Friday, July 29, 2011

Canada Maintains Stellar Credit Rating. Canada Rated AAA by Moody's. Global Investors Pour Money into Canada.

Amidst a spreading financial crisis, and an effective default in Greece, Canada has maintained its status as a safe-haven for global investors. Though a number of analysts are expecting that there might be a housing downturn sometime soon, Canada's overall financial situation is a bright spot in today's gloomy economic climate.

Moody's stated that Canada has a "high degree of economic resiliency, a very high government financial strength, and low susceptibility to risk." This is in stark contrast to the United States, which is drowning in government spending and soaring deficits. Will the United States default? Probably not considering the calamitous consequences that it would have on international finance. American businesses and their bankers would much rather ensure that the United States experiences inflationary pressures from monetary easing rather than a default on its debt. 

Canada's triple A credit rating is the highest possible, and it has maintained this rating since 2002. Of course, if the Harper government continues on its current course of deficit spending, we will not be able to maintain this rating, and higher interest rates will surely result for the government. Interestingly, only 16 countries in the world still possess a triple A rating, so Canada is in an elite pool, and this has caused investment to pour into the Canadian market. This has caused our currency to increase and for interest rates in Canada to stay relatively low as compared to most other nations. Globally, investors feel safe keeping their money here, and that means that the federal government does not have to offer competitive rates in order to attract the loans that it needs to operate.

Some additional information concerning this topic is in the Toronto Star.

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