The article referred to did in fact mention that this central economic planner just lowered rates, and that means inflation. It didn’t mention how much risky mortgage paper their banks have on the books. It did mention sub-prime, ignoring the fact that sub-prime mortgages were only the tip of the iceberg in defaults, the canary in the mine, as it were.

The Canadian dollar hasn’t been defiled as quickly as ours, only about half as quickly. As ours falls faster, they face the specter of losing export sales, and exports to the U.S. are a huge part of their economy. So the central bankers have a choice — follow us with inflation, or follow us into recession. Or more likely, both.

Canada has inflated her currency, and will experience the pain of the collapse of her own housing bubble. Perhaps they will be wise and just let the recession unwind the bad investments, or perhaps they will follow Bernanke in trying to paper it over, a plan with dangerous risks.

If I were a Canadian, I would be just as nervous as I am here in the U.S. right now. If the U.S. dollar tanks, or the U.S. enters a depression, or U.S. banks start collapsing like dominoes (and Bear Stearns was the first one), then Canada is in for a very bad time. Recovery will be just as difficult in her socialist economy as in ours.