Author Topic: Canadians With More Debt Than U.S. Spark Policy Makers' Warning  (Read 3219 times)

Soul Crusher

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Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« on: December 14, 2010, 08:42:12 PM »
Canadians With More Debt Than U.S. Spark Policy Makers' Warning
By Theophilos Argitis and Greg Quinn - Dec 14, 2010





Canada’s top economic officials yesterday urged households to be wary of taking on too much debt after data showed the indebtedness of Canadians surpassed U.S. levels for the first time in 12 years.


Bank of Canada Governor Mark Carney, Finance Minister Jim Flaherty and Prime Minister Stephen Harper said in separate public appearances that they are concerned about rising debt. The ratio of household debt to disposable income in Canada was 1.48 in the third quarter according to Statistics Canada, exceeding the U.S. level of 1.47.

“Our parents were more inclined to pay off that mortgage as soon as possible, and some Canadians are not as inclined to do that now,” Flaherty told reporters yesterday. “I encourage them to do it.”

The comments by the policy makers underscore government concern that debt levels in Canada could threaten the recovery if borrowing costs rise and households struggle to pay their bills. Canada has relied on regulatory steps to rein in mortgage borrowing, most recently in February, and Flaherty said yesterday he is prepared to take additional measures if needed.

“The fear is that were we to see sharp rises in interest rates or were we to see sharp rises in unemployment, that a significant number of people might not be able to afford their debt obligations,” Flaherty said.

In Canada, where banks largely escaped the global financial crisis and continued to lend even as credit dried up elsewhere, low interest rates have encouraged consumers to take on debt.

Limits to Divergence

Carney, 45, left the benchmark target rate at 1 percent this month to gauge the global recovery after three earlier increases, while the U.S. Federal Reserve has kept its benchmark rate in a range of zero to 0.25 percent since December 2008. Carney said in a Sept. 24 interview on CNBC that “there are limits to the divergence that there can be between Canada and the United States.”

While Canada’s economic recovery could be threatened in the future by elevated debt levels, higher Canadian interest rates could also cause the Canadian dollar to appreciate. Speaking to reporters after a speech in Toronto, Carney noted that the bank had flagged as a risk to the economy that “persistent strength of the Canadian dollar” and weak productivity could crimp exports and hinder Canada’s recovery.

“To some extent that risk is being realized, which is one of the things we will have to assess as we sit down in January,” Carney said, referring to the bank’s next interest rate decision and monetary policy report.

Boxed In

“The Bank of Canada is in a bit of a box, given where the Fed is and where the Canadian dollar is,” said Doug Porter, deputy chief economist with BMO Capital markets in Toronto.

Canada’s dollar rose for the fifth consecutive day today to post the longest winning streak in more than a month. The currency has gained 2.2 percent this month versus the U.S. dollar. The Canadian dollar rose 0.3 percent to C$1.0047 per U.S. dollar at 1:19 a.m. in Toronto, from C$1.0074 yesterday. One Canadian dollar bought 99.53 U.S. cents.

Measures to restrain lending taken earlier this year included changes for government-backed mortgages that forced buyers to meet standards for five-year, fixed-rate mortgages even if they opt for variable rates. Limits on refinancing were made stricter and down payment rules were tightened.

The proportion of Canadians in a stretched financial position “has grown significantly,” Carney said in his speech -- entitled “Living with Low for Long” -- adding that authorities continue to monitor households’ finances.

Watching Closely

“The level of vulnerabilities of households remains high” Carney said at the press conference. “The authorities are cooperating closely, we are continuing to monitor the situation closely.”

“We have debt levels that are unprecedented in this country,” Carney said in an interview broadcast today on BNN Television. “We are in uncharted territory.”

To be sure, Harper said his government cannot “exaggerate” the degree with which it can control borrowing.



“We are a free country and people are entitled to make their own financial decisions,” Harper said. “This is a matter that is of concern to the government, we continue to warn Canadian households that interest rates are unlikely to go down.”

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Greg Quinn in Toronto at gquinn1@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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tonymctones

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #1 on: December 14, 2010, 09:00:30 PM »
but jagson said that canada is a utopia where ppl have free health care and everyone holds hands and sings kum bye ya

how can this be?

whork25

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #2 on: December 15, 2010, 02:52:05 AM »
Yeah because free health care and being in debt from your morgage is axactly the same thing ::)

Besides nothing is free health care is just a lot cheaper in Canada because private coorperations is not required to make money of it

Soul Crusher

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #3 on: December 15, 2010, 03:48:07 AM »
Oh lord. 

kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #4 on: December 15, 2010, 10:55:07 AM »
Canada won't have a US style meltdown. 
Abandon every hope...

tonymctones

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #5 on: December 15, 2010, 11:30:26 AM »
Canada won't have a US style meltdown. 
hope not or we might get pulled into another world wide economic downturn...

OH WAIT this is canada were talking about

nvm nobody would even notice  ;)

kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #6 on: December 15, 2010, 11:33:52 AM »
hope not or we might get pulled into another world wide economic downturn...

OH WAIT this is canada were talking about

nvm nobody would even notice  ;)

I wouldn't be so cocksure of knocking Canada down.  It's economy is certainly not as large as the US BUT it has the 2nd largest proven oil reserves.  30+% of our oil comes from them and investment in their oil sands has just increased with the price of oil going up. 

Add in the largest potash companies which fertilize the worlds food and you have a country with a lot going for it economically. 

I'm sure you knew this already though right?  I mean aren't you goldman sachs these days?
Abandon every hope...

tonymctones

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #7 on: December 15, 2010, 11:38:33 AM »
I wouldn't be so cocksure of knocking Canada down.  It's economy is certainly not as large as the US BUT it has the 2nd largest proven oil reserves.  30+% of our oil comes from them and investment in their oil sands has just increased with the price of oil going up. 

Add in the largest potash companies which fertilize the worlds food and you have a country with a lot going for it economically. 

I'm sure you knew this already though right?  I mean aren't you goldman sachs these days?
LOL nope still at ML

doubt either one of those would hurt us, were probably the number one customer of their oil so just like the oil industry here and cities that it is based in Houston primarily and Texas in general that industry wouldnt see the downturn as much as others.. ;)

old_lifter

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #8 on: December 15, 2010, 01:25:54 PM »
you are our number one customer, at least until we get approval for the pipeline to the pacific, then it goes to the highest bidder

24KT

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #9 on: December 15, 2010, 01:30:27 PM »
kc baller, ...you forgot to mention 20% of the world's fresh water supply as well.   :D
Not so sure about the potash. Tony Clemente may have sold us out. I didn't keep track of his decision.


Tony, what Flaherty and Harper are doing, is using a bit of foresight, ...something your leaders should have had.

Normally in a stable environment, these debt levels are not as risky, ...however, given the state of affairs worldwide, given the weakness of the US dollar, given the fact that interest rates are going to have to rise in order to stave off inflation, especially with the expected downturn in our economy, due to the fact that as a result of fiscal mismanagement, corruption and deregulation, our largest trading partner will soon no longer be able to afford the goods we manufacture... this will put a bit of a definite crimp in our exports. So given these factors, these debt levels could present a problem for Canadians in the foreseeable future. They are indicating that they are willing to enact measure to ensure stupid, irresponsible, ignorant and/or reckless Canadians don't end up in the same mess their American counterparts did south of the border. This is Canada where our winter temperatures frequently reach minus 40 degrees. We can't afford a bunch of tent cities here... too many bodies to clear out after the spring thaw. Flaherty is simply signalling to Canadians potential hazards, and that he is not going to let the US style monstrosity occur on his watch. It's what happens with responsible government
w

George Whorewell

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #10 on: December 15, 2010, 02:11:52 PM »
kc baller, ...you forgot to mention 20% of the world's fresh water supply as well.   :D
Not so sure about the potash. Tony Clemente may have sold us out. I didn't keep track of his decision.


Tony, what Flaherty and Harper are doing, is using a bit of foresight, ...something your leaders should have had.

Normally in a stable environment, these debt levels are not as risky, ...however, given the state of affairs worldwide, given the weakness of the US dollar, given the fact that interest rates are going to have to rise in order to stave off inflation, especially with the expected downturn in our economy, due to the fact that as a result of fiscal mismanagement, corruption and deregulation, our largest trading partner will soon no longer be able to afford the goods we manufacture... this will put a bit of a definite crimp in our exports. So given these factors, these debt levels could present a problem for Canadians in the foreseeable future. They are indicating that they are willing to enact measure to ensure stupid, irresponsible, ignorant and/or reckless Canadians don't end up in the same mess their American counterparts did south of the border. This is Canada where our winter temperatures frequently reach minus 40 degrees. We can't afford a bunch of tent cities here... too many bodies to clear out after the spring thaw. Flaherty is simply signalling to Canadians potential hazards, and that he is not going to let the US style monstrosity occur on his watch. It's what happens with responsible government


Translation: I don't know jack shit about American politics and now, it has been shown that I know even less about the country in which I supposedly reside.


kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #11 on: December 15, 2010, 02:24:06 PM »
kc baller, ...you forgot to mention 20% of the world's fresh water supply as well.   :D
Not so sure about the potash. Tony Clemente may have sold us out. I didn't keep track of his decision.


Tony, what Flaherty and Harper are doing, is using a bit of foresight, ...something your leaders should have had.

Normally in a stable environment, these debt levels are not as risky, ...however, given the state of affairs worldwide, given the weakness of the US dollar, given the fact that interest rates are going to have to rise in order to stave off inflation, especially with the expected downturn in our economy, due to the fact that as a result of fiscal mismanagement, corruption and deregulation, our largest trading partner will soon no longer be able to afford the goods we manufacture... this will put a bit of a definite crimp in our exports. So given these factors, these debt levels could present a problem for Canadians in the foreseeable future. They are indicating that they are willing to enact measure to ensure stupid, irresponsible, ignorant and/or reckless Canadians don't end up in the same mess their American counterparts did south of the border. This is Canada where our winter temperatures frequently reach minus 40 degrees. We can't afford a bunch of tent cities here... too many bodies to clear out after the spring thaw. Flaherty is simply signalling to Canadians potential hazards, and that he is not going to let the US style monstrosity occur on his watch. It's what happens with responsible government

sold us out?  Us?  Do you own potash corp?  Didn't think so snake oil peddler.  

BTW YOUR responsible government can not afford a crash because unlike the United States, CMHC aka the Canadian government will be forced to shoulder the costs of a mass default.  Your government decided it was a good idea to lower lending criteria and then in the face of the bubble bursting drove rates down to near 0% where they now reside because if they raise them too quickly it will not only lead to mass foreclosures but also to the bankruptcy of the Canadian government via CMHC. So your responsible government did the exact same thing as the united states and is now facing a debt crisis and housing correction, albeit with smaller implications and size than in the US.    
Abandon every hope...

kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #12 on: December 15, 2010, 02:26:55 PM »
Today, its main function is providing insurance for residential mortgage loans to Canadian home buyers. This insurance protects mortgage lenders against mortgage defaults on mortgages of less than 20% down. The insurance makes it more economical for banks to lend to riskier borrowers because some of the risk will be borne by CMHC. In other words, risk is transferred to the government.

So yeah really responsible - drive rates down, continue a bubble that is unable to last, watch wages decrease 1.5% whilst debt increases, then be on the hook for it.  THAT is responsible government?  What an idiot.  Go back to being the gold peddling gimmick.
Abandon every hope...

George Whorewell

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #13 on: December 15, 2010, 02:40:10 PM »
KC kicking ass and taking names.  ;D

Soul Crusher

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #14 on: December 15, 2010, 02:41:14 PM »
Today, its main function is providing insurance for residential mortgage loans to Canadian home buyers. This insurance protects mortgage lenders against mortgage defaults on mortgages of less than 20% down. The insurance makes it more economical for banks to lend to riskier borrowers because some of the risk will be borne by CMHC. In other words, risk is transferred to the government.

So yeah really responsible - drive rates down, continue a bubble that is unable to last, watch wages decrease 1.5% whilst debt increases, then be on the hook for it.  THAT is responsible government?  What an idiot.  Go back to being the gold peddling gimmick.


Ouch. 

24KT

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #15 on: December 15, 2010, 06:46:11 PM »
sold us out?  Us?  Do you own potash corp?  Didn't think so snake oil peddler.  

By sold us out, I mean sold Canadians out. Potash is Canadian owned (or was) hopefully it remained Cdn.

Quote
BTW YOUR responsible government can not afford a crash because unlike the United States, CMHC aka the Canadian government will be forced to shoulder the costs of a mass default.  Your government decided it was a good idea to lower lending criteria and then in the face of the bubble bursting drove rates down to near 0% where they now reside because if they raise them too quickly it will not only lead to mass foreclosures but also to the bankruptcy of the Canadian government via CMHC. So your responsible government did the exact same thing as the united states and is now facing a debt crisis and housing correction, albeit with smaller implications and size than in the US.    

Uh.. actually no. That's the problem the US has.
Canada has always maintained high standards when it comes to lending criteria.
w

24KT

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #16 on: December 15, 2010, 06:50:09 PM »
KC kicking ass and taking names.  ;D

LOL... Yeah that would be pretty brutal if it were accurate. It is only an extremely small percentage of mortgages that are less than 20% down ...first time home buyers, not speculators and/or investors.
w

tonymctones

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #17 on: December 16, 2010, 12:26:28 AM »
LOL... Yeah that would be pretty brutal if it were accurate. It is only an extremely small percentage of mortgages that are less than 20% down ...first time home buyers, not speculators and/or investors.
LOL so would 99% of any of your posts...

hows that hyperinflation working for you  ;)

magicuser

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #18 on: December 16, 2010, 01:43:09 AM »
what is canada deficit vs gdp?

what is avg income after taxes? vs usa?

kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #19 on: December 16, 2010, 09:22:13 AM »
By sold us out, I mean sold Canadians out. Potash is Canadian owned (or was) hopefully it remained Cdn.

Uh.. actually no. That's the problem the US has.
Canada has always maintained high standards when it comes to lending criteria.

Potash is owned and has been owned by overseas investors for years.  Sask gets royalties from potash but they do NOT own the company.  The CEO is American, he lives in Chicago, most of the head office staff live in Chicago.  It is an American company based in Canada.  Deal with it.

High standards?  Are you joking?  TD bank just changed their mortgages -

At the heart of the overhaul is a switch to collateral-charge mortgages, which are similar to lines of credit. The bank is encouraging employees to approve customers at 125 per cent of a home’s actual value under certain circumstances, so the homeowner can easily borrow more money if their property increases in value.

Um yeah smart banking cause housing never go down right?  I mean it's not like countless countries have had corrections (Canada included) over the past century. 

Please explain how a 40 year term, 5% down is responsible?  I can go up into your country buy a property WITHOUT deposit because i can get 5% back on any loan through certain banks.  Tell me now how is that responsible banking again? 
Abandon every hope...

loco

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #20 on: December 16, 2010, 09:24:10 AM »
Canada sucks!

kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #21 on: December 16, 2010, 09:24:18 AM »
LOL... Yeah that would be pretty brutal if it were accurate. It is only an extremely small percentage of mortgages that are less than 20% down ...first time home buyers, not speculators and/or investors.

Are you kidding?  If everyone had over 20% deposit why is the debt ratio so high?  That makes ZERO sense.  If people had money why would they be borrowing at such astronomical rates?  For fun?  You're that stupid but Canadians as a whole aren't.
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Bindare_Dundat

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #22 on: December 16, 2010, 03:51:38 PM »

At the heart of the overhaul is a switch to collateral-charge mortgages, which are similar to lines of credit. The bank is encouraging employees to approve customers at 125 per cent of a home’s actual value under certain circumstances, so the homeowner can easily borrow more money if their property increases in value.

Um yeah smart banking cause housing never go down right?  I mean it's not like countless countries have had corrections (Canada included) over the past century.  

Please explain how a 40 year term, 5% down is responsible?  I can go up into your country buy a property WITHOUT deposit because i can get 5% back on any loan through certain banks.  Tell me now how is that responsible banking again?  

Wasnt that raised not too long ago? If so,  what is the new amount? Where could you buy with no deposit?

kcballer

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Re: Canadians With More Debt Than U.S. Spark Policy Makers' Warning
« Reply #23 on: December 20, 2010, 09:14:10 AM »
Wasnt that raised not too long ago? If so,  what is the new amount? Where could you buy with no deposit?

It's a new thing by TD bank i think they started it in November of this year. 

As for the 5% back it's a cash back loan offered by RBC.  Essentially if you have 5% down from anywhere (loan shark etc) you purchase the house, RBC gives you 5% cash back for you to pay back that loan and there you go - house without deposit.  This is from their website - Your cash back is paid on the date your mortgage is advanced-just in time to help you cover immediate expenses  Hmmm what could those be Jag?  Fu*ken retard she is.  Is she even Canadian or is she pretending so she can give Canada a bad name?
Abandon every hope...