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Malcolm Jolley: In Northern Italy, lighter and lesser-known red wines are trending up

Commentary

It’s easy to forget that traveling is a privilege when you’re in the middle of it. It’s particularly easy when the lady at the airline customer service desk at the Frankfurt airport tells you that you are about to experience the privilege of an unscheduled overnight layover in Eddersheim rather than a night of negroni hopping in Turin, where the hotel room you’ve already paid for is waiting for you.

But it is a privilege, and one of its invaluable lessons is to learn to take what it gives you, make the best of it, and try to have fun since you’re paying for it anyway. The schnitzel and beer in Eddersheim are fine.

I have been traveling this week in the company of my young adult son, who is in between terms at university and his summer job. His mother’s side of our family is trans-Atlantic, and after seeing relations in the U.K., we have abandoned the rest of our nuclear family and come to Piedmont in Northern Italy to acquaint and reacquaint ourselves with the wine and food culture here. It’s worked out well, despite or maybe even because of some re-adjustments. 

We had three winery visits planned in the hilly Barolo and Barbaresco regions around the old cathedral town of Alba, southeast of Turin. In the end, only one managed to happen. This was partly due to our German delay, but also just life getting in the way of the best-laid plans.

The one we made it to was exceptionally good in any event, and it will require its own column (coming soon). The other two will happen eventually (I hope), but not on this trip.

I like visiting wineries very much. Seeing how and where good wine is made only enhances its appreciation. So does getting to meet and observe the people who make it in their natural habitat. Sometimes that’s a multi-million dollar cathedral built to Dionysus and sometimes it’s not much more than a converted barn or garden shed. 

One of the things wine writers look for when they visit wineries is the state of cleanliness of the operation, which can affect the quality of the wine. Another is the type, shape, and size of the vessels wine is fermented and stored in. There are quite a few of these physical manifestations of wine-making that can be deduced quickly from a visit.

I like to make a more esoteric observation in the form of the question: would I like to work here? Happy people make happy wine. Or, so I would like to believe.

And visiting a winery is more times than not fun. It’s not always true that the best winemakers are natural hosts, but it usually is. I joke that I am a professional houseguest, and I will readily admit that receiving generous hospitality is a prerequisite of this job I missed dearly during the lockdowns of the pandemic. Of course, wineries are also where they keep the wine, so if you’re interested in tasting as much as you can, they are the place to be.

It’s also at the winery that you get the inside stories, the bits of information that don’t make it on the website or the technical sheets that list lab results. This wine is made from vines planted by a grandfather after the war. Or, as a young woman the winemaker was called the crazy lady of the village because she refused to spray pesticides on her family’s rows.

But this week, we are not really on a wine trip so much as just traveling in wine country, and that offers a unique kind of education in and of itself. North Americans will probably never consume wine quite like the French, Italians, Argentines, or whoever. So what? We don’t drive like the Germans or Japanese either.

Seeing, and tasting, wine in situ helps to understand why it’s made beyond just the mechanics of how. Over the last decade or so, I have traveled more in Italy than anywhere abroad, and it’s fascinating to see subtle differences in wine culture.

It’s a small thing, but I have noticed that the standard wine order at dinner is one bottle, nearly always red. It’s one bottle whether the table is for two, three, or four. I don’t know if it’s magic or a really well-coordinated effort between servers and the kitchen, but the food arrives and is consumed in near-perfect synchronicity with the time it takes to finish the bottle. When the last plate is cleared, it’s time to order coffee (or grappa, or both).

A wine that carries a whole meal needs to be flexible. A wine that carries the menu choices of more than one person needs to be even more flexible. So, the wines I see most often on the tables of other patrons at dinner in Piedmont are less likely to be the big famous wines of the region like Barolo or Barbera, and more likely to be the lesser-known lighter reds like Dolcetto, Freisa, or Pelaverga. (All three of which are hard—though not impossible—to find in Canada for reasons elaborated in my last column.)

Could the flexibility of the wines for restaurant dinners be the reason that producers are rediscovering them? Or are the Italian diners just happy that there are more of them on wine lists and ordering them more? If it’s the latter, then is this an early signal for a wine trend to come?

I have no idea. Just the same when I think of lighter reds, I’ll think of them on the restaurant tables of Northern Italy and see if they pass the one-bottle-for-all-of-dinner test.

Trevor Tombe: Do Canadians have a debt problem?

Commentary

Dramatic headlines about household debt are everywhere: “Canada’s household debt is now highest in the G7,” read one headline. “Households now owe more than Canada’s entire GDP,” read another

It’s not just the media. The Bank of Canada is increasingly signaling that it is “more concerned than it was last year about the ability of households to service their debt.” And the CMHC’s deputy chief economist recently warned that Canada’s high debt levels make its economy more vulnerable to any global economic crisis.

This all sounds pretty dire. 

But do Canadians really have a debt problem? 

A deeper look at the data suggests things may not be as gloomy as these headlines suggest. At least, not for most households. Instead, we should focus much more than we do on the very real challenges facing young Canadians and avoid lumping all households together.

Of course, it’s certainly true that household debt is higher than in many other countries. In Canada, households owe an amount equivalent to 107 percent of the economy—behind only Australia among advanced industrial economies, according to the IMF. Just for comparison, consider the U.S., with a household debt representing 78 percent of their GDP. Or the U.K., with their figure sitting at 86 percent. And Germany? A modest 57 percent.

This is not a new development. Canadian household debt has been rising considerably in recent decades. Today, household debt exceeds 182 percent of income—roughly double what it was in the early 1990s.

But these particular statistics tell a misleading story if viewed in isolation. 

Households have not only been increasing their debt but have also dramatically increased their assets. So while Canadians owe a lot, they also own a lot!

This might even be a better way to think about household debt. Comparing it to GDP or to incomes is to compare stocks (debt) with flows (income or GDP). Better to compare like with like, i.e. debt (a stock) with assets (also a stock). After all, in the event of a crisis leading to job losses and declining incomes, those affected can lean on savings to meet their obligations. 

In short, we mustn’t forget the other side of household balance sheets.

And I’m not just talking about the ever-increasing value of real estate that Canadians own. Selling a home is challenging, both financially and sometimes emotionally too. Even if we look at just financial assets, which excludes real estate, you can see Canadian households on the whole are doing well. Financial assets are 600 percent of income—more than triple the total debt—and over 330 percent of GDP.

So by comparing total debt as a share of assets, we get a very different story. Instead of an intimidating upward climb, the chart below presents a steadier landscape. Debt as a share of assets remained within a range of about 15 to 20 percent for most of the past thirty years. Today, it’s actually on the relatively low end of things historically. Relative to financial assets only, household debt is barely over 30 percent—also in line with historical norms.

Let me be clear, though: this is not to suggest that all Canadians are having an easy time with debt during a time of rapidly rising interest rates. The cost of servicing debt has risen from just under 6 percent of income at the end of 2021 to nearly 8 percent at the end of 2022. That’s a sharp change and an interest burden not seen since 2009. Mortgage interest payments also reached 4.5 percent of household income at the end of 2022, the highest since early 2000.

But these rising burdens are not evenly felt. The situation facing young families and new home buyers is particularly acute.

Consider younger families that have not yet built up a substantial cushion of liquid savings and must take out considerable debt to access unaffordable housing in many cities. By the end of 2022, households led by those under 35 found their debt burdens outweighing their financial assets. In households headed by someone aged 35 to 44, debt amounted to 80 percent of their financial assets on average. Debt burdens decline sharply for older households.

Young households are also typically new home buyers. The proportion of new homeowners who are devoting more than a quarter of their monthly income to mortgage payments is now substantially higher than it has been in the recent past. Today, nearly half of these buyers find themselves in this situation—more than double the normal share in most previous years. And while I don’t have data, these buyers are almost surely dominated by young Canadians.

This is where the risks are. Recessions normally lead to large increases in the share of households that can’t make a mortgage payment on time—a fact of the data that is strongly related to changes in the unemployment rate over the past half-century. That’s a real and serious risk, but not one faced by the majority of households. Indeed, it may not even be a concern for the average household. 

But it most certainly is a risk for most young households. Little wonder that young Canadians are generally pessimistic

Addressing this appropriately means a targeted response, with concrete policy ideas. “If there is a battle for the hearts and votes of young Canadians,” as Stuart Thomson noted in these pages recently, “it likely won’t be won with soaring rhetoric and patriotic appeals.” 

In short, we should take the typical coverage surrounding Canadian household debt levels with several large grains of salt. Digging deeper into the data makes clear that Canada’s debt situation may not be as ominous as it first appears. At least, not when considering the overall picture. 

Headlines that paint all households with the same broad brush divert attention from the genuine challenges confronting young Canadians. That’s where our focus should be.