Canadians Have Overtaken Americans in Wealth

From the USNews.com

For the first time in recent history, the average Canadian is richer than the average American, according to a report cited in Toronto's Globe and Mail.

And not just by a little. Currently, the average Canadian household is more than $40,000 richer than the average American household. The net worth of the average Canadian household in 2011 was $363,202, compared to around $320,000 for Americans.

If you're thinking the Canadian advantage must be due to exchange rates, think again. The Canadian dollar has actually caught up to the U.S. dollar in recent years.

"These are not 60-cent dollars, but Canadian dollars more or less at par with the U.S. greenback," Globe and Mail's Michael Adams writes.

To add insult to injury, not only are Canadians comparatively better-off than Americans, they're also more likely to be employed. The unemployment rate is 7.2 percent—and dropping—in Canada, while the U.S. is stuck with a stubbornly high rate of 8.2 percent.

Besides a strengthening currency and a better labor market, experts credit the particularly savage fallout from the financial crisis on the U.S. economy and housing market, which torpedoed home values and gutted household wealth. According to the report, real estate held by Canadians is worth more than $140,000 more on average and they have almost four times as much equity in their real estate investments.

In contrast to most of mainstream reporting, Canada’s strong currency has been imputed as manifestation of a relatively “superior” performing economy than the US.

Of course commodity exports have been partly responsible for the this but has barely been an indication of the resource course: the Dutch Disease.

Canada’s strength, according to the report, has been founded on two aspects: one relatively “better” labor market, and two, America’s boom bust cycles which has “torpedoed home values and gutted household wealth”.

While there are many other factors to consider for comparison, I would focus on three;

One, Canadian banks has outperformed the US. Like in the great depression, the US financial crisis of 2008 barely dinted on Canada’s banking system.

Two, Canada tops the US in Economic Freedom…

Canada ranks 6th in the Heritage Foundation’s world’s country ranking of economic freedom index compared to the US…

The economic freedom in the US has been in a steady descent.

Finally, Canada’s government has been relatively fiscal prudent than her neighbor.

As Cato’s Chris Edwards writes

The spending reforms of the 1990s allowed the Canadian federal government to balance its budget every year between 1998 and 2008. The government's debt plunged from 68 percent of GDP in 1995 to just 34 percent today. In the United States federal debt held by the public fell during the 1990s, reaching a low of 33 percent of GDP in 2001, but debt has soared since then to reach more than 70 percent today.

Bottom line: Economic freedom and fiscal prudence are once again depicted as key to economic prosperity.