Ouch! U.S. booted from Triple-A debt club

Source: CNN money
By Annalyn Censky @CNNMoney August 6, 2011: 2:52 PM ET

These 15 countries (and the Isle of Man) have the world's highest credit rating, AAA from both Moody's and Standard & Poor's. The U.S. lost that high standing Friday, when S&P downgraded it to a AA+ rating.

NEW YORK (CNNMoney) -- The Triple-A debt club just got even more exclusive: Late Friday, the United States was booted out of a prestigious group of countries that boast a spotless credit rating.

Now only 15 countries (and the very small Isle of Man) hold the triple-A rating from both Standard & Poor's and Moody's.

Canada, France, Germany, Norway, Sweden and Switzerland are among those with the undisputed stamp of approval -- so is Isle of Man, a British crown dependency off the United Kingdom's west coast, and Singapore (both of which are too small to see on our CNNMoney map above.)

The triple-A rating enables nations to borrow funds at a low cost, because their governments are considered stable and their bonds safe.

S&P downgrades U.S. credit rating

The United States for example, has seen its dollar become the world's No. 1 reserve currency because its bonds are held in such high regard by investors. They're backed by the "full faith and credit of the U.S. government" -- which until now, has never seriously been called into question.

On Friday, S&P downgraded the United States to AA+, an investment grade level just one notch below triple-A. It marked the first time the world's largest economy has been downgraded, since Moody's first gave the country a credit rating in 1917.

S&P cited estimates that U.S. government debt would balloon to 79% of the size of the entire U.S. economy by 2015, and 85% by 2021 -- a level S&P says is consistent with AA+ rated countries.

In comparison, estimates from the International Monetary Fund show triple-A rated Canada's debt is likely to only rise to 34% of its economy by 2015, and Germany's is forecast to rise to 52%. (The IMF does not publish forecasts out to 2021).

Your money in a AA-rated U.S.

The debt of Belgium, another AA+ rated country on S&P's list, is expected to grow to 85% of GDP by 2015, according to the IMF.

Abu Dhabi, with a AA rating, is just a step below AA+. Also in that group are Bermuda, Chile, Qatar, Slovenia and Spain.

Meanwhile, China -- the world's second largest economy -- is rated two notches below the United States, at AA-.

Greece -- the lowest rated country in the world -- is forecast to see its debt well exceed the size of its economy, at 149% the size of its GDP in 2015. 

First Published: August 6, 2011: 11:47 AM ET

Canada keeps AAA credit rating

Image via Wikipedia

BY ERIC LAM, POSTMEDIA NEWS JULY 28, 2011

As the debt spectacle continues in Washington, Moody’s Investor Service renewed Canada’s AAA credit rating on Thursday.

While all eyes are on the United States as it tries to hammer out a deal to raise its borrowing limit by Aug. 2, avoid a debt default and a possible debt downgrade, Canada sailed through its annual credit checkup with flying colours.

Moody’s said the country’s high resiliency, government financial strength and low susceptibility to risk were key to the top marks.

Here’s a breakdown of the reasons why Moody’s says Canada deserves the highest possible credit rating:

Economic strength: Very high.

Canada missed the worst of the financial crisis because of the financial strength of its banks and only a mild downturn in the housing market.

The country had a stronger rebound from the recession, with a 3.2-per-cent rise in gross domestic product, compared with 2.9 per cent south of the border. Moody’s said monetary policy and Ottawa’s stimulus program helped the recovery.

There are important differences between the Canadian and U.S. economies that affected Moody’s evaluation of Canada’s strength, including the fact that trade in goods and services makes up more than half of Canada’s GDP, compared with less than one- third in the U.S. This points to a greater degree of openness in the economy, it said.

Canada also has lower federal debt and a stronger banking system and housing market, as well as a higher domestic saving rate, resulting in less reliance on external financial markets.

Institutional strength: Very high.

Fiscal discipline at the Bank of Canada, inflation control, government effectiveness and rule of law all rank highly.

Economic and fiscal policies have remained stable for the past 15 years under Liberal and Conservative governments. Some tax differences exist, but the overall goal of fiscal balance and declining debt has been a constant.

While the proportion of total government debt credited to provincial, territorial and local governments is the highest among major countries, and Moody’s judges the risk of the federal government having to step in to assist these governments with their debt payments as high, it said local ratings indicate little risk that such assistance would actually be needed.

Government financial strength: Very high.

This evaluation is based on a well-established pattern of budget surpluses at the federal level, except during exceptional circumstances such as the financial crisis, leading to declining government debt and debt ratios since the 1990s.

Susceptibility to event risk: Low.

The most important risks are related to the housing market and to separatism in Quebec, although the probability of either affecting Canada’s rating is quite low.

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Moody’s maintains Canada Aaa credit rating

Moody’s Investor Services is renewing Canada’s triple-A debt rating, the highest possible.

In its annual report on Canada's sovereign ratings, the firm said the Aaa rating was warranted due to the country’s high degree of economic resiliency, efforts by Ottawa and the provinces to deal with their debt ratios over the coming years and other factors.

The economy’s very high degree of resiliency is demonstrated by a high per capita income, the large scale of the economy, and its diversity, says the Moody’s report. Natural resource industries, a competitive manufacturing sector, and a well-developed and well-regulated financial market also support the country’s resiliency.

While Canada’s public finances deteriorated as a result of the global financial crisis, the federal government and the provinces are now on a track of fiscal consolidation that will improve general government debt ratios over the next few years, according to Moody’s.

Although general government debt, including the debt of the provinces and municipalities, is similar to that of other large Aaa-rated countries, the federal government’s debt position by itself is relatively low. As the provinces are highly rated, Moody’s considers the contingent liability from this source to be low, despite the relatively large size of provincial debt.

Canada’s current account balance returned to surplus in 1999 and remained there until 2008, bringing down the reliance on foreign capital inflows. This has risen somewhat in the past two years but is still not considered a risk to financial stability. Canada’s susceptibility to event risk is low and is related to the housing market and to Quebec’s sovereignty issue.

S&P affirms Canada rating, lauds fiscal discipline

Reuters) - Ratings agency Standard and Poor's affirmed Canada's AAA rating on Friday and lauded the country's strong finances compared with its Group of Seven peers.

The review stood in sharp contrast to growing pressure on the ratings of many Western countries, highlighted by this week's downgrade to Greece's sovereign debt by Moody's Investors Service. [ID:nLDE63L28G]

Standard & Poor's affirmed Canada's AAA long-term and A-1+ short-term sovereign credit ratings with a stable outlook.

"Canada has what we view as strong public finances, a relatively diversified economy, stable public policy, and a sound financial sector," the agency said in a statement.

"The stable outlook reflects our opinion that Canada has the political capacity and will to respond quickly to changing conditions, and the strongest fiscal position of the five 'AAA' rated G7 sovereigns."

The other G7 nations with AAA ratings are the United States, France, Germany and Britain.

S&P cut the outlook on Britain's AAA rating to "negative" on May 21, 2009, a move that typically carries a one in three chance of a downgrade. [ID:nLL292085]

Some analysts have speculated the top-tier credit rating of the United States could be cut one day, an idea rejected by U.S. Treasury Secretary Timothy Geithner. [ID:nN16225360] [ID:nN18366282].

Canada's Conservative government, in presenting its annual budget last month, pledged to turn off the stimulus tap and curtail spending sharply after the economy recovers. [ID:nCFB000108]

"We expect the prevailing consensus on the need for robust public finances, across Canadian regions and political parties, to avoid a return to recurring, structural deficits, in the medium term," S&P said.

The agency also said Canada's financial system is well-developed and sound. The nation's banks did not require government bailouts during the economic crisis and have been ranked as the world's soundest by the World Economic Forum. (Reporting by Jeffrey Hodgson; editing by Rob Wilson)

CIC: COME TO CANADA WIZARD WORKING ITS MAGIC

Prospective immigrants and visitors to Canada now have a new interactive web tool at their fingertips to help them determine if they are eligible to come to Canada. Citizenship, Immigration and Multiculturalism Minister Jason Kenney announced today the launch of the Come to Canada Wizard.

“We understand that our application processes can be complex, but this new tool is a major service improvement,” said Minister Kenney. “The Wizard will make it easier for potential immigrants and visitors to navigate the application process.”

“The Wizard should also reduce applicants’ reliance on immigration consultants and hopefully will make the Department more efficient by decreasing calls to our Call Centre,” Minister Kenney added.

The Wizard simplifies the application process by matching applicants with the federal immigration option that best suits their specific circumstances. The Wizard does this by asking applicants a series of questions and, based on the answers, it provides the best options for them.

The Wizard leads applicants to a results page that breaks down the application steps and provides instructions and forms.

To view the Wizard, go to www.cic.gc.ca/cometocanada.

39% of Canadians see immigration as positive, poll finds

POSTMEDIA NEWS AUGUST 5, 2011

Nearly half the respondents to a groundbreaking global poll believe immigration has had a negative impact on their countries, according to results released Thursday by Ipsos.

And while Canadians have a relatively upbeat attitude on immigration, only a minority of Canadians polled - 39 per cent - viewed its impact as positive.

Forty-five per cent of the 17,601 respondents to the 23-country survey believe "immigration has generally had a negative impact on their country." Only 21 per cent believe immigration has had a positive effect. The rest - 29 per cent - are on the fence.

Thirty-five per cent of Canadians viewed immigration's effects as negative, while 26 per cent were either neutral or did not know.

Countries with the strongest negative opinions were Belgium (72 per cent) followed by South Africa (70 per cent), Russia (69 per cent), Great Britain (64 per cent) and Turkey (57 per cent).

Education made a big difference in respondents' attitudes. Educated Canadians topped the list of people most likely to view immigration positively. Sixty per cent of Canadians with higher levels of education believed its impact on their country was positive, "followed by their highly-educated counterparts in Australia (51 per cent), Saudi Arabia (47 per cent), Brazil (43 per cent), India (43 per cent), Sweden (39 per cent) and the United States (32 per cent)."

The results come at a time when many people seem to believe immigration rates are rising. Some 80 per cent of those surveyed believe that immigration has increased in their respective countries in the past five years.

Ipsos senior vice-president John Wright said he wasn't surprised by the results, given the social end economic tur-moil that has embroiled many of the countries surveyed.

Italy, for example, has dealt with a flood of migrants fleeing strife in Tunisia. Millions of migrants have headed to South Africa from neighbouring African states.

Wright said the survey was a "quick snapshot to find out where the world is" and Ipsos is providing details to academic institutions for study.

Most countries surveyed had more than 1,000 respondents. In those countries, the margin of error is plus or minus 3.1 per cent, 19 times out of 20.

© Copyright (c) The Ottawa Citizen

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Unemployment rate in Saskatchewan unchanged, lowest in Canada

David Giles, Global Saskatoon: Friday, August 5, 2011

No change in unemployment rate in Saskatchewan, remains lowest in Canada.

Photo Credit: -, Global News

RELATED

• Over 12,000 jobs posted on Sask. government website in July
• Job outlook remains strong in Saskatoon
• Unemployment rate drops slightly in Saskatchewan

Saskatchewan’s unemployment rate remained steady in July as the province continues to lead Canada with the lowest unemployment rate in Canada.

New numbers released by Stats Canada on Friday has the unemployment rate in the province at 4.9 per cent for July 2011, unchanged from June and down 0.2 per cent from the same time last year. The number of unemployed people actually rose to 27,100, an increase of 300 from June.

Employment in the province also increased in July, with 1,600 more people working than in the previous month. Full-time employment increased by 4,500 while there were 2,900 less people working part-time.

Saskatoon’s unemployment rate dropped 0.1 per cent from the previous month to 5.4 per cent, the fourth lowest in the country for a major centre. Regina held steady at 5.2 per cent, the second lowest in Canada.

"Today's numbers show that Saskatchewan's economy remains strong and steady despite the economic uncertainty south of the border and in other parts of the world," Advanced Education, Employment and Immigration Minister Rob Norris said.

While the opposition NDP was happy to see an increase in jobs, NDP Critic for Education, Employment and Immigration Cam Broten was concerned about the number of unemployed people.

“Clearly, the overall picture released by Statistics Canada this morning is not entirely a pretty one,” Broten said. “With nearly 30,000 people looking for work and with significant job losses in key regions and sectors, there is certainly cause for concern in the latest statistics.”

However, Norris remains optimistic about the future, pointing to job opportunities all across the province and continued growth in the economy.

“Seven major economic forecasters place Saskatchewan's real GDP growth rate at 3.7 per cent in 2011, second highest in Canada."

The unemployment rate in Canada for July was 7.2 per cent.

© Copyright (c) Shaw Media Inc.

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Pay more, get less, or work longer - these are likely scenarios

As our workforce ages, younger income-earners are being asked to carry more of the tax burden and cost of services such as health care

BY DON CAYO, VANCOUVER SUN AUGUST 4, 2011

• STORY
• PHOTOS ( 1 )

Seniors tend to cost governments more money than they pay in taxes

Photograph by: WAYNE HIEBERT, Postmedia files

Seniors tend to cost governments more money than they pay in taxes; younger workers are more apt to pay in more than they get back in services.

As the balance of these two groups changes in Canada - a burgeoning cohort of retirees, and a barely budging number of income-earners - something's got to give. What are the options?

The best choice, though it's unlikely to be sufficient to cover all of the new demand for government services, would be to simply get more productivity out of those who still go to work.

On one hand, there should be scope for this because, compared to other countries, we haven't been improving our productivity very well. On the other hand, our track record is discouraging because - you guessed it - compared to other countries, we haven't been improving our productivity very well.

Also, because productivity gains are tied to investment, our efforts won't be helped by the shrinking of Canada's capital pool as a growing number of seniors stop saving and start drawing down capital to fund retirement.

Another strategy would be to add new workers through immigration.

We're already doing that, and it works - to a point.

An analysis by Schroder Investment Management notes that Canada has the highest immigration rates in the developed world.

"This is why Canada's population will continue to grow, albeit slowly, until 2050, while many other developed countries will shrink," it says.

"By the 2020s, all population growth is expected to come from immigration, and many sectors of the economy (transport, primary industry, construction) will be dependent on foreign workers. In light of this, it seems unlikely that immigration could be raised to high enough levels to completely offset the effect of domestic population aging."

There are other options, of course, but all look less palatable.

One is that governments could simply give Canadians fewer benefits and services. For seniors, this would almost certainly mean cuts to pensions and further erosion of health care, the two biggies that strain government coffers.

Schroder notes that this is, in effect, what Canada already does to keep the growth of its health care costs at a lower rate than most other developed countries.

Health care cost control "has been largely achieved by limiting capacity," the analysis says. "The number of doctors per 1,000 residents has barely risen; the number of nurses and hospital beds has fallen, and Canada has lagged other OECD countries in its stock of medical technology.

"Capacity control does not appear to have adversely affected health outcomes, with life expectancy and infant mortality continuing to improve and outperform the U.S. However, continued demand growth has necessitated health care rationing and the user experience has deteriorated: Waiting lists for procedures are long and it is often difficult to find a family doctor."

Hands up if you're an older person who wants to see us go farther down this road.

A second strategy would be to tax working people more steeply to pay the freight for the growing numbers who don't go to work any more. That's essentially what the federal government did a decade ago when it raised the mandatory contribution rate for the Canada Pension Plan to 9.9 per cent from six per cent of eligible earnings. Hands up if you're a younger worker who wants to see your deductions go higher still.

Finally, it would help - but only to a point - if baby boomers were to put off retirement for a few more years. Governments have recently made this possible by banning mandatory retirement at 65, and misbehaving markets have made it necessary for at least some of us to stay on the job for a few years longer than we once planned. But the next logical policy step would be to add a stick to the carrot by delaying eligibility for pensions and seniors' benefits.

This would likely irk both sides of the generation gap - boomers who are eager to retire, and younger workers who itch to be promoted into the jobs the old guys vacate.

dcayo@vancouversun.com Blog:

vancouversun.com/economy

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