The Globe and Mail, James Bradshaw, 11 September 2018
The chief executive officer of Canadian Imperial Bank of Commerce is sounding an alarm over rising global debt levels, warning that Canada needs to start preparing now for the next economic shock.
After a decade of “tremendous growth” in debt markets fuelled by ultra low interest rates, “cracks are starting to appear in certain areas,” according to CIBC CEO Victor Dodig, who issued a call to action on issues ranging from foreign direct investment to immigration in a speech to the Empire Club in Toronto on Tuesday.
Low interest rates introduced to speed the recovery from the last global financial crisis have remained low, and Mr. Dodig thinks economic historians will ultimately decide they were “too low for way too long.” As those rates rise, emerging economies in Turkey, Argentina and Indonesia are struggling with weakened currencies, making it increasingly difficult to pay back their foreign debts. And even as economic conditions in Canada remain strong, giving Mr. Dodig reason to be optimistic, he worries that developing problems could ripple through interwoven financial markets around the world.
“It sounds counterintuitive, but that same debt that helped the world recover is actually infusing risk into the global financial system today," Mr. Dodig said. “I think there’s a real serious global challenge of this low-interest-rate party developing a big hangover."
Sitting at the helm of Canada’s fifth-largest bank, which has more than $377-billion in loans outstanding and an expanding U.S. banking division, Mr. Dodig frets over the outcome. He used his speech to propose some remedies that he believes would make Canada’s economy more resilient in the face of a downturn.
The first is to clarify rules around foreign direct investment, which is falling in Canada. The main culprit, he argues, is the uncertainty plaguing large business deals that require approval from Ottawa under opaque foreign-investment rules – and he cites the turmoil surrounding the Trans Mountain pipeline expansion as an example. Foreign investors “need confidence. They need an element of certainty. They need to know the rules. They need a clear understanding of how things get approved," Mr. Dodig said. “We need our approval systems to work better, and to work more predictably, because they have other choices.”
Mr. Dodig also called for more immigration to Canada, asking the government – which has already set higher immigration targets for the coming years – to open its arms even wider. In particular, he highlighted pilot projects such as the Global Talent Stream, which helps speed the process when companies hire highly skilled workers from abroad, as worthy of being made permanent.
“I think we need to increase the number of people that we welcome to our country," he said. “We need to lean in at this moment in time. This is not a policy that can wait.”
And he called on governments and employers to work more closely with universities and colleges to match the skills graduates have to employers' needs, promoting what are known as the STEM disciplines – science, technology, engineering and math – as well as skilled trades. “There’s a gap today. We know there’s a gap," he said. “There’s a war for talent going on out there.”
Mr. Dodig also took aim at inter-provincial trade barriers he hopes to see removed, and which he called “an embarrassment to our country." And he urged the federal government to allow companies to expense capital investments within one year to be more competitive with U.S. rules.
Mr. Dodig acknowledged that some of the most acute threats to the global economy are beyond this country’s control, but cautioned Canadians not to get too comfortable while times are good. “We need to use this sunny time to enjoy our success, but to prepare for the future,” he said.
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The chief executive officer of Canadian Imperial Bank of Commerce is sounding an alarm over rising global debt levels, warning that Canada needs to start preparing now for the next economic shock.
After a decade of “tremendous growth” in debt markets fuelled by ultra low interest rates, “cracks are starting to appear in certain areas,” according to CIBC CEO Victor Dodig, who issued a call to action on issues ranging from foreign direct investment to immigration in a speech to the Empire Club in Toronto on Tuesday.
Low interest rates introduced to speed the recovery from the last global financial crisis have remained low, and Mr. Dodig thinks economic historians will ultimately decide they were “too low for way too long.” As those rates rise, emerging economies in Turkey, Argentina and Indonesia are struggling with weakened currencies, making it increasingly difficult to pay back their foreign debts. And even as economic conditions in Canada remain strong, giving Mr. Dodig reason to be optimistic, he worries that developing problems could ripple through interwoven financial markets around the world.
“It sounds counterintuitive, but that same debt that helped the world recover is actually infusing risk into the global financial system today," Mr. Dodig said. “I think there’s a real serious global challenge of this low-interest-rate party developing a big hangover."
Sitting at the helm of Canada’s fifth-largest bank, which has more than $377-billion in loans outstanding and an expanding U.S. banking division, Mr. Dodig frets over the outcome. He used his speech to propose some remedies that he believes would make Canada’s economy more resilient in the face of a downturn.
The first is to clarify rules around foreign direct investment, which is falling in Canada. The main culprit, he argues, is the uncertainty plaguing large business deals that require approval from Ottawa under opaque foreign-investment rules – and he cites the turmoil surrounding the Trans Mountain pipeline expansion as an example. Foreign investors “need confidence. They need an element of certainty. They need to know the rules. They need a clear understanding of how things get approved," Mr. Dodig said. “We need our approval systems to work better, and to work more predictably, because they have other choices.”
Mr. Dodig also called for more immigration to Canada, asking the government – which has already set higher immigration targets for the coming years – to open its arms even wider. In particular, he highlighted pilot projects such as the Global Talent Stream, which helps speed the process when companies hire highly skilled workers from abroad, as worthy of being made permanent.
“I think we need to increase the number of people that we welcome to our country," he said. “We need to lean in at this moment in time. This is not a policy that can wait.”
And he called on governments and employers to work more closely with universities and colleges to match the skills graduates have to employers' needs, promoting what are known as the STEM disciplines – science, technology, engineering and math – as well as skilled trades. “There’s a gap today. We know there’s a gap," he said. “There’s a war for talent going on out there.”
Mr. Dodig also took aim at inter-provincial trade barriers he hopes to see removed, and which he called “an embarrassment to our country." And he urged the federal government to allow companies to expense capital investments within one year to be more competitive with U.S. rules.
Mr. Dodig acknowledged that some of the most acute threats to the global economy are beyond this country’s control, but cautioned Canadians not to get too comfortable while times are good. “We need to use this sunny time to enjoy our success, but to prepare for the future,” he said.
