The Bank of Canada has cut interest rates for the second time this month, slashing its benchmark rate by another 0.5 percentage points to 0.75 per cent in an emergency move to help the country’s economy grapple with a double hit from the coronavirus outbreak and plunging oil prices.
The move was part of a series of dramatic steps taken by Ottawa on Friday as a growing number of economists warn a recession for the country seems inevitable.
When Bombardier launched its first Ski-Doo snowmobile in 1959, it was initially targeted at trappers, prospectors and anyone else isolated by snow and ice. But the bright-yellow machines soon became a hot toy for affluent sports enthusiasts across North America and Europe, and by the time the company went public on the Toronto Stock Exchange a decade later, Ski-Doo sales were exploding. Bombardier’s revenues in 1970 came in at nearly $1 billion, when measured in today’s dollars, up a whopping 60 per cent in just one year.
So you can forgive Bombardier’s president, Laurent Beaudoin, for his swagger in the company’s first annual report that year. Bombardier “has proved itself to be one of the most important industrial and commercial organizations in Canada,” he crowed, while the report said the snowmobile industry was “riding the crest of the leisure market [and] the wave shows no sign of cresting . . . All forecasts point to a positive and continuing upsweep of the trend well into the 21st century.”
Instead, within three years Bombardier was in serious trouble, caught out by the 1970s oil crisis and a glut of snowmobiles on the market from more than 100 rival companies, which caused its revenues to plunge.
It’s become an all-too familiar image from the coronavirus scare of 2020—aisles of empty store shelves bereft of products like hand sanitizer, cans of soup and face masks. Oh yes, and toilet paper.
It’s that last item that has struck many as most puzzling. The symptoms of Covid-19, a respiratory illness, don’t suggest a need for vast quantities of toilet paper, while toilet paper manufacturers themselves say there have been no disruptions to their supply chains. So why has panicked buying and hoarding been so widespread, not just in Canada but in every country impacted by the virus?
Put simply, our human brains.
Most of the world’s central banks have responded by slashing interest rates. Last week the Bank of Canada joined them with a 50 basis point cut. But while more rate cuts are expected, the ability of central banks to tackle this particularly type of crisis — supply chains have been crippled and consumers are increasingly afraid of simply going out to spend — is seen as limited. “With interest rates already so low to begin with you’re just pushing on a string with rate cuts,” says Kevin Milligan, an economics professor at the University of British Columbia. “It takes months for investment patterns to change, and that doesn’t help when something is hitting you in the short run.”
Which is why a growing chorus of economists and investors are calling on Finance Minister Bill Morneau to roll out a fiscal stimulus plan, spending heavily to shore up Canada’s economy. Morneau was already set to release the Liberals’ first re-election budget, likely at the end of March. On Monday he acknowledged Canada was in a “very volatile position” and said the federal government has the “capacity to deal with challenges exactly like this” and will introduce measures this week.
But what should those stimulus efforts look like? Maclean’s spoke with four economy watchers about what a fiscal plan for Canada’s battered economy should entail.
A decade ago I traveled to San Francisco for Canadian Business to take in the launch of Apple’s newest device at the time, the iPad. From the February 2010 issue of Canadian Business, here was my take on Steve Jobs the Magician:
It’s a mild January morning in San Francisco, and the circus has come to town. Outside the Yerba Buena Arts Center, a mob has gathered to witness the unveiling of Apple’s latest creation, a handheld computer that all the world will soon know as the iPad. Network TV crews have set up camp, their satellite dishes pointed skyward. A crush of reporters and bloggers jostle past burly security guards like kids pushing their way into a rock concert. Even after the doors close and Apple’s turtlenecked CEO, Steve Jobs, launches into what is arguably the most important presentation of his life, outside, the people keep coming.
Rafael Fischmann, a tech blogger from Brazil, travelled 18 hours just to be close to the event, “because something very big and revolutionary is coming.” Dr. Bernd Weidner, a Berlin physicist in town for a major photonics conference taking place across the street, is thrilled just to find himself in San Francisco “at this moment in history.” In fact, throughout the morning several groups of photonics experts, people who study the very building blocks of light, converge on the Apple event like moths to a torch. “This is going to be a game changer,” predicts Conor Evans, an instructor at Harvard University and an avid Apple fan.
Finally Raghavan Rajagopalan, a St. Louis — based medical researcher who’s been listening to others heap praise on Apple, cuts in. “I don’t get it,” he says simply. “There are thousands of products [at the photonics conference] to help cure cancer, amazing research into all kinds of things. But the whole world is over here watching Apple bring out some little device.”
Welcome to the $200-billion Steve Jobs magical mystery extravaganza. Jobs the Magnificent is the act everyone has come to see. It’s not always easy to articulate exactly how Jobs is able to wield such uncanny power over the consumer imagination, but the launch of the iPad provided some of the clearest examples of his unmatched, some might say mystical, powers.
When a turtleneck-clad Steve Jobs unveiled the first iPhone in June 2007, Apple was already massive, with a market capitalization of US$100 billion. But Research In Motion, as BlackBerry was then called, was no slouch — later that year, it would rocket past Royal Bank of Canada to become the most valuable firm in this country, with a market cap of more than US$70 billion.
Thirteen years later, Apple is a $1.4-trillion juggernaut and the world’s most valuable company.
In the fall of 2009, as green shoots emerged from the ashes of America’s economy and the panic wrought by the Great Recession turned to outrage over the taxpayer bailouts handed to the very Wall Street banks whose reckless lending and disastrous bets caused the crisis, filmmaker Michael Moore debuted his latest documentary, Capitalism: A Love Story. It was anything but an ode to America’s economy. Moore’s film took angry aim at a laundry list of recent ills he blamed on an “evil” capitalist system: inequality, corrupt politicians, Wall Street’s casino-like mentality and out-of-control corporations.
As with all of Moore’s earlier documentaries, an underlying theme in Capitalism was his criticism of the way corporations concern themselves primarily with turning a buck for shareholders, damn everything, and everyone, else.
Who would have thought that almost exactly one decade later, America’s biggest capitalists would be saying the same thing?
Tim Hortons has a serious Canada problem. Simply put, too many Canadians no longer think of Timmies as the folksy Canadian coffee and donut shop it once was. And they’re abandoning the chain in droves.
The latest financial results of Restaurant Brands International, the quick serve restaurant conglomerate that owns Tim Hortons, tell the bitter tale. In the fourth quarter same-store sales at Tim Hortons in Canada, a measure that tracks the performance of locations that have been open for 13 months or more, fell 4.6 per cent. The awful results in the last quarter were partly due to the large number of coffee giveaways through the Tim Hortons loyalty program, a rewards scheme the company now plans to overhaul, but this is a problem that’s been building over the past four years. Canadians have lost faith in Tim Hortons.
Recessions are a bit like earthquakes. They can knock you off your feet and are impossible to predict. But in the same way seismologists are working to detect quakes critical seconds before the ground starts to shake, economists are watching a new realtime gauge for signs of an imminent downturn.
It’s called the Sahm Rule, the brainchild of former Federal Reserve economist Claudia Sahm.
Prince Harry and Meghan Markle’s decision to give up their positions in the British royal family and spend more time in North America has rattled not just monarchists, but also Canadian taxpayers who fear being left with the bill.
Just weeks after the couple made clear their intent to step back, Buckingham Palace has said that the two will no longer use their royal titles or receive public funds. It remains unclear how their security costs will be covered.
Canadians’ lack of interest in celebrity news may make the country appealing for the privacy-seeking couple. However, with the Liberal government sensitive to any spending scandals, Prime Minister Justin Trudeau needs to handle any long-term move carefully, observers said.