This article has been updated and republished to correct and clarify aspects of the original analysis, ensuring a more accurate reflection of the underlying data and arguments.

A new Deloitte report is projecting 1.3 percent GDP growth for Canada this year. The same report says that as long as Donald Trump keeps the CUSMA carve-outs in his tariff plan—meaning that most of the goods we export to the United States won’t face tariffs—we can look forward to 1.7 percent growth next year. This would mark a return to the growth rates we saw in 2023 and 2024.

Economists seem cautiously optimistic that Canada will avoid a recession and return to a period of relative stability.

This should be great news. On paper, the economy has proved its resilience in the face of serious challenges. But why then do things feel increasingly precarious? If the economy is doing so well why are so many Canadians lining up at food banks, putting off having kids and giving up on the idea of homeownership? Why are 30 percent of us cutting down on essentials like food and heat to make ends meet? Why is it that, after years of post-pandemic growth, our wages feel more stretched than ever?

The disconnect between big economic indicators and Canadians’ day-to-day experience is a gap our political leaders seem unable or unwilling to bridge. Parliamentarians have gotten in the habit of telling us that everything is basically fine—we just need to live within our means, blame immigrants, and cancel Disney Plus. It hasn’t occurred to our political elites that their metrics might be missing something.

Something like the $3 trillion debt bomb quietly ticking beneath Canada’s thin veneer of stability.

While the economy grew by 1.5 percent last year, Canadians saw interest payments on their household debt rise by nine percent (annual interest payments climbed by $16 billion to reach a staggering $174 billion). These historically unprecedented debt levels have resulted in 14 percent of our disposable income being earmarked by our creditors. It’s no wonder we’re feeling squeezed.

These debts, 75 percent of which are mortgage debts, hurt everyone. Well, everyone who isn’t a banker. High debt servicing costs means people have less money to spend and businesses have less money to make. Excessive debt payments pull money from the circular flow of the economy of production and consumption (that is, the real economy) and funnel it to the wealthiest among us.

The people doing the lending argue this kind of analysis misses the point. They say that interest payments cannot be separated from some arbitrarily delineated ‘real’ economy, that banks use the interest they collect to reinvest in the nation’s productive capacity. While this is how things work in undergraduate textbooks—banks are said to lend to businesses to upgrade their technology or expand their operations—it is simply not how lending operates in practice.

Instead of using their profits to grow businesses banks have demonstrated a strong preference to issue less risky loans, the majority of which are for the purchase of residential and commercial real estate. The fact is that the lion’s share of lending occurs primarily to facilitate property title transfers. This has the dual effect of deepening our debt burden and juicing housing prices.

In the words of economist Michael Hudson, banks pretend their profits are infused into the economy, “creating jobs and financing new factories and other means of production,” but “the reality is that bank loans do not fund direct investment and employment. They extract debt service while inflating asset prices to provide ‘capital’ gains.”

The counter-productive nature of these financial games is summarized by former UK Financial Services Authority Chairman Adair Turner who described much of global finance as “socially useless.”

Even decidedly pro-banking institutions like the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) have published research showing that a financial sector over a certain size is a drag on growth that raises the risk of economic crisis. Reviewing a wide range of national and historical contexts, these studies suggest the threshold for “too much finance” is crossed when private lending amounts to 80-100 percent of GDP.

For reference, Canada’s private debt is now 212 percent of nominal GDP.

So, yes, Chrystia Freeland is right; the economy is growing, but our debt servicing costs are growing faster. This phenomenon is observable in the GDP data itself. Banks and landlords account for 32 percent of GDP growth making real estate speculation the single largest driver of growth in Canada—significantly larger than manufacturing, retail, or oil and gas. When banks and landlords take money out of your pocket know that you are experiencing Canada’s growing GDP.

Our economy is being driven by “socially useless” industries profiting off of debt-fuelled speculation in housing markets. This kind of growth is not associated with expanded production but with rentiers charging more to access what already exists. It is growth that reduces our ability buy goods and services and ultimately drags down national productive capacity.

Despite rosy post-pandemic GDP figures, we have found ourselves doing more with less. An ever-increasing debt burden has pushed us into an effective recession, one masked in the official metrics by a massive bubble in the housing market. There is a limit to this, a point at which the debt that is imposed on us becomes simply unpayable. If we allow ourselves to come to that point, the bubble will burst. The only question is what will be left of the real economy when it does.

James Hardwick is a writer and community advocate. He has over ten years experience serving adults experiencing poverty and houselessness with various NGOs across the country.