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How a recession in Canada could affect you



The average Canadian household could see a $3,000 reduction in their overall buying power in 2023, according to a recent RBC report. This will likely be caused by higher prices and interest rates across the board.

The same report also predicts that Canada is heading toward an economic recession as early as the first quarter of 2023.

Today, I’ll show you how an economic recession could affect your finances and give you a few tips to ensure that you’re prepared for what’s to come.

Ways an economic recession could hurt your finances:

A recession can have several negative effects on your household finances. Some of the key pressure points that Canadians could feel include:

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  • Higher interest rates
  • Higher cost of goods and services
  • It can be harder to find employment (especially for recent graduates)
  • There may be pay cuts, or you may not receive bonuses at work
  • Investment losses from the stock market potentially declining
  • Small businesses may have trouble keeping or getting clients

Below, I’ll cover each of these in a bit more detail so you have a better idea of what to expect.

1. Job loss or reduced hours

When an economic recession occurs, the whole economy suffers. Many businesses may find it hard to retain clients or attract new business. In turn, business owners may have to lay off some of their employees or cut hours in an effort to save money. This could even affect high-performing employees.

If you have a unionized job or a government job, your position may be a bit more secure. However, nothing is promised, so make sure that you do what you can to prove your value to your employer.

2. No bonuses or pay raises

If you’re used to receiving quarterly or annual bonuses, then you may be in for disappointment this coming year. Just as many businesses will have to cut employee hours, they’ll also have to cut additional spending on bonuses and other rewards.

Employees who are scheduled to receive a wage increase could also be affected and may see their raises postponed for the time being. You can ask your employer if this is what to expect and budget your finances accordingly to what they tell you.

3. Harder to find good-paying jobs after university or college

I have some bad news for recent grads – it could be difficult to find employment in your desired career path. Some of the companies you may want to work with will already be laying off employees, which means that hiring new employees is likely the last thing the company is thinking about.

In this case, recent grads may find it easier to join the gig economy, move back in with their parents to save money, or develop new skills and wait for the economy to improve.

4. Lower demand for service-based businesses

If you operate a service-based business such as landscaping, snow shovelling, house washing, or doing custom audio installations, you may see a dramatic drop in your clientele.

As Canadians’ finances are squeezed, many will drop some of the “luxury” services that they were subscribed to. They’ll start taking care of their own maintenance or postponing certain purchases until after the recession.

5. Higher interest rates on credit cards and loans

If you have a credit card with a variable interest rate, then you may see increased interest rates going into 2023. The Bank of Canada recently increased its policy interest rate by 75 basis points to 3.25%, and many Canadians have already seen an increase in credit card interest rates.

6. It will be more difficult to obtain a loan or financing

If you’re applying for a small business loan, trying to mortgage a home, or need to finance a new car, then you’ll likely undergo higher levels of scrutiny. In addition to higher interest rates for all loans, applicants may be subject to more rigorous screening or required to make a higher down payment on the amount they’re financing.

7. Investments could be more volatile

If you’re invested in the stock market, then you may be in for a bumpy ride. Stock prices generally sink during a recession. Investors often lose faith in their investments as companies show reduced earnings, and many people take their money out of the market for fear of heavy losses.

8. Harder to build a business

If you’re thinking about starting a new business, you could run into some difficulties. For one, lenders are less likely to approve small business loans. Secondly, Canadians will be spending less, making it hard to obtain new customers. Lastly, your business expenses and cost of goods may increase as you lose some of your buying power.

During this unstable time, it’s important to save money where you can, spend wisely, and continue to provide value at your job.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.

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DoorDash laying off 1,250 people, about 6% of its workforce – CBC News



DoorDash Inc. said on Wednesday it was cutting about 1,250 jobs, or six per cent of its total workforce, as the food-delivery company looks to keep a lid on costs to cope with a slowdown in demand.

DoorDash went on a hiring spree to cater to a flood of orders from people stuck at home during the height of the pandemic, but a sudden drop in demand from inflation-wary customers has left the company grappling with ballooning costs.

“We were not as rigorous as we should have been in managing our team growth … That’s on me. As a result, operating expenses grew quickly,” chief executive Tony Xu said in a memo to employees that was posted on the company’s website.

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“Given how quickly we hired, our operating expenses — if left unabated — would continue to outgrow our revenue.”

DoorDash has about 20,000 employees worldwide, and “some of the affected employees are based in Canada,” the company told CBC News in a statement, without elaborating.

The company joins a growing list of technology firms, including Amazon, Facebook-owner Meta, Twitter, Shopify and others that have laid off thousands of employees in recent weeks as they brace for a potential economic downturn.

British food delivery company Deliveroo said in late October that sales growth would be at the lower end of its previous forecast. In September, Winnipeg-based food delivery app SkipTheDishes laid off 350 workers.

Earlier this month, DoorDash reported a bigger-than-expected quarterly net loss of $295 million US, raising questions about the growth prospect of delivery firms as economies reopen. The company’s shares have lost two thirds of their value this year.

“Greater emphasis on its cost structure is a welcoming sign, especially given the potential for consumer spending to deteriorate faster than expected,” said Angelo Zino, analyst at CFRA Research.

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'I didn't ever try to commit fraud on anyone,' FTX founder Sam Bankman-Fried says – CBC News



The man at the centre of collapsed cryptocurrency exchange FTX made his first public appearance since the saga began, telling a New York audience on Wednesday that it was never his intention to commit fraud.

Sam Bankman-Fried, the 30-year-old founder of FTX, appeared at the New York Times’ Dealbook Summit on Wednesday, for an interview with journalist Andrew Ross Sorkin about what happened to cause his cryptocurrency firm to collapse into bankruptcy earlier this month.

The firm, once worth more than $32 billion US, entered bankruptcy protection on Nov. 11 after a whirlwind series of days that saw it go from trying to solve a liquidity crunch by merging with a rival, to having that deal fall apart and succumbing to a run on the bank as traders pulled out $6 billion in funds within three days.

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Filings show the company owes almost $10 billion to various creditors, and at least $1 billion worth of customer deposits are missing. 

Among numerous allegations, customer deposits at FTX appear to have been used as capital and collateral for loans for an investment firm called Alameda affiliated with him — an allegation that amounts to fraud, and one that he pushed back against strongly.

‘Deeply sorry’ 

“I didn’t ever try to commit fraud on anyone,” he told Sorkin, “I didn’t knowingly co-mingle funds.”

While he acknowledged mistakes were made, Bankman-Fried rejected repeated attempts to characterize what happened at his cryptocurrency firm as being in any way malicious or illegal.

“I am deeply sorry about what happened,” he said. “I was excited about the prospects of FTX a month ago, I saw it as a thriving, growing business.”

Bankman-Fried has seen his personal net worth evaporate in the debacle, from more than $26 billion a year ago to “close to nothing” today — and he insisted that he doesn’t have any of the money that has vanished.

“I don’t have any hidden funds here. Everything I have, I am disclosing,” he said. 

“I’m down to one working credit card … [and] hundreds of dollars or something like that, in a bank account.”

WATCH | Former regulator weighs in on FTX debacle: 

Former regulatory executive weighs in on FTX collapse

19 days ago

Duration 4:04

Charley Cooper, a former executive at commodities regulator the CFTC, says the collapse of FTX is a good lesson of the inherent dangers of the cryptocurrency space.

He says, to his knowledge, there are enough funds at FTX to give users their money. But his hands are tied since he no longer has a formal role at the company since it entered bankruptcy proceedings.

“I believe that withdrawals could be opened up today and everyone could be made whole,” he said.

John Jay Ray III, the restructuring expert who has been handling FTX’s bankruptcy proceedings has said in legal filings that Bankman-Fried appears to have treated the company as his “personal fiefdom” and has called the fiasco a “complete failure of corporate controls.”

Bankman-Fried has been active on Twitter since the debacle first started, but his appearance on Wednesday marks his first public appearance since the saga began.

There was speculation he was going to appear in person, but ultimately he appeared via video link from the Bahamas, where he lives.

Legal problems

Sorkin asked Bankman-Fried if he did not appear in person because he is worried about being within the reach of U.S. agencies including the Department of Justice and the Securities and Exchange Commission, both of which are probing what happened at FTX.

Bankman-Fried appeared to side-step that question, remarking instead that, to his knowledge, he can still legally enter the U.S. 

“I’ve seen a lot of the hearings that have been happening [and] would not be surprised if some time I am out there talking about what happened,” he said, adding that he “does not personally think” he has any criminal liability to worry about.

That being said, he said his legal team is “very much not” supportive of his decision to appear at the summit and speak publicly about what happened at FTX. His lawyers advice was “to recede into a hole,” he joked.

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Investors focus on Powell's comments which put gold back into rally mode – Kitco NEWS



Today gold futures are trading solidly higher as market participants react to Chairman Jerome Powell’s speech at the Hutchings Center on Fiscal and Monetary Policy, held at the Brookings Institution in Washington. Market participants focused intently on his remarks which alluded to a dynamic change in the Federal Reserve’s monetary policy.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down … The time for moderating the pace of rate increases may come as soon as the December meeting.”

However, it must be noted that the reaction by investors at large seems to focus on what they had hoped to hear which is the Fed will begin to raise rates at a slower pace rather than his nuanced message that the time required for the Federal Reserve to achieve their goal will take much longer.

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“It is likely that restoring price stability will require holding policy at a restrictive level for some time … History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”

As of 6:16 PM EST gold futures basis of the most active February, 2023 Comex contract is fixed at $1784.60 After factoring in today’s double-digit advance comprised of dollar weakness, buyers in the market along with the rollover from the December to February contract month.

Chairman Powell’s speech today diminished the concern of investors as they reacted to other members of the Federal Reserve who have been extremely vocal about upcoming interest rate hikes. Specifically, recent remarks by James Bullard underscored the hawkish intent of the Federal Reserve. Last week he commented on the need for the Federal Reserve’s benchmark rate to go as high as 7% to deal with inflation. This week he said that “the Federal Reserve will likely need to keep its benchmark policy rate north of 5% for most of 2023 and into 2024 to succeed in taming inflation.”

Chairman Powell’s statements were not in conflict in any way with those made earlier by James Bullard and other members of the Federal Reserve in his prepared speech. However, the chairman was able to deliver this message in a much softer tone. Chairman Powell in essence cemented a 50-basis point rate hike at the December FOMC meeting. However, he stressed that slowing the pace of rate hikes would require that the Fed maintains a restrictive monetary policy for a longer period.

Gold’s recent rally from $1621 to just shy of $1800 is a reflection of a major change in the market sentiment of investors. It suggests that investors are focusing intently on inflation and that lowering inflation to restore price stability will be a multi-year process.

For those who would like more information simply use this link.

Wishing you as always good trading,

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