The US economy will continue to grow during the first part of the year, driven mostly by sectors that have benefited from the reallocation of resources due to the pandemic. If the incoming Biden administration does not impose greater restrictions on the U.S. economy, there will also be some recovery in areas that saw the greatest losses during 2020. The Federal Reserve’s easy monetary policy will continue, and for the time being this will fuel increased economic activity.
I usually base my yearly forecasts on indicators relevant to the business environment. Such factors (which are also used to calculate the various indices of economic freedom) include tax and regulatory policies, trade, rule of law, and monetary policy. But analyzing what will happen with the economy in 2021 will depend on factors that go beyond economic policy. The two key factors are the continued impact of the Covid-19 pandemic and the change in the U.S. administration and the composition of Congress.
The Democratic sweep of the Georgia Senate races opens the door for the adoption of several of the Biden administration’s most anti-free-economy proposals. Biden will be pressured to fulfill his promise to reverse Trump tax cuts, especially the corporate tax rate. The narrow victory will give a huge boost to the current “Washington consensus” that government spending accompanied by an easy monetary policy and increased borrowing is an elixir that can’t fail. Increased regulations will also be part of the Biden economic policy mix. Increase in taxation, however, might be delayed since, despite higher growth rates, the economy will be still very weak compared to pre-pandemic days.
Nothing in the Biden agenda is different from what many European countries have been implementing in recent years. The higher level of government spending relative to GDP, more stringent environmental regulations, higher taxes, and “quantitative easing” have not led to higher growth rates in Europe. On average, the large economies of Europe saw a bigger decline in their GDP than the US did. They will also likely recover at a slower pace than the US. The new U.K. lockdowns and the spike in Covid-19 cases in Germany should revise European growth forecasts downward. Nevertheless, in the U.S. the 2021 economy, given the 2020 decline, will likely grow at over 4%, partly in new directions and partly catching up. The potential for a rebound is there, especially if the vaccines prove effective and state and local governments begin to lift restrictions.
Photo by: STRF/STAR MAX/IPx 2021 1/2/21 Atmosphere at Wall Street in New York City. The Stock Market … [+] closed at all time highs in 2020, and continued to rise in January 2021
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The U.S. stock market shows a good deal of optimism, as if the easy-money party can go on forever. But stocks also reflect changes in the real economy. For instance, the stock price of Tractor Supply Company
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(almost doubling since March 2020) reflects the general move away from large cities and the increased construction in rural areas. New investments by people working from home and by the companies that serve them, from entertainment to communication, are also reflected in rising stock prices. Such companies include Microsoft
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. Part of this dynamic and reallocation of resources will continue at least for the first half of 2021. Some of the new consumer and investment patterns caused by reactions to the pandemic will be here to stay, but it too early to evaluate whether it will lead to higher or lower productivity in the future.
Regarding monetary policy, rare is the analyst that does not expect a more expansionary trend. More voices are cautioning about the return of inflation, but I think we will have to wait until 2022 to see inflation pressures that are strong enough (over 3% per year in consumer price index) to lead to a change of the current mindset that monetary authorities can save us from any trouble.
Despite the increase in the trade deficit, we will see a gradual return to the pre-Trump consensus. Not that the prospects for freer trade were rosy before Trump – any proposal that leads to greater liberalization with Europe is likely to face opposition there. It seems that it will be easier to get the United States back into the Trans-Pacific Partnership Agreement than to achieve a big breakthrough with Europe.
Among Western countries, none comes close to the importance the United States in evaluating what will happen with the world economy. Globally, however, China is almost as relevant. Unfortunately, more capitalism has not lead to a freer political system in China. We saw another corroboration of this on January 6, when fifty three pro-democracy activists were detained in Hong Kong. In my piece last year about the 2020 economy, I wrote that leading publications around the world were publishing articles with titles such as “2019 was a horrible year for Xi Jinping’s China” (Le Monde). The scene has changed now and the Chinese economy is forecast to grow over 8% next year, remaining a magnet for those who want to do business and pursue profits at all costs.
In March of 2020, when it was clear that the pandemic was spreading around the world, I stated that, in the long term, the biggest danger for the free society and economy would be to see the Chinese model of a mix of communism and markets emerge victorious. If we trust the numbers, China has won. Even if they undercounted their Covid-19 deaths by a factor of 10, they would have, together with Japan, the lowest Covid-19 deaths per million. The Chinese economy is the only one in the top ten which grew last year. The power of the Chinese Communist Party can’t be measured by government spending. It can rule its mega-State without the need of becoming a Deep State.
What are the implications of a victory of the China model for the US and the world economy? It is logical to conclude that the world of business, at least big business, will continue to work with the conviction that working with governments both here and abroad is not only consistent, but necessary for profit maximization. This alliance of large corporations and big government is what many of us call the “crony capitalist” model. Some Western countries might be able to resist the pressure, but most of the countries that have China as their main trading partner have a very weak rule of law and prevalent corruption. In those countries Chinese corporations working side by side with the Chinese government will likely dictate the terms of the most relevant business transactions.
John Maynard Keynes, (1883 – 1946), (centre), to overcome stagnation, Keynes advocated government … [+] spending financed by increases in the money supply with less concern for the long term. (Photo by Hulton Archive/Getty Images)
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During economic crises it is normal to hear those responsible for economic policy say, “We are all Keynesians now.” Looking at the record highs of the stock markets during a time of dramatic political division, it almost seems that “we are all super-Keynesians now.” Although like other analysts I believe we are in an “almost-everything” bubble, when it comes to the real economy I will have to leave my pessimistic thoughts for 2022.
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)
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.
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.
