Considering 2008: Buying That Chinese Car On Some Mundane Tuesday

Looking ahead, nobody knows, including me.  Nonetheless its that time of year again when people refocus, make resolutions and economists guess again about the economic road ahead.  Eeni meeni mini mo.

For economic watchers surely 2008 cannot be a repeat of 2007 when we saw the loonie soar, the greenback swoon and oil prices continue there long march upward.  As 2008 dawns events in Pakistan and Kenya might yet upset the turnip wagon.  However, for the immediate future, it looks like full speed ahead for the Canadian economy.  With tax cuts in place consumers should have a bit more money to spend, save and invest.

There will be an election this year.  I don’t think that will settle much.  Yes, we might see a change in government but nobody will get a majority.  The political arithmetic is such that no party can get a majority.  Simply put with the Bloc taking a large amount of seats out of Quebec and the Greens skimming 10% of the vote across the country, it leaves little room for political drama.  At the end of 2008 I don’t think our political realities will be much different.

The Canadian economy will do well, but once again it’s the tale of two economies.  My trip to Grande Prairie Alberta in December 2007 confirmed everything I’ve ever written about the wild rose province.  There is money flowing in the ditches out there.  Too much money is chasing too few labour resources.  With McDonald’s and Tim Horton’s closing down drive thru windows because they can’t find anybody to man them, you know the Alberta economy is hot.  However, the “other Canadian economy” is in the East and it won’t fair as well in 2008.

There is no way Ontario and Quebec can continue to weather the economic pitfalls of a par dollar and an American economy, which is sputtering.  Even Prime Minister Stephen Harper is warning us about the economic “turbulence” ahead.  The translation is he’s looking at economic forecasts none of us have and he can see how Eastern Canada will suffer from the economic fall out down south.  With our loonie finishing just over par as the year changed it was a reminder for many Eastern Canadians that tougher times may come in 2008.

Nonetheless many of you might not see it that way.  If you are in the public service it might still be the best of times.  You would not be buffeted by these economic events like those on the front lines of the economy like shop workers, farmers and retailers.  With interest rates dropping and set to drop even more in 2008, for many in the public service their immunity from any economic slowdown continues.

Still, in January 2008 there is a great economic stimulus in the land.  Tax cuts effective January 1st are currently percolating throughout coffee shops and retail outlets across the land.  Scoff if you may, but it’s very real.  The big difference is you have the money to spend as you see fit.  The problem with government is when they get a dollar; much more of it is wasted than when you get it.  Invariably, government then asks for more and more.  That’s one reason and only one why tax cuts are always a good thing.

Looking ahead it’s easy to gaze over your two square kilometers in front of you and decide on what’s going to happen next.  However, we’ve learned the last few years there are many others in this world scratching out an existence and at the same time challenging our own standard of living.  Check out who is making North America’s clothes the next time you’re in Wal-Mart or some high-end designer store like Hollister.  Labels that say Bangladesh, India and even China are disappearing.  Labels from even lower cost producers like Vietnam, Cambodia and Laos are on store shelves.  They might be starving to death as they sew, but our Asian friends are building their economies into a powerhouse.  As Canadians we need to be aware economic competition from those far off lands isn’t far behind.

What are you suppose to take back from that?  Look at it this way.  Money is like warm grease.  It spurts out wherever there is the least resistance.  The grease ends up just about anywhere and now it’s in Asia.  Meanwhile back in Canada and the United States, we’re consuming Asian goods like no tomorrow.  Chinese automobiles at cut-rate prices into North America will be the next things.

Of coarse, 2008 will have its fair share of surprises.  Great change will surely come on some mundane Tuesday when you least expect it.  Let’s just hope it’s not too big for all of us to consider.