Tuesday, August 9, 2011


It has been (sometimes) painfully obvious during  the last 48 hours that players along the investment food chain - big and small, institutional and individual - have clearly been spooked by this worldwide debt debacle and credit rating(s) downgrade.

Of course it isn't just within the United States. The European banks once again are having to rescue yet two more of their own (Spain and Italy) from the near precipice of total financial failure.  Though China is not itself without financial sin, it was a darn rude awakening over last weekend for our American friends to be lectured about their mountain of debt by the Communist government of the country's largest lender. The $14+Trillion hell-hole the United States Federal Government is into is just one component of the macabre imbroglio the folks at S&P and debt holders worldwide had to mull-over and consider to arrive at the credit downgrade which has now shaken confidence in the American "greenback" to the very core.

Individually, each man, woman and child in the United-States owes about $150,000 when their share of the Federal debt is combined with State, Municipal and personal borrowing commitments. That is a $45-Trillion drain on the world's largest economy. Be that as it may, much of it (about 40%) is being borrowed from offshore lenders despite growing anecdotal evidence of America's right-wing political agenda desires, efforts, and tendencies to insulate and isolate itself from the rest of the world.

On the Canadian side of the border where the Federal Government deficit is about $50-Billion and the total national debt roughly $1-Trillion, (though still cautious) politicians are sounding somewhat more smug about the long-term effects on our economy of this debt downfall. Though probably not a lesson for our partners south of the border, there is interesting evidence that Canada's embrace of the spirit of multiculturalism has worked in surprisingly strong terms to favour the economy. It comes in the results of a survey of rich Canadians undertaken by Bank of Montreal (BMO) and the Harris polling organization. The survey which was conducted amongst people who have more than $1-Million in "investable" assets found that about one-third of those investors were "new" Canadians (not born in Canada).  Even more interesting was that pollsters found 96% of those new rich Canadians had no plans to invest outside of the country.

There are about 250,000 immigrants who arrive in Canada each year. Clearly the very vast majority are not wealthy and are simply seeking a better life for themselves and their families. But,  as a
spokesman for BMO told the Financial Post of the survey results: "These findings speak to the spirit of Canadian multiculturalism and how this country fosters an environment that helps individuals to succeed and thrive. Attracting the best and brightest demonstrates the relative prosperity and openness of Canada's economy. This bodes well for long-term wealth generation."

The net result is that although about one-third of rich Canadians weren't born here, most of them are keeping the bulk of their money in their adopted home country. That's a worthwhile lesson learned.

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