The global financial crisis has already spread to the real U.S. economy of retail sales, and will continue to seep northward until Canada falls into a recession, according to a prominent American economist.
Pointing to swelling U.S. unemployment numbers, Dennis Gartman, author of "The Gartman Letter," said the jobless rate could climb to eight or nine per cent, leading to economic aftershocks in Canada.
"Canada can't avoid recession," said Gartman, noting that U.S. unemployment currently sits near six per cent.
He added that the U.S. and Canadian economies are so tightly connected that whatever happens in the U.S. also happens to its northern neighbour.
"We are your biggest client, you are our biggest client and for the next six months or so we are going to drag Canada down with us," he told CTV's Question Period from Virginia Beach, Va.
"That's just a very normal circumstance."
Gartman said he's been travelling across North America in recent weeks, and everywhere he goes, retail sales look as though they have "fallen off the edge of the cliff.
"Wherever you go, whether it's in New York, whether it's in Cleveland whether it's in Virginia -- even last week, when I was in Toronto, you talk to people and retail sales are very weak," he said.
Although Ottawa has said Canada's economy will slow in the coming months, officials have maintained that the country's economic fundamentals -- including the banking system -- remain relatively stable.
Finance Minister Jim Flaherty has even predicted Canada will avoid a major recession and post a modest surplus this fiscal year.
According to Gartman, the economic picture could be much bleaker.
"I can remember the recession of 1973-74; unemployment got to 13 per cent here in the United States," he said. "That was severe."
Prime Minister Stephen Harper will meet with other G20 leaders in Washington on Nov. 15 to discuss the global reaction to the crisis.
However, Gartman said the meeting won't accomplish much.
"Until the new (U.S.) regime takes over in January, does anybody think they're going to take direction from the United States? The answer is probably not," Gartman said.
Tom Vassos, a professor at the University of Toronto's Rotman School of Management, said the meeting likely won't have any immediate effects on global stock markets, which have been on a volatile rollercoaster ride in recent weeks.
"I think we're going to see volatility for quite a while, because you've got people around the world concerned about their investment," he said.
"Let's face it, it may not be economic factors driving these things; in many cases, it's psychological factors."
Instead, Vassos told CTV Newsnet the meeting will give leaders of the world's biggest economies a chance to work toward tightening their financial regulations, which could have long-term gains.
In fact, given Canada's relative banking strength, Vassos said world leaders will be looking to Canada's mix of financial innovation and prudent government regulation.
"I think you'll see more and more countries around the world moving to a governance model that looks actually a lot more like Canada than other countries," he said.
