Debt deductions

Declining wages, reduced savings rates and ever-increasing consumer expectations. That was the story in 1995. With a record number of consumer bankruptcies and personal debt soaring, financial experts worried too many Canadians were headed for financial ruin. The risks appeared to increase during the recent borrowing-friendly days, but now the conventional wisdom for many has shifted. A recent report says that while debt levels are in fact growing, Canadians are simply using that money to increase their assets — apparently turning bad money into good.

“There doesn’t seem to be any respite in sight for the [personal bankruptcy] numbers. The numbers are just crazy.”
John Procter, assistant superintendent for Edmonton’s federal bankruptcy office in 1995, when an average of 90% of disposable income was going toward household debt
 
“The failure of consumers to rein in debt levels this time around demonstrates how seriously household balance sheets are out of whack.”
Angus reid, pollster, in his 1996 book, Shakedown, laments the inability of consumers to pay down debt even during financial boom times. The number of clients using credit counselling services increases 30% during this period

“We are getting addicted to low interest rates. We’re at the most leveraged in history. Raising interest rates prematurely will be devastating for the consumer.”
Benjamin Tal, an economist at CIBC World Markets, and others warn in 2003 that low interest rates and record personal debt levels make Canadians more vulnerable than ever to financial disaster

“The popular perception that North American households are veering towards disastrous debt levels is totally unfounded.”
Royal Bank, in a 2004 study that says rising debt levels are more than offset by increasing assets and adds that Canadian households own about six times as much as they owe

Steve Brearton