It may be sunny summer skies outside, but this week's financial news certainly looks like bad weather on the horizon.
Financial news from both Europe and the United States is downright sobering. Canadian stocks were falling at midday on Monday, not because of anything happening in this country's economy, but because of fears about the weakness of the European economy. Barely have concerns ebbed about whether Greece might tumble into default, when new concerns started to crop up about Italy's ability to sustain its financial commitments.
To the south of us, the United States is embroiled in the question of how much to cut, how much to tax, and how fast. The Obama White House wants spending cuts and tax increases to trim $4 trillion from the U.S. deficit over 10 years, while the Republican-controlled Congress is looking at between $1 trillion and $2 trillion in spending cuts alone. That's set against a backdrop of the U.S. government having to raise the ceiling on U.S. borrowing if it wants to be able to continue to fund programs and pay salaries, while bond rating agencies are starting to rumble about downgrading the U.S. credit rating, a move that could see the country pay higher interest payments on its debt.
There are, it seems, troubling signs from all over the place.
U.S. job numbers, for example, were surprisingly weak at the end of last week, and Chinese export numbers also slumped to their lowest level in almost two years - all in all, signs that the impact of the recent recession are far from over, and that resource-based economies, like here in this province, have to be ready in case people slow consumption of the products we produce.
All in all, it would be a good time for the provincial government to start at least holding the line on ever-growing provincial expenses and an ever-growing civil service.
After years of "have-not," this province's Progressive Conservative government has overseen some of the largest spending increases in this province's history, meaning that, while we've had huge windfall revenues from offshore oil, we've spent far more of that money on immediate growth and expansion than we have on trimming down the province's massive debt. (It is, it's worth keeping in mind, a massive debt that may get massively bigger with billions in borrowing to build the proposed Muskrat Falls project.)
The signal you might take from the rest of the world right now? Debt is a dirty word, despite the fact that everyone seems to have it. We've had low interest rates, high oilfield revenues and good times on our side for most of the last seven years. You have to wonder if, sometime in the future, the next generation of Newfoundlanders and Labradorians will ask just exactly what we did with it all.
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