Wednesday, September 2, 2009

ScotiaBank Chief Economist Warns of a New World Reality

Warren Jestin, Chief Economist, Scotiabank, released an economic update today very much confirming the thoughts posted ion this blog for quite some time:

"In the U.S., massive monetary and fiscal stimulus is beginning to gain traction and will account for the majority of growth during the next year. Government initiatives are bolstering disposable income and spending at a time when households are focussing on reducing debt and rebuilding savings."

However, he warns that a new world reality is here. Canada has always relied on exports to the U.S. The economy in the US will be stagnant, or growing a little at best. Canada should be looking at new opportunities elsewhere.

Brazil did this a while ago. China is now its biggest export market, passing the US last year. Canada's government however, has had a tendency to show the finger to China lately.

Mr. Jestin says that the road to recovery "won't take us back to the world that existed before the sub-prime crisis began. The global financial system is being revamped and, in some areas, reconstructed. Big government deficits are back and will be politically difficult to unwind. We soon will begin to experience the profound impact of an aging global population and the crusade to improve energy efficiency and environmental outcomes. The global economic landscape also is changing, with developed nations like Canada and the U.S. likely to experience relatively subdued growth in the decade ahead. World activity will be driven increasingly by China, India, Brazil and other emerging power houses, with their production and investment decisions having a major impact on world trade, commodity prices and financial markets."

This blog's opinion has bene that growth in North America is history (as we knew it), and that the spiralling debt its nations will never be repaid, at least not with the current currencies. Unfortunately those caught with savings in money markets will pay the price.

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