Cheap debt has led to many issues with solvency for businesses, government and personal.

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DEBTISSUES–CANADA
ANDTHEWORLD–
ANALYSIS
By: Paul Young, CPA, CGA
October 17, 2019

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PAULYOUNG - BIO
• CPA, CGA
• Financial Solutions
• SME – Business Process Changes
• SME – Risk Management
• SME – Close, Consolidate and
Reporting
• SME – Public Policy
• SME – Financial Solutions
• SME – Supply Chain Management
• Academia – Advance Accounting,
Public Finance and Advanced
Management Systems
Contact information:
Paul_Young_CGA@Hotmail.com

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• This presentation is one perspective on Debt. It is not the only view. People are more than
welcome to visit other sites like BEA, Stats Canada, OECD, Banks, etc.

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AGENDA
• What is debt
• Types of debt
• Market Forecast
• Government Debt
• Corporate Debt
• Consumer Debt
• City/Local Government
• Training and Development

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WHAT IS DEBT
• Debt is an amount of money borrowed by one party from another. Debt is used by many
corporations and individuals as a method of making large purchases that they could not afford
under normal circumstances. A debt arrangement gives the borrowing party permission to borrow
money under the condition that it is to be paid back at a later date, usually with interest.

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TYPES
DEBT /
SEGMENTS
Corporate/Business
Household Debt
Government

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GLOBAL FORECAST
What drives an Economy?
• Consumer Spending
• Exports
• Government Spending
Source - http://www.scotiabank.com/ca/en/about/global-
economics/economics-publications.html

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GOVERNMENT
DEBT
• Many government have Debt to GDP
ratios 92% or above
• Government Debt (Bonds)
• Yields are based on credit ratings
• Government debt
• Deficits
• New debt financing (Infrastructure,
operating requirements, etc.)

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CORPORATE
DEBT
• The corporate debt of non-financial firms across major
emerging markets rose sharply from about $4 trillion in
2004 to well over $18 trillion in 2014 - (Source – IMF)
• In the past six years,” the report stated, “the global
economy has enjoyed a benign default environment as
accommodative monetary policies have fueled the
corporate debt market with abundant liquidity, allowing
many low-rated issuers to refinance when needed. The
party is likely coming to an end soon as the global
default rate is expected to approach the historical
average mark by the end of 2016.” The default rate for
all corporate debt is expected to rise to 2.1%, Moody’s
said. That is up from 0.9% in 2014 and 1.7% in 2015. It
also would be the highest default rate since the 2008-
2009 crisis. If the rate is realized, it would translate to
138 defaults this year, up from 109 in 2015 (a 30%
increase) and 55 in 2014. (Source – Moodys)

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HOUSEHOLD DEBT
Source: OECD
Household debt has risen markedly since
the turn of the century and stands at a
historically high level in most OECD
countries.
It examines the vulnerabilities associated
with high household debt for households,
the financial system and the wider economy.
Finally, it describes the challenges faced by
policymakers at the current juncture and
outlines responses in terms of monetary,
micro and macro-prudential, and housing
policies.

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CORPORATE
DEBT
Source - https://www.cfo.com/credit-capital/2019/10/imf-
warns-of-19-trillion-corporate-debt-
risk/?utm_campaign=CFODailyAlert&utm_nooverride=1&ut
m_source=CFO-
email&utm_medium=email&utm_content=CFODailyAlert_
Wednesday_2019-10-16&utm_term=credit-capital
11

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CANADA–
HOUSEHOLD
DEBT

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HOUSING AFFORDABILITY INDEX
Source - https://www.numbeo.com/property-investment/rankings_by_country.jsp
2019
2015

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USA – STATE AND LOCAL GOVERNMENT
14
• State Government – https://www.slideshare.net/paulyoungcga/fiscal-management-united-states-individual-states-
performance
• Pension crisis - https://www.slideshare.net/paulyoungcga/performance-of-pension-is-there-a-pension-crisis
• Provincial Govt - https://www.slideshare.net/paulyoungcga/fiscal-management-provinces-canada
• Chicago fiscal mess - https://www.chicagotribune.com/opinion/commentary/ct-opinion-mayor-lightfoot-budget-greising-
20190627-ucfjr2ye2fgarilf2jklcpqmo4-story.html
• San Francisco - https://www.bloomberg.com/news/articles/2019-12-17/san-francisco-faces-budget-gap-as-6-billion-can-t-
meet-costs
• NYC Fiscal Mess
• https://www.crainsnewyork.com/economy/report-new-york-sitting-debt-bomb - NYC Debt
• Deficits - https://nypost.com/2019/03/09/new-york-city-is-edging-toward-financial-disaster-experts-warn/ - NYC was already
running a deficit
• 2019 budget deficit - https://www.nydailynews.com/news/politics/nyc-faces-3-8b-budget-gap-2019-bigger-mayor-claim-article-
1.2648797

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EDUCATION AND PROFESSIONAL
DEVELOPMENT
• If you like to learn more about
trade and/or other subjects as
part of your professional
learning and development then
feel free to review my material
on https://www.udemy.com/
(search Paul Young CPA CGA

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RISKS
• Cheap Debt cannot last forever
• Hike in mortgage or personal credit
rates
• More consumer default
• Lower Credit rating for government
• Higher bond yields means higher
interest rates and higher debt
coverage