Jim Flaherty’s Interview with BNN’s Amanda Lang at the Conference of Montreal

The International Economic Forum of the Americas’ Conference of Montreal was covered this week by BNN’s Amanda Lang, who interviewed the World Bank President (Robert Zoellick), the managing director of the International Monetary Fund (Dominique Strauss-Kahn), former U.S. Secretary of State Madeline Albright and the CEO of General Electric (Jeffrey Immelt).

I’ll provide a brief overview here of some of the main points the interviews covered for those who didn’t catch them.   Here’s a brief look at Amanda Lang’s talk with Jim Flaherty.  Lang spoke with Canada’s Minister of Finance to talk about the calls for more stimulus and how far through the crisis we are.  (the following is my paraphrase)

“Canada’s in the best shape of any of the G7 countries.  The IMF has said that.” reports Jim Flaherty, Canada’s Minister of Finance.

AL:   How do we manage (getting through the crisis and stimulus)?
JF:   We’re very busy getting the money out the door.  That’s the key thing, now.  We’ve been pushing really hard this last quarter with my colleagues.

AL: We’ve talked a lot about whether the auto bailout was the right thing to do.  What do you think about how that fits into what’s happening in Canada?
JF: The real decision was made last December when the Bush administration indicated it was going to move on the auto bailout.  And then we had to decide whether we’d participate or not.  This is the only industry we really have that’s truly integrated in North America.  So that if we don’t participate, we would lose General Motors and Chrysler in Canada.  Do we want to be players in the world auto sector?  And the answer we came to was yes.   I accept the logic of the market on this.  We had a choice.  I think we took the right path.

AL:  What’s your reaction to the reaction to the $50 billion stimulus? How has that felt from where you sit in your office?
JF: I don’t like the personal part, but you do what you have to do.  Nobody expected the recession.  Or that it would be this broad or this deep.  The toughest part was creating the plan in December and January.  The plan is going to be more expensive than we thought, but that’s because the recession is worse than anyone expected it would be.

AL: Is there going to be even more stimulus in 2010, as Dominique Strauss-Kahn (from the IMF) suggested there will have to be?
JF: Canada’s in the best shape of any of the G7 countries.  The IMF has said that.  We’re in great shape to be able to do that.  We paid off a lot of debt in our first three years … alot of the deficit now is one-time stuff with GM and the increase in Employment insurance benefits.  All this spending has a two-year deadline, so it will end.

AL: Do you think average Canadians understand what we’re doing with the stimulus, or do you think they’re too consumed with job losses, paying their bills, etc.?
JF: I think Canadians get it overall.  First of all, this recession didn’t start in this country.  It’s imported here.  I think they realize we’re prepared for a rainy day here, much better than the U.S. and the U.K.  And we have a plan and we’re implementing it.  So, we will get through this.  And I see that in some of the consumer spending, which shows some confidence.

AL: What can you do to push the stimulus out faster?
JF: In Ontario alone we announced hundreds of projects just on Friday.  Now it’s up to the municipalities to get the tender documents out there and get it done.◊

Aron Gampel (Chief Economist, Scotiabank)’s Reaction to Flaherty’s comments:

• I hope he’s right.  I just spoke with a client who works across the country who’s still looking for those infrastructure dollars to trickle down.
• Mr. Flaherty and colleagues still have a lot to do.  I think the money’s coming, it just takes a lot of work.
• We’ll see a 2010 stimulus-based recovery.  This will help us deal with a stronger currency and any protectionist threat from the U.S.  I believe the recovery is already under way.
• Federal and Provincial deficits combined are already well over $50 billion.  We shouldn’t be giving even more money to developing countries until we see the economy really moving forward again.
• Stimulus was the only way to get through the 2008 financial crisis.  It’s finally starting to gain traction.
• Governments need to start putting plans in place for an exit strategy from all the excess inflation coming ahead.

Basically, we’re still in the “green shoots” phase of the stimulus-led recovery.  But as Kevin O’Leary has continued to point out, until we see some real earnings come in in August this summer, there’s no basis for the recovery going ahead.  Without more earnings evidence, “we’re going to have a tough September,” he said this week.

For a great visual picture of the stimulus-led recovery, check out the graph Canadian Capitalist posted on what the TSX has done in the last 90 days (since March 9, 2009).

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Tagged as: Amanda Lang, BNN, IMF, International Economic Forum, international economy, Jim Flaherty, World Bank, world economy