Canada & The Crisis

[Jerome Scuggs]

It's become very obvious that Canada is definitely riding the storm. This is in part to the very cautious governing, and strict banking regulations:

http://money.canoe.ca/News/Economy/2...017666-cp.html

Flaherty, who will meet Friday in Washington with finance ministers from industrial countries to co-ordinate efforts to deal with the global economic crisis, said Canadian banks have been bolstered by strict government monitoring of their capital.

"We've had a couple of financial institutions in Canada that ran the risk of falling outside the capitalization requirements," he said during a news conference on Wednesday.

"We required them... to maintain the appropriate capital requirements and raise capital as necessary, which was done months ago."

The Conservative government has implemented a number of changes to the Bank Act that have given more power to the Bank of Canada as the credit crisis unfolded.

Among its many recent moves, it joined other central banks Tuesday in cutting interest rates by half a percentage point in a co-ordinated effort to stimulate lending and economic growth.

Some of the fundamentals credited with keeping Canada's banks in the safe zone were put in place nearly a decade ago by the Liberal government of Jean Chretien, including a refusal to approve any Canadian bank mergers.

While Flaherty said government regulation has helped make Canada's banking industry more secure than financial sectors in the United States and many other countries, Canada has also benefited from a strong housing market and more conservative lending practices.

Regulation debate aside - Canada's in a very safe spot - stable housing market, ample capitalization requirements for their banks, and fairly strict oversight that prevented the sort of problems that led to the American (and, I guess, global) financial crisis.

While that puts Canadians outside of the immediate crisis, this is a point that should raise concern:

But, he said, for "domestic financial institutions to continue to outperform, you have to assume the economic environment here will continue to outperform - because if it doesn't you're going to get deterioration here as well."

I think that Canada, while definitely staying out of the stock-market rollercoaster, is going to eventually succumb to the global slowdown. According to a quick Wiki check, "International trade makes up a large part of the Canadian economy, particularly of its natural resources. The United States is by far its largest trading partner, accounting for about 76% of exports and 65% of imports as of 2007. Canada's combined exports and imports ranked 8th among all nations in 2006."

The main exports, though, are Energy, Agriculture, and Manufacturing. I think Energy and Agriculture are "important" enough to remain a source of exports - Manufacturing, I'm not sure. But it seems that manufacturing is not a critical component of Canadian industries; the major industry is automotive, and GM/Ford have been taking hits and it seems like Canada's not taking it too hard.

Aside from that, Canada's strength is in its service sector - a sector that is generally more resilient to economic downturns. People can easily stop buying new cars, but they'll always need Wal-Mart and haircuts.

With the U.S. as a major import/export partner, I think trade does, overall, stand to take a hit.

Now, I know that discussing Canada will probably... have alot of potential for disaster, and so I'll refrain from any sort of ideological extrapolations and stick to the basics. And so with that in mind, I will tread ever-so-softly onto the... dreaded topic.

Health-care. As a public service, health care is, of course, funded by taxes - and so assuming Canada is affected by the slowdown in the long-run, a question of funding will arise.

Canada, having an amazingly balanced federal budget, will probably not have any problems any time soon. Having such a large healthcare industry while retaining a surplus budget means that the healthcare system might actually be efficient enough to sustain alot of the economic impacts that will come about as a result of the global slowdown.

How is the Canadian dollar doing? The U.S. dollar is falling and so the U.S. is probably going to see a boom in exports - because it is cheaper to buy goods here. If the Canadian dollar rises, it will discourage exports - but if it falls, it will discourage imports.

I think it would most beneficial if Canada's currency rises (or, should I say, stays the same). Potentially, industries could see this as an opportunity to step up manufacturing in Canada - which will, of course, generate jobs and wages and taxes, all of which would be most vital to a country during these times. This would set up Canada to be less dependent on imports. Following that, if industrial output rises to meet the lack of imports - then Canada will only re-influence its exporting position, as the increases in production will lower the prices of goods, which may keep export prices attractively low.

Canadians, you guys live in Canada - tell me what's up and what's being done and who's doing what. Even better, if you guys have some local Canadian papers that would let me get a good, daily dose of what's happening, it would help as well.

Hopefully we can figure out some things that Canadians can do to prepare for the global slowdown which, at this point, seems quite likely. Politics aside, I think it's time I started thinking practical, and if I can't help America, might as well look north :P

[project dragon]

Live rates at 2008.10.10 21:48:22 UTC
1.00 CAD = 0.850100 USD
from http://www.xe.com/

I think we are also a part of the stock market roller-coaster, tumbling 543 points (here)

As for newspapers, I believe the National Post is the newspaper with a bigger interest in business (the business building at our university gets the National Post for free)

I'm not very knowledged in exactly what's going on, so I don't know if what I'm telling you is what you need. I'm sure there are more Canadians out there that are more informed as to what is going on.

[Kolar]

Our industry and trade are linked, things are going to get worse in the coming months because of our close relation to the US but I don't think we will have a crisis on the levels going on south because we don't do subprime lending. It may hurt job growth and investors but at least people won't be defaulting left, right and centre. The loonie tends to rise and fall on the price of oil, so if prices drop it historically does also. Its drop right now is probably related to other factors.

[Izor]

how in the fucking hell do you gather that the us dollar is falling and the canadian market is doing fine???? what the FUCK do you read?!

http://finance.yahoo.com/currency/co...CAD&amt=1&t=1y

Please research first

[Troll King]

The loss of manufacturing jobs has been a big problem for us in Ontario, especially in the automotive industry. Politically, Prime Minister Harper puts more weight towards his native Alberta than he does for the province with the largest economy an 30% of the population. Ontario's economy especially is tied to US fortunes, so it has been harder hit than some other provinces.

One thing you didn't mention there but is an important factor is the federal election on Tuesday.

The economy has jumped ahead of the environment and health-care issues to be the top issue. It's also why the Liberal party has risen in the polls after being at risk of dropping to third before last week's debates. Meanwhile Harper and company, who had been picturing the possibility of a majority victory early in the campaign have taken a dive. The Conservatives said they would fix the economy by staying the course, claiming that they predicted tough times and had made enough preparations. But the economy has turned far worse than expected and the Conservatives' plan now looks like a lack of action.

Harper didn't help matters any when he spoke earlier this week at The Empire Club of Canada and said that the current state of the stock market was good because it means low stock prices means that just means it's a better buying opportunity.

[Liquid Blue]

hi tk

<3

[Hakaku]

A lot of people aren't even aware that there are issues with the economy, although unsurprisingly they're aware that the United States are having financial problems, which will inevitably affect us in the end.

But asides good banking and financial strategies, Canada will survive the same way it has since the 1800s; through interprovincial dependence. To point out, the Prairies have the agriculture, while surrounding provinces have the manufacturing industries which in turn rely on the prairies (ok, so Ford will lose some employees, but their tie to the US is a factor). There's not too much to say about the northern territories, but I assume the hardest hit regions will be around the Maritime region, which is probably the most dependant region on exports. However, if problems begin to arise with the oil industry in the Prairies, their economy will without a doubt cause a major hault.

Although I don't remember the article anymore, a francophone author had explained the Prairie's overdependance on the oil industry which would eventually lead to its demise, while Québec could partly boast being a self-sustainable economy, since economically it's diversified (energy, manufacturing, foresting, potential oil...) and not dependant on one specific thing for revenue. In comparison, the author compared the situation in other countries to support his point of view. (although I should point out the argument was focused specifically on the oil industry, rather than an unrelated financial crisis on a larger scale)

Back on track though, Canadians don't have as much to worry, as it certainly won't come to anything half close to the forgotten depression that occurred in Canada during the mid to late XIX century; where wages were stagnant, prices for commodities stagnated or regressed, and interest rates soared. To add, exports and investments sagged, while several Canadian banks collapsed. In comparison, I think our current situation won't come close to that, despite a good portion of the economy that could be affected by a change in international trade, in addition to the upcoming gamble of elections as Troll King pointed out.

[Kolar]

Harper, in an interview with Canwest News Service, said he understands people are uncertain about the future, but he believes his party remains the best choice.

"I don't expect every Canadian to agree with me, but I hope Canadians understand that we have thought through what we're doing, and I do know why I'm doing what I'm doing," the prime minister said. "Do they really believe that the other guys know what they're doing?"

:ermm: :unsure:

The economy has jumped ahead of the environment and health-care issues to be the top issue. It's also why the Liberal party has risen in the polls after being at risk of dropping to third before last week's debates. Meanwhile Harper and company, who had been picturing the possibility of a majority victory early in the campaign have taken a dive. The Conservatives said they would fix the economy by staying the course, claiming that they predicted tough times and had made enough preparations. But the economy has turned far worse than expected and the Conservatives' plan now looks like a lack of action.

And now back tracking and buying up 25 billion dollars worth of mortgages probably isn't going to help their position. If their position was that our banking system is secure and that we won't see credit dry up then stick by it and don't hand the public a pile of ideological "hands off" approach CRAP. I don't understand entirely how we are going to fair in all of this but their appeal of somehow being in more control or in the know on the economy is gone.

Edit: I dont feel like bringing up the other thread so I'll post it here, I found this site: http://www.democraticspace.com/canada2008/ which makes some good predictions. The "Articles" are mostly crap but the seating projections and riding projections are done very well and updated daily.

[project dragon]

how in the fucking hell do you gather that the us dollar is falling and the canadian market is doing fine???? what the FUCK do you read?!

http://finance.yahoo.com/currency/co...CAD&amt=1&t=1y

Please research first

This tells me one american dollar is worth 1.1756 of our candian dollars

[Epinephrine]

Canada's economy is mixed right now. We are a bit different than the US obviously, because of the makeup of our economy. In the last few years, oil has been the major driver of growth in Canada, especially in the West where oil is king and our version of Texas (Alberta) has been booming incredibly for the past decade. Recent high oil prices have further driven up the economy out West, but also had the side effect of making Canada a 'resource' country, which greatly increased the value of our dollar.

Meanwhile, Ontario the largest province in Canada has always historically been the industrial heartland of the country. While neighbouring rust-belt US States suffered, Ontario did better and better thanks to universal healthcare (aka lower worker legacy costs) and a lower dollar. But like the rest of North America, manufacturing has been on a downturn in Ontario for the past decade, ever since China opened up. The last major pieces have been the auto industry. In fact Ontario produces more cars than Michigan (or did so the last time I checked before the recent shutdowns).

Unfortunately, the increasing value of the dollar in the past two years has basically decimated the already decimated manufacturing base in Ontario. We've lost hundreds of thousands of manufacturing jobs in a province of 10 million people which is no small loss. With many auto plants closing the best of the manufacturing jobs are now disappearing as well.

The thing is, for whatever reason, Ontario has been able to absorb these losses quite well. Although like in the US there has always been calls (and some moderate action) to subsidize manufacturers with tax incentives and deals, the last 4 governments have been surplus obsessed, and as such have done much to make sure spending did not run away. As well, a huge immigrant base in Ontario which do not have access to cushy union jobs, have also not really cared much about the traditional industries, and as such these industries have by large been allowed to fail, and other jobs have taken their place, mainly in health care, biotechnology, information technology, and finance (Toronto is the 3rd largest finance hub in North America).

Meanwhile the East of Canada has lost it's manufacturing years ago, and has been in the doldrums for as long as I can remember. Because of this they have been forced to innovate and find alternate ways to make a living, things that don't depend on easily outsourced jobs. Same with Quebec which has an economy based largely within the province.

Meanwhile British Columbia has been in a protracted boom with international real estate investment, forestry, resources, and the 2010 Winter Olympics.

All of this has in a way buffered Canada. For us, a lot of the worst businesses that needed to fail have already failed in the past few years in Ontario. Alberta, while now reeling somewhat from lower oil prices, is still so vastly more wealthy than the rest of the country and with many locked in investments (getting oil from the oil sands is extremely capital intensive requiring decades of investment, not something that would easily disappear over one year).

As for the housing market, with the exception of Vancouver and it's ridiculous housing prices, the rest of Canada has never seen anywhere near the kind of ridiculous levels seen around the rest of the Western world in the last 10 years. Even in Toronto, a consistently growing population (we're one of the fastest and most consistently growing cities in North America) has fostered enough demand so that while houses are expensive, condos are generally very affordable for most people with jobs. This can be partly attributed to more strict lending rules, as well as abundant land to grow, and in Toronto a well accepted and protracted skyscraper/condo boom which has seen so much condo development that market forces have kept prices affordable.

Canada also does not have the same level of problem with credit card debt and personal debt as the USA. Some of this is cultural. We're unique in the western world as our governments for the last decade have prided themselves on balancing budgets (indeed governments get elected for such things here) while the rest of the world has seen debts increase. We also have percentage-wise a larger share of immigrants than the US, and as such people who are more risk-adverse to begin with. These and other factors such as Canadians generally being more conservative with money have made us better savers, and thus we carry less debt overall. Secondly stricter rules have also stopped the most predatory of practices over in the US from happening here.

Finally we get to the stock market and money markets. The Toronto Stock Exchange (TSX) has seen equivalent and massive drops in share price over the last month along with the Dow. While there certainly is a lot of panic over retirees losing their savings, we do not have as big as a credit crisis as the US. Certainly a lot of things here are funded by international lenders, but we also have our own protected and extremely locally competitive banks. These banks still do most of their business in Canada, and with no real international banks here in Canada aside from HSBC, I don't think there is nearly as severe a credit crisis as the US.

What it all means. Last month Canada created 104,000 jobs, compared to the loss of much more in the USA. We're at our lowest unemployment rate ever right now. Our dollar is dropping again massively, which means that struggling manufacturers which managed to survive the past 5 years (aka the strongest businesses) now have a real competitive advantage in international markets. Our oil, resource and agricultural investments continue to be competitive with a sinking dollar. Even as oil prices drop they are still what they were 2 years ago when we all thought it was too high. Our protected banking system, with strong local banks which have limited international exposure may have been a weakness in terms of global power and share prices, but have a side effect of making us strong in times of crisis unlike say... Iceland. Finally our lower debt levels, and less inflated housing market means that even with drops, it can only drop so much and people won't be losing that much in the end. They haven't leveraged themselves to the hilt, and will be better able to weather any problems.

Still this is not to say Canada is perfect. Indeed we've seen our stock market shrink immensely these past few weeks. We're going to see a drop in our exports soon, and a rising dollar will of course make things more expensive. The only 'bright' spot about this, is companies were taking advantage of our higher dollar to increase profits and not lower prices here already anyway (our cars still cost more to buy in Canada than the US when our dollar was worth more than the US dollar, even those cars solely manufactured in Canada and exported to the USA) so it won't hurt us that much when we buy things.

Oh and finally, because we have strong social systems, and deficit free government and small debt levels, I think people are generally less worried overall, because they know if things go really bad, at least they will be taken care of.

[Izor]

This tells me one american dollar is worth 1.1756 of our candian dollars

It also shows that the usd is rapidly pulling away

[Da1andonly]

eheh

[Galleleo]

I don't think you are really that unique with your government balancing its budget.

[Epinephrine]

I don't think you are really that unique with your government balancing its budget.

Oops... I think we're unique in the G7 is what I was thinking of.

[Galleleo]

ah ok, that could be.