Who benefits from household debt? To banks, to companies? by William André Nadeau

Well, here is some amazing information, for our Canadian friends, like Americans or French, it will be so also 21% more debt! I have always been unlucky in research; ) So For France with regard to « household debt » , I did not find the raw data for 2011... And INSEE does not seem to have had the idea of ​​publishing them at « day »

But by default the exhibits pile up, and we can make deductions... Because again in 2010 we see that... the debt of French households had been rising steadily since 1980 and this on a very regular basis... 

To achieve debt that reached 77,3% of disposable income (because too sudden a rise in energy & food expenditure items, and therefore in temperature as for our frogs would alert the latter and be saving, but far too obvious!) However, I reassure you, the pattern seems global, and you will understand why, without political will, it seems inevitable...

This thanks to the friend Lupus! Because needless to say that this economic info is not mine, but comes from our enlightened werewolf friend on the trail of Canadian William André Nadeau, Besides, the Lupus Blog is now the 11^e financial news blog in France at the top Wikio ! And congratulate him! because it has become by force of circumstances (as far as we are concerned by its seriousness and its originality), one of our most innovative official providers in terms of QUALITY financial news. It is, fortunately for him of course, not exclusive, but from a good source! drawing too regularly from its atomic feed, so as not to miss any of the power of the latter, I strongly suggest that you subscribe to it (cover page)... Which, I think, will perhaps make you think and draw a certain conclusion on this logic iniquitous one way... (sorry for the concern about the quality of the video below, it's not my fault.)

The rich still + rich, the poor still +... by Little_Mule

According to Statistics Canada, for every dollar of income earned, Canadians owed almost $1,50 in debt. Average debt soared 266% between 1984 and 2005.

Only the less fortunate households experience this problem of over-indebtedness. The more they are in debt, the more the middle class crumbles.

The supply of credit is high, varied and pernicious. Interest rates are low for mortgages and car loans, but remain excessively high for credit cards. Their rates have increased for 4 years while other rates have been falling. Rates at 20% become very profitable for issuing banks. The indebted are caught in a vicious circle and the banks benefit from it.

It has been shown that the wealthiest are increasingly wealthy, and they are the ones who contribute the most to the increase in consumption. However, for the middle and poor class, income growth after inflation has been either stable or declining for 15 years..

In 1980, the level of savings was 20%, and it is 5% today. Here again, it is people with high incomes who save the most.

The most worrying, in this context, will be the moment of retirement, for the indebted.

Private companies have rarely been in such a good financial position, which explains why the level of redemption of outstanding shares has been very high in recent decades. The level of business liquidity has gone from 13% in 1990 to 32% of Canadian GDP. Alas, these surpluses of liquidities do not contribute to the increase in the wages of the middle class.

William Andre Nadeau  Canadian Portfolio Manager/Finance Orientation Apr11

EN COMPLEMENT : Household debt is not caused by frivolous spending or a lack of financial education

Contrary to what is regularly claimed, the rise in household debt in Canada is not caused by an increase in unnecessary spending or a lack of “financial literacy”. This is shown by the Institute for Socio-economic Research and Information (IRIS) in a note which sheds light on the root causes of the current indebtedness:

(1) the reduction in the wages of part of the population,

(2) the growing availability of credit and

(3) the transfer of indebtedness from governments and companies to households.

“Even if we have recently been talking about household debt in the media, this phenomenon is not new, it has been growing for three decades. It is not caused by an increase in household spending, which has been relatively stable over 30 years, but rather because households the poorest saw their income decrease by 21% during this period. It was these poor households that fell heavily into debt since the growing availability of credit was the only way for them to cope with an increase in the cost of living at a time when their wages were falling. » highlights Simon Tremblay-Pepin, researcher at IRIS who collaborated in the drafting of the socio-economic note.

“While households got into debt, governments waged 'deficit wars' to reduce their debt. To do so, either they increased the regressive tariffs, or they reduced the services. All of these strategies have contributed to increasing the indebtedness of poor households because they forced them to pay for services that were once free or to contribute more through the payment of taxes and tariffs. says Julia Posca, author of the note.

While the Bank of Canada is once again showing its dismay at the lack of corporate investment, IRIS stresses that this situation is not new and that it contributes to household debt. In fact, thanks to major tax cuts both federally and provincially, companies have been able to reduce their level of indebtedness, but rather than reinvesting it in the economy, they opted to accumulate significant liquid assets (which have more than doubled in 20 years) to invest them in the financial economy. Thus, this money does not go back to households, which continue to go into debt.

« In the end, who wins from the increase in indebtedness?  Obviously, the financial institutions that derive significant profits from it. But also the wealthiest 10% of the population who own most of the financial assets (stocks, bonds, RRSPs, etc.) and who benefit from the securitization of these debts and the dividends paid to shareholders. In short, the poorest households are therefore going into debt at an unprecedented level so that the government reduces its debt, so that the companies pile up liquid assets and so that the banks and the richest maximize their profits.. »

The socio-economic score Who benefits from household debt? is available free of charge at: www.iris-recherche.qc.ca

source: The Lupus Blog, www.cnwtelbec.com

Further information :

France of resourcefulness (special envoy) 1/2 by Nhomme-Beur-One

France of resourcefulness (special envoy) 2/2 by Nhomme-Beur-One