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Why cash is still king

CARL MORTISHED

If the barbarian armies were at the gates and the government had thrown in the towel; if your neighbours had fled to the highways, already jammed with panicking families; if the pillars of civilized life were tottering, what would you stuff in your pockets as you herded your family into the back of the station wagon? Would it be plastic cards or paper bills?

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Provinces need to tackle fiscal pressures now

GLEN HODGSON

Canada’s provinces are caught in a fiscal vise and there is no easy way out. They face similar demographic forces, with slowing labour force growth. As a consequence, economic growth of 2 per cent or less is the “new normal.”

Provinces in Atlantic Canada and Quebec in particular will be hard pressed to reach that level, and slower growth is putting the brake on growth in government revenues. Simultaneously, health care costs (which represent more than 40 per cent of provincial spending) are mounting, due to an increased prevalence of chronic diseases, higher usage of the health care system and more expensive treatment.

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The secret is out: Alberta’s going through tough times

JEFFREY JONES

Maybe I shouldn’t tell you this.

The economy in Alberta is in rough shape.

The effects are acute in Calgary, where oil patch layoffs are the order of the day due to the collapse in crude prices. It’s hitting many families hard.

The nervousness about it at city hall is palpable, as shown last week when the city’s manager and chief administrative officer, Jeff Fielding, told a committee that reporting by certain news outlets was making the situation even worse. In essence, investors in major financial centres are getting wind of this.

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Venezuela’s economic misery will only worsen as energy rout deepens

BRIAN MILNER

If Venezuelan oil minister Eulogio del Pino seems more than a little harried these days as he trudges from Moscow to Riyadh in search of a deal to trim oil production, it is understandable.

Mr. del Pino, a media-shy engineer who also heads the troubled state oil giant Petroleos de Venezuela SA, is on a desperate mission. Without a co-ordinated reduction of supply by fellow members of the Organization of Petroleum Exporting Countries, and key non-members such as Russia, crude prices are likely to remain weak and Venezuela’s prospects even bleaker.

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Stabilizing Canadian economy has little to fear but fear itself

DAVID PARKINSON

Two big Canadian economic reports at the end of last week – employment and trade – told us a couple of important things about Canada’s economy. One is that, despite what you might have heard, both indicators were pretty good, suggesting that the economy is getting back on track. The other is that after a volatile period filled with worrisome headlines, businesses are hesitant to come along for the ride.

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U.S. consumer windfall likely overrated

BARRIE McKENNA

If there is a silver lining in the oil price collapse for Canada, it is that our neighbour and closest trading partner should be a winner.

The United States is a net oil importer and a huge guzzler. Lower gasoline prices are putting roughly $100-billion (U.S.) a year back into the pockets of consumers, who represent more than 70 per cent of the world’s largest economy.

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Canadian home price divergence likely to continue in 2016

TAMSIN McMAHON

 

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On trade, Trudeau Liberals want to have their cake and eat it too

Brian Lee Crowley

It’s 1993 all over again.

In that year, the Chrétien Liberals swept out of office a decade-old Tory regime whose legacy they despised. Yet sometimes governments you detest nonetheless do things that are in the national interest. That presented the Chrétien Liberals with the dilemma of what to do about the North American Free Trade Agreement their predecessors had negotiated with the U.S. and Mexico.

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Russia readies for showdown on LNG

CARL MORTISHED

Someone at OPEC misunderstood the message from Moscow last month when rumours circulated that Russia might fall in line with cartel policy. The oil price surged briefly in the hope that Russian oil producers would reduce output in collaboration with Saudi Aramco, but the whisperers were looking at the wrong commodity and the wrong policy.

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Redistribution of work hours should be on Ottawa’s policy agenda

ANDREW JACKSON

More than 20 years ago, back in 1994, the federal government released the report of the Advisory Group on Working Time and Distribution of Work. (Disclosure: I served as the labour adviser.) The central message of the report has been pretty much ignored by governments ever since, even though it is more relevant today in a slow-growth world where good jobs are hard to find.

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Oil downturn’s forgotten victim: Newfoundland

DAVID PARKINSON

As Prime Minister Justin Trudeau’s visit to Alberta this week puts the focus squarely on the ailing provincial economy, it’s easy to forget that Alberta actually isn’t the province hurting the worst from oil’s demise.

Last week, debt-rating agency Standard and Poor’s lowered Newfoundland’s credit rating to single-A from single-A-plus, citing the deterioration of the provincial government’s budget as a result of “the fall in oil prices, significant expected increase in debt and now-low economic prospects.” It also slapped a “negative” outlook on the rating – implying that, unless conditions improve, a further downgrade could still be down the road.

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State assets for sale in tough times for petrocrats

BRIAN MILNER

As their vital oil revenues sink to intolerable levels, hard-pressed governments from Riyadh to Moscow are looking to peddle some of the family jewels to fill gaping holes in their budgets. Most of the proposed deals should come with flashing signs reading: Beware of autocrats who embrace capitalism when the cash stops pouring in from their usual channels.

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Too much stuff, with no one to buy it: Is this the future economy?

Scott Barlow

University of California professor Brad DeLong’s “Economics and the Age of Abundance” highlighted the new economic study of global production growth – a new-ish school of thought that attributes much of the economic malaise in the developed world to a technology-driven “too much of everything.”

Close to home, the negative effects of technological advances on the economy are clear. At first, the domestic oil patch benefitted tremendously from the development of Steam Assisted Gravity Drainage (SAGD) and other extraction processes. But the rapid progress in U.S. shale oil extraction techniques created an oversupply of oil that threatens a significant segment of the Alberta energy industry with bankruptcy. Elsewhere in the commodity space, Chinese over-investment in steel and aluminum caused a collapse in global prices.

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What the Bank of Canada isn’t saying about inflation

DAVID PARKINSON

Lost in the drama of the Bank of Canada’s interest-rate decision last month was a potentially meaningful change in how the central bank is talking about inflation. How meaningful? At this point, that’s anyone’s guess.

The decision whether to cut was a close one, with the central bank weighing the role of the plunging dollar and the waiting game for Ottawa’s promised infrastructure spending. But buried within the bank’s quarterly monetary policy report (MPR) that accompanied the big rate announcement, keen central-bank watchers noticed something eyebrow-raising about the bank’s discussion surrounding inflation.

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Trudeau will eventually have to admit pipelines are needed

BARRIE McKENNA

If the Keystone XL pipeline was a measure of Barack Obama’s environmental record, Energy East is destined to become a test of Justin Trudeau’s economic cred.

Many Canadians may wish the country was not a natural resource powerhouse.

But we are. In many ways, it’s the family business.

Commodities such as lumber, nickel, wheat and oil make up roughly 20 per cent of the economy. They represent an even larger share of the exports and investments that help sustain Canada’s envied standard of living.

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Japan’s move to negative rates underscores failure of Abenomics

BRIAN MILNER

It’s been a bad week for Abenomics, the stimulus strategy that propelled Japanese Prime Minister Shinzo Abe to power three years ago with the promise of defeating entrenched deflation, reviving Japan’s moribund economy and restoring its lustre as a global power.

First, Economy Minister Akira Amari, the key cabinet minister steering his boss’s reform agenda, including the Trans-Pacific Partnership trade deal, resigned in the face of bribery allegations.

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The oil glut’s big opportunity: Cutting tyrants’ cash supply

BRIAN MILNER

Falling oil prices are making life miserable for Canadian producers and everyone else connected to the energy sector. But the global glut and continuing price weakness may have a silver lining: It makes it easier for Western governments to wean themselves off the crude pumped out of the ground by authoritarians, despots and armed thugs. And one of the key beneficiaries would be Canada.

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BoC worried about consumer confidence, not inflation

DAVID PARKINSON

Let’s be clear: Stephen Poloz isn’t worried about inflation. But he’s worried that you’re worried about inflation.

Last week, when the Bank of Canada’s governor chose not to cut interest rates again despite a clearly weakening economic backdrop, he left the distinct impression that the plunge of the Canadian dollar played an important role in the decision. In many media and economists’ reports on the rate announcement, the shorthand was that Mr. Poloz is concerned about the sinking loonie’s rising impact on inflation – specifically for imported goods, as the currency’s purchasing power sinks.

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Why Canada should be a key player in an emerging Cuba

Glen Hodgson

One of the positive world developments in 2015 was the restoration of more normal political relations between the United States and Cuba. After nearly six decades of fruitless stalemate, this change is one more step in clearing the way for the eventual transformation of Cuba’s economy.

I have been to many Caribbean nations, but never Cuba, until recently. Earlier this month, I got to see Cuba, in what could be one last glimpse before it begins to really change. Canada can play an active role in the transformation.

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U.S. Fed rate watchers wait to see what happens when doves cry

BRIAN MILNER

When Federal Reserve chief Janet Yellen and her fellow policy-setters finally ended months of uncertainty and raised interest rates by a slim quarter of a percentage point in mid-December, they knew they were taking a divergent path from other major central banks.

While the Fed embarked on its first tightening cycle in nearly a decade, signalling confidence in the U.S. economic recovery, worried monetary minders in Europe, Japan, China and Canada were either loosening policy or holding fire amid deteriorating economic and trade conditions.

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Alberta royalty calculus can’t ignore reality of the oil market

JEFFREY JONES

Alberta Premier Rachel Notley’s pledge to tinker with the province’s oil and gas royalties is what most struck fear deep into the hearts of the business set.

Conditions in the energy sector were grim when her New Democrats took power last spring, promising to make sure that Albertans got their fair share of spoils from the province’s massive resources. Since then, they have become much grimmer as crude oil crashed below $30 (U.S.) a barrel, a price at which most projects lose money.

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Piecing together the federal-provincial climate puzzle

CHRISTOPHER RAGAN

Federal and provincial ministers will be meeting early in March to discuss how best to move forward with coherent policies aimed at reducing greenhouse-gas emissions. Despite plenty of enthusiasm from the new federal government and a few provinces, the task ahead is daunting, and hard work will be required to sort through the many complex details.

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Russia’s roughed-up ruble makes Canadian dollar look stable

BRIAN MILNER

Bank of Canada Governor Stephen Poloz may not be having much fun minding monetary policy these days as the economy stumbles and his options narrow. But things could always be worse, as his embattled Russian counterpart, Elvira Nabiullina, can no doubt attest.

The Bank of Russia chief and her fellow directors will hold their first policy meeting of the year on Friday against a grim backdrop of recession, double-digit inflation and a battered currency. Despite deepening economic woes exacerbated by low oil and gas prices, the bank is expected to leave its key rate at 11 per cent amid concerns about inflation and extreme volatility in the currency market.

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Stock market correction doesn't spell economic doom

BARRIE McKENNA

Breathe in. Breathe out.

Doesn’t that feel better?

China’s economy is not imploding. The world is not engulfed in a 2008-style crisis. And Canada is not a failed petrostate.

You might be forgiven for thinking otherwise amid the overwhelming sense of doom gripping financial markets of late.

It’s worth remembering that the stock market and the economy are not the same thing. Yes, stocks can be a predictor of economic shifts, but they’re not an ideal leading indicator. Nor is the Canadian dollar, for that matter.

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The Poloz puzzle: Policy lauded, but message muddled

DAVID PARKINSON And BARRIE McKENNA

Last winter, not long after Bank of Canada Governor Stephen Poloz stunned financial markets with an unexpected interest rate cut – perhaps the defining moment of his tenure as head of the central bank – he was asked whether he was enjoying his time in an economic hot seat that had just gotten considerably hotter. His response: “I’m loving it.”

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Ultra-low yields turn savers into losers

BARRIE McKENNA

Stocks go up and down, but alarm bells really started to go off when the Toronto Stock Exchange’s S&P/TSX composite index briefly fell below the 12,000 mark this week.

That left the TSX back to roughly where it was 10 years ago. For Canadian investors, it’s a grim reminder of a lost decade.

Stocks will inevitably rebound, as they did in a big way Thursday and Friday.

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Canada’s energy policy can’t be decided at the municipal level

JEFFREY JONES

Canada’s mayors, bless their hearts, do critical work in areas that directly affect everyday lives – from keeping buses running to making sure the garbage gets picked up.

Determining national policy on energy and trade isn’t part of the job, though. Mayors contribute to development decisions by airing their citizens’ concerns at hearings – and those concerns need to be heard – but they don’t get final say.

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What the U.S. and Britain can teach Canada about foreign trade

BRIAN LEE CROWLEY

The part of international trade that gets all the attention is goods and services. Canada has negotiated free trade deals with South Korea, the European Union and the Trans-Pacific Partnership, and now there is talk of a deal with China. In every case, the fans of free trade tout the benefits of opening foreign markets to things Canadians make. But as desirable as that is, it may not be the most valuable kind of trade. And the most valuable kind of trade does not necessarily involve the countries with which we have been signing trade deals.

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To maximize benefits, Liberals must invest efficiently in infrastructure

DAVID PARKINSON

When the Bank of Canada decided Wednesday to hold off cutting interest rates until it sees the details of the new Liberal government’s infrastructure spending plans in the federal budget, it essentially lobbed the ball for stimulating Canada’s flagging economy into the government’s court. That leaves Ottawa with a dilemma: Should it be focusing on near-term economic stimulus, or maximizing the long-term benefits of its ambitious infrastructure program?

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How bad is the commodity downturn? Depends who you ask

IAN McGUGAN

Here is Wall Street’s view of the great oil-and-mining slump: Run for the hills! This is ugly and going to get uglier!

Here’s the Bank of Canada perspective: Oh, calm down. By 2020, you’ll hardly remember this kerfuffle.

These are, granted, rather liberal translations, but they do capture the essence of a striking and important contrast in attitudes.

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Plunging dollar, ultralow oil prices need not lead to disaster

ANDREW JACKSON

With a plunging Canadian dollar, collapsing oil prices, slumping stock markets and signs that the economy stalled in the last quarter of 2015, it is easy to think that we are on the cusp of economic disaster. But the state of the Canadian economy, while indeed dismal, does not justify alarmist pronouncements that threaten to make things even worse by undermining consumer and business confidence.

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Oil patch's go-to guy Greg Stringham is stepping down

JEFFREY JONES

In a way, this is where Greg Stringham came in.

Mr. Stringham, energy’s inside man, is retiring from his executive post at the Canadian Association of Petroleum Producers after two decades, four royalty reviews, numerous pipeline battles and three industry downturns. Now, oil prices are in the tank.

“When I started this 20 years ago the price of oil was $25 [U.S.] a barrel. I thought I would leave with it slightly higher but it might actually get back to that point,” Mr. Stringham says. “The more things change, the more they stay the same – although the production was 400,000 from the oil sands when I started here and now we’re at almost 2.4 million barrels a day, so that has changed.”

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Oil market will see little relief in 2016, FirstEnergy analyst says

KELLY CRYDERMAN

As crude oil continues its deep slide, it’s hard to distinguish whether market fundamentals, or sentiment about market fundamentals, is driving the price drop, FirstEnergy Capital Corp. says.

Analyst Martin King gave an energy market update to a standing-room-only audience of oil and gas executives and white-collar workers at Calgary’s Petroleum Club Tuesday. Attendees joked whether the large crowd was a result of intense industry interest in the forecast or the free hot breakfast.

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Hold, cut or … take the third way? How the BoC’s rate decision could play out

DAVID PARKINSON

Central bank interest rate decisions don’t get much more suspenseful than this.

The Bank of Canada will issue its latest policy announcement Wednesday morning (10 a.m. ET), in a true nail-biter of a decision as the country’s struggling economy has been hit by a new wave of slumping oil prices to start the year. The market has see-sawed over the past week on whether the central bank will cut its key interest rate for the third time in a year, but as of late Tuesday, bond traders were split almost right down the middle, pricing in a 54-per-cent chance of a cut. It’s too close to call.

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Oil price crash may be biggest resource shock the loonie has ever absorbed

JEFF RUBIN

Will a 60-cent Canadian dollar be a fitting end to Canada’s burst carbon bubble?

Just as soaring oil prices, and soaring oil sands production, lifted the loonie to parity and for a while even a premium against the greenback, plunging oil prices and the risk of bankruptcies in the sector have already pushed the currency to a 13-year low with a growing number of foreign exchange traders believing it’s on course to retest the all-time low of 61.7 cents against the U.S. dollar set back in 2002.

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Banking on a rate cut? Don’t expect mortgage rates to match

DAVID BERMAN

If the Bank of Canada cuts its key interest rate on Wednesday in response to dismal economic conditions, don’t expect the big banks to follow with similar reductions to their prime lending rates.

Robert Sedran, an analyst at CIBC World Markets, figures that banks will cut their prime rates by just 5 or 10 basis points if the Bank of Canada cuts its overnight rate by 25 basis points. (There are 100 basis points in a percentage point.)

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Global leaders call for infrastructure spending to spur growth

NATHAN VANDERKLIPPE

Amid rising fears of a hard landing for the Chinese economy, global financial leaders gathered in Hong Kong to call for a rush of infrastructure spending to cushion the blow to world markets.

As slowing growth sparks concern that has driven markets worldwide toward bear territory, companies, governments and even individuals with big savings accounts should pour money into new foundations for growth, said executives and bankers gathered at the Asian Financial Forum on Monday.

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‘Close call’ for Poloz as rate decision looms

DAVID PARKINSON

A year ago at this time, Bank of Canada Governor Stephen Poloz stunned the financial markets with a surprise interest-rate cut in the teeth of a tumbling oil price and a slumping economy. Now, with oil’s renewed slide threatening to derail Canada’s 2016 economic prospects, the markets are steeling themselves for a repeat performance from Mr. Poloz this week – though it’s far from a sure thing.

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Focus on productivity to boost Canada’s stalling economy

BARRIE McKENNA

For much of the economy, it hardly matters what Stephen Poloz and the Bank of Canada do on Wednesday.

One of the key lessons of the past year is that monetary policy isn’t a cure-all. On its own, it won’t get Canada out of its slow-growth rut. Two interest rate cuts in 2015 kept cheap credit flowing and helped send the Canadian dollar skidding lower, but they didn’t stop the economy from stalling. One more cut this week won’t alter the economic outlook or change the direction of commodities prices.

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Oil prices plunge below $30; analysts fear further drops to come

JEFFREY JONES And JEFF LEWIS

World and U.S. oil prices cratered to below $30 (U.S.) a barrel on Friday with no sign of stopping, as fears spread that shaky economic growth and the lifting of sanctions against OPEC member Iran would deepen a global supply glut.

U.S. benchmark West Texas intermediate (WTI) oil and Brent crude sank nearly 6 per cent to about $29.42 a barrel, and several analysts warned that the worst is yet to come. Oil tumbled amid uncertainty about the timing and volume of Iranian crude expected to hit the already oversupplied global market in the coming weeks and growing questions about demand, especially in China.

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There is an upside to Canada's downward dollar

BARRIE McKENNA

There are some obvious downsides to the sub-70-cent (U.S.) dollar.

A winter break in Florida may now be out of reach. So too is that California cauliflower at the grocery story.

But there are also benefits, particularly for Canadian exporters.

It’s not just about manufactured goods. A wide array of high-value services, once destined primarily for domestic consumption, are now readily traded globally – everything from financial and accounting services to engineering, architecture, information technology, communications and scientific research.

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The business world needs to come to grips with gender ambiguity

TODD HIRSCH

Near my home in downtown Calgary, a century-old schoolhouse reminds us how societal concepts around gender have changed. Two entrances on the same side of the building, one for boys and one for girls, are marked in sandstone. They weren’t kidding. In 1912, it was improper for school-aged boys and girls to use the same door.

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