Oh, Canada!

A Canadian reader writes: 


Drum and Zakaria are busy applauding us Canadians for our financial foresight. While it is true that the relative lack of leverage in the financial system was a good thing, it is also true that the Canadian economy tends to follow the course of the US economy with a 2-3 quarter lag. In short, does this (Canada's trade balance, released Tuesday, attached) look like the chart of a healthy economy? We are a leveraged play on the US and Asian economies.

bot_feb11.gif

Canada is now being held up as a regulatory example to us, but Canada has always been an odd duck--it was also the only major economy in the Great Depression not to have a banking crisis.  You can tell a lot of stories about why this is so, but most of them--like nationwide banking, big downpayments on mortgages, and banks keeping substantial portions of the loans they originated, are found elsewhere.  Moreover, it doesn't explain why they didn't have a banking crisis the first time around, when both their banking system and ours looked very different.  Another Canadian of my acquaintance credits some deep resistence in the Canadian soul to get-rich-quick schemes, or even get-rich-slow schemes, but I couldn't comment.

It is quite true, however, that if the American economy really tanks, it won't matter much how great the Canadian banking system is; they'll have a nasty depression just the same.  Their GDP is by now so dependent on exports, particularly to the US, that a downturn in the US means massive job losses in our neighbor to the north.

What they do indisputably have is a government in a much better position to deal with a crisis, because they've been running surpluses and paying down debt for over a decade.  If only we'd had similar prudence.
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

What Happened to the Milky Way?

Light pollution has taken away our ability to see the stars. Can we still save the night sky?

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

What Happened to the Milky Way?

Light pollution has taken away our ability to see the stars. Can we still save the night sky?

Video

The Faces of #BlackLivesMatter

Scenes from a recent protest in New York City

Video

Desegregated, Yet Unequal

A short documentary about the legacy of Boston busing

Video

Ruth Bader Ginsburg on Life

The Supreme Court justice talks gender equality and marriage.

Video

Social Media: The Video Game

What if the validation of your peers could "level up" your life?

Video

The Pentagon's $1.5 Trillion Mistake

The F-35 fighter jet was supposed to do everything. Instead, it can barely do anything.

More in Business

Just In