Imagining what it would take for Poloz to raise your mortgage rate: Don Pittis – Reviewed – April 23, 2019,
It should be noted that even in a centralized government controlled system, they’ll be genuinely good people who will follow the law and do the right thing. The problem is that this is rarely if ever the norm, typically when you have a state-owned media giant like the Crown Corporation known as the CBC, what will be the end result are people trying to protect their jobs, people behaving like individuals instead of looking out for the public good.
So Don Pittis in case you didn’t know often does a pretty good job simply reporting the news as he sees it, given the reader 2 sides to an argument and allowing the reader to form their own conclusions. If you read most of the news in Canada it tends to be biased, I wouldn’t write these blog posts if the news reporting in Canada is honest, I write these post primarily because I want people to be able to see things from more than one angle.
Personally, I understand socialist, leftists, collectivists etc. and I get where they’re coming from, however, if a central bank or a government is going to make an action to benefit a group that general society perceives to be a victimized group than it should be known to the public the history of a particular government initiative. So in the event, a particular action has proven not to work or proven that it caused more harm than good like CMHC as an example, that government program can be scrutinized and possibly sold off to the private sector. Or if taxpayers prefer to decide to vote to hold onto a money pit at the very least they’ll know it’s a money pit. The leads me to the article by Don Pittis that states the following:
Imagining what it would take for Poloz to raise your mortgage rate: Don Pittis – CBC
In this article, it appears that Don Pettis makes the same argument that I’ve been making for years, which is why in the hell are interest rates in Canada so low? There’s no justification for it unless of course, some lobby groups are fighting to keep the Canadian dollar low or to keep the housing market from crashing. Now, I’m of the opinion that Canada would be better off allowing the housing market to crash sooner than later, because unlike countries like Japan where they manufacturer FINISHED things that people want, Canada currently doesn’t have that reputation. Alberta is Canada’s shining economic star and even Alberta isn’t known for a finished retail-ready product. Why I bring this up is that there are limits to the financial wizardry of Canada’s financial system.
Having a lot of land in many ways can work to your disadvantage if disaster strikes. Canadians as an example have long commute times, I understand that Leftists want social justice this and welfare that, but in the event where the Canadian dollar is threatened with hyperinflation, public programs in this type of economy will be hardest hit. Once the money stops flowing into Government coffers from the Private Sector it’s game over.
Even Stephen Poloz has brought up job numbers being skewed by Crown Corporations. Crown Corporations in case people don’t understand cause certain industries not be competitive and it’s not like I’m against Cron Corporations, I’m just against Crown Corporations being unionized and also allowed to grow to the sizes they are today. The tax revenue consumed by Crown Corporations aren’t linked to real market fundamentals and for this reason in the event of an economic reset, an economic downturn or an economic crash a lot of these government-related or government-backed institutions who employ people whose wages not only keep up with inflation but who are also shielded from the market, these creations can create for Canada what already exists in Argentina, which is a perpetual financial crisis.
In Canada, it’s still not too late to turn this ship around, Petro Canada used to be a Crown Corporation and it appears to be surviving just fine without the Government. Supply management is fueled by Crown corporations and in general, a lot of Canada’s economic problems are fueled by Crown Corporations like the CMHC. It’s important to understand that the Government or a Government created monopoly creates price inflation. Ever since the CMHC lowered the downpayment cost of mortgage prices for homes went up. The first place to experience a housing boom was Metro Vancouver, why? Because they have very low property taxes. Lower taxes along with Government incentives you have yourself an artificially created housing crisis.
Now, making matters worse is that there are price controls in Vancouver rentals. Now, being that price controls which are a creation of government can’t be enforced on when a new rental property is put on the market, in order to protect themselves from financial losses the landlords inflate rent prices, now being that CMHC is actually fueling Condo building by making it so cheap to put a down payment on one, you get a lot of flippers and real estate investors purchasing condos quickly at above-asking prices with the anticipation of making a profit either from flipping, renting, Airbnb or maybe it’s a foreign student making sure they have a place to live for school all of this money is competing with itself which causes not only mortgage prices to rise but residential rents rise also.
Now, adding to this disaster created by CMHC is commercial real estate which for the most part operates in the free market, because, commercial property is becoming more scarce with residential developments, property prices for commercial properties are high also. It’s hilarious to me that in Vancouver people don’t understand why Gas prices are so high, last time I checked Gas stations are situated on commercial land, in many instances in very in-demand real estate, in Toronto I’ve seen a lot of Condos built where Gas Stations used to be. If people can’t see or comprehend the correlation, it’s not my business to explain it.
So the argument that I’m gathering from the article written by Don Pittis is that the BoC is backed into a corner and well, I keep trying to tell Canadians that this isn’t the 1990’s, also were not in the same situation as America and although the rest of the world has it’s own financial disasters to deal with, here in Canada our financial disasters are structurally different. The BIG Canadian banks in Canada are already prepared, the people who aren’t prepared are the Canadians sinking in debt.
A brief explanation of what happens when banks don’t lend easily, well if you were dependent on your line of credit, your home equity, your credit cards or debt in general to survive, one day that pot of gold is taken from you and you’re forced to live within your means or forced to sell yourself to get access to other people money(OPM). In an easy lending market, people forget that they’d have to put up collateral to access to credit and let’s say you’ve already used up that collateral and now the bank has decided to lower your access to capital, this is what leads to economic crashes. Canada hasn’t experienced tighter lending since the 1990s, anyway again consider reading the article written by Don Pettis it’s short straight to the point and should get you thinking.
Imagining what it would take for Poloz to raise your mortgage rate: Don Pittis – CBC
Interesting times ahead