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Canada's fate in the event of US economic collapse

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posted on Sep, 15 2008 @ 10:44 AM
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I've been trying to sort this out for a while now. Obviously Canada's economy is tied to the US economy, but is it inextricably so?

The US is the largest buyer of Canadian exports. Americans are also one of the largest groups of tourists to Canada. So Canadian tourism and manufacturing will be hurt by an American financial collapse, not to mention natural resource industries like lumber once Americans can't afford to build houses any longer. I don't think oil will bust as there are people lining up to buy it such as China.

But what will happen to the Loonie? The Cdn dollar has been at, above, or only just below par with the USD for about a year now. Will it crash if the USD crashes?

What say you, financial aficionados?




posted on Sep, 15 2008 @ 10:55 AM
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reply to post by sc2099
 



Good post,

Although I have no answers or even speculations, I have been wondering the same for a while now.

It seems to me Canada has been leaning towards foreign markets for a while now (especially tourism), maybe the big guys have seen the writing on the wall.



posted on Sep, 15 2008 @ 11:25 AM
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reply to post by Grailkeeper
 


Thanks. I have been wondering as well. I want to do what I can to C my A, but I want to know the extent the damage might reach.

The 5 or so big banks in Canada have had some trouble with losses due to involvement in the housing crisis. RBC for example has lots of real estate holdings in the SU southeast and losses from these investments. But overall their earnings are good and they don't offer crazy mortgages like in the US...anymore.



posted on Sep, 15 2008 @ 10:51 PM
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reply to post by sc2099
 

Don't worry about "US economic collapse," because the economy is expanding even though the expansion has slowed down due to the FED decision to make things tighter for the borrowers.

The current financial upheaval can't collapse the way goods and services are exchanged. There is enough money in the banks to keep things going. Even if all the money suddenly disappeared from the banks, the US Treasury will print new money and haul it to the vaults.

The problem here is liquidity. For example, Lehman Brothers pay cash to the folks who will build your house. You promise to repay your lender over the period of 30 years plus interest on the loan. But 30 years is a big room for changes from good to bad and vice versa. As it happened, too many folks borrowed money to build houses that they couldn't actually afford with respect to the future economic development. They stopped paying the loans and their houses got foreclosed. These houses are assets to the lenders, but they need to be sold, so the lenders would have operating capital to continue what they do for living: lend money. The foreclosed houses didn't get sold in such a rate that it would keep Lehman and other lenders afloat. The lenders are also borrowers; they can borrow money from banks and other investors. Since they couldn't liquidate or sell the foreclosed houses fast enough to take care of their own debts, they got into trouble. End of the story.

This situation cannot collapse the economy; it just bruises the financial system. But it will affect the Federal Reserve Board's decision regarding interests rate. Higher interest rate means slower economy, lower interests rate means the opposite. The Feds will try to avoid the mistake to keep the interest rate low thus sending a false signal to the borrowers on any level that things are rosy and they can afford anything. In the long run, expect higher interest rate and slower economy. That means your business may not get that many orders as you are used to, and things may stay that way for a bit longer. Don't get fooled by a sudden drop in interest rates. It won't last long; these will be just short, temporary fixes.

It's a jungle out there -- and there is always a room for some unexpected sh-t to sneak through.



posted on Sep, 19 2008 @ 07:54 AM
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Now is a good time to invest in rental housing... if your up for it. No flipping, just buy and rent.




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