Canadians now wealthier than Americans?

In an astonishing economic turnaround, Canadians appear to have overtaken Americans in terms of individual wealth, according to Macleans:

How did this happen? Canada often comes out ahead when you look at squishy things like quality of life. But since when were we richer? Mintz credits the rising loonie, the boom in commodities, and better public policy. He says that over the past decade productivity growth in the U.S. has slowed, while we've been hacking away at our government debt and lowering taxes. In short, as a nation, we've been doing everything right, while the U.S. has been doing everything wrong.

When you look at how individual Canadian and American families make and spend their money, it gets even more interesting. The numbers show that our median household incomes are about the same, or at least they were back in 2005 when the most recent figures came out. That year the median household income in Canada was about US$44,300, after you adjust it for the exchange rate and our lower purchasing power, while the American median was US$46,300. Since then, the loonie has gained on the U.S. dollar, so we've likely narrowed the gap. But while our incomes may be similar to American incomes, we're still much wealthier because we have less debt. What you make isn't a good measure of how rich you are — to figure out your true wealth you should add up everything you have and subtract what you owe. And Americans owe more. A lot more. Here in Canada the average amount of personal debt per person is US$23,460. In the U.S. it's a whopping US$40,250. And all those numbers are from 2005, just before their housing market slipped into a sinkhole. If you looked at the numbers now, you'd find that Americans are even further behind, because their largest asset — their home — is worth less. "There has been a lot of destruction of wealth in the U.S. over the past few years," says Mintz, "and that would affect the net worth figures significantly. I would suspect that they would be even worse off today."

This is a very interesting article, although it does reinforce a few smug Canuck notions, it's surprising how different the average statistical American is from the average statistical Canadian. (Note the careful deployment of the word "statistical" in that statement.) Certainly some of the differences between Canadian and American attitude to debt can be traced to the differences in tax policies: Americans can deduct mortgage interest, while Canadians don't have that incentive. That alone would encourage people to take on a larger mortgage debtload, and with the housing market currently wobbling and the employment picture dimming, there are going to be more people discovering that they can't service those larger debtloads.

That being said, we're still disproportionally dependent on the overall health of the US economy . . . if recent anaemic economic numbers continue or worsen, Canada will still suffer as our largest trading partner does. In economic terms, no North American country is an island, and we're all much more vulnerable to economic downturns in the US economy than we used to be.

H/T to Craig Nodwell for the link.