Chapter 2- Household debt now rising faster than wealth: CIBC

http://www.financialpost.com/magazine/family_finance/story.html?id=732170


Summary
The debt of Canadian households is now climbing faster, because of the stock market is correcting and the housing market is falling down. Many Canadian consumers are starting the personal bankruptcies and mortgage arrears. CIBC reviews the Canadian credit markets, they get an analysis that the bankruptcies will continue rising. Early, the professor predicts that consumer credit growth will be increased 10%. CIBC economist and Benjamin Tal mention if these conditions are unchanging, the Canadian consumer would build up more liability and they are not able to pay it. Recently, the Western Canadian cities are starting to control strictly for the federal mortgage lending restrictions.

Connection
This article is connecting the rule of principal. The Bank needs to make sure the Canadian consumers are available to pay their liability. During the economy slow down, the business or consumer cannot follow the rule of matching concept. Their expenses cannot match to the production of revenues because the spice is continue rising. The condition will be turning better while the business or bank follows the rule of accrual basis. Especially, bank requires recognizing seriously of revenues and expense from whom they owed the money. However, the consumer still requires analyzing their financial before they have loan.

Reflection
I think both of the bank and consumer need to be took little responsible for the debt rise. Of course, the government needs to resolve this financial problem. The first considering is decreasing the production price. The second considering is slowdown in borrowing money. Even though, the bank decides to borrowing money to other businesses or consumers, the bank needs to make sure their financials are stable. I think this economy problem will be continuing for couple of years.