Corporate Canada to bear the brunt of the 2008-2009 crisis
Canadian finance did spring back to its feet after the brutal hit it took because of the 2008-2009 international economic crisis. But the feet it stands on are still shaky, threatening to keel over at the first signs of a storm. After having used every weapon in his arsenal, Bank of Canada Governor, Mark Carney decides it is time for corporate Canada to get involved hands down in reviving Canadian finance.
Throwing subtlety out of the window, he accused corporate Canada of having a high savings rate. He also termed the savings as ‘dead money’ and declared that if the big firms did not know what to do with it they should then they should trust their shareholders to make wise decisions on their behalf. While the corporate Canada expected an assault from the high-nosed Bank of Canada, what threw them off guard was Jim Flaherty backing this sentiment.
The finance minister firmly believes that it is not the sole responsibility of the Government banks to encourage economic growth and strengthen Canadian finance in case of another emergency. Flaherty did state; though not as loudly and as vehemently as Mark Carney, that the private sector was sitting on enough of money to bring about this change.
It most certainly looks like a last ditch attempt by two financial figures of Canada to stabilize economic growth. They have tried everything, even lowering interest rates on loans to a staggering difference to encourage investments. Philip Cross points out that the Government is working on the assumption that if they increase the number of net borrowers by dropping their interest rates, then it is their right to expect the big firms of Canada to put up their savings to become the net lenders.
Corporate Canada has retaliated with force pointing out that the primary goal of their businesses is to make money for Canada. The international crisis of 2008-2009 has not left the corporate sector unaffected and it is the duty of the corporate sector to safeguard their businesses in the event of the repeat of such an occurrence. Globally firms have a high savings rate to emerge out of this situation and create a more favorable economic environment. Besides, having a high savings rate does not necessarily mean one is ‘sitting on’ net cash.
Mark Carney and Jim Flaherty need to look for new measures to boost Canadian finance and leave the corporate sector of Canada to make more money for the country via their businesses.