Baraka_Guru

This is an excellent question. I'm no economist, but I'll give this a try.

The cyclical thing is a big one. Most people are either ignorant of long cycles, or they think they can go about their merry way and not worry about them. There is little we can do about them as consumers, so it's a matter of knowing what's happening and acting accordingly.

The other factors, I think, are related directly to consumer spending and investor strategies. When you have things like negative equity outcomes from far too many sub-prime mortgages, people will suddenly find themselves in bad situations and they will slow their spending. Same goes for those who rack up too much credit and find their interest payments are now wiping out their disposable income. This also slows spending. When you get factors like these during a bear-market economy, you have investors getting burned as well. They too become more defensive and park things in safer places (like cash) or they simply lose money in the markets.

All of these factors exacerbate the problems of an already existing recession. In recessions, you need people to spend money. If they don't have any to spend, you're economy goes through fits and starts, if not unpleasant heaves.

When consumer confidence plummets, markets get jittery. It's a domino effect. People lose jobs, and things just keep spiraling. This is why you find some governments spending a lot of money at this time, to keep the cash flowing somehow as they weather the storm.

Yeah, Canadian Dollar looks good because of the shaky American Dollar, plus such things as high oil prices and a somewhat stable economy (i.e. job rate is good). But we should expect repercussions from the American economy hitting the rough patches.

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Knowing that death is certain and that the time of death is uncertain, what's the most important thing?
—Bhikkhuni Pema Chödrön

Humankind cannot bear very much reality.
—From "Burnt Norton," Four Quartets (1936), T. S. Eliot