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Is Canada really in outer space somewhere?

So, that link got your attention? Good, it was meant to!
Strangely enough this story about Canada and its neighbour starts in London. My siblings and I went there a couple of years back, and our list of Things You Just Have To See When In London included Speaker's Corner. On this particular day one of the speakers was a black fellow who seemed to be talking about economy or something - at least that's what he claimed whenever the discussion threatened to get too sidetracked even for this Corner: "That's not what I'm talking about! I'm talking about MONEY!" When we got there, however, he and the hecklers were for some reason involved in a discussion about whether Canada was part of America or not! He claimed that it was, but one of the hecklers insisted that it wasn't, until the speaker threw up his hand and declared in mock surrender:
"Okay, Canada isn't in America - it's somewhere in outer space!"
The reason for this confusion was of course that the two didn't quite agree on the definition of "America". To the rest of the world (including the speaker) America is a continent - two continents, in fact - including (from the north) Canada, USA, Mexico, Guatemala and so on all the way down to Cape Horn. The people of USA (presumably including the insistent heckler), on the other hand, have this strange habit of calling their country America and themselves americans as opposed to canadians, mexicans etc.
I have two theories about why they are doing this. One, USA doesn't really hae a proper name as such, which makes it pretty hard to determine what kind of "ans" the residents are (Let's face it - "usans" is a pretty stupid word!), so they swiped the name of the continent. Two, they really think "The United States of America" is similar to e.g. "The Kingdom of Denmark" - if KOD means "the kingdom whose name is Denmark" then USA must mean "the united states whose name is America" rather than (correctly) "the united states which belong to (or are part of) America".
Sounds stupid? Hey, we are talking about a people who named half their cities and states after the places in the old world their ancestors came from (and only a few of them added "New"), causing all kinds of confusion. I remember a story in which a Californian character mentioned his friend in Venice and the editor had to add a footnote saying "That's Venice, California". On a more personal level, I once received a letter from an American that had made a detour on the way out of USA (the letter, not my friend). The envelope had some extra cancellation marks, one of which said "Norway", and a written note: "That's Norway, EUROPE!" That's right - on its way to the country of Norway (meaning the country whose name is Norway...) it had passed through the CITY of Norway...
Which,presumably, is not in outer space somewhere.