Shelled out

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The Christmas bills are trickling in. (Or, rather, the credit card totals are well in the red.)

This is the time of year many people are faced with some serious reckoning. Holiday gifts, food and spirits tend to add up. Now it’s time to slim expenses, as well as the waistline.

Unfortunately, this isn’t only a post-Christmas phenomenon anymore. We don’t need a special occasion to rack up debt. And we’re not happy about it, either.

A recent poll conducted for CIBC found paying down debt is the top financial priority for Canadians. Yet many seem powerless to do it.

“It’s not just first-time homebuyers, younger Canadians or those impacted by shifts in the economy, such as a downturn in the oilpatch, who are focused on cutting down their debt,” CIBC executive vice-president Christina Kramer told The Canadian Press.

“Canadians across the country are telling us that reducing the burden of debt, along with keeping up with their bills, is what they are focused on.”

With all that worry, you’d think people would spend more responsibly.

You’d be wrong.

The household debt meter continues to climb to record-breaking levels, hitting a new high in August.

A Bank of Montreal report at the time reported that of the 80 per cent of Canadians who are in debt, two-thirds would have trouble affording their debts if interest rates went up by just two percentage points.

For comparison, here’s how The Globe and Mail put it in September:

“Canadians now spend an average 14 per cent of after-tax income on their debts, up from 11 per cent in 1990, even though interest rates have plunged from 14 per cent back then to below one per cent today.”

Keep in mind, as well, that most incomes have remained relatively stagnant.

This is madness.

And the worst thing is that financial institutions and politicians have little to no motivation to help curb it.

Politicians like to see more consumer spending because it keeps the economy moving. And banks want to make money.

But there’s a real threat it will come crashing down soon. The government must find alternative means to encourage economic activity other than personal debt.

It will be one of the biggest challenges for the new federal government this year. As well as promised infrastructure spending, it will need to boost exports and try to encourage more capital investment from businesses.

Canadians are too broke to prop up the economy any further.

Organizations: CIBC, Canadian Press, August.A Bank of Montreal Globe and Mail

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  • Ken Kavanagh
    January 02, 2016 - 10:47

    The most telling sentence in your piece and the one that deserves the most attention and analysis is: "Politicians like to see more consumer spending because it keeps the economy moving. And banks want to make money." Not meaning to be disrespectful, Mr. Editor, but to paraphrase a famous Bill Clinton campaign slogan: "It's the economic system, stupid." What kind of self-destructing man-made economic system have we created such that a select few Wizards (like the Wizard of Oz) manipulate a few ransom levers and props to 'prop' up this construct we call an economy at the expense of the vast majority players who are part of it? It is actually sinister to that a select few politicians and central bankers conspire to lower interests rates for the express purpose to 'entice' consumers to borrow beyond their means and spend and consume beyond their means so that the construct (the economy) is healthy!!!! In the meantime, the enticed excessive spending creates untold pain and suffering for these borrowers and spenders and their families yet it is all considered right and proper in the name of a 'healthy economy. Then when the economy is ok, the Wizard, with a stern warning to the plebs, ‘levers’ up the interest rates to inflict even further pain. But all is well as long as the construct (the economy) moves along for the chosen few. By the way, Mr. Editor, you need to pull the curtain fully back and broaden the club to more than the central bankers and wealthy politicians. This thing we call the economy does have a much broader chosen few. Bishop Remi DeRoo did have it right in 1983 in “Ethical Reflections on the Economy.” The economy should serve people; not the people serve the economy.

    • Angela
      January 05, 2016 - 08:02

      Thanks Mr. Kavanah for your great truthful and well informative commentary to this well needed editorial. Your commentary Mr. Kavanah explains the corrupt template of the so called construct {economy} that was set up by politicians and those who had the benefit of their influences to serve mainly the politicians and their business acquaintances very, very well at the expense of the rest of us. The fact that this article was written by Mr. Editor is a plus but I hazard to guess those needing to obey its contents won't be reading it any time soon because they are too busy creating debt and a whip`for their own backsides and for the rest of ours. The debt makers are OBLIVIOUS to the fact of the dire debt situation hovering over everyones' heads that is so inflated` it anuerism will burst very soon, I suspect. The only ones who will be immune then, to the great economic suffering that is being created, will be the politicians and their masters.