My feeling was the ripple effect, just as you said, shock doesn't stop at the border. Not a good time to make financial investments for the short term.
This is mostly about the US private debt market which is estimated to be in the $2-3 trillion dollar range. The Canadian private debt market is not really that large.
I’m not sure that Canadian and European pension funds or Mutual Funds have not invested directly or indirectly in US Private Equity and could be exposed to losses even if they are not the lenders. In their search for higher returns, Private Equity may have been a good investment at some point.
I’m sure someone has a better feel for it and my chime-in.
Does this article refer to Canada specifically or to the US, or both combined?
Good question Ron 👍
This one is primarily about the U.S. financial system, where private credit has grown into a massive $1 trillion market with less oversight.
Canada isn’t at the centre of it... but we’re not immune either.
If something breaks in the U.S. system, it tends to ripple outward through global markets, investments, and pension exposure.
So think of it like this...
👉 The risk is built in the U.S.
👉 The effects don’t stay there
That’s why it’s worth paying attention.
You are right on Fred!
And globally we have some very greedy, expansionists, corrupt leaders who seem to want it all.
Very unstable time.
What country are you referring to
This one is mainly about the United States.
That’s where the private credit market grew into a huge, lightly regulated system.
Other countries... including Canada... have some exposure through investments, but they didn’t build it to the same scale.
So the short version...
👉 Built in the U.S.
👉 Felt globally if it goes sideways
I believe that we saw this movie before. It was called the Sub-prime Mortgage Horror Show.
You’re not wrong Kevin.
Same basic script...
Hide the risk → repackage it → chase yield → ignore warning signs → act surprised when it breaks.
2008 had subprime mortgages.
This time it’s private credit sitting outside the banking system.
Different name… same behaviour.
Let’s just hope the ending isn’t a sequel nobody asked for.
Well now, that's scary.
Definitely an eye opener Fred, hope we are in better shape than our neighbours, less risky.
We are in better shape overall Patsy...
mainly because our system stayed more regulated and less “creative” than what built up in the U.S.
But we’re not sitting in a bubble either.
Our pensions and institutions invest globally, so if something cracks down there, we’ll feel it through markets, returns, and confidence.
So yeah…
👉 Less risky? Yes.
👉 Untouchable? Not even close.
That’s the difference.
Investors must realize this too & start moving in other directions?
Is this a somewhat worldwide problem now that started in the US, or does it apply mostly to the US? It's important to know this, if investing.
Great question Carol-Ann... and it matters.
This is primarily a U.S.-driven issue, because that’s where private credit exploded into a massive, lightly regulated market.
That said, it’s not contained.
Large investors around the world... pension funds, insurance companies, institutions... have exposure to it, including some outside the U.S.
So think of it this way...
👉 The risk is concentrated in the U.S.
👉 The exposure is global
If it unravels, the shock doesn’t stop at the border... it moves through markets, investments, and confidence.
That’s why investors everywhere should at least be aware of it.
Thank You, Fred.
My feeling was the ripple effect, just as you said, shock doesn't stop at the border. Not a good time to make financial investments for the short term.
This is mostly about the US private debt market which is estimated to be in the $2-3 trillion dollar range. The Canadian private debt market is not really that large.
I’m not sure that Canadian and European pension funds or Mutual Funds have not invested directly or indirectly in US Private Equity and could be exposed to losses even if they are not the lenders. In their search for higher returns, Private Equity may have been a good investment at some point.
I’m sure someone has a better feel for it and my chime-in.
You’re absolutely right to raise that Luc.
Canadian and European funds do have exposure...
often through private equity, credit funds, or blended institutional portfolios chasing higher returns over the past decade.
That’s where this gets tricky...
👉 They may not be the direct lenders
👉 But they’re still tied into the same ecosystem
Private equity and private credit often sit under the same roof, with the same capital flowing through both.
So when stress shows up in private credit…
It doesn’t stay isolated for long.
That said, the concentration and scale of risk is still much heavier in the U.S., which is why it’s likely to be the epicentre if things escalate.
So your instinct is right...
👉 Not immune
👉 But not ground zero either
Thank you. Good info to know.
Really good information! Grace Blakeley also has a recent video short on what private credit is and the problem now
https://substack.com/@graceblakeley/note/c-232464445?r=fbs2f