Are we living in a debt-based economy?

We’ve all grown comfortable with being in debt, and not just for houses and cars, but for vacations, nights out, birthday presents — a product of the 20th century, personal debt is at an all-time high. So, are we living in a debt-based economy?

I’ve always advocated for buying a house you can afford over the long term, not the bigger, nicer one you can buy now because temporary circumstances make it possible... but what if you didn’t? What if you got wooed by an ensuite bath or a second floor balcony and, lulled into a sense of security because of the duration of these historically low interest rates? Now that the RBC, TD and Scotiabank have raised their mortgage rates, should you be concerned? I don’t think so, at least not yet.

RBC last week upped rates on its special five-year fixed mortgage by 1/10th of a point to 3.04%. Scotiabank raised its rates in December, and says it has no further announcements in light of RBC’s changes; TD also raised its rates in December and introduced a five-year closed mortgage special at 2.94%.

It doesn’t look, at this point, like the hikes are harbingers of any sort of economic doom. Some industry experts say the rate hikes aren’t based on the crash in oil or a weakened economy per se at all. It’s more of a trickle-down thing, where those factors have increased the costs banks face when acquiring the money they raise to in turn lend to clients.

“They could be offsetting those losses ahead of time,” RateSupermarket.ca editor Penelope Graham told the Toronto Star. “The main motivation for raising rates appears to be padding the bank’s margins, as the economic factors do not support it.”

The Bank of Canada has said it will continue to “conduct an independent monetary policy in response to our own economic circumstances in order to meet our two-percent inflation target,” Bank of Canada chief Stephen Poloz said last month, adding that they had a number of tools at their disposal to mitigate risks to the economy.

So, it doesn’t look like changes that will profoundly affect most of us are imminent. The amount that the rate hikes affect mortgage payments is minimal: An increase to 3.04% for five years makes a monthly difference of less than $25. You can’t even go to a movie for that. If you’re the nervous type and a fan of the “slippery slope” argument, you may want to consider renting. But if you can take a little drama, hang in there. There’s no reason to lose sleep, and it’s going to be an interesting year.

It all got me thinking. Banks are responsible to their shareholders, who demand that they make as much profit as possible, and I’m as big a capitalist as the next guy, so I get it. (As an aside, in 2014, RBC posted recorded profits, which meant $12.6 million in remuneration for chief Gordon Nixon alone, excluding such niceties as pension.) Greed is always highly motivating.

Remember that banks get the bulk of their borrowing funds from the debt market. You borrow money from them to pay now for things you wouldn’t be able to afford until later.

Some societies have an economy based still on old-fashioned manufacturing, but most first-world countries now run on something else. Tourism, say, or technology. Some would say ours is a real-estate based economy, but I think we’re living in a debt-based economy.

It has obvious nerve-wracking implications. It’s volatile, based on the whims of mere humans, and inherently cyclical. The financial details of the housing sector right now are like some weird soap opera where the protagonists and antagonists both are money. Money these days practically has a personality. The story is so fascinating because it all comes down to whether you think — and the one-percenters who run our world think — money is the protagonist or the antagonist.

But the fact is that we citizens of the 21st century have gotten used to a constantly changing world, which we watch avidly on YouTube or read about on Facebook or Reddit. We know anything can happen at any time, and many of us embrace it. Are you ready for 2016?