Mark Carney: The man who speaks the truth - By Jeffrey Simpson

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http://www.theglobeandmail.com/news/opinions/jeffrey-simpson/mark-carney-the-man-who-speaks-the-truth/article2270030/?cmpid=nl-news1

By Jeffrey Simpson
From Wednesday's Globe and Mail
Published Wednesday, Dec. 14, 2011 2:00AM EST

Mark Carney: The man who speaks the truth

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Mr. Carney believes, and he’s profoundly correct, that the Western world stands at a point of “rupture.” For decades, countries borrowed beyond their means – leveraged themselves with accumulations of debt. “That era,” Mr. Carney proclaimed, “is now decisively over.”

What he calls the “debt super cycle” occurred everywhere, albeit at different times – in Japan, in many European countries and in the United States. Canada was part of the cycle, too, until the Chrétien government put an end to the country’s rising debts in the mid-1990s.

Debt fuelled consumer spending, not productive investments. Excessive private debt (collapsed banks, for example) wound up on the public ledger. The more households and governments borrowed for consumption, the less productive the economy became, which, in turn, meant the overall debt burden was less sustainable.

Everywhere in the Western world, a long period of deleveraging – that is, reducing debts – has begun, or must begin. The global economy, Mr. Carney predicts, risks entering a “prolonged period of deficient demand.” In Europe, there’ll be fiscal austerity, high unemployment and tight credit; in the U.S., personal and government debt will hang over the economy for years. The U.S. economic crisis began with its financial system, and Mr. Carney (agreeing with many others) notes that “recessions involving financial crises tend to be deeper and have recoveries that take twice as long.”

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