

Canadian Credit Bubble In Pictures - cwan
http://globaleconomicanalysis.blogspot.com/2010/03/canadian-credit-bubble-in-pictures.html

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henryprecheur
The per-capita numbers wouldn't be as dramatic. Canada's population grew by
10% between 99 and 09.

Also saying that "Canada is fiscally prudent" is true if we consider only the
Public debt (which excludes household debt). France has the opposite problem,
the state is a big spender and households are financially prudent. A country's
finance doesn't necessarily reflect its citizens financial habits.

This is still a worrying picture for Canada...

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MikeCapone
I'd rather live in a country where the government is fiscally prudent, because
then you still have choice to be personally prudent and put most chances on
your side.

If you live somewhere where there's a massive public debt, whatever you do
personally won't avoid you a world of hurt in the long-term.

(or at least, that's my understanding of the situation)

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mrtron
Wouldn't comparing the actual numbers with a line that represented both
inflation and increases in disposable income be most fair?

In which case from my eyeballing:

a) Credit card debt has doubled

b) Personal lines of credit have tripled - but this could be related to an
increased number of lines of credit available to people.

c) Mortgages look on pace

d) Household debt has increased about 50%

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rapind
I know right? Seems like the data can stand on it's own without the
embellishment. Omitting important data just makes me distrust the author.

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pedalpete
That is quite scary, but I'd like to see this as a per/capita comparison
against america and maybe even europe.

We didn't have the 'sub-prime' credit program like the US did, or maybe we
just don't realize that we in Canada have something similar, but maybe it just
hasn't struck us yet.

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chaosmachine
In other news, the dollar was very close to hitting parity today:

[http://ca.finance.yahoo.com/q/bc?s=USDCAD=X&t=1d](http://ca.finance.yahoo.com/q/bc?s=USDCAD=X&t=1d)

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pantsd
Also, a minor point, the heading for the last graph talks about the increase
in credit from '99, but the legend shows '02, so I'd be hesitant comparing
those numbers to the rest.

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barryfandango
This shows an increase in household debt, not a bubble.
<http://en.wikipedia.org/wiki/Economic_bubble>

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Chronos
Debt is a leading indicator of a temporary and artificial increase in spending
and prices: people don't take out loans just because they want to sit on a
pile of money, they take out loans because they want to buy goods and
services. And when more money is chasing after the same goods and services,
prices goes up (microecon 101).

If investors are making bad forecasts by assuming that such temporary upward
trends in price will be sustained for a long time, or even permanent, then the
result is a bubble economy.

A bubble exists because it is a self-fulfilling prophesy: when investors
increase debt ("leverage") in order to invest in whatever good is currently
rising in price (i.e. has already been bid up via debt-funded spending), those
investors further increase the price and thus attract even more investors.
This continues until a sufficient number of investors are cashing out in order
to pay back the debt (whether due to the timeline of the loan or due to the
lender calling them on their leverage position).

Investors who don't use leverage (i.e. use only their own money) are far less
capable of creating large price moves: a leveraged investor can generate a
trade volume two or three orders of magnitude larger than an unleveraged
investor. Bubbles are much harder to sustain purely with unleveraged
investments: to become a bubble, a price rise has to be sharp enough to
attract attention, bringing in more investors to form the next layer of the
pyramid.

