Signs of another recession are here

It may be summer and a bit slower than usual in our nation’s capital, but that did not stop it from being an interesting week.
Bad economic news weighed heavy and kept people on our side of the fence busy trying to assess the damage—and where things are heading.
The bad news came quickly and in bunches. Bond yields surged in Europe, the U.S. was on the verge on defaulting on some its credit obligations, and economic and job growth stalled in Canada—yes, our Canada.
Each problem is unique in and of itself, but together they should be cause for concern to Finance minister Jim Flaherty.
The first bad news came from Europe, which has seen its share of economic problems of late. Portugal, Ireland, Greece, and Spain have caused some serious headaches for investors and bankers alike.
Unfortunately, it now would seem that a much larger economy also is teetering on the brink: Italy.
As if Italy wasn’t enough to worry about, the United States also was teetering—albeit briefly—on the bankruptcy front. Unlike the Italian situation, though, the problems in the U.S. were entirely of its own making.
A failure to find an agreement between President Obama and members of the House and Senate to increase the borrowing limit for the U.S. government almost resulted in the shutdown of that government.
The problem was made more complex when one remembers that there now are essentially three parties in U.S. politics: the Democrats, Republicans, and the new Tea Party movement.
The clear way forward for the U.S. is the way that Bill Clinton took the country the last time a Democrat inherited a mess from a Republican—raise some taxes, cut some spending, and live within your means while paying down the debt.
Unfortunately, moderation apparently is an artifact in U.S. politics now, so I don’t anticipate the U.S. debt problem to go away anytime soon, and nor should Mr. Flaherty.
As if there wasn’t enough to worry about outside of our borders, it seems economic growth and job creation actually are stalling or falling backwards in Canada. The first blow within our own borders came on July 29 when Statistics Canada released a report that showed Canada’s GDP numbers for May, which refers to the market value of all final goods and services produced in a country.
On that day, the report showed that the value of our goods and services—the net worth of our economy, basically—shrunk by 0.3 percent for the month.
The decline in GDP for May followed a break-even month in April and a slight 0.3 percent increase in March.
Needless to say, that bit of economic news came as a surprise to financial analysts as our rate of growth fell behind the U.S. for this period and has caused banks to revise future growth forecasts downward.
The second bit of bad news pertained to job growth for July, which came in at just 7,100—well short of the 15,000 that economists were predicting for the month and far short of the 36,000 that was the average for the three months previous.
Declining growth and less job creation within Canada—especially when coupled with a possible global credit crisis—should be a huge red flag for the Harper Conservatives if they are truly on top of things on the economic front as they claim.
It was a rough week for the global and Canadian economy, to be sure, with many questions left to be answered. Are we headed for a double-dip recession? Are we already in one?
The warning signs are everywhere—there is a global credit crunch looming, and poor growth and job numbers at home. But can Jim Flaherty and the Harper Conservatives see them?
No one knows for sure, but time will tell.
On that note, let’s hope the answers to those questions are “no, no, and yes” for everyone’s sake.

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