http://news.sympatico.msn.cbc.ca/Local/BC/ContentPosting?newsitemid=vancouver-bc-film&feedname=CBC_LOCALNEWS&show=False&number=0&showbyline=True&subtitle=&detect=&abc=abc&date=True
Summary
BC’s film industry continues to thrive through the challenging economic times as in April, there were four feature films, one miniseries, four TV pilots, four reality shows, a documentary, and three TV series shooting in the province. The majority of BC’s film industry comes from foreign production from the U.S. Although the Vancouver-based filming company, Insight Film Studios, has laid off over a quarter of its employees due to a reduction in production, there seems to be a constant flow of U.S. filming companies flying to BC to film. Even during the current economic downturn, BC’s film industry was worth $1.2 billion last year, up nearly 25% from the previous year in 2007. The outlook of this still remains optimistic as the Canadian dollar, which is lower this year compared to last year, will help attract filming companies to this province, which already has many sound stages, post-production facilities, and infrastructure in place.
Industrial Organization in Canada
Chapter 10 discusses the decision-making process of business firms and individuals also known as microeconomics. According to the article, BC’s film industry is almost all made up of foreign investment and ownership, which is a topic covered in the chapter. There are many benefits for the BC economy from the foreign investments made by the U.S. to our filming industry such as having access to capital where foreign firms bring investment dollars to Canada, improving research and development to enhance the quality of movie or filming production, and increasing the employment in BC so the citizens have jobs. The foreign investments also help to keep some of the skilled workers in the filming and media industry to stay in this province. With increased employment due to the American investments, our economy benefits as more employment means more production, increasing our GDP. The U.S. filming companies that invest in BC like Warner Bros., 20th Century Fox, and Summit Entertainment, are categorized to be in the competitive group called many differentiated sellers. They are categorize in this type of competition because there are many companies selling or promoting the same product, movies in this case, however the products from the companies are different from each from each other; no movies are alike. Through non-price competition like advertising, companies hope to grab more of the market share that way and separate from their competitors.
Personal Reflection
I believe the BC’s filming industry will continue to do well and remain prosperous in the near future and is an industry worth investing in for the BC government. A reason why the filming industry will do well in BC is because BC has the human and infrastructure resources to attract the U.S. filming companies to shoot their films in this province. BC has various movie studios located throughout the province, most notably The Bridge Studios, located in Burnaby. BC also has the skilled workers in this industry and with the growing number of students taking interactive arts and graphic designs there should be no shortage of workers in this field. The global demand of movie entertainment also seems to be relatively stable as consumers are demanding this entertainment despite the economic downturn. Therefore, the filming industry in BC should expect to continue to bring in foreign investments creating jobs in the near future.
Thursday, June 11, 2009
Tuesday, April 21, 2009
Chapter Eight Economics Blog
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090420/battle_lines_090420/20090420?hub=Politics
Summary
As Canada has lost 300,000 jobs in the first three months of 2009, the federal Liberals were accusing the Conservative government of mismanaging the economy. Liberal Leader Michael Ignatieff emphasized that the Harper government’s stimulus programs is doing little to help reduce the number of job losses, which are “sweeping across the country”. However, the Conservatives responded by pointing out the Liberals will raise taxes to pay down the debt caused by the Conservative’s stimulus package. Both sides are attacking each other’s fiscal policies. The Conservative Government is spending billions of dollars to increase employment and improve economic conditions at the expense of increasing the public debt. On the other hand, the Liberals are hinting to raise taxes, which may lower employment, to eliminate the debt the Conservative government has recently caused.
Stabilization Policy
To get out of current economic recession, the Conservative government has imposed fiscal policies that increased government spending and cut back on certain taxes. The changes in fiscal policies can be referred to as economic stabilization programs where increased government spending can create jobs, therefore lowering levels of unemployment. A reduction of taxes can also increase the country’s GDP, leading to an increase in inflation. A decrease in government spending and an increase in taxes can lower the GDP resulting in higher unemployment, which is a plan the Liberals are considering to do. In this case, the current fiscal policy laid out by the Conservative government is classified as a discretionary fiscal policy, which aims at improving the economy through changing level of government spending and taxation. Since it is easier to gain political approval by having a fiscal policy that increase government spending and reduce taxes, the Conservative government implemented this policy and tried to paint the Liberals as the party that will raise taxes and reduce government spending—a fiscal policy that is unpopular with many Canadians. Discretionary fiscal policies are also known to have huge “inside” and “outside” time lags where effects of those policies can’t be measured until months after they are introduced. This is a major reason why thousands of Canadians are losing their jobs at the beginning of 2009, despite the government’s announcement of increased spending and decreased taxation.
Personal Reflection
Liberal Leader Michael ignatieff does have a very good reason to be attacking the Conservatives for mishandling the economy. Because of the recognition, decision, and outside time lags of the Conservatives’ discretionary fiscal policies, thousands of Canadians are experiencing unemployment across the country. Though increases in government spending and tax cuts may be the right thing to do, the policies have came too late to save the jobs of many Canadians. The Conservative government should have implemented automatic stabilizers months, even a year, before this recession, so those programs would be fully in place now. The government should have injected more money earlier in the employment insurance programs, so when Canadians loses their jobs they can quickly get some financial support, instead of waiting for weeks to get the money, which further slows down the economy.
Summary
As Canada has lost 300,000 jobs in the first three months of 2009, the federal Liberals were accusing the Conservative government of mismanaging the economy. Liberal Leader Michael Ignatieff emphasized that the Harper government’s stimulus programs is doing little to help reduce the number of job losses, which are “sweeping across the country”. However, the Conservatives responded by pointing out the Liberals will raise taxes to pay down the debt caused by the Conservative’s stimulus package. Both sides are attacking each other’s fiscal policies. The Conservative Government is spending billions of dollars to increase employment and improve economic conditions at the expense of increasing the public debt. On the other hand, the Liberals are hinting to raise taxes, which may lower employment, to eliminate the debt the Conservative government has recently caused.
Stabilization Policy
To get out of current economic recession, the Conservative government has imposed fiscal policies that increased government spending and cut back on certain taxes. The changes in fiscal policies can be referred to as economic stabilization programs where increased government spending can create jobs, therefore lowering levels of unemployment. A reduction of taxes can also increase the country’s GDP, leading to an increase in inflation. A decrease in government spending and an increase in taxes can lower the GDP resulting in higher unemployment, which is a plan the Liberals are considering to do. In this case, the current fiscal policy laid out by the Conservative government is classified as a discretionary fiscal policy, which aims at improving the economy through changing level of government spending and taxation. Since it is easier to gain political approval by having a fiscal policy that increase government spending and reduce taxes, the Conservative government implemented this policy and tried to paint the Liberals as the party that will raise taxes and reduce government spending—a fiscal policy that is unpopular with many Canadians. Discretionary fiscal policies are also known to have huge “inside” and “outside” time lags where effects of those policies can’t be measured until months after they are introduced. This is a major reason why thousands of Canadians are losing their jobs at the beginning of 2009, despite the government’s announcement of increased spending and decreased taxation.
Personal Reflection
Liberal Leader Michael ignatieff does have a very good reason to be attacking the Conservatives for mishandling the economy. Because of the recognition, decision, and outside time lags of the Conservatives’ discretionary fiscal policies, thousands of Canadians are experiencing unemployment across the country. Though increases in government spending and tax cuts may be the right thing to do, the policies have came too late to save the jobs of many Canadians. The Conservative government should have implemented automatic stabilizers months, even a year, before this recession, so those programs would be fully in place now. The government should have injected more money earlier in the employment insurance programs, so when Canadians loses their jobs they can quickly get some financial support, instead of waiting for weeks to get the money, which further slows down the economy.
Wednesday, April 1, 2009
Chapter Seven Economics Blog
http://www.thestar.com/Business/article/611246
Summary
On March 31, the Organization for Economic Cooperation and Development (OECD) urged the Canadian governments to do more and spend more to help stimulate the contracting economy. The international organization advocated the Bank of Canada to cut interest rates, increase the money supply, and increase income support for laid-off workers. The OCED also encouraged Canada to cut interest rates even lower than at the current rate of 0.5 per cent to boost spending. It strongly supports that governments, Canada in particular, needs to spend a lot more to get out of a recession. Finance Minister Jim Flaherty earlier did say he will do more if we need to do more, but will not do anything now because the stimulus package introduced in the government’s budget haven’t gone to Canadians yet.
Money and the Canadian Banking System
Two of the recommendations the OCED has put forward that relates to chapter seven are lowering the interest rates of the Bank of Canada and injecting more money supply in the economy. If the Bank of Canada further lowers their interest rates, then hopefully the chartered banks which borrow money from the Bank of Canada would pass the lowered interest rates to the consumers by lowering their lending rates. The will encourage spending, but most importantly will increase the demand for money. According to the demand-for-money curve, if interest rates drop there will be an increase in the quantity-of-money demanded. When more money is demanded from Canadians, the Bank of Canada might increase the nation’s supply of money and if the supply of money increases, the purchases of goods and services will also increase, as well. The increased purchasing power and spending will create more jobs and increase the value of goods, and ultimately increase the country’s GDP to help them get out of a recession. Cutting interest rates and increasing the money supply both helps Canadians to spend more to help the ailing economy.
Personal Reflection
Personally, I disagree with the OCED’s recommendation that the Bank of Canada should lower interest rates. The interest rate of the Bank of Canada is at 0.5 per cent now and given that the interest rates can’t go much lower. Since September 2008 the interest rate has dropped 2.5 per cent and made very little, if any, effect on consumer spending. However, the interest rates of the chartered banks in Canada can be lowered as the lending rates of those banks vary between 3-5 per cent. I do disagree with the OCED’s recommendation that Canada should boost the money supply because if they produce more money, that means the Bank of Canada will have more money to lend out to the chartered banks, ultimately the banks will have more money to lend out to consumers. This will force the interest rates of the banks to drop and consumers will loan more and spend more. Increased consumption will create more jobs and the economy will improve, that is why during the recession we should increase the production of money, so the banks will lend money out easier.
Summary
On March 31, the Organization for Economic Cooperation and Development (OECD) urged the Canadian governments to do more and spend more to help stimulate the contracting economy. The international organization advocated the Bank of Canada to cut interest rates, increase the money supply, and increase income support for laid-off workers. The OCED also encouraged Canada to cut interest rates even lower than at the current rate of 0.5 per cent to boost spending. It strongly supports that governments, Canada in particular, needs to spend a lot more to get out of a recession. Finance Minister Jim Flaherty earlier did say he will do more if we need to do more, but will not do anything now because the stimulus package introduced in the government’s budget haven’t gone to Canadians yet.
Money and the Canadian Banking System
Two of the recommendations the OCED has put forward that relates to chapter seven are lowering the interest rates of the Bank of Canada and injecting more money supply in the economy. If the Bank of Canada further lowers their interest rates, then hopefully the chartered banks which borrow money from the Bank of Canada would pass the lowered interest rates to the consumers by lowering their lending rates. The will encourage spending, but most importantly will increase the demand for money. According to the demand-for-money curve, if interest rates drop there will be an increase in the quantity-of-money demanded. When more money is demanded from Canadians, the Bank of Canada might increase the nation’s supply of money and if the supply of money increases, the purchases of goods and services will also increase, as well. The increased purchasing power and spending will create more jobs and increase the value of goods, and ultimately increase the country’s GDP to help them get out of a recession. Cutting interest rates and increasing the money supply both helps Canadians to spend more to help the ailing economy.
Personal Reflection
Personally, I disagree with the OCED’s recommendation that the Bank of Canada should lower interest rates. The interest rate of the Bank of Canada is at 0.5 per cent now and given that the interest rates can’t go much lower. Since September 2008 the interest rate has dropped 2.5 per cent and made very little, if any, effect on consumer spending. However, the interest rates of the chartered banks in Canada can be lowered as the lending rates of those banks vary between 3-5 per cent. I do disagree with the OCED’s recommendation that Canada should boost the money supply because if they produce more money, that means the Bank of Canada will have more money to lend out to the chartered banks, ultimately the banks will have more money to lend out to consumers. This will force the interest rates of the banks to drop and consumers will loan more and spend more. Increased consumption will create more jobs and the economy will improve, that is why during the recession we should increase the production of money, so the banks will lend money out easier.
Sunday, March 8, 2009
Chapter Six Economics Blog
http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090306.wusjobs0306/business/Business/businessBN/ctv-business
Summary
The U.S. Labour Department released a report at the beginning of March showing that a total of 651,000 jobs were lost in February, alone, across the United States. The significant job loses cause the unemployment rate to rise to 8.1 per cent from 7.6 per cent, which is at the highest level since 1983. The report also showed figures of job loses in January and December, which reported over 600,000 jobs lost in each month. With three consecutive months posting over 600,000 jobs lost, the current pace of unemployment figures have never reached its levels since 1945, right after World War II. There are now 12.5 million Americans out of work, with 5 million of them losing their jobs in the past year. The steady growing unemployment rate is contributing to the shrinking GDP, which contracted 3.9 per cent last quarter. With the U.S. already in a midst of a recession, the report confirmed that the American economy and unemployment numbers continue to worsen.
Determination of National Income
GDP (gross domestic products) is used to determine the national income of a country based on the goods and services it has produced in a year and is thoroughly explained in chapter 6. An economy that has high unemployment numbers usually mean its GDP is contracting because less people are needed to produce less goods and services. When more people go out of work, households’ incomes are decreased because without a job there would be minimal income for the households. With lesser income, people will spend less because they can no longer afford the luxury items. Therefore the amount of money in the circular flow and the country's GDP will decrease, which affects the businesses as sales will go down and less people are willing to invest. People who do have jobs are also afraid that they will lose their jobs later on, so they tend to save more money in case they are unemployed in the future. When people are generally saving more, it also means they are spending less, which further reduces the amount of money flowing in the economy. As companies are struggling to maintain profits with decreasing revenues, they cut even more jobs. As a result, more people are unemployed, less money is being circulated, and the GDP continues to fall, partly due because the amount of savings are greater than the amount of investing, creating an endless pattern.
Reflection
In a time where thousands of people are losing their jobs each day, the U.S. government need to take action and promote spending in the economy. The government should lower their interest rate borrowed to the financial institutions, so they can pass the lower interest rates to businesses and private customers. If the interest rates are low, people and businesses will tend to spend because paying back for it later on will cost less than it did before. With more business investment, businesses will be looking to expand by upgrading or expanding their factories and buildings and buying newer machinery and technological equipment. The lower interest rates also create more household investments as more people will likely be buying houses and cars. The lower interest rates not only can promote more spending in the economy and keep money circulating in the economy, but it can also prevent companies from laying off workers because more business investment requires more workers to operate the business and with more money flowing in the economy the companies will not have to layoff workers to keep the company from making profits. The U.S. government should also give tax credits to the businesses and industries, like reducing the businesses’ income tax, to generate more exports, which means the country’s income would increase and so will the country’s GDP. Setting lower interest rates and giving tax breaks can get more businesses and most importantly the people to start spending again to get the country out of a recession.
Summary
The U.S. Labour Department released a report at the beginning of March showing that a total of 651,000 jobs were lost in February, alone, across the United States. The significant job loses cause the unemployment rate to rise to 8.1 per cent from 7.6 per cent, which is at the highest level since 1983. The report also showed figures of job loses in January and December, which reported over 600,000 jobs lost in each month. With three consecutive months posting over 600,000 jobs lost, the current pace of unemployment figures have never reached its levels since 1945, right after World War II. There are now 12.5 million Americans out of work, with 5 million of them losing their jobs in the past year. The steady growing unemployment rate is contributing to the shrinking GDP, which contracted 3.9 per cent last quarter. With the U.S. already in a midst of a recession, the report confirmed that the American economy and unemployment numbers continue to worsen.
Determination of National Income
GDP (gross domestic products) is used to determine the national income of a country based on the goods and services it has produced in a year and is thoroughly explained in chapter 6. An economy that has high unemployment numbers usually mean its GDP is contracting because less people are needed to produce less goods and services. When more people go out of work, households’ incomes are decreased because without a job there would be minimal income for the households. With lesser income, people will spend less because they can no longer afford the luxury items. Therefore the amount of money in the circular flow and the country's GDP will decrease, which affects the businesses as sales will go down and less people are willing to invest. People who do have jobs are also afraid that they will lose their jobs later on, so they tend to save more money in case they are unemployed in the future. When people are generally saving more, it also means they are spending less, which further reduces the amount of money flowing in the economy. As companies are struggling to maintain profits with decreasing revenues, they cut even more jobs. As a result, more people are unemployed, less money is being circulated, and the GDP continues to fall, partly due because the amount of savings are greater than the amount of investing, creating an endless pattern.
Reflection
In a time where thousands of people are losing their jobs each day, the U.S. government need to take action and promote spending in the economy. The government should lower their interest rate borrowed to the financial institutions, so they can pass the lower interest rates to businesses and private customers. If the interest rates are low, people and businesses will tend to spend because paying back for it later on will cost less than it did before. With more business investment, businesses will be looking to expand by upgrading or expanding their factories and buildings and buying newer machinery and technological equipment. The lower interest rates also create more household investments as more people will likely be buying houses and cars. The lower interest rates not only can promote more spending in the economy and keep money circulating in the economy, but it can also prevent companies from laying off workers because more business investment requires more workers to operate the business and with more money flowing in the economy the companies will not have to layoff workers to keep the company from making profits. The U.S. government should also give tax credits to the businesses and industries, like reducing the businesses’ income tax, to generate more exports, which means the country’s income would increase and so will the country’s GDP. Setting lower interest rates and giving tax breaks can get more businesses and most importantly the people to start spending again to get the country out of a recession.
Saturday, February 21, 2009
Chapter Five Economics Blog
http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20090216.wjapanmarkets0216/business/Business/businessBN/ctv-business
Summary
On February 16, the Japanese government announced Japan’s gross domestic product contracted by 3.3 per cent in the fourth quarter last year from the previous quarter. This stat shows Japan’s economy is shrinking at the fastest rate in nearly 35 years due to the declining global export demand. Japan’s economy, the second largest in the world, shows no signs of recovery as the government also projected that the current quarter will also post a contracting GDP value. The global economic problem has hit the Japanese export-dependent economy hard as Japan’s export fell a record 13.9 per cent in the last quarter. This triggered many companies like Sony Corp. and Toyota Motor Corp. to cut thousands of jobs. Families are also feeling the pinch and are spending less due to rising number of unemployment. In 2008 overall, the value of Japan’s GDP shrunk by 0.7 per cent, which is its first decline in nine years.
Economic Indicators
Being this is the third consecutive drop for the GDP value, Japan’s economy is officially in amidst of a recession as when a country posts at least two consecutive quarters posting negative growth, the economy is deemed to be in a recession. The declining levels of the GDP, measuring the market value of total goods and services produced in a given time period, is mainly due to the shrinking global demand of Japanese products, causing Japan’s production of goods to plunge. This means less workers are needed to produce those goods, therefore more people are unemployed and are looking for a job. When Japan is not producing as much the curve representing the production of goods and services falls inside its production-possibilities curve and the curve shifts to the left. As production is slowing down, the type of the unemployment that the Japanese faces is either called demand-deficit unemployment or occupational dimension of structural unemployment, which are situations where employers find it more difficult to sell their products, mainly luxury items, so they layoff their employees. High levels of unemployment usually means there will be less spending in the economy, causing a chain reaction in that due to less spending even more jobs will be lost.
Reflection
Since Japan has many companies that depend on global export, their economic crisis is unavoidable. The slumping economies in the world render less demand for Japanese products such as cars, electronics, and appliances. To deal with the economic slowdown in Japan, the government should hire the workers who have lost their jobs in the manufacturing industry to improve on infrastructure. To prevent rising unemployment levels, the government should hire the unemployed to work on highway constructions, buildings development, and bridge upgrades. This way, the unemployed would get a job and spend more in the economy. In turn, the public benefits because of the infrastructure improvements. With more spending in the economy, the security of people’s jobs will be better, as well. During this economic slowdown, Japan should also consider diversifying their industries and not just depend on the export manufacturing industry for economic growth. They might want to consider expanding the tourist industry for the local Japan citizens, aimed at promoting spending within their own country. Although the short term outlook of Japan’s economy may seem bleak, the government can create a healthy economic recovery by employing more people and diversify their industries.
Summary
On February 16, the Japanese government announced Japan’s gross domestic product contracted by 3.3 per cent in the fourth quarter last year from the previous quarter. This stat shows Japan’s economy is shrinking at the fastest rate in nearly 35 years due to the declining global export demand. Japan’s economy, the second largest in the world, shows no signs of recovery as the government also projected that the current quarter will also post a contracting GDP value. The global economic problem has hit the Japanese export-dependent economy hard as Japan’s export fell a record 13.9 per cent in the last quarter. This triggered many companies like Sony Corp. and Toyota Motor Corp. to cut thousands of jobs. Families are also feeling the pinch and are spending less due to rising number of unemployment. In 2008 overall, the value of Japan’s GDP shrunk by 0.7 per cent, which is its first decline in nine years.
Economic Indicators
Being this is the third consecutive drop for the GDP value, Japan’s economy is officially in amidst of a recession as when a country posts at least two consecutive quarters posting negative growth, the economy is deemed to be in a recession. The declining levels of the GDP, measuring the market value of total goods and services produced in a given time period, is mainly due to the shrinking global demand of Japanese products, causing Japan’s production of goods to plunge. This means less workers are needed to produce those goods, therefore more people are unemployed and are looking for a job. When Japan is not producing as much the curve representing the production of goods and services falls inside its production-possibilities curve and the curve shifts to the left. As production is slowing down, the type of the unemployment that the Japanese faces is either called demand-deficit unemployment or occupational dimension of structural unemployment, which are situations where employers find it more difficult to sell their products, mainly luxury items, so they layoff their employees. High levels of unemployment usually means there will be less spending in the economy, causing a chain reaction in that due to less spending even more jobs will be lost.
Reflection
Since Japan has many companies that depend on global export, their economic crisis is unavoidable. The slumping economies in the world render less demand for Japanese products such as cars, electronics, and appliances. To deal with the economic slowdown in Japan, the government should hire the workers who have lost their jobs in the manufacturing industry to improve on infrastructure. To prevent rising unemployment levels, the government should hire the unemployed to work on highway constructions, buildings development, and bridge upgrades. This way, the unemployed would get a job and spend more in the economy. In turn, the public benefits because of the infrastructure improvements. With more spending in the economy, the security of people’s jobs will be better, as well. During this economic slowdown, Japan should also consider diversifying their industries and not just depend on the export manufacturing industry for economic growth. They might want to consider expanding the tourist industry for the local Japan citizens, aimed at promoting spending within their own country. Although the short term outlook of Japan’s economy may seem bleak, the government can create a healthy economic recovery by employing more people and diversify their industries.
Friday, January 23, 2009
Chapter 4 Economics Blog
Link:http://www.theglobeandmail.com/servlet/story/RTGAM.20090121.wPOLbudget0121/BNStory/politics/home
Summary
With almost a week before the Conservative government announces their federal budget, a Canadian parliamentary watchdog, Kevin Page, released projections that the federal government is at risk in wiping out almost all the debt the country has paid off since 1998. According to Page, Canada has paid down $105 billion in debt over the 11 year period and the ruling Conservative government could eliminate that debt reduction within the next five years in their next federal budget. The parliamentary budget officer also warns that his findings did not include the stimulus package that the government promised in the next budget, which can be a $20-30 billion stimulus plan. Page’s report projects the government will run a budget deficit of $14 million next fiscal year and if you include the huge stimulus package it could amount to around $40 billion just next year alone, wiping nearly all the debt reduction Canada has paid off since 1998.
Government Borrowing
Chapter 4 mainly discusses the different sources of government revenue. Currently in Canada, borrowing is considered to be one of the major sources of revenue for the government as an alternative to taxation. In the next fiscal budget, the Canadian government seems it will be running a huge deficit, meaning it will have to borrow money from either its citizens or other countries to pay for its expenditures. The government could ask the bank corporations and its citizens to buy government bonds as a form of borrowing. With Page’s findings projecting that the government could run deficits in the next five years, Canadians should also expect Canada’s net debt to increase. With the Canadian government facing enormous pressure from several of ailing industries, thousands of jobless people, and even the opposing political parties to spend money to stimulate the economy, Canadians need to realize is it really worth it in the long term. If we continue to keep borrowing money from foreign countries, especially at a time where our currency is falling, our debt will never be paid off, furthermore, there is no guarrantee if the stimulus package can really make a difference to our economy as our reliance on foreign trade is huge. For example if no one in the world is buying our wood to build houses, our logging industry would suffer regardless of the stimulus plan. Canadians ultimately need to think is it worth going billions of dollars into debt, wiping out nearly all of the debt reduction in the past decade.
Personal Reflection
I would oppose the next federal budget if the government decides to go into a $40 billion deficit in the next federal budget. Despite that many Canadian industries are suffering because of the economic downturn, the government should not wipe out nearly the entire debt reduction Canada has achieved in the past decade. If the government borrows the money to pay for the stimulus package, Canadians overall will be suffering in the long term. Debt charges such as interest payments already make up over 15 percent of the federal expenditures and are ranked the second largest component of government spending. If Canada borrows the money now, interest charges will need to be paid later on in the years to come, that means there will be less money being spent on the actual social services for Canadians; the expenditure of interest and debt charges will never go down. This is why during the economic downturn I feel we should minimize the stimulus plan and just focuses on a couple of suffering industries. I believe we should focus on the trade industry to improve our infrastructures and get more people working. We should also focus on the auto industry as one in seven jobs are somewhat related to the auto sector. Since our country in the past 11 years have been making progress in paying down the debts, I feel the efforts should not be wasted and we should still try to continue that trend and not eliminate nearly all the debt reduction we have achieved despite the unprecedented economic hardships.
Summary
With almost a week before the Conservative government announces their federal budget, a Canadian parliamentary watchdog, Kevin Page, released projections that the federal government is at risk in wiping out almost all the debt the country has paid off since 1998. According to Page, Canada has paid down $105 billion in debt over the 11 year period and the ruling Conservative government could eliminate that debt reduction within the next five years in their next federal budget. The parliamentary budget officer also warns that his findings did not include the stimulus package that the government promised in the next budget, which can be a $20-30 billion stimulus plan. Page’s report projects the government will run a budget deficit of $14 million next fiscal year and if you include the huge stimulus package it could amount to around $40 billion just next year alone, wiping nearly all the debt reduction Canada has paid off since 1998.
Government Borrowing
Chapter 4 mainly discusses the different sources of government revenue. Currently in Canada, borrowing is considered to be one of the major sources of revenue for the government as an alternative to taxation. In the next fiscal budget, the Canadian government seems it will be running a huge deficit, meaning it will have to borrow money from either its citizens or other countries to pay for its expenditures. The government could ask the bank corporations and its citizens to buy government bonds as a form of borrowing. With Page’s findings projecting that the government could run deficits in the next five years, Canadians should also expect Canada’s net debt to increase. With the Canadian government facing enormous pressure from several of ailing industries, thousands of jobless people, and even the opposing political parties to spend money to stimulate the economy, Canadians need to realize is it really worth it in the long term. If we continue to keep borrowing money from foreign countries, especially at a time where our currency is falling, our debt will never be paid off, furthermore, there is no guarrantee if the stimulus package can really make a difference to our economy as our reliance on foreign trade is huge. For example if no one in the world is buying our wood to build houses, our logging industry would suffer regardless of the stimulus plan. Canadians ultimately need to think is it worth going billions of dollars into debt, wiping out nearly all of the debt reduction in the past decade.
Personal Reflection
I would oppose the next federal budget if the government decides to go into a $40 billion deficit in the next federal budget. Despite that many Canadian industries are suffering because of the economic downturn, the government should not wipe out nearly the entire debt reduction Canada has achieved in the past decade. If the government borrows the money to pay for the stimulus package, Canadians overall will be suffering in the long term. Debt charges such as interest payments already make up over 15 percent of the federal expenditures and are ranked the second largest component of government spending. If Canada borrows the money now, interest charges will need to be paid later on in the years to come, that means there will be less money being spent on the actual social services for Canadians; the expenditure of interest and debt charges will never go down. This is why during the economic downturn I feel we should minimize the stimulus plan and just focuses on a couple of suffering industries. I believe we should focus on the trade industry to improve our infrastructures and get more people working. We should also focus on the auto industry as one in seven jobs are somewhat related to the auto sector. Since our country in the past 11 years have been making progress in paying down the debts, I feel the efforts should not be wasted and we should still try to continue that trend and not eliminate nearly all the debt reduction we have achieved despite the unprecedented economic hardships.
Sunday, November 23, 2008
Chapter Three Economics Blog
Link:http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20081112/Ottawa_mortgages_081112/20081112?hub=CTVNewsAt11
Summary
On November 12, the Canadian government bought out $50 billion in residential mortgages to encourage the banks to lend more money and lower interest rates. The federal government bought the mortgages from the banks, so that the banks would have money to lend it back out to people asking for a loan or mortgage to buy a house or start a business. With the Canadian economy on the brink of recession and the nation’s financial institutions hesitant to lend, the government hopes that the purchase will increase the sales of houses and properties, therefore increase consumer spending. Finance Minister Jim Flaherty states the mortgage buy out is not a bailout, but is just an asset swap, so the banks would have more liquidity to lend out.
The Role of Government in a Market Economy: Market Shortcomings
The government in this financial crisis intervene because of third party effects. If the government had not buy out the mortgages, the third party, which would be the potential home buyers and business owners, would be negatively affected. They would be negatively affected because they would not be able to get a loan or cannot afford one because of high interest rates. This means people would not be able to live in a home or start or expand their business. Therefore, in this case, the government sort of set up a price ceiling. Since the government feels that the interest rates are too high for consumers to afford, they try to lower the interest rates by giving the banks more money to cut interest rate. All in all, the government hopes to lower the price of interest rates to attempt to increase the demand of getting a mortgage and increase spending.
Reflection
Although the federal government is trying to stabilize the lending industry and encourage lower interest rates, the mortgage purchase is not helping the Canadians who want to buy a home or start a business. Banks are still reluctant to lend; they have practically not cut interest rates to assist their clients in borrowing money. The banks’ interest rates are still way higher than the prime rates that they were offering. Home buyers still believe the interest rates are too high and are not affordable. From my perspective, the mortgage buy out was simply unsuccessful. Hardly any money was passed down to the Canadians who wanted to borrow. The government should have known the banks would still be hesitant to lend in the current financial crisis and should set up programs that would directly lend money out to home buyers and businesses.
Summary
On November 12, the Canadian government bought out $50 billion in residential mortgages to encourage the banks to lend more money and lower interest rates. The federal government bought the mortgages from the banks, so that the banks would have money to lend it back out to people asking for a loan or mortgage to buy a house or start a business. With the Canadian economy on the brink of recession and the nation’s financial institutions hesitant to lend, the government hopes that the purchase will increase the sales of houses and properties, therefore increase consumer spending. Finance Minister Jim Flaherty states the mortgage buy out is not a bailout, but is just an asset swap, so the banks would have more liquidity to lend out.
The Role of Government in a Market Economy: Market Shortcomings
The government in this financial crisis intervene because of third party effects. If the government had not buy out the mortgages, the third party, which would be the potential home buyers and business owners, would be negatively affected. They would be negatively affected because they would not be able to get a loan or cannot afford one because of high interest rates. This means people would not be able to live in a home or start or expand their business. Therefore, in this case, the government sort of set up a price ceiling. Since the government feels that the interest rates are too high for consumers to afford, they try to lower the interest rates by giving the banks more money to cut interest rate. All in all, the government hopes to lower the price of interest rates to attempt to increase the demand of getting a mortgage and increase spending.
Reflection
Although the federal government is trying to stabilize the lending industry and encourage lower interest rates, the mortgage purchase is not helping the Canadians who want to buy a home or start a business. Banks are still reluctant to lend; they have practically not cut interest rates to assist their clients in borrowing money. The banks’ interest rates are still way higher than the prime rates that they were offering. Home buyers still believe the interest rates are too high and are not affordable. From my perspective, the mortgage buy out was simply unsuccessful. Hardly any money was passed down to the Canadians who wanted to borrow. The government should have known the banks would still be hesitant to lend in the current financial crisis and should set up programs that would directly lend money out to home buyers and businesses.
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