Loonies and Bankers - Any Real Difference?

Well, the )*&;#*(&; is truly hitting the fan on Wall Street, Bay Street and in The City. Seems our bright minds who thought that easy, "sub-prime" credit and "asset"-backed paper would create wealth are seeing the downside of this bright idea. No matter - they have made their millions (or billions) and could care a less about the fall-out we will see surrounding us.

Everyone keeps saying the fundamentals are strong. I'm not so sure. It's the financial community (ie, the banks, ie the fundamental economic institutions...) that got us into this mess, and it's the central banks (the Fed and the Bank of England) who are trying to bail them out. But the water keeps leaking in the boat, and in a global, integrated economy, how much power does a national central bank even have any more?

Here's how I see it, with particular reference to the Alberta context. There is a slow down coming. Why? A number of things, not the least of which is the long-awaited oil and gas royalty review report, which says we Albertans got royally (or is that royalty?) screwed under King Ralph. No surprise there. But Mister Ed must put it right, or he will be in serious trouble with the electorate. Then we have the housing crisis in the States. Less housing starts equal less soft-wood lumber required, for sure. Watch the consumer spending report due out later this week. If the US abandons its Wal-Mart addiction because of this credit crunch, it means our biggest trade partner will reduce purchasing from us too. And with the loonie at par, it only doubles the danger of that occurring.

The manufacturing heartland (Ontario), is in serious trouble because of the loonie, all the more so with the GM strike and resultant lay-offs. Less cars sold equals less oil sold. The federal government too may well cast a greedy eye westward. And don't for a New York minute think that because we have a Calgary PM that we'll be safe. He is wily enough to ignore Alberta's interests for vote-rich Ontario's. Remember the income trust debacle? 'Nuff said.

Will it result in a complete turnaround in our economy? Probably not, but I'm not buying real estate just yet. I don't think we've seen the full consequences of this whole thing play out - not by a long shot.