Op-Eds

For much of the last decade, Canadians have been told their debt levels were unsustainable and that their day of reckoning was fast approaching. Data recently released by the Office of the Superintendent of Bankruptcy (OSB) seem to indicate that day has arrived. According to the data, insolvencies by Canadian consumers were up 9.2 per cent in October 2018, compared to a year earlier. To say the least, these results appear alarming. But in light of what we know about homeownership and net worth, we are not so sure. The data show that Canadians’ net worth has never been higher. Moreover, the data do not distinguish between the more harmful economic effects from households in negative net asset positions, or balance sheet...
Markets were not surprised by today’s Bank of Canada announcement to hike its overnight target rate by 25 basis points to 1.5 per cent. They had factored in a very high probability of an increase. And, consistent with a stated desire to improve its communications with both market participants and “the soccer dad,” it was a speech and a press conference that set the stage. Governor Stephen Poloz’s speech on June 27 was an important factor in moving market expectations. By the end of the news conference that followed his speech, markets were confident of a hike. The theme of the speech was transparency and communications. By significantly shifting market expectations in the direction of a rate hike, the speech and news conference were...
In the United States and around the world, millions of people are now asking “how could this happen?” How can we make sense of an America in which Donald Trump becomes the next president? Discovering the real answer to this question will be good for America—and for Canada, too. Many people who are now angry and perplexed focus on Donald Trump, the man. They argue that he is the real problem America now faces—that he is not temperamentally capable of being president and that he cannot be trusted in the White House. Those skeptical of this view point out that Mr. Trump may surround himself with knowledgeable people and that the famous checks and balances in the U.S. system of government will prevent him from doing crazy things. Only time...
The Canadian economy faces serious growth headwinds over the next few decades, and policy makers across the country should be thinking hard about how to improve growth. Many policy options will likely be considered, but finance ministers will soon find that there are no quick fixes. Economic growth is a complex process. The broadest measure of average income is per capita gross domestic product (GDP), which is simply the overall national income divided by the number of people. Over long periods of time, this measure grows for two reasons: improvements in labour productivity and increases in the labour force participation rate. Since 1970, per capita GDP in Canada has increased at an average rate of 1.3 per cent a year – enough to...
By Craig Alexander The precipitous decline in the Canadian dollar has come as a shock to many businesses. Only a few years ago, forecasters were telling them to come to terms with a currency at par for the foreseeable future. Now, the Canadian dollar is worth close to 75 cents (U.S.) and could fall further. This is welcome news for the near-term economic outlook – the benefits to exporters will exceed the cost to importers, boosting economic growth. This demonstrates the value of Canada’s flexible exchange rate regime that acts as a buffer when economic shocks occur, such as the recent tumble in commodity prices. However, there is a potential dark side to a sustained low-valued loonie, as it can erode productivity and dampen innovation...