Monthly Archives: August 2015
Interest-free loans from the central bank to the government
What is the difference between: A. I print $100, and give it to you as an interest-free loan. B. I print $100, lend it to you at 5% interest, so you give me $5 per year, and then I give that $5 per year straight back to you. C. I print $100, lend it to […]
Fencing In Canada
Wisconsin Governor and potential presidential candidate Scott Walker apparently thinks it is not an unreasonable idea to consider building a wall between Canada and the United States in order to secure his country’s borders from security threats. Now, to be fair, he did not say that a wall should be built along the 5,525 mile […]
“King of deficits”??
I normally stay out of politics on this blog. But with the upcoming election, the political conversation on fiscal policy is starting to get stupid. In particular, for Paul Martin to accuse Stephen Harper of being the "King of deficits" was really stupid. Is there anything Stephen Harper could have done to have prevented a […]
Update: Twitter and the Canadian Federal Election
Well it is just over two weeks since I began tracking the number of Twitter followers that each federal party leader has during the course of the current election capmpaign in order to see what the impact of this type of social media presence might be. All of the party leaders have increased their number […]
Making Change?
Alex Usher at Higher Education Strategy Associates had a great post on his One Thought Blog today dealing with policy-making and change. His comparison to policy-making in Ottawa as a slow stately moving river compared to Washington's high-pressure ice jam was pretty entertaining – he only left out that parts of the policy making river […]
Good shocks, bad shocks, and shocks that cause a monetary coordination failure
Just because a shock is a bad shock doesn't mean it should cause a recession. A recession is a monetary coordination failure. Monetary coordination failures are caused by monetary policy. Start with a Robinson Crusoe economy. By assumption, Robinson Crusoe always allocates his resources perfectly to maximise his expected utility given his information about the […]
Why did (Canadian) inflation-targeting work in 1996 but fail in 2008?
In both 1996 and 2008 the Canadian economy was hit with a big shock. The 1996 shock was the change in fiscal policy, turning a large deficit into a large surplus. The 2008 shock was the global financial crisis. (Canada didn't really have much of a financial crisis; no banks failed, as usual.) In both […]
The efficiency wage case for maximum wage laws
I think Larry Summers is wrong, on a point of theory. He commits a fallacy of composition. (That's a brave way to start the day.) He says (HT John Cochrane): "Businesses will raise wages to a point where the cost is just balanced by the reduced bill for recruiting and motivating workers. At that point, […]
Twitter Followers and Canada’s Federal Election
Well, I thought it was time to resurrect an activity I last did a number of years ago – in 2011 – during an Ontario election campaign. I tracked the number of Twitter followers each party leader had during the course of the election to see if the electoral outcome was correlated with social media […]
A question for beta bankers
This post covers the same ground as my previous post, but it's written for a different audience. It's written for those people who approach monetary policy from a banking/finance perspective. Suppose you are running a commercial bank. Let's call it "BMO". And let's simplify massively. On the asset side of your balance sheet you have […]
Worthwhile Canadian Initiative 
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