2014 Canadian Economic Outlook

Sadly to look at the outlook of the Canadian economy, we have to first take a look at what is happening in America. Since our economy is so dependent on theirs.

Here is a decent breakdown of what will be happening south of the border in the coming months.

Many trusted economists are predicted massive problems in the American economy and possibly even a complete crash in the coming year. Here is Gerald Celente giving his forcast for the 2014 American economic outlook.

The economy that Canada has so greatly tied itself to, is facing major problems which means major problems for us.

Here are some key factors that should be of concern to Canadians.

Gold

In a time that fiat currencies seem to be reaching their end days, and the markets are facing big troubles. One would think that governments and banks would be increasing their gold reserves. But we are seeing the opposite.

“Curious why over the past few months JPM has quietly been accumulating a substantial amount of eligible physical gold (even as its registered gold inventory is the lowest it has ever been at just 87K ounces since December 13, 2013 when 147K ounces of gold was withdrawn - keep that date in mind for a few minutes)? This may have something to do with it: moments ago the daily Comex gold vault report confirmed what many expected, namely that the JPM accumulation was merely in advance anticipation of major withdrawals. How major? Well, on January 23, JPM saw 321,500 ounces of gold depart in one day. This was tied for the single biggest daily withdrawal in history!The last time JPM had an identically sized withdrawal? December 13…. 2012.”
zerohedge.com

Here in Canada we literally sold the vast majority of our gold reserves back in the early 1990′s. You can read about that HERE. Now the government is “unloading” even more gold.

“Canada’s first gold coins had barely been minted before Ottawa yanked them out of circulation a hundred years ago in an effort to stop gold from leaving the country during the First World War.

After a century of sitting in cloth bags inside the Bank of Canada vault, they are among a wide range of assets the Conservative government is liquidating – in this case literally – to save taxpayers a few dollars and help balance the books. The plan is to melt down more than 200,000 gold coins from the years 1912 to 1914, when Ottawa suspended the gold standard.

The coins have been the subject of whispers among collectors curious what happened to the $5 and $10 gold coins that Ottawa had pulled out of circulation. The mystery was lifted late last year when the Bank of Canada announced it would be offering 30,000 of the bank’s 246,000 coins for sale to collectors.

The sale is unlikely to make a big difference to Ottawa’s bottom line, but it is among a string of recent moves by the federal government to unload public assets as it moves to balance the books by 2015.
theglobeandmail.com

At the same time there seems to be some “shady” trading in the gold sector.

Gold futures suffered a sudden, brief sell-off in early trading on Monday. According to Nanex, a trade of about 4,200 contracts sent gold for February delivery tumbling US$30 to US$1,215 per ounce. This triggered a 10-second halt to trading.

Investors are demanding an explanation. Some were quick to suggest that this suspicious trading is evidence of market manipulation. Pundits see gold’s mysterious plunge as evidence of Wall Street running rickshaw over average investors. Others think this was just a fat-finger error.
Source

While all of this is taking place in western countries, emerging economies like China. Are buying massive amounts of both gold and silver.

Housing Market

There is no question about Canada facing a very large housing bubble. The only questions have been, when and how it will burst.

“A risky condo market, overbuilding, ever-decreasing affordability and runaway real estate sales that continue to defy expectations seem like a recipe for a crash. So far the bears have been wrong, and home prices have continued to rise. But that means Canada is now at or near the top of indices of the most inflated housing markets in the world. And that means the risk of a housing bubble bursting is not yet behind us.”
Source

We are at the top of the list when it comes to housing inflation, in the world! Economists like Nicole Foss have predicted a major housing collapse that would make the American collapse of 2008, look like child’s play. Yet we just keep on building!

Personal Debt Levels

At the end of 2013, it was shown that Canadians are racking up record breaking amounts of personal debt.

“According to Statistics Canada, mortgage debt stood at about $1.1-trillion by the end of the second quarter, up by $18-billion, while other consumer credit hit $500-billion.

The key measure of the debt burden – credit market debt to disposable income – rose in the quarter to 163.4 per cent from 162.1 per cent in the first three months of the year. That’s seen to be a dangerous level.”
Source

The average Canadian adult owes 163.4% of their incomes to the credit market. This is the highest amount of personal debt in Canada, America, Briton, or any other western nation has ever seen. To put it into perspective, American personal debt levels where 153% when the collapse of 2008 hit.

This has been the main factor in the Bank of Canada’s decision to keep interest rates extremely low for the last 4 years. But analysts have been warning the the ability to keep the rates low, is coming to an end. Which means a lot more problems for those indebted Canadians.

Conclusion

Our largest trading partner and interconnected economy is facing huge problems, we are selling off the last Remanence of our gold reserves to “balance the books”, have a massive housing bubble that we are waiting to see how and when it will burst, and have record breaking amounts of personal debt.

2014 is shaping up to be a very interesting year for economics in Canada! Personally I will be hoping for the best, but planning for the worst. The Canadian economy has been propped up and has been delaying the inevitable for some time now, and it will come to an end. Will that happen in the coming year? None of us can say for sure, but the conditions seem to be ripe for it.