Nonetheless, a great work ethic evolved, the importance of an education was paramount and family was the bond that kept us together. There was no entitlement, it was always hard work that produced results. Further, the value of money was evident as money was tight for many families. There were always road trips, vacations, money for school, music lessons or sports activities.

Growing up, most families I was surrounded by usually had one working parent. Mothers would stay home as their contribution was most often overlooked. In most cases, it was the mother who provided the key component in our upbringing. She was the essential building block to our development and management abilities. It was budgeting and financial management we subliminally were exposed. Learning, the value of money, taught us responsibility with our finances putting us on a path to success.

Consequently, in today’s world, it seems people have lost their grip on their finances. It’s not about saving for a rainy day and working toward earning enough money to buy a home, car or furniture. It is immediate satisfaction, keeping up with the neighbour. Must impress by having everything you really don’t need but need to support an image.

The introduction of credit facilities made living above one’s means possible.  I remember my father couldn’t get a credit card in the early 1970s,  he needed it to rent a car, on our Florida vacation. It was a prestigious honour to have one. Then the floodgates opened and anyone and everyone was allowed regardless of credit status. Access to money became too easy and the concept of borrowing by only paying the bare minimum seemed like a genius idea. It quickly became the downfall for those not familiar with the concept of compounded interest as providers of such services had become legalized loan sharks.

We are coming to a point where the impact of higher rates will have a devastating effect on the market as well as families. Don’t be fooled, sticker shock is already evident. It will be most prominent when those having to renew their mortgages face the new reality of their lives. Many are simply unprepared for the reality check forthcoming.

The average mortgage is well over $750k in Canada. Carrying this mortgage at an interest rate of 2.79% would cost the borrower just over $3k/month. Many that took the opportunity to buy while rates were low, did on the assumption interest rates would stay low for the foreseeable future, plus the government encouraged homeownership thinking of short-term benefits rather than long-term consequences.

It would have been prudent to pay the mortgage based on the qualifying rate. This way the extra money could have been applied directly to the Principle of the mortgage, reducing the amortization, like fat melting off one’s body. Instead, we are seeing mortgages going into reverse amortization, by actually adding time and expense to a debt that was structured to diminish over time.

Consequently, money became too cheap, and many holding mortgages also had a revolving line of credit attached to the loan. Keep in mind, people’s pay didn’t increase exponentially as rates increased, therefore when there were shortfalls, tapping into the line was the most logical option. That is until one reaches the credit limit.

In the last 20 years, we have seen real estate prices explode. As a result, when people would get into financial difficulties, it now became an exercise of mortgage refinancing. It was easy when values are escalating and the cost of borrowing remains cheap. Today that the Prime Lending Rate hits 5%, bringing retail rates above the 7% mark. People can’t qualify for a conventional mortgage and will be left with few choices, Sell, rent or become homeless.

Jobless Claims were lower toward 237k vs 260k expected even though the USD Index breached below the 100.0 level. USA PPI a measurement of inflation was a precursor to the demise of USD strength as it came in lower than expected. Meanwhile, the Europeans will be vigilant in also raising interest rates another quarter point, just like the Bank of Canada did. The difference is that the ECB might halt for now while the BOC has left the door open to further increases.

The Canadian Dollar was on a tear toward the 0.7650 level this week but today Michigan Consumer Confidence report came in better than expected. It quickly deflated the Cad$ back toward the 0.7550 level. Keep in mind, Canada is not the oasis of hope that it once was. Financial difficulties are arising while the government continues to amass new immigrants with incentives and spending while citizens drown in debt.

Lastly, Precious Metals bounce back with Gold above the $1960/oz level and Silver regains the $25/oz handle on overall USD weakness. On the other hand,  Oil rose above the $77/B vicinity but now slips toward the $75/B. The price increase overall has been a catalyst contributing to the recent Cad$ strength.