The 1.8 Trillion Dollar Millstone

As a collection agency Edmonton, collection agency Calgary and collection agency GTA we recognize that the vast majority of consumers we inevitably end up dealing with are good people, with good intentions that have now simply arrived at the tipping point of having to either try to continue to rob Peter to pay Paul or, in the alternative, to make some hard choices in monthly budgeting in order to honour their outstanding financial obligations.

Canadians’ collective household debt has climbed to $1.8 trillion as the Bank of International Settlements (BIS) sounded an early warning that the country’s banking system is at risk from rising debt levels.

China, Canada and Hong Kong are among the economies deemed most at risk of a banking crisis.  Yes, you read that right.  Not Greece, Italy or Spain but Canada!  It was less than 10 years ago, during the 2008-2009 global credit crisis, that Canada was lauded as the global ‘poster-person’ of sound banking.

Earlier this week Equifax Canada reported that consumers now owe $1.821 trillion including mortgages as of the fourth-quarter of 2017, marking a six per cent increase from a year earlier.

Although nearly half of Canadians reduced their personal liabilities, roughly 37 per cent added to their debt to push the average amount up 3.3 per cent to $22,837 per person, not including mortgages.

The fresh numbers come as the BIS indicated Canada’s credit-to-gross-domestic-product and debt-service ratios show early warning signs of potential risk to the banking system in the coming years.

The latest report by the Bank for International Settlements says Canada’s credit-to-GDP gap and debt-service ratios have surpassed critical thresholds and are signalling red, pointing to vulnerabilities.

The BIS however, with their typical politically correct mannerisms, cautioned that these indicators should not be treated as a formal stress test, but as a first step in a broader analysis. Broader analysis?  Wait, what?  Here’s an idea: instead of feeling we are entitled to whatever our heart desires how about simply spending less than we make?