Canada’s dirty little secret

Among the lies that are bandied about by Canada's politicians (not including me) during an election, is the one about Canada's fiscal restraint, and how we have our house in order compared to our American neighbours for example.
In the midst of this election campaign most of the "news" has focused on polls, parties, leaders and their whereabouts, with very little on issues that will affect everyone in the not-to-distant-future. An article in the National Post by Diane Francis highlights one of those issues. Her column Canada's Case of 'Dutch Disease' illustrates that the economy is not as rosy as the politicians paint it. Ms. Francis claims that much of Canada's current prosperity is due to the commodity boom fuelled by China's growth. If China were to stumble, look out.
I've written before on why I think China's growth is an illusion based their government's desire to export cheap stuff to the rest of the world, keeping their employment high, even at a loss, which they can absorb for the time being. At some point even they will not be able to continue, that could be months or years from now, its impossible to know. But when, China does stumble Ms. Francis says Canada gets badly hurt.
Her column comes after a report issued by a Montreal independent investment consulting firm MacroResearchBoard (MRB). Ms. Francis criticizes the report because "it ignores, as do politicians, Canada’s dirty little secret, which is that federal public debt to GDP may be the lowest in the developed world, but when provincial debts are included, the ratio is nearly as serious as America’s in relationship to GDP. To separate them is misleading because provincial debts are guaranteed by Ottawa. And a year from now, Ontario and Quebec alone will owe more than Ottawa, or half a trillion dollars." Ms. Francis goes on to say: "In fact, Eastern Canada’s economies resemble Michigan’s, Detroit’s or Spain’s, but are hidden by the boom in the West, led by Alberta.
But once commodity prices head downward, China slows or both, it will have a huge impact on Canada. This is the report’s important takeaway."
Ontario's debt is approaching $240 billion, Quebec's debt is approaching $236 billion, and the Federal government's debt is approaching $570 billion (April 25th, 2011). So the question is, how long before a problem occurs? Maybe when interest rates rise, do you think they ever will? This video won't make you feel any better either: