How much can we blame algorithms for the high cost of everyday items?
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Hello, readers! Welcome back to Business Cycle – a look at what The Globe and Mail’s business columnists are talking about this week. In the latest edition, we’re talking about meme stocks and GameStop ’s latest rally, the Bank of Canada ’s first rate cut in four years and algorithmic pricing.
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Want to understand GameStop’s rally? Let’s talk about Trump, Nvidia and Taylor Swift
By David Berman
Meme stocks are rallying again, largely because of Keith Gill, known by his online moniker Roaring Kitty. GameStop jumped as much as 74 per cent at the start of trading on Monday after Roaring Kitty implied – through a screenshot – that he holds five million shares in the video-game retailer.
The latest meme-stock surge isn’t entirely surprising given recent stirrings of meme-like behaviour in the stock market, columnist David Berman argues. In a world of extremes – Donald Trump’s conviction, bitcoin hitting record highs and Taylor Swift’s surging popularity – the GameStop rally is part of a broader trend where little can surprise us.?
“There is another aspect to this latest version of the meme-stock phenomenon: It arrives when nothing seems out of the ordinary any more. The conviction of Mr. Trump for falsifying records as part of a hush-money cover-up is certainly part of this extreme environment. There are plenty of others. The Dow Jones Industrial Average recently touched a record high of 40,000, surpassing a psychological threshold. Bitcoin recently surpassed US$70,000. Nvidia Corp.’s share price has surged more than 190 per cent over the past year, as the artificial-intelligence investing theme rolls on. Even Taylor Swift fits in here.”
What do you think of the latest GameStop rally? Are meme stocks a good investment? Check out the full opinion piece here.?
How fast and how far for further rate cuts, Bank of Canada?
By Jeremy Kronick, PhD and Steven Ambler
The Bank of Canada finally pulled the trigger and lowered its policy rate to 4.75 per cent on Wednesday – the first rate cut in four years. The highly anticipated move marks a turning point for the Canadian economy after the biggest inflation and interest-rate shock in decades.
Further rate cuts are on the horizon, but the question now is the timing and depth of those cuts – how far and how fast? Jeremy Kronick, PhD , a director at C.D. Howe Institute, and Steven Ambler , economics professor at Université du Québec à Montréal, did the math to answer.?
“With the exception of the recent rate hikes, we have not seen a policy rate as high as 2.75 per cent since October, 2008. The policy rate is very unlikely to go lower than this unless the bank needs to fight a deflationary recession, so Canadians will likely have to get used to an era of higher interest rates.”
How fast and how far do you think the Bank of Canada needs to go with its interest rate cuts? Check out the full opinion piece here.
Algorithms are raising prices for everything. This must stop
Why are prices still so high? Beyond inflation and interest rates, you can also add algorithmic pricing to the list of reasons driving up the cost of everything. The practice automatically sets the price of an item for sale online to maximize profits – and it’s becoming increasingly common for companies.?
Contributing columnist Vasiliki (Vass) B. argues that these algorithms can mimic the effects of traditional price-fixing, which is illegal in Canada, but the government has yet to take a clear position on its use.
“Price fixing by humans is currently illegal, with penalties of a fine, imprisonment for up to 14 years or some combination. Over the years, class-action lawsuits in Canada have been settled over the price-fixing of bread, chocolate, diamonds, drywall, car tires, LCD screens and more. But we haven’t decided whether we’re going to actually acknowledge how such collusion is now effectively being done by algorithms. Canada is still far from explicitly condemning the practice as it pertains to computational activities.”
Do you think Canada needs limits on algorithmic pricing? Check out the full opinion piece here.
More business headlines we’re following this week:?
The Globe's business opinion pieces are commissioned and edited by Ethan Lou. If you would like to write in this section, please send pitches to [email protected].?
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