Krugman Wonders about Canada's Economy

link here to article

Canadian banks did not get caught in the housing bubble like US banks. Its economy has suffered from the US recession because we are the largest importer of Canadian products. Since Krugman believes that the bursting of the housing bubble and rising household debt levels were more important causes of the US recession than the problems in the banking system, he looks at data from Canada and he sees problems. Canada has had its own housing bubble but prices have not dropped back to pre-bubble levels yet. Moreover, household debt to income has continued its upward slope in Canada.

It seems to me that housing prices in Canada may have been driven upward by population growth as well as by low interest rates. Canada's open immigration policy has encouraged immigration and may have contributed to a spike in demand for housing in Canada. The percent of the US population owning homes increased during the US boom. I wonder if this has happened in Canada?

Also Krugman plays down the role of the financial crisis because the banking system's recovery has not led to job growth. Job loss following the financial collapse, however, was immediate and severe. This was due to concerns in the business community about the implications of the banking crisis. The impact of falling household demand on business hiring came later in the cycle.