There is near unanimity that the Bank of Canada Governor will lift the benchmark interest rate tomorrow for a third consecutive time, to 1 per cent. There’s also a growing consensus that the bank will then pause at its Oct. 19 decision while Mr. Carney spends more time assessing the durability of the rebound. But the market is already looking – with great uncertainty – at what comes after that.

The question is how long that pause will be, and if last week’s economic data are any guide, it is nearly impossible to answer with confidence. Some of the numbers have given Mr. Carney – the only Group of Seven central banker to raise rates this year – plenty of reasons to hold his fire tomorrow. Others seemed to give him a green light to keep raising rates.

A report last Tuesday from Statistics Canada showed the economy slowed sharply in the second quarter, with exports losing momentum as a result of sluggish overseas demand as companies, households and governments repair their balance sheets and spend cautiously. Meanwhile, inflation in Canada is tame, and the main drivers of growth – housing, government stimulus and consumer purchases – are giving the economy less of a boost.

On Friday, though, the picture in the vital U.S. market seemed a shade less fragile. American companies hired more workers than anticipated in August, data from the Labour Department showed, sending stocks higher and leaving analysts to hurriedly push aside any talk of a “double-dip” recession.

The case for Mr. Carney to plow ahead with another step away from emergency-low rates was already decent. A Canadian slowdown was always expected, even if the second quarter’s 2-per-cent annual growth rate was worse than the most pessimistic estimates. Business investment picked up, meaning the private sector – which has helped the economy recoup most of the jobs lost during the slump – is starting to fill the void left by the fading impact of stimulus and the cooling real estate market.

The bank’s main rate is still a long way from the 3.5 to 4 per cent that most consider “neutral.” And unlike the U.S., much of Europe and Japan, low interest rates and healthy banks have worked to re-ignite spending – so much so that many Canadians’ debt loads have risen even as de-leveraging takes hold in the rest of the developed world.

“The risk of keeping rates too low for too long is probably a little more pressing in Canada,” said Michael Gregory, a senior economist with BMO Nesbitt Burns. “You’ve got jobs, you’ve got a healthy banking system, and you’ve got consumers that do still have some capacity to take on more debt. That’s why Canada has to be a little bit more careful, a little bit more pre-emptive, in dealing with interest rates than the other central banks.”

Read more:
http://www.theglobeandmail.com

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Prices have dropped for developed island properties near populated areas, although sales of remote and high-end private islands in exotic locales are holding fairly steady.

However, don’t make the mistake of believing that owning an island is a good investment. As Mark Goldman, professor of real estate finance at San Diego State University, points out, “I wouldn’t describe it as an investment, really. It’s more a consumption item, like buying a yacht. And, boy, it’s got to be one of the ultimate status symbols. You get privacy, status, your own domain, a kingdom where, to a great extent, you can create your own rules.”

View a selection of private islands for sale below:

Ram Island

Ram Island, Private Islands Online

Place: Machias Bay, Maine, 50 miles east ofBar Harbor
Asking Price: $595,000
Acreage: 16
Undeveloped

One tree, a few sheep, a 20 by 20 foot platform for pitching a tent, and a mooring in the cove. The rest is grass, rocks, and 360-degree views of the ocean and bay.

Charlie’s Island

Charlie’s Island, Private Islands Online

Where: Near Marathon, in the Florida Keys
Asking Price: $995,000
Acreage: 0.32
Undeveloped

The turquoise-colored roofs you see in the picture are open-air sitting areas with decks, chairs, and a campfire cooking area. But the island also comes with a 38-foot houseboat, not pictured here, that sleeps 4-5 people. Great reefs nearby for snorkeling. All the seafood you can eat.

Snug Harbour Island

Snug Harbour Island, Private Islands Online

Where: On Georgian Bay, Ontario, Canada
Asking Price: $1,057,000
Acreage: 3
Developed

A two-hour drive from Toronto, this island features a two-bedroom, two-bath cottage with a glassed-in porch overlooking the water, a separate guest cabin with bathroom, hot tub built into the rock outcropping, and a boathouse with deep water mooring. Running water, electric, a septic field. And it has wireless Internet access. So you could get away from it all, but still check your e-mail, Facebook, and Twitter accounts.

Watch Island

Watch Island, Private Islands Online

Place: St. Lawrence Seaway, near Clayton, NY
Asking Price: $1,950,000
Acreage: 1.3
Developed

There are 1,400 lakes in the Thousand Lakes region of upstate New York. But few of them come with a 6,500-square-foot mansion — ten bedrooms, four bathrooms, plus a boat house and dock. About an hour-and-a-half drive from either Syracuse or Montreal.

Little Hog Cay

Little Hog Cay, Private Islands Online

Place: Near Abacos, Northern Bahamas
Asking Price: $1,950,000
Acreage: 25
Partially developed

Notice the lagoon that separates the west side of the island from the east. On the west side sits a studio home and a guest cabana with an electric generator. The east side is undeveloped. Marina and airstrip are a 15-minute boat ride away, on the main island of Abacos.

5 Cove Island

Cove Island, Private Islands Online

Place: Howe Sound, British Columbia, between Whistler and Vancouver
Asking Price: $2,950,000
Acreage: 5
Developed

A 30-minute boat ride from the city of Vancouver, this island is up for sale to developers, with an approved subdvision plan.

No related posts.

Gonzalo’s answer?: “Yes—absolutely. No question.

Below the four main charges against Greenspan:

One—Irresponsible Market Liquidity, Which Created Rampant Moral Hazard:
The Accused was instrumental in creating the pernicious policy mentality of “providing markets with necessary liquidity”—essentially, throwing money at every problem.

Two—The Fed’s Do-Not-Touch-the Financial-Services-Sector Policy:
The Accused was instrumental in creating a Do-Not-Touch attitude towards the banks, both investment and commercial—which of course led the financial sector to pursue incredibly stupid products and strategies: All in the name of “maintaining financial markets’ ability to innovate”. These “innovations” were directly to blame for the Global Financial Crisis, as they created unsustainable liabilities which sooner or later would lead to system-wide collapse.

Three—Subsidized Money, Which Radically Distorted The Economy:
This is probably the biggest crime Alan Greenspan committed as Federal Reserve Chairman: The so-called “Greenspan Put”.
For the twenty years of his tenure, the Accused—supposedly an avowed free marketeer—subsidized the cost of money. Rather than let the Fed funds rate more or less mirror what banks were lending among themselves, and tighten interest rates when the economy overheated (as his predecessors had done), Greenspan instead goosed the markets: His “targeted” Fed funds rate was forever undercutting what the financial markets were dictating, as to the true price of money.

Fourth and finally—Turning Economics Into a Religion with the “We Are Right Because Our God—Math—Is On Our Side” Fallacy, and Marginalizing the Heterodox.
The Accused—Alan Greenspan—reneged on his sworn mandate to maintain low inflation and full employment, and instead pursued a policy of maintaining—and increasing—aggregate asset values, whatsoever the cost. In other words, he actively pursued bubble-creation and inflated asset values, to the benefit of the financial services industry, and to the detriment of the U.S. and world economies as a whole.

The Conclusion:
Alan Greenspan furthermore created rampant moral hazard, and declined to carry out his sworn duty to regulate and monitor financial markets, and to curb usurious or unsafe financial products and services. Finally, he created the conditions that—quite possibly—will lead to a Treasury bond collapse and a hyperinflationary catastrophe.

The Prosecution rests.

Read the whole post here:
http://gonzalolira.blogspot.com

Read Also:
25 People to Blame for the Financial Crisis
The good intentions, bad managers and greed behind the meltdown
A list of 25 people to blame for the financial crisis by Time Magazine, that placed Greenspan at # 3.

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Bank of Montreal

The move will provide home buyers just the incentive they need to kick-start the fall house-hunting season with a renewed fervour.

“It’s a great time to buy a home,” said Martin Nel, Vice President, Lending and Deposit Products, BMO Bank of Montreal.

“The housing market has cooled a bit recently, giving buyers an advantage over motivated sellers. But there’s still some uncertainty about where fixed rate mortgage rates may be headed over the next little while. To provide homebuyers with comfort and extra motivation, BMO has slashed our market leading low rate mortgage by 20 basis points. If ever there was a time to buy, it is now.”

To help reduce uncertainty, BMO is advising homebuyers to guarantee their mortgage rate by getting pre-approved ahead of time.

“Getting pre-approved on your mortgage is a smart move for any homebuyer,” added Nel. “First, it allows you to shop with confidence knowing your financing is lined up. Second, it secures your mortgage rate for up to 90 days – if rates increase during that time, you’re covered.”

The special five-year low rate fixed mortgage:

* Continues to offer the lowest fixed rate for a five-year closed term at 3.59 per cent
* Allows customers to repay their mortgage faster with a maximum 25-year or less amortization
* Saves homeowners over $60,000 in interest costs compared to leading competitors’ five-year special fixed rate at 3.89 per cent and 35-year amortization (based on a $200,000 mortgage)

*This special discounted rate is not the posted rate of BMO Bank of Montreal. Rate is subject to change without notice. Offer may be withdrawn or extended without notice. Mortgage funds must be advanced within 90 days of the application.

About Bank of Montreal

BMO Bank of Montreal is part of the BMO Financial Group.

Established in 1817 and based in Canada, BMO Financial Group serves more than 10 million personal, commercial, corporate and institutional customers in North America and internationally.

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The probability of a double dip in the US appears to be the main focus these days. And you cannot blame the market for getting a bit nervous given the latest array of disappointing numbers coming from the US economy.
But the real story is not whether there will be a double dip or not. After all, even if we avoid a double-dip recession, economic growth in the US will, in all likelihood, be so slow that it will feel like a double dip.

The more important question is what kind of an economy is emerging following the recession and the brief recovery? In this context many talk about a new normal. That is, a new economy that will see a much weaker growth trajectory in the coming five years or so, a weaker consumer due to deleveraging, a much larger role played by the government, low interest rates, and low inflation.

But this kind of assessment assumes that the US economy does not adjust to the new reality in any significant way. This assumption, I think, will be proven wrong. Key here is the role that emerging markets will be playing in changing the nature of the US economy.

A necessary condition to any previous US and, in fact, global recovery was a rebound in housing and consumer spending. These two sectors were always the pioneers of the recovery. Today this, of course, is not the case. The housing market is probably entering double-dip territory, and the consumer is busy deleveraging and saving, with the saving rates reaching well over 6%.

What’s different this time around is the fact that housing and consumer spending are not the only necessary and sufficient conditions for a sustainable US recovery. Just look at the contribution of exports and investment to recent US performance and you find that for the first time on record, the contribution of these two sectors to overall GDP growth during a recovery was larger than the combined contribution of housing and consumption.

Is this sustainable? The shorts answer is yes. While in previous recessions and recoveries, emerging markets were too small to impact the US economy; that is not the case this time around. Emerging markets now account for almost 25% of global GDP and are close to 80% of the size of the US economy. That’s large enough to impact the trajectory of US exports. In fact, no less than 55% of US exports go to emerging markets, and with emerging markets likely to continue to outpace developed economies, this share will continue to rise.

Increased exports lead to increased investment by corporations. And the question is to what extent corporate America is ready to take advantage of the increased demand for its  products. And if you look at the recent improvement in productivity in US manufacturing, the increased investment in capital intensive industries and the elevated cash position enjoyed by corporate America, the likelihood is that we will see an even stronger push into emerging markets given limited opportunities at home.

Given this dynamic, it is not unthinkable that the new economy will see a much smaller share of housing and consumption and a much larger share of exports and investment. So maybe we should be talking about a new growth mix as opposed to a new normal.

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Via: Credit Score

The graphic is a bit outdated, because as you can see, the United States still holds its highly valued AAA Credit Ranking, but in fact it lost that coveted status in July from the very agency whose data was used on the creation of the above graphic, the Beijing-based entity called Dagong Global Credit Rating .

Criticism has aroused over the downgrade, since its results differ sharply from those offered by the Big Three (Standard & Poor’s, Moody’s Investors Service and Fitch Ratings). For one Dagong granted higher scores to developing nations like China, Russia and Brazil, while coming out with  lower ratings for other established developed economies including Britain, France or Canada. In the end, Dagong deemed China’s creditworthiness superior to that of America.

“The U.S. is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings,” Guan Jianzhong, chairman and president of Dagong, recently complained to the Financial Times.

Many share Guan’s skepticism. Seemingly oblivious to its mounting trillion-dollar deficits, the Big Three continue to rate the U.S. with an AAA and a “stable” outlook. But they’ve been wrong before. Over the past decade, they failed to predict the implosions of Enron and Lehman Bros and they handed AAAs to dodgy mortgage-backed securities, thus contributing to America’s housing bubble.

Dagong’s describes its Sovereign Rating Methodology as “a complex process of analysis”, that has met with some approving nods in Asia, where resentment over the Big Three’s perceived bias abounds.

In investment, the bond credit rating assesses the credit worthiness of a corporation’s debt issues. It is analogous to credit ratings for individuals and countries. The credit rating is a financial indicator to potential investors of debt securities such as bonds. These are traditionally assigned by credit rating agencies such as the Big Three (Standard & Poor’s, Moody’s Investors Service and Fitch Ratings) to have letter designations (such as AAA, B, CC) which represent the quality of a bond.

Read more:

• http://www.canadianbusiness.com
• http://en.wikipedia.org/wiki/Bond_credit_rating

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The Canadian government was also more disciplined in terms of fiscal stimulus at the bottom of the recession. As a result, the 2010 budget deficit projected by the Economist panel of forecasters is only 4.5 percent of GDP — against 8.9 percent in the United States. Further, Canada has a relatively larger resources sector than the U.S. economy, an advantage when energy and commodity prices are drawn upwards by largely Asian demand.

The Bank of Canada has begun to reverse the stimulative monetary policy it adopted in April 2009, raising its target overnight interest rate twice so far to a current level of 0.75 percent. Even if that’s now held steady, the central bank has more leeway than the Federal Reserve with its near-zero rates. Meanwhile, 10-year Canadian government bonds currently yield 2.77 percent compared with 2.47 percent for U.S. Treasuries, so savers are marginally closer to getting a decent deal. Canada’s savings rate jumped to 5.9 percent in the second quarter, close to the 6.1 percent seen south of the border.

Martin Hutchinson is a Reuters Breakingviews columnist who provides Views on emerging markets and on monetary and macroeconomic issues. He is a former merchant/investment banker with 27 years experience.

Read More:
http://blogs.reuters.com

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In the report, aptly named “Not Here? Housing Market Policy and the Risk of a Housing Bust”, author Jim MacGee, an associate professor of economics at the University of Western Ontario,  evaluates the likelihood of a US-style housing market crash in Canada by examining what caused the US housing boom and bust from 2000 to 2010 and comparing housing market policies in the two countries.

“Recent swings in Canadian house prices have raised concerns that a U.S.-style housing bust looms on the horizon,” wrote Jim MacGee,
“A comparison of housing market policies in Canada versus the U.S., however, suggests that there is little likelihood of a U.S.-style surge in foreclosures or a collapse of house prices in Canada.”

“During the U.S. housing boom, both private insurers and government-sponsored enterprises facilitated looser underwriting standards by increasing their exposure to high-risk mortgage products such as low-documentation, interest-only and adjustable rate mortgages. This buildup was a key factor in the U.S. housing market crash, since when house price appreciation slowed (and then reversed) many borrowers found themselves unable to meet their monthly mortgage bills or to rely on higher prices to refinance. The resulting rapid rise in foreclosures, in turn, seems to have played a role in driving the large decline in U.S. house prices since 2006”, he added.

“Canadian housing policies, which avoided the sharp decline in underwriting standards seen in the U.S., worked well in reducing the possibility of a housing bust in Canada during 2008-2009, and continue to mitigate the risk of a massive wave of defaults in the future. To the extent that current policies impose on taxpayers a significant exposure to mortgage insurance guarantees and, therefore, some of the aggregate risk of a decline in housing prices, it will be in the interest of all Canadians if policy makers recall the lessons of the 2008-2009 experience should pressures to relax underwriting standards reoccur in the future”, concluded MacGee.

• For a PDF of the study click here.
• To read an article on the study in the Globe and Mail click here.
• To read an article on the study in the Toronto Star click here.
• To read a Reuters article citing the study click here.
• To read a Financial Post article citing the study click here.
• To read an article on the study in Investment Executive click here.
• To read a Canadian Press article citing the study click here.
• The article appeared in more than 10 publications across Canada, including CBC.ca, Canadian Business and the Winnipeg Free Press.

About the C. D. Howe Institute

The C.D. Howe Institute is a Canadian public policy think tank based in downtown Toronto, Ontario.

Founded in 1958, the Institute publishes research and hosts conferences on a wide variety of issues in Canadian economic and social policy.

As a Non-profit, politically Independent organization, its official mandate is to improve the standard of living for Canadians through sound public policy solutions.

Visit their Website at:
www.cdhowe.org

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