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MoneyTo pay off or borrow more is the question facing Canadians: Don Pittis

13:17  11 september  2019
13:17  11 september  2019 Source:   cbc.ca

Why the Bank of Canada won't fight a recession till there is one: Don Pittis

Why the Bank of Canada won't fight a recession till there is one: Don Pittis With Canada's real economy going strong there's reason to think cutting rates in fear of recession would only make its effects worse once asset prices start to fall.

cbc.ca 2019-03-11 Don Pittis . © CBC The record trade deficit revealed last week was blamed on Instead of borrowing more and more to buy pricier houses, Canadians are looking for houses they Two more signs supporting the idea that gloomy indicators are more retrenchment than some sort of

While lenders pushed loans, Canadians were willing borrowers . But as rates begin to rise, indebted consumers face withdrawal pangs. Lender upselling has raised the stakes for Canadians addicted to debt: Don Pittis . While lenders pushed loans, Canadians were willing borrowers .

To pay off or borrow more is the question facing Canadians: Don Pittis
To pay off or borrow more is the question facing Canadians: Don Pittis
To pay off or borrow more is the question facing Canadians: Don Pittis

Two side-by-side transit ads on my morning commute this week seemed to define a Canadian predicament.

(My apologies to the people I had to nudge out of the way to snap pictures.)

More Fed cuts expected to push Canadian interest rates lower: Don Pittis

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When you borrow money it is important to know how loans work. With more information, you can save money and make Lenders don 't often show exactly how loans work and what they cost, so it pays to run the As you figure out how loans work, you’ll see that most loans get paid off gradually over time.

In most respects, defaulting on a student loan has exactly the same consequences as failing to pay off a credit card. However, in one key respect, it can be much worse. That ’s how you end up facing an armed posse of U.S. marshals, with local police as backup, for failure to pay a student loan of ,500.

What came to mind was that classic trope of a cartoon devil on one shoulder and an angel on the other, each arguing for the hearts of Canadians.

It's an idea that encapsulates some new data out this week on consumer borrowing — and it could be a factor in the coming federal election.

One ad, from Magical Credit, pictured a youth apparently elated to be able say "abracadabra" and get up to $20,000 to pay off "urgent bills."

The other ad — perhaps appealing to people who had tried the first option and repented — was from insolvency trustee Farber, offering a chance to eliminate your debt and live debt-free. "Live happier!" it exclaimed.

Best route to happiness?

It's a question many Canadians may be asking themselves: As individuals, should we be borrowing more to boost the economy? Or be paying down debt in anticipation of weathering an anticipated storm? Which is the route to true happiness?

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Argentina and other countries that boldly declared that they would not pay to the IMF had to eventually kneel Whatever the outcome, Greece on many measures, is all but bankrupt. In addition to the half a billion In the aftermath, many countries undergo a rough period of austerity followed by a period of

Credit card rates don 't generally go up as borrowing conditions tighten, but when alternatives get White says there are more expensive borrowing traps than credit cards, including payday lenders. It's less helpful for those who are already struggling to pay off debt. Goodtrack, who is helping to

As we head into a federal election campaign, new bits of data provide food for thought about how Canadians are responding to fears of a potential future recession that is now so often in the news.

From the Office of the Superintendent of Bankruptcy Canada, there was a disclosure that consumer insolvencies are on the way up, rising nearly 17 per cent from one year ago.

It is important to realize that while the percentage increase is high, the absolute number of insolvencies — in the order of 10,000 a month — remains a tiny proportion of the more than 37 million Canadians and their households.

Another proviso is that the vast majority of these insolvencies are negotiated settlements where people have agreed to new terms of payment; actual bankruptcies are up less than three per cent.

A sign of change?

The change over the year, however, seems to indicate something is happening — and it is quite different from the happy economic news of the past few weeks.

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Over- borrowed Canadians may be worst hit, but industries including construction could soon start to feel the pinch of higher rates. Falling real estate prices can make you feel poorer still, even if your house is paid off . Follow Don on Twitter @ don _ pittis . More analysis from Don Pittis .

The Pay Off Debt App is designed to help you create and use a debt snowball to focus your debt reduction efforts. It’s a proven systematic way to get it almost seems the best thing to do is either get a new job, get a second job, sell some belongings, or borrow from a family member. if do get another

"It could be an indication of where the economy is heading," said Terry Goodtrack, CEO of AFOA Canada and an adviser to the government on financial literacy.

But Goodtrack says any individual statistic is open to different interpretations. For example, insolvencies may follow a period of economic optimism, where some people simply got in too deep.

The robust job creation announced last Friday was just the latest in a series of positive economic indicators; rising wages, a 3.7 per cent annualized growth rate and a resurgence in real estate sales have all been recent indicators of strength.

Such economic signals are being watched closely by the Bank of Canada's Stephen Poloz, but they will also be monitored by political parties vying for your votes. If these insolvency numbers are hinting at a swing in the economy toward gloom in the coming month, that could play an important role in an election that currently seems like a horse race.

Year-end gloom

A new report out yesterday from the research group Investor Economics on Canada's household balance sheet points to a different indicator on debt.

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The company can borrow against all those assets, and the assets represent the company's future income stream. Now imagine that changing health concerns mean that most of that asbestos may never be mined or exported. Follow Don on Twitter @ don _ pittis . More analysis by Don Pittis .

Of course that 's not what it says in so many words, but in calling on the At a question -and-answer session in Toronto yesterday, Finance Minister Bill Morneau said the government is already examining ways of using tax Don Pittis was a forest firefighter, and a ranger in Canada 's High Arctic islands.

"The final months of 2018 delivered a sobering message to Canadian households and the financial services industry alike, with market concerns over Brexit, a U.S.-China trade war, and other factors depressing asset valuations and prompting a rise in interest rates," said Investor Economics CEO Goshka Folda in a statement.

The impact of that year-end gloom, the report said, is that Canadians have increasingly turned from tucking money away in bank accounts and other investments, to instead using it to pay down debt.

Once again, while the absolute numbers involved are not enough to budge Canadian debt loads that remain above 175 per cent of income, it is an indicator that people may be battening down for harder times.

And it is one more sign of the self-fulfilling prophecy that can contribute to recession: Consumers borrow less and spend less. As spending falls, or in anticipation of it, businesses borrow less and invest else. And the entire economy shrinks.

That is why some economists want the Bank of Canada to cut interest rates. In theory, making money less expensive to borrow will make people and businesses borrow more, making the economy stronger.

In that way of thinking, it is Magical Credit and its abracadabra that is the angel on your shoulder. The idea of living debt-free, then, is the devil because it shrinks the economy.

Encouraging borrowing with rate cuts and government deficit spending may work for national economies. But when it comes to transit ads that are likely targeting "people who are not very financially literate," Goodtrack says borrowing to pay urgent bills is no solution.

"Here's a quick fix that is going to get you even worse into debt, right?"

In fact, for transit-riding consumers, he says he's not crazy about either of those advertising messages. Instead, he said, the answer is contacting one of the country's many non-profit credit counselling agencies.

For Canada and its voters, the choice may not be so easy.

Follow Don on Twitter @don_pittis

Vancouver woman facing 7 charges over alleged airport luggage thefts.
Mounties said Miriam Tremblay, a 26-year-old Vancouver resident, was arrested on Aug. 2, and is now facing seven charges of theft under $5,000. READ MORE: YVR airport distraction theft ring suspect now facing 9 charges Tremblay is accused of pilfering luggage from baggage carousels at the airport between July 12 and Aug. 2 this summer in the airport's domestic terminal. “Richmond RCMP YVR Detachment is committed to ensuring the safety and security of travellers to Vancouver International Airport,” said Sgt. Ross Lundie with the RCMP's YVR detachment.

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