Category: Economy

Canada, Economy, US3 Comments

Consumer mindsets in North America have shifted permanently with regard to finances

Colin Henderson

After my last post, I thought it better to follow up with some facts to support my contention that this economic recovery is L shaped in Canada and US.  This is not meant to be an economic projection, and I leave that to the professional economists.  However in terms of planning, banks ought to consider the high probability of a scenario where the reduction in economic activity will level off but hardly see growth in the near future.  This will be driven by consumer confidence and frankly their financial circumstances. If we go back to the root cause of the … Continue reading Consumer mindsets in North America have shifted permanently with regard to finances

Economy

World Bank GDF highlights growing risks to economic forecasts

Colin Henderson

When thinking about the future and the economic position of countries that banks must consider, I listen far less to politicians and more to IMF and World bank forecasts. The use (misuse) of the term recovery fails to acknowledge what the circumstances for people and businesses will be on the other side of the recession. Here is a new report from World Bank that looks to the future with more pragmatism, although they still use the word recovery.  Note their focus is skewed by their mandate for developing countries, however they have to look at the entire economic picture to … Continue reading World Bank GDF highlights growing risks to economic forecasts

Economy1 Comment

Canadian Residential Mortgage Market – Boring but Effective | IMF

Colin Henderson

A new working paper from the IMF reviews the Canadian mortgage market, and compares to the US.  There are striking differences, which they characterise as ‘boring but effective’. Canadian Residential Mortgage Market | IMF working Paper {pdf – 18 pages] Mortgage securitization is not as pervasive in Canada as in the United States, despite the shift toward bank origination and stronger government presence in the market. Only $267 billion (29 percent) of loans have been securitized, compared to about 60 percent of U.S. residential mortgages. $245 billion of these securitized mortgages are held by special purpose vehicles that issue mortgage-backed … Continue reading Canadian Residential Mortgage Market – Boring but Effective | IMF

Economy

Economic forecasts for Canada – latest June 2009

Colin Henderson

Here is a quick summary GDP forecasts for North American planners. Courtesy of CBC here is the summary of the banks and Bank of Canada GDP forecasts for 2009 and 2010.  For me the open question remains to what extent 2010 is wishful thinking.  The other and related problem with the graph is that GDP growth is calculated on a moving base. So the other way to read this is that even if the 2010 forecasts are correct, the absolute dollar GDP at December 2010 will not have achieved the level of Dec 2008, or 2 years previous. The IMF … Continue reading Economic forecasts for Canada – latest June 2009

Economy

The $3.6 Trillion Leveraged Loan Wall of Debt | MISH’S Global Economic Trend Analysis

Colin Henderson

I happen to believe in the L shaped recovery theory.  Recovery will be based on a stop in the reduction of growth, and will flatline there.  We will not go back to the GDP $ levels of 2007 ( a return to 2007 would require a V shaped recovery).  This post from Mish summarises why, quite well. The $3.6 Trillion Leveraged Loan Wall of Debt However, the clock is ticking on many things at once: Leveraged loans, boomer retirements and subsequent downsizing, Pay Option ARMs recasts, Alt-A recasts, and last but certainly not least, a jobless recovery that ensures massive … Continue reading The $3.6 Trillion Leveraged Loan Wall of Debt | MISH’S Global Economic Trend Analysis

Economy

Japan, China Vow To Promote World Economic Recovery

Colin Henderson

In a headline few expected to see, Japan and China put mutual interest in world economic stability and their own economic futures ahead of disagreements and agree to co-operate on economic packages. Japan, China Vow To Promote World Economic Recovery | Nikkei TOKYO (Kyodo)–Japan and China pledged Sunday to promote recovery in the slumping world economy and called for an early conclusion to global trade liberalization negotiations, Foreign Minister Hirofumi Nakasone and Chinese Vice Premier Wang Qishan said after a one-day economic ministerial meeting in Tokyo. Asia’s two economic giants issued 11 sets of documents highlighting bilateral cooperation in areas … Continue reading Japan, China Vow To Promote World Economic Recovery

Economy

Cabinet Office Pegs Global Economic Growth At Just 1% In 2010

Colin Henderson

I have read enough economic forecasts over the last 2 years to realise that this forecast from the Japanese government is the first time that government has recognised the obvious that the situation we are in is not going to resolve quickly. I am a firm believer in this being an L shaped recovery, and this report points in that direction.  There is just too much lag built into the shift we have experienced.  With such a dramatic and permanent drop in asset values we have seen, the natural deleveraging impact will take years to work through the system. Cabinet … Continue reading Cabinet Office Pegs Global Economic Growth At Just 1% In 2010

Economy

Worries about government debt load in Japan

Colin Henderson

Following on the testimony from US Bernanke today, similar moves in Japan, the next largest world economy (for the moment), to reduce debt which remains at a world leading high. Japan’s long-term public debt, which is already the largest of any industrialized nation, is projected to reach 168 percent of GDP at the end of March 2010, according to the ministry. … Concerning when to achieve a surplus in the primary balance, many members of the Aso-chaired panel believe it may take about 10 years, based on the latest economic growth and revenue projections, according to government officials.At the next … Continue reading Worries about government debt load in Japan

Economy, US5 Comments

Bernanke is concerned about budget deficits

Colin Henderson

Fed Chairman Bernanke picks his words carefully here as the US treads that line between economic recovery and much higher interest rates which would produce other unintended consequences such as stifling growth, currency value shifts or inflation. Bernanke calls for action on deficits | FT Ben Bernanke on Wednesday called on Congress to take action now to bring down long term US budget deficits, warning that the bond market was concerned about rising US government debt. The Federal Reserve chairman said the recent increases in bond yields “appear to reflect concern about large federal deficits” as well as improved optimism … Continue reading Bernanke is concerned about budget deficits

Economy, US1 Comment

No consumer driven economy in US | Geithner in China

Colin Henderson

Some important messages within Geithners speech in China today that paint a very different next few years compared to the last 10, and as the ‘G2’ move to manage a transition the American economy into one that is very different, yet stable.  And all this to be managed against the backdrop of  the fear of eventual inflation, which would devalue foreign holdings in US T-Bills, something China is acutely aware of. These macro factors will play a large role in US banks and credit unions strategy design for the next 5 years. no consumer purchase driven economy in US – … Continue reading No consumer driven economy in US | Geithner in China