We have all heard the term.  I was thinking this morning about the economies of the world and the shape they are in.  There are two reasons I believe are causing the widespread fear and panic in Canada right now.  The number one reason that people are hoarding their cash and reigning in spending on big ticket items, in my view, is due to the media.  Yes, the media.  You say but why bandit?  the media has nothing to do with the economic engines of the world....but that's where I disagree....they have alot more to do with it than you think.

Again, we have all heard the saying "you are what you eat" right?  If you have poor nutritional habits your body will indicate this.  If all you eat is saturated fat filled food, high sugar drinks/foods, then your body will eventually reflect your constant intake of this type of diet.  The same applies to many other facets of life.  If you work in an atmosphere of constant daily negativity, even if you are the most optimistic person on the planet, it will eventually wear you out, suck you in, and destroy you making you the same way.  The media is unrelenting with constant negative news every single day.  Every newspaper, every tv news program, every magazine, and then some.  So what happens?  Even the most optimistic start to get sucked in and creates doubt in their minds causing them to waiver and hold on to their money, panic if you will.

Why am I saying this today?  Well because I find that all of this constant barraging of negativity from the media is even wearing on me.  The doomsayers are certainly in their glory as well.  Some would say I was one of them in the past but I have never been a doomsayer, only a realist combined with some common sense.  I never follow the herd and only think for myself, but the daily beatings from the media are even making me doubt our family's future.  Hard to believe.  So I stop watching media reports and news programs since most of them are fabricated anyway.

Make no mistake, a recession is here and I was expecting it since 2006, but again this is a necessary event.  One that is only being exaggerated by consumers and businesses, hit by constant negativity every day, who are not spending or trying to grow right now, but simply sit on the sidelines waiting to see if Jesus arrives to save. 

The purpose of my rant is to say a person really needs to step back and take a look around them, literally.  GO to the mall, see what is happening.  Go to a car dealership or two, see what is happening.  Go to open houses and see how many are showing up.  Go to restaurants and watch how many sit down for a meal.   It is a simplisitic view but none of this is rocket science. 

The second reason, and one of the biggest reasons consumer spending is stalled, is the banks.  The banks are hoarding money.  They are still very profitable and they are not hitting hard times here in Canada nor will they.  But they are not lending money as they are supposed to be.  They are focused on cutting credit, which is a good thing I agree, but they are doing it to the wrong customers.

I heard a story the other day from my accountant.  He said one of his clients uses an operating line of credit once a year during busy times for a short period.  He has always paid it back time after time.  The bank called him and said they were calling his credit line in.  Upon speaking to the bank manager he asked why since he had been such a good payer/client.  The bank manager told him, I had to since I was told our bank had too much money out, and I knew if I calle dyours in that the bank would get their money back. !!!!!!!!!!!!!!!!!!!

So, let's get this straight.  The bank calls in debt from a good payer because they are a good payer, because they don't want to call in higher risk debt, who may not pay?  Sounds logical to me.  So once again, the good get screwed and those who are riskier rock on. 

Don't get me wrong, credit should be called, but only on those who should not have it! That was one of the dumbest things I had ever heard.  I am waiting for my call.  They can have it since I rarely use credit, but it  is good to have for rainy days.  Credit is good if it is used as it was meant to be.

Banks are not lending in abundance on mortgages.  So what happens?  limited buyers, limited people willing to attempt to apply even though they would be low risk, prices drop and so it goes.  If any bankers had common sense they would lend to low risk clients who will buy houses etc and this would therefore at least stabilize property values.  I would think this would be in the banks interest as well since if property values drop, foreclosures could rise and therefore causing unnecessary losses to those same banks.

Does the government *really* want to stimulate housing?  If so, drop the GST on new houses.  Reduce taxes in general and people will spend.  I do not agree with a consumer based economy at all but this is what we have, so this is what it will take ot get it going again, other than silencing the media.


Anyway, this has all become a vicious circle.  A stalemate if you will. 

Gold looks as if it is ready to explode and I don;t know how much longer shorts can hold it down.  And oil, in my view, may move up much sooner than I had originally thought.  It looks oddly stable at this point.  I expect the CDN dollar to climb somewhat in the near future too. 

Canada will come out of this media mess much shinier than the US and much sooner (if the US ever does) but we really need to seek other trade partners other than the US since the US is of no value to us anymore.  Does it make sense to impose even more regulations on a depressed economy?  More protectionism?  higher costs?  makes total sense to me.