Canadians Falling Further Into Debt

Non-mortgage debt rising in Canada according to new Equifax report.

Canadians are falling further into debt, as high inflation and a weak economy force people into more and more desperate efforts to maintain their standard of living.

According to a new Equifax report, the average non-mortgage debt of Canadians has risen 2.4% this year:

“The report out Tuesday by the credit rating agency said the average non-mortgage debt per consumer was $21,128 in the second quarter, up 2.4 per cent compared with a year earlier.

Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, said financial stress is becoming a very real thing for many more Canadians.

“Its impact on consumer credit is not just visible in day-to-day credit card spending, but also in other non-mortgage debt like auto loans and lines of credit, where balances are on the rise,” Oakes said in a statement.

Equifax said credit card balances rose to the highest level since the fourth quarter of 2019 and the average credit limit on new cards is over $5,800, the highest it has been in the last seven years.”

Notably, the decline in housing prices – which theoretically should be easing matters – is not leading to increased affordability:

“However, despite a cool-down in the housing market, the average loan amount for first-time homebuyers only dropped 0.5 per cent in the second quarter compared with the first quarter, with the average monthly payments increasing by 10 per cent.

“The cooling housing market in Canada should not be mistaken for increasing affordability,” Oakes said.

“Affordability depends not just on home prices, but also on monthly payment obligations for a mortgage. Higher interest rates coupled with high inflation can really stretch a consumer’s monthly expenditure, while many could find it difficult to qualify for a mortgage.”

An energy problem

As we’ve discussed before, the foundation of any advanced civilization is affordable energy.

In fact, it would be fair to say that advanced civilization and affordable energy are the same thing.

The ability to either extract or repurpose potential energy into actual energy must happen before any other civilizational advancements take place.

For those who counter that some advanced countries survive by importing energy, that doesn’t change the fundamental point, because those countries are still building their economies on a foundation provided by the energy production of others.

Thus, with energy becoming less affordable in large part due to deliberate government policies such as carbon taxes and ever-expanding regulatory hurdles, the foundation of our civilization is being eroded.

You would then expect to see exactly what we are seeing – higher prices as governments try to cover up rising poverty by printing money (which of course doesn’t work), and a slowly receding standard of living.

People will try to hold on to their standard of living, and that manifests itself in higher debt levels.

But all of this is heading in the wrong direction.

With weak productivity, a still completely distorted housing market, and a reliance on debt, Canada’s economy is on an unsustainable path.

We can keep pretending that simply printing money and throwing it around equals ‘growth,’ but living in that delusion doesn’t change reality.

To get back on a true path to prosperity, Canada needs more actual productivity, and needs to produce real things. We must reward work, not punish it. And we must get the government out of the way, so the creative power and potential of Canadians can be unleashed.

Spencer Fernando

Photo – YouTube

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