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Posted: April 18, 2015

It may be time to burn your credit card

GerrywPerceptions by Gerry Warner

When the governor of the Bank of Canada describes economic growth in this country as “atrocious,” one tends to take notice. But that’s what Stephen Poloz did last week in a Financial Times interview that dramatically departed from the low- key way bankers usually talk.

Poloz, after all, isn’t your friendly local banker. He’s the guy who makes banking policy in the country and controls the Bank of Canada interest rate, which the big national banks follow in lockstep.

So if he sneezes when describing the economic state of the country other bankers get a cold, if not pneumonia, and ordinary Canadians nervously start wondering if they shouldn’t start paying their credit cards off.

Let’s face it. Canadians are binge drinkers when it comes to that bottle of double-distilled credit that looks so appealing through the window of the liquor store or gleaming on the counter of your local bank. And I doubt I’m the only one getting solicitations in the mail almost every other week to increase the maximum on my card or take out a line of credit and buy that 40 inch, flat-screen TV I’ve long lusted for or maybe another bucket trip adventure to the Himalayas or Bali?

Oscar Wilde once said, “I can resist anything but temptation” and that’s how many of us are when it comes to the siren call of credit, but the party can only go on for so long and I can’t help but wonder if our ride on the party barge is about to be over. Consider the following.

Consumer debt in Canada currently stands at $1.4 trillion, according to the Financial Post and at the end of 2013 the average Canadian family owed

$27,368 in non-mortgage debt on such things as lines of credit, credit cards and car loans, according to credit monitoring agency TransUnion. It said the total would likely climb to $28,853 by the end of 2014; an all-time high.

And then there’s the debt governments run up worldwide as we pass the burden on to our children, grandchildren, great grandchildren and for generations to come. And it’s no surprise what tops the list. It’s the U.S., of course, at just under $18 trillion which translates to almost $60,000 for every man, woman and child in a country of well over 300 million. And that’s only government debt, not the accumulated debt of every man, woman and child in what’s ironically the richest country on Earth.

Believe it or not, Canada is relatively far down the list in 16th place with our piddling, little government debt of $1.3 trillion which is 64% of our Gross Domestic Product (GDP), while the humungous American debt amounts to 106% of US GDP. Not bad for a country that carries more debt than any other, but almost half that debt is owed to Chinese financial institutions and if those institutions ever start cashing in their mountains of US treasury bills – the gold standard of international finance – that’s a prospect too terrifying to contemplate as far as the world’s economy is concerned. (All figures from the Worldfact Book.)

And speaking of The Middle Kingdom, the engine of the world’s economy, there was some unsettling news last week. China’s growth rate slipped to seven per cent in the first quarter of 2015 – great by North American or European standards – but the weakest growth rate in China for 24 years. I don’t know if any Wal-Mart executives are jumping out of their windows yet, but a slowdown in China is an ominous sign for the entire world economy. Couple that with the dramatic crash of oil prices so far this year and you have all the conditions for a perfect, economic storm.

My advice? Pay off that damn credit card.

Gerry Warner is a retired journalist and a credit card holder. But he does pay his balance off every month


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