• 2 days Markets Unfazed As Inflation Hits 13-Year High
  • 3 days How the Token Economy is Disrupting Financial Markets
  • 5 days FBI Investigating 100 Types Of Ransomware Attacks
  • 7 days Fed Ends Corporate Credit Emergency Lending Program
  • 9 days AMC Becomes the Latest Winning Meme Stock After GameStop
  • 10 days The Real Reason Your 401k Has Been Lagging
  • 11 days China Lifts Cap On Births, Allows Three Children Per Couple
  • 13 days The Market Is Ripe For Another GameStop Saga
  • 16 days Senate Grills Big Banks Over Pandemic Opportunism
  • 17 days Cannabis Has A Major Cash Problem
  • 18 days Ransomware Netted Criminals $350M In 2020 Alone
  • 19 days Russia Is Taking On Google
  • 20 days Chinese Regulators Deal Another Big Blow To Bitcoin
  • 21 days Ohio Residents Brave Vaccine for Chance To Win $1M
  • 23 days Inflation Is Coming. Are You Prepared?
  • 24 days 3 World-Shaking Trends Investors Need To Watch This Year
  • 24 days Travel Might Get Another Supersonic Disruption
  • 25 days The World Is Running Out Of 6 Key Resources
  • 26 days $15/Hour Minimum Wage Might Happen Naturally
  • 28 days Money-Laundering Binance Probe Report Adds To Bitcoin Woes
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Nathan McDonald

Nathan McDonald

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early…

Contact Author

  1. Home
  2. Markets
  3. Other

Are Canadian Banks the Next Shoe to Drop?

Canadian Economy

Originally posted at Sprott Money February 23, 2016

Oil once again is in the spotlight, in fact, it never really has left since the correction has begun. Oil is so deeply linked with our global economy, that it cannot and will not be ignored. The continued downturn is highlighting the fact that the global economy is weak and due for a correction. All indicators point to this.

Many financial experts and pundits believe that we have already begun the next recession, others believe that we remain in the same crisis that was papered over in 2008. I am in the camp of the latter, but in the end, to the man on the street, it is a matter of perspective.

If you have lost your job, had your wages reduced or suffered any hardships, then you will agree, that a recession is here, perhaps even a depression depending on how severely you have been impacted.

For many in Canada, they are waking up today in a full blown depression. The absolute gutting of the oil market has hit many in this country particularly hard. Unemployment in key oil provinces has skyrocketed over the past year, with no reprieve in sight.

Yet, as I have pointed out in past articles, this is not the end. The contagion is spreading, unemployment insurance will only last so long, and then what? Then we will see the true ramifications of this crash in oil prices. Simply put, those laid off will not be able to replace their high income jobs. Why you ask? Because the jobs aren't there, period.

Moody's is one such source that is now starting to point out this contagion in the Canadian economy. The next victim, according to them? The Canadian banking sector, which is going to be heavily impacted by the layoffs and crash in oil prices.

According to Moody's the Canadian banking sector is set to lose C$5.56 billion to C$12.9 billion in profits due to defaulting credit by its customers, with the two most heavily affected banks being CIBC and the Bank of Nova Scotia.

Unfortunately, as we have historically seen, the worst case scenario is typically the most likely outcome, perhaps even an underestimation. Remember, this estimate is only taking into account the current oil market and the people laid off in that space. Additional downsizing in the economy is set to come as a decrease in broad spending begins to affect other sectors of the economy, leading to further hardships.

Given the fact that the two largest sectors of the Canadian stock market are the commodities sector and banking space, then we can expect a very very bumpy ride in the future for the Canadian economy.

Things will turn around, eventually, as the oil is not going anywhere and is simply wealth in the ground, waiting to be extracted. Unfortunately, this is little relief for those currently being affected by the crash in oil prices. When the "good times" will return is anyones guess and sadly, may be long in the coming.

 


The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

 

Back to homepage

Leave a comment

Leave a comment