Household Debt Growing Larger At A Slower Pace


He knows

“There are some signs that accumulation of household debt is slowing… So the pace is slowing, it’s still accumulating… and that some adjustment appears to be under way in the housing market. This requires continued vigilance by all parties and we intend to play our part in that.”
Bank of Canada Governor Mark Carney, 30 Oct 2012, in response to a question from a member of the House of Commons Standing Committee on Finance (Reuters)

Ever had that experience in a station where a train passing yours makes you feel like you’re going backwards, even though you aren’t?
Me neither, but I’ve heard it happens.
Household debt expansion and spending is still growing, but the slowing pace sure feels like it’s stopped all together, or even reversing, doesn’t it? And when household debt load actually stops expanding (or, the mind boggles, starts shrinking) our economy is going to feel like it’s running backwards at significant speed.
– vreaa

16 responses to “Household Debt Growing Larger At A Slower Pace

  1. That would go some of the way to explain the GDP growth downgrade. Bad or poorly performing debts need to be consumed.

  2. “This requires continued vigilance by all parties and we intend to play our part in that.”
    Which in Mr Carney’s case means to sit by and try to talk this thing down. His hands are tied…which begs the question…who really IS in charge of monetary policy in Canada?

  3. was thinking there probably wouldn’t be much resistance to the idea of an 80c-90c loonie … go for it … perverse! … was also thinking did philips intend my sonicare be tuned to 1st note of also sprach zarathustra?

    • 1. 85c probably right.
      2. sonicare/zarathustra… hahahaha

      • I tend to agree 85 is not a bad target but it would be coming off a devaluing USD which just magnifies the decline in our own spending power over time. The devaluative process in the US is destined to be significant during the coming years or there will be a very major crisis of debt management and hell to pay.Longer term, the inevitability of rising interest rates assures us all that inflation (and a concommitant loss in our own standard of living) is assured before that ugly day arrives if the US is to avoid that crisis. My belief is inflation could spike quite unexpectedly so we had best be prepared. Americas troubles are our own in that regard and their low dollar will thus feed directly into our own losses in spending power which will put further downward pressure on consumption if incomes do not rise.

    • Funny you should say that, Jonnson’sRod… I used to have a FunkyToothbrush, too…

      • [NoteToEd: Paleolithic StrataCouncil AGM… Apparently there was a CaveEnvelope failure and the Owners were none too pleased about the pending SpecialAssessment.]

      • hah! … “if i see raphael, i will give him your message” … maybe funniest sequence of cine-homage ever

      • rod_chance_y_gardner -> great reference. fail to see relevance, but perhaps greater still as consequence.

  4. I’m interested to know what the population’s spending will be like this Christmas season. I wonder if their financial situation will be such that they’d go so far as to be thrifty with their gift buying.

  5. A debt not growing anymore will not just feel like a GDP going backwards, it will actually happen, everything else equal.
    More debt = more spending = higher GDP
    Say in a 1 billion GDP economy, there is first 50 mln financed with 50 mln more debt. If debt growth goes down to zero, GDP will shrink with 50 mln.

  6. I don’t believe that the amount of new borrowing has changed much in the last 4 years, it is just that all time low interest rates have skewed the real growth rate of outstanding household debt. We can only guess at how high household debt growth would be if interest rates were between 5% and 6% and not between 3% and 4%.

    Another way to look at this is that outstanding household debt is a great big reservoir that has always been growing in size. This reservoir (outstanding household debt) has a river feeding it (new debt) and it has a creek with chutes ( interest rates) letting water out ( debt paid down). Now in the last 4 years, the river feeding (new debt) the reservoir (outstanding household debt) has not really slowed down much, but what has happened, is that the water leaving the reservoir (outstanding household debt) via the creek (debt paid down) has had chutes opened full blast ( all time low interest rates). Now if the chutes ( interest rates) were put at levels experienced from the last 10, 15 or even 20 years , we would see that the reservoir would be growing at a clip faster than 5.4% per year. This is troubling.
    .

  7. Pingback: Weekly News Links : The Retiring Boomer

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