Finance Minister Bill Morneau and those who work for him will not like what they have read in the Bloomberg News List recently.
Last week, the Canadian wing of the news and information machine was launched by US billionaire Michael Bloomberg predstavio to us, a new participant in the short-channel trade, a hedge fund called Crescat Capital and betting against the banks of this country. And on January 22, he published provocative thoughts about Jim Milonas, the strategist at BCA Research Inc.A research team based in Montreal, once used by Stephen Poloza, Governor of the Bank of Canada. "I think we're just on the slope to start a serious recession," Milonas said Bloomberg. "It's not a matter of whether, but when."
Hedge funds and prestigious forecasters are wrong all the time. But when you come across someone who is ready to bet on millions of dollars that your economy will collapse, or when you see that one of the country's most precious firms predicts a recession, it's time to check. I hope this is happening behind the Ottawa scene because there is little evidence that men and women are responsible ready to admit that the economy could go to a rough patch.
To consider This from Morneau on the withdrawal of the Sherbrooke Cabinet in Quebec last week, when they asked him for all the confusion about Brekit: "We do not see this as something that is directly problematic for the Canadian economy, but it is obvious that this is difficult for the global economy. "
I give Morneau a benefit of suspicion and suppose that he simply forgot to talk to living beings at that moment; in his mind, he nevertheless had to retweet the latest news from the prime minister's office.
Canada is a relatively small, relatively open economy dependent on exports and stable financial markets; hard time for a global economy Always problematic for the economy of Canada. Britain is not the United States, and Brekit is not a US-China war, but the turbulent divorce between London and Brussels will hurt Europe, and this will be felt everywhere. It's stupid to pretend otherwise, and voters should be offended that the federal government seems to think we can not handle the truth.
In any case, return to the beginning of the recession. Slowdown is by no means a mainstream. International monetary fund on January 21st shaved forecasts for economic growth in Canada in 2019 to 1.9% compared to the previous 2 percent estimate. Bank of Canada see expansion of 1.7%. Both views are decent, if they are slower than the last few years. "For the Canadian economy, that will be fine," said Pierre Clerouck, chief economist at the Canadian Business Development Bank, in an interview on January 21st. Albert will fight this year because of a crisis in the oil patch. but for the rest of the country, the economy continues to function well, "Clerouck said.
For the most part, recession forecasts come from unreliable sources such as Dag Ford. Prime Minister Ontario said On January 21, the risk that a carbon tax could trigger an economic crisis is "very, very real". It's nonsense, as well as a few billions of dollars that the government could collect from taxes – all of which says it will be returned to taxpayers – Equals with tape $ 2.2 billion of Canada's gross domestic product.
Hedge funds against Canada have a slightly better case. Bloomberg has announced that Crescat with the shortening in Denver shortens banks' stocks because Big Sik will "be the ones who will suffer from what is likely to be a major economic downturn" brought by housing bankruptcy, says Tavi Costa, an analyst at the firm.
The big six will be those who will suffer from what is likely to be a major economic downturn that has brought a failure in housing care
Tavi Costa, Crescat analyst
Maybe. The problem with this hypothesis is to forget that Canadian banks are too big to fail; Under no circumstances would Ottawa allow any of the largest creditors to approach the edge. Much of the housing debt is already supported by the government, and banks now need to have enough cash to act as a pillow during the financial crisis. The chances of an accident are low.
Moody's Investors Service estimates that a housing shock of the size of the one in the US that caused a major recession was contained in Canada because banks would absorb pain, and because the construction industry is relatively smaller. Mortgage losses could amount to five percent of GDP, which would not change Canada's credit rating, Moody's said in his latest assessment of the country.
The credit rating agency confirmed that a "sharp fall" in housing prices would damage spending, which could be considered Milonas' prospects. The analyst at BCA told Bloomberg that Canadian households are transferring too much debt to power through higher interest rates. "We are now in a place where the Bank of Canada will flirt with the launch of the next recession if it is not already," said Milonas.
Surely, all this debt has left Canada vulnerable. How vulnerable it depends on your interest rate perspective. Milonas and others who share his view are convinced that the Bank of Canada will launch a recession led by spending, raising excessive interest rates.
Nevertheless, Poloz, a former BCA analyst, earlier earlier this month said pending borrowing costs were still not verified by the Canadian bank that households could bear higher borrowing costs. The Central Bank sees what pessimists see. The question is, is Morneau? He seems unlikely to tell us even if he is.