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The continuing deleveraging process in the United States is finally getting somewhere, but the fact that it took five years from the onset of the financial crisis suggests that Canadians – who haven't even begun deleveraging – have a long, painful period of adjustment ahead.

U.S. consumer debt levels reached 95 per cent of GDP in March of 2009 and, more than three years later, the shedding of debt continues. This painful process of spending restraint is explained by the work of professors Kenneth Rogoff and Carmen Reinhart, who warned that recoveries from financial crises like 2008 are far slower than normal cyclical recessions: "Severe postwar financial crises … have a deep and lasting effect on asset prices, output and employment."

The pace of Canadian household debt growth has plateaued at levels just below 95 per cent of GDP, matching peak debt levels south of the border. Bank of Canada Governor Carney is far from content with current levels of indebtedness, calling it "the biggest domestic risk" for the economy.

The primary means by which U.S. consumers accomplished delveraging – defaulting on mortgages – is less practical for Canadians. In the United States, the mortgage defaults merely transfer the liability from consumers to the banking system. In Canada, the debt will remain in the household sector, and it will likely take much longer to repair consumer balance sheets.

The U.S. example suggests that there is no quick fix for excessive household debt and that, if the Bank of Canada is correct and deleveraging must occur, there is a multiyear period of slow consumer spending ahead.

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