The tsunami is here
What we're facing could be a lot worse than a recession
By LINDA LEATHERDALE, TORONTO SUN
Last Updated: 7th October 2008, 8:17am
All the indicators of the North American economy have taken a beating in the past month. (Mary Altaffer/the Associated Press) A year ago, none of them dare to utter the "R" word.
No, the gurus on Bay Street wanted us to believe though a subprime crisis was raging in the U.S., Canada's financial system was safe, our economy sound. So, don't worry, be happy.
Now, as a financial tsunami spreads through Europe, threatening to bring down our global financial system, while yesterday the hard-hit TSX suffered its biggest intra-day point loss ever with $225 billion wiped from share values since last week -- these gurus have changed their tune.
It's not recession we need to fear, it's something far worse.
"It (this credit crisis) is being driven through the financial markets into the real economy. All of those things suggest it's entirely different than what you might expect from a typical recession," Scotiabank chief economist Warren Jestin told the Economic Club yesterday.
"You have to invent a new word to describe what we're in now," he said.
WARNING
Okay, how about the "GD" word? That's "global depression," which I warned was coming in my Economic Armageddon column on Feb. 24, 2008, where doomsayers also predicted the fall of capitalist economies, famine, plagues and a world war.
Then, on June 19, I wrote about the warnings from Royal Bank of Scotland credit strategist Bob Janjuah, who said: "A very nasty period is soon to be upon us -- be prepared."
Janjuah correctly called this fall's global market crash and he correctly predicted this madness would spread to Europe. He also warned when New York's Standard & Poor's 500 loses 300 points to close around 1,050 -- watch out! That's when "all the chickens come home to roost" from excesses of a global boom.
Well, hold on, because in yesterday's stunning market collapse, which wiped another $2 trillion from share values around the world, the S&P lost another 42.34 points to close at 1,056.
Poor investors who are bailing out the big boys on Bay Street and Wall Street, while watching their portfolios go up in smoke: When news hit European banks were also failing and a bailout plan proposed by EU leaders was in trouble -- all hell broke lose. At one time, the S&P TSX plunged 1,200 points, with the index falling below 10,000 for the first time in more than three years.
That wiped out all the gains since mid-2005, when many investors still hadn't recouped their losses from the bursting of the dot.com bubble and 9/11.
By the time the dust settled yesterday, the TSX clawed back some of its losses to close down 573 points at 10,230.43. On Wall Street, the Dow Jones plunged 800 points, but recovered to close down 370 points at 9,955,50.
On Bay Street, leading the freefall was the energy sector, which lost a whopping 9.4%, its lowest level since May 2005, as oil prices dipped below $90 US a barrel for the first time since February.
To me, it looks like Jeff Rubin, chief strategist at CIBC World Markets and Bay Street's star-studded soothsayer, has lost his crystal ball. He predicted oil at $200 US a barrel oil and a TSX at 14,300 by year-end.
Falling oil prices means Ottawa can no longer count on an energy boom in the West to keep Canada's economy afloat, while us Eastern bastards, who are losing jobs, freeze in the dark.
And sadly, it's too late for a falling Canadian dollar, which slid 1.5 cents to close just under 91 cents yesterday, to stop the job bleeding in Ontario.
Now, if it isn't bad enough -- here's comes the variable rate credit crunch at a time when real estate prices are starting to fall for the first time since the 1990s recession.
RATES UP BY 1%
Today, TD Canada Trust is hiking the interest rate charged on its home equity lines of credit and variable-interest mortgage by a whole 1%. TD, like most major Canadians banks, had charging prime at 4.75%. Today, the rate jumps to 5.75%. Open rate mortgages will also jump by 1%.
Blamed is the higher cost of banks to borrow money, as the credit crunch causes the London interbank offered rate (LIBOR) to triple.
Yet, economists at yesterday's Economic Club meeting, were calling for a 1% cut in rates to fight a recession in both Canada and the U.S. This ain't going to be pretty.
http://www.torontosun.com/money/columnists/linda_leatherdale/2008/10/07/7002461-sun.html
What we're facing could be a lot worse than a recession
By LINDA LEATHERDALE, TORONTO SUN
Last Updated: 7th October 2008, 8:17am
All the indicators of the North American economy have taken a beating in the past month. (Mary Altaffer/the Associated Press) A year ago, none of them dare to utter the "R" word.
No, the gurus on Bay Street wanted us to believe though a subprime crisis was raging in the U.S., Canada's financial system was safe, our economy sound. So, don't worry, be happy.
Now, as a financial tsunami spreads through Europe, threatening to bring down our global financial system, while yesterday the hard-hit TSX suffered its biggest intra-day point loss ever with $225 billion wiped from share values since last week -- these gurus have changed their tune.
It's not recession we need to fear, it's something far worse.
"It (this credit crisis) is being driven through the financial markets into the real economy. All of those things suggest it's entirely different than what you might expect from a typical recession," Scotiabank chief economist Warren Jestin told the Economic Club yesterday.
"You have to invent a new word to describe what we're in now," he said.
WARNING
Okay, how about the "GD" word? That's "global depression," which I warned was coming in my Economic Armageddon column on Feb. 24, 2008, where doomsayers also predicted the fall of capitalist economies, famine, plagues and a world war.
Then, on June 19, I wrote about the warnings from Royal Bank of Scotland credit strategist Bob Janjuah, who said: "A very nasty period is soon to be upon us -- be prepared."
Janjuah correctly called this fall's global market crash and he correctly predicted this madness would spread to Europe. He also warned when New York's Standard & Poor's 500 loses 300 points to close around 1,050 -- watch out! That's when "all the chickens come home to roost" from excesses of a global boom.
Well, hold on, because in yesterday's stunning market collapse, which wiped another $2 trillion from share values around the world, the S&P lost another 42.34 points to close at 1,056.
Poor investors who are bailing out the big boys on Bay Street and Wall Street, while watching their portfolios go up in smoke: When news hit European banks were also failing and a bailout plan proposed by EU leaders was in trouble -- all hell broke lose. At one time, the S&P TSX plunged 1,200 points, with the index falling below 10,000 for the first time in more than three years.
That wiped out all the gains since mid-2005, when many investors still hadn't recouped their losses from the bursting of the dot.com bubble and 9/11.
By the time the dust settled yesterday, the TSX clawed back some of its losses to close down 573 points at 10,230.43. On Wall Street, the Dow Jones plunged 800 points, but recovered to close down 370 points at 9,955,50.
On Bay Street, leading the freefall was the energy sector, which lost a whopping 9.4%, its lowest level since May 2005, as oil prices dipped below $90 US a barrel for the first time since February.
To me, it looks like Jeff Rubin, chief strategist at CIBC World Markets and Bay Street's star-studded soothsayer, has lost his crystal ball. He predicted oil at $200 US a barrel oil and a TSX at 14,300 by year-end.
Falling oil prices means Ottawa can no longer count on an energy boom in the West to keep Canada's economy afloat, while us Eastern bastards, who are losing jobs, freeze in the dark.
And sadly, it's too late for a falling Canadian dollar, which slid 1.5 cents to close just under 91 cents yesterday, to stop the job bleeding in Ontario.
Now, if it isn't bad enough -- here's comes the variable rate credit crunch at a time when real estate prices are starting to fall for the first time since the 1990s recession.
RATES UP BY 1%
Today, TD Canada Trust is hiking the interest rate charged on its home equity lines of credit and variable-interest mortgage by a whole 1%. TD, like most major Canadians banks, had charging prime at 4.75%. Today, the rate jumps to 5.75%. Open rate mortgages will also jump by 1%.
Blamed is the higher cost of banks to borrow money, as the credit crunch causes the London interbank offered rate (LIBOR) to triple.
Yet, economists at yesterday's Economic Club meeting, were calling for a 1% cut in rates to fight a recession in both Canada and the U.S. This ain't going to be pretty.
http://www.torontosun.com/money/columnists/linda_leatherdale/2008/10/07/7002461-sun.html