A construction crew walks in front of new homes under construction, on the day Bank of Canada increased its policy rate a full percentage point in Brampton, Ont., on July 13.CARLOS OSORIO/Reuters
Canadians who pay any attention to the world around them are gradually coming to realize they have been living in a fool’s paradise.
In that dreamy world, certain verities stood like granite pillars. Canadian housing was the safest investment you could imagine, a sure thing in an uncertain world. Inflation was a thing of the past, something that our parents or grandparents worried about.
Borrowing lots of money to buy houses and other nice things was only smart and sensible, the cost of loans was so low. The Canadian health system was second to none. Our national defence was in safe hands.
One by one, the pillars have been crumbling. The housing market has gone from soft to shaky to downright sickly. Sold Over Asking! is being replaced by New Price. The mania that pushed prices skyward over the past couple of years is at risk of being replaced by panic.
Inflation just hit its highest rate since 1983. The dragon we all considered slain has come roaring out of its cave, leaving central bankers sputtering in its trail. The cost of borrowing is going up fast – a full percentage point in the Bank of Canada’s last hike, the biggest since 1998.
Our health system has been pushed to the edge by COVID-19 and is struggling to recover. Canadians in some places face long delays getting a family doctor and record wait times at emergency departments. Burned out health workers have been quitting. Nurses are in short supply. Surgeries are backing up. The costs of the system are enormous – among the highest in the developed world – and the results underwhelming.
The war in Ukraine forced every democracy to look at the state of its defences. Ours have been underfunded for decades. Canada falls far short of the figure the North Atlantic Treaty Organization expects its members to devote to their armed forces: 2 per cent of gross domestic product. A recent NATO report says that, in reality, spending is due to decline this year to 1.27 per cent of GDP, down from 1.42 per cent a couple of years ago. Filling the gap would cost a staggering $75-billion over five years, says the parliamentary budget officer.
We will be all right in the end. Canada is a rich and resourceful country. The current moment is part of an ancient cycle: Things go north, things go south – and back again. In the meantime, though, we find ourselves in a fine mess.
Who is to blame? It’s hard to know where to start. Up-selling bankers positively threw money at consumers in the fat years – lines of credits, consumer loans, flexible credit card limits. Happy-talking real estate agents insisted the housing party would never stop.
Those who govern us borrowed and spent as if there were no tomorrow, spraying money in every direction. Why not? Weren’t interest rates rock bottom? Wasn’t inflation safely confined to its cave?
Instead of fixing health care, they quarreled over it. One side of the aisle said the other side was plotting to destroy the system; the other side swore it wasn’t. Any talk of reform was drowned out by the tussle. The health system became the ultimate sacred cow.
Instead of properly funding our defence, they did what every government for decades has done and contracted it out to the big-spending Americans. Our expensive medical care and other social services are only possible because we rely on Washington to keep us safe.
But it won’t do just to rail against the authorities. We have ourselves to blame, too. Once frugal and prudent, Canadians have become some of the world’s biggest spenders and borrowers, loading up our credit cards and credit lines to pay for SUVs, granite countertops, jet-skis and spa retreats. Even a pandemic didn’t slow us down. The ratio of household debt to disposable income reached a new record in the final quarter of last year.
Many of us used our homes as automatic teller machines, assuming, against the historical evidence, their value could never fall. We believed the real estate shills. We forgot inflation was even a thing. We boasted about our “free” health care – so much better than that American train wreck! – without ever wondering how it was paid for. We paid tribute to our fallen heroes on Remembrance Day, but gave no thought to the condition of our real-life military.
In short, we fell prey to a common human failing and believed that things would keep on going much as they had been. Paradise was a lovely place while it lasted.
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