The Future of The United States Economy -China or Canada-Who Will It Be?
Does The United States Still Control Its Own Destiny Or Is It Too Late?
A few days ago, while sitting down with a coffee and reading articles on some of my favorite business sites, I came across a "headline" that at first I nearly missed and when I went back and re-read it I have to admit it startled me a bit. I was surprised by the frankness of the words, as well as their potentially explosive meaning, and who they were coming from. I spent some time researching the issue and I would like to share my findings with you.
The "headline" I stumbled upon announced.."U.S. unlikely to fully recover, Carney warns"! At first glance the full impact of the statement eluded me and I have to admit I wasn't sure who "Carney" was. I knew I had heard the name before but at that moment I couldn't place it. Going back and reading the article certainly got my attention and I hope by sharing it with you ....it will get yours!!
The full "headline" of the story read..."U.S. unlikely to fully recover, Carney warns. Bank of Canada Governor says Canada must look to Asian trading partners if our economy is to thrive". The story goes on to say .. "Canada needs to look beyond its southern neighbor for markets because the United States economy is unlikely to ever recover". I found that statement startling and the next one equally so. "Governor Carney goes on to say It's going to take a number of years before they get back to the U.S. that we used to know....in fact they are not, in our opinion, ultimately going to get back to the U.S. that we used to know".
Mark Carney is the Governor of the Bank of Canada. Although the Canadian monetary system is somewhat different than that of the U.S. his position would be very similar to that of the Chairman of the Federal Reserve...Ben Bernake. The point is this guy is not some politician looking for votes and willing to say anything. When this guy speaks a lot of people around the world, including Bernake, take note.
Why should it matter what Canada thinks? Why should the U.S. pay any attention? Fair questions and here are some of the answers. There are a few things every American needs to know about our relationship with Canada. The U.S./Canada relationship is unparalleled anywhere in the world. The two countries form the largest trading partnership in the world. They share the longest undefended border and, most importantly, each nation is heavily dependent on the other for their standard of living and their wealth.
Eight million American jobs depend directly on the trading relationship with Canada. In Canada one job in four is attributed to the U.S. trading partnership. More than 60% of everything Canada imports comes from the U.S..in fact, according to U.S government statistics, Canada buy more from the U.S. that all 27 member nations of the European Union combined. Canada buys more U.S. goods than all of Asia combined ,as well, including China, Japan and Korea. Very few Americans are aware of the importance of the trade relationship of the U.S and Canada or how dependent both nations are upon each other.
For those who are unaware of Canada's importance to the U.S. here are just a few statistics
Canada is the 8th largest economy in the world and America's number one customer.
Canada supplies 22% of all oil imports to the U.S which equals about 2 million barrels a day
Canada supplies 20% of the natural gas imports to the U.S.
Canada is the 10th largest exporter of oil in the world
Canada is the 3rd largest exporter of natural gas in the world and has the largest proven reserves
Canada has the 2nd largest proven oil reserves in the world behind Saudi Arabia and that is now being disputed by some who claim that Canada has more oil reserves that Saudi Arabia. I could go on but I think you see the point.
So why all the facts and figures? What real difference does it make what Canada thinks anyway? The answer is actually quite simple. The American and Canadian economies are so intertwined that any shift or outside influence that led to even a small negative change could cause very dire consequences to both countries. Most miscalculations are made out of ignorance or misunderstanding. With the national debt and yearly deficits becoming such a albatross around the neck of the U.S. economy the normal influences that affect the day to day flow of the economy are magnified. When an economy is under extreme pressure minor irritants can easily become major negative events and can easily spiral out of control. The key, to the relationship, is stability and both nations need to be on the same page as much as possible . The importance and influence of the U.S./Canada trading partnership to the global economy is unparalleled in history. Together we can revive the world economy and we can also send it spiraling downward to levels where no nation would ever want to go.
If you have been following the Greek financial situation and how it has impacted the currency markets you may question why Greece can have such an effect on global affairs. The simple answer is all the economies of the world are connected and more importantly influenced by events, big and small, that occur daily all over the world. You can see the importance of the EU economy to the rest of the world and how its' difficulties affect the global community. What you need to understand is that if the US/Canada partnership were ever to come undone the damage to the global economy would be, in my opinion, catastrophic and would, in fact, end the global economy as we now know it. We need each other... now perhaps, more than ever because there is a new presence in the world. One that is surpassing all economic projections and whose economy is growing at such a rate that it's true effects can only be speculated on.....of course that nation is China.
China's influence is spreading across the globe. The are looking for political and business opportunities wherever they can find them. They are very interested in acquiring the raw materials that are and will be necessary to meet their unparalleled growth projections in the coming decade and beyond. Canada is and will become a major focus of China's unending search for the materials she needs.
The influence of "outside" nations can be difficult to measure and it would be in our best interest to watch very closely as China sources the world. China, economically , is growing exponentially and their influence is expanding at, what some in government and the media refer to, "an alarming rate". Could China negatively affect the U.S./Canada relationship? Will that relationship become a "target" in the years to come by outside forces. There are some who believe that China will attempt to move Canada away from its long term trading partner but ultimately, I believe, they will fail.
The U.S./Canada relationship is not built solely on trade it is also built on personal connections. 80% of the Canadian polulation lives within 100 miles of the Canada/U.S. border. 1 in 3 Canadians have extended family living in the U.S. On any given day more than 4 million Canadians are in the U.S. visiting living or on day trips. The relationship between Canadians and Americans goes much deeper than just trade relations and those deeper connections will always serve us well.
We started this piece with a pronouncement by the Governor of the Bank of Canada, Mark Carney, that the U.S "is unlikely to ever recover" from its economic woes. I believe Mr Carney is wrong. He underestimates, and perhaps does not fully appreciate, the very nature of the relationship that the two nations have fostered especially over the last 100 years.. They are so intertwined that if the United States fell... Canada would fall with it. Their economies cannot be separated enough to produce different results. For better or worse they are joined in such a way that, rise or fall, they are in this together. So in a way Mr. Carney's prediction that the United States is "unlikely to ever recover" would , if proved true, become the epitaph on his own nations long term fiscal stability.
Like all good bankers Mr. Carney focuses on the raw numbers. You cannot define a long standing and historical relationship with siimple numbers....they will, in the end, let you down and they never tell the whole story.
The United States will recover and its economy will grow again. Hopefully it will have learned some valuable lessons along the way. To protect itself maybe in the near future we will make it a criminal offence, for all politicians regardless of affiliation, to engage in any reckless activity that results in bringing this nation to the brink of economic disaster again. If the politicians will not accept responsibility for their actions then "we the people" need to change the rules that govern their actions.