Speed Bumps ahead

It seems that the economies around the world are moving in fits and starts in reaction to every piece of disturbing news that the media is able to report.

Despite many signs that indicate the U.S. economy is moving (all be it slowly) in the right direction, a disappointing jobs report seems to be enough to get everyone scrambling for the exits. Explaining that the slower than hoped growth in employment states side may be more reflective of the residual effects of the natural disaster in Japan, that had many Toyota as well as other plants around the world shut down due to parts and demand shortages and that many U.S. businesses are still dealing with the uncertainties of the new gov't health care program and associated taxes, to name just a few challenges, just doesn't seem to lift the pessimistic sentiment that prevails.

Europe seems to be struggling with it's own challenges with the countries collectively known as the PIIGS(Portugal, Ireland, Italy, Greece and Spain). The debt problems associated with these countries are of course complicated by the Euro currency which makes each county's debt and debt rating affect all of the countries within the ECM zone. That too will be solved over time, with, or without all of the countries remaining in the pact. Of course, if countries leave the pact, they will simply inflate their way out of the situation and carry on, but arguable this is how they arrived there in the first place and one of the reasons the union was formed. In short, the threat of the failure of most of the smaller economies in the Euro zone is only world news because of the head aches they are delivering to the large Euro economies. Again though, market pessimism prevails.

Finally, we have the BRIC(Brazil, Russia, India and China) countries and developing world which seems to be experiencing higher inflation as a result of the developed world problems, which is offset by continued growth in trade, jobs and wages etc. Hard as it is to be pessimistic about this, there seems to be no shortage of pundits who predict this to be a ticking time bomb, that is sure to explode and add to our woos. At least for the present, these economies contiue to drive prices higher for many commodities and I struggle with the concept that this can quickly be reversed in order to support disaster.

Our own country, Canada, seems to be doing quite well, thank you, as is our cousin Australia since we are both large suppliers of raw materials. I think we see it reflected in property pricing, with some inflation that will need to be tamed at some point.in the future.

In summary, the challenges remain and must be reconciled, but as I see it, the world remains on a heavy prescription of pessimism and withdrawal seems to be more painful than necessary. To be sure, there is an evolution of some of the developing world economies that is important to growth and stability, but for those who believe the U.S. economy has ceded the crown as the worlds largest and most influential economy, I would simply point to the present wrangling over their budget deficit ceiling and suggest that is the most influential factor in keeping the present level of uncertainty high. The sad caveat here is however, that, no matter how the argument is settled the result will likel;y be much the same and their economy will then resume the mending process. I guess we just watch and see.

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Tom Herlick

Tom Herlick

CENTURY 21 Pinnacle Realty Ltd., Brokerage*
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