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Herd of economists faces one direction... not

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This week is going to be an economics roller-coaster ride.

On Wednesday, the Harper government will unveil its speech from the throne, which will give us an idea of what its main policy themes will be between now and the 2015 election.

The next day, the U.S. Congress must decide on whether to raise the federal government's borrowing limit. Failure to increase the $16.7-trillion limit, says the International Monetary Fund, could lead to a U.S. government default (the first in history) that might disrupt global financial markets, raise interest rates and push the U.S., our largest trading partner, back into recession.

The timing of the two events raises a critical question: In our highly interrelated world, can any nation -- let alone a middle power like Canada -- protect its economy from craziness in the U.S., the world's largest economy?

One of the problems in coming up with an answer is to figure out our economy's future. I've been trying to do that for a couple of weeks.

I'm not economist, but, as a reporter, I have covered economic issues for 30 years. Although I no longer must roll out of bed at 4:30 a.m. when the newspapers whump against my door, I have to know what's going on.

That's been difficult. I was intrigued a few weeks ago when Stephen Poloz, the new Bank of Canada governor, said the economy was like tomato sauce simmering on a stove. He said: "If you look carefully at a pot of simmering spaghetti sauce, under every bubble there is a crater that's equal in size. Central banks have been filling that crater with liquidity, so we can row our boats across it."

But we may be able to stop rowing. Switching metaphors, the governor said our economy is at a "tipping point" poised for much stronger growth. We are on our way "home" to more normal conditions. One reason is that the U.S. economy is getting stronger.

But the very next day, U.S. Federal Reserve Chairman Ben Bernanke said the central bank must keep on with its $85-billion monthly bond purchases (which have put downward pressure on long-term borrowing rates) because America's economy is fragile.

Two central bankers. Two points of view. But another voice jumps up.

Finance Minister Jim Flaherty said that the Bank of Canada governor is "a bit more bullish than I am." In all my years of reporting, I have never heard a finance minister say anything like that. But Flaherty has a reputation as a straight shooter. I put off writing my article.

Days later, economists at Canada's leading banks were cautiously optimistic about our economic future. "There are still some risks out there, but I'd argue they're less significant than in the past and in that environment, we should see some better growth numbers," said Royal Bank chief economist Craig Wright.

It's rare to find a herd of economists facing in the same direction. Perhaps now is the time to write my article.

Then Congress debated driving its economy over a cliff. And Bank of Canada officials lowered their forecasts for economic growth in the second half of 2013 because of more cautious consumers and a flagging U.S. economy.

Listen, can't you guys get this straight? The governor is walking on the sunny side; his minions are not. I'm back to where I started -- at the Bank of Canada -- and exhausted. I have reached only one conclusion: We may be at a tipping point, but there's no agreement on which way it's going to tip.

Pass the spaghetti sauce, please.

 

Tom Ford is editor of the Issues Networ

Republished from the Winnipeg Free Press print edition October 15, 2013 0

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