August is sometimes seen as a “summer doldrums” period, but such has not been the case on world economic markets, with stock markets in free fall, commodity prices falling and the U.S. debt being downgraded for the first time in history.
Canadians may feel that they are somewhat insulated from all these troubles. After all, our housing market has stayed strong, the banking system is sound, the Canadian dollar has been above par with the U.S. dollar for months and Canada has an enormous store of resources which the world needs.
Canada does have many advantages, but it is far from insulated.
As Finance Minister Jim Flaherty said on Friday, before Monday’s major selloffs, “Canada is not an island. We are a trading nation, with about a third of output generated by exports and deep linkages with the U.S. economy. The global economic recovery remains fragile and this uncertainty may eventually impact Canada.”
The softness of the economy can be seen in many areas. High gas prices all this year have affected consumer spending. Governments at all levels continue to want more tax dollars (including more gas tax) from taxpayers, most of whom are making no more than they were three years ago.
These and other factors have kept people from spending money the way they did in the mid-2000s. Money isn’t as easy to come by, and there is no sign that good times are coming anytime soon.
There is no doubt that the economy is changing, and where it is going is pretty hard for anyone to predict. However, all of us are part of a global economy which has been hit by many challenges in recent years, from the U.S. subprime mortgage mess to European governments being unable to pay their debts.
More of these types of unexpected occurrences will come along, and Canada will have to deal with the fallout as it affects businesses and individuals, and ultimately governments, in this country.
All of it can be overwhelming, yet at the same time there is room for optimism. Canadians have weathered difficult times in the past, and Canadian attributes of hard work, caution and innovation can come to the forefront again.
But that is no reason for Canadians not to proceed with a great deal of caution.
