There is an interesting article in the latest Maclean’s magazine (June 7th edition) that says we may be facing a recession redux. Basically, the article describes how the dire financial situations in places like Greece, Spain, Portugal, Ireland and Italy are not merely regional phenomena.
Canada, which according to most observers and experts has handled the recession fairly well, is also under threat. The reason at the most basic level is that most nations have been enacting some form of stimulus plan in order to keep their respective countries from going in to a financial depression. However, these nations (Canada among them) were already in debt and thus were adding substantial amounts to their defecits without having a way of paying them off.
Now as we are seeing with Greece which is facing massive debts, other countries may be forced to follow suit and cut government programs and raise taxes in order to lessen debts. The Greeks have been protesting these austerity measures, but in reality massive budget cuts and increased taxes are the only way they have of fixing their problem.
Canada is in a much better position than Greece, but our major trading partners like the US and the UK are under threat as well, which means we have reason to worry. In fact, as Maclean’s mentions, Canadian families now owe $1.44 for every dollar of income they earn. This is the result of families taking on more mortgages, lines of credit and credit cards. So before you start spending money like it is 2007 as many seemlingly are, think about it first because we haven’t completely weathered the storm.
All of this raises the question about the long term viability of capitalism. I’m no expert in economics or the accompanying theories, but our current economic system clearly is not working (at least not for everyone). I would say that higher taxes would be a great help, but people don’t want to pay any taxes at all, so that’s not likely. This stuff is very complex, so I wouldn’t know what to do otherwise. If there are any economic experts out there reading this, what is the answer?
Here is a link to the Maclean’s article.