Comparing then and now

I happened to be looking back at a column my father wrote in the early 1990s.
In it, he was explaining how Canadians had racked up huge debts that were going unpaid. The IMF, at that point, had told the federal government that Canada had to get its finances in order.
And that is what the Liberal government, led by Jean Chrétien and finance minister Paul Martin, did over the next decade. In part, they cut payments to the provinces and, in turn, the provinces cut payments to municipalities.
Everyone tightened his or her belts. There was financial pain everywhere but Canadians adapted to it.
It took a strong-willed government to make those changes. A minority government, on the other hand, never would have been able to wrestle the debt down easily.
And over the next 12 years, the debt of Canada was reduced and Canada regained its ‘AAA‘ credit rating. The provinces began creating surpluses, as well, and eventually took back some of the downloaded provincial programs.
The federal government was aided by the GST, which put new funds into the coffers. It still is not a popular tax, but it does work.
As Canada’s debt declined, and the interest that was going to pay for that debt declined, the availability of surplus cash enabled the government to both accelerate debt reduction while creating opportunities for new initiatives to help Canadians.
I remember this looking at the stock market crash Monday morning less than three years since the last big one. Banks failing to operate prudently in other nations precipitated the stock market crash of 2008.
Today’s economic crisis is the failure of countries in Europe to be more fiscally responsible, and today the markets worry countries like Greece, Spain, Ireland, and Italy may not be able to make their debt payments.
In the United States, because of the political gridlock and brinkmanship, Standard and Poor’s, a bond rating company, downgraded the credit rating of that country.
The other two international bond rating agencies—Moodys and Fitch—have not changed their credit outlook of the U.S., although they have placed the nation’s credit rating on watch.
But today we are feeling the effects of the monetary turmoil across the world. Canada is a trading and exporting nation, and our natural resources and products must be competitive.
Consumers of the world must be willing to pay for those items. At the same time, consumers must have confidence that they can afford to make those purchases.
We are seeing that the economies normally driven by consumers are lagging. It is particularly true of the United States, where fear has residents saving at unprecedented rates.
And if we can’t sell our resources and products to our U.S. and European customers, we will see a tightening of the Canadian economy.
August normally has a sell-off of stocks. The past 10 days have seen a value decline of more than 15 percent worldwide. Every nation is feeling the pinch, as is every pension plan and investment.
Canadians would like to think that Canada will be spared from all this monetary turmoil, but already we are seeing our stocks decline.

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