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Peter's Political Blog

Economic Predictions
Posted: Mar 12, 2008
Last seen: Jan 12, 2010

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I blogged about a year ago about how the Conservatives had no idea how to properly run an economy.  At that time I mentioned that although the CAD was raising against the USD, we were infact falling against all other major currencies.

2007 saw a reverse of that.  As the world noticed how far we were lagging we were rushed to catch up, that was the reason for the massive appreciation of the CAD in 2007.  However, since we first hit parity we have LOST 7% against all other major currencies as the USD continues to fall.

We are the largest suplpier of oil and gas to the USA, we are a mjor world supplier of raw materials, and precious metals such as gold and silver, and of gems such as diamonds.  Yet.... we are falling off the world scale of top economies.

One of the largest probems with the Conservatives, and this goes for 95% of "conservative" parties out there, is that they really have no idea how to strengthen an economy.  Forget the retoric and look at history.  Mulroney could not improve the Canadian economy, Flaherty could not improve the Ontario economy.  Look at the USA, where Clinton has surpluses, Bush has half trillion dollar deficits.

Now look at today, we have Flaherty running Canada's finances, and he has no idea how to decouple us from the USA.  Instead he is hoping if he stays the course things will just work out for the best, the US economy has to turn around sooner or later, right?

Which brings me to my point.  No, it doesn't.

Recently I was discussing the economic conditions in North America and the world with a friend.  As we were discussing some possible saf(er) investments pretty much every topic imaginable came up.  Pretty much every issue we explored came up to this, "if the credit crisis/rescission is short then (A), else (B)"

So the real question is how long until the US recovers?  The ugly truth is that it won't.  I won't say "never" because that's a pretty long time, but I think the next 20 years will see hard times in the USA, probably not to the absolute extreme of the 1930s, but it is a place I wouldn't want to live.

Why do I say that?  Because the sad truth is sub-prime mortgages did not cause the problems that the USA is in today.  SPMs are a minor aspect of a much larger problem, and in fact the SPMs were just the final straw.

Massive trade deficits, massive economic deficits, massive consumer deficits all existed long before SPMs.  Take the SPMs out of the equation and all these other things still exist.  The attitudes of American consumers harms their own selves.  Overspending, living beyond their own means and not being able to budget hurts the nation as much as themselves.

This is where Canada needs to be careful. For the first time in a decade we had a negative trade surplus (when taking into account all goods/services).  Excuses can be made, "Oh we have a high dollar", "It's just a one time thing", "It's because the US economy is weak", "It's because of lower auto sales".  I don't care what the excuse is, the excuse is just the symptom.  Treat the disease.  The Canadian economy (3 years ago) was the pride of the world, it still is today, but only because people still spout it as if it were fact.  But the fact is, it is dying, we are dying.

The problem is we are too tightly coupled to the US economy.  There is no simple solution to this, just as there was no simple solution to Mulroney's 45 billion dollar deficits.  It took hard work, it took tough decisions.  It took people with the education, knowledge and experience needed to do that work and make those decisions.

If we look at history, sadly, the Conservatives have never been able to live up to being these people.

Something to consider.

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