A Global Recovery Without Growth

OECD Expects A Period Of Stunted Growth Over The Course Of 2010

First Published: ADawnJournal.com Published Date : July 1, 2009

The good news first, so no-one loses hope: Next year will see, in Canada and the rest of the industrial world, an economic recovery from the recession we currently find ourselves in. Now, the bad news: there will be little or no growth in the economy as part of this recovery. So says the global Organization for Economic Co-operation and Development in a report published this week which will leave many people wondering whether to smile or frown. The general consensus has been that the recession is heading for an end later this year with a cautious but pronounced period of growth next year. The Bank of Canada for its part claims that growth may even reach 2.5%, but the OECD thinks differently.

This report seems to be more pessimistic in general than the assumptions of the World Bank, with the OECD expecting a period of stunted growth over the course of 2010 which will see the Canadian economy grow by a small margin of 0.7%, lower than the USA’s figure of 0.9% and the world in general at 2.3%. The World Bank, which does not have a breakdown for Canada, expects the US to have growth of 1.8%. Things could be worse of course as, according to the OECD, the United Kingdom will experience no growth at all. It should also be noted that the OECD forecast is just one of many, and the most pessimistic of them all so far – forecasts certainly do not always reflect the eventual truth.

What does seem universally accepted is the belief that the latter part of this year will see an end to the market contraction which has characterized 2009. Aside from that, it is difficult to know what to believe, with market figures completely failing to provide a uniform indicator of how the future will pan out. Goods and retail purchases have been rising in Canada and above, for example, but the housing market, particularly in the United States, has failed to perform as well as had been hoped. Reading the trends is likely to remain a lottery for some time to come, although news that the recession is soon to be over will hopefully become a self-fulfilling prophecy, with consumer confidence expected to grow as a result.

On the last point, the OECD and the World Bank seem at least to be of one mind. The global recession does not have long to run, whichever way you read the figures. OECD member countries have seen market contraction in the region of 4.1%, expected to be the overall figure for this year. In March, this figure was estimated at 4.3%. Given the horrors of 2008 and much of this year, the recession was inevitable, but it looks to be nearing its end. Economic strategists seem to be of a single mind on stimulus packages too, giving the concept a cautious thumbs up, urging that the governments implement the programs included under those packages, and advising against further action to pump economies up once recovery does appear – correction is good, micro-management may be detrimental.

Positive Signs In Canadian Economy – But A Long Way Still To Go

Financial Crisis and Canadian Economy

First Published: ADawnJournal.com April 1, 2009

As people hang on for news that the financial world is lifting itself from its sickbed and preparing to walk again, any little bit of good news is likely to be taken as an encouraging sign that the end may be in sight. There are timely warnings, then, attached to the news that Toronto and Ontario have both reported rises in the rate of inflation for February. As both cities saw a rise of 0.1% from January’s rates, and Canada in general leaped by 0.3%, and the stock market rose for an eighth consecutive day, there may well be some desire to crack open a bottle of moderately-priced champagne – but this should be initially resisted, say experts. The inflation rate is predicted to fall in the coming months as more factors come into play.

The markets and the prices will continue to be watched in the months to come, as the world watches America for signs that things are improving there. Like the British government a few weeks ago, the US administration has taken its first steps toward quantitative easing by announcing a plan to buy up US$300bn in treasury bills. The danger inherent in this is that it can cause inflation to rise too quickly, and the Canadian government is expected to hold off on any quantitative easing at least for the present, preferring to keep a close eye on the economy and put in place prudent measures such as purchasing commercial paper in a bit to stimulate business lending.

While any signs of stirring in the economy are certainly to be welcomed, the fact of the matter is that nothing can presently be said to be happening that is a definitive “beginning of the end” of the financial turmoil, even in a Canada that has been applauded for its sound handling of the crisis. As a newly-installed President is finding out south of the border, people are tending to be skeptical of any financial stimulus plans, preferring to wait until the evidence of their own eyes gives them permission to get excited. The overall message is still that this is not a crisis which will recede overnight, and that we may well be looking at something that takes years to finally be over.

For the present, it seems that all that the consumer can to is continue to spend wisely, save assiduously and wait things out. The thing that is sticking in everyone’s mind, no matter which nation they live in, is that nobody can really say they have a definitive way to cure the crisis. If they did, it would already be in place. Patience is going to be the key, in Canada as much as everywhere else, and this is one case where no-one can predict with absolute certainty what will happen tomorrow, next week or next month. Amid all that, who’d be a President?

New Body Launched to Help Canadians in Financial Crisis

The Canadian Association of Credit Counselling Services Begins Its Journey

First Published: ADawnJournal.com April 5, 2009

The credit crisis has bitten deep in many countries the world over. Perhaps as a result of the many alerts that have been sounded worldwide in the last few years, it had seemed like people were taking a rather skeptical view of this crisis. When you take into account that the Y2K bug never really stung – or at least planes did not fall from the sky and in fact the world kept operating much as it had before – and that although bird flu claimed more lives than one would have hoped, it never really reared up into the crisis it may have been, it is easy to see why there were people who brushed off the idea of the credit crunch. But it is here, and it is very real.

More and more Canadians are now having to admit that they are being sucked into the trouble that the crisis has caused. People are losing their jobs and their homes, and as a consequence there is a very real human cost to all of this. Although Canada was one of the last countries to submit to the global credit crisis, it has certainly succumbed to some extent, and the people being affected range from the high earners to the low-paid. Although the sound financial policies practised more widely in Canada than almost anywhere else mean that we will be one of the first countries to recover, that may be a while off yet. In the meantime it is essential that there are people out there to provide help for those who are at the mercy of the credit crunch, and that is why people should be relieved at the founding of the Canadian Association of Credit Counselling Services (CACCS).

Credit counselling is a vitally important step in putting people on the right footing to deal with this crisis. The existence of paid-for debt counselling is something that is really not helping the current situation, and if you have been considering putting your debt matters in the hands of a company who promise to get your finances sorted out “for a small monthly fee”, please reconsider. If anyone says that you paying them to fix things will help you out of debt, then they are lying to you. There are services who will do the same thing free of charge, and they are generally far better qualified than the fly-by-night profit-based debt management companies.

CACCS are dedicated to providing an umbrella under which the not-for-profit credit counselling services can operate, and raising awareness of the services they provide. If you think about it, the profit-making companies who purport to offer the same service are going to have less incentive to get you out of debt – because the longer you are paying them to “sort things out”, the better for their profit margin. If you are working with one of those organizations, take the first steps towards kicking them into the long grass today and contact CACCS at their website (www.caccs.ca)

Is Now The Right Time To Buy?

The credit Crisis And You

First Published ADawnJournal.com : May 10, 2009

The fact that the financial markets are currently in a total mess has led many people to question whether getting on the real estate ladder is quite safe. As the news reports continue to resemble some kind of reality TV show by the title of “When Mortgages Go Toxic”, it is only to be expected that people should be reserved in terms of going after that new house – if things go wrong they could end up in poorer financial shape than they ever had imagined. But as with everything, there are two sides to the situation. You need to take into account things other than the turmoil that the market is in, and get an idea of exactly where you stand – because the truth of the matter is that no two situations are exactly the same.

The people who will really lose out in the current market are those who have a poor credit score along with those with a dubious score. As little as one missed or incomplete payment, or any reduced payment agreements with creditors and you could be judged as a credit risk in the current market. If, in addition, you need to sell to buy, then you are looking at getting less for your current house, and the shortfall may be too much to make up. It is not the time to upgrade your living arrangements, nor get into property developing for profit if you are in any of the above situations. Aside from people in these cases, however, there is still some scope. After all, the banks cannot stop lending completely – it is still an important income for them.

The credit crisis has meant that banks need to be more careful about who they lend to. Seeing it from their point of view, it is entirely reasonable that they could look at an individual’s credit file, see black marks against their name and be more than a little bit reticent about lending large sums of money. They need to protect their investments, and it was irresponsible lending on the part of major banks that precipitated the crisis in the first place.

If, however, you have an excellent credit history – the longer the better as it is long-term control of lending and repayment that they are looking for – you still stand a good chance of getting a loan, and the market is depressed at the moment, meaning that the speculator with access to funds is in a very advantageous position.

If you have recently taken out a loan, it may be wise to wait a little while to take out another. If you have the ability to pay off all or most of the loan, it is less important, as the thing that the lenders are really looking out for is overcommitment. Even people in very good jobs are still prone to downsizing – so large monthly repayments are still undesirable. The banks and the borrowers have been given a sobering lesson in the last couple of years, and it would be naïve to think that the rules could stay as they were.

What Is A Recession ?

Definition Of Recession

First Published : May 13, 2009 ADawnJournal.com
Simply put, recession is the opposite of economic growth. A recession can be defined as a decline in the GDP (Gross Domestic Product) for more than two consecutive quarters spreading across the country or across the globe.

GDP measures the performance of an economy. You get GDP by adding goods and services produced within a country’s borders in a year.

Signs Of A Recession

You will see the following when a recession occurs:

– Demands for products and services decline
– Goods and products start piling up in the factory, as no one wants to buy  them
– Firms start to lay-off employees, as there is no need for full-scale production due to unsold inventories
– Unemployment starts to rise
– Real income declines
– Business profits and confidence start to plummet
– Investors hold off on investing new money
– Goods and services start to get heavy discounted, as no one is buying anything anymore
– Government start to borrow money
– It’s a lose-lose situation for everyone

What Causes Recession

Recession can be caused by internal and external factors.

Internal or Domestic factors: Higher interest rates can cause a recession, as it discourages consumers from spending and therefore factories shut down, resulting in lay-offs. Examples of other causes include harmful government policies, a sudden increase of food and resource prices, natural disasters, and terrorist attacks.

External Factors: High oil prices, wars, global political instabilities, currency crisis can cause a recession as well.

What Is A Depression

A depression is kind of a recession but on a large scale and has a greater impact. Here are the common characteristics of a depression:

– Lasts longer
– Much larger decline in economic and business activities
– Real GDP usually declines by more than 10 percent
– Causes panic and public fear

The Great Depression, as it is commonly known, was the last depression the United States and many industrialized countries experienced from 1929 to 1938. During that period, the unemployment rate in America reached 25% and the GDP declined by 33%. The world hasn’t seen anything like the Great Depression in the industrialized nations since. Millions of people were unemployed, homeless, and facing starvation.

The Asian Financial Crisis of the 1990s caused depressions in many Asian and non-Asian countries. Indonesia, Thailand, and South Korea were affected the most among many other Asian countries. Non-Asian countries such as Finland and Russia were hit hard as well. Russia’s GDP fell 40% and Finland’s GDP fell 11%.