A new study from the Business Development Bank of Canada finds that 76% of the small- and medium-sized Canadian businesses surveyed saw a decline in revenue and profits in 2020. Nearly half laid off staff, while about 39% of entrepreneurs have taken on more debt to survive.

The good news is that recent experience has shocked many households and businesses to focus on greater efficiency, reduce costs, and build up cash savings – critical behaviours needed to restore financial strength.

The bad news is that as the recession and under-employment continue, many lack the income needed to rebuild. Many are more indebted now than they were six months ago.

Two-thirds of small business owners say they’re in a worse situation now than before the pandemic. And insolvency trustees are warning of similar trends in Canadian households.

New Bank of Canada chief Tiff Macklem acknowledged Canada’s debt-linked fragility today in a speech: “The bottom line is that the private and public sectors together need to be acutely aware of financial system risks and vulnerabilities as the economy recovers.”

Falling commercial and residential rents are much needed for reducing overhead costs, but property prices must also follow, and the income and balance sheet losses will hurt present owners and lenders.

As shown in the chart below (source: not indicated), since 1990, central banks don’t admit it, but the policy obsession with lower and lower interest rates is the cornerstone of our present fragility.

As the interest component of mortgage payments flatlined from 2008 to 2017, prices paid soared along with the debt’s principal portion. This inflated debt is now a heavyweight on consumption and saving ability for years into the future.

Simultaneously, the low rates that have enabled record debt, unaffordable shelter and other asset bubbles have worsened retirement prospects worldwide as