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Finance Minister Jim Flaherty listens to a question during an interview in Ottawa Dec. 21, 2009. (CHRIS WATTIE/Chris Wattie/Reuters)
Finance Minister Jim Flaherty listens to a question during an interview in Ottawa Dec. 21, 2009. (CHRIS WATTIE/Chris Wattie/Reuters)

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Jim Flaherty on economists: 'Predictive power is limited' Add to ...

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Flaherty on economists Finance Minister Jim Flaherty believes the crystal balls of economists go only so far. Mr. Flaherty was asked today on CBC's The Current about critics who said Canada was slow to see the looming recession and a bit too quick to forecast the recovery, and about how confident he is in his current assessment. Here's what Mr. Flaherty told the radio interviewer: "No disrespect to people who offer economic opinions, but none of them - I mean not one of them - predicted the recession coming to Canada in the last quarter of 2008. And I consult with economists regularly as Minister of Finance, and I respect the views expressed, but their predictive power is limited, and that's based on the past few years."

Is the bull aging? The recovery in stock prices from the lows of the recession now look more normal given the recent correction, BMO Nesbitt Burns says. Previously the strongest rebound of the postwar era, BMO economist Robert Kavcic illustrated how after indexing each rally to the trough, the Dow Jones industrial average is now in the middle of the range after some 70 weeks, trailing the rebounds of 1974 and 1982 and outpacing five others. Mr. Kavcic noted that the chart above shows "that a period of sluggish stock market performance is completely normal after a post-recession sprint, as growth expectations moderate."

Krugman warns of long 'siege' Paul Krugman, the Princeton professor and Nobel laureate who got tongues wagging last week when he said he fears the U.S. is in the early stage of a depression, warns of a long "siege" that will require forceful government action. "We are looking at what could be a very long siege here," Mr. Krugman told Bloomberg Television yesterday. "We really are at a stage where we should have a kitchen sink strategy. We should be throwing everything we can get at this."

Mr. Krugman said the government should "go out and hire people" and needs to be unconventional.

Chief economist David Rosenberg of Gluskin Sheff + Associates, agrees with Mr. Krugman on his depression fears, but said today that the kitchen sink strategy assumes the U.S. government is the answer. "The question he has to answer on behalf of the Administration is why their forecast of an 8-per-cent unemployment rate, given all the stimulus it was going to provide, never did materialize, and what exactly is the long-term benefit to the economy of paying people to be out of work for two years," said Mr. Rosenberg. "That's our jobs strategy?"

China rules out reserve 'nuclear weapon' China warned the United States and other countries today to take "responsible measures" to protect their currencies and, in a move seemingly aimed at calming fears, said it would not use the so-called "nuclear" weapon of dumping the hundreds of billions worth of U.S. Treasury paper it holds.

The State Administration of Foreign Exchange posted a statement on its website saying that "U.S. Treasury bonds deliver fair good security, liquidity and market depth with low transaction costs."

It marks the second time this week that SAFE has posted statements related to handles its huge reserves. Today, the statement was in the form of a question-and-answer session that asked "Are China's foreign reserves a 'secret weapon' or a 'nuclear weapon'?" SAFE said it would not use such power, adding that reserves should not be "politicized."

The Chinese agency pointed out that investors were, at one point, worried that the U.S. dollar could sink given the U.S. government's huge borrowing, but that developments in other countries also play a role in the value of the greenback. "We must recognize that any depreciation of the dollar is relative to other countries, and other countries or regions also have this or that problem," SAFE said.

The U.S. and other governments have long pressured Beijing over its currency, urging it to allow the yuan to rise, which it did just prior to the G20 summit in Toronto.

How long-term unemployment doubled Long-term unemployment in Canada almost doubled during the financial crisis and recession, the OECD says, and it warns the government to closely monitor job-search efforts to avoid "dependency" on jobless benefits. In a report today on the employment in its member countries, the Organization for Economic Co-Operation and Development said the proportion of workers unemployed for at least 12 months stood at about 8 per cent last year, far below the OECD average of almost one in four. "However, as a percentage of the labour force, the number of long-term unemployed has almost doubled in the two years to the end of the 2009," it said.

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