Hey there, time traveller!
This article was published 22/4/2009 (4610 days ago), so information in it may no longer be current.
Is the worst over? Has the world now turned an economic corner? Are we heading away from a depression and towards recovery?
Yes and no. The easy answer is that it really is too early to tell. The financial world may look better on the surface, but deep problems remain and in the real world of production and employment, things are going to get a lot worse before they get better.
In Manitoba, you get a very skewed idea of what is going on in the world as a whole. A friend of mine has just sold his modest River Heights house for far more than he expected. Anyone tracking the weekly offer and sales prices of houses in the Free Press will notice that it is still common for homes to sell above the asking price. That is not a sign of a recession. Right now Manitoba's economy is one of the most robust, not just in Canada but anywhere in the world.
Part of the reason for this is government spending: the new Hydro building on Portage Avenue; the enlargement of the Floodway. Part, also, is the diversified nature of the province's economy and a continued sense of optimism.
Elsewhere, the public mood is very different. Take a look at the front of food magazines at your supermarket. Extravagant dishes have been replaced by spaghetti and meatballs. Editors are telling us how to save money, not how to hold expensive dinner parties. Those advertisers that are still on television are pushing thrift. Excessive consumption is so yesterday it hurts.
It's not surprising. While there are signs that the rate of increase of job losses in North America is slowing, the absolute numbers are going to go up for some time. Unemployment is still forecast to get close to 10 per cent in both Canada and the United States before this recession is over.
General Motors and Chrysler may escape bankruptcy, but are not going to escape large-scale layoffs. Canada's largest forest company, Abitibi-Bowater has filed for bankruptcy, threatening still more jobs. The television industry is on life support.
Although we have moved away from the threat of a full-blown 1930s-style depression, its close sister -- a continuing and deep recession -- is still with us.
A continuing recession or close to it is the best expectation of pessimists, like the British economic historian and Harvard professor Niall Ferguson, who believes that the weight of excessive debt held by both companies and households will make recovery slow and difficult.
Ferguson writes that with household debt in the United States and the United Kingdom way above annual disposable income, there is no easy way out of the current mess. He argues that increasing government debt to create consumption only makes matters worse. Few agree with him, but the overhanging household debt remains a major impediment to recovery.
The worry that creates was highlighted this week as the United States' largest bank, Bank of America, reported a US$1.8-billion loss on its credit card business and a US$13.4-billion increase in its provisions against possible bad loans.
There are too many people with maxed-out credit cards who may lose their jobs and a whole lot more who won't be earning as much as they were when they took on that debt. There's still more toxic debt out there.
U.S. President Barack Obama and finance ministers around the world may have pumped enough money into the banks to keep them afloat, but consumers who still have jobs are more likely to pay down their debts than start on a new spending spree.
That's why most economists have been lowering rather than raising their forecasts. Last November, the OECD, the organization of wealthy countries, was predicting an almost negligible decline in world economies. Its latest forecast is for a contraction of 4.3 per cent.
For all the stimulus packages that governments have promised, despite the cash pumped into financial markets to keep loans flowing and the rescuing of troubled banks and financial institutions, there remains no easy end to this recession.
The chances of the kind of cascading economic collapse that marked the Great Depression of the 1930s were always relatively small. The prospects of years of no growth or low growth, however, remain uncomfortably real.
The unanswerable question is how long it will take for excessive household debt to work its way out of the system.
Nicholas Hirst is CEO of Winnipeg-based television and film producer Original Pictures Inc.