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Bank of Canada Governor Mark Carney is urging Canadians to claw back their household debt.

Chris Young/CP

Canada's self-congratulation on its economic performance has evidently passed its peak. The Statistics Canada report on Tuesday that household net worth has declined for the second quarter in a row is sobering. So is the accompanying realization that Canadians have surpassed the Americans in their debt-to-income ratio – a reversal of national stereotypes. If these figures sink into the country's consciousness, holiday gift-buying may turn out to be more modest than in most years.

Mark Carney, the Governor of the Bank of Canada, places some faith in exhortation. His speech on Monday to the Empire and the Canadian Clubs warned against the temptation to "appear to prosper for a while by consuming beyond our means." He is not altogether gloomy, however; the Bank of Canada's most recent Financial System Review, released on the same day, predicts that the increase in indebtedness will slow down as "heightened volatility in the financial markets weigh on the wealth and confidence of Canadian households" – but that the debt-to-income will keep rising for some time.

Just as it takes two to tango, it takes two to borrow and lend. Banks are in the business of lending, and compete with each other to get more of that business. Householders cannot simply assume that they can reasonably afford to borrow, just because a respectable financial institution is ready and willing to extend them credit. Bankers are not automatically fiduciaries of their customers; that is, they have no obligation to put the borrowers' interests ahead of their own. Would-be borrowers must look to other advisers to evaluate their position for them. On the other hand, of course, banks are not predators; they do not actively seek to make bad loans.

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Canadian lenders have increasingly relied on consumer credit, as Canadian corporations have reduced their borrowing. So all this is not only a story of consumer overconfidence. Mr. Carney's homily on Monday was equally about the business community's reluctance to invest, especially in new technologies that would help speed up Canada's currently slow productivity growth.

Cautious corporations and overexcited householders turn out to be two sides of the same coin. Consumers cannot do all their own deleveraging. Entrepreneurs, large, middle-sized and small, should do their part by adding to Canada's growth.

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