Government Credit

Monograph on the role of public sector banks and government agencys in the provision of credit, credit insurance and investment guarantys (state intervention in the financial market) in Canada - discusses trends since 1930, institutional framework, objectives and instruments (incl. Agricultural credit, consumer credit, export credit, housing mortgages and housing subsidy, and the impact on export promotion, economic growth, etc., and provides comparisons with OECD countries. Diagrams, graphs and references.

"On the night of August 22, 1935, as Canadians listened to their radios, they heard, with amazement and incredulity, that the first Social Credit government in the world had been elected that day in the province of Alberta. . . . Before the tabulation of votes was completed, telephone calls from New York and London, headlines in newspapers, spot news in broadcasts, had confirmed the slogan of Social Crediters, 'The Eyes of the World are on Alberta.' The morning after the election a number of people lined up at the city hall in Calgary to collect the first installment of the Social Credit dividend of $25 monthly, which, they confidently believed, would be immediately forthcoming from their new government." This quotation from Professor Irving's book indicates how the apparent suddenness of the Social Credit rise to power and the magnitude of the victory aroused world-wide comment. Why had the doctrines of Social Credit, promoted unsuccessfully in the British Commonwealth and the United States for nearly twenty years, achieved political acceptance in Alberta? Why had the people of Alberta elected to public office persons so little experienced in the economic and political world as William Aberhart and his Social Credit colleagues? Professor Iving answers these questions and analyses systematically and comprehensively the rise of the movement as a phenomenon of mass psychology. His study, based mainly on interviews, supplemented with references to private papers, newspapers, and government sources provides a truly fascinating record.

Advanced economies made available more than 5 trillion USD through government-supported credit guarantee and direct loan programs to provide lifelines to firms in the face of the COVID-19 pandemic. Notwithstanding the unprecedented scale of credit made available, an in-depth analysis of the fiscal consequences is missing, and the costs of these programs are not recognized in a transparent way. In this paper, we fill in an important aspect of the fiscal picture by estimating the subsidies that were provided by the largest credit guarantee programs introduced in 2020 in seven advanced economies. We estimate the subsidies on a fair value basis that provides a consistent and comprehensive upfront measure of cost. We explain the logic behind applying a fair value framework in a government context and compare it to alternative approaches. For the programs that we examine, total credit extended totaled 1.7 trillion USD. The subsidy element (cash-equivalent subsidy) is estimated to be 67 percent of loan principal on average (37 percent, excluding the US PPP), with a wide range across programs, from 12 to 100 percent. The variation is explained by differences across programs including eligibility criteria, loan terms, compensation to lenders, and other program design choices.