Canada’s Economy Sits Atop A Mountain Of Debt

InsightSpencerFernando

The ponzi-style economy is unsustainable.

The following chart is making the rounds on social media, showing an OECD listing of household debt levels in major economies.

The good news?

Canada is at the top.

The bad news?

Being at the top means we have the highest household debt ratio:

There’s no sugarcoating it.

These are bad numbers.

And they’ve been getting worse.

In March of 2022, Statistics Canada revealed that Canada’s household debt ratio had reached 186.2% in Q4 of 2021.

That was the highest on record, up from 180.4% in Q3 of 2021, and ahead of the previous record high of 184.7% from Q3 of 2018.

False ‘growth’

We’ve often discussed how Canada’s economic ‘growth’ is mostly illusory, as it has been built upon a foundation of excessive government spending, inflation, and borrowing.

And the household debt numbers make that clear.

Under the Liberal government, Canada is trying every way to ‘grow’ except the one that really matters:

Productivity.

Instead, our productivity stagnates and problems pile up.

Ponzi-style economy

As productivity stagnates, the government increases the population and the Bank of Canada prints more money to finance the rising debt.

Debt payments go up, meaning the government seeks more revenue. Without productivity increases, more revenue comes from a higher population and higher taxes. This further raises the cost of living, pushing many Canadians to go further into debt in order to try and hold on to their standard of living.

Many seek out assets that are being inflated through government/bank of Canada policies, which has – along with a surging population – fuelled the housing bubble.

This dependence on housing and rising household debt pushes the government to inflate Canada out of our economic problems through higher and higher government spending, which of course only makes things worse as it devalues our money and drives up the cost-of-living.

In effect, our politicians and the central bank are engaged in a desperate game of putting off the moment of reckoning.

Of course, if you constantly need more people to ‘buy-in’ in order to keep your scheme afloat, it’s not a real business or idea, it’s a ponzi-scheme, and that is exactly what our economy is becoming.

What is the way out?

Because serious economic distortions have built up over time and have been exacerbated by inflationary policies, there is no easy or painless way out of this situation.

But of course, there’s no easy or painless way to stay in it either.

Many Canadians are already facing severe difficulty as the unsustainability of our economic policies become more and more apparent.

So, what can we do?

The best move is to ensure that we stop doubling-down on inflationary policies, and make a necessary course-correction that will return us to prosperity and real growth.

To start with, we need to get back to balanced budgets to stop the distortionary impact of government spending.

We also need to return to sound money, and stop trying to print our way out of every potential downturn.

We have to let the market work, and trust in the fact that innovation and technological advancement happens best when the government doesn’t try to control every aspect of the economy.

And finally, we have to overcome our irrational fear of deflation.

That’s right, deflation.

Technology should be having a deeply deflationary impact on our economy, bringing down prices.

Instead of fearing this, and instead of governments/central banks trying to artificially induce inflation through the printing of massive amounts of money, we need to let the deflationary effect of technology run its course.

We can no longer continue basing our economy on endless borrowing and population growth.

One way or another, that kind of thinking is coming to an end.

Spencer Fernando

***

I am funded by people like you, not the Liberal government. If you value my work, you can make a contribution through PayPal, or directly through Stripe below.

[simpay id=”28904″]