[PEN-L:1839] Re: Response to Doug Henwood's questions (long)

[dhenwood@xxxxxxxxx (Doug Henwood)]

Sid Shniad wrote a long response the other day to my queries about the
(un)reality of the Canadian debt problem, citing among other things tales
of Canadian corporate pressure on Moody's to lower the country's debt
ratings.

The June edition of the OECD Economic Outlook - the December one isn't in
my mailbox yet - tells a harsher tale. Gross Canadian government debt in
1995 is estimted at 95% of GDP, the second-highest in the G-7 after Italy's
122%. Next is Japan's 89% and the US and Germany, tied at 63%. Subtracting
intragovernmental holdings to yield net debt (which I'm not so sure is such
a good idea) still leaves Canada #2, at 64%, after Italy's 121%. The UK
comes in 3rd at 47%, then Germany, at 46%, then the US at 38%.

When it comes to foreign debts, however, Canada is in a class by itself
among the G-7. As of 1993 (the latest year the OECD reports), net foreign
liabilities for Canada were 43% of GDP, nearly four times Italy's level
(12%) and over four times the US level (10%). Net investment income -
actually an outgo in Canada's case - is estimated at -5% of GDP in 1995,
more than three times Italy's -1.5%, and dwarfing the US's -0.3%.

I'd say these are very bad numbers, and no progressive government in Canada
could avoid facing them. The problem may be put to bad political use by the
right, but there's no denying there's a problem. Any progressive government
taking office in Canada would be extremely vulnerable to a capital strike,
more than any other country in the G-7 probably.

Doug

--

Doug Henwood
Left Business Observer
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