The article stresses that the crisis was painful:
- stock markets lost half of their value
- North American car industry (GM and Chrysler) needed government support
- unemployment increased by 500 000 in Canada and 6 million in the US
But it also stresses that, as we discuss, fiscal and monetary policies saved the world from a collapse of the financial system and the second Great Depression.
But the crisis has had long-term consequences:
- slow growth. In Canada
1997-2007: 3% per year
2009-2017: 1.7% per year
World growth also slowed down, from 3.3% to 2.9%.
Recoveries are slow after a financial recession
- Firms are now much more cautious than before the crisis, and even though profits recovered, investment is low
- Commodity prices fell during the recession and for many commodities, prices did not recover
- Low interest rates led to increase in asset prices, raising inequality
- Low interest rates lead to increased risk-taking in financial markets; a lot of corporate bonds are low-rated
Biggest problem:
- Rising debt around the world, in particular in Canada. Not a surprise: interest rates are at record low.
source: tradingeconomics.com
When interest rates rise, households and firms may have problems servicing the debt.
The Canadian economy has not performed as well as the US economy over the last 10 years:
No comments:
Post a Comment