Debate thoughts: the economy


On the policy front nobody impressed me.  We all have issues that we care about the most.  I deeply care about the economy but I don’t see that as Harper’s strength.  In 2008 when the credit crunch was collapsing stock markets around the world the Harper government seemed completely asleep at the switch.  For all Harper’s rhetoric about how important it is to keep parliament focused on the economy it really doesn’t jive with the reality that in the midst of the market crash and the recession he prorogued parliament in 2008/2009.

I don’t attribute Canada’s economic stability with anything Harper has done.  He started in 2006 with a huge budget surplus which he squandered through increased spending and lower taxes.  The reason we are in deficit is because of poor economic management.  Some think it was the recession but that is over and we are still in deficit. 

The recession didn’t start in Canada nor did we pull ourselves out of it.  The “Economic Action Plan” is just a fancy word for stimulus spending which the Harper government didn’t want to do.  It was the threat of the coalition that forced his hand to bring out stimulus spending in the 2009 budget.  As much as I might hate to admit it, I’m not convinced Harper was wrong on his initial instinct on this.  It does get surreal when I consider that Harper is taking credit for managing the economy well because of surplus spending he didn’t want to do that probably didn’t make that much of a difference anyway.

The bank of Canada did introduce a lot of “monetary stimulus” in the form of really low interest rates and other measures to keep the credit markets fluid.  This certainly propped up the value of our homes but I fear we will pay a terrible cost for this.  The price of Canadian housing is unsustainable.  Canadians have taken on an incredible amount of debt and when interest rates come back up we will see the housing bubble burst and some serious hardship.  In all fairness the Bank of Canada is independent of the government and I don’t link these issues too Harper.  However the government is responsible for mortgage rules.   They just started to tighten up some very lax lending standards but I think it will be too little too late.

Jeff Rubin maintains that high oil prices are what caused the world to tip over to recession.  Oil is now over $110 / barrel in the North American markets and over $120 / barrel in Europe.  Different agencies are issuing warnings that if the price goes any higher it is going to seriously impact the economy again. 
In Canada we produce much more oil than we use so high prices do benefit us in some ways.  The impact on the American economy is much more negative.  When we sell 70% of our stuff to a country that is hurtling itself towards bankruptcy that doesn’t bode well for us.  The Harper government has successfully negotiated more avenues of trade with other countries which I will say is a positive.  When the US government maxes out its credit card and the debt financing that is keeping the US economy afloat ceases, we will find out in a hurry that we can’t avoid the impact of the economic realities of our neighbour to the south. 

What I would have loved to see are concrete measures to transition towards a sustainable economy.  Our system assumes that we can have infinite growth in a world with finite resources.  This assumption is going to hurt us sooner or later.  The only party that really tackles this is the Green Party. 

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