"Which Western economy has both a budget surplus as well as a current account surplus?" asks Fred Jones of Jutland Capital Management. "Or, what country has the world's second-largest oil reserves?"

The answer to both questions is the same. It's that land north of the 48th parallel.

How Canada got such vast quantities of Mother Nature's gifts we don't know. Canada not only has oil reserves second only to Saudi Arabia, she also has what Saudi Arabia and California both lack - water, as well as immense supplies of other natural resources.

If you believe, as we do, that the coming decade or two are likely to be kind to raw materials but cruel to paper assets, that alone should make Americans want to take a look across the border at what Canada has to offer.

But it is not just the works of nature that interest us there; we also like how man has played his part. And we particularly like one thing the Canucks did - they resisted temptation, while Americans gave into it.

We drift back a few years. The Reagan administration, faced with the perennial choice of whether to raise taxes or cut spending decided to do neither. Instead, it cut taxes and borrowed - giving itself and its citizens more money to spend. The spending spree currently reaching its zenith in the United States can be traced back to those years...among others. What it has wrought takes our breath away each and every day. The U.S. economy stands behind no other when it comes to spending and to debt. It is numero uno.

But where is the Canadian economy?

"When we examine what happened when Canada faced a similar situation in the mid-1980s," writes Jones, "...we see that the government chose to make some very difficult and unpopular choices. Starting in the mid-1980s, the Canadian government resisted the politically expedient temptation to cut taxes. In fact, the Tory government of Brian Mulroney actually introduced a new federal tax, the goods and serves tax (GST). It was a consumption-based tax modeled after a similar tax in New Zealand."

Thus did the Canadians tighten the screws on both their government and their citizens. Neither was given much rope; neither hanged himself.

"Of all the G7 countries," notes Harold Chorney, "only Canada remains obsessed with balanced budgets and avoiding deficits."

Readers might consider replacing their U.S. dollars with the Canadian brand. Both are emitted by English-speaking countries in the North America. Both are made of paper. But one comes from the world's largest debtor - now desperately dependent on imported energy and imported capital. The other comes from a country that is an exporter of both. The former has not enough energy and capital. The latter has so much it can share with its neighbor - particularly its giant neighbor to the south.

Our guess is that the sharing will go on...but the terms will change. Canada is likely to want more dollars for its exports. The Canadian dollar
- also known as the 'Loonie," because it has a picture of a bird on it, rather than a dead president - will likely go up.

Not only does Canada have the winds of major economic trends at its back, it seems to have the good sense to trim its sails. While U.S. federal debt races ahead as if the ship of state had lost its rudder, its mind and its master...Canadian federal debt is actually in decline...and at least one province, Alberta, has paid off all its provincial debt.

Yes, all the Western nations are likely to lose ground against new Eastern competitors. But some will lose more than others. Canada, thanks to man and nature, may come out better than most.

Buy Canada.

*** A note from Chris Mayer telling of something most have no idea about: labor shortages in China...

"I've written labor constraints in China. So, I was interested when a recent Wall Street Journal article confirmed this idea of a shortage in skilled labor in China.

"The article quoted the head of a French consulting firm, which operates a business out of Guangdong in southern China, employing 500 people.

"'Eighty million people live in this province,' he said. 'When you see that, you think you can get anything you want. It's just not true.'

"The problems: a weak educational system, not a lot of mid-level managerial talent and a cultural propensity to prefer local firms to Western ones. These are problems that are spread out among many other parts of China, not just Guangdong.

"Of the 1.3 billion people in China, only 5% or so have college degrees, compared with 25% of the U.S. population. Even among these college- educated, there are complaints that most of them are not prepared or comparably equipped as graduates from other nations. The Journal reports, citing a McKinsey & Co. study:

"'Even engineering students from the most prestigious universities in Beijing receive little practical training in projects or in working with a team. Few speak passable English. As a result, McKinsey estimates that only 160,000 engineering graduates a year are suitable to work in multinationals - a pool no larger than the U.K.'s.'

"Then there is a lot of turnover. It is common for companies to lose a third of their work force per year. Most firms are happy if they can limit turnover to about 15% per year.

"These forces are pushing up the price of Chinese skilled labor. Hewitt Associates says wages for experienced English speakers are rising 15% per year. Anecdotal evidence suggests the number is much higher.

"In any event, China is not a panacea for companies looking to cut costs. There are many obstacles and challenges on the road to success."

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.