The Canadian Housing Market Debacle: CMHC reports the annual pace of housing starts climbed nearly 16% in July compared with June – August 11, 2020,
So, some positive news for Canadian homeowners, even though a large percentage of Canadian homeowners defaulted on their mortgages via mortgage deferrals, the pace of housing starts climbed nearly 16% in July compared with June. This is pretty common, people tend to move and build things during the summer.
Although 2020 is a different kind of summer with COVID-19 dominating the headlines, based on my research the Canadian economy would be in a world of trouble if we experience any prolonged period of housing deflation. What the Canadian housing market, in my opinion, should be viewed as is a sign of the Canadian dollar losing its domestic purchasing power.
CMHC reports annual pace of housing starts climbed nearly 16 per cent in July | ctvnews.ca
What makes purchasing power so problematic are wages in the private sector not keeping up rising consumer prices. This, of course, is going to make the Canadian economy look very weird, but, more importantly it’s going to cause “cash flow problems” all over the Canadian economy, as the rising cost to finance all levels of the Canadian government, won’t be conducive with the prices consumers are willing to pay for non-essential goods and services.
This, of course, equates to problems for certain portions of Canada’s private sector that will have a hard time collecting money for the bloated Canadian public sector. The public sector is financed by the private sector and a part of the reason why a crown corporation like CMHC is so problematic for the Canadian economy is that it’s distorting the pricing mechanisms of the private sector.
Not allowing companies and individuals to fail and not cutting any regulations, there currently remains no deflationary force in Canada’s housing MARKET. This in my view makes Canada’s housing market APPEAR to be almost as liquid as a Canadian bank.
Now, had the Canadian Federal Government and CMHC not been there protecting deflation from occurring, the Canadian housing market at the very least during this COVID-19 recession would have found price discoveries, as interest rates would have been forced up (not by much) as more and more Canadians would have defaulted on their mortgages and rents.
But what makes our situation so dire is that not only are Canadian savings rates low but now Canadians and the Canadian government are behind on their debt servicing payments, while at the same time straddled with Government regulations. The problem with regulations is when the real economy falls below the price of regulations.
There is a price to pay for regulations, the price we pay in Canada for the CMHC and Federal government bailouts is that housing crashes that would occur DON’T! In a market economy and economic crash allows for things to be repriced to what the market can handle, but in a socialist economy, prices aren’t allowed to stay low, especially when there are ‘inflation targets’ that need to be met.
Canada by all the metrics I’ve checked appears to be entering into a stage of Late Stage Socialism. Most socialist countries get to this phase and the hardest part of late-stage socialism are austerity measures, good luck with austerity measures when you have an entitlement culture.
Now because Canada is a developed nation, similar to Argentina, Greece, Italy France, etc. late-stage socialism doesn’t mean poverty for everyone, it just means if you have a low financial IQ and you believe that a big government will ‘save us’ you might find yourself waiting a very long time for an answer to the economic problems.
I always say, not everyone in Argentina, Greece or Italy are poor, in the worst of economies there are people who thrive, in Communist Party, there are still billionaires, the problem with late stage-socialism is that the wealth gap keeps expanding.
When the U.S economy crashed, Baack Obama bailed out wall street and asset prices in the United States rose, well in Canada one of our wall streets is our housing market which just got a boast and I can hear many of you saying to yourself well America got bailed-out out too, yes, but America didn’t ALREADY HAVE AN INFLATED housing market!
The American housing market crashed, Canada’s didn’t, as I’ve been writing for years, I don’t see how the Canadian housing market can crash with CMHC there? CMHC exists to prevent housing crashes, furthermore, the Bank of Canada works in harmony with CMHC, what I see is inflation and the debasement of the Canadian dollar, the price of gold appears to be finding a new bottom, what should terrify Canadians is when Silver starts to find it’s a new bottom because silver is an industrial precious metal and being that Canada is reliant on imports, we better hope we don’t start getting those catalytic convertor problems with Silver.
When I write about minimum wages and prices controls, there’s a reason for it, because when the government distorts prices, humans who operate in the real economy, start to calculate risk vs. reward, this is usually how police states in socialist countries occur, as prices are distorted in the real economy, unforeseen, unimaginable problems start happening.
When the market can’t rediscover prices, all sorts of weird things start happening in the real economy. For the record Catalytic converter were designed to appease the environmentalist, why do thieves target Catalytic converters? because of their platinum, palladium, and rhodium content, look up the price of those metals and you’ll see why they’re being targeted. Anyway, this is more than I planned to write! Prepare yourselves accordingly!
Interesting times ahead!