Canadians can’t stop lying to themselves about their debt

It’s clear Canadians are caught in a debt trap. The more they talk about digging themselves out, the deeper they sink.



To absolutely no one’s surprise, Canadian households continue to pile on more debt. The latest figures from Statistics Canada released Thursday reveal the level of credit-market debt to disposable household income hit an all time record of 163.3 per cent in the fourth quarter of 2014. This means that for ever $1 in disposable income, Canadians carry $1.63 of debt. That’s up substantially from $1.30 a decade ago.

Many Canadians seem to know they’ve got a debt problem. They seem know they have to tighten their budgets, save more, and chip away at their credit card, line of credit and mortgage balances. And they seem to know they can’t keep on borrowing and living beyond their means forever. Only, they also seem completely powerless to rein themselves in.

Each December for the past few years CIBC has released a survey of Canadians and their financial priorities, and each year a growing number of people have said their goal is to pay down their debt. In the most recent poll, the share of respondents who said debt repayment was a “top priority” rose to 22 per cent from 14 per cent in 2011.

Now here’s what’s happened to debt-to-income levels over that time. (For best results on mobile, view chart in landscape mode.)

It’s important to remember that the debt to income ratio is an average. So while roughly one-third of Canadian households have no debt at all, a relatively small segment—about 12 per cent—carry more than 40 per cent of all debt. These highly indebted households have debt-to-income ratios ranging from 250 per cent to more than 450 per cent.

household debt ratios

The recent jump in the household debt-to-income ratio also came before Bank of Canada Governor Stephen Poloz surprised everyone by cutting the overnight rate to 0.75 per cent from one per cent, where it had lingered since 2010. That’s almost certain to spur additional borrowing, and if incomes continue to stall out, the household imbalance is likely to break new records in the quarters ahead.

It’s clear Canadians are caught in a debt trap. The more they talk about digging themselves out, the deeper they sink.

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Canadians can’t stop lying to themselves about their debt

  1. Spring break has come to mean taking the kids on an annual pilgrimage to Cuba or Dominican republic, and worry about paying for it later. Those Facebook posts of you feet in the sand are totally worth it. Real incomes haven’t gone up in decades but spending sure has. It doesn’t seem to occur to anyone that there will be a price to be paid for all this.

    In Germany, credit card balances get auto-debited from you bank account at the end of each month. No money means no credit. Period. I thought we could use such rules in Canada, but quickly realised that people would just use their HELOCs instead. You can’t fix stupid, and living on credit is the very definition of stupid.

    • But we are as a collective, a stupid nation of looancy.

      It isn’t going to end well. Its why I no longer invest in Canada, and have moved my money to USD.

      Canada is a bankrupt country.

  2. Yes and no. While many are debt addicted is true, there is a method to the madness if you plan it.

    Canadian money is depreciating far faster than then interest rates, so debt has a negative value. It actually pays to have debt in the short term. Say 2 years ago you borrowed $100,000 and converted it at part to USD. Today its worth $128,000 in CAD money. Or the reverse, $100,000 USD converted to CAD 2 years ago is worth $78,000 USD today.

    Canada has been depreciated, and devalued so Ottawa/provinces can live large on debt. Makes it a debt paradise, but also unsustainable. Canada is now like Argentina, a devaluing, depreciation nation of debt and currency fraud.

    It is fraud when money deprecates far faster than the cost of money. Rips off pensioners, disabled, savers, RRSPs, and wage/income values. Just #$$^s people who do it right.

    Its why I tell young people, save in USD, Yuan and physical gold and do debt in Canadian money. Over 75% of my cash investments are in USD and abroad because from a investment perspective and world view, Canada is a massive huge LOSER and running on FRAUD. Not worth investing in Canada at all.

    Argentina is Canada’s future. But we have lots of political/union cards living beyond their means. No one legitimate is buying prov/fed/city debt, its fraudulently created out of thin air in the ruse of solvency. Canada is a bankrupt country.

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