TERROR IN THE WEST
THE NEW PRESIDENT
Experts predict the volatility of the Middle East will continue. Terror is the weapon of choice for organizations pursuing global notoriety. Recently signs of discontent with some western government’s proposed polices on gun control and immigration have created discontent with radical groups inside their own borders. Aggressive policy changes could be a catalyst for domestic terroristic activity. The shock of 9/11 was ravaging on Western economies. Experts allude that it played an indirect part in creating, and prolonging, the economic downturn in 2008. Terrorist activity on Western soil, foreign or domestic, could put economic recovery into turmoil for North America.
As the US’s closest ally and trading partner, Canada has a vested interest in the success of the US economy. Canada has persistently benefited by respecting, not always following, US policy on important items like; fighting terrorism, immigration, environmental protection and a host of other crucial issues. It is vital that the new US President affirm the country’s unrelenting conviction that Canada is a faithful ally. The potential challenge is rooted in the complex and controversial stances both Democratic and Republican candidates are promoting. It may prove very difficult for Canada to remain deferential to US policy while disagreements arise over pipelines, the Trans Pacific Partnership, and foreign policy. It is key Prime Minister Trudeau quickly build a strong rapport with whomever ends up in the White House even if it means taking a softer line on precarious issues. Tighter border controls, trade disputes and the repatriation of companies operating from Canada are just a few problems our economy cannot endure. The Canadian dollar is now so depressed a toonie is racing towards the value of what a loonie was worth 5 years ago when compared to the US dollar. This decline triggers a price increase for imported goods. Domestic products also rise for reasons like escalated costs of imported raw materials. The economic impact of a low dollar also includes inflation, lower adjusted incomes, capital projects cost esca- lation, and the possible exodus of our most skilled workers to other countries. Academics debate whether a low dollar is good or bad for an economy in recovery. The real world answer is perhaps both. The dilemma for Canada is the negatives like higher prices emerge more rapidly than the positives like boosted demand for Canadian goods and services. THE LOONIE DIVE
THE CRUDE TRUTH
Canada has become a one trick pony with GDP growth. Oil production has been the sector of the economy producing strong gains to safe- guarding us from recession. Global crude prices are still falling. Declin- ing prices eliminate good jobs, decrease exploration, degrade energy stocks and critically ravage previously robust oil and gas industry companies. Canada can muddle through an interim downward slide but a long term slump in oil prices will have permanent consequences for the energy sector. Thwarting the ability of the economy to handle lower prices is the problem that Provincial governments have become addicted to the tax revenue directly tied to petroleum products. With sparse alternatives to generate new revenue, cash strapped govern- ments will have to increase other taxes to replace the level of contribu- tion from items like gasoline. Tax increases slow GDP growth. Petro- leum contributes 27% of our national GDP and presently most of the growth. Pragmatically thinking analysts acknowledge that in the near future no other sector of the economy can replace the GDP growth oil production provides.
COMMODITIES, TAXES AND YOUR WALLET
The growing tax burden in most Canadian provinces is prohibitive to growth. The mounting individual debt load for middle and lower class workers is a warning sign of strained personal finances. If commodity prices skyrocket because of a weak loonie consumer spending will unques- tionably fall off. Consumer confidence indexes are wholly based on opinions and attitudes. Reporting a decrease in consumer confidence directly influences spending, the job market and investment. Time and again the tools used to rally consumer confidence have taken several quarters to transform an unenthusiastic outlook into optimistic spending behavior. The tax burden and debt payments for many workers precludes them from absorbing large price increases in essential commodities while maintaining their current spending patterns. Without strong consumer spending, the economy will not rally.
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APRIL 2016 • SPOTLIGHT ON BUSINESS
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