Canada's Place in the Global Economy

[GAP]

Which makes him qualified to write about finance and politics? Not meant to be particularly ad hominem, but I think a reasonable question.

Of Course!!  It came to him one quiet night on the "boundary".....

 

[Bam_dice]

As me growing up attending elementary school along with high school. The brain is the most important part of the body it helps us move and think. Without it we would be able to make decisions. Decisions govern everyone today even politics. Through out the years there been alot decisions about we should pump money in here... "No there". As the world today Canada is struggling and the only thing keeping it together is world peace. In years time there going to be another down fall in the economic. As the Mayans predict a end of world and begin of new era. You guess it... Where in the new generation where people need strong leaders and I don't see are prime minister or president doing anything about the economy. With great power comes great responsibility. I say we bring more people and unite Canada with more jobs. Put alot more money into education for the youth along with tap into are oil system. Through that we are able to grow like china. Literally are prime minister should cut the bs and doing something about it.  Along with up north once that ice melts it's going to be a race against territory.

 

[Bruce Monkhouse]

MY HEAD HURTS

 

[Bam_dice]

You got that my head just can't shut up about this stuff. It's screwed..

 

[GAP]

What's that saying about being thought a *&*^ but open your mouth and removing all doubt........ :

 

[Good2Golf]

...Through that we are able to grow like china...

China isn't grown, it's actually a mineral also known as kaolinite...alumina octahedral silicate, Al2Si2O5(OH)4.

 

[RangerRay]

As me growing up attending elementary school along with high school. The brain is the most important part of the body it helps us move and think. Without it we would be able to make decisions. Decisions govern everyone today even politics. Through out the years there been alot decisions about we should pump money in here... "No there". As the world today Canada is struggling and the only thing keeping it together is world peace. In years time there going to be another down fall in the economic. As the Mayans predict a end of world and begin of new era. You guess it... Where in the new generation where people need strong leaders and I don't see are prime minister or president doing anything about the economy. With great power comes great responsibility. I say we bring more people and unite Canada with more jobs. Put alot more money into education for the youth along with tap into are oil system. Through that we are able to grow like china. Literally are prime minister should cut the bs and doing something about it.  Along with up north once that ice melts it's going to be a race against territory.

That makes absolutely no sense...

 

[GAP]

That's the stated reason, but I will bet N.A. production is expendable in tough times....

Honda cuts N. American auto output by 50 per cent
Article Link
The Canadian Press

Date: Monday Oct. 31, 2011 1:03 PM ET

TORONTO — Honda's assembly plants in Canada will be part of a dramatic international slowdown by the Japanese automaker.

The company says it will cut output at its six North American factories by 50 per cent, starting Wednesday.

The big Japanese carmaker is suffering from a parts shortage due to flooding in Thailand.

In Canada, Honda has major assembly and parts operations in the central Ontario community of Alliston, near Barrie.
end

 

[Edward Campbell]

Greece is spiraling downwards from tragedy to comedy to farce.

Italy, Portugal and Spain (not necessarily in that order) are set to follow suit.

The Euro is, probably, unsustainable, in its current form; the problem now is to plan for its orderly demise - for the return of the poor but musical Greeks, Italians, Portuguese and Spaniards to their accustomed poverty. Austria, Denmark, Finland, Germany, Netherlands and Sweden may be rich enough and productive enough to prevent the EU from unraveling and, thereby, may prevent a new (just longer and deeper?) global Great Recession.


Edit: punctuation

 

[Kirkhill]

Greece is spiraling downwards from tragedy to comedy to farce.

Italy, Portugal and Spain (not necessarily in that order) are set to follow suit.

The Euro is, probably, unsustainable, in its current form; the problem now is to plan for its orderly demise - for the return of the poor but musical Greeks, Italians, Portuguese and Spaniards to their accustomed poverty. Austria, Denmark, Finland, Germany, Netherlands and Sweden may be rich enough and productive enough to prevent the EU from unraveling and, thereby, may prevent a new Just longer and deeper?) global Great Recession.

Fascinating: this "End of Days" stuff.

:argument: op:

Can't wait to see how it all works out.

The Franco-German argument seems to be: "We gave you Charlemagne, the Bourbons, Frederick the Great and Bismark - and topped it off with a couple of corporals from Corsica and Austria. We've agreed to split the difference. Fall in line or else we'll each find another chap with a penchant for white horses." 

Democracy in the abstract.

 

[Brad Sallows]

My rule of thumb: I expect any country with deeply embedded social welfare institutions (ie. culture of dependency) which has more than a 5% primary surplus is going to default on all its outstanding debt.

 

[Edward Campbell]

At least, and despite some European objections (they are used to having a European in the post) one global agency is in safe hands according to this article which is reprodyced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail:

http://www.theglobeandmail.com/report-on-business/international-news/carney-takes-reins-of-global-banking-watchdog/article2225184/

Carney takes reins of global banking watchdog

ERIC REGULY
CANNES— Globe and Mail Update

Published Friday, Nov. 04, 2011

Mark Carney, governor of the Bank of Canada, has been confirmed as new chairman of the Financial Stability Board, the G20's global banking watchdog.

Mark Carney
CTV News photo

The FSB is an international body tasked with co-ordinating global efforts to set regulations aimed at preventing future financial meltdowns.

Based in Basel, Switzerland, the FSB works with central banks and regulators from more than 20 of the world’s leading economies, and is poised to act as more of a policeman to make sure governments implement the reforms as promised, Mr. Carney has said in recent media appearances.

The position at the FSB is part-time, meaning Mr. Carney will continue in his position at the Bank of Canada.

More to come

Although it is, as the article says, a "part time job," a secondary duty in military terms, given the global banking situation, Carney will be busy as will be, I predict, Senior Deputy Governor of the Bank of Canada Tiff Macklem.

Canadians should get used to seeing Mr. Macklem's face on their TV screens as he takes a more public role in setting Canada's monetary policy.

Tiff Macklem
University of Western Ontario photo

 

[Edward Campbell]

A bit more, in an article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, re: what Carney is likely to do to help stave off a global financial disaster:

My edits
http://www.theglobeandmail.com/report-on-business/international-news/carney-expected-to-impose-tougher-rules-on-top-global-banks/article2224790/

Carney expected to impose tougher rules on top global banks

JEREMY TOROBIN  AND GRANT ROBERTSON
OTTAWA AND TORONTO— From Friday's Globe and Mail

Last updated Friday, Nov. 04, 2011

Mark Carney, who today is almost certain to be was named head of the Financial Stability Board, will use the role to push countries to impose stricter rules on very large banks - the ones that could take down the global economy if they were to fail.

That task is delicate enough. What could make it even tougher for Mr. Carney is the strong likelihood that no Canadian bank will fall into this category.

Mr. Carney, who as FSB chairman will lead an international group that seeks to guide the regulation of the financial industry, could find himself fielding accusations that he is favouring the home team. This is important, because according to a Canadian official at the G20, the FSB will soon have “broader powers and legal status,” suggesting it may eventually be able to enforce its will more easily.

As part of the Group of 20’s push to rewrite the rules of global finance to prevent future meltdowns, regulators want to make the world’s largest and most interconnected banks hold more capital in reserve than smaller ones. That would force them to be more cautious about their lending and investing activities, which could crimp their profits. The idea is to prevent a repeat of the 2008 banking crisis, when the failure of a single large Wall Street institution created a domino effect that quickly paralyzed the world’s credit markets.

Several of the planet’s most powerful bankers have railed against the proposal, arguing it will limit their lending so much that the economic recovery could be in jeopardy. Jamie Dimon of JP Morgan Chase and Co. even went so far as to call it “anti-American,” since most of the biggest banks are in the U.S., if they’re not in Europe or Japan.

The official list of globally significant banks is still being worked out, but no Canadian bank is expected to be tagged.

As the FSB grows in stature, Mr. Carney may need to counter any impression that he’s giving Canada a hometown discount on reforms.

“Sooner or later some people are going to be taking shots at him publicly, and I think the easiest one is what Jamie Dimon did - that these regulations are grounded in anti-Americanism, or anti-fill-in-the-blank nationality,’’ said Ian Lee, a professor with Carleton University’s Sprott School of Business and a former banker.

“He may have to take some jabs at Canadian banks, just to show that he is not biased, that he is not there to carry their water.”

Prof. Lee reckoned this could come in the form of pointed remarks about the need for Canadian banks to remain vigilant in their lending, given near-record levels of household debt and a global economic environment that suggests interest rates may be close to rock-bottom for another year.

As recently as Wednesday afternoon, in testimony to the Senate Banking Committee in Ottawa, Mr. Carney stressed that he is not “complacent” about Canadians’ debt load, or about the housing market in general, which the central bank believes has shown signs of overheating in some cities.

Earlier Wednesday, Julie Dickson, who runs the Office of the Superintendent of Financial Institutions (OSFI), wrote to banks for the second time in two months, urging them to be “extra diligent” in their lending standards.

“Given the current uncertainty and volatility in global capital markets, historically low interest rates, higher Canadian borrower debt-to-income levels, and relatively strong housing price appreciation,” Ms. Dickson wrote, “OSFI expects [lenders] to be extra diligent in maintaining sound and prudent mortgage underwriting practices.”

The unmistakable message - a timely one, from Mr. Carney’s perspective - was that Canadian authorities are on the case and will not let their banks rest on their laurels or insulate them from tougher rules, whenever applicable, even though they are among the soundest institutions in the world.

OSFI’s stated position is that none of Canada’s banks are large enough to be globally systemically important, and that Canada’s capital requirements are already stringent enough that even the largest Canadian banks will not be forced to hold additional capital beyond what existing standards require.

That helps explain why Canadian institutions don’t seem concerned about what Mr. Carney’s new role could end up meaning for them. The Bank of Canada Governor is already an influential figure in international efforts to overhaul the rules of finance, so his positions on the key issues are well known.

“One of the reasons he has become chairman is because he’s been so influential in terms of his role within the Financial Stability Board and G20,’’ said Gordon Nixon, chief executive officer of Royal Bank of Canada. “So he’s always had to balance representing the Canadian interest and representing the global perspective, and I think he manages that very well. I don’t think him becoming chairman is going to change that one bit.”

With a file from reporter Eric Reguly in Cannes, France

Canada appears to be losing the battle to force European countries to take full responsibility for Europe's problems - the emerging consensus seems to be that Europe, alone, is too weak to take responsibility for its own problems. Applying more stringent stress tests to all banks and then requiring American and European banks to look more and more like Canadian banks will not make Carney (or Canada) popular, but it has to be done. And, as the article mentions, Canada is not "out of the woods:" our household debt levels are far too high.

 

[Edward Campbell]

This report, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, is a bit technical but it highlights part of the global problem - lax accounting standards:

http://www.theglobeandmail.com/globe-investor/how-a-canadian-address-turned-manulifes-22-billion-profit-into-a-128-billion-loss/article2223793/

How a Canadian address turned Manulife’s $2.2-billion profit into a $1.28-billion loss

TARA PERKINS — FINANCIAL SERVICES REPORTER
From Friday's Globe and Mail

Published Thursday, Nov. 03, 2011

If Canada’s major life insurers were headquartered in New York, they would be reporting billions in profits right now.

Instead, Manulife Financial Corp. (MFC-T13.110.564.46%), Sun Life Financial Inc. (SLF-T22.85-1.15-4.79%) and Industrial Alliance Insurance and Financial Services Inc. (IAG-T26.80-1.96-6.82%) have each posted ugly financial results this week, with the ugliest being Manulife’s $1.28-billion third-quarter loss, disclosed Thursday.

Low interest rates and falling stock markets continue to eat away at the industry’s profits, and life insurers here are raising prices and shrinking some businesses as a result. But there is another issue at play in the industry’s red ink: accounting rules that Canadian insurers say are unfair and put them at a competitive disadvantage.

Manulife said that had it reported under U.S. accounting rules, it would have posted a profit of $2.2-billion in this latest quarter - a $3.4-billion swing. Manulife’s shareholders’ equity is $16-billion higher when measured under U.S. rules.

Canada’s life insurers have been complaining since the financial crisis began that the Canadian rules hinder them in competition against their U.S. peers – especially since the federal regulator uses this country’s accounting rules to determine how much capital insurers must sock away.

Accounting rules for insurers around the world are widely viewed as so complex and murky that many professional analysts don’t even understand them, so the grumbling from Canadian insurers has largely fallen on deaf ears. But their views got some high-profile backing this week when Moody’s and Standard & Poor’s issued reports highlighting how tough Canadian accounting rules are on insurers when stock markets and interest rates are depressed.

Beyond the company’s balance sheets, the issue is having a real impact on their operations. Manulife sold a reinsurance business to U.S. insurer Pacific Life Insurance Co. this summer, in large part because the U.S. firm will face looser accounting and capital rules for that unit.

Proponents of the Canadian regime argue that it’s more conservative, forcing insurers to be extra safe when markets are tough, and then letting them relax when conditions are good again. If the economy is entering a period such as the Great Depression, where interest rates and stock markets are low for a long period of time, then there will be a reckoning for U.S. insurers, while Canadian insurers will have already taken the hit.

On the other hand, if interest rates and markets rebound, Canadian insurers will be able to boost their profits by releasing some of the reserves they’ve socked away.

In the meantime, investors looking at U.S. and Canadian insurers are comparing apples to oranges, Manulife executives suggested Thursday.

“You look at companies in a much more fragile position than us in the United States that are increasing dividends and buying back stock…” Manulife chief executive Don Guloien said on a conference call. But, aside from lobbying accounting authorities and regulators, there’s little Canadian firms can do. “It is what it is. We don’t have roller skates,” Mr. Guloien said.

Under Canadian accounting rules, Manulife posted a $312-million loss last year. Under U.S. rules, it would have earned $1.7-billion.

Sun Life has stopped disclosing what its earnings would be under U.S. rules – it used to give both sets of numbers – but outgoing CEO Don Stewart said the insurer’s results would have been better this quarter under U.S. rules. Sun Life reported a loss of $621-million.

Dean Connor, Sun Life’s CEO-in-waiting, says the accounting rules penalize Canadian insurers by requiring them to “mark to market” more of their assets and liabilities at the end of each quarter – that is, to base them on the market conditions at that moment.

“It can have a significant effect as you [make present-value calculations for] 30 or 40 years of future experience into one moment of time,” he said in an interview. “That creates enormous volatility ... mark-to-market is of dubious value to users of financial statements.”

Mr. Guloien stressed yesterday that investors need to keep the accounting differences in mind when evaluating Manulife. Between the company’s reserves and capital levels and the hedging programs it’s put in place to protect against its risks, “this has to be one of the most secure institutions on the face of the earth,” he said.

Just look at the fourth paragraph: the differences between American and Canadian accounting rules are "worth" nearly $3.5 Billion on over $25 Billion worth of revenues.* Does that mean we, Canada, are too strict or that American insurance companies are badly (10-15%) overvalued?

It matters, and the differences in standards are a global phenomenon.



__________
* http://manulife.com/public/files/202/1/MFC_3Q11_SIP.pdf

 

[Kirkhill]

......

Just look at the fourth paragraph: the differences between American and Canadian accounting rules are "worth" nearly $3.5 Billion on over $25 Billion worth of revenues.* Does that mean we, Canada, are too strict or that American insurance companies are badly (10-15%) overvalued?

It matters, and the differences in standards are a global phenomenon.

Or should Canada be trumpeting the fact that its standards result in a more secure investment?  I believe that strategy has worked for Switzerland and (historically) the Bank of England.  People invested there for safety.  If Canada could develop the reputation of Switzerland.......

As to the earlier comment about Canada losing the argument about Europe being forced to "heal themselves" I would suggest that that is not the message being heard in Britain: G20 summit leaders: in their own words.

My read of that list of comments suggests that Canada, the US and the BRICS, and (to whatever extent you can trust Cameron's words) Britain - are all telling the EU in general, the Eurozone in particular and France and Germany especially - there is no help coming.  The "Haves" will shore up the system by plunking money into the IMF but they won't be placing any bets on the Euro any time soon.

Now Europe may go looking for IMF relief, and many folks expect/fear that they will be granted such relief, but would the IMF be more inclined to be more generous with Italy than it was with Argentina when its exposure will be manifold greater?

 

[a_majoor]

Option 3 might be to sip the oil to Eastern Canada:

http://news.investors.com/Article/590518/201111031841/Obamas-Keystone-Dilemma.htm

Keystone Pipeline Delay Puts Energy Future On Hold

Posted 11/03/2011 06:41 PM ET
Energy Policy: The president who often lets policy decisions be driven by others now says the pipeline to bring Canada's tar sands oil to America is his decision to make. So make it already, Mr. President.

The administration's industrial policy of picking winners and losers, particularly in the energy sector, has given us such white, or should we say green, elephants as the bankrupt solar panel manufacturer Solyndra. It has an opportunity to pick a real winner — the Keystone XL pipeline to bring oil from Canada's rich tar sands to the American market.

So far the administration has given lip service to the project, with final approval seemingly in the hands of the State Department, since the pipeline crosses an international border. White House Press Secretary Jay Carney seemingly reaffirmed this by stating, "This is a decision that will be made by the State Department."

But President Obama seemed to indicate Carney didn't get the memo when he indicated in an interview with Omaha, Neb., television station KETV that the State Department would send him a report in a few months and that he would make the final decision.

"There's a way of doing that and making sure the health and safety of the people of Nebraska are protected. And that's how I'll be measuring these recommendations when they come to me," Obama said.

This "health and safety" excuse was used after the Deepwater Horizon spill in the Gulf of Mexico to impose drilling moratoriums there, off both Atlantic and Pacific coasts and in Alaska. This does not bode well.

An increasingly peeved Canada may not wait for the U.S. to remain its best customer, a promise Obama made Brazil as it pursued offshore drilling we were curtailing. "What will happen if there wasn't approval — and we think there will be — is that we'll simply have to intensify our efforts to sell the oil elsewhere," Joe Oliver, Canada's natural resource minister, told Reuters .

That elsewhere is China. As we've noted, Sinopec, a Chinese state-controlled oil company, has a stake in a $5.5 billion plan to build the Northern Gateway Pipeline from Alberta to the Pacific Coast province of British Columbia. Alberta's finance minister met this month with Sinopec and CNOOC, China's other big oil company, and representatives of China's banks.

Unlike issues such as ObamaCare, which the White House let Congress run with, the Keystone ball has been squarely placed in the president's court by Obama himself. Will he dismiss a loyal ally and friend if it means offending his environmentalist base? He hasn't exactly been a profile in courage.

 

[Brad Sallows]

>My rule of thumb: I expect any country with deeply embedded social welfare institutions (ie. culture of dependency) which has more than a 5% primary surplus is going to default on all its outstanding debt.

That makes no sense at all... "primary surplus" should be "primary deficit".

 

[FoverF]

This report, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail, is a bit technical but it highlights part of the global problem - lax accounting standards:

http://www.theglobeandmail.com/globe-investor/how-a-canadian-address-turned-manulifes-22-billion-profit-into-a-128-billion-loss/article2223793/

Just look at the fourth paragraph: the differences between American and Canadian accounting rules are "worth" nearly $3.5 Billion on over $25 Billion worth of revenues.* Does that mean we, Canada, are too strict or that American insurance companies are badly (10-15%) overvalued?

It matters, and the differences in standards are a global phenomenon.

I am obviously no technical expert on the matter, but I am scepitcal. It seems to me that if there were a legitimate $3.5 billion difference, these companies would be operating from the USA. Or paying a large team of lawyers and accountants a lot of money to find ways around this. Or bribing lobbying some politicians/bureaucrats to the tune of hundreds of millions of dollars to change these laws. That is just too much money to let it walk away.

I appreciate what a billion dollars means. I also understand that there are an almost infinite number of ways of counting money. So while I have no doubt that Canadian regulations result in increased difficulties for big business here, I think that a) it is wildly exaggerated in this article, and b) our performance in the recent financial slowdown has proven that these regulations are prudent and benefcial.

If we were treading on their toes to the tune of billions of dollars, they would be investing elsewhere. They're not investing their money in this market because of charity.

 

[FoverF]

Or should Canada be trumpeting the fact that its standards result in a more secure investment?  I believe that strategy has worked for Switzerland and (historically) the Bank of England.  People invested there for safety. 

Exactly.

 

[Kirkhill]

Further to the thought of Canada as Switzerland:

.....Mario Draghi, the outgoing FSB chairman who has just started as President of the European Central Bank, said the capital surcharges should not affect global growth. "We have done several impact studies and they don't show any significant economic effects," he said.

Mr Draghi will be replaced by Mark Carney, Bank of Canada's Governor. Swiss National Bank chairman Philipp Hildebrand will become vice-chairman.....

Edit: Source - Daily Telegraph