The Budget

[msj]

Anyone have any additional info on allowing banks to take our deposits for bail ins, in the budget.

I went to the source document and found that it is quoted exactly from the budget. Unfortunately there are no further details to be had.

My understanding was that deposits above the amount insured by cdic have always been at risk. One interpretation of this is that the government will allow a percentage of your deposits to be taken to recapitalize the bank rather than having it fail altogether. We'll have to wait for implementing legislation for further details.

Browsing through the Liberal budget was a stomach churning experience.

Did you feel this way when almost the exact same language was used in the 2013 budget documents?

This is not new: it is rehash from Flaherty's days when he was concerned about a debt/housing bubble leading to problems for one of our banks.

So, unless you are going to gnash your teeth over the 2013 bail-in while also gnashing them in the 2016 rehash of it, then you might be a partisan......

[msj]

For those looking for links about this rehash of 2013 CPC policy: http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf. page 145.

At least zerohedge was complaining about it in 2013 too: http://www.zerohedge.com/contributed/2013-03-30/canadian-government-offers-bail-regime-prepares-confiscation-bank-deposits-ba

[Smallc]

Kind of a pathetic rejoinder given you didn't seem able to address any of his points. He's one of Canada's most noted political commentators and a regular on the CBC. Dismissing him as a 'wacko' is silly.

I've never considered Coynes opinion on finance, taxes, or spending to be the least bit credible. He's a lone voice for a system of governance that has never worked.

[Argus]

I've never considered Coynes opinion on finance, taxes, or spending to be the least bit credible. He's a lone voice for a system of governance that has never worked.

Which is why, I gather, you choose not to attack any of the points he made?

[Smallc]

Which is why, I gather, you choose not to attack any of the points he made?

Second time doing this:

Canada’s economy, on this view, has been struggling under the yoke of years of Conservative austerity, public services deliberately starved of funds by years of Conservative tax cuts.

Canada has actually suffered under years of tax cuts to corporations that have hoarded the money, rendering it useless. The Liberals are as responsible as the Conservatives. Federal austerity doesn't help.

On the other hand, Canada’s public debts are modest, by international standards, and interest rates are low. Therefore the government has both the opportunity and the obligation to borrow now, to invest in the kinds of public infrastructure that will stimulate economic growth.

A fine argument. He was being sarcastic, but his sarcasm is wrong.

Even if the resulting deficits are larger than advertised in the last election, this is what Canadians voted for. Any other course would not only have required the government to impose deep and damaging cuts in spending, but to break important campaign promises.

The deficits are larger because revenues are lower than expected, and a larger than usual buffer has been built in. Spending is actually lower than promised, on everything from infrastructure to child benefits.

To the extent that economic growth has been sluggish over the last decade, it has had little to do with domestic factors and everything to do with the effects of, first, a world-wide financial crisis (2008-09) and its aftermath, and second, a worldwide collapse in the price of oil (2014-15).

That's his theory. It's more likely a combination of factors. The reason is really irrelevant anyway. His solutions remind me of the episode of South Park about the economy.

Even in proportion to gross domestic product, spending was higher over the Conservatives’ decade in power than the previous one, under the Liberals: 13.8 per cent, on average, versus 12.8 per cent.

That's an interesting tactic, using an average that includes the high spending years during the recession. At the moment, federal revenue and spending is at its lowest point since the 1950s. The Liberal years under Martin and Chretien were already historically low spending years.

So while it’s true that Conservative tax cuts, notably the two-percentage-point cut in the goods and services tax, did reduce federal revenues — from roughly 16.5 per cent of GDP to 14.5 — it’s not true that this imposed any undue constraint on spending. Had the Conservatives merely kept growth in spending to roughly three per cent per year, enough to cover inflation and population growth, spending today would be nearly $30 billion lower than it is, leaving the Liberals ample room to increase spending without going into deficit.

And we'd be running surpluses with the extra revenue that they and the previous Liberals have let sit in corporate bank accounts.

Is there room to borrow instead? Yes, if you look only at the federal debt. The ratio of federal debt to GDP, at 31 per cent, is not far off its pre-recession low, and compares favourably to that of most developed nations. Servicing the debt, with interest rates at historic lows, now costs just nine cents of every tax dollar, down from 38 cents at its 1991 peak.

But the federal debt is only part of our overall debt level. The provinces collectively have debts very nearly equal to the feds, bringing the combined federal-provincial debt closer to 60 per cent of GDP — 50 per cent, if you net out assets held by the Canada and Quebec pension plans. And it’s the provinces which will bear the bulk of the costs of population aging, principally in the form of higher health-care spending.

Given the scale of the fiscal challenges facing the provinces in the coming decades — there are credible projections that one or more of them may eventually be forced to default on their debts — the very last thing Ottawa should be doing now is weakening its own financial position. It would be one thing if the $113-billion it plans to borrow over five years was to be invested in the sort of productive assets that would pay off over the longer term in higher economic growth and more revenues.

So what he's saying, is that they need the transfers. There's also, only one province in real financial trouble. Newfoundland spends too much money.

But as is now becoming more widely recognized, only a very small proportion of the spending the Liberals have planned could conceivably be described in such terms. Of the nearly $40 billion in new spending the current government has planned over the next two years, I count $2.5 billion for public transit, $1 billion for “accelerating federal infrastructure investments,” $1.8 billion for “strategic infrastructure investments at post-secondary institutions,” $260 million for “existing infrastructure programs,” and … not much else.

There has not been $40B in proposed net new spending in the next 2 years. Programs have been consolidated and changed. The net cost of the new child benefit is only $2B per year. He also leaves out infrastructure spending on reserves, and for things like water and waste water, hospitals, jails, and social housing.

I would go on, but I already lost this post once.

[69cat]

Agree with a lot of what you said dre about the budget discussion regarding partisan attacks and a meaningful discussion. I do get very tired of talk about debt/gdp ratio and more spending is ok, Keynesian Economics, the entire world is doing it etc. I dont care what the world is doing, what i care about is wasting $25B for nothing, and that the next government in power will add more to the deficit, and why not? Debt/gdp ratio is an arbitrary target number easily changed. So what if $25B becomes $50B in interest as it will be someone elses bill to deal with the next decade.

I think people should be more fiscally responsible so as to not saddle my kids with debt that they did not ask for. To me that is responsible stewardship. The environmentalists demand it from our government but fiscal stewardship is meaningless.

I agree Canada economy is not great, but what the Liberals announced is going to have next to no impact on that fact. People can dress it up how they want. The reality is that if Canada hits another key juncture like the GFC (which others are quick to point out as a bump in the road) then it would be in conjunction with other global issues. So if the GFC was a minor bump then the next will either be a minor bump or a huge one, in any case todays deficit spending will do nothing to prevent or avert it but if the government needs to go to the well for a huge cash injection then we are that much further behind to begin with.

This budget tells me they expect everything will be AOK and have no plan if we hit a major recession that the world monetary policies may have set in motion since the GFC. If things get bad then hunkering down now is better than later. Lets hope it is all Sunny, but then why the deficits.

[BC_chick]

What bothers me about the budget is how we went from 10 billion (per year) to balanced budget after year 3 to 113 billion with no end in sight.

That's nearly FOUR fold from what was promised. I don't know how anyone thinks that's ok.

Edited March 27, 2016 by BC_chick

[waldo]

What bothers me about the budget is how we went from 10 billion (per year) to balanced budget after year 3 to 113 billion with no end in sight.

c'mon... notwithstanding Harper Conservatives cooked the books and oil revenues kept plummeting, perhaps some perspective for you in the following graph (a composite sourced from original National Post (Harper deficits) & Macleans (Trudeau deficits) images)... $144 Billion in Harper Conservative deficits:

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[BC_chick]

Harper's incompetence does not excuse a four-fold miscalculation (blatant lie?) from the current prime minister.

Edited March 27, 2016 by BC_chick

[waldo]

Harper's incompetence does not excuse a four-fold miscalculation (blatant lie?) from the current prime minister.

get over yourself! The target was with respect to 2019/2020; you're choosing to extend upon that another 3 years... notwithstanding, again, that was before getting a look at the real state of the numbers/'books' and a continued declining oil revenue impact... add in the (some are saying) purposeful too conservative projections on growth and oil price on the deficit forecasts.

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[scribblet]

I believe someone accused Coyne of being a Liberal during the election. He's actually a wacko when it comes to government - a hardcore libertarian with no real understanding of how the body politic operates.

Andrew Coyne endorsed the NDP in 2015 and voted for them , I'm pretty sure he voted Liberal prior to that but can't find the tweet.

https://twitter.com/acoyne/status/656131830068985856?lang=en

[scribblet]

I didnt delve into anything beyond this article but does not sound like anything as changed. As i understand it, laws were changed in the last few years in US and Canada to enact the bail in policy. In Canada we are insured of our savings up to $100,000 if a bank fails. Anything over that is taken by the bank and converted to shares, if the bank survives then you have a share with some value, if the bank still fails then you have nothing.

...

Okay, thanks... Turner says it's not so, deposits would be excluded from the bail-in regime. http://www.greaterfool.ca/2016/03/25/merchants-of-fear

Also this from 2013 saying it would not cover deposits. Let's hope when the Liberal legislation comes about it will be clear on that issue.

http://www.theglobeandmail.com/report-on-business/ottawa-clears-up-confusion-over-bank-bail-in/article10697667/

Edited March 27, 2016 by scribblet

[69cat]

Good to know that in less than six years the GFC is already considered no big deal. It will make things much easier if Canadas economy really tanks in the next few years as it seems such an occurrence will essentially be a non-event when put in histotical context and we can be confident the Liberals wont go to the trough of tax payer money to inject it into the econony in such an event. Frankly i dont beleive this but certainly am left with this impression based on reading here so i can have some degree of optimism that there is no chance the deficit will increase beyond projections no matter what transpires.

[69cat]

Scribblet, perhaps not a great link but some info to consider.

https://pressfortruth.ca/top-stories/what-bail-means-why-you-shouldnt-hold-your-money-big-five-banks/

I do beleive a depositor in excess of $100,000 will be part of the bail in. I do not see it being any other way. Why else would one write legislation that would otherwise essentially say the banks owners are responsible for the bank. Perhaps in this messed up banking world it is otherwise possible for the owners to walk away. My guess is that bank owners will have away around the bail-in laws anyway, if your asset is a bank and it is bankrupt then what do you have to invest? The reality is that if bail-in is triggered then things are very bad and as the article notes, our insured deposits will likely cease to exist anyway.

Of note in the article is the origin of the bail-in structure, it is not a Conservative or Liberal agenda and articles labelling it as such should be skipped.

[msj]

Of note in the article is the origin of the bail-in structure, it is not a Conservative or Liberal agenda and articles labelling it as such should be skipped.

One can only hope that based on facts, rather than partisan opinion, that we can look upon such legislation with a rational view.

I don't hold up much hope, however.

Zerohedge and the link you have provided (pressfortruth) are far too conspiracy based to be taken seriously.

We need someone like David Dodge or, better, someone from OSFI to give us their long take on this issue.

[Smallc]

Andrew Coyne endorsed the NDP in 2015 and voted for them , I'm pretty sure he voted Liberal prior to that but can't find the tweet.

https://twitter.com/acoyne/status/656131830068985856?lang=en

Coyne voted NDP because he hates government.

[Argus]

c'mon... notwithstanding Harper Conservatives cooked the books and oil revenues kept plummeting, perhaps some perspective for you in the following graph (a composite sourced from original National Post (Harper deficits) & Macleans (Trudeau deficits) images)... $144 Billion in Harper Conservative deficits:

What pretty colours say the progressives!

Harper's spending was when Canada's gdp was shrinking by over 2%. It's now growing by 1 1/2%. And far more of his spending was on economic incentives and support, not on the start of a continuing stream of welfare payments.

[Argus]

Kevin O'leary has his say on the federal budget. It mirrors what Coyne and others have said, in many respects, especially with regard to a lack of justifable reasons for the sudden huge expansion of the deficit. Spending for spending's sake.

So just why are we the taxpayers being forced into spending over $100 billion in the first place? We are not in recession. Finance Minister Bill Morneau suggests that this spending will increase our GDP growth by .5% next year. Who cares?! That is a rounding error. We have to plunge ourselves into debt for .5% growth? This is the definition of unproductive and wasteful spending.

New idea: how about we keep our powder dry and wait for the commodity cycle to recover instead. We may need that cash when a real recession arrives.

This budget is about spending for the sake of spending with no end in sight.

http://www.ottawasun.com/2016/03/26/the-federal-budgets-overflowing-with-risk

[Argus]

Coyne voted NDP because he hates government.

Coyne voted for the party of big, big government because he hates government?

[waldo]

What pretty colours say the progressives!

Harper's spending was when Canada's gdp was shrinking by over 2%. It's now growing by 1 1/2%. And far more of his spending was on economic incentives and support, not on the start of a continuing stream of welfare payments.

really? Are you sure? All of Harper's spending? Are you sure? Do you like this more subtle colouring?

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[Smallc]

Coyne voted for the party of big, big government because he hates government?

He endorsed them when they didn't have a hope in hell of winning.

Edited March 27, 2016 by Smallc

[69cat]

Dont know how far you want to look msj for an article that you do not consider a conspiracy based source. While i find zero-hedge pessimistic i do find over the years that there are many articles there that are based on fact and reality. Whether or not we choose to accept them as such does not make the article conspiracy or non-conspiracy based.

Here is another one that you can pre-determine whether it is a conspiracy based website.

http://internationalbanker.com/banking/banking-rebuilding-system-bail-policy/

Of note in the above link is the fact that we have not heard much discussion of bail-in bonds as pondered by the G20 meetings but we have heard much about new legal structure so is it conspiracy thinking to beleive the bail-in bond idea has not received much traction but an alternative legal structure has, and if so who are the creditors that the G20 discussions are seeking out if not bond holders?

"Whether there is a need to have specific bail-inable bonds or a new legal structure to permit a bail-in element of debt structuring will be discussed, while leaders put together a bail-in operation designed to bring stability and economic freedom to the global financial system."

Edited March 27, 2016 by 69cat

[Argus]

really? Are you sure? All of Harper's spending? Are you sure? Do you like this more subtle colouring?

As I've already pointed out, you don't bounce back from a huge deficit overnight without hammering a fragile economy. It took Harper and Chretien years to reduce spending to the point of balance. It took Justin a day to blow that away in a spurt of self-aggrandizing moral superiority.

[waldo]

As I've already pointed out, you don't bounce back from a huge deficit overnight without hammering a fragile economy. It took Harper and Chretien years to reduce spending to the point of balance. It took Justin a day to blow that away in a spurt of self-aggrandizing moral superiority.

ya ya... the "fragile economy"... the "Great Harper Recession"! The one Canada entered later than and exited earlier than any other G7 country... the one Stats Canada defined as "short and mild", the one that lasted all of 3 quarters! That one right, hey Argus! The total Harper Conservative deficits - $144 Billion - oh my!

.

[Smallc]

As I've already pointed out, you don't bounce back from a huge deficit overnight without hammering a fragile economy.

We still have a fragile economy.