After a year of record-breaking cash injections, the world’s big central banks are starting to ease off the stimulus pedal, forcing economies and financial markets to practise walking on their own again.
Not everyone is dismayed at the prospect. Since March 2020, central banks and governments have flooded markets with some $27 trillion – a third of global gross domestic product, consultancy CrossBorder Capital estimates.
Since then, world stocks have surged 85%, economic growth is rebounding from last year’s pandemic-inflicted devastation, and inflation expectations are rising. Continuing to pump out cash at last year’s pace would do more harm than good, some economists argue.
Still, cheap cash remains plentiful. At the end of March, 82% of central banks were running loose monetary policies, CrossBorder estimates, though that is down from 88% in January.
Last month the Bank of Canada began tapering its asset purchases and signalled it could raise interest rates next year, while the Bank of England this month slowed its money-printing. Others, including the Federal Reserve, may start scaling back stimulus by the end of the year.
In other words, the growth of liquidity – the catchphrase for all that money pumped in by central banks, private lenders and governments – has peaked and is already waning.
Total liquidity from central banks and private financial institutions in the United States, China, euro zone, Japan and Britain topped 28.8% of GDP last year but is now running at 18.5%, estimates Steve Donzé, senior macro strategist at Pictet Asset Management.
The main drag is China, he says, which has halved its liquidity additions from last year’s peak.
Global money supply has dipped to 24% from last year’s peak of 26%, but is way above its pre-pandemic levels of 10%. (Graphic: 3-month growth of Global M2 ex China, https://fingfx.thomsonreuters.com/gfx/mkt/qmyvmeyyxvr/Pasted%20image%201621424406439.png)
The other big stimulus plank was government spending but as lockdowns end, so do emergency support schemes for workers and businesses.
Some central bank policy tightening may be offset by U.S. President Joe Biden’s stimulus plans, which if approved, could top 15% of GDP. But much of that is to be financed through tax rises, limiting its stimulatory effect.
JPMorgan strategist Nikolaos Panigirtzoglou said that on all commonly-used measures of gauging “excess liquidity” the extraordinarily loose conditions of 2020 appear to be tightening.
First, money supply growth has been falling relative to GDP since January, he notes, a reversal of 2020.
“That means we may already have entered a phase where excess liquidity is being contracted,” Panigirtzoglou said.
Second, the cash holdings of global investors relative to the size of their equity and bond holdings are now “exceptionally low”. It means stock markets “must rely on other things like the growth trajectory to sustain the bull market”. (Graphic: Pace of central bank purchases falls in 2021, https://fingfx.thomsonreuters.com/gfx/mkt/oakpekyjdpr/Pasted%20image%201621423590115.png)
TIME TO TAPER?
Since the 2008 crisis, markets have become hooked on ever-increasing sums of cash ploughed in by central banks. Past attempts to cut money-printing, such as in 2013 and late-2018, sowed market panic, forcing policymakers to backtrack.
But today’s backdrop, with economies recovering strongly and bond markets finally pricing in the return of inflation, looks different.
Property markets, fed by abundant liquidity, may be overheating; house prices are rising at an annualised six-month rate of more than 10%, according to data from the Bank of International Settlements analysed by CrossBorder Capital.
So piling on more stimulus risks an inflation explosion and overheating, some economists warn. Larry Summers, advisor to former President Barack Obama, accused the Fed this week of “dangerous complacency” in keeping policy so loose.
Pictet’s Donzé too believes the Fed should kick off tapering by year-end “before excesses emerge and force a drastic tightening that could derail current expansion.”
The Fed, ECB, BoE and the Bank of Japan could shrink asset purchases this year to about $3.4 trillion from almost $9 trillion last year, BofA estimates.
But that’s still huge by pre-2020 standards. Aside from the Bank of Canada, big central banks will likely end 2021 with significantly bigger balance sheets.
Norman Villamin, chief investment officer at Swiss wealth manager UBP, said that given policymakers’ recent experience of trying to tighten and their focus on job creation, “if policymakers are going to make a mistake, it will likely be a mistake of erring on the side of being too easy rather than becoming too tight too soon.” (Graphic: Central bank balance sheet projections, https://graphics.reuters.com/HEALTH-CORONAVIRUS/jznvnjmjzvl/chart.png)
The B.C. Greens say Sonia Furstenau will be staying on as party leader, despite losing her seat in the legislature in Saturday’s provincial election.
The party says in a statement that its two newly elected MLAs, Jeremy Valeriote and Rob Botterell, support Furstenau’s leadership as they “navigate the prospect of having the balance of power in the legislature.”
Neither the NDP led by Premier David Eby nor the B.C. Conservatives led by John Rustad secured a majority in the election, with two recounts set to take place from Oct. 26 to 28.
Eby says in a news conference that while the election outcome is uncertain, it’s “very likely” that the NDP would need the support of others to pass legislation.
He says he reached out to Furstenau on election night to congratulate her on the Greens’ showing.
But he says the Green party has told the NDP they are “not ready yet” for a conversation about a minority government deal.
The Conservatives went from taking less than two per cent of the vote in 2020 to being elected or leading in 45 ridings, two short of a majority and only one behind the NDP.
This report by The Canadian Press was first published Oct. 22, 2024.
Toronto FC captain Jonathan Osorio is making a difference, 4,175 kilometres away from home.
The 32-year-old Canadian international midfielder, whose parents hail from Colombia, has been working with the Canadian Colombian Children’s Organization, a charity whose goal is to help disadvantaged youth in the South American country.
Osorio has worked behind the scenes, with no fanfare.
Until now, with his benevolence resulting in becoming Toronto FC’s nominee for the Audi Goals Drive Progress Impact Award, which honours an MLS player “who showed outstanding dedication to charitable efforts and serving the community” during the 2024 season.”
Other nominees include Vancouver Whitecaps midfielder Sebastian Berhalter and CF Montreal goalkeeper Jonathan Sirois.
The winner will be announced in late November.
The Canadian Colombian Children’s Organization (CCCO) is run entirely by volunteers like Monica Figueredo and Claudia Soler. Founded in 1991, it received charitable status in 2005.
The charity currently has four projects on the go: two in Medellin and one each in Armenia and Barranquilla.
They include a school, a home for young girls whose parents are addicted to drugs, after-school and weekend programs for children in a disadvantaged neighbourhood, and nutrition and education help for underprivileged youth.
The organization heard about Osorio and was put in contact with him via an intermediary, which led to a lunch meeting. Osorio did his due diligence and soon got back to the charity with his decision.
“It was something that I wanted to be a part of right away,” said Osorio, whose lone regret is that he didn’t get involved sooner.
“I’m fortunate now that to help more now that I could have back then,” he added. “The timing actually worked out for everybody. For the last three years I have donated to their cause and we’ve built a couple of (football) fields in different cities over there in the schools.”
His father visited one of the sites in Armenia close to his hometown.
“He said it was amazing, the kids, how grateful they are to be able to play on any pitch, really,” said Osorio. “But to be playing on a new pitch, they’re just so grateful and so humble.
“It really makes it worth it being part of this organization.”
The collaboration has also made Osorio take stock.
“We’re very fortunate here in Canada, I think, for the most part. Kids get to go to school and have a roof over their head and things like that. In Colombia, it’s not really the same case. My father and his family grew up in tough conditions, so giving back is like giving back to my father.”
Osorio’s help has been a godsend to the charity.
“We were so surprised with how willing he was,” said Soler.
The TFC skipper has helped pay for a football field in Armenia as well as an ambitious sports complex under construction in Barranquilla.
“It’s been great for them,” Figueredo said of the pitch in Armenia. “Because when they go to school, now they have a proper place to train.”
Osorio has also sent videos encouraging the kids to stay active — as well as shipping soccer balls and signed jerseys their way.
“They know more about Jonathan than the other players in Colombia,” Figueredo said. “That’s the funny part. Even though he’s far away, they’ve connected with him.”
“They feel that they have a future, that they can do more,” she added. “Seeing that was really, really great.”
The kids also followed Osorio through the 2022 World Cup and this summer’s Copa America.
Back home, Osorio has also attended the charity’s annual golf tournament, helping raise funds.
A Toronto native, he has long donated four tickets for every TFC home game to the Hospital for Sick Children.
Vancouver’s Berhalter was nominated for his involvement in the Whitecaps’ partnership with B.C. Children’s Hospital while Montreal’s Sirois was chosen for his work with the Montreal Impact Foundation.
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This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – The Toronto Raptors kick off the 2024-25 season on Wednesday night when they host the Cleveland Cavaliers at Scotiabank Arena. Here are five things to know ahead of the Raptors’ home opener:
THREE DECADES — It’s the Raptors’ 30th anniversary and the team has plans to celebrate all season, including bringing back their purple jerseys from the mid-1990s. Toronto will also be honouring former players, including Hall of Famer Vince Carter. He’ll be the first-ever player to have his Raptors jersey retired in a ceremony at Scotiabank Arena on Nov. 2.
DEPTH CHART — The Raptors lacked depth to start last season with essentially one player coming off the bench — shooting guard Gary Trent Jr. — with then-rookie swingman Gradey Dick sometimes rotating in too. That short bench was evident with a -4.4 net rating over the season, tied with the San Antonio Spurs for third-worst in the NBA. Net rating is an advanced stat that indicates how much better or worse a team performs on a per-possession basis.
However, a series of trades and four draft picks remade the roster and greatly improved Toronto’s depth.
Point guard Davion Mitchell, power forward Ochai Agbaji and centre Chris Boucher of Montreal will lead the reserves to start the season. All three have serious NBA experience, averaging more than 17 minutes per game in their careers. They’ll be joined on the second unit by centre Kelly Olynyk (back) of Kamloops, B.C., and small forward Bruce Brown (arthroscopic knee surgery) once they’re healthy for a robust veteran bench that can handle big minutes. Ja’Kobe Walter, Toronto’s 19th overall pick in this past summer’s draft, will presumably be Dick’s backup at the two-guard once he’s recovered from a sprained shoulder.
COMMUTERS — Walter was the highest of Toronto’s four picks selected in the 2024 NBA draft in late June. Power forward Jonathan Mogbo (31st), point guard Jamal Shead (45th) and centre Ulrich Chomche (57th) were also selected. Although all four will see some NBA minutes this season — especially Shead, whose dogged defence was a highlight of the Raptors’ pre-season — they’ll also be regulars for the G-League’s Raptors 905 in nearby Mississauga, Ont.
IN-SEASON TOURNAMENT — The Raptors are in Group B for the NBA’s second-annual in-season tournament. They’re grouped with the Milwaukee Bucks, Indiana Pacers, Miami Heat and Detroit Pistons. Toronto’s so-called Cup Nights will begin Nov. 12 in Milwaukee and continue when the Raptors host Detroit on Nov. 15. Their third tournament game will be Nov. 29 in Miami and then their group stage will end Dec. 3 when Indiana visits Scotiabank Arena.
Financial incentive has been added to the NBA Cup playoffs this season, with players on the winning team earning US$514,971 each, while $205,988 goes to each player on the runner-up team. Players who lost in the semis will get $102,994 apiece and players that lose in the quarters will get $51,497.
PORTER SENTENCING — Former Toronto backup centre Jontay Porter will receive face sentencing on Dec. 18 after he pleaded guilty in the summer to a U.S. federal conspiracy crime. Porter, 24, was banned from the NBA after admitting that he helped bettors by intentionally underperforming in games. Prosecutors have estimated that he could be facing a range from just under 3 1/2 years in prison to a little over four years.
This report by The Canadian Press was first published Oct. 22, 2024.
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