Mark Carney – “This cannot continue. While asset prices can rise or fall, debt endures.’’

From The Globe and Mail 30 Sep 2010
BOC Governor Mark Carney used a speech in Windsor, Ontario, Thursday to express concerns over the levels of debt built up during the era of rock-bottom interest rates. Too many households are becoming too stretched for comfort and the dynamic is already proving to be unsustainable, adding to the forces causing growth to slow as some Canadians’ ability to spend seems to have tapped out.
“This cannot continue,’’ Mr. Carney said. “While asset prices can rise or fall, debt endures.’’
His tone was significant because throughout the recession, the central bank frequently expressed surprise at the pace of credit growth, without ringing alarm bells in such stark terms.
“What we’ve urged Canadians, and I think Canadians are starting to heed this message – of their own accord, not because we’re saying it – to think about the debt that they’re taking on over a longer term, and what’s a normal interest rate, and am I comfortable paying a normal interest rate with the type of debt I have?’’ Mr. Carney said after the speech. “Our expectation is that behaviour will become increasingly common, given the level of debt.”

8 responses to “Mark Carney – “This cannot continue. While asset prices can rise or fall, debt endures.’’

  1. How about you just shut your trap and keep raising interest rates, Mr. Carney?

  2. Quite incredible. Lower rates to zero and then wonder why borrowing goes up? Take a glutton to a all-you-can eat-buffet and wonder why they are gorging half to death!

    This is the sort of brains that works at Goldman Sachs and draws multi-Million dollar bonuses. We are doomed.

  3. I nearly pissed myself. Great picture.

  4. I think Carney’s dead wrong on this one. I see no evidence longer term “regular” interest rates play a significant role in large personal residence financing. Future wage growth is often seen as a way out.

    It looks, though, that lower sales are an indication that there are fewer buyers who are so profligate. The market is not adjusting to some baseline shift in how households perceive debt, it just ran out of fools.

    Holding rates low, as Carney is implying is now possible due to this supposed shift, is missing how big a drain personal debt levels will have on the economy.

    • “The market is not adjusting to some baseline shift in how households perceive debt, it just ran out of fools.”

      Agree completely.
      Players don’t suddenly smarten up at this point in the cycle… They’re still hungry to borrow and spend as much as they can.

  5. On CKNW, I heard the business report talk about Carney’s cautionary words… and then the closing line was… “This business report has been brought to you by Capital Direct… Let you house lend a hand… Capital Direct dot ca…” Immmediately followed by their saccharine 30 second spot… I laughed heartily at the irony…

  6. Market desperation in Squamish and Whistler…

    “Squamish Real Estate is a great investment right now! Correction in the real estate market is making it a true buyer’s market. Check this out …..

    PRICE HAS BEEN REDUCED AGAIN….NOW $327,000 making it the best price in complex! ”
    http://vancouver.kijiji.ca/c-housing-housing-for-sale-Squamish-2-bedroom-Townhouse-Reduced-W0QQAdIdZ222054701

    “NEW PRICE!!! NOW $579,000!!! Squamish Real Estate is a great investment right now, it is a Buyer’s market!! Get in before it changes!!!”
    http://vancouver.kijiji.ca/c-housing-housing-for-sale-Squamish-4-bedroom-House-New-Price-W0QQAdIdZ222054055

    “RICE REDUCED $30,000…Squamish Real Estate is a great investment in a very bright future! It is a Buyer’s market now but it won’t last!!!
    New Roof and New Price!! ”
    http://vancouver.kijiji.ca/c-housing-housing-for-sale-Squamish-3-bedroom-House-New-Price-W0QQAdIdZ222053383

    “A charming cabin in Whistler with great flexibility now REDUCED by $50,000 to $849,000. REDUCED AGAIN TO $799,000”
    http://whistler.kijiji.ca/c-housing-housing-for-sale-Reduced-100-000-Charming-Whistler-Home-for-sale-W0QQAdIdZ195191592

    “Paid $307,000 and now wants OUT! Listed at $219,500”
    http://whistler.kijiji.ca/c-housing-housing-for-sale-PAID-307-000-Now-At-219-500-Slopeside-2-bedroom-1-4-share-W0QQAdIdZ209164159

    “1/10th Share, Ironwood – MASSIVE PRICE REDUCTION!!!
    Originally listed at $20k, now deeply discounted to $5900! Motivated Seller, will consider all offers!”
    http://whistler.kijiji.ca/c-housing-housing-for-sale-1-10th-Share-Ironwood-MASSIVE-PRICE-REDUCTION-W0QQAdIdZ226922422

    “The Best 2 bedroom in Lost Lake Lodge, Whistler BC Canada
    REDUCED BY $40,000 TO $659,000”
    http://whistler.kijiji.ca/c-housing-housing-for-sale-The-Best-2-bedroom-in-Lost-Lake-Lodge-Whistler-BC-Canada-W0QQAdIdZ226583374

    Soon to arrive in Vancouver!

  7. Now the mortgage brokers are on to it!
    http://www.victoria-mortgages.com/blog

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