Kevin Laliberte
Editor, Smoky River Express

In these times of economic uncertainty it really didn’t come as a big surprise last week to hear that Canada's Conservative government is planning to budget for a large, yet temporary, deficit to try to rescue the ailing economy A top aide to Prime Minister Stephen Harper said last Wednesday that the government is prepared to run large short-term deficits in it’s proposed Jan. 27th budget in order to support a realistic economic recovery package. He also said the Conservatives, which remain dependent on the support of one of the three opposition parties to remain in power, were less inclined than before to make non-economic issues matters of confidence that could topple the government. Looking at the present projected state of the economy this year, some analysts are suggesting that deflation may be public enemy number one among central bankers, monetary policy wonks and bond market aficionados. Still, a recent survey indicated that it hasn’t even shown up as a blip on the average Canadian's radar screen. The poll released Wednesday shows that 50 per cent of Canadians expect inflation to increase over the next year, versus 21 per cent who expect the current recession to be deflationary in nature. The findings , contained in Pollara Inc.'s annual financial outlook survey, underscores the grip inflation continues to hold on us as Canadians. And some suggest the results could ultimately be a positive thing, providing a much needed spark to thwart off deflation – a downward spiral in prices caused by consumers who may be holder onto their wallets tighter than even in anticipation of cheaper goods in the future. Most experts in the field acknowledge that an extended period of deflation might companies to cut production and employment. The poll of 2,670 people was conducted between Dec. 11 and 15, 2008. This was after gas prices had dropped off sharply (after reaching record levels in the summer months), sale signs filled shopping malls, stock markets had bottomed out and house prices were beginning to fall. The reality is that after decades of dealing with significant inflationary hikes, it could be that Canadians just aren’t attuned to the concept that what goes up must come down. It could also be that with the domestic economy in much better shape than our neighbours in the United States, Canadians simply don’t see deflation posing as much of a threat as south of the border. In fact, the average consumer in Canada likely doesn’t see lower prices as a serious threat to the economy. Most of us, in fact, are probably doing back flips and cartwheels, thanking our lucky stars that prices for many commodities and services have finally dropped. Ah, but the reason prices fall typically means that the economy is in a state of disarray. For these falling prices to become dangerous, consumers would literally have to curtail any and all purchases, and right now that’s not happening. Still, that’s not to say it won’t. The current solution is direct government intervention, which includes spending on infrastructure job retraining, tax cuts, and yes, even bailouts and protection for the private sector (automobile manufacturing sector. Spend, spend, spend, the government is saying, and then spend more. That’s its solution to getting the sagging economy back on track. But it’s not that easy for the average Canadian trying to make ends meet. Maybe if the government gave us more we’d be willing to spend more.

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