Daniel Tencer of HuffingtonPost: It’s easier to get rich in Canada, Canadians have way more debt – November 18, 2019,
I often refer to the Huggington Post as the NDP Post, being that their writers tend to align with the NDP. I’ve read quite a few posts written by Daniel Tencer, because I like to listen to and read into how Leftists think. Although I lean more towards the Libertarian point of view, I’m not naive to other points of view, because after all in life you have to roll with the punches and accept that other humans have a right to think the way they want. So, in Daniel Tencers article titled: Canadians, Americans’ Financial Situations Are Now Totally Different Daniel does what most Leftists do which is omit details.
Now, I understand perfectly why Leftist politicians omit important details because if let’s say Jagmet Singh had a plan to Nationalise Dental care and he was asked serious questions as to how he would pay for it, the listener or the readers could at the very least be educated as to how the public sector functions. In Canada, we’ve experienced an artificial economic boom as has most of the world, what’s being ignored however are the policies that have created this economic boom in Canada. Canadians are richer primarily because we have more access to debt.
Via CMHC, a lot of Canadians have gotten access to capital to purchase housing and this CMHC mortgage insurance experiment has also opened the doors to my schedule 2 and 3 lenders entering the Canadian financial markets. This is of course what’s led to more Canadians becoming rich from the “Net Worth” point of view. Your Net Worth is often “WORTHLESS” than you think.
What is the net worth of a person?
In a nutshell, your net worth is really everything you own of significance (your assets) minus what you owe in debts (your liabilities).
Canadians are Net worth rich in many respects because we’re currently experiencing a housing boom, however, the debt to service these housing and other related debts shows an entirely different picture, this is why within the body of Daniels article you’ll notice contradictory statements.
Canadians have way more debt
While it may be easier to get rich in Canada than in the U.S., it’s also easier to get yourself up to your eyeballs in debt.It didn’t used to be like this. For decades, Canadians carried slightly less debt than Americans and the trends in both countries followed the same pattern.
But that all changed around 2008, when the U.S. housing bust led to many Americans reducing their debt load (often through home foreclosures), while Canada’s housing market only accelerated, sending mortgage debt levels up.
Adding to the pending doom to the Canadian economy, “Canadians are saving way less than Americans”. You see prior to 2008, the thinking of the world used to revolve around savers being winners in some capacity, now the truth of the matter is in the real world this hasn’t changed, savers still do better than do spendthrifts, however if a person were merely to look at the numbers and conflate information the way most Leftists do, you can see where Daniels contradiction comes into play.
Now, real estate prices, namely higher real estate prices in Canada exist primarily because via entities like the CMHC and the Federal Government, they’ve artificially raised not only the barrier to entry to enter into the real estate market, but they’ve also created an artificial minimum, meaning that it’s well known in the real estate community that if there’s a housing crash, the Canadian government whether it be Conservative, NDP or Liberal will step in and bailout as many banks as it can. Bailing out the banks means higher rental prices, even extending amortizations comes with risks, if it will take a longer period of time for investors to get their money back, they’re going to demand higher payments.
This is of course why rental prices have been rising so much, why build rental housing when the Government made condo development more preferable? Why deal with rental controls when the government is going to bail me out in times of crisis? This picking of winners and losers as giving rise to a whole new species of rich people in Canada. I know quite a few Net Worth millionaires in Toronto.
Their homes are worth a million but they’re heavily dependent on Banks giving them a loan, if their ability to qualify for debt ever vanished, they’d probably lose their home. However, because of what their home will sell for, they’re considered millionaires by the stats, they’re considered rich if you calculate their net worth, but if they were to sell, even if they downgraded, they’d still be a debt position because their mortgage is massive! Now imagine you’re a millionaire but you’re a paycheck away from bankruptcy? This is what’s happening in Canada, in America, it’s the opposite unless you’re actually rich, chances are you don’t live in a price inflated house.
My family in the U.S have 2000 square foot homes that wouldn’t sell for more than $300,000. Sure they might list their home at $400K or more but what they actually sell it for is something completely different. The hot housing markets in the U.S tend to reflect the booming economy, as an example in Texas, home prices are soaring, but in parts of America where the future looks grim housing prices are declining.
There are housing booms in the United States, but the U.S doesn’t have the equivalent to the CMHC on a Federal Level, typically States have more rights and quite frankly it’s unlikely that CMHC would work in the United States because each U.S State has its own characteristics and this is why in the U.S there is so much push back against the Federal government.
In Canada, our Federal Government is looked at as a savior of some kind and because of writers like Daniel Tencer who in my opinion intentionally don’t educate Canadian readers as to how our economic system differs from Americas, Canadians, namely poorer Canadians are suffering, with no understanding of how easily this housing shortage problem can be fixed. The bias reporting is going to cost Canadian families down the line. Look, I’ve even met Conservatives who like this idea of government price and wage controls, all of this stuff is fine as long as the Canadian population has an understanding of what’s going on.
The article below, basically ignores who Canadians are getting rich, many of them are getting rich because the government has decided to make owners of real estate the winner and the people who rent and lease the losers. In a free market, there’s a risk to everyone which is why prices fluctuate, prior to CMHC getting involved in mortgage insurance there were all sorts of rental deals all over Toronto, not anymore, why? Because Condos are being built where Rental housing was needed.
Why weren’t those Condos being built before? Well, if you know anything about how it all works, you know development has to be properly financed prior to it being built, this is of course why prior to all this 0-5% down nonsense consumers were more demanding. CMHC is now at a point where they’re offering downpayment loans? If the 0% down scheme equated to inflated prices, what makes you think a downpayment loan will remedy the situation?
The Government Can’t Control The Selling Price – HYPERINFLATION
The major flaw in socialism is that the government can’t control the selling price, this is of course what leads to authoritarianism. Communists simply understand what socialists fail to realize, in any market environment the Government can’t control the selling price. This is of course what has lead to the debt bubble in Canada and it’s getting larger every day. It’s not only real estate prices, but it’s also food prices, energy prices, consumer prices, price distortions eventually make they’re way down to the middle class and as the middle class is hollowed out, these lead to a crash.
It’s happened to Europe plenty of times, the European Union the Eurodollar was only created in 1999, mainly to appease Germany because the rest of Europe had been engaging in excessive money printing thereby devaluing their currencies which course hurt domestic consumers. What the Canadian government is doing is nothing new, it’s just that Canadians haven’t experienced what it’s like when people stop lending you money.
What happens unintentionally with these government schemes is that it reaches a point where the middle class can’t afford anything, in Alberta as an example a lot of hard-working people don’t qualify for CHMC loans! Whereas a newly arrived immigrant will, there is so much of this craziness going on, that when the correct starts it’s going to hit a lot of Canadians by surprise. I personally think because of the lack of financial education that when the correction happens Canadians are going to assume that it will be an easy fix for the government. Well, for their sake, let’s hope it is!
Canadians, Americans’ Financial Situations Are Now Totally Different | huffingtonpost.ca
Interesting times ahead!