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The bill for saving the world economy is $7 trillion and rising – CNN

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The response to the coronavirus pandemic has been unprecedented in terms of speed and scale. Commitments from governments and central banks to date are close to $7 trillion, according to an analysis by CNN Business. The total includes government spending, loan guarantees and tax breaks, as well as money printing by central banks to buy assets such as bonds and stock funds.
30 days that brought the world to the brink of a depression
The figure includes the $2 trillion US relief package working its way through Congress and an anticipated 30 trillion yen ($274 billion) in stimulus from Japan that could be approved next month. In Europe, CNN Business tallied stimulus efforts by the biggest economies: Germany, France, the United Kingdom, Italy and Spain.
The combined effort dwarfs the response to the 2008 financial crisis, which smashed records at the time. But economists worry even the Herculean efforts undertaken so far won’t be sufficient should the crisis extend beyond June.
“The [$2 trillion US] stimulus package is likely the bare minimum needed to offset the current drag from the outbreak,” Bank of America economist Joseph Song told clients Thursday. “The economy will likely need close $3 [trillion] in fiscal stimulus, if not more.”
The last time global economic growth was this depressed during peacetime was in 1938, according to Chetan Ahya, Morgan Stanley’s chief economist.
G20 leaders, who represent the world’s biggest economies, said Thursday that they stand ready to do “whatever it takes” to minimize the economic damage from the pandemic and restore global growth.
“The magnitude and scope of this response will get the global economy back on its feet and set a strong basis for the protection of jobs and the recovery of growth,” the leaders said in a joint statement after a video conference. They say that their countries have committed to stimulus worth $5 trillion.
Yet the vast spending can only blunt some of the economic pain. While unemployment benefits and cutting checks to citizens will provide much needed assistance, the economy can’t begin to recover in earnest until bars and restaurants start to reopen, people go back to work and travel resumes. Even then, it will take time, as China is discovering.
UK government will pay 80% of wages as it closes pubs to fight coronavirusUK government will pay 80% of wages as it closes pubs to fight coronavirus
“It’s not going to be possible to get back to the same level of output and activity immediately,” Ahya said, noting the lingering effects of a sharp spike in unemployment and battered corporate balance sheets.
Here are the highlights from the first wave of central bank and government action.

United States

  • US lawmakers are expected to pass a $2 trillion stimulus package later this week. The legislation includes direct payments to individuals, a boost to unemployment benefits and a $500 billion lending program.
  • Congress has already approved more than $112 billion to ramp up vaccine research and provide two weeks of paid sick leave for those who are being tested or treated for Covid-19, the disease cause by the novel coronavirus.
  • The Federal Reserve has let loose a tsunami of stimulus measures in recent days. That includes an initial pledge to purchase $700 billion in US Treasuries and mortgage-backed securities, which now has no cap and can include corporate bonds and bond exchange-traded funds. The Fed also announced $300 billion in new financing to keep credit flowing to businesses and consumers.

United Kingdom

  • The UK government has unveiled £330 billion ($397 billion) in loan guarantees and suspended local business taxes for the retail, hospitality and leisure sectors for 12 months. It will also cover 80% of workers’ salaries for at least the next three months, up to a maximum of £2,500 ($2,900) a month. It’s unclear how much that initiative will cost.
  • In addition, the UK government on Thursday promised to provide the self-employed with a cash grant of 80% of their average monthly profit, up to £2,500 ($3,000) a month, over the next quarter.
  • The Bank of England has said it will increase its holdings of UK government and corporate bonds by £200 billion ($242 billion).

European Union

  • Germany has unveiled a rescue package worth up to €750 billion ($825 billion) that includes measures to spur lending to businesses and take direct stakes in companies.
  • France has approved €45 billion ($50 billion) in relief for small businesses and unemployed workers. It is also guaranteeing €300 billion ($330 billion) in corporate borrowing.
  • Italy has greenlit €25 billion ($27.5 billion) to help workers and support the country’s health system, while Spain has put up €200 billion ($220 billion).
  • The European Central Bank has said it will spend €750 billion ($824 billion) buying government debt and private securities before the end of 2020, and stands ready to do more if necessary. That’s on top of €120 billion ($133 billion) in extra purchases it announced previously.
  • So far, China has announced at least 116.9 trillion yuan ($16.4 billion) in financial relief and stimulus, plus 800 billion yuan ($112.5 billion) in tax and fee reductions. But if necessary, the country could very well spend trillions of dollars and rack up massive amounts of debt to shore up its economy.
  • The People’s Bank of China has adopted various credit easing measures, allocating at least 1.15 trillion yuan ($162 billion) to help businesses hit by the virus.
  • The Japanese government is expected to consider an economic stimulus package in the coming weeks that would likely include cash handouts as well as measures to help small and medium-sized companies get access to loans. The package could total 30 trillion yen ($274.2 billion).
  • The Bank of Japan has said it will raise the annual rate of its purchases of exchange-traded funds by 6 trillion yen ($55 billion) and boost the annual rate of purchases of real estate investment trusts by 90 billion yen ($822 million). It also raised the limit for purchases of commercial paper and corporate bonds by 2 trillion yen ($18 billion).
  • The Indian government unveiled a relief package worth $22.6 billion just 36 hours after the country’s lockdown was imposed. It includes health coverage and food assistance, as well as subsidies and benefits for workers.
— Laura He, Manveena Suri, Kaori Enjoji, Yoko Wakatsuki, Ya Chun Wang, Fanny Bobille, Benjamin Berteau and Hada Messia contributed reporting.

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Economy

Britain's economy went into recession last year, official figures confirm – The Globe and Mail

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People walk over London Bridge, in London, on Oct. 25, 2023.SUSANNAH IRELAND/Reuters

Britain’s economy entered a shallow recession last year, official figures confirmed on Thursday, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.

Gross domestic product shrank by 0.1 per cent in the third quarter and by 0.3 per cent in the fourth, unchanged from preliminary estimates, the Office for National Statistics (ONS) said on Thursday.

The figures will be disappointing for Mr. Sunak, who has been accused by the opposition Labour Party – far ahead in opinion polls – of overseeing “Rishi’s recession.”

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“The weak starting point for GDP this year means calendar-year growth in 2024 is likely to be limited to less than 1 per cent,” said Martin Beck, chief economic adviser at EY ITEM Club.

“However, an acceleration in momentum this year remains on the cards.”

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2 per cent in January, and unofficial surveys suggesting growth continued in February and March.

Tax cuts announced by finance minister Jeremy Hunt and expectations of interest-rate cuts are likely to help the economy in 2024.

However, Britain remains one of the slowest countries to recover from the effects of the COVID-19 pandemic. At the end of last year, its economy was just 1 per cent bigger than in late 2019, with only Germany faring worse among Group of Seven nations.

The economy grew just 0.1 per cent in all of 2023, its weakest performance since 2009, excluding the peak-pandemic year of 2020.

GDP per person, which has not grown since early 2022, fell by 0.6 per cent in the fourth quarter and 0.7 per cent across 2023.

Sterling was little changed against the dollar and the euro after the data release.

The Bank of England (BOE) has said inflation is moving toward the point where it can start cutting rates. It expects the economy to grow by just 0.25 per cent this year, although official budget forecasters expect a 0.8-per-cent expansion.

BOE policy maker Jonathan Haskel said in an interview reported in Thursday’s Financial Times that rate cuts were “a long way off,” despite dropping his advocacy of a rise at last week’s meeting.

Thursday’s figures from the ONS also showed 0.7 per cent growth in households’ real disposable income, flat in the previous quarter.

Thomas Pugh, an economist at consulting firm RSM, said the increase could prompt consumers to increase their spending and support the economy.

“Consumer confidence has been improving gradually over the last year … as the impact of rising real wages filters through into people’s pockets, even though consumers remain cautious overall,” Mr. Pugh said.

Britain’s current account deficit totalled £21.18-billion ($36.21-billion) in the fourth quarter, slightly narrower than a forecast of £21.4-billion ($36.6-billion) shortfall in a Reuters poll of economists, and equivalent to 3.1 per cent of GDP, up from 2.7 per cent in the third quarter.

The underlying current account deficit, which strips out volatile trade in precious metals, expanded to 3.9 per cent of GDP.

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How will a shrinking population affect the global economy? – Al Jazeera English

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Falling fertility rates could bring about a transformational demographic shift over the next 25 years.

It has been described as a demographic catastrophe.

The Lancet medical journal warns that a majority of countries do not have a high enough fertility rate to sustain their population size by the end of the century.

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The rate of the decline is uneven, with some developing nations seeing a baby boom.

The shift could have far-reaching social and economic impacts.

Enormous population growth since the industrial revolution has put enormous pressure on the planet’s limited resources.

So, how does the drop in births affect the economy?

And regulators in the United States and the European Union crack down on tech monopolies.

The gender gap in tech narrows.

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Economy

John Ivison: Canada's economy desperately needs shock treatment after this Liberal government – National Post

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Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators

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It speaks to the seriousness of the situation that the Bank of Canada is not so much taking the gloves off as slipping lead into them.

Senior deputy governor, Carolyn Rogers, came as close to wading into the political arena as any senior deputy governor of the central bank probably should in her speech in Halifax this week.

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But she was right to sound the alarm about a subject — Canada’s waning productivity — on which the federal government’s performance has been lacklustre at best.

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Productivity has fallen in six consecutive quarters and is now on a par with where it was seven years ago.

Lack of business investment is the main culprit.

In essence, Canadians are digging holes with shovels while many of our competitors are buying excavators.

“You’ve seen those signs that say, ‘in emergency, break glass.’ Well, it’s time to break the glass,” Rogers said.

She was explicit that government policy is partly to blame, pointing out that businesses need more certainty to invest with confidence. Government incentives and regulatory approaches that change year to year do not inspire confidence, she said.

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The government’s most recent contribution to the competitiveness file — Bill C-56, which made a number of competition-related changes — is a case in point. It was aimed at cracking down on “abusive practices” in the grocery industry that no one, including the bank in its own study, has been able to substantiate. Rather than encouraging investment, it added a political actor — the minister of industry — to the market review process. The Business Council of Canada called the move “capricious,” which was Rogers’s point.

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While blatant price-fixing is rare, the lack of investment is a product of the paucity of competition in many sectors, where Canadian companies protected from foreign competition are sitting on fat profit margins and don’t feel compelled to invest to make their operations more efficient. “Competition can make the whole economy more productive,” said Rogers.

The Conservatives now look set to make this an election issue. Ontario MP Ryan Williams has just released a slick 13-minute video that makes clear his party intends to act in this area.

Using the Monopoly board game as a prop, Williams, the party’s critic for pan-Canadian trade and competition, claims that in every sector, monopolies and oligopolies reign supreme, resulting in lower investment, lower productivity, higher prices, worse service, lower wages and more wealth inequality.

(As an aside, it was a marked improvement on last year’s “Justinflation” rap video.)

Williams said that Canadians pay among the highest cell phone prices in the world and that Rogers, Telus and Bell are the priciest carriers, bar none. The claim has some foundation: in a recent Cable.co.uk global league table that compared the average price of one gigabyte, Canada was ranked 216th of 237 countries at US$5.37 (noticeably, the U.S. was ranked even more expensive at US$6).

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Williams noted that two airlines control 80 per cent of the market, even though Air Canada was ranked dead last of all North American airlines for timeliness.

He pointed out that six banks control 87 per cent of Canada’s mortgage market, while five grocery stores — Sobeys, Metro, Loblaw, Walmart and Costco — command a similar dominance of the grocery market.

“Competition is dying in Canada,” Williams said. “The federal government has made things worse by over-regulating airlines, banks and telecoms to actually protect monopolies and keep new players out.”

So far, so good.

The Conservatives will “bring back home a capitalist economy” — a market that does not protect monopolies and creates more competition, in the form of Canadian companies that will provide new supply and better prices.

That sounds great. But at the same time, the Conservative formula for fixing things appears to involve more government intervention, not less.

Williams pointed out the Conservatives opposed RBC buying HSBC’s Canadian operations, WestJet buying Sunwing and Rogers buying Shaw. The party would oppose monopolies from buying up the competition, he said.

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The real solution is to let the market do its work to bring prices down. But that is a more complicated process than Williams lets on.

Back in 2007, when Research in Motion was Canada’s most valuable company, the Harper government appointed a panel of experts, led by former Nortel chair Lynton “Red” Wilson, to address concerns that the corporate sector was being “hollowed out” by foreign takeovers, following the sale of giants Alcan, Dofasco and Inco.

The “Compete to Win” report that came out in June 2008 found that the number of foreign-owned firms had remained relatively unchanged, but recommended 65 changes to make Canada more competitive.

The Harper government acted on the least-contentious suggestions: lowering corporate taxes, harmonizing sales taxes with a number of provinces and making immigration more responsive to labour markets.

But it did not end up liberalizing the banking, broadcasting, aviation or telecom markets, as the report suggested (ironically, it was a Liberal transport minister, Marc Garneau, who raised foreign ownership levels of air carriers to 49 per cent from 25 per cent in 2018).

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The point is, Canada has a competition problem but solving it requires taking on vested interests. Conservative Leader Pierre Poilievre has indicated he is willing to do that, calling corporate lobbyists “utterly useless” and saying he will focus on Canadian workers, not corporate interests.

“My daily obsession will be about what is good for the working-class people in this country,” he said in Vancouver earlier this month.

Even opening up sectors to foreign competition is no guarantee that investors will come. There are no foreign ownership restrictions in the grocery market (in addition to the five supermarkets listed above, there is Amazon-owned Whole Foods). When the Competition Bureau concluded last year that there was a “modest but meaningful” increase in food prices, it recommended Ottawa encourage a foreign-owned player to enter the Canadian market. It was a recommendation adopted by Industry Minister Francois-Philippe Champagne, to no avail thus far.

But it is clear from the Bank’s warning that the Canadian economy requires some shock treatment.

Robert Scrivener, the chairman of Bell and Northern Telecom in the 1970s, called Canada a nation of overprotected underachievers. That is even more true now than it was back then.

It’s time to break the glass.

jivison@criffel.ca

Get even more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here.

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