It's different situation but one I do think about occasionally. I bought my first unit in the late 80's when interest rates were 17.5%. Disclaimer - Inflation was running at about 8% at the time. You could get a term deposit at 12% easily. Within a few years interest rates had dropped by 4% or 5% as we went through the recession.
The ambiguous point I am trying to make is we can't cut rates by three or four percent now. In fact we probably can't cut them by more a 1%. If we do we will just become more and more reliant on foreign debt ( as the article doing the rounds states ) as savers get punished and borrowers get rewarded. We have created a financial world were it is all about lending and low rates to fuel assets price rises which do nothing meaningful for the world. In the end we will pay the price, the world needs savers and forcing them into riskier assets will have consequences.
Also, it goes against economics 101 but to me lending is finite especially given we have very little real economic growth within the system. I actually preferred the old financial world ( even when rates went to 17% ) were there was more of a equilibrium between savers and borrowers and people had to save up for month or longer to purchase something rather than just borrow to do so. Debt at one stage will have to be repaid, you can't rely on asset price rises to pay for your purchases indefinitely.
Sorry about the rant, but to answer your question Canada is now in recession so no reason why we can't be. We are extremely similar economies. My guess we will be in recession by this time next year.
