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No Mardi Gras

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As signs of recession seep into Canada, I cannot help but think of New Orleans.

Not the colourful images of Mardi Gras, the party to end all parties.

I'm thinking of those CNN visuals of Katrina, where New Orleans residents who refused to believe warnings of a massive flood stayed stubbornly in their homes until all they had left was a rooftop to stand on and the hope of a helicopter rescue.

Here in Canada, many refuse to believe warnings that an economic storm will hit our nation long and hard. Harvard professor Niall Ferguson calls our current situation not just an economic storm, but a full-blown "crisis of globalization." Ferguson offers these warnings:

Canada is not as insulated from the global economic meltdown as we may believe.

Ferguson says Canada's economic fundamentals may look good now but our economy will suffer because this is a "crisis of globalization." He says the more an economy depends on the fragile global system, the harder it will be hit.

Ferguson says: "It's tempting to conclude ... that Canada will be less hard hit in the crisis than the United States. But that is unfortunately wrong. Because this is a very unfair crisis. The epicentre is the United States, but the rest of the world, and particularly America's trading partners, will get hit harder than the U.S."

Predictions of a quick economic recovery are false.

The economic models that yield rosy economic predictions of only short-term pain are based on recent recession experiences - which Ferguson says is a mistake.

He says our current situation "is something really quite different in character from anything we've experienced in the postwar era. That's why these projections give positive numbers for 2010. That's the default setting. And it just seems to me ostrich-like, to bury one's head in the sand and assume this has to end this year because, well, that's what recessions do."

In Canada, signs of a serious and deepening recession are starting to flood in.

The number of Canadians receiving Employment Insurance benefits went up by 4.9% in December - and we know that's masking the real story. Canada lost 234,000 jobs between November 2008 and January 2009. The majority of unemployed don't qualify for EI benefits. The system's restrictive eligibility rules could turn a temporary period of unemployment into a disaster for many Canadians.

Consumer bankruptcies went up by 50 per cent in December. Retails sales dropped by 5.4 per cent in December. That's the worst drop in 15 years.

And it's prompted our Finance Minister Jim Flaherty to admit: "I expect that the numbers are going to continue to deteriorate for the time being."

Canada's daily newspapers are starting to get the message, publishing compelling interviews with survivors of the Great Depression. One woman talked about how they were the lucky ones. Her family could occasionally afford to buy two pork chops. Those two pork chops fed five.

There are those who call these comparisons with the Great Depression alarmist; those who fear talking about a Depression will become a self-fulfilling prophecy.

And then there are those, like me, who believe early warnings make for a more realistic intervention. If the flood is coming, why harbour illusions? Why not get out the life jackets and plan an exit strategy now?

The world may not be in a Great Depression -- yet -- but this ain't no Mardi Gras. The signs are all around us. Will Canada be left standing on a shaky rooftop, wishing it had heeded the early warnings?

To read a full and fascinating interview with Niall Ferguson, go to this link at the Globe and Mail.
The Toronto Star series on the Great Depression is equally edifying.

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