What has happened to Canada’s economy? And how will we increase living standards?

I put together some graphs that compare the US and Canadian economies. It seems while the US economy does have its housing booms, Canada’s business investment has seemed to have shifted in a more permanent fashion.In 1999, Canada had a spending ratio of about 1.85X on productivity enhancing business tools vs residential construction. The US ratio was about 2.4X. Today, the US spends has about the same ratio (2.4X), whereas Canada’s has fallen to 0.5X, a decrease of 73%.In 1987, in the last housing bubble, spending on machinery/eq/ip was still above 6.2% of GDP, giving a ratio of about 1.0X. Yes, we had too much credit flowing into real estate, but at least we still had a balance between productivity investments and speculation. Today, real estate speculation is near double that of productivity enhancing investments.In fact, since around 2009, the level of investment into machinery/eq/ip has remained lower than in the depths of the early 90’s recession. In a way, we are suffering through a 12 year old recession, because we are unwilling to raise rates and get back to a real economy, rather than a credit fueled housing bubble.Productivity drives growth and increases living standards over the long term. Housing bubbles make some people rich on paper, but ultimately do nothing for growth. Strong economies don’t have households with record debt. Nor do they have headlines telling people to buy a house now, or regret it for the rest of your life. Canada is in a bad way and something needs to change.In my opinion, we need higher rates and without them, we are setting ourselves up for some serious economic and political turmoil. Pay now or pay later.Source data…Statcan & Bureau of Economic Analysis. via /r/canadahousing https://ift.tt/3Ehsm0p