The global economy is in a 'delicate balance' that risks central bank missteps, CEO says - Canadanewsmedia
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The global economy is in a 'delicate balance' that risks central bank missteps, CEO says

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A decade after the 2008 financial crisis, the global economy is in a “delicate balance” that’s at risk of getting tilted by a central bank misstep or unresolved trade dispute, according to financial services firm Northern Trust.

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Recovery is still intact and inflation has been kept under control, but central banks need to maintain a balance, said Michael O’Grady, the CEO and president of Northern Trust at the annual Singapore Summit Friday.

Major central banks in the world have started to unwind massive stimulus that was put in place to boost the economy after the crisis. The Federal Reserve has increased interest rates and ended its bond-buying program, while the European Central Bank is expected to stop its quantitative easing initiative by end of this year.

The global economic conditions are favorable for such course of actions, O’Grady told CNBC’s Amanda Drury.

“I think it’s a delicate balance,” O’Grady said. “Where the balance comes in is where the Fed and other central banks manage this unwind, and our concern would be if they get ahead of where the market is and ahead of where inflation is.”

Trade is also helping to hold up that “balance” in the global economy, he said, adding that he wants to see the ongoing trade spat between the U.S. and its partners get resolved in a favorable way, even if they need some time to get there.

But overall, the U.S. financial system — the center of the crisis 10 years ago — is in “a dramatically better shape” now, said O’Grady. Efforts to strengthen the banks have resulted in better buffers to withstand risks, he noted.

“It’s difficult to predict where the next crisis is coming from, so I think it is much more important to be prepared regardless of where it comes from,” he said. “On that front, I think the system is in a dramatically better shape than it was before.”

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Economy

IMF warns storms clouds gathering for global economy – The Globe and Mail

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One of the International Monetary Fund’s top officials warned on Tuesday that storm clouds were gathering over the global economy and that governments and central banks might not be well- equipped to cope.

The fund had been urging governments to “fix the roof” during a sunny last two years for the world economy, IMF First Deputy Managing Director David Lipton said.

“But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,” he said at a banking conference hosted by Bloomberg.

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He also warned that strains could leave policymakers under pressure and in uncharted waters.

“Central banks would likely end up exploring ever-more unconventional measures. But with their effectiveness uncertain, we ought to be concerned about the potency of monetary policy.”

Many governments won’t have much room for manoeuvre, either, having already racked up high debts.

“We should not expect governments to end up with the ample space to respond to a downturn that they had 10 years ago,” Lipton said. Stimulus may also be a hard sell politically, considering the financial burden it creates, he said.

The biggest immediate risk, though, is the current trade war between the United States and China. If all of the threatened tariffs are put in place, as much as three-quarters of a percent of global GDP would be lost by 2020, the IMF has estimated.

“That would be a self-inflicted wound. So it is vital that this ceasefire (recently announced between Washington and Beijing) leads to a durable agreement that avoids an intensification or spread of tensions.”

If it doesn’t and a stalemate sets in, there could be a damaging “fragmentation” of the global economy that causes a downturn, he said.

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Economy

Goodyear halts tire production in Venezuela as economy slips – Prince George Citizen

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VALENCIA, Venezuela — Goodyear Tire & Rubber Co. is halting production in Venezuela, making it the latest international corporation to abandon a South American nation in economic crisis, officials said Monday.

Spokesman Eduardo Arguelles told The Associated Press that Goodyear-Venezuela had made the “difficult decision” to no longer produce tires in the country, which has seen an economic contraction worse than the U.S. Great Depression.

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“Our goal had been to maintain its operations, but economic conditions and U.S. sanctions have made this impossible,” Arguelles said.

The company had endured tens of millions in losses in recent years as the Venezuelan bolivar plummeted in value against the U.S. dollar. The company based in Akron, Ohio, moved to deconsolidate its Venezuelan subsidiary in the fourth quarter of 2015, but continued to operate with a staff of about 1,100 from the depressed industrial city of Valencia.

Workers who arrived at the plant Monday were stunned to find it was no longer in operation.

“They closed doors without saying anything,” said Luis Aponte, a union worker who said government workers were on site assessing the situation.

There was no immediate response from the government.

The announcement came after a letter issued “to whom it may concern” circulated online stating the company had been forced to cease operations and that starting Monday no one in Venezuela would be authorized to continue producing the company’s products.

The letter also said Goodyear would fulfil its financial obligations to workers.

Goodyear’s retreat from Venezuela adds it to a growing list of corporations that have ceased operations in the country. Some of those enterprises, like General Motors, had assets including factories and vehicles seized by the government. Others chose to cut their losses because shortages, inflation and currency and prices controls made business difficult.

Kellogg, Bridgestone, Kimberly-Clark and General Mills have all closed or reduced operations in recent years.

Julian Rodriguez, 62, said he spent over three decades working for Goodyear and was unsure how he’d make ends meet after losing his only source of income.

“This is a grave situation,” he said.

The International Monetary Fund has estimated that inflation in Venezuela could top 1 million per cent by the year’s end.

President Nicolas Maduro activated an economic recovery plan in August that including increasing the minimum wage and printing a new currency, among other measures, but thus far the economy has shown few signs of improvement.

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Economy

Premier Ford Meets with Mayors to Grow the Economy and Deliver Better Services – Government of Ontario News

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Ontario’s Government for the People Renews Commitment to Municipal Partnerships

TORONTO — Premier Doug Ford met with Ontario mayors at Queen’s Park today to discuss their shared priorities, such as improving transportation infrastructure, increasing the supply of housing to bring down costs and making sure that municipalities are open for business.

“Ontario has some fantastic mayors, and we have some great working relationships. Today, we strengthened those relationships,” said Ford. “We’re going to work together to get things done. We’re going to build transit and infrastructure. We’re going to make sure everyone can afford a place to call home. And we’re going to show the world that Ontario is open for business.”

In a series of meetings throughout the day, Premier Ford met with Guelph Mayor Cam Guthrie; Kawartha Lakes Mayor Andy Letham; London Mayor Ed Holder; Mississauga Mayor Bonnie Crombie; Oro-Medonte Mayor Harry Hughes; Ottawa Mayor Jim Watson; and Windsor Mayor Drew Dilkens.

During one-on-one meetings with each mayor, Premier Ford discussed upcoming plans for the private retail sale of cannabis and restated his commitment to public health, public safety and protecting Ontario’s youth. He also discussed ways to deliver better services to the people of this province and get more money back in the taxpayer’s pocket.

All leaders committed to meeting regularly to make progress on the issues that matter most to people across Ontario’s municipalities.

“When it comes to Ontarians’ day-to-day lives, municipalities make the most direct impact,” said Ford. “Today, I had some great conversations with Ontario mayors about how to tackle the issues that people face every day. We’re committed to working for the people and respecting the taxpayer.”

For high-resolution photos from the meetings, click here.

Quick Facts

  • There are 444 municipal governments in Ontario.
  • Ontario’s Government for the People recently signed a joint memorandum of understanding (MOU) with the Association of Municipalities of Ontario (AMO) committing to regular consultation on provincial legislation or regulations that have a significant impact on municipalities.

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