Is The Tide Turning?

Canadians have known economic pain for quite a while now. Glen Pearson writes:

Canadians continue to feel that the ongoing impacts of the Russian-Ukrainian conflict are having detrimental effects on the economy overall and their own personal standard of living as well.  They aren’t wrong.  We knew collective pain was coming.  It still is, continually prompting speculation about an oncoming recession.

But the situation appears to be changing:

This past weekend, CNN host Fareed Zakaria offered some valuable insights rarely mentioned in traditional media accounts.  He titled his episode “The End of the Russia Shock”.  It was a bold statement.  Here’s why he said it.

The launch of the Russian-Ukrainian war sent the global economy into something of a tailspin, with skyrocketing prices for oil, gas, and fertilizer, leaving commentators to note that the economic pain could go on for years.  That’s not happening, at least to the degree predicted.  After a surprisingly short amount of time, the economic shock has begun to dissipate.

According to the Global Index, global food prices ended lower in 2022 than when the conflict started.  They remain high but are now beginning their descent.  Having suffered a series of meteoric spikes, natural gas prices have now fallen below initial levels.  Oil prices have dropped considerably from their peak levels months ago.

There remain many essentials that still carry historically high costs, but the worst of it now seems to have passed and that will carry significant economic, political, and personal improvements.

What's going on?

Zakaria targets three groups as responsible for avoiding what could have been an economic catastrophe – governments, the private sector, and citizens, saying that they all “swung into action” in a fashion that blunted the more drastic predictions.

While sanctioning Russian energy resources, Western governments ramped up their domestic oil production and utilized vast reserves put aside for precisely such dramatic circumstances.  European countries searched out and secured energy partnerships with other nations.  And Canadians, like other citizens in the world, sacrificed in their own way.  They drove less in the summer and, partly due to a warmer winter, turned down their thermostats to reduce costs.  This had a major impact on the economy in ways few understood.

The decline in natural gas prices led to a lowering of costs for fertilizers, which is ultimately leading to a decline in food prices – not quickly enough, but at least heading in the right direction.  A moderate fall season and warmer winter are also leading to abundant harvests.

With many observers now wondering if the Russian forces are in retreat, some are wondering if a full economic recovery could eventually be possible.  That seems doubtful, but at least we are considering it.

All this is bound to have political consequences around the world.  Economic shock, especially extended over time, could lead to political turbulence and citizen discontent.  This would have profound effects on governments and opposition parties alike.  Should pressures ease, however, especially as the warmer months draw nearer, a sense of national optimism could be on the rise, forcing political parties to recalibrate their policies and practices as a result.

Pierre Poilievre doesn't see things this way. He's been traveling around the country proclaiming that "everything is broken."

Time will tell if the tide has turned.

Image: Quotefancy