Rail Blockades, Coronavirus, Bitcoin
Coronavirus has the economy nervous…
Since our last update on the coronavirus outbreak, a lot has happened. New cases are being reported around the world each day, with the disease present on all continents except for Antarctica. In short, coronavirus is on the verge of being declared a pandemic – this only happens when an infectious disease is simultaneously present in different parts of the world.
From a financial perspective, the coronavirus has the ability to cause what economists call a “supply shock.” A supply shock is when there is a sudden reduction in the global economy’s ability to produce goods. Understandably, as more people get infected, a shortage of workers occurs, resulting in a decrease in operating capacity, and an overall reduction in global supply.
Is the world economy ready for the coronavirus damage? Experts argue this could be a ‘no’, stating that the traditional macroeconomic policies (interest rate cuts, lower borrowing costs, fiscal stimulus) used by the government in cases of recession would not work in a supply shock scenario such as this one.
The damage has already become apparent in certain industries. The aviation industry is facing its worst decline since the 9/11 attack. Decreased demand is estimated to cost the aviation industry a whopping $30 billion in lost revenue. The tourism industry is also being severely impacted as concerts, fashion shows, sporting games, and business conferences are increasingly cancelled. Overall, the entire global market has experienced a downturn – as seen above in our Btchcoin Ticker, major market indicators continue to tumble.
With each passing day, news of the virus’ spread will impact markets in complex ways, testing the global economy. Btchcoin will continue to keep you informed and up to date about the economic impacts.
Rail Blockades Continue…
Rail blockades continued to a lessened extent across the country this week, with the private sector signalling a tentative return to “business as usual.” As reported in last week’s newsletter, numerous rail blockades formed across Canada in protest of the construction of the Coastal GasLink liquified natural gas pipeline, crippling supply chains for dozens of industries reliant on rail for transport.
At its peak this month, there were almost four dozen rail and highway blockades set up across the country. This week saw the closure of the longest standing protest, which was set up by members of the Mohawk First Nation on their territory in Tyendinaga, Ontario after the arrest of 10 protestors.
Over 450 employees of CN Rail were laid off, however, it has been reported that as of Saturday the company would be hiring back an undisclosed number of those temporarily unemployed workers to resume rail services. Passenger rail routes are also slowly returning to normal with VIA Rail expected to provide full service for the Toronto – Ottawa and Toronto – Montreal routes by Tuesday, with other routes in Manitoba and Quebec commencing later in the week.
Meanwhile, negotiations have resumed between the federal and provincial government and indigenous leaders in Smithers, BC. Speaking to the Globe and Mail, Minister Carolyn Bennett said the issues at hand are complex, and reflect a history of “broken promises and cynicism that is completely understandable.”
Bank of Canada says “Boi Bye” to Crypto…
…with a possibility of a second chance in the future. Will BoC give Crypto their final rose?
Well, that depends. So far, the Bank of Canada (BOC) hasn’t really seen the need to say ‘yes’ to cryptocurrency, yet.
Despite other central banks making money moves towards e-currency, the BOC’s deputy governor general Timothy Lane stated in a speech in Montreal last Tuesday that the BOC has concluded that there’s no need to issue a central bank digital currency (CBDC) at this time.
Mr. Lane noted in his speech that there are two things that need to happen before the BOC implements e-currency:
1. Canadians and their elected representatives will have to make the decision to implement e-currency.
2. The BOC would need proper legislative authority to launch the CBDC.
It might take several years before the BOC is ready to launch the CBDC. Bank issued digital currency has been a key research priority for the BOC, alongside other central banks around the world. A recent survey found that one in ten central banks are likely to implement CBDC within the next three years.
Facebook’s proposed Libra currency has also placed pressure on central banks to respond to the implementation of digital currency. The BOC released a series of research papers on this topic which can be found here.
But while electronic payment methods are becoming more popular, Canadians still rely on cash for a third of transactions, and a CBDC would be more compelling if Canadians no longer used cash for such a wide range of transactions. Implementing CBDC could also potentially add risk to the stability of central bank currencies and how Canada conducts monetary policy.