Thursday, July 23, 2009

Economists Nowhere Near Reality

Today, the Canada’s federal financial regulator – the Bank of Canada – boldly declared the recession over.

The national financial regulator – which sets the stage for how other financial institutions across the country will operate – estimated that the Canadian economy will advance by 1.3 per cent during the current July to September period and three per cent in the final fourth quarter of the year.

The optimistic view of the economy had an immediate effect on the Canadian dollar, which jumped 0.97 cent to 92 cents U.S.

Bank of CanadaImage by d.neuman via Flickr

However the Bank of Canada is still concerned about the slumping American and European markets, and says they may contain more unpleasant surprises, which could affect the global economy just as it did back last October.

Wait a sec . . . the Bank of Canada says we’re out of the woods, but we’re still in the forest?

Doesn’t make sense – Canada isn’t the only country affected by the global economic downturn, Canada is very much tied to the American and European markets.

So how can the country’s national fiscal institution declare the recession over?
One word: posturing.

The stereotyped image of the tight-wad, highly cautious, nerdy banker-type rings true. Those in positions to influence world economies are easily spooked by even the tiniest of teeny-tiny things.

Just look at how fast most of the major trading indexes of the world fell when the planes crashed into the World Trade Center on the infamous “9-11” – trade indexes in Canada, Europe and Asia all dropped, even though they all were many hundreds – if not thousands – of miles away.

The same holds true when good news spreads from reputable sources, such as the Bank of Canada – even though it may only be a prediction, estimate, or the result of someone holding out on his or her lucky rabbit’s foot for luck.

Despite the numbers released by the Bank of Canada, this sounds very much like political posturing, in an attempt to stimulate the economy. By claiming the country is out of the recession – or will be by the end of the summer – investors will have more confidence to put their money back into the market, and that influx of dollars should help the wheels of the economy.

In theory, that sounds great – but just how realistic is it, given the dependence on most nation’s economies by the big American financial machine?

Don’t be fooled by premature statements, driven by lucky rabbit’s feet. Just look at what is still going on around you and ask yourself if we really are out of the woods.

Almost 400,000 Canadians have lost their jobs since October – and just how many of those people are still out of work or working in underemployment situations, just to make ends meet?

Many businesses are still suffering – just go to your local mall and count all the empty and gone out of business stores.

More people in Canada are depending on food banks to feed themselves and their families than ever before – simply because they can’t afford the basic

Economy of American SamoaImage via Wikipedia

needs for themselves.

Canada’s economic recovery may be taking place, but clearly we have a long way to go before declaring the recession a done deal.

And that economic recovery could be stalled or even halted suddenly, if the economies of the States and/or Europe continue to tumble, as they presently are.

The financial stimulus package American President Barack Obama launched in the spring is meeting with mixed results. On the one hand, it is providing some movement of funds in the economy, but on the other hand, people are still losing their shirts – or worse – their homes.

Until the American economy is stable and once again prosperous, the Canadian economy won’t be.

Keep stroking that lucky rabbit’s foot – but I’m waiting for more evidence before considering the recession over.

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