Resource Bubble?

Here's a bit from a Maclean's article worrying that Canada's current boom is a resource & housing bubble that is bound to burst:

Investors, both domestic and foreign, simply can’t get enough of Canada. In 2010, non-residents poured $116 billion into Canadian investments, the highest level ever. In January, they continued to add to their haul, snapping up $11.8 billion in Canadian securities. That month Peter Schiff, the CEO of Euro Pacific Capital and someone well known for his dismal view of the American economy, set up operations in Toronto and has been promoting the country as an ideal place to invest. “I think the Chinese appetite for resources is going to be particularly voracious,” he said in a speech from the floor of the old Toronto Stock Exchange. “Canada has a lot of what China needs.” Then, last month, HSBC, the U.K.-based banking giant, launched an exchange-traded fund devoted to Canadian stocks that will trade on the London Stock Exchange. “We think that Canada, with the relatively uncommon combination of being rich in natural resources coupled with having a stable political system, has attractive features for growth investors,” Mark Rodino, HSBC head of ETF sales in Europe, told the U.K.’s Money Observer magazine.

Eleven years into the bull market in commodities, it’s easy to forget just how much Canada has riding on strong resource prices. For one thing, the boom has boosted our paycheques. The rise in commodity prices was responsible for two-thirds of the 15 per cent gain in disposable income experienced in the last decade, Bank of Canada governor Mark Carney said in a 2008 speech. While Canada’s soaring loonie has hurt manufacturers, it’s also improved living standards by keeping inflation low. And rising commodity prices have also helped keep unemployment muted. As bad as Canadians think the recent recession was, in terms of the job market it was the mildest downturn of the last 30 years. In January, the Canadian economy added nearly double the number of jobs created in the entire U.S. economy, which is 10 times larger.

It is a bubble and it will pop but it isn't clear how soon and it isn't clear how big the bubble truly is. If the US roars to life and China booms, it isn't that big a bubble. If China falters and the US never really recovers from the Great Recession, the Canada will inevitably fall flat on its face. Only the future knows what is in store for Canada.