[This was written a few days before the actual budget came down. Still, the analysis hinges on important move that was ignored by both the pop media and the loyal opposition. In fact, that is the point. As Chossudovsky puts it, "in contrast [to the TARP bailout in the US], in Canada, the granting of 75 billion dollars to Canada's chartered banks was implemented at the height of an election campaign, without duly informing the Canadian public." Garth Turner believes "the Bank of Canada has been buying up other commercial bank liabilities, such as credit card debt." That would mean that while this and previous governments sell off public assets to the private sector, it has now started buying up some "near-cash holdings" to replace real assets. As Chossudovsky concludes, "It is worth noting that in addition to the $75 billion, the government has pledged "to backstop more than $200 billion in interbank lending so banks can boost their lending capacity." (Toronto Star, December 13, 2009). The implications of this decision remain to be carefully analysed." -jlt]
The Conservative government has leaked the details of Tuesday's budget. They have announced a $64 billion deficit.
The Harper government, which has consistently committed itself to a "balanced budget", now claims that deficit spending is required to boost the economy at the height of a major economic recession.
Does this constitute a turnaround in federal government economic policy?
Is the government really committed to running a budget deficit with a view to stimulating demand and reversing the tide of economic decline.
Or is there a hidden agenda?
A modest $500 million farm modernization program, a $1 billion fund "to send workers from hard-hit industries back to school", the reduction in the Goods and Services Tax (GST)... The figures do not seem to add up to a staggering $64 billion.
Where is the bulk of the money going? These budget allocations do not explain the dramatic increase in the budget deficit.
Bear in mind that barely a month ago, Finance Minister Jim Flaherty had projected "a $2.3-billion surplus for the current fiscal year" (Edmonton Sun, December 24, 2008)
|The likely consequences of the Canada bank bailout on the federal fiscal structure were not the object of discussion or political debate.|
Don't miss the rest of Chossudovsky's piece here =>
Garth Turner discusses this on December 19 2008 ("Toxic cash?").
Mound of Sound raises questions and draws comments as a "Disaffected Lib."
Flaherty announced the second of the purchases on November 12 2008, bringing the total to $75 billion here =>
The first $25 billion was announced on October 10. Election day was October 14.
Mike Watkins refers in passing to an earlier $10-21 billion in July before he notes the opportunity costs of the first $25 bn:
"Was the $25 billion dollar bailout even necessary? For months and months Harper and Flaherty have said that Canada's banks don't need the help, that Canada's economy is strong and doesn't suffer from the same issues as the U.S. is plagued with. True - costs for banks have been rising as a consequence of the credit crunch. But Canada's banks were not starved for credit. Their operations have not been halted. There are no banks failing here in this country" (Watkins Oct 13 2008).Recommend this Post