The Bank of Canada released its bi-annual report on Canada’s financial system. According to the report, [and yes, I agree with it] Canada has absorbed the shock of the global recession admirably and has made some initial re-organization in order to return the nation to prosperous times. In fact, many elements of the Canadian economy have improved, all except one. As we go through extended periods of slow growth, the greatest vulnerability in the economy will be consumers who have taken on more debt than they can handle.
If consumers begin to struggle to pay back their loans, this could lead to tighter credit, which would effect everyone’s ability to buy homes, and borrow to renovate or upgrade appliances. Obviously, such a shift would drive down the prices of homes, and household goods.
The economy is currently experiencing a phase of very slow growth, however that growth is at the insistence of a variety of government stimulus programs. There is concern that if this slow growth period is extensive, those who currently have found renewed confidence in the economy, will begin to despair, causing a correction in stock market gains.
There is a lot of instability in currency markets around the world, most notably with the United States. Instability also exists in the interest rates available in different nations. Low interest rates may lead to assets being traded at levels above their true value. [Yes, that includes homes] Trade needs stability, but unfortunately this will not be resolved in the near term.
Overall, the world has responded well to the massive jolt to the global financial system. We are headed toward recovery, but it will be a long road of restructuring and innovating before we can say prosperity has returned to the economy.
The following links to the report are courtesy of the Bank of Canada
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Very useful! Thanks, this website is amazing
Its sad to read about people who lose money because they dont understand how credit works.
We need to be more careful with debt. when I came to canada do you think we had so much debt? no! we worked day and night to pay off the house. I drove a rusty car but my house is nice.
It marvelous to read your article, as you interpret the information direct from the source. From the mainstream media, you would think they said something totally different. Why does the media feel they need to skew the information the public receives? thank you for your article and your blog, you are doing good work here.
What do you make of the Bank of Canada’s statement the other day? More importantly, Ben Bernanke’s released statement yesterday?
A house in Toronto is waaaaay overpriced. People should not have to risk everything just to own a house. Its crazy!
Debt will kill us!
Today theyreleased how much Canadians are in debt! We are the worst in all the civilized world! we have no self control. The average Canadian owes like $41,000! can you imagine! This cannot continue.
Wasn’t it some accounting group who said that Canadians have the largest debt amounts? The credit card debt, for sure is dumb, but house debt is good debt. We can’t buy houses above our means here, so that is saving us.