World economic news is not good.
The price of oil, the falling loonie, and the slumping Chinese stock market suggest 2016 is not going to be a banner year. Add in a sudden shift in the U.S. economy in the fourth quarter which has severely put the brakes on U.S. economic growth and things get a little gloomier.
Consider the increases in the Eurozone inflation rates, the Japanese government setting a negative interest rate, and a plunge in the U.S. durable goods orders and things start to go from gloomy to frightening.
Closer to home, the Canadian GDP gained 0.6 percent in the final quarter of 2015 but only because of October. November and December showed declining GDP numbers. Unemployment hovers at 7.1 percent while Canada experienced a two-billion-dollar trade deficit last month. For a nation dependent upon exports to drive the economy, a trade deficit is a death knoll.
Housing starts remain strong but the cost of housing has become absurd in some cities such as Vancouver. Knock-downs - houses needing to be demolished - from the 1930s are on the market for as much as $2.4 million. Essentially, that is the perceived lot value. Who can afford that sort of money given the average Canadian took in just over $49,000 last year?
There are many economic issues facing us. What are the solutions?
The answer is likely that "there aren't any." Or there are as many solutions as people. Everyone has their own view on the economy.
For example, the solution for Rona Ambrose, interim leader of the Conservative Party, is to just build more pipelines. Energy East is the key to economic salvation in her world view.
"The key to long-term growth for the energy sector across the board is pipelines and, yes, everyone across the country demands that they be built in an environmentally safe way," she is quoted as saying. She added: "(Trudeau) has not shown yet that he cares about this issue and he cares about the people that are suffering, and that is my concern."
It is perhaps not a surprising stance given that along with being interim leader, Ambrose is an Edmonton MP. It has long been the stance of Alberta based Conservatives that as Alberta goes, so goes Canada. I would argue that is precisely the problem.
To put it another way, the slumping price of oil has resulted in 100,000 people being laid off in Alberta. The slumping price of oil is a consequence of an over-supply in the marketplace induced by Saudi Arabia. Indeed, when rumour hit the world markets last week that the Saudis might be turning off the taps, the price in oil spiked, only to crash again as the Saudi Arabian government said they had no intention to reduce production.
Because of this over-supply and the NAFTA, oil companies in Alberta can not profitably mine the oil sands. Like all other resource export based economic sectors, they are fundamentally dependent on international markets.
What is Ambrose suggesting? We need to add more oil into the supply chain. That will fix everything. With the second largest reserves in the world, dumping more Canadian oil into an already saturated market will just increase the glut on the market. If anything, it will likely drive the value of a barrel down even further.
Of course, this is economics and for all I know it could have the exact opposite effect. But a cursory look would suggest this is not a good economic solution.
At the other end of the spectrum is Thomas Mulcair, still leader of the NDP, who has chastised the government for indicating it will sign on to the Trans-Pacific Partnership. Personally, I don't think the TPP will be the boon to the Canadian economy that Harper and his Conservative government promised.
But I also don't think it will cost us tens of thousands of jobs as Mulcair seems to think. Indeed, without a good economic analysis any suggestion of job losses really is just speculation. And by his own admission, a good economic impact study of the agreement doesn't exist.
The TPP may actually result, as the Prime Minister contends, in the creation of middle-class jobs and economic growth. But even if it doesn't, there are dangers for our economy in a flattening world if we are not part of the game.
It is like the campaigns for lotteries always say: "You can't win if you don't buy a ticket." What they also don't point out is that the vast majority of participants end up losing. Unfortunately, in our modern world, I don't think we can afford to sit on the sidelines.
Maybe someday, years from now, an economic historian will look back on this decade and be able to explain just what happened. In the meantime, we are all doomed to riding the tiger.
