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Pastimes : C$ - The Peso of the North? -- Ignore unavailable to you. Want to Upgrade?

To: Kitskid who wrote (166)	12/10/2000 2:59:40 AM
From: Tupulak	Respond to of 177

That article told the way it is. 5 more years of the Liberal government here doesn't sit well for the future of our economy. Try again next time to change Ontario's mind.

To: Kitskid who wrote (166)	1/8/2001 1:21:20 AM
From: Kitskid	Read Replies (2) \| Respond to of 177

Interesting article about the B of C. --------->snip<----------------------------- Written by David E. Bond, Retired Chief Economist to HSBC Bank Canada and Adjunct Professor at the University of British Columbia, Economic Bulletin is a weekly commentary on current economic issues. EB #01-001 A quiet man At the end of this month after seven years in the post, Gordon Thiessen will step down as Governor of the Bank of Canada. His immediate predecessor, John Crow, had tangled often with the Liberals when they were in opposition. He was a very public personality and suffered fools not at all. When the Liberals gained power in the fall of 1993, it was evident that he would not be reappointed when his term expired in the spring of 1994. Failing to reappoint a sitting central banker is fraught with difficulties. International financial markets might misinterpret the dismissal of the Governor as an indication the new government was inclined to subordinate monetary policy to more immediate political aims. In an open economy such as Canada, such an opinion, if widely held, could have drastic consequences to the value of the Loonie. Therefore the government had to proceed with caution. In the end, Crow accepted the inevitable -- thereby saving both the government and the Minister of Finance embarrassment, Thiessen, Crow's Senior Deputy Governor, was appointed in his place. Virtually unknown outside banking and government circles, Thiessen is, in many ways, the opposite of Crow. Quiet of demeanor, without a forceful image but with a razor sharp mind, he had his work cut out for him. First he needed to convince his fellow central bankers, world financial markets and doubters within Canada that he was just as dedicated to price stability as was his predecessor. The proof came early on with a clear reaffirmation of the determination of the central bank to keep inflation within a defined limit. Until the inflation demon was vanquished both in fact and in expectation, the stance of the central bank was to be one of restraint. While interest rates had come down from their high levels of 1990, they were still high in early 1994 at over 6% for 90 day Treasury Bills. The inflation rate was well within the bank's target range at 1.7% per year, but unemployment was in double digits at 10.6%. A second challenge Thiessen faced in 1994 was toning down the rhetoric about monetary policy. Crow had been vocal in pushing for price stability even when it was obvious to many that the Canadian economy was in the throws of a recession. Strident critical articles appeared not just in academic journals, but in the popular press denouncing the Bank's policy. Thiessen's response was a series of speeches and publications from the Bank that described how it was formulating its policy, what were the variables it was following and why. He was willing to go out and face the Bank's critics and argue the pith and substance of the arguments. It is a testament to the success of this policy that, while there are still critics of the Bank's policies, the debate is much more civilized. Third, Thiessen made a major effort to improve the transparency of the Bank's activities. Monetary Policy was a new half-yearly publication that explained the Bank's outlook for the economy and what were, in its opinion, the important events of the immediate past. He made sure that the document and the Bank's general line of thinking were carried out to the regions beyond Ottawa and that built further confidence in the Bank. A related achievement was to move the Bank to a policy of fixed dates for announcing the Bank Rate, the rate at which the central Bank will lend funds to the banks and other financial institutions. In the past when the Bank had announced changes it was on an as-needed basis and some critics thought it created uncertainty and potential misinterpretation. Fixed announcement dates would minimize uncertainty. Finally, Thiessen made it very clear that he was his own man and that he understood how the Bank had evolved since its founding in the middle 1930's. In two speeches in particular, he reflected on how monetary policy had evolved in the 65 year history of the bank and how the financial services sector had changed from the 1964 Royal Commission on Banking and Finance. They are thoughtful and insightful pieces indicating a profound understanding of how the financial system works in Canada and the role of the central Bank. He has served his country well and he deserves our thanks for a job well done. Economic Bulletin Économique, prepared by David E. Bond, Retired Chief Economist to HSBC Bank Canada and Adjunct Professor at the University of British Columbia, reflects his personal observations and does not necessarily reflect the position of HSBC Bank Canada or its board of directors. The Economic Bulletin Économique is not intended to be a comprehensive review of all developments nor is it intended to provide financial advice. Readers should not act on information in Economic Bulletin Économique without seeking specific advice from qualified advisors on particular matters which are of concern to them. This publication may be reproduced in whole or in part as long as credit is acknowledged to the author and HSBC Bank Canada. ------------------------------------------------------------- hsbc.ca