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If you're happy and you know it, you're probably deep in debt

These are stories Report on Business is following Wednesday, Dec. 19, 2012.

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If you're happy and you know it …
Economists at BMO Nesbitt Burns have found an interesting connection between happiness and debt.

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The bottom line is that Canadians aren't alone when it comes to worrisome debt levels. And whatever we're doing with that borrowed money is buoying our spirits in troubled times.

Statistics Canada reported last week that the key measure of credit market debt to disposable income climbed in the third quarter of the year to a record 16.46 per cent.

While credit growth has slowed – thank you, Jim Flaherty and Mark Carney – it has still outpaced the rise in income.

Now, BMO's Douglas Porter and Sal Guatieri have found something of a "positive correlation" between consumer debt and happiness among developed countries.

Denmark, they note, has a debt-to-income ratio of 300 per cent, and, according to the United Nations, is the "happiest" country in the world.

The Danes aren't alone. According to BMO's findings from the UN World Happiness Report and debt measures, folks in the Netherlands, Ireland, Switzerland and Norway are both deeper in debt and happier than we are.

(For BMO's research, see accompanying infographic or click here.)

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IMF sees mild growth
The Canadian economy is expected to pick up a little speed by the middle of next year, though external risks still "loom large," the International Monetary Fund said in a new forecast today.

Gross domestic product will expand by just below 2 per cent next year and accelerate to about 2.3 per cent in 2014, according to the projection, The Globe and Mail's Tavia Grant reports.

That's down slightly from its October forecast of 2 per cent growth for next year.

Canada's housing market cools
Fresh numbers today provide further evidence of Canada's cooling housing market, if any was needed.

On a month-to-month basis, prices fell 0.4 per cent in November from October, with prices down in 10 of 11 markets tracked in the Teranet-Natonal Bank house price index. Only Calgary was up, The Globe and Mail's Tara Perkins reports.

Today's numbers mark just the fourth time in 13 years that prices have dropped in the month of November.

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On an annual basis, prices rose 3.3 per cent in November from a year earlier, marking the 12 month in a row of slowing increases.

"Up through September this cross-country trend was replicated in the Vancouver market, but this is no longer the case," said National Bank senior economist Marc Pinsonneault.

"In Montreal 12-month inflation has decelerated in 11 of the last 12 months, in Toronto in each of the last seven months, in Winnipeg in each of the last five months, in Ottawa-Gatineau in eight of the last 10 months."

UBS settles Libor case
The Libor scandal claimed another of the world's major banks today as UBS announced a $1.5-billion (U.S.) settlement with authorities in the United States, Britain and Switzerland.

It's the second big bank, after Barclays, to settle the case over manipulating key interest rates.

"Today's resolutions stem from industry-wide investigations into the setting of certain benchmark rates across a range of currencies," the bank said.

"These investigations have focused on whether there were improper attempts by banks, either acting on their own or with others, to manipulate Libor and other benchmark rates at certain times," it said in a statement.

"UBS has fully co-operated with the authorities in their investigations and significantly enhanced its control framework for its submissions process for Libor and other benchmark interest rates. The investigations by other governmental authorities and private litigation referred to in our third quarter 2012 report remain ongoing notwithstanding today's announcements."

U.S. to sell GM shares
In another sign of the winding up of the bailout era, the U.S. government is selling 200 million General Motors Co. shares to the auto maker, and plans to sell its entire holding within 12 to 15 months.

The Treasury Department said GM is buying the shares at $27.50 (U.S.) each, or $5.5-billion and almost 8 per cent above yesterday's closing price.

"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," said GM chief executive officer Dan Akerson.

The U.S. government, which, along with Canada, bailed out both GM and Chrysler, will still hold 300 million GM shares after the sale. Today's deal doesn't include any of the 1.4 million GM shares held by the Canadian and Ontario governments, The Globe and Mail's Greg Keenan reports.

"The auto industry rescue helped save more than 1 million jobs during a severe economic crisis, but TARP was always meant to be a temporary, emergency program," said Timothy Massad, the Treasury Department's assistant secretary for financial stability, referring to the government's Troubled Asset Relief Program.

"The government should not be in the business of owning stakes in private companies for an indefinite period of time," he said in a statement.

"Moving to exit our investment in GM within the next 12 to 15 months is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests."

Last week, the government got out of its interests in AIG, and so far, it says, it has recovered some 90 per cent of the almost $420-billion in original TARP funds.

China growth to pick up
China's economy slowed this year to its slowest pace since 1999, but is still expected to help the wider region drive nearly 40 per cent of the world's growth next year, the World Bank said today.

World Bank economists expect China's economic growth will end up averaging 7.9 per cent, which still exceeds an official government target of 7.5 per cent, Carolynne Wheeler reports from Beijing.

However, gross domestic product is forecast to grow 8.3 per cent next year, they said, based largely on investment-driven growth and fiscal stimulus.

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