Central bankers have slashed interest rates reducing borrowing costs to help keep businesses afloat. Governments continue to inject billions of dollars of borrowed money into their economies. In Canada, pandemic financial supports are nearing $500 billion.
Low interest rates mean cheap money for all including our federal Liberal government which has driven debt to GDP ratios from 34 per cent in 2019 to near 100 per cent in 2021.
Adrian White – Cape Breton Post
The amazing thing about cheap money today is that no one seems to care or even notice how much debt Canadians and our governments are accumulating. And there appears to be no urgency for repayment.
Governments seem more than ready to throw money (our tax dollars) at Canadians whether they need it or not. As a result, they have enabled an unhealthy dependency on government (taxpayer) to solve everyone’s problems. That negatively impacts innovation, creativity and productivity in Canada.
Soon we will have a federal budget. The first in almost two years. Rumours are afloat there will be lots more borrowed stimulus cash to reboot the economy as the pandemic subsides and vaccines get rolled out later this year.
A major concern for most Canadians is the slow rollout of pandemic vaccines. We are all painfully aware that Canada has no domestic COVID-19 vaccine production and is totally dependent on foreign producers.
There are a couple of reasons why Canada does not have large scale domestic vaccine production.
First is Canada’s unfavourable patent protection laws which guarantee shorter windows of time for exclusive marketing of products developed in Canada by the manufacturer before generic production is allowed.
This means when a drug company brings an approved drug to market after investing many years and billions of dollars in research and development, they may not have enough time to recover those large investment costs plus a reasonable profit before Canada allows generic production to compete with the drugmaker.
” … the Americans are eating our lunch when it comes to attracting new capital investment dollars.” — Adrian White
Secondly, the income tax climate for large drug manufacturing corporations in Canada is not as favourable as it is in other countries such as the United States or India.
To further emphasize Canada’s disadvantages as a place to do business let’s look at corporate investment in Canada over the last few years.
A recent report, “From the Chronic to the Acute: Canada’s Investment Crisis” by the C.D. Howe Institute, tells a bleak story of a nation that will struggle to compete when it emerges from the COVID-19 pandemic.
The study calculates that new investment in Canada per available worker has fallen to 58 cents for every dollar of investment in the U.S. In other words, the Americans are eating our lunch when it comes to attracting new capital investment dollars. This is a reflection of ill-founded policies on the part of our governments that drive investors away from Canada.
That should be concerning for all Canadians.
Over the past five years, the investment gap between Canada and other advanced countries has become “unprecedentedly” wide. By the middle of the past decade when the Liberal government took power it was 81 cents in Canada to every dollar spent in the OECD. That has shrunk to 60 cents now. That is a sure sign of a government working against you, not for you.
The C.D. Howe Institute study looks at three kinds of investment: machinery and equipment, buildings and intellectual property (IP) that drives innovation. Of these, IP investment is by far the worst, sinking steadily since the mid-2000s to just 29 cents to the U.S. dollar in 2020.
Why does it matter? It’s another reason why Canada doesn’t have a world-class domestic vaccine producer. And Canada desperately needs capital investment to pay back the $1 trillion in government debt we are leaving our grandkids.
It puts Canada at a competitive disadvantage to other advanced countries and increases the economy’s dependence on consumers for growth.
For example, Canada now has an unhealthy dependence on the domestic housing market to stimulate its economy. The nation’s mortgage debt is now over $1.75 trillion which is scary. 2020 was the fastest year ever for mortgage debt growth due to cheap money availability.
The prospect that Canadians will find themselves increasingly relegated to lower-value-added jobs relative to workers in the United States and OECD, who are raising their productivity and earnings faster, should encourage the Canadian government to take action on many fronts. There will be little investment in Canada’s “green economy” if we continue down this road.
Government can’t influence all factors affecting business investment. But government can be supportive by investing in infrastructure, particularly oil pipelines, cutting business taxes, reviewing regulations that hamper competition, resolving international trade uncertainties and loosening inter-provincial trade restrictions.
Can the current Liberal government figure this out? Let’s see if needed government policy changes show up in the next federal budget. If not, we will continue to lose traction in attracting new capital investment to Canada and the needed jobs that brings. And we still won’t have a world class vaccine producer based in Canada.
Adrian White is CEO of NNF Inc., Business Consultants. He resides Sydney and Baddeck.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
