This op-ed by David Rosenberg points out the problem with using GDP as the yardstick for measuring economic growth. If you discount the impact of governments borrowing capital that they have no intention of repaying as well as consumers borrowing to buy houses that they cannot afford, the economy is actually shrinking, not growing:
…the Canadian housing market has gone simply insane with ultra-low interest rates, easy access to credit, shifting preferences (work from home) toward more real estate and tremendous speculation. Total residential construction has surged 22.5 per cent in the past year and that has taken the housing share of GDP to a record high of 9.3 per cent — double the historical norm. Strip out housing, and GDP contracted 3.5 per cent in the past year (versus the actual decline of 1.5 per cent); strip out housing and government, and the economic contraction is -5.6 per cent.
One has to wonder what happens to the Canadian economy when the housing bubble finally does pop, the stimulus programs abate, and the commodity cycle runs its course. What is left? The reopening of the economy? I have news for you: If the real estate gravy train ever does end, considering the outsized impact it has exerted on the economy, there is no reopening large enough to offset the housing reversal and all the negative multiplier effects that will reverberate across the entire economy.
And then there is this related issue. Coincidence? I think not.
That related issue looks suspiciously close to one of Dr. Michael Burry’s (of the Big Short fame) criteria for a housing collapse.
The Liberals love to play both ends against the middle.
They are greedier than anyone else, despite Juth-tins bluster over the 1% (remember that?), yeah, he’s one of them.
The Libbies are stuck. They want to borrow forever at low interest rates, and will keep rates ultra-low for two reasons:
They dont want to be the idiots to raise taxes due to higher interest rates. They will bail and let those awful conservatives have to either cut spending or raise taxes, vacation time for Libbies.
The Libbies don’t want to destroy the housing wealth of home owning Canadians, including themselves and their wealthy sponsors. All the while, they provide boutique tweaks to financing and qualifications, for the millenials.
One day the millenials will realize that Juth-tin is not their friend and never was.
Rates need to normalize, sooner, rather than later, but I’m not holding my breath
The Liberals and their central banker cannot keep interest rates ultra-low. The only rate they can control is the “overnight” rate, that is what chartered banks charge to lend each other for short-term overnight lending.
The interest rates on federal bonds (ie. all that enormous borrowing the Justin is doing) is affected by outside forces like inflation, credit ratings, and international investor confidence in Canadian governance. These are beyond Justin’s control, just like they were out of Paul Martin’s control in the mid-1990s fiscal crisis when no one wanted to buy Canadian bonds and the Canadian government was weeks away from running out of money.
The Bank of Canada is printing money to support Justin’s borrowing. Four billion dollars per week (the bank announced last week it was slowly cutting back to three billion per week).
You should read their balance sheet and notes, in March they were at 9 billion per week, 7 billion for the Feds, I believe they were also printing 2 billion for one or more provinces, the deliberate opacity of their reporting made that difficult to determine.
I could never figure out why people love paying interest to the banks?
This notion of normal rates makes you a slave to the banks.
Considering they create the credit from thin air and want you to pay interest on this.
Quite the ingenious scam really.
I don’t believe they intend on relinquishing power, ever. The current steps being taken to enact UBI by backdoor means along with them paralyzing the public using pandemic fear leads me to conclude the endgame is corporatist tyranny, some perverted blend of fascism and marxism. This require private wealth confiscation on a massive level, once about 60% of people either work for, or depend on the government for subsistence, it will become politically popular and that is the ballgame. Elections will take on the form of people’s representatives to government or some such, but nothing will change the power structure.
Considering 65 % of the GDP is salaries and programs across the countries 3 levels of govt and the last yr has destroyed 35 % of small businesses there is no return
You nailed it. When they announced the CERB payouts last year, they said there were 18M workers in Canada. So 18m from 37M means more than half are retired, too young, too old disabled etc. Of that 18 they broke it down that 4 million were government employees. Now we have 14M pulling the wagon.
The accumulated debt by 2014 was 4.1T under Harper. Justin has added his 2T. That is 6T plus now.
That is more debt than France, Italy, Spain Greece and Portugal combined. With a tax base of 14M.
When the crash comes and it is coming fast I figure Mid Summer to Late summer the blood bath is going to hit so fast and brutally that everyone is going to be in absolute shock.
UBI is what Venezuela has and they are chasing cats and dogs in the streets for meat. Because the currency is worthless. UBI sounds good but means worthless currency with no buying power.
And it is not just about printing money. The debts have to be paid eventually. This was the reason Chretien and Martin stole 54B from UI fud held in trust for Canadian workers. This is why they sold off Canada’s 1000Metric Tonnes of Gold Reserves for 250/oz. The people are going to lose everything.
Already in Alberta Kenney is using borrowed money to give grants to small business that he bankrupted.
There is no cushion. There is no return until there is a huge blood letting. There is going to be rafts of homeless families and very upset people.
In the 1930’s men traveled for thousands of miles to find work. May died from starvation with their bellies full of grass. These are facts.
And until the citizens turn on them. They will come with a vengeance through higher taxes. Because they will refuse to downsize government. And the local Municipal Governments will be merciless about extorting and gouging more and more from citizens.
Watcher, when I look at accumulated debt, i see only about half your figure to the end of Harper when adding combined Federal and Provincial debt, what am I missing?
If you look at trends since the 60s, with the massive expansion of credit that happened at that time, people have actually been getting poorer, as debt has increased at twice the rate of the increase in the economy. Ultimately this was all bound to happen.
Corona is just an accelerator.
This was predicted in 2015.
Hell, the sock monkey even admitted he was going to do this.
Saw this happen back through the 70’s to the 80’s.
I do see a silver lining.
The last time the guy that created the mess was out of office long enough for liberals to invoke plausible denial and deflect blame away from him.
This time the crash will likely come while the party responsible will still be in the PMO.
He will have to make the cuts and stop playing Santa, problem is that’s the one role he can’t handle and once he breaks character it deconstructs the only platform the liberals can campaign on.
And now they’re warming us up for Modern Monetary Theory, which means debt doesn’t matter.
It’s long winded theory, but it sounds like the usual response when people are struggling: avoid debt, then try to pay off said debt, then give up and just try to make the payments while buying more lottery tickets.
“…while buying more lottery tickets.”
That’s the retirement plan for a majority of Canadians, no?
I just paid 8.50 each for 200 2×4 studs that used to cost 3.50 each, pre-covid.
You’re welcome for me adding $1,000 of pure vapour to Canada’s GDP.
I increased GDP without actually building more wall.
I’m a fucking magician.
Geez, maybe this is how The Great Reset is brought about. You will OWN nothing, the Banks will own it all. They will tell you that you are happy, whether you like it or NOT!!!!
Crackheadia Freeland has unlocked the savings of the population, as she wished, to feed themselves.
What a great country.
When politicians lie and are not held to account it inevitably leads to a free for all. Spending is easier than hard choices and maybe having to say no. Society has become so specialized in function that the vast majority of people will not be able to sustain themselves if there is a serious collapse. If nothing else Covid should tell us how vulnerable supply chains are.
A collapse will not lead to an epithany by society. It will degenerate into finger pointing and theft by any means. Politicians and bureacracy will have to be held to account but they will avoid that as the spiral down accelerates.
What do I see in my small town;
– lots of vehicles, all new
– lots of money available for new parks and upgrades
– absolutely no cut backs in staffing, in fact increases
– we have two garbage facilities which employ 5 people to overseas ‘proper’ recycling. Signs aren’t good enough.
– a small town of 5000 people who have 6 staff making $150K or more.
– a new fire hall under construction with a cost escalating from $4.75 mil to $7.5 mill
There is a pond in our neighbourhood that my wife thought was naturally occurring. She says why doesn’t the owner use it for farm irrigation? Sadly I had to tell her that the pond was built in the ’70’s by grants made by the Trudeau Sr. government. It cost $40,000 and has never served any purpose as there is no water supply other than runoff. That same line of thought funded a pyramid structure at a cost of $225,000 to grow bananas year around in southern BC. What is going on today is no dif than 50 years ago, orchestrated by the same type of people. The difference being is that the room for error has shrunk enormously. The Chinese will not be kind landlords.
Same deal with inflation, you change the content of the basket of goods that you measure. Ask my wife.
It’s amazing that the increase in prices on things traded on future markets isn’t showing up in the “basket of goods” which stats canada uses to track inflation….
Until it penetrates the “highly educated”minds of Canadians,that our dollar is worth less than nothing,they will continue on this merry way.
OPM is addictive as hell.
Coupled with envy and greed,becomes so toxic a stew that people cannot think,let alone do basic maths.
Having no wealth,Canadians will still consider a million dollars as wealth,even when you cannot buy a loaf of bread with that million.
We will all be billionaires before Emperor Justine is through “Growing the Budget from the heart”.
And as the billionaire schoolteachers,nurses and university graduates wheel their barrow of Trudy Bucks up to the Bakery,they will all be heard complaining ;”The Government should do something about this mess”.
For it will never reach them,short of starvation and more likely death itself,that they are the problem.
There is a limit to how many nonproductive persons can be supported by each productive person..
Especially when that producer is punished and abused for their work.
I say 1:10 is the maximum sustainable ratio.
Current govt claims 4/18,which I believe to be off by a factor of 2 at least.As they do not ever acknowledge all the parasitic overload.