Lagged Effects Of Epic Tightening Cycle Will Intensify In 2024

Photo by Michelle Spollen on Unsplash
Equifax Canada reports that Canadian households added $80 billion of additional consumer debt over the past year, taking the total outstanding an eye-watering $2.4 trillion.Well beyond paycheck to paycheck, many are living credit card to credit card. The average Canadian credit card balance rose to $4,119 in the third quarter, up from $3,727 in the third quarter of 2022, and is now beyond pre-COVID levels. The percentage of cardholders making the minimum payment rose by 3.4%, while the percentage of those paying off their balance in full dropped by 1.5%.Equifax vice-president Rebecca Oakes noted that increased rent and mortgage costs mean more people are relying on credit to cover their living costs, and “As more mortgage renewals continue to happen, we’re going to see more Canadians begin to experience payment shock, and that’ll continue over the next year.”It’s not just households struggling to stay afloat; corporate debt is also at historic highs, with loans coming up for renewal at significantly higher interest rates every month.Forty percent of the economically sensitive Russell 2000 companies are unprofitable today compared with 20% pre-COVID. Many have relied on cheap credit and government handouts for years to keep the lights on, and neither is on offer now.In the latest Canadian Business surveys, insufficient demand has overtaken labour shortages as a primary concern. It is little wonder that new hires, job openings and average hours worked are declining while layoffs are rising. Labour’s share of national income has tumbled toward the 2011-2015 all-time-lows of 55%–the least since at least 1945.Deflation is back on deck as financial mania sobers to the brutal math of high leverage and mean-reverting asset prices. The segment below offers a worthwhile update.

Is 2024 likely to be the year the Lag Effect arrives in force? To find out, we’re fortunate to speak today with CEO & Chief Strategist for QI Research LLC and the author of the book “Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America.” Here’s a direct video link.

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Easing Cycles Are No Quick Fix
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