The latest data on unemployment and inflation and central bank determined interest rates strongly suggest there is still further room for stimulus and continued monetization of debt by the central bank in both Canada and the U.S as both economies recover from the covid induced collapse. The Wall Street Journal has noted that ten year treasury bills are attracting an interest rate of 1.47 % which to the extent they anchor consumer interest rates on mortgages, credit card and bank debt have an important role in the overall economy. This rate is far from contractionary.
The Bank of Canada for its part has continued holding the bank rate to 0.25% this is also recognition that inflation to the extent it exists is moderate, low and for the time being stable. Oil prices rose substantially over the past year from just under $40 per barrel to around 70 $ per barrel for WTI and Brent But today they weakened somewhat with WTI just under that price.
Oil prices account for close to 8 % of the GDP So the inflationary impact of the rise from 40 dollars a barrel to 70 dollars a barrel is low to moderate. With 8.2 % unemployment there is still considerable further room for expansion of the Canadian economy . The U.S. economy is somewhat tighter, unemployment Is 5.8%- but they could target lower unemployment, say setting a rate below 3 % – perhaps 2 %. The Nobel prize winning Canadian economist who taught at Columbia for many years William Vickery argued that 1 % unemployment was an excellent and achievable target.
I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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