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Moody's Turns To Canada: Ontario Outlook Revised To Negative, "Softening Economic Outlook" Cited
And so the focus shifts to the quietest neighborhood on the block: "The negative [Moody's] outlook on the province [of Ontario] reflects the softening economic outlook, Ontario's growing debt burden, and the extended timeframe to achieving a balanced budget." What's next: someone dares to question the stability of Canadian banks which as we it turns out may have a few hundred billion in hyper-rehypo assets (Canadian Imperial Bank of Commerce (re-pledged $72 billion in client assets), Royal Bank of Canada (re-pledged $53.8 billion of $126.7 billion available for re-pledging)) pledged there... and there... and there... and so, ad inf.
From Moody's:
RATINGS RATIONALE
The change in the outlook reflects Moody's assessment of risks surrounding the province's ability to meet its medium term fiscal targets given the recent slowdown in provincial economic growth and the resulting risks to the province's ability to stabilize the recent accumulation in debt.
"The negative outlook on the province reflects the softening economic outlook, Ontario's growing debt burden, and the extended timeframe to achieving a balanced budget," said Moody's Assistant Vice President Jennifer Wong, lead analyst for the Province of Ontario.
The province's Fall 2011 statement, released in November, revised its forecasts down for provincial growth in 2011 and 2012 to 1.8% and 1.8% from 2.4% and 2.7%, respectively. The provincial economy is particularly affected by the moderation in US growth, given its higher export share relative to other Canadian provinces and the high proportion of international exports (roughly 80%) destined for the US.
The province set out in its 2011-12 budget a plan to return to fiscal balance in 2017-18. Moody's has highlighted that the extended period of fiscal consolidation presents an element of risk in achieving the planned consolidation path, and a risk to stabilizing and reversing the recent deterioration in the province's financial position. At March 31, 2011, Ontario's net direct and indirect debt, at roughly 200% of consolidated revenues, was at the high end of the spectrum for Canadian provinces, whose ratings remain in the narrow range of Aaa to Aa2.
The slowdown in provincial economic growth presents a challenge to the already lengthy planned consolidation path, particularly given the strong expense growth seen in recent years. Expense growth leading up to the recent downturn was relatively robust, highlighting the challenge ahead. Indeed, expense growth averaged 7% annually in the five years to 2007-08, with health expenses having grown at an average of 8%. The fiscal plan presented in the 2011-12 budget assumed expense growth of roughly 2% annually for the duration of the plan.
Nevertheless, Moody's reports that Ontario's high investment-grade rating reflects high debt affordability and the high degree of fiscal flexibility inherent in the institutional framework governing the way Canadian provinces operate. The current low interest rate environment has enabled the province to issue long-term debt bearing historically low coupons. While the proportion of revenues consumed by interest payments has increased with the recent accumulation in debt, this remains manageable given the province's fiscal flexibility. Moreover, the province's large and diversified economy and growing population provides access to a broad and productive tax base and, as such, remains a source of credit strength.
While Ontario retains sufficient fiscal flexibility inherent in the institutional framework to adjust its fiscal outcomes, thereby improving its financial position, difficult policy decisions are required.
"We believe that increased fiscal discipline will be required to sustain debt affordability," said Ms. Wong. "If a credible plan to address the fiscal imbalance and stabilize the debt burden is not implemented in the next provincial budget, expected in March 2012, downward pressure on the province's Aa1 rating would emerge."
Moody's P-1 rating on Ontario's commercial paper program remains unchanged.
The Province of Ontario is Canada's largest province, representing approximately 40% of national GDP. The province's population measured approximately 13.2 million in 2010.
WHAT COULD CHANGE THE RATING UP/DOWN
A rating upgrade is unlikely in the near term given the current context of continued consolidated deficits and debt accumulation.
An inability to address continued consolidated deficits and to stabilize the debt burden over the medium term would put downward pressure on the rating. Further downward revisions to growth would also place pressure on the province's ability to achieve medium term fiscal targets and would place negative pressure on the rating. Finally, if debt affordability were to deteriorate due to higher-than-expected increases in debt levels or a significant rise in interest rates, the province's fiscal flexibility would be reduced, exerting downward pressure on the rating.
The methodologies used in this rating were "Regional and Local Governments Outside the US", published in May 2008, and "The Application of Joint-Default Analysis for Regional and Local Governments", published in December 2008.
Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 31 January 2012. ESMA may extend the use of credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, if ESMA decides that exceptional circumstances arise that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
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+1 on everything, except that you only have part of the picture when you say:
Hydro Québec sells, each year, $950 million of electricity to New England, New York, Pennsylvania, New Jersey and Maryland.
Indeed. They will sell more power in the future. I'm glad that you saw the humor in my ultra-superficial survey of my next door neighbor's affairs (for northern New Englanders, Canada is of primary economic interest and importance-- we're very aware of what goes on up there, counter to the stereotype of "Americans arriving at the border with skis in July"-- Scott Thompson
What did you all expect, Rothchild owned and Goldman controled Bank of Canada, did anyone really think they would leave us out of the global collapse party?
The bank of Canada act states that the Federal and provincial governments can borrow from the bank of Canada up to 25% of their annual tax reuenue, guess what not one level of government does, they all borrow from the same place the US Greece Italy and just about everyone else does,
"the international criminal banksters"
Canadians are running personal/household debt at around 152% of disposable income. When you tack that onto Gov and Corporate debt you’re at 274% of GDP. At least it’s not UK (tipping 500%).
I've always preferred the more prosaic "Pointed-Headed, Reptilian Kitten eater" when referring to out illustrious premier.
The Loonie RE Bubble may be worse then USA RE Bubble. My friend bought a place in Calgary back in 1999 for $225,000 and sold it last year for $1.2 million.
That's a Bubble.
The irony,
PHOENIX (AP) — A scathing U.S. Justice Department report released Thursday found that Sheriff Joe Arpaio's office carried out a blatant pattern of discrimination against Latinos and held a "systematic disregard" for the Constitution amid a series of immigration crackdowns that have turned the lawman into a prominent national political figure.
The government found that Arpaio's office committed a wide range of civil rights violations against Latinos, including unjust immigration patrols and jail policies that deprive prisoners of basic Constitutional rights.
Homeland security officials also are restricting Arpaio's office from using a program that uses fingerprints collected in local jails to identify illegal immigrants.
It's ok for the Fed to allow selling guns to the Mexican drug cartels, and when did the Fed start worrying about constitutional rights? Strange days indeed! As far as the article is concerned should they not down grade Quebec as it is "more" French?So... my shares of CEF backed by gold-plated tungsten are still safe, right?
Rehypothetically speaking, that is.
+1. Funny
Oh Leo???? Oh Leo?????
Too bad Leo K. was banned from ZH. Man, could you image the garbage that he would be spewing by now?
LEO this is for you..
LONG CHINESE SOLARS.....
Sorry Duplicate...
Now I wonder who would have given my comment a -1? I just wonder. The only person who ever gave Leo a +1 wsa Leo himself...
Gee, Zerohedge - did this post only get to your West Virginia following? Misery loves company I guess eh Yanks?
Name the G8 country least affected by 2008? - yeah, that was Canada. The reason the Chinese are buying in Vancouver as oppossed to Podunk, Tennessee is they don't want to live in a third world country. That is where you are headed. Remind me to put the boot in when the US is downgraded next week, or next month. It is a certainity.
As I walk across the Tundra to work each day - I have to fend off the same damn Polar Bear... geez. But I never run into any hairdressers that own 19 homes either. US has had great successes because they are unafraid to do things to excess - like f%ckup. Canada is too chickensh*t to get themselves in any real trouble... Ty has a bent-on about us cause we are so sqeaky-clean. Have some back-bacon and lighten-up, eh...
ah ah, don't forget the maple syrop, esti.
Wow, if the level of commentary here is representative of the ZH readership, you guys are seriously fucking retarded.
I'm Canadian, as in nice, polite, civil and educated, and yes, I just called you all fucking retarded. In USD (we print to keep our exports cheap), when a Canadian calls you fucking retarded, that's like "OMFG you are like retards on dramamine." in local currency. In Yen, that's like, "they only keep you alive because they're long colostomy bags", in GBP it's, "Right then, anyway", and in euros it's well, that won't matter in a few days will it.
Ontario has some significant exposures, particularly around pension liabilities, and the social program known to outsiders as the auto industry, but to call out Ontario and not Quebec, which culturally is like Greece except imagine it full of people not even France would want, seems a bit much.
i'm all for ribbing, but Jesus, get a goddamn clue .
Retards.
Your wife called me retarded last night, too. I just looked right down at her and told her not to talk with her mouth full.
You're nothing more than a #uckin Liberal bag-licker, that spews anti American rhetoric from your puney little soap box. You #uckin Canadian Liberals think that all Americans come from W Virgina and play the banjo. Keep dreaming your northern mythology. Morons don't put men on the moon, or become superpowers by being inbreds. Your state run government media and Liberal-imposed CRTC Act are soon to be extinct if I'm reading the Canadian press right, so hopefully Canada will have a brighter future.
Now... the first piece of shit that came out of your mouth was around pensions... then I hear the word "Greece"... and there is only one loser that I and Mr. Akak know that would drip this down his chin... nite Leo.
BATZ = NONE OTHER THAN THE FAMOUS...LEO K. WHO WAS BANNED FROM ZH.
ha ha - funny and so very true.
The spittle I keep reading about candian housing is ridiculous too. New mortgages require a 10% DP now, or is it 15%. The banks require the money to be in your accounts for 3 months prior. You can't walk away from your mortgage, and our banking system is not built on the bigger fool theory WRT refinancing. All loans are made with expectations on a 5 year fixed closed mortgage. I don't see the banks walking away from refinancing here. A 30 year mortgage is the largest you can get here now.
All business or 2nd houses require a 25% downpayment, I just don't see the risks... Sure housing can drop, but unless a 50% drop is incurred everything will survive, even a 20% drop won't wipe people out so they have no equity. There isn't nearly the overbuilding as in the US.
Beside all this, a 20% + drop will take a few years, during which people will be building equity in their homes. They won't be refinancing. The banks won't let it occur.
http://www.infowars.com/syria-urges-its-citizens-to-flee-canada/
One thing not often discussed in Canada is what happened to Canada's gold. Previous to the 1980s Canada had 660 tons of gold. A bunch of thieving asshats started selling it off and now stockpiles are down to less than 20 tons. This is probably one then biggest criminal conspiracies in Canada and is never discussed. The question is what's going to happen when the world goes back on the gold standard!
Number One Asshat is called Paul Martin......
Stockpile gold yourself! By my calculations, if each Canadian owned 1 ounce, that would amount to 1167 tons.
Actually, I really wish the US government would sell all the gold it owns. This would be very foolish from the government's standpoint, but would be great for those of us who are looking to increase our holdings.
you mean the Liberals....
My guess is Canada will be the first to nationalize it's mines. That brings up a good question. When Ron Paul wins and puts us back on a gaold standard, what does that do to the price of gold? A strong dollar means lower price of gold right? Or does a gold standard inherently mean a much higher price?
If Dr. Paul puts the US greenback - back on a Gold Standard (he won't) then the US dollar rises to crush your economy. Your M3 is so out of reality that Gold would have to be like $20K an ounce. No? More? - how about 100K an ounce as there is nothing in Fort Knox to back it. Just too silly to think about - Try the Renmimbi in about 10 years... or sooner.
I thought he was going to cut trillions? Begin to normalize interest rates (raise them). I am being sold a shit sandwich? I believe this man and his sound money philospohy.
Besides it seems a strong dollar is going to do us in if we print money and hold on while everyone else blows up around us.
What is gold going to if we don't back it up....too many questions. How about that Christian Bale?
RP is for competing currencies inc shiny.
Don't worry, RP will be dead before he can pull any shenanigans like that.
The US supposedly has 8133 metric tons of gold (262 million troy ounces). And US currency in circulation is about $1T. So in order to back the currency completely, you would need an exchange rate of about $3825/oz.
Now you could have a system where each dollar is only partly backed by gold, which would lead to a lower gold price. In the late 20's, the US government had only 40% of the gold required to fully back the dollar. But in my opinion, this was extremely foolish and was just asking for trouble and was one of the things that lead to the bank runs of the early 30's.
Even if Ron Paul were elected, he would still need consent of congress to move the US back to a gold standard. My suspicion is that we might not go back to the gold standard, but perhaps we might get some tax changes which would allow people to convert between gold, silver, and dollars without a tax penalty. This would allow people to use gold and silver as a store of value and a medium of exchange without formally linking them to the dollar or to each other.
dup
Forget that the Gold figure is unprovable - I Trillion in circulation? I don't know that being 'in circulation' even matters or how in the world that could be proven. What about all the money not 'in circulation'? What happems to that? Just forgotten about? The TARP money, the 600 Billion for QE2... the Billions in foreign aid. If you back with Gold that would/could all come back... for Gold. That you don't really have. I suggest that your 1 Trillion figure is off by a factor of... multiples.
Now you could have a system where each dollar is only partly backed by gold, which would lead to a lower gold price.
***************
That cannot happen in a floating competing fiat currency regime-
If the US had "any" gold backing-or any other currency in the world for that matter-it would force everyone to match that % of backing-
I believe that is what will bring the world back to some type of gold standard-but it wont come by choice-it will happen from having no other choice
obviously US "market" has de-coupled from Canada, the rest o' the world & Mars, too: futures revving UP for Friday
Canadians: Definitive proof that the Indians fucked raccoons.
I am the Oracle of Ontario and I say Ontario should have an AAAA rating. I just had a 'private party' with Liberal leader McGuinty and everything will be fine.
BTW Fuck you Moody's - downgrading Ontario but not the US? Sat back while S&P took all the heat for the US downgrade and target Ontario instead? Omaha, Obama and CNBC will send you some nice treats for this.
Rating agencies playing good cop/bad cop.
Heille LeZinc, c'est bon cop/bad cop 'sti.
Ouais, 'sti, pour celle là t'as raison.
I liked that movie!
Our dear leader sold out Canada to banks via the CMHC in 2007 & 2008, anyone who is delusional enough to think real estate here isn't a giant bubble should give their heads a shake. Taxpayer is on the hook for over a trillion in mortgages, our GDP just crosses the 1T mark.
Famously our neo-con leader spoke at G20 saying we'll have to accept giving up some sovereignty in exchange for prosperity. All you really need to know about our polical situation summed up nicely.
Bright spot is we've got a ridiculous amount of natural resources - go long Canada, short Canadian taxpayers.
And BC should definately be on Moody's hit list, I mean c'mon, we just built a half billion dollar stadium roof, picked up the tab on 300M condo fuck up all on top of an Olympic spending spree.
Oh ya, and our entire economy is run on foreign condo buying + drugs. The later should be OK, but they don't pay much tax on that stuff.
Jim Willie's latest article ay Goldseek states:
Compare to Canada which has a mere 34.9% total debt burden versus its GDP, a much stronger financial situation. The nation in the Great White North could have been a powerhouse leader with a huge sovereign wealth fund like Norway, except they followed the Goldman Sachs path to the fields of corruption and fealty, selling almost all their gold in a grand Wall Street game that even Switzerland joined. Then Canada followed the Bush Doctrine of fascism, embracing the war footing, sending soldiers to support the narco war, and tightening the security vise. Next they will become a Chinese commercial colony, a better fate than the US to be sure.
CIBC is largely owned by Lee Ka Shing - Whampoa.
Surprised to read about RBC. Both Ontario and BC have horrific
debt levels but holding our own out west. Alberta by the way
has already had on average, house values drop 17pc from peak.
Our family is french/english blend - our roots go back to
New France times.
I am really worried about the housing, it's in a terrible bubble.
CIBC is largely owned by Lee Ka Shing - Whampoa.
Wrong, moron. Lee owns 10% of CIBC, making him the largest single foreign owner. He can't buy any more, as there are federal limits to what non-Canadians can own.
Its disturbing that the CMHC invest in MBS. Doubling down? If the RE market in Ontario does suffer, it could cripple maybe 2 major banks. If there is trouble, short CIBC first.