A summary of the speech is here: The BoC’s Coté On Risk & Household Debt
Something to note on this chart. In the late nineties during the dot com era, far more credit growth was directed at business than households. The lines swap just as the housing bubble gets going in Canada, which is around 2002. Same thing back in the eighties. They were a time of heavy investment in business.
Economies make a choice, as directed by policymakers creating incentives, to either borrow from the future for industry to make things better and cheaper, or for larger houses with more granite and imported tile. Or in the case of Toronto, a spare 10-20,000 shoeboxes in the sky.
If interest rates were to rise to 4.25% by mid-2015, then: the share of highly indebted households would rise from slightly above 6% in 2011 to roughly 10% by 2016 the proportion of debt held by these households would rise from 11.5% to about 20% over the same period.
Economies make a choice, as directed by policymakers creating incentives, to either borrow from the future for industry to make things better and cheaper, or for larger houses with more granite and imported tile. Or in the case of Toronto, a spare 10-20,000 shoeboxes in the sky.
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