Canadians are even deeper in debt than Paul Krugman thinks they are, says the Canadian Centre for Policy Alternatives.
In an article on the CCPA website, Armine Yalnizyan cited Paul Krugman, Nobel Prizewinning US economist and blogger, who recently spoke to the Canadian Bar Association.
Household budgets are a bigger part of the economy, and re-balancing them will take a lot longer if governments prioritize putting their own fiscal house in order first. On this front, Krugman notes, Canadians have little reason to be sanguine about what happens next.
Though our labour market did not lose jobs for 27 long months as in the U.S., he reminds us we have one of the worst debt to income ratios in the world.
In fact Canadians have the worst debt to income ratio of 20 OECD nations.
He went on to deliver this shocker: today Canada’s household savings rate ($2.80 on every $100 dollars of household income) is less than half that of the U.S. ($6.40 on every $100). He said that’s the first time this has occurred since the 1970s.
Yalnizyan said household debt is even worse than Krugman thinks: "You actually have to go back to 1938 to see Canadian savings rates this low."
Interest rates are so low that it's easy to borrow, Yalnizyan said, but it's also getting harder to save because incomes are stagnant while costs of housing education and transportation all keep going up.
Rising debt levels since the crisis began is one obvious indication of how hard this is going to be: In the fall of 2008, before the crisis hit, Canadians owed $1.40 owed on every dollar of disposable income. That broke all previous records. At last count (1st quarter of 2010), the average Canadian household owed $1.47 on every dollar they took in.
Krugman reminds us of what we all know: interest rates have nowhere to go but up. Indeed, it’s a fine balancing act, leaving behind an era of easy money, and making ends meet.
Crawford Kilian is a contributing editor of The Tyee.
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cocean
1 year ago
Low Rates Discourage Saving
Far too many seniors and other people who are dependent on savings are being hurt by the artificially-induced interest rates; and such rates do nothing to encourage families and households to save.
It's no wonder, either. Debt is the name of the game and the engine that drives in a society for which the sole measure of its progress is the Gross Domestic Product.
samuidave (not verified)
1 year ago
Krugman, the frontman for systemic theft
"Krugman reminds us of what we all know: interest rates have nowhere to go but up. Indeed, it’s a fine balancing act, leaving behind an era of easy money, and making ends meet"
Well, in passing the writer got one thing right: governments balancing the books is an ACT.
It's common knowledge the esteemed Paul Krugman supports the New Deal model. His beef is that not enough billions or trillions have been spent to properly supercharge the economy.
Krugman's logic appears to be that if we cram enough food onto the elite's banquet table, the likelihood of even more table scraps must surely increase. Clearly Mr Krugman has difficulty in distinguishing between beef and pork.
That aside, Paul Krugman, the economic saviour from the murky left, neglects the other side of his sophisticated equation: the banquet only carries on by mortgaging the people's financial future for, well, almost forever.
And that, dear reader, is the complexity of advanced economics in the current times.
Me, I am sick of this type of servitude to the elite's economic oligopoly being passed off by those with establishment credentials as some sort of cure all for the people.
Paul Krugman is, in any reasonably objective view of the game, just a front man for the system; he's been bought and paid for, given the accolades of the Nobel Prize, and comes with ideas designed to prop the capitalist machine up for one more go-around.
Seriously, what needs to be said that isn't obvious to one with grade seven maths skills?
Running the governmental household budget is, ultimately, not terribly different than managing your own financial affairs. Eventually, despite any fancy fiscal dance, the creditor always comes calling for his pound of flesh.
For those unfamiliar with his writing, Joe Bageant LINK has another great article, this one on class alliances and the legally sanctioned 'upward mobility of wealth' world we all are forced to endure.
And, yes, I know the story was about household debt. So here's the first step to fixing most of our personal financial woes: stop thinking wants are needs. Better yet, let's throw the bums from office and establish a sovereign nation.
asp
1 year ago
or
The costs of housing, education and transportation all keep going up because it's easy to borrow. Cheap money makes us value money less.
Car loan? No problem. Here's 20 grand. Student loan? Sure. Another 20 grand. The status of calling yourself a home owner? Only 200K. No? Ok, what the heck, make it 400K. Money's cheap. Put the strata fees, utilities, and food on the credit card.
When most people had to save before they could spend things like housing, transport, education, clothes, restaurants (etc, etc) were priced according to peoples incomes.
Now prices are determined by peoples credit card limits.
Ain't life grand in the 21st century? Much better then before!
freebear
1 year ago
Global economy all about
debt and credit now; not making things, or improving ecological and human well-being.
Ed Seedhouse
1 year ago
Financial Lies
samuidave
"Running the governmental household budget is, ultimately, not terribly different than managing your own financial affairs. Eventually, despite any fancy fiscal dance, the creditor always comes calling for his pound of flesh."
This, of course, is a false analogy, and any conclusion drawn from it is false. The Federal government is NOT a household and no matter how many times you say it is it is not and never will be so long as it issues money.
The government of Canada is under no financial restraint because it can do the one thing no household can do, namely create money out of thin air (which is where all money has alwys come from anyway).
Provincial and Municipal governments cannot do this, but the Canadian government can. And so the analogy between the Federal government and a household is utterly false, and totally misleading.
It is this kind of abysmal financial ignorance that is fostered by the power elites and largely intentionally so, to make jobs scarce and labour cheap. There is NO financial constraint upon the government of Canada and in fact continuous deficits are absolutely necessary to sustain a capitalist market economy. When the government sector as a whole is in surplus the private sector MUST, as a mathematical identity of the rules of accounting, be in deficit.
However government never needs to be in deficit because it's spending never depends on tax revenue in the first place. The function of taxes is merely to give the money issued by the government a stable valuation. The Federal government never needs tax revenue to spend and could easily issue enough money for all provincial governments to completly eliminate their deficits, although there is no reason to do that in the forseeable future.
Yes, too much money can be one of the causes of inflation. But too little money causes deflation, and there is not enough money to cause significant inflation as long as Canada is not in full employment, which it is now a long way from.
This is not opinion, it is simple fact. It is mathematics, not psychology. It is how our money system in fact works.
Repeat after me: "The Government is NOT a household and the constraints of households do not apply to it." Say it a hundred or a thousand times until it's truth penetrates.