Daily Management Review

How soon will the Canadian economy collapse?


03/07/2018


Canada can unexpectedly become a world leader in terms of debt.



terimakasih0 via pixabay
terimakasih0 via pixabay
In the fourth quarter, Canadian economy grew by 1.7%. This growth, albeit modest, is explained by cheap loans and growth in consumer spending. Also, households in Canada have one of the greatest indebtedness in the world. For each income of $ 1, an average consumer owes $ 1.68, which is the world's highest debt-to-income ratio. 

Canada, which has a record high level of consumer debt, may face a serious recession, as further increase becomes shaking.

The deficit in Canada grew to $ 18.1 bln two years ago. A higher level of debt and increased costs raise great concerns. It may well be so that the country's economy is on a seesaw.

A significant part of the economic growth in Canada in future is based on the strengthening and improvement of the country's infrastructure. Nevertheless, Prime Minister Trudeau's policy is capable of stifling expected economic growth if 7.2 bln Canadian dollars aimed at improving infrastructure are put into the implementation of government programs in the labor market.

Apparently, to restrain its economic growth becomes crucial for Canada.

The three main infrastructure projects, the Pacific NorthWest LNG ($ 36 bln), the Northern Gateway ($ 7.9 bln) and possibly the Energy East ($ 15.7 bln) gas pipelines, would play an important role in ensuring economic rise for a long time.

Yet, all this has come to a standstill because of the economic egalitarian policy of Trudeau. Consequently, investors abandoned some projects. Only presidency of current Prime Minister's father, Pierre Trudeau, made Canada face such a stiff intervention in its economy .

The future of the Energy East project is still foggy. It can eventually be destroyed. The National Energy Board (NEB) decided to expand its studies of the oil industry and its environmental impact , which makes the fate of the TransCanada Keystone XL project unpredictable.

At stake are 100,000 workers, which is also a concern for the liberal government of Trudeau, as they blame the NEB for excessive actions. Only politicians should determine future of the energy industry in Canada. 

The unstable economy of Canada also suffers from the loss of 88,000 workplaces because of the increase in the minimum wage. Many employers had to fire workers as they couldn't afford the new level of salaries.

Wage growth may mean future inflation, which is likely to lead to high prices. At the beginning of 2018, the labor market felt relatively good, but all the consequences of raising the wage are still unclear.

Canada seems to be at a crossroads, and its biggest problem in 2018 is hesitancy. The uncertain level of public debt and household debt combined with laid-off workers and higher levels of minimum wages can lead to a historic collapse. Since the plans for immigration are still uncertain, the real estate market will be shaking and ultimately lead to a catastrophically large volume of dubious mortgage lending.

Does Canada have hope? Maybe. Although Trudeau has turned the liberal public in the right direction to encourage warriors for social justice, nevertheless, until now, he talked for quite some time and at the same time avoided actions. The potentially disastrous policies of Trudeau still has to be managed somehow.

source: zerohedge.com






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