How bad is OUR crisis?
Not to say that we’re not on heading toward recession, that the downturn in the US economy is doing anything to help our situation, or that everything is rosy and great.
BUT:
Do we really have a banking crisis in Canada? Just throwing this out there for thoughts… Peter Mansbridge, in his interview with Stephen Harper today, mentioned the banking crisis several times (watch). I’m not denying that we live in an interconnected world, that the US economy won’t drag ours down, or that our financial institutions stand alone, separate from the global banking system. But when no banks have failed, and the biggest issue they’re having seems to be that they’re stuck with (in CIBC’s case, very substantial) bad sub-prime mortgage debt from the US… When Canadian companies like Manulife are looking to scoop up American behemoths like AIG… When the best example the CBC could find of someone who is ‘hurting’ because of our ‘banking crisis’ is a guy who couldn’t refinance his condo so that he could jump into the stock market while it’s down (note: he eventually found financing)… do we really have a crisis on the scale of that in the US? Do we really need to be demanding to know how our leaders would react given the (unrealistic) event of a US-style collapse?
Granted, we do have two very serious situations at play:
1. The drastic downturn of the US economy, failure of its banking sector, and huge public debt burden creating a perfect storm in our biggest trading partner
2. The stock market sucks
The outlook isn’t amazing, and we’ll have to deal with that. But is it really fair to say we have a banking crisis? Where’s the evidence of that? Please, point it out. And is the focus on ‘our’ banking crisis in the media and in the election campaign not just serving to exacerbate the problem and decrease public confidence, further exacerbating the problems… basically putting us into a downward spiral? Isn’t that really, if you think about it, an overreaction that we (and our leaders) are driving?
I don’t often agree with Stephen Harper, but frankly, I do agree that lending is and has always been better regulated here, that banks are in more secure financial situations (and are more ethical than their US counterparts in many ways), that our relatively more healthy budget and debt situation puts us in a better place to deal with a banking crisis, were it to erupt, than the US, and that a good leader doesn’t set policy or change plans based on the nightly news or movements in the markets. I honestly have to give him all those points. And we, Canadians, have to learn our lessons: save more, buy things you can afford, and if a deal sounds too good to be true….
We’re still talking about a crisis at the margins. Our credit crunch has not yet reached the mainstream, although it feels like the power of public opinion alone is pushing is in that direction. But this issue, given our context, is getting way too much attention, at the expense of some other very important issues impacting our economy, and our society more broadly. That word ‘context’ is absolutely crucial. We’re hardly in an optimal situation here, from a consumer information perspective. Individual investors and voters have always suffered because their access to information, even in the age of the internet, is even more imperfect than that of bigger players. Add to that the complexity of the situation (I have a degree in economics, and it confuses the hell out of me), and our inundation with foreign media/relative scarcity of local focus in coverage, and… well, who can even make sense of it. I think that the media, as much as they have been emphasizing the relative differences between the Canadian and US economics at the structural level, have a short term focus that thrives on a crisis, which is only helping to create an overreaction among both investors and voters. But the impacts of that short term focus are definitely only going to hit us in short, or at worst, medium term.
My worry bigger worry is for the longer term. Both Canada and the US are in the middle of elections, times when spin goes out of control and issues that could otherwise be dealt with in a relatively rational way become blown out of proportion. Politicians have to focus on getting elected, and reacting to a crisis while in that mindset… well, you can’t deny that they’ve got competing priorities. My fear is that leaders and parties will take and are taking (I’m looking at you, Jack Layton) the cheap road–the Sarah Palin road. I can already see Jack Layton, in his references to the Great Depression, taking a populist, alarmist, and even fear-mongering focus that can and will, without providing complete or even factual information, influence a choice that people can only make once ever four years–their vote.
Image credit: Public Citizen
