Even the Bank of Canada is concerned about our government and household debt levels.
Three months ago I read the following:
The Bank of Canada forewarned debt, both government and private, could derail the nation from recovering from the global economic downturn.
With a Canadian national unemployment rate of 8.5 per cent and in the midst of a global economic crisis, the Bank of Canada has forewarned Canadians that public and private debt could assist the recession in continuing, according to Reuters.
Canada’s central bank released its semi-annual Financial System Review and they say that there are some positive economic signs but increasing debt could wreak havoc on the nation’s financial system. [Digital Journal]
I ask you, if they’re worried should we be worried?
["Are we sinking the pig?"]
Kevin Gaudet, federal director of the Canadian Taxpayers Federation, certainly seems to be.
He shared his concerns several months ago (before the recent federal budget blew our debt load from $500 to $620 billion) under the headline, ‘Harper, Ignatieff ignore growing national debt at their peril.’
Mr. Gaudet writes the folowing:
New figures from economists at the IMF suggest that the public debt of the 10 leading wealthy nations will rise from 78% of GDP in 2007 to 114% by 2014.
That line made me think of something I read recently, then wrote about in a post, concerning the rising cost of weather-related damages vs global income. It ain’t pretty.
Gaudet continues:
In the fall economic update, Finance Minister Jim Flaherty bragged that Canada is much better off than most of its G7 colleagues. He argued that our deficit and debt levels are manageable and small relative to other countries. This brag is not true.
In fact, when debt levels are compared to the size of the economy (as measured by debt as a per cent of GDP), Canada is worse off than is the United States and the United Kingdom, only bettering France, Germany, Italy, and Japan.
According to the Intelligence Unit at The Economist magazine Canada's total public debt for 2009 approaches $1.1 trillion and is climbing.
Total debt levels stand at 72% of GDP.
Worse, today's borrowing binge is taking place just before an inevitable budget-crunch caused by the pension and health-care costs of an aging population.
Again, should we worry?
I would say we should manage our finances better as individuals and as a country, starting asap.
The higher our debts, the greater our vulnerability to another recession, a job less, a surprise.
But is the money out there?
***
“Is the money out there?”
That’s what I’m now thinking about.
What do you think?
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