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People walk past homes for sale in Oakville, Ont., in this file photo. The IMF says CMHC mortgage insurance exposes the government to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital. (The Canadian Press/Nathan Denette)
Further measures should be considered to encourage appropriate risk retention by private sector and increase the market share of private mortgage insurers.
International Monetary Fund
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The International Monetary Fund says Ottawa should consider phasing out insuring home mortgages through Canada Mortgage and Housing Corp.
The advice is contained in the IMF’s latest economic report card on Canada, which projects modest economic growth of 2.25 percent for the country next year.
Such a recommendation, surprising from an international financial organization, appears to side with Finance Minister Jim Flaherty, who has recently questioned whether the federal government should be in the business of insuring higher-risk mortgages at all.
Some analysts have credited the system for providing much-needed confidence in Canada’s housing sector during the 2008–09 crisis, which many believe was sparked by a crisis in the U.S. mortgage market.
The IMF concedes that the current system has its advantages for stability. But it says it also exposes the government, or taxpayers, to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital.
“We think banks lend too much to mortgages and too little to small and medium enterprises,” Roberto Cardarelli, the IMF mission chief for Canada, told reporters in a briefing in Toronto.
“We suspect the fact that banks may benefit from government-backed insurance on mortgages … it sort of makes it easier for banks to do mortgages than other kinds of lending which, presumably, we think, is going to be more useful for the real economy.”
CIBC deputy chief economist Benjamin Tal says he believes the advice may be appropriate for the U.S., particularly prior to the crisis, but not necessarily for Canada, where the mortgage securitization market is a relatively small slice of the financial pie. CMHC can carry a maximum of $600 billion mortgage loan insurance on its books.
“In this case size matters,” he said. “It is true when securitization dominates the market it is not a very healthy thing, but when it is part of a normally functioning market, it actually helps the economy” by contributing to low borrowing rates and liquidity.
The Washington-based financial institution said further measures should be considered to “encourage appropriate risk retention by private sector and increase the market share of private mortgage insurers.”
It cautioned, however, that if any structural changes are made, they should be gradual to avoid unintended consequences.
The IMF report, released Wednesday, forecasts that Canada’s economy as a whole will start benefiting next year from a pickup in the U.S. economy, leading to greater demand for Canadian exports and renewed business investment.
In essence, the scenario is identical to the one predicted by the Bank of Canada, which also sees growth rising from the current 1.6 percent level to 2.3 next year.
A slightly more positive estimate was issued Wednesday by the Ottawa-based Conference Board of Canada, which is projecting Canadian real GDP will grow 1.8 percent in 2013, 2.4 percent in 2014, and 2.6 percent in 2015—assuming strong growth in the United States.
The Bank of Canada forecast holds that the risks are balanced—meaning there is as much chance the projected growth rate will be higher as lower.
But the IMF warns, however, that the risks to its outlook are primarily on the downside. The main reason, it says, is that it might be wrong about the U.S. economy rebounding in 2014.
“Renewed political standoff (in the United States) over spending appropriations and the debt ceiling and a faster-than-expected increase in long-term rates in the context of exit from quantitative easing could negatively affect the U.S. recovery and hence demand for Canadian exports,” the IMF said.
“Protracted weakness in the euro area economic recovery and lower-than-anticipated growth in emerging markets would also hurt the prospects for Canada’s exports, including through lower commodity prices,” it added.
On the domestic front, the IMF said the long period of low productivity growth and strong Canadian dollar may have left a deeper dent in Canada’s export potential, especially in the traditional manufacturing base, limiting the economy’s ability to benefit from the projected strengthening in external demand.
Cardarelli stressed the importance of investing in the energy sector, an industry that he said would have a significant impact on the organization’s economic forecasts in the future.
“We really feel that the system is stressed in terms of the transportation capacity—the ability of moving these resources out of Alberta, British Columbia, and Saskatchewan,” he said at a news conference in Toronto.
Among other things, the IMF recommends that Canada’s central bank hold off raising interest rates until there are firmer signs of a sustained transition from household spending to exports and investment, something bank governor Stephen Poloz has signalled he intends to do.
And it warns the federal government that it need not be so fixated on balancing the federal budget in 2015 if there is no meaningful pickup in economic activity.
That is likely to fall on deaf ears, however. Finance Minister Jim Flaherty said this week he is confident he will eliminate the deficit in 2015 and bring in surpluses after that.
With files from The Canadian Press
Prairies deep freeze 2:33
Newfoundland power update1:24
Storm hits Atlantic Canada2:18
- STORM CENTRE: Latest updates on cancellations, closures
- Newfoundland power outage closes schools, sparks debate
- U.S. Midwest, Northeast hit by bitter cold temperatures
- Everything you needed to know about snow
- Winter storm in Canada, U.S. captured in frosty photos
- Everything you need to know about frostbite
- Storm Centre New Brunswick
The relentless weather is causing misery this morning across much of Canada, with southern Ontario hit with freezing rain, wind-chill warnings in some parts of the Prairies and 30,000 Newfoundlanders still in the dark after a mass power outage on the weekend.
- Everything you needed to know about snow
- ‘Frost quakes’ wake Toronto residents on cold night
- ‘Dangerous’ storm, deep freeze hits Waterloo Region
In Ontario, parts of the province were hit with massive snowfalls, while other areas, including the Toronto region, were pelted with snow and freezing rain.
“In southern Ontario, that temperature is starting to drop and quickly,” CBC meteorologist Jay Scotland said Monday morning. “That slushy mix on the roads is icing up quickly.”
Both drivers and pedestrians are urged to be aware of a possible flash freeze during the morning commute. A flash-freeze warning comes when a steep temperature drop causes water from rain or melted snow to quickly freeze.
The weather wreaked havoc at Pearson International Airport in Toronto on Monday morning, with hundreds of flights cancelled or delayed. Both Air Canada and WestJet advised customers to check their flight status before heading to the airport.
Due to weather, please check with your airline for delays or cancellations and give yourself extra time to get to the airport safely.
— Toronto Pearson (@TorontoPearson) January 6, 2014
“I wasn’t five minutes here at the airport before people started telling me horror stories of being stuck on an airplane for hours on end,” CBC reporter Linda Ward said from the airport.
“Passengers are telling me their planes just couldn’t get to the gate because of so many cancelled planes, so it’s definitely a very frustrating scene here this morning … The people who were on those planes [are] very angry, very tired, very hungry … They say all in all this was just a horrible travel experience.”
Environment Canada extended wind-chill and flash freeze warnings for the Toronto area on Monday morning, warning temperatures will feel as cold as –35 C to –40 C Monday night and into Tuesday morning.
A mix of snow and rain in Toronto, and snow further north, produced hundreds of accidents on the roads and highways Sunday evening, including one crash in Brampton that left one man dead.
Local school boards warned parents to check online Monday morning to see if any schools cancelled classes for the day. The Toronto Catholic District School Board said it would release a decision by 6 a.m. ET and the Toronto District School Board warned of potential closures.
Much of Quebec was also facing adverse weather warnings Monday morning. Environment Canada issued winter storm, freezing rain and wind warnings for most of the province.
Storm wallops Atlantic Canada
The winter weather blast also left much of Atlantic Canada under weather advisories.
“Atlantic Canada is a real mess … where I see the risk of freezing rain continuing this morning as a warm front pushes north,” Scotland said.
“For much of the Maritimes, this will switch over to rain through the morning and early afternoon … and further east warnings are out for Newfoundland who deal with this mess tonight through tomorrow — gusty wind, freezing rain and heavy rain.”
Environment Canada issued freezing rain warnings for most of New Brunswick and Prince Edward Island. Nova Scotia was under freezing rain and rainfall warnings, while Newfoundland was under freezing rain, blizzard and wind warnings.
In Newfoundland and Labrador, about 30,000 Newfoundland Power customers were still without electricity Monday morning after a power plant went offline in the latest power problem to hit the province in recent days.
- Newfoundland power outage closes schools, sparks debate
- Visit CBC Newfoundland & Labrador storm centre for the latest closures
- CBC Maritimes storm centre
Residents and businesses throughout the province were told to conserve energy as the province grapples with rolling power outages.
— Newfoundland Power (@NFPower) January 6, 2014
Aging infrastructure, a terminal station fire and a blizzard that ripped through the province Friday night combined to overburden an already stretched electricity grid, according to Premier Kathy Dunderdale.
At the peak of the power outages Saturday morning, about 190,000 customers were in the dark, Newfoundland Power said.
Prairie deep freeze
Meanwhile, much of Saskatchewan and Manitoba are under extreme wind chill warnings, where residents are facing temperatures that feel as cold as –40 C with wind chill.
“To the east, wind chill warnings are out from Hanna in eastern Alberta through southern Saskatchewan [and] Manitoba,” Scotland said.
“Across this warned area, current temps are well into the – 30s C with wind chills well into the – 40s.”
The potentially record-low temperatures are heightening fears of frostbite and hypothermia.
“Persons in or near this area should be on the lookout for adverse weather conditions and take necessary safety precautions,” warns Environment Canada.
Idle No More prepares for day of action – Canada – CBC News. (FULL ARTICLE)
The Idle No More movement has plans for over 63 protests and actions across Canada today, with solidarity events expected in over 12 countries.
The day should indicate whether the movement still has the energy and intensity it displayed last winter.
Idle No More began a year ago with an email exchange between four women in Saskatchewan, growing very quickly into one of the biggest protest movements Canada has seen in years. Idle No More uses social media as a key organizing tool, as it has for today’s events.
Oct. 7 was chosen because that’s the date 250 years ago that King George III signed the Royal Proclamation, which, in its concluding paragraphs, sets out policy for the Crown’s relationship with the “nations or tribes of Indians” and the lands “reserved to them.”…
- Royal Proclamation, the ‘Indian Magna Carta’, turns 250 (cbc.ca)
- Idle No More Event Listing for October 7, 2013 (intercontinentalcry.org)
- We are less than 24 hours from Idle No More’s Global Day of Action! (climate-connections.org)
- First Nations, Métis and Inuit: Global Day of Action (dailykos.com)
News – Storm leaves thousands of Quebecers without power amid scorching heat wave – The Weather Network
- Weather Network forecaster calls for more consistent summer conditions (ctvnews.ca)
- ‘Upside down’ weather forecast for Canada this summer (calgaryherald.com)
- Wild weather in Saskatchewan: Storms produce four tornadoes (calgaryherald.com)
News – Super sandbags line streets in Manitoba, water levels below projections – The Weather Network
- Cold weather and more snow aggravate flood risk in Manitoba (globalnews.ca)
- Cool weather increases risk of flooding in Manitoba: forecasters (metronews.ca)
- North Dakota prepares for record flooding, watch out Manitoba (macleans.ca)
- Spring floods cause trouble in 4 provinces (cbc.ca)
- Saskatchewan – Coldest Spring In a Century (iceagenow.info)
- Portage Diversion breaches, floods ice jams – Manitoba – CBC News (sherrconsultingblog.com)
- Flooded highways damage vehicles, causes traffic delays (globalnews.ca)
- Southern Manitoba towns brace for possible flooding (cbc.ca)
- Ottawa crews starting blasting river ice with dynamite to avoid spring flooding (local-news.jtn-network.com)
- Warming temperatures cause flood advisory (cbc.ca)
- Manitoba municipality ramps up flood preparations (updatednews.ca)
- Relief measures in place for taxpayers affected by spring flooding (globalnews.ca)
- Manitoba flooding closes roads as police warn of rising waters (ctvnews.ca)