Expert explains global financial crisis

By Brian St. Denis

Guru: Linda Sims explains the financial crisis and offers advice to a large audience at the Empire Theatre on Oct. 28.Quinte residents hoping to wrap their heads around the current global economic crisis found some answers at the Empire Theatre on Tuesday night.
Business journalist Linda Sims delivered her presentation “The Great Unwinding” to an audience of over 500 people on Oct. 28.
Sims gave some explanation for why the global economy is in the state it is, how it got there, and where it could be going. The Great Unwinding is what she calls the “end of endless credit” as well as the end of the housing boom in the U.S. Much of the lecture was geared towards the demographic with mortgages, mutual funds, and stock portfolios.
Although much of the financial crisis is due to the collapse of sub-prime mortgages, Sims stressed that consumer debt is also an enormous factor. In the U.S. there is $2.6 trillion of it, with $70 billion of it in credit cards alone. From 2002 to 2006, consumer debt rose 11 per cent a year while income levels stayed flat.
All was not doom and gloom. Sims said that despite the media’s insistent comparisons of today to the Great Depression, we are still “light years” from it. In fact, she said, because we have never seen a global recession before, few people know exactly what will happen.
Sims also praised the conservative nature of Canadian banks, saying that they are rated the most stable in the world right now. While Canada still has debt, the sub-prime mortgage boom in the U.S. was avoided for the most part here.
Sims clarified early on that she is not a business, investment or bank expert, but a journalist who has been talking to people in these professions for 25 years, interviewing over 500 businesses.
During the question and answer period following the lecture, the issue was raised of the lack of financial literacy being taught to students. Sims agrees with the expressed concerns, but believes the current crisis won’t affect students in the long term.
“I think you’ve got time, but I think that what people college age need to be thinking about is how to handle credit,” said Sims. “I know that there are students that have basically financed a lot of their university on credit, and they have horrendous credit card debt.”
For students unsure of where to become financially literate, Sims didn’t have many answers.
“As for where you can get it, that’s part of the problem. I think you do it step by step, as you hit the point in life where you need one product or the other.”
Sims is a Gemini award-winning broadcaster who has worked for CTV’s Canada AM, CTV NewsNet, and is currently working for the Business News Network.