Debt Makes the World Go 'Round and Eventually Down
The recent Bank of Canada interest rate drop is a desperate attempt to stimulate growth through debt, potentially suckering those already in debt up to their eyeballs through long-term mortgages, automobile payments, and of course credit cards and lines of credit. An implosion waiting to happen, especially if the housing market, overvalued by up to 30%, continues to wobble.
But debt burdened Canadians could also decide to exercise some discipline and restraint with the lower rates and begin to pay down all that debt, in which case the average Canadian would presumably “consume” much less - thus inhibiting any imagined so-called growth through consumption. Not a likely scenario, however, given stagnant if not shrinking wages throughout the country, no region a more obvious victim than Alberta.
In other words, neither monetary stimulus nor consumer spending is going to save the Canadian economy under the Harper Regime.
Now comes news that Canada had the second biggest jump in household debt-to-income ratios of any country other than Greece between 2007 and the second quarter of 2014. And other recent data indicates the ratio has moved up since then. Add to this stark news the fact that GDP shrank in November and continues to do so because of our unwarranted concentrated dependence on oil exports - the price of which is dramatically slumping - and that job numbers have been revised downwards for 2014 by StatsCan.
The root cause of this gloomy situation: neoliberal policy privileging the financial sector and investor class at both the federal and provincial level - everyone is a true believer - and the failure to encourage a diversified productive domestic economy. Yet many Canadians, including the apathetic and indifferent when they they can find the time to hear the spin, continue to believe that the Harper Regime are “good economic managers.”
Economics makes the world and “politics” go round but few really understand how economic policy impacts their daily lives. It’s where progressives should really be focusing their attention if they seek systemic change.
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