Monday, May 28, 2012 2:03 PM EDT
At Bank of Japan, no good deed goes unpunished
JEREMY TOROBIN
Monetary policy makers in some of the world’s biggest economies are being counted on for much of the heavy lifting out of the post-downturn malaise afflicting so-called advanced nations, and with that stepped-up role comes stepped-up scrutiny.
Which is why many have been at pains to better explain their actions to the public. In the case of the U.S. Federal Reserve and the Bank of Japan, a big part of efforts to communicate more effectively has been adopting formal inflation targets, 2 per cent for the Fed, and 1 per cent for the BOJ. In an op-ed for The Financial Times this month, Bank of Canada Governor Mark Carney surmised that the adoption or targets by the Fed and BOJ “improves the effectiveness of their unconventional policies, and will be essential to manage their exit from those policies.”
At least in terms of blunting criticism, the strategy is already paying off for the Fed and chairman Ben Bernanke.
Link to this post
Monday, May 28, 2012 3:58 PM EDT
Apprenticeships a profitable substitute to college: studies
TAVIA GRANT
Want to boost your earnings power without the trouble and expense of traditional post-secondary education? Do an apprenticeship.
Turns out, at least for men, getting an apprenticeship certification can be more lucrative than a college education, a pair of two new Canadian studies show.
Apprenticeships have been the norm in countries like Switzerland and Germany for centuries – but they're not nearly as common in North America. And though research has consistently found post-secondary education boosts economic prosperity, the value of apprenticeships often gets overlooked.
Friday, May 25, 2012 11:19 AM EDT
Want a good trade wage? Go west, keep the lights on
Rob Gilroy
Statistics Canada released its monthly look at wages in the unionized construction trades this week and, not surprisingly, the highest wages for April were found in Western Canada.
Statscan gathers hourly wages for 16 trades in 22 metropolitan area. Wages in Regina, Calgary, Edmonton, Vancouver and Victoria were consistently higher than those in eastern cities.
Electricians fared the best across the country, with an average hourly wage ranging from $31.32 in St. John’s to $44.34 in both Calgary and Edmonton. Plumbers were generally second on the wage scale.
Click on the attached graph for a closer look at wage rates across Canada in the unionized trades.
Thursday, May 24, 2012 7:06 PM EDT
Beijing eyes more stimulus as manufacturing slows
CAROLYNNE WHEELER
China is headed toward another round of economic stimulus amid deteriorating economic results.
The latest gloom is an HSBC flash purchasing managers index that showed manufacturing falling for the seventh month running, down to 48.7. That added to April results showing economic growth down to 8.1 per cent, industrial production at its lowest level of growth since May, 2009, exports up a modest 4.9 per cent and imports up only 0.3 per cent year on year.
The tone of China’s leaders is now changing from continuing anxiety over inflation and the property market to concern over maintaining growth.
“We must proactively take policies and measures to expand demand and to create a favourable policy environment for stable and relatively fast economic growth,” the Chinese government said on its website Wednesday, following a State Council meeting.
Wednesday, May 23, 2012 12:05 PM EDT
We shouldn’t drain Atlantic Canada’s labour force
DAVID CAMPBELL
There is some concern in Atlantic Canada that the federal government’s proposed reforms to the Employment Insurance program are meant to stimulate more outward migration of workers from that region to western Canada.
This notion was reinforced by a recent story that uncovered a study commissioned by the federal government meant to determine what would motivate people to move out of their communities to take jobs elsewhere in Canada.
This thinking is not new. I saw a report prepared for the government back in the early 1990s that suggested the same thing - the federal government should create incentives for people to leave areas with limited economic opportunity - such as Atlantic Canada - for areas that face labour shortages.
Wednesday, May 23, 2012 7:44 PM EDT
For almost a million young people: No job, no school
TAVIA GRANT
Nearly a million young Canadians were neither in school nor holding down a job last year, a proportion that has inched higher since the recession but remains lower than in most other G7 nations.
New analysis by Statistics Canada -- the first of its kind in the country -- finds 13 per cent, or 904,000, of the 6.8 million Canadians between the ages of 15 and 29 weren't in school nor at work last year.
Friday, May 25, 2012 4:59 AM EDT
Global market rally snuffed out on Europe fears
ERIC REGULY
A market rally that had lasted two days came to a halt hours before a European Union summit that is not expected to produce a breakthrough agreement to remove the threat of Greece from abandoning the euro zone.
Comments made by former Greek prime minister Lucas Papademos about a possible euro zone exit by Greece only heightened investor anxiety. In an interview with The Wall Street Journal, he said that while he did not want to see the return of the drachma “it cannot be excluded that preparations are being made to contain the potential consequences of a Geek euro exit.”
He later clarified his comments, insisting that he had no specific knowledge of institutions or countries preparing for euro zone exit.
Wednesday, May 23, 2012 6:44 AM EDT
A fragile Europe must change fast
Martin Wolf
I sympathize with the Germans. This is not because I agree with their prevailing view of how the crisis occurred or what to do about it. I sympathize because the German elite were the ones who understood what creating the euro implied. They realized that a currency union could not work without a political union. But the French elite wanted, instead, to end their humiliating dependence on the monetary policy set by Germany’s Bundesbank. Now, two decades later, Germany’s partners, including France, have learnt a painful lesson. Far from being liberated from German control, they are now far more firmly under it. In a big crisis, creditors rule.
Wednesday, May 23, 2012 5:57 AM EDT
German stand against euro bond sets stage for tense EU summit
ERIC REGULY
Germany’s near-term borrowing costs fell to zero as euro zone turmoil ahead of a European Union summit reinforced the country’s status as the safest of havens.
The informal leaders summit, to be held in Brussels Wednesday, is unlikely to relieve the pressure on the bonds of the weakest countries. That’s because various German officials have made it clear Germany will not endorse euro bonds at the summit, despite strong pressure to do so.
Italy, France, the European Commission, the International Monetary Fund and the Organization for Economic Co-operation and Development have all pushed for euro bonds in the days before the summit. Such bonds would be backed by the credit ratings of all 17 euro zone countries, effectively exploiting Germany’s triple-A rating.
The co-mingling of debt would substantially lower the debt costs of the weakest countries, and raise costs for the strongest. If Germany’s borrowing costs were to rise to the euro zone average, its repayments would rise by about €50-billion ($64.7-billion) a year.
German Chancellor Angela Merkel has warned repeatedly that euro bonds would remove the weak countries’ incentive to clean up their fiscal act. German Finance Minister Wolfgang Schaeuble has stressed that the basis for economic growth lies in fiscal discipline through austerity, combined with close oversight of euro zone budgets. “Fiscal consolidation is the precondition for our goal, which is more growth,” he said this week.
Germany’s opposition to euro bonds is bound to make Wednesday’s summit tense. Frances’s new president, François Hollande, had made euro bonds, along with fresh growth policies to counteract the job-killing austerity programs, the centrepieces of his euro zone rescue plan.
In a note Tuesday, economist James Nixon of France’s Société Générale SA said, “Despite the smiles and show of unity, the respective positions of the two sides still look to be virtually immiscible. What is clear is the euro bonds will not be a white knight that rides to the rescue of the euro area’s immediate travails.”
The absence of euro bonds is likely to keep Germany’s borrowing costs at rock-bottom levels. The yields of the distressed countries, including Spain and Italy, will likely remain high as confidence in their economic salvation plans collapse.
Germany’s central bank, the Bundesbank, announced that it expects on Wednesday to sell two-year treasury notes that carry a zero-per-cent coupon. After factoring in inflation, that means bond investors are effectively paying the German government to protect their capital.
Yields across the German debt spectrum have plunged as sovereign bond investors dump the ailing debt of Greece, Spain, Italy and other euro zone countries mired in recession with little prospect of quick recovery. German 10-year bonds now yield less than 1.5 per cent, well lower than yields on U.S. and British debt. Only Japanese bonds, with a yield of about 0.85 per cent, are cheaper.
Berlin plans to sell €5-billion of the two-year, zero-coupon debt. In mid-April, it sold a similar issue with a 0.25-per-cent coupon, and Germany also plans to sell €1.5-billion of inflation-linked bonds, maturing in 2023, with a yield that is likely to fall into negative territory.
Economists and strategists said that sovereign bond investors are more concerned about return of capital than return on capital as the debt crisis, after a brief interlude earlier this year, gains momentum. Greece’s exodus from the euro zone is no longer unthinkable.
With euro bonds off the table at Wednesday’s summit, growth measures are expected to rise to the forefront of the agenda. The leaders probably will endorse a €10-billion increase in the capital of the European Investment Bank, which finances infrastructure projects.
They will probably also call for greater use of EU structural funds in the countries with the highest jobless rates. Reportedly, about €80-billion of structural funds are available but unspent.
The leaders may also discuss granting the European Stability Mechanism, Europe’s permanent rescue fund, which is to launch later this year, the ability to lend directly to banks. Currently, it is allowed only to lend to governments.
Tuesday, May 22, 2012 10:14 AM EDT
Keep closer eye on financial risks, C.D. Howe urges
JEREMY TOROBIN
Canadian officials constantly say sound regulation and supervision by various agencies helped shield the country from the worst of the 2008-09 global downturn.
While this is largely true, some experts worry there’s not enough clarity over who's responsible for safeguarding the entire financial system, something officials call “macroprudential regulation.” This is an increasingly important concept, since many argue that the credit crisis in the United States might have been avoided if, for example, a central authority with power to act had seen the systemic danger posed by Wall Street's aggressive selling of securities backed by subprime loans.
Daily Mix Contributors
Michael Babad
Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world.
Kevin Carmichael
Kevin Carmichael is the Report on Business’s correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick’s Upper St. John River Valley, Kevin graduated from Carleton University with a combined degree in journalism and political science in 1996. He joined the Globe and Mail’s Ottawa bureau in early 2008, writing extensively about the financial crisis.
Rob Gilroy
Rob Gilroy is the Economy Lab editor and he has been with The Report on Business since 2004, most recently as a morning Web editor. Other recent stints included editor in charge of the ROB's International Business pages and Deputy Editor in charge of Production in the news section. He began his career at The Canadian Press in the late 1980s and has also spent time at TSN.ca and CTV.ca as a Web editor.
Tavia Grant
Tavia Grant has worked at The Globe and Mail for five years, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. She holds a degree in international development and Spanish and has lived in Ecuador and Spain.
Steve Ladurantaye
Steve Ladurantaye wrote about technology companies in Ottawa before reporting for the Peterborough Examiner and Kingston Whig-Standard, where he won a National Newspaper Award for explanatory journalism. He joined the Globe and Mail in 2007, and now covers real estate for the paper.
Barrie McKenna
Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. A native Montrealer, he has degrees from McGill University (history) and Carleton University (journalism). He is also a two-time finalist for Canada's National Newspaper Award.
William Polushin
William Polushin is founding director of the Program for International Competitiveness: Trade and Innovation at McGill University. He is also President of AMAXIS Inc., an international business and operational development services firm headquartered in Montreal, and an Adjunct Professor in international competitiveness and management in the Desautels Faculty of Management. Mr. Polushin is president of the Canada-Mexico Education Foundation and was previously president of the Canadian Chamber of Commerce in Mexico.
Eric Reguly
Eric Reguly joined The Globe and Mail in November of 1997. He has worked for a number of publications, including the Times of London, The Financial Post in New York and London, England, the Financial Times of Canada, Alberta Report magazine and the London (Ontario) Free Press. Until April, 2007, when he became The Globe's European business correspondent, based in Rome, Eric wrote the paper's main business column from Toronto. He is a regular radio guest in Europe, Canada and the United States and makes speeches about business issues. Eric has won several awards for his work, including, in 2007, the Hyman Solomon Award for Excellence in Public Policy Journalism.
