There's a better barometer for determining Canadians' financial fragility - Financial Post Op-ed
Over the past 25 years, Canadians’ household debt has increased steadily as a share of their disposable income. During this time, and especially since the financial crisis, they have often been told their debt levels were unsustainable and that a day of reckoning was fast approaching. And yet that day has not come. One reason why seems clear: for the most part over the past 25 years, the amount Canadians spend servicing their debt has not changed as a percentage of their disposable income.
In a recent C.D. Howe Commentary, we argue that it is primarily this “debt service ratio” (interest payments plus reimbursement of principal divided by disposable income) that determines households’ ability to make their payments at…
Alberta’s government will table its 2020-21 budget on Feb. 27. Its previous budget in October mapped out the government’s fiscal path to return to budget balance by 2022-23, including annual spending targets by program area. The government’s freeze on topline program spending translates into real per capita reductions in spending, particularly in health and education.
These targets are necessary to bring Alberta’s program spending in-line with nationwide benchmarks and to return Alberta to a sustainable fiscal path. However, while the government laid out its long-term plan in October, this budget must clearly specify measures for restructuring spending.
The challenge will be to implement spending reductions in the face of…
In Canada the financial services sector weathered the 2007-08 global “credit crunch” better than it did in many other developed countries. One argument for why, certainly in contrast to the U.S., was the smaller size of our “non-bank financial intermediation” (NBFI) sector, more commonly referred to as “shadow banking.” But rapid growth in the shadow sector since the crisis suggests this resilience might be under threat. What does that mean for monetary policy, financial stability and regulation? As it turns out, a lot.
Broadly speaking, the shadow sector includes investment funds, private lenders like mortgage finance companies, companies that offer private-label securitization like asset-backed securities, and more. Shadow…
