Is Canada good?

Recently, and numerous times in the past, a certain right wing podcaster, comedian and UFC announcer called Canada Communist, amongst other strange and flagrant adjectives that I won’t repeat here. While this is something that I thought any Canadian with a brain in their skull would scoff at, I certainly did, I have found that not only do many Canadians agree with this person, and their guest, but believe we live in a vast hellhole. A “third world country” even.

Now, let’s never-mind the fact that this person himself admits, he knows nothing about our government, our political system or the people who live and work here, and that Canada was recently ranked the #2 country to live in which includes an overall Adaptability score ranking second in the world, 3rd in Quality of LIfe and 4th in social purpose. Canada Also ranks 6th overall in freedom on a global scale, with America trailing us at 5th and 15th place overall, respectively.

Quality of Life in America lands in the mid 20’s (23rd), with Education 25.3 points below Canada and Healthcare a whopping 57.8 points behind us. While we do not live in a perfect nation, I would imagine someone speaking from Texas, a state that ranks 35th in the nation in Education, 32nd in Healthcare and 47th in opportunity, might consider working on fixing the problems of his own back yard. hmmm?

I suppose if I had to choose, I would not choose to live in a country where I would die early and pass on crippling medical debt to my family. But that is just me.

Calling Canada Communist and our PM a dictator seems a little strange to me when more than 50% of the people of the state he lives in lack basic human rights.

But hey, we enjoy freedom of speech and expression on this continent, he can say what he likes for clout. The problem and what got me thinking about the subject'; “what is wrong with Canada?” is that so many people believe we live in a broken nation and agree that our democratically elected government is Communist.

How did we get here? How can the rest of the world view Canada, by nearly every metric, as one of the best nations on earth, but so many Canadians see it as the opposite. Believing, without knowing what 1st, 2nd, 3rd world means, that we live in some communist 3rd world hellscape?

I really don’t know. But I think it is time to dispel some of the nonsense we are observing with some facts and good news about this Country.

First things first, as I mentioned up top, Canada is a very free and excellent place to live. While a lot of people point to the Emergencies Act as a step too far, or perhaps mandates provinces set up during Covid as draconian, we do in fact live in a very free place. Special times call for special circumstances, rightly or wrongly. The Charter of Rights is more than one fancy page, maybe read it and understand what laws are.

Please don’t think some liberal think tank came up with this. The Fraser Institute, a conservative Canadian NGO and the Cato Institute, a self professed Libertarian Right organization, are the people behind the Freedom Index. They use a wide variety of metrics to determine their rankings. I would not consider these two organizations, shall we put it, fans of Liberal pursuits, but still rank Canada extremely highly.

And that is great, because it sets the tone for a lot of the positive things we have to look forward to over the coming years. But also, some potential for upheaval.

Generally speaking, Canada has historically held a very stable economic and political environment on which to generate policy. Federally, Provincially and from a municipal standpoint, our governments tend to be just right of centre, with very little (until recently) spectral movement. Federally we have never really seen a radical government.

Conservatives are a little more right of centre than Liberals, but historically, not by much. Due to the nature of our political makeup, Canada is a very safe place for foreign interests to do business, which has kept our economy moving forward for the entire lifetimes of the people reading this. While it may not seem that way to many, from a macro perspective, it is simple and good to do business in Canada.

In fact, in all of the G7, we have the most simple tax system and we do the best job of removing tax burdens from Small to medium enterprises. (SME’s) Isn’t that cool?

While some of the players change over time, not much about this picture has changed in many decades. Will that last?

Speaking of taxes, we have one of the most progressive tax regimes on earth, and while we rank in the top 3rd of highest paying countries at 25th (lower than 56 other countries). There is certainly room for improvement, regardless which side of the spectrum you believe in, we certainly have it pretty good here.

Where we could use a little help here is on the lower end of the spectrum where working class Canadians are likely paying too much tax, and the extremely wealthy pay too little.

With that being said, when we look at political stability for the moment, and taxes, it is no wonder our Gross Domestic Product (GDP) growth is in such solid spot. Let’s explore important GDP factors where Canada has been quite resilient through the last two major global economic events. 2008 and Covid.

If I asked you what you think Canada’s growth was compared to other countries, what would you say in response?

I beg this question in most of my meetings and the response back is generally very negative. Alberta is a funny place, we’re simply too far from Ottawa and also somehow too close. Alberta makes up 16.33% of Canadian GDP this percentage rarely fluctuates beyond a few points up or down. We see ourselves as much more meaningful to the overall macro picture in Canada than we are. That said, our share helped ensure Canada would hold among the worlds best GDP growth projected over the coming years. (source) Which is great, right?

A world of Debt

While Canada appears to have a huge amount of debt, it aligns with our ability to pay debts quite well, and leaves us in an enviable position as our economy continues to grow.

Small part of the globe, but still a major player.

With fewer than 28,000,000 tax payers, and a simple Debt/GDP ratio of 1.015x Canada is in a great spot to continue to borrow and grow. Compare this to the USA ratio of 1.27x and there is very little reason to believe that Canada is in any kind of financial trouble, despite what the media and politicians would have you believe.

Can we pay our bills?

Canada has an excellent credit rating overall and as illustrated in these slides, it is easy to see why.

Few households or businesses on earth would be capable of generating this kind of growth, considering revenue.

Governments are not households, nor are they businesses. They are extremely complex organizms that we are attempting to break down into simple terms.

Canada is in a good a spot as it has been in 3 decades at least. The stats don’t lie.

I think so, we are also a leader in our ability to pay our bills. Did you know that Canada ranks best in terms of national net debt to GDP? Now you do. For a nation as long and tall as we are, with such a small tax base, we can sure pump the dollars out. The stability and resilience of our economy ensures a stable and great credit rating of AA+, a downgrade from 2020 where we held a AAA credit rating, but lets be honest, a lot of you would have assumed it was far worse, right?

We do have some issues with consumer debt to GDP, and this may become worse as mortgages continue to renew while the Bank of Canada continues to hold overnight rates where they are, but barring any unforeseen spikes, Canada currently enjoys among the lowest levels of inflation of the G7. What hurts us the most is the lack of competition in this country. We are governed by a grocer oligopoly that is indeed able to lower food prices, but has spent money on stock buybacks, dividend scaling and executive bonuses, all while keeping wages low. The same can be said for energy. Again, there is improvement to be made, but overall inflation is returning to historical norms and prices will drop eventually.

All this is to say, we are nearing the inflection point where it is likely we would see central banks begin to reduce rates. Conventional wisdom states that the delay between raising interest rates and falling inflationary pressures is about 18 months, well, we are just about to bang on that window.

Back in 2008-9, our federal government and the Bank of Canada (BoC) took some extremely drastic steps to curb what could have been an extremely intense recession. Instead, Canada enjoyed a soft landing and far fewer issues due to some Canadian laws, some luck and prudent financial management by our banks and institutions. We fared far better than our G8 (now G7) counterparts, and enjoyed a muted but solid expansion in the economy and markets that well prepared us to be able to handle whatever form of disaster the world could throw at us.

Due to economic and political stability, a growing list of solid legislation from the feds and quick action on their part when the world stopped turning in 2020 at the beginning of the Covid Pandemic, Canadians were again able to weather the storm better than most of our counterparts, which led us to invest more of our portfolio into Canada. Through 2020 to the end of 2021, things looked peachy. 2022 saw global inflation rise by a rate we haven’t seen in, I dunno, a hundred years?

We’re pretty smart, we know how to sustain ourselves in a tough spot.

Through this, childhood poverty has fallen by 40%, overall poverty is well below pre-Harper years. Employment is still near multi generational highs. Yes more people than ever are using food banks, but I would point back to earlier in the post, these pantries ought to be stocked by the people keeping food prices high.

I didn’t say Canada was a perfect place, but I did say we live in a great place. Subsidized daycare pays back into the economy $6 for every $1 we spend, and put hundreds of thousands of people to work. Our Healthcare and Education systems, while needing work, are excellent pillars in our society we ought to be proud of. We’re peacekeepers, not mongers of war or colonizers (I do understand the irony of this statement), we have one of the worlds best national pensions, we’re one of the wealthiest nations on earth and are free to spend our money wherever and however we choose.

The world agrees and the stats tell us that we are free and stable. Perhaps it would be a good idea to take a positive look at things and define where we could be better and find a way to progress.

Not everything is perfect. Far from it, but as a country, we have worked hard and prospered through some of the most volatile and corrosive economic conditions we’ve seen in a very long time.

I like it here. I think Canada is a wonderful country, and the rich tapestry we have collectively created from coast to coast, the shared experiences of a disparate but also somehow compatible human beings living across 7,560 kilometres of gorgeous land, makes us unique and interesting.

I hope you share this experience. I hope you can look out at the country and see what I see.

Thanks for reading, have any thing constructive to add? Comments are open.

I hope you all make a very nice Christmas and holiday season.

2024 is a new year and a time to keep progressing!

Darris Cameron,
CEO
Financial Value Inc.