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Thursday April 11, 2024

The decision by the Bank of Canada to maintain interest rates at 5% underscores the economic struggles faced by middle-income families, who play a vital role in driving economic activity but bear the brunt of stagnant wages, rising costs of living, and financial pressures exacerbated by high borrowing costs.

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday April 11, 2024

The Struggles of The Middle-Income as the Economic Engine

Yesterday’s announcements highlight the challenges of high inflation and housing costs in Canada. The report on food banks shows the growing need for affordable options, while the Bank of Canada's focus on managing inflation could lead to rate hikes. It's clear that addressing affordability, inflation, and social support is crucial.

October 26, 2023

In light of the recent decision by the Bank of Canada to maintain interest rates at 5%, it’s crucial to examine the profound impact this has on the struggles faced by middle-income people and families, who often serve as the backbone of our economy. This decision reflects broader economic realities that disproportionately affect ordinary households, exacerbating existing challenges and highlighting the crucial role of middle income working people as an economic engine.

The middle class play a vital role in driving economic activity, fuelling consumption, and sustaining businesses through their spending habits and contributions to the workforce. However, they often bear the brunt of economic policies and decisions, particularly in an environment of stagnant wages and rising costs of living.

News: Bank of Canada to Hold as It Debates When to Start Easing Rates

September 8, 2023

One of the primary concerns for these households is the impact of sustained high interest rates set by central banks like the Bank of Canada. While these rates are intended to manage inflation and maintain economic stability, they can inadvertently burden households with higher borrowing costs, particularly for mortgages, loans, and credit card debt. This strain on disposable income can limit the ability of middle-income families to save, invest, or adequately cover essential expenses.

Moreover, middle-income families face persistent challenges in accessing affordable housing, managing healthcare costs, and ensuring quality education for their children. The decision to maintain higher interest rates adds an additional layer of financial pressure, making it harder for families to achieve financial security and upward mobility.

July 18, 2023

In the context of the Bank of Canada’s decision, it’s essential to recognize that the middle class are not only affected by interest rates but also by broader economic trends such as job market dynamics, globalization, and technological advancements. These factors can contribute to income inequality and precarious employment conditions, further undermining the financial well-being of households.

To address these challenges, policymakers must prioritize policies that support and empower middle-income families. This includes targeted measures to enhance income growth, improve access to affordable housing, and provide adequate social safety nets. Additionally, there is a need for greater transparency and accountability in monetary policy decisions to ensure they align with the interests of everyday Canadians.

Opinion: As the Bank of Canada resists cutting interest rates, is it falling behind the curve again?

March 27, 2023

Ultimately, the struggles faced by middle-income families underscore the urgency of adopting holistic economic policies that prioritize inclusive growth and address systemic barriers to prosperity. As we navigate the complexities of our economic landscape, let us remember that a thriving middle class is not only a measure of economic success but also a reflection of societal well-being and resilience.

The decision by the Bank of Canada to maintain interest rates at 5% highlights the ongoing challenges faced by the middle class as the true economic engine of our society. It is imperative that we advocate for policies that promote economic fairness and opportunity for all, ensuring that middle-income families can continue to fulfill their vital role in driving sustainable and equitable growth. (AI)

 

Saturday March 4, 2023

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Saturday March 4, 2023

Interest rates have skyrocketed. So why hasn’t the rate on your savings account budged?

As anyone with a mortgage can attest, the cost to borrow money has gotten a lot more expensive this year. Banks were swift to pass on the rate hikes the Bank of Canada implemented as part of its aggressive campaign to tame inflation.

May 2, 2020

Variable rate home loans routinely top five per cent right now, more than twice what they were a year ago.

But the same can’t be said of savings accounts, which are not paying out much more today than they were a year ago, when the Bank of Canada’s lending rate was 0.25 per cent — its lowest level on record.

Canada’s five biggest banks offer a basic savings account with a rate paying between 0.01 and 0.035 per cent at the moment. So, if you are saving $1,000 for a year, you could earn a grand total of 10 to 35 cents in interest.

Even their so-called high-interest savings accounts that come with minimum balances and other stipulations all pay less than two per cent on an annualized basis.

CBC News reached out to Royal Bank, TD Bank, CIBC, Scotiabank and the Bank of Montreal this week, asking for an explanation as to why savings account rates seem to be slow to rise while lending rates do not, and all the responses were versions of a similar theme: that their rates are based on a variety of funding costs, and while rates on savings accounts are competitive, customers can often get higher rates with products such as GICs that lock in their money for a longer term.

May 13, 2010

Natasha Macmillan, director of everyday banking with rate comparison website Ratehub.ca, says consumers are keenly aware of that gap between what’s happening to the rates on what they owe versus what they have to save.

“As soon as the Bank of Canada raises their interest rate, we see that being translated immediately on the borrowing side,” she told CBC News in an interview. “But it does take a little bit slower for it to be translated to the high-interest saving side — not quite as quickly [and] not quite at the same rate.”

Natasha Macmillan, director of everyday banking with rate comparison website Ratehub.ca, says consumers are keenly aware of that gap between what’s happening to the rates on what they owe versus what they have to save.

“As soon as the Bank of Canada raises their interest rate, we see that being translated immediately on the borrowing side,” she told CBC News in an interview. “But it does take a little bit slower for it to be translated to the high-interest saving side — not quite as quickly [and] not quite at the same rate.” 

That’s not happening today, and there are a few reasons why… (Continued: CBC) 

 

Friday December 9, 2022

December 9, 2022

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Friday December 9, 2022

Inflation is changing how Canadians do Christmas

A new poll by the Angus Reid Institute says more than half of Canadians – 56 per cent – say they will be spending less on Christmas, including presents and entertaining.

September 29, 2022

“When you look at the Atlantic Canadian data, among the highest numbers in the country in Nova Scotia, 57 per cent, say they’re worse off now,” said Dave Korzinski, the research director with Angus Reid Institute.

“In Newfoundland and Labrador, 54 per cent, in New Brunswick 53 per cent, all of those are higher than the national average of 50 per cent,” Korzinski said.

This is the first time the non-profit’s data has shown that more than 50 per cent of Canadians say they are financially worse off this year than this time last year.

“Seeing food banks across the country who are dealing with essentially budgets that are smaller and demand that is larger, which is a really tough recipe when you’re trying to keep your programs going,” Korzinski said.

“When it’s more expensive for your household, imagine buying it for 1,400 households,” said Alex Boyd,  the executive director Greener Village Food Bank in Fredericton.

May 10, 2022

“So, that’s what we do with milk and eggs, those are very seldom donated items,” Boyd said.

Charitable giving is also already down this holiday season, according to the poll.

“To see 37 per cent of Canadians say they’re cutting back on donations, including more than two-in-five who are older, who are 55+ who tend to be the most generous and the most consistent givers, has been really challenging for a lot of charities,” Korzinski said.

“It’s always a concern that we watch for, especially being an organization that relies heavily on November and December giving to make up for the leaner months earlier in the year,” Boyd said.

Eighty-seven per cent of Canadians say they have cut back on spending in some way recently – up from 80 per cent in August. (CTV) 

 

Thursday November 4, 2021

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday November 4, 2021

New net-zero alliance of banks, funds prioritizes green investment, but key emitters are absent

April 6, 2021

As a former central banker on two continents, Canada’s Mark Carney has honed the dark art of haranguing and arm-twisting members of the global investment community better than almost anyone.

But his latest task, as the United Nations’ special envoy on climate action and finance, involved some pretty daunting numbers.

Carney, who headed up the Bank of Canada and then the Bank of England between 2008 and 2020, was tasked to find more than $100 trillion US in capital from the global financial community to help drive the transformation of the world’s economy from fossil fuels to a new age powered by clean energy.

“It’s a mammoth transition,” Carney told CBC News at COP26, the UN’s climate change conference, in Glasgow, Scotland. 

“It’s absolutely enormous. It’s bigger than global GDP.”

May 14, 2019

On Wednesday, designated finance day at the Glasgow conference, Carney announced success, of sorts.

“We have banks, asset managers, pension funds, insurance companies from around the world — more than 45 countries — and their total resources, totalling $130 trillion US,” said Carney, $30 trillion more than the target.

Carney says more than 450 firms — including Canada’s big five chartered banks — have committed to supporting the goals of what’s become known as the Glasgow Financial Alliance for Net Zero (GFANZ).

Net zero means countries are no longer adding heat-trapping greenhouse gases to the atmosphere. Some greenhouse gases might still be emitted, but they would be balanced off or “cancelled out” by the removal of an equivalent amount of greenhouse gases. The concept is similar to carbon neutrality but includes more than just carbon dioxide emissions.

December 1, 2015

Firms that sign onto the GFANZ agreement are promising to abide by 24 financial initiatives that will signal to their customers, shareholders and investors that they are making green investments a priority.

The initiatives include climate-related reporting of their investments and transparency about climate-related financial risks.

While the agreement doesn’t compel the financial institutions to invest any specific amount of money or put it into any specific industry, Carney says it creates a new framework for them to make green investments.

September 23, 2014

“It’s about what their clients are doing, what are the emissions of their clients, the people they lend to, the people they invest in,” he said. 

However, there are notable gaps.

Big banks from some of the countries with the largest emissions — China, India and Russia — are not part of the agreement.

Nor does it compel signatories to cease funding projects such as coal mines or other ventures that contribute to greenhouse gas emissions. 

But Carney says if such investments happen they will draw both shareholder and public scrutiny. (CBC) 

 

Thursday April 2, 2020

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday April 2, 2020

If we want the economy to recover, we need to bail out tenants and property owners, too

Coronavirus cartoons

The federal government recently introduced a plan to encourage businesses to retain workers by subsidizing 75 per cent of their wages. By providing laid-off and self-isolating workers with an alternative to employment benefits it should help limit social, economic and financial disruption from the pandemic. Rather than let the economy tailspin, the hope is to engineer a successful recovery once the virus is contained. If business activity and consumer confidence vanish, getting the economy back off the ground will be hard.

We need to expand this plan to the real estate sector. For many newly laid-off people, neither expanded Employment Insurance nor the new Emergency Response Benefit will be enough to cover rent or mortgage payments. But homeowners in Vancouver and tenants in Toronto typically have much higher monthly obligations than those in Moncton and Trois-Rivières. Issuing the same federal cheque to everyone would not be fair. Commercial tenants are just as diverse: their ability to pay rent today depends on how hard the virus has hit their business and that varies from case to case and region to region.

On the positive side, banks rebuilt their capital over the past decade and most commercial landlords, because of strong recent growth, have resources to deal with temporary difficulties. But the scope of the current crisis is unprecedented: large numbers of homeowners could soon stop paying their mortgages, while many real estate owners could default on their commercial mortgages as both tenants stop paying rents. This would force banks to take large write-offs, quickly depleting their capital and potentially throwing the country into a financial crisis.

Such an outcome can be avoided by providing rapid and targeted mortgage and rent relief where it is most urgently needed. Because governments are already over-extended, banks and real estate owners should manage the programs I’m proposing, with government limited to providing funds, liquidity and loan guarantees. Minimizing the government’s role and putting the onus of implementation on banks and landlords would encourage efficiency and speed. (Continued: Financial Post) If we want the economy to recover, we need to bail out tenants and property owners, too

The federal government recently introduced a plan to encourage businesses to retain workers by subsidizing 75 per cent of their wages. By providing laid-off and self-isolating workers with an alternative to employment benefits it should help limit social, economic and financial disruption from the pandemic. Rather than let the economy tailspin, the hope is to engineer a successful recovery once the virus is contained. If business activity and consumer confidence vanish, getting the economy back off the ground will be hard.

We need to expand this plan to the real estate sector. For many newly laid-off people, neither expanded Employment Insurance nor the new Emergency Response Benefit will be enough to cover rent or mortgage payments. But homeowners in Vancouver and tenants in Toronto typically have much higher monthly obligations than those in Moncton and Trois-Rivières. Issuing the same federal cheque to everyone would not be fair. Commercial tenants are just as diverse: their ability to pay rent today depends on how hard the virus has hit their business and that varies from case to case and region to region.

On the positive side, banks rebuilt their capital over the past decade and most commercial landlords, because of strong recent growth, have resources to deal with temporary difficulties. But the scope of the current crisis is unprecedented: large numbers of homeowners could soon stop paying their mortgages, while many real estate owners could default on their commercial mortgages as both tenants stop paying rents. This would force banks to take large write-offs, quickly depleting their capital and potentially throwing the country into a financial crisis.

Such an outcome can be avoided by providing rapid and targeted mortgage and rent relief where it is most urgently needed. Because governments are already over-extended, banks and real estate owners should manage the programs I’m proposing, with government limited to providing funds, liquidity and loan guarantees. Minimizing the government’s role and putting the onus of implementation on banks and landlords would encourage efficiency and speed. (Continued: Financial Post)