Bank of International Settlements says Canada, China, and Hong Kong are at serious risk.
Numerous organizations are warning that Canada is facing a higher risk of a banking crisis, as household debt levels continue to grow at the same time as interest rates rise.
As noted by BNN, “Moody’s Investors Service joined the Bank for International Settlements and S&P Global Ratings which have all warned in the last month that Canada’s banking system, dominated by five giants, is facing a growing threat of souring consumer loans amid rising interest rates. The country’s ratio of household debt to disposable income reached a record 171 per cent in the third quarter of last year.”
Bloomberg reported that the Bank for International Settlements said Canada, “was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study.”
Earlier, I reported on how this debt is impacting Canadians, with a disturbing survey showing 21% of Canadians saying they would give up their right to vote in order to get out of debt.
As governments take more and more of our money, the tax burden on Canadians is making the debt burden even worse, and this makes our economy and financial system far more fragile.
Now, with rising interest rates, the problem is spreading:
“The proportion of uninsured mortgages has increased to 60 per cent from 50 per cent five years ago, including home equity lines of credit, amid government efforts to reduce taxpayer exposure, according to the report from Moody’s on Tuesday. Canada Mortgage and Housing Corp., a government agency, insurers the bulk of mortgages in Canada. Almost half of outstanding mortgages, many of them on fixed-rate terms, will have an interest-rate reset within the year, increasing the strain on households’ debt-servicing capacity, Moody’s said.”
This is why bad government policies like the carbon tax and expanding bureaucracy don’t just impact one part of the economy.
A weaker economy, less investment, and higher taxes all indirectly increase the burden of debt, and that increased burden of debt makes our economy far more at risk of a serious crisis, and that won’t change until we get a new government that puts money back in the pockets of the people.