Saving For A Rainy COVID
"A lot of that money went toward people who didn't need it, who just banked it.""People were not supposed to make money on this. Quite rightly, we told people that we would compensate them for lockdowns that were beyond their control.""But we did more than compensate.""[The rise in incomes and savings suggests the support programs brought out by Ottawa were] excessive and very poorly targeted, [and should have flowed more toward lower-income households whom the economic downturn hit acutely]."Philip Cross, economist Macdonald-Laurier Institute"In every recession, you see income falling. This is the first recession that income is actually rising, reflecting the fact that government transfers were actually larger than the amount of money lost in the labour market.""I suspect it's not unthinkable that some of this money went to people that didn't need it."Economist Benjamin Tal, CIBC
 |
Ottawa is projected to run a $343 billion deficit in 2021, due to expenditures related to COVID-19. Much of the outlay in treasury relates to the Canada Emergency Wage Subsidy. Canada is known among the G7 to have doled out more aid funding than any other of its peers. In the government's rush to circulate money in aid to Canadians who lost employment or whose businesses were in dire straits, it deliberately overlooked the necessity of double-checking applicants for aid, informing public servants running the programs to ask no questions, perform no checks, just send out those cheques to the waiting public.
The government informed its critics that it would be clawing back aid funding that went out erroneously or that was claimed without justification. It has been revealed that given lax security and accepting people's applications without requiring verification, some homeless people addicted to street narcotics went on binges and an increase in opioid overdose deaths resulted. It has also been related that people with secure incomes applied for the Canada Emergency Response Benefit, as did students living at home. All to be investigated at some future date.
The Canadian Imperial Bank of Commerce issued a new report that estimates Canadians are hoarding cash at a record rate, that households across the country are depositing more money than savings accounts have been known traditionally to accommodate. Before the onset of the global pandemic the concern was that Canadians were overspending were too much in debt, had insufficient savings for the proverbial rainy day. That rainy day has arrived and instead of having savings already padding accounts, post-pandemic-arrival Canadians are finally frantically saving.
This saving spree coincidentally accommodated with the government doling out tens of billions in emergency aid funding. The newly released report estimates Canadians collectively have put away $90 billion in excess cash, equal to four percent of consumer spending, even as Canadian businesses are hoarding another $80 billion. The savings rate was 3.6 percent pre-COVID, and it is currently, as of the second quarter of 2020, 28.2 percent at the same time as a steep decline in consumer spending has been noted.
Mr. Cross's contention is that a scaling system for the Canada Emergency Response Benefit would have ensured higher-income households would not benefit to put the incidental cash into savings. The focus should have been on aiding people from a broad lower-income demographic to benefit from the CERB unveiled early in the pandemic to provide $2,000 monthly to people who lost employment; rather than roll it out as a universal across-the-board benefit.
A separate report issued by the Organization for Economic Co-Operation and Development (OECD) indicated that Canadian household incomes rose 11 percent in the second quarter of 2020 at the very time that incomes in other countries including the U.K., France and Germany declined. Ironically, the Canadian economy experienced a ten percent contraction over the same period, given strict lockdowns imposed across the country, and the government went deeply into debt.
Labour income fell by over $100 billion across the country in the second quarter of 2020, offset by government transfers which amounted to $225 billion, somewhat off kilter, with direct spending measures to a total of $151 billion, which makes it look like amateur hour at the government executive level, sprinkling borrowed money like fairy dust to settle into people's memories to last as long as the next election when they can pay it forward at the ballot box even while no one is thinking too much about the astronomical national debt.
Labels: Canada, COVID-19, Government Aid, Government Debt, Savings Accounts
posted by Pieface @ Thursday, November 19, 2020
<< Home