Consequences ‘huge’
Province
David Dodge wants globalization to be of benefit to Latin America
NEW YORK — The troubles in the U.S. housing sector triggered by a plunge in the market for so-called subprime loans could delay recovery and have “huge consequences” for Canada’s economy, says Bank of Canada governor David Dodge.
“Everybody else in the world looks at housing and says that doesn’t have much consequence for demand for us. But of course for Canada it’s exactly the opposite — it has huge consequences,” the central bank governor said yesterday after a speech to the Americas Society and the Council of Americas.
A slew of U.S. banks and firms that lend to subprime borrowers — consumers with higher credit risks — have run into trouble as rising interest rates and falling home prices increased the number of loan delinquencies and foreclosures.
There are worries that it might spill over into the general-housing market and lead to a further weakening of the U.S. homebuilding sector, a buyer of billions of dollars worth of Canadian lumber and other materials.
In response to questions, Dodge said “the recovery of demand for new housing in the United States and construction of new housing . . . is going to take a bit longer than we might have thought last fall.”
“We’ll have perhaps more repossessions coming back on the market in the next year or so, the credit markets for mortgages have tightened up a bit, so that means a little bit slower growth of demand, and we have an accumulation now of pretty close to nine months of newly built but unsold homes on the market.”
In his speech, Dodge called for the creation of new economic-policy institution for the Western Hemisphere as a way to help countries in Latin America that have been left behind by the economic successes of Asia.
He said most Latin American countries have missed out on the benefits of globalization and require a jump-start to spur them on to greater trade liberalization and economic integration.
© The Vancouver Province 2007