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Average Consumer Debt

Allan

Allan

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I was looking at consumer debt this morning and noticed a huge disparity between Canada and the US.

To see who the anomaly might be I checked Australia. Debt there is $169,271 USD. WTF is going on Aussies? Are you buying houses on your credit card?

I'm assuming US debt is a result of college loans and medical bills.

Consumer debt
Canada: $14,665*
USA: $105,000

*$21,013 CDN converted to USD.

I lazily used AI for the numbers above so feel free to post your own if you feel these are inaccurate.
 
The thing everyone should understand about the American middle class is that it’s a funhouse of smoke and mirrors created by debt. Privately held debt includes the following:

$12.6 trillion in mortgage debt
$1.8 trillion in student loan debt
$1.6 trillion in auto loan debt
$1.2 trillion in credit card debt
$249 billion in personal loan debt
$220 billion in medical debt
 
I would want to look at what that debt is.
First and foremost it cannot possibly include mortgages, home ownership between CN and the U.S. is less than 1% different.
13% less Canadians own cars than Americans, but far greater difference is 15% more Canadian families own TWO cars than Americans.
So that is counter to what is seen.
And then there is student loans - the mount of debt is only $1000 difference. However a significant difference is Canada has repayment assistance programs that Americans have less of.

All of this said - I am having a very difficult time believing Americans have 10 times the consumer debt (whatever your figure us) than Canadians.
 
iamwhatiseem said:
And then according to Equifax - the average Canadian debt is $72,950.
Something is very screwy about the $21,013
Click to expand...

From Equifax...

Consumer debt reached $2.54 trillion in Q3 2024, a 4 per cent increase from the same period last year, with the non-mortgage debt per active credit consumer up 3.8 per cent from Q3 2023, and currently averaging $21,810, up $796 from last year.
Click to expand...

Interest Rate Cuts Begins to Ease Consumer Credit Burden - But Not for Everyone

TORONTO, ON (November 26, 2024) – Equifax Canada’s latest Market Pulse Consumer Credit Trends Report reveals that while recent interest rate cuts have provided easing of financial press
www.equifax.ca www.equifax.ca
 
Like I said, something is odd about the figures, it is obvious.
There is no way Americans have 10x the amount of debt as Canadians.
 
Allan said:
That's 2020. The Equifax number I posted is 2024.

Interesting thing about the information you posted is that the average debt for the age group +65 is $49,900 including mortgages.

I sure wouldn't want to retire with that much debt.
Click to expand...
So Canadians have almost 70% less consumer debt now than 4 years ago??
yeah... don't believe that at all.
Not trying to be contrary here, just don't at all believe the first 2 numbers.
In everything I have known about Canadians and Americans for decades - is we live pretty close to the exact same lifestyles.
It is not like comparing American lifestyle to Norway for instance.
So it would make zero sense that we are to believe there is 10x difference in debt
 
Allan said:
I lazily used AI for the numbers above so feel free to post your own if you feel these are inaccurate.
Click to expand...

They may be, and it boils down to the difference in debt types and how we treat them.

At least in the US, "consumer debt" tends to be just about anything personal as in home, auto, student, and credit card debt. The issue is how each debt type is handled when considering new lines of credit down to dealing with bankruptcies.

In the US consumer debt equates to roughly $17.9 Trillion in total, and when divided by some funky government household math we end up with something like $104,215 per household.

And while the US household debt levels are substantially higher than say Canada, this gets more interesting when putting it in percentage of GDP. The US consumer debt number is somewhere in that 72% to 74% of GDP range, where as Canada is somewhere in the 102% range (for reference UK and Germany is in the 78% and 52% range respectfully.) The over number matters, so does the % of GDP number.

The other interesting aspect here is over 72% of all US consumer debt is home related (next is auto, then student, then credit card.) In that context no other comparable nation has the student debt the US carries, and some comparable nations flip credit card debt as higher than and auto.)

Regardless, in the US, consumer spending accounts for some 68% to 70% of GDP (in Canada and UK it is right around 60%, and in Germany it is struggle to be 50%.) When you frame it that way it stands to reason why the US tends to dwarf all other comparable nations in consumer spending and consumer debt.

By the numbers it is not even close, the US is a debt based consumer economic model.
 
OrphanSlug said:
They may be, and it boils down to the difference in debt types and how we treat them.

At least in the US, "consumer debt" tends to be just about anything personal as in home, auto, student, and credit card debt. The issue is how each debt type is handled when considering new lines of credit down to dealing with bankruptcies.

In the US consumer debt equates to roughly $17.9 Trillion in total, and when divided by some funky government household math we end up with something like $104,215 per household.

And while the US household debt levels are substantially higher than say Canada, this gets more interesting when putting it in percentage of GDP. The US consumer debt number is somewhere in that 72% to 74% of GDP range, where as Canada is somewhere in the 102% range (for reference UK and Germany is in the 78% and 52% range respectfully.) The over number matters, so does the % of GDP number.

The other interesting aspect here is over 72% of all US consumer debt is home related (next is auto, then student, then credit card.) In that context no other comparable nation has the student debt the US carries, and some comparable nations flip credit card debt as higher than and auto.)

Regardless, in the US, consumer spending accounts for some 68% to 70% of GDP (in Canada and UK it is right around 60%, and in Germany it is struggle to be 50%.) When you frame it that way it stands to reason why the US tends to dwarf all other comparable nations in consumer spending and consumer debt.

By the numbers it is not even close, the US is a debt based consumer economic model.
Click to expand...
Indeed - more accurate is a "debt as income" economic model.
Installed by Greenspan, who for a long time was thought of as this economic genius.
Well, certainly not anymore. Doesn't take a genius to figure out you can easily create a faux economic boom by greatly expanding debt as if it is income
 
iamwhatiseem said:
Indeed - more accurate is a "debt as income" economic model.
Installed by Greenspan, who for a long time was thought of as this economic genius.
Well, certainly not anymore. Doesn't take a genius to figure out you can easily create a faux economic boom by greatly expanding debt as if it is income
Click to expand...

Unfortunately, that is a bit of a mischaracterization too but I get, and sometimes agree with, the sentiment.

The reality is this nation's consumer debt to GDP started to take off in 1984, jumping from roughly 48% to 63% just 10 years later. Our economic model at the time was largely Republican fiscal policy driven with monetary policy, arguably, sleeping at the wheel. The economy took off but the relationship of our growth to deficit trade conditions also grew (or, the further shift from a production and manufacturing model of economics to and imports consumer spending model.) By end of 2004 it was near 90%, well above today, on our way to a galactic financial system collapse in 2007 were we almost eclipsed consumer debt being 100% of GDP. What allowed that? Deregulation of risk, arguably another Republican idea.

Think about that, in just 20 years from 1984 to 2004 we jumped from 48% to 90% consumer debt as a percent of GDP. I would argue that Greenspan will end up in the history books as the most passive and ignorant Fed Chairs in history, but he was not alone in watching our entire model of economics shift putting us on the course of a largely debt based consumer model. There were political goals and winners picked, sure was not the average worker.

And BTW, debt is income... for the holder of that debt, assuming no default. Debt is an investment vehicle, nothing more.

The good news is the overall trend of consumer debt as a percentage of GDP is downward, falling from the 2007 high of 98.8% to the 72% 'ish range it is in today. Even over the past 5 years we have fallen from the 78% range to now. The bad news is everyone's financial position (from the federal government down to the household) is in no position to see drastic increases in debt incurred to deal with the next economic downturn.
 
I've been saying for years that the "recovery" in the US from the COVID shut down and the Inflation spike has been largely maintained by debt.

Rather than austerity in the face of rising prices the American people have shifted their shortfalls into debt. Canada didn't have the inflation spike that the US had in 2021-2023 because they didn't throw money at an already recovering economy.

That said, I don't think those numbers are entirely accurate.
 
I don't know what source you used, but mortgage data is normally included in measurements of household or consumer debt.


This may help understand US debt. Most of it is mortgages. Very little is credit cards.

chart-1-total-houshold-debt-q12023.jpg



From what I've gathered so far (which isn't much :D ) the same thing is happening in Australia. Like the US, they're experiencing a housing crisis, due to a shortage of supply. This is exacerbated by the government cutting back on housing aid, including building new public housing.

www.abc.net.au

Australia's housing crisis in 10 graphs, from the federal budget

The Albanese government dedicated a special chapter in its budget to Australia's housing crisis, and it used these graphs to illustrate the problem.
www.abc.net.au www.abc.net.au


Anyway. The composition of debt is useful to know, but keep in mind that the above chart is not indexed to inflation or income. Things look MUCH better when we look at the ratio of household debt to disposable income.

fredgraph.png



Australia is apparently above the international average for household debt to income ratio, and again I believe that's almost all due to their housing crisis.
 
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Kushinator said:
Hmmm....
fredgraph.png

Imagine that!

At least you got something right.
Click to expand...

1742513894036.png

I didn't say that they didn't have a spike, I said they didn't have the US spike because they didn't.

It didn't help that their neighbor to the south threw as much money into an already recovering economy as the Canadian GDP.
 
Kushinator said:
That's exactly what you said:

They did. Your own source confirms this 🤣
Click to expand...

Can't read, aye? What you think you read: "Canada didn't have an inflation spike at all"

what I actually said: "Canada didn't have the inflation spike that the US had."

Not the same statement.
 
Allan said:
I was looking at consumer debt this morning and noticed a huge disparity between Canada and the US.

To see who the anomaly might be I checked Australia. Debt there is $169,271 USD. WTF is going on Aussies? Are you buying houses on your credit card?

I'm assuming US debt is a result of college loans and medical bills.

Consumer debt
Canada: $14,665*
USA: $105,000

*$21,013 CDN converted to USD.

I lazily used AI for the numbers above so feel free to post your own if you feel these are inaccurate.
Click to expand...
Houses, dude.


In my state, CT, the average house price is, what, 350k now? But the median wage is 55k.
 
jmotivator said:
Can't read, aye?
Click to expand...
You can't formulate a post without being deceitful for partisan purposes, unless it's not about politics.
jmotivator said:
What you think you read: "Canada didn't have an inflation spike at all"

what I actually said: "Canada didn't have the inflation spike that the US had."
Click to expand...
They had a similar spike. You're trying to walk back your ignorance because it was called out. Not going to work. Own it.
 
Kushinator said:
You can't formulate a post without being deceitful for partisan purposes, unless it's not about politics.
Click to expand...

I wrote the statement perfectly fine. You read it wrong. Get over it.

Kushinator said:
They had a similar spike. You're trying to walk back your ignorance because it was called out. Not going to work. Own it.
Click to expand...

Not the same spike, as I said. I'm not walking back anything.

You on the other hand have had to admit that the spikes weren't the same. Even though you'll stomp your feet about it for a few more posts. :rolleyes:
 
jmotivator said:
I wrote the statement perfectly fine.
Click to expand...
This is a lie.

Canada had YoY CPI more than 3 standard deviations above their 10 and 20 year mean. The same as the U.S. In fact, Canada had more deviation from their mean than the U.S.. You made a mistake in order to try to push a partisan talking point... and it failed. Don't be a coward about it.
jmotivator said:
You read it wrong. Get over it.
Click to expand...
You're trying to make it literal. The U.S. experienced higher overall inflation. I get that. But they both spiked in an almost identical fashion, and so did the rest of the developed world. For example, Japan didn't have 9% YoY CPI, but they did have more than 3 standard deviations above their 10 and 20 year average.
jmotivator said:
Not the same spike, as I said. I'm not walking back anything.
Click to expand...
The correlation of the spikes are nearly identical. Own your mistake.
jmotivator said:
You on the other hand have had to admit that the spikes weren't the same.
Click to expand...
They were similar. CPI for Canada peaked at 8.1% where as it peaked at 9% for the U.S.
fredgraph.png

jmotivator said:
Even though you'll stomp your feet about it for a few more posts. :rolleyes:
Click to expand...
You lost this exchange. There is no doubt about it and i will continue to rub your nose in to it until you need your cpap mask.
 
Kushinator said:
This is a lie.

Canada had YoY CPI more than 3 standard deviations above their 10 and 20 year mean.
Click to expand...

Ad you could have just stopped there. My statement was comparing the US to Canada, and you are comparing Canada to Canada.

You attempt to compare standard deviations is the logical equivalent of saying all 10% raises are the same when clearly they aren't.

And good job with graphs, Kushinator. You are using Urban CPI for the US and All of Canada for Canada. And even then it proves that Canada's inflation was not US inflation, even when Canada incorporates non-urban CPI and the US graph doesn't.
 
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Kushinator said:
They were similar. CPI for Canada peaked at 8.1% where as it peaked at 9% for the U.S.
Click to expand...

Also, this is a misrepresentation since "similar" isn't the same, and where it peaks isn't as important as the aggregated difference, and Canada's aggregated inflation in the time period I stated, 2021 to 2023, is much lower than the US.

For instance, is the 8.1% vs 9.0 difference in CPI at the peak in mid 2022 that you use a more appropriate comparison than the 4.7% vs 8% difference in late 2021? :unsure:
 
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