Canadians look and sound (mostly) like Americans. To a Canadian to be referred to as an American is a huge insult (well maybe not that big, but we are always concerned with foreigners hating Americans...why take a chance!). Anyway, while the rest of the world suffered from America's mortgage binge of 2008, few in Canada were affected -- excluding my old firm. So when the world went crazy, Canada just slowed down a bit. Canadian banks had to use the liquidity of the Bank of Canada, and its (the BoC) balance sheet grew, but within a few quarters that liquidity was fully repaid. For Canadian banks this was an opportunity to shop for talent south of the border, with great success for some (thinking of you RBC, BMO) and less so for others (CIBC, TD and NBC).
Canada's economy slowed a bit, as oil prices dipped as did commodities but the people's principal asset (their houses) hardly faltered, it has been a constant upswing in Canadian house price with only a brief slowdown in 2008. Of course not all is well in the Great White North, but its still ok. In fact, last week StatsCan announced that labor participation had not been this high since 1976 -- 40 years ago!
What of our southern neighbors. Well the 2008 crisis was one of the deepest recession that the country ever faced, thanks to Obama and Congress a depression was avoided. Obamacare was passed and slow economic recovery ensued. The pace of recovery was somewhat similar to other recessions, but the dip was so much deeper that recovery took nearly a decade. What's more the quality of new jobs created was less than appealing, offshoring, the ending of the manufacturing base and the writing is on the wall.
What has changed, in a bad way, is credit. The lessons of 2008 seem to have been forgotten, instead of mortgages its higher education or car loans, but the maladie is the same, standards are weakened to ensure that "growth" continues.
What is amazing is the recovery of the stock market, those who spoke of market having a lot of growth potential between 2012/2017 have been absolutely right. Today America's stock market is about as highly valued as it has ever been (in terms of earnings per share), but then again you would expect this kind of outcome in a very low interest rate environment. The all in yield for stocks has been very good over the past decade.
There are some worrying signs ahead, the US dollar has really weakened tremendously over the past few months especially against the Euro and the CAD. No so long ago the Euro was trading at 1.11 and its now at 1.18 so sure its not like a 30% increase but it is significant.
Back to our subject: Canada's economy is hitting all cylinders, and has for a number of years. Sure the slow down in natural resources was a blow to the economy (especially out west) but the weakness in the CAD was a real bonanza to Ontario and Quebec exporters -- between 2008 and 2016 the CAD went from 1.07 to 0.71 -- that's a massive reduction in the cost of Canadian labour. Moreover, healthcare is a much smaller fraction of costs in Canada than in the US. All these factors add up. Also we don't have the toxic political system that the Americans seem to enjoy...
So Canada was saved from the 2008 fall out because its financial institutions were conservative. It also helped that if the head of the Bank of Canada wanted to talk privately to all Canadian bank CEOs he could start at 9 am and be done by noon...of the same day. There are 8 major and another 10 minor financial institutions in Canada, with the top 6 controlling about 80% of all deposits.
Canada system is not so much role by rules as it is ruled by the law of small numbers -- its easy to see the trend in Canadian banking when there are so few institutions. The manufacturing side of Canada did what it did because the weakened economy allowed the CAD to fall against the currency of its trading partner (USA) and reduce cost dramatically (40% folks).
There you have it economic growth in Canada has been good, unemployment is at a 40 year low -- anyway you count it, labor participation is down but that's caused by the retirement of baby boomers. Politics are not toxic, healthcare, while far from perfect, is manageable.
Canada's economy slowed a bit, as oil prices dipped as did commodities but the people's principal asset (their houses) hardly faltered, it has been a constant upswing in Canadian house price with only a brief slowdown in 2008. Of course not all is well in the Great White North, but its still ok. In fact, last week StatsCan announced that labor participation had not been this high since 1976 -- 40 years ago!
What of our southern neighbors. Well the 2008 crisis was one of the deepest recession that the country ever faced, thanks to Obama and Congress a depression was avoided. Obamacare was passed and slow economic recovery ensued. The pace of recovery was somewhat similar to other recessions, but the dip was so much deeper that recovery took nearly a decade. What's more the quality of new jobs created was less than appealing, offshoring, the ending of the manufacturing base and the writing is on the wall.
What has changed, in a bad way, is credit. The lessons of 2008 seem to have been forgotten, instead of mortgages its higher education or car loans, but the maladie is the same, standards are weakened to ensure that "growth" continues.
What is amazing is the recovery of the stock market, those who spoke of market having a lot of growth potential between 2012/2017 have been absolutely right. Today America's stock market is about as highly valued as it has ever been (in terms of earnings per share), but then again you would expect this kind of outcome in a very low interest rate environment. The all in yield for stocks has been very good over the past decade.
There are some worrying signs ahead, the US dollar has really weakened tremendously over the past few months especially against the Euro and the CAD. No so long ago the Euro was trading at 1.11 and its now at 1.18 so sure its not like a 30% increase but it is significant.
Back to our subject: Canada's economy is hitting all cylinders, and has for a number of years. Sure the slow down in natural resources was a blow to the economy (especially out west) but the weakness in the CAD was a real bonanza to Ontario and Quebec exporters -- between 2008 and 2016 the CAD went from 1.07 to 0.71 -- that's a massive reduction in the cost of Canadian labour. Moreover, healthcare is a much smaller fraction of costs in Canada than in the US. All these factors add up. Also we don't have the toxic political system that the Americans seem to enjoy...
So Canada was saved from the 2008 fall out because its financial institutions were conservative. It also helped that if the head of the Bank of Canada wanted to talk privately to all Canadian bank CEOs he could start at 9 am and be done by noon...of the same day. There are 8 major and another 10 minor financial institutions in Canada, with the top 6 controlling about 80% of all deposits.
Canada system is not so much role by rules as it is ruled by the law of small numbers -- its easy to see the trend in Canadian banking when there are so few institutions. The manufacturing side of Canada did what it did because the weakened economy allowed the CAD to fall against the currency of its trading partner (USA) and reduce cost dramatically (40% folks).
There you have it economic growth in Canada has been good, unemployment is at a 40 year low -- anyway you count it, labor participation is down but that's caused by the retirement of baby boomers. Politics are not toxic, healthcare, while far from perfect, is manageable.
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