The Fundamentals Are Pretty Shaky
Thanks to Arthur Donner’s Economic Comment for bringing this to my attention.
The official line we hear everyday is that the Canadian fundamentals are great, while other countries are in deep trouble because they are spending beyond their means and borrowing too much from the rest of the world.
Yet IMF projections show that Canada’s Balance of Payments deficit on current account is now just about the worse among the advanced economies – worse than the US, and set to be even worse than Italy and Spain in 2012.
Despite the fact that our public sector deficit is relatively low and resource prices have been high, we are now very large net borrowers from the rest of the world because of our large and growing trade deficit. The huge shrinkage of our manufacturing sector during the Great Recession and our relapse into resource dependency mean that correcting the current account imbalance will be difficult.
Fortunately, the exchange rate of the Canadian dollar is catching up to the reality of our real economic relationship with the rest of the world.
| Advanced Economies: Balance on Current Account | |||
| (Percent of GDP) | |||
| 2011 | 2012 | ||
| US | -3.1 | -2.1 | |
| Euro Area | 0.1 | 0.4 | |
| Canada | -3.3 | -3.8 | |
| Japan | 2.5 | 2.8 | |
| UK | -2.7 | -2.3 | |
| Germany | 5.0 | 4.9 | |
| France | -2.7 | -2.5 | |
| Italy | -3.5 | -3.0 | |
| Spain | -3.8 | -3.1 | |
| Source: IMF World Economic Outlook. Table A11. |
It is coming apart at every nail, just like we ahve been screaming on here for how long now?????
I wionder how we will get Harper to move into some sort of economic action this time. We have no threat of a coalition and given that I wonder how long will he wait before throwing a very small bone to working people in this country. We all know it is coming, yet the only action we have seen to date is cheer leading on the side lines.
I think the challenge will be getting these right wing ideologues off there behinds and into doing something smart. We cannot wait for an election, thankfully for Canada, the feds do not hold all the economic power. Without the coalition threat, the provinces, and the municipalities will have to start yelling real loud, and I hope they start soon. I think the threat of a three sweep for TO will be enough to keep the cons out of power in Ontario.
The time for preventative measures is now. We need to start formulating Smart investment stimulus now!! Training, infrastructure, povert relief etc.
Not sure, but given the political situation in the USA, you can be rest assured that the social wealth divide, and the deeply troubling tea party movement, will mean no comprimise and a very limited US econimic relief. You might get some protectionist measures and potentually some lower dollar relief from USA policy makers, but both will most likely only harm Canada’s economy. THere will be no massive US stimulus this time. The brunt of the worst economic storm could be on us real soon and we are caught up with our own politcal tea party in power. Watch this majority really show its blue colours during this upcoming economic storm. And what’s up now that Oil is sinking like a rock????
Harper’s oil buddies and the whole Oil sands project could soon become a non-profit organization- again. I wonder if they will try for tax exemptions again. (did HArper ever pull those subsidies???)
Just to underscore how fundamental this issue is, Thomas Geogehan has a piece at The Nation – http://www.thenation.com/article/163673/what-would-keynes-do – hammering home the dire consequences of what he calls the “sucking chest wound” of the US trade deficit.