I really wish I could provide you with structured, reasoned post written in full paragraphs that more or less hung together. But I can't: things are moving too quickly, and I promised myself I would work on my SSHRC grant application today. So here are some quick points.
- The odds of a Canadian version of the financial meltdown happening anytime soon are very small. Say what you will about the cozy clique of Canadian banks, it must be acknowledged that they are well-nigh indestructible. There were no bank failures here in the 1930's, and it looks as though they'll pull off the same trick this time around as well.
- The odds of a catastrophic decline in the value of mortgages are also very small. Yes, housing prices will no doubt soften in the next few months. But we're nowhere near the point where significant numbers of people will be walking away from their houses because they are worth less than their mortgages. (CIBC's Benjamin Tal has a good take on this here.)
- I haven't seen data or heard of anecdotes that suggests that credit in Canada is drying up. That doesn't mean there isn't any; I just haven't seen it. Or maybe I missed it; if you see something (for example, over here) that suggests otherwise, please let me know in the comments.
- As long as the Bank of Canada can keep dealing with the liquidity issues, the main problem will be dealing with the slowdown in the US real economy.
- If the recent expansion had been driven by exports of manufactured goods to the US, we'd be in deep, deep trouble right now. Let's all be grateful that this isn't 1998.
- The concern is what will happen to commodity prices. China has been an important driver of global demand. Can they keep it up?