Economic recovery – u r doing it rong

Well with S&P downgrading the US from AAA to AA, that should send interest rates for a ride. Yup, interest rates just went for a ride all right, and hard. Below is the Government of Canada 5 year note one-year chart:

Yes, interest rates fell when, normally, a ratings downgrade would increase yields. The story to pay attention to isn’t the S&P downgrade, it’s comments like this from Hon. Jim Flaherty on continuing government-led austerity measures in countries that are not running at full capacity:

European and American leaders have demonstrated they have the “will to act” but more needs to be done to rein in global debt and deficits, Canada’s Finance Minister Jim Flaherty says.
In an interview Monday, Flaherty told Amanda Lang of CBC News that he is most concerned about European sovereign debt, though he noted that the U.S. also needs to tackle its debt and deficit.
“These are fiscal issues; they’re not bank issues, they’re not monetary issues,” Flaherty said. “And it’s very important that Italy, Spain and the others — Portugal, Ireland and Greece — go ahead and implement the programs that they’ve committed to, the fiscal restraint programs, the reforms they’ve committed to. They have to get it done.”

Just throwing it out there… comments like these from Flaherty and others, along with the pudding of actually cutting said governments’ expenditures, may actually be why global stock markets are taking a rather large poo.

What will all this mean for Vancouver and its real estate? Dunno, but two things look baked in for the next few quarters: lower mortgage rates and more employment weakness.

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rp1
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rp1

BUY YOU FOOLS! BUY!!!!

logic
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logic

so, they are finally admitting that borrowing to provide stimulus was a stupid idea? wow, however did they work that one out…

patriotz
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Flaherty is talking the talk but he sure as hell hasn't been walking the walk – remember his response to the 2008 crisis was to increase spending and massively increase the GoC's contingent liabilities (i.e. CMHC-insured mortgages).

The latter is off the books and I'm sure Jimbo prays every night before bedtime that it will stay there. Good luck with that, it sure didn't in the US and Ireland.

Canada's game of let's pretend isn't going to survive a downturn in commodities or in house prices, the former being very likely and the latter being inevitable. Only question is which happens first.

registered
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registered

The scorching crime is that, after watching the dramatic consequences roll out across the globe, the feds still PROACTIVELY shoveled money at the banks by buying up their mortgage securities. Pure evil.

Bummed-out renter
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Bummed-out renter

I can't begin to say how pissed-off I am with the people that are "managing" our economies. They have created huge asset bubbles that will pop and decimate millions. They have also ruined the savings of prudent people and senior citizens who were counting on realistic interest rates to carry them through retirement. They also royally fucked up the housing market globally as well as the stock markets and as far as I'm concerned Mark Carney, Ben Bernanke et al should be strung up.

Anonymous
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Anonymous

@patriotz:

"remember his response to the 2008 crisis was to increase spending"

Not quite. His response (to increase spending) was to the Liberals threatening to take down the government if he didn't spend. They were forced by the Liberals to increase spending with a minority government. Later they took credit for "saving" us with the stimulus but make no mistake the stimulus would have been a fraction of what it was if the conservatives had a majority.

Good thing we don't have to worry about the Liberals anymore. Canada should now be prepared to take its medicine.

patriotz
Member

@Anonymous:

In case you've forgotten, the Conservatives called an election in 2008 in violation of their own fixed election dates law. They weren't brought down by the Opposition.

So spare us the nonsense of the Cons being forced to spend by the other parties. They decided to do so themselves to sell the illusion that Canada had a strong economy under their "management".

Troll
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Troll

Yes, interest rates fell when, normally, a ratings downgrade would increase yields.

Falling interest rates after a US downgrade was expected as there is a flight to 'safety' towards Canadian bonds. Just like Euro troubles last summer and this summer sank our yields as well. Forget the 'rates have nowhere to go but up' nonsense….they could stay low for a long time.

Jay Banks
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There were finally signs that the real estate market could be returning to life and now the interest rates fell, the cost to obtain a mortgage to buy a home will decrease, which will create a higher demand for real estate and push prices up again. Is it ever going to recover?

Best place on meth
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Active Member
Best place on meth

@patriotz:

Flaherty's initial response the the crisis was to say there was no crisis.

WFT?
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WFT?

@Troll:

Just like Japan. And what happened to their real estate market on that environment?

When prices, credit, ownership rates are at their limit, continued low rates do nothing to goose the market.

patriotz
Member

@Best place on meth:

Flaherty’s initial response the the crisis was to say there was no crisis.

Yes I remember that well. He "discovered" the crisis after election day in 2008.

Li Kai Shing
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Li Kai Shing

Broddy Herr

Bubba
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Bubba

On another blog they mentioned that 75% of all currency in existence is in US dollars…(or US dollars amount to 75 % of all global currency)

patriotz
Member

@Troll:

Falling interest rates after a US downgrade was expected as there is a flight to ‘safety’ towards Canadian bonds.

There was no flight away from US to Canadian bonds. If that had happened the CAD would have gone up against the USD, instead of going down.

The "flight to safety" was to the very USG debt that had been downgraded.

Bubba
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Bubba

Also..I think people should stock up on medeival weapons…catapults…sheilds , suits of armour , lances ….and watch BraveHeart.

Perhaps a moat and 40 ft walls, with pots of boiling oil at the ready.

Maybe do work for Cam Good and Boob Rennie?…..who rumour has it have hired themselves as replacement whack-a- moles.

Bubba
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Bubba

All bets are of…its a classic clusterfuck.

Goldman Sachs trading "vampire" computer will manipulate and milk whatever action occurs.

People will get cornholed either way.

Troll
Guest
Troll

@patriotz: The effect on Canadian bonds is the same. Don't make it too complicated or get all semantic again. When the poop hits the fan in the US or Euro, Canadian bond prices rise. Since we can expect continued poop in the US and Euro, we can expect continued low bond yields ie mortgage rates.

PallB
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PallB

West Van mansions: 2 for 1 sale(plus incldude slightly used Lamborghini and/or trophy wife )

West Side: 30% off sale (plus include slightly used Porsche and recycled trophy wife )

Richmond : 50% off ( plus include slightly used BMW's and Mercedes )

Olympic Village ( RU kidding ? bwhahahahaha) !)

East Van : 40 % off ( plus 30 % off full patch membership)

Whalley – Newton : Up 50% (include 1977 Ford F150 PU….brakes optional)

Survey Says
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Survey Says

@PallB:

What is a "full patch membership"?

bubba
Guest
bubba

Future ?

One prognosticator states that US dollar is Toast by 2012.

The Federal Reserve , whether audited ,….or any other action taken is futile now.

A global currency will be created, actually backed by Gold….with Gold at approx. $10,000 ounce.

I'm just the messenger, but interesting nonetheless.

IMHO……I don't think even Goldman Sachs thought it would get this bad…but then again pigs tend to get slaughtered.

PallB
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PallB

@Survey Says:

Hells Angels members,

(Y know…the the nice clean shaven guys in suits that drive Harley's and deliver Xmas toys.

Best place on meth
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Active Member
Best place on meth

And there it is: Fed does nothing, markets tank, gold skyrockets.

Bernake Hates Bears
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Bernake Hates Bears
Feds Keep Rates Low Toll Q1 2013 Oh no bears, looks like the US will have two more years of low interest rates. That means Canada will have two more years of low interest rates. That means no RE crash (and screw the reference to Japan's crash with their low rates – it was an insulated market). I guess all those realtors and Dave were right that the low interest rates were here to stay a long time. I feel sorry for anyone that listened to bear advice! All the arm chair analysts on this site who are supposedly adept at playing the stock market must be hitting their head against the wall for being wrong for the umpteenth year. So if the rates stay low for two more years, that will have been 5 years of low interest rates… Read more »
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