Debt was a becoming significant issues for many economies pre-covid19. The post covid19 may see even more challenges including the restructuring of debt.

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DEBTISSUES–CANADA
ANDTHEWORLD–
ANALYSIS
By: Paul Young, CPA, CGA
August 30, 2020

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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
• Fitch and Canada
• Corporate Debt
• Bank Stress Testing
• Safest banking systems in the world
• Consumer Debt
• City/Local Government
• Global TV / Canada Debt
• Canada bonds downgraded
• Fintech
• Shenzhen China
• COVID19 / Bankruptcies
• Cash flow
• 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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BANK
DEBTAND CANADA/
COVD19
8
http://www.cbc.ca/news/politics/canada-election-2015-justin-trudeau-affordable-
housing-1.3220479
Rebuttal
1. RRSP Borrowing - http://business.financialpost.com/personal-
finance/retirement/rrsp/forget-tfsas-and-resps-debt-now-the-biggest-challenger-
to-rrsps-when-it-comes-to-where-to-stash-your-money. So, JT supports Harper’s
expanding RRSP, but yet JT has said people are not saving enough for retirement -
http://ralphgoodale.ca/blog/canadian-middle-class-disappointed-frustrated/. Does
this not contradict Goodale’s statement?
2. Commitment for $20B over 10 years for social housing. It seems there are land
issues in cities like Toronto/Vancouver as such how will that additional money
provide more affordable housing and not drive out real estate prices more in those
cities? What about the waste? http://www.torontosun.com/2015/06/07/former-
to-social-housing-boss-lands-in-chicago
3. Justin Trudeau asked the experts? Who are these experts?
McCallum/Brison/Goodale?
https://www.central1.com/sites/default/files/uploads/files/analysis_report/report
_file/Housing%20myths.pdf
Summary:
It is funny how both the NDP and LPC throw out new policies including new moneys,
but do not deal with issues facing various policies. It seems to me that the statements
are narrow minded that do not look at all angle of policies.
Household debt was a 2015 election

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FITCH / CANADA
Source – Fitch -
https://www.fitchratings.com/research
/sovereigns/canadas-growing-deficit-
raises-fiscal-consolidation-risks-27-
08-2020

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GOVERNMENT
DEBT
• COVID19 has led to fiscal management issues for all levels of
the government -
https://www.slideshare.net/paulyoungcga/canada-and-
provinces-fiscal-and-economic-management or
https://www.slideshare.net/paulyoungcga/canada-municipal-
and-local-government-whats-needs-to-be-done
• China Debt - https://www.businessinsider.in/finance/chinas-28-
trillion-problem-the-dark-side-of-asias-
debt/slidelist/50383894.cms#slideid=50383917
• China debt with countries
• Developing countries -
https://www.straitstimes.com/opinion/china-lent-billions-to-
poor-countries-they-cant-pay-it-back
• Government Default
• Record defaults / 2020 -
https://www.fitchratings.com/research/sovereigns/sovereign-
defaults-set-to-hit-record-in-2020-12-05-2020-1
• 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)
• New corporate debt - https://www.axios.com/corporate-
debt-issuance-1-trillion-2020-b813ca2e-2a29-459b-afa5-
41299c987d12.html
• Cash Management - https://hbr.org/2020/01/why-are-
companies-sitting-on-so-much-cash
• Corporate Debt -
https://seekingalpha.com/article/4363921-corporate-debt-
crisis-not-gone-away

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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
12

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STRESS TESTING BANKS
13Source - https://www.gfmag.com/magazine/november-2019/worlds-safest-banks-2019

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SAFEST BANKING SYSTEMS IN THE WORLD
14
Source - https://passportsymphony.com/countries-with-the-safest-banks/
1. Finland
2. Canada
3. Hong Kong
4. Norway
5. Singapore
6. Germany
7. Switzerland
8. Luxembourg
9. Sweden
10. Guatemala
11. Chile
12. Panama
13. South Africa
14. Belize
15. Vanuatu
• Government debt issues
• Zambia - https://www.bloombergquint.com/business/zambia-s-debt-
burden-hinders-access-to-imf-coronavirus-funds
• Banks taken loans provisions
• Canada write-downs - https://www.wsj.com/articles/canadas-banks-
take-earnings-hit-from-loan-loss-provisions-11590779182
• Tax Havens
• Luxembourg is Ranked #12
• Source - https://www.businessinsider.com/tax-havens-for-
millionaires-around-the-world-2019-11#12-luxembourg-4

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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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CANADA
AND USA–
HOUSEHOLD
DEBT
Source - https://economics.td.com/impact-pandemic-financial
• CMHC new debt policies - https://www.ratespy.com/breaking-cmhc-
rumoured-to-tighten-its-mortgage-rules-impacting-first-time-buyers-
060414150
• BOC warns about business and household debt -
https://nationalpost.com/pmn/news-pmn/canada-news-pmn/bank-of-
canada-warns-of-excess-business-household-debt-from-covid-19

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CONSUMER CREDIT
17
Source – Scotiabank

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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
19
• 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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CANADA BOND RATING
20Source – RBC and Fitch

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BANKING SECTOR – RISK ANALYTICS(FINTECH)
21

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SHENZHEN/ DEBT
Source - Moody's
• Tahoe Development defaults -
https://www.caixinglobal.com
/2020-07-08/drowning-in-
debt-property-developer-
tahoe-defaults-again-
101577286.html
• Default Debt Issues – China -
https://financialpost.com/pmn
/business-pmn/chinas-
corporate-debt-defaults-
uncover-hidden-soft-spots
• China growing corporate debt
defaults -
https://www.hindustantimes.c
om/business-news/china-s-
growing-dollar-bond-
defaults-reveal-depth-of-
stress/story-
onRQK2FExlIvGHB8AHbj
WI.html

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BANKRUPTCIES
• 24 retailers and restaurant chains have filed for bankruptcy and liquidation -
https://www.businessinsider.com/retailers-filed-bankruptcy-liquidation-closing-
stores-2020-2
• Chapter 11 bankruptcies rose 26% for the first half of 2020
https://www.wsj.com/articles/chapter-11-business-bankruptcies-rose-26-in-first-half-
of-2020-11593722250
• Bankruptcies in the USA for June 2020 are up 43% from June 2019 -
https://nymag.com/intelligencer/2020/07/major-companies-filing-for-bankruptcy-due-
to-coronavirus.html
• IMF warns small to medium-size bankruptcies may tripe -
https://economictimes.indiatimes.com/small-biz/sme-sector/imf-warns-small-and-
mid-sized-business-bankruptcies-may-triple/articleshow/76992460.cms
• Mortgage issues - https://www.housingwire.com/articles/foreclosure-threat-grows-as-
covid-19-surges-fed-says/
• Housing market will face many issues over the next few years -
https://www.slideshare.net/paulyoungcga/latest-news-housing-canada-june-2020
• Changes in business operational model could lead to changes in commercial and
office - https://www.ibisworld.com/global/market-research-reports/global-
commercial-real-estate-industry/

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CASH FLOW
• There are significant challenges facing many countries including job quality. Interest rates likely will rise slightly
- https://www.forbes.com/sites/alyyale/2020/08/06/mortgage-rates-hit-new-low-keeping-rising-home-prices-in-
check/#208edbd53674 . The issue will be more about wages due to job quality issues -
https://www.slideshare.net/paulyoungcga/average-wages-and-job-quality-canada
• USA continues to struggle with recovery from COVID19 including job quality related issues -
https://www.theguardian.com/business/2020/aug/07/us-jobs-unemployment-figures-covid-19
• Middle East and Africa - https://www.middleeastmonitor.com/20200812-mena-highest-youth-unemployment/
• OECD and Job Quality
Bottom line:
• If there are pressures on wages due to competitive pressures, sale drop, access to new markets, etc. this will
lead to employment issues
• Both government and the private sector are turning to more automation -
https://www.slideshare.net/paulyoungcga/technology-canada-and-the-world

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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

26. WOODGROVE
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RISKS –
WHAT
NEEDS TO
HAPPEN
• Systemic issues with housing -
https://www.slideshare.net/paulyoungcga/latest-new-housing-market-canada-
april-2020 or https://www.slideshare.net/paulyoungcga/urban-and-rural-
planning-whats-next-236315321
• Restructuring of government -
https://www.slideshare.net/paulyoungcga/canada-and-provinces-fiscal-and-
economic-management or https://www.slideshare.net/paulyoungcga/canada-
municipal-and-local-government-whats-needs-to-be-done or
https://www.slideshare.net/paulyoungcga/how-to-reform-local-and-municipal-
government
• The new reality of economy post-covid will see many issues facing businesses
- https://www.slideshare.net/paulyoungcga/state-of-the-world-economy-june-
2020 or https://www.slideshare.net/paulyoungcga/key-macro-and-micro-
indicators-canada-april-2020-and-may-2020
• Cheap Debt cannot last forever
• Risks with GDP - https://www.slideshare.net/paulyoungcga/gdp-by-industry-
canada-june-2020 or https://www.slideshare.net/paulyoungcga/what-is-next-
for-the-global-economy-august-2020
• Corporate debt
https://www.forbes.com/sites/ezequielminaya/2020/06/16/indicator-points-
toward-slowdown-in-us-corporate-debt/#150a98cf43a5
• Restructuring of many businesses -
https://www.slideshare.net/paulyoungcga/canada-hospitality-sector-whats-
next-236439916 or https://www.slideshare.net/paulyoungcga/retail-sales-
united-states-may-2020
• 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