Bank of Canada qualifying mortgage rate stress tests Decreases – $22 per hour need to Afford 2 Bedroom Apartment – July 21, 2019,
Although the focus of most people revolves around money or currency, that’s not something I focus on, what I focus on is Austerity measures. In the private sector when expenses exceed Profits a private business will go bankrupt, in the Government, when a Country goes bankrupt there’s the possibility of a revolution. Regarding Venezuela, people forget what destroyed the Venezuelan economy, if you say hyperinflation, you’d be right, but what caused hyperinflation? Oil prices falling you say? I say you’re incorrect, what caused the Venezuelan economy to collapse was the governments’ refusal inability to shrink the size of Government.
Governments typically don’t go bankrupt, they instead do what Argentina or Zimbabwe do, which is they create another currency and hope people buy-in. The European Union was created why? A large portion of Europe refused to shrink the size of their governments. Together under one currency, they figured the global markets would give us the same respect granted to the United States. Unfortunately for the European Union, they’re not as involved as the United States in foreign entanglements. Love them or hate them, the United States is one of the main reasons why trade in the modern era runs so smoothly.
You’d be surprised how many pirates would emerge if the U.S wasn’t securing global trade. If America one day disappeared, a lot of countries in the middle east would disappear also. Do people remember ISIS and how quickly they spread, the European Union couldn’t stop that problem from multiplying, it was the U.S presence that at least for now as slowed down the growth of ISIS, now, this, of course, gives the U.S Dollar power, countries will prop up the U.S dollar for their National Security.
You might not like that, but it’s the current reality, The United States also does something that most European nations don’t do, which is trying to keep consumption taxes down. The Republicans in the United States have a better understanding of Regressive taxes than most European nations. This, of course, allows America to flourish as a consumption-based nation, sure the Leftist citizens of America, many of whom are obese have a hard time appreciating what they have, but be warned, something as simple as a $15 per hour minimum wage hike would be the death nail for the U.S economy
U.S. House passes $15 minimum wage bill — now faces Republican-led Senate – GlobalNews.ca
Now, on the Canadian side, Canadians would be wise to wake up very soon to the destruction of the Canadian dollar if our Keynesian based economy isn’t allowed to deflate. I found 2 articles very interesting and I’ve already written about them but I’m going to write about them again because I don’t think Canadians understand how serious this problem is. One article titled $22/hr wage needed to survive in a two-bedroom apartment in Canada—report that I found on ThePostMillennial.com and Central bank qualifying rate used in mortgage stress tests falls that I found on MSN.
In both articles, the Canada Mortgage and Housing Corporation (CMHC) was mentioned. Of course in a different context, but it’s important to understand why the cost of living as it relates to housing is causing so much economic destruction.
In response to Real Estate Lobby, which by the way is has a strong presence in Andrew Scheer’s Conservative Party, got Stephen Harper to hire Stephen Poloz to be the Bank of Canada governor. Stephen Harper by far is the worst BoC Governor in Canadian history, I don’t think there’s a close second, the Canadian economy never crashed in 2007-2008, yet Stephen Poloz now has interest rates in Canada lower than they are in the United States, why? I argue it’s the Real Estate lobby in Canada. Can I prove it? NOPE! But it sure looks like it to me. Now, below is the argument CMHC made regarding the stricter mortgage stress test rules.
Being that the CMHC which is an Insurance mortgage company that has Crown Corporation status was created to help the middle class qualify for mortgages they’d otherwise have to put 20% down for, the CMHC has to protect its right to exist and therefore, deflecting blame is a necessary position they must undertake in order for the average Canadian to assume that the problem lies with evil corporations who aren’t paying their fair share. Now, comes The Canadian Centre for Policy Alternatives (CCPA) which is supposedly an independent, non-partisan research institute concerned with issues of social, economic and environmental justice(Yea sure it is). Makes the following statement.
Now the conclusion the CCPA comes to is:
The report recommends increasing the amount of affordable housing units as the best way to address rental affordability.
Well, unfortunately, because CMHC exists and being that developers and builders are incentivized to build condos over Rental Units, more and more condos are being built where Rental housing should be. Also because the Real Estate Lobby has a strong voice with the Bank of Canada, The BoC is doing everything in its power to keep this pyramid scheme afloat. What’s different from the Canadian economy than other countries is that we used up our backup plans already, so if there’s a crash or a correction, I predict a potentially dangerous economic problem.
Dropping interest rates in Canada won’t have much effect on housing anymore and making matters worse, the taxpayer is on the hook if there’s a housing crash or a housing price correction. Remember the key to insurance is the hope that everyone doesn’t call in the debt at the same time. If housing price drop below the mortgages that people are paying on them, well you have a whole new problem to contend with. 100-year amortizations can solve the coming housing crash, but what do you do with wages if 100-year amortizations are introduced and prices to service a mortgage don’t decline by very much?
Well, that’s where the minimum wage debate comes into play, minimum wages will destroy a countries economy, because minimum wages, mean it’s illegal to pay a person below the set minimum wage, once a minimum wage is set, it equates to not only a higher barrier of entry but permanent the devaluation of a currency. What do I mean by that exactly? Well, in Mexico minimum wages are $102.68 Mexican pesos per day, so the Mexican Pesos can never rise in value too high because if their currency increased to the value of the U.S dollar as an example, the numbers in the private sector won’t work.
Now, in Canada, because the Government exists in multiple facets of the Canadian economy and is manipulating prices, either by helping with mortgage insurance or guaranteeing workers a minimum wage, this coming disaster is going to be a major problem going forward. In a free enterprise or Capitalist system, deflation happens, price rise and prices fall as the quality of life increases, in a Keynesian economic system, prices rise and if they fall in a Keynesian economic system the government or the central banks step in and artificially pumps the prices back up.
Now, this doesn’t seem like a big deal until the Private Sector realizes that in order to pay its bills it has to raise prices, now obviously this is the time for a politician to play hero and when this politician plays hero, this is when businesses either leave or change how they do business. Lately in Canada in case you haven’t been paying attention portions of food are getting smaller, were becoming more and more reliant on imports and this is why I say that the Canadian dollar could be in serious trouble because I don’t see Canadians as ready for Austerity measures. Maybe I’m wrong, but I don’t see it.
$22/hr wage needed to survive in a two-bedroom apartment in Canada—report – ThePostMillennial.com
If this article left you confused, all I can say is try to be prepared for the potential of some more economic turmoil.
Central bank qualifying rate used in mortgage stress tests falls – TheCanadianPress
Interesting times ahead.