Is The Canadian Economic Situation – Stable?
We have all learnt the Bank of Canada’s views on this; that any difficulties are only short-term and then things will be getting better rapidly. This is based entirely on a probable but uncertain supposition that levels of energy charges will not rise, and that they’re more likely to decline. The current reasoning for the depression, however, is thought to have arisen from events in Japan. A perfectly credible reason, but underneath this problem the consumers are the individuals who influence our economy. The disaster in Japan will affect us, just as it affects the rest of the world, but it is without doubt not the main reason. The majority of consumers are bewildered by the results of gasoline prices and erratic job growth.
In the US previous to the depression, the Canadian debt, how much income a person has in comparison to how much debt, was only slightly lower than the Canadian ratio is now. If there were difficulties with debt, what we can certainly say, is that the banks would be better able to deal with it. It is always a concern to home owners that house prices are going to fall even more so during any recession; but at the end of the day the effect on bank profits are not going to be as bad as they were a few years ago. In the US there have been bailouts that sway the US economy, although with the banking situation as it is in Canada we are unlikely to see the same thing happening here.
The one thing that has to be clear to everyone is that the Canadian economy is closely linked to that of the US – particularly in the field of bank stocks and BC real estate. Thus, it doesn’t matter how strong and stable the situation on the domestic market presently is; US problems have the potential to hit us hard. Furthermore with the European problems affecting countries such as Greece, they could escalate and become Canada’s problems if it starts affecting the wider markets. In this situation, we could face a series of very unfortunate events: a decline in commodity prices, destroying the economy’s potential, or shifts in the equity market and the above-mentioned contagion of the housing sector in case of tightened credits.
Overall, the situation seems to be stable as it is, but much more will be seen in the future.