Don’t Blame Macklem: FP Comment’s 2022 Album for July and August

Some notable excerpts from the FP commentary columns that aired in July and August

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Naked monetary emperors

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The strict monetarism of the 1970s and early 1980s, which held that only the money supply determined economic growth, led to a preference for rules-based monetary policy over discretionary monetary policy. Since then, a gradual return to discretionary judgment exercised by think tank leaders and famous central bankers has intimidated critics. The central bankers’ recent failed inflation demonstrates that these financial emperors have no clothes, a lesson now learned that will be good for the rest of us in the long run. — Philippe Cross, July 6

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Governments have had enough

Overall, windfall taxes are mostly paid for by Main Street, either through rising consumer prices or worsening supply shortages. At a time when the world urgently needs a greater supply of almost everything, this is a particularly bad idea. In addition, governments have enough revenue. Kings, presidents and prime ministers in their counting houses already count enough coins without outstanding taxes. — Jack Mintz, July 29

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Canada needs a Gorbachev

In the West, Gorbachev’s main legacy, besides the liberation of Eastern Europe, should be his rejection of the bureaucratic command system as « stifling ». And yet, we are in a Western age where command bureaucracy is all the rage. We don’t have a Soviet-style or Chinese-style five-year plan to cut carbon emissions by 40% from 2030. But we do have an eight-year plan to do it. In 2035, Britons and now Californians were told that it would simply be illegal for them to buy a diesel or petrol-powered vehicle. Can Canada be far behind? Industry and environment ministers are busy teaming up with “tables” of business leaders to plan tens of billions of dollars of investment in our energy industries. The Prime Minister decreed: hydrogen energy, a largely unprecedented technology, is good but there is no “business case” for LNG, which is already commonly used in the world. So, “Nie! to LNG. If 30-year-old comrade Mikhail Gorbachev were teleported from his first job as an apparatchik in the North Caucasus to Ottawa in the 21st century, he would feel pretty much at home. You only hope he would start proselytizing for glasnost and perestroika. — William Watson, September 1

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Reduce the climate project

The problem is that for the many trillions of dollars spent on the net zero emissions goal, which is based on a goal of limiting global warming to 1.5 degrees above pre-industrial levels, even an optimistic estimate is that environmental benefits would amount to better at only about half the costs incurred, and probably much less. Just as accountants must balance debits and credits, the economist’s job is to balance marginal costs with marginal benefits. Already, the climate project has stretched far beyond this equilibrium point and should therefore be reduced everywhere, including in public spending, reporting requirements, other regulations and corporate enthusiasm. . — Matthew Lau, July 13

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  1. Cows on a dairy farm in Caledon, Ontario.

    FP Comment’s 2022 album: May and June

  2. Finance Minister Chrystia Freeland receives a standing ovation as she presents the 2022-2023 budget in the House of Commons on Parliament Hill in Ottawa, April 7, 2022.

    FP Comment’s 2022 album: March and April

Don’t blame the bank

Unprecedented, unplanned and unpredictable, the lockdowns have created economic and social circumstances that have thrown all standard economic theory out the window and placed central banks in an impossible political quagmire. How much money should they provide to the government, what should be the interest rate, how fragile was the economy in the face of policies to shut down production and services? Everywhere, central banks have groped their way. “The Fed that failed” was the cover story of The Economist last April. But the US Federal Reserve and the Bank of Canada failed because they were reacting to the extreme economic controls imposed by the government. The strongest argument, it seems to me, is that it was the COVID-19 lockdowns that failed to take into account the massive future economic implications of the lockdowns – impacts on growth, jobs, inflation, trade. At the time, even the most prominent economists predicted a relatively short-term impact. On this issue, critics of the BofC could blame first and foremost the monetary policy that has been imposed on central banks by government policy. Maybe it’s not Macklem who should be fired, but the Trudeau government officials who flattened the economy. — Terence Corcoran, August 19

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For social good, choose S&P, not ESG

Probably the best reason for skepticism about the merits of ESG investing is that in a market economy, the companies that aim to do well financially are the ones that do the most social good. As Adam Smith observed, those who « affect to trade for the public good » generally do not do much good, while mankind is fed by butchers, brewers and bakers who are motivated by commercial profits. . Want to be socially responsible with your investment? Whatever your cause – stopping global warming, increasing gender equality, improving consumer well-being, ensuring high labor standards or anything else – there is no need to opt for ESG funds. expensive. The S&P 500 ETF is perfectly fine. — Matthew Lau, July 27

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Declare business subsidies

To make corporate subsidies more transparent to both investors and voters, we should start viewing them as negative corporate income taxes. Currently, a public company’s financial statements show how much corporate income tax it pays. If the company receives investment tax credits or other tax advantages, it pays less tax. But business subsidies, such as grants and low-cost government loans, are not reported separately. If, instead, they were reported as a negative corporate tax payment, investors and the public could see how much tax the company is paying net of subsidies. Federal and provincial auditors general could also require governments to report corporate taxes net of business subsidies. — Jack Mintz, August 5.



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