Canada's Woes
Part III
It didn't make front-page news here in Canada (drowned under the massive
Olympic coverage I suppose), but the finance ministers and central bank governors of the world's seven biggest industrial countries have just completed a two day "retreat" near Ottawa. Here are some of the comments that came out of that meeting:
- Things are looking up for the global economy (People are more optimistic than they were 3 months ago).
- Consumer spending has held up extremely well in North America and Europe
- The United States is equally committed to keeping its border open to Canadian commerce as it is to maintaining security.
- Foreign aid should be increased when poor states can demonstrate they are providing good government and spending aid dollars properly meaning "sound policies, good governance and the rule of law." (G7 final statement).
- Risks still remain/countries must continue to promote stronger economic growth.
Aside from the last point of the above list, the only quote that I found worthy of commenting was the following from Bank of Canada Governor David Dodge: "The signs are mounting that we've turned a corner." Unlike the venerable head of our central bank, I do not believe things are looking up for the Global Economy or that consumer spending is holding up extremely well. I believe indeed that we've turned a corner, but the same one the U.S. NASDAQ weekly volume average took in early 2000 (from 5,000 to 1,800, here we go!) Go to your local malls and department stores and realize it for yourself. I was surprised to witness, while walking around the Rideau Centre in Ottawa, that first, there seemed to be less shoppers wandering around than at the same period for the past three years, and secondly that most stores had left their "after Christmas style" liquidation sale prices banners (i.e. 50% or 70% off selected items) all over the place. Now maybe the governors meant that consumer spending is holding up extremely well for a slowdown period preceding a decade long global recession, then I would agree. France came out with its economic growth forecast that same weekend. It's down from 3.7 to 0.7%. Is that the type data on which you're supporting your comments dear central bank governors?
Retail isn't the only place that suffers at the moment from "volatility" in the stock markets or "hesitation" from the spenders. I believe that the surge of interest in gold this past week illustrates how hard the mainstream media in Canada are trying to keep the general public from panicking and rushing to sell a good chunk of their stocks and mutual funds to buy some precious metals before it is too late. After a few stories on the rising prices of gold, the media is today going back to its old ranting of "gold is just as volatile as the rest of the stocks again". Most people around me seem to be just as asleep as the media on that issue, completely oblivious to the fact that the Enron fallout will lead to other similar large scales bankruptcies in the following months. As I was telling another gold-eagle contributor this week, the elevator cable of the stock market skyscraper is still in the process of breaking, people can hear the impending failure's distinctive noise and can only get out of it safely for the next couple of floors, but alas, they instead believe they can make it to the ground floor safely and stick in the elevator until it's too late.
In Canada you have to look at the underlying messages of recent federal government advertisements to "really" know what you should do with your investments. Aside from the usual increase in the "Join the navy, join the air force, join the army" ads on TV and at the movies that drive me nuts*, we've been bombarded recently with a Revenue Canada/Deposit Insurance Society ad that goes something like this: "Remember citizens of Canada, your savings are insured up to 60,000$, but that does not include mutual funds, stocks and savings in foreign currency." Well, you've just eliminated the most common way our most successful people and businesses use to accumulate wealth there have you? There was no mention of precious metals in that ad (of course) as a mean of "insuring" at least a percentage of your portfolio before an impending crash.
In conclusion, let's go back to the last point in my list of comments emanating from the Ottawa G7 financial meeting: "Risks still remain and countries must continue to promote stronger economic growth." Like everybody, I agree with this in principle. The only problem (if you read between the lines) with that statement is that it's encouraging the adoption by G7 governments of more of those economic stimulus packages… and we've seen what those have done to Japan during the past decade. It's hard to believe that Japan's central bank governor didn't throw a fit at his colleagues and make a point that such packages do nothing to relieve an ailing economy in the long run. I see the U.S. government is planning to go back into deficit spending this year. That's just brilliant. Now that many of the E.U. countries are trying to avoid deficits and/or buy back their gold reserves that's just what the U.S. needed, another deficit year flooding the economy with even more non-backed useless paper money. Again it just goes to show you: even if it's paying its public debt, the Canadian mouse will be dragged down the drain by the American elephant in the near future if that fiat money madness continues.
*This is slightly unrelated to my topic, but I'm still angry at our federal government for sending 1,000 non-peacekeeping/fighting Canadian troops to Afghanistan under U.S. command (that's like saying to the terrorists, oh please come and commit unfathomable acts of terror in our country too!) renting foreign airlift carriers (ours can't accommodate our vehicles) while dressing them up in green camouflage gear for desert warfare. You can't believe how impressed I am: cost of new desert gear for this non-UN backed, non-peacekeeping endeavor for Canada: 280 millions CDN dollars (roughly 20 metric tons of gold at today's price).
Philippe Bérubé, M.A. Political Science
Ottawa, Canada
epb1886@hotmail.com
12 February 2002
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