December 19, 2005

Ah-choo! Other countries worries about the US catching a cold (as our excesses unwind in 2006)

Record and unsustainable trade deficits. The mother of all housing bubbles. Entitlement programs run amock. Massive budget deficits. A war that won't end. Consumer pullback as the housing ATM closes.


Times are good in Canada, really good. Now watch out.

The story is not quite as simple as that, of course, since we're talking about an economic forecast that takes into account factors from all over the globe. But this is the essence of a sobering new warning from chief economist Clement Gignac at the National Bank of Canada.

Gignac paints a persuasive picture that 2006 could well be the year in which our luck runs out as years of accumulated financial excesses in the U.S. economy start to come unwound, beginning with the deflation of a housing bubble that may be stretched to its limit.


000000000000000000000000000000000000 said...

Just after 911 I picked up 2 Canadian clients that kept me going during our adjustment to “shock and awe”. There was no business here in the States. After reading this article I can see that many of my past economic saves just won’t work any more. This is one reason this blog has value to me. I wish more folks would come out and share their experience in real life terms in relation to financial bubbles. I want to learn from your experience.

Arioch said...

"Thus, the U.S. has a negative savings rate for the first time ever.

That is terrifying. It doesn't matter who or where you are on this planet, this thing will be felt.

The home ATM will have an "out of order sign". So we won't buy big screen TV's and DVD players. So the docks will slow down (sorry longshoreman). So the container ships will transport less. So the Chinese will make less cheap DVD players. So the mines will flog less metals.... etc... etc...

It would be interesting (to me at least) to build a dependancy tree of the cascading effect to see /use as the effects work through the supply chain.

This is also why gold is going up. Central banks are snapping it up to prop up their currency, they feel uneasy holding forex (especially US dollars) as their currency backing.

Canada will do ok, but it will feel it in manufacturing. They rely heavily on base primary industries (#1 food exporter, electricity, oil) which will not go out of style even in a downturn. Their manufacturing will take a hit as the Canadian dolar keeps gaining value (8 yrs of federal budget surplus will do that to you) making exports less appealing.

Will need to clip newspapers through this so the grandkids can read about "the 2nd great depression".

keith said...

the beauty of blogging - especially since you can see the whole arc - rampant unchecked speculation, nay-sayers and contrarians seen as idiots, then the soft numbers come in, then the sudden change in mentality, then the decline

and finally, after capitulation, the recovery

as long as google doesn't go out of business (host of blogger) this site will be here for those future harvard MBAs to read as they prepare their paper on the buble

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