Scared yet? I mean, blood-run-cold, hyperventilation, wet-your-pants scared? That’s what the mass media is trying to do us with their coverage of the current global “credit crunch.” That kind of fear is not only misplaced, it just might create the kind of consumer panic that can create the very recession that the pundits and “experts” are predicting. Here’s the truth:
Our banks are O. K.
Our banking system, perhaps because of it maddening conservatism, simply isn’t part of the insanity that’s washed over the world from the U. S. sub-prime mortgage crisis. Our banking system is rock-solid and there is no need for the kind of government intervention seen in the U. S. and Europe. Canadians savings are secure, period. The only issue that affects the average Canadian is an increasing tightening of consumer credit, which may play into our industry well. Why? Restrictive credit for new vehicles (look for manufacturers to step up here as sales fall), but more importantly, credit for used cars and trucks, where dealers don’t have a major manufacturer to underwrite loans, may force owners to hang onto their vehicles longer. That’s cold comfort for Ontario’s manufacturing sector, but good for the Canadian repair aftermarket.
The impact on employment isn’t as serious as we think
Even at current oil pricing, the overheated oil patch will see a slowing of new development, but experts were advocating a little cooling off at the peak of the boom anyway…a reduction of the number of jobs going open because of labour shortages isn’t a problem for the economy. Existing projects will continue, along with the employment they generate. In central Canada, the manufacturing sector is contracting badly, but again, that was happening before the current crisis. And the suddenly low value of the Canadian dollar compared to the Greenback has just added 20 per cent or so on the good side of the cost equation if you’re building things in this country right now. If you’re a Big Three manufacturer, this would be good time to suspend plant closures for a while. Long term, it’s a different matter. The wacky, inexplicable abandonment of these high quality jobs by provincial and federal governments is completely reversible.
The roots are strong
The root of the problem south of the border right now is a dramatic rise in foreclosures driving home prices down so far that thousands of homeowners owe much more on their homes than they’re worth, encouraging even solvent homeowners to bail out, worsening the price fall. It’s like a real estate version of a stock market crash, where panic creates a self-fulfilling disaster. It’s different here. Prices are down, but from sky-high to reality, and Canadian homebuyers can keep making their payments with certainty that their investment will appreciate over the long term.
It’s different this time
Globally, this crisis is very different. Why? Suddenly, governments are willing to intervene in free markets more than they ever have, or imagined they would; banks are nationalized, interest rates manipulated and money pumped by the billions into stagnant credit markets. Governments have tremendous power to influence economies and whatever your ideological take on government intervention, they have the power and are prepared to use it to stop a full-fledged meltdown. Of course, what governments can’t control is irresponsible media reporting that equates disaster for a few billionaires to a crisis for the average Canadian. This economy is like walking into your bedroom in the dark… you might bark your shin on the bed frame, but there’s nothing in the room that wasn’t there in the daylight.
Restrictive credit for new vehicles (look for manufacturers to step up here as sales fall), but more importantly, credit for used cars and trucks, where dealers don’t have a major manufacturer to underwrite loans, may force owners to hang onto their vehicles longer.