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Ottawa's pension obligation higher, study says The federal government's pension obligation is a whopping $65-billion higher than reported, according to a new study that uses a different method of calculation.
Using a fair-value measure for the government's obligations related to public service employees, the Canadian Forces and RCMP, the C.D. Howe Institute study released today pegged the amount at almost $208-billion, or about $65-billion more than the number in the Public Accounts.
"The larger-than-reported gap between federal pension promises in these plans and the assets that back them is a problem, both for federal employees and for taxpayers," said the authors of the report, Alexandre Laurin and William Robson.
"For federal employees, the gap represents a risk if furture taxpayers refuse to fill the hole left by inadquate contributions.
"... Taxpayers face two types of risks. One is obvious: responsibility to backfill the funding hole will fall to them. The other risk is more speculative: as debt levels rise, fears of sovereign defaults will likely drive up the cost of borrowing - for all governments, but particularly for those with opaque balance sheets and big exposure to public employee pensions. Europe's less fiscally healthy governments now face double-digit borrowing costs and painful budgetary consolidations. U.S. state governments may be next.
"Fair-value reporting of Ottawa's pension obligations, ideally in conjunction with supporting change in Canada's public-sector accounting standards, plus a credible plan to manage the costs revealed by a proper measurement of pension liabilities, would help keep Canada off that list."
Can Ireland avoid bailout? Speculation is mounting that Ireland will be forced to seek a Greek-style bailout.
Borrowing costs have spiked and bank shares have tumbled. And according to a Reuters poll published today, 20 of 30 analysts surveyed think Ireland can't make it through to the end of next year without getting outside help.
A bailout could run to some €48-billion, based on the forecasts of 10 of the analysts surveyed.
"The further rise in Irish bond yields over recent days has intensified speculation that Ireland will soon be forced to follow Greece in turning to international financial support," Jonathan Loynes of Capital Economics said in a report today.
"Is there anything that could yet save Ireland from a similar fate?"
On that, he's doubtful.
One could hope that confidence will rise if, and when, the government reaches a deal with opposition politicians on an austerity program before the Dec. 7 budget. But that could not have a big impact even if it happens. Other possibilities also are doubtful, he said.
"Perhaps the real worry for Ireland is that, six months after it first received help, Greece's position appears to be almost as precarious as ever," Mr. Loynes wrote.
Tensions build at G20 Currency tensions are forming the backdrop at the G20 summit in Seoul. While Washington points a finger at Beijing, other countries are firing back at the United States. Where's Canada in all this?
Today, Globe and Mail correspondents Kevin Carmichael and Bill Curry report from Seoul, Prime Minister Stephen Harper came to the defence of the country's biggest trading partner, challenging the critics of the Federal Reserve to come up with something better.
The Fed's latest quantitative easing initiative, a $600-billion (U.S.) plan to drive down longer-term interest rates by buying longer-term Treasurys, has become a particular flashpoint in the run-up to the summit. The U.S. dollar has generally weakened on what has become QE2.
Mr. Harper made the comment before the official start of the meeting. Emerging economies such as Brazil, China and Russia have cited the Fed for weakening the greenback, as have others such as Germany.
Mr. Harper, in his first comments on the controversy, dismissed those allegations, saying the Fed is simply doing what it can to breath life into the U.S.'s sluggish recovery.
The Wall Street Journal reports today that the leaders are close to an agreement that "appears to paper over" many of their differences by reiterating the language to which finance ministers already agreed.
A draft communiqué, the newspaper said, would pledge that countries would refrain from competitive devaluation of their currencies, though in brackets, in an apparent reference to China was alternate wording of "competitive undervaluation."
U.S. pursuing weak-dollar policy, Greenspan says Alan Greenspan is making waves today, suggesting in a guest column in The Financial Times that the United States is chasing a weak-dollar policy that's roiling currency markets.
The former chairman of the Federal Reserve does not name the culprit but, as the newspaper, critics of the U.S. central bank will probably seize on his comments.
He also said that China should allow the yuan, also known as the renminbi, to appreciate, and that by holding down its value the world risks a return to protectionism.
"America is also pursuing a policy of currency weakening," Mr. Greenspan wrote. "The suppression of the renminbi and the recent weakening of the dollar are, of necessity, producing firming exchange rates in the rest of the world. Something has to give in this arena of zero-consolidated current account balances."
In an interview with CNBC, U.S. Treasury Secretary Timothy Geithner said Mr. Greenspan is wrong.
"That's not an accurate description of either the Fed's policies or our policies and again I don't think it's an accurate description of what's happening in markets today," Mr. Geithner said.
China's economy strong The latest batch of numbers from China suggest its economy remains strong, prompting speculation that the People's Bank could move to tighten again at some point.
Inflation jumped in October to 4.4 per cent from 3.6 per cent in September, but that was driven largely by food costs. Growth in industrial production and retail spending dipped, down just slightly in each case, and, said Mark Williams, senior China economist at Capital Economics in London, "the big picture is that activity remains relatively strong and should not be a barrier to further policy tightening."
Earlier this week, the central bank boosted the reserve ratio for financial institutions, following an earlier hike in October. But that hasn't dampened credit despite the signals from Beijing that it wants a tightening, Mr. Williams said.
"The required reserve ratio will probably be raised again before the end of the year, with a second benchmark interest rate hike also increasingly likely."
Canadian Tire boosts dividend Canadian Tire Corp. is boosting its dividend after reporting a 21-per-cent increase in third-quarter profit.
The iconic retailer said today it earned $103.2-million or $1.27 a share, up from $85.4-million or $1.04 a year earlier. Sales climbed 2.6 per cent to $2.51-billion.
Canadian Tire also announced it will boost next year's quarterly dividends to 27.5 cents from 21 cents.
"Over all, our business is performing well," said chief executive officer Stephen Wetmore. "We have managed conservatively through challenging economic conditions and we have confidence in our continued performance which is reflected in our decision to increase our dividend payout and to repay $300-million in debt that matured this quarter."
Tim Hortons to close some U.S. outlets Tim Hortons Inc. is retreating somewhat from New England. The coffee and doughnut chain said late yesterday, as it reported third-quarter earnings, that it will close 36 shops in the U.S., 34 of them in Hartford, Conn., and Providence, R.I.
The company's earnings took a hit on that, and will take another in the fourth quarter.
The well-known chain said it earned $73.8 million or 42 cents a share in the third quarter, up from $61.2-million or 34 cents a year earlier though below analysts' estimates. Revenue climbed almost 10 per cent to $670.5-million.
The company is also spending the bulk of the money from the sale of a joint venture stake, some $400-million, to buy back shares.
UBS Securities Canada analyst Vishal Shreedhar said the results were good, adding the aim of the pullback in New England is "to focus on growth markets in the Northeast and Midwest U.S., where the brand continues to develop."
Added Desjardins analyst Keith Howlett: "We continue to view Tim Hortons as a premier branded consumer growth company in our coverage universe and anticipate continued sales momentum and profitable growth over the coming quarters."
Foreclosures slow in U.S. The number of foreclosures in the United States has dropped markedly amid the controversy over improper documentation.
Several of the country's major lenders temporarily stopped procedures while they reviewed their documentation procedures, although some stressed nothing appeared to be improper. There were allegations that so-called robo-signers were gathering information with little knowledge behind them.
Foreclosures by lenders fell 9 per cent in October from a month earlier, RealtyTrac Inc. said today. Some institutions have restarted the process, though, The Associated Press reported today, at a slower pace.
"We will still see some softness in the numbers in November, just because of the lag time from when you announce something like this and when you can actually enact it and then reverse it," Rick Sharga, a senior vice-president at RealtyTrac, told the news agency.
Madoff items up for auction As Bloomberg News puts it today, it's a chance to walk in Bernie Madoff's shoes.
The U.S. Marshals Service plans another auction on Saturday, this one to raise money from the sale of shoes, clothes, furniture, jewelry and chatzkes from his various homes. The estimate is $1.5-million (U.S.) to $2-million, Bloomberg said.
It's not quite like Imelda Marcos, famous for her footwear collection, though there are some 200 pairs of shoes, many of them loafers, worn by Madoff and his wife Ruth.
Many of his are "Mr. Casual," while some of hers are Prada, Armani and Ralph Lauren.
Mr. Madoff is serving a prison term in North Carolina for one of history's great Ponzi schemes.
From today's Report on Business
- Ontario asked Ottawa to delay AECL sales
- Squeezed by drug reform, Shoppers turns to export market
- Eric Reguly: The real story behind Ottawa's Potash rejection
- CPPIB urges Ottawa to clarify takeover rules
And, read our Streetwise blog and Your Business section.