Will the Canadian Government Solve the Equity Problem?

Will the Canadian Government Solve the Equity Problem?

The Bank of Canada (BoC) released new data on Thursday, showing its first-ever quarterly loss. Aiming to boost the economy, the federal government announced that it would introduce legislation enabling the bank to retain profits instead of remitting them to the government.

BoC Governor Tiff Macklem noted that this new legislation would enable the central bank to restore positive equity, moving its balance sheet into the green territory. However, the Bank of Canada’s balance sheet will probably move into negative equity in the following years, with liabilities exceeding assets. The bank has to pay a higher interest rate on settlement balances than it currently earns on government bonds. The bank has bought the latter to support the economy during the coronavirus crisis. But the country will need to take more action to help the economy.

Several other major central banks that expanded their balance sheets face negative equity issues, including the U.S. Federal Reserve. Macklem noted that the Minister of Finance recently spoke about the government’s intention to introduce legislative amendments. The latter will allow the BoC to retain earnings to offset current losses.

Meanwhile, Erdogan Introduced the NATO Expansion Issue Ahead of The Turkish Elections 

Turkish President Tayyip Erdogan spoke about the NATO expansion ahead of tight elections, dimming Finland and Sweden’s hopes of joining NATO before the summer. 

A copy of the Muslim holy book was burned last weekend. After that incident, the President quickly spoke about the issue of NATO expansion into domestic politics. Moreover, a week earlier, an effigy of the Turkish leader was hung on a lamppost.

Even though these incidents aren’t illegal in Sweden, they still hindered Stockholm’s effort to win Ankara’s support for its request to join NATO. Erdogan saw an opportunity to distract people from a cost-of-living crisis weighing on citizens’ minds. According to polls, he could lose to some presidential candidates in the May 14 vote.