Tom and Sarah make $140,000 between them, although she’s now just logging part-time hours. They have two kids under four, rent a decent townhouse in the GTA (“But too many stairs,” she complains) and have, at 38 years of age, saved about $250,000. Not bad.

They have a choice, and dumped it on me three weeks ago. They can carry on as now, topping up the TFSAs and putting a little into Tom’s group RRSP while maxing the kids’ RESPs. At age 65, I told them, they should have about two million bucks, and a life-long retirement income north of $150,000. Or, they can buy a house.

“We really don’t wanna spend more than $950,000,” Tom said when we met. “But we’ve been pre-approved to purchase a property as high as $1.2 million. That’s what Sarah wants. Besides, wouldn’t we be smart to up our budget to just over the 1 million mark considering there are fewer people who can actually muster up a bigger down payment on a million-dollar property?”

By the way, these guys had already ‘lost’ out on at least two bidding wars. That experience impacted them deeply, so the house lust within has been smoldering and explosive. As usual in life, the most desired object is the one you do not possess.

So, I said sagely and uselessly, if you buy for over a mill you’ll need at least 20% down, plus closing costs, wiping out all your savings. Then you’ll have no liquidity, no retirement nestegg, a one-asset strategy with zero diversification and a mortgage of at least $800,000 which won’t stay at 3%. Property taxes, insurance, renos, maintenance and interest charges will far exceed the rent you now pay (by two grand a month), so you’re totally gambling housing prices in the next decade will continue to wildly inflate. Is that a risk worth taking?

So, they bought the house.

Last weekend, while we were grappling with turkeys and politics, the guy in charge of interest rates was making two key speeches. Neither were in Canada. But in Lima, Peru (at a G20 conflab) and in Washington (before a room of economists). Stephen Poloz said the same thing. Actually you can read it here. Don’t blame the Bank of Canada, he intoned, for the bad choices people like Tom and Sarah are making.

“Borrowers and lenders bear the ultimate responsibility for their own decisions at the individual and firm level. It is not the role of monetary policy to protect individuals from making bad choices.”

There’s no mistaking the “bad” he’s talking about. In the same speech Poloz calls epic mortgages “a key vulnerability for the financial system.” He admits that “the main driver” of this mountain of dangerous borrowing “has been an increase in home-backed debt against a backdrop of rising house prices, particularly in Toronto and Vancouver.” The central banker also is blunt that “house prices have generally been rising faster than incomes,” so “we have seen increases in the size of a first-time mortgage” that people like Tom and Sarah commit to. Plus, “the total debt-to-income ratio rises as a result.”

Not much in the way of sunshine and ponies there, right? Poloz is passing the buck, obviously. He admits that people borrowing excessively is “a rational response” to cheapo mortgage rates. But he also defends those rates by saying the cuts he made this year (January and July) were a necessary defence against the oil shocks.

The best way to deal with the Tom & Sarahs of this world, he suggests, is with “macroprudential measures” enacted by politicians. In other words, reigning in CHMC, clipping the wings of voracious bankers and halting the race to the bottom with gimmicks like the 1.85% mortgage dissed here a few days ago. This stands in oh-so stark contrast with the current election campaign, in which all three party leaders have turned into realtor pimps. It’s sad to see the Tories, Libs and Dippers encouraging higher debt and hotter house lust, telling people that buying an asset at the top of its value with a boatload of loans is somehow wise.

What shall we make of this?

I’d say the Bank of Canada is terrified of doing anything. Another rate cut just makes the debt monster bigger and the outcome worse. Raising rates, because politicians are gutless, just imperil an oil-ravaged economy. So leaving the country to give big speeches is safer. No rate change next Wednesday.

Let’s see what Monday night brings. But I’m not holding my breath. Courage has become uncommon, and I regret seeing another family roll the dice.