David Rosenberg: The real reason Canada’s economic recovery is a mirage

Financial Post
Stimulus Getty Images Financial Post | James Alexander Michie

Few other countries have turned on the monetary and fiscal spigots like Canada has, writes David Rosenberg. PHOTO BY GETTY IMAGES

Knowing how inorganic this recovery is makes it hard to be bullish on the loonie

I get asked all the time why it is that data in Canada have been looking so good. Well, few other countries have turned on the monetary and fiscal spigots like Canada has. It’s an embarrassment of riches — who knew so much money could grow on so many trees?

The Bank of Canada has taken its balance sheet relative to the size of the economy to 27 per cent — the average for the industrialized world is 19 per cent. The federal government deficit in Canada is on the precipice of testing 20 per cent of GDP, which is more than double the rest of the Organisation for Economic Co-operation and Development (OECD). Who knew the Canadian government would be of the view that it oversees the world’s reserve currency, and who would have believed that the modern monetary theorists would have found such a welcome home in Canada?

Anyone around in the late 1960s when Justin’s dad, Pierre, was in charge, knows that we have seen this movie before. And how it ends

Borrow, redistribute, spend. Borrow, redistribute, spend. And don’t worry, interest rates will remain at zero forever. Anyone who was around in the late 1960s when Justin’s dad, Pierre, was in charge, knows that we have seen this movie before. And how it ends.

The data are startling. Here we are with a first-quarter real GDP performance in Canada at a minus 8.2 per cent annual rate and followed that up with a 38.7 per cent plunge in Q2. Even with the recovery in recent months, employment is still in the hole to the tune of more than one million jobs, or an annual rate of minus eight per cent through the first eight months of the year. This is double the worst trend we ever saw in the 2008/09 Great Recession, for some perspective on what this recovery really is about.

Continue reading…

Source: David Rosenberg | Financial Post

Leave a Reply

Your email address will not be published. Required fields are marked *