Tag Archives: recession

An Atlantic Canadian field guide to surviving recessions

The one thing Atlantic Canadians manage better than almost anything else is recession.

When the economic wind blows cold, we throw another log into the wood stove and cinch our collars.

When our spending money runs short, we whip out a tin of beans and tighten our belts.

When others across the country tremble at the mere thought of stock markets circling the drain, we cast a rueful eye to the storm clouds gathering on the near horizon and mutter, “Yeah, what else you got?”

Of course, we’ve had plenty of practice. Recessions – or weathering them – are kind of our thing. After all, two consecutive quarters of what experts call “negative growth” is, relatively speaking, a permanent way of life along the East Coast. It’s certainly no reason to panic.

But just tell that to the chattering class.

In times of yore, when the mighty wanted to know the shape of things to come, they would instruct an augur to read the entrails of a small animal. Today, they’re more likely to consult an economist.

Are we, in the western world, barrelling toward another recession?

Yup, says Martin Feldstein, a former chairman of the Council of Economic Advisers and a professor at Harvard University. “Ten years after the Great Recession’s onset, another long, deep downturn may soon roil the U.S. economy,” he wrote in a recent edition of the Wall Street Journal.

Maybe or maybe not, thinks The Toronto Star’s David Olive, who wrote this fall, “The Canadian financial system is among the world’s most stable. . .

But that is small comfort for Canadians. The global financial system is intimately interconnected. . .At all times, the world’s 300 or so biggest banks, including Canada’s Big Six, have enormous short-term loans outstanding to each other. Which means that the failure of just one giant financial institution could bring them all down.”

Anyone ready for a second helping of entrails?

Never mind. Here are some hard-won – if not exactly failsafe – tips for surviving the next recession in Atlantic Canada:

Avoid obvious and precarious flights of fancy. I once worked for a guy in the United States who truly believed that starting a magazine in the middle of a downturn was a grand idea. After all, there’d be no competition. Advertisers would surely flock to his venture, begging to spend their marketing budgets. The lesson learned? Don’t start a magazine in the middle of a downturn.

Still, don’t be afraid to embrace the big, wide world. If we have jobs, we should do everything we can to keep them. But if we don’t, because, well, we just don’t roll that way, we ought to double-down on our enterprising instincts. Is there a promising, new revenue stream just waiting for our particular talents and experiences? Are there two or three or even four? Indeed, when the world finally comes up for air again, our bank accounts will thank us.

Be pennywise, but not essentially miserly. It’s important to know the difference, which is sound advice even when good times roll. Ask ourselves whether the dollar we’re planning to spend will vanish like rain on a sun-caked riverbed, or germinate the seeds of new growth. We might take a course that will upgrade our suite of professional skills. But, unless the world’s supply of wicker suddenly dries up, we should ensure that course is not applied basket weaving.

Finally, float like a boat. If history teaches anything about Atlantic Canada it’s that periodic highs and lows in the regional economy are like Fundy tides: They come, they go, and there’s nothing we can do about them.

So, we throw another log on the fire. We crack open a tin of beans. We wait for the light.

Meanwhile, we manage.

We always do.

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What’s wrong with this picture?

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As a resident of this fair province, New Brunswick, it’s a hopeless comfort to know that while the rest of Canada slips quietly into recession, I may expect to keep my head above water and even thrive during the two minutes it takes me to attach the absurdity filter to the worn and threadbare spectacles I use to read the morning headlines.

So it was the other day when I came across this marvelous series of proclamations from New Brunswick’s finance minister, dutifully reported in the pages of provincial newspapers:

“Nationally, we’re in a recession and Stats Canada has confirmed it,” Roger Melanson said some days ago. “So we will continue to monitor the situation on a quarterly basis. That’s why we have quarterly updates. It’s the tool we have in terms of making the information public so New Brunswickers are fully aware of the state of our economy.”

Yet, his finance department boldly predicts an annualized growth rate in the province of between 1.5 and 1.7 per cent next year. Why? Because the economic auguries say so? Because the entrails of road kill on the Trans-Canada are aligned just so? Because the tea leaves in the lunchtime cups left on the cafeteria tops at Freddy Beach suggest better times ahead?

How bluntly irrelevant Minister Melanson’s claim is – especially when you consider that most New Brunswickers are already fully aware of the state of their economy. Indeed, as the nation dips into recession, this province has never managed to crawl out of a long, agonizingly slow one.

The essential quandary is: Do we care?

Go back into history see the same ludicrous patterns repeating today: A province whose economy is bifurcated by rural and semi-urban sensibilities; an institutional sector that will protect its turf at the expense of the students, professionals, patients, and citizens it purports to represent; a political culture whose last, good idea for meaningful change died when the New Brunswick inventor of kerosene did.

The agony that Mr. Melanson does not address when he talks of scraps of GDP improvement in this province in this year is the long, slow dissolution of self-reliance, self-improvement, and enthusiasm in this province.

Where are the monumental projects of imagination?

Who will build the next generation of entrepreneurs willing and ready to break the molds crafted by their forbears?

What new cohort of young people, coupled to older folks, stands to step up in this province to usher a renaissance of economic, social and political principals and priorities?

These are the questions that political leadership in this province should pose. Instead, Mr. Melanson seems content to rely on the predictions of statisticians and economic actuaries to spin a wobbly tale of good news about New Brunswick’s prospects.

“It’s important to note,” he says, “that every province, including us, have adjusted their GDP projection based on growth. . .(With the exception of Prince Edward Island) we’ve all brought it down because of the national situation economically. But we still have to keep in mind that there are sectors of our economy in our province where we have seen positives.”

T’was ever thus, perhaps. But our present condition demands sterner stuff from our elected representatives, appointed bureaucrats and, in the end, us.

Our future cries out for it.

Canada’s national recession may be a lamentable circumstance; ours, in New Brunswick, is a state of mind.

We have, in this province, only two avenues: becoming or calcifying.

We either fossilize or shunt the ties that bind and live in hope.

Through my threadbare spectacles, I choose hope.

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Don’t fear the “R-word”

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Economists tremble at the appellation’s very utterance. Politicians descend into denial at the term’s deployment in the mainstream media. And, when the “R-word” hovers into view, regular folks batten down the hatches and check the condition of their rainy day funds stored neatly under their mattresses.

But are recessions really all bad, after all?

Sure, they tend to increase the amount of joblessness in society. They devalue personal savings and investments. They dampen business opportunities, and they generate the sort of fear and loathing that a 100-year blizzard often engenders.

Now that Canada is in one (a recession, that is), despite protestations to the contrary of our fearless, federal leaders, we might properly expect a slow, agonizing grind in the months, or even years, ahead.

Still, it ain’t necessarily so.

According to an item on the investopedia website, posted by financial writer Chris Seabury, recessions enable economies to “clean out the excesses. During this process, inventories drop to more normal levels, allowing the economy to experience long-term growth as demand for products picks back up.”

What’s more, these cyclical downturns – typically identified after the gross domestic product shrinks in two consecutive months – have an almost refreshing, levelling effect. As Mr. Seabury writes, “Recessions. . .help keep economic growth balanced. If the economy grew unchecked at an expansionist rate for many years, this could lead to uncontrolled inflation. By having recessions. . .consumers are forced to cut back in response to falling wages. These falling wages force prices to drop, creating a situation in which the economy can grow at normal levels without having prices run away.”

They can also “create massive buying opportunities in huge asset classes. As the economy runs its course, the markets will readjust to an expanding economy.”

Notably, perhaps, “economic hardship can create a change in the mindset of consumers. . .(who) stop trying to live above their means (but) within the income they have. This generally causes the national savings rate to rise and allows investments in the economy to increase once again.”

In fact, writes Stijn Claessens and M. Ayhan Kose in the International Monetary Fund’s research department, “There were 122 completed recessions in 21 advanced economies over the 1960–2007 period. Although this sounds like a lot, recessions do not happen frequently. Indeed, the proportion of time spent in recession – measured by the percentage of quarters a country was in recession over the full sample period – was typically about 10 per cent.”

So while recessions can clean out the pipes and tune up the engine of any economy, they don’t last forever, even if it only seems that way.

In my adult life, I’ve gamely weathered four downtowns – 1981-82; 1991-1993; 2000-2001; and 2008-2009. They didn’t kill me. In fact, I might even say, they made me stronger. Certainly, they made me smarter about debt, equity, and never taking anything for granted in the precarious, capricious world of money management and the revolving doors of the labour market.

None of which is to say that economic dislocation is preferable to long-term stability. Still, it’s worth noting that droves of Canadians endure near-permanent states of recession thanks to patently unfair, negligent policies of various governments at every level.

And, as this country appears to be heading into another one of its multi-month, economic head colds, only the mighty among us will truly fall.

In this company, of course, belong politicians who overpromise and underestimate their own power to affect the course of human affairs just in time for a general election.

They do, indeed, need fear the “R-word”.

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Arrrrg word!

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Is recession a natural phenomenon, attached to the human species the way the weather attaches to Earth, itself? Or, is it a conjurer’s trick of the imagination – a self-fulfilling prophecy – fated to repeat the more we utter its name?

Economic schools of thought are divided on the subject, though the literature and lore is abundant.

In a recent post to The Drum, the Australian Broadcasting Corporation’s online screed-fest, editorialist Greg Jerhico writes, “After such a long time without a recession, no treasurer would wish to be the one to preside over such an event. For (Australian Finance Minister) Joe Hockey, the path away from recession lies with his hope that the budget measures for small businesses will enliven investment in the non-mining sector. And given the current poor state of investment in that sector, his measures will need to work.”

Adds Mr. Jerhico: “Economists love to call recessions. The standard joke about economists and recessions is the one made by (the late American economist) Paul Samuelson that some economists have predicted nine out of the last five recessions. . .Australia has not had a recession since June 1991, which was the last time there were two consecutive quarters of negative GDP growth in seasonally adjusted terms.

“Of course, such a definition is utterly stupid, and really should be thrown out as soon as possible. Any definition where an economy could shrink by 0.5 per cent in one quarter, rise by 0.1 per cent in the next, and then shrink by 0.6 per cent the quarter after and not be in a recession is complete lunacy.”

If this doesn’t sound familiar, it should. According to a Globe and Mail piece, headlined “Economy’s dip stokes recession fears”, last week, “The latest reading of Canada’s economic health suggests the economy’s oil-induced coma extended into the second quarter, renewing fears of a mild recession and casting doubt about the country’s capacity to recover from the severe oil price slump.

Statistics Canada reported Tuesday that real gross domestic product (i.e. adjusted for inflation) shrank by 0.1 per cent in April from March. The economy was hit by a 3.4-per-cent drop in oil and gas extraction – the sharpest one-month drop in nearly four years, adding to declines in March.”

Australia is the southern hemisphere’s Canada; both are great, global lodestones of natural resources.

The Aussies have their extraordinary reserves of precious metals, rare-earth minerals, iron ore, coal; whereas, we Canucks can dine out on the fact that we are the largest exporter of unrefined petroleum products in the western world.

But a funny thing happened to both nations on their way to their respective commodity markets: The stalls were closed.

Now, Canadian and Australian pundits are concurrently convinced that recession is, again, a virtual certainty in both nations. Although they are separated by about 12,000 kilometres of ocean, they still share practically every doomsday instinct that is the common weal of two peoples forged by Anglo-Saxon principles of crime, punishment and – not for nothing – blowing the biggest of free lunches geology and history ever displayed before man.

Do we extract natural resources and denude the good earth solely for private pillage, or do we leverage our talent for plunder to obtain better, more efficacious, ends? What safe, reliable, environmentally benign technologies can we invent – from the wealth we extract from the ground – that will preserve and protect the biosphere on which billions of species depend, including our own?

This is the dialectic our times, of our condition. The answer is either our progression or our final recession into oblivion.

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