The title of this post begs a basic question – what is normal? For our intent, normal is the economic status before the start of the troubles that lead us to recession.
I have seen editorials in the past few weeks warning of the complacency that comes with narrowly escaping an economic depression. These same editorialists are asking the same questions – mostly of our leaders – why are they not warning us of not heeding the lessons we apparently just learned? If this recession was so quick to fix (I said quick, not inexpensive), then why can’t we just continue with our cavalier ways? If it happens again, the governments and central banks will just bail us out again, right? No harm, no foul. Perhaps this situation calls for Cesar Millan (The Dog Whisperer) – he always reminds his students over and over again – be calm, be assertive and be consistent! But then again, dogs are easier to train than humans.
Following is a recent press release from the Bank of Canada, quoting Governor Mark Carney as he warns of becoming overly complacent. I just wonder if the media will run the story or bury it as potentially damaging to the miraculous recovery we are making. I just wish all the world leaders had stood up together at the recent G20 summit in Pittsburgh to voice the same warning. All of them except Mo that is (Muammar Gaddafi) – if he gave such a warning we would be guaranteed no one would take it seriously!
Transmitted by CNW Group on : September 28, 2009 16:14
Initial Success Should Not Give Way to Complacency, Governor Carney Says
VICTORIA, BC, Sept. 28 /CNW Telbec/ – While there are renewed signs of economic growth in Canada and around the world, Bank of CanadaGovernor Mark Carney urged today that this initial success should not give way to complacency.
“The recovery is in its earliest stages and almost entirely driven by public policy,” Governor Carney said, noting that the coordinated worldwide response to the global financial crisis and economic collapse was both ambitious and unprecedented. “In effect,” he said, “there was wartime spending on a peacetime calamity.”
For the recovery to take hold in a sustained fashion, a difficult hand-off from public- to private-led growth must occur over the medium term, the Governor said in a speech delivered to the Greater Victoria Chamber of Commerce. “Over the longer term, the economic environment will be challenging as the global economy undergoes a fundamental restructuring.”
This global recovery is likely to be protracted, Governor Carney warned. “We may be on the right track, but there is a long road ahead,” he said. Repair of major foreign financial systems remains a work in progress and it is important that private-sector demand grow consistently in the countries that were at the epicentre of the crisis, particularly the United States. Governor Carney cautioned that this may be both difficult and uneven.
“On balance, the external sector may not be reliable as the sole engine of the Canadian recovery,” Governor Carney noted. “In this context, domestic factors could prove decisive.” As the Canadian fiscal stimulus will largely be finished by next year, consumer and business spending will need to drive economic growth in Canada, he said.
In conclusion, Governor Carney reaffirmed the Bank of Canada’s commitment to price stability and to keeping inflation low, stable, and predictable. “The Bank’s sole monetary policy objective is to achieve its 2 per cent inflation target,” Governor Carney said, adding, “the single, most direct contribution that monetary policy can make to sound economic performance is to provide Canadians with confidence that their money will retain its purchasing power.”
Personally, I think the days of excess consumer spending and bulging credit debt are behind us. Not to say that we the people got bailed out like our big corporate relations did, but I think we might have learned the lessons very quickly. As I have stated before, if you don’t believe me just look at the shrinking use of credit cards and the growing use of cash as a way of forced savings. Nicole might be right that the banking industry could be moving to the cashless branch, but the cashless society is still just a dream – in my humble opinion… Although others may disagree with that last statement.
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Thank you for your insightful comments about the notion that if the recession is over, can we breath a sigh of relief and return to normal?
What is normal? Should we resume business as usual? Should we accept and indeed overlook the lack of a strong regulatory framework in the financial sector of the economy which may well have contributed to the collapse of world markets? Should we continue to promote highly questionable financial instruments such as credit default swaps and derivatives, many of which have masked billions of dollars worth of toxic assets and sub-prime mortgages?
Furthermore, if every seven seconds in the United States today there is a home foreclosure…is the recession over, and is that phenomenon normal?
While pundits paint a rosey picture about “economic recovery”, perhaps they are not even aware of the next financial tsunami headed our way — three trillion dollars worth of questionable commercial mortgages up for renewal in the United States…all of which dwarf the sub-prime mortgage crisis and the growing consumer debt in the country.
Those who are scratching their heads trying to figure out just what is normal would be well advised to listen to the wise words of Whoopi Goldberg, “Normal is nothing more than a cycle on a washing machine” (which is probably why some enterprising folks see money laundering as a recession-proof cleaning business opportunity)…just kidding!
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