Econowatch: A decade's end

January 5, 2010
A look back at a decade of triumph and heartbreak in the north american economy
by Steve Maich on Friday, December 18, 2009

Congratulations, ladies and gentlemen, you have survived your worst fears.

When we began Econowatch a little over a year ago, the world economic order seemed to be breaking  all around us. We warned that things were going to get a whole lot worse before they got better, and indeed they did. World governments pressed ahead with emergency policies that had only ever been considered in theoretical discussions of worst-case scenarios. The good news is, those policies successfully doused what can be thought of as a global economic forest fire. Often, forests grow back stronger and healthier than before, but it takes time.

These days, we hear a lot of fretting that world economic powers are headed toward a “lost decade” with stagnant growth and stubborn unemployment. Well, folks, look in the rear-view mirror—or better yet, look at the graph below—and you will discover that our stock market is pretty much exactly where it was nine years ago. Now, if this were just about stock prices, it wouldn’t be such a big deal. But in fact, the Canadian and especially the American economies have stagnated in a host of ways over the past 10 years. The most striking might be private sector employment in the U.S. There were 108.4 million private sector jobs south of the border in October of this year. In October 1999 there were 1.1 million more. Another example? American industrial production is down about four per cent from a decade ago.

And where are the numbers bigger than they were a decade ago? Well, mortgage delinquencies in the U.S. are at an all-time high. Claims for jobless benefits are also in uncharted territory. On the more positive side, retail sales are more than 25 per cent higher than in 1999. But that’s no great mystery when you consider that consumer debt is up by 60 per cent over the same period.

Believe it or not, though, the point here is not to despair but to focus on our resiliency. To avert financial calamity, the world’s financial powers transferred the staggering cost of financial malpractice onto the public books. You’d be well justified to complain about this, but it’d do no good. Problems this big belong to everybody, and instead of watching the system implode quickly, we all get to pay to fix it slowly. We’ll pay through higher taxes, weaker growth, higher interest rates and a whole lot more uncertainty than we’ve ever known before. The well-educated, flexible and relatively debt-free will find the future a lot less scary than others.

For a long time, we were taught to believe that markets only ever go up. By now, it’s clear that they can gyrate sideways for a long, long time. But that, in itself, isn’t a disaster. We’ve seen all this before—weak markets, expensive energy, high unemployment, bouncing interest rates—and we lived through it. By some measures, it might be another lost decade while the forest recovers. But hey, we’ve just lived through one of those, too.

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