BIS warning for Canadian economy

The Bank for International Settlements (BIS) issued a recent report that found Canada’s economy is in perilous condition

Hilliard MacBeth is the author of “When the Bubble Bursts: Surviving the Canadian Real Estate Crash”. Published two years ago, the warns Canadians, particularly in the large cities with the booming real estate markets, that the glory days can’t continue.

“Household debt in Canada, has tripled, more than tripled, in the last 17 years”

Recently MacBeth published a blog focusing on the warning from the international overseer, the Bank for International Settlements, otherwise known as the Central Bank of central banks, that shows the dangerous indicators.

“Canada was singled out as breaching the red alert level, if you like, on three of the four measures.” MacBeth says, out of twenty countries the BIS tracks.

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Today there is news that two of Canada’s big banks have gotten the message. They’re issuing warnings about Toronto housing prices, describing them as “simply unsustainable” and a “bubble” in separate reports.

“Household debt in Canada, has tripled, more than tripled, in the last 17 years” says MacBeth, a statistic he finds “mind boggling” and one he say he finds difficult to explain to people, just how unusual this is.

Meanwhile, “the shares of the Canadian banks, in the last 20 years, have risen tenfold or more… and their revenues and their profits and all that has gone up.”

“Somehow people have gone from believing that debt is a bad thing to credit, if you change the word to credit, credit is a good thing”

“Somehow people have gone from believing that debt is a bad thing to credit, if you change the word to credit, credit is a good thing”according to MacBeth. He say” it allows you to do what you want now, you don’t have to wait”

There are cushions built in to the Canadian system, and indeed it allowed the country, for the most part, to escape the ravaging so many countries experienced in the 2008 financial collapse that began in United States.

In Canada now, however, the combined elements of record household debt, a stagnant economy and the spectre of rising interest rates, are cause for concern and a wake up call that the banks are beginning to issue.