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Provincial deposit insurance, Manitoba rates, etc
April 1, 2017
5:57 pm
Norman1
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It is clearer after the deposits are grouped by the depositor on record at the CDIC institution. For CDIC insurance purposes, there are five different depositors:

Depositor
(Coverage)
Deposit
Bill
($100,000 max)
$100,000 into a savings account in Bills name
$100,000 into GICs in Bill's name
Andrea
($100,000 max)
$100,000 into a savings account in Andrea's name
$100,000 into GICs in Andrea's name
Bill and Andrea
($100,000 max)
$100,000 into a savings account in a joint name account
$100,000 into GICs in joint name
TFSA trustee in trust for Bill
($10,000)
$10,000 into a TFSA in Bill's name
TFSA trustee in trust for Andrea
($10,000)
$10,000 into a TFSA in Andrea's name
April 2, 2017
3:41 am
Saver-Mom
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Most high income earners have no CDIC coverage because they have wads of money in one place, usually mananged, and they are sleeping easily. Maybe we are all too conservative and falsely comforted by deposit insurance.

April 2, 2017
9:05 am
Norman1
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Saver-Mom said
Most high income earners have no CDIC coverage because they have wads of money in one place, usually mananged, and they are sleeping easily. Maybe we are all too conservative and falsely comforted by deposit insurance.  

They know that and they choose their financial institution carefully as a result.

In addition to CDIC, deposits are also backed by the strength of the financial institution itself. The risk of default on a deposit with some financial institutions is about the same as those of bonds from some governments.

This a chart from earlier showing the DBRS credit ratings of the big banks and some governments. It is still up to date:

DBRS Rating Issuers
AAA Government of Canada
AA (high) Province of Alberta
Province of British Columbia
AA Bank of Montreal
Bank of Nova Scotia
Canadian Imperial Bank of Commerce
Royal Bank of Canada
The Toronto Dominion Bank
Province of Saskatchewan
AA (low) National Bank of Canada
Province of Ontario
A (high) Province of Manitoba
Province of Quebec
A
A (low) Province of Newfoundland & Labrador
Province of Prince Edward Island

An $1 million deposit with the Royal Bank (rated AA) would have $100,000 of CDIC coverage. The remaining $900,000 would be at a higher risk than in a Canada Savings Bond (rated AAA) but lower risk than in an Ontario Savings Bond (rated AA(low)).

April 2, 2017
11:02 am
Sonz
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Hi Loonie - I think you can only decide on one entity (Home Trust OR Home Bank) - please correct me if I'm wrong

Loonie Wrote....
"If you and your spouse maxed out with TFSA, RSP, unregistered, in joint accounts where possible, at Oaken, you could have up to 1,000,000 coverage. However, it's unlikely you would because TFSAs haven't been around that long and you may not yet have this much in your RSPs.
It would go like this:

TFSA 100K x 2 entities x 2 people = 400K
RSP 100K x 2 entities x 2 people = 400K
Unregistered Savings/GICs 100K joint x 2 entities = 200K
TOTAL.....................................................................1,000,000. "

April 2, 2017
4:46 pm
Loonie
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Dealing with Oaken is more or less like dealing with 2 banks under one roof.
Each has full slate of CDIC coverage.
So, you could put 100K of unregistered funds in Home Trust and another 100K in Home Bank, and both would be covered.
Similarly for RSP, TFSA.

Oaken is quite proud of this offering and is eager to get people to invest more money accordingly.

This from their FAQ page:
"Q: What is the maximum amount of deposit insurance at Oaken?
A: The maximum protection for eligible deposits at Oaken is $100,000 per name registration (principal and interest combined), for each issuer. In addition, CDIC provides separate insurance protection for joint deposits ($100,000 collectively, not per individual), as well as deposits held in RSPs, TFSAs, and RIFs ($100,000, principal and interest combined per registration type). "

You can see here that Home Bank and Home Trust are listed separately as members of CDIC.
http://www.cdic.ca/en/about-di.....rs.aspx#HH

I hope that clarifies for you. If you don't feel confident in my answer, however, you should check directly with Oaken and with CDIC.

April 8, 2017
5:15 am
Twotons
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Norman1 said
An $1 million deposit with the Royal Bank (rated AA) would have $100,000 of CDIC coverage. The remaining $900,000 would be at a higher risk than in a Canada Savings Bond (rated AAA) but lower risk than in an Ontario Savings Bond (rated AA(low)).  

I don't know if I would go that far and say that a national bank is less risky than say, for example the Province of Ontario. I realize that Ontario is a fiscal disaster at the moment, but its ability to generate revenues through taxation makes its debt less risky in my option regardless of its lower credit rating.

April 8, 2017
6:37 am
Bill
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Twotons, I'm going with the debt raters over you on this one. Ontario's been in big debt a long time now. For example, today a family unit of 4 people in Ontario owes about $90,000 (and climbing every day for the foreseeable future) in just Ontario government debt. I'd be very interested in any specific ideas how this much additional tax revenue can be generated from the already-strapped (probably maximum) two wage-earners in the family.

April 8, 2017
7:31 am
Twotons
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I'm not sure if your trolling me or not. Do you really believe the government cannot raise additional income or sales taxes or get creative with other fees, like the health care supplement? There is always money to be had; unfortunately, it's always poorly managed.

April 8, 2017
9:59 am
Norman1
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Unlimited legal ability to raise fees and taxes is not the same as unlimited political ability to do so.

The ratings agencies are not just a bunch of naïve mathematicians. They know that any tax and fee changes can be rolled back after the next election. The Ontario politicians know that as well.

In fact, the politicians in the current Ontario government are feeling uncomfortable about what people now think of something as modest as their electricity bills.

April 8, 2017
1:29 pm
Bill
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Twotons, I'm not disputing that the government can raise taxes here, there and everywhere. My point was that a family of 4 is responsible for paying off about $90K at today's Ontario debt levels so I was asking you if you had any specific suggestions on how to get that much additional taxes out of that family in order to pay off the debt. Increasing their income, sales or other taxes and fees by a few hundred or thousand per year is easy and obvious, but the real issue is how do you get $90K more out of that family? And climbing by about $7 - $8 per day for that family in Ontario. And that's not even talking about ever-increasing federal and municipal debt amounts we all also share.

April 8, 2017
7:21 pm
Twotons
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Bill, I can't speak for that family, but I know I'll manage to make my tax payments even with all the increases to come (just like most peeps in Ontario).

And, yes Norman1, I don't place my full faith in any credit rating agency because its just a tool and not gospel. Do peeps still remember when Moody's and Standard & Poor's gave out AAA ratings to all that sub prime debt? Were they naïve mathematicians? I vote yes.

April 9, 2017
9:57 am
Norman1
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Twotons said
And, yes Norman1, I don't place my full faith in any credit rating agency because its just a tool and not gospel. Do peeps still remember when Moody's and Standard & Poor's gave out AAA ratings to all that sub prime debt? Were they naïve mathematicians? I vote yes.

Just because the ratings agencies are not perfect doesn't mean they are "just a tool".

Warren Buffet must be a lousy investor then. Lost around $100 million once by investing in an airline.

Ever wonder why that AAA rated mortgage-backed debt defaulted? Maybe it had something to do with something no-one expected? Like whole neighbourhoods in the US being foreclosed and property values collapsing under the weight of all those houses coming onto the market at once?

That "it's a government, it is safer" reasoning has been debunked decades ago. The banks used to believe that in the 1970's. They lent large sums of money to lesser-developed countries as a result. After all, how could a country default, with unlimited powers of taxation and currency issuance?

By the 1980's, the lesser-developed country loan defaults threatened to wipe out the capital bases of the big Canadian banks.

As for what the ratings agencies are, a previous discussion examined what they do and how they reach their opinions. In having a closer look at the ratings for Alberta and Ontario, we were surprised to find out how well Alberta and Ontario are actually doing, in contrast to the sensationalized reporting in the media.

April 9, 2017
10:04 am
Top It Up
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Norman1 said

In having a closer look at the ratings for Alberta and Ontario, we were surprised to find out how well Alberta and Ontario are actually doing, in contrast to the sensationalized reporting in the media.  

Maybe you could share your sources that tell us just how well Alberta is doing ... you know, something other than the socialist, Ms Notley, telling everyone that "... the debt ... is “absolutely manageable”" or the ever dubious past history of credit ratings agencies.

I'd particularly like to hear about your sources for oil price forecasting and, when the Keystone, Energy East, and TransMountain pipeline projects will come on stream and, when the current supply/demand for oil will come into balance (or will money markets continue to drive futures pricing) and, when the Alberta netback price will be in a positive position to allow the province to collect meaningful royalties?

April 11, 2017
7:53 pm
Norman1
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Top It Up said

Maybe you could share your sources that tell us just how well Alberta is doing ... you know, something other than the socialist, Ms Notley, telling everyone that "... the debt ... is “absolutely manageable”" or the ever dubious past history of credit ratings agencies.

I'd particularly like to hear about your sources for oil price forecasting and, when the Keystone, Energy East, and TransMountain pipeline projects will come on stream …  

Don't need those forecasts. Just look at their situation today. Assume oil won't recover and the pipelines won't get built.

Our findings about Alberta and Ontario are at the tail of the previous discussion.

Ontario is expected to require less than 10% of its revenues to service its debt. Alberta will require less than Ontario. Can't say debt load is unmanageable with a debt-service-to-income ratio of under 10%.

April 12, 2017
4:22 am
Top It Up
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I'll just use a quote following the release of Manitoba's budget, yesterday:

"But urgency in reducing Manitoba's deficit is disconcertingly absent in this budget. Our provincial debt will climb again this year, with annual debt servicing fees at approximately $1 billion.

One billion dollars ... And each year, Manitoba pays more to cover just the interest on debt, with fading hope of actually paying down the principal."

That fading hope follows 16 years of not-a-care-in-the-world spending by the socialist NDP government. The PCs were elected to save a sinking ship, but with taxation being their only revenue source - chances of doing so, are slim to nil.

MEANWHILE, Manitoba's debt continues to grow.

Using "debt-to-GDP ratio — a measure of the public debt burden" is the new hoodwinking tactic of the socialist governments of Trudeau, Wynne, and Notley, to rationalize their out-of-control spending.

March 4, 2019
2:06 pm
Bud
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Is the implied government guarantee deposit insurance stronger in Ontario than Manitoba?

March 4, 2019
4:58 pm
canadian.100
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Top It Up said

MEANWHILE, Manitoba's debt continues to grow.

Using "debt-to-GDP ratio — a measure of the public debt burden" is the new hoodwinking tactic of the socialist governments of Trudeau, Wynne, and Notley, to rationalize their out-of-control spending.  

I absolutely believe that the debt/GDP benchmark is a way for politicians to camouflage how bad the debt situation is. The benchmark is fine while the economy is growing but not fine when we go into a downturn - which is a real possibility this year.
As far as Manitoba, that province has been in poor financial shape for ages - yes overspending and overspending. I find that paying $1 billion in interest to service the debt is disgusting - funds which could be used for healthcare, education, welfare etc. The concept of a balanced budget does not seem important - but for sure, overspending today WILL lead to higher taxes for future generations.

March 4, 2019
6:49 pm
Loonie
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A while ago, I read that the UK is still carrying debt that they acquired in the 1700s (sic). They just keep refinancing it.

March 4, 2019
7:15 pm
Doug
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Loonie said
A while ago, I read that the UK is still carrying debt that they acquired in the 1700s (sic). They just keep refinancing it.  

Wow! I knew they'd had World War I era debt still, but the 1700s? Geez. 😉

Cheers,
Doug

March 4, 2019
7:54 pm
Jon
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Doug said

Wow! I knew they'd had World War I era debt still, but the 1700s? Geez. 😉

Cheers,
Doug  

I think this is what Loonie talks about. The wiki article say the UK government have fully redeem it as interest rate becomes more favorable and induced the government to refinance instead.

Government is not an individual, it is an entity that will never die, hence, there is no need to pay down all the debt of the government as creditor expect someone will always pay for the obligation of the debt.

Borrowing by government of developed country is useful if it is use for financing infrastructure projects because the alternative maybe much more expensive (worst economy, lower tax revenue etc). It is however, not recommended for the purpose of day to day operation.

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