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TlifliriiMUll THE HERALD OUTLOOK Saturday August Page Market crash of 87 returns Farmers support boycott TORONTO David Laidler says that if the central bank does not start pumping money into the economy soon it will set off a deflationary spiral Mr is no wildeyed pro phet of doom He is scholar-m- residence at the CD Howe In stitute a strong supporter of the Bank of Canada Although he sup ports the bank Mr says it must change its strategy of fighting money growth High interest rates and tight money have scared away bor rowers Mr Laidler argues But the way our credit system works borrowing is what creates money Scare off too many borrowers and money growth begins to col lapse further downward pressure on prices and output ensues and a deflationary spiral just as damag ing as an inflationary one is soon in full swing he says Now this may seem strange to those who have aruged that the money supply has been growing too quickly Indeed it has until recently In an eery way the Crash of 87 is coming back to haunt us TOO MUCH MONEY Throughout 1986 and early in Canadian and S central bankers kept the system flush with money When they tried to tighten October 1987 they precipitated the stock market crash The crash was so devastating that central bankers flooded the market with money again In so doing they laid the groundwork for a wave of infla tion later Until a few months ago the money supply was burgeoning But money growth has since ground to a halt Ml cash in circulation and bank deposits fell at an annualized rate of per cent over the past six months Mr notes Ml is the most interestsensitive measure of money supply M2 which includes certain term deposits grew at a meagre per cent rate Over the past three months both measures have shrunk by per cent and M2 by 15 per cent These figures are far too low to be compatible with zero inflation Mr says They offer an early warning that a downward spiral of the 198182 variety is in the CORPORATE PURCHASING AGENTS a Wholesale Prices I Full Service FAX and COPIERS New and Used DESKS CABINETS SEATING etc DATA and SYSTEMS FURNITURE and LOTS MORE BuyLease 4167603393 obtain a new skill make taxes work for you enhance your tax knowledge stepbystep program HR BLOCK For More Information Call making He urges the central bank to in crease liquidity available to the banking system Otherwise recent money supply numbers will be a route marker on the way into a much deeper and by then unavoidable depression Will John Crow governor of the Bank of Canada take Mr La idlers advice Will Finance Minister Michael Wilson agree that the money supply is shrinking too fast LOWER RATES If they do and if liquidity is pumped into the banking system shortterm interest rates will fall The danger is that longterm rates would do the opposite and rise As it is now shortterm rates are higher than longterm ones Looking back one can see what the Bank of Canada did wrong Monetary policy works with a lag so easy money spells inflation down the road By being free with money in and the bank fuelled a boom in the housing market in 1988 and Credit de mand swelled led by skyrocketing mortgage loans STEVEN C FOSTER BA BARRISTERS SOLICITOR MAIN ST SOUTH GEORGETOWN 8734961 fax 8734962 NX1 PRINTER ONLY 229 I j ISM Epson Compatibility I COLOUR ONLY j While Quantities Last St I 8730641 Fail Unit Georgttown OTTAWA The Canadian Federation of Agriculture is reac ting postively to indications from the federal government that it is sympathetic to farmers who could lose millions of dollars as a result of the United Nations trade boycott against Iraq Last year Iraq was Canadas fourth largest customers for wheat In 198889 Iraq purchased wheat and barley exports worth about million to Canadian grain producers CFA President Don Knoerr said the trade em bargo could represent a significant loss to farmers who are already facing economic difficulties because of high interest rates low world prices for grains and oilseeds and high input costs Im encouraged that both Prime Minister Brian Mulroney and Mr Mazankowski are careful ly considering the difficulties faced SERVICE by farmers and I am anxiously waiting to hear of a favorable com pensation package Knoerr said Knoerr noted a precedent exists for supporting farmers during trade embargoes Were hopeful the government will act quickly again to assist the countrys food producers he said The government paid about million td producers shortly after it agreed in 1980 not to increase Canadas market share in the Soviet Union The government took that decision following the imposi tion of a grain embargo by the United States OFFICE MAGIC St Georgetown SHOPPING SPREE VALUE STORE CALL GOLIGERS NOW TO BOOK YOUR CHRISTMAS FLIGHTS VANCOUVER REGENT and 235 STREET GohaerH Travel Georgetown SINCE Ive my studies at since mi retirement Inking courses helps me keep current with world events Victor Ontario 8841970 Extension 4447 For a complimentary copy of the FallWinter Parttime Studies Course Calendar or for personal assistance just call us Exploring New Horizons FALL SEMESTER 1990 September 10 December 21 Laurier offers courses both through classroom lectures and at a distance through In Brampton degree programs are available on a parttime basis in six disciplines or you can work toward a Diploma in Business Administration or an Arts Certificate Rather than completing a program you may want to study only for your own interest and enjoyment What ever your motivation were here to help you achieve your educational goals Classes are available for parttime students at Brampton Centennial Secondary School 251 Avenue South Brampton Teleconferences for Telecollege courses are also held at this location Were sure that at Laurier youll find classes that suit your interests career and schedule Wilfrid Laurier University 75 University Ave West Waterloo Ontario 3C5