Canada was the economic underdog in the 1990s and early 2000s in the developed Western world. Japan was the new economic superstar throughout most of 1980s and 1990s. In the summer of 1995, Japanese economic prowess reached a new high. With the flying Japanese yen, Japan’s GDP was almost as large as that of the United States. The United States, on the other hand, staged a spectacular comeback in the 1990s with the advent of the technology era. Companies like Microsoft, Intel and Cisco Systems ushered in a new age of American economic dominance, helping the US in reclaiming economic leadership from Japan. Britain, France, Germany and Italy were moving ever closer to a more unified European Union and the Euro was being planned as the sole competitor to the US dollar.
Canada was left out in the cold. Sure, Canada is rich in natural resources and is a major exporter of oil and gas. But in the 1990s, economic growth was dominated by technology advances in computer and the Internet. Such growth did not require significant increase in consumption of resources. In the summer of 1998, the price of crude oil dropped to a multi-decade low of US$10 per barrel. Russia, a major oil exporter, was in a full-blown financial crisis. Canada’s key source of competitiveness turned to the constant devaluation of its currency. Canadian dollar sank to $1.58 per US dollar at the end of 1998 and reached an all-time low of $1.62 per US dollar in January 2002. Many people in Canada believed that the only way Canada could retain jobs was to constantly devalue the Canadian dollar.
But Canada’s luck would soon improve in the new millennium. Canada would once again become the economic darling of the world.
On September 11, 2001, terrorists brought down the World Trade Centers in New York City in the worst attack on the US mainland. President George W. Bush declared the War on Terrors. On March 20th, 2003, US troops invaded Saddam Hussein’s Iraq. US victory was swift and decisive and 20 million Iraqis were liberated from the rule of one of the most brutal dictators in the 20th century. However, US invasion of Iraq also broke the original equilibrium in Iraq and the Middle East and opened a Pandora’s box. The invasion unleashed a series of uncertainties suppressed under the Saddam regime and the Middle East was in even greater turmoil. Oil price reacted violently to the fear of disruption of oil supply in the region. Crude oil traded at US$20 per barrel in early 2002 and rose to US$36.76 on Feb. 28th, 2003, right before the War broke out. By October 2004, oil reached US$55 per barrel after the US troops were engaged in bloody street fighting with Saddam loyalist insurgents.
On the other side of the globe in that March of 2003, a seemingly unrelated event was playing out in Beijing, China. The Communist Party of China held its annual People’s Congress meeting in the month and selected Hu Jintao as the nation’s President and Wen Jiabao as the premier of the government. Hu and Wen were mandated with a ten-year tenure and China would enter into an extended period of unprecedented economic growth with strong emphasis on increasing consumption of resources. China’s crude oil consumption would double from 4.95 million barrels a day in 2002 to 10 million barrels a day in 2012. China’s insatiable appetite for oil and other resources would prove to be a major boon for Canada.
Starting in 2003, a national euphoria was descending upon Canada. Canadian dollar was rising fast against the US dollar and reached $1.20 per US dollar in late 2004. Oil price kept going higher, reaching US$70 per barrel in 2006. Jobs were plentiful in Canada and the long-held Canadian inferiority complex against its American cousins was quickly dissipating. On September 28, 2007, Canadian dollar closed above par for the first time in 30 years against the US dollar. On November 7, 2007, Canadian dollar hit $0.9071 per US dollar during trading, a modern-day high. The strength of Canadian dollar became a new source of pride for Canadians. Canada was now billed by many as the “new energy superpower”.
The new year of 2006 quickly came. The stars of How I Met Your Mother were sharing their New Year Eve limo ride through New York City in their first season and one of them, Cobie Smulders, is actually a Canadian. Canada was on the doorsteps of an unprecedented housing bubble with the GTA at the centre of it.