The thin ice that is our economy

Many Franks pointed out this article in the Economist.

Looks like some gloomy gus over at that magazine is taking a peek behind the curtain that is Canada’s economic miracle.

WHEN the world financial system collapsed in 2007, triggering a global recession, Canada recovered faster than any of the other members of the G7 group of large developed countries. Its banks remained solid, while low interest rates encouraged consumers to borrow and spend. But five years on, consumers are showing signs of flagging. The economy is set to expand by a paltry 1.6% this year. So the authorities are casting around for another source of growth. The trouble is they cannot seem to find one.

The problem?

Our engine of growth recently has been based on rising household debt. Imagine our surprise when the result of this growth in debt manifests itself in high debt loads.

Will we be able to engineer a smooth transition to an economy that grows based on business investment and exports instead?

Read the full article here.

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Anonymous
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Anonymous

I was just looking at yesterday’s comments and I am a bit confused. Has VCI shifted to automatically listing comments in chronological order? Based on the time stamps, it would appear yes. But I can’t see the numbering of the comments anymore. I noticed the other day, the numbering of the comments is gone. You used to be able to refer to comments by number, ie. Comment #1, #2, etc. I think I could see those numbers on the ipad but not on the desktop. Also, it still has the link to click to “view comments chronologically”, which seems unnecessary if we are going to chronological order by default (which is my preference). But when you click on “view comments chronologically” it still takes you to an old thread from last year called “All aboard the poverty train”.

patriotz
Member

…interest rate cuts led to soaring home prices, which led in turn not just to a construction boom but to high consumer spending, because homeowners used mortgage refinancing to go deeper into debt. All of this created jobs to make up for those lost…

Now the question is what can replace the housing bubble.

Sounds like that came from the Economist article, but it didn’t.

Running Out of Bubbles

Most of the rest of the article sounds pretty familiar too.

Anonymous
Guest
Anonymous

Super Bear Garth Turner is ridiculing anyone (in his response to people’s comments) that says a crash is coming.

Did the Banks (he indirectly works for) have a secret talk with him?

He’s going to be left with the <80 IQ crowd as his followers if his flip flops keep up any longer.

Ford Prefect
Guest
Ford Prefect

#2 patriotz: great link. Answers one of my questions ” what will replace the housing bubble?” If Paul Krugman has no idea, then I think we are really in trouble.

b5baxter
Member

New inventory graph at:
http://vancouverpeak.com/Thread-Inventory-Graphs?pid=758#pid758

Over the last 14 days the average daily increase was:
24
At this rate we would reach 17,000 in 19 days (Apr-16-13)
At this rate we would reach 20,000 in 146 days (Aug-20-13)
Last year during this same 14 day period the averages was: 24
Last week the average was 36

Congratulations to PaulB!
(Sometime during the next few week weeks I will be taking a break from updating these inventory graphs for the same reason.)

Bailing in BC
Guest
Bailing in BC

# 1 Anonymous – The numbers are still there, they are just so faint as to be almost imperceivable. If you look to the far right of each post across from the date stamp you will see a large number in a VERY light grey.

Bailing in BC
Guest
Bailing in BC

Congratulations to you b5baxter.

Anonymous
Guest
Anonymous

“Super Bear Garth Turner is ridiculing anyone (in his response to people’s comments) that says a crash is coming.

Did the Banks (he indirectly works for) have a secret talk with him?

He’s going to be left with the <80 IQ crowd as his followers if his flip flops keep up any longer."

And you only realized this now? dont worry cuz some posters here and at vreaa's have sworn the oath of loyalty until death. what are their IQ levels again?

Don Lapre
Member
Don Lapre

Great article over at The Financial Post:

“A line of credit is the most flexible option….It’s also quite sustainable, since your home will often appreciate in value more than the amount of debt being drawn down against it.”

You see now, free money for everyone!!

http://business.financialpost.com/2013/03/27/canada-housing-retirement/?__lsa=598a-4e20

Many Franks
Guest
Many Franks

@Don Lapre: There’s so much to scoff at there, it’s easy to miss the real dirt, as pointed out by Bo Xilai in the comments:

Allan Hoegg (the “I’m-so-happy-with-my-mortgage” subject of the story) works for the same company as Rob Regan-Pollock, the chipper mortgage expert interviewed in the story. It looks like a MAC Marketing-style plant all over again.

specuskeptic
Member

Rat leaving sinking ship is one way to look at it. Selling high, buying low is another.
http://thetyee.ca/News/2013/03/28/Patrick-Kinsella-Arizona/

Many Franks
Guest
Many Franks

@Furthermore, the author of that article works for Blue Sky Communications, a PR/marketing firm that appears to specialize in planting its clients in the media.

painted turtle
Guest
painted turtle

From the Realtylink website, if one wants to buy a (below) average house in Van East:

The Household Income Required figure of $ 214,560 is the minimum amount of Gross Income to qualify for a total mortgage of $ 855,000 under generally accepted underwriting guidelines… Typical loan qualification criteria requires that borrowers spend no more than 32% of their gross income on shelter financial obligations including mortgage payments, taxes, utilities & half of condo fees. In addition, borrowers should spend no more than an additional 8% to 10% of their gross income on all other financial obligation including personal loans, car loans, credit cards and other debts.

(what a bunch of hypocrites)

mac
Member
mac

CONGRATS!!! B BAXTER and thank you for those graphs.

They keep me focused while the Rennies, Goods, Suns and Provinces keep talking their trash.

Not much of a name...
Member
Not much of a name...

@painted turtle

The Household Income Required figure of $ 214,560 is the minimum amount of Gross Income to qualify for a total mortgage of $ 855,000 under generally accepted underwriting guidelines…

So, it only takes three times the median household income to qualify to purchase an “average” Van East home. No problem here. Move along, there’s nothing to see.

painted turtle
Guest
painted turtle

Forgot the link:
http://www.realtylink.org/prop_search/buyers_psearch.cfm
Choose a house in East Van and try for yourself 🙂

Vote Down The Facts
Guest
Vote Down The Facts

Home != House

Many Franks
Guest
Many Franks

Well, I’ll be. I slagged Left already living in San Diego‘s suggestion that the budget contained deposit confiscation measures, but apparently Mish sees them too. I don’t always agree with Mish but he’s certainly more knowledgeable than me about central bankerspeak.

See Canada Discusses Forced Depositor Bail-In Procedures for “Too Big To Fail” Banks in 2013 Budget for details.

patriotz
Member

Conversion of debt into equity for insolvent companies is called restructuring and happens all the time, in the US and in Canada as authorized by law.

The alternative to this is bailing out out the company with taxpayers’ money.

gokou3
Guest
gokou3

Re #18 Many Franks:

Well the government didn’t specifically say deposit confiscation. It says “conversion of certain bank liabilities into regulatory capital”. A bank generally has various liabilities, and deposit is considered as senior for a credit event.

For example, Bank of America still owes $300B in the form of long-term debt, much bigger than the amount it lost (~$100B) during the past few years.

I think it’s a bit paraonid to think that the government will apply a haircut to the deposits before it wipes out the shareholders and bondholders.

C.Junta
Guest
C.Junta

@patriotz
>Conversion of debt into equity … authorized by law.
Makes sense. Now I wonder what about CDIC 100K deposit insurance. My guess is that taxpayers will save the first 100K of every deposit, and the banks (or the regulator entity) will perform the haircut on the rest.

Otherwise… if CDIC insurance is somehow voided or reimburses those 100K to the depositors with other instruments, not cash? Did somebody read the CDIC fine print?

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

don’t keep money in the bank it isn’t safe. Buy a house instead. Even if the market goes down, at least you’ll own something.

or you could buy some bitcoins, lol!

Alan
Guest
Alan

RE Bull! Bull! Bull! Says:
don’t keep money in the bank it isn’t safe. Buy a house instead. Even if the market goes down, at least you’ll own something.

or you could buy some bitcoins, lol!

-> Sooner or later, we might need to trade an apartment for a meal

gokou3
Guest
gokou3

Re #22:

Ya right. It’s easier to assess a higher property tax than taking someone’s cash deposit.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@gokou3

the reason they raided the bank accounts is because the banks were under capitalized. unless the municipality is going to go bankrupt, your property tax argument is invalid.

if canadian banks are in danger of being under-capitalized then you should get the money out of them. the government is telling you that they will raid accounts before they use tax payer money to bail out the banks.

so, buy the dip or bail out the people you hate most.

wpDiscuz