Did we dodge the meltdown or just delay it? Remember, Canadians took on a lot of new private debt in 2009 to keep the party going.
And instead of bailing out the banks, we kind of gave them a 'pre bailout' via the CMHC policies.
A good read:
http://www.progressive-economics.ca/...hurts-so-much/
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But the implication of Keen’s analysis is that when the expansion of the private debt burden does stop (as it must sometime), it will wreak disastrous results on spending power, GDP, and labour markets. It’s not just that a decline in debt would be associated with another downturn; that’s something most of us are well aware of. Because our economy has become so dependent in recent years on the rapid (and obviously unsustainable) expansion of private debt, merely stopping (or substantially slowing) the growth of that debt would knock a giant hole in aggregate spending - enough to send us into a double dip.
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The implication of Keen’s model is that the only reason the recession was not much worse in Canada (like Australia) is because of the surprising continued expansion of private indebtedness right through the downturn. In both countries, this was entirely due to feverish activity in real estate markets (mostly the resale of properties, not new construction), sparked by near-zero interest rates and a healthy dose of speculative greed. That expansion of private debt, despite declining incomes, has pushed private debt ratios to record highs. Clearly it cannot continue forever (although it’s not easy to predict exactly when it will turn around).
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