Bailouts, Shakeups, and Giving Amazon a Run for its $$$
Bailouts in the time of Covid-19…
Last week, Prime Minister Justin Trudeau said that no government bailouts would be provided to companies that use offshore tax havens.
Hold on, what exactly is a bailout?
A government bailout gives financial support to businesses facing severe financial trouble. They are usually offered to industries which have a direct impact on the overall health of the economy. Over the years, governments have increasingly relied on bailouts as an economic tool to weather financial crises. However, they do not come without criticism. Critics of government bailouts argue that they interrupt the creative destruction process, which forces less competitive businesses to adapt (think darwinism).
What type of bailout is Canada providing?
In this crisis, Canada is providing financial support to more than just businesses. Canada’s COVID-19 Economic Response Plan has included a wide range of support for individuals and businesses, including sector specific support.
What kind of sector support is being provided?
A variety of Canadian industries are being offered support, including the energy industry. In April, the federal government announced funds to provide repayable loans to resource companies and help clean up inactive oil wells. Support for air transportation is also being offered; the government is waiving the ground lease rents for airport authorities and airlines can access the wage subsidy program for their workers. Though, airlines continue to be hit hard by the pandemic and are in talks with the federal government for a wider industry bailout.
Sounds like a lot of money, how much will it cost?
In mid-March the first stimulus plan was announced and estimated to cost $27 billion. As of last week, it was reported that the federal package has increased rapidly to $145 billion to support individuals (check if you’re eligible), $85 billion in tax deferrals, and $586 billion to help businesses.
Yep, that’s a huge jump! What does it mean?
It is projected that this will lead the government into a deficit (when spending exceeds revenue) of $200 billion. For reference, the 2018 federal deficit was $14 billion. Yet, experts in the field argue that considering the extraordinary circumstances of the pandemic, the economic stimulus package is necessary to keep the economy afloat.
BoC’s Got a New Governor…
Last Friday, the Bank of Canada (BoC) announced the appointment of its new Governor, Tiff Macklem, who will be taking over from current Governor Stephen Poloz when his term ends this June. FYI, BoC’s governing council is made up of six people: The Governor (head honcho), the Senior Deputy Governor, and four Deputy Governors.
Mr. Macklem previously served as Associate Deputy Minister at the Department of Finance through the recession of 2008, and then as the BoC’s Senior Deputy Governor from 2010-2017, basically acting as the bank’s chief operating officer.
Many had predicted that Carolyn Wilkins, the BoC’s current Senior Deputy Governor, would receive the top appointment, becoming the institution’s first-ever female governor. Given the current government’s focus on gender equality, and the fact that Prime Minister Trudeau and Finance Minister Morneau had the final say, commentators were surprised they would pass up on this historic opportunity.
That said, it’s clear that Mr. Macklem is well-positioned to take control of Canada’s economy during this unprecedented time of financial turmoil. The soon-to-be Governor is very familiar with the nuances that drive the overnight rate given that he actually helped create the research that led to the target 2% inflation-control policy.
For now, we don’t expect much to change – in early responses to his appointment Macklem noted that “he was comfortable with the effective 0.25% floor that the Bank of Canada has settled on.” From a longer term standpoint, he quoted last Friday that “we will be looking at climate change, along with a host of other major economic forces acting on the economy, to the extent that they affect inflation.”
Sounds like we’re in good hands folks, we wish you well Mr. Macklem.
Shopify Races to the Top of Canada’s “Most Valuable” List with a New Shopping App…
As we near the two-month mark of social distancing in Canada, the Ottawa-based e-commerce company Shopify has launched a new mobile app to make it easier to shop from home – and stepping up its game to challenge e-commerce giant Amazon.
The aptly named Shop app combines social media platforms with features to follow brands, buy products easily, and track packages to your door. The app allows users to personalize their shopping experience by curating their own shopping feeds, identifying small local businesses, and even providing recommendations based on shopping habits. Think of it as a dangerous combination of the buying ease of Amazon with the personalization of your Pinterest or Instagram feed.
So far, things are looking good for Shopify – In April, the company’s shares rose 65%, beating competitors like eBay and Etsy. They even surpassed Zoom, the online video conferencing platform that has become #1 in the world since social distancing started. According to recent estimates, the company is now valued at over $100 billion and is the second largest company in Canada after the Royal Bank of Canada.
Shopify is also supporting small- and medium-sized businesses by offering an extended 90-day free trial on their platform, offering interest-free cash advances between $200 and $500,000 to merchants, and adding $200 million to its small business loan fund – Shopify Capital.With more and more businesses pushing online sales due to COVID-19, and the general decline of brick and mortar retail, the launch of Shop is well-timed. Watch out Amazon, the Canadians are coming!
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We’re shaking things up this week.
Instead of links to articles, we’re using this space to highlight womxn-owned businesses across the country:
Calgary-based The Upside promotes sustainability by offering luxury second-hand items, and ships across Canada
Ottawa staple The Scone Witch delivers scones to pair perfectly with your WFH coffee
Edmonton entrepreneur (and upcoming Guest Editor) Sophie Gray has made DiveThru, a guided journaling app, completely free during this crisis
In Toronto, The Silk Labs sells designer silk hair accessories
Zero-waste Bar Star Buch in Calgary delivers kombucha straight to your door and supports local charities (this month is Cerebral Palsy Calgary)
Support women, girls, and gender-diverse people across the country by donating to YWCA Canada’s COVID-19 Emergency Response Fund