Canadians Just Don't Get It

Debt growth slows, but income growth slows even more

Canadians are piling on debt at a slower pace, but with incomes barely growing and the threat from Europe increasing, many of Canada’s most vulnerable households may be running out of time to get their finances in shape.

The latest figures from Statistics Canada on household balance sheets, released Friday, show the debt-to-disposable income ratio rose in the first quarter to a record 152 per cent, from 150.6 per cent in the last three months of 2011. Debt growth slowed, but incomes increased at an even slower pace, a familiar trend the Bank of Canada this week said will probably continue.
 According to an analysis by policy makers at the central bank, the proportion of households deemed most vulnerable to changing financial conditions may be small, at just over 6 per cent, but it is higher than the average of the past decade. And in a semi-annual assessment of the financial system, released Thursday, the bank warned that as the global backdrop threatens to deteriorate, those who are most indebted are “especially vulnerable” to shocks such as job losses or falling home prices even as the overall pace of debt growth slows.
If the economy here were to pull back, too, all these households that have gotten way deeper into debt, purchasing homes at over-inflated prices, will sooner or later experience real trouble,” said Louis Gagnon, a finance professor at the Queen’s University School of Business. “From that point, who knows how the situation will unfold, but it won’t be good news.”
 My view:

For the past 3 years this blog has warned about the seriousness of over indebtedness; by households, businesses, and governments.

It has been most disappointing to see the lack of response, even indifference to many of these posts.

Most of the individuals I know with in Canada, whether they are relatives, community members, or more distant acquaintances seem to be willfully blind to the deflationary forces at work in the housing market and will actively argue the status quo.

This blindness and denial shows up in rising debt levels despite the high level of awareness of the bursting of the American housing bubble over the past 5 years.

Only this past year has Central Bank Governor Mark Carney expressed concern publicly about the level of personal indebtedness.

One wonders how much more bad news out of Europe and America it will take to alter the poor financial decision making of Canadians?


  1. Most will not realise it until it's too late. After all, has there ever been an orderly unwinding of a speculative mania, or bubble?


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