It's not too late, is it?
[Country Gentleman, October 1928]
I'm getting caught up on some reading over the weekend and made a comment on a friend of mine's blog, One-sided Argument. El Cid, the author, is bully on the Canadian banking system and despite my usual doom and gloom, I think he's probably right. The fact that Harper is not engaging in a bail out for the banks in Canada is a good sign that ours are stable. However, I'm still of the mind that this election call was rushed due to the knowledge that things are going to get pretty tight soon. Best try to get re-elected now.
One of the biggest hits to Canada may come when the U.S. dollar plunges, which is going to be inevitable now that Washington is absorbing the debt of Wall Street. However, according Reuters, we've been weening ourselves off reliance on the greenback in favour of Euros, while our exposure to Fannie May and Freddie Mac is limited to 6% of reserves.
On the upside, countries with greater exposure may lose big too, keeping things at least partly level. U.S. debt is everyone's debt these days. China has expressed concern over what amounts to the U.S. printing money to cover the losses (see a post on Piglipstick, for example.) If my meagre economic understanding is right, this would sink the dollar but theoretically home values would remain numerically constant. Your house would still be worth $250,000 U.S., but $250,000 U.S. would be worth a lot less.
There's a lot of fear that this situation would solidify China's dominance but I think they're going to have more problems when their major market implodes. More recalls of Chinese products isn't helping either. China needs to sustain a high rate of growth to keep its awakening citizens happy. On top of the prospect of decreased exports, they could be faced with an exodus of foreign firms soon. Not only is trade protectionism becoming an election issue in the U.S. but those Chinese who are demanding better lives for themselves will be buoyed when the government there forces the creation of labour unions in international corporations doing business in China. While their economy has been on fire for the past decade, this might start to starve the oxygen out of it.
And if the seriousness of things still hasn't sunk in, the Marmot's Hole had a few choice quotes on the matter from the American press.
UPDATE: Maybe it's just me being at home alone tonight, but it sure feels like somethings up. The moon was deep red over Toronto when it came up, and now the CBC is showing "The Grapes of Wrath" as their midnight movie. Real funny, guys. We're doomed.
Labels: China, economy, election, National Politics, United States
posted by Ian at 10:46 PM - link ...
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