Oh, those fools on the Hill.  And the spin they try to sucker Canadians into believing.

But don't be fooled.  As the Beatles' song goes:

“Head in a cloud, the man of a thousand voices talking perfectly loud.  But nobody ever hears him .... they can see that he's just a fool.”

Need I remind you?

“This country will not go into recession next year and will lead the G7 countries.”  Those are the words of Finance Minister Jim Flaherty. The date was October 9, 2008. A few days earlier, on October 6, Prime Minister Stephen Harper declared:  “We will not run a deficit.”

But as the world was spinnin' deeper into the darkest economic contraction since the Great Depression, just as I predicted in my “Economic Armageddon” column almost a year earlier, the fools, who daren't utter the R-word, were suddenly trying to dig themselves out.

“We may well be in a technical recession,” admitted PM Harper on November 15, 2008.  And on November 23, his financial sidekick, Flaherty, finally warned dark storm clouds were raining on Canada's economic parade.

Yet, still they stuck to their line of no deficits and the creation of 190,000 new jobs by 2010, as they preached Canada was the one global nation that could withstand a recession.

Now, fast forward to the summer that was as dark as storm clouds on Canadians' vacation:  The promise of no deficits was quickly zapped with Ottawa's coffers $50 billion in the hole, as taxpayers forked out billions to prop up banks and bail out auto giants.  Combined annual deficits are now expected to swell to a whopping $159 billion by 2014. That's a far cry from the $4.2 billion surplus the fools predicted for 2012-2013.

Meanwhile, Canada's economy shed 454,000 positions since October 2009, pushing the unemployment rate to 8.6 per cent, an 11-year high.At the same time, the number of Canadians collecting EI (Employment Insurance) benefits jumped an alarming 55.6 per cent, or by 278,300 to almost 800,000.  The biggest jumps were in oil-rich Alberta, up 16.8 per cent and Ontario's hard-hit manufacturing economy, up 16 per cent.

Yet, the fools can't seem to help themselves.  So, here we go again with more spin. “The recession is over,” declares some of the same political pundits who wouldn't dare utter the “R” word in the first place.

First, it was the Bank of Canada officially declaring the recession is essentially over, while predicting our economy will start growing this summer to lead most of the industrialized world next year, after suffering nine months of stagnation.

“We believe the economy will grow this quarter,” said Bank of Canada Governor Mark Carney.  “Things are unfolding a little faster in terms of the recovery in confidence and financial conditions.” Canada's central bank is predicting annualized growth of 1.3 per cent for this year, while the trendsetting bank rate sits at a record low of 0.25 per cent at least until mid-2010.

A low bank rate makes borrowing dirt cheap, which should stimulate the economy.  But it's a killer for seniors who've fled the stock market and socked money into safe, interest-bearing vehicles as they fight to keep their pension money from going up in smoke with more and more wind-ups and businesses going under.
The low bank rate may also explain why pockets of Canada's real estate sector are back to red-hot record levels, with June the best month on record for the Toronto Real Estate Board.  Even in Vancouver, where condo projects are going broke before the shovel hits the ground, the market is scoring impressive gains.
Who can resist buying in at bargain basement prices? Or is it buyers are getting out their chequebooks before the hated GST/PST harmonization hits the real estate market, pushing affordability further out of reach?

Though homes valued under $400,000 will be exempt from the blended tax to hit in Ontario in July 2010, Ontario's Building Industry and Land Development (BILD) Association estimates harmonization will add more than $46,000 to the price of a $580,000 new home in Toronto.

Believe me, in high-priced Toronto, a $580,000 home is no mansion.

Tax harmonization has been vehemently opposed.  In fact, during a heated Ontario Tory leadership race debate, all four candidates, including Flaherty's wife, Christine Elliott, signed a petition demanding leaders back off blending Ontario 8 per cent provincial sales tax with Ottawa's 5 per cent goods and service tax, meaning a host of services never taxed before would now be hit with a 13 per cent whammy.

Spin doctors want you believe this is an evil idea from loony left provincial leaders, or misguided bunk from corporate pundits that combining two sales tax regimes will ease the administrative nightmare for businesses, even though it hurts the very consumer they count on to buy their goods and services.
Yet, buried in federal budget numbers is the $4.3 billion Flaherty has earmarked to blend the two taxes, as harmonization began on East Coast a few years ago and is now being pushed coast to coast, with B.C. even contemplating it.  The only province unscathed is Alberta where there is no sales tax.

Bottom line is the last thing over-taxed, overly indebted Canadians need right now are higher taxes, even though in fairness Flaherty has cut taxes, with Tax Freedom Day now falling in early June.

Which leads to this:  Is this spin, or finally have the fools come to their senses?

Both Flaherty and Harper are now cautioning Canadians not to be overly optimistic that the recession is over, even though the Conference Board of Canada jumped on the bandwagon predicting Ontario's battered economy will grow by 3.1 per cent in 2010, after shrinking by 3 per cent this year. 

Scotia Economics is also optimistic, predicting Ontario—once Canada's economic engine and now a have-not province—will enjoy 2.2 per cent growth next year.
“I know there are some signs of optimism,” said Harper, but he cautions, “the so-called recovery at this point is extremely fragile. We're still in the middle of a major global economic crisis, the biggest economic crisis since the Second World War.”

Flaherty is echoing Harper's sentiment.  It's just too early to say the recession is over. Meanwhile, the latest recession map by Moody's Economy.com has most of the globe drowning in a sea of red, including Canada.

The Economist, commenting on the Moody's map, reports that all of North America is in recession.  In Europe, only Norway, Slovenia and Slovakia have avoided recession, though Moody's believes these countries are on the brink.  Small export-led economies of Singapore and Hong Kong are shrinking, as are Malaysia and Thailand. Brazil and Russia are suffering downturns. South Africa is also in a recession.

The only bright spots appear to be China and India, says The Economist.  That could be a silver lining, except for one thing.

China is heavily subsidizing many industries, including oil, automotive, mining and now the latest fad.  According to media reports, Canada's home-grown granite industry is getting slaughtered by government subsidization and cheap labour in China, even though we're rich in the resource.

Media reports say production costs are so low in China and government assistance so generous, Chinese firms can buy granite from around the world, including Canada, ship it to their country, cut it into finished products and ship it back, and still sell 40 per cent cheaper.

So, here's my spin, and this spin I believe: If we are to come out this mess in our new global trading world, we need fair trade. Not just free trade.

But that's a whole other column.

By LINDA LEATHERDALE

Linda Leatherdale is one of Canada's most trusted financial columnists, who can be read at lindaleatherdale.com.  She is also Vice-President, Marketing and Business Development in Canada for Cambria, North America's leading manufacturer of natural quartz products.