Global Recession? The Canadian Economy Shrinks At The Fastest Pace Since The Last Financial Crisis

Canada - Public DomainThings have not been this bad for the Canadian economy since the last global recession.  During the second quarter of 2016, Canada’s GDP contracted at a 1.6 percent annualized rate.  That was the worst number in seven years, and it was even worse than most analysts were projecting.  This comes at a time when bad news is pouring in from all corners of the global economy.  While things in the United States are still relatively stable for the moment, the same cannot be said for much of the rest of the planet.  Canada in particular has been hit very hard by the collapse in oil prices, and the massive wildfire in northern Alberta back in May certainly did not help things.  The following comes from the BBC

The recent drop in GDP was larger than analysts had projected, but not far off the predicted 1.5% loss.

“[The figure] could have been worse, given the hit from the wildfire, and clearly confirms the disappointing downward trend in exports over the last few months,” said Sal Guatieri, senior economist at BMO Capital Markets.

In May, wildfires devastated the parts of northern Alberta where much of Canada’s oil and natural gas is produced.

For many years, high oil prices and booming exports enabled the Canadian economy to significantly outperform the U.S. economy.  But now conditions have changed dramatically, and all of the economic bubbles up in Canada are starting to burst.  This includes the housing bubble, as we have seen home sales in the hottest markets such as Vancouver drop through the floor late in the summer.  In fact, it is being reported that home sales during the first two weeks of August in British Columbia were down a whopping 51 percent on a year over year basis.

Do you remember the housing bubble in the U.S. that helped fuel the last financial crisis?  Well, a very similar bubble is now bursting up in Canada, and some investors have positioned themselves to make a tremendous amount of money when the whole thing comes violently crashing down.  The following comes from Wolf Richter

This summer, famed short seller Marc Cohodes came out of retirement (he now raises chickens on a farm in Sonoma County, CA, and sells the eggs for a fortune in San Francisco) and jumped into ring with a number of interviews on TV and in the print media, and this too rattled some nerves – largely because it hit home.

“I think it’s a money laundering-induced market,” he said as we reported at the time. “Where the local politicians, or the BC Liberals, are kept or in cahoots with the real estate brokers, developers, lawyers, that angle. And they have sought Chinese money to keep the market propped up and it won’t last,” he said. “China has capital controls on, and Vancouver has become the money laundering mecca of either the world or North America, and something is going to change and change drastically.”

If the price of oil does not rebound in a major way, the Canadian economy is going to continue to deeply struggle.

Meanwhile, one of the biggest economies in Africa is also shrinking.  Nigeria is yet another oil-dependent economy that has fallen on really hard times, and during the latest quarter their GDP shrunk by 2.06 percent on an annualized basis

Nigeria has slipped into recession, with the latest growth figures showing the economy contracted 2.06% between April and June.

The country has now seen two consecutive quarters of declining growth, the usual definition of recession.

Its vital oil industry has been hit by weaker global prices, according to the Nigerian Bureau of Statistics (NBS).

There are so many signs that indicate that the global economy has entered a new major downturn.  Yes, the U.S. is doing better than almost everyone else for the moment, but this will not last indefinitely.  Our planet is more interconnected than ever before, and just as we saw in 2008, big trouble on one side of the globe quickly affects the other side.

Today we also learned that the 7th largest container shipping company in the entire world has completely imploded.  Total global trade has been declining for quite some time now, and it was inevitable that this sort of thing would start happening

After years of relentless decline in the Baltic Dry index…

… today the largest casualty finally emerged on Wednesday when South Korea’s Hanjin Shipping, the country’s largest shipping firm and the world’s seventh-biggest container carrier, filed for court receivership after losing the support of its banks, leaving its assets frozen as ports from China to Spain denied access to its vessels.

Over in Europe, an emerging banking crisis continues to simmer just under the surface.

Most Americans are completely oblivious to the fact that major global financial problems could be just around the corner, but CNBC is reporting that banks over in Europe are “preparing for an economic nuclear winter situation”…

European banks, in particular, have had a very tough six months as the shock and volatility around Brexit sent banking stocks south. Major European banks like Deutsche Bank and Credit Suisse saw their shares in free-fall after the referendum’s results were announced. In the U.K., RBS was the worst-hit, with its shares plunging by more than 30 percent since June 24.

The current uncertainty over when the U.K. will start the process of quitting the EU has banks on tenterhooks. But a source told CNBC that banks are “preparing for an economic nuclear winter situation.”

Speaking on the condition of anonymity due to the sensitive nature of the topic, a source from a major investment bank told CNBC that financial services firms have put together a strategy in place that takes into account the worst-case scenario that could happen by the end of this year.

So precisely what would an “economic nuclear winter” look like?

I don’t know, but it certainly does not sound good.

We should be thankful that things have been as calm and stable as they have been so far in 2016, but nobody should be fooled into thinking that our problems have been fixed.

The truth is that the global debt bubble is at an all-time high, the banks are being more reckless and are more vulnerable than ever before, and troubling economic numbers continue to pour in from all over the planet.

The stage is certainly set for the next major global economic crisis, and it isn’t going to take much to push the world over the edge.

Welcome To Hell: The Giant Fort McMurray Fire Is The Worst Blaze In Canadian History

Fort McMurray Fire - Photo by DarrenRDThe gigantic wildfire that has forced the evacuation of the entire city of Fort McMurray in northern Alberta has been nicknamed “the Beast“, and mainstream news reports are telling us that it is now approximately 25 percent larger than New York City.  88,000 people have already been forced out of their homes, at least 1,600 buildings have been destroyed, and smoke from the fire has been spotted as far away as Iowa.  To say that this is a “disaster” is a massive understatement.  Northern Alberta is “tinder dry” right now, and authorities say that high winds could result in the size of the fire doubling by the end of the weekend.  One-fourth of Canada’s oil output has already been shut down, and the edge of the fire is now getting very close to the neighboring province of Saskatchewan.  This is already the most expensive natural disaster in the history of Canada, and officials fully expect to be fighting this blaze for months to come.

At this point, only rain is going to stop this fire.  Canadian authorities insist that they are not going to be able to defeat this raging inferno no matter how many resources they throw at it.  The best that they can hope for is to try to steer it away from heavily populated areas until the rain comes.

Nobody knows precisely how this tragedy is going to end, but everyone agrees that it is going to last for quite some time.  According to the Washington Post, this fire has the potential to keep on burning “for months”…

The images are ones of devastation — scorched homes, virtually whole neighborhoods burned to the ground. And Canadian officials say they expect to fight the massive wildfire that has destroyed large parts of Alberta’s oil sands town for months.

There’s fear the growing wildfire could double in size and reach a major oil sands mine and even the neighboring province of Saskatchewan.

I have relatives that live up in Alberta, and this is the biggest thing to hit that part of the world in many, many years.

This massive fire is making headlines all over the planet, and some of the video footage that is emerging is so shocking that it can be hard to believe.  Some of the terms being used to describe the devastation are “hell”, “the end of the world” and “Armageddon”

“It was something like Armageddon,” said Morgan Elliott, who traveled with his fiancee, Cara Kennedy, and their baby, Abigail. “Everything was burnt, houses gone. Leaving the city, it was like a scene out of a movie. It reminded me of the TV show ‘The Walking Dead’ where you’re going on the highway, and there’s just abandoned vehicles everywhere; hundreds of cars, just abandoned vehicles.”

In this YouTube video, you can watch vehicles attempt to escape Fort McMurray as hot embers from towering flames just a few feet away rain down on them.  What would you do in this kind of situation?…

The amount of resources that has been committed to fighting this fire has been unprecedented, and yet it just continues to rage wildly out of control.  The following comes from CNN

The blaze is moving in a northeast direction and could reach the border with Saskatchewan by the end of Saturday, Alberta Premier Rachel Notley said.

The response has been massive. Notley said more than 500 firefighters are battling the blaze around Fort McMurray, with the help of 15 helicopters and 14 air tankers. More than 1,400 firefighters and 133 helicopters are fighting blazes across the province.

Unfortunately, a lot of Americans simply are not going to care what is happening up in Alberta because it is in Canada.

But let us not forget that 2015 was the worst year for wildfires in all of U.S. history.  Last year more acres burned in the United States than we had ever seen before, and 2016 is already shaping up to be another very bad year.

In fact, according to the National Interagency Fire Center we are already more than a million acres ahead of the pace that was set last year.

I just checked the U.S. Drought Monitor, and much of the western third of the country is still extremely dry.  Conditions are certainly ripe for another horrible wildfire season, and so let us pray for lots of rain between right now and the end of the summer.

Because all we have to do to see what a worst case scenario looks like is to watch what is going on in Fort McMurray right now.

To me, this is the closest thing that we have seen to “hell on Earth” in a very long time…

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