Reprinted with permission from The Packet, February 18, 2010
by Barbara Dean-Simmons
The wisdom came with age – with having lived many years and watching change happen right outside his window and in the broader world.
Before he died, Jim Critch of Hillview offered us his take on world economics.
It was just two years ago – oil money was coming in a steady pour, not only from the Hibernia fields but also from the West – feeding the appetite for new homes, cars and Bermuda vacations right across this province.
Editorial –
The wisdom came with age – with having lived many years and watching change happen right outside his window and in the broader world.
Before he died, Jim Critch of Hillview offered us his take on world economics.
It was just two years ago – oil money was coming in a steady pour, not only from the Hibernia fields but also from the West – feeding the appetite for new homes, cars and Bermuda vacations right across this province.
Things were about as good as they could be. The sub-prime mortgage crisis was not yet a phrase, and American banks were seen as stalwart and stable.
But it couldn’t go on forever – not according to Mr. Critch.
Money just can’t last like that, he contended. You just can’t spend, spend, spend with, apparently, no thought for tomorrow.
And that’s what he figured people were doing. Borrowing and spending at will, thinking the economy would always be this good, and the well-paying job would always be there.
They had a lot of money coming in, but there was an awful lot of it going out too.
And Mr. Critch, from the experience of having lived through a lot of lean years, could reflect on a time when work, if you could get it, paid meagerly and was hard.
He could also recall several economic cycles of boom and bust – of jobs for everyone and nothing for nobody.
He knew, from experience, that personal economic security came down to a couple of key points; borrow little, save more and make do with only what you need.
He predicted, long before the sub-prime mortgage collapse, that the world’s economy was fragile, that it would take very little to go from prosperity to hard times.
He knew, long before federal Finance Minister Jim Flaherty announced tighter mortgage rules last week, that too many people were living beyond their means in terms of borrowing and spending, and had nothing for the proverbial rainy day.
On Tuesday, Flaherty announced new government regulations to ensure consumers don’t get in over their heads in housing debt.
Under the new rules, purchases will have to meet the requirements for a five-year, fixed-rate mortgage.
Those purchasing properties for investment will have to make a 20 per cent down payment.
The new rules come at the same time a report from the Vanier Institute of the Family reports that household debt in Canada rose to record levels in 2009. Almost two-thirds of families repot they would be in financial trouble if their pay cheques were just a week late.
According to the Institute’s report, average household debt rose to $96,100 – creating a debt to family income ratio of 145 per cent.
The Institute also noted that low interest rates in the past encouraged home buyers to take on more debt than they can afford, a problem which will only get worse as interest rates rise.
And with some using the “bubble” term to describe Canada’s rising housing prices, there is a real fear that if the bubble bursts, and housing prices stagnate or fall, some homeowners may realize they have paid too much for something they can’t afford.
Jim Critch came from a day when ownership of a home was something that took time that you saved for dollar-by-dollar, and built bit by bit, until it was done. And at the end, you had something you could call your own.
Those days may be gone. But that doesn’t mean Jim Critch’s other advice is not worthy.
His simple maxim of borrow little, save more and buy only what you need, will stand the test for those who follow it.
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Transcribed by Lester Green, April 2015
These transcriptions may contain human errors. As always, confirm these as you would any other source material.