Thursday, June 9, 2016

Canada's housing hotbed of denial

Writing about Canada's housing situation is always a frustrating experience for me. For years many of us, sceptical of Canada's debt-fuelled "recovery", have said Canada's housing situation is absolutely insane. Cheap loans have been allowing us to limp along on the back of what we're likely to discover is a bunch of fake wealth we conjured up out of thin air.

Bank Of Canada Warns Of "Higher Possilbity" Of Housing Downturn, Sees Vancouver, Toronto Prices Unsustainable

Governments terrified of popping foreign-buyer housing bubble: Don Pittis

It's ironic isn't it, that the bank of Canada is only now warning that Toronto and Vancouver are "unsustainable" since other overheated parts of Canada - like Calgary - are already "un-sustaining"? Even this admittance by the Bank of Canada is a better sounding understatement than the true situation. The Bank of Canada, along with the federal government, has manufactured this situation and for years they have been using this artificial asset bubble to "prove" the recovery is real.

A few years ago I wrote some commentary titled 'The magic of minimum wage and inflation hocus pocus'. It is without a doubt one of the most important things I've written about the state of our economy and the belief in economic fixes that attempt to fix the unsustainable within that same unsustainable box. A significant portion of the piece is spent on housing, in which I show that the author of the work I was commenting on actually believed that devaluing your purchasing power to create the illusion of rising equity was a "good thing" because it supposedly fought off "evil deflation". How so-called "economists" are blind to the unsustainable and inevitably deflationary nature of that arrangement I'll never know, yet here we are. The rabbit is out of the hat now.

Back in September of last year I caught a little-noticed article.

Canadian banks helping clients bend rules to move money out of China
Some Canadian banks allow wealthy Asian investors to skirt Chinese law by helping them bring in large amounts of money that is often used to buy real estate in Vancouver. 
Financial institutions in the area have flagged more than 8,200 suspicious transactions since January, 2012, the year China began cracking down on citizens they suspect of corruption. 
Ninety-six per cent of those transactions were also facilitated by the banks, however, even though the vast majority of that business involved suspected money laundering, according to FinTRAC, the federal agency responsible for tracking money laundering. 
These findings, obtained by The Globe and Mail through an Access To Information Request, come as a debate rages over the source of foreign investment and Vancouver’s soaring luxury housing markets. A recent study by Macdonald Realty said 70 per cent of clients who paid more than $3-million for Vancouver houses last year were from China.
This housing situation didn't happen by accident, the government and the banks have been relying on foreign currency to prevent it from collapsing in the first place. It's been obvious as day with millennials moving home and wages stagnating that there was a disconnect between reality and the housing market. It was clear with Canadian household debt hitting ever increasing highs and constant low interest rates to "spur borrowing" that this would be the result. All those who have been saying "don't worry" for the last 3 years as they drank the economic koolaid should be ashamed of themselves; if they call themselves an economist? resign. This situation couldn't have been more obvious for those not mesmerised by the belief in infinite growth or easily fooled by non-sensical "there's no bubble" propaganda.

"The Whole Shebang Is Broke" - The Only Thing That's Growing Is Debt

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

2 comments:

  1. Richard: Reading your writing restores my faith in the younger crowd here in Canada- I can't thank you enough.

    I've long called the libs and cons; Oppisames
    you think they are opposite but they are the same

    Also: I'm sorry to read about your dog, late last year we had to put our cat down- she was very old- 19 years, 4 mos and her heart was failing-

    I still miss her and cry thinking about her- she was the best darn cat anyone could have had- And I had her! So, I understand the hurt

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  2. Wages have been stagnant for decades- Long before the millennials- All the lost employment over the past decades has exacerbated the wage stagnancy.

    Was reading an article the other day in the Globe and Mail regarding all the so called actions taken by the gov to 'cool the housing market'
    Said to hubby, not one of these would have made any difference to the housing market
    Not as long as interest rates were so very low
    And the banks sure don't want that ride to end- the debtor the better- and it will end with a bail in for themselves- cause they (banks) aren't going to lose a cent

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