Prime Minister Stephen Harper ruffled more than a few feathers in October of 2008 when he advised Canadians that, despite the bloodbath in their RRSPs, it was a great time to buy stocks.
He turned out to be right, but he angered many Canadians who were looking for reassurance that his government was working to protect them from a financial calamity. Stock tips were not asked for, nor appreciated.
Last week, Toronto City Councillor Doug Ford made a similar gaffe, only with far more dangerous repercussions.
Speaking on CBC radio’s Metro Morning, Councillor Ford was describing his vision for the city’s derelict Portlands area, which would include—among other things—a mega-mall. When questioned about the necessity of the mall, he responded as follows:
“Studies show that we need more opportunities to get out there and shop and start stirring the economy.”
Matt Galloway (the show’s host) neglected to press him to name these studies, which is a shame. I would love to see them, because in the past year of working for MoneySense the stories that have crossed my desk suggest the exact opposite. Credit is too cheap, people are living beyond their means and a sudden hike in interest rates may leave many Canadians dangerously exposed to bankruptcy.
But don’t take my word for it. Let’s go to some sources with more economic credibility than myself or Councillor Ford.
Transunion reported in June that total consumer debt per Canadian, excluding mortgages, grew to $25,597 in the first quarter of 2011 (italics mine).
The Certified General Accountants Association of Canada warned that household debt is at historic highs. According to Anthony Ariganello, President and CEO of CGA-Canada, “more than half of indebted Canadians are borrowing just to afford day-to-day living expenses like food, housing and transportation. For these individuals, there is little hope for improved financial condition.”
For those Canadians lucky enough to own a home, chances are it’s the largest asset they’ve got and they’re hoping to see its value grow. However, the Canadian real estate market is currently overpriced and is some say it could drop by up to 12% over the next two years.
Lastly, the U.S. economy—which is directly tied to ours—is in deep trouble. The Federal Reserve has emptied its quiver of remedial arrows, and yet the economy is barely keeping its head above water. Canada cannot remain insulated from the headwinds battering the U.S. forever.
Again, I’d love to see the studies cited by Mr. Ford. Considering the economic climate, the last thing Torontonians (and Canadians in general) need is more opportunity to spend their money on depreciable consumer goods.