The last time Mark Carney gave a speech in Canada, it was to warn that the hot housing market in some cities might boil over, threatening an ugly reckoning for borrowers who have used low interest rates to pile up debt in the belief their net worth would rise endlessly.
Those are still top-flight issues for the Bank of Canada Governor, especially with interest rates expected to stay at a near-emergency-low level of 1 per cent for much of the next year.
But the reason borrowing costs will stay lower for longer is because, unlike in mid-June – when Mr. Carney warned a Vancouver audience about "extreme" real-estate values in that city – it cannot be taken for granted that Canada's recovery is here to stay.
Most forecasters, including the central bank, see a long stretch of weak growth, not another downturn. Still, when Mr. Carney speaks Tuesday in Saint John about global economic developments and the impact on Canada, he will do so as the fear and doubt that has gripped markets for six weeks threatens to sideswipe domestic confidence as well.
Mr. Carney's speech comes at a time when there is far less scope for the significant, co-ordinated policy responses that helped contain the global financial crisis and Great Recession of 2008-09. During the height of that crisis, central banks slashed interest rates and united to inject hundreds of billions of dollars into the financial system to ensure banks had ample cash to meet obligations. And, of course, governments spent billions and billions on stimulus.
The response to the wild ride that started in early August when Standard & Poor's downgraded Washington's credit rating and the European debt crisis started to infect the euro zone's larger economies, has been halting and inconsistent, and has failed to inspire markets.
On Thursday, the third anniversary of the collapse of Wall Street's Lehman Brothers, some of the world's biggest central banks joined forces to prop up European lenders, ensuring they have unlimited access to the U.S. dollars they need to fund their operations. The next day, though, European finance ministers ruled out spending any more much-needed stimulus money, and gave no hint that they will match the central banks' joint move with financial aid for their banks.
In the U.S., there is hope among economists that President Barack Obama's job-creation proposals will be effective if Congress enacts them. But it's far from clear that that will happen in a capital that's already in full-blown campaign mode, more than a year before the 2012 election.
"Our assumption is that politicians faced with completely unacceptable outcomes will, at the end of the day, prevent those outcomes from happening," Craig Alexander, chief economist at Toronto-Dominion Bank, said in an interview. "But we could be wrong."
Stubborn core inflation will make for a spirited debate this week at the U.S. Federal Reserve, where chairman Ben Bernanke and his policy team meet on Tuesday and Wednesday to discuss whether to deploy any of the few weapons they have left in their arsenal.
Policy makers in this country arguably have more flexibility than their peers to respond if the global slowdown that has already hit us deteriorates.
A report Wednesday from Statistics Canada will likely show inflationary pressures continuing to ease, meaning Mr. Carney can leave borrowing costs alone indefinitely.
And Ottawa's finances are better than in most advanced economies.
But even the most optimistic analysts say the rosiest scenario for the global economy – and Canada's – is years of subpar growth. So Mr. Carney could do well Tuesday to explain very clearly what Canadians, and the central bank, can do to minimize the pain.