Just a thought...
It seems almost paradoxical that while USA and Canada are the closest neighbours and biggest trading partners, Canada is doing much better economically than the USA after 2008 financial crisis as well as after 2001 dot-com bust. Media and economy analyst like to attribute to particular reasons such as Canada's mortgage system is more displined or more conservative banking system, or whatever specific reasons they find. While there might be some truths to these analysis, however I wonder if all these reasons are just backward rationalization of a bigger cycle - cycle of investment flows...
Remember during the economic growth of early 1990's and start of the commercialization of internet, USA was growing at a much faster rate than Canada. Even as the closest trading partner, Canada lagged behind, and loonies traded at as low as 67 cents American. We had bunch of problems people like to lay blame to - threat of Quebec seperation, government wasteful spending, low crude oil and resource prices etc... Canada looking better only started to outgrow USA after the dot-com bust, and even more attractive after 2008 credit crisis.
This is what I think really happens... World's money supply is very liquid, everyone in any country of the free world can put their money in any country, any corporation or any commodity with a few clicks of mouse or a call to their broker. So when there was a scientific breakthrough that spurs the growth which usually starts in USA, all the money flows into that country. When the growth starts to slow down, and too much speculation causes some crashes, fear makes money flow out of the USA into a safer alternative - smaller economies that are heavily resource based like Canada, Australia, gold, oil, metals etc... And when there comes another technological innovation that restarts the growth - which almost always happens in the USA, money flows out of Canada, Australia, gold, oil etc... back into USA and Canada once again lags behind, the cycle repeats itself all over again...
This is what's really happening in Canada today, and simplest explanation why our employment and economy has not yet suffered even though our closest trading partner is doing so badly, and seemingly unstoppable real estate boom continues... This is because foreign investment flows into Canada, creating jobs, creating local business, pushing up real estate prices etc... And Canada will continue to do well as long as USA remains in bad shape, but when another economic boom starts in the USA, all the money previously invested in Canada will flow back into USA... the cycle starts again...
It seems almost paradoxical that while USA and Canada are the closest neighbours and biggest trading partners, Canada is doing much better economically than the USA after 2008 financial crisis as well as after 2001 dot-com bust. Media and economy analyst like to attribute to particular reasons such as Canada's mortgage system is more displined or more conservative banking system, or whatever specific reasons they find. While there might be some truths to these analysis, however I wonder if all these reasons are just backward rationalization of a bigger cycle - cycle of investment flows...
Remember during the economic growth of early 1990's and start of the commercialization of internet, USA was growing at a much faster rate than Canada. Even as the closest trading partner, Canada lagged behind, and loonies traded at as low as 67 cents American. We had bunch of problems people like to lay blame to - threat of Quebec seperation, government wasteful spending, low crude oil and resource prices etc... Canada looking better only started to outgrow USA after the dot-com bust, and even more attractive after 2008 credit crisis.
This is what I think really happens... World's money supply is very liquid, everyone in any country of the free world can put their money in any country, any corporation or any commodity with a few clicks of mouse or a call to their broker. So when there was a scientific breakthrough that spurs the growth which usually starts in USA, all the money flows into that country. When the growth starts to slow down, and too much speculation causes some crashes, fear makes money flow out of the USA into a safer alternative - smaller economies that are heavily resource based like Canada, Australia, gold, oil, metals etc... And when there comes another technological innovation that restarts the growth - which almost always happens in the USA, money flows out of Canada, Australia, gold, oil etc... back into USA and Canada once again lags behind, the cycle repeats itself all over again...
This is what's really happening in Canada today, and simplest explanation why our employment and economy has not yet suffered even though our closest trading partner is doing so badly, and seemingly unstoppable real estate boom continues... This is because foreign investment flows into Canada, creating jobs, creating local business, pushing up real estate prices etc... And Canada will continue to do well as long as USA remains in bad shape, but when another economic boom starts in the USA, all the money previously invested in Canada will flow back into USA... the cycle starts again...
