Recession will come to Canada in 2013.

Oh Carney. What a wacky guy. He seems convinced we will only enter a recession if the US falls off the fiscal cliff. Err, I’m sorry, not a “recession,” but a “near-recession.” Central bankers don’t like to use the word “recession” in their predictions, because that serves as a confession that they are not “managing” the economy effectively.

If the fiscal cliff is resolved, he says, Canada will surge with the resultant economic relief!

So… is it the case that Canada’s only economic threat is idiots in the US Congress? (That’s redundant — I should just say “US Congress.)

Sorry, Carney. That is nonsense.

What about recession in Europe? Asia? Not to mention the general problems of the US, out biggest trading partner.

First there is Europe. The European recession is spreading, evidenced by slowing price inflation and rising unemployment (at 12% for the Eurozone). This deeply aggravates the existing European crisis. Even Germany, the ‘good’ (cough cough) part of Europe, is grinding into economic slowdown. Its central bank predicts a pathetic 0.4% for next year. It could very easily be less. As long as everyone over there relies on Keynesianism to solve their problems, they will never escape the financial death spiral.

Japan is in a recession. Other Asian export markets are slowing down, because the weight of China’s economic distortions are turning into a brutal yoke and necessitating slowdown there.

And what of the US? The perception is that if “something” is done about the fiscal cliff, everything will be rosy. Shockingly, the US is still considered a safe haven. But foreigners are not scooping up US debt like they used to. China is reducing its exposure; Japan’s purchases are slowing. Bernanke’s surprise announcement to expand the Fed’s balance sheet by an additional $45 billion a month to buy US debt is a telltale sign that he understands the problem, at least to some extent. Yet I do not believe that Bernanke’s action will deflect the recessionary pressures coming from both sides.

Then there is Canada. Everyone here thinks we are special. “Well, if the world goes into recession, we will be okay — we’re CANADA!” they say. The myths spawned during the 2008 financial crisis have sunk deep into the nation’s collective unconscious. Canadians feel invincible. That is dangerous. So the debts continue to grow. Harper continues growing the government, thinking it’s perfectly acceptable to do so because Canada is not as bad as other countries (ignoring the fact that it is still bad).

I frequently speak with executives in the oil industry. There are big deals being made, plenty of excitement as usual. But I’ve noticed people seem strangely oblivious to even the prospect of slowdown in 2013. We are largely a resource based economy, so if the entire world is slowing down, they are not going to buy as much of our stuff. It’s a fairly easy prediction to make. Myanmar and Laos are not going to make up for lost demand from China. Canada’s slow growth will drop mid-to-late 2013 unless some new crisis speeds the world’s decline. Canadians should get ready for this. Hold cash. Get ready to use it when prices fall.

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