Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Path: utzoo!utgpu!utfyzx!oscvax!utflis!smithsco From: smithsco@utflis.UUCP Newsgroups: can.politics Subject: Re: Market Crash Message-ID: <1021@utflis.UUCP> Date: Wed, 28-Oct-87 22:33:31 EST Article-I.D.: utflis.1021 Posted: Wed Oct 28 22:33:31 1987 Date-Received: Fri, 30-Oct-87 21:37:30 EST References: <167@bby-bc.UUCP> <1060@looking.UUCP> Reply-To: smithsco@flis.toronto.edu.UUCP (Scott Alan Smith) Followup-To: can.politics Distribution: can Organization: FLIS, University of Toronto Lines: 55 >I just wish people would stop attributing too much significance to what >the stock market is doing on any given day. > >It is interesting as a study of herd instinct, but that is about it. What >is more interesting are the statistics released by the US Department of >Commerce and Statistics Canada. > >What is more important is the value of the Canadian dollar. We must remember that in the twentieth century, the New York Stock Exchange has accurately predicted eight of the last three depressions/recessions. Seriously though, the stock markets are often accurate predictors of our economic future especially since the market value of a corporation's stocks is its capital at any given time and therefore affects corporations ability to engage in new ventures or in some cases even continue business. Also, it is estimated that the $500,000,000,000 paper loss on the NYSE on Black Monday will result in a sixty to eighty billion falling off in consumer expenditure in the the U.S. I do not know what the current multiplier effect is in the US, but I am no doubt safe in saying that once this tapering off of consumption is mulitplied through the economy, its effects could be quite serious. It is for this reason that the central banks of the OECD nations have been acting in concert to maintain liquidity in the money markets (this is also to prevent a recurrence of the tragedy of the tight money policies of the 1930s). In fact, the Bank of Canada doubled the money supply to the chartered banks from $100,000,000 per day to $200,000,000 per day the week of Black Monday. As far as how one should consider the Free Trade Agreement in light of recent events on the world's stock markets, let's not forget that it was extreme protectionism during the Great Depression that greatly exacerbated the effects of the depression. Also, whether we like it or not, given the nature of Canada's economy as a branch-plant economy, high tariff barriers would have little effect on the Americanization of our economy anyway. If one goes back to the National Policy of the 19th century one discovers that it was the implementation of high tariff walls that brought American plants to Canada in the first place. If they couldn't export their goods to Canada, the Americans figured they would just set up plants here and sell the stuff from inside. Thus, was Canada's branch-plant economy born. So, given the interdependence of the world's national economies and the ability of financial capital to move freely across borders, and the nature of the transnational or multinational corporation, shutting down Canada's borders to the rest of the world certainly won't help our stock exchanges nor will it help Canada's economy. Funny thing is that while I understand the need for freer trade from a cold, hard, economic perspective, from a political and humanistic perspective I have a great deal of difficulty supporting it. Scott Smith, University of Toronto. -- UUCP: {ihnp4,allegra,mnetor}!gpu.utcs.toronto.edu!utcsri!lsuc!utflis!smithsco OR: smithsco@flis.toronto.edu.UUCP BITNET: smithsco@utflis.utoronto BELL-TALK: (416)791-4929