Canada has surpassed $1 Trillion in public debt

[SeanNewman]

Farmboy,

The government is not controlling by saying people can not have things they can not afford.  That is just common sense and protecting people from predatory businesses who can't wait for people to get behind on their payments so the interest can add up.

That's not telling people how to live their lives any more than telling someone they're not allowed to steal from someone to get something.

Anecdotal cases like someone getting sick or losing their job are not the kinds of cases that would apply and safety nets would exist for people who genuinely need it (ie providing proof you lost your job or are sick and applying for it).

For cases like the yacht, nothing is saying that the system could not exist like it does now where people with different credit scores can get different amounts of credit.  If you are 35 and have never missed a payment on everything then absolutely you deserve to get your boat because you have demonstrated you are responsible.

I am not suggesting that everyone be max controlled so much as I am saying that the vast majority of people should have less credit available to them.

Your last case is irrelevant because I have already stated that it would be obvious that a person would be allowed to assume debt for housing and transportation.  That being said though, that family should be driving a $10,000 2005 minivan or Accord and not a $50,000 2011 Toyota 4Runner.

 

[Farmboy]

The government is not controlling by saying people can not have things they can not afford.

How is that not controlling?

Anecdotal cases like someone getting sick or losing their job are not the kinds of cases that would apply and safety nets would exist for people who genuinely need it (ie providing proof you lost your job or are sick and applying for it).

I have a problem with this as well.  People should be taught in school about money and about saving it.  The safety nets need to be removed.

By removing the safety nets people don't learn to become dependant and would realize from a young age that they need to save for a rainy day.

For cases like the yacht, nothing is saying that the system could not exist like it does now where people with different credit scores can get different amounts of credit.  If you are 35 and have never missed a payment on everything then absolutely you deserve to get your boat because you have demonstrated you are responsible.

I am not suggesting that everyone be max controlled so much as I am saying that the vast majority of people should have less credit available to them.

Your last case is irrelevant because I have already stated that it would be obvious that a person would be allowed to assume debt for housing and transportation.  That being said though, that family should be driving a $10,000 2005 minivan or Accord and not a $50,000 2011 Toyota 4Runner.

The problem you face with this is creating further inequalities between people. There are already protests like at the G20 because they feel the rich are treated differently. You would be magnifying this even more.

 

[SeanNewman]

As I wrote, it's no more controlling (IMO) than a government telling someone they aren't allowed to steal something.  It would be controlling if you could afford it but the government wouldn't allow to buy it.

People should be complaining about not being allowed to buy guns or drugs they can afford before they complain about their government not allowing them to buy things they can't afford.

I agree with you that the system allows for people being treated differently, but only in the sense of being treated well when you have earned a better credit score and credit rating.  In my proposed system, if we were both 35 and you were allowed more credit than I was, I would only have myself to blame because you have made all your payments and I would not have.

What I think is really crazy difference-wise is how US car companies do financing.  Over here, if you see Ford offering 0% financing then it doesn't matter who buys that car; if you qualify to buy it you get the same payments that I do.  However, in the US you might get the same new car for $30,000 with 1.9% financing for 5 years that my credit rating means that I am penalized and have to buy that same car for 5 years but I have to pay 6.9%.  That's not what I want.  In that case I would rather just see me not being allowed to buy a $30k car under any circumstances.

Again, don't think of what I am proposing as something radically different and oppressive, but lowering the amount of debt that financially irresponsible people can get. 

 

[Farmboy]

I agree with you that the system allows for people being treated differently, but only in the sense of being treated well when you have earned a better credit score and credit rating.

Everything right now is based on credit rating. 

but lowering the amount of debt that financially irresponsible people can get.

I'm pretty sure that that part of the debt may be a small part of the map/chart.

People should be complaining about not being allowed to buy guns or drugs they can afford before they complain about their government not allowing them to buy things they can't afford.

People should be complaining about all the government monopolies, and regulations preventing people from starting companies related to them.  :nod:

 

[SeanNewman]

...and regulations preventing people from starting companies related to them...

Wait out, PM incoming (about starting a business, not personal).

 

[ekpiper]

I definitely see where Petamocto is coming from.  Banks need to be regulated into not giving a ridiculous amount of credit just for making minimum payments.  Lenders must also not be allowed to charge stupid interest rates.  Credit rating must be judged along with with income level, and then determine the size of credit allowed.  While people are idiots for getting themselves into situations where they're neck deep into debt, being stuck paying 18% interest on something is ludicrous and should not be allowed.  As far as I'm concerned, no one should be paying more than 10% interest on anything.

Sure, a family pulling $200k /year in little debt and a good rating should be allowed to get a reasonable loan.  A family pulling $60k/year just making payments on $40k debt should not be afforded the same luxury.  Perhaps some form of formula for allowing a maximum debt owed TO ALL banks/lenders should be implemented so people can't bounce from one bank to the other and still screw themselves.  In my opinion, while it is the people's fault for falling prey to lenders, it is also the fault of lenders allowing them to do it.  As we all know, common sense is not very common these days.

 

[Edward Campbell]

Not all debt is "bad." Debt that is used to "grow" one's fortune, the mortgage for example, can be a good debt. Similarly, debt that is used by a corporation to e.g. buy new machinery and, thereby, increase productivity is "good" debt, too. Debt hat is incurred to serve one's person - new clothes for example or public (government) welfare is, almost always and with a few easy to understand exceptions, "bad" debt.

Canada's total debt is too high; China's appears to be too low and, in China beyond the rich Eastern seaboard, it probably is too low. But the Chinese have different sociocultural values and they save, by inclination, because one does not trust the government, any government, and one cannot understand why one would want a government agency to e.g. care for one's parents in their old age when, manifestly, that is a filial duty.

Folks like (Bank of Canada) Governor Carney have been very careful in distinguishing between debt types: good and bad, public and private. We are not in the same boat as the PIIGS, even though our "bad" public debt (social spending, etc) is too high. We are, however, not yet headed in the right direction because people feel "entitled t their entitlements" and, left t their own devices, the people will, eventually break the bank.

 

[Edward Campbell]

There is no such thing as a "stupid interest rate." Capital is a commodity with a value: if you need more you will, perforce, pay more. The problem is that people demand that which they do not need - there is nothing wrong with capital or banks; the problem lies with borrowers who are, in the overwhelming majority, "stupid."

 

[Fishbone Jones]

And we all know "You Can't Fix Stupid" - Ron White

 

[a_majoor]

Having some sort of State agency to distinguish between private "wants" and "needs" is about the most totalitarian suggestion I have ever heard. Like so called "Human Rights" legislation which protects people's "feelings" and "Hate Crime" legislation which bases sentencing on people's state of mind, you now have unelected and unaccountable people making life choices for you based on totally arbitrary and subjective criteria. Like Edward says, debt can be "good" or "bad", my mortgage and your mortgage might be identical in all financial respects but be taken for totally different purposes. Do you want some faceless, unaccountable bureaucrat to decide if your purpose is worthy?)

The other, far larger problem is the "public debt" is powered by the natural inclination of all people to transfer their costs to others (especially since they don't see or don't care to see that they are included in the pool of "others"). So long as government spending is presented as free goods for the people, and people have easy access to these "free" goods and services, there will be an irresistible demand for this sort of spending.

When I did some calculations on Canadian government spending, transfers to individuals was by far the largest single cost, about $61 billion/year; more than twice the annual cost of servicing the debt, almost 8X the annual cost of Crown corporations and 4X the operating cost of the Canadian government. Unfortunately, eliminating transfers to individuals would be political suicide for any party. (Luckily, eliminating Crown corporations, transfers to provinces and subsidies to corporations would cut spending by @ $80 billion/year, allowing the elimination of the Federal debt in a bit over six years).

Individual education and action can also be totally negated by the actions of the State; the threat of a coalition of losers caused the current government to increase the deficit by $50 billion this year alone; way beyond anything the private sector of the economy could do (and putting the private sector at risk by ladling interest payments and taxes on it for decades to come if payed off at the normal rate).

 

[SeanNewman]

I am not so much for the gov't deciding between people's wants and needs so much as 18 year olds starting off with something like 5% of their annual income being available for debt.

And then from there, if those people pay their bills on time they can move up through 6, 7, 10, 20, 50, etc.  However, if someone isn't responsible that 5% turns to 4, 2, 1, and eventually 0% if they have demonstrated they don't deserve credit.

That way someone can have all the wants they can possibly buy on credit if they have proven they can handle it.  As has been mentioned though, establishing a business or buying a house is a different matter.

That's not the government controlling anything and in fact it's setting the conditions for people to be in charge of their own destinies complete with rewards and punishments based on their behaviour.

 

[larry Strong]

We already have that with credit scores. If you have a sh#tty score, you don't get money....to easy. And if the Government doesn't regulate your suggestion, who will?

 

[SeanNewman]

We already have that with credit scores. If you have a sh#tty score, you don't get money....too easy. And if the Government doesn't regulate your suggestion, who will?

The current system is set up based on credit scores but the available credit for those with average or below average ratings is far too high.

Unless you have excellent credit you shouldn't (IMO) be able to dig yourself into a hole, but the way things are now you can.  A person with bad credit and making $10,000/yr might not be able to finance a Ferrari but that's not the kind of thing I'm talking about.

What this would also eliminate, which I have not yet brought up, is being able to claim personal bankruptcy.  Big companies would still go under occasionally, but no person would be able to push that reset button (which the rest of us end up paying for) because they were never be allowed to rack up too much debt in the first place.

 

[SupersonicMax]

And then someone wants to go to school and cannot afford it because it costs 20 000$ a year, which is more than 5% of what the 18 year old makes.

Does the statistic include mortgages?

 

[SeanNewman]

Has already been discussed into the ground:

1. Education or starting a business, as Mr Wallace pointed out are "good debt" and justifiable in the eyes of the culture.

2. Housing and transportation are also things that most people need.  But that being said, does a small family need a $500,000 house and a new BMW 328 and a Toyota Highlander?

 

[SupersonicMax]

1. Education or starting a business, as Mr Wallace pointed out are "good debt" and justifiable in the eyes of the culture.

And you really believe that a student will ONLY spend his loan money on school stuff??  I don't think so

2. Housing and transportation are also things that most people need.  But that being said, does a small family need a $500,000 house and a new BMW 328 and a Toyota Highlander?

$350 000 - $400 000 is not unreasonable in some parts of the contry.  Vancouver's average home just hit $1 000 000 last spring.

I say let's not become a socialist state.  Let the weak sink.  If they can't learn from their mistakes and other's mistake, than so be it. 

 

[57Chevy]

does a small family need a $500,000 house and a new BMW 328 and a Toyota Highlander?

Don't forget about the yacht, and the cottage in the country. :

 

[a_majoor]

Generally, banks do cut off credit for those who abuse it, but in some circumstances, people can "game" the system, and in others, regulatory failure by the State actually sets people up for failure. Student loans is probably the largest single one that you or I can point to, while the current credit crisis was largely caused by the US "Community Reinvestment Act"; which essentially told banks they must lend to people who do not meet normal mortgage criteria or face the penalty of law. (A certain Chicago community organizer apparently made a name by shaking down Chicago area banks in this fashion). Of course central banks manipulating interest rates for political purposes also have a large responsibility in inflating or deflating credit bubbles.

IF you really want to ensure people don't borrow beyond their limits and banks and institutions have few incentives to do so, eliminate central banks and State intervention in the financial markets, and allow "Free Banking"; where banks can set their own credit policies and interest rates based on their own portfolios of assets and liabilities. Irresponsible people may still shop around for credit beyond their means (and will probably fall into the arms of a loan shark), but that is a personal decision, and that person may bear the consequences.

 

[vonGarvin]

Irresponsible people may still shop around for credit beyond their means (and will probably fall into the arms of a loan shark), but that is a personal decision, and that person may bear the consequences.

WHOA!  Slow down!  Are you suggesting that people take responsibility for their own actions?  NEVER.  I DEMAND THAT THE STATE BAIL ME OUT OF ALL OF MY STUPID DECISIONS! 


;D

 

[dapaterson]

WHOA!  Slow down!  Are you suggesting that people take responsibility for their own actions?  NEVER.  I DEMAND THAT THE STATE BAIL ME OUT OF ALL OF MY STUPID DECISIONS! 


;D

They do.  You joined the military, and the state pays you for it.


I find it amusing how many hard core capitalists we find inside the CF - all of who are more than happy to have the state pay their way.  Everyone else, however, is gaming and abusing the system for personal gain.