Heading into a recession with record debt

Troll posted a link to this article: Canadians are getting carried away with debt in the current low interest rate environment and may be particularly unprepared for a recession.

At the Toronto edition of the MoneyShow last week, TD deputy chief economist Derek Burleton warned we are in a “balance-sheet recession that will take years to shake off.” As a result, Burleton said, interest rates will stay “very low for a long time.”

At the same show, Danielle Park, of Barrie, Ont.-based Venable Park Investment Counsel Inc., told attendees to “keep your powder dry, pay off debt and use these record low interest rates to get debt free and downsize real estate sooner than later, where necessary: Canada has gone on longer than it ought to have in this cycle.”

So are you taking advantage of record low interest rates and loading up on debt or are you ‘keeping the powder dry’ in the assumption that we’re heading into another recession? As a nation we keep loading up on more debt.

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jesse
Member

"interest rates will stay “very low for a long time.”"

How long is a "long time"? Just wondering, being a "numbers guy", I kinda like calling out weasely statements like this.

registered
Member
registered

If the Wiki definition of balance-sheet recession is accurate, Burleton appears wrong about Canada. We're not yet upside in assets and choking consumer spending to pay off debt, 'rectifying the balance sheet'. We're still packing it on with abandon because our government keeps selling us manifest economic destiny bedtime stories.

"Household indebtedness has been a source for worry for policymakers with Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty both sounding warnings in recent months. "

"When I sell you that discount cocaine, I'm not expecting you to keep putting it up your nose. It's not our fault." The Three Stooges' arguments wouldn't work in a used car lot, why do Canadian keep buying it when the stakes are so much higher?

pipewrench
Member
pipewrench

http://timiacono.com/index.php/2011/09/14/still-b

The popular belief that we, as a nation, could spend more than we made because our home prices or stock investments would rise in perpetuity is in the process of coming crashing to the ground.

http://www.cnbc.com/id/44515876

Excluding autos, sales increased 0.1 percent in August, below forecasts for a 0.3 percent gain. Sales of motor vehicles and parts fell 0.3 percent.

space889
Member
space889

Obviously these people still haven't accepted the wisdom and gossipel of Garth Turner! They still cling to the old ways! Garth has shown the way and this is the perfect environment to not only keep your powder dry, reduce your debt but also allows you to increase your powder supply!

space889
Member
space889

Well, looks like we are all clear, Manpower survey reports "Upbeat" hiring climite in Lower Mainland –
http://www.vancouversun.com/business/Upbeat+hirin

I liked the fact that if I report planning to hire just 1 person I get counted the same as a company planning to layoff 100 employees. 🙂 Nice equality concept.

One thing I did note, employers want people to hit the ground running – experiences and no or very little training required. Seems like a theme in local companies. No one wants to give the inexperienced people a chance or any training for new/existing employees. And companies wonder why they can't hire experienced people with exactly the skills they want….

chip
Guest
chip

http://www.vancouversun.com/business/Municipaliti
There's nothing like the topic of immigration to induce cognitive dissonance. In this story, municipalities are demanding more say in immigration policy because:

"Every immigrant's arrival is an economic and social investment in our future."

Yet if you read further, the problem is municipalities need more funding for affordable housing and a 'broader range of services' for new arrivals.

In other words, immigration is an economic investment in our future but we can't afford it.

bubba
Guest
bubba

Just heard on news that Herr Obama is looking at protectionist measures, starting with steel. If approved, Shovel ready public infrastructure projects in the US must not use imported Steel.

Always made me wonder about Softwood Lumber dispute, all pre-meditated attack to set the tone for more protectionism ?, given they ignored GATT rulings and Free Trade agreemnts

bubba
Guest
bubba

@chip:

That an admission that Local Gov'ts are formally addicted to growth, likely set their budgets in foreseeable future on expectations of the immigration golden goose ie DCC's permits,future property taxes.

Watch the clusterf*ck unfold. Local Gov'ts have been pissing away revenues on frivolous pet projects, not saving for a rainy day…watch SHTF soon.

Troll
Guest
Troll

@fixie guy: My interpretation, and what the quote is sort of saying, is that rates are low because the US and EU are in a balance sheet recession and that we are in the same boat, just a little behind the cycle. Although we don't have any burst asset bubbles, it's hard to see how we normalize rates without that happening. It's certainly a different message than we get from F, which is that we weathered the economic storm thanks to prudent stewardship. I presume they hope they can engineer a soft landing while normalizing rates and debt levels. They'll really be the envy of the world if they can make that happen.

Troll
Guest
Troll

@jesse:

How long is a “long time”? Just wondering, being a “numbers guy”, I kinda like calling out weasely statements like this.

When exactly is the housing bubble going to pop? No weasely statements please.

Noodlevan
Member
Noodlevan

@jesse,

"How long is a “long time”? "

Beranke is on the record stating that the short rate will stay at roughly zero until 2013. I don't see Carney doing anything different from Bernanke. Given Bernake's track records in predicting anything related to the economy, my bet is he is going to be way off and we will likely be in a low rate environment much longer than that.

If I were on the sideline looking to buy, this would remove the urgency for me to buy, if trying to secure an attractive rate is a key cosnideration in the purchase decision.

patriotz
Member

@Troll:

The timing of future market movements of RE or anything is else is inherently unknowable. You already know this so you know your question is BS.

I will say that for someone waiting to buy RE at some future point when ownership costs equal renting, it makes no difference to their financial outcome how long they have to wait.

Li Kai Shing
Guest
Li Kai Shing

How come HUGE " No Smoking" sign near 41st and Granville, approx 80 properties, attached to " For Sale" signs.

I tink there may be a problem. May have to get WorkSafe coverage and wear HazMat suit when supervising concubines collecting empties.

PS we up to 15,000 cans befor noon !!!

Hoo Boy..good economic indicator!!!

PS Get off ass basement suite troglodytes, Desperate Housewives being cancelled.

Bubba Junior
Guest
Bubba Junior
So let me get this straight…. All you bears were predicting higher rates around the corner which would crush the market. There were cries of "remember the 1980s" All those dumb, uneducated realtors told people to buy because rates would remain low for some time. All the bears mocked them. We have had three years of low rates and now have at least another 2 based on Bernake's statements and the predictions of every economist and theorist weighing in. That makes 5 YEARS of low rates at minimum. Looks like the realtors were right! Glad I listened to the bears. I now have to leave the province to find an even better paying job (I am already in the top 5% income bracket) so that I can accumulate an even bigger down payment to make up for the lost years… Read more »
Future VCI dickhead
Guest
Future VCI dickhead

Membership application:

— Can you rag on immigration?

— Rant on re: economics issues not even Nobel prize laureates have clue WTF you are saying?

—Feel the real world adheres to any/all economic models, like the law of gravity and/or like shit to a blanket?

—Auto vote PaulB past 20 into the green zone

—Have the hots for PaulB's assistant?

—Think Landlords are assholes

—Have at least (3) UNneutered pets that have diarrhea as soon as Landlord replaces carpeting for the 3 rd time in one month?

If so Sign hear: ___________

Best place on meth
Member
Active Member
Best place on meth

This is what happens to the blog when Vancouver real estate tanks, more worthless cheerleaders like #14 and #15 lashing out in an incoherent rage.

It will only get worse as RE circles the drain and disappears down the hole.

space889
Member
space889
@Bubba Junior: Well US housing market isn't exactly in a bubble back in 2000. As well there are tons of sellers in US who would love to sell except they can't find a buyer willing to pay their asking price. So these sellers are trapped in their house without an option to leave, unless they declare bankruptcy which might not be a good option for them either. Housing prices in US are projected to go down for another few years as well, the fat lady hasn't sing yet. Lastly, why do you think we have low rates? Unless you have some specialized skills that are recession proof, low rates aren't going to be much helpful to you if you aren't going to be secure income. As well central banks are creating money like mad so while official interest rates may… Read more »
Anonymouse
Guest
Anonymouse

@patriotz:

"I will say that for someone waiting to buy RE at some future point when ownership costs equal renting,"

Why would they want to if the cost is the same? All we hear from people here is that homeownership is a grind, and it's better to have a landlord to take care of all your problems for you.

space889
Member
space889

@Best place on meth: Well at least bears are being blamed for the drop yet. Once RE really goes down in earnest, what for the blame that is all bears fault for ruining people and family, that bears are the scourage & bottom feeders of Vancouver that needs to be hanged and lynched.

jesse
Member

@Troll: "When exactly is the housing bubble going to pop?"

It already has, just not in Vancouver. How about an honest answer — rates will eventually go up within the amortization length of the property.

If you want my guess, I think 2015 will see the US turning itself around and rates will rise. The reason is this is when their housing inventory looks to be cleared and construction spending will return to historic levels. It's also about when China will face significant pressures trying to resolve bad investments.

That's a guess, but you were looking for something more concrete than a "long time" so, FWIW from an anonymous blogger, there you go. Let me know what you think; maybe you can offer another take for the benefit of readers here. Ideas are free and worth as much.

Bubba Junior
Guest
Bubba Junior

This is what happens to the blog when Vancouver real estate tanks, more worthless cheerleaders like #14 and #15 lashing out in an incoherent rage.

It will only get worse as RE circles the drain and disappears down the hole.

________

Hate to disappoint, but I have been a long term bear. I simply pointed out what the reality has been and what it might be for some time.

Not all of us are grad school students Meth, who can bide their time because they cannot purchase in the foreseeable future. Some of us have lives and families and need to move on and not hold on to childish delusions of a market collapse. Some of us live in the real world and not the theoretical.

Bleater
Guest
Bleater

Well at least bears are being blamed for the drop yet. Once RE really goes down in earnest, what for the blame that is all bears fault for ruining people and family, that bears are the scourage & bottom feeders of Vancouver that needs to be hanged and lynched.

____

Don't flatter yourselves. In this city, nobody knows what bears are – you are an all but extinct species. Bulls roam this city, and IF, and that is a big IF, the RE market pops, no one is going to blame you. Nobody cares about your pissing in the wind voice.

patriotz
Member

@bubba:

Local Gov’ts have been pissing away revenues on frivolous pet projects, not saving for a rainy day

Locals governments aren't supposed to save for a rainy day. By law they must run balanced budgets, and can keep only small contingency funds to allow for unexpected shortfalls.

Remember that local governments don't have cyclical expenses such as EI or welfare nor do they have unpredictable revenues such as income taxes, which makes their budgeting quite predictable. Remember it's budgets first, then property taxes to meet the budget.

patriotz
Member

@Anonymouse:

"Why would they want to (buy) if the cost is the same?"

Maybe they wouldn't. I was simply pointing out the the timing of a future purchase doesn't matter, just how much you pay.

The question we're asking is that why would anyone want to buy if renting is cheaper.

Devore
Member
Devore

@Anonymouse: When you're paying 2-3 times more to own rather than rent, ownership IS a grind.

You're simply misstating what people are saying, in other words, you're trolling to illicit a response. Some people would be happy to buy if ownership costs are similar to rental costs, others would be happy to continue to rent. If ownership costs get low enough, it would also make sense for some people to buy real estate for investment purposes.

The point is, there's no single block of people all thinking and behaving alike that can be labelled "bears", that you can stereotype and make fun of.

wpDiscuz