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An informal, stream-of-consciousness reflection on business ideas, events and issues in modern business, modern life and with some specifics to the web-software industry by Paul Tomori, Internet Entrepreneur

Devising New Principles Instead Of New Tactics
By Paul Tomori
Wednesday, April 22, 2009 at 06:40:53 (EDT)

The Financial Post published an April 21 article outlining how the government of Canada has begun to implement "unorthodox policies" in an effort to avail lenders and borrowers with adequate cash. See my previous blog post on "Acting on Principle". Does it not seem that the people at the helm are operating situationally here? Where is the underlying principle behind what they are doing?

"OTTAWA -- Faced with an economy that is much weaker than anticipated, the Bank of Canada on Tuesday began moving into untested territory by cutting its key interest rate to its lowest level possible, and flooding excess cash into financial markets.

The central bank lowered its benchmark lending rate to 0.25% from 0.5%, and signalled it would remain there until June of next year. But coupled with that were changes to the financial system, among them were moves to ensure more cash than necessary is available to market participants.

And the initiatives won't stop there. The Bank of Canada, led by governor Mark Carney, is set Thursday to unveil additional stimulus-laden weapons it will have at its disposal to deploy -- if necessary -- through so-called quantitative easing. Under that scheme, the central bank would acquire a range of securities with a dual aim of increasing the money supply and lowering longer-term lending costs.

"The beginning of unorthodox policies has started in a significant way," said Eric Lascelles, chief economist and rates strategist at TD Securities. "This is, however, an untested approach, so there is some uncertainty here."

The extraordinary measures are required, the central bank indicated, because the recession has "intensified" since the bank's January forecast
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