umarsaeed

Clear as Mud

In Criticism, Financial on July 15, 2009 at 9:44 PM

In the Monday, July 13th edition of the Globe and Mail I came across this article about how the economic slump is all but over. Then I clicked around, and came across this article about how Ottawa’s credit strategy (part of the overall stimulus package) isn’t working. The hole in the stimulus plan is that it won’t help small business, which is always a critical part of any nation’s economic recovery.

Same paper. One page points to a sign that the recession is over. Flip the page and it says we’re failing to get out of this mess.

So are we clear?

The experts have made it known that the recession will officially end this year. If not this year, then it will definitely end next year. But nobody made that prediction without qualifying our fate by saying it will be an excruciatingly slow recovery. The word stagnant has been thrown around. I’ve also seen “jobless recovery” several times. I urge you to read all about the “painful recovery.”

Which begs the question, what the hell kind of recovery can you have if job creation and growth is not a part of it? To me, it sounds like we’re making the GDP rise, even though the basic economic conditions have yet to improve. That’s not a recovery, that’s an accounting trick.

I know lots of accounting tricks. An oil spill, as tragic as the event can be, ultimately increases the GDP. If you want to decrease unemployment, subsidize going back to school since if you are in school you’re no longer part of the statistic. Better yet, someone that works 12 hours a week at McDonald’s isn’t considered unemployed.

Here’s a new one: Let’s have all tour World leaders meet and decide to collectively spend billions upon billions of dollars worldwide to stimulate the economy! That money will take a few months to run through the system, but once it does, it will allow people and companies to spend on goods which will in turn increase the GDP! All we need is one quarter of GDP growth and we’re out of the recession!

[Note: The technical definition of a recession is two or more consecutive quarters of negative economic growth]

Every recession is different. But in no way are we on our way to economic recovery unless there is sustainable job creation. Canada is in a good situation, relatively speaking, because we have stuff (oil) that other people need. That’s safe. But we’re certainly not out of the woods yet, and provinces like Ontario things will get worse before they get better. But overall we simply won’t have much of a recovery until the US economy turns around, and from what I see they are a long ways away.

You’re about to hear lots of reports about how the recession is nearing the end, But this is an accounting trick. It’s just the bean counters number crunching and saying we’re in the black.

How can a recession be over if a recovery does not follow?

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