
Money Flooding Out of Canada at Fastest Pace in Developed World - kspaans
http://www.bloomberg.com/news/articles/2015-11-02/money-flooding-out-of-canada-at-fastest-pace-in-developed-world
======
bigethan
I'm currently living in Tunisia, which does not allow currency to leave the
country in any meaningful way. You can change a maximum of 10,000 TD at a
time, equivalent to ~$5,000 USD, and if you did it many times, they'd probably
stop letting you do so.

As the Tunisian economy reels from the crash of the tourism industry due to
terrorism, all of the new startups are starting to cater to entrenched upper
middle class Tunisians who's family money is stuck here. The policy kind of
enforces saving money, and buys a bit of time for the economy if things go
awry. It also creates a lot of animosity for the Tunisians who'd much rather
have Euros to invest properly.

Economic policy is fascinating stuff. Any other fun stories out there?

~~~
pjc50
The UK had capital controls until the 1970s. I see the GBP far up there on the
opposite side of the chart; presumably that represents all the money rushing
into the property bubble.

I'm coming round to the belief that the big downside of free movement of
goods/people/capital is the possibility of "sloshing": rapid change that
capsizes the economy. Entire areas can dry up or become booms overnight. And
because there isn't and can't be free movement of real estate to compensate,
we get craziness in the property market.

~~~
crdoconnor
>I'm coming round to the belief that the big downside of free movement of
goods/people/capital is the possibility of "sloshing"

High capital flows do correlate with frequency and severity of financial
crises:

[http://www.voxeu.org/article/ez-crisis-and-historical-
trilem...](http://www.voxeu.org/article/ez-crisis-and-historical-trilemmas)

This is why poorer countries tend to enact capital controls. Foreign capital
has a tendency to flee all at the same time (for a safe haven like America),
which is ruinous for the economy. There's something of a feedback loop there.

This is why some investors describe emerging markets as markets from which it
is difficult to emerge in an emergency.

~~~
kspaans
I've seen this article repeated in the NatPo[0], and more-or-less copied in
the HuffPo[1], but no where else. I suspect this is mostly fearmongering. The
US market is so much bigger than Canada's that most investment portfolio
recommendations for Canadians include double-digit proportions of US equities
and bonds. And if they are weighted towards energy, I can see why they'd shift
south of the border.

0 - [http://business.financialpost.com/investing/global-
investor/...](http://business.financialpost.com/investing/global-
investor/money-is-flooding-out-of-canada-at-the-fastest-pace-in-the-developed-
world)

1 - [http://www.huffingtonpost.ca/2015/11/02/canada-economy-
manuf...](http://www.huffingtonpost.ca/2015/11/02/canada-economy-
manufacturing-capital-investment_n_8452426.html)

------
Mikeb85
Thankfully I had my money in HKD and Euros for several years now...

Seriously though, this is what happens when you base your economy on primary
industries (aka. resource extraction) and commodities take a huge hit.

Canada has a major infrastructure deficit, no competitive industries, major
brain drain (and why not, you can go to the US or Europe and get paid way
more, and pay less in cost of living), and absurdly expensive real estate.
Even the cost of meat has gone up to the point where it'll make an Albertan
think about going vegetarian (then again, a cabbage costs like 3$).

Not sure I'd even want to start a tech company here - people are too cheap to
pay for services, and good luck ever getting any funding - maybe a small
government grant or something...

~~~
guiomie
Considering the CAD is so weak to the USD and there are skilled software
engineers up there, wouldn't it make sense for VC's to fund Canadian startups?
If you can get a software engineer at 30-50% of the price in the US with state
funded healthcare ...

~~~
adventured
Why would you think you can get a software engineer at 50% the price of one in
the US? Particularly given Canada's median income is now roughly on par with
the US.

The US is a very large place with a lot of cities, it has 30 cities the size
of (or larger than) Vancouver. You can find good software engineers across the
entire nation, including in lower cost locations. From Portland, to Las Vegas,
to Kansas City, to Raleigh, to Atlanta, to Detroit, to Pittsburgh, to Tulsa
etc. You have dozens of cities to choose from that will have good engineers.

There's no reason you'd need to pay bay area salaries or locate in Silicon
Valley (or NY). Unless you're trying to build the next juggernaut tech-startup
and are going to take on the VC to match (in which case that pays for the high
salaries).

~~~
gabbo
Depends on the market. I don't live in the Bay Area or NY, but knowing how
much I make where I am (plus that of my peers) and similar pay levels in the
Toronto tech labour market (one of the better ones in Canada), I would
probably end up with ~50% of my US compensation in Canada even when assuming 1
USD = 1 CAD. Once you factor in the exchange, it's probably in the low 40s.

And that doesn't even account for take-home pay after taxes and the large
Canadian urban markets' cost of living, since the tax brackets top out quite a
bit lower in Canada (not that I think the higher taxes are a bad thing; I
don't feel my taxes in the US are high enough).

------
moonshinefe
I'm not necessarily convinced oil investment leaving Canada is a major blow
after all. It will leave some unemployed, but most of that oil from what I've
read was being exported abroad and the profits pretty much exclusively went to
private businesses and the elite. The employment benefits locally were a drop
in the bucket.

It wasn't like Canada was living in a golden age during this 'boom', in fact
housing prices across most of Canada and costs in general have skyrocketed. If
there was a 'boom', it wasn't being felt in most of the country.

With globalization I just fail to see how it helps the average person, it just
seems to mainly help the extremely wealthy. The rest of us are just left in a
race to the bottom.

~~~
hodder
This analysis misses the knock on effects of the oil economy. In Calgary or
Edmonton for instance, the centre of the oil economy in Canada, all jobs
depend on oil. If you don't work in oil but work in a geographic region
fuelled by oil profits, your profits will drop as well. All retail and most
all service industries are being hit.

Canada was absolutely enjoying an oil boom. It can be hard to see the
connection between a new highway or hospital and oil prices at 100, but rest
assured they are intertwined. Yes people who owned oil production facilities
benefit most as they took on the most risk, but all of Canada benefits when
they do well. It is sort of like being a cafe owner in Silicon Valley saying,
"I'm not sure how I, as a normal hard working person, benefits from all these
rich programmers around."

Further, oil revenues are a major component of the tax base to Federal and
Provincial governments. With those revenues drying out, transfer payments to
non oil provinces, and social programs across Canada are threatened. Oil is
absolutely fundamental to the Canadian economy at this point.

------
thomnific
For some context ...

[http://alberta.ca/budget/](http://alberta.ca/budget/)

Long story short ... it's about really, really poor prospects for the oilsands
going forward, added to a very uncertain fiscal situation:

[http://www.cbc.ca/news/canada/calgary/alberta-budget-debt-
wi...](http://www.cbc.ca/news/canada/calgary/alberta-budget-debt-with-
spending-affects-credit-optics-1.3292983)

For what it's worth, yes, this is what we get for being hewers of wood,
drawers of water, etc. Traders don't call CAD a commodity currency for
nothing.

Edit: wrong link!

------
api
Isn't this a really positive indicator that Canada is acquiring more foreign
holdings?

Isolationism is generally a path to irrelevance. The most powerful countries
are porous and actively engaged with the world, allowing capital and people to
flow in and out. Isolated countries wither.

~~~
kspaans
Agreed. The savvy Canadian investor (even a retail investor planning for their
retirement) wouldn't invest 100% in Canadian investments. I think this is a
natural rebalancing of the admittedly enery- and commodity-heavy sectors of
the Canadian market.

------
cdnsteve
I would seem to think this is the case for China, not Canada.
[https://news.ycombinator.com/item?id=10499126](https://news.ycombinator.com/item?id=10499126)

~~~
jrgv
In financial markets, China is usually considered an emerging markets country,
not a developed markets country, so this is not necessarily a contradiction.

------
agiamas
Canada, meet Greece, the King of Capital Controls in European Union :)

~~~
alex_anglin
I don't get the comparison: What capital controls has Canada put in place? The
newly elected government has pledged an anti-austerity budget for the next few
years and the debt level is much more sustainable than Greece given surpluses
from the late nineties to late 2000s (plus a small one this year from the
outgoing government).

