Canada's banks should prepare for a failure

Mark Zelmer, a senior fellow with the C.D. Howe Institute talks with Financial Post's Larysa Harapyn about how Canada's banks should prepare for a failure.

[PaulKatrina.]

Bank failures are likely to continue increasing due to rising interest rates, as it causes their commercial paper and treasuries to become devalued. To prevent a severe economic downturn, it is necessary to implement a freeze on interest rates. Simultaneously, the White House should support the industry in boosting gas and oil production to lower fuel prices. The anti-oil stance only contributes to higher energy costs, leading to inflation throughout the economy. By reducing interest rates, tightening the money supply, cutting government expenditures, and increasing the availability of affordable fuel, inflation will decrease, and the economy will thrive. Unfortunately, various conflicting agendas make it unlikely for all these measures to be implemented, resulting in a recession and persistent inflation.

[austinbar]

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson.

[joshdoddadbod]

Privatize the profits, socialize the bailouts. These folks cant fail, unfortunately.

[BillyKaz-nopf]

It’s also the risk exposure to the canadian housing bubble .. and domestic house hold debt that makes Canadians banks exposure to risk that’s at 2.9 % greater then that of UK banks @ 1.3% and US @ 1.2% exposure . Simply said Canadians banks are twice as likely to be exposed to risk due to domestic house hold debt ( mortgages)

[neil]

I don't know if we should be insuring deposits at 100%, but the current 100K limit to CDIC coverage has not been increased in decades. Isn't the deposit limit in the US up to 250K?

[StephanieG.Augustus]

There are always new challenges and a constant need to stay updated with stock market news, current regulations, industry trends, and the latest financial products.

[nicolasbenson]

The system is failing as a result of both government and federal policy. In the next days, the banking crisis would have to be epic and gigantic for the FED to decide not to raise interest rates. This won't happen; an increase and a crash are coming. There will be more negative portfolios this 2nd half of 2024 with markets tumbling, soaring inflation, and banks going out of business. My concern is how can the rapid interest-rate hike be of favor to a value investor, or is it better avoiding stocks for a while?

[cassie]

The four options for fixing the problem that are enumerated near the end of the interview... for more prudent behaviour on behalf of the banks, the consequences being to raise the cost of banking. This for me is the most important insight of the entire interview. What we are saying is that we--the banks and the citizens who underwrite the elected government who authorizes the banks--seem to want to avoid doing the right thing because it means it'll somehow cost us more and we don't believe it's worth it. We've made money our highest value. Why is that?

[jerrycampbell-utyf]

A perfect storm is brewing in the United States. Inflation, bank collapse, severe drought in the agricultural belt, recession, food shortages, diesel fuel and heating oil shortages, baby formula shortages, available automobile shortages and prices, the price of living place. It's all coming together and it could lead to a real disaster towards the end of this year (or sooner). With inflation currently at about 6%, my primary concern is how to maximize my savings/retirement fund of about $300k which has been sitting duck since forever with zero to no gains

[KM-srcc]

Sharp Fall of Home and Land Prices will be on the horizon here in Canada as the inflation numbers will rise again due to ongoing geopolitical conflict in West Asia.
Geopolitical instability in West Asia (Mid-East) and high risks of long-term conflict will push the global economy back into another DEEP recession and possibly a Depression.

We are just at the beginning of a long hard slog in the Global Economy. (i.e. 1960 - 70's Vietnam era Inflation), everything is overleveraged and overpriced.

The Global Central Banks are losing control over the economy and running out of tools and options.
The sad reality is also that here in Canada, the Bank of Canada has LOST TOTAL CONTROL over the economy and especially its own created Inflation for the past 20+ years.
- HIGH Food Prices
- HIGH Oil/Energy Prices
- HIGH Taxes
- HIGH Asset Prices (Land and Home Prices)
- HIGH Consumer /Household Debt (Over $3 Trillion)
- HIGH Cost of Living and Expenses
- Bubble/ Debt based Economy
- HIGH Poverty and Homelessness
- HIGH Crimes rates
- HIGH Expectations by Consumers and Investors
- WIDENING Gap between 99% poor and 1% rich
- Growing Social and Economic Disparity and Inequalities created by the Bank of Canada
- Growing Social, Economic, Political and Security Crises in Canada
- Continuing Printing of Dollar/ Cutting Rates and Devaluation of Currency by the Bank of Canada
- Continuous Decline in Standard of Living in Canada caused by the Bank of Canada's inflationary monetary policies.
- and ...
All of the above factors have contributed to the current ongoing Dhilemas and Crises in the country with NO END in sight.
Given the current Global Geopolitical Situation and Canada's stand, we will see a STEADY and SIGNIFICANT DECLINE in ASSET prices in Canada in the coming months and years.
(C-R-A-S-H) and ( D-E-P-R-E-S-S-I-O-N)

[gingerkilkus]

I am really worried about the current bank crisis/interest rates, these are all the signs of yet another 2008 market crash 2.0, so my question is do I still save in the Canada's dollar or is this a good time to buy gold?

[NecTeezay]

Another option is to leave them fail.
Alot of the solutions offered seem inflationary and they give the banks no reasons to better manage their loans as they know they will get bailed out. Or if everyone else is insured 100% then they will just be more reckless in their investments as they will have no consequence for bad loans. And who ends up paying for all this insurance ? Canadians via the printing of money from boc to bail out or to insure everyone.

Keep them on the hook and keep them honest. Depositors will be more inclined to shop around for the banks that have better balance sheets and less risky loan profile

[luciodelgado]

CREATED BY DESIGN! CBDC FOR 2025! Bank control on your account.

[SilverSquirrel]

Crazy talk! Everyone knows that budgets balance themselves'.

[The_Coffee_Rabbit_Hole]

The system is failling because the money is not sound anymore. Plain and simple

[bigsid]

Canadians have lost all confidence in the Trudeau Liberal Government. Once Justin is removed from his position of PM, Canada will be on a safer footing.

[FeriaAllenkempf]

I'm favoured only God knows how much I praise Him, $230k every 4weeks! I now have a big mansion and can now afford anything and also support God’s work and the church.

[FranklinRodriguez-rizu]

Thank you for quality programming. What you are describing here is accurate - the flight to safety to the US stock market and dollar. This is what is keeping the market going at this time and preventing a crash. This "melt UP" phase will go on for a while, then as the global economy crashes so will US markets only harder due to the "No Win scenario" that has been created by so much obscene debt. Next comes the "Default Phase" with mega-massive bankruptcies and lastly "Asset Seizures" where banks and the Fed government will simply declare an extreme national emergency to justify the crisis and debit your account directly. The fools will think that this could never happen. The actual legislation for this type of action is already in place. My advice to anyone feeling the heat in this inflation, just trade long term more than ever, I have made over 540k from day trading with Adriana Jensen in few weeks, this is one of the best medium to backup your assets incase it goes bearish..

[gereral_jackofalltrades]

If the banks and government were serious they would remove bank bailins law for deposits and insure the whole deposit amount. Will they do that? Hell no😅

[DawnStyleArt]

Interesting how he doesn’t address WHY PEOPLE LOSE CONFIDENCE IN BANKS.