Private Sector Loans

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Do Canadians Need to Look at Their Balance Sheets Again?

Loan growth generally accompanies economic expansion. Individuals, businesses and large corporations have no problem raising capital to fund new projects or upgrade and retool when prices are rising. 

The 3 panel chart to the left shows lending to the private sector since 2008. Canadian private sector borrowing is compared to that of the U.S. the U.K. and the Eurozone in each panel.

The Canadian and U.S. private sectors very quickly in 2008-09 reacted to the global credit defaults by reducing their total borrowing by +/-10% and did not change course to head back to the teller's cage until 2010 when a new wave of borrowing was sparked by fresh lows in the bank rate. The mania has lasted 5 years and private sector loans have grown by more than 40% and only recently does the chart show any signs of exhaustion... for Canadians. 

The plot line for private sector borrowing began to roll over in Canada in mid 2014; the energy market took its first big hit in the fall of 2013; that was the warning; the bust has arrived.

Energy prices are plunging and Canada's biggest export sector is energy. 

According to StatsCan Canada's top 5 export sectors account for +/- 68% of total exports:

Top 5 Canadian EXPORT Sectors (and % of total exports)

• Energy products (23%)
  
• Motor vehicles and parts (14%)
• Metal and non-metallic mineral products (12%)
• Consumer goods (11%)
• Forestry products and building and packaging materials 7%

Notice that Canadians also import the same stuff they export:

• IMPORTS in the same sectors (and % of total imports)

• Energy products (7%)
• Motor vehicles and parts (17%)
• Metal and non-metallic mineral products (9%)
• Consumer goods (21%)
• Forestry products and building and packaging materials (4%)

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The stuff that Canadians have to import is with a sub par and falling Canadian dollar. 

That is not good news for a chronic consumer society like Canada.

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Here is a photo of the cheapest building lot I could find on the west side of Vancouver and the lot is small at only 4026 sf. ($330/sf) Listing ID: V1096241 ~ Good luck to you sir.