Consumer Debt

For all the talk about governments acting responsibly over the past decade and a half, the reality is that a lot of the debt has simply been passed along to consumers:

(B)allooning paper wealth combined with ultra-low borrowing costs are also inspiring Canadians to dig themselves deeper and deeper into debt, breaking records every year.

Debt as a percentage of an average household's disposable income hit 122.3 per cent last year, double the 61.1 per cent level in 1961.

The federal government has, of course, been going in the opposite direction:

Since its peak in 1995, Canada’s ratio of total government net financial liabilities to GDP is estimated to have been reduced by 38.2 percentage points to 31.1 per cent of GDP in 2004, which was again the lowest in the G-7.

Lest there be any doubt, I'm not advocating that the government try to increase its own debt at the same level as consumer debt. On the contrary, what would should be striving for is for consumers to live more within their means as well. Instead, what we see is this:

The "false economy" of surging house and stock values is certainly contributing to yet another hefty increase in the number of people getting into debt trouble, said Laurie Campbell, program manager of Credit Counselling Service of Toronto.

"There doesn't seem to be any limit to the amount of credit people can get, and they just keep borrowing and borrowing."

That borrowing is undoubtedly helping to drive the economy for the moment. But surely we know by now that the positive effect of added short-term economic growth isn't worth the long-term harm of a foreseeable market crash. I don't have all the answers to make sure that doesn't happen, but some public awareness of the problem seems like a start.