Gone are the days of fairytale stories about Canada's incredibly stable and safe banking system. These stories are now slowly being replaced by a stark reality: Canadians are carrying too much debt.
It is now 2012, and the much promised economic security and stability isn't here. Sure, many supporters of our politicians will say "well it's not our fault, the global economy is at fault" and I certainly won't argue that point, it is definitely at fault. What few seem to realize though is we are a part of that economy as well. It's not that I honestly expected the global economy to be out of the woods but what upsets me is just 1 year ago: our politicians and supposed economic experts did expect that. What good is an "expert" if they can't tell which way the wind is blowing?
Even now, our politicians continue to provide promises of "balanced books" by 2014, 2015, and beyond. Pick a year and somewhere there is some government estimating that's the year their books will be balanced. But based on what? This is utter and complete double-think. The world economy cannot both be recovering and holding back economic recovery at the same time. Someone's lying, and I don't think it is reality.
Canada's tipping point will be here within the next few months. Already austerity is the talk of the town in Ontario. Quebec is now pulling an Alberta; betting that royalties from mining will cover anticipated deficits. People should be quite upset when royalties are used to balance budgets. Why? Because that's future revenue being used to cover current revenue shortfalls or overspending. It's shortsighted and when the future they are stealing wealth from arrives, what then?
Maybe that future is here right now. A recent indicator to our true economic health passed by recently showing just how thin the line we're walking really is. Back in February TD & RBC ended a cheap mortgage financing scheme early a few days after a series of warnings about Canada's debt load sustainability. But it didn't last long as the banks recently just launched the same deal again! What's going on here? Can you think of a good reason why banks would cancel cheap financing for mortgages early only to relaunch the same deal a month later? The only answer I can think of is that Canadian's are out of wiggle room.
If we're to keep up the illusion that our economy is actually still growing, secure, and stable Canadians must be able to afford houses. Not being able to afford a home is a sure sign that your purchasing power has been destroyed; that your real wealth has fallen. Thus there is a need for the Bank of Canada to maintain low interest rates and for banks to offer cheap loans. As long as housing sales & housing starts look healthy most people believe the economy is healthy. Indeed "housing starts" blanket the headlines every time new reports come out. However, if the Canadian household debt continues to grow then it is safe to reason that housing starts & housing sales are only bouyant due to the financing options available and only at the record low interest rates that come with them, but should these rates raise it's likely many people will not afford their monthly payments: triggering defaults. Sound familiar?
This is the issue I was thinking about today. While visiting different cities of Canada today, I realized that they are not in best condition. I have never seen these cities before but I had impression that they had(have) serious economic problems. I believe that Canada has huge potential and we need good leadership to lead us towards success.ReplyDelete
Thank you for your comment, you can find my reply here: http://hellberta.blogspot.ca/2012/03/so-you-know-problems-but-are-looking.html?spref=twReplyDelete