Debt is a Four-Letter Word

You know what really dills my pickle? It’s when people who have some influence start spouting pure unmitigated clap-trap because they are a) too dumb to know better, b) need to say something no matter how ignorant it is or c) don’t know when they’ve drunk the koolaid. There might be a fourth: d) want to lure people into bad decision-making. No, that can’t be right! Who would do that?

Last spring Rob Carrick wrote an article in the Globe & Mail in which he said: “No more shrill warnings about the dangers of high household debt levels. I’m moving on.” He goes on to say, “But today’s high debt loads are not as dangerous as once thought.”

And… “The case for not worrying quite so much about debt was laid out by the chief economist at CIBC World Markets earlier this year in a note issued with the headline: Debt is Not a Four-Letter Word. ‘There’s no reason to raise alarm bells over household debt,’ Avery Shenfeld wrote.”

Okay then.

I don’t actually believe Rob Carrick is an idiot, so is this must have been a case of needing something new to write about. Or having drunk the koolaid. And in the case of Avery Shenfeld, it’s definitely d)  want to lure people into bad decision-making..

The most-often quoted gauge of Canada’s indebtedness is our average debt-to-income ratio, which just ticked up again to almost 165 percent up another percent from last year. While bankers want you to believe it’s not a big worry, my question is, “Not a big worry for whom?” Maybe not for the BANKER who is about as happy as a tick on a fat dog.

Carrick ended the column with “Let’s can the shrill warnings about debt and leave it at that.”

NO, let’s not. With the U.S. just having raised it’s prime rate by a quarter point — it’s economy is doing well while ours is in the crapper — will Canadian debtors end up being the ones that feel the pinch? American’s were scared out of their rampant consumerism by their economy retracting in 2008, but Canada hasn’t seen that retraction yet. Canada hasn’t seen a change in direction in the housing market as a country… yet. To keep ratcheting up debt because even our media doesn’t want to talk about it any more means to give the hell up and let the banks have their way with us.

Do you know that Canadians are juggling debt on 74 million credit cards. That’s just Visa and MasterCard. And those mythical prime rates experts like to quote as the justification for why debt is okie-dokie are available to almost no one you know. Despite the lowest central bank rate ever, mortgage rates have started to tick up again.

Owing money is dangerous. What if you lose your job? What if someone in your family gets sick? What if anything else in your life changes? If you can’t afford to pay for it today, why is putting it on credit the answer? Debt is the mother of FOUR letter words.