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The culture of debt

Today, our children have to work — and borrow — to keep pace with our standard of living

By David Wilson

Homeowners on our street gasped last summer when a solid but unexceptional house about a block away from ours sold for nearly $1 million. It had been listed for $865,000; the for-sale sign was barely in the ground before a bidding war erupted.

I don’t know who ended up winning the battle, but if other recent homebuyers in our neighbourhood are any clue, chances are it’s a young two-income couple with a toddler or two. They were probably attracted to the neighbourhood for the same reasons we were attracted 20 years ago — older but comfortable homes and easy access to schools, shopping, public transit and parks. It’s a good place to raise a family.

It hasn’t always been easy for us to make ends meet while paying down the mortgage on our house. I shudder at the challenge facing our new neighbours. Even in the unlikely event that they came up with a full 25 percent down payment, they’re looking at a mortgage of more than $700,000. The interest payments alone on the mortgage will be something like $430,000 — and that’s at today’s historically low rates. Add in credit cards, lines of credit and consumer loans, and it’s hard to imagine our new neighbours ever climbing out of debt on an average household income — or even an above-average one.

This month, Vancouver writer Pieta Woolley observes that some 20- to 45-year-olds are shaking off the debt burden by opting to live more simply. But they are the exception. The average debt load for Canadians is now 150 percent of their income — the highest in the industrialized world. Money we used to save is now spent servicing the money we owe.

I think our indebtedness is partly tied to the myth that each generation should live better or at least as well as the generation it succeeded. On the whole, my generation has had to work like crazy just to keep pace with our parents’ standard of living. Now our children have to work — and borrow — like crazy just to keep pace with ours. Perhaps this growing tolerance for debt expresses resistance to the idea that upward or even sideways mobility may be a thing of the past.

You can’t blame people of any generation for wanting a decent standard of living. But the culture of debt we have created in the pursuit of that ideal is unsustainable. Sooner or later, circumstances may force us to take a cue from the mavericks in Woolley’s story and question whether a standard of living that consigns so many to debt slavery is the standard of living we want. Until we get our values straight, we’re going to have a hard time putting our economic house in order.

• For another perspective on the current economic mess, check out the interview with business writer Linda McQuaig. The interview was conducted before last summer’s debt-ceiling fiasco in the United States and the subsequent stock market plunge. McQuaig’s words are eerily prescient.

Author's photo
David Wilson is the editor-publisher of The Observer.
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