It seems former Bank of Canada Governor Mark Carney may have spoken too soon when he asserted that Canadian household indebtedness was starting to decline from recent record levels. Statistics Canada reported this week that the ratio of household debt to disposable income rose to a new record high of 163.4 percent in the second quarter of this year, after falling very marginally in the two preceding quarters.
Mark Carney, his successor Stephen Poloz, Finance Minister Jim Flaherty and just about every economist in the country have been warning for months that debt levels will start to become a serious burden as soon as interest rates start to rise. You can maybe understand why the average Canadian might not entirely get the message: cheap money is cheap money, so why not take advantage? But you'd surely think the banks would know better than to keep shoveling out money to people who are all but certain to start defaulting in ever-increasing numbers as rates move back toward more historically normal levels.
Easy credit is artificially inflating house prices in Toronto and Vancouver, and setting up people all across the country for a nasty financial mess in the not-too-distant future. Do these guys never learn?
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