Economy Essay Research Paper Thomas Dalzell What

Economy Essay, Research Paper

Thomas Dalzell: What are the main factors underlying the weak Canadian dollar vs U.S. dollar. I am thinking not only of the last three points of drop, but the plummet from parity with the U.S. dollar.

Sherry Cooper: The Canadian dollar has been in long-term decline since 1975 for many reasons. Most fundamentally, our economy has dramatically underperformed the U.S. since that time. Productivity growth,in particular, has been quite disappointing. More recently, the flow of capital has been to the U.S. Even with a stellar performance in our stock market, most of the record inflow of foreign capital to our stock market has been transacted through U.S. exchanges, not through the TSE. Moreover, Canadian residents are sending a record volume of capital outside the country, mainly to the U.S. Finally, foreigners have been huge net sellers of Canadian bonds this year–for the first time since 1955–because our interest rates have been consistently below the U.S..

Karen: What’s your prediction for the next year. Will Canada outperform the U.S..

Sherry Cooper: Yes. I am forecasting roughly 3.1% real GDP growth in the U.S. next year with 3.6% growth in Canada. We have a lot of catching up to do, so this is a very good thing.

David: What are the missing ingredients, if any, for Canada’s transformation to the Knowledge-Based Economy, as compared to the United States.

Sherry Cooper: In order for us to compete on an equal footing with the U.S., we must do a number of things to improve our competitiveness. Firstly, tax rates must be at parity with the U.S. for personal income, corporate income and capital gains. We are making meaningful strides in that direction, but more must be done. In addition, financial capital availability must be enhanced. Our venture capital market is much less mature than in the States and our banks are more reticent to take risk, particularly on start-ups. Labour shortages are also a big issue. We need to train an dramatically increasing numbers of engineers and computer scientists, programmers, web site designers, etc. Business must work with the universities and colleges in this regard. Managerial talent in high tech is also insufficient, which means we must be able to attract talent from the U.S. and elsewhere. Innovation has to be rewarded. The tides have turned in our favour, but more needs to be done. Infrastructure to support the Web-driven world is also a must.

Jennifer: Will the uncertainty caused by the U.S. presidential mess have an effect on the economy.

FORUM ON THE FUTUREHow High Can It Fly.A Time panel of experts ponders the future of Canada’s soaring economy and the best ways to face global competition Editor George Russell introduces the TIME Canada Economic Forum issue

Sherry Cooper: Uncertainty is never good for financial markets or for the economy. The U.S. economy was already slowing even before the Presidential stalemate. Depending on how long this goes on, a large number of decisions, both financial and economic, will be postponed. In any event, either candidate will not be seen to have a strong mandate. Bold, sweeping policy changes will not happen now with the Congress so evenly divided. That may be a good thing in the long run. But for now, volatility and loss of confidence can’t help but spill into Canada as well.

Gary: Dr. Cooper, how significant do you see the “CNBC effect” on US stock performance and market performance. If US cheerleading is a factor, how can Canada respond to it. Would it be hard to get air time for you on CNBC. You would be great on it! (-:

Sherry Cooper: All of the financial news networks–CNBC, CNNfn, Bloomberg, etc–have markedly increased public awareness of things financial. There is a good deal of cheerleading, but there is also the opposite–a lot of hype of so-called disappointing results that often exaggerate the effect. I don’t think there is anything we could or should do about it. The information-driven economy is upon us and that will never change. We are all news junkies now. I have been on CNBC and the other stations in the U.S. and Canada many times. Thanks very much for your support, I really like doing the tv spots, as time permits.

Caroline: What do you expect will happen to interest rates in Canada over the next few years.

Sherry Cooper: In general, I believe that inflation will remain muted and global economic activity will slow. This, in combination with continued debt reduction will bring interest rates down on balance. The Federal Reserve has stopped tightening monetary policy and their next move could be to lower rates, although probably not until the second half of next year. The Bank of Canada’s next move will depend on the dollar. If it falls too much further, they may feel compelled to raise rates, at least temporarily. This, obviously, would not be good for the economy.

Fred: In the Time story you said American firms are courting Canadian students. What can we do to stop them and stem the brain drain.

Sherry Cooper: We can’t stop them, nor should we. It is a free, global marketplace and it is great for our young people to be sought after with tremendous opportunities. The only way to stem the brain drain is to provide tremendous opportunity here in Canada too. That means more growth, which will create more and better paying jobs.

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