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Finance

Realistic fiscal update needed from Ontario

On Thursday, Ontario Finance Minister Charles Sousa will provide an update on provincial government finances. One important thing to look for is whether Sousa will present a more realistic plan on how his government expects to eliminate the deficit. To date, the government has hoped for revenues to grow robustly and eventually catch up to total spending. This strategy is a risky one.

There are two primary risks to the government's plan to eliminate the deficit by 2017/18. First, the government is relying on optimistic revenue projections. Second, the government lacks a detailed, specific plan showing how it will markedly slow the rate of spending growth. These are concerns the government's own Financial Accountability Office (FAO) has flagged.

A look at the numbers will explain.

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Trudeau would run deficits to double infrastructure spending

Liberal Leader Justin Trudeau is ready to spend billions more on infrastructure by running the federal budget into the red.

Trudeau came out Thursday promising that if elected, the Liberals would almost double federal infrastructure spending to $125 billion from $65 billion over the next 10 years.

The spending spree for public transit, social and green infrastructure would force the federal government to run an almost $10 billion deficit for the first two fiscal years and another deficit in 2018 but Trudeau is pledging to return the budget to balance by 2019.

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With twice the debt of California, Ontario is now the world's most indebted sub-sovereign borrower

Ontario, the world's most indebted sub-sovereign borrower, is ploughing ahead with Canada's most ambitious infrastructure plan - risking the censure of Standard & Poor's and underperformance for its $307 billion of bonds.

The nation's most-populous province is keeping a goal of spending $130 billion over the next decade on work such as roads and mass transit in Toronto even after S&P dropped its credit grade this month to the lowest level ever. Yield spreads on some of the province's debt reached the widest since January after the ratings move.

Ontario, with about 13.7 million residents, wants to carry out some of the projects using public-private partnerships, or P3s, an approach it used to build the athlete's village for this month's Pan Am Games in Toronto. While bringing in the private sector may reduce risk or speed up work, Ontario would still have to borrow for the financing.

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Eight signs a global market crash is imminent as central banks lose control

When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.

Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.

The FTSE 100 has now erased its gains for the year, but there are signs things could get a whole lot worse.

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The Big Bank Bailout

Most people think that the big bank bailout was the $700 billion that the treasury department used to save the banks during the financial crash in September of 2008. But this is a long way from the truth because the bailout is still ongoing. The Special Inspector General for TARP summary of the bailout says that the total commitment of government is $16.8 trillion dollars with the $4.6 trillion already paid out. Yes, it was trillions not billions and the banks are now larger and still too big to fail. But it isn't just the government bailout money that tells the story of the bailout. This is a story about lies, cheating, and a multi-faceted corruption which was often criminal.

- Rating agencies - Rating agencies like Standard and Poor's are paid by the banks (which is a conflict of interest) and have a huge influence on the ratings of securities. During the housing bubble ratings agencies continued to give triple AAA ratings to toxic mortgages. The justice department wants $5 billion in restitution from Standard and Poor's for its part in falsifying ratings.


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