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The Recession is NOT Over

Tony Wanless

| July 28, 2009

Image by: Wikipedia Commons/Dorothea Lange

The Bank of Canada says the recession is over. Five reasons it isn't.

The Bank of Canada may be technically correct in that the economy has stopped shrinking for two quarters. But an accurate, albeit very narrow, technical description hardly means a recession is "over," growth is back, and happy days are here again. Here's why I think so:

1. Economic shrinkage of more than 5% per quarter stopped because governments, including our own in BC, threw money at the largest companies to keep them afloat when they got caught up in the banking crisis. But that doesn’t mean other factors have stopped. So while, the technical “recession” may have ended, the recovery won’t begin for a long time. In fact, many are expecting a double dip -- a falling back into recession. In the 30s, recessions came regularly, and the 70s were one long stagnant period.

2. Governments, frightened of losing votes, “resolved” the crisis through subsidization. But subsidizing bad business practices is not a long term solution, and we’re all going to have to pay for it the long run through continued joblessness, tightened spending regimes, and currency fluctuations. If there is a recovery in the works, it sure won’t feel like one.

3. Taxes are going to rise, leading to a continued hobbling of any recovery. Someone has to pay for the billions in subsidies that are propping up industries that were in their sunset periods and so will always require some form of government support. That someone will be you.

4. Do you really think businesses that were mightily wounded by the savagery of this recession, will forget it so easily? Despite the Bank of Canada’s (and supposedly, the federal government as well) whistling of a happy tune, the dirge continues in the minds of Canadian business. They’re not about to open up their wallets soon.

5. Most of the all important consumer buying that is supposedly leading us out of the recession is a cannibalizing of future spending. It’s said that some 80 per cent of recent car sales were simply purchases that would have been made in future anyway but were made now because of incentives like 0% loan rates. Most real estate purchases were investors taking advantage of lower prices and higher currency values offshore.

Those are my reasons why I believe the recession isn't over. How about you? Do you think it is, or are we in for a long grind?

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I smell an election - always

Submitted by Anonymous on Thu, 2009-07-30 18:10.

I smell an election - always good for a government to say it rode valiantly through a recession and rescued us all in record time. Much better than having to defend landing Canada into a recession, don't you think? The fact of the matter is, Canada should have been in one of the best positions to ride out this recession in the first place, but everyone screamed that the sky was falling, so businesses and consumers acted accordingly. We were the masters of our own destiny with lots of help from our 'hero' government. We were due a sound levelling out of our economy and that's all. If the Government had the ability to look beyond the end of it's nose, they would know that the best way to ride out a recession is to keep people working and failing that, make EI cover more than the bare minimum so even the unemployed can keep spending. We fund that, it's an insurance, so why is it that the Government can dictate how it is run? Here's a thought, how about we make social assistance a tough roe to hoe? If people are capable of working, they shouldn't receive it. Making babies to get more money isn't a career. But the Government won't touch social assistance because (a) it's easier to target workers and (b) it might make the bleeding hearts cry. Same goes for aboriginals, obviously throwing money at them hasn't resolved their issues, they need something to take pride in - work, education and motivation. I assume when these ridiculous 'land claims' are settled, our aboriginal friends will begin paying taxes? Can you imagine if even the basic obvious solutions like these were implemented? We'd be rolling in money! I am tired of taking all of the hits just because I'm a hard working caucasian. I consider everyone to be equals and they should be treated like equals. This country should be one of the most wealthy in the World, instead we're the joke of the world. We need solid, independent leaders so we can break the cycle of trading one useless, gutless, self-centered party for another. THAT will end the recession and place Canada where it was always capable of being. Do polite Canadians have the guts to demand it? Will they take this country back and remind our 'leaders' that they are representatives and we're the boss? Stay tuned...

Long grind ... and as it

Submitted by Anonymous on Thu, 2009-07-30 14:52.

Long grind ... and as it grinds on, it will become more and more evident that the ways we lived, worked and spent belong to the past. There will be IMO revisiting and (in some cases, a fundamental) re-structuring and re-visiting of core assumptions about growth, etc. Jon Husband