Bubble case-studies: Ireland and Canada

Personal debt in Canada has been described as a Ticking Time-Bomb:

As the chart shows, back in the year 2000 we each had approximately $20,000 in debt, so in less than a decade the debt we are carrying has doubled. That’s a staggering statistic. If you are the average Canadian, your debt has doubled. Has your income doubled? Are you making twice as much today as you were earning in the year 2000? Probably not. If you still have a job you may have received “cost of living” increases of 2% per year for the last decade, but that obviously does not add up to a doubling of your income.

Canadians are extremely vulnerable, but do not seem to realize it:

Average Canadian household debt reaches $96,000

The average Canadian family’s household debt rose to $96,000 last year, a new study says. Debt-to-income levels rose to 145 per cent – the highest level ever recorded in the study, which has run annually for 11 years. The Vanier Institute of the Family study found a dramatic rise in late debt payments. Mortgage payments that were at least 90 days late were up 50 per cent over 2008.

Additionally, there was a rise of 40 per cent in credit card payments that were three months behind. The study said first-time mortgage buyers were taking on the most debt, unsurprisingly. However, the study says that many have taken advantage of record low interest rates and may have problems making payments if interest rates rise. Two-thirds of Canadians 18-34 would find themselves in trouble if their paycheque was delayed by only one week, a September 2009 survey by the Canadian Payroll Association found.

Canadians should also be looking south of the border, at the skyrocketing foreclosures in former bubble areas, despite a year-long rally in the credit markets. They should be looking at the inventory build-up that has already exceeded the crisis period of 2008, and continues to reach for the sky now that the credit markets have turned down again. Where the credit markets lead, the real economy will follow. If people cannot get financing, there will be no price support for real estate at anything like current housing prices.

via The Automatic Earth: August 31 2010: Bubble case-studies: Ireland and Canada.

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