The economy of Toronto and its history is tied to the Bank of Canada.
Founded in 1935, The Bank of Canada celebrated its 75th year in March of 2010. The Bank of Canada is not a commercial organization in that it does not provide financial services to the public. It is not a lending or borrowing institution for the citizens of Canada.
The Bank of Canada has five primary responsibilities to the citizens of Canada. These would be as follows:
- Management of Monetary Policy
- Designing and Issuing Canadian Currency
- Promoting Safety and Efficiency of the Canadian Financial Institutions
- Funds Management and
- Corporate Administration
The Bank of Canada is also not a government institution, although it is a crown corporation. A board of directors runs this entity. The board of directors consists of 12 members.
Two of the board of directors are appointed and approved by Cabinet with a seat reserved for the Minister of Finance. The Minister in this case does not have any voting privileges. The Minister of Finance appoints the other members for a three-year term.
There are 1,400 people employed currently by the Bank of Canada. In 2008 the Bank of Canada recorded assets of $79 Billion.
The current Governor is Mark Carney. He is the eighth Governor since the founding of this governing council in 1935.
The prime goal of this crown corporation is to manage inflation. The objective is to hold inflation at about 2% – or somewhere between 1% and 3%!
Based on the economic situation in Canada, the Bank of Canada will produce more or less bank notes. Again based on the global economic situation, the Bank of Canada will impose a higher or lower interest rate.
As with most central banks, the Bank of Canada governs policy and administration of such in relation to the governing of financial institutions operating in Canada.
In the early years of the central banking system in Canada the world was facing the great depression. Under the governance of Graham Towers (1935-1954) the strategy was to keep interest rates low and print ample currency. With low interest rates and good cash flow, spending would increase and the economy would see the boost that was needed. Strong growth in home ownership and positive employment rates resulted from this.
As people were comfortable in homes and employment there was little attention paid to the rising prices. The result of this was high inflation.
With James Coyne as governor (1955-1961), interest rates had to increase in order to control the inflation rates. With higher interest rates, individuals are encouraged to save their money and invest.
Having this lesson led to the Bank of Canada’s realization that the ideal rate of inflation would be between 1-3%. Currently, it is a focus of this centralized bank to monitor and hold the inflation rates steady.
Tourism in Toronto, while not the main revenue stream definitely has a strong influence on the economy of Toronto, as it is an International port for Canada. Pearson International Airport running out of the Greater Toronto Area bring travelers and business people in from all over the world.
Most recently, Porter Airlines began short-haul flights from the Toronto Island Airport in downtown Toronto. This has been very convenient for the local business traveler within a 3-5 hour flight distance from Toronto. Much of the northeastern United States and eastern Canada is connected via Porter flights.
The United States is Canada’s largest neighbor and a country with the longest shared border. It has been, therefore, the largest contributor to tourism in Toronto. With the current recession in the United States, the economy of Toronto has suffered and has definitely experienced a downturn.
Toronto has turned to other markets for an economic boost and has found itself in a relatively better economic situation. With full time employment creeping down monthly in 2010, we are still a little higher than a year ago in 2009. Part time employment, though creeping slowly up, remains lower than a year ago in 2009.
Driven by retail sales, Toronto’s economy will find its way to a more positive position with the current rates of interest. It has been suggested that the real estate market will soon hit a ceiling and that market will slow down. This has not happened in the year plus that it has been rumored to happen.
The Bank of Canada is looking to raise the rate of interest in the near future. Again, the citizens of Toronto are waiting patiently for the interest rates to rise and will again look to invest their savings. Spending is currently up and March 2010 has seen further increase in retail strength.