Imagine a place where four in every ten families had borrowed so much that their debt was excessive. So obese, in fact, their loan and mortgages accounted for 80% of all the money everybody owned. Worse, they’d all pigged out buying the same thing, which was wobbling. And they’d amassed this mountain of debt when interest rates were cheap, and could only go higher.

Welcome to Alberta.

But you non-cowboy, metrosexual, latte-sucking coasties shouldn’t feel superior. BC is worse. The personal savings rate there is negative 8%, which means the average family spends more every year than it earns, making up the difference with a LOC or mortgage.

As you may have heard this week, the country’s bank economists are catching up to this bottom-feeding blog. CIBC economists have confirmed we’re screwed. (Our theme song.) The bank says most of this debt’s because of ‘punch drunk’ Boomers who turn out to be hornier than their boomerang kids.

This is sad. Used to be that hitting middle age meant buying a new Corvette, getting a dangly gold thing around your neck, a pointy little hat to cover the bald spot, and a buxom babe to replace the wife your children used up. That delightful social custom’s gone. Now all that useful energy is channeled into a trophy home with a new Acura sedan in front or (in Alberta), an Escalade with silvery balls.

So here’s the result: Boomers heading into retirement with fat houses and scant investments. Disposable incomes falling as wage gains are outstripped by inflation. Over a third of all households in the nation now ‘heavily indebted.’ And the place where they stuffed all this borrowed money (even the banks say) is destined to erode – their houses.

It’s exactly the conclusion I gave you four million words ago: there’s nothing sustaining higher real estate values but debt. As a financial strategy, that sucks. This will lead us into a Boomer slaughter.

Here’s how the bankers put it:

True, debt is only one side of the household’s balance sheet; the asset side also counts, and both total assets and household net worth have been climbing until the last couple of quarters. But much of the gain in total assets has been associated with rising market values for housing and land. If both mortgage debt and house price climbs are part of an unsustainable market overvaluation of housing fueled by unsustainably low mortgage rates, then the asset values could stall or even deteriorate, without a compensating change in debt outstanding.

Yep. More confirmation. When real estate values normalize and retreat to the mean, debt remains. How’s that possibly a retirement strategy?

Two boring blogs ago I said I’d given up on humanity. True statement. I’ve had it. Never again, for example, will I run for the honour of fitting my tanned and athletic bottom into a seat in the House of Commons. I’ve taken a conscious break from criss-crossing the country talking to rooms full of people looking for free advice they won’t act on. I don’t bother returning media calls unless the reporter’s hot. After all, what’s the point? I won’t change behaviours.

Most people – the vast majority – will continue down their path to financial ruin. Utterly lacking in self-control, they’ll spend unearned money chasing stuff they want, but do not need. There’s no clear plan to repay any of this borrowing. Just a vague notion things will turn out, and an ingrained sense of entitlement.

Gone are rented apartments for newlyweds. Now they need glass-sheathed condos. Vanished is the idea of a starter bung. Young families expect a better home than parents ever had. Second car a beater? Go buy new. Were it not for an ocean of available credit at historic low rates, if people had to afford what they buy, the economy would be a vapid black hole.

So this blog is not for everyone. In fact, most people will never get it. They can’t see rising house values as dangerous or falling interest rates as a warning. Debt’s so normal among people in their thirties they can’t imagine functioning without it. Students have debt. Young marrieds have debt. Families have debt. Now the grandparents are smoked.

In an economy 65%-fueled by consumer spending, this is like shooting the farm’s only milk cow. It won’t end well.

Hence my repeated calls to reduce the amount of net worth in the most dangerous of assets, your house. This also explains the need to find more diversification, and love liquidity. For most people, having the bulk of their net worth in liquid assets is the best defence against what’s coming. If you are 50 or 60 years old, it’s non-negotiable.

Remember my Rule of 90? Take your age and deduct it from that number. The result should be the percentage of net worth tied up in residential real estate. So a thirtysomething with 60% in a house is understandable. But a sixtysomething in the same boat’s in denial.

Like I said, most folks won’t listen or act. As a consequence, in a country where 70% of people have most of their money in the same thing, don’t be surprised at what happens next.

Even gilt balls won’t save you.

Maybe I was wrong. This could be worse than anticipated. Even the bankers are covering their butts.

A year ago Scotiabank was burning through media bucks telling us ‘You’re Richer than You Think.” Mutual funds. Financial planners. Monster mortgages. Happy customers finding money on the branch floor. Sexy colours. Fuchsia and teal with a hint of aubergine.

  In the next few days you’ll probably catch the bank’s sober second thought campaign. Heavy on babies and rug rats it says, “Richness is: All Around You.” In an age when the 99% wouldn’t cross the street to whiz on the 1%, Scotia explains, “Everyone’s definition of richness is different – so let’s talk about what it means to you.”

Translation: At the Bank we know you’re screwed. But we care. Come in for a free tissue.

The change is a profound one. Getting rich is out. Coping is in. When a growing army of people are anxious about their debts, their jobs, their non-existent savings and pensionless retirements, selling the masses lines of credit, home loans and credit cards is a sunset industry. The real economy is worsening, even as corporations like Apple blow past all profit expectations and stock markets reward the people who actually have money.

As the real estate market corrects, the bank figures, it needs to be on the right side of customer sentiment.

Now some sad folks on this pathetic blog took yesterday’s Fed announcement as bullish news for houses. Pray for them. Lead them not into temptation. For they are fools.

In case you missed it, US central banker Ben Bernanke indicated American rates would not be rising now for about two years. As a result, stocks shot higher since corporate debt will remain dirt cheap, allowing the profit parade to continue. Sadly, the malcontents who love to hang around here because they have a man crush on the host took this to mean Canadian rates will also stay low forever, allowing real estate values to rise without end.

But it means the opposite. Low rates – emergency rates, historically low rates – are something to fear. They’re the last resort of central banks scrambling to keep an economy from sliding into deflation.

Japan is an interesting case in point (and often mentioned here by those who cheer cheap money). A real estate bubble brought on by lax lending standards, a robust economy, rampant speculation and runaway corporate profits in the Eighties pushed Tokyo prices six fold higher. It burst, of course (they all do), taking down the economy and the stock market with it. The government responded by slashing interest rates to an unheard of level – zero. But without more jobs and wage gains, housing languished.

Homes lost 80% of their value, and stayed there for years, not bottoming until 2002. In fact, it took three entire decades for real estate values in 2011 to approximate what they were in 1985. Just imagine if you were the typical horny young Tokyo couple in 1984, throwing everything you had into a piece of property. Or a 60-year-old comfortable with the bulk of your net worth in a no-lose house. What’s to worry, my little samurai? It’s different here!

Central bankers only lower rates when the economy proves incapable of healing itself. After all, cheap money makes people crazy for more of it. Credit bubbles inflate. Asset prices swell. Inflation’s easily created, destroying the value of everybody’s savings and forcing companies to raise prices.

This is why you rarely see such moments. In fact, none of us alive have experienced so many years with a prime rate this low. And now the guys in charge of American monetary policy have announced two more years – totally unprecedented. Totally worrisome. Is this an admission what happened to Tokyo could replicate in Miami or southern California? And do not for a moment underestimate the impact on Canada.

Without a recovering and strengthening America, there’s scant hope for the Canadian middle class, especially when it continues to commit suicide by house lust. The accumulation of debt has been historic. Without growth, employment and fatter paycheques, how will it be paid back? With battered exports, sloth economy and tapped-out consumers why would house prices stay aloft?

Because rates are staying where they are? Give me a break. Dumber than we think.

Nothing in recent months has changed my view. The Fed’s move, along with BeeMo’s 2.99 Special, may have given the condomaniacs, speckers and property gluttons a few more months to take cover. It may send more greater fools into the arms of wise sellers his spring. It may fool the MSM and turn realtors into predators. But it will not change the outcome.

Scotia’s getting ready. Are you?