The media reporting on the state of the TSX is pitiful. Daily we hear either that it is rallying, or that some commodity or other is to blame for a slump. And every day, the pundits are able to tell another story, spin out another reason to bet your savings against the promise of growth. But the general feeling in the news rooms seems to be that the recession is over – don’t mix this up with unbridled optimism in the general public though. Governments would have to be getting nervous as their budgets show red for years to come, and the need to spend our way out of this mess is ingrained deeper with every cheque that is signed.
[ad#125-right]The optimism from the finance sector in Canada is bordering on disturbing…
“Clearly it was a severe financial crisis but it was not 1929. I think that’s very important to remember. This recession came to an end relatively quickly in Canada largely because of the fact this was not a made-in-Canada recession. This was a made-in-the-U.S. recession.”
“This recession is over. This recession is over. No question about it,” said Tal. “I think that we will see real GDP growth in the third quarter of this year.”
In a report released Friday, CIBC World Markets said Canada’s two per cent growth in 2010 will be half a percentage point stronger than the projected growth for the U.S. and more than double the growth that most Eurozone economies will see. The report said Canada’s growth will be 3.8 per cent in 2011.
This growth should not be allowed to occur while based on a hyped-up debt-ridden economy, and this optimistic approach to recovery flies in the face of common sense. Talking about restructuring America, James Howard Kunstler writes, (and this applies equally to Canada as well):
American perestroika really boils down to this: we have to rescale the activities of daily life to a level consistent with the mandates of the future, especially the ones having to do with available energy and capital. We have to dismantle things that have no future and rebuild things that will allow daily life to function. We have to say goodbye to big box shopping and rebuild Main Street. More people will be needed to work in farming and fewer in tourism, public relations, gambling, and party planning. We have to make some basic useful products in this country again. We have to systematically decommission suburbia and reactivate our small towns and small cities. We have to prepare for the contraction of our large cities. We have to let the sun set on Happy Motoring and rebuild our trains, transit systems, harbors, and inland waterways. We have to reorganize schooling at a much more modest level. We have to close down most of the overseas military bases we’re operating and conclude our wars in Asia. Mostly, we have to recover a national sense of common purpose and common decency.
Source: Kunstler – Reality Receding
The restructuring Kunstler talks of, revolves around preparation for a lower level of economic activity and energy. These words are like a foreign language to those financial types out there, and many of the political ones too. We can keep flubbing along as a society, borrowing to build our empires. “It’s a recovery strategy”, they say as though we need $22M cruise ship terminals, even though from the BC Minister of Community and Rural Development Bennett stated, “We don’t have as much money as we thought we were going to have. We’re strapped.”
If we’re strapped, should we be spending money on flashy projects that make the news – while the infrastructure laying around it crumbles beneath our feet? The recover needs to be deeper than just a cash injection like a pat on the back of a wheezing smoker that sure as anything is going to light up another cigarette as soon as he stops coughing. The recovery needs to play catch up with the infrastructure that is failing, it needs to downsize the expectations of the public for level of service and convenience. Just like the banking system, we’ve over extended our lifestyles and habits to a point where any recovery to a system that meets our expectations can only spell disaster in terms of sustainability.
Let’s tone down the cheerleading section on the recovery front and work out where we are headed before we crank this machine back up again. Do you feel a sense of foreboding? Or are you just glad that it’s all over and we can continue on our consumerist bingeing way.
Bonus Link – For examples of where the US Stimulus funding is blundering, check out this pdf – this will be worth a post in and of itself, but that’s for another day.