Transcript: Economic Upheaval in a Global Economy | Sep 05, 2019

Steve sits in the studio. He's slim, clean-shaven, in his fifties, with short curly brown hair. He's wearing a gray suit, white shirt, and spotted blue tie.

A caption on screen reads "Economic upheaval in a global economy. @spaikin, @theagenda."

Steve says UNLESS YOU'VE REALLY
BEEN OFF THE GRID THIS SUMMER,
YOU HAVE NO DOUBT ENCOUNTERED
THE WARNINGS ABOUT A POSSIBLE
RECESSION OR ECONOMIC SLOWDOWN.
BUT IS IT JUST THAT -
SPECULATION - OR IS THERE
SOMETHING REALLY TO BE WORRIED
ABOUT?
HERE TO HELP US FIGURE ALL THAT
OUT:
DAWN DESJARDINS, DEPUTY CHIEF
ECONOMIST, RBC...

Dawn is in her sixties, with chin-length platinum blond hair. She's wearing a red blazer over a white blouse, and a thin golden necklace.

Steve continues MIKE MOFFATT, ASSISTANT
PROFESSOR IN THE BUSINESS,
ECONOMICS AND PUBLIC POLICY
GROUP AT THE IVEY BUSINESS SCHOOL...

Mike is in his late forties, clean-shaven, with short gray hair. He's wearing a blue suit, white shirt, and pink tie.

Steve continues LINDA NAZARETH, PRINCIPAL OF
RELENTLESS ECONOMICS AND SENIOR
FELLOW FOR ECONOMICS AND
POPULATION CHANGE AT THE
MACDONALD LAURIER INSTITUTE...

Linda is in her early fifties, with shoulder-length wavy chestnut hair. She's wearing a pale pink blazer and a silver pendant necklace.

Steve continues AND JASON KIRBY, FREELANCE
BUSINESS JOURNALIST WHOSE WORK
YOU HAVE SEEN IN MACLEAN'S AND
THE GLOBE AND MAIL.
AND OTHER PUBLICATIONS AS WELL.

Jason is in his early fifties, balding, with a gray stubble. He's wearing a blue suit and a purple shirt.

Steve continues IT'S GREAT TO HAVE EVERYBODY
HERE AT THE FIRST WEEK OF OUR
14TH SEASON HERE ON THE AGENDA.
I WANT TO START WITH YOU,
BECAUSE YESTERDAY, DAWN, THE
BANK OF CANADA MAINTAINED THE
OVERNIGHT INTEREST RATE AT
1.75 percent.
HISTORICALLY SPEAKING A VERY LOW
RATE.
GIVEN THE U.S. LOWERED ITS
OVERNIGHT RATE FOR THE FIRST
TIME SINCE 2008 EARLIER THIS
SUMMER, I'M WONDERING WHAT YOUR
VIEW IS ON THE ADVISABILITY OF
OUR BANK DOING WHAT IT DID.

The caption changes to "Dawn Desjardins. RBC."
Then, it changes again to "Recession osession."

Dawn says WE'VE COME
OFF A PERIOD OF PRETTY STRONG
GROWTH, ESPECIALLY IN THE SECOND
QUARTER.
IN FACT, IF WE AVERAGE THE FIRST
COUPLE OF QUARTERS, OUR ECONOMY
GREW AT OVER A 2 percent RATE.
SO I THINK FOR THE BANK, THEY'RE
LOOKING AT GROWTH AND THEY'RE
LOOKING AT INFLATION, THE CORE
MEASURE IS RIGHT AROUND THEIR 2 percent
TARGET, AND I DON'T THINK
THEY'RE FEELING AN URGENT NEED
AT THIS STAGE TO CHANGE MONETARY
POLICY AS THEY SAY IT REMAINS
APPROPRIATE.
I THINK THERE ARE SOME RISKS TO
THE OUTLOOK AND I THINK THE BANK
DID POINT TO THOSE GLOBAL RISKS
IN THEIR STATEMENT, BUT I DON'T
THINK IT'S ENOUGH TO GET THEM
OFF THE SIDELINES RIGHT NOW.

Steve says WE WILL GET INTO
THOSE RISKS AS WE CONTINUE OUR
CONVERSATION.
HOW DID YOU READ IT?

The caption changes to "Linda Nazareth. Relentless Economics."

Linda says AS DAWN DID, THEY DO HAVE A
JUSTIFICATION TO CUT RATES,
STEVE, IF WHAT HE BELIEVE IS
HAPPENING OUTSIDE OUR BORDERS IS
GOING TO HIT US VERY QUICKLY.
IF THEY DON'T THINK IT'S GOING
TO HAPPEN ANY TIME SOON, THERE'S
TIME TO WAIT.
AND LET'S REMEMBER, THERE ARE A
LOT OF MOVING PIECES HERE.
WE'RE NOT JUST VANCOUVER,
TORONTO, OR CALGARY.
WE'RE ALL OF THOSE THINGS.
AND YOU HAVE TO HAVE A POLICY
APPROPRIATE FOR EVERYONE.
AND RIGHT NOW CUTTING RATES MAY
NOT BE THAT POLICY.

Steve says OKAY.
MIKE, WE NEED A GOOD PROFESSOR
HERE AND THANKFULLY WE HAVE ONE
AND YOU'RE GOING TO TAKE US
THROUGH A COUPLE OF CHARTS WE'RE
GOING TO LOOK AT HERE ON BOND
YIELDS.
WHY DON'T YOU FIRST OF ALL TELL
US WHAT THAT MEANS AND THEN THE
SIGNIFICANCE OF WHAT WE'RE ABOUT
TO SEE.

The caption changes to "Mike Moffatt. Western University."

Mike says A BOND YIELD
IS ESSENTIALLY AN INTEREST RATE.
SO THE INTEREST RATE ON A
GOVERNMENT BOND.
NORMALLY SPEAKING, THE LONGER
YOU LOAN A GOVERNMENT MONEY FOR,
THE HIGHER INTEREST RATE THAT
YOU GET BECAUSE THERE'S A CHANCE
INFLATION MIGHT GO UP IN THE
FUTURE, THERE'S A CHANCE...
THERE'S A CHANCE THAT THE
GOVERNMENT MIGHT JUST NOT PAY
YOU BACK FOR WHATEVER REASON.
SO IF I'M GOING TO LOAN A
GOVERNMENT MORE MONEY OR MONEY
OVER A LONGER TERM, I'M GOING TO
NEED A HIGHER INTEREST RATE TO
COVER THAT.
SO NORMALLY OUR YIELD CURVE IS
UPWARD SLOPING, THAT THE
LONGER...

Steve says SHELDON, BRING THAT
UP.
THIS IS WHAT NORMALLY THINGS
LOOK LIKE IN THE COURSE OF
REGULAR BUSINESS, RIGHT?

A line chart pops up titled "Normal bond yield curve."
It shows the yield percentage against the maturity in years, where bonds reach their peak approximately in 5 years, approximately at a 3 percent yield.

Mike says SO IF I'M
LOANING A GOVERNMENT MONEY FOR
TWO MONTHS, I'M PRETTY CONFIDENT
THEY'RE GOING TO PAY ME BACK.
INTEREST RATES ARE LOW.
I'M PRETTY SURE YOU'RE NOT GOING
TO HAVE A SURGE OF INFLATION.
THIRTY YEARS FROM NOW, YOU DON'T
KNOW WHAT'S GOING TO HAPPEN.
YOU MIGHT GET 1970-STYLE
INFLATION.
YOU MIGHT GET A CASE LIKE WE'VE
SEEN IN LATIN AMERICAN COUNTRIES
WHERE THE COUNTRY GOES INSOLVENT
AND CAN'T PAY YOU BACK.
NORMALLY SPEAKING INTEREST RATES
ARE HIGHER IF YOU'RE LOANING THE
GOVERNMENT MONEY FOR 25, 30
YEARS OR SO ON.

Steve says WHAT'S HAPPENED OVER
THE SUMMER THAT HAVE GOT PEOPLE CONFUSED?

Another line chart appears titled "Canada yield curve, 4 Sept. 2019."
It shows three lines, red yellow and green. The red line shows the yield percentage for Canada on September 4, falling from over 1.5 to less than 1.25 in 4 years of residual maturity. The green line shows the curve expected one month ago, with a slightly better outcome. The yellow line shows the curve expected six months ago, with a much better outcome.

Mike says WHAT'S GOTTEN PEOPLE CONFUSED
IS THAT IT'S POINTING THE OTHER
WAY, THAT ACTUALLY IF YOU ARE
LOANING GOVERNMENTS MONEY FOR A
LONGER PERIOD OF TIME, YOU'RE
ACTUALLY GETTING LOWER INTEREST
RATES.
AND THIS IS A VERY CONCERNING
SIGN BECAUSE IT MEANS THAT
MARKETS ARE EXPECTING LOWER...
INTEREST RATES TO GO DOWN IN THE
FUTURE.
WHY ARE INTEREST RATES GOING TO
GO DOWN IN THE FUTURE?
WELL, THAT'S A SIGN THAT A
RECESSION MAY BE COMING.

Steve says HOW DID YOU READ THAT?

The caption changes to "Jason Kirby. Business Journalist."

Jason says THAT'S EXACTLY
THE VIEW AND PEOPLE ARE... THE
INVERTED YIELD CURVE IS GETTING
A LOT OF ATTENTION RIGHT NOW AND
PEOPLE ARE, YOU KNOW, HEARING
ABOUT IT ON THE NEWS AND
WONDERING WHAT IS THIS THING?
IT'S A VERY KIND OF COMPLEX
INDICATOR.
BUT IT'S A THING THAT ECONOMISTS
ARE WATCHING CLOSELY AND I
THINK, YOU KNOW, PEOPLE ARE
STARTING TO... I USE... I LOVE
GOING TO GOOGLE TRENDS, WHICH IS
A WAY OF SEARCHING WHAT PEOPLE
ARE... IT'S KIND OF LIKE THE ID
OF SOCIETY.
HERE'S WHAT PEOPLE ARE REALLY
LOOKING AT.
AND PEOPLE ARE NOW SEARCHING FOR
THE TERM "RECESSION" AT THE
HIGHEST LEVEL THAT THEY WERE IN
2008.
IT'S ON PEOPLE'S MINDS AND IT'S
PARTLY BECAUSE OF THIS, BECAUSE
AN INVERTED YIELD CURVE
HISTORICALLY HAS PRECEDED
RECESSIONS.
THAT'S, YOU KNOW, GOING BACK...
I DON'T KNOW HOW FAR YOU COULD
GO BACK.
PROBABLY, YOU KNOW, 50, 60 YEARS
AND BEFORE EVERY RECESSION
YOU'VE HAD THIS TAKE PLACE.

Steve says SO YOU CAN THEREFORE
NOW TELL US WHAT'S GOING TO HAPPEN...

Jason says YOU CAN'T SAY
THAT BECAUSE THIS TIME IS
DIFFERENT IS THE FAMOUS LINE.

Mike says IT'S
PREDICTED EIGHT OUT OF THE LAST
FIVE RECESSIONS.
SO THERE ARE... YOU KNOW, THERE
ARE SORT OF FALSE POSITIVES HERE.

Steve says AT WHAT POINT DO YOU
FIGURE OUT WHETHER THIS IS A
FALSE POSITIVE OR AN ACTUAL
INDICATION OF A RECESSION?

Mike says USUALLY THE AMOUNT IT'S
INVERTED.
I THINK THAT'S WHAT PEOPLE ARE
CONCERNED WITH.
IF IT'S KIND OF SLIGHTLY
INVERTED, THAT'S A SIGN MAYBE
THIS TIME IS DIFFERENT, AS JASON
SAYS.
BUT WHAT WE SAW, AGAIN, GOING
BACK TO ABOUT MAY OR SO, JUST
THE LEVEL OF INVERSION SUGGESTED
THAT MARKETS ARE QUITE CONCERNED
ABOUT, YOU KNOW, WHAT'S GOING ON
WITH TRADE WARS, BREXIT, AND ALL
OF THESE SORT OF INTERNATIONAL
ISSUES, REALLY SIGNALLING JUST A
LEVEL OF INVERSION SUGGESTS THAT
THERE'S A HIGH PROBABILITY OF A
RECESSION.

Steve says HAVE YOU MADE A
DETERMINATION FOR THE BANK AS TO
WHETHER OR NOT THIS IS A FALSE
POSITIVE OR THE REAL THING?

Dawn says WE DON'T
GIVE... I WOULD SAY ABOUT A 30 percent
CHANCE OF RECESSION OVER THE
NEXT 12 MONTHS.
WE DON'T THINK IT'S A LOT HIGHER
THAN THAT.
CERTAINLY WHEN YOU LOOK AT OTHER
INDICATORS, SO WE LOOK AT THE
INVERSION OF THE YIELD CURVE AS
ONE.
YOU LOOK AT CERTAIN PARTS OF THE
ECONOMY.
ARE THEY SUFFERING?
WELL, MANUFACTURING RIGHT NOW,
ARGUABLY, IS COMING UNDER SOME
PRESSURE.
OUR EXPORTERS, BECAUSE WE DO
SEND OUR GOODS INTO THE U.S.
INDUSTRIAL SECTOR.
BUT THEN YOU LOOK AT THE OTHER
SIDE OF THE EQUATION AND THE
BENEFITS FROM THESE VERY LOW
INTEREST RATES IS THAT THE
CANADIAN CONSUMER IS IN PRETTY
GOOD SHAPE.
OUR LABOUR MARKETS ARE VERY
HEALTHY.
AND THE RISE IN DEBT SERVICE
COSTS THAT WE WERE FRETTING
ABOUT, IT DOESN'T LOOK LIKE IT'S
GOING TO BE SO ONEROUS.
SO YOU'VE GOT TO WEIGH THOSE TWO
SIDES, I WOULD SAY.

Steve says LINDA, I HAVE HEARD
PEOPLE SAY YOU CAN ACTUALLY TALK
YOURSELF INTO A RECESSION IF YOU
KEEP PREDICTING THERE'S GOING TO
BE A RECESSION BECAUSE PEOPLE
LOSE CONFIDENCE AND THEY GET
NERVOUS AND THEY CHANGE THEIR
SPENDING HABITS AND SO ON.
IS THAT TRUE?

The caption changes to "Linda Nazareth. Macdonald Laurier Institute."

Linda says IT IS AND IT ISN'T.
PEOPLE IF THEY GET SCARED
THEY'RE GOING TO LOSE THEIR JOB,
THEY'RE GOING TO SPEND LESS.
THEY'RE NOT GOING TO TAKE
HOLIDAYS OR DO RENOVATIONS,
THEY'RE GOING TO BE CAREFUL, AND
THAT GOES THROUGH THE ECONOMY
AND IT'S NOT THE GREATEST THING.
I'M MORE CONCERNED ABOUT
BUSINESSES AND HOW THEY'RE
ACTING, PARTICULARLY IN THE U.S.
IF WE'VE SEEN DECENT SPENDS ON
BUSINESS INVESTMENT IN THE LAST
COUPLE OF YEARS, WE MIGHT NOT BE
IN THIS POSITION.
WE MIGHT SEE THAT GOING.
DESPITE THE TRUMP TAX CUT, YOU
DIDN'T SEE BUSINESSES STEP UP
THE WAY YOU EXPECTED THEM TO.

The caption changes to "Connect with us: Twitter: @theagenda; Facebook, agendaconnect@tvo.org, Instagram."

Steve says WHAT DID THEY DO
WITH ALL THAT MONEY?

The caption changes to "Linda Nazareth, @relentlesseco."

Linda says GOES TO DIVIDENDS, SOME OF IT.
SOME OF IT PERHAPS WILL BE SPENT
IN THE NEXT LITTLE WHILE.
I LIKE TO THINK THERE'S A
CUSHION THERE THAT COMPANIES
AREN'T NECESSARILY ON THE BRINK,
BUT FOR NOW THE NUMBERS HAVE
BEEN PRETTY DISAPPOINTING.
I'D LIKE TO SEE A LOT MORE
BUSINESS SPENDING BECAUSE I
THINK TECHNOLOGY IS PERHAPS
GOING TO BE A SAVIOUR HERE, THAT
IF COMPANIES ARE WELL-POSITIONED
AND EFFICIENT AND DOING THINGS
WELL, THEY MAY NOT HAVE TO
RESORT TO MAJOR LAYOFFS, THIS
MAY GO THROUGH MORE SMOOTHLY
THAN OTHER RECESSIONS HAVE DONE.

Steve says JASON, LET ME
REVISIT THAT QUESTION.
DO YOU THINK WE CAN TALK
OURSELVES INTO A RECESSION?

The caption changes to "Jason Kirby, @jason_kirby."

Jason says I THINK THAT,
IF YOU GO BACK OVER THE TIME
PERIOD, YOU KNOW, THE LAST
DECADE OR SO SINCE THE LAST
RECESSION, THERE HAVE BEEN
SEVERAL TIMES WHERE THIS
QUESTION HAS COME UP WHERE, YOU
KNOW, YOU HAD THE EURO CRISIS,
YOU HAD THE POTENTIAL OF WHOLE
COUNTRIES NEAR... YOU KNOW, THE
SO-CALLED PIGS, YOU KNOW,
PORTUGAL, ITALY, GREECE... YOU
KNOW, THIS PANIC THING, THIS
PANIC THAT WAS CONSUMING, YOU
KNOW, GLOBAL MARKETS, AND I WENT
BACK AND I LOOKED AND PEOPLE
WERE ASKING THAT EXACT SAME
QUESTION THEN, WE'RE GOING TO
TALK OURSELVES INTO A RECESSION,
THAT IT'S A SELF-FULFILLING
PROPHESY, BUT WE DIDN'T.
THERE'S BEEN A COUPLE OF THOSE
MOMENTS WHERE CERTAINLY... I
KNOW I MIGHT HAVE WRITTEN A
COUPLE OF RECESSION LOOMING
SESSIONS ALONG THE WAY WHERE IT
SEEMED WE WERE ABOUT TO HEAD
INTO ONE.
I DON'T THINK YOU CAN REALLY, AS
CONSUMERS, TALK YOURSELF INTO
THAT, BUT I DO THINK, AS LINDA
SAID, IT COMES DOWN TO THE
CONFIDENCE THAT BUSINESSES HAVE
AND WHETHER THEY HAVE, YOU KNOW,
ULTIMATELY THE REAL CONCERN IS
WHETHER LENDERS START TO PANIC
AS WELL AND WHETHER THEY START
TO PULL BACK, AND THAT'S WHEN
YOU START TO GET INTO, YOU KNOW,
LOWER CREDIT AND KIND OF THE
CREDIT CRUNCH SCENARIO.
YOU KNOW, THAT'S THE EXTREME,
YOU KNOW, KIND OF SITUATION THAT
SENT US INTO THE GREAT RECESSION
THE LAST TIME, WAS THAT CREDIT
CRUNCH.
ULTIMATELY, YOU KNOW, YOU WANT
LENDERS TO KEEP LENDING, AND I
ALSO... I DON'T SEE ANY... YOU
KNOW, ON THE CONSUMER SIDE, MY
MAILBOX IS FULL THESE DAYS OF,
YOU KNOW, CREDIT CARD OFFERS, I
KNOW THIS IS THE SAME FOR A LOT
OF PEOPLE.
IT'S KIND OF HARD TO KEEP UP.
LENDERS ARE DOING EVERYTHING
THEY CAN...

Steve says THEY JUST THINK
YOU'RE A GREAT RISK.

[LAUGHTER]

Jason says FIRST IT'S ME.
I'VE TAKEN A LOOK OUT THERE, AND
PEOPLE ARE BEING INUNDATED WITH
CREDIT CARD OFFERS RIGHT NOW,
AND, YOU KNOW, AND PLEASE BUY A HOUSE.
THAT IS THE OTHER...

Steve says LET ME JUST TWEAK
THAT QUESTION A BIT FOR YOU, MIKE.
CAN WE TALK OURSELVES INTO A
RECESSION THAT OTHERWISE WOULD
NOT HAVE HAPPENED, BUT BECAUSE
OF ALL OF THE LACK OF CONFIDENCE
DEMONSTRATED BY, YOU KNOW, 24-7
DISCUSSION OF IT ON NEWS
CHANNELS AND SO ON, WE'VE
BROUGHT IT ABOUT?

The caption changes to "Mike Moffatt, @MikePMoffatt."

Mike says I THINK WE
CAN, PARTICULARLY AGAIN ON THE
BUSINESS INVESTMENT SIDE,
BECAUSE WE HAVE TO REMEMBER THAT
SOMEONE SPENDING IS SOMEBODY
ELSE'S INCOME.
SO IF I'M NOT OUT THERE BUILDING
A NEW FACTORY BUILDING
EQUIPMENT, THOSE ARE, YOU KNOW,
FACTORY WORKERS WHO ARE NOT
GETTING HIRED AND SO ON.
ABSOLUTELY THERE'S A
SELF-FULFILLING PROPHESY IN
THIS.
BUT WE ALSO HAVE TO REMEMBER, AT
SOME POINT A RECESSION IS GOING
TO HAPPEN, SO THE QUESTION IS,
YOU KNOW, WILL A RECESSION
HAPPEN?
WELL, 100 PERCENT YES, YOU KNOW?
ALL WE'RE SORT OF ARGUING HERE
IS WHEN'S THE TIMING OF THAT.
WE'VE HAD A COUPLE DOZEN OVER
THE LAST 200 YEARS AND OVER THE
NEXT FEW HUNDRED YEARS, WE'LL
PROBABLY HAVE A COUPLE DOZEN MORE.

Steve says WELL, ONE OF THE
REASONS... BESIDES THE REASONS
YOU'VE ALL GIVEN SO FAR HERE
TONIGHT, ONE OF THE REASONS,
DAWN, WE'RE TALKING SO MUCH
ABOUT THIS IS BECAUSE OF THE
TRADE WAR, THE TARIFF WAR,
BETWEEN CHINA AND THE UNITED
STATES RIGHT NOW.
IT HAS BEEN DEMONSTRATED THAT
DONALD TRUMP'S TARIFF WAR WITH
CHINA HAS, AS A RESULT, LOWERED
ECONOMIC GROWTH FIGURES AND MADE
PEOPLE A WHOLE LOT MORE SKITTISH
AND NERVOUS ABOUT THINGS.
WHERE DO THINGS SIT IN THAT
TARIFF WAR RIGHT NOW?

The caption changes to "Trade troubles."

Dawn says WELL, IT
STILL SEEMS TO BE MOVING
FORWARD, LET'S PUT IT THAT WAY.
AND SO CERTAINLY I THINK WE'RE
SEEING ON THE SENTIMENT
INDICATORS THAT WE'RE TALKING
ABOUT, ESPECIALLY IN THE U.S.,
WHERE WE ARE SEEING
MANUFACTURERS SAYING, "HEY, YOU
KNOW, WE ARE WORRIED," AND WE'RE
STARTING TO SEE SIGNS THAT
PERHAPS CONTRACTION IN ECONOMIC
ACTIVITY IN THAT SECTOR IS IN
THE OFFING.
SO THAT WAR IS TRAINING.
WE'RE NOT... CONTINUING.
WE'RE NOT SEEING A LOT OF ITEM
PRANCE IN TERMS OF THEIR
LANGUAGE.

Steve says SO SURPRISING FROM
THE PRESIDENT.

The caption changes to "Dawn Desjardins, @RBC."

Dawn says WE DID SEE
THAT LATEST ROUND OF TARIFFS
BEING PUT IN PLACE AS OF
SEPTEMBER THE 1ST, AND YOU ARE
READING A LOT ABOUT IT.
I READ ABOUT A COMPANY IN
COLORADO THAT MAKES SHOES, AND
THEY'RE SAYING, OKAY, NOW, WE'RE
A PRETTY SMALL COMPANY AND WE
ARE TRYING TO GET OUR SHOES IN
FROM CHINA, BUT BECAUSE
EVERYONE'S RUSHING TO DO IT, WE
CAN'T GET OUR ORDER FILLED,
FIRST OF ALL, AND, YOU KNOW,
WE'RE GOING TO FACE THESE COSTS.
HOW IS THAT REALLY GOING TO WORK
FOR US?
BUT WE ALSO CAN'T AFFORD TO MOVE
OUR MANUFACTURING BACK INTO THE
UNITED STATES.
SO I THINK IT IS DAMAGING, WHEN
YOU READ STORIES LIKE THAT, FOR
COMPANIES AT LARGE IN THE UNITED
STATES, AND SOME OF THESE
SMALLER ONES REALLY JUST CAN'T
AFFORD TO BRING IT BACK.

Steve says IT'S NOT JUST THE
TARIFF WAR, THOUGH, LINDA, THE
PRESIDENT ALSO TWEETED THAT HE
BELIEVED THAT AMERICAN
BUSINESSES IN CHINA OUGHT TO
CLOSE SHOP AND COME HOME.
HE SAID THAT.

Linda says HE DID.

Steve says HOW CONSTRUCTIVE IS THAT?

Linda says IT'S NOT CONSTRUCTIVE.
I THINK HE DID HAVE TO BACKTRACK
ON THAT A LITTLE BIT BECAUSE IT
WOULD BE VERY HARD TO MAKE THAT
HAPPEN.
BUT, YOU KNOW, JUST TO COME BACK
TO THE IDEA OF TRADE.
IF YOU ONLY REMEMBER ONE THING
FROM YOUR ECONOMICS AT
UNIVERSITY, IT'S THAT TRADE IS
GOOD, RIGHT?
DESTROYING TRADE WILL USUALLY
DESTROY AN ECONOMY.
THAT'S HISTORICALLY SOMETHING
THAT'S BEEN TRUE.
SO I THINK IT'S A LITTLE BIT
TRAGIC THAT THIS IS HAPPENING.
TO PICK UP ON WHAT MIKE SAID
THAT RECESSIONS ARE INEVITABLE.
I'M GOING TO QUITE BEN BERNANKE,
THE FORMER HEAD OF THE FED.
HE SAID BUSINESS CYCLES DON'T
DIE, THEY ARE MURDERED.

Steve says THAT'S A GREAT LINE,
A BERNANKE LINE.
THAT'S A GREAT LINE.
HOW MUCH WORSE DID THE
PRESIDENT'S COMMENT ABOUT, IF
YOU'RE DOING BUSINESS IN CHINA,
YOU'RE A TRAITOR, BRING YOUR
BUSINESS HOME.
I DEMAND THAT YOU BRING YOUR
BUSINESS HOME TO THE UNITED
STATES.
HOW MUCH DID THAT EXACERBATE THE
SITUATION?

Mike says IT CERTAINLY
DIDN'T HELP, THOUGH, YOU KNOW,
WHAT ARE WE ONTO, THE 2,000th
CRAZY TWEET FROM THE PRESIDENT.
I THINK WE'RE NOW ALL SORT OF
IMMUNE TO IT.
IT'S NOT THE SORT OF THING YOU
EXPECT FROM A DEMOCRATIC
COUNTRY, SORT OF ORDERING
BUSINESS PEOPLE TO MOVE YOUR
PRODUCTION, AND I THINK WHAT THE
PRESIDENT NEEDS TO REALIZE IS
THERE ARE A LOT OF OTHER
COUNTRIES OUT THERE.
SO IF CHINA BECOMES TOO
EXPENSIVE BECAUSE OF TARIFFS,
THEY'RE NOT NECESSARILY GOING TO
MOVE BACK TO THE UNITED STATES,
AND WE'RE SEEING THIS.
SO GOOGLE JUST ANNOUNCED A
COUPLE WEEKS AGO THAT THEY'RE
PRODUCING THEIR NEW SMARTPHONE
IN VIETNAM.
WE HAVE THE INDIAN GOVERNMENT
UNDER MODI, THEY'VE IDENTIFIED
NINE DIFFERENT SECTORS,
TELECOMMUNICATIONS,
PHARMACEUTICALS AND SO ON, WE'RE
GOING TO TRY TO GET APPLE TO OUR
COUNTRY, WE'RE GOING TO TRY TO
GET THESE OTHER COMPANIES TO OUR
COUNTRY.
I THINK THAT'S WHAT WE'LL SEE AS
THE SUPPLY CHAINS CHANGE. THEY
MAY LEAVE CHINA BUT THAT DOESN'T
NECESSARILY MEAN THEY ARE GOING
TO GO TO THE UNITED STATES.
THEY'RE GOING TO VIETNAM, THE
PHILIPPINES, INDONESIA, AND SO ON.

Steve says JASON, I HAVE TO
TELL YOU A LITTLE STORY AS I SET
UP THIS NEXT QUESTION.
THAT IS, OVER THE SUMMER, I WAS
ON THE DOCK OF THE MARINA IN
KAGAWONG, ONTARIO, POPULATION
ABOUT 100. MAYBE 105 WHEN MY
FAMILY SHOWS UP.
THERE WERE SOME VISITORS FROM
MICHIGAN THERE, A HUSBAND, WIFE,
AND 20-SOMETHING DAUGHTER, AND I
ASKED THEM ABOUT THE PRESIDENT
AND ABOUT THE TRADE WAR WITH
CHINA AND THE TARIFFS AND SO ON,
AND I ASKED... I KEPT IT VERY
NEUTRAL AND OPEN-ENDED THE
QUESTION.
I SAID, WHAT DO YOU LIKE ABOUT
WHAT DONALD TRUMP IS DOING SO
FAR?
AND THE FIRST THING THE HUSBAND
SAID WAS, STICKING IT TO CHINA.
HE'S A SMALL BUSINESS PERSON IN
MICHIGAN.
AND I SAID BUT YOU KNOW THAT
HURTS YOUR BOTTOM LINE.
HE SAYS, I KNOW, BUT WE'VE GOT
TO DO IT.
HOW MUCH OF THAT THINKING EITHER
CONTRIBUTES OR DOESN'T TO THE
PREDICAMENT THE U.S. FINDS
ITSELF IN RIGHT NOW?

Jason says WELL, THAT'S
TRUMP'S BASE AND HE'S APPEALING
TO THAT STRONGLY AND
DEFINITELY... DEFINITELY IT'S A
WIDELY-HELD SENTIMENT.
IT'S INTERESTING, THOUGH, WHEN
YOU HAVE ALL THE RHETORIC AROUND
THE CHINA-U.S. TRADE WAR AND ALL
THESE TWEETS AND JUST THE ANGRY
LANGUAGE, I MEAN, WE'VE IN
CANADA, HERE, HEARD ALL THIS
BEFORE.
WE WENT THROUGH THIS.
WE WERE LIKE THE ROUGH DRAFT OF
THE CHINA-U.S. TRADE WAR.
WHAT'S INTERESTING FROM THAT WAS
THAT AT THE END OF THE DAY,
DESPITE ALL THE UPHEAVAL AND THE
CHAOS THAT CAME OUT OF IT, WE
ENDED UP WITH A TRADE DEAL THAT
IS STILL YET TO BE RATIFIED THAT
WAS NOT ALL THAT DIFFERENT FROM
THE SCENARIO, THE SITUATION THAT
WE HAD BEFORE...

Steve says THAT'S NOT TRUE.
THE PRESIDENT SAID BEFORE...

Jason says EXACTLY, EXACTLY.

Steve says NOW IT'S THE
GREATEST EVER.
SO YOU'RE WRONG.
I'M SORRY.
YOU'RE WRONG ABOUT THAT.

Jason says NO, THAT'S THE POINT.
TRUMP WILL... WHATEVER HE GETS
OUT OF CHINA, IT MIGHT BE THAT
THERE IS SOME INCREMENTAL
OPENING OF ACCESS ON PATENTS AND
TECHNOLOGY, COMPANIES BEING ABLE
TO MOVE IN THERE, OR WHATEVER HE
MIGHT GET.
HE WILL TURN AROUND AND CLAIM
THAT IT WAS A MASSIVE VICTORY.
HE'S FIXED, YOU KNOW, THE
LONGSTANDING, YOU KNOW, PROBLEMS
THAT THE U.S. MIGHT HAVE HAD
WITH CHINA, AND FOR 40 TO
50 PERCENT OF THE AMERICAN
POPULATION, THAT... HIS WORD IS
GOLD AND THEY WILL TAKE HIM ON
THAT.
BUT, YOU KNOW, THE REST OF THE
WORLD, YOU KNOW, MAY WANT TO
TAKE A LOOK AT WHAT CANADA DID
GO THROUGH AND HOW, AT THE END
OF THE DAY, NOTHING... THERE
WERE CHANGES AND FARMERS WILL
DEFINITELY SAY THAT THERE WERE
BIG CHANGES.

Steve says SURE.

Jason says BUT EVEN THERE, IT WASN'T
NEARLY AS BIG AS TRUMP WAS
TALKING LIKE.
SO MAYBE, YOU KNOW, THE OPTIMIST
IN ME SAYS MAYBE WE COME OUT OF
THIS WITH, AGAIN, A LOT OF
RHETORIC BUT NOT A LOT OF
CHANGE, AND TRADE CONTINUES AND
TRUMP STILL GETS TO GO OFF AND
CLAIM THAT HE, YOU KNOW, HAD
THIS MASSIVE VICTORY.

Steve says HOW MUCH, MIKE, IN
YOUR VIEW, DID THE U.S.M.C.A., I'VE
HEARD SOMEBODY REFER TO IT AS
YOU-SMACKA, HOW MUCH WAS THAT A
TEMPLATE FOR WHATEVER FUTURE
TRADE ARRANGEMENTS THE UNITED
STATES IS LIKELY TO MAKE WITH OTHERS?

Mike says I THINK IT WAS.
I AGREE WITH JASON.
THEY'RE WILLING TO MAKE NOISE, A
LOT OF HARD DEMANDS, BUT AT THE
END OF THE DAY, THIS IS GOING TO
LOOK A LOT LIKE THE PREVIOUS
DEALS.
THAT SAID, WE STILL DON'T HAVE
THIS RATIFIED.
WE'RE KIND OF IN THIS SITUATION
WHERE WE'RE NOT SURE WHAT'S
GOING TO HAPPEN IN THE NEXT
COUPLE OF YEARS.
THE DEMOCRATS AND REPUBLICANS
HAVE TO WORK TOGETHER TO RESOLVE
THIS AND THAT'S HARD BECAUSE IT
INVOLVES DEMOCRATS AND
REPUBLICANS WORKING TOGETHER.
YEAH, IT'S HARD TO SEE.
I DON'T REALLY SEE A PATHWAY OUT
TO HAVE THE UNITED STATES FORCE
CHINA TO MAKE A LOT OF CHANGES.
THE AMERICANS DON'T HAVE A LOT
OF ALLIES ON THEIR SIDE RIGHT
NOW.
I MEAN, THEY DID HAVE A PATHWAY.
THEY HAVE SOME VERY LEGITIMATE
CONCERNS ABOUT CHINA WHEN IT
COMES TO INTELLECTUAL PROPERTY,
AND WHAT THEY COULD HAVE DONE IS
WORK WITH THEIR TPP PARTNERS TO
TRY TO LEVERAGE CHINA, BUT
THEY'RE TRYING TO GO ABOUT THIS
SOLO.
THAT'S TRUMP'S STYLE.
AND I'M JUST... I DON'T SEE A
PATH TO VICTORY FOR THEM HERE
AGAIN, OTHER THAN SOME SYMBOLIC
VICTORIES THAT TRUMP CAN WAVE
AROUND IN 2020.

Steve says DAWN, THE LACK OF
RATIFICATION FOR USMCA RIGHT
NOW, HOW MUCH DOES THAT
UNCERTAINTY AFFECT THE CANADIAN
ECONOMY, IN YOUR VIEW?

Dawn says WELL, I
DON'T KNOW... I MEAN, WE'RE
GOING BACK TO OUR, YOU KNOW,
STATUS QUO, AND SO FOR US THAT
IS GOOD, REASONABLY GOOD, WE'VE
LIVED WITH IT FOR MANY YEARS AND
WE'VE BENEFITED FROM THAT.
SO I DON'T SEE THAT AS RILING UP
OR CREATING A LOT OF UNCERTAINTY
FOR CANADIAN BUSINESSES.
I THINK IT'S MORE, HOW DO WE SEE
DEMAND EVOLVING AND I THINK FOR
BUSINESSES, IT'S MORE THAT, LIKE
WHERE AM I GOING TO SELL MY
STUFF, EVEN IF IT'S STILL A
FRIENDLY RELATIONSHIP WITH THE
UNITED STATES?
IF THE UNITED STATES DEMAND IS
WEAKENING, YOU KNOW, IT DOESN'T
REALLY MAKE ALL THAT MUCH
DIFFERENCE.

Steve says DO YOU THINK THERE
IS A LACK OF CONFIDENCE OR A
GREATER UNCERTAINTY AS A RESULT
OF THE LACK OF RATIFICATION FOR
USMCA SO FAR?

Linda says I AGREE WITH DAWN.
IT'S NOT THE MAJOR FACTOR HERE.
IF YOU'RE ASKING, IS THIS GOING
TO CONTRIBUTE TO A RECESSION?
I DON'T THINK IT IS.
I THINK THIS IS COMING FROM
OUTSIDE OF CANADA.
IT'S COMING FROM THE U.S.
IT'S COMING FROM CHINA.
AND THE CHINESE ECONOMY IS
WEAKENING QUITE A BIT TOO.
IF YOU LOOK AT THE ECONOMIC
SIGNALS THERE.
IF YOU LOOK AT COMMODITY PRICES,
THEY'RE WEAKENING.
IF YOU LOOK AT EUROPE, THE
GERMAN NUMBERS ARE QUITE
CONCERNING RIGHT NOW.
SO IT'S NOT REALLY A CANADIAN
ISSUE.
CANADA CAN SURVIVE, I THINK, AS
LONG AS THE INTERNATIONAL
ENVIRONMENT IS OKAY.
BUT WHAT'S HAPPENING IS THE
INTERNATIONAL ENVIRONMENT IS
CRUMBLING AROUND US, AND THAT'S
WHAT THE BANK OF CANADA IS
TRYING TO JUDGE: HOW QUICKLY IS
THIS HAPPENING?

Steve says IN WHICH CASE, HOW
IS OUR ECONOMY GENERALLY
SPEAKING DOING RIGHT NOW
NOTWITHSTANDING ALL THE THINGS
WE JUST MENTIONED?

The caption changes to "Mike Moffatt. Smart Prosperity Institute."
Then, it changes again to "On the home front."

Mike says THAT'S KIND
OF THE FUNNY THING IS THINGS
SEEM TO BE GOING PRETTY WELL.
AS WE DISCUSSED EARLIER, GDP
NUMBERS ARE STRONG.
WE'VE HAD SOME OF THE BEST JOB
GROWTH IN THE FIRST HALF OF 2019
THAN WE'VE SEEN IN A DECADE.
THOSE ALL TEND TO BE WHAT WE
CALL LAGGING INDICATORS.
THOSE ARE KIND OF THE LAST
THINGS TO CHANGE.
THAT DOES MAKE IT A LITTLE BIT
IRONIC THAT, YOU KNOW, WE'RE
LOOKING OUT 12 TO 18 MONTHS FROM
NOW AND SAYING, OH, OKAY,
THERE'S ALL THESE BLACK CLOUDS
OUT THERE, THERE MIGHT BE A
RECESSION, BUT THE HERE AND NOW
IS ACTUALLY PRETTY GOOD.

Steve says HOW ABOUT IN THE
PROVINCE OF ONTARIO, JASON?
THE FORD GOVERNMENT WOULD LIKE
TO MAKE A CLAIM THE ECONOMY IS
DOING WELL AND THEY GET THE
CREDIT FOR IT.

Jason says I DON'T THINK
THE ONTARIO ECONOMY IS DOING ANY
BETTER OR WORSE THAN IT WAS
UNDER THE LIBERAL GOVERNMENT.
AGAIN, GOING BACK TO THE TRUMP
TACTIC, YOU KNOW, YOU CLAIM WHAT
YOU WANT AND, YOU KNOW, YOUR
SUPPORTERS WILL GO ALONG WITH IT.

Steve says BUT WHAT DO THE
EMPIRICALLY PROVABLE FACTS TELL US?

Jason says THAT THERE IS A SLOWDOWN IN
MANUFACTURING BUT THERE'S BEEN A
SLOWDOWN IN MANUFACTURING, YOU
KNOW, FOR A LONG TIME.
IT'S GOING THROUGH A BIG
ADJUSTMENT.
EMPLOYMENT GROWTH IS STILL... IS
STILL HUMMING ALONG VERY NICELY,
WAGE GROWTH IS GOING ALONG
REALLY NICELY, AND SO, LIKE MIKE
SAID, THESE ARE ALL, LIKE, YOU
KNOW, LAGGING INDICATORS.
A RECESSION CAN BE UNDERWAY
BEFORE YOU START TO SEE WAGES
AND EMPLOYMENT TAKE A HIT.
THAT'S WHAT HAPPENED IN 2007,
2008.
EMPLOYMENT KEPT... YOU KNOW, IT
TOOK A WHILE FOR THAT TO START
TO ACTUALLY HIT.
BUT RIGHT NOW, IF YOU JUST TAKE
A LOOK AT EMPIRICALLY THE
NUMBERS, ONTARIO IS DOING QUITE
WELL.

Steve says LET ME TRY A
DOUBLE-BARRELED HYPOTHETICAL
QUESTION HERE, WHICH NO GOOD
POLITICIAN IS EVER SUPPOSED TO
ANSWER BUT MAYBE AN ECONOMIST CAN.

Dawn says WHOA.

Steve says WHICH IS...
HOW CONCERNED ARE YOU ABOUT THE
SIZE OF THE ONTARIO DEFICIT
REGARDLESS OF WHAT IT IS,
BECAUSE THERE'S A DISPUTE ABOUT
WHAT IT IS.
IS IT BIG ENOUGH TO MAKE YOU
WORRIED THAT IF WE DO GO INTO A
RECESSION, WE DON'T HAVE A LOT
OF WIGGLE ROOM FOR GOVERNMENT TO
PRIME THE PUMP TO PROTECT PEOPLE
FROM WHATEVER RAVAGES COME AFTER THAT?

Dawn says WELL, I
DON'T THINK THERE'S ANY LIMIT IN
THE SENSE OF THERE'S A
HARD-AND-FAST RULE.
YOU COULD FACE HIGHER FUNDING
COSTS BECAUSE INTERNATIONAL
INVESTORS COULD SAY, WELL, YOU
KNOW, I NEED A LITTLE BIT MORE
IF I'M GOING TO LEND THAT MONEY
TO THAT GOVERNMENT BECAUSE THEIR
CREDIT ISN'T LOOKING QUITE AS
SPARKLING AS I'D LIKE TO SEE IT.
BUT I DO THINK IF GOVERNMENTS
HAVE TO... I MEAN, THAT'S THEIR
ROLE, TO STABILIZE THE ECONOMY.
SO IF WE DO HIT A RECESSION,
THERE IS A RISK THAT WE WILL
FACE THESE HIGHER FUNDING COSTS,
BUT I DON'T THINK THAT THE
GOVERNMENT WOULDN'T DO THAT IF
THEY NEEDED, IF PRESSED.

Steve says CAN I GET YOU ON
THAT, LINDA?

Linda says THAT'S WHAT
GOVERNMENTS DO EVERY TIME IN
THIS COUNTRY AND EVERY COUNTRY
AND THIS PROVINCE AND OTHER
PROVINCES.
IF THINGS LOOK LIKE THEY'RE
GOING TO WEAKEN, YOU WILL SEE
THE GOODIES WE HAD TEN YEARS
AGO.
REMEMBER THERE WERE A LOT OF
ARENAS BUILT, ROADS PAVED,
INCENTIVES TO BUSINESSES.
YES, THE DEFICIT WILL GO HIGHER
AND AT SOME POINT THERE WILL BE
HIGHER TAXES.
IF YOU'RE ASKING ME IS THIS
GREAT LONG TERM? IT ISN'T.
I WORRY ABOUT THE DEMOGRAPHICS
AND HOW THE LONG TERM WILL WEIGH
ON PEOPLE.
IN TERMS OF THE SHORT TERM, I'M
SURE THE PUMPS WILL BE PRIMED
AGAIN.

Steve says HERE'S THE CONCERN.
WE'RE CRUISING IN AROUND
340 BILLION dollars WORTH OF DEBT IN
THE PROVINCE OF ONTARIO AND THAT
MONEY PRESUMABLY HAS TO BE PAID
BACK SOME DAY, AND IF WE'RE
GOING TO GO ON A MASSIVE
SPENDING SPREE OVER THE NEXT FEW
YEARS, IN THE EVENT THAT WE HAVE
TO PROTECT PEOPLE FROM A
RECESSION, WHAT DOES THAT DO TO
THE BALANCE SHEET?

Mike says I'M LESS
CONCERNED ABOUT THIS BECAUSE
INTEREST RATES ARE SO LOW AND
DON'T LOOK LIKE THEY'RE GOING UP
ANY TIME SOON, THOUGH YOU DO
HAVE TO WORRY ABOUT, YOU KNOW,
BLACK SWAN TYPE EVENTS.
RIGHT NOW, ON A PER CAPITA BASIS
IN REAL INFLATION-ADJUSTED
TERMS, THE PROVINCIAL GOVERNMENT
IS SPENDING ABOUT 100 dollars LESS A
PERSON IN INTEREST COSTS THAN
THEY DID UNDER BILL DAVIS.

The caption changes to "Watch us anytime: tvo.org, Twitter: @theagenda, Facebook Live, YouTube."

Steve says FOR THOSE WHO DON'T
KNOW, THIS IS '70s AND EARLY '80s.

Mike says '80s, EXACTLY.
SO WHILE THE DEFICIT HAS
INCREASED, THE POPULATION HAS
INCREASED, WE'VE HAD INFLATION,
AND ALSO WE'VE HAD MUCH LOWER
INTEREST RATES.
SO I THINK WE CAN WEATHER THIS.
I DO WORRY ABOUT DEMOGRAPHICS.
YOU KNOW, AS THE BABY BOOMERS
GET OLDER, OUR HEALTH CARE COSTS
ARE GOING TO RISE SUBSTANTIALLY,
BUT I THINK OVERALL, YOU KNOW,
WE HAVE OTHER ISSUES AND WE LOOK
AROUND THE WORLD, YOU KNOW, AT
THE U.K., THE U.S., AND ALL
THESE OTHER JURISDICTIONS... OUR
DEFICITS AND DEBTS LOOK
ABSOLUTELY TINY COMPARED TO
WHAT, SAY, THE TRUMP
ADMINISTRATION IS DOING.

Steve says THEY DO, AND AGAIN,
THESE ARE ALL POLITICIANS WHO
ARE MAKING THESE COMMENTS, SO
TAKE IT FOR WHAT IT'S WORTH.
WE WERE TOLD BY THE PROGRESSIVE
CONSERVATIVES WHEN THEY WERE
CAMPAIGNING FOR OFFICE A LITTLE
OVER A YEAR AGO THAT LOOK LESS
AT THE NUMBER OF THE ACTUAL
DEFICIT, LOOK MORE AT THE
PERCENTAGE OF THE GROSS DOMESTIC
PRODUCT THAT IT REPRESENTS, AND
THAT THE LIBERALS HAD THAT
NUMBER UP AROUND 40 PERCENT AND
GOING NERVOUSLY HIGHER, AND IN
THEIR VIEW, IT OUGHT TO BE
COMING DOWN BELOW 40 PERCENT.
WELL, WE'RE NOT COMING DOWN
BELOW 40 PERCENT RIGHT NOW SO
SHOULD WE STILL BE NERVOUS ABOUT
ALL THIS?

Mike says I DON'T THINK SO.
AGAIN, BECAUSE INTEREST RATES
ARE SO LOW.
AGAIN, YOU DON'T... YOU DO HAVE
TO WORRY THEY MIGHT SPIKE UP.
THERE'S ALWAYS THE POTENTIAL FOR
BLACK SWAN EVENTS.
I DON'T SEE IT AS PROBLEMATIC.
IF THERE'S WASTEFUL SPENDING,
OBVIOUSLY WE SHOULD GET RID OF
THAT WASTEFUL SPENDING.
RATES ARE LOW.
IT LOOKS LIKE THEY'RE GOING TO
CONTINUE TO BE LOW OR GO DOWN
FURTHER.
IN MY MIND, IF BOND RATES ARE
ONLY 1 percent A YEAR, WHAT WERE YOU
WORRIED ABOUT, YOU KNOW?
BECAUSE, AGAIN, THE PER CAPITA
REAL EXPENDITURE ON INTEREST IS
MUCH LOWER THAN IT WAS BACK IN
THE 1980s.

Steve says ADMITTEDLY WE'RE NOT
AT 100 PERCENT, 200 PERCENT AS
DEBT IS A PROPORTION OF THE
ECONOMY, BUT WE'RE AT 40 PERCENT
AND PEOPLE HAVE SAID IN THE PAST
YOU DON'T WANT TO BE HIGHER THAN
40 PERCENT IF YOU WANT YOUR
BOOKS TO BE IN GOOD SHAPE.
DOES THAT GIVE YOU PAUSE?
ARE YOU NERVOUS ABOUT THAT?

Jason says I'M WITH EVERYBODY...

Steve says I'M NOT TRYING TO
STIR UP TROUBLE WHERE THERE
ISN'T ANY.

Jason says ALSO, TRUMP HAS ALSO COME
ALONG AND MADE THE JOB OF, YOU
KNOW, WITH THE DEFICITS THAT THE
TRUMP ADMINISTRATION...

Steve says TRILLION DOLLAR...

Jason says TRILLION DOLLAR DEFICIT.

Steve says TRILLION.

Jason says IT REALLY PUTS EVERYTHING IN
CANADA IN REAL PERSPECTIVE, THAT
OUR SITUATION IS NOT NEARLY AS
BAD.
AND IT ALSO MAKES IT A LITTLE
BIT HARDER FOR THOSE ARE KIND OF
THE DEFICIT HAWKS OUT THERE
BECAUSE THE U.S. IS ALWAYS LIKE,
WE'VE GOT TO GET OUR HOUSE IN
ORDER.
YOU KNOW, THE... THE U.S. IS
ALWAYS KIND OF HELD UP, EVEN
THOUGH THEIR DEFICITS HAVE
ALWAYS BEEN MASSIVE, THERE WAS
STILL THIS IDEA THAT, YOU KNOW,
WE HAD TO BRING THINGS DOWN TO
BE MORE IN LINE WITH THEM.
SO THAT KIND OF ARGUMENT GOES
AWAY WHEN YOU'RE TALKING ABOUT
TRILLION DOLLAR DEFICITS AND NO
SIGN OF THAT CHANGING COURSE.

Steve says NO PLAN TO BALANCE.

Jason says NOT IN THE STATES.

Steve says NOT ANY TIME SOON.
WHAT ABOUT... CAN I BRING
PERSONAL DEBT LEVELS INTO THIS
BECAUSE THAT'S THE ONE THING WE
HEAR FREQUENTLY IN THE MEDIA IS
THAT PEOPLE ARE CARRYING TOO
MUCH DEBT ON THEIR CREDIT CARDS,
THEIR CARS, THEIR HOUSES,
WHATEVER.
YOU LOOK AT THE NUMBERS.
DOES IT CONCERN YOU?

Dawn says WELL, IT
IS CERTAINLY, IF WE HIT A
RECESSION, IT WILL BE VERY
PROBLEMATIC, I THINK.
THE THING WE'VE BEEN LOOKING
AT... WE WERE LOOKING AT DEBT
SERVICE COSTS.
AND OUR CONCERN FOR THE FUTURE
WAS THAT AS INTEREST RATES WERE
GOING TO MOVE HIGHER, WHICH THEY
TEMPORARILY DID, WE WERE GOING
TO SEE A BIGGER BITE IN TERMS OF
INCOME.
THAT YOU HAD TO USE EVERY MONTH
TO PAY YOUR DEBT, TO SERVICE IT.
BUT NOW, WITH INTEREST RATES
HAVING MOVED BACK DOWN WITH OUR
INCOMES GROWING, THAT RATIO
ACTUALLY IS STARTING TO MOVE
DOWN.
SO IS IT CONCERNING?
WELL, TO SOME DEGREE.
IF WE HIT A WEAK PATCH, YEAH,
IT'S GOING TO BE PROBLEMATIC.
BUT I THINK AT THIS STAGE, IT IS
DEFINITELY MANAGEABLE AND IT
SHOULDN'T IMPEDE THE CANADIAN
CONSUMER FROM CONTINUING TO
SPEND... NOT LAVISH I, BUT
CONTINUE TO SPEND AS WE GO AND
DRIVE THE ECONOMY HIGHER.

Steve says HOW DO YOU READ IT, LINDA.

Linda says I WOULD AGREE.
REMEMBER, WE WERE SUPPOSED TO BE
TALKING ABOUT HIGHER INTEREST
RATES RIGHT NOW.
AND IF YOU ARE SOMEBODY WHO HAS
A JOB AND DOING RELATIVELY WELL,
YOU'RE GOING TO GET A BREAK.
YOU WERE SUPPOSED TO BE COPING
WITH IT COSTING MORE TO BORROW,
COSTING MORE TO SERVICE YOUR
DEBT, AND YOU ARE NOT DEALING
WITH THAT...

Steve says WELL, UNLESS YOUR
CREDIT CARD DEBT IS THROUGH THE
ROOF.
WHAT THE INTEREST RATES YOU'RE
PAYING ON THAT?
19, 20, 21?

Linda says THEY WOULD
HAVE BEEN 22 OR 23.
WE DIDN'T GO THAT ROUTE.
SO THE BANK OF CANADA MAY NOT BE
CUTTING RATES.
WE THOUGHT OR HAD PLANNED FOR
THEM TO BE RAISING RATES RIGHT
NOW.
WE ARE SHIELDED FROM THAT.

Steve says IN OUR REMAINING
MINUTES, I KNOW NONE OF YOU ARE
IN POLITICS, YOU HAVE TO SKIRT
AROUND THE EDGES OF IT, BUT
WE'RE ABOUT TO GO INTO A FEDERAL
ELECTION CAMPAIGN, AND I DO WANT
TO GET SOME SENSE AT THE TABLE
HERE AS TO... YOU'VE ALL SAID
TONIGHT THAT CANADA'S ECONOMY,
RELATIVELY SPEAKING, AS YOU LOOK
AROUND THE WORLD, IS IN PRETTY
GOOD SHAPE.
AND I WANT TO KNOW, IN YOUR
VIEW, HOW MUCH CREDIT DOES THE
TRUDEAU GOVERNMENT GET FOR THE
STATE OF OUR ECONOMY?

The caption changes to "Political reality cheque."

Jason says NOT NEARLY AS
MUCH AS THE CREDIT IT TAKES FOR
IT FOR THE STATE OF THE ECONOMY.
POLITICIANS LOVE TO PRESENT
THEMSELVES AS HAVING THESE
LEVERS AND THEY CAN CONTROL, YOU
KNOW, GET IN AND GUIDE GROWTH
AND GUIDE THE ECONOMY THE WAY
THEY'D LIKE.
AND THE REALITY IS THAT
ECONOMIES ARE SO COMPLEX,
ESPECIALLY WITH, YOU KNOW,
FLOATING EXCHANGE RATES, THAT
ANY ACTIONS THAT GOVERNMENTS
TAKE TEND TO BE... TEND TO BE
OUTWEIGHED BY OTHER FACTORS.
AND SO, NO, I DON'T THINK...
THEY WILL CAMPAIGN, TRUDEAU WILL
BE CAMPAIGNING HARD, AND THEY
ALREADY ARE.
EVERY TIME YOU SEE THEM AND ANY
OTHER TWEET, IT'S ALL ABOUT HOW
OUR POLICIES CREATED THIS
SITUATION.
BUT REALLY, THE ECONOMY IS NOT
DOING ALL THAT DIFFERENT...
PERFORMING ALL THAT DIFFERENTLY
THAN IT WAS UNDER HARPER.
HE HAD TO DEAL WITH, LIKE, THE
OIL CRASH AND ALL OF THAT AND
LIKE THE PANIC IN 2014, 2015,
THAT THERE MIGHT BE KIND OF A
RECESSION, TIMED WITH THE LAST
ELECTION.
BUT REALLY, THINGS ARE NOT ALL
THAT DIFFERENT THAN THAT.
THE REALITY IS, POLITICIANS
DON'T HAVE THAT MUCH CONTROL
OVER ECONOMIES, BUT THEY WILL
TELL VOTERS THEY DO.

Steve says MIKE, WHAT'S YOUR
VIEW ON THAT?

Mike says YEAH, ABSOLUTELY.
POLICY MATTERS, BUT IT MATTERS
MORE IN THE LONG-RUN SENSE.
YOU BUILD SOME INFRASTRUCTURE
AND THAT INFRASTRUCTURE GETS
USED FOR DECADES AND BOOSTS THE
ECONOMY FOR DECADES.
EDUCATION POLICY; YOU TEACH A
4-YEAR-OLD HOW TO READ AND THAT
IS A SKILL THEY'RE GONNA HAVE
FOR THE NEXT 80 TO 90 YEARS.
THEY MATTER IN A LONG-RUN SENSE
AND THEY MATTER WHETHER OR NOT
THE ECONOMY GROWS AT 2.1 OR 2.2
PERCENT, WE MIGHT NOT
NOTICE THIS YEAR BUT COMPOUNDED
OVER 80 YEARS, THAT MAKES A
MASSIVE DIFFERENCE. THEY MATTER
IN A LONG-RUN SENSE.
I AGREE WITH JASON, IN THE SHORT
RUN, ANYTHING THEY DO TENDS TO
BE OUTWEIGHED BY CENTRAL BANKS,
BY GLOBAL CONDITIONS, AND A
VARIETY OF FACTORS.

Steve says IN THE LAST ELECTION
CAMPAIGN, THE LIBERALS RAN
MODEST DEFICITS, ABOUT
10 BILLION dollars A YEAR WHICH WOULD,
YOU KNOW, SPARK A LITTLE BIT,
SOME ECONOMIC GROWTH AND
ACTIVITY.
WE NOW KNOW THAT THOSE NUMBERS
HAVE BEEN ABOUT THREE TIMES
HIGHER THAN WHAT THEY ORIGINALLY
PROMISED, MAYBE MORE THAN THREE
TIMES HIGHER.
HOW WORRIED DOES BAY STREET GET
ABOUT THAT?

Dawn says WELL I
THINK IT IS WORRYING IF YOU'RE
GOING TO CONTINUE TO DO THAT
MAINLY BECAUSE, IT'S TRUE.
INTEREST RATES ARE LOW.
DEBT SERVICE COSTS ARE NOT
GROWING EXPONENTIALLY.
HOWEVER, IS THAT REALLY THE MOST
EFFECTIVE WAY TO USE TAXPAYERS'
MONEY?
SHOULD WE BE FUNNELING THAT INTO
MORE INFRASTRUCTURE OR OTHER
MORE PRODUCTIVE... AS MIKE SAYS,
WE WANT POLICY THAT'S GOING TO
BE SETTING US UP FOR THE FUTURE
AND CONTINUING TO ENSURE OUR
PRODUCTIVITY.
SO THAT IS A CHALLENGE.
SO, YEAH, I MEAN, I THINK IT IS
CONCERNING.
YOU DO WANT TO SOME DAY THINK
ABOUT HOW YOU'RE GOING TO GET,
ESPECIALLY YOUR DEBT LEVELS TO
START TO MOVE THE OPPOSITE
DIRECTION.

Steve says THOSE DEFICITS BEING
300 TO 350 percent HIGHER THAN WHAT WAS
PLANNED?
YOU GET CONCERNED ABOUT THAT?

Linda says I DON'T
THINK SO IT'S IDEAL BUT I DON'T
NECESSARILY THINK THAT'S THE
WORST THING FOR THE ECONOMY.
I'D LIKE TO SEE LOTS OF POLICIES
BEING EMPHASIZED THAT AREN'T,
LONG-TERM POLICIES, THINGS THAT
IMPROVE PRODUCTIVITY, OUR
PERFORMANCE THERE IN CANADA IS
STILL NOT AT ALL WHAT IT SHOULD
BE.
TAXES LOWER TO ENCOURAGE JOBS IN
A LOT OF PLACES.
THOSE ARE NOT OVERNIGHT THINGS.
SO WE'RE NOT THERE.

Steve says I HAVE A REALLY
WEIRD QUESTION TO FINISH UP WITH
HERE.

[LAUGHTER]

Steve says SO HERE GOES.
PUT IT TO THE JOURNALIST FIRST.
IF POLITICIANS... YOU'VE ALL
SAID HERE THAT POLITICIANS CAN'T
HAVE THAT GREAT AN IMPACT OVER
THE OVERALL PERFORMANCE OF A
ECONOMY, OR CERTAINLY NOT NEARLY
AS MUCH AS THEY CLAIM THEY CAN.
IF THAT'S THE CASE, WHY DO THEY
LIKE TO PERPETUATE THE ILLUSION
THAT THEY DO HAVE THIS MUCH
IMPACT ON OUR DAILY LIVES?

Jason says WELL, BECAUSE
IF YOU POLL CANADIANS OR
AMERICANS ON THE MOST IMPORTANT
ISSUES IN ANY ELECTION, THE
ECONOMY IS ALWAYS AT THE TOP.
THEY KNOW THAT.
AND IT'S... YOU KNOW, AM I GOING
TO HAVE A JOB?
IS MY PAYCHEQUE GOING TO KEEP
RISING?
THOSE ARE THE ULTIMATE QUESTIONS
THAT EVERY HOUSEHOLD HAS, AND
POLITICIANS KNOW THAT, AND SO
THEY... YOU'RE GOING TO SEE
SCHEER ARGUING THAT THINGS ARE A
LOT WORSE THAN THEY APPEAR TO BE
AND THEY WILL BE POINTING OUT
WHAT DID TRUDEAU, YOU KNOW, THE
TRUDEAU GOVERNMENT DO WITH ALL
THAT DEFICIT SPENDING?
DO WE HAVE LIKE THE BIG
INFRASTRUCTURE PROJECTS THAT
WERE PROMISED?
NO, WE DON'T REALLY HAVE ALL
THAT.
AND VICE VERSA.
TRUDEAU IS GOING TO BE ARGUING
THAT MONEY WAS WELL-SPENT AND
CANADIAN... WELL, THEY WILL BE
POINTING AT THE JOBS, THEY'LL BE
POINTING AT WAGES AND SAYING,
LOOK WHAT WE'VE DONE.

Steve says DO WE IN MEDIA AND
EVEN ACADEMIA AND CERTAINLY IN
POLITICS PERPETUATE THIS MYTH
THAT THEY HAVE A LOT MORE
CONTROL OVER THE ECONOMIC LEVERS
AT HAND THAN THEY DO?

Mike says I THINK WE DO.
IT'S ALMOST THIS HUMAN TENDENCY
THAT WE ACTUALLY WANT SOMEBODY
TO BE IN CHARGE.
WE WANT SOMEBODY... OKAY.
YOU'VE GOT THIS HANDLED OR
SOMEBODY... SOMEBODY TO BLAME.
YEAH, I THINK IF YOU LOOK AT
WHETHER OR NOT A U.S. PRESIDENT
IS REELECTED, IT IS ALMOST
100 PERCENT DUE TO JOB GROWTH.
IT HAS NOTHING TO DO WITH THEIR
FOREIGN POLICY, ANY POLICIES YOU
CAN PUT ON A PRESIDENT.
IS THE ECONOMY GOOD?
I'M GOING TO REELECT THAT GUY.
LOOK AT GEORGE H.W. BUSH BACK IN
'92, AFTER DESERT STORM, THE
MOST POPULAR PRESIDENT IN
HISTORY.
THE ECONOMY STARTS TO GO SOUTH
AND HE LOSES.
SO, YEAH, I THINK WE DO.
I THINK THIS IS, AGAIN, THIS
HUMAN TENDENCY TO BE ABLE TO
POINT TO THESE EVENTS AND SAY,
OKAY, SOMEBODY'S CONTROLLING
THIS, SOMEBODY'S IN CHARGE.

Steve says I GUESS YOU CAN'T
VERY WELL RUN FOR OFFICE ON A
PLATFORM OF, THERE'S REALLY NOT
VERY MUCH I CAN DO...

[LAUGHTER]

Steve says DO YOUR BEST, EVERYBODY.

Mike says WE'LL TWEET THINGS AT THE
SIDE AND WHAT'S GOING TO HAPPEN
IS GOING TO HAPPEN.

The caption changes to "Producer: Meredith Martin, @MeredithMartin."

Steve says I TOLD YOU IT WAS A
WEIRD QUESTION. THERE YOU GO.
I WANT TO THANK EVERYBODY FOR
BEING ON THE PROGRAM TONIGHT,
DAWN DESJARDINS FROM RBC,
JASON KIRBY, THE BUSINESS
JOURNALIST WHOSE STUFF YOU
READ IN MACLEANS, GLOBE AND
MAIL, AND OTHER PLACES AS WELL.
MIKE MOFFATT FROM THE
IVEY BUSINESS SCHOOL,
LINDA NAZARETH FROM THE
MACDONALD-LAURIER INSTITUTE.
GREAT TO HAVE ALL OF YOU ON TVO
TONIGHT.
THANKS SO MUCH FOR COMING IN.

The caption changes to "Subscribe to The Agenda Podcast: tvo.org/theagenda."

Linda says IT'S BEEN FUN.

Watch: Economic Upheaval in a Global Economy