Bank of Canada Governor Mark Carney said Canada is in trouble and spending cuts are inevitable
Mark Carney had a dose of bad news for Canadians Thursday. He said government spending cuts are coming. The only question is how deep, and when politicians will have the courage to act.
“The question is how do you do it,” said Carney, “and how do you do it most effectively.” Those are code words for how deep and what gets cut.
Carney warned the world economy had worsened due to currency wars as countries jockey for the best position. China, for example, is devaluing it’s currency on purpose to gain market share in the US.
Canada’s trading partners – the US and the EU – are economically weak and not willing to increase their purchases of our goods, except Alberta oil.
The hints of weakness in the Canadian housing market could bring on a crash similar to the US. Markets in Vancouver and Calgary are especially inflated and a burst of the bubble is expected.
Carney called on private investors to start spending. His comments fly in the face of Canadian household debt loads which are 143% of income, higher than the US. Businesses are hoarding cash and speculators are having a run on the stock market. Job creation is not on many business minds.
It’s not that Carney and political leaders didn’t know about the need for deficit reduction. It’s simply they wait for someone else to take the heat. Cuts in Greece, Ireland, France and now the UK psychologically prepare the voters for the inevitable.
Social unrest that follows cuts depends on the level of political activism in the population. Timing always depends on the time before politicians must face the voters again.
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