Sun Tzu Moment: “It is too late to cover your ears after you hear the thunderclap”
I’m not here to give you investment advice but as a long-term strategist looking at trends, I can share with you thoughts supported by some evidence of an emerging issue worth tracking.
At the core of economics is the concept of demand and supply curves. A credit to Adam Smith and his “Wealth of Nations” 1776. (See link below). The well-being of the economy is like a child’s teeter totter … once one child jumps off without warning… The other has precipitous fast drop followed by a very hard and painful landing.
There are synapse of light in the darkness that must be noted by strategist. And having done so assign some probability that the economic teeter totter playing out between the demand and supply curves will experience a very significant and violent shift(s) there by distorting the status quo.
Marginal shifts in the teeter totter balance are generally accommodated by the marketplace—and a non-issue. The challenge of course is when a market / economy ‘tsunami’ appear ‘when’ one child or more’ jumps off the teeter totter resulting in the other’s economy crashing to the ground.
I fear that this is a very real possibility. But this event would impact not just one nation for, “No man is an island entire of itself; every man is a piece of the continent, a part of the main; … “(John Donne).
Canada and the United States are tethered.
Canada’s economic interdependence is ‘over weighed’ (to borrow term from our investment portfolios). Canada exports just over 70% of everything we produce to America. It was 85% in 2008! Since then Canada has been ‘decoupling’ – indeed some may say not fast enough. But the message is … should the US dollar for some reason investors cease to have confidence in its value – a shift in the demand-supply curve takes palace and Canada and others will experience significant economic disruption.
The global economic engine today is the USA.
There is a number of fissures emerging that might be of the proportion needed to have the teeter tooter crash to the ground. One of course is the conflict in Ukraine.
We will examine a few scenarios in Part 2.