Friday, December 22, 2006
regional economies, national policies
I've been thinking of the different economies in Canada, and the universality of interest rates. RBC Economics has a report on the economies that reveals a polytomous disparity in those economies, yet one will be afforded the relatively identical interest rate whether in Calgary, Toronto, or Corner Brook, NFLD. The Bank of Canada sets the benchmark, and the chartered banks and credit unions tack on their percentage.
As the larger economy(s) of Ontario (and Quebec) contracts, the BoC hints at cutting rates, but as they do so, they stand to further stimulate the hot economies of Alberta and BC. Being that the BC economy is largely driven by construction (as of late), will this stimulate more building (and buying)? Will this drive RE prices up further in BC?, or has the limit been reached (read - surpassed)?
But the BC economy seems to be feeding on itself. As lumber, oil and gas, and metals (copper) see less demand, how can that idea be supported? An economy built on construction (no pun intended). What could possibly sustain it - other than construction itself? Greater and bigger fools?
I think that things have become so surreal, that we cannot even guess at what will transpire. It seems to me that as the central government tries to maintain equilibrium, it creates a greater imbalance. Order out of chaos, and order begets chaos.
So what is the answer? Regional interest rates? How could that be engineered? Maintained? Sublimation of the nation into distinct regional societies?
There is a growing trend away from globalization/conglomeration, micro-credit is filling the void left by larger institutions, large corporations are being riven by anti-trust type rulings, citizens are turning inward, and reclaiming community, federal gov't off-loads responsibilities to provincial gov'ts, which in turn, off-load responsibilities to municipal gov'ts, which in turn, off-load to the denizens of the cities.
For those familiar with the Peter Principle (The implication of the Peter Principle for an organization as a whole is that the organization is prone to collapse when the number of incompetents among its ranks reaches a critical mass, resulting in the inability of the organization to perform its functions.), it would seem that we, as a society, have reached a critical mass.
The only conclusion that I can reach is that "the system" is primed for collapse.