History shows that excessive debt is dangerous and always exacts a high price. Yet, those in power are acting as if there’s no problem at all.
A recent article on Zero Hedge discussing rising debt levels has a big warning for Canada.
The article focuses on the immense amount of debt in China, and the possibility that the bubble is close to bursting. However, the article goes beyond China, pointing out how the Canada and Australia are facing giant debt levels – and are deeply tied to the danger in China as well.
As the article notes:
“The Bank for International Settlements (BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to gross domestic product (GDP) in the household and (non-financial) corporate sector. Three large (G-20) countries are flashing warning signals today for impending banking crises based on such imbalances: China, Canada, and Australia.”
The following chart was also included, and the comparison between Canada’s debt levels and historical pre-crisis peaks are disturbing:
The report also notes how the debt laden economies of Canada, Australia, and China are all linked together – which should be a clear warning against Trudeau’s efforts to get us closer to China.
“The three credit bubbles shown in the chart above are connected. Canada and Australia export raw materials to China and have been part of China’s excessive housing and infrastructure expansion over the last two decades. In turn, these countries have been significant recipients of capital inflows from Chinese real estate speculators that have contributed to Canadian and Australian housing bubbles. In all three countries, domestic credit-to-GDP expansion financed by banks has created asset bubbles in self-reinforcing but unsustainable fashion.”
This shows a few things:
- First, Canada’s debt mountain is totally unsustainable. It’s above the peak levels just before the previous bursting of debt bubbles.
- Second, the central banks have created policies that are great for the big banks – while generating false prosperity. Of course, we know that prosperity evaporates when the debt bill comes due.
- And third, closer trade and economic ties with China don’t make our economy any stronger – despite what Trudeau and the elites might say.
Clearly, Canada’s mountain of debt is a massive vulnerability, and is only being made worse by the big-spending Trudeau government. Any debt problem is made worse by increased government debt, as it can reduce confidence in the government and the entire financial system when a crisis response takes place.
Yet, the government is ignoring all the warnings.
As I’ve said before, debt can seem fine for a long time, until the exact moment when it isn’t fine. Then, it’s too late.
We can clearly see that Canada is at serious risk, and the longer those in power bury their heads in the sand, the more dangerous the situation becomes.
The elites want to hide their many failures behind political correctness, deception, and manipulation. We need to push back and spread the truth.
That’s why I write.
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