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As bankruptcies edge up, Poloz personally responds to Canadians’ concerns

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OTTAWA — Bankruptcies are up in Canada, the head of the Bank of Canada said this week, and he expects they’ll rise even more as the central bank continues to hike interest rates.
Governor Stephen Poloz said he hears just how difficult higher borro…


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  • OTTAWA — Bankruptcies are up in Canada, the head of the Bank of Canada said this week, and he expects they’ll rise even more as the central bank continues to hike interest rates.

    Governor Stephen Poloz said he hears just how difficult higher borrowing costs can be straight from the people feeling the pain.

    “We’re acutely aware that our decisions affect everybody — they affect the financial well-being of everybody and many Canadians are carrying a high debtload,” Poloz told reporters Wednesday after holding the bank’s key interest rate at 1.75 per cent. “I don’t have to work hard to remind myself of that. I get daily correspondence from people explaining to me what their situation is.”

    According to the bank, Poloz personally responds to emails and letters addressed to him from the public. Last year, for instance, about 200 people reached out to him directly. The most common themes of the messages are the state of the Canadian economy, inflation and interest rates, a bank spokeswoman said. If they aren’t abusive and they include return addresses, he answers them.

    Poloz’s decision to leave rates unchanged this week is likely just a pause on the bank’s rate-hiking path as the country deals with what he described as a temporary economic setback from a sharp decline in oil prices.

    The central bank will continue raising rates once Canada gets past the soft patch and the economy builds new momentum, he said. A stronger economy has encouraged Poloz to raise the rate target five times since mid-2017 to keep inflation from eventually running too hot.

    But in recent months, the number of Canadians who have run into financial trouble has edged up. Insolvencies have seen a slight increase after spending nearly a decade at very low levels. Following a long period of cheap borrowing, Canadians have amassed record piles of debt.

    “On bankruptcy statistics, I understand that they have picked up,” Poloz said when asked about the recent figures. “My understanding of the data points is that they’re picked up from an extraordinarily low level. So, there is, in any point in time, always a certain number of unfortunate folks who may lose their job or what have you and go through this process.

    “And it wouldn’t be surprising to see things pick up a little bit when interest rates have risen.”

    Poloz added the bank has deliberately been very careful and very gradual in its hiking, while reminding people the low-rate era wouldn’t last.

    The Bank of Canada has said it will likely keep pushing its trend-setting rate higher until it hits the so-called “neutral” level between 2.5 and 3.5 per cent. That would mean between three and seven more quarter-point hikes.

    Earlier in the week, the latest federal figures showed that consumer insolvencies filed under the Bankruptcy and Insolvency Act rose 5.1 per cent in November compared to 12 months earlier.

    Oil-producing provinces saw some of the biggest increases — they’re the parts of the country hit hardest by the low price of the commodity. Alberta led the way with 20.9 per cent more insolvencies compared to a year earlier.

    Insolvency numbers are made up of both bankruptcies and “proposals,” which the law describes as offers to creditors to settle debts under conditions other than existing terms. 

    In the 12 months leading up to November, Canada saw a 12.1-per-cent increase in the number of proposals and a 3.6-per-cent decrease in bankruptcies.

    “We’ve started to see a trend that’s going up and that, coupled with high debt ratios, obviously are putting a strain on household spending,” said BMO economic analyst Priscilla Thiagamoorthy.

    Benjamin Tal, CIBC Capital Markets’ deputy chief economist, said a very modest increase in insolvencies started in early 2018.

    “If you ask me what’s the direction for the next year? Clearly, it’s up,” Tal said. “But it’s not going to be a terrible-type situation. It will be kind of just an adjustment to higher interest rates.”

    After climbing during the 2008-09 recession, insolvency numbers slid back down and have stayed low for nearly a decade.

    Tal said a bigger concern is that higher borrowing costs could force people to spend more money on financing their debt rather than on consumption. A drop in consumption can affect the economy as a whole and eventually lead to lost jobs, he added.

    Unemployment is always the No. 1 reason for delinquencies, he said.

    Tal said he used to produce a regular bankruptcy report after the recession, but he eventually stopped because the numbers were flat for many years.

    “There was nothing to write about — it was boring,” he said. “Maybe now I have to renew it.”

    Andy Blatchford, The Canadian Press


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    National

    Canadian Press NewsAlert: Canadian citizen killed in Honduras plane crash

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    TEGUCIGALPA, Honduras — Global Affairs is confirming that a Canadian citizen has been killed in a plane crash in Honduras.
    A spokesperson for the department says the crash happened in the Roatan Islands area.
    Stefano Maron says consular offic…


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  • TEGUCIGALPA, Honduras — Global Affairs is confirming that a Canadian citizen has been killed in a plane crash in Honduras.

    A spokesperson for the department says the crash happened in the Roatan Islands area.

    Stefano Maron says consular officials in the capital, Tegucigalpa, are in contact with local authorities and providing consular assistance to the victim’s family.

    Local media report that all five people who died in yesterday’s crash were foreigners.

    More coming.

    The Canadian Press


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    Environment

    ‘Rope-a-dope’: Environmentalists say Alberta war room threat won’t distract them

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    EDMONTON — Environmental groups targeted by Alberta Premier Jason Kenney are shrugging off the new government’s promised $30-million “war room” to fight criticisms of the province’s energy industry.
    “The war room makes for good theatre, but the people …


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  • EDMONTON — Environmental groups targeted by Alberta Premier Jason Kenney are shrugging off the new government’s promised $30-million “war room” to fight criticisms of the province’s energy industry.

    “The war room makes for good theatre, but the people who follow this closely are going to look at this as amateur hour,” said Keith Stewart of Greenpeace.

    “Chasing environmentalists might play well politically, but it’s not actually relevant to the discussion that Alberta and Canada need to be having,” added Simon Dyer of the clean-energy think tank Pembina Institute.

    Both groups have been singled out by Kenney as examples of ones distorting the truth about the impact of the oilsands. The premier has said government staff will be tasked with responding quickly to what he calls myths and lies.

    Kenney has also promised to fund lawsuits against offending environmentalists and to call a public inquiry into the role of money from U.S. foundations.

    “Stay tuned,” Energy Minister Sonya Savage said Tuesday. “We’ll have something to talk about next week.”

    Environmental groups have already been discussing informally what the United Conservative government might have in mind and how they should react.

    “We’ve been contacted,” said Devon Page of Ecojustice, an environmental law firm. “We’ve been saying to the groups, ‘We’re here. We’ll respond and represent you as we have in the past.’

    “What we’re trying hard not to do is to do what I think the Kenney government wants, which is to get distracted.”

    Dyer and Stewart said their groups are about 85 per cent funded by Canadians. The Pembina Institute was founded in Drayton Valley, Alta., and its headquarters remain in Calgary.

    Both called the war room political posturing aimed at the party’s base.

    “A lot of the rhetoric around our work and our contribution to Alberta has been based on complete misinformation,” said Dyer, who pointed out Pembina has worked with virtually every major energy company in the province.

    Stewart called the threats a rerun of the 2012 campaign against environmental groups fuelled by the right-wing The Rebel media group and led by Stephen Harper’s federal Conservatives.

    “We learned to play rope-a-dope,” said Stewart. “Stephen Harper was our best recruiter.

    “We had people contacting us saying, ‘How do I lie down in front of a bulldozer?’ We don’t usually get a lot of those calls but we were getting a lot of those calls.”

    Each group is confident in the accuracy of the facts it cites. Dyer said Pembina research has been used by investors, academics and governments.

    Stewart said the issue isn’t facts, but how they are understood. 

    “Often what it is is a disagreement over which fact is important. Industry will say, ‘We’re reducing emissions per barrel.’ We’ll say, ‘Emissions are going up.’ Both statements are true and it depends which you think is more important.”

    Cara Zwibel of the Canadian Civil Liberties Association said the Kenney government must tread carefully. It’s OK to defend your position, but not to threaten, she said.

    “If we’re talking about initiating lawsuits against individuals or organizations on the basis of speaking out on issues of public importance, then that raises serious problems,” she said. “Then we have a much more obvious impact and potential violation on freedom of expression.”

    The province could possibly expose itself to legal action if its statements harm a group or individual — say, by putting them at the centre of a Twitter firestorm, said an Edmonton lawyer.

    “There’s certainly some kind of moral responsibility in terms of understanding that kind of highly charged rhetoric,” said Sean Ward, who practises media law. “You have to understand the consequences that are likely to follow.”

    Ward said any cases the government funds would also be tough to win. 

    “There are a lot of available defences. It’s difficult to see that this sort of general debate they’re going to be able to shut down with defamation law.”

    Environmentalists say their response will be to avoid distraction and carry on.

    “The vast majority active in this place don’t want to go back to a high conflict, polarizing environment,” Dyer said. “We’re not interested in polarizing this debate.”

    Bob Weber, The Canadian Press




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