Canadian prosperity can withstand U.S. slowdown

Some economists are predicting that this year, Canada may outperform the U.S. According to this article, the reason the U.S. is not doing so well this year is its decline in housing construction and prices. Statistics Canada reports that the value of building permits decreased by 22 per cent in February. However, according to Ted Carmichaels, an economist at J.P. Morgan Securities, he relates the drop as not-so-severe when looking back. He refers to how earlier in the year, the building permit prices were rising at an unsustainable rate, growing even more since January had rather nice weather. As the year edged into February, the weather was too cold for any construction so the permits fell quickly.

In comparison to the year 2006, residential permits have risen 6.6 per cent with non-residential permits up by 45 per cent. This only goes to say that non-residential construction will benefit Canada a large amount, not even counting the other sources that contribute to the GDP. Douglas Porter, an economist at BMO Capital Markets, estimates that U.S. housing construction will decline 16 per cent. For Canada, he predicts a loss of three percent. However, housing prices are still rising in Canada whereas they are falling in the U.S.

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Relationship to Ch. 5 -- Economic Indicators

At the end of the article, it says that Canada's unemployment rate is at its three-decade low of 6.1 per cent. Economic growth is estimated to be 2.4 per cent, although it changes with different economists. Why? Douglas Porter chalks it up to the growing resource sales. Canadian commodities producers are investing heavily in oilsand projects to aluminum. There is more to employment and many are exporting at high prices which affect the GDP greatly. "When business activity is great, prices may rise due to the increased demand for goods and services" is what the textbook says which I believe relates to the article.

It's obvious that construction has seasonal unemployment. While the weather is fine, construction levels go up and so do the prices for permits, which I suppose is inflation of a sort. When colder months approach, both construction and permits go down. I believe that even though there are these months of unemployment, the increase in the productivity during the active months should make up for it. With low unemployment rates and other sources to help boost our GDP, such as exports and more products and services being produced and invested in, Canada should have quite a successful year. Hopefully, the unemployment rates keep declining.

Canada's New Government Provides Real Tax Relief for Canadians

In the 2006 budget, a $26 billion tax relief package was included. The article tells us that the Minister of Finance, Jim Flaherty, announced it was given Royal Assent (An okay from the Governor General after the bill has gone through the cabinet and what other legislation there is). The budget bill is called Bill C-28.

According to Flaherty, the new government has reduced the tax burden on Canadians but the taxes are still too high. As they develop the Budget for 2007, they’re in the process of providing more tax relief for Canadians.

There are several tax reductions listed at the source. This includes a 1% reduction in the goods and services tax rate that took place after July, 2006 and the children’s fitness tax credit that started at the beginning of this year.

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Relationship to Ch. 4 – Government in Canada

I find that it is rather nice that there are tax reliefs for us Canadians, but is it really a good thing? The chapter refers to a few factors that contribute to government spending. Part of the political process is to promise certain things, and most likely, one of those promises was to lower taxes. As of November 28, 2006, the government reported that they had “reduced the debt burden to the lowest level in quarter century”. They had eliminated the $13.2 billion in debt by spending 15 cents of every revenue dollar on the interest for public debt. Canada's net debt burden is the lowest in the G8. The G8 is the Group of Eight, an international forum for Canada, France, Germany, Italy, Japan, Russia, The United Kingdom and the United States.

With the reductions, is it possible to continue paying off the debt and saying that these levels of debt reduction will remain the same? I can only hope that the government has calculated everything properly because to increase taxes and any plans to revoke the newer reliefs in the future wouldn't fall too well with people.

Also, the tax relief only benefits certain groups most of the time. Perhaps a personal income reduction would have put too large of a dent in the government's revenue? According to Wagner's law of increasing state activity, the government's spending will increase at a faster rate than the output of goods and services. Therefore, it will be pretty hard to sustain the level that Canada has been at with paying off its debts.

Minimum wage boost urged

As many people know, the minimum wage is $8/hour and the training wage is $6/hour. About 80% of the people (601 BC residents) surveyed in a Strategic Communications poll supported a $2 increase in the minimum wage. 73.5% thought that the training wage should be eliminated. In BC, 6% of workers make minimum wage.

The article says that N. Vancouver Mayor Darrell Mussato believes that full-time workers should earn enough so they are above the poverty line. However, an economist at the Frasier Institute argues that any increase would be a negative. Research shows that when the minimum wage is increased, the drop-out rate in schools go up as well. Veldhuis says that increases in minimum wage discourage students from pursuing better career paths. He goes on to suggest that a broad tax reform would be a better solution in any case.

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Relationship to Ch. 3 -- The Role of Government in a Market Economy

Distribution of income: Income differentials are reduced by having minimum wage since not as many Canadians are in the state of poverty. Mayor Darrell Mussatto said that full-time workers should make enough to live above the poverty line, which is what minimum wage generally does. I find that training wages are more directed to teens, who are already living with parents or relatives. Under those cases, the teenagers are employed to earn money for frivolous items such as games, as well as cash for social outings. However, they are not living in poverty since they do have a home and most likely are supplied with food, shelter and clothing as a basis. The abolition of training wages could have a chain of effects that would not serve the economy, as well as the citizens, for the better.

Minimum wages act as a price floor, which is a government-imposed minimum price. An increase in minimum wage could have quite a few third party effects. If it goes up, the cost of goods must go up in order for the seller to make a profit is one scenario that involves the consumers. Another would be that the owner of the company would have to discharge their workers in order to keep operations running. If what Niels Veldhuis says is true on higher drop out rates, this would have a negative impact on the economy. The more money there is to be distributed, the more there is spent, which is good for companies who hire more workers and the cycle repeats.

UN urges rich nations to solve global water crisis

One of the main concerns for third world countries is the scarcity of water. According to the article, which quotes the United Nations, "poverty, power and inequality are the reasons for the global water crisis. " There are about 1.2 billion people in poor countries, mostly located in Africa, that do not have safe drinking water. Countries are in competition for water. Since there is power and inequality in the world, the pricing of water supply is outrageous. "The poorer you are, the more you pay." The article also suggests that water is not a physical scarcity, but rather "poverty, power and inequality" is where all the blame should be placed.

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Relationship to Ch. 1 -- Resources & Scarcity

How does any of this article relate to resources and scarcity? Water is a resource that every nation is in need of. Although there seems to be plenty of it, considering the world is mainly of ocean, it is still short in supply. Wealthier nations, such as the United States and Canada, often waste this valuable resource. On the other hand, poorer countries, mostly in Africa, are left with minute amounts that are mostly unsuitable for human consumption.

Is it really "poverty, power and inequality" that results in the scarcity of water? Yes, the three play a part as to why water is such an expensive commodity. Greed is an ugly human product. For example, America could probably either donate or supply water to third world countries, yet the chances are, they take hold of the opportunity to make more money. It is already established that water is a limited resource, but it is not viewed that way. Water conservation warnings are never listened to. During the heat wave in the summer, California had the desperate need for more water. If water was unlimited, that would not have been a problem.

Despite the fact that it seems water is abundant, not all of it is suitable for a person's daily needs. This would include drinking water (a recommended 8 glasses a day that only the privileged can have) and taking baths (a supposed rarity in Africa). Since there is such a large demand for water, it only goes to say that the price would be raised as well. That is part of how supply and demand comes into the picture.

Housing starts rebound in October: CMHC
Published: Nov. 08, 2006

The number of housing units being created rose to 223,200 in October. The numbers are surprising, but it shows that the real estate market is slowing down too. Multiple starts are of condominiums and townhouses which affect the total number of starts. One condominium can equal to 100 starts. Single starts (actual houses) have fallen 4.2%. What are starts? It is the term used to label buildings started and being built.

The article makes a comparison on how Canada's housing market is performing better than the U.S. Their "housing market recession is getting deeper and deeper." The housing is mostly in Alberta, where most people will decide to migrate because their job growth seems to be continuing into the next year. Alberta and British Columbia have both been growing in population because of how strong their oil, gas and mining sectors are. In Atlantic Canada, urban starts have dropped by 15.7% and the Prairies have decreased by 6.4%. The CHMC says, "the annual rate of urban starts has increased 8.3% to 191,700 units in October compared to September. "

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Relationship to Ch. 2 - Supply and Demand

The demand for housing in both British Columbia and Alberta are up due to the notion of the provinces having high employment rates. Since the two provinces have thriving industries related to oil, gas and mining in several areas, citizens and immigrants will move to these cities to compete for jobs. Of course, one of the basic needs is a home. Condominiums and townhouses are a popular choice to be built since it seems to be an efficient way to use the land. The want for a single housing unit has decreased since everyone is moving to where they can earn a better living. This would explain why single start rates have fallen everywhere except British Columbia.

The desire for houses is there, but the number of individual houses built has declined. Instead, joint homes are created so that more people can move into the more successful cities. Urban starts have increased considerably because of this. There is a huge demand for homes and although there are many being built, the supply still falls short. Although not stated in the article chosen, there are many citizens that remain homeless because the demand for housing has driven prices very high. This is one of the problems that is derived from a high demand.