Shelled out

Published on January 2, 2016

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.