We have all seen the Bank of Canada’s views on this; that any difficulties are only short-term and then things will be improving rapidly. The reasoning behind the bank’s forecasts is based around energy costs; they tell us that they have hit the highest point with regards to price. The current excuse for the depression, however, is assumed to have arisen from events in Japan. This sounds feasible but it is not exactly true, especially if we look deeper, as it is the consumer who represents the economy. Of course, the Japanese disaster has an definite impact on the economy, but the thing is that it is not even close to being the fundamental reason for the slowdown. We therefore have to look closer to home, with the employment situation being poor, the increasing gas prices and all around prices increases, the future is uncertain.
In the US previous to the depression, the Canadian debt, how much income a person has in comparison to how much debt, was only slightly lower than the Canadian ratio is at this time. Another thing in our favour is that the banking sectors are on a lot firmer ground, suggesting that if there was a difficulty with debt, then the banks would still stay strong. If it came, the consequences of a drop in home prices caused by the recession would have considerably milder effects on banking sector profits than it had four years ago on the US one. This all has an influence on monetary bailouts which are unlikely especially compared to the problems surrounding the US Banking and US politics.
The US and Canadian monetary status are closely linked, so trouble facing the US could impact unfavourably on Canada, including banks and BC real estate. So, we can say the Canadian economy is quite healthy but that could fluctuate dramatically if the US economy declines any further. Europe is also something which needs to be monitored, with countries such as Greece declaring bankruptcy, the problems confined to these areas could increase to become bigger problems which could affect Canada. In this setting, we may face a series of very troublesome events: a decline in commodity prices, destroying the economy’s potential, or shifts in the equity market and the above-mentioned contagion of the housing sector in case of tightened credits.