Economy: A sunny spell for Canada through heavy clouds

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(Photo: Unsplash’s Juste voyage)

Chronic. When Joe Biden saw rising inflation last spring, he wanted to relieve his concerns by saying that it was due to a pandemic supply chain disruption and the situation would soon return to normal.

It didn’t happen. After the suspension, US prices began to recover, reaching a 40-year high of 7.9% in February. This phenomenon is the same in Europe, with a March rate of 7.5% and a February rate of 5.7% in Canada. Inflation is over 10% in Eastern Europe. It is clear that inflation will continue to skyrocket, with oil prices soaring since the Ukrainian war and rising prices that have hit fertilizers, agricultural production, some raw materials, the transportation industry, housing and food.

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Price increases are no longer solely due to supply chain disruptions, lack of capacity in certain industries such as semiconductors, and lack of containers. Inflation was also boosted by the surge in demand following generous support for businesses, workers and consumers during the pandemic. The US and Canadian economies are moving at full speed, so there is a shortage of labor.

The majority of economists have reiterated that governments should take the risk of doing more to protect their citizens and avoid recession, but now the economy is over-stimulated. understand. In Canada, the savings rate, which reached 28% of personal disposable income in the summer of 2020, freed up the money spent, especially to buy cars and homes. The savings rate is currently 14%, but historical averages are 3% to 5%.

As a direct result of rising prices and labor shortages, employees are raising expectations and some companies are responding positively. In the United States, labor disputes are skyrocketing and wages are rising significantly. It seems that the unionization has been reborn. Thousands of workers at Staten Island’s Amazon warehouse have just formed a union. This is the first time for a major retailer. The same is true for Starbucks in Manhattan. It is the largest and tenth integrated in the chain. The union is working on 130 other cafes.

Rate hike

They are targeting an inflation rate of about 2% and the inflation spiral has begun, but the Federal Reserve Board and the Bank of Canada have begun to raise key interest rates. An increase of 0.25 points will increase until 2023, so a total growth of at least 2 percentage points can be achieved. The pill is hurt, but inflation should be reduced to 3%, and then ideally to 2%. If you want to avoid a recession, it will be a considerable challenge.

Two big losers

Russia’s war with Ukraine, the main cause of destabilization, has serious implications for the world economy.

Ukraine, a major grain-producing country (15%, 10% and 9% of global production of corn, barley and wheat, respectively), may not be able to sow a significant portion of its vineyards as the war continues. The result is tremendous price increases, delivery disruptions, the inability of poor countries to buy food, and the risk of famine.

Massive destruction of infrastructure and buildings, the cost of war, national debt, civilian, corporate and national income losses have caused a serious recession in Ukraine and requires major international support.

Due to economic sanctions and military losses, Russia cannot escape the recession so far, even if it benefits from rising prices for large exports of oil and raw materials. To protect the bank’s capital, the central bank raised the base interest rate to 20%. Russia, a global pariah state, has long suffered from the scars of armed attacks.

The collapse of the Russian and Ukrainian economies has hurt Europe, which could be on the verge of recession. The dependence on oil and gas from Russia needs to be reconsidered. War can also cause commercial and political restructuring.

A glorious spot in Canada

Canada will be affected by the slowdown in the global economy, but rising commodity prices will increase exports of hydrocarbons, minerals, metals, fertilizers and grains, offsetting the decline in domestic demand.

Our Canadian economy has several trade agreements, including the Canada-US-Mexico Agreement (CUSMA), the Comprehensive Economic and Trade Agreement (CETA), which eliminates tariffs on 98% of exports in Europe, and the Trans-Pacific Partnership Agreement. Protected by. A Pacific partnership that brings together 11 countries.

Canada is interested in protecting these alliances. They not only protect our markets, but also solidify the economic and political relationships that are the factors of peace and stability. This is important in connection with the rise of the dictatorship.

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I love

Ottawa has announced five steps to impact temporary foreign workers (TFWs) to address labor shortages. The maximum employment period for low-wage TFWs in these industries will be extended from 180 days to 270 days. TFW’s employment period in high-paying positions has been extended from two years to three years. In the seven industries most affected by the shortage, employers can meet 30% of their labor needs with low-wage TFW. Abandonment of refusal to apply for TFW employment in certain occupations in areas with an unemployment rate of 6% or higher. It is not yet known whether Quebec will support these measures for work under its jurisdiction.

Does not like

Pierre Poilièvre, an ambitious leader of the Conservative Party of Canada, wants to make Ottawa the capital of cryptocurrencies. The ambitious Prime Minister, a fierce critic of the Bank of Canada and its monetary policy, wants to normalize the use of cryptocurrencies and reduce the influence of the central bank. However, these cryptocurrencies are unregulated and very volatile. They help speculation and promote money laundering. Warren Buffett said: “Bitcoin has no value. It’s an illusion. It’s a rodenticide for investors. China has banned cryptocurrencies that” can destabilize the financial system and encourage fraud. “


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