Canada debt-to-income ratio hits two-year low as rates set to rise – June 14, 2018,
If you’re interested in read the Reuters publication in full click the link below:
https://ca.reuters.com/article/topNews/idCAKBN1JA25H-OCATP
My thoughts on this are simple, debt-to-income ratios are shrinking because fewer people are qualifying for loans, which based on the cost of living in Canada is a very depressing thought, because the current fundamentals of the Canadian economy do not allow for too much deflation. Excessive regulations and bigger governments in areas better served by the private sector ensure that deflation won’t be something lasting in Canada. Deflation in Canada equates to a very stagnant economy, it’s important to understand that the American economy was allowed to crash in 2007-08, there are still Americans with mortgages on homes more than the home will sell for.
In Canada home prices can’t fall, the economy can’t crash because if it does many of the creditors that exist today will not exist in Canada for the forcible future. What a lot of people don’t understand is what happens during an economic crash, during an economic crash no entity want’s to loan out any money, banks start to call in debts which leads to fewer options for loans and mortgages. The other factor is the potential left-leaning party in power who will blame financial entities for lending out these bad loans, to garner votes, thus taking away personal responsibility. This type of thinking, in general, prolongs stagnation.
If you don’t qualify for a mortgage you lose your home, I personally don’t see a scenario where any Canadian politician allows Canadian families to go homeless without government intervention. So in my personal opinion and I’ve been saying this for years there’s a very good chance that the Canadian dollar will either be hyper-inflated or the Canadian economy will be very stagnant for the foreseeable future. I don’t see a crash, nor do I see a correction, what I see stagflation, there are simply too many regulations in place in Canada. Too much government intervention in every province, too many entitlements, too many Canadians who feel economically entitled for there to be a crash. If the government has any weapon at its disposal to prevent a crash, I’m certain they’ll use it.
In real terms, I have no idea why the Canadian dollar is as high as it is right now. It’s baffling to me when I look at the fundamentals of the Canadian economy from an investment perspective, the only areas of profit remain in the sectors heavily regulated by the government, what this equates too is innovation in Canada being less likely, which means stagnate growth unless there’s a Canadian politician with Donald Trump-like balls to turn things around. Again the areas to profit from in the Canadian economy right now are mostly areas that are regulated and/or owned and controlled by the Canadian government.
This is only my opinion, not to be taken as legal advice.
Interesting times ahead.
