Lectured about our savings by financial profligates
©
Money is the problem. We need more of it, yet we never seem to have enough. So, according to Canada’s minister of finance, Jim Flaherty, we need more savings. To help, he’s going to make it harder for you to borrow on your home, so you, too, can increase your savings.
Hinting that mortgage rates will be going up "sometime”, Flaherty announced that he’ll be reducing mortgage amortization periods from 35 down to 30 years, and he’ll be downsizing the refinancing limit from 90 percent to 85 percent of your home’s value.
To the average worker–homeowner, this may seem like nonsense. But Flaherty says that ordinary Canadians are carrying record levels of debt—now at 148 percent of their income. To translate, a worker earning $100,000 is now carrying $148,000 in debt, which is now higher than her American neighbour’s.
And the problem isn’t only mortgage debt. It’s also the growing use of home-equity lines of credit and loans, which have risen by 170 percent over the past decade and account for 12 percent of all household debt.
The trouble with Flaherty’s solution is, it doesn’t work. He already tried this approach in 2008, reducing the amortization period from 40 to 35 years and downsizing the refinancing limit from 95 to 90 percent. Instead of stimulating personal savings, Canadians borrowed more, and consumer insolvencies have increased by a whopping 22.5 percent from 2007-8—despite the recession.
Flaherty’s approach is technocratic and instrumentalist. There seems to be no vision for building a prosperous Canadian future.
What little vision for the future the Conservatives do have seems to be centred around shoring up U.S. security interests at home and abroad. It’s doubtful that the purchase of American-built F-35 jets for $16 billion over 20 years is going to help the ordinary Canadian, especially when Flaherty himself is trying to cut back on the hiring of civilian military personnel because we can’t afford them.
Nowhere do Flaherty and his Conservatives take direct action to seriously redistribute the increasing disparity of wealth between Canada’s rich and the rest of us. The only thing that Flaherty’s tinkering with mortgage regulations does is protect the interests of the banks.
The real problem facing Canadians is the growing gap between the size of their incomes and the ever-rising cost of their homes. Canadian incomes have more or less plateaued for the last 20 years. But Canadian home prices, in some areas, have more than quadrupled, which has fuelled huge bank profits. Now, you don’t hear the banks complaining about that, at least until their overburdened mortgage holders can’t pay their monthlies.
Such is the financial disconnect from reality. Savings are not based on financial tinkering. Savings are based on production. And Canada’s real production, like its wages, plateaued two decades ago. Without its vast treasure trove of natural resources such as energy, minerals, forest fibre and natural agricultural assets, the country would be a bit player on the world economic stage. I expect that Harper, Flaherty and company know this intuitively. Or should.
Ordinary Canadians have turned to housing as one of the last real “products” available to them for investment. By the millions they’ve rolled up their sleeves and upgraded their homes to increase the resale values, in order to build their nest eggs for retirement—knowing full well that their bank-managed RRSP portfolios have been flat-lining for years.
What Canada needs now is a new approach. One that tackles climate change, energy transition from fossil fuels to new alternatives, income redistribution from the wealthy to the less wealthy—and 100 percent employment.
Instead, what we keep getting is a mish-mash of lame private sector corporate policies such as belt-tightening, downsizing, financial accountability and efficiency (as if the health and welfare of a population were ever efficient).
Sadly, we get the government we deserve. With a population obsessed with credentializing and inducting our children into the corporatist-managerial economy, we’re handing over our future to the so-called experts as fast as we can. We actually trust these experts to run the country for us, rather than running the country ourselves. And one of the possible reasons is, we’ve lost the ability to actually dream—because we’re living in a corporately-induced coma, in which we think corporate reality is real.
Here’s a wakeup call: it’s not real. Whereas corporate reality is about management and profits, real life is not profitable. We all lose. We die. It’s the quality of life in between that counts. And the quality of life of a country depends on the quality of life of all of its citizens—not just the top .1 percent.
Quality of life includes the opportunity to explore one’s potential. To raise a family. To engage in the community. To do find fulfilling work. To make real products. To direct one’s own destiny. And to take an active role in the political discourse of the region.
Mr. Flaherty’s instrumental fiddling with one of our last sources of real income—our homes—is maddening. Of course we Canadians will take it up the tailpipe gracefully, as usual. Hopefully we may get a few more options for the future with the next election.
But what Canada really needs is a complete new vision for the future.
Money is the problem. We need more of it, yet we never seem to have enough. So, according to Canada’s minister of finance, Jim Flaherty, we need more savings. To help, he’s going to make it harder for you to borrow on your home, so you, too, can increase your savings.
Hinting that mortgage rates will be going up "sometime”, Flaherty announced that he’ll be reducing mortgage amortization periods from 35 down to 30 years, and he’ll be downsizing the refinancing limit from 90 percent to 85 percent of your home’s value.To the average worker–homeowner, this may seem like nonsense. But Flaherty says that ordinary Canadians are carrying record levels of debt—now at 148 percent of their income. To translate, a worker earning $100,000 is now carrying $148,000 in debt, which is now higher than her American neighbour’s.
And the problem isn’t only mortgage debt. It’s also the growing use of home-equity lines of credit and loans, which have risen by 170 percent over the past decade and account for 12 percent of all household debt.
The trouble with Flaherty’s solution is, it doesn’t work. He already tried this approach in 2008, reducing the amortization period from 40 to 35 years and downsizing the refinancing limit from 95 to 90 percent. Instead of stimulating personal savings, Canadians borrowed more, and consumer insolvencies have increased by a whopping 22.5 percent from 2007-8—despite the recession.
Flaherty’s approach is technocratic and instrumentalist. There seems to be no vision for building a prosperous Canadian future.
What little vision for the future the Conservatives do have seems to be centred around shoring up U.S. security interests at home and abroad. It’s doubtful that the purchase of American-built F-35 jets for $16 billion over 20 years is going to help the ordinary Canadian, especially when Flaherty himself is trying to cut back on the hiring of civilian military personnel because we can’t afford them.Nowhere do Flaherty and his Conservatives take direct action to seriously redistribute the increasing disparity of wealth between Canada’s rich and the rest of us. The only thing that Flaherty’s tinkering with mortgage regulations does is protect the interests of the banks.
The real problem facing Canadians is the growing gap between the size of their incomes and the ever-rising cost of their homes. Canadian incomes have more or less plateaued for the last 20 years. But Canadian home prices, in some areas, have more than quadrupled, which has fuelled huge bank profits. Now, you don’t hear the banks complaining about that, at least until their overburdened mortgage holders can’t pay their monthlies.
Such is the financial disconnect from reality. Savings are not based on financial tinkering. Savings are based on production. And Canada’s real production, like its wages, plateaued two decades ago. Without its vast treasure trove of natural resources such as energy, minerals, forest fibre and natural agricultural assets, the country would be a bit player on the world economic stage. I expect that Harper, Flaherty and company know this intuitively. Or should.
Ordinary Canadians have turned to housing as one of the last real “products” available to them for investment. By the millions they’ve rolled up their sleeves and upgraded their homes to increase the resale values, in order to build their nest eggs for retirement—knowing full well that their bank-managed RRSP portfolios have been flat-lining for years.What Canada needs now is a new approach. One that tackles climate change, energy transition from fossil fuels to new alternatives, income redistribution from the wealthy to the less wealthy—and 100 percent employment.
Instead, what we keep getting is a mish-mash of lame private sector corporate policies such as belt-tightening, downsizing, financial accountability and efficiency (as if the health and welfare of a population were ever efficient).
Sadly, we get the government we deserve. With a population obsessed with credentializing and inducting our children into the corporatist-managerial economy, we’re handing over our future to the so-called experts as fast as we can. We actually trust these experts to run the country for us, rather than running the country ourselves. And one of the possible reasons is, we’ve lost the ability to actually dream—because we’re living in a corporately-induced coma, in which we think corporate reality is real.
Here’s a wakeup call: it’s not real. Whereas corporate reality is about management and profits, real life is not profitable. We all lose. We die. It’s the quality of life in between that counts. And the quality of life of a country depends on the quality of life of all of its citizens—not just the top .1 percent.
Quality of life includes the opportunity to explore one’s potential. To raise a family. To engage in the community. To do find fulfilling work. To make real products. To direct one’s own destiny. And to take an active role in the political discourse of the region.
Mr. Flaherty’s instrumental fiddling with one of our last sources of real income—our homes—is maddening. Of course we Canadians will take it up the tailpipe gracefully, as usual. Hopefully we may get a few more options for the future with the next election.
But what Canada really needs is a complete new vision for the future.
Don't we all.
ReplyDeleteTrue. Trouble is, we seem to have difficulty picturing what we want!
ReplyDelete