Yukonomist: Yukon Risk Outlook 2023

Yukonomist Keith Halliday

2022 was like an unwanted houseguest. “At least they didn’t bore us,” is the best you can say as you watch them drive away.

We saw an unexpected war and humanitarian catastrophe. Omicron continued its rampage, killing thousands even if life returned to semi-normal for most people. Flooding floated away more Yukon docks. Inflation mugged your wallet. Your mortgage rate spiked. The stock market took a beating and, if you had diversified by owning bonds, they also took a beating. If you bought cryptocurrencies, your tokens might now be worth as much as a bag of spruce needles.

So, what should we look out for in 2023?

The first thing to remember is that just because a long shot event happened in 2022 does not mean it can’t happen again in 2023. In statistics class, this is called the Gambler’s Fallacy.

In reality, the chances of rolling snake eyes is always the same, whether you rolled a seven or a two on your last throw.

Which brings up the pandemic. Just because people call it “once in a lifetime” doesn’t actually mean one can’t happen again this year. A more dangerous variant could appear. And there are plenty of other weird bugs out there, waiting to jump the species barrier into humans. Last year I heard a bio-security expert say, chillingly, that COVID-19 was “good practice for when the big one hits.”

If it does, the consequences of mask aversion and anti-vaccination campaigns could be much bigger next time.

On the war front, there could be more deadly surprises. The Russia-Ukraine war may drag on. Or it may end, and possibly in a way that leads to more chaos and conflict inside Russia itself. Nor can we rule out conflicts in the Middle East or even between China and Taiwan.

On the financial side, things seem to be on a path, however long and windy, to semi-normalcy. Inflation and then interest rates are expected to subside as 2023 progresses. Your investments might even recover.

Things may not be that predictable, however. It is possible that higher interest rates will go beyond slowing inflation and cause a painful economic contraction. In this scenario, heavily indebted Yukon households and businesses are forced to dramatically tighten their belts. This leads to corporate bankruptcies, layoffs, falling house prices and people forced to sell homes for less than they paid for them.

Nor is it certain that stock prices will rebound. In the last few decades, we have gotten used to stock market crashes that are followed a few months later by gratifying rebounds. It is now conventional wisdom to buy stocks when they dip.

However, instead of catching the upward waves you may, as the old saying goes, just be catching a falling knife.

Ask someone who invested in the Tokyo stock market at its peak in 1989. Even 32 years later, the market still hasn’t fully recovered.

If you really want to do some gloomstorming, there are plenty of so-called black swan events you can scare the family with. For example, a Carrington Event. This is where a massive solar flare engulfs the planet in a geomagnetic storm, causing a mass failure of electrical devices.

Hopefully you aren’t in a plane or relying on an electronically controlled heating system in Forty Below when it happens.

Black swans are by their nature highly improbable. You should also consider less rare but still dangerous events, called “grey rhinos” by risk mavens. In Yukon terms, grey rhinos are like brown moose. Because we are all used to the idea that moose live in the forest, we tend to underthink how dangerous they can be if you run into one on a ski trail.

The two brown moose risk events to think about are a prolonged power outage and a massive Fort-McMurray-style wildfire.

The people at Yukon Energy spend a lot of time thinking about grid resilience and doing contingency planning. But they can only do so much. We are very dependent on a few big assets such as the Aishihik dam. Think about the consequences of a major problem there, possibly combined with an ice storm that knocks trees onto a few thousand power lines.

In Quebec in 1989, 30,000 electrical poles were damaged and some people went several weeks without power. 600,000 people evacuated their homes. If that happened here, how long would your home stay warm? Do you have a generator or even a furnace wired for that purpose?

Wildfires are also scary. In 2019, fire experts made a presentation to Whitehorse city council. The Fire Weather Index (FWI) puts a numeric value on fire risk. It increases with conditions such as dry forests and wind. Fort McMurray’s FWI was 47 on the day of its infamous 2016 fire. In 1998, Whitehorse observed a day where FWI hit 69.8.

The report suggested danger whenever FWI exceeds 35. Whitehorse averaged 8.1 days per year where we hit this value from 1990 to 2018. With climate change, we can expect more such high readings.

You might want to show the family some news clips from YouTube of people fleeing that Fort McMurray fire. Whole neighbourhoods went up in smoke. People who only had a quarter tank of gas in the 4×4 had to abandon their vehicles on the side of the road.

Perhaps none of these things will happen. But if they do, you will want to have discussed your emergency plan with your family. In the Jan. 9, 2020 version of this column, I mentioned the risk of a pandemic. And then proceeded to take no precautions at all.

Regular Yukoners can’t prevent most of the risks above, but you can prepare. Financially, this includes keeping enough cash as a reserve in case of an unexpected layoff or spike in your mortgage payments. It also includes preparing for a local emergency. Register your phone with Whitehorse Alert at the City of Whitehorse’s website and visit getprepared.gc.ca for a good emergency preparedness checklist.

Of course, like your home insurance, this will seem like a waste if nothing happens. But if you need it, you’ll be glad you got up from reading this column and took some action.

Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He won the 2022 Canadian Community Newspaper Award for Outstanding Columnist.