Is Canada Heading for a Banking Crisis?
The international banking system just had its biggest scare since 2008. The collapse of Silicon Valley Bank, Signature Bank, First Republic and Credit Suisse seriously undermined the confidence in financial institutions. Yet as banks in the United States and Europe failed, the “big six” banks in Canada seemed unaffected. In fact, the media and banks themselves are telling Canadians it is virtually impossible for these banks to ever collapse.
Is Canada immune from these shocks to the financial system?
There are some troubling signs surfacing. Despite the common narrative that it “couldn’t happen here,” some characteristics unique to the Canadian economy make it especially vulnerable to a financial crisis. Bible prophecy indicates Canada will be swallowed up in a world-changing banking crisis.
If you live in Canada, you know the economy is in rough shape. Food and fuel prices creep up month after month. More people use credit cards to pay for necessities or maintain their standard of living. In April, the trend of rising rates returned, with inflation rising 4.4 percent overall and gas prices rising 6.3 percent. These pressures are causing the entire economy to contract.
Canada is already in the midst of a recession. According to real gross domestic product (gdp) per capita, the Canadian economy retracted in the last two quarters of 2022: 0.2 percent in the third quarter and 0.9 percent in the fourth quarter. This is unknown to most Canadians because the government hides the truth behind technicalities and definitions.
What is real gdp per capita? “Real gdp is a country’s economic output adjusted to remove the impact of inflation,” wrote Canadian publisher Better Dwelling, “Adjusting it per capita averages it per person, removing the impact of population change.” This is the most accurate statistic for measuring economic performance and the overall quality of life.
The Trudeau government likes aggregate gdp, which looks at the total output value, regardless of performance. This means even if the economy contracted and performed poorly, the aggregate gdp number might still be higher because of rapid population growth resulting in increased tax income. This is exactly what the Trudeau government is doing: The aggressive immigration policy bringing in more than 500,000 people a year is hiding the real state of the economy.
Better Dwelling continued:
Is it a recession? Canadians are likely seeing an erosion in quality of life, and while incomes are rising, they aren’t rising enough to compete with inflation. At the same time, shelter costs are spiraling out of control, and the economy is preparing to double down on housing investment, despite already being too overly dependent. …
The trend isn’t expected to end any time soon either.
Canada’s first quarter 2023 data is expected to reflect another contraction—another step toward a depression. The erosion of the standard of living in Canada is being driven by the Canadian economy’s Achilles’ heel: the housing bubble.
Out of Control
Canada has the worst housing bubble in the world. Real estate prices have been steadily rising since 2002. Toronto is the world’s most expensive city, with the average house costing $1.9 million. This means you would need $244,000 per year to service the mortgage. Even the mayor of Toronto could not afford a house there on his salary. Vancouver is not far behind—the sixth most expensive in the world.
The sky-high home prices and rising inflation caused the Bank of Canada to raise interest rates, which currently stand at 4.75 percent, the highest in 10 years. This is threatening to collapse the entire house of cards that is Canadian real estate. People are carrying so much debt they can’t afford to pay the interest.
Consequently, mortgage borrowers will have their payments increase by 20 percent over three years. Better Dwelling explained: “Both fixed and variable rate mortgage payments will have climbed by the end of 2026. The median payment is estimated to be 20 percent higher than February 2022, before rate hikes. They estimate the average fixed rate borrower will see their payment increase between 20 and 25 percent during this period.” Even if you were able to buy a home, would you be able to afford the mortgage payments? This is how the standard of living erodes: People stop purchasing non-necessities to survive.
In fact, the International Monetary Fund says that Canadian mortgages have the highest default risk in the world. This is caused by high household debt and high home prices. Why aren’t there more people defaulting on their mortgages? Banks are doing absolutely everything possible to keep them afloat.
Most people have variable rate mortgages, meaning they pay the same amount each month. That amount is divided into paying the principal on the house and paying the interest on the loan. The higher the interest rate, the more of the payment goes to servicing the debt. The recent rate hikes mean this fixed payment isn’t even paying the interest anymore, so banks—particularly TD Bank, the Canadian Imperial Bank of Commerce and the Royal Bank of Canada (rbc)—are amortizing over 25 percent of their mortgages. That means they are extending the time period to repay the loan. Some individuals who started a 35-year mortgage now require an additional 35 years to pay off the loan. People are essentially getting stuck with 70-year mortgages.
Current mortgage debt stands at a whopping $2.08 trillion, which nearly equals the country’s gdp. The country’s total credit card debt just surpassed $100 billion, and the average Canadian carries $21,183 in debt, excluding mortgages. As prices and interest rates continue to increase, people will get squeezed until they can’t debt their way out of crises. When that tipping point comes, it will be a widespread crisis.
“The whole banking structure in the United States is a network all joined together,” wrote the late Herbert W. Armstrong in July 1984. He continuted:
[B]ut not only that—one nation has to deal with other nations in imports and exports. And so they have to have means of transferring money from one nation to another. And so the banking structure is international and interwoven. … [T]he banking system has become very complex.
The international financial system is so interconnected that every nation is affected by a crisis in another nation. Canada is no different.
Most of Canada’s six big banks own smaller, local banks in the United States. TD Bank has a 10 percent stake in Charles Schwab Corporation, which just lost $47 billion. bmo and rbc both have over $2 billion invested in U.S. banks. This exposes them to instability in the U.S. market.
“Turns out, the biggest short in the banking industry anywhere in the world isn’t in Switzerland or Silicon Valley, but rather, in the relatively tame financial center of Canada,” wrote Bloomberg. TD has the biggest shortfall of any bank in the world. According to Bloomberg, if TD declines in value, it will have to pay more to investors, leaving it $3.7 billion short. TD is exposed to the U.S. and heavily involved in Canadian real estate. A sudden downturn could spell major trouble.
However, a major difference in Canada is that the government has already deemed the six big banks too systemically important to fail. Two government agencies, the Office of the Superintendent of Financial Institutions and Canada Deposit Insurance Corporation, would immediately take over the operations and guarantee deposits up to $100,000.
The average, debt-laden taxpayer would foot the bill for these failed banks. The Canadian government would de facto control the banking industry. The government would create the facade of economic stability, while international confidence in Canada disappeared.
There are some existential problems in the Canadian economy. It is so interconnected with the United States and the rest of the world that it cannot escape the coming financial crisis. Mr. Armstrong warned that a massive banking crisis would completely reshape the balance of power. We wrote in He Was Right: “To put it succinctly: Mr. Armstrong warned that a massive financial crisis centered in America would ripple across the whole world—and would spark the rise of the seventh and final resurrection of the Holy Roman Empire.”
The brokers of power and leaders of the financial system for the last 200 years—America and the British Commonwealth—will collapse. Isaiah 23:3 prophesies that the rest of the world will create a new financial system excluding these nations. This is interlaced with numerous Bible prophecies warning of our national collapse. The writing is on the wall: Canada will be caught in the ripple effects of this soon-coming financial crisis.
To learn more about how this prophetic event will impact your life, read Trumpet editor in chief Gerald Flurry’s article “America’s Banking Crisis Will Unite Europe.”