Saturday, January 21, 2012

Dr. Doom on Canada

Nouriel Roubini in the Globe today:
What's your assessment of how well Canada is doing in the current global environment?

It's a mixed picture. The overall fundamentals are better than many advanced economies. The fiscal situation, the balance sheet, is better. The banks have been better regulated. But now, with weakness in U.S. and Europe, growth will be below trend. Household debt is rising. There is some frothiness in the housing market. I don't see a bust as in the U.S., but I would not rule out a 10-per-cent correction.
And at that point the Globe interviewer proceeds to ask Roubini about how many Twitter followers he has. I would have thought there would be a follow-up question on Canada's economy given what he said on the housing market but that's just me I guess. Plus this interview style just seems whack and a little off given the interview subject. For example, "Why have you never married?" Um, excuse me? Anyway, read on for Roubini's take that the European austerity push is wrong and for more dire economic predictions for 2013 and beyond.

All of which would have consequences for Canada's economy in the next few years and the political dynamics. Which parties are going to be the ones who speak credibly on economic issues in view of these uncertain times is a question for Canada's opposition political parties to step up and answer. We know that the Conservatives claim to occupy this space but it can't be ceded to them (and won't be, of course).

It's a tough road for parties of the center and left. In Britain, Ed Miliband is struggling to provide a credible alternative position to the coalition. Here, see Caplan today urging the NDP to start ramping up (last paragraph, although the CCPA doesn't align itself with partisans, come now). There's been little in the way of economic policy making a splash in the NDP campaign, not eye catching to the broader public that is.

And of course the Liberals will be conscious of this too and will need to develop economic policies as a party in the next few years, policies that were non-existent at the just concluded policy convention. It may be a prominent feature of the coming leadership race as well, at least, you'd think the smart candidates would speak to economic issues with a view to this backdrop.

Roubini's that guy who called the U.S. housing collapse so he's always a noteworthy commentator to take in and colour our worlds, doom and all. Happy Saturday!