Governments set poor example with borrowing

Last week’s quarter-point rise in interest rates is causing a world of consternation, mostly because this might be the start of a trend.

Most concerned are those who are leveraged so much there’s no more money for payments. They’ve already taken a hammer to their kids’ piggy banks.

Many borrowers didn’t believe historically low interest rates would not last forever.

The interest rate issue is worrying in rural areas where farmland is selling a such high prices it will never pay for itself and rural routes are clogged with ever-bigger equipment.

This is not new. Been there, done that.

In the 1980s, interest rates peaked above 20 per cent. Although economists don’t believe we’ll reach that level anytime soon, a rise of a point or two will create havoc for holders of enormous mortgages and lines of credit.

In the ’80s debts of $1 million or more were the exception. Today, that’s considered chump change to a lot of farm operators.

The lessons of the ’80s are still valid as the economy begins to adjust to a world of higher interest rates.

It’s those days that brought us farm survivalists — a movement that gained national attention when a group of masked farmers posed for a photograph, shotguns in hand, in the hay mow of a barn. There were protests in front of banks, demonstrations at bankruptcy auction sales and farm gate pickets.

The human tragedies that accompanied these financial problems brought about the formation of Queen’s Bush Rural Ministries. This group provided a shoulder to cry on, spiritual support and practical assistance for farmers at their wit’s end trying to deal with banks and agencies that could provide relief.

Queen’s Bush is still in operation today and might be well advised to ramp up its readiness if rising interest rates become a trend.

Both provincial and federal governments have been warning people not to overextend themselves with credit in recent years. Far too many Canadians are under water with debt.

However, these same governments did nothing to lead by example and in fact ran up debt like there was no tomorrow.

When interest rates spiked in the ’80s, Ontario’s debt was less than $30 billion. Today it’s more than 10 times higher than that, hovering around $320 billion.

That debt will add to the woes of every resident of the province, while battling their own personal situations.

The answer for both individuals and governments is to put the credit cards away and don’t buy until you have the cash to pay.

Canadians have proven to be reluctant to follow such a path. Unfortunately, government spending habits are even worse.

The financial road ahead may be rocky for all of us.