Let’s face it – Canada’s reputation is not one of the glitzy stars of the world. It is rather conservative, moderate, and perhaps even a bit dull at times. But, those exact qualities allowed the nation to remain strong and secure during the recent recession. At the same time that the U.S. economy has been floundering with no end yet in sight, Canada weathered the storm that lasted just eight months.
Canada’s well managed banking sector was a key factor in saving the day. The country’s strict regulatory system, combined with a conservative banking culture and superior credit conditions, paved the way for stability. The recession saw the loss of more than 122 banks in the U.S. Not a single Canadian bank closed and none needed bailouts.
Certainly there has been Canadian unemployment. But, our workforce shrinkage of 2.5% was half of our American neighbours.
Let’s look at the GDP. Canada’s fell 5.4% but that’s far less than other nations like Germany’s 14.4% fall or Japan that plummeted by a whopping 15.2%.
Sub-prime mortgages dealt a death blow to U.S. banks, comprising almost 20% of the mortgage market. Canadian banks were a lot more cautious and only 7% of the market was comprised of sub-prime mortgages. Furthermore, banks in Canada rarely sold their mortgages and kept a tight reign, thus reducing the risks of default.
Conservative Canadians are more reserved? Quite possibly so, if one considers personal finances. Canadian household debt measures approximately 102% of income while the U.S. ratio is 114%. When Americans had to start repaying their debts, Canadians were able to take advantage of low borrowing rates and boost consumer spending.
Do Canadians have the last laugh? Not really. The recession has hurt everyone and is far from over around the world. But, whereas the great credit bubble burst in other countries, and many are still reeling from the effects of the recession, Canada has shone brightly as a model of fiscal prudence and responsible financial management.
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