The federal Liberals have set an ambitious new target for Canada to reduce its greenhouse gas emissions as part of a sweeping set of big-ticket budget measures aimed at fighting climate change while giving Canada’s pandemic-hit economy a green lift.
In her budget speech, Finance Minister Chrystia Freeland said Canada’s new goal is to reduce emissions by 36 percent below 2005 levels by 2030, up from the 30 percent reduction target first set by the previous Conservative government.
But with U.S. President Joe Biden set to host a virtual climate summit of 40 world leaders later this week, where some believe he may announce a reduction target of 50 percent, it’s not clear Canada’s upgraded plan will be ambitious enough.
Canada’s finance minister Chrystia Freeland delivered the Liberal government’s first budget since 2019, vowing to “punch our way out of the Covid recession” with C$101bn (US$81bn) in spending over three years.
“This budget is about finishing the fight against Covid,” she said during her budget speech, which she delivered to a nearly empty parliament with Prime Minister Justin Trudeau seated nearby. “Our country cannot prosper if we leave hundreds of thousands behind.”
In drafting the budget, Freeland said the government drew motivation from mistakes some countries made in the wake of the 2008-09 recession, which showed “the cost of allowing economic hardship to fester”.
Like every CEO when the pandemic hit, Christopher Gimmer wondered how the crisis would affect his Ottawa-based startup, Snappa. He had reason to be hopeful, on the business front at least. Snappa is a small company with only a handful of employees, its simple-to-use online graphic design tools were already popular with entrepreneurs, and within weeks Snappa’s growth rate accelerated as more businesses rushed online. Yet Gimmer was troubled by what he saw around him— governments battling the rapidly spreading COVID-19 virus by raising debt to levels not seen since the Second World War, while central banks slashed interest rates to near zero.
Which is when Gimmer did something very few other CEOs had ever dreamed of. After Snappa’s bank cut the interest rate on its “high-interest savings account” to 0.45%, Gimmer began to shift a portion of Snappa’s cash holdings into bitcoin (BTC), the radical cryptocurrency that promises a way to conduct transactions online while sidestepping the established world of finance. It’s also an asset JPMorgan Chase & Co.’s chief executive officer, Jamie Dimon, once derided as a “fraud … worse than tulip bulbs.”
“Central banks and nation states have reached a point of no return, and they’ll never be able to raise rates again,” says Gimmer, who fears the value of currencies will be driven down even further after the pandemic ends. Bitcoin, on the other hand, has a hard cap of 21 million units, and the last bitcoin won’t be electronically mined until the year 2140, something fervent adherents, including Gimmer, insist protects its value against erosion. “We worked really hard on this business over the course of five years and developed a really nice cash balance. We realized bitcoin could be the ultimate reserve asset for us to protect our purchasing power,” he says.
When COVID-19 first struck the global economy last spring, the Bank of Canada joined central banks around the world in administering a massive dose of monetary support to aid businesses and households. And just as they did during prior crises in 2001, the Great Recession and the oil crash, Canadian consumers were spurred into action by this support (at least, as much as is possible in a once-a-century pandemic). Vehicle sales are above pre-pandemic levels. Retail sales have reached new heights, even if what we’re buying has changed. As for real estate, the boom seems to have barely paused.
It’s no surprise that, once again, consumers are carrying the weight of this recovery.
While the Reddit-fuelled stock-market frenzy of recent weeks draws scrutiny from regulators and lawmakers, the managers of Canada’s largest pension fund are also watching closely to see what the so-called “meme stock” craze says about governments’ ability to support the economy through pandemic shocks without overheating it.
“Policymakers have been able to intervene with real significant force without having excessive negative impacts on economies,” said Geoffrey Rubin, the chief investment strategist at the Canada Pension Plan Investment Board, in an interview with The Logic.
“But I also believe when we see issues like this crop up, these are the kinds of risks that can accompany the kind of significant policy intervention that we’re seeing.”
My first piece for The Logic looked at the meme stock frenzy and how was part of a phenomenon unsettling the financial world:
By the time a five-storey electronic billboard in New York City’s Times Square began flaunting shares in the struggling video game retailer GameStop last Friday—“$GME GO BRRR,” the giant letters blared out—the saga of the company’s rocketing share price had come to reinforce whatever narrative one wished to apply to it.
There was the David versus Goliath telling, with a legion of small-time investors who populate Reddit punishing nefarious Wall Street hedge funds for trying to ruin the company. Or similarly, it was a manifestation of the populist anger that propelled the Occupy Wall Street movement in 2011. The moment ushered in a new bottom-up power dynamic in American capitalism made possible for the first time by the interconnectedness of social media, argued some, while others saw it as the ultimate swindle of gullible retail investors who would ultimately be left holding an empty bag.
Even before COVID-19 touched off a global rethink of life in the big city, Raheema Brettingham’s husband, Larry, often mused about selling their home in Toronto’s west end and moving to Vancouver Island. As the lockdown measures tightened and the couple saw their world reduced to strolls around the neighbourhood, he began to press the idea more intently. Even so, the 59-year-old self-described “city girl” felt she wasn’t ready to leave Toronto. “I used to love hopping on the subway to go downtown and meet friends,” she says. “So, every time he talked to me about it, I said, ‘No, no, no.’”
Then in June, Larry, 67, sat down to pen an email to his wife detailing his case for ditching Hogtown. It wasn’t just that pandemic restrictions had robbed them of the urban lifestyle they both enjoyed, he wrote. COVID-19 offered a unique financial reset for the couple. In 2019, both were suddenly laid off within a month of each other – Larry from his job as a software engineer and Raheema from her position at a financial advisory firm – and the pandemic brought their job searches to a halt. While they could get by staying in Toronto, it might entail working for another decade or more. But if they sold and moved to Comox, B.C., where his sister lived, they could easily erase their $400,000 mortgage and have enough to retire right away and, once the pandemic ends, travel the world.
Shortly after reading Larry’s email, Raheema decided to take the leap and, within a month, their detached house was on the market. Purchased for $845,000 in 2011, it quickly sold for a little more than $1.8 million. Meanwhile they were able to snap up a more spacious house just minutes from the ocean for $785,000 in the town of Comox, population 15,000. “I was apprehensive at first, but we’re already settled, and I love this house,” says Raheema, who joined a local newcomers group that is full of other eastern city expats. “I never thought I could enjoy nature the way I do here, and the city is not shut down like Toronto. We made the perfect decision at the perfect time.”
When it came time to compile this year’s collection of charts to watch, our seventh annual year-end chartstravaganza, it was obvious the elephant in the room would be 0.125 microns in size. COVID-19 has left its mark on every facet of our lives and by extension, the economy. The disruption to how we live, work and interact with each other caught the entire world off guard. As one economist remarked when approached for a chart this year, “perhaps an epidemiologist would have more insight into 2021 than an economist.”
Still, the struggle to make sense of this pandemic economy and its many contradictions continues. Against this backdrop we reached out to scores of economists, business leaders, investors and analysts and asked each to chose a chart that will be important to Canada’s economy in 2021 and beyond, and to explain why in their own words.
The coronavirus crisis has forced countries around the world to dig deep to save their economies. But when it comes to pandemic spending, Canada is in a league of its own. Ottawa is on track for a $343-billion deficit this year. Compared to 2019, the country is expected to see its fiscal outlook worsen more than any G20 nation, with a change in its deficit equal to 19.6 pe cent of gross domestic product, according to the International Monetary Fund’s (IMF) most recent fiscal monitor.
While budgetary hawks have expressed deep concern with the federal government’s refusal to commit to a timeline for balancing its books, Prime Minister Justin Trudeau has defended the massive volley of spending by arguing the economy would be worse without it.