Canada – The First Nation To Step Out Of The Recession

Good News – Growth Is Here!

First Published Date: July 26, 2009

It is slightly too early to say that the recession is in its final throes, and those of us who wish to avoid tempting fate would never dream of creating such a hostage to fortune, but the announcement by Finance minister Jim Flaherty on Thursday that stability and recovery have arrived must at least be a positive sign for those of us who had begun to wonder if the positive forecasts blowing around were part of some mirage. Of course, until we see two consecutive periods of stability and growth it will be hard to say for sure that the recession is receding. At the present time, however, it is good to hear the central bank issuing positive news on growth.

The projections by the Bank of Canada are that after three consecutive quarters of contraction in the national economy, this quarter will see growth of 1.3%. The figures may not be earth-shattering, but it is what they represent that means good news for the country. After a sustained period of contraction, any quarterly growth can be seen as a sign that things are warming up. With better growth, the opportunity for new jobs to be created will be higher, and Canadians left unemployed by the effects of the recession can begin to look ore hopefully for jobs.

This means a welcome vote of confidence for the reading which argued that due to Canada’s more reserved economic approach, the nation would be among the first to step out of the recession and do it in a stronger way. It does not, however, mean that the global recession is over or that a domino effect will see growth kick off in the United States, Europe or Japan. Indeed, some of the financial systems in the world’s other countries may cause more ripples in the global economy for a while yet – meaning that international trade may be stymied somewhat.

The central bank has been keen to point out that the recovery in Canada is, as yet, in its infancy and not something to be taken for granted. This may not yet be the time to take even a calculated financial risk. The financial recovery is at the moment still reliant on stimulus spending from the government – the equivalent of a sportsman whose knee injury has healed but still requires crutches.

The US, meanwhile, is believed by its bankers to be on its way to recovery, with the pace of decline slowing and growth predicted to begin by the end of the year. As Canada’s nearest neighbour this will undoubtedly affect the recovery here, so it is worth keeping an eye on the financial news from south of the border. Although the economy is still vulnerable it is looking in much better shape than a year ago. The global recovery may yet be painfully slow, but the good news is that it is at least set to happen, and that the contraction is beginning to die down. Given the doom and gloom in the immediate aftermath of the credit crunch in 2008, that we may be out of recession by the end of 2010 is positive news.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on July 26, 2009.

Global Credit Crisis and Canadians

Canadians Showing More Caution On Borrowing

First Published Date: March 27, 2009

It is becoming clearer that the average Canadian is cutting right back on borrowing as the global credit crisis continues to exert its hold on the purse strings of both businesses and the individual. In a world where money is now becoming more of a luxury item, people are becoming much more likely to save than to go out and spend money that they do not really have. What is becoming more and more obvious with every new set of figures that is released, is that more and more people are coming around to the idea that this credit crisis is not something that will be here today and gone tomorrow.

It is therefore no great shock that people are seeking to feather their nests in the current climate. With the best will in the world, no one really seems to have any firm idea when things are going to be better. So while people at the beginning of the credit crisis may have taken a more gung-ho attitude and resolved to ride things out without making major changes, it would take a brave or foolhardy individual to look at the pronounced slowdown and assume that things will improve tomorrow, next month or even next year. In such a climate, the only thing that many people feel they can do is hold on to what they have and pray for a boost.

With the figures for 2009 likely to show that the market growth globally for this year has slipped into the negative numbers – the first time that it has happened since the end of the Second World War – there is an absolute necessity to live according to the realities. This in turn is posing problems for governments, though. In order for markets to recover, it is essential that consumers are spending. If consumers are to spend, it is necessary that banks will allow them to borrow. With banks going to the wall in many countries, it is unsurprising that those who remain are keeping a firmer hold on the purse strings. It all adds up to a apocalyptic vision.

Fewer people are buying homes at the moment, and now it emerges that less money is going on retail too. When you are not sure that your job is recession proof, the prospect of speculating in order to accumulate is naturally less attractive. So what does the future hold? If people do not get spending, how will the markets ever recover? What we are likely to see – and there is not a period on this – is a slow, cautious improvement when it happens, which will gradually pick up pace as people gain confidence in the markets. We must hope when this does take place that banks and governments have learned lessons from the chaotic situation which has led us where we are now – and make the changes that need to be made.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Mar 27, 2009.

Credit Crisis, Canada, Real Estate, and Mortgage

Canada Mortgage

First Published Date: May 9, 2015

Canada has not been immune to the credit crisis that has hit the world over the last eighteen months, but there are many inside Canada and out who feel that of all the major developed nations things have been handled better in Canada than anywhere else. This is down, in no small part, to a sense that Canadian banks have had more sensible lending policies and that panic is something that is not a major part of the Canadian psyche. A recent IMF report has said that Canada is actually specifically well placed to handle any further economic crisis and has applauded the $400billion stimulus plan unveiled in January as being the right amount at the right time. In addition, Canada has been recognized as the last country to succumb to the crisis and is expected to be the first to lift itself out.

What this means for those hoping to buy a house in Canada is that there may never be a better time, if you currently have the borrowing power, to buy one. By taking advantage of the effects of the crisis – admittedly something that causes a moral issue for many – one can find some bargains that will begin to increase in price once the clouds start to lift. The question is, where should you go in order to borrow the money it will take to buy? With Canada less marked than other countries by the crisis – but marked nonetheless, no doubt – the banks are more willing to lend to those who can show credit worthiness than banks in other countries.

Before you decide on a mortgage, the first and most important step is to shore up your own position. This can be done chiefly in two ways. Firstly, it is vitally important to save cash for a deposit, or down payment. If you can place this in a high-yield savings account, so much the better. By putting aside more money, you will cut into how much money you have to borrow when the day comes. This can dramatically change how much you have to pay back, and bring a number of properties within your reach that would have been fantasy purchases otherwise. It will take a bit of time to make significant savings, but the base that this gives you and the difference that it makes will be well worth the wait.

In addition, you should live on credit for a while. Yes, you read that correctly, but do not make the mistake of thinking that this is advice to go crazy with your Mastercard. The reason for this possibly controversial advice is actually fairly sensible. If you make purchases on your credit card and pay them off immediately, you build up a strong credit rating. And the people with the better credit ratings get better mortgages. By  paying off credit card purchases the moment they hit your balance, you will avoid having to pay interest, so there is no penalty for use. It’s a more roundabout way of doing things, sure – but it’ll get you into that house quicker! Try to make sure, too, that you do not have high balances on any lines of credit when you apply for your mortgage – this will badly squeeze your borrowing power.

Boring is the new Sexy

Canada Will Emerge From Global Crisis First

First Published Date: April 25, 2009

For a long time now Canada has had to put up with jibes about being a boring country. This is something that Canadians have come to live with in a sense. Being called boring isn’t nice, exactly, but there comes a point where you cease to care what people think about you based on your nationality. Equally, ask an Irish person if it bothers them to be called “stupid”. This clichéd image of friendly, but drunken and unintelligent Irish, people was common currency for years. That Ireland had turned out Oscar Wilde, George Bernard Shaw and W.B. Yeats was ignored. Now Irish people are happy for someone to underestimate them – as it means the advantage is with them.

Equally, while Canada was carrying on being “boring”, other more “exciting” nations were mortgaging their futures on the wave of credit that never seemed to slow at all. While the banks were taking on customers in their millions, and those customers were buying expensive goods, houses and cars, there may well have been many people who looked at Canada from the outside and considered its financial caution to be boring and pedestrian. But looking at Canada’s financial position, which has attracted somewhat envious compliments from US President Barack Obama, who would swap places with the “exciting” countries now?

Yes, there is a recession in Canada, and it will not be here today, gone tomorrow. There are hurdles to clear, and right now it is a little more difficult to get a home loan than it was a few years ago. But with the government’s financial policies having stipulated caution while all around were deregulating and hiding behind credit – very shaky credit at that – the Canadian banks have not required bailouts like in the US, Britain, Germany and elsewhere. This means that while those countries are still recovering from the battering that their economies took, and looking at a tax burden that could persist for some time, Canada will emerge in a better position.

Finance Minister Jim Flaherty has recently expressed an opinion that will probably write a thousand headlines between now and the end of the global crisis. Speaking to a seminar in Chicago on financial literacy he gave the opinion that “boring is the new sexy”. There are very few countries in the world that would not love to be where Canada is right now, and fewer still who wouldn’t like to be where Canada is going. Having succumbed last to the crisis, Canada is due to escape it first – and then, the possibilities are intriguing.

Sure, nothing is guaranteed in this climate, and even if there are positive signs, it would not be a typically “Canadian” attitude to crow about the relative strength of our position. But if the current global situation shows us anything, it is that being “boring” while everyone else is counting on the goose to continue laying golden eggs can be a very wise decision. Just watch the other global economies once they are back on their feet. They’re likely to be a lot more “boring” than before. Especially now that they know how sexy it is.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Apr 25, 2009.

Canadian Banking – World’s Soundest Banking System

Canadian Banking System Gets A+

First Published Date: January 4, 2009

Good news if you do your banking in Canada – you are storing your money in what is accepted to be the safest banking system in the world, ahead, even of banking paradise Switzerland. This means that even in the current global financial crisis, there is no cause to worry about the safety of your banking deposits, and that putting your money into a Canadian bank is as close as you can get to a guarantee that it will be handled in the most efficient way imaginable. After the annual study by the World Economic Forum polled bankers worldwide, Canada came out on top – well ahead of near neighbours the United States, which came in 40th.

The World Economic Forum polls its members every year, asking them to award marks out of seven for the soundness of a countries banking system. Canada polled a remarkable 6.8 out of seven, ahead of the previous leader as well as other notables such as Sweden, Luxembourg and Denmark, all of which are known for unshakeable fiscal probity.

This is news worth shouting about, as banks in many other countries have had to rely on government bailouts while others have gone to the wall. Canadian Finance Minister Jim Flaherty is a man with plenty of reasons to smile. As his counterparts in supposedly more prestigious economies flounder against a seemingly unstoppable wave of financial doom, Flaherty is presiding over a competitive economy with a lessening level of debt. As other governments borrow to escape the meltdown, Canada’s surefootedness is likely to reassure banking customers.

Canada has a progressive banking system too. It is a lot less stressful to try and get hold of your money here, with more Automated Bank Telling Machines per capita than any country in the world. Anybody who has ever spent time in a city or town with a dearth of ABMs can tell you that it’s a frustrating experience trying to withdraw money that you know you have. Sometimes it’s like they don’t WANT you to spend your money.

Electronic banking plays its own part in this most efficient bank system. Canada has the highest penetration levels worldwide of debit cards (enabling you to make use of your account even if you can’t find one of the country’s many branches or cash points), Internet banking (so if your bank doesn’t have one of the many branches nearby you can still conduct any transaction you care to name) and telephone banking. It’s a quite impressive story overall, to be honest. Knowing that your money is safe and that you face the fewest restrictions imaginable should you wish to make use of it means Canada should be in a position to ride out the crisis and come out the other side ready to compete.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Jan 4, 2009.