Tens of thousands of Canadians are out of the country after vacationing. Most are stranded now. No flights. Closed borders. And a mess of them are running out of money. Maxed credit cards. No savings. No reserves. About to be tossed from hotel rooms they cannot finance.
Ottawa is bailing them out. The holiday folks are being given $5,000 loans to pay for lodging and food.
As detailed here yesterday, up to a million tenants have indicated they cannot pay rent. How many withheld payments yesterday is unknown. But May 1st won’t be any better. No savings. No reserves.
Governments are bailing them out with a $2,000-per-month CERB payment. Applications open Monday. The web site will be flooded, mercilessly. Meanwhile claims for EI have been at unheard-of levels. More than historic. Off the charts. People are desperate for money. No savings. No emergency funds.
In the last seven days alone over 60,000 homeowners besieged a single bank asking for mortgage payment deferrals. Multiply that by five and you can see what’s happening – a quarter million people a week who have houses but lack the money to pay for them. No savings. No contingency. No funds. Just debt.
This week came word half the businesses in Edmonton will soon fold. A major hotel in Halifax has reduced its staff from over 100 to ten. Occupancy in Toronto major’s hotels is less than 5%. Restaurant revenues have declined 100%. Says the Canadian Chamber of Commerce: “We are very concerned that without a significant increase in the assistance made available to businesses to keep their employees on the payroll, we are going to see massive numbers of layoffs and tens of thousands of small businesses going out of business entirely. It will mean that when we come out the other side of the tunnel there won’t be a business for employees to go back to.”
Government’s bail-out will cost $71 billion as it underwrites 75% of payroll costs. But businesses fret they cannot come up with the other 25% to qualify. There are calls for a hundred per cent subsidy. No retained profits. No cash flow, no business. No contingency.
The latest Nik Nanos survey finds one in five people are likely to miss a major payment this month – mortgage, rent or credit card. Among those under 34, the number jumps to almost a third. No rainy day or emergency fund. No plan. Paycheque-to-paycheque.
In response, government will be increasing spending as never before and is on track for a deficit of $180 billion in a single year – 220% above what Conservatives coughed up to get through the 2008-9 crisis. Almost all of this money will go directly to individuals. Opposition leaders say it’s too little, too slow. Parliament is coming back to authorize even more spending.
Yes, unprecedented times. Nobody thought two months ago the economy would be turned off. In fact a lot of us – perhaps the majority – believed adversity would never come. We were immune. There was no reason to be ready for it. So we were not. What we made, we spent. What we lacked, we borrowed. What we wanted, we bought.
Does it sound elitist, smug and unsympathetic to talk about debt and financial promiscuity at a time like this?
You bet. So not a single leader dares do it. Certain. Political. Death. Government’s avowed role now – after preventing people from working, paying their bills and supporting their families – is to paper it all over with borrowed billions. In the next three months there’s no option. Let ‘er rip. But the long-term consequences of our collective profligacy will be, well, Biblical.
Come September, Dog willing, we’ll all be back at it. Remaining stores and businesses will be open. A few more planes flying. Brave people traveling. Offices functioning. Houses being shown, bought and sold. Financial assets restored. Double-digit unemployment nibbled lower as the recession recedes. The subsidies, grants, loans, gifts and deferrals will be trailing away. But federal government debt will be higher by as much as 30% – in less than a year. Canada’s debt-to-GDP ratio will crest 100%. The next budget could usher in toe-curling ‘emergency’ tax increases. Ironically, those who had savings, reserves, emergency funds, retained profits or prudence will be in the crosshairs.
This episode’s painful. Scary. Terrifying. A virus 95% of victims recover from has nonetheless created public panic. Media has convinced the bulk of the population they’re at imminent risk of death.
Overwhelmed health care workers have emerged as heroes. Thank you, thank you.
May every deceased patient and their family rest in our thoughts and hearts. This is awful. Loved ones were swept from you in a storm. Undeserved and tragic.
But when this is done, Canada, we need to have a serious talk.