VANCOUVER, B.C. - Canadians are getting deeper into debt and increasingly using credit to cover day-to-day living expenses, "a highly disturbing matter" that has pushed national household debt to $1.3 trillion, a new report shows.So what are we going to do when consumer debt catches up with the Gross Domestic Product, and then exceeds it? What will be left of our financial sector when at least a million households can no longer afford to make even the minimum payments on their debts? How will our economy overcome $100B or more worth of personal bankruptcies? And what kind of recovery could we look forward for, once a large share of consumers is excluded from the credit market for at least seven years following the crisis?
The Certified General Accountants Association of Canada (CGA) said debt levels - mainly mortgage and consumer borrowing in a period of low interest rates - increased 6.8 per cent at the end of 2008, and have climbed another six per cent so far this year.
"It just keeps swelling," said Rock Lefebvre, vice-president of research at the CGA.
"Anecdotally we keep hearing a lot of stories about people who are being more frugal ... but I would argue that, based on the numbers, we aren't seeing people tightening their belts as much as suggested," Lefebvre said, adding that debt has been rising 5.5 per cent annually over the past decade.
Of the $1.3 trillion in debt weighing down Canadians, Lefebvre said $900 billion is from mortgages - reflecting the rising costs of housing in many parts of the country - and $400 billion from general consumer debt.
I can already foresee such measures as tens of billions of bailout money for the banks, sharp devaluation of the currency (to reduce the face value of the outstanding debts,) a lot more deficit spending and more taxes for those who managed to stay debt-free, to ease the financial troubles of those who kept going shopping with the money that wasn't theirs.
But I'm afraid we're unlikely to see any steps towards a real reform of our sales-on-credit-driven economy. I doubt that any of the major parties considers even conducting a research, let alone - hosting an open forum on the economy, to see if we can have at least a fraction of our money supply created as a national dividend, rather than as a consumer's debt.