Canada has surpassed $1 Trillion in public debt

[SeanNewman]

Source is an Economist chart found here:

http://buttonwood.economist.com/content/gdc

What I find interesting is that you always seem to hear about us being better off than anyone else in the world (particularly the US), but this graph certainly doesn't show that.  For example, we're $30k in public debt per capita compared to the US' $25k, and our debt to GDP ratio is 73% vs 54%.  Once you go to 2011 though you see that the US is really steamrolling downhill.

China's is hilarious.  $739/person.  If I lived there and they made an announcement that they were collecting $739 from every citizen in order for the country to be completely in the black I think I'd actually have no problems doing it, but $30k is a different matter (let alone 90% of the country couldn't afford to do it anyway).

Heck, Greece isn't that much worse than us at $33k, but granted their debt/GDP is 100%.  Another interesting point is that all of the "bad" (re: Axis of Evil) countries seem to be a lot better off than we are.  Japan is beyond screwed, Italy is screwed, France and Germany are on par with us.

Maybe democracy and capitalism aren't the best after all.

Added:  Strangely, I wasn't able to find any countries showing as an overall surplus.  I would have thought one of the oil-rich ones would have been, but nope.  Please let me know if anyone else finds one.

 

[TimBit]

Maybe democracy and capitalism aren't the best after all.

Probably wildly unpopular thing to say 

Francis Fukuyama who, in the 90's, wrote an article trumpetting the end of history and the final triump of liberal democracy and capitalism recently wrote a retraction saying pretty much just that. Good read!

 

[SeanNewman]

It's strange because we have all the tools to work as a country, but due to personal greed we screw the whole thing up.

We live far outside of our means due to available credit, so IMO the government should be far more strict (invasive on private companies) on how much debt they can let a person get into.

Whatever the regulations would end up as, like a person is allowed to have 25% of their income going toward housing debt and 10% of their income on transportation debt and that's it.

I know the chart above is more about public debt than private debt, but if every individual had more money, more people are working and paying taxes, etc.

 

[George Wallace]

It's strange because we have all the tools to work as a country, but due to personal greed we screw the whole thing up.

We live far outside of our means due to available credit, so IMO the government should be far more strict (invasive on private companies) on how much debt they can let a person get into.

Whatever the regulations would end up as, like a person is allowed to have 25% of their income going toward housing debt and 10% of their income on transportation debt and that's it.

I know the chart above is more about public debt than private debt, but if every individual had more money, more people are working and paying taxes, etc.

Are you trying to tell us that your spending beyond your means is the Government's fault?

Get real.

It is quite simple:  If you can't afford it, don't buy it. 

 

[Farmboy]

so IMO the government should be far more strict (invasive on private companies) on how much debt they can let a person get into.

What we need is less government intervention and a freer market.

There is to much government control already. 

Don't think so?  Start your own company.

Then if you still aren't convinced that our government has to much control, try and start a company that deals with alcohol, gambling, tobaco, health care, energy, food,  etc.

 

[SeanNewman]

Are you trying to tell us that your spending beyond your means is the Government's fault?  Get real.  It is quite simple:  If you can't afford it, don't buy it.

Sounds great in practice for those of use who know that, but how's that working out for everyone else?

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20100216/household_debt_100216/20100216

Average Canadian household debt reaches $96,000
CTV.ca News Staff
Date: Tue. Feb. 16 2010 7:38 PM ET

The average Canadian family's household debt rose to $96,000 last year, a new study says.

Debt-to-income levels rose to 145 per cent – the highest level ever recorded in the study, which has run annually for 11 years.

The Vanier Institute of the Family study found a dramatic rise in late debt payments.

Mortgage payments that were at least 90 days late were up 50 per cent over 2008.

Additionally, there was a rise of 40 per cent in credit card payments that were three months behind.

(More at link)

People can not be trusted to live their own lives with the greedy companies that exist today any more than they could be expected to defend themselves if vikings landed on our shores to pillage the country.  Companies are predatory and the government can take steps to protect the people.

 

[SeaKingTacco]

People can not be trusted to live their own lives with the greedy companies that exist today any more than they could be expected to defend themselves if vikings landed on our shores to pillage the country.  Companies are predatory and the government can take steps to protect the people.

Yes.  "We" must immediately strip the citizens of Canada of their responsibilities.  "We" know better.  :

 

[Farmboy]

People can not be trusted to live their own lives with the greedy companies that exist today any more than they could be expected to defend themselves if vikings landed on our shores to pillage the country.  Companies are predatory and the government can take steps to protect the people.

Protect the people like they did at the G20?

Protect the people like they have done in Rwanda and Darfur?


People get into debt problem because:

1) They don't teach money manage in school unlike math and biology.  We use money every day of our life.

2) If they falter the system will catch them.  This is a huge issue and people need to take responsibility.

3) They think short term instead of long term

4) The government inhibits success

any more than they could be expected to defend themselves if vikings landed on our shores to pillage the country.

So be it.  The strong will prosper and the weak shall cease to exist.

The problem right now is we prop the weak up and try to pull the strong down.  This does nothing to improve the quality of anyones life, and contributes to the downfall of society.

 

[SeanNewman]

You guys are acting like I said I want a safety net for the weak, or that people should be in debt.

I completely agree that everyone is responsible for their own financial situation, but laws that allow people to get into too much debt + companies that exist that are more than willing to lend money at a high interest rate is a terrible combination.

Why would it be a bad thing to not allow people to get into more debt than they can afford to get out of?  Someone has their reasonable house, someone has their reasonable car, and if they want anything else they have to save up for it.  Not they should save up for it, but they must because other than a $1,000 limit credit card for emergencies they wouldn't be allowed to spend anything they don't have.

No deciding on a whim they need $20,000 worth of stuff from The Brick or at Future Shop on credit, because they would not be allowed to buy it without debit.

How is that so wrong?  How does it make the government look bad to not allow people to spend money they don't have?

 

[57Chevy]

Ok.....I looked at the chart above and not surprisingly it just keeps getting bigger and bigger all
the time. So, what does that mean? Is everybody out there spending money that they just don't
have? Are we all so foolish with our money? I have my doubts.
Sure, they turn it around and tell us that each and every one of us owes a fortune to who knows who.

Say. I buy something on credit with no interest charges added on to my purchase, over say a 12 month
period, then the total of that purchase is added to the national debt at the time of purchase. Right?
Even though I could have bought it outright, it makes sense to take advantage of the no interest
charges. I'm thinking that most people are doing the same, which makes the national debt figures
a bit of an unrealistic calculation.

Of course, I may be wrong, and while writing this the debt has increased by a few hundred thousands.

 

[Farmboy]

No deciding on a whim they need $20,000 worth of stuff from The Brick or at Future Shop on credit, because they would not be allowed to buy it without debit.

How is that so wrong?  How does it make the government look bad to not allow people to spend money they don't have?

How would people start companies?  How would people buy commercial property? How would people expand what they have?

Interesting concept as well about saving up for something.  I was recently talking to someone about that very thing.

Here is the situation:

His wife like to save $1000 a month towards a new vehicle.  When she has enough she buys the new vehicle.  Sounds like a smart thing to do right?.

He on the other hand buys a new vehicle and pays $1000 a month for it.

So basically they both put out $1000 a month towards a new vehicle.


If I didn't go into debt I wouldn't be able to purchase the building my company is in.  If I didn't go into debt it would be years saving before I could expand the way I have done.


As said above with the furniture.  I have bought a few thousand dollars worth of furniture from Leons before, again going into debt, on their don't pay a cent.  Then paid it off in full a year later without paying any interest.

In a business sence, the less money you put out up front, the  more money you have for other investments

You guys are acting like I said I want a safety net for the weak

No deciding on a whim they need $20,000 worth of stuff from The Brick or at Future Shop on credit, because they would not be allowed to buy it without debit.

Hense what you said.  Protect the weak and punish the strong.

 

[SeanNewman]

Farmboy,

Investment capitol for a business is a completely different animal.

Borrowing money for something that has the potential to produce profitable income is hardly the same as borrowing money to buy furniture and a giant TV.

 

[Farmboy]

Correct.

However it's said that most businesses fail in the first five years. 

So.... it could be said that the majority of them are creating debt that is never paid off.

My point is, how do you legislate against it and why would you? 

To prevent people from making mistakes is removing one of lifes greatest teaching methods.  To save them after they have made a mistake teaches dependancy.

Instead of creating more government intervention (laws) why not teach children in school how to use money and make it work for them 

 

[SeanNewman]

I am not saying your ideological theory doesn't make sense, but the ground truth is staring us in the face.

The majority of Canadians spend more on credit than they can reasonably be expected to pay back.

 

[Farmboy]

ahhh, but think of it this way......

I'll use my brother as an example.

He is an artist, most artists starve, and he was no exeption  ;D

However, he would go into debt to buy paints, brushes, canvas etc.

He would then paint amazing pieces which started selling quite well, so he was able to pay off the debts, buy more product and save money as well.


ahhh but again that is a business right?


However.


Does the chart take that into account?   

Nope

Does it make a distinction between someone who can't pay it back ie. welfare case who bought a 65" TV and the business owner who used his credit cards to finance a purchase?

Nope

Remember charts like this are done to show a specific side of a story. 

 

[57Chevy]

It doesn't take away the fact that alot of people spend more than can afford, and end up paying
the minimum payment due. And when that happens.......then you have big problems.

But take my example above. Right now I could buy something at 700$ with no interest over 12 months. If I wait, and put the money aside during 12 months time, when I go to buy it, then it won't
be 700$ anymore, but maybe 800$. What have I gained?

 

[SeanNewman]

The point would be that if there were a fundamental shift in personal finance, people would always have savings (because they wouldn't be paying off debt and they would have less), so when they wanted that $700 purchase they could buy it out of their $10,000 savings account.

And for the case of the business, I didn't say "no credit", I just said not a stupid amount of credit.  There is a big difference between someone spending a couple thousand on paint, brushes, and canvas than someone having two cars with $500+/mo payments, $10,000 in Leons debt, $10,000 in future shop debt, $20,000 in credit card debt, etc.

 

[Farmboy]

And for the case of the business, I didn't say "no credit", I just said not a stupid amount of credit.

But who is to say what is the proper amount of credit?  I for one don't trust the government to manage that properly and second I wouldn't want them to tell me how to live.

Remember in Canada the Banks are private and hold that debt themselves, unlike the US where banks can "sell" that debt.  The banks here have more to loose if someone defaults which means they are more picky on how they hand out credit.

There is a big difference between someone spending a couple thousand on paint, brushes, and canvas than someone having two cars with $500+/mo payments, $10,000 in Leons debt, $10,000 in future shop debt, $20,000 in credit card debt, etc.

Again it comes down to how a person manages their finances and their income.

$1000 for one person could spell trouble when others can manage with $500,000 + worth of debt.

A large amount of debt could easily be paid off as well however government rules make it much more worthwhile to have debt.

One of my good friends paid off their house soon after they bought it. However they took out a mortgage to be able to finance other improvements to their property and to lowever taxes at year end.

If you talk to those who are well off they usually have their own business and have a ratio of debt/assets of about 1 to 3

Again, it could be paid off but why? It works in the persons favour to have debt.

You're correct that a number of people spend beyond there means but it comes down to knowledge and discipline.


The big point is that governments can't manage things well, as they are made up of a large number of people, who a large number again don't enough know how to manage their personal finances.

Government intervention and regulation has brought us to this point in history and even more regulations won't make it better.

 

[SeanNewman]

You're correct that a number of people spend beyond there means but it comes down to knowledge and discipline.

Government intervention and regulation has brought us to this point in history and even more regulations won't make it better.

What I am trying to get across though has nothing really to do with the government controlling what a person can do.  I am not suggesting the government tells you how to spend your money, or should tax more/less, or anything like that.

Yes it comes to knowledge and discipline, but I still don't see why it should even be possible to get yourself in over your head.  I 100% agree with you that allowable debt should be based on individual factors, but it can not be debated that the current bar allows far too much debt to be accumulated by people.

The government is not being over-bearing if it makes laws that say people can not have things they can't afford. 

 

[Farmboy]

I am not suggesting the government tells you how to spend your money, or should tax more/less, or anything like that.

You are though.

The government is not being over-bearing if it makes laws that say people can not have things they can't afford

The government should not be telling people how to live their lives.  The government is supposed to be elected to represent us, not control us.

but I still don't see why it should even be possible to get yourself in over your head

Because sometimes it doesn't go well for some people.  They could be fine for years, then something happens and they are out of a job, or their payments go up, or the government does something to affect their income in some way.

The government is not being over-bearing if it makes laws that say people can not have things they can't afford.

What happens when I want to purchase a 42' yacht for myself?  Do I have to save up for 15yrs before I buy it?  Rather than financing it and using that money I was saving monthly, for my monthly payments instead?

What you're suggesting though is that because of a new government regulation I would have to save for years before buying it. 

What about a young family starting out and they don't have a vehicle, but require one to get to work? They couldn't save for one if they couldn't get to work.