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?

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