Truth is indeed stranger than fiction, both in the global economy and in our everyday lives. One true story from a recent restaurant experience was so bizarre you’ll think I’m making this up.
Even Alberta economists need to get out of their home province and stomp around the rest of the country now and then. And thanks to a bit of work/vacation, I had the chance to do this very thing. Three fantastic days in Montreal this week was a great way to wrap up summer of 2012. Through the people I met and talked to, along with simply keeping my eyes open, I learned a thing or two about our sister province.
It would be great if the world’s political and economic leaders had a trusted resource that they could turn to for advice, like the old “Dear Betty and Veronica” page in the comics? What if economic advice was dished out in the way that comic book column dished out advice on fashion, dating and etiquette? It may sound a bit like this:
Dear Todd: My neighbours have invited me to yet another dinner party, but I’m starting to think they are only interested in my hostess gifts. Is it rude to show up without a gift?
- Angela Merkel, Chancellor of Germany
Dear Angela: Absolutely not. While a hostess gift is usually de rigueur, with the number of parties (or “summits” as you call them) they’re throwing in Europe these days, you’re not obligated to bring something every time. But if you feel awkward arriving without another €100 billion in bailouts for Greece, try handing out coupon books. For example, you’d be a hit at the next summit if you arrived with a nice bouquet of Eurobonds, which would allow other party guests (Spain, Italy and Greece come to mind) to borrow money at a lower price. Instead of just showing up with cash, you’d be extending your country’s good credit rating. That would be an even more useful hostess gift.
Dear Todd: My province needs a few updates to its wardrobe this fall, but my budget depends on oil prices. How can I best manage this?
– Doug Horner, Alberta Minister of Finance
Dear Doug: This is always a tricky one. On one hand, if your oil price forecast is too low, you’ll end up looking silly with tons of cash in the bank but holes in your clothes (or highways, or schools). But if your forecast is too high, you’ll overspend and be left with a big fat deficit. There’s no easy way to navigate this. Oil prices have been lifted lately by better-than-expected economic news out of the United States. But that trend could reverse just as quickly as it started. You’re always better off playing it safe with oil forecasts. Spend as the money comes in. The best advice for forecasting oil prices? Revise frequently. Your wardrobe will thank you.
Dear Todd: I’m thinking of painting the house this fall, and I’m leaning towards a bright Socialist Red for the living room. What are your thoughts?
–Cristina Fernandez, President of Argentina
Dear Cristina: Don’t do it. I know you’re trying to make a bold statement that will get noticed, but you will regret it. Red walls tend to make visitors feel aggressive and irritated, and soon no one will want to come and visit. For example, your latest home renovation scheme to nationalize oil companies was just tacky and provocative. Try something softer and more accommodating, like free market mauve.
Dear Todd: I’ve been trying hard lately to be friendly and inviting to my neighbour, China. She’s certainly warmed up to my overtures—but perhaps too much. Now she wants to move into the recreation room on the west side of our home. How can I tell her that she’s welcome to visit but that she can’t take over the house?
– Stephen Harper, Prime Minister of Canada
Dear Stephen: You’re facing a real dilemma. You were absolutely right to build a friendship with China, but you’ve now realized some of the drawbacks of chumming with her. She’s raising the eyebrows of your other neighbour the United States. And while she’s got a lot of money, she wears too much perfume (called Poor Human Rights) that gives everyone a headache.
It may be difficult, but tell her plainly that you enjoy her company and she’s welcome to visit at any time. But there needs to be some boundaries too. Perhaps a compromise on the recreation room: she can use it as often as she likes, but she doesn’t get a key to the house. (Some subtle hints on the perfume will help, too.)
Dear Todd: Are penny loafers still in style?
– Jim Flaherty, Finance Minister, Government of Canada
Dear Jim: No. They haven’t been in style for over twenty years. Retailers kept offering them to consumers because they thought they wanted them. Consumers kept loading up because they thought they were in style. Finally the cycle of madness is over. Try something sleek and less fussy—fewer buckles or shiny coin-like attachments are on trend this fall.
Housing starts in Alberta slipped a bit in July 2012 to 31,500 (that's seasonally adjusted at annualized rates, for all areas of the province).
On the surface, that may seem like bad news--particularly since it is down from a recent high of nearly 40,000 new homes in April (see graph).
But on a longer-term view, the housing construction sector in the province is still in fairly good shape. Over the period January to July 2012, total housing starts are still higher by 46 per cent compared to the same period last year.
The changes to the CMHC mortgage lending (i.e., reducing the amortization period from 30 to 25 years) is likely to have an impact on housing demand, and some of this many have been the cause of the dip in July. However, a strong economy and labour market means that Alberta's residential real estate is in much better shape than some of the other worry spots in the country.
It matters for manufacturing exporters and crude oil producers. It matters for importers of California wine and specialized machinery. And of course it matters for families planning that long-awaited trip to Disneyland. The value of the Canadian dollar makes a difference.
The loonie returned to parity with the U.S. dollar today for the first time in months. Where can we expect the loonie’s exchange rate to go in the fall?