by Steve da Silva
Basics Issue #13 (Apr/May 2009)
According to Statistics Canada, in the last quarter of 2008 Canada’s economy shrank at an annualized rate of 3.4%, and it’s expected that the economy contracted at an even faster rate in the first quarter of 2009. This means that Canada is officially in a recession, defined as a period of at least six months of economic contraction. Despite the reassurances made by Canada’s politicians, as the job losses amount into the hundreds of thousands and with an unemployment rate of 8%, there is nothing for workers to be optimistic about.
And how has the Canadian government responded to what is scaling up to become the greatest economic crisis in Canada and the world since the 1930s?
In late 2008, the Canadian government injected $75 billion into the Canadian banking system in order to buy up unstable mortgage debts held by the banks in a program called the Insured Mortgage Purchase Program (IMPP). Preparing themselves for worse times ahead, the Canadian banks quietly liquated their soon-to-be-troubled assets in exchange for cold, hard cash from the public purse.
With a nearly total media blackout on the decision and thus no opposition to check this unprecedented transfer of wealth from the public to the rich, the back-room dealings were taken to new levels in early 2009 as Canada’s banks were pushing for more bailout money. The Conservative government – with the silent complicity of their “opponents” in Parliament – passed the 2009 Federal Budget which approved an additional $200 billion in bailout money under a program they called the Extraordinary Financing Framework (EFF). While much adieu was made about the Federal Budget’s estimated 5-year $85 billion deficit, nothing at all was said about the plan to spend $200 billion to bail out the banks. This bailout was not calculated into the deficit projections because, as the budget tells us, in return the government was getting “revenue-bearing assets” from the banks. Well, the question immediately follows: If these assets were bearing revenue, why would the banks by trying to liquidate them in the first place? When these assets begin to fail in the coming months and years, it is now working-class Canadians who are going to be picking up the bill for these toxic liabilities.
By early March 2009, the Bank of Canada lowered its interest rate to an all-time record low of 0.5%, a move that economists compared to making a decision to launch nuclear warfare. What this move signaled was the Bank of Canada’s preparations to flood the economy with new dollars that are going to be used to buy up billions of dollars of corporate debt, which is setting the stage for pushing the bank bailout beyond $275 billion.
As the Canadian economy moves into depression territory, all signs suggest that the Canadian government and every political party represented in it are going to stand firm as staunch defenders and apologists for the bankers and big business. The majority of us, in the meantime, can either sit back and watch our interests continue to be attacked; or we can begin organizing ourselves to seriously confront the capitalist class relations that are allowing these outrages to be carried out.