What Happens to Canada When the US Debt Crisis Hits?

<p>What would a US debt crisis mean for Canada?Martin Eichenbaum, Charles Moskos Professor of Economics at Northwestern University and International Fellow at the C.D. Howe Institute, says a US fiscal crisis is a “very high probability event” over his lifetime. The question is not exactly when it will happen, but whether Canada will be prepared when it does.In this episode, Eichenbaum explains how a US debt crisis could affect Canada through weaker US demand, falling exports, financial-market losses, a stronger Canadian dollar and lower commodity prices. He also discusses why Canada needs enough fiscal space to respond to a crisis and why Canadian financial institutions should stress-test their exposure to a US sovereign debt shock.The bigger question: if the US debt bomb detonates, will Canada wish it had prepared sooner?</p>