Sunday, November 3, 2013

Canadians are getting deeper into (non-mortgage) debt -- thanks to low interest rates.

From the link: http://www.huffingtonpost.ca/2013/10/29/consumer-debt-canada-rbc_n_4171324.html

Canadians’ debt loads have grown 21 per cent in the past year, and more consumers are running into the red, according to Royal Bank’s debt poll. Just 24 per cent of Canadians say they are debt-free, compared to 26 per cent in 2012. And those who are in debt have increased their non-mortgage burdens to $15,920 from $13,141 in the same time frame, RBC’s survey found. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior. Canadians are taking advantage of the era of super low interest rates to finance more borrowing, a move the government has vocally discouraged. Debt loads have skyrocketed in the years since the 2008-2009 recession, after the government dropped borrowing rates to near zero in order to stimulate consumer activity, the housing market and the economy.

Is this high debt load a good thing? I don't think so. Not if they have not been invested into appreciating assets, or capital investments with long term gains and cash flows. If people are simply spending on depreciating assets and consumer goods, this is the formation of another debt bubble. If there are multiple defaults in the future, there could be another recession, eh?

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