My Data Shows That If Canada’s Housing Market Experiences Prolonged Deflation It Will COLLAPSE: Why I think Negative Interest Rates Are Coming To Canada – May 14, 2022,
I’m sorry if some people this post may come across as Pro-Justin Trudeau, but I have to call a spade a spade. So first and foremost the reason the housing market was about collapse under Justin Trudeau was that he made the DECISION to shut down the Canadian economy, which did not allow people to earn money to pay their bills. With that said, once Justin Trudeau did that, he had to BORROW money and send working-class Canadians free money in the mail, being that this money wasn’t enough to cover some Canadian’s expenses, Trudeau also worked with the private banks to allow mortgage deferrals, because… The evidence showed most Canadians with mortgages were ONE missed MORTGAGE PAYMENT AWAY FROM DEFAULT!
You have to remember that for most people when they have a new house they need a new car, some new furniture, some new credit cards, some new loans, etc. Canadians in general are carrying a LOT of debt. Most of this debt Canadians are carrying come out of their bank accounts DIRECTLY every single money. I say this because Canada’s overall credit markets can not shrink extended period of time or we’re talking about a SERIOUS housing and credit collapse.
When most people think about the housing market, they’re only thinking bout the mortgage costs. Well, I know a lot of people who’ve used their homes to get access to a lot more credit, meaning that if the price of their home deflated, while the cost of living rose, they’d be way underwater. Now, let me also be clear that there are a lot of Canadians who are mortgage-free, but it’s not like these people are exactly rich either, because if they sell their homes, are they really going to move into an apartment? Because if they’re not, they’re likely going to be moving to a condo WITH STRATA fees or an equally priced home potentially with more problems than their current home.
A house that doesn’t CASH FLOW positively is a money pit if the value of the house in Canadian dollars doesn’t go up value. The Bank of Canada appears disinterested in controlling consumer price inflation, which in my opinion equates to the Bank of Canada waiting for a FINANCIAL crisis so they can lower interest rates again.
Now because consumer price inflation is running rampant and the Bank of Canada is still near zero, if there’s a financial crisis, from where I’m observing things, this has NEGATIVE INTEREST RATES written all over it. Because the Bank of Canada has interest rates at 1% currently, Unless it can reach 4%, there is nowhere for interest rates to drop if there’s a financial crisis.
I imagine an argument being made that the Bank of Canada is taking on emergency measures to spur spending, and prevent a recession. I like to point out in regards to Canada how large the government is. Ignore the bloated public sector for a moment, we also have to talk about Crown Corporations that have arbitrary prices that Canadian consumers are forced to pay. Whether it’s a federal or provincial crown corporation, the prices Canadians pay for Canada Post, Diary, poultry and eggs, Alchohol in some provinces, auto insurance in other provinces, mortgage insurance, etc. all of these prices which including consumer prices, and wages are made up numbers by various branches of government, that would probably be lower if left to the market.
Combine this with carbon taxes and you start to see the disasters my data is showing. In America as an example, certain financial problems are relegated to a particular U.S State. Sure financial shock waves could hit the entire U.S, but for the most part, bad economic ideas are seen more clearly in the United States than they are in Canada.
As an example, the Province of Quebec runs perpetual deficits, Western Canada doesn’t, but Western Canada has to pay for Quebec’s bad investments with transfer payments, which reward the Quebec government for making promises it can’t keep. So Quebec citizens enjoy a standard of living they haven’t earned. How does that translate to the housing market?
Well, housing revolves around BUSINESS activity, if businesses can’t make a profit and can’t raise prices in fear of what the government will do, businesses will either stop hiring or start firing people. By firing businesses don’t have to fire people, they can simply offer them fewer hours, which looks good for Justin Trudeau because he can claim businesses are hiring and more people are working?
It’s only when you dive into the data that you see what’s going on, and most people aren’t interested in knowing what’s going on. These deflationary forces are already happening, but access to credit is still available, but consumer price inflation equates to higher wages, and higher consumer prices, which equates to it costing more money to purchase fewer goods, where I’m going with this if you’re not paying attention, is that if housing and other asset prices DO NOT GO UP and consumer price inflation rages forward, that’s the equivalent to malinvestment being exposed!
There is nothing fun about paying down debt, the idea is to CONSOLIDATE date. As the price of my home increases, I use the asset appreciation to pay off my auto loan, my credit card, my line of credit, etc. If my labor has to be used to pay off debt? I’m screwed, this why prolonged deflation which in this market is consumer price inflation has NEGATIVE interest rates written all over it.
If the bank of Canada is disinterested in fighting inflation, they’re merely raising interest rates to drop them back down again and the slower they take to raise interest rates more likely we’re going to get a financial crisis and the financial crisis will likely lead to NEGATIVE INTEREST RATE POLICY! Now, sure I can write about the value of the Canadian dollar potentially reaching record lows, but I’ll leave that alone for now!
Interesting times ahead!