Either Stephen Harper utterly failed to see this recession coming or, worse, he did see it but froze like a deer caught in the headlights. The extent to which governments throughout the West were seemingly caught unawares by this made-in-America meltdown utterly strains belief.
Some of us knew. I just stumbled across this passage I wrote on this blog in September, 2006 in a post entitled Deutschland Uber Alles - Again? -
"...Think about that. The United States, for all its prowess, is a lumbering debt machine. It sells to the world vastly less than it buys from the world, roughly half a trillion dollars a year worth. America doesn't make what its people want and what it does make isn't wanted anywhere else. What it doesn't buy from the world it borrows, another half trillion a year for the federal government alone and plenty more for state and municipal governments. Hey, somebody is lending the American public the vast sums they're borrowing too. Do you see a pattern here?
America does generate a lot of money that goes into investment, just not in the U.S. America invests it's money in other countries, places like China, where the returns are better. The trouble is that this is a telltale symptom of a country in decline. It's happened to all the grand empires in the past - Holland, Spain and Britain, each in turn. When you pump your wealth into growing somebody else's economy instead of your own it's just a matter of time.
The American economy is now driven by its housing market and even the World Bank fears the global consequences of a burst bubble there. This is a fascinating phenonmenon, a veritable Mardi Gras of indulgence fueled by cheap rates and tax deductible mortgage interest. Fully half of new mortgages in California are "interest only." At the same time, American homeowner equity levels have never been lower. Americans use the mortgage-interest deductibility to expand their purchasing power. They siphon the notional equity out of their homes to buy - well, to buy all those BMWs and Infinitys.
Canada, of course, is a net exporter to the U.S. We have a substantial and potentially dangerous balance of trade surplus with America which buys something in the order of 70 plus percent of our exports. Thanks to NAFTA, we're tied to the American economy as never before. What do the Europeans buy from us, maple syrup? Here, we're a lot like the U.S. Canada runs a very large balance of trade deficit with Europe. Our economic ties to the European Union are broken.
We have a balance of trade surplus thanks only to our natural resources and to America's insatiable appetite for our fossil fuels. Without that, where are we? That's a question you need to ponder for a while.
Economically, America is the luxury cruiser and we're the dinghy tied fast and floating merrily along behind. The trouble is the cruiser has sprung a lot of leaks and is taking on water. If it sinks, it's taking us down with it. Let's see: we know the big boat is shipping water and may well sink. What should we do? The obvious thing would be to cut the line or at least leave it tied very loosely so that we don't have to go down if the cruiser sinks. Does that make sense?"
I wrote that in September, 2006 but that wasn't the first time I'd spoken out against the obvious Ponzi scheme underway south of the border. I'm pointing this out not to suggest that I'm brilliant but to show that anyone, including Stephen Harper, who didn't see this runaway freight train coming down the track is/was either delusional or grossly incompetent.
To not see this meltdown coming you had to believe that it was actually possible to defy gravity. It was that obvious - even to a layman. So, why was nothing done to protect Canada against the consequences of the inevitable? Steve - over to you.