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.
Sunday, November 23, 2008
Saturday, October 25, 2008
Chapter Two Economics Blog
Link: http://www.cbc.ca/consumer/story/2008/10/14/cars.html
Summary
On Tuesday October 14th, Statistics Canada released new figures that the new car and truck sales in Canada are down for the third month in a row. The figures are based from the car and truck sales in August, which means since May, car sales have been lower from the previous month for the third time. The August sales were down 2.3 percent from July, with the passenger car sales taking the biggest hit sliding 4.2 per cent in the month. However, the sales of passenger cars built overseas increased by a mere 0.4 per cent. Since the start of the year, Canada new car and trucks sales have been continuing to fall due to the increasing fuel prices and the economic meltdown. The figures did not include September’s sales, which could be way worse with many more economic struggles in the country.
The Operation of a Market: The Concept of Supply and Demand
The declining demand of new cars and trucks in Canada can cause changes to the supply of the cars and trucks. When people have less desire to buy cars and trucks, the supply of them will remain high until the demand goes up again. This is an example of supply and demand. The factors that have affected the dwindling demand of cars and trucks could be because of the increased fuel costs, income uncertainty and the switching to other alternatives such as public transit. The increases in gas prices influence the demand of the car and truck sales because if gas is too expensive then people can’t afford a car, which needs gas to run. Therefore gas is a complementary product to cars. People’s incomes also affect the demand of cars in that when people have less money to spend, the demand of costly items like cars decline.
Reflection
I believe the slowing economy is the main factor of why the there is a declining demand of cars and trucks. With the economic outlook uncertain when people’s jobs are at risk and investment savings are deteriorating, people would rather save some money than to buy a new car or truck. Furthermore, people are continuing to look for more sustainable sources of transportation like taking public transit or riding a bike. The high fuel prices might also give second thoughts to people thinking of buying a truck or SUV where those vehicles consume a lot of gas. It seems that the demand of new cars and trucks will continue to go down in the upcoming months as the economy continues to worsen.
Summary
On Tuesday October 14th, Statistics Canada released new figures that the new car and truck sales in Canada are down for the third month in a row. The figures are based from the car and truck sales in August, which means since May, car sales have been lower from the previous month for the third time. The August sales were down 2.3 percent from July, with the passenger car sales taking the biggest hit sliding 4.2 per cent in the month. However, the sales of passenger cars built overseas increased by a mere 0.4 per cent. Since the start of the year, Canada new car and trucks sales have been continuing to fall due to the increasing fuel prices and the economic meltdown. The figures did not include September’s sales, which could be way worse with many more economic struggles in the country.
The Operation of a Market: The Concept of Supply and Demand
The declining demand of new cars and trucks in Canada can cause changes to the supply of the cars and trucks. When people have less desire to buy cars and trucks, the supply of them will remain high until the demand goes up again. This is an example of supply and demand. The factors that have affected the dwindling demand of cars and trucks could be because of the increased fuel costs, income uncertainty and the switching to other alternatives such as public transit. The increases in gas prices influence the demand of the car and truck sales because if gas is too expensive then people can’t afford a car, which needs gas to run. Therefore gas is a complementary product to cars. People’s incomes also affect the demand of cars in that when people have less money to spend, the demand of costly items like cars decline.
Reflection
I believe the slowing economy is the main factor of why the there is a declining demand of cars and trucks. With the economic outlook uncertain when people’s jobs are at risk and investment savings are deteriorating, people would rather save some money than to buy a new car or truck. Furthermore, people are continuing to look for more sustainable sources of transportation like taking public transit or riding a bike. The high fuel prices might also give second thoughts to people thinking of buying a truck or SUV where those vehicles consume a lot of gas. It seems that the demand of new cars and trucks will continue to go down in the upcoming months as the economy continues to worsen.
Monday, September 22, 2008
Chapter One Economics Blog
Link: http://www.economist.com/agenda/displaystory.cfm?story_id=12236443
Summary
As humans around the world are constantly burning fossil fuels every day, the European Parliament’s industry and energy committee has recently agreed to invest more money in renewable energies and biofuels. The committee have supported an amended draft that aims at raising the renewable energies usage to 20% of Europe’s total energy usage by 2020. The draft, which is to distance Europe from relying on fossil fuel, also states that the transportation sector in Europe must be using at least 10% of their energy from sources besides fossil fuel by the same target date. To enforce that the mandatory targets will be met, there will be fines to a country if it is not meeting the target, however a country could also receive financial benefits if it is doing better than the standards. The amended draft also tries to combat one of the greatest global problems we have today—climate change.
Introductory Concept: Scarcity
The reason why Europe has approved the draft to invest in renewable energies is because the amount of fossil fuel and oil in the world is limited. Therefore fossil fuels are a scarce resource and scarcity is one of the major topics in chapter one. Fossil fuels are classified as a land resource, so the leaders and governments in the world must make reasonable decisions regarding on its use and consumption. Chapter one states that when a resource is diminishing, we must find alternatives to replace the resource. This relates to the article in that the European leaders are trying to switch to alternative energy sources and away from the declining supply of fossil fuel. If we keep using fossil fuels the way we are today to drive our cars, one day it will run out because there is only a limited amount of it.
Personal Reflection
From my point of view, not only will the draft help save the supply of fuels in the world, but could also make humans switch to a cleaner alternative—one that would not pollute the world as much. This would be a benefit for us in the future as we would have cleaner air to breathe in. This crucial decision made by the European leaders could influence Canada and other countries to set targets to put more renewable energies into our societies. Furthermore, with the oil prices so high, switching to renewable energy sources could save us a lot of money in the long run. We all need to separate ourselves from relying too much on fossil fuels to help save the environment and tackle climate change.
Summary
As humans around the world are constantly burning fossil fuels every day, the European Parliament’s industry and energy committee has recently agreed to invest more money in renewable energies and biofuels. The committee have supported an amended draft that aims at raising the renewable energies usage to 20% of Europe’s total energy usage by 2020. The draft, which is to distance Europe from relying on fossil fuel, also states that the transportation sector in Europe must be using at least 10% of their energy from sources besides fossil fuel by the same target date. To enforce that the mandatory targets will be met, there will be fines to a country if it is not meeting the target, however a country could also receive financial benefits if it is doing better than the standards. The amended draft also tries to combat one of the greatest global problems we have today—climate change.
Introductory Concept: Scarcity
The reason why Europe has approved the draft to invest in renewable energies is because the amount of fossil fuel and oil in the world is limited. Therefore fossil fuels are a scarce resource and scarcity is one of the major topics in chapter one. Fossil fuels are classified as a land resource, so the leaders and governments in the world must make reasonable decisions regarding on its use and consumption. Chapter one states that when a resource is diminishing, we must find alternatives to replace the resource. This relates to the article in that the European leaders are trying to switch to alternative energy sources and away from the declining supply of fossil fuel. If we keep using fossil fuels the way we are today to drive our cars, one day it will run out because there is only a limited amount of it.
Personal Reflection
From my point of view, not only will the draft help save the supply of fuels in the world, but could also make humans switch to a cleaner alternative—one that would not pollute the world as much. This would be a benefit for us in the future as we would have cleaner air to breathe in. This crucial decision made by the European leaders could influence Canada and other countries to set targets to put more renewable energies into our societies. Furthermore, with the oil prices so high, switching to renewable energy sources could save us a lot of money in the long run. We all need to separate ourselves from relying too much on fossil fuels to help save the environment and tackle climate change.
Thursday, September 4, 2008
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