Household Debt and Carney Warnings – Maclean’s Chart

“It’s been years since Bank of Canada governor Mark Carney first started warning about Canadians piling on too much personal debt. Rising household debt, after all, has been the most dangerous byproduct of his low interest rate policy, which was initially designed to help Canada sprint out of the Great Recession––and, later on, partly dictated by the need to help sputtering Canuck exports. Right from the get-go, though, Canadians haven’t been listening. As the situation became more dire, so did the Bank’s warnings. Today Canada’s ratio of household debt compared to disposable income is inching toward 160 per cent, the peak seen in the U.S. and the U.K. just before their respective housing busts. (In the last three months of 2011, the debt-to-income ratio declined somewhat–not because Canadians stopped taking on debt, but because income levels also rose during the same period.) Carney is still at it. Last week, he finally raised the prospect of raising interest rates, cutting people off from all that cheap money, even as the Fed down south sticks to near-zero rates.”

– from ‘Household debt and the Bank of Canada’s anxiety levels—in a graph’, Macleans, 11 Apr 2012

19 responses to “Household Debt and Carney Warnings – Maclean’s Chart

  1. It is time to reward the frugal and punish the unapologetically extravagent. End the warnings, grow a pair, and just do it already.

    • “From your lips to His ears.”

    • It really doesn’t matter what anyone does at this point, we will hit the debt servicing wall. The time to clamp down was in 2009.

    • It is Show Time. A whole lot of pain in the GTA can be saved with just a warning shot 25 basis points right now. It’s like that glass of cold water in an old movie when someone is hysterical. Doesn’t hurt ’em, just gets them to start thinkin’ again.

  2. You know things are nuts when developers announce $800,000 condos for downtown… wait for it…

    Prince George.

    http://www.opinion250.com/blog/view/23985/1/new+%2440+million+hotel+condo+complex+officially+unveiled?

    • For some slightly bullish analysis of the above story, see http://www.andrewkurjata.ca/blog/2012/04/12/game-changer/

    • Aldus Huxtable

      Only four star you know. I recall someone once telling me that a five star hotel was designated by having painted artwork in the bathroom.

    • Vancouver is already a playground for a horde of coal mine owners from the north-eastern regions including Shaanxi and Heilongjiang. The $800k price tag per unit is a chump change. What was the price for a vice mayorship … $1M? Can’t see the mountain for the coal ores.
      http://www.westerninvestor.com/index.php/news/bc/382-chinese-investors-plan-underground-bc-coal-mines

    • Prince George now? The world has officially gone crazy. Next there will be million dollar crack shacks in Hundred Mile House…(apologies to the locals, no offence).

      I picked up on a story over at Seeking Alpha this morning, by the way. Since it makes mention of Vancouver relative to Sydney and a few big Chinese cities I thought you might all appreciate one guys view of how the China bubble will end in tears for everyone. He has a bunch of helpful comparative charts there too.

      Effects of a Chinese Real Estate Crash
      http://seekingalpha.com/article/495641-affects-of-a-china-real-estate-crash

      Hint: It’s all about commodities…even (oh Lord, no) Gold.

    • I would be willing to place bets they don’t even dig the foundation for this Prince George project. It is waaay too expensive and much too ambitious for a Northern regional center, especially at a time when sales are choking up and prices falling in Vancouver, Victoria and the Okanagan. They are much too late in bringing this to market. BC meanwhile, is clearly leading the country where the correction is concerned. Just look at the Island and places like Parksville, Nanaimo and Qualicum. Seriously, if you can’t move an 800k house near the beach on the Coast how are you going to sell an 800k condo in PG. Hell, as we just saw last week, you can get more bang for the buck on a 500k Hotel/Condo in Whistler and it is almost within commuting distance to the airport in Van.

      We won’t have long to wait to know. The sales office will open in just weeks. You can almost hear the gas escaping from this project as it deflates on nothing more than negative sentiments and poor expectations.

      • “I would be willing to place bets they don’t even dig the foundation for this Prince George project.”

        There are heavy odds that you’d be right on that. As you can see from the second article, there is a fine history of vapor-projects of this sort in Prince George.

  3. Ralph Cramdown

    Carney doesn’t want to raise rates because he feels that manufacturers and businesses (outside the residential construction sector) need the stimulus, and don’t need the higher dollar that higher rates may bring.

    But his hands are being tied by Flaherty, who won’t do enough sector specific stuff to rein in consumer debt, especially mortgage-backed debt. I’d be surprised if there haven’t been heated, loud discussions between these two.

    • Yeah, I am sure. It is because every time they invoke the “interest rate” fear then a new batch of fresh fools rush out and buy in droves which just gives another bump to the market. Demand is being drawn forward with the simple tools of Bank of Canada suggestions that it could use monetary policy to cool all us Canucks.You should be cynical though. There is no mistake in the timing of those remarks to come at the start of the spring buying season. If Mr Carney was really going to give the country a cold shower he would not telegraph his intent to raise rates. He would just do it at the prescribed time. Twenty Five basis points would be a shot across the bow. Fifty basis points would wake everyone up fast.

  4. Well you know why PG hasn’t attracted enough northern Chinese barons who’s used to 3 meters of snow in winter? Because the prices aren’t high enough! Those rich Chinese people have minimal standards and that includes not buying anything priced too low. So you gotta have the highest price so the buyer can have bragging rights as the “property king” of PG. :p

  5. All hot air Carney is. BoC will be lowering rates, not raising rates, as the RE implosion picks up speed wiping out much of the Canadian economy. Canadian households will continue to pile on debt where they can get it and I’ll still be shorting the big banks.

  6. Put your money where your mouth is…. in this case, interest rate, you rat.

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