The trajectory of US consumer demand proved unsustainable, and what we now know is a tenuous financial structure has buckled. With each new piece of economic data, with every trading day, the implications of that reality become more obvious and more painful. Leaders of the G-20 got together last weekend to talk it out, issuing a seven-page compendium of declarations, commitments, agreements, principles and promises that boils down to this: See you after Jan. 20.

World leaders agreed to work together to plug the gaps and weaknesses in current financial regulatory systems that precipitated the collapse. And though the Nov. 15 G-20 communique was as opaque on the topic as the web of interconnected obligations at the middle of the financial crisis, subsequent public statements and follow-up actions by participating leaders leave little doubt that governments will spend to stimulate their respective domestic economies.

Specific measures are still to be determined. But Canadian Prime Minister Stephen Harper, for example, took to a set of microphones at his nation’s Washington, DC embassy Saturday afternoon to announce he’s prepared for a budget deficit if that’s what it takes to mitigate the effects of the slowdown. Canada has been in surplus for a decade, so this is no trivial matter.

The Prime Minister benefits from certain political realities that make it easier for him to pivot so abruptly from long-held views on fiscal responsibility--first of all, North Americans have had their fill of campaigns and elections.

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And a fast, firm response could also prove good tactics for the notoriously shrewd Mr. Harper. The willingness to entertain an imbalance is a good measure of the gravity he assigns to the problem, and his country is, by way of its prudence, on good footing to make such commitments. He’s not necessarily “buying” votes. And if indeed federal intervention it is, should it prove temporary, targeted and effective, Harper might finally earn his cherished majority government.

Wednesday’s Throne Speech kicking off Canada’s 40th Parliament included a pledge to aid the auto sector, but that still depends on consultations with US policymakers about a possible bailout package. The speech also included a pledge that the government will “provide further support” for the Canadian manufacturing sector, particularly the auto and aerospace industries.

Harper used the occasion to issue a head’s up to Canadians, saying the government is likely to go into deficit early next year. A “strong fiscal foundation is not an end in itself,” read the speech, “but is the bedrock on which a resilient economy is built.”

Finance Minister Jim Flaherty backed away from his comments last weekend indicating a package would be cobbled together in time for inclusion in a statement on the economy he’ll deliver next week; in fact, rather than consolidate spending programs in a mini-budget before the end of the year, stimulus or industrial-aid measures will be included in the formal budget early next year.

Among other specifics, Harper committed to creating a common national securities regulator, offering incentives to business to make capital investments and making it easier to develop a northern natural gas pipeline, a reference to the long-delayed, CAD16.2 billion Mackenzie gas pipeline.

Harper also said that by 2020, 90 percent of all electricity generated should be from clean or renewable sources. Nuclear power will be a critical element in meeting that target. Harper’s recent talks with provincial and territorial leaders likely included the need for infrastructure spending and the possible timing of various projects.

Assistance for the Big Three automakers from Canada depends largely on what Washington ultimately decides to do. The debate in DC seemed to break down Wednesday, but reports late Wednesday night suggested China’s Shanghai Automotive Industry Corp (SAIC) and Dongfeng “have plans” to buy GM and/or Chrysler assets. That may explain in part the late Thursday talk of a compromise that will allow the Big Three to tap into USD25 billion in loans originally set aside for the automakers to retool their factories.

The story in the link above quotes a China-based 21st Central Business Herald report that cites a “senior official of China’s Ministry of Industry and Information Technology--the state regulator of China’s auto industry--who dropped the hint that ‘the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers.’” That’ll give them the chance to sell China-built cars with globally marketable brand names--without the labor/legacy costs plaguing GM, Chrysler and Ford.

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Harper promised during his election campaign to put another CAD200 million into Canada’s CAD250 million Auto Innovation Fund. President-elect Obama is in favor of rescuing the auto industry and its 3 million jobs. That’s a lot of jobs and a lot of consumption vanished, and that’s another log on the deflationary fire.

As we’ve noted in other contexts, these are no ordinary times. It’s useful, for example, to distinguish a prudent distribution cut from a desperate stab at hoarding cash. As well, spending into the red to stimulate aggregate demand is distinct from building in structural deficits. The global financial crisis has made balance sheet strength fashionable again when it comes to evaluating companies. It’s what will allow those that have it to survive.

Countries that entered this extraordinary period with sound finances are similarly positioned to weather it better and emerge from it stronger relative to not-so-prudent nations.