic meltdown caused by the effects of the COVID-19 pandemic, economists are suddenly considering the helicopter option, though the subject remains controversial.

One of the many controversies is over the definition of exactly what helicopter money is and what it is not.

No actual helicopters needed

While no actual helicopters are used in the process, the one thing most economists agree on is that it involves the distribution of money into the economy in a way that boosts the spending power of ordinary citizens.

“Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community,” Friedman famously proposed.

U.S. President George W. Bush, centre, talks to Rose Friedman, right, as her husband, economist Milton Friedman, left, addresses dignitaries gathered at an event held in his honour at the Eisenhower Executive Building in Washington, May 9, 2002. Friedman, a 1976 Nobel Prize winner for excellence in economics, was one of the strongest advocates of economic freedoms and free enterprise. (Kevin Lamarque/Reuters)

Friedman, who died in 2006, was one of the founders of the Chicago school of economics that tended to oppose government involvement in the workings of the economy.

Usually described as a monetarist because of his belief in monetary policy as a means of adjusting or fine-tuning the economy, Friedman was part of the small government movement that began to mature following his influential paper in 1969. In general, Friedman objected to the fiscal spending championed by Keynesians, who believe that governments should borrow money and spend it on anything from roads to schools to reignite economic growth.

Deflation fighter

In the helicopter theory’s original form, Friedman saw this distribution of cash in the economy as something to be used when interest rates had gone as low as they could go and the economy was refusing to respond to other kinds of monetary stimulus. He saw it as a one-time measure to return inflation to a healthy level.

As described by Friedman, helicopter money was exclusively a monetary tool used by the central banks, which can create the money out of thin air, just as they do with the money used to buy bonds in quantitative easing. Often called “printing money,” it is the process of creating new currency units, as the Fed promised to do yesterday, and using them to buy existing bonds, thus injecting cash into the economy.

“When the economics community talks about helicopter money, what they really mean is, at the end of the day, the Bank of Canada could print money and simply send it to Canadians,” Craig Alexander, Deloitte Canada’s chief economist, said in an interview last week.

But he says now is not the time for that inflationary boost.

“You might start to entertain distributing money from the central bank to households if there was deflation, but that isn’t where we are in terms of risks yet,” he said.

In the slippery world of economic theory, the definition of helicopter money as solely a tool for generating inflation has expanded beyond what Friedman proposed.

No doubt he turns over in his grave every time someone uses the term modern monetary theory, or MMT, the idea that helicopter money could be used in place of fiscal spending to redistribute wealth and even pay for policies like the proposed Green New Deal in the U.S.

While many economists would object to the wider use of the term, sources as credible as the Financial Times and the Bank of Canada suggest it has become more inclusive.

U.S. President Donald Trump, left, and Treasury Secretary Steven Mnuchin, right, answer questions during the administration’s daily coronavirus briefing at the White House last Tuesday. Mnuchin said the administration was looking to send money directly to Americans to help them cope with the COVID-19 crisis. (Jonathan Ernst/Reuters)

The FT story with headline, White House warms to showering U.S. with ‘helicopter money,’ points out the Trump administration is seriously considering a cash handout to every American that would expand the national debt.

“We are looking at sending cheques to Americans immediately,” Treasury Secretary Steven Mnuchin said last week. “Americans need cash now, and the president wants to get cash now — and I mean now, in the next two weeks.”

You are the guinea pig

Economists at the Bank of Canada bridge the monetarist and Keynesian perspectives with a fresh report out last month titled: The Power of Helicopter Money Revisited: A New Keynesian Perspective.

A quick glance at the Bank of Canada paper, besides demonstrating that economics is a very different language than most of us use, reveals how much the results of cash injections of this kind remain theoretical.

As University of Ottawa professor Jacqueline Best told me last week, only half in jest, it’s all a big experiment. But, she says, no matter how it is done, there may be a qualitative difference between handing money out to ordinary people or dumping it into bond markets with quantitative easing, where only large corporations can make use of it.

But among those who would entertain the idea of helicopter money, there is one consideration that both central bank theorists and practical politicians must now be thinking about:

While most agree it is crucial to turn on the spending taps immediately to fight COVID-19, and to tide people over with the essentials and to keep the economy from collapsing, the real need for helicopter money may come later.

With so much of the economy shut down and so many people laid off and feeling insecure, until everyone is able to get out of their homes and resume normal lives, a new flood of money might not have the desired effect of sparking a new round of stimulative discretionary spending.

Follow Don on Twitter @don_pittis

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Business

A timeline of events in the bread price-fixing scandal

Published

7 hours ago

September 19, 2024

Anne Joseph

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)

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Economy

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

Published

7 hours ago

September 19, 2024

Anne Joseph

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)

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Economy

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

Published

21 hours ago

September 18, 2024

Anne Joseph

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.

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