Quote:
Originally Posted by macker
Mark Carney in a somewhat unusual move has stated on more than one occassion in the past year that Canadians should not take the current low interest rate environment for granted and should not take on more debt as rates will rise in the future and they won't be able to handle things. Part of these warnings is based on the fact that Canadian consumer debt is at an all-time high of $1.5 Trillion. Things have escallated from 2005 when Statistics Canada showed debt to income of 116% to this year where the same ratio is at an all-time high of 150% even though consumers ability to pay back debt is not rising nearly as fast. The equity people have in their homes hit a 20 year low in 2010 and stood at just 34.3% Carney knows that he needs to make these comments as things will eventually change and easy credit and easy rates that are creating these elements logically have to go up. One day he will be able to sit back and say that he warned everyone well in advance as it is not a trend that is reversing thus far.
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I am confused.....
My understanding of what your saying is when the economy turns around for the good (be it today or 5 years from now), the government raises interest rates to account for normal growth & inflation (or on the flip-side - hyperinflation would require raised rates if my very weak understanding of economics holds true).
But your also saying, due to the high debt levels, higher rates will force people into hard times because they are budgeting with the current low rates.
So times will be better, as the economy is healing, but no one will have money due to large dept levels based on lower interest rates. Doesn't that throw us back to square 1?