Canadian Debt levels Rise Again

The third quarter of this year saw another alarming rise in Canadian household debt reaching record levels.  One of the main policy objectives currently is to limit the risks in a collapse in the Canadian real estate sector, which is looking a distinct possibility.


The latest figures suggest that credit market debt, which includes mortgages is now up to just under 164% of net income, nearly a whole percentage point higher than the previous quarter.    Fortunately two other key indicators –  the ratio of debt to assets and debts to net worth stayed relatively unchanged at 17% and 20.5% respectively, these figures have remained fairly consistent over the last couple of years.

There are real concerns that many families are taking unsustainable risks in order to buy homes especially in the high price areas like Toronto and Vancouver.  The Government has responded by tightening mortgage lending requirements in it’s semi-annual financial review.  It’s happening at a time when the cost of borrowing has dropped increasing people’s tendency to take on more debt.

However the most telling fact is the simple statement that Canadians owe almost $1.64 for every $1 of disposable income that they earned in the third quarter of this year.   This has been confirmed by the National Statistics Agency this week.

There are lots of positive signs though, for instance income generation and business outlook seems positive with the Canadian economy seemingly weathering the economic turmoil better than most countries.  Looking at independant economic reports particularly from foreign news stations like the BBC iPlayer (access here by proxy), all seem to point to a gentle recovery with the high property prices expected to stabilise in the near future.

Obviously raising interest rates would dampen down this rise in consumer credit and possibly reduce property prices too, however this is generally seen as a risky tactic in times of low economic growth and recession.  The Government is hoping to  keep stimulating growth and Canada has a particularly important digital market.  Many entrepreneurs are basing themselves in Canada in order to run North American related digital businesses like the company who market this video making software.

Will Rising Debt Derail African Markets

For many years now investors have started to heavily back both global and African emerging markets.  Slower growth rates in the ‘established economies’ have meant that there is little to attract their money. Places like Africa and South America often looked hugely attractive compared to say investing in Europe or North America.  However market pressures are starting to affect these locations too and investment is slowing.

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The problem is that economic indicators in some of these locations is looking ominous.  Growth rates are falling here too and combined with rising inflation and currency depreciating are meaning that debt it rising too. Take for example places like Zambia and Ghana, two investment favorites on the African continent.    Now there is a worry of rising debt highlighted by the IMF.

Zambia no longer looks like a safe and profitable haven for investment funds, the country has many issues which are dragging the economy back.  Commodity prices are plummeting mostly caused by the slowdown in China which are very important for Zambia.   They also have a host of internal issues – like a huge problem with power the electrical infrastructure simply not able to cope with the requirements of a growing country.  There is also a sense of political instability with  an election due in the following twelve months.

The currency of Zambia has now become the worst performing currency in the world, losing over 80 percent of it’s value over the year.  There are numerous examples in the Africana economy of countries following a similar pattern to this and none of them are good.  The lack of confidence in the economy and it’s currency is bound to affect investment and such growth will become something unachievable.

The story is similar in Ghana,which was the fastest growing economy in 2011.  However that strong growth has now stalled and the country has actually needed external assistance in the last few months.  There are a host of reports and studies available on line although to access on an iPad, you may have to spoof your IP address.

Although falling commodity prices have caused a lot of the problems there is still a common problem shared by these advanced African economies – the lack of strong and adaptable policies needed to react to external changes.  It’s easy to be successful in the overall context of world growth but when that stalls it’s important to adapt your own fiscal policy.  Very few of these economies have done this continuing to drift on in the same way, however without growth debt will rise quickly if you don’t check expenditure.

The success of these economies have obviously caused wage pressures, which have filtered into the economy.  This has also added to debt pressures especially and meant huge financing gaps in all sorts of sectors.

Further Reading

UN Votes for Vital Debt Restructuring Guidelines

Whenever debt becomes unsustainable it causes chaos, businesses fail, people lose their homes and livelihoods. There are few winners amongst both debtors and creditors which is why most societies have laws and guidelines for dealing with these situations. Mostly they help minimize the effects and enable a fair resolution on all sides. Often these help people hold onto their homes, businesses keep trading – not always of course but there is at least some sort of protection.

This however has not been the case for sovereign or state debt, the lack of any fair principles has caused chaos, economic and political instability. The latest example is of course Greece, where the crisis has deepened while the arguments go on. The problem is that the lack of agreement hurts both sides – economic output falls due to uncertainty which of course means that the creditors are even less likely to see their money repaid.


However last week we saw what looks like a genuine improvement for nations trying to deal with unsustainable debt problems. The United Nations general assembly has approved a set of guidelines and principles which can be applied to resolve disputes between countries and their creditors. It was passed almost overwhelmingly with 136 voting for, 41 abstaining and only 6 against. The primary hope is that the process will help protect countries from having to make destabilising cuts in order to satisfy aggressive creditors.

The principles are as yet non-binding but perhaps signal a watershed in how bankrupt countries are plunged into disarray in order to meet creditor demands. Nation debt has caused misery to millions across the planet in numerous situations. From Argentina’s default more than a decade ago to ‘vulture funds’, countries like Iceland, Ireland, Greece and El Salvador have also suffered from financial crisis due to debt issues.

It is disappointing but probably not surprising that the few nations which voted against the proposals were the powerful and rich creditors such as the USA, Germany, and the United Kingdom. Even the European Union collectively abstained despite various please for it to join the pro-group.

Further Reading:

UK Media

Choosing A Fast VPN

Will Greece Start a Euro Collapse?

Well today is Sunday the 5th July, the day after the anniversary of US independance but certainly today was an event of much more importance to the future of a European Union.  The Greeks have voted no to the current offer from the EU of more money based on specific austerity measures.

It’s a difficult one to call, at the moment I’m watching the news on the BBC and there are pictures of Greeks dancing in the street at the result. I’m watching from a cafe in Western Paris known for it’s fast internet access even with a VPN to help watch BBC News live – available here.

Greek Exit From Euro

Greek Exit From Euro?

So what’s next? Does the Greek Government now have a mandate to negotiate real change in the debt restructure? Well the reality is probably not, Greece is unable to function for more than a few days without a serious cash injection. It is certainly not a position of strength, although many would argue that a democratic mandate from a few million Euro citizens should count for something.

There are many Euro officials, probably not easy to find now, that stated that a ‘No’ vote was basically a vote to leave the Euro and rejecting the terms of the creditors. The problem is that when the amounts are this large creditors are not really acting from a position of strength.

You can’t send in a firm of bailiffs to a country to recover a few billion euros, after all where will sell a few hundred thousand flat screen TVs with all the settings set to Greek. The reality is that a default and exit for Greece will be devastating for both sides, so I feel that a compromise will definitely happen. You can get really upset about someone not paying you back 50 billion euros, but losing another 200 billion euros as your currency and economy crashes is not going to cheer you up.

Time will tell on what happens, at the moment I’m treated myself to buy IP address, so that I could watch all the different News sites and listen to experts across the world. There seems to be little common consensus, but the reality is that the amount that will be wiped off Euro stocks, the economies of the Eurozone and many other areas, will be many times more that the Greek debts will mean that someone will give ground. My money says that Greece have played a very shrewd game and will benefit from this no vote, however I could be completely wrong.

Trade Figures Point to UK Recovery

At any given time, for most of the European economies you can find a positive economic story and a negative one.  It’s particularly valid for the United Kingdom where speculation and predictions veer widely from one extreme to another.


This week we’ve seen a lot of positive news around increasing trade and negative ones warning of credit problems caused by  the spectre of the European Referendum whenever that might occur.  However it’s best not to dwell on the fears of the market as they are largely overblown so far into the future.

So what about the trade news?  Well the positive signs are coming from the size of the UK’s trade deficit which finally seems to be heading downwards.  In fact it’s falling a significant amount with the March figures falling from 3.1 billion pounds to a little over 1 billion.  A huge fall in one of the UK’s problem areas – the trade deficit is estimated to knock nearly a percentage point from the quarterly economic growth forecast.  So it is expected that this good news should filter through to the economic growth indicators for the second quarter of 2015.

It is the April figures that outshone the rest, and some optimists have predicted that instead of net trade being a drag on economic growth, they might in fact contribute to them in the future.    This would be a huge surprise for most economists and perhaps point to a great increase in confidence particularly in manufacturing and their export markets.

UK growth will likely still be reliant on domestic demand, the improvement in most Eurozone economies over the last quarter will hopefully bring some positive benefits to the UK too.  There are many signs that export volumes are increasing at a pace, this will partly be fueled by the increase in confidence in British companies over the last couple of years and some would suggest the shock Conservative majority.

The overall figures suggest that imports are falling rapidly and the exports are climbing. The fall in imports was largely due to other factors though particularly the falling commodity prices particularly oil – this also helped cut manufacturers costs and make British exports more affordable.

For further information on the UK economy, see the UK press and media.


UK Proxy Service –


Are Prospects Improving for the Canadian Economy

Canada has had a rough few years, which might surprise a lot of people who don’t watch international movements of economies. It initially weathered the global 2008 crash better than most economies mainly because it wasn’t as heavily reliant on the banking sector and they weren’t required to bailout institutions to the extent of the US and European governments.


However they have been impacted by the global slump in economic prosperity partly because this has caused such a fall in oil prices. There are many countries across the world who’s economic success is currently linked directly to the oil price and Canada is definitely in that category.

However economists are particularly worried about the growth of private debt that has been occurring despite this economic slowdown. Some experts think that Canadians have continued to spend and borrow too much over the last few years. House prices and the levels of debt have grown consistently and Mark Warner the previous governor of the Bank of Canada consistently warned of this while he was in office.

The figures are worrying, in March a report stated that Canadians hold about $1.32 for every $1 of disposable income in 2014, this represents a record high for Canada. Some economists are not worried about these numbers arguing that net asset values and worth are also rising steadily to support these debts.

The standpoints vary depending on whether you think that you compare the level of debt to the level of income or net worth.

Further Reading

BBC Reports Canada Economic Development

Access via here –




Is the Eurozone Finally Recovering?

It seems like years since we had some genuinely positive news about the eurozone’s economic outlook.  So for many the news that the economy of the eurozone has grown by 0.4% in the first three months of the year was well over due.  The official figures show that the recovery is beginning to speed up slightly, although many forecasters had been predicting a slightly larger rise than this.


The trend is encouraging though with this fastest quarter growth results for a couple of years.  The growth is still slow but it’s looking sustainable and showing the possibility that it may increase.

There were other figures released before then which are of interest to eurozone economists.  Germany’s economic growth was actually below the average at 0.3%, which represents a significant slow down from the previous 0.7% growth figure for the last quarter of 2014.   The positive signs in the German economy in the areas of private consumption and investment in construction which both rose, were countered by a surprising fall in German exports.

Inflation in Germany is under control and is under the current ECB target of 2% or under.  Most European countries have fairly well controlled inflation in fact the concerns are usually around the level being too low.  An interesting economic documentary covered the risks of deflation, you can still catch the programme on the BBC iPlayer application although you’ll need to connect through a UK proxy to view it.

One of the bigger surprises was the long awaited improvement of the French recovery.  The economy also hit a two year high for growth with it rising an impressive 0.6%.  There are reports that confidence is returning to the economy with French consumer spending growing by 1.6%, although some of this will be due to the lower oil prices and the relatively weak euro rate.  Industrial production levels are also on the rise, with a four year high being recorded.

Other countries are also fairing better with Italy also recording growth figures, for the first time in several years.  Spain topped the Euro growth charts with a recorded 0.9% improvement in it’s economy, the fastest rate for eight years.

How much of this is a result of external factors like the fall in oil prices and the weak currency is difficult to tell.  There is no doubt that there are several factors which are helping plus the increased level of fiscal stimulus from the European Central Bank. There is little doubt that the majority of this growth is being fuelled by domestic demand which would be similar to the initial recover in the UK economy too.

John Usain


IMF States Economic Recovery at Risk

It seems like these comments come along every week, in fact you’d probably manage to find IMF comments to support most divergent policies if you looked hard enough.  Although their latest statements regarding the economy rings very true with us on

It’s focussed not on our national debt for once, but on the household debt figures – the amount of debt that an average British household has to cope with.  Just like any sort of debt, it has to be serviced and can have a huge effect on our daily lives and the economy in general.  It’s quite simple really, an economy grows if it can stimulate demand and keep it’s output growing.  However domestic demand is obviously going to be related to our spending power, of which Britain has a problem.


Families in the UK simply have more debt than the vast majority of developed countries, in fact the only comparable country is Portugal.  This is a country which has already sought emergency funding because it nearly ran out of money, it’s not a club that the UK wants to be a member of.

IMF suggests that household debt is 87% of GDP in the UK, compared with 82% in Portugal, 72% in Spain, 55% in Germany and less than 40% in France and Italy.

So are UK families excessive consumers?  Do we wander around on credit fuelled spending sprees and consistently live beyond our means?  Well the answer is no, not particularly our debt levels are largely due to our obsession with home ownership.

Houses are expensive in the UK, largely due to the laws of supply and demand.  The UK simply doesn’t have enough houses and demand is always very high. it’s simply hard coded into our identity – own your own home at all costs. Prices are unlikely to fall in the short term at least until some serious increases in supply are undertaken which also seems unlikely.

Just take a look at the UK media, get yourself a subscription to a proxy service like this and have a look at the BBC and other UK TV services.  You’ll see evidence of the UK’s obsession with home ownership pretty quickly, thousands of hours every week with buying, selling and upgrading property.

The problems is that this particular desire is extremely expensive, house prices are amongst the highest in the world and even the process of buying a house is expensive. Yet we all try and do this, an inevitably take on huge levels of debt in order to own our own home. Never mind property costs, first you have to deal with estate agent fees, removal costs, and stamp duty – average cost of moving or buying – about £12,000 currently.

UK consumers are unlikely to be able to either save enough or spend to fuel a domestic demand driven recovery with these sort of costs to contend with.  But until we change our outlook about owning property then it is likely that household debt is likely to stay extremely high.

Jennie Calwood