# Canada due for debt crisis and recession, economist argues



## dubmac (Jan 9, 2011)

http://www.cbc.ca/news/business/canada-debt-crisis-forbes-1.3510581

Interesting. 3rd last paragraph suggests Canada will go the way of Europe as stimulus dries up, and that excess credit will pile up and cause a recession. Author suggests 1-3 years away. Possible? Likely?


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## AltaRed (Jun 8, 2009)

Probably. The current government and BoC Governor must be Keynesian economists....which works when an economy is stalled and there is no liquidity (no money moving around), aka the Great Depression. But here we are in a non-recession, with consumers blowing their brains out spending money, and low interest rates (lowest burden on debt for a long time).... and yet few of our governments can balance the books because they are spending like drunken sailors? 

My belief is we will have stagflation, i.e. inflation without GDP growth. Interest rates have to go higher as the loonie gets closer to play money and consumer spending will dry up as they sudddenly have to service their debt. The picture does not look pretty to me.


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## andrewf (Mar 1, 2010)

Just to be clear, we're talking about a private debt crisis.

Which makes it interesting that the government is moving on bank bail-in regime. Hopefully this means that the private debt crisis does not become a public debt crisis via bailouts. Which means you should be cautious with allocation to Canadian banks either common or preferred shares.


When/if the bubble bursts, I would not be surprised to see the dollar weaken into the 60 cent range, particularly if the US market starts to pick up and the Fed is able to reduce QE/raise rates. It's a good time to ensure you have a sizable allocation to foreign equities.


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## james4beach (Nov 15, 2012)

dubmac said:


> suggests Canada will go the way of Europe as stimulus dries up


That's hardly news. Every country's market will plummet as global stimulus dries up. The global economy is entirely driven by artificial, short-term stimulus. It's the only game in town and it's been very serious central bank manipulation.

Institutional investors know this too. The only bet you can make these days is whether you think stimulus can perpetually drive markets higher (i.e. QE and ZIRP can drive markets forever), or if it's a temporary phenomenon that will eventually be exhausted.


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## tygrus (Mar 13, 2012)

Well the writer says china goes first, so I suspect that has a cascade effect here.

But in 1-3 years the US is bound to go in too. Its been 7 or 8 years already since their last real recession.


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## sags (May 15, 2010)

A credit crisis would be a symptom. The cause is income/wealth disparity.

_Between 1985 and 2005, the OECD estimates that increasing inequality has knocked nearly five percentage points off growth in OECD countries._

https://www.washingtonpost.com/news...-the-stuff-and-its-dragging-our-economy-down/


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## lonewolf (Jun 12, 2012)

dubmac said:


> http://www.cbc.ca/news/business/canada-debt-crisis-forbes-1.3510581
> 
> QUOTE] "Timing precisely when these countries will have their recessions is not possible" the above link says.
> 
> ...


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## LBCfan (Jan 13, 2011)

AltaRed said:


> ...... they are spending like drunken sailors? .....................


As a former drunken sailor, I beg to differ. No real drunken sailor could spend like a government. Quit with the slander.


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