Excess personal debt has been a topic in the media for many years.
Debt is still a problem but it is time to view the danger of debt from a different perspective.
The more you look at the problem of increasing debt the more you realize it is turning into a public relations battle.
Who is to blame?
Is our federal government predicting a national economic collapse under the weight of excess debt and are they getting ready to say “it was not our fault”?
Is Ottawa attempting to shift the blame to greedy consumers on a consumption binge?
Let’s start with the basics.
The use of personal debt, including mortgages, has many advantages.
These advantages can turn into negatives if excess debt is used.
Debt comes with two obligations; lenders pay interest and eventually the principal debt has to be repaid.
At a certain point too much debt will cause great economic hardship.
For many years the Department of Finance and the Bank of Canada have preached the soundness of a more conservative strategy of using less household debt.
Excessive debt is a risk to individuals.
A domino effect of too many consumers defaulting on their personal and mortgage loans could have negative economic repercussions for Canada’s fragile economy.
Earlier this month, Ottawa introduced another measure aimed at slowing down the red hot housing market. Finance Minister Bill Morneau introduced small restrictions on mortgage borrowing.
For the sake of simplicity let’s acknowledge that too much debt is an economic risk for individuals and our country. Also we should acknowledge that household debt is at historic highs.
The debt conversation needs a reset.
The problem is not just with Canadians but it includes the Canadian government.
Our federal debt is approaching $700-billion and Ontario owes approximately $300-billion.
If our federal government thinks excessive debt is that bad it should stop pointing the finger at us and look in the mirror.
Governments are part of the problem and it is about time for politicians to provide leadership into better fiscal management of our country.
Stop worrying about the consumer and get your own house in order.
For individuals to have financial prosperity we have to properly manage our money.
All of that is within our individual control. However we are also dependent on knowing that our government is on a solid financial base.
If we manage our debt but our country does not then the economic prosperity that we would hope for will quickly become an illusion.
In the spirit of a New Year’s resolution we can all hope our political leaders both federally and provincially start to manage Canada’s debt.
Our individual financial success is a partnership between us and our government. Governments have to start doing a better job.
It is time to stop the hypocrisy and have our governments manage their debt the way they have been encouraging Canadians to manage our household debt.