It is human nature to think (hope) that grass may be greener in farther pastures. If you happen to be living in trauma centers like Darfur or Haiti, no doubt you would be right.

But if you happen to live in the developed world—ground zero for our generation’s credit crisis—there is little truth to support the hope. We have pretty much done the same dumb, over-levered things everywhere these past few years: politicians wanting to be popular adopted a unanimous and mistaken belief that increased home ownership on pretty much any terms was good. Bank heads believed that securitization made them genius magicians who could magnify zero equity into fabulous risk-free profits for all. The masses bought in; the debt and equity markets levered it up. Until suddenly (or so it seemed) in March 2007, people began stirring from the dream to discover we aren’t “richer than we think”, in fact we are collectively broke.

The past month a fresh spate of horror is sweeping the world as the extent of the European debt debacle unfolds. The UK is a nightmare of its own. Those who believed stupidity was localized to the US the past decade have to rethink. Those who believe that Canada has been smarter and thus immune from the debt disease are dreaming still. Concerns about Canada’s ballooning debt and housing prices made front page news last weekend for the Wall Street Journal: As Housing Rebound in Canada Spurs Talk of a New Bubble and the Globe and Mail: Big Six banks urge Ottawa to tighten mortgage rules.

Meanwhile an important point to realize is that unlike the US where borrowers can lock in rates for 30 years, Canadian mortgages tend to be set for 5 year terms and less. This means eventually higher rates ahead will be a big hurdle for those barely carrying mega mansion loans at today’s rock bottom rates. We add to that the fact that at December 2009 Canadian house prices had leapt up about 20% in 1 year for no fundamentally sound reason other than low, low, rates and lax lending rules. Sound familiar?

Whether Canada is the worst of the global debt-enslaved is really not the question. We are certainly well within the pack of over-levered, under-saved and presently under-employed-- that much we know. Politicians and cheerleaders can argue about Canada\s economic superiority-- but it is a mirage. Our commodities focus has left us over-levered to the consumption bubble on the way up and now vulnerable to the consumption contraction on the way down.

The fact is that our stock market lost half of its value along with the rest in both of the bear markets of the last 10 years. Each time a resurgence of risk aversion hits the world flies back to the US dollar we suffer big outflows from Canadian currency, equities and commodities. Pretending this is ‘not our problem’ is a big mistake for those trying to protect and grow capital.