Monthly Archives: December 2008
“The Bank of Canada should peg the TSE 300” – revisited
"The Bank of Canada should peg the TSE-300" is the title of a Carleton Economics Department working paper I wrote in 1992. (Sorry, but no web version available; this was in the olden days when all we had was paper, and when the TSX was the TSE.) Given the recent turmoil in financial markets, and […]
The 15-year old Liquidity Trap
Macroeconomists think of the zero lower bound liquidity trap as something that only became a problem in 2008 (Japan aside). JKH, a commenter on this blog, says it became a problem for banks about 15 years ago. "An interesting aspect of gap management is that the zero bound for interest rates has been a critical […]
Job creation, job destruction, and the Detroit Three bailouts
The most compelling argument for the Detroit Three bailout is not that North America must always have a certain number of people working in the auto sector. Our economic history is one of industries that start from nothing, grow, and then are displaced (if not replaced) by even newer industries. There's nothing special about the […]
Economists’ fatal flaw: diffidence
Paul Krugman asks why more economists didn't make more of an effort to draw attention to the bubbles in the US housing market. My answer is that economists are by training – if not by nature – perhaps too diffident. If people behave in a way that cannot be reconciled with what our theories predict, […]
Hair of the Dog
"Too much debt got us into this mess, and now central banks are trying to get us out of the mess by lowering interest rates to get us to borrow and spend more?" It sounds very much like the cure for hangovers: "take some hair of the dog that bit you". At best, drinking more […]
Central Banks should bet on recovery – literally
Ben Bernanke should publicly bet $1 trillion dollars that the US economy will recover quickly from deflation and recession. He should make that bet on the Fed's behalf. The Treasury should publicly disavow all responsibility for bailing out the Fed if Bernanke loses the bet. If he loses the bet, it would be paid for […]
A fiscal stimulus proposal that should be implemented, but won’t be
A recession is here, the Bank of Canada is running out of bullets, and it's time for a fiscal stimulus. The problem is that the worst possible signal has been sent out to the usual gang of well-connected, media-savvy interest groups: "We're giving money away, and we really don't care who gets it!". This has […]
Always hire the worst
"Are you sitting comfortably? Then I'll begin. Once upon a time, in a city called Ottawa…." "I thought it was called Windsor?" "No dear, that's another story. Once upon a time, the City of Ottawa needed to hire one person to do a job…." "I thought it was a car factory?"
Deflation may be on its way, but it’s still not here
Coverage of today's CPI release seems to be stressing the fall in the y/y all-items CPI inflation rate (example): The recent fall in prices appears to have been entirely generated by the fall in gasoline prices, which has had the effect of canceling out the spike we saw a few months ago. Here's what's happening […]
We will not be undersold! Budget advice available here at the low, low cost of 99 cents a year!
Finance Minister Jim Flaherty has announced the formation of a committee of outside experts, who will be paid $1/year (plus expenses) for their views. We here at WCI are prepared to use whatever means necessary to defend our market share: if our competitors want a price war, then that's what they'll get.
Worthwhile Canadian Initiative 
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