David Rosenberg: Canada is in crisis, but maybe not for much longer
The announcement that the New Democratic Party is splintering from its coalition with the Liberals served as a reminder of what a colossal mess the government has left the national economy. The imbalances are shocking and numerous.
For one, Canada is in a debt crisis. Not necessarily in the government sector, but for whatever reason, someone at the helm thought it prudent to allow the household sector to run up an extraordinarily leveraged balance sheet.
Total debt-to-income sits at 177 per cent, which is double the government sector debt load and nearly 40 percentage points above both the historical norm and the peak of the credit market bubble in the United States in 2006-2007. We all know what happened next.
Canadians, in the aggregate, are shelling out 15 cents in debt service for every after-tax dollar earned
With the Bank of Canada’s prior aggressive tightening cycle bumping against this debt burden, Canadians, in the aggregate, are shelling out 15 cents in debt service for every after-tax dollar earned, which is a level that presaged each of the past four official recessions.
Second, we have had a government that has not been at all focused on capital formation and productivity, camouflaging the underlying weakness in the economy by promoting the most aggressive immigration policy on record — to a point where population growth is running at a hot 3.5 per cent annual rate.
But the multiplier impact on the economy has been so nonexistent in that it has only managed to spin out a real gross domestic product growth trend of less than one per cent year over year. Real per capita GDP has sequentially contracted in each of the past five quarters and is now down 2.4 per cent on a year-over-year basis.
Third, and this is a
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