Global financial crisis patches are leaking: Don Pittis

A new potential crisis in Greece makes our stock market worries about oil prices here in Canada seem trifling.

That said, trouble in Greece and a reawakening ofeconomic distress in Japan remind us that the deep wounds of the 2008 economic crisis may have been bandaged, but the healing process is far fromcomplete. We could still face unpleasant surprises.

• Asian markets tumble as Beijing tightens credit
• Japan's GDP shrinks even more than thought

This week's financial headlines sound like a recap of the horror stories of the last six years. Greek shares plunged 13per cent on threat of turmoil. Gold begins to rise (a bad sign unless you own a lot). Shanghai stocks take their biggest plunge in five years. Japan's economy shrinks nearly two per cent, much worse that previous estimates.

Market crash

In Greece, the stock market had its worst day in 27 years asPrime Minister Antonis Samarasplayed chicken with the opposition Syriza party in a move that could see the government fall. Syriza represents Greeks who are still bitter about the austerity forced on the country to protect bondholders and keep Greece in the Eurozone.

All of a sudden, it seemed nothing had changed since I wrote about a crumbing Greece at the heart of a crumbling Europe four years ago. Suddenly Greek default and a Euro exit were back on the table.

It reminded me of Thomas Piketty's warning that if inequality persisted "some countries will choose to turn against globalization" by voting foranti-capitalist governments.

• Unlike Marx Thomas Piketty wants to save capitalism
• Shhh! Don't say Greek default

In Japan, the situation is in some ways far more complicated. But once again the country's latest troublestakeme back more than four years to when I contrastedthestrategies of Japan and Irelandon how to deal with a shrinking economy. Japan's plan was to spend its way to economic health. Ireland's route was austerity.

So far it appears Ireland is winning that bet. AsJapan sinks further into the mire, the rating agency S&P has once again upped Ireland's credit rating. The Irish economy is expected to grow at a rate of nearly fourper cent between now and 2016.

The Irish casemight be a lesson in favour of taking your knocks now rather than putting off a resolution till later.But that is exactly the opposite of what most of the world has done.

For the most part, the fix for the world economy was a patch job. China, Europe and the United States flooded the world withmoney. Countries like Canada pulled out the stops to provide the booming Chinese economy with more and more commodities.

Now we are seeing signs that the patches are leaking. In some places the bandaged wounds are festering.

The rush to produce commodities created a glut. The austerity forced upon the countries of southern Europe has not led to the kind of success that the Irish forced upon themselves. A brazen attempt to shock Japanese consumers out of frugality by dumping even more cash into the Japanese economyand then takingit back in taxes seems to have fooled no one.

With an election under way there, the opposition doesn't seem to have any better ideas, and the government is expected to be re-elected.

Scary story

Yesterdaychief economist at the bank HSBC, with the same name as a famous horror author, Stephen King, revealed some scary prospects of his own, issuing The Top 10 Risks for 2015.

Among the scariest, a hard landing for China, a suddenrise in U.S. interest rates, anothernew attempt to fix the Japanese economy that goes terribly wrong allcreated by the unresolved problems of our last financial crisis.

"Wehave done our best to come up with tales of theunexpected, ideas not yet on the radar screen orviews that the consensus has largely ignored," King says in the introduction to the report. But with the document already in the pipeline for a Tuesday publication date, even HSBC gloomsters did not include new fears of aEuro area disintegration threatened by a Greek presidential election.

Fortunately this is not Murphy's world where everything that can go wrong will go wrong. The Greekmarket response to the threat of Syriza may concentrate the voters' minds. China along withFed chair Janet Yellen may be able to finesse a reduction in stimulus. Japan may finally turn its economy around, though that could be the toughest challenge of all.

Despite the commodity crash, there are early signs that Canada can join the U.S. in nudging the North American industrial economy back into gear. If we can accomplish that, it will be our turn to carrythe load, giving the rest of the world a little more time to heal.