Canadian Mortgages, Housing, and Banks Safe from US Troubles

Last week’s turmoil in the US banking and mortgage sector has had some people dredging up the spectre of the Great Depression. At least one expert on this side of the border disagrees profoundly with that comparison.

Speaking to the Montreal Gazette, Thomas Velk of McGill University noted that the fundamentals of the US economy are, in fact, sound. A similar statement by US presidential contender John McCain landed him in hot water last week, but the numbers presented by Velk give evidence to the argument. Unlike the situation in the 1930s, growth in the US economy in the last quarter was strong, unemployment is low, and productivity is high.

Velk also addresses concerns about the writedowns Canadian insurance companies are being forced to accept. He thinks the impact will be minimal, unless our government decides to bail out the companies. Speaking to reporters last Friday, Prime Minister Harper put any fears of a government-led rescue to rest: “…the Canadian financial system is very strong and the balance sheets of the banks and insurance companies are solid enough that they don’t need any financial aid.”

All of this news is sure to put the minds of many Canadians at ease.