Connect with us
[bsa_pro_ad_space id=12]

Business

The big quiet bail out – Euro/Japan central banks propping up stock markets, is the US next?

Published

6 minute read

You’d think that the golden age of markets, if there was one, would be something like the post WWII economic expansion era. That was pretty impressive, driven by baby boomers and the gigantic wave of consumption that enveloped them. Never before in history had parents worried so much about the outfits that New Baby would wear, and it only got crazier from there.

Fundamentally though, the late 1700s were far more earth-shaking. Not in the consumerist sense; those austere horse-travelers managed to survive somehow without the likes of either Apple or Lululemon, for example, but consider the free-market achievements of that period. The United States came into existence, a profound new experiment in governance and free(ish) markets. In academic circles, famed economist/philosopher Adam Smith coined the term “the invisible hand of the market” in his book The Wealth of Nations. It was a reference to the ability of a market economy to provide benefits far beyond those that accrue to the creator. That is, an inventor of something that becomes wildly successful enriches not only the inventor, but society as a whole. Plus, it is an indirect reference to the ability of markets to efficiently allocate capital.

We tend to forget that wonder of capital markets, particularly as the world drifts into one defined more and more by government intervention. Since the 2008 financial meltdown, governments have gone kind of berserk in attempting to keep the financial world afloat, causing markets to gyrate in increasing spirals through wild-eyed policy guidance as the dollars at stake become stupefyingly large. We no longer have economist/philosophers at the helm; we have economist/desperados who have convinced the world their alchemic ways will work, and they don’t know that it will, but they’re really really hoping.

The new breed of economist has introduced an all new Invisible Market Hand – not one that provides infinite benevolence, but one that is like a forklift driver feeling confident in his/her ability to pilot a fighter jet because the seats are similar.

The strategy of which I speak began in Japan over the past decade. After years of trying to kick start the Japanese economy in various ways, including dropping interest rates to zero, the central bank began buying up treasuries as a means of supporting debt markets. When that didn’t get things going, they took the next step and actually began buying up equities to prop up stock markets. Since then, Europe has started a similar program. And yes, you heard that right – in those jurisdictions, if stock prices fall too much, the market is prevented from self-correcting, and governments are, in effect, breaking the fingers of the original Invisible Hand.

They appear to be stepping in to keep critical sectors of the economy in good shape, and also to enhance the “wealth effect”. The wealth effect refers to how citizens tend to spend more drunkenly when they feel wealthy, and for many that means a healthy portfolio. If someone sees their retirement nest egg shrink from $100,000 to $50,000 in a severe market downturn, those people tend to lockdown spending – a wise reaction. But as we’re seeing, the world keeps turning because we are consumers, and like it or not, consumption makes our world go round. So by making those portfolios stay healthy one way or another, governments seek to put the population in a semi-drunken spending stupor in order to keep the party going. Anyone who’s witnesses a true boom economy will recognize the phenomenon – at the peak of the oil boom 6 or 8 years ago, there were direct flights from Fort McMurray to Las Vegas, and thousands of twenty-somethings were purchasing vacation properties. Suffice it to say that those days are gone.

Don’t expect the new Invisible Market Hand to bail you out if your brother-in-law convinces you to load up some hot stock tip he got from a friend who got it from a friend who got it from a friend, because the “friend” at the end of that chain will be some dubious stock promoter that may or may not end up in jail, and even panicked governments won’t save those souls.

With the new strategies for propping up markets however, we’re starting to see the lengths governments will go to in order to maintain financial stability. You’d think the mountains of debt will lead to a day of reckoning, but, emboldened by the global government response to the 2008 financial crisis, the high priests of finance are becoming more emboldened. That our fate depends so heavily on a squadron of tweedy economists is truly frightening, but we’re all in the same boat, so enjoy the ride…

 

For more stories, visit Todayville Calgary.

Terry Etam is a twenty-five-year veteran of Canada’s energy business. He has worked at a number of occupations spanning the finance, accounting, communications, and trading aspects of energy, and has written for several years on his own website Public Energy Number One and the widely-read industry site the BOE Report. In 2019, his first book, The End of Fossil Fuel Insanity, was published. Mr. Etam has been called an industry thought leader and the most influential voice in the oil patch. He lives in Calgary, Alberta.

Follow Author

2025 Federal Election

As PM Poilievre would cancel summer holidays for MP’s so Ottawa can finally get back to work

Published on

From Conservative Party Communications

In the first 100 days, a new Conservative government will pass 3 laws:

1. Affordability For a Change Act—cutting spending, income tax, sales tax off homes

2. Safety For a Change Act to lock up criminals

3. Bring Home Jobs Act—that repeals C-69, sets up 6 month permit turnarounds for new projects

No summer holiday til they pass!

Conservative Leader Pierre Poilievre announced today that as Prime Minister he will cancel the summer holiday for Ottawa politicians and introduce three pieces of legislation to make life affordable, stop crime, and unleash our economy to bring back powerful paycheques. Because change can’t wait.

A new Conservative government will kickstart the plan to undo the damage of the Lost Liberal Decade and restore the promise of Canada with a comprehensive legislative agenda to reverse the worst Trudeau laws and cut the cost of living, crack down on crime, and unleash the Canadian economy with ‘100 Days of Change.’ Parliament will not rise until all three bills are law and Canadians get the change they voted for.

“After three Liberal terms, Canadians want change now,” said Poilievre. “My plan for ‘100 Days of Change’ will deliver that change. A new Conservative government will immediately get to work, and we will not stop until we have delivered lower costs, safer streets, and bigger paycheques.”

The ’100 Days of Change’ will include three pieces of legislation:

The Affordability–For a Change Act 

Will lower food prices, build more homes, and bring back affordability for Canadians by:

We will also:

  • Identify 15% of federal buildings and lands to sell for housing in Canadian cities.

The Safe Streets–For a Change Act 

Will end the Liberal violent crime wave by:

The Bring Home Jobs–For a Change Act 

This Act will be rocket fuel for our economy. We will unleash Canada’s vast resource wealth, bring back investment, and create powerful paycheques for workers so we can stand on our own feet and stand up to Trump from a position of strength, by:

Poilievre will also:

  • Call President Trump to end the damaging and unjustified tariffs and accelerate negotiations to replace CUSMA with a new deal on trade and security. We need certainty—not chaos, but Conservatives will never compromise on our sovereignty and security. 
  • Get Phase 2 of LNG Canada built to double the project’s natural gas production.
  • Accelerate at least nine other projects currently snarled in Liberal red tape to get workers working and Canada building again.

“After the Lost Liberal Decade of rising costs and crime and a falling economy under America’s thumb, we cannot afford a fourth Liberal term,” said Poilievre. “We need real change, and that is what Conservatives will bring in the first 100 days of a new government. A new Conservative government will get to work on Day 1 and we won’t stop until we have delivered the change we promised, the change Canadians deserve, the change Canadians voted for.”

Continue Reading

Automotive

Canadians’ Interest in Buying an EV Falls for Third Year in a Row

Published on

From Energy Now

Electric vehicle prices fell 7.8 per cent in the last quarter of 2024 year-over-year, according to the AutoTader price index

Fewer Canadians are considering buying an electric vehicle, marking the third year in a row interest has dropped despite lower EV prices, a survey from AutoTrader shows.

Forty-two per cent of survey respondents say they’re considering an EV as their next vehicle, down from 46 per cent last year. In 2022, 68 per cent said they would consider buying an EV.

Meanwhile, 29 per cent of respondents say they would exclusively consider buying an EV — a significant drop from 40 per cent last year.

The report, which surveyed 1,801 people on the AutoTrader website, shows drivers are concerned about reduced government incentives, a lack of infrastructure and long-term costs despite falling prices.

Electric vehicle prices fell 7.8 per cent in the last quarter of 2024 year-over-year, according to the AutoTader price index.

The survey, conducted between Feb. 13 and March 12, shows 68 per cent of non-EV owners say government incentives could influence their decision, while a little over half say incentives increase their confidence in buying an EV.

Continue Reading

Trending

X