Brandon manitoba iconomy3/26/2023 Freeland has been pouring borrowed money into the hands of Canadian households and businesses to overcome the effects of the pandemic. Freeland can draw some lessons from the Silicon Valley Bank failure, particularly when it comes to financial decisions made in times of high interest rates and rising inflation.Īs long as she has been finance minister, Ms. The Financial Post reports that - unlike SVB, which catered to niche tech startup companies - Canada’s big banks dominate their home market and “are diversified across industries and business lines.”īank of Nova Scotia analyst Meny Grauman told the Post that the banking crisis down south “should actually be viewed as further vindication of the Canadian banking model, which is dominated by a few large and diversified players.” As a result, California bank regulators put the bank out of business on Friday, and federal authorities urged calm to prevent a wider run on the banks.Ĭould such a banking failure that shakes public confidence happen in Canada? While not impossible, our system appears more resilient. With shares trending down 60 per cent on Thursday last week, other SVB clients pulled their money out on the advice of venture capital firms, which spooked investors off the stock sale, ultimately collapsing the bank’s efforts to raise capital. Treasuries at a US$1.8-billion loss, and announced a US$2.25-billion sale in common equity and preferred convertible stock “to fill its funding hole,” according to the Reuters report. ![]() In turn, the bank went looking for ways to meet its customers’ withdrawals, and sold a US$21-billion bond portfolio of mostly U.S. As such, some Silicon Valley Bank clients started pulling money out of their accounts to meet their liquidity needs. Reuters reports that these higher interest rates caused the market for initial public offerings to shut down for many startups and made private fundraising more costly. ![]() government bonds had dropped sharply in value on account of rising U.S. The latest development was failure of the Silicon Valley Bank, whose inventory of U.S. They announced a pause in rate increases to await developments. The February employment data suggested employment growth has slowed down from the rapid pace set in December and January.īank of Canada governor Tiff Macklem and his colleagues believe the interest rate increases they had already imposed will slow Canada’s economic growth in the second half of this year. The Bank of Canada has been raising interest rates rapidly for the past year in the hope of curtailing business expansion and employment growth as a means of curtailing the inflation that has driven up consumer prices. The number of employed people in Canada reached 20,054,000 in February, an increase of 348,000 since August. ![]() Employment trended upward since September. ![]() She should keep some room to manoeuvre in case she needs to cut taxes or launch new spending programs to fight a recession.Įmployment grew rapidly in the late months of 2022. She should curb the free-spending method that helped Canadians through the pandemic. The sudden collapse on Friday of the California-based Silicon Valley Bank, however, showed there are weak spots in North American industry that could trigger a wider loss of confidence, leading perhaps to a recession.įinance Minister Chrystia Freeland has promised a federal budget for March 28 in which she must support economic expansion and employment growth without adding to the inflation already impoverishing Canadian households. The data suggested the Canadian economy was recovering nicely from the depressing effects of the COVID-19 pandemic. Friday’s Labour Force Survey for February found employment holding steady in Canada from January to February and the unemployment rate holding at five per cent.
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