Since 1990, Valuation Gains Outweighed Canada's Cumulative Current-Account Deficit About Three to One
Canada has spent more than its national income for much of the post-global-financial-crisis period — the sort of flow imbalance that would, on the usual arithmetic, drain a country's net foreign assets. Instead, Canada's net foreign assets have risen, because favourable movements in asset prices and exchange rates have repriced both what Canadians own abroad and what foreigners own in Canada. A Bank of Canada paper puts the scale of it bluntly: since 1990, cumulative valuation gains were about three times the current-account deficit, which relaxed how much adjustment was needed to stabilize the country's external position. That is the difference between a balance sheet and a shopping list. Net foreign assets are marked to market continuously, so a country can run deficits for years while the stock still climbs — and the same repricing would cut the other way if prices and currencies moved unfavourably.
AI-generated discussion · Different perspectives
Coverage fixates on flows, because flows come with quarterly headlines and a villain. If valuation did roughly three times the work of the deficit over three and a half decades, the number that actually moved Canada's external position is the one nobody votes on: the asset price.
Valuation gains are paper gains. They raised net foreign assets, but they rest on asset prices and exchange rates moving favourably — not on a lever any finance minister can promise to keep pulling.
Fair, but the point is about how much adjustment is needed, and it is less than the deficit alone implies. Reading the current account as the whole story flatters the pessimists and the complacent alike.