Archive for November, 2012

28
Nov
12

Is Mark Carney Bad for Bank of England?

For the first time in the Bank of England’s history it has chosen a non Britisher to govern the most historical of global Central Banks. By selecting Mark Carney, the chief of the Bank of Canada, England has made a bold statement in trying to mimic Canada’s success in recent years. But should they really try to? Looking at Canada, it has weathered the storm from the 2008 economic crisis but one comes to ask how? With the Canadian central bank chief Mark Carney following the rest of the global central bank leaders in opening up the flood gates to monetary policy a massive housing and real estate bubble was created to replace the lack of growth from the previous crisis. Canadian Consumers, levels of government as well as businesses are in debt at historical levels. Canadian Banks grew by mammoth proportions as the industry took advantage of the looser regulations employed by the Central Bank. Global commodities prices ballooned as a result of the loose monetary policy also helping the Canadian economy (especially being a primarily resource driven one). With the end consequence inevitable, the Canadian Banks now have more riskier assets than ever under their helm. With lowered interest rates it becomes harder for insurance companies to pay out annuities without taking a loss as well as fixed income investors (especially retirees) to generate income without any level of risk in Canada. The Canadian economy is on dangerous ground as an emminent housing correction as well as global slowdown (resulting in less demand for commodities) will crush it. Is Mark Carney leaving the Bank of Canada before the ship sinks? With England’s finances fairly instable right now as the EU is on the brink of a recession, how can Carney’s track record of excessive monetary policy benefit them? Having said this, whas it a good choice for the Bank of England to employ Mark Carney as it’s Governor?

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22
Nov
12

Is a Crisis Coming to Canada?

Below are some interesting statistics about Canada:

– 1 in 6 Canadians will either go bankrupt or file for bankruptcy in their lifetime

– 73.7% of country’s exports go to the US

– Canadian consumers debt to income is now over 164%

– Canada’s national debt is now around 90% of GDP

– the total mortgages outstanding in Canada have now surpassed $1.15 trillion

– the average house price in Canada is now nearly 10 times the average salary

– around 70% of Canadians have no pensions

Looking at the above facts, it becomes obvious how dependant Canada is on the US economy. With a retirement crunch coming soon as Baby Boomer’s are of ripe retiring age as well as Canadian Consumers, Corporations and Governments borrowing levels at all times highs, there is a debt crisis of of epic proportions in Canada. With an economy that has been severly reliant on Natural Resource Exports as well as construction, how will it survive with an imminent housing downturn? With the US moving towards being self-sufficient in it’s energy needs, how will Canada generate revenues from it’s Natural resources in a slowing down Global Economy? Is the debt crisis about to hit Canada?