Is Canada’s economy still safe?

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Last week, Stephen Harper claimed:

Today, we see more volatility in the financial markets due to the crisis in the United States. Remember, Canada is not the United States. The fundamentals of the Canadian economy are sound.

Granted, this was said at the beginning of the week before the TSX had two of it largest single-day drops in history.

Today, the TSX started off terrible, falling 11 percentage points right out if the gate, and closed lower than where it had ended Friday. To top it off, get this.

No sector was untouched ?¢‚Ǩ‚Äú health care was off about 7 per cent, industrials fell 6.35 per cent and materials fell 5.62 per cent. The telecom sector fared the best, losing 3.01 per cent.

Are the fundamentals of our economy still sound? Is it still the Conservative stance to continue doing nothing?

33 thoughts on “Is Canada’s economy still safe?

  1. To be completely honest I would rather see what the laws of supply and demand have to say rather than a bureaucratic committee. If our economy needs recession then let there be recession, better than what the US economy is facing and that is risk of depression. The reason the economy is in dire straits in the United States is not wholly but largely related to governmental interference.

  2. I think the bigger risk is letting the government poke around in an economy they have no idea how to fix or even whether it is broken. I feel like big business sometimes needs a reign but never a leash.

  3. At the same time, I think the government needs to encourage diversity in the economy. I don’t think it’s a good habit to get into to give tax breaks to as single economy (like oil and gas, for example).

  4. Just because Jack Layton says that tax breaks are only going to oil and gas doesn’t means that that information is correct. The tax breaks that have been enacted are for all corporations and individuals. There are no single economy tax breaks. I agree that a portion of the tax breaks have gone to corporations but only $50 Billion of the $200 Billion enacted so I can’t see how that undiverse. The opposition parties are using manufacturing as an example of how the conservatives are not propping up business but you tell me why we should dump taxpayer funds into a single economy to help it limp along rather than into retraining programs that help workers find more productive and competitive industries and jobs?

  5. you tell me why we should dump taxpayer funds into a single economy to help it limp along

    Uh, I just finished saying that I think the government should encourage economic diversity.

  6. So why is it that you are ok with the party that you seem to support taxing more heavily the energy sector? Is that encouraging economic diversity? I guess some of the politicians out there figure that the energy sector has too much money and should be penalized. I surely hope some day they don’t decide the same thing about accountants. I know they make it seem like the energy sector are the ones causing the global warming problem but really isn’t it the ones burning the oil not the ones digging/piping it out of the ground that are the culprits? Of course that would make more taxation of the individual which is political suicide so they blame it on the big, bad, faceless, deep pocketed, energy sector. Nice try but you aren’t fooling me, either way Dion I end up paying the tab and you end up with less money to run an increasingly expensive platform.

  7. Because based on what I have read, they seem to be the most interested in developing a diversified economy this time around; although, Liberals would be my second choice this time around for the same reason. The CPC seems interested in supporting only what’s trendy and letting market forces determine where the jobs are. If we let market forces determine our economy, we will never get out of being a resource-based economy.

    That being said, my decision on which party to support, as with each election, was based on more than economic policy.

  8. I would hesitate to give credit or blame to Harper for the economic instability currently present in Canada since it seems the same instability is world-wide currently.

    Either Harper has significantly more influence than I was led to believe or more likely it’s a global trend and we should batten down the hatches and try and do our best to ride out the storm.

    Given our budgets are in the black (both provincially and federally), I’d say we’re in a better position than most countries to come out of this in decent shape.

    In fact, if we are especially fiscally responsible now, we may be able to take advantage of the fact than many countries have been running in the red – this would allow us to leverage our production and boost exports, tourism, and R&D.

  9. “I was simply wondering if he still thinks our economic fundamentals are strong.”

    As per my comments about running in the black, above, I’d say that he still thinks our fundamentals are strong.

    In regard to your fiscal responsibility comment and link, as with so many other issues this election – I am looking for the lesser of evils. I believe that Harper would spend less than any of the alternatives, just as I believe that we (Harper and I) agree on more issues than I agree with any of the other leaders.

    If I can elect a person who will get 7 of 10 things I want done, I am less prone to quibble about the other three. That’s just in my nature. I’d consider myself a practical voter rather than a party loyalist, for the most part.

  10. If I can elect a person who will get 7 of 10 things I want done, I am less prone to quibble about the other three. That’s just in my nature. I’d consider myself a practical voter rather than a party loyalist, for the most part.

    On that, we both agree.

  11. I have to agree with Kim that the best economies have diversity.

    It is hard for me to believe that any government holds the key as to which industries they have to limit and which to promote.

  12. I was doing a wee bit of reading about the chance that the US may eliminate the Capital Gains tax … I look forward to Harper stating something about how we would eliminate it as well if the US decides to do so.

    I can’t even imagine how many businesses would move to the US if they had not gains taxes…

  13. Rick, if the CPC does eliminate capital gain taxes, it would be their last fiscal promise from the 2006 campaign to be fulfilled. Maybe that’s why they have yet to do it, because the US hasn’t.

  14. Not me.

    I have a feeling that none of the companies who depend on a low dollar for exports will take advantage in this and invest the additional profits into R&D. When the dollar reaches parity again, they’ll complain to the government about reduced revenues and expect handouts. Just like they did earlier this year.

    In addition, our dollar is generally governed by commodity prices, which means, for example, while it may be cheaper to export lumber, lumber harvesters will get less money for their product.

  15. The dollar is down because of energy prices – this has nothing to do with any programs our govt could put into effect.

  16. Well, most commodities, really. Not just energy.

    That being said, I don’t think anyone had said here that it is the government’s fault.

  17. When Cretien and Martin were in power they both LIED about how well canada’s economy was doing. At least under Harper we actually have a surplus. The liberals are even admitting now that they want to go into deficit spending which is the worst thing you can do during an economic decline.

  18. Again with the figure of a Liberal surplus of $13.2 billion, you are acting as though the Liberal government created revenue. That is our money. That surplus was elimiated not by spending more of our money but taking less of our money. Lets make sure we are clear here.

  19. The 2007 budget alone highlights $14 billion in new spending, but only $6 billion in tax cuts. Maybe I am misinterpreting this, but where is the $8 billion coming from if not from surplus?

  20. The economy is not safe at all.

    To be safe, there is an inevitable need for worldwide deflation.

    People with funds, like single mothers, natives, street people, and a number of assorted disparate groups cannot afford bread, milk and eggs.

    Also, without deflation, nobody with a normal wage will ever be able to afford a house in the future.

    The two main culprits are:

    (1) Unions — they keep pushing wages higher, forcing companies to raise their prices to cover the higher wages, and then wage-earners in other fields also need a greater income to pay the extra costs. It’s cyclical.

    (2) Real Estate sales and bankers. My parents bought a huge house in Toronto in 1975 for $57,000. They sold it in 1989 for $240,000 (a more than 400 percent increase). Two years ago the demand for condominiums was slowing. There were more condos across Canada than the number of people wanting them. So, to keep demand artificially high, real estate agents got first in line (sometimes paying someone to stand in line for day in their place) and bought up all the new condos that were being built, preventing home owners from having access unless they wanted to pay a higher price to the real estate agent.

    Anyone buying a house or condominim today is going to be hurt financially. It’s a foolish decision. Real estate price will fall heavily over the next few years. Houses that were worth $200,000 at their height will be worth maybe $40,000 when it’s over (an 80 percent drop). The homeowner who puts $50,000 into a $200,000 home today, might end up owing $150,000 on a $40,000 house.

    It’s best to hunker down, pay off all of your debts, and save toward the end of the depression, which is not only unavoidable but will be worldwide.

    It was a huge mistake for the U.S. government to bail out Fanny or Freddy or AIG or the three big auto makers. Failure of each would mean we’d get through the financial crisis quicker. There were likely very rich business men who would have been happy bid on each of those industries at a lower than cost offer. But, instead, the gov’t bought then at a higher than cost price. Why would the failing companies sell to lower bidders if the taxpayer is going to pay more.

    It also means the government is going to fail, financially speaking. The dollar is going to loss all of its value, like in Zimbabwe. While you can buy an apple for 25 cents outside the border of Zimbabwe, it costs $25,000 to buy one inside the border. At least it did a few months ago. The price is far higher now, somewhere between $30,000 and $50,000. Their money has no value.

    Yesterday the Canadian dollar was almost at 80 cents, down from $1.10 at the beginning of the year. In the past couple of decades we’ve been below $70 cents. If it reaches 50 cents, it means you pay $2.00 for anything outside of Canada that would normally cost $1.00.

    And, it would be a good idea to pray for Japan. They’re known for experiencing earthquakes. If they endure too many at one time, the wealthy Japanese citizens will feel compelled to pull their investments from world markets to prop up their country.

    Of course, conversely, if they liquidate, it will mean the deflationary period will happen much more swiftly and the recover will kick in sooner.

    The question is, would you prefer an extremely difficult financial time that is somewhat short, or a less difficult, but difficult nonetheless time that lasts for years? Would you prefer to think you can buy more with your money in two years from now, or a slower recovery in perhaps seven to ten year?

    If the economy crashed heavily, eggs and milk and bread would be forced to come down in price or nobody will be buying it – they no longer have money or jobs. Houses and cars and gas wouldn’t sell at all, and costs would come down even faster since they are not as essential as eggs and milk and bread.

    I actually thought these bubbles were going to burst in the 90s. But I was wrong, regarding the timing. The bad news is, if I’m wrong about the overall results and the need for the crash, it means prices (inflation) will never come down again to more affordable meet cost of living realities.

    I’m not intending to monger fears, but to tell the truth. That’s where my loyalty lies.

  21. Incidentally, while I’m not a member of the Conservative Party in Canada, and have no interest in being there, after looking at the platforms of each party, I honestly believe Harper is the best leader to get Canada through a bad economy.

    And, to make sure I’m clear about this, I don’t believe any government can stop the economy from going bad, nor do I think they should (even if they could).

    Churches and soup kitchens and food banks and all sorts of community organizations are far better prepared to help the citizenry than the government. Higher taxes only mean that the dollars collected are being wasted in government coffers and paying for bureaucrats when those dollars would be better in the hands of the needy through voluntary contributions to community groups.

    To best way to aid the needy is for government to lower taxes right across the board (unfortunately, most governments believe they can spend your money better than you can).

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