China Is Not the Sole Economy Engine and India Bright Spot

China Should Not Be The Sole Global Economy Engine

First Published Date: August 3, 2016

In a recent roundtable talk with six global finance leaders, Chinese Premier mentioned that China should not be the only growth engine to carry the global economy. China is still a developing country and should not be responsible for the major world responsibilities.

International Monetary Fund (IMF) recently trimmed global economic growth to 3.1 percent for 2016 and 3.4 percent for 2017 and China’s GDP growth for 2016 to 6.6 percent. All these numbers were reduced by 0.1 percent to reflect recent global conditions.

India Is A Bright Spot

On the other hand, IMF reports that India is a bright spot, as it has the fastest growth rate at 7.5 percent in the global economy. This growth pace should be steady for at least the next three years.

A stable and peaceful political environment is an advantage India enjoys when compared to other countries such as Brazil, China, Russia, and Turkey. Also, foreign investments in India are higher than any other country’s, including China.

Global Economy Consuming Less Energy

The U.S. Department of Energy reports that the consumption of energy such as coal, oil, gas, and even renewable energy is gradually decreasing. This is a good example of how the world is getting better at handling climate change.

Also, carbon emission is decreasing as global economies switch towards renewable energy at a faster pace.

Urgent Call for Global Economies

IMF recently issued an urgent call to implement more growth-boosting policies to put global economies on the right track. IMF suggested the world’s 20 largest economies should maintain relaxed money policies and stay ready to implement contingency plans should things turn worse.

However, the U.S. Treasury believes such a crisis response is not necessary because conditions seem to be improving.

What Is Employment Insurance (EI)?

Employment Insurance

Published Date: Sep 15, 2010

When something bad happens, employment-wise speaking, there is often the worry of how you are going to pay your bills. Thankfully, in Canada, there is something called Employment Insurance, which is there to help you when you need help after losing your jobs.

Employment Insurance has not always been the name of the program. Until 1996, it was called Unemployment Insurance. However, it was changed to Employment Insurance because of the negative connotations associated with the word unemployment. Canadians who work within the country pay 1.73 percent of their earnings in return for benefits if they lose their job. There used to be a government contribution to the program but that was stopped in 1990.

Depending on how long you were at your previous job, the amount you receive for employment insurance and how long you get employment insurance will vary. Your employer will contribute 1.4 times the value of the premium you pay.

The amount of employment insurance paid out around Canada varies by the region. Roughly half of all employment insurance premiums are paid out to individuals in Ontario and the Western Provinces. However, employment insurance is very important in the Atlantic Provinces where there are many season workers who work in fishing, tourism and forestry. During the winter there is no work, so those who work in seasonal industries need something to help pay the bills until their work season begins again. To help with this, employment insurance has special rules for those who fish for a living.

Employment insurance will also pay for things like parental leave, maternity leave, and compassionate care leave and illness coverage.

Employment insurance first came about during the Great Depression in 1935. The odd thing was that the Supreme Court of Canada ended it because it was deemed unconstitutional. The constitution was amended so that employment insurance could fall under federal, and not provincial, leadership. The first system then came into being in 1940 and Canada was the last major western country to implement a system of employment insurance.

Changes to the system came about in 1971 under Prime Minister Pierre Trudeau when he made it easier to get. Under the new system, only needed to work for 10 weeks to get benefits for 42 weeks. At this time, the program was also opened up for sickness and maternity leave, which would run for 15 weeks.

However, from 1971 to 1990, the government slowly reduced its contributions until it was no longer contributing. The employment insurance system was then cut back on in 1990, 1993, 1994 and 1996 by the ruling governments, increasing the time someone had to work in a seasonal job until they could earn money. In 2001, the federal government increased parental leave from 10 to 35 weeks and gave workers employment insurance for compassionate care leave.

Currently, the system costs the country $22.7 billion per year.

No matter the cost, it is an important thing for individuals who need help after they have lost their job, suffered a death in the family, or are welcoming a new member to the family.

Global Economy Updates

World Economy

First Published Date: May 8, 2016

The recent global economic outlooks provided by IMF forecast a grim picture for the upcoming months. The global economy will continue to recover, but at a slower and fragile pace.

Due to uncertain growth and confidence, advanced economies have deteriorated economic growth in the near future. Also, due to declines in commodity and prices, emerging economies will continue to suffer along with commodity-exporting countries.

As China is moving towards an economic growth based on consumption and services, there will be spills along the way that could affect other countries, especially emerging markets and developing economies. Emerging markets also suffer from slowing capital inflows and accelerating outflows.

Countries should emphasize accommodation monetary policies supplemented by complementary fiscal policies to boost economic growth and output.

However, another report published by Oxford Economies indicated that the global economy is no longer likely to fall into a full recession due to a surge in the global stock market, stable oil prices, and surging commodity prices. Economy health is at a better position now than it was in early January when oil prices were heading towards $20 a barrel and the stock market was in a free-fall.

The US Federal Reserve also keeps maintaining its current interest rate until at least June. Faith in the strengthening US economy makes the Fed believe that evolving economic conditions will make it possible to increase interest rates gradually in the future.

Declining Canadian Dollar Has Positives Too

Canadian Dollar Slides

First Published Date: January 24, 2016

The Canadian dollar is in a declining mode and hit a 13-year low recently by hitting below 69 cents. This happened last in 2003. There is no sign of moving into positive territory in the short run, as the oil price is staying around or below $30 US.

As a wide array of global issues are unfolding, it’s hard to see anything positive enough to push up the Canadian dollar any time soon. China’s sluggish economy, Iran’s stepping into the global market, and the Syrian crisis are only a few to mention.

However, it can’t be all bad for a dollar that’s at its decade low. Yes, a low dollar means paying more at the groceries, travelling abroad less, and shopping less online and outside Canada, but it has some good sides too.

The film industry, Hollywood North, has experienced an accelerated incoming flow from Hollywood to make more movies due to the low dollar.

The tourism industry is also going through a boost as more visitors are coming in from the USA and across the globe. From hotels to dining, and everything else, the Canadian dollar makes much more sense now than before.

Shopping malls across Canada are experiencing more foreign buyers than ever before. In the past, Canadians are the one to cross the border for bargains, but the picture has reversed, as Americans are finding things a lot cheaper with currency conversions and shopping in Canada makes sense.

Industries such as animal agriculture, mining, goods and services, automotive, and anything related to manufacturing industries will be able to export more as foreign buyers will find cheaper prices more attractive due to the dollar’s nosedive.

As the Canadian dollar goes through its cycle, just like everything else, Canadians are embracing and adjusting to deal with the dollar’s peak and dips.

The Canada Pension Plan (CPP) Faces Depletion?

The Performance of the Canada Pension Plan

First Published Date: June 11, 2010

The Canadian Pension Plan is very important to many people because it serves as a good chunk of their monthly income when they retire. To ensure that the Canada Pension Plan always has money in it, the Canada Pension Plan Investment Board oversees the plan to ensure that it keeps growing to accommodate the growing population of Canada. Under the direction of the Finance Minister at the time, Paul Martin, the CPP Investment Board was created in 1997 as an independent organization that monitors the funds in the CPP and invests them. Every three months it reports on its performance and a professional team oversees the operation of aspects of the CPP fund, while also planning out the direction of the investments.

In order to provide more money to those who will be retiring, especially baby boomers, the Canada Pension Plan Investment Board decided to use 45 percent of its assets to invest in securities located outside of Canada, including in Western Europe and the United States. The Investment Board has also been investing heavily in emerging markets because, as the board states, Canada as one market cannot accommodate the future growth of the pension plan.

According to most estimates, to sustain the population in 2020 that will be using the Canada Pension Plan, the CPP must grow at least 4.1 percent per year. By 2010, the CPP Investment Board had grown to $147 billion. The next 40 years also see some benchmarks for the CPP Reserve Fund that the CPP Investment Board hopes to achieve to accommodate a growing population:

·      2015:  $200 billion

·      2030:  $592 billion

·      2050:  $1.55 trillion

The performance of the CPP has varied in the past few years, as has the CPP Reserve Fund, which grows based on the contributions by Canadians. In the past few years, the CPP Reserve Fund has grown and fallen over the years, seeing a rate of return that was highly fluctuating:

·      March 2003 Total Value: $55.6 billion Rate of Return: -1.1 percent

·      March 2004 Total Value: $70.5 billion Rate of Return: 10.3 percent

·      March 2005 Total Value: $81.3 billion Rate of Return: 8.5 percent

·      March 2006 Total Value: $98.0 billion Rate of Return: 15.5 percent

·      March 2007 Total Value: $116.6 billion Rate of Return: 12.9 percent

·      March 2008 Total Value: $122.7 billion Rate of Return: -.29 percent

·      March 2009 Total Value: $105.5 billion Rate of Return: -18.6 percent

The large fall in 2009 was because of the recession that hit the world due to the credit crisis that began in the United States. However, the increase in 2010 was expected to be roughly seven percent, which would allow the CPP Reserve Fund to increase for the first time since 2008.

The Canadian Pension Plan needs to grow at a continuous rate to ensure that there is enough money available for the growing retiring population in Canada. With millions of Baby Boomers retiring and not enough of subsequent generations to prop up the Pension Plan, the Pension Plan needs to grow to ensure everyone has enough money when they retire using the Pension Plan. As long as there are no more years like 2009, it should continue to grow to meet those needs.