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Anecdotally, what I see is pretty dismal. Firms are adjusting in fits and starts. They made the first adjustment last year. Layoffs and slashing cap-ex budgets. Now are holding on to see what happens. If oil stays in the $30 dollar range for a prolonged period it will get very ugly. If it lasts long enough, producers will have to shut down much of the oil sands operations, unless they can find a way to drop their break even price significantly.

If I'm interpreting this right, the drop in world oil prices hit the Canadian economy largely through causing a fall in investment in producing oil (and gas?). Which makes sense.

Given this scenario, may readers of this blog please have some commentary/analysis of the potential mitigating effects, if any, of the Federal Government's proposed infrastructure and other "investment" spending. The current debate among commentators/bloggers in the US regarding the efficacy of the stimulus effects claimed for the infrastructure spending proposals of the Bernie Sanders campaign exposes some of the potentially pertinent issues. This blog explores monetary policy issues in great depth but very little attention is ever given to fiscal policy matters. I think I recall Nick Rowe commenting in an earlier blog that he prefers to stay away from issues that potentially involve politics; I suggest this inhibition is depriving your readers. especially we non-economists, of informed, expert economic commentary, of which there are few if any other Canadian sources, on matters of interest and importance to all of us. If examples are needed of the kind of commentary I suggest is missing from and badly needed in the Canadian blogosphere I would refer you to Simon Wren-Lewis in the UK and Brad DeLong, Scott Sumner and Paul Krugman in the US. You economists need not all envelop yourselves in the drab garb of your allegedly dismal science.

Doug A.

Doug: my short answer: increased government spending will not help the economic recovery, because the Bank of Canada will offset any effects it might have on aggregate demand, to keep forecast inflation at the 2% target. But it might (or might not) be a good thing, depending on what precisely the government spends it on.

I tend to write more general posts about fiscal policy, rather than getting sucked into current debates.

But I take your point.

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