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Consumers have hit their limits, bank CEOs say – Business – CBC News

Consumers have hit their limits, bank CEOs say – Business – CBC News.

There’s no question that the consumer has been leveraged up,’ Royal Bank CEO says

The Canadian Press Posted: Jan 14, 2014 2:08 PM ET Last Updated: Jan 14, 2014 2:08 PM ET

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edm-090103-credit-cardsRoyal Bank chief executive Gord Nixon said Tuesday he expects Canadian households will begin to show more restraint

Canada’s biggest banks say consumers are reaching the limit on how much they can afford to borrow, and that’s likely to slow loan growth this year.

Royal Bank chief executive Gord Nixon said Tuesday he expects Canadian households will begin to show more restraint.

“In terms of pure consumer lending (growth), we’ll probably be operating at a much lower rate than we have been over the last few years,” he told a bank industry conference.

“There’s no question that the consumer has been leveraged up.”

Low rates will end

Canadians have taken advantage of low interest rates for years, borrowing record amounts, but leaving them vulnerable.

Policy-makers have expressed concern that a sudden rise in interest rates would leave many consumers unable to meet their payments, potentially causing a fallout that ripples through the housing market and consumer spending.

Statistics Canada reported last month that household debt touched an all-time high during the third-quarter of 2013, inching up 0.6 percentage points to 163.7 per cent over the summer months. The increase means Canadians owe nearly $1.64 for every $1 in disposable income they earn in a year.

Nixon said he expects consumer lending growth to remain tight, rising by mid single-digit levels, for “an extended period of time.”

“What would be the most healthy outcome for the marketplace is for there to be a steady, orderly increase in interest rates to a reasonable level,” he said.

Focus away from consumer loans

Bank of Montreal chief executive Bill Downe said a slower increase in the debt levels of Canadians would help shift away from a dependence on the consumer for overall economic growth.

He expects U.S. business loans will become a more dominant force in the banking industry this year.

“We’re going to benefit from continued strong commercial and industrial loan growth and I think that’s going to spill over into Canada,” he said.

Downe said as consumers borrow less they will focus more on saving, which will benefit the wealth management business.

Scotiabank chief executive Brian Porter said he’s comfortable with the credit quality from its customers and doesn’t see any major concerns developing in the real estate market either.

“We would view supply and demand relatively in check across the country,” he said.

What do I believe about the world complex? Or, why I think a collapse is inevitable.

Last evening (January 12, 2014) I sat down to create a compilation of beliefs I hold about the world complex. The first twenty that popped into my head were pretty easy with the last few (I only went as far as once through the alphabet) requiring a little thinking. In no particular order I offer this quickly composed list with some links to articles/websites to support them:

ECONOMY/FINANCES

a)     Economic markets are rigged.

  1. http://www.zerohedge.com/news/2013-12-11/are-markets-rigged
  2. http://www.zerohedge.com/news/2013-06-12/summarizing-known-rigged-markets
  3. http://www.zerohedge.com/news/2013-06-11/wmreuters-busted-latest-market-rigging-and-collusion-scandal-foreign-exchange

b)    Gold has been moving from the West to the East.

  1. http://www.zerohedge.com/news/guest-post-world’s-gold-moving-west-east
  2. http://www.zerohedge.com/news/2013-12-19/chinese-dont-want-dollars-anymore-they-want-gold-londons-gold-vaults-are-empty-why
  3. http://www.zerohedge.com/news/2013-05-08/chinese-gold-imports-soar-monthly-record-insatiable-demand

c)     The world’s primary reserve currency never lasts forever.

  1. http://www.zerohedge.com/news/2014-01-10/todays-reserve-currency-tomorrows-wallpaper
  2. http://www.zerohedge.com/news/2013-07-06/bundesbank-warns-chinas-currency-its-way-becoming-global-reserve-currency
  3. http://www.zerohedge.com/news/2013-10-13/guest-post-how-much-longer-will-dollar-be-reserve-currency

d)    Central banks have been coordinating their monetary policies from interest rates to ‘money printing’ to ‘forward guidance’ that is resulting in currency devaluations

  1. http://www.zerohedge.com/news/here-comes-mother-all-rumors-g-20-sources-say-central-banks-preparing-coordinated-action
  2. http://www.zerohedge.com/news/goldman-todays-coordinated-central-bank-bailout-it-isn’t-enough-save-anyone-or-solve-averything
  3. http://www.zerohedge.com/news/2013-10-03/guest-post-rise-and-fall-monetary-policy-coordination

e)     Central banks have been monetizing sovereign debt through increased holdings of government bonds.

  1. http://www.zerohedge.com/news/2013-01-07/japan-may-or-may-not-mint-quadrillion-yen-coins-it-will-monetize-european-debt
  2. http://www.zerohedge.com/news/ecb-monetizes-another-€10-billion-piigs-debt-trichet-says-prudent-ecb-not-fed
  3. http://www.zerohedge.com/news/2012-10-20/presenting-all-us-debt-thats-fit-monetize

f)     Sovereign nations are in extreme debt.

  1. http://en.wikipedia.org/wiki/Government_debt
  2. http://www.economist.com/content/global_debt_clock
  3. http://www.tradingeconomics.com/country-list/government-debt-to-gdp

g)    Private households are in extreme debt.

  1. http://www.oecd.org/std/fin-stats/
  2. http://www.zerohedge.com/news/2013-06-04/debt-nations
  3. http://www.economist.com/blogs/graphicdetail/2013/06/focus-1

h)    All fiat currency experiments eventually end.

  1. http://dailyreckoning.com/fiat-currency/
  2. http://www.youtube.com/watch?v=Oql8CTy6AcA
  3. http://georgewashington2.blogspot.ca/2011/08/average-life-expectancy-for-fiat.html

i)      Robotic technology is replacing increasing number of jobs.

  1. http://www.news.com.au/technology/science/robots-to-replace-almost-50-per-cent-of-the-work-force/story-fn5fsgyc-1226729696075
  2. http://robotswillstealyourjob.tumblr.com/post/48210312400/robots-are-taking-our-jobs-and-we-will-take-their
  3. http://www.amazon.com/Jobocalypse-Human-Jobs-Robots-Replace/dp/1482701960

j)      There exist trillions of dollars of IOUs supporting the financial system.

  1. http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html
  2. http://theeconomiccollapseblog.com/archives/the-coming-derivatives-panic-that-will-destroy-global-financial-markets
  3.  http://moneymorning.com/2011/10/12/derivatives-the-600-trillion-time-bomb-thats-set-to-explode/

k)    Unemployment has skyrocketed across western nations, especially for the young (under 25).

  1. http://www.theguardian.com/commentisfree/2013/nov/14/youth-unemployment-wreck-europe-economic-recovery
  2. http://business.time.com/2012/11/05/why-the-u-s-has-a-worse-youth-employment-problem-than-europe/
  3. http://www.workopolis.com/content/advice/article/study-why-youth-unemployment-in-canada-is-here-to-stay/

ENERGY

l)      Production of conventional oil has begun to decline.

  1. http://www.oildecline.com/
  2. http://www.theguardian.com/environment/earth-insight/2013/dec/23/british-petroleum-geologist-peak-oil-break-economy-recession
  3. http://www.csmonitor.com/Environment/Energy-Voices/2013/0412/The-decline-of-the-world-s-major-oil-fields

m)   New technologies and dirtier sources are being increasingly required to sustain fuel production.

  1. http://www.peakoil.net/future-oil-production-in-canada
  2. http://www.ft.com/cms/s/0/d005f176-4ad8-11e3-8c4c-00144feabdc0.html
  3. http://www.theoildrum.com/node/10017

n)    Fuel production barely sustains demand.

  1. http://omrpublic.iea.org/balances.asp
  2. http://www.economist.com/blogs/dailychart/2011/06/oil-production-and-consumption
  3. http://www.eia.gov/todayinenergy/detail.cfm?id=12891

o)   The Shale Oil Revolution is not.

  1. http://shalebubble.org/drill-baby-drill/
  2. http://www.resilience.org/stories/2013-10-21/major-study-projects-no-long-term-climate-benefit-from-shale-gas-revolution
  3. http://mondediplo.com/2013/03/09gaz

p)    Models of future fuel production rely on significant ‘yet-to-be-discovered’ sources.

  1. http://www.abo.net/en_IT/publications/reportage/togo/togo_1.shtml
  2. http://seekingalpha.com/article/236162-iea-forecast-economy-depends-on-yet-to-be-found-oil
  3. http://www.jeffrubinssmallerworld.com/2010/11/24/even-the-international-energy-agency-forecasts-peak-oil/

q)    Fossil fuel extraction, transportation, and use have polluted the planet with numerous toxins.

  1. http://www.ec.gc.ca/energie-energy/default.asp?lang=En&n=1F4E5D8A-1
  2. http://www2.epa.gov/nutrientpollution/sources-and-solutions-fossil-fuels
  3. http://www.ucsusa.org/clean_energy/our-energy-choices/coal-and-other-fossil-fuels/the-hidden-cost-of-fossil.html

ENVIRONMENT

r)     Climate extremes are increasing in frequency, duration, and magnitude.

  1. http://www.theguardian.com/environment/2013/dec/18/2013-extreme-weather-events
  2. http://www.climatecommunication.org/new/articles/extreme-weather/overview/
  3. https://www.ipcc.ch/pdf/special-reports/srex/SREX_FD_SPM_final.pdf

s)     Polar ice caps are melting.

  1. http://www.nrdc.org/globalwarming/qthinice.asp
  2. http://www.dw.de/polar-ice-sheets-melting-faster-than-ever/a-16432199
  3. http://uk.news.yahoo.com/what-if-the-world-s-icecaps-melted-overnight–120351663.html#PK3eE9D

t)      We are experiencing peak water.

  1. http://www.wired.com/science/planetearth/magazine/16-05/ff_peakwater?currentPage=all
  2. http://www.bloomberg.com/news/2012-02-06/peak-water-the-rise-and-fall-of-cheap-clean-h2o.html
  3. http://www.princegeorgecitizen.com/article/20130606/PRINCEGEORGE0304/306069987/-1/princegeorge/peak-water-limiting-energy-production

u)    Deserts are expanding.

  1. http://www.nature.com/climate/2009/0909/full/climate.2009.84.html
  2. http://www.bbc.co.uk/learningzone/clips/desertification-expansion-of-the-sahara-desert/1498.html
  3. http://www.globalpost.com/dispatch/news/science/131211/waterless-world-inner-mongolia-desert-wasteland

v)     Sea levels are rising.

  1. http://pri.org/stories/2014-01-10/sea-levels-rising-uk-starting-let-go-some-its-coastline
  2. http://ocean.nationalgeographic.com/ocean/critical-issues-sea-level-rise/
  3. http://www.env.gov.bc.ca/cas/adaptation/sea_level.html

w)   Honeybees have been decimated by human chemical use.

  1. https://www.commondreams.org/archive/2008/05/24/9177
  2. http://www.businessinsider.com/the-world-without-honeybees-2013-6
  3. http://www.prnewswire.com/news-releases/honeybee-population-decline-and-its-devastating-effects-are-topic-of-vanishing-of-the-bees-82364717.html

LIBERTY

x)    Governments are spying on their citizens.

  1. http://www.theguardian.com/world/2013/dec/02/revealed-australian-spy-agency-offered-to-share-data-about-ordinary-citizens
  2. http://www.theguardian.com/world/2013/dec/02/revealed-australian-spy-agency-offered-to-share-data-about-ordinary-citizens
  3. http://www.canada.com/nationalpost/news/story.html?id=dae581de-2490-45f8-90c7-919d01fbd4f4

y)    Governments are spying on each other and themselves.

  1. http://www.globalresearch.ca/nsa-spying-on-congress-to-manipulate-intimidate-blackmail-top-government-and-military-officials/5364273
  2. http://www.cbc.ca/news/politics/new-snowden-docs-show-u-s-spied-during-g20-in-toronto-1.2442448
  3. http://www.nytimes.com/2013/12/21/world/nsa-dragnet-included-allies-aid-groups-and-business-elite.html?_r=0

z)     Governments are manipulating the data they provide to the public.

  1. http://www.businessinsider.com/government-data-manipulation-pricestats-argentina-inflation-2012-10
  2. http://www.wealthdaily.com/articles/unemployment-data-manipulation/4767
  3. http://www.zerohedge.com/news/2013-11-19/government-investigate-government-over-jobs-manipulation-report

I know many people would prefer to hear a message of hope but when these ‘realities’ exist I can’t help but be fairly pessimistic about our chances of a ‘sustainable’ future or a ‘soft landing’ for our economic woes. Unless some unforeseen miracle can save us from ourselves, I can only conclude that the day of reckoning is quickly approaching; it’s a matter of when, not if. Some event, minor or major, will be that snowflake that begins a cascading collapse of our interrelated, complex world. And by collapse, I mean a sudden, devastating drop in the standard of living (similar to Dimitry Orlov’s Five Stages of Collapse) OR an elongated, slow contraction (similar to James Howard Kunstler’s The Long Emergency or John Michael Greer’s The Long Descent); to me, these are not too dissimilar and require simply a change in time perspective to interpret the change as either ‘sudden’ or ‘lengthy’.

To quote William Catton Jr., from his book Overshoot: “…the pressure of our numbers and technology upon manifestly limited resources has already put out of reach the previously acceptable solutions to many of our problems. There remains steadfast resistance to admitting this, but facts are not repealed by refusal to face them. On the other hand, even the ‘alarmists’ who have been warning of grave perils besetting mankind have not fathomed our present predicament…” (p. 5).

Update 1. January 17, 2014

1.  Far more ‘paper’ precious metals exists than actual ‘physical’ metal in existence (a type of ‘fractional reserve’ banking):

2. Large Western financial institutions (i.e. U.S. Federal Reserve; Bank of England) have sold/leased their gold holdings and misled their clients about this:

3. The United States government and/or people within it have carried out domestic assassinations of numerous leaders:

4. The Fukushima Daichii Nuclear Plant disaster is far worse than the corporate media is letting on:

5. ‘Democratic’ countries are becoming more secretive and totalitarian through ‘legislation’:

Interesting thoughts: Murray Rothbard, Anatomy of the State (ISBN 978-80-87888-43-8):
“…the government is not ‘us.’ The government does not in any accurate sense ‘represent’ the majority of the people…Briefly, the State is the only organization in society which attempts to maintain a monopoly of use of force and violence in a given territorial area; in particular, it is the only organization in society that obtains its revenue …by use of complusion; that is, by the use and the threat of the jailhouse and the bayonnet. Having used force and violence to obtain its revenue, the State generally goes on to regulate and dictate the other actions of its individual subjects…The State provides a legal, orderly, systematic channel for the predation of private property; it renders certain, secure, and relatively ‘peaceful’ the lifeline of the parasitic caste in society….The State has never been created by a ‘Social Contract’; it has always been born of conquest and exploitation…”

Feel free to offer some further ‘beliefs’, and three ‘credible’ links, in the comments. I will update the list periodically.

Cheers,

Steve

World-Beating Debt Burden Is No ‘Serious Threat’ to Denmark – Bloomberg

World-Beating Debt Burden Is No ‘Serious Threat’ to Denmark – Bloomberg.

Danish central bank GovernorLars Rohdesaid most of the nation’s households would survive a jump in interest rates or a loss of income as Denmark tops world debt rankings.

An investigation into household borrowing revealed that high indebtedness curbed spending and economic growth during the financial crisis, the Copenhagen-based Systemic Risk Council, which Rohde chairs, said yesterday. Still, those findings aren’t grounds for alarm, according to Rohde.

“By far the major part of Danish households’ debt is carried by families who are robust enough to be able to handle shocks to interest rates or incomes,” Rohde said yesterday in a written reply to questions. “The threat to financial stability from that corner is therefore not serious in the current situation.”

Danish households owe their creditors 321 percent of disposable incomes, according to the Organization for Economic Cooperation and Development. That’s the highest ratio in the world and a level that has prompted warnings from both the OECD and the International Monetary Fund to rein in borrowing. Danish authorities have argued that households aren’t at risk thanks to high pension and household equity levels.

Swedish Cap

In neighboring Sweden, central bank GovernorStefan Ingves has suggested capping household indebtedness, not adjusting for assets, at 180 percent of disposable incomes. In Norway, the central bank has cautioned against further private borrowing after households owed their creditors about 200 percent of disposable incomes.

Photographer: Price Chambers/Bloomberg

Danish central bank Governor Lars Rohde said, “By far the major part of Danish… Read More

The Paris-based OECD said in November that policy makers in Scandinavia need to do more to stem risks posed by household debt growth.

Referring to its Dec. 20 meeting, Denmark’s Systemic Risk Council said an analysis suggested that households with high debt levels as of 2007 were prone to spend less during the crisis.

“That has probably contributed to a weaker development in private spending and economic activity in recent years, and has affected the financial industry. The council will return to this matter,” it said.

Denmark emerged as Scandinavia’s weakest economy after a housing boom that peaked in 2007 burst a year later. As many as 62 community banks failed during the ensuing slump, according to a September report by a government-appointed committee.

AAA Debt

The nation’s AAA-rated government debt load is less than half the euro-zone average, helping keep mortgage borrowing costs low and supporting households. The central bank, which uses monetary policy to defend the krone’s peg to the euro, resorted to negative rates in 2012 to counter a capital influx. Denmark’s benchmark deposit rate, now minus 0.1 percent, has stayed below zero since July 2012.

Gross domestic product contracted 0.4 percent in 2012 and grew just 0.3 percent last year, the European Commission said in November. Growth is set to accelerate to 1.7 percent in 2014, compared with a rate of 2.8 percent in Sweden, according to the commission.

Data today showed that Danish seasonally adjusted bankruptcies declined to 382 in December from 417 the previous month, while adjusted forced sales of homes were at 334 last month, compared with an average of 428 in 2012.

The reports show that the crisis is “loosening its grip” on Denmark, Helge Pedersen, chief economist at Nordea Bank AB, said in a note.

Denmark’s Systemic Risk Council was created last year with a view to advising lawmakers on financial imbalances that may warrant a legislative response. The council also said yesterday it will examine potential risks to financial stability posed by the repo market.

“Increased use of repos and re-use of collateral can in some situations render the financial system more vulnerable,” the council said. It has therefore “decided to do more work on the subject,” it said.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

Bank of Canada says housing, debt still pose stability risks | Canada | Reuters

Bank of Canada says housing, debt still pose stability risks | Canada | Reuters.

By Louise Egan

OTTAWA (Reuters) – Soaring consumer debt and a robust housing market pose an “elevated” risk to Canada’s financial stability, but the overall level of danger has fallen from six months ago, the Bank of Canada said on Tuesday.

“In Canada, the high level of household debt and imbalances in the housing sector are the most significant domestic vulnerabilities to address,” the central bank said in its semi-annual Financial System Review.

These risks could make Canadians vulnerable to an adverse macroeconomic shock and a sharp correction in the housing market, it said.

The bank cut its overall level of risk to the country’s financial system to “elevated” from “high”, citing among other factors continuing stabilization in the euro zone and the start of a modest recovery in that region. Despite the brighter outlook for Europe, it remains the biggest threat to Canada, the bank said.

Tuesday’s report marked the first time the bank has eased its overall risk level since it began classifying risk in this way in December 2011.

The overall level of risk could fall further with continued progress on banking sector reform and other reforms in the euro area. That said, the level could increase if the current low interest rate environment in advanced economies persists longer than anticipated, it added.

The bank listed risky financial investments in a prolonged period of low interest rates as a “moderate” risk and added financial vulnerabilities in emerging markets as another moderate threat.

Canada’s housing market has been a source of concern for policymakers and economists since a property boom helped fuel the economy’s rebound from the 2008-09 recession.

After four government interventions to tighten mortgage rules, the market cooled in late 2012 only to regain momentum through the spring and summer of this year.

The bank, the finance ministry and the banking regulator monitor the market closely. The bank noted an oversupply of multiple-unit dwellings in some areas, and cited an elevated number of high-rise condos under construction in Toronto.

“If the upcoming supply of units is not absorbed by demand as units are completed over the next few years, there is a risk of a correction in prices and construction activity,” it said.

Such a correction could spread to other parts of the market and hit the overall economy, it added.

The bank said simple indicators suggest there is overvaluation in the housing market overall and it said any sharp downturn in a large city could spread, ultimately affecting sentiment, lending conditions as well as jobs and income.

While the latest data suggest some stabilization in the market, there is still much debate among economists over whether housing is poised to crash and damage the economy, or have a so-called “soft landing”.

Bank of Canada Governor Stephen Poloz has placed himself in the latter camp, saying he expects record-high household debt to ease gradually as the housing market softens.

The report on Tuesday supported that view.

“The overall moderating trend is expected to resume in due course,” it said. “As long term interest rates normalize with the strengthening global economy, the risk will diminish over time.”

The ratio of household debt to income in Canada hit a record high in the second quarter of 163.4 percent, although the pace of credit growth has been slowing.

Statistics Canada will release third-quarter data on household debt on Friday.

(Reporting by Louise Egan; editing by David Ljunggren; and Peter Galloway)

 

Personal debt ratio hits record high of 163.7% – Business – CBC News

Personal debt ratio hits record high of 163.7% – Business – CBC News.

Canadians’ debt ratio increased last quarter, but so did the value of their assets, so the national net worth increased. (The Associated Press)

The amount that Canadians owe compared to their disposable income rose to an all-time record last quarter, although their net worth also increased.

Statistics Canada reported Friday that the level of household credit market debt to disposable income increased to 163.7 per cent in the third quarter from 163.1 per cent in the second quarter.

That means Canadians owe nearly $1.64 for every $1 in disposable income they earn in a year.

‘The seasonal bounce in mortgage borrowing in the previous quarter picked up into the fall’– Royal Bank economist Laura Cooper

Policymakers are fixated on the debt ratio in part because it was at above 160 per cent that households in the United States and Britain ran into trouble about five years ago, contributing to defaults and the financial crisis that triggered the 2008-09 recession.

Debt loads can be influenced by seasonal factors, and although the headline figure is higher, the rate of growth in that ratio was the smallest in 12 years.

“Those figures should be encouraging for policymakers and suggest that the Bank of Canada’s belief that imbalances are evolving constructively is right on the mark,” said Benjamin Reitzes, a senior economist with BMO Capital Markets.

Indeed, while they are borrowing more, Canadians are also worth more as their assets increase by a similar amount. The national net worth increased to $7.5 trillion in the third quarter, up 2.1 per cent from the previous quarter.

On a per capita basis, that works out to $212,700 for every Canadian. The previous quarter, that figure was $208,300.

Canadians saw their financial assets go up in value, as well as their non-financial assets (such as houses) do the same. The value of shares and other equities gained 3.7 per cent in the quarter, while the value of household real estate gained 1.5 per cent.

“The pace of debt accumulation picked up slightly in the third quarter as the seasonal bounce in mortgage borrowing in the previous quarter picked up into the fall,” Royal Bank economist Laura Cooper said.

HOUSEHOLD DEBT RATIO

With files from The Canadian Press

Federal Student Loans Surpass $1 Trillion; Delinquency Rate Soars To All Time High | Zero Hedge

Federal Student Loans Surpass $1 Trillion; Delinquency Rate Soars To All Time High | Zero Hedge.

There is a reason why US consumer revolving (credit card) credit growth is getting lower and lower and lower and at last check posted a mere 0.2% annual increase.

That reason is that as the NY Fed disclosed moments ago, federal student loans officially crossed the $1 trillion level for the first time ever. Notably: the quarterly student loan balance has increased every quarter without fail for the past 10 years!

And just to prove that while credit card balances are plunging due to more stringent bank repayment requirements, this is more than offset by borrowers shifting to student loans, where the delinquency rate on student loans is soaring and has just hit an all time high of 11.83%, an increase of almost 1% compared to last quarter. Even according to just the government lax definition of delinquency, a whopping $120 billion in student loans will be discharged. Thank you Uncle Sam for your epically lax lending standards in a world in
which it is increasingly becoming probably that up to all of the loans will end up in deliquency.

 

 

Harper says household debt not his biggest worry | Canada | Reuters

Harper says household debt not his biggest worry | Canada | Reuters.

 

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