While Canada has managed the crisis better than many countries, a collapse in oil prices, weak foreign demand and overwhelming uncertainty are all weighing on the Canadian economy. Needless to say, this scenario does not require much imagination—we are living it. But this scenario also describes Canada in 2009, as we began pulling out of the global financial crisis.
When pegged exchange rate systems in Asia broke down under pressure, because they were fixed at levels that had become incompatible with changing economic fundamentals, both local and foreign investors rushed for the exits. And as exchange rates tumbled and interest rates soared, a host of other long-standing problems, especially related to weak banking systems, were unearthed.