Economic Meltdown, Is it

The $700 billion bailout plan by the US government and latest short term interest rates cut by Central Banks of United States, Canada, Sweden, Switzerland, England and the European Union have not resulted in the expected positive effect on the world stock markets. Specially in the United States, the real estate market continues to be in doldrums, unemployment rate jumped to 6.1%, stock market is down and car sales shrinking. In  Canada, exports are down, CA$ had a free fall, real estate market has stagnated, stock market performance is listless, and increasing unemployment / layoffs a major threats.

The million dollar question is how to check the impending economic meltdown and recuperate the Canadian economy?

There are 101 ways to skin a cat. My way is to diversify the economy & trade in order to reduce dependence on the US markets. (As Canadian economic fundamentals are better, however we are still badly affected due to over-reliance on south of border). I think trade can be expeditiously diversified by encouraging and facilitating new Canadians to look for business opportunities with their country of origin. This will be a win-win situation for the government and the unemployed & underemployed new Canadians.

Do you agree with the above strategy? Please comment below.

From the “R” word to “D” word

We are paying the price of unabated spending on homes and consumer goods during last few years. Cheap and easily available credit (sub-prime lending), stable consumer goods prices, and technological & productivity gains created excesses and fueled the economy for most of current decade. Thus we got caught up in a housing boom in 2000 and onwards similar to the dot-com boom of 1990s.

Excessive sub-prime lending in the United States has taken its toll with rampant defaults on mortgage payments resulting in write-offs and tightening of credit by commercial banks. This checked the growth of Real Estate market. Simultaneously, oil prices rose to unprecedented level crossing US$140 mark in July 2008, which along with increased staple food prices sparked inflation. This decreased the consumer purchasing power and slowed down the demand for capital goods. Spillover from economic downturn south of border has adversely affected Canadian economy, especially the economy of Ontario, which is heavily dependent on sales to the US markets. In 2007, 83.5% of the total goods exports from Ontario were to the US<!–[if !supportFootnotes]–>[1]<!–[endif]–>. Furthermore, exports declined due to stronger Canadian dollar, while layoffs in auto industry further contracted the Canadian economy. Read more of this post

%d bloggers like this: