On October 10, 2008, the federal government announced plans to buy $25 billion in mortgage-backed securities from banks. Four days later, the Bank of Canada announced plans to pump an additional $10 billion in liquidity into troubled financial markets.
That $35 billion in four days to bail out the financial sector is a lot of money. It’s not the first time the government or the central bank has provided big financial relief, and it likely won’t be the last. One estimate from late October put the total global bailout package from central banks and governments at US$4 trillion – that’s more than $5 trillion in Canadian dollars.
Here’s a comparison:
That $35 billion in just four days for the financial sector is about the same as the federal government spends over an entire year on health ($25.8 billion), education ($5.6 billion), labour, training and immigration ($2.1 billion) and housing ($2 billion) combined for all Canadians.
The global financial crisis triggered by the U.S. subprime mortgage crisis was, in turn, triggered by the U.S. affordable housing crisis. And, what happens in the financial sector does bleed over into the real economy. Canada, and the world, is facing an economic recession that is stacking up as the worst economic tsunami since the great depression of the 1930s.
So, governments and central banks are required to take action.
But these challenging times require innovative actions by governments and central banks.
At a time when Canada, along with many other countries in the world, is facing growing health inequality, housing insecurity, poverty and income inequality – innovation is urgently required.