Anodyne
Friday, March 28, 2008
 
Everyone wants to dispute economics with me today.

Dru writes,

"American recession (debatable) does not translate to Canadian recession.

Have a look at these indicators:

http://www.economist.com/markets/indicators/displaystory.cfm?story_id=10926201

5.8% unemployment as of March 27/08.

Historically, that's ridiculously low for Canada.

In many previous recessions (even 97-98) people would have killed to have it this good."

This illustrates the danger of using a single variable as a determinant of economic health.

For a contrary point of view, check the following sources:

US Household Debt Service Ratio (DSR) -- at its highest point ever

Equity Loans as Next Round of Credit Crisis -- note the graphs and accompanying multimedia. When the value of one's property falls, perhaps dramatically, in the short-term, and a lender either calls the loan or asks for additional equity as a security, how will those payments be made? On a 19% credit card? For how long? Or perhaps in conjuction with reduced consumer spending? If funds previously directed to consumer purchases are redirected to debt service, what effect will this have on an economy fuelled by selling goods and services?

Also, your insistance that the US and Canadian economies aren't joined at the hip is pretty tenuous. When US new home orders slow down, which major North American country's lumber producers experience a dramatic downturn in sales? (Check Norbord Inc.'s last few quarterly reports for an excellent illustration of this process at work). When US consumers quit buying new cars, which province's auto plants lay off workers? And when broke US residents quit visiting their "super, natural" northern friend, whose hospitality industries, recreation industries, and retailers feel the pinch?


<< Home

Powered by Blogger

.post-title { display: none!important; }