The combination of a weakening economy and rising interest rates put Canada in a very dangerous position.
Canada’s household debt ratio – often measured as the highest on earth – has risen once again.
This time, it’s rising because of weakening income growth, rather than surging debt levels.
The household debt ratio ‘unexpectedly’ increased from 177.4 in Q2, to 177.5 in Q3.
According to economic analyst Priscilla Thiagamoorthy, “but unlike in past quarters, the culprit is a weaker income backdrop rather than higher debt loads. While the decades-long consumer debt mania is finally easing, income growth now remains a concern, keeping household credit burdens a key headwind to the Canadian economy.”
The media often fails to mention Canada’s sky-high household debt ratio, despite how vulnerable it makes our economy. Any large interest rate hike, or decline in income, or combination of the two, could push Canada towards a recession or even an economic crisis.
And that risk is being made far worse by the policies of the Trudeau government. By making life more expensive, they make it tougher for people to spend money in the economy and manage their debts, which causes economic weakness and makes high debt levels even more burdensome.