Statistics Canada Reports a 3.4% Drop in Real GDP In 2008’s Fourth Quarter
http://www.reedconstructiondata.com/news/2009/03/statistics-canada-reports-a-34-drop-in-real-gdp-in-2008s-fourth-quarter/
Summary:
In the fourth quarter of 2008, “real” inflation adjusted GDP in Canada dropped 3.4% on an annualized basis in the latest measured period, according to Statistics Canada. This would be the poorest performance for Canadian GDP since the first quarter of 1991, where the change was -5.9%. The fact that personal consumer spending fell by 3.3% was the main contributing factor to the GDP decline. Also, the volume of imports dropped in Canada for two reasons; the weaker economy cut into buyers’ demands and the higher price of imports was an inhibiting factor.
Real GDP:
The Gross Domestic Product value is the level of economic activity in a country. In Canada, one way of measuring the level of economic activity would be to add up the total amount of spending during a calendar year. GDP is determined not only from households, but also businesses, government, and buyers from foreign countries (who buy our exports). Investments also affect the GDP value, businesses make purchases from other businesses for such things as machinery, equipment, and new buildings. Government spending and purchases contain goods and services as well, such as the purchase of a new fighter aircraft.
Reflection:
Referring to the economic situation as of now, consumer spending has certainly decreased, thus lowering the GDP. Inflation, the price raise of consumer products, causes households to reduce their spending and affects the economic balance causing other’s to do the same. Imports coming into Canada should also naturally drop because of the inflation and the prices of import to protect the value of the products in Canada. I believe that the statistics discussed were inevitable, probably the only solution is to use strategies like stimulus plans and government action. I find that even my own personal spending has been effected by the inflation and I am now more cautious of how I use my own money.
Monday, March 9, 2009
Tuesday, March 3, 2009
Chapter 4 – Government in Canada
Government – backed interbank lending program up and running.
http://www.financialpost.com/news/story.html?id=1332885
Summary:
The department of Finance has informed banks that it can now tap into an insurance program that guarantees interbank lending, four months after the government announced its creation. The chartered banks, on the other hand, are not expected to line up and seek help, observers say, in large part thanks to their solid balance sheets that has allowed them to tap credit. More conservative lending practices and banking regulations helped the Canadian banks avoid most of the US $1.1-trillion in debt-related write downs and losses taken by finance companies worldwide.
Government Borrowing:
All levels of government in Canada borrow money in order to pay for expenditures. Government borrowing is done by selling various types of securities to the public. With the efforts of the Department of Finance, this offers support to Canadian chartered banks, but for its part, the Canadian Bankers Association said in a statement that its members "won't necessarily need to use this facility, but it's good to know it is there as one more tool in the toolkit." Mr. Drummond, chief economist at Toronto-Dominion Bank, states that “Canadian banks have been able to obtain short-term financing through the Bank of Canada, via its buybank of government securities; and medium-term financing through Ottawa's acquisition of insured mortgage pools.”
Reflection:
Looking back into the recession, many American banks went bankrupt because they could not keep up with their debts. As a result, many businesses were at stake and once one bank falls, others follow suit. Ever since the bank fell, many people were afraid of losing their jobs because of poor financial relationships between businesses and households. Many people are refraining from purchasing too freely and also limiting their spending. I believe the Canadian banks are working very well in trying to evade all the havoc that the American banks have aroused, by being careful with their borrowing and their balance sheets.
http://www.financialpost.com/news/story.html?id=1332885
Summary:
The department of Finance has informed banks that it can now tap into an insurance program that guarantees interbank lending, four months after the government announced its creation. The chartered banks, on the other hand, are not expected to line up and seek help, observers say, in large part thanks to their solid balance sheets that has allowed them to tap credit. More conservative lending practices and banking regulations helped the Canadian banks avoid most of the US $1.1-trillion in debt-related write downs and losses taken by finance companies worldwide.
Government Borrowing:
All levels of government in Canada borrow money in order to pay for expenditures. Government borrowing is done by selling various types of securities to the public. With the efforts of the Department of Finance, this offers support to Canadian chartered banks, but for its part, the Canadian Bankers Association said in a statement that its members "won't necessarily need to use this facility, but it's good to know it is there as one more tool in the toolkit." Mr. Drummond, chief economist at Toronto-Dominion Bank, states that “Canadian banks have been able to obtain short-term financing through the Bank of Canada, via its buybank of government securities; and medium-term financing through Ottawa's acquisition of insured mortgage pools.”
Reflection:
Looking back into the recession, many American banks went bankrupt because they could not keep up with their debts. As a result, many businesses were at stake and once one bank falls, others follow suit. Ever since the bank fell, many people were afraid of losing their jobs because of poor financial relationships between businesses and households. Many people are refraining from purchasing too freely and also limiting their spending. I believe the Canadian banks are working very well in trying to evade all the havoc that the American banks have aroused, by being careful with their borrowing and their balance sheets.
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