For Canada, Carney said the No. 1 risk continues to be household debt, which currently stands at a record 153 per cent of disposable annual income.
Here is Carney's dilemma. He has rates low to try and stimulate business spending and give businesses a break on their borrowing. However the consumer is doing all the borrowing and despite all the jaw-boning from him and Flaherty the banks are still the big pushers of debt. Witness the BMO shenanigans.
Lower rates can give borrowers a break and leave them more money for food and clothing or they can let them borrow more than they should. Will the BMO mortgage officers tell their clients to calm down and not over-leverage with the low rates and be sensible..what do you think?
Of course we will have all the other banks getting on the band-wagon. Remember those huge pay-packets have to be earned ($11 Million for the CEO of TD Bank).
This shows us that the banks are not responsible. Who lent this record amount to Canadian consumers..they did! Yes the Government is the enabler with low rates and the CMHC but the banks have been using aggressive US-style money back, lair loans, teaser rates to get people into huge amounts of debt and pumped up this RE and debt bubble.
We have a big reckoning to come. And I would say to bears that this too is good. Yes it may draw some more feeble minded into buying too much house for their wallet but it will prove to Flaherty and Carney that if they care about the future of this country at all, they have to rein the banks in big time.
Had the banks been more responsible they may have been more reluctant to cross them (think plum future jobs at risk). Now they have no choice.