adplus-dvertising
Connect with us

Business

What is the Fed Doing? – A Wealth of Common Sense

Published

 on


Don’t fight the Fed used to be a positive slogan.

That’s not the case anymore.

If anything, it feels like the Fed wants to fight us, all of us, including the stock market and the economy.

300x250x1

The Fed is actively trying to crash the stock market, break the housing market and push the economy into a recession.

How do I know this?

Because Fed officials are literally telling us this every time they speak.

In fact, this week Fed chair Jerome Powell basically said people need to lose their job to slow inflation:

We’re never going to say that are too many people working, but the real point is this, inflation, what we hear from people when we meet with them is that they really are suffering from inflation. And if we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that, there isn’t.

We’re not saying there are too many people working but we’re also not not saying that.

When asked how long Americans should be prepared to experience economic pain, Powell said he wants wages to fall:

How long? I mean it really depends on how long it takes for wages and more than that, prices, to come down for inflation to come down. And so what you see in our projections today is that inflation moves down significantly over the course of next year and then more the next year after that. And I think once you’re on that path, that’s a good thing, and things will start to feel better to people, they’ll feel lower inflation, they’ll feel the economy is improving, and also, if our projections are close to right, you’ll see that the costs in unemployment are, they’re meaningful, and they’re certainly very meaningful to the people who lose their jobs, and we talk about that in our meetings quite a lot.

And will this pain lead to a recession? Powell says he doesn’t know:

We have always understood that restoring price stability while achieving a relatively modest decline, or rather increase, in unemployment and a soft landing would be very challenging and we don’t know, no one knows whether this process will lead to a recession or if so, how significant that recession would be.

Please allow me to translate each of these statements:

  • The Fed wants the unemployment rate to rise to slow inflation.
  • They want wages to fall to slow inflation.
  • They are willing to throw us into a recession to slow inflation.

In some ways, I understand why the Fed is so hell-bent on slowing rising prices. People REALLY don’t like sky-high inflation.

But in other ways, I think what the Fed is doing is INSANE.

What are they doing?!

The pandemic seriously messed up the economy and markets in a multitude of ways. The Fed was responsible for some of those problems but there were also extenuating circumstances.

They don’t dictate how the different waves of Covid will impact the global economy. They don’t control government spending. The Fed can’t produce more cars. They can’t fix supply chains. They cannot control the actions of a madman in Russia who continues to fight a cruel war against an innocent nation.

I appreciate how the Fed must feel somewhat responsible for the highest inflation reading in 40 some odd years because they kept rates at 0% for a long time and gobbled up bonds like people at Costco eating free samples.

I get it.

The Fed was behind the eightball in terms of seeing this inflation coming. It was supposed to be transitory and it wasn’t.

But the Fed has already moved ridiculously fast with their tightening.

Kathy Jones from Charles Schwab looked at the change in Fed Funds Rate during the last 40 years or so of tightening cycles:

It took them a while to get going but once they realized inflation was an actual problem they’ve now overcorrected and raised rates at a faster clip than just about every Federal Reserve in history.

They want the stock market to go down. They want people to lose their jobs and make less money. They will take the economy down if they have to so prices will stop rising.

The Fed is more or less telling us they are willing to raise interest rates high enough to crush the economy.

Should we believe them?

For now I guess.

I think Fed officials are so embarrassed they missed inflation getting this high that they’re willing to overcorrect to the other side and force us into a recession to prove a point.

On the other hand, the Fed’s forecasting ability leaves a lot to be desired.

In September 2020 the Fed predicted it would take until 2023 for the unemployment rate to get to 4%. That seemed reasonable at the time considering how long it’s taken for jobs to come back during previous recoveries.

Instead, the unemployment rate was already under 4% by December 2021, years ahead of schedule:

Ok fine, we had the fastest jobs recovery in history from a double-digit unemployment rate. Let’s give them a mulligan for that one. It was easy to be pessimistic in 2020 before the vaccine was here.

But how did the Fed do with their predictions once it became apparent the economic recovery was already underway?

Well…

The Fed provided a similar forecast in June of 2021 when it was clear markets and the economy were already recovering:

I’ve highlighted here the Fed’s forecast for short-term interest rates here. They were figuring 0% through the end of 2022 with a 50 basis point hike in 2023.

Obviously, the Fed did not assume we would see inflation rise to 9% this year (neither did I).

But the Fed Funds Rate is now at 3.25%. They have raised rates 75 basis points at the last two meetings. Those two rate hikes are higher than the forecast for rates to rise for the entirety of 2023!

I’m not going to fault anyone for being just a bit outside on their forecast of the economy since the start of the pandemic.

This is clearly one of the most difficult economic environments we’ve ever experienced. There are no historical precedents for what we’ve lived through.

It feels like we’ve been through 7 economic cycles in the past 3 years.

My problem with the Fed is they don’t seem to have the humility to admit how difficult of an environment we find ourselves in.

They’ve already tightened considerably.

The stock market is crashing. The housing market is screeching to a halt. Gas prices are down. Commodity prices are down. Mortgage rates have more than doubled.

Why not give it some time to see how things shake out from here?

Why don’t we let the economy breath for a hot minute before trying to get people fired from their job?

I’m not worried about the stock market or the bond market. It’s no fun to deal with losses but losses are part of the deal with risk assets.

They’ll recover eventually.

It’s much easier to recover from a bear market than a job loss. Just think of the millions of people who lost their jobs in 2020 from the pandemic. We really want to put people through that again so soon?

I realize recessions are a feature of this system in which we operate. Downturns are impossible to avoid.

But why would we choose to create one if we can help it?

Why not allow people to see their wages rise for a little longer and have a little patience to see if the pandemic-related inflation stuff will subside on its own?

There are two types of risks when it comes to financial markets — (1) avoidable and (2) unavoidable.

If the Fed sends us into a recession that seems like an avoidable risk to me.

I don’t understand what Jerome Powell and company are doing right now.

The good news is the Fed is constantly changing its mind because they’re just as bad at predicting the future as everyone else.

Hopefully they come to their senses before they break something.

Further Reading:
How to Prepare For a Recession

 

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Business

What’s open and closed Good Friday, Easter Monday in Hamilton, Burlington and Niagara Region – Global News

Published

 on


The Easter long weekend is upon us, bringing a rare four-day holiday to some in the Hamilton area. Several businesses and services will be closed on Good Friday (March 29), Easter Sunday (March 31) or Easter Monday (April 1).

Here’s a list of some things that will or will not be operating in Hamilton, Burlington and Niagara Region.

300x250x1

Administrative offices: Offices are closed on Friday and Monday.

Licensing and bylaw services: Licensing and bylaw phone queue line will be closed on Friday and Monday. Service will resume on Tuesday.

Green bin, garbage and recycling: No collection on Good Friday. Friday’s pickup will occur on Saturday (March 31). Monday will be a regular collection day (April 1). The city says all materials must be at the curb by 7 a.m. Community recycling centres and transfer stations will be closed Friday and Monday.

HSR bus: Buses will operate on a Sunday/holiday schedule Friday and a regular schedule on Monday.

GO Transit: Trains and buses are operating on a Sunday schedule Friday.

ATS DARTS: Service will be operating with holiday service hours on Friday and Monday. Subscription trips on DARTS, with the exception of dialysis, are cancelled for Friday and Monday. ATS customer service will also be closed on Friday and Monday.

Ontario Works: The program, including the special supports, will be closed Friday and Monday. Phone service will resume on Tuesday.

Recreation centres: Closed on Friday and Monday.

Hamilton civic museums: Dundurn National Historic Site, the Hamilton Military Museum and the Hamilton Museum of Steam and Technology will be closed on Friday and Monday.

Tourism Hamilton visitor information centre: Closed Friday to Monday.

Hamilton Public Library: All HPL branches are closed on Good Friday, Easter Sunday and Easter Monday. Branches are open on Saturday and regular hours resume Tuesday, April 2

Social services: All Ontario Works offices, special supports and the housing services office will be closed on Friday and Monday.

Senior centres: Closed Friday and Sunday. Senior clubs will be running modified program schedules from Friday to Monday.

Arenas: Closed to public programming Friday, Sunday and Monday.

Animal services: Closed Good Friday, Sunday and Easter Monday.

Canadian Warplane Heritage Museum in Mount Hope: Open Good Friday, Saturday and Easter Sunday. Closed Easter Monday.

Burlington

Government offices: Local government such as city hall, municipal offices and facilities will be closed on Good Friday and Easter Monday.


Breaking news from Canada and around the world
sent to your email, as it happens.

Administrative services: Services including parks, roads and forestry will be closed on Friday and Monday. Only snow removal and urgent services will be provided.

Animal Shelter and Control: Closed all weekend, Friday through Monday. Emergencies can be called in to 905-335-7777.

Recreation centres: Some city pools, arenas and community centres will be operational on a limited schedule. Visit burlington.ca/dropinandplay for details. Some outdoor recreation facilities will also be open, weather permitting. Visit burlington.ca/outdoorplay for more information. Tyandaga Golf Course will be closed. The tentative season opener is set for April 6.

Halton Provincial Offences Court: Closed on Friday and Monday.

Free parking: Available Friday and Monday in the downtown core in municipal lots, on-street and in the parking garage, however, the Waterfront parking lots (east and west) do not provide free parking on statutory holidays. Parking exemptions are required to park overnight on city streets and for longer than five hours. Visit burlington.ca/parkingexemptions for more.

Burlington Transit: Transit will operate a holiday schedule Sunday. The downtown transit terminal, specialized dispatch and the administration office will be closed on March 29. Monday is a regular schedule.

Niagara Region

Government offices: City halls, the Enterprise Centre and administration offices are all closed on Good Friday. Some offices, like St. Catharines, will reopen on Easter Monday.

Parks, recreation and culture services: All City recreation centres are closed on Good Friday and Easter Sunday. Administration offices are all closed on Friday. Some will be closed on Monday. St. Catharines Kiwanis Aquatics Centre is closed Friday, but open on Saturday. Seymour-Hannah Sports and Entertainment Centre is closed Friday, but open regular hours through the weekend and Monday.

Community centres: All older adult centres and arenas will either be closed or have reduced hours on Friday, Sunday and Monday.

St. Catharines Museum; Welland Canals Centre: Both facilities will be closed on Good Friday but open the rest of the long weekend between 9 a.m. to 5 p.m.

Niagara Regional Transit: Both St. Catharines and Niagara Falls buses will operate on a holiday schedule for Good Friday. Regional, Fort Erie and Welland service will not be running Friday. The agency will have regular hours on Easter Sunday and Monday.

Canada Post: No collection or mail delivery on Monday. Most post offices operated by the private sector will also be closed during business hours.

Grocery stores: Major grocery stores like Fortinos, Metro, FreshCo and No Frills will be closed on Good Friday and Easter Sunday.

Shoppers Drug Mart: Some locations in the city will be open on Good Friday and Easter Sunday, but not all. Holiday hours can be seen on the Shoppers store locator map.

Rexall: Some outlets are open on a holiday schedule, but not all. Visit the Rexall website for store hours.

Malls: All major shopping centres in Hamilton, Burlington, St. Catharines and Niagara Falls will be closed on Good Friday. Exceptions include:

  • Outlet Collection at Niagara Falls: Open from 10 a.m. to 6 p.m.
  • CF Toronto Eaton Centre: Open noon to 7 p.m.
  • Toronto Premium Outlets in Halton Hills: Open Friday from 9:30 a.m. to 7 p.m. and Sunday from 11 a.m. to 7 p.m.
  • Pacific Mall in Toronto: Open between 11 a.m. and 7 p.m.
  • Vaughan Mills will be open from 11 a.m. to 7 p.m.

In Toronto, retailers in designated tourist areas such as Yorkville, downtown Yonge, Queen’s Quay West and the Distillery District can stay open Good Friday, according to City of Toronto bylaws.

Walmart: All Walmarts in the GTHA will be closed Good Friday and Easter Sunday except the Niagara Falls Supercentre on Oakwood Drive, which is open between 7 a.m. and 11 p.m. on those days.

Alcohol

The Beer Store: All stores will be closed Good Friday and Easter Sunday.

LCBO: All stores will be closed Good Friday and Easter Sunday.

More on Canada

Wine Rack: Most Hamilton locations will be closed on Good Friday and Easter Monday except for the Wilson Street West location in Ancaster and the Guelph Line outlet in Burlington.

Wilson Street will be open Noon to 5 p.m. on Good Friday and 11 a.m. to 6 p.m. on Easter Sunday. Guelph Line will open 10 a.m. to 6 p.m. on Friday and Sunday.

Tourist destinations

Niagara Falls: Some Niagara Falls attractions are closed during the early spring, including the Whirlpool Aero Car and Wildplay Whirlpool Adventure Course, and the White Water Walk.

However, some, like the Niagara City Cruises, Journey Behind the Falls, Niagara Falls History Museum and The Exchange, and the Niagara Power Station are open and will be operating on Good Friday and Easter Sunday. Hours of operation can be seen on the Niagara Parks website.

The Butterfly Conservatory will be open on Good Friday and Easter Sunday between 10 a.m. and 6 p.m.

Toronto: Most Toronto attractions are either closed or have adjusted hours on Good Friday and Easter Sunday.

  • The Hockey Hall of Fame will be open from 10 a.m. to 5 p.m.
  • The Toronto Zoo will be open from 9:30 a.m. to 6 p.m.
  • The Ontario Science Centre will be open from 10 a.m. to 5 p.m.
  • Ripley’s Aquarium will be open from 9 a.m. to 11 p.m.
  • The Art Gallery of Ontario will be open from 10:30 a.m. to 4:30 p.m.
  • The Royal Ontario Museum will be open from 10 a.m. to 5:30 p.m.
  • The Aga Khan Museum will be open from 10 a.m. to 5:30 p.m.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Business

CRA pausing new 'bare trust' reporting requirement just days before filing deadline – CBC News

Published

 on


The Canada Revenue Agency (CRA) is hitting pause on a new “bare trust” reporting requirement with just a few days remaining before the deadline.

New reporting requirements for such trust arrangements were introduced for the 2024 tax season. Anyone with a bare trust was required to file a T3 tax return form naming the trustees, beneficiaries and settlors of each trust by April 2.

But on Thursday — with four days before the deadline to file — the CRA announced that it would be pausing the reporting measures.

300x250x1

“In recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians, the Canada Revenue Agency will not require bare trusts to file a T3 … for the 2023 tax year, unless the CRA makes a direct request for these filings,” a statement released by the tax agency said.

John Oakey, a vice president with the Chartered Professional Accountants of Canada, said the government hasn’t done a great job of communicating the changes.

“There’s no advertising from the government saying these are coming. You don’t see an ad on the television. You don’t see ads in magazines,” he said.

“The only way that individuals are really finding out is from advisers, financial institutions … people that are already aware of these rules.”

No definition of ‘bare trust’ in Income Tax Act

There is no definition of a bare trust in the Income Tax Act. The CRA defines a bare trust as “arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property.”

Unlike express trusts, where people seek out a lawyer to create a trust, bare trusts can happen almost accidentally — when a parent cosigns a mortgage for a child and becomes partial owner, or when an aging parent puts their kids down as partial owners of their house in anticipation of an impending death.

Oakey said a bare trust could also be something as simple as a shared bank account.

“If I put my name on [my parents’] bank account in order to help them pay their bills, that creates a trust relationship,” he said.

“I have no real control over the asset. I still have to adhere to their wishes. All I’m doing is acting as an agent on their behalf to do whatever they want me to do.”

In those cases, the bare trust does not earn any money for the trustee to report in a given tax year.

Even though Canadians wouldn’t have been taxed on a trust’s value, failure to report being a member of a bare trust could have resulted in a fine of $2,500, or five per cent of the value of all property in the trust, whichever is higher.

The requirement was meant as a way to crack down on tax avoidance. Corporations and wealthy individuals sometimes hold properties in bare trusts so they can avoid paying property transfer taxes. Oakey said the move was also likely an effort to crack down on money laundering.

The CRA said it would be working to “to further clarify its guidance on this filing requirement” over the coming months.

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Business

Economy grows more than expected, keeping the Bank of Canada 'on its toes' – Financial Post

Published

 on


January GDP strongest monthly growth in a year

Get the latest from Naimul Karim straight to your inbox

Article content

The Canadian economy surprised to the upside in January, posting its strongest monthly growth in a year, which could keep the Bank of Canada “on its toes,” say economists.

Real gross domestic product (GDP), which measures the value of goods and services produced during a specific time frame, edged up by 0.6 per cent in January, according to Statistics Canada, beating analysts’ expectations of 0.4 per cent. The agency also expects a 0.4 per cent rise in GDP during February.

Advertisement 2

Article content

Article content

“To put that two-month flurry of growth into perspective, the combined one per cent gain is as much as the economy grew in the entire 12 months of 2023,” Bank of Montreal chief economist Douglas Porter said in a note. “After a prolonged lull through much of last year … the economy looks to have caught some strong tailwinds early this year.”

GDP
Financial Post

The rise in GDP was due to broad-based growth in 18 of the 20 sectors measured by Statistics Canada.

The public sector, which includes education, health care and social assistance and public administration, increased 1.9 per cent in January, following two consecutive monthly declines. Education, which grew by six per cent, was the largest contributor to the country’s growth as activity rebounded from strikes by public sector workers in Quebec late last year.

Manufacturing fully recouped December’s decline in growth with a 0.9 per cent rise in January. A sudden drop in temperature in mid-January in parts of Canada contributed to increased activity in the utilities sector, which rose by 3.2 per cent, its highest growth rate since January 2022.

Article content

Advertisement 3

Article content

The real estate and rental sector grew for a third consecutive month — by 0.4 per cent — on higher resale activity. The Greater Toronto Area, Hamilton-Burlington and most markets in Ontario’s Greater Golden Horseshoe contributed to the growth.

The information and cultural services sector, which includes the motion picture and sound recording industry, also grew for the third consecutive month, as activity continued to ramp up following the end of a strike by the Screen Actors Guild – American Federation of Television and Radio Artists in November.

These “robust” figures could pose a difficult challenge for the Bank of Canada, Toronto-Dominion Bank economist Marc Ercolao said in a note.

While the central bank has received “solid evidence” in the past two months that inflation is cooperating, “strong GDP data prints” such as today’s will “keep them on their toes,” said Ercolao, who expects the first interest rate cut to take place in July.

On the labour front, Statistics Canada said there were 632,100 job vacancies in January, down 34,800, or 5.2 per cent, from November. Vacancies in the manufacturing sector declined by 10.2 per cent to 37,500, the lowest level since September 2017.

Advertisement 4

Article content

Monthly payroll increases were recorded in 13 of 20 sectors, led by retail trade, manufacturing and finance. But these gains were offset by a 0.3 per cent decline in construction.

The number of employees receiving pay and benefits from their employers, as measured by payroll employment, rose for the first time in the retail trade after four consecutive monthly declines.

Despite the strong start to the year, some economists expressed caution, especially regarding February’s GDP estimate.

Claire Fan, an economist at the Royal Bank of Canada, said the “substantially stronger-than-expected” numbers are partially driven by one-off factors such as the ending of the Quebec teachers’ strike, so growth isn’t likely to be sustained in the coming months.

“We’ve learned to take the advance estimates (February) with a grain of salt as they have been highly revision prone,” she said, while retaining RBC’s assessment of a weak economic backdrop.

Recommended from Editorial

  1. Bank of Canada senior deputy governor Carolyn Rogers said on Tuesday it is time to “break the emergency glass” regarding the structural decline in Canadian productivity.

    How to fix Canada’s poor productivity performance

  2. Bank of Canada

    Bank of Canada says nation faces a productivity ’emergency’

BMO’s Porter said Canada experienced something similar last year when GDP stalled after a strong start to the year.

“There could be a serious issue with seasonality here, especially in light of much milder winters recently,” he said.

Despite the increase in GDP, most economists have stuck to their previous predictions that June will be when the Bank of Canada issues its initial interest rate cut.

• Email: nkarim@postmedia.com

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content

Comments

Join the Conversation

This Week in Flyers

Adblock test (Why?)

728x90x4

Source link

Continue Reading

Trending