🇨🇦 The Canadian soft landing starter pack.

🧵 Household spending per capita comparable to the ‘80s, ‘90s, GFC, and scamdemic recessions.

🇨🇦 CANADIAN MORTGAGE TIME BOMB ⏰

A thread 🧵

Canadians are drowning in debt - $58 billion in lines of credit, $81 billion in auto loans, and $119 billion on credit cards. These forms of credit have relatively high interest rates, so when you fall behind on payments it’s almost impossible to catch up which is why we’re seeing increasing defaults on these types of debt.

This debt, however, is almost negligible compared to the debt tied directly to real estate: mortgages and HELOCs, which amount to $2 trillion combined.

This amount of debt is not sustainable, especially when most of it originated at rock bottom rates.

We’re only just starting to see these higher rates hit the housing market but most of the pain will be felt in the coming months and years.

(1/6) MORTGAGE VS INCOME ⚖️

To put in perspective how much mortgage debt Canadians have taken on we need to compare it to incomes, which have not kept up with required payments - this is why debt servicing ratios have rapidly increased since 2020 and are forecast to worsen (chart 1).

Mortgage debt as a percentage of disposable income has reached a staggering 134% - that means for every $1 earned, $1.34 is owed to the mortgagee.

This is, by definition, unsustainable.

As a percentage of income, our household mortgage debt exceeds the United States’ TOTAL household debt just before the GFC (128%) and we now hold the third highest household debt-to-income ratio in the world (chart 2).

(2/6)

🇨🇦 CANADA’S DEBT CRISIS 🧨

A thread 🧵

Canadian consumers, businesses, and governments have been accumulating debt at an unsustainable pace for over a decade and it’s starting to come to a head.

Total debt in Canada (consumer, corporate, and government debt combined) has reached $10.2 trillion while our GDP is less than a third of that at $2.86 trillion - that translates to a debt-to-GDP ratio of 357%.

For comparison, that’s well above the US just before the Great Depression (125%), Japan just before their lost decade (239%), and Greece before their sovereign debt crisis (206%).

Today, US is also in bad shape sitting around 334% and globally we’re at approximately 336%.

At 357% Canada is actually in the same camp as the US just before the Global Financial Crisis when they had a debt burden of 349%.

(1/6) TOTAL DEBT VS NET GOVERNMENT DEBT 💸

Total debt is not to be confused with net government debt.

Net government debt counts the pension plans against the debt - this implies that when the government can’t make their debt repayments they would use the pension funds to pay for it. If they tried to do this pensioners would revolt and cause an even bigger crisis so realistically it’s not likely to unfold this way.

Net government debt also doesn’t consider corporate or consumer debt, which are very real issues.

For these reasons total debt is a better metric when discussing the overall status of Canada’s debt environment.

(2/6)

🇨🇦BANK OF CANADA IS IN A BIND🔒

Canada’s economy is weakening quickly. Businesses are going bankrupt, unemployment is rising, and GDP per capita is abysmal.

For 13 years BoC held rates at 2% (or less) so Canadians grew addicted to cheap debt and took on a lot of it. Now that we’re sitting at 5% rates it’s a shock to many people.

The debt accumulated by businesses, consumers, and the government is no longer feasible which is why many are calling for imminent rate cuts. Given the weakening economy I’m sure rate cuts are on the BoC’s mind but it’s not that simple.

If BoC cuts rates too soon we risk a second wave of inflation and a repeat of the 1970s. 1970s INFLATION CRISIS 📈

In the 1970s Canada experienced an inflation crisis which came in two waves.

WAVE 1:

From 1971 to 1974 inflation accelerated from 2.7% to 11% prompting the BoC to hike interest rates to >9%.

As a result, inflation fell to 7.5% by 1976.

With inflation falling, the BoC prematurely cut interest rates which only helped to fuel the second wave.

WAVE 2:

From 1976 to 1981 inflation jumped to 12.5% forcing the BoC to hike to a whopping 21.5% to finally contain inflation.

Many other countries experienced these inflation waves, including the US, so it’s not entirely the BoC’s fault. Fiscal expansion and external factors, like the surging price of oil, both played large roles but the BoC was an indisputable factor.

🇨🇦 THE DECLINE OF CANADA 💣

A thread 🧵

Homelessness. Housing crisis. Mass immigration. Debt. Deficits. These are a few common terms often used when discussing Canada today. It’s no secret the country is deteriorating.

Many people blame Justin Trudeau and the Liberal policies (myself included), but this has been a generational problem in the making. Whether Trudeau has used climate change as an excuse to shift away from our natural resources because he truly believes he’s saving the world, or he’s an agent for the CCP and compromised by the WEF to intentionally destroy Canada for The Great Reset, or he’s just completely incompetent, he is indisputably a significant factor in the decline of the Canada we once knew.

The bottom line is that Canada’s economy has transitioned away from natural resources to a real estate Ponzi scheme rendering this country unproductive. We no longer have a real economy, and the consequences are starting to unfold.

(1/11) CANADA’S PRODUCTIVITY CRISIS 🏭

Productivity is the measure of how efficiently economic inputs (labour and capital) are converted into outputs (goods and services). High productivity reflects a healthy, competitive, and fruitful economy which leads to higher standards of living. The opposite is also true - low productivity leads to lower standards of living which means lower wages, higher prices for goods and services, and less employment opportunities. This is what we’re seeing in Canada today.

Over the past few decades Canada’s productivity has been plummeting and continues to approach zero. Canadians have stopped producing goods to predominantly buy and sell houses. The country has transformed from a robust resource economy into a Ponzi scheme, where Canadians buy and sell real estate for increasingly large sums of money.

(2/11)