18.05.12
Introduction
These are worrying times.
In our largest trading partner, households are undergoing a crave process of balance-sheet repair. Partly as a consequence, American needed for Canadian exports is $30 billion lower than normal.
In Europe, a renewed calamity is underway. An increasing number of countries are being forced to pay unsustainable rates on their borrowings. With a bestial deleveraging process taking hold in its banking sector, the euro quarter is sinking into recession. Given ties of trade, finance and self-reliance, the rest of the world is beginning to feel the effects.
Most fundamentally, going round events mark a rupture. Advanced economies have steadily increased leverage for decades. That era is now decisively over. The pointing may be clear, but the magnitude and abruptness of the process are not. It could be long and orderly or it could be unkind and chaotic. How we manage it will do much to determine our relative prosperity.
This is my subject today: how Canada can arise in this environment of global deleveraging.
Source: Bank of Canada