Comparing then and now

I happened to be looking back on a column my father wrote in the early 1990’s. In it he was explaining how Canadians had racked up huge debts that were going unpaid for. The IMF at that point had told the Canadian government that Canada had to get its finances in order.
And that is what the Liberal government led by Jean Chretien and finance minister Paul Martin did over the next decade. In part they cut payments to the provinces and in turn the provinces cut payments to municipalities. Everyone tightened his or her belts. There was pain everywhere and Canadians adapted to it.
It took a strong willed government to make those changes. A minority government would never have been able to wrestle the debt down easily.
And over the next 12 years, the debt of Canada was reduced. Canada regained its AAA credit rating. The provinces began creating surpluses as well and eventually took back some of the downloaded provincial programs.
The federal government was aided by the GST, which put new funds into the coffers. It still is not a popular tax but it does work. As Canada’s debt declined and the interest that was going to pay for the debt declined, the availability of surplus cash enabled the government to both accelerate the debt reduction, and created opportunities for new initiatives to help Canadians.
I remember this looking at the stock market crash this morning less than three years since the last big crash. Banks failing to operate prudently in other nations precipitated the stock market crash of 2008. Canada’s banking industry was looked on as the model for other nations to emulate.
Today’s economic crisis is the failure of countries in Europe to be more fiscally responsible and today the markets worry those countries like Greece, Spain, Ireland, and Italy may not be able to make their debt payments. In the United States because of the political gridlock and brinkmanship, Standard and Poor’s, a bond rating company, has downgraded the credit rating of the country. The other two Moodys and Fitch international bond rating agencies have not changed their credit outlook of the United States.
But today we are feeling the effects of the monetary turmoil across the world. Canada is a trading and exporting nation. Our natural resources and products must be competitive. Consumers of the world must be willing to pay for those items.
Consumers must have confidence that they can afford to make those purchases. We are seeing that the economies normally driven by consumers are lagging. It is particularly true of North America where fear has increased the amount that is being saved.
And if we can’t sell our resources and products to our US and European customers, we will see a tightening of the Canadian economy.
August normally has a sell off of stocks. The past ten days have seen a decline of over 15% worldwide. Every nation is feeling the pinch, as is every pension plan and investment. Canadians would like to think that Canada will be spared from all this monetary turmoil, but already we are seeing our stocks decline.

–Jim Cumming,
Publisher