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Earlier this week I participated in a round table discussion about the short term outlook for Canada's economy. Of the four panelists, I was the most bearish. I hope I'm wrong and that Canada remains an 'Island of Stability,' but it's tough to ignore all the risk factors – partly because there are so many of them.

For the person reading this at home, what's the message? What can we do with the information in front of us?

As individuals, we can do nothing about the U.S. fiscal cliff. The choices for our southern neighbours range from quick, sharp austerity (hitting the cliff and triggering $560-billion (U.S.) of increased taxes and reduced spending) to longer drawn-out austerity (they can avoid the cliff by finding $1.2-trillion over 10 years).

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Either of those scenarios, while better for the U.S. budget, are not exactly a recipe for economic growth. Not if your yardstick is continuing Euro zone austerity which has now put Europe into another recession.

We're often reminded that Canada is a natural resource-heavy economy and that worldwide growth will fuel the demand for what we harvest. Well, commodities prices are down as expectations for growth around the world have dropped.

Here at home, record low interest rates have led to record levels of household debt. Go figure. And businesses are keeping cash on the sidelines, further stalling growth. While we've been hearing about the spectre of higher rates, for the first time we are starting to hear less confidence from those who say, "rates can only go up."

Can't forget about real estate. Sure, real estate in Canada is very localized, but we've started to see the turn in the most bubbly markets. I need to point out that if prices can be irrational to the upside, they can be irrational to the downside. So all the calls for a correction softly to fundamental values for real estate are Pollyannaish, in my opinion.

A sharper than predicted downturn in the large real estate markets could have wider ranging effects. A disproportionately higher than average percentage of the population now work in real estate related industries, such as construction, contracting, and jobs related to selling and financing homes, because that's where the money has been.

As I said, there are a lot of risk factors to our economy. I also hope it's possible that we scathe skate on by without getting hit hard. Things are fragile at best though, and that means the prudent thing to do is batten down your own hatches. Pay down high interest debts and beef up those emergency funds.

I'll reiterate that I hope I'm wrong for being bearish, but consider this for those who question shoring up their personal balance sheets: If I'm right, you're financially better off. If I am indeed wrong, you're still financially better off.

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