Thursday, April 9, 2009

Flaherty needs a lesson in Finance Minister etiquette

Mr. Flaherty is moving bond markets with his words

Yves Fortin wrote:

When I worked in the Department of Finance one of the first things that went into the briefing book of a new Minister was not to say anything that could impact the currency and financial markets. Market decisions relative to tens of billions of dollars should not be at the mercy of political pronouncements or pronouncements made for political purpose or gain. It is totally inappropriate for ministers to comment in advance on the release of budgetary and other official numbers that can influence the markets. This can also lead to the suspicion that crucial information is passed deliberately or undeliberately to insiders or persons close to the government. As the old witch doctor would say: "Knowledge is power."


Mr. Flaherty is moving bond markets with his words
Flaherty's economic predicto-matic

Globe and Mail
Boyd Erman,
April 8, 2009

Finance Minister Jim Flaherty is raising eyebrows in the bond market again with yet another prediction for job numbers, which are scheduled to be released Thursday. Apparently they aren't likely to be encouraging. All this prognosticating about economic numbers has people wondering whether the minister is getting an early look at Statistics Canada releases and speaking out of school, especially given the fact that the minister, unlike most economists, has been right more often than not (saved by a small sample size, no doubt). The question is important because Mr. Flaherty is moving bond markets with his words. On Wednesday, Mr. Flaherty told reporters that, "We are in the middle of a serious recession. I expect the numbers will continue to be worse over the next several months. I expect tomorrow's numbers to be not encouraging." Well, the official word from the minister's office is that the minister doesn't have the numbers in hand when making his fearless predictions, but that hey, it's "not rocket science" given the trajectory of the economy. But as anybody who follows economists over the long term will tell you, if you've got a few calls right, best to quit while they're ahead.


Anonymous said...

Of course it also makes it hard to see if anyone was given that information and used it for personal gain, in the environment Flaherty and Harper have created.


Anonymous said...

Hmm etiquette ...

1. conventional requirements as to social behavior; proprieties of conduct as established in any class or community or for any occasion.
2. a prescribed or accepted code of usage in matters of ceremony, as at a court or in official or other formal observances.
3. the code of ethical behavior regarding professional practice or action among the members of a profession in their dealings with each other: medical etiquette

Strongly agree Flaherty needs a lesson in Finance etiquette.

Unlikely he would be interested in practicing or learning Finance Minister etiquette as it would probably get him thrown out of the CON party.

Kephalos said...

The TSX and securities commission seem to believe that the Department of Finance is god-like. The mythological difference between gods and mere mortals is important.

The gods may be arbitrary, capricious and evil towards mere mortals. If Poseidon wants to destroy a ship just because he's mad, the other gods will not interfere. If Apollo accidentally kills his young boyfriend while just goofing around, there's no coroner's trial. You get the picture, eh?

But the Department of Finance is just men, mere mortals snivelling mortals like you and me.

If a mere mortal listed on the SEC selectively releases financial information and/or promotes trading based on inside information, a SEC hellcat will attack the corporation. The same principle applies in Canada, except the OSC sends a pussycat that causes a nasty allergy.

My question is: why are government officials exempt from rules intended to protect the integrity of the market?