As MacLean’s Jason Kirby points out, the Bank of Canada, in a clear sign of desperation, has taken to YouTube to warn Canadians about the dangers of too much debt and unrealistic house price expectations. He wonders, however, whether anyone will listen considering on growing housing bubbles in some regions and household debt ratios continuing to grow.
As a collection agency operating in Edmonton, Calgary and the 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.
As talked about ad nauseam in this blog over the years Canada’s household debt ratio data continues in an unabated uptrend going back 25 plus years and is showing no signs of slowing down.
In a video posted on December 19, 2016 on YouTube, in conjunction with the release of the Bank’s semi-annual financial system review December 15, 2016, Bank of Canada senior policy adviser Joshua Slive sketches out how Canada’s dangerous brew of debt and inflated house prices could combine to devastate the economy.
There is good news, Slive says. Stress tests show Canada’s big banks will be just fine even with a large drop in house prices (stress tests also showed that both Belgian Dexia and Spanish Bankia were perfectly solvent just months prior to their respectively failrues). It’s also important to note that the Bank, in its financial system review, said there is a “low probability” of a sharp correction in house prices (for what it’s worth once considering the overall predictive success rate of economists). Regardless, there is no getting around the immense damage such a scenario would have on the economy
Although central-banker dry, the message is stark, and shows the Bank of Canada is desperate for Canadians to heed its warnings on debt and rising house prices.
Whatever the case, the Bank’s video should be another wake-up call for Canadians, but “not that anyone’s listening” as Jason Kirby laments.
Here’s a link to the BOC video “The risk of household financial stress and a sharp correction in house prices” explaining things in under 2 minutes.
https://www.youtube.com/watch?v=rR8TqaHIOu4