Canada’s household debt keeps climbing

Carney: families’ debt number one domestic threat to the economy

Canadian consumers kept piling on debt for a third consecutive quarter between July and September, according to Statistics Canada figures, the Globe and Mail reports. The ratio of debt to personal disposable income, the key measure of household debt sustainability, was 152.98 per cent in the third quarter, up from 150.57 per cent in the previous three months. The report comes as Bank of Canada governor Mark Carney warned that Canadian families’ credit burden, which has surpassed levels seen in the U.S. and U.K,. represents the biggest domestic threat to the economy.

The Globe and Mail




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Canada’s household debt keeps climbing

  1. Oh c’mon Mark.. it’s fine. After all, the banks keep lending us money and as the libertarian/capitalists tell us, those bankers and high-falutin’ investors always make the most rational decisions.

    • Sorry Thwim, there is no reply button on your comment to me about making bankruptcy easier to force companies that lend money to be more “picky” about who they lend money to.    That may work but at the same time, we want the borrowers to learn some responsibility too.  Afterall, many of these credit cards have interest rates as high as 18% and people still max them out….if bankruptcy gives them an easy out of their financial woes what deterrant is there for them to ever change their spending habits?  A big issue with the buying is the “high” people get when they make purchases.  If you don’t have a lot of debt, chances are you don’t understand that.  Unless these people get over buying, they will just end up going bankrupt all over again.  Are you familiar with the show, “Extreme Makeover…Home Edition”?  They give people a home.   A good number of those people end up losing those homes but taking out mortgages on them and buying stupid things.  Like you said earlier, it is human nature.

      • Sure we want people to learn responsibility. That’d be the ideal solution. We also want unicorns and world peace. The problem is that there’s simply too many people, and we’re bred with an evolutionary predilection to being short-sighted. So hoping to teach the masses to delay gratification is a mugs game.

        Instead, appeal to the short-sighted nature of the lenders and make it obvious that lending to bad risks is going to lose you money fast.

        In short, control the options of the ignorant so that they don’t hurt themselves and end up hurting the rest of us in the process.

        (Oh, as a side note, if you go to the disqus website, you can see replies to you and reply to any of them individually, no matter how deep they might be in the comment stream. It doesn’t help when you’re trying to reply to a comment deep in the stream that wasn’t to you originally, but still, a little’s better than nothing, right?)

  2. Carney worries about debt….. then keeps interest rates at record low levels. Duh. The longer rates stay low, the larger the credit bubble will get, and the more devastating it will be when the BoC finally acts. So of course they’ll hold their fire as long as humanly possible. We need John Crow back at the BoC. Failing that, anyone with a backbone will do. 

    • I was under the impression that the interest rates are kept low to encourage people to expand their business, create jobs.. and perhaps encourage those who are out of work to think about going to school (borrowing the money to go is cheap) or start their own business.  I don’t think the plan is for people to use credit cards to buy materialistic items they don’t need or borrow more money to buy houses they can’t afford if the interest rate shoots up to 10%.  At some point the people who live in this country and call themselves adults are going to have to realize that they can’t keep spending money like they are Oprah…..she is a billionaire, they are not.

      • And how, exactly, do we direct those people if the credit card companies are willing to provide them these things they can’t afford when the rates go up?

        My own suggestion is to alter the bankruptcy laws. Make bankruptcies easier to attain and lower the length of time it affects your credit rating.  Then let the lenders figure it out on their own.

        • I know people just swimming in debt.  Partly because the economy has tanked, but party because they were on the edge before the economy tanked.  I see no option for them but to declare bankruptcy although they are firmly against even thinking about it.  Which is the problem.  It isn’t so much that it affects credit ratings and lasts for so long (frankly, I think I’m about the only person who’s ever declared bankruptcy and paid the full price–I had no idea you could keep the house, for example, and the cause of my bankruptcy–husband–got a credit card THE VERY NEXT DAY)  The problem is they should have done it the instant the economy tanked.  Because now they’ll probably be looking at punitive things they are so upside down.

          For the rest of us, I really do think it is time to take responsibility for our own actions.  Admittedly, it is hard to get one’s head around with all the spin saying otherwise, but surprise, the banks want to make a killing off of you–hey, did you know they are a for-profit business?  Why did you believe the idea they were looking out for YOUR interests?  It isn’t only politicians to be cynical of these days.

          • Yes Jenn exactly.  These credit companies are in it to make money! It is time for people to act like adults and accept that there is no “altruistic” motive behind companies letting them buy furniture on a “do not pay for 2 year” plan.  Our need for “instant gratification” and insatiable appetite for more, more, more can’t really be blamed on anybody by us.

          • Of course not. However, their willingness to lend to us should not go unremarked, and when people go bankrupt, it should certainly not be rewarded by having those companies debts protected.

            Companies that lend poorly should go out of business. Hence why I suggest making the bankruptcy laws easier so that people can take advantage of them more often, which will in turn force the companies to be more picky about who they lend to.

        • You might as well ask how do we get someone off heroin if the dealers are still out there selling it.  In the end, it has nothing to do with the “dealers” and everything to do with the people who are “addicted” to their stuff.  The dealers and the credit card companies and their ilk will always be there to tempt people…you have to “rehabilitate” the attitude of Canadians who somehow think living in a big house and driving a fancy car leads to happiness, even when the unpaid bills keep them awake all night.  

          • Raise interest rates. Some will turn to loan sharks (just as opiate addicts who start off with a legal prescription for oxycontin might turn to heroin dealers eventually) but most people will be dissuaded from going to farther into debt. The flip side is, we’ve let it get so bad there will be hell to pay with even a small increase in rates. 

            Most people I know who are debt slaves (and I used to be one) were either lured into it by low teaser rates from credit cards (Transfer your balance and enjoy 5% for the next 12 months!) or by continually rolling their card debt into their mortgage each time it was up for renewal. (I was the latter.)

            I got my house in order through a combination of good timing, good fortune (a better job) and a sudden wake-up call. I woke up one morning and felt fear. Lucky thing I did. I don’t pretend to any fiscal astuteness whatsoever. But I never did live recklessly. No big trips. No flashy cars. Don’t gamble. Don’t drink much or do any drugs. No child support to pay. No ridiculous mortgage. If it happened to me, it’s happening to millions. And it will end very badly. 

          • The problem Ranter…can I call you that….is “we” feel entitled to our “stuff” and we get used to convincing ourselves that everybody has a big debt load (which they do).
            You are the exception…someone who doesn’t like to feel afraid…most people just get numb or don’t think about it.
            I know people who take 3 or 4 international trips per year; have their credit cards maxed out and live in houses valued at $700K and above….they are healthcare workers…..do you really think a few percentage points are going to convince them to change their lifestyle because that is what is needed….a reality check and a lifestyle change.

          • Healthcare, I do believe that higher rates would temper some of these individuals. The biggest selling point any creditor has is, “It’s a great time to borrow. Rates have never been so low!” And it’s a justification that a person can use to convince themselves to borrow more. We won’t change all of them. But remember, everything happens at the margin. If we can change the behaviour of say, 1/3 of them, then any future debt crisis might be not nearly as bad. Who knows? 

          • Just remember Ranter, much of the household debt is credit card debt that has interest rates of 9 to 18%.  The only credit debt that has the low rates is that which is “secured” against property such as a car loan or a line credit secured against a property.

          • Yeah. Communism didn’t work for the same reason. Human nature is what it is.

      • The only way we can impose discipline on the masses is through higher interest rates. Indeed, that’s the sole reason for interest rate policy. To influence credit decisions, and through that, the inflation rate. That’s really all central banks can do. They can’t magically create growth by lowering rates. They can only create bubbles by doing that. (Bubbles are not growth, even if they feel like it for a time, but that’s another issue entirely.)  They can certainly pop bubbles with higher rates. But bursting bubbles can be messy, if not downright catastrophic. Better to move pre-emptively and prevent bubbles from ever forming. Of course all that is in the rear view mirror now. We’re sitting on a giant real estate bubble and if and when the BoC does act, it’s party over. And we’ll all suffer – not just the debtors. 

        • “impose discipline on the masses”…..How old are you?  Were you around in 1980 when the interest rate went to 20%?  The masses didn’t get discipline until it was at 15% and then that was only because the masses were all losing their houses….and what do you know….here are the masses’ children and they have learned nothing from 1980, they have all bought houses they can’t afford if the rates rise even marginally.  At what percent do you think these masses will become disciplined?

          • This whole argument reminds me of smokers who said they would quit when cigarettes got to $2.00 a pack…they are all still smoking and they’re almost $10.00 a pack.  It isn’t really about the cost, it’s all about the addiction to materialism.

    • They are keeping interest rates low because if they raise the prime by even 0.5% over a million people will lose there homes. The biggest problem is that economic mercenaries are operating unchecked and without recourse. Once the world economy finally crashes? They will have caused it… they will profit from it and we will all suffer.
       
      In Winnipeg, predatory real estate agents are setting up face to face bidding wars for housing in decent and safe neighbourhoods, driving up the price and lining their pockets with $$$ garnered from the fear of having to live and raise a family in a literal war zone, rife with gangs and the lifestyle that goes with gangsterism.
       
      The price of a human life on the streets of Winnipeg has been set at the minimum of one singular stick of tobacco.
       
      One can build a new home (in new developments for $125 per sq/ft lot included) but those desperate for immediate relief from the slums in which they live and a move up to a decent lifestyle are paying over $200 per sq/ft for 800 sq/ft WW2 homes.
       
      When the time comes that rates must rise, these people will not be able to afford to make the payments. The will not only lose their house, they will not be able to sell it for any price even close to what they paid. Wholesale bankruptcy due to mortgage default, akin to that which took place south of the border, will rule the day.
       
      When you listen to any economic news, who do you think to be credible, the one who profits from their words of people farting rainbows and lollypops growing from the ground like trees?…. or the words of warning from someone who has NO VESTED INTEREST except to report the truth as they know it.
       
      Our Mayor (whom I have known for over 30 years, and if you put a gun to my head would not vote for), for the second time in two years has set up a Christmas Party for his staff that took place at a restaurant which HE OWNS!!!! The cost of this party is paid for with tax dollars. His profit from the party HE SET UP last year was nearly $1000.00.
       
      The problems run deep my friends, from the grassroots up to the top.
       
      If those who we have chosen to rule us think nothing of robbing us, what are we to do?
       
      Seriously people….. WHAT ARE WE TO DO!!!!!!!!!!!
       

    • Higher rates, Higher rates… how many times do you feel you need to say that in one topic.
      The ‘rates’ on most credit cards are well over 18% how much higher do you think they need to be? Do you believe the bank of canada directly controls the interest rate on credit cards?

      I can’t think of a bigger anchor on the economy than national debt. How high should the “higher rates” be for politicians? Any idea how much the total package for those stupid F35′s will be, principal, interest and operating expenses? How about those new prisons, land, construction, operating expenses and interest on the entire package?

      How about the interest Canada pays to the privately owned federal reserve for money that was never even loaned, simply printed, which is what a country can do when it owns it’s own currency? That interest payment alone represents around 1/3 of all government revenue. Do we really want that increased or should we just raise the rate!

  3. Something has to be done to get private enterprises to start spending– or the economy will contract. Households can’t be fully placed with the burden of solely keeping the economy going ad nauseum, let alone expanding it. It’s time to hire more people, advertise a little more, invest in equipment and research. Spend a little, or the government will do it for you if you wait too long.

  4. Thanks to the Bank of Canada which has ruined Savings Accounts to subsidize the Spenders.
    Bring the Interest rate to a decent level and they’ll back off. Why save when the rate doesn’t meet inflation. 

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