After several years of negotiations, and after overcoming significant protectionist sentiment on both sides, the Province of Canada struck a reciprocity agreement with the United States in 1854—essentially, a free-trade agreement in resources. Meanwhile, the Irish famine touched off waves of immigration into the colonies and the United States, fuelling growth.
As a consequence, ever more consumption was financed by borrowing against future incomes. But instead of systematically reflecting this inter-temporal shift of consumption opportunities in higher real borrowing costs, credit conditions were largely unaffected. Mispricing of credit can be protracted, but it exposes the credit market to sudden reversals of sentiment.