Also in this playlist...
This transcript is automatically generated
Very much well if you think economic recovery has been on -- slippery slope my next guest says that oil prices are to blame.
Jeff -- as the author of wider world is about to get a whole lot smaller for he says oil prices will never be cheap again.
Does that mean we're gonna have to get used -- some slower rate of economic growth he's also the former CIBC chief economist joins me now from Toronto -- that's actually it was my question is.
Do you think -- a massive slowdown in growth -- I think we've got to change the speed limit on what an economy like the US can grow -- in a world of 75 to.
The triple digit oil prices and I think that's problem.
The essence of the problem that President Obama faces that.
You know there's nothing wrong with these stimulus measures in themselves but the US is already ran out by almost a one and a half trillion dollar deficit.
And the economy's not responding and the implicit assumption is that we can stimulate the economy back to the rates of economic growth that we had.
Last cycle when oil was thirty to forty dollars a barrel and we -- so all we're ending up doing is running up a larger and larger deficit with very little dividend in terms of economic growth.
Well Jeff you know this certainly addition to -- -- with crude.
Is changing here in this country got -- moratorium on.
Offshore drilling deep water drilling in place right now some of the rigs -- already leaving have left the -- to go overseas.
Go to other markets.
If we do indeed start to depend more and more on foreign oil.
What does that mean for the domestic economy.
Well there's only one real credible source of foreign oil supply available.
And that's in Canadian tar sands and if President Obama and EPA eventually approve the keystone XL pipeline.
And if the oil isn't first diverted to.
Another pipeline taking it -- the West Coast the China.
We can get that kind of loyal but unfortunately.
Because -- oil prices that we're gonna need to see to get 34 million barrels out of the Canadian tar sand.
It's going to translate into pump prices that are gonna take.
Millions of Americans off the road and that's a world of triple digit oil prices and that's a world where I think one to 2% growth is.
Is really the kind of maximum speed limit that an economy that consumes nineteen barrels a day can hope to grow -- you know.
That you mention Canada House Speaker Nancy Pelosi actually up their right now visiting.
The tar -- that you drive did you think Jeff that this is the silver -- being -- It's -- catch 22 because it's -- of forget about its carbon trail it's extremely expensive oil and incidentally.
The US consumer isn't the only consumer going after -- I mean -- -- -- OPEC they're making huge investments in the tar sands.
And -- wants to build a 900000.
Barrel a -- pipeline to the West Coast and that's the giant has though.
You know I mean it's it's not clear that all that's gonna go to the states but whoever is gonna get that oil that's very expensive -- you have -- otherwise it's not gonna flow you've been very concerned about the US have a set of our government -- -- concern about the rest of us have a version four trillion dollars right now but that is something in particular.
That you brought up in your book what is your main concern it is there any type -- again magic bullet silver bullet.
That is out there while I do what.
My main concern is that right now we have effectively zero interest rates and record deficits and zero interest rates is not a marriage that history says is gonna last for too much longer.
I think the next big challenge is that when foreign holders of US bonds like the People's Bank of China.
Start unloading them we're gonna find it very difficult to keep interest rates anywhere close to these levels until we do something about the deficit.
Jeff I think I know what you're gonna say have but I have to asked the question if you're not saying a lot of growth positive growth in this country around assuming.
You're saying it overseas in emerging markets but where do you think we're gonna see overseas -- We're gonna see overseas growth from the very -- places that are pushing up food prices and oil prices.
And that's from what is nothing short -- really industrial revolutions in places like China and India.
It's certainly not not coming from the US nor is -- coming from the G-7 because with the exception of Germany and Canada all of those economies are miles below their pre recession peak just like the US economy it's just I think they stop trying to stimulate those economies and grow their deficits more.
Well we showed the book cover once again why year old is about to get a lot smaller.
Jeff Rubin former CIBC chief economist thank you very much -- My pleasure take care -- points he makes in the.
Filter by section