The journey

“When it comes to interest rates,” says blog dog and financial guy Rob, “anyone I speak with (under the age of 40) cannot imagine a future of higher rates, that inflation is long dead and will never pose a problem, this interest rate environment IS the new normal, rather than an anomaly.”

He’s right. It’s a constant refrain: ‘the government will never raise rates because we’d all be screwed.’

But rates will go up. And lots of borrowers will get it in the ear. So pay attention.

My Porsche-driving, fancy colleague Ryan argued this concisely on the weekend. He showed you why the Bank of Canada rate (now 1%) will end up being 2.5% or even 3%. That would translate into 5% fixed-rate mortgages. With the coming stress test it means borrowers will have to qualify as if rates were 7%. Gulp.

Yup, it’s coming. All over everywhere, actually. What our big bank’s doing may well be part of a global trend set to absolutely rock the moister world. People who bought houses in 2016 or 2017 may regret it for decades. The reasons are contained in a recently-published document from the BIS – the Bank for International Settlements, which is kind of a central bank to the central banks. Here’s the argument:

Between the 1980s and the 2000s, the largest ever positive labour supply shock occurred, resulting from demographic trends and from the inclusion of China and Eastern Europe into the World Trade Organization. This led to a shift in manufacturing to Asia, especially China; a stagnation in real wages; a collapse in the power of private sector trade unions; increasing inequality within countries, but less inequality between countries; deflationary pressures; and falling interest rates.

This shock is now reversing. As the world ages, real interest rates will rise, inflation and wage growth will pick up and inequality will fall. The hardest prior trend to reverse will be that of low interest rates, which have resulted in a huge and persistent debt overhang. Future problems may now intensify as the demographic structure worsens, growth slows, and there is little stomach for major inflation.

In other words, for thirty years rates and inflation trailed off to nothing with the climax being the 2008-9 credit crisis. Like Adele, it nearly plunged the world into deflation and darkness. Cheap money encouraged people to borrow insanely. They did, forcing assets (especially houses) higher. Now growth has resumed and inflation returned but in a time when an aging population, rising life expectancy and falling fertility are dropping the supply of labour. Fewer workies in future to support more wrinklies equals higher taxes, lower savings and increasing rates.

Yes, it’s esoteric and theoretical. But the journey’s already happening.

Did you see the census data StatsCan popped last week?

Household debt went up (to a new record $2.007 trillion) – which is not good – but at the same time net worth went down (by $10 billion), because of falling real estate values. That’s new. “A decline in household net worth, albeit modest, alongside a sharp increase in consumer credit growth,” said RBC in response, “are notable as together they suggest that the ability of households to absorb higher interest rates continued to deteriorate.” Yes, we owe $1.361 trillion in mortgages and $609 billion in consumer credit. Interest rates are now swelling fairly rapidly, and household incomes are not. Figure it out.

On Friday CREA confirmed it. House sales in the biggest market fell 35% last month, prices are down 20% from the spring, and as a result real estate’s share of average net worth grew at the worst level since 2009. In two weeks expect further evidence as it’s revealed the September property renaissance was a poop.

Realtors and Millennials think this is temporary. But what if it’s not?

The coming 2% jump in interest rates – effectively doubling the cost of a mortgage from the levels of just a few months ago – may be (sort of) permanent. If central banks around the world raise levels to attract capital, given demographics and inflation, our guys will certainly follow suit. As Donald Trump’s (so far) abject failure to effect change has shown, globalization is relentless and unstoppable. Canada will never have its own interest-rate policy, and yet now has some of the most indebted, leveraged and over-housed citizens in the world.

As Rob adds, “Anyone who thinks a 23% bump in the minimum wage rate won’t have an impact on inflation and interest rates must be dreaming.”

Looks like we reap what we sow. Imagine that.

169 comments ↓

#1 Blacksheep on 09.17.17 at 3:09 pm

“PS, Blacksheep is quickly becoming the new Mark.”
————————————-
You win…No need to get nasty!

#2 Dan on 09.17.17 at 3:12 pm

Well screwing of working people started with collapse of soviet union and rich just tried to reverse benefits which they were forced to give, so yes economy and politics are inseparable, anyway I am the first today

#3 Mark on 09.17.17 at 3:16 pm

Feel like a broken record here, but how do rates go up, at least in Canada, when CPI, the target that the BoC aims at modulating with its interest rate policy, is teetering on nothing-ness?

How do rates systemically go up when the consumer economy is fully saturated in debt?

Its not hard to accept that argument that consumer/retail interest rates are going up, the result of diminished credit-worthiness and falling net worth against the specific collateral that consumers pledge for their loans (houses, cars, and their labour!). However, central policy rates are responsive to the systemic nature of the economy, and the fact that consumers will be taken to the woodshed with higher consumer/retail rates leaves the Bank of Canada little choice but to hold, if not cut rates to keep the Canadian economy moving in light of the deflationary tsunami emerging.

“anyone I speak with (under the age of 40) cannot imagine a future of higher rates, that inflation is long dead and will never pose a problem, this interest rate environment IS the new normal, rather than an anomaly.”

One thing that came as no surprise to me, but shocked the public (judging by comments on message boards, etc.) is the fact that retail interest rates are not set by the Bank of Canada. I’m seeing an uptick of people complaining on the CBC comments, on various other message boards, that the lenders are implementing increases to their rates far beyond what is implied by the BoC rate hikes. Much to their shock. Some can just switch lenders, and get away from this, but there’s an increasingly large subset of Canadians for which the consumer debt noose is rapidly tightening beyond their ability to keep up.

#4 Wertie McFlore on 09.17.17 at 3:19 pm

So Lewenza says the TSX is undervalued compared to the US, and there are opportunities in Europe. US equite is trimmed back to 16%. So the Canadian Economy can grow through this rising interest rate environment you reckon Mr.T?

#5 Fluorine on 09.17.17 at 3:29 pm

The Game
———–
Making an interesting, considered original comment: 5 points
Replying to an interesting comment on topic: 2 points
Being first comment, and not pointing it out: 3 points
Being first comment and calling it correctly: 10 points

Claiming that you are first when you are not: -(10 points + actual comment number + 1)

For example, if you call First!!, but you are actually comment # 9, that is (-10 – 9 +1), so -18 points. Super risky!

The only way to win the First Game is not to play.

#6 Stan Broock on 09.17.17 at 3:39 pm

As Rob adds, “Anyone who thinks a 23% bump in the minimum wage rate won’t have an impact on inflation and interest rates must be dreaming.”

——————————–

Total payroll cannot and will not increase as the Businesses can no afford it. Where will the money come from? Consumers are stretched anyway to the max.

Small Businesses will be hit way with the new idiotic taxes and employment will drop.

The bump in minimum wage will only result in less jobs and even more depressed economy.

In my my mind the combination of the 3:
– increasing rates after record debt
– increase taxes/stealing for small Businesses
– increased minimum wage

will kill the economy.
Unless government start running 100 billion annual + deficit to compensate for the reduced credit.

#7 DON on 09.17.17 at 3:40 pm

Realtors and Millennials think this is temporary. But what if it’s not?

Yup – they all think it is temporary. Just a blip…but no one offers proof of a blip though. They just raise their voices – assert their illogical reasons. It is truly amazing…instead of wading into the details with an open minds they seek safety in ignorance. You can’t run and hide from this. The real estate debt provider agents are now being forced to report the real news – gotta wonder if they are reporting the full truth (as we know they always take the happy path – based on the path.

My younger brother is outright hostile at the thought of interest rates rising and house values diminishing. Touchy subject – he didn’t over pay for his house but will not sustain the gains.

Remember the herd thinks they are right…so it must be true.

#8 For those about to flop... on 09.17.17 at 3:41 pm

Pink Lemonade stand in Vancouver.

Remember how I have been telling you guys how the lower end in Vancouver is not selling like it used to ,well here is another example where in previous years a developer would have swooped in right away to bail these guy’s all too brief attempt at speculation.

The ink only dried in late June 2017 but they have already dropped the price and are just trying to add expenses on to cover their dignity.

Hopefully this small adjustment makes the new buyer feel like they had a small victory but with what I have seen going on in this neighbourhood(I live 15 blocks away) ,they should just take the first offer around 1.2and run…

M43BC

4041 St. Catherines Street, Vancouver

Aug 29:$1,250,000
Sep 14: $1,225,000
Change 25,000 -2%

https://www.zolo.ca/index.php?sarea=4041%20St%20Catherines%20Street,%20Vancouver&ptype_house=1&max_price=1300000&min_price=800000&filter=1

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAwMjJKNw==

#9 Toronto real estate is dangerous now! on 09.17.17 at 3:45 pm

Oh good ole Toronto…..The city of extreme feminists who facilitate a police state, while money laundering criminals go free on rampages to execute real estate agents hitman style:
http://www.cbc.ca/news/canada/toronto/michaels-restaurant-shooting-toronto-1.4293881

Sounds like someone lost some serious money in Toronto real estate.

This does not support Mark (Pitz’s) claims that once the deflationary pressures push prices in the real estate lower, Canadians will be paying off their debt…Rather, shady characters in good ole Toronto are paying off hitmen to conduct execution style murders.

#10 Mark on 09.17.17 at 3:52 pm

“So the Canadian Economy can grow through this rising interest rate environment you reckon Mr.T?”

That’s been historically the case, that the Canadian stock market performs better than the US during periods of rising long-term interest rates.

The 1970s is a great case study in such. The TSE index went from ~1000 in 1970 to ~2000 in 1980.

The US DJIA, in comparison, went nowhere in the 1970s.

https://upload.wikimedia.org/wikipedia/commons/thumb/a/ad/S%26P_TSX_Composite_Index.png/1200px-S%26P_TSX_Composite_Index.png

https://upload.wikimedia.org/wikipedia/commons/thumb/c/c8/DJIA_historical_graph_to_jul11_%28log%29.svg/1200px-DJIA_historical_graph_to_jul11_%28log%29.svg.png

Of course, “the stock market” and the economy are often two different things, but Canadian investors did relatively well in that era compared to their US counterparts.

#11 DON on 09.17.17 at 3:55 pm

#3 Mark on 09.17.17 at 3:16 pm

The government officials are well off – in most cases (they will not feel the pain). Other countries have been raising rates as Garth stated in a competition to attract capital in a new world environment. The gov does not care about adults who make wrong choices, they have bigger worries on their hands.

The talk at work is “how could they do this, don’t they know…no body can afford rate increases”.

My goodness the bad news is all over the papers, but no one is taking notice.

We have now well entrenched in the Denial stage, and anger is slowly increasing. The market is falling under it own weight and now the feds are piling on. This is why past observation and experience matters.

And why would you expect a rational orderly decline when the rise was the most irrational (on record). Theory is only theory. If theory was the answer – wouldn’t it already be fixed.

#12 @Mark on 09.17.17 at 4:00 pm

@Mark:

“Canadians” are no longer those law-abiding citizens who pay off their debts in a deflationary environment because it’s the right thing to do.

Torontonians in real estate are paying off hitmen to execute real estate agents (as a form of revenge perhaps on losses?)

“Toronto police have identified the man who died of his injuries in hospital after a shooting inside a downtown restaurant as Simon Giannini, 54.

Det. Shannon Dawson of Toronto Police Service’s homicide squad told reporters on Sunday that Giannini was a real estate broker in Toronto. He succumbed to his injuries in hospital overnight.”

#13 Screwed Canadian Millenial on 09.17.17 at 4:04 pm

Sheesh I don’t even know where to begin with this post and the amount of bones I have to pick. 3 main ones I guess.

1. I absolutely love how the elites suppress the sh*t out of wages with completely destructive labour market policies (which I’ve already spoken about plenty) and then are somehow surprised that inflation is low. You want inflation? Get wages up. And no that’s not a bad thing btw. Last I checked we have what, a 70% consumer economy? When consumers have money to spend, they spend it in the local economy. The economy does better. This isn’t complicated. Middle and especially lower class consumers deploy their money into the economy the fastest (velocity of money) and the lower end especially spends 100% (or more) of their income.

Here is the alternative that conservatives fight for. Here’s what happens when wages are suppressed and corporations and the wealthy elites hoard income and wealth.

Super rich hold $32 trillion in offshore havens
http://www.reuters.com/article/us-offshore-wealth/super-rich-hold-32-trillion-in-offshore-havens-idUSBRE86L03U20120722

https://www.youtube.com/watch?v=8wAa9DqHZtM

The US has low unemployment, low immigration (1/3 the rate of Canada), strongly rising wages, their 2016 median household income just boomed again, and lo and behold they’re right on that arbitrarily magical 2% inflation rate.

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

U.S. middle-class incomes reached highest-ever level in 2016, Census Bureau says
https://www.washingtonpost.com/business/economy/us-middle-class-incomes-reached-highest-ever-level-in-2016-census-bureau-says/2017/09/12/7226905e-97de-11e7-b569-3360011663b4_story.html?deferJs=true&outputType=default-article&utm_term=.eb1e028e1108

Thanks Obama!

I’ll put the 2 next “bones” in separate posts.

#14 Ex-Cowtown on 09.17.17 at 4:06 pm

As Rob adds, “Anyone who thinks a 23% bump in the minimum wage rate won’t have an impact on inflation and interest rates must be dreaming.”

+++++++++++++++++++++++++++++++++++

It’s biggest impact will be on unemployment, ie, raising it hugely amongst the people who can afford it least. Tons of entry level McJobs will disappear. As usual, progressive socialist policies end up accomplishing the polar opposite of what was intended.

You’d figure that after 120 years of socialist failures the progressives would get the hint that their policies are mush, but I guess not. And I can’t discuss climate change policy now because it’s now illegal in Canada to question it.

http://www.breitbart.com/big-government/2017/09/16/delingpole-climate-change-skepticism-now-virtually-illegal-in-trudeaus-canada/

Great country we used to have.

#15 Arto on 09.17.17 at 4:07 pm

Typo: I think you meant “lots of borrowers will get it in the Rear”

#16 Ex-Cowtown on 09.17.17 at 4:13 pm

#3 Mark on 09.17.17 at 3:16 pm
Feel like a broken record here, but how do rates go up, at least in Canada, when CPI, the target that the BoC aims at modulating with its interest rate policy, is teetering on nothing-ness?

How do rates systemically go up when the consumer economy is fully saturated in debt?

+++++++++++++++++++++++++++++++++

Think of it this way; you have two neighbors. One makes good money and lives within his or her means. The other is a drunk, spends every penny made and owes gambling debts all over town. Both come to you for a loan. Who do you charge higher interest rates to?

It’s that simple.

#17 Pete on 09.17.17 at 4:14 pm

#12 @Mark on 09.17.17 at 4:00 pm
@Mark:

“Canadians” are no longer those law-abiding citizens who pay off their debts in a deflationary environment because it’s the right thing to do.

Torontonians in real estate are paying off hitmen to execute real estate agents (as a form of revenge perhaps on losses?)

“Toronto police have identified the man who died of his injuries in hospital after a shooting inside a downtown restaurant as Simon Giannini, 54.

Det. Shannon Dawson of Toronto Police Service’s homicide squad told reporters on Sunday that Giannini was a real estate broker in Toronto. He succumbed to his injuries in hospital overnight.”

______________________________

Who knows what happened but one wonders if they ruined someone’s life on a RE deal? We will see what details come up.

#18 Screwed Canadian Millenial on 09.17.17 at 4:15 pm

2. I know what people are thinking, “ZOMG INFLATION.” We can’t have rising wages because “MUH INFLATION, omg 1970s here we come.” I can’t help but laugh at these people who claim that the inflation of the 1970s was somehow caused by low unemployment. It’s one of the most absurd things I’ve ever heard. The amount of damage the Milton Friedman and his ilk brought to the western world is incalculable. To this day, I still hear supposed experts and economists still fearmongering that low unemployment is going to cause a 1970s inflation crisis.

First of all you had much lower unemployment in the 50s, and 60s, you know that Golden Age of the middle class. Even under Based Bill Clinton in the late 1990s you had unemployment as low as 3.9%, the highest labor force participation ever, and still inflation was under control.

Anyone who does a few minutes of research can see that the oil inflation crisis of the 1970s was brought about by the oil crises caused by OPEC. This is so obvious, I can’t believe that supposed experts don’t understand this. The 2 major spikes of inflation directly coincided with the 1973 and 1979 oil crises.

https://en.wikipedia.org/wiki/1973_oil_crisis

https://en.wikipedia.org/wiki/1979_energy_crisis

As far as minimum wage goes, Seattle has $15/hour minimum wage (nearly $20 CAD) and their CPI is 2.5%.

https://www.bls.gov/regions/west/news-release/consumerpriceindex_seattle.htm

I’m still waiting for those protests of Seattle min wage workers begging to have their raises taken back and their wage going back to $11/hour. Conservatives keep telling me how bad those raises are for the workers.

I’ll save part 3 for later, gotta go enjoy this nice weather before this country turns into a frozen wasteland.

#19 Cherry Picker on 09.17.17 at 4:21 pm

I love the Stats-Can findings that some of the most expensive houses in Vancouver are owned by some of the lowest income earning people in the province. The lack of reported income, usually money made overseas and not reported, is a problem when some don’t pay their equal share for their public services, like police, firefighters, hospitals, military, schools, infrastructure, etc. Hope T2s tax avoidance dogs are on their scent. Maybe they’ll reduce income tax and start a wealth tax to help solve the problem. What a novel idea :)

#20 Freedom First on 09.17.17 at 4:29 pm

I like to buy low and sell high. History has taught me to keep an open mind and believe anything can happen at any time. I like liquidity and being debt free. I am never in a rush to do anything, which gives me the freedom to do anything at any time. I love freedom in every area of my life. Priceless.

Decades of continuing my practise of learning to live a freedom first lifestyle. I enjoy living life more than ever. I have been blessed.

#1
Freedom First
Master of Freedomonics
Its my life

#21 Pete from St. Cesaire on 09.17.17 at 4:31 pm

It’s a constant refrain: ‘the government will never raise rates because we’d all be screwed.’
——————————————————-
The people who are voicing this are completely unaware that destroying and stealing everything from everyone IS the game plan. They need to do some research into the New World Order.

#22 Dan on 09.17.17 at 4:32 pm

Should realtors get police benefits now because people shoot at them, do their lawyers have some plan for them

#23 young & foolish on 09.17.17 at 4:37 pm

great post today ….

#24 Dan.t on 09.17.17 at 4:46 pm

And history repeats itself right on time. What happened in the 80’s??

But…but, I thought it was different this time?

We are transitioning out of a major demographic shift, a major cycle, and moving out of…oh my god, I want fixed, safe, income, hard assets, gold, Bitcoin (but maybe new growth asset too?) anything half safe and fear of collapse, to…

growth and it’s funny because I see the transition…now the herd slowly getting interested in and wanting to know more about the stock market and growth assets…not there yet but it will happen. First a lot of pain to come. Those debt pigs, have fun paying off your 1.2 mil rancher, that should really only cost 430k…if you had to qualify at 6%.

rates moving up, still dirt cheap but Canadians funnelled the cool aid like at a frat party and now lets see how things work out.

Then again, maybe nothing will never change in Canada and the herd will never stop coveting life long debt servitude to the big banks and never stop coveting the holy grail of life, a detached POS house at all and any cost…

Maybe HGTV will have to start increasing their advertising budget and the real estate board will have to come up with more Paid for “News” articles so the herd doesn’t notice prices declining and so they keep believing that at any price real estate is the best investment in the world…even in the face of…

rising interest rates, prices at nose bleed levels after a 17 year run up, and never before seen levels of unaffordable house prices based on wages and other fundamentals, an ageing population who will be looking to downsize or cash out in 5-15 years, housing prices that are only based on how much debt you have access to and, and , and, bla bla, I know that Canadians don’t care about that stuff.

They only care about facts like:

Its different this time
The realturd told me real estate only ever goes up
Everyone wants to live here
Its different this time
rates will never rise
people will always pay their mortgage
did I say it’s different this time and real estate never goes down?

I have no idea how Canadians (who owe 1.70 for ever 1 earned) sleep at night. But I get the feeling the herd just reassures itself. If everyone is doing it, it must be ok.

#25 TurnerNation on 09.17.17 at 4:46 pm

Still people paying 800k for a slanty semi with cheap appliances:

http://www.blogto.com/city/2017/09/sold-toronto-semi-goes-200k-over-asking/

#26 jay#2 on 09.17.17 at 4:51 pm

This will make life interesting for government as well ,they will have to raise taxes or lower spending. http://www.usdebtclock.org/world-debt-clock.html

#27 Perspective on 09.17.17 at 5:01 pm

Went to many open houses in Coquitlam this weekend. Some places want you to sign in, and looking at the sign in sheet my take was 4 visits per hour by prospective clients. When I was going to open houses in the Spring of 2016 it was crazy, with lots of people, no place to park and families arriving in very expensive foreign luxury cars. The shoes at the front door were also telling last year and high dollar, making my wife drool. This weekend, worn out Nikes’ were the norm. Of the homes we’ve looked at over the Fall season only one has sold, and it was in very good shape. So all appears to be quiet on the western front.

#28 dr. talc on 09.17.17 at 5:05 pm

Re Friday’s gang of idiots typing nonsense along the lines of:

‘all treb data should be public, the government should do something to make them hand it over to us so we can analyze it ‘

People, the so called ‘government’ already outsourced land registry and assessments.
All sales data is available to everyone: get out your credit card.
Dont like your assessment?: get out your credit card, appeals have a fee.
The data re mls sales, ie before the deal is closed and registered, is private

#29 Rob The Property Guy Germany on 09.17.17 at 5:32 pm

A few worthile twitter feeds

Scott Terrio‏ @CooperTrustee
Doug Hoyes‏ @doughoyes
LandlordRescue @LandlordRescue F

Doug Hoyes also has a great new book out

https://www.hoyes.com/straight-talk/

#30 Mark on 09.17.17 at 5:34 pm

“Think of it this way; you have two neighbors. One makes good money and lives within his or her means. The other is a drunk, spends every penny made and owes gambling debts all over town. Both come to you for a loan. Who do you charge higher interest rates to?”

I don’t disagree with that, conceptually. That’s exactly how it works. The problem is that we have an amazingly low-debt corporate sector in Canada (in fact, corporate savings are largely funding the consumer debt bubble), contrasted with a very high debt consumer sector. So the corporate sector should continue to enjoy lower, if not falling rates, while the system naturally will tighten up consumer credit including higher rates.

The problem that thus arises, which relates to the BoC mandate, is whether or not corporate/business spending can sustain the Canadian economy in an era of tightening consumer credit.

The answer to this is rather problematic, as businesses rely upon consumers to consume, hence, there isn’t a lot of reason for business to go out and borrow for investment. Business might borrow to buy back their stock, or to pay large dividends, but they probably won’t borrow to invest in expanded production when consumers are severely constrained.

Buybacks, higher dividends, of course, are very stock market friendly. Which in a roundabout way, along with Canada’s past underperformance over the past decade, are amongst the reasons why Garth, Ryan, et al have suggested increasing Canadian allocations.

As far as minimum wage goes, Seattle has $15/hour minimum wage (nearly $20 CAD) and their CPI is 2.5%.

Yeah there are many studies out there that show that workers really aren’t much better off earning incremental income until they are well into the $40-$50k/year range due to the lack of rational coordination with government benefits such as low-income housing, food stamps, retirement savings plans, etc. So minimum wage increases are not particularly inflationary as they do not really increase the net after-tax, after-benefits compensation of a worker.

#31 Doug t on 09.17.17 at 5:42 pm

Most people live way beyond their means which I absolutely disgusting – I know a number of young people who are well below the poverty line and struggle enormously. So when I hear about the gross misuse off credit and borrowing it makes me want to puke. I worked hard and took risks to get to where I am today and try to give back to less fortunate – this country and the people that live here have lost their way and I don’t feel ounce of pity for the kick to the stones most greed sucking pigs are gonna get hit with – in fact I hope that kick resonates for years.

RATM

#32 Stone on 09.17.17 at 5:45 pm

#6 Stan Broock on 09.17.17 at 3:39 pm
As Rob adds, “Anyone who thinks a 23% bump in the minimum wage rate won’t have an impact on inflation and interest rates must be dreaming.”

——————————–

Total payroll cannot and will not increase as the Businesses can no afford it. Where will the money come from? Consumers are stretched anyway to the max.

Small Businesses will be hit way with the new idiotic taxes and employment will drop.

The bump in minimum wage will only result in less jobs and even more depressed economy.

In my my mind the combination of the 3:
– increasing rates after record debt
– increase taxes/stealing for small Businesses
– increased minimum wage

will kill the economy.
Unless government start running 100 billion annual + deficit to compensate for the reduced credit.

—————–

Silly rabbit, tricks are for kids. Of course wages can go up and they will. Businesses will try to absorb the cost for a short time, but like any pimple, will pop and then pass along the costs to consumers regardless whether they can pay or not. C’est la vie, mon ami! We’ve just been in a low interest rate environment for 10 years. It’s wakey wakey time now though. The last 10 years were artificial. Kudos to those who made a tidy profit during that time (including me – big pat on the back – you’re a winner boyo) however the world dynamics are a changing. Best thing to do is prepare. Don’t own real estate, invest in assets that will take advantage of rising interest rates and sit back and relax. That’s my plan. Minimum BoC rate to be 3% by end of 2018. That’s my prediction.

#33 Entrepreneur on 09.17.17 at 5:52 pm

Cringed at “$1,361 trillion on mortgages and $60 billion on consumer credit, article.” And used the housing as an economy when needed (used debit/credit).

Now, reversing because the economy is growing? Maybe in the resource (give-away) sector. But now people/consumers are left holding the poop bag and how is this helping the economy?

So my take on this is that the leaders lured us, used us and now dumping us. And “globalization is relentless and unstoppable” article, and the leaders focus is on this but not the people within the borders.

So sad, too bad attitude from our leaders?!?

#34 VICTORIA TEA PARTY on 09.17.17 at 6:04 pm

LACK OF CONTROL; AYE, THERE’S THE RUB!

Exactly, as St. Garth of Day-of-Reckoning-Cometh-Soon continuously explains ten-thousand ways to Sunday, too many people out there just don ‘t understand what it means to play with (financial) fire.

Read Garth’s piece again, the part that says Canada has essentially NO control over our domestic movement of interest rates because the big international financial lads mucking about in the same sand box don’t play by our rules. Never will. That’s the problem one and all. He who owns the gold makes the rules. We don’t own THAT kind of gold.

All of this borrowing will end badly, as we’re find out already.

In Victoria, the only Canadian graveyard with a business district, is seeing an ever-windening gulf between the haves and have-nots.

The haves roam about town in their expensive cars and trucks, yammering on and on about their latest escapades and vacations, while the peasants wait for the bus and their next miserable pay cheques.

Minimum wage increase chatter here will accomplish nothing save upping the cost of living.

Dinging the “rich” for more taxes will either send them elsewhere or they will go on a spending strike. Thanks a lot low interest rates.

Another effect of low interest rates is huge evidence that governments have little control over fiscal policies as demands for government services skyrockets to meet the demands of the poor and dispossessed who believe governments can and will solve all of their impossibly complex problems. They can’t and they won’t.

Monetary policy, affected also by low interest rates, is a whole different ball game as Garth has mentioned in his latest contribution to the huddled and over-indebted masses. Read that again and again. Memorize it!

Not good, this. Reap what we sow indeed.

#35 Pete on 09.17.17 at 6:07 pm

#25 TurnerNation on

Realtor propaganda and people are getting sick of it.

#36 OffshoreObserver on 09.17.17 at 6:18 pm

Before the heft of my post, please allow me to speak about my handle: “OffshoreObserver:”

In 2010, I went offshore to Thailand. I had sold my little hotel in downtown Vancouver. Thailand was OK, but the problem with being a Caucasian in a third world country, one walks around with a big “X” on one’s back.

After waking up in hospital twice with no recollection of how I got there, and two $3,000 hospital bills, I figured my “girlfriends” got a commission on admitting me to hospital in Pattaya and then Bangkok.

So, I kind of liked Vietnam, so I ditched my stuff, desktop computer 50″ LCD TV and fled to Vietnam.

It didn’t take me long to attract a hottie. I met her at her computer shop when I inquired about an adapter for my Macbookpro to plug-in to the LCD TV in my hotel.

She delivered my purchase to my hotel, and stayed the night.

However, my eerie feelings about 3rd World women reverberated when she asked me, oh so, innocently: “When you die, can I have the gold in your teeth?”

My Mom died in 2015 so there was no compelling reason to bring me back to Vancouver.

I investigated establishing an offshore company, but there are many sharks in that world.

I met with my accountant and he quoted me $100,000 to set-up a structure.

I declined. (I used to be a Merchant Banker and am pretty familiar what can be done.) However, what happens once the structure is set-up?”

I figured never-ending annual fees.

I was thinking to change my handle to: “OnshoreObserver.”

My reason was, it is just as simple to pay the friggin’ taxes and not allow the “professionals” to penetrate.

However, this Ballet Dancer we have as a Prime Minister–and that sobriquet is not a compliment–he who is the apple fallen from the Father who was first to leverage Canadian assets.

Now, I feel, one must depart, again, for the political direction is clear: Death by tax increases.

Watch me perform a “John Galt 2.0”.

Oh yeah, my post:

Could areas of Surrey and Toronto hinterland await the fate of Glendale, Arizona?

https://www.mhvillage.com/Communities/MobileHomePark.php?key=1963

#37 Lost....but not leased on 09.17.17 at 6:31 pm

Re Person shot in Toronto (who is also a realtor)…

Lets not get ahead of ourselves and make unsubstantiated correlations between deceased person and their career.

For all we know it was a lover’s triangle…wrong place at wrong time…etc. etc.

#38 Smoking Man on 09.17.17 at 6:37 pm

The journey.

New Orleans dogs.
Last stop on the Savage Road Trip. If I can find some free wifi on Burbon street I will be live on periscope. Telling all you up in Canada the libral grand globalist plot to remove you from your wealth. The Dr Tax? you ain’t seen nothing yet.

@SmokingMan

#39 Danny on 09.17.17 at 6:41 pm

Yes labor shortage will definitely be a problem.
But this Country has a long history of waves of skilled immigrants to help build it…the pioneers to start things off…the Chinese to build our railroads…the Europeans to build our houses….the Mexicans to farm our land…
Without laborers things become stagnant…machines still can’t do it all.
Housing sales down steeply….maybe prices still way too high may be one reason…the greed of early this year still alive and well.
One senior like condo high rise in South Etobicoke…has 3 units for sale…in original condition..30 years old buildings and with inflated gall asking for mid $600,000 to $825,0000…when just 3 years ago sold from $400,000 to $600,000.
But as sleazy Trump says…..there is no such thing as Too Much Greed…sure Trump….that’s your philosophy….fill the Whitehouse with rich dudes…let the government feed them too…and laugh all the way to the bank…and have your companies working overseas…while Americans still wait for improved wages..Don’t hold your breath…Trump takes care of those close to him first….”It’s Family “

#40 Andrew Woburn on 09.17.17 at 6:42 pm

Thank you Garth for that clip from the BIS. Although conspiracy theorists love to imagine the BIS as controlled by the Illuminati, the few of their publications I have read seem sane and sober and somewhat worried about the actions of the major Central Banks.

Those of us who lived through the inflationary years cannot believe they won’t come back as it is much easier for governments to manage their debts under inflation. I had a client whose husband left her comfortably off with fixed income investments. Ten years later she was barely scraping by. I would be surprised if the next round of inflation is that virulent but even the 2% annual BoC target compounds a lot over a decade.

One potential source of wage inflation will be the inflated cost of land in our major cities. Even if land prices ease down in the new interest rate environment, the impact on business of recent surges in land values are still working their way through. Many businesses in Vancouver are struggling to find labour that can afford to live there so it is a matter of time before wages increases drive prices or businesses shut down. This is apparently already happening on the Vancouver and Victoria restaurant scene where under-staffing is chronic.

#41 Long Branch Apprentice on 09.17.17 at 6:48 pm

I know people that have bought and sold property, but don’t know what an amortization table is. Garth, I really don’t think you realize how clueless the average Canadian is when it comes to anything that involves numbers.

#42 Stone on 09.17.17 at 6:50 pm

So here’s my take on minimum wage. Gouvernment mandates an increase of minimum wage. Ripple effect occurs as businesses adapt to this and increase prices. Increased prices force higher earning wage earners to knock on the bosses door for an increase. Value of gouvernment debt dimishes as a result. Gouvernment now pays the equivalent of pennies on the dollars they owe. Rinse and repeat.

World gouvernments have public debt they need to get rid of. That’s what is currently happening. They went out, sold bonds at record low rates with terms of 30, 40, 50 years.

Gouvernment debt problem? Please! Let’s not all be naive. Gouvernments don’t have debt problems. Individuals do though. Don’t be an individual with debt. You, as that individual with debt you can’t repay in quick order will always loss. Lenders will raise rates to cover the inflation they get hit with on loans made to individuals. The gouvernment though continues to pay their 2-3% for next 30-50 years. The gouvernment, BIS and central banks are not dumb. Individuals though are another story.

#43 MF on 09.17.17 at 7:05 pm

I have a question:

If the population is aging, wouldn’t that mean that the demand for bonds would go up (because they are “safe”)?

Wouldn’t that drive down interest rates?

Also how can inflation return when most people consume less as they get older?

And that is despite the huge asset bubbles we have.

I don’t see it sorry. They are just raising because they have to get off of 0% to give wiggle room in the next inevitable crisis.

MF

#44 Lost....but not leased on 09.17.17 at 7:06 pm

$15/hour jobs and Twilight Zone et al.

One only has to search industrial robots on YOUTUBE to see the level of sophistication that exists and the tasks they are able to perform. In other words…those $15 an hour jobs , in theory, could vanish.

However, there is an old Twilight Zone episode from early 1960’s whose theme/plot is based on a factory manager who continually displaces workers with machines, with the climactic ending of the manager replaced by a machine….perhaps inspired the Terminator movies and Sky Net premise.

It seems we are at a juncture of aging boomers, pissed off millenials…..a domestic birthrate that does not keep the domestic population at minimum at a a 1:1 replacement level,…….thus a national immigration policy that aims for 300,000 + immigrants…(is your head spinning yet??)

My point is…all things considered…given technology gains…is our immigration policy based on an archaic model…and that the collective future of the current Canadian citizenry best addressed by a “time out” on immigration ?..ie where is it written that our population must grow….aren’t humans a blight on mother nature?

I know that 99.9% of our so called elected(aka vote pimp) representatives would cry foul..which is why I am 100% sure I am on to something.

#45 MF on 09.17.17 at 7:13 pm

The minimum wage increase is nothing but a vote grab by the provincial Liberals who have an approval of like 6%.

It will just speed up automation and increase unemployment.

More dictator, banana republic, and dictator funded UN garbage.

MF

#46 AK on 09.17.17 at 7:19 pm

“With the coming stress test it means borrowers will have to qualify as if rates were 7%. Gulp.”
——————————————————————–
My first mortgage in 1979, was for 5 years @ 9.25%.

Renewed in 1984, 1 year @ 12.75%

#47 family business on 09.17.17 at 7:20 pm

I visited my friend in Brampton and was shocked to learn something:
1. He mentioned that in their neighborhood, there were so many sales in the last 2 years but they were surprised that no one was coming in or out. He learned while living there that people sell to each other in the same family, or relatives, or close friends and keep on increasing the house price by themselves through a traction and then they share the profit.
2. Real estate agents also increase the price by selling to each other (while the houses are on lease and the tenants know that this selling and buying is just a transaction to increase the house value)

#48 rainclouds on 09.17.17 at 7:23 pm

#28 talc”all treb data should be public, the government should do something to make them hand it over to us so we can analyze it ”
Zillow. in Canada Viewpoint. already doing it……..no apocalypse ensued.

Alternatively, RE organizations who choose to prevent disclosure by throwing up ridiculous smokescreens should be disbanded or subjected to far tighter regulation, maybe start with “THEIR MEMBERS” who freely make unsubstantiated, untruthful, categorically incorrect, spurious claims which have the potential to cause great financial distress. Never seen any of them sanctioned by TREB………….E.V.E.R.

In the real world timely, accurate, independent, information is welcome. In Treb’s? information is only good if they have it and you dont…

#49 Bonhomme Carnaval on 09.17.17 at 7:28 pm

Today’s blog post is eerily reminiscent of Harry Dent’s writings.

#50 rainclouds on 09.17.17 at 7:29 pm

smokey go here, smile, show all 6 teeth. hurricane in hand. Enjoy Nawlens!!!

http://www.mylivestreams.com/webcam/bourbon-street-live-streaming-new-orleans-webcam-louisiana/10699.html

#51 Doghouse Dweller on 09.17.17 at 7:31 pm

“2.5% or even 3%”. The great depression- by October 1930 the discount rate was 2.5%.
So rates might rise to levels reminiscent of the depths of the great depression and it will cause moister mayhem throughout the land.
Perhaps with the help of the new AI Robots we get to a normal 6% or a Wynne-flationary style 1970`s 10 or 18 % . That was caused by oil problems. Are we not having oil problems now ? Dang ! The Middle East has already blowed up !

#52 crowdedelevatorfartz on 09.17.17 at 7:45 pm

@#37 Lost and leasing
“For all we know it was a lover’s triangle…wrong place at wrong time…etc. etc.”
+++++

total agreement.
Just seems odd that the news media thought it necessary to mention that the victim was a Real estate agent/ broker.
By all indications it was a planned/ targetted shooting.

#53 jess on 09.17.17 at 7:53 pm

The banking crash and its aftermath continue to reverberate in Ireland with thousands of families still trapped in negative equity.
==========
Ireland jails three top bankers for ‘deceitful and corrupt’ actions in 2008 financial crisis
Judge condemns trio for inflating bank’s deposit levels by €7.2bn

Official report delivers last word on Ireland’s bank collapse Episode cost taxpayers an initial €64bn, or about a third of the country’s GDP
https://www.ft.com/content/0d45a2e0-c393-11e5-b3b1-7b2481276e45

Jhttps://www.irishtimes.com/opinion/fintan-o-toole-irish-banks-have-got-away-with-major-fraud-1.2923644

=========================

The Central Bank has fined Bank of Ireland €3 million for ‘significant failures’
The Central Bank found “significant failures” in some of Bank of Ireland’s controls, policies and procedures.
May 30th 2017,
the “bad bank” ireland – nama
https://www.ft.com/content/d6fac8cc-eb75-11e5-bb79-2303682345c8

http://www.reuters.com/article/us-ireland-housing/ireland-may-repurpose-bad-bank-to-drive-housing-supply-idUSKCN1BP1XH?il=0

http://www.thejournal.ie/social-housing-nama-galway-3205988-Jan2017/
==========================

“Table 1 gives an overview of the scale of housing vacancy.
More than 38 million conventional dwellings were unoccupied(i.e. vacant or used as seasonal orsecondary residences) in 2011 in Europe. In eight European countries, more than one in four housing units is not a home. While the process of putting this housing stock to use is complex (often involving renovation work), and while it would be inconceivable to question the property rights of people who own a secondary
residence, the scale of the problem and the alarming increase in the number of people experiencing housing exclusion calls for an appropriate political response.”

https://ec.europa.eu/futurium/sites/futurium/files/long_version_en.pdf.pdf

#54 Andrew Woburn on 09.17.17 at 7:53 pm

The Internet of Things is growing fast but caution is advised. Also, who really owns your cellphone? The age of digital serfitude is upon us.

“Internet-enabled devices are so common, and so vulnerable, that hackers recently broke into a casino through its fish tank. The tank had internet-connected sensors measuring its temperature and cleanliness. The hackers got into the fish tank’s sensors and then to the computer used to control them, and from there to other parts of the casino’s network. The intruders were able to copy 10 gigabytes of data to somewhere in Finland.

By gazing into this fish tank, we can see the problem with “internet of things” devices: We don’t really control them. And it’s not always clear who does – though often software designers and advertisers are involved.”

https://theconversation.com/the-internet-of-things-is-sending-us-back-to-the-middle-ages-81435

#55 Goin up on 09.17.17 at 7:58 pm

Yes going up no question about that. Wtf did anyone expect after the pigging out on stuff noone needs to the tune of 2 trillion!!

Cant wait to see the fallout. Glad i sold 6 months ago and am renting and invested. There will be blood in the streets!!

#56 Herb on 09.17.17 at 8:07 pm

Screwed Canadian Millenial,

don’t you know that ideology is impervious to facts?

#57 Fake News Again on 09.17.17 at 8:11 pm

So as the economy slides (the labour force market is on fire is BS) and tons of people start to lose jobs….how many people here think that the Govt will also contract and start to shrink in size to match the private sector?

#58 Tony on 09.17.17 at 8:17 pm

The only way inflation, wages and interest rates will head higher is endless helicopter money in the form of free coupons in America. People always spend free money on the wrong things so the government has to print assorted free coupons (in dollar denominated amounts) for people to use on the right things.

#59 Gary smith on 09.17.17 at 8:22 pm

Man, the realtors get me at times. Went
to an open house today in Ladner BC. 30 year old SF house on the market for a couple of days, in older neighbourhood. Open Ditches, no streetlights or sidewalks. Minor updates, but nothing substantial. Car port- no enclosed garage.

Basement suites in Delta are very difficult to get approved and house didn’t have one.

REALTOR asks two questions; are
You working with anyone? And …are you thinking of puttin in an offer because one has already been put in?

998,000$

GTFO

#60 Keith on 09.17.17 at 8:28 pm

From 2014, minimum wage in Denmark is more than double the U.S., over $20 U.S. per hour. The cost to the customer is a Big Mac costs 80 cents more. Wages double, cost increase to the consumer 15%. All the prices will go up accordingly people need to understand the labour cost of the product or service goes up, but labour is not all of the cost of the product. Math is hard.

http://www.businessinsider.com/denmark-mcdonalds-pays-20-hourly-wages-2014-10

#61 Tony on 09.17.17 at 8:29 pm

Re: #49 Bonhomme Carnaval on 09.17.17 at 7:28 pm

If Harry is right Germany is next.

#62 geopolitical-macro-man on 09.17.17 at 8:31 pm

Not if there is a systemic crisis looming at a global scale. For instance, if a financial collapse happens in China, contagion will spread all the way to U.S. and Canada. By that time central banks will have no choice but cut rates again.

#63 NoName on 09.17.17 at 8:35 pm

very interesting read

https://www.computerworld.com/article/3222680/social-media/disinformation-as-a-service-daas-not-good.html

#64 YVR Update on 09.17.17 at 8:36 pm

Interest rate rises are done in Canada.

They had to bump Loonie for NAFTA negotiations.

If you believe that rates going much higher, then good for you! The smart money is on negative rates eventually. Thats why asset prices going thru the roof. …Or you can do wishful thinking if it fits your narrative.

#65 Smoking Man on 09.17.17 at 8:37 pm

Harrahs New Orleans. No Animals permitted in. Well for tonight they got 3. Me Wyatt and Sophie. Pics on my twitter. @SmokingMan

No one wants to mess with a Nictonite. Where the hell is CRA. They know.

Alien Disclosure soon humans.

#66 Smoking Man on 09.17.17 at 8:40 pm

45 MF on 09.17.17 at 7:13 pm
The minimum wage increase is nothing but a vote grab by the provincial Liberals who have an approval of like 6%.

It will just speed up automation and increase unemployment.

More dictator, banana republic, and dictator funded UN garbage.

MF
..

If I get WiFi on Burbon street tonight all those wierd questions in your head will be answered.

Just hope I can still talk English. When I get pissed back to mother tongue nectonite.

#67 bigtowne on 09.17.17 at 8:40 pm

Garth is the “Ann Coulter” of Canada….we all have our crosses to bear but we will make light of our own “specialness” and celebrate our unique bandwidth. Maybe I shall use a smaller spoon for that brandy.

The issue with Garth is his very normal and fact finding and on the money too often so we need to polish the image …attend a few post secondary institutes; get a few of the kids Triggered and then it’s on the CBC and we are there.

#68 Trojan House on 09.17.17 at 8:45 pm

#44 Lost….but not leased on 09.17.17 at 7:06 pm

Since Canadians are having babies at a much lower rate, eventually the government will run out of people to pay taxes, therefore, bring in 300,000+ immigrants per year and bingo, you have a higher taxpayer base!

#13 Screwed Canadian Millenial on 09.17.17 at 4:04 pm

Geez, dude, chill! Your comment about going out to enjoy the weather is telling – you’d rather waste the day than bettering yourself by working OT hours or have a side hustle that you concentrate on, etc. No it’s complain about the “man” while you’re on some patio having a beer and enjoying doing nothing. It sounds like you would rather have things handed to you on silver platter. Perhaps you should change your handle to “Wanna Be Entitled Canadian Millenial.”

#69 Andrewt on 09.17.17 at 8:47 pm

#38 Smoking Man on 09.17.17 at 6:37 pm
The journey.

New Orleans dogs.
Last stop on the Savage Road Trip. If I can find some free wifi on Burbon street I will be live on periscope. Telling all you up in Canada the libral grand globalist plot to remove you from your wealth. The Dr Tax? you ain’t seen nothing yet.

@SmokingMan

Smokey. The quarter is great and all but you gotta go uptown to get down. Try the Maple Leaf for music and move on to Snake & Jakes for the ultimate dive experience. Trust me on this one.

#70 MF on 09.17.17 at 8:49 pm

#44 Lost….but not leased on 09.17.17 at 7:06 pm

“My point is…all things considered…given technology gains…is our immigration policy based on an archaic model…and that the collective future of the current Canadian citizenry best addressed by a “time out” on immigration ?..ie where is it written that our population must grow….aren’t humans a blight on mother nature?”

-The population is aging and more people are taking rather than contributing.

It’s as simple as that.

And by the way, it’s actually tough to become a Canadian.

MF

#71 Cristian on 09.17.17 at 8:50 pm

I still remember 2000-2001, when I was just considering immigrating to Canada and the interest rate for the CAD was around 5-5.5%.

#72 knock knock, whose there? your honest realtor. on 09.17.17 at 8:51 pm

DELETED

#73 Porsche on 09.17.17 at 8:55 pm

When I was 40 a 7% mortgage was a dream.

https://beta.theglobeandmail.com/real-estate/the-market/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/?ref=http://www.theglobeandmail.com&

#74 CREIT on 09.17.17 at 9:04 pm

Just got back from a Real estate workshop this weekend, and one investor told me when he renewed his mortgage in May 2017, his property is in Edmonton, the mortgage lender asked him to top up his mortgage by $225,000 because he was under water.

ouch!

#75 OttawaMike on 09.17.17 at 9:16 pm

By reading tonight’s post, it sounds like you are on board with these ladies in support of fairer taxation to pay for the increased medicare and social needs of our aging society:

https://www.thestar.com/news/canada/2017/09/17/dissenting-doctors-write-open-letter-in-support-of-federal-tax-reforms.html

#76 Kartoshka on 09.17.17 at 9:22 pm

Inflation is relative, and so are its effects. Consider the massive inflation of house prices in the GTA… Who wins? Who loses?

On the brink of deflation… Yet an inflation surge in house prices? Please explain this contradiction.

#77 Stan brooks on 09.17.17 at 9:35 pm

Stone,

Consumers have no money and are in record debt, how would you exactly pass that prices increase to them?

By printing more money and purchasing assets? People have no assets except houses.

You of course realize what will happen if BOC starts buying houses or if government starts running 100 b. Deficits.

And the confused politicians want to raise taxes which will hurt spending.

Small businesses will eliminate labour or close to preserve capital and stop losses.

The effect of raising rates and hurting businesses while at record debt will be catastrophic. Load on poocorn and watch venezuela 2.0

#78 OttawaMike on 09.17.17 at 9:36 pm

Here’s an example why higher taxation will ruin us:
https://www.bloomberg.com/news/articles/2017-06-28/swedish-government-bets-on-improved-finances-ahead-of-showdown

Oh wait, Sweden has such a huge surplus that they are saving for the coming aging population bomb.

#79 Lost..but not leased on 09.17.17 at 9:37 pm

To reiterate..

Much like the roots of the ancient Chinese culture…beware of the “civil servant” class in any current/historical global governance model.

Admittedly, they do, in theory, serve a useful objective info/policy buffering model. what seems to have evolved is a balkanized survival model.

While the fiscal “Blood/$weat/Tear” donor private sector “Management vs Labor ” debates “merit versus liability”…the buffer class of Civil Service class morphs from merit to entitlement.

If their” solidarity forever” koombaya model has any integrity, they should acknowledge a rank -and- file
core proportional to the private sector. Anything to the contrary is simply classic featherbedding which is never sustainable…its rob Peter to pay Paul.

Otherwise…. we have a rather draconian power triangle whereby our politicians cater to these UNelected thugs as opposed to their constituents being unwittingly held as hostages.

#80 800k semi detached on 09.17.17 at 9:47 pm

#25 TurnerNation

Yeah, I wondered if it could be an old listing, but you’re right: sold in sept 2017.

Maybe Toronto’s dip will be as short lived as the Vancouver one?

I guess anything that is still remotely affordable will sell in the blink of an eye.
Not sure if high end is still shifting.

#81 dave in kincardine on 09.17.17 at 9:51 pm

Economic major here: One of the things people don’t realize is the Bank of Canada will lead interest rate policy (thus raise rates as we overheat) but sometimes the Bank of Canada does not lead but follows, and if the financial markets deam rates should be higher for bond buys to be enticed to buy the Bank of Canada will follow. BOC has unfortunately lost control when this happens. Ugly recessions are inevitable. Thank you Garth for broaching the subject. We won’t hit the tipping point until late 2018 or early 19 is my guess. Put your seat belts on, a bumpy ride to follow. Life is good when you position yourself correctly.

#82 dosouth on 09.17.17 at 9:55 pm

I hate to beat a dead horse but it was good to see that not all Dr.’s are drinking the juice of the “poor us” taxes on Incorporation. In fact they were told to “tow the line” until some have now spoken out….huh, go figure?

Docs support new tax regime…

#83 Perpective on 09.17.17 at 10:01 pm

The deal on the in-laws place closed last week. It sold for just south of $5 million to 10 moisters who saved since they had a newspaper route, borrowed money from their RRSPs, and Moms. A second loan was secured through Home Capital using their incomes at Canada post.

It was either that, or it was bought by unicorns.

The truth is out there, as they say!

https://www.thepinnaclelist.com/video/290-turtlehead-rd-the-place-to-be-belcarra-bc-canada/

#84 T on 09.17.17 at 10:04 pm

#52 crowdedelevatorfartz on 09.17.17 at 7:45 pm

Simon was 54, happily married, dealt with a lot of investment clients, and a perma bull.

A lot of people have lost a lot of money taking the advice of realtors lately. All it takes is one person who has nothing left to lose and wants someone to blame other than themselves. Sad.

#85 T on 09.17.17 at 10:09 pm

#70 MF on 09.17.17 at 8:49 pm
#44 Lost….but not leased on 09.17.17 at 7:06 pm

“My point is…all things considered…given technology gains…is our immigration policy based on an archaic model…and that the collective future of the current Canadian citizenry best addressed by a “time out” on immigration ?..ie where is it written that our population must grow….aren’t humans a blight on mother nature?”

-The population is aging and more people are taking rather than contributing.

It’s as simple as that.

And by the way, it’s actually tough to become a Canadian.

MF

—–

1. Who is taking rather than contributing? Isn’t spending money contributing to the economy?

2. Man up and marry your girl already. It makes the immigration process much easier. About 6 months turnaround and she’s good to stay. It’s not hard – it’s rather easy actually.

#86 Fake News Again on 09.17.17 at 10:10 pm

#73 Porsche on 09.17.17 at 8:55 pm
When I was 40 a 7% mortgage was a dream.

https://beta.theglobeandmail.com/real-estate/the-market/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/?ref=http://www.theglobeandmail.com&

__________________

And a $250K house was an expensive house…..

So, do you now understand the relationship between mortgage rates and property valuations? — Garth

#87 Sebee on 09.17.17 at 10:30 pm

What to make of the 14TR of fx swap debt in footnotes BIS found?

#88 Infatuation on 09.17.17 at 10:42 pm

With wages rising and taxes rising, who gonna pay for it? The Inc’s and Ltd’s will be raising prices on goods and services, doctors too. This is a very inflationary cycle that we’d better get used to cause its happening

#89 Deplorable dancer on 09.17.17 at 10:42 pm

#66 Smoking Man on 09.17.17 at 8:40 pm

45 MF on 09.17.17 at 7:13 pm
The minimum wage increase is nothing but a vote grab by the provincial Liberals who have an approval of like 6%.

It will just speed up automation and increase unemployment.

More dictator, banana republic, and dictator funded UN garbage.

MF
..

If I get WiFi on Burbon street tonight all those wierd questions in your head will be answered.

Just hope I can still talk English. When I get pissed back to mother tongue nectonite.
..
Your fly is undone…

You are the dancing queen
Young and sweet
Only seventeen
Dancing queen
Feel the beat from the tambourine, oh yeah
You can dance
You can jive
Having the time of your life
Ooh, see that girl
Watch that scene
Dig in the dancing queen

#90 NoName on 09.17.17 at 10:56 pm

Many things i like to say but what i type just makes no sense, unless i devote days probably weeks to write up one half decent post. but ill try to cram something before i put kid to bed.

People should be paid decent living wage, i remember me working for min wage 6.75 and having enough for rent food, buss pass, seldom pairs of socks from by-way, and at that time lots of items from amity/goodwill store. Two years of that, than better job, car came along and opportunities to do better.

In a few month it will be that i lived half of my life i Canada, and i can’t believe to se transformation form fairly “comfortable” life to walking on a fine line above social/financial abyss.

Back then (98-99) very few people worked for min wage, my impression then and now was that min wage reserved for very young that want to enetr labour market and old that like to supplement some of the income and mainly get out of the house. But back then 12-13cad an hour jobs were easy to find, and 15-20 were easy to land with some experience. Now 20 yrs later 20cad an hour job is “premium job” and for for “unskilled” just a noun phrase as a direct object. (ex i want good job.)

What boggles my mind is that how can civilized society decay so quick, yes i’ve seen worse but lets hope that we wont ever get there.

Someone posted a video about electric car yesterday and disruption that self driving car will bring, can remember all thing what that dude mentioned but 3 did stick in my head.
1. oil if extracted above 25 not viable
2. car ownership in decline 70% sales lost due to efficency
3. better utilization of current city space and more density

It will be up hill battle for working stiff, people can adopt to everything but not at this pace, at some point something has to give. If we think low interest rates, JT, DJT, KJU, Russia, commy PRC are bad i am telling you people you ain’t see $#!7 yet.

https://www.youtube.com/watch?v=WzVzntwqpIA

#91 NoName on 09.17.17 at 11:02 pm

bad language in video i posted above

#92 Long-Time Lurker on 09.17.17 at 11:13 pm

#47 family business on 09.17.17 at 7:20 pm
I visited my friend in Brampton and was shocked to learn something:
1. He mentioned that in their neighborhood, there were so many sales in the last 2 years but they were surprised that no one was coming in or out. He learned while living there that people sell to each other in the same family, or relatives, or close friends and keep on increasing the house price by themselves through a traction and then they share the profit.
2. Real estate agents also increase the price by selling to each other (while the houses are on lease and the tenants know that this selling and buying is just a transaction to increase the house value)

That’s called “painting the tape” in stock market manipulation terms. It’s also going on with Bitcoin according to Jim Rickards (among other things).

#93 Entrepreneur on 09.17.17 at 11:33 pm

Sure glad we have elections, only thing we have left.

#94 Mark on 09.17.17 at 11:40 pm

“That’s called “painting the tape” in stock market manipulation terms. It’s also going on with Bitcoin according to Jim Rickards (among other things).”

That’s the essence of “assignment flipping” which was prevalent in Vancouver. No rational person would ever “buy” a house from a non-related party and not demand full title of it, but rather, accept an assignment. Banks don’t generally lend against an assignment rather than a clear title with a senior mortgage. The practice was almost completely fraudulent and an attempt at market manipulation. Desperation amongst the Vancouver-based “landlord families” to manipulate the quoted prices of housing in the post-2013 peak era so that they could cash out (or maintain their extravagant lifestyles) when property portfolios are increasingly cash flow neutral or negative.

I’ve been screaming from the rooftops about this for the past few years in the post-2013 peak era.

#95 MF on 09.17.17 at 11:44 pm

#85 T on 09.17.17 at 10:09 pm

1. Who is taking rather than contributing? Isn’t spending money contributing to the economy?

-In General,

Older seniors spend less than younger people do on consumption. They usually have everything they “need” like cars, houses, stereo systems, antique collections, clothes etc.

They are also past the heavy consumption period of family forming (cribs, baby food, vans, houses and so on).

At the same time they are drawing more from the “system” with CPP, OAS, but mostly health care costs for medicines, doctor visits, surgeries and the rest.

It’s not a question of whether it’s right or not. It just is the way it is.

(thanks for the personal advice by the way)…

MF

#96 NoName on 09.18.17 at 12:48 am

Interesting read

http://www.aei.org/publication/warren-buffett-wins-1m-bet-made-a-decade-ago-that-the-sp-500-stock-index-would-outperform-hedge-funds/

#97 Belcara on 09.18.17 at 1:08 am

#83
The deal on the in-laws place closed last week. It sold for just south of $5 million

Sweet damn!

In 50yrs from 5k to 5m.
That is +100,000%
One hundred thousand percent.

And to believe some people insist RE is not a good investment.
Those are BTC like returns, near impossible on TSX.

Good for them.

#98 morry on 09.18.17 at 1:43 am

#92
“sell to each other in the same family, or relatives, or close friends and keep on increasing the house price”

illogical. i call bs

#99 blofilted on 09.18.17 at 1:51 am

#9 Toronto real estate is dangerous now! on 09.17.17 at 3:45 pm

Oh good ole Toronto…..The city of extreme feminists who facilitate a police state, while money laundering criminals go free on rampages to execute real estate agents hitman style:
http://www.cbc.ca/news/canada/toronto/michaels-restaurant-shooting-toronto-1.4293881

Sounds like someone lost some serious money in Toronto real estate.”

Always eat fast food….it is safer and quicker, though you may die a slow death from a host of ailments.

#100 herestoyou on 09.18.17 at 2:15 am

Looks like New Zealand’s housing bubble is probably bursting…….Housing market slumps around New Zealand
15/09/2017
Housing market slumps around New Zealand
Simon Shepherd

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Figures show 47 fewer houses are being sold every day. Credits: Image: Getty; Video: Newshub
The number of houses being sold has dropped a whopping 20 percent compared to this time last year – and it’s also not just in Auckland – the slump is happening all over the country.

Southland led the way down, 37 percent. Northland is down almost 30 percent, and Taranaki and Waikato both down 25 percent. Sales in our biggest market, Auckland, are also off by 21 percent.

Figures show 47 fewer houses are being sold every day, and some experts have gone as far as suggesting real estate agents start looking for a second job.

Why such a drop?

The Real Estate Institute of New Zealand (REINZ) blames ongoing Reserve Bank lending restrictions, winter and election uncertainty.

“People take a wait and see approach in terms of policies and how it will potentially impact them personally,” says a REINZ spokesperson.

Nationally prices have held up in the past year, and while Auckland is off the boil – down 1.2 percent – the regions led by Southland and Hawke’s Bay have risen because of the urban exodus.

The question is what happens now?

There’s a less sunny forecast from one economist.

BNZ Bank’s Tony Alexander believes sales volumes will continue to fall so he has a message for real estate agents.

“Maybe for some of them – start looking for alternative job in the next few years,” he says.

And are we going to see prices fall?

“It’s impossible to predict but this is a flattening initially in Auckland, then in fits and starts around the rest of the country,” he says.

But that could bring with it one bit of good news for first home buyers. In some parts of Auckland investors may have overcommitted and finally there could be a chance to get into the market.

Newshub.

#101 Midnights on 09.18.17 at 3:40 am

Canadian Perspective
By Armstrong

https://www.armstrongeconomics.com/markets-by-sector/foreign-exchange/c/canadian-perspective/

#102 Oft deleted much maligned stock picker on 09.18.17 at 5:06 am

#36…..Offshore Observer…..Friend …..you’re making some patented rookie mistakes……this Asian culture ain’t your culture…..you’ll have to become more self sufficient….and if your looking for friends in Pattaya……you painted the X on your own back…..they saw you and every other farang coming a mile away.

I made my first business trip to Asia in 1974…..learned along the way….when no one spoke English and ‘lady friends’ weren’t as sophisticated as today’s crop. Today’s bargirls learn from a collegiate system of tried and true methods on how to fleece the farang…..drug and rob being only one of many techniques. Pattaya is world famous for attracting idiots ….innocent and nefarious. As my Thai friends say “we don’t go there”….neither should you.

So…I suggest you find another outlet….some kind of ‘sport’ that doesn’t involve bargirls or investments….take up regional travel ….or diving….or anything else. Sounds like you have a few bucks so stay away from the whores and hustlers.

Want a laugh….or a lesson…..read Heart to Heart with Hillary…..a lonely hearts advise column for really stupid farang …published in the Pattaya Mail…..endless stories from farang (foreigners) who came from loserdom to paradise and constantly make the same mistakes by allowing the whores and hustlers rip them off due to stupidity, idiocy, loneliness and sheer naivitie.

This ain’t your culture….but it’s a great place to live if you stay soberish…..and keep your wits about you. I have worked here ….passed through for years at a time doing nothing on visas….retired here at least three times….left in disgust swearing never to come back many times…..but live here now enjoying the crap out of life.

Living in Asia….don’t be a fool….don’t be stupid….know that most of the other foreigners are scum…..and keep in mind that all the bargirls are schooled in the sad sack shuffle. Take it from an old Asia hand…..

And Dude…..what the heck do you need a registered company for when you can trade stock poolside with a cold beer in hand……you’re living in the past man.

#103 Ian on 09.18.17 at 5:10 am

Speaking of journeys, the Fed starts one this week. They’re selling the nearly 4t of shit they accumulated during the Obama years.

They’re starting slowly, but it’s on. Should lead to higher bond yields from now until end of 19.

Fed to take historic leap into the unknown
http://on.mktw.net/2vWJINb

#104 FLHTK on 09.18.17 at 7:04 am

Good Post! I think as interest rates rise and houses become more expensive for people as Garth says….for decades to come…People will be doing more cash deals to screw the Gov…
Business owners who’s personal taxes are rising in the coming months will start to do more cash deals to hide the money and pay less tax…that’s it. And why wouldn’t they?

#105 crowdedelevatorfartz on 09.18.17 at 8:28 am

@#83 Perspective

Well, its good to know that the Greaterfools are flocking together and pooling their money to continue the madness…..

The In-Laws have sold at the tip of the precipice. Well done.

#106 nick on 09.18.17 at 9:01 am

Are we getting mid month stats today? I hope tonight’s post is juicy!

#107 Sam the Sham on 09.18.17 at 9:25 am

DELETED

#108 TalkingPie on 09.18.17 at 9:31 am

#97 Belcara on 09.18.17 at 1:08 am

Sweet damn!

In 50yrs from 5k to 5m.
That is +100,000%
One hundred thousand percent.

And to believe some people insist RE is not a good investment.
Those are BTC like returns, near impossible on TSX.

Good for them.

******

To be fair, when you do the math on that, it comes out to about 14.8% annual price gains. That’s very good, to be sure, but that’s the gross gain, before factoring any of the ownership costs.

The time value of money over 50 years does a lot, no matter what you’re invested in.

#109 Dups on 09.18.17 at 9:39 am

If this is for sure true: “Fewer workies in future to support more wrinklies equals higher taxes, lower savings and increasing rates.” then we should not put much money in RRSP’s since they would be taxed higher in the future than they do now.

#110 n1tro on 09.18.17 at 9:59 am

#36 OffshoreObserver on 09.17.17 at 6:18 pm

Maybe you should think with your head above your shoulders instead of the one below the belt. 3rd world or not, who sleeps with a women you just met unless you booked and paid for it? Actions have consequences. I think if you can get past being date raped, you’ll see there is more to south east asia than gold mining.

#111 geopolitical macro man on 09.18.17 at 10:12 am

Fed’s Brainard Says Caution Warranted on Further Tightening

https://www.bloomberg.com/news/articles/2017-09-
05/fed-s-brainard-says-caution-warranted-on-further-tightening

#112 Stan Broock on 09.18.17 at 10:21 am

#74 Looney Baloney on 09.17.17 at 1:18 am
Here’s a long time client of mine from the prairies trashing T2’s tax grab on BNN:

http://www.bnn.ca/economics/video/ottawa-s-blanket-approach-to-tax-changes-is-reckless-says-small-business-owner~1200273

———————————-

Very interesting interview.

They rape your savings, steal your labour with arrogance and we are still polite, intelligent and conforming.

Do we deserve the thieves that rule us?

#113 Smoking Man on 09.18.17 at 10:26 am

It’s bad enough that globalists are trying to turn 4 year old boys into girls via educational industrial complex. In Ontario if you bitch about it. They take your kid away. They want to take it a step further with hormone treatment.

I’m calling the machine will try and remove all of John Wayne and Bruce Wills die hard movies from the earth.

#114 Renter's Redress on 09.18.17 at 10:52 am

How’s this for an economic model?

1960’s – 80’s: Boomers outnumber their parents, demand for debt is higher than demand for savings, strong unions, nationalism = high inflation, high interest rates.

1990’s – 2010’s: Boomers outnumber their children, demand for savings is higher than demand for debt, weak unions, globalism = disinflation, low interest rates.

2020’s – 2040’s: Boomers and Millennials roughly equal in number, Boomers exchange savings for consumption, Millenials exchange production for savings = balanced economy.

Looks like evrytin’ gon’ be airee mon. Don’t worry, be happy!

#115 Belcarra on 09.18.17 at 11:53 am

#108 TalkingPie
To be fair, when you do the math on that, it comes out to about 14.8% annual price gains. That’s very good, to be sure,

Indeed!
And… very refreshing to see a Canadian who knows his math.

Let me guess? Educated in Europe?

1000 ** ( 1/50 ) is indeed 114.8

I would argue that +14.8% in a single year is exceptionally good.
But that +14.8% average over 50 years is impossibly good.
Heck, did any tech giant today managed to do this? I doubt it.

#116 Fake News Again on 09.18.17 at 12:04 pm

#86 Fake News Again on 09.17.17 at 10:10 pm
#73 Porsche on 09.17.17 at 8:55 pm
When I was 40 a 7% mortgage was a dream.

https://beta.theglobeandmail.com/real-estate/the-market/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/?ref=http://www.theglobeandmail.com&

__________________

And a $250K house was an expensive house…..

So, do you now understand the relationship between mortgage rates and property valuations? — Garth

_____________________

Yes…in 1994 I think it was…..a colleague at work was freaking out because rates were 9.25% and he was like LOCK ME IN for 5 years !!

Keep bumping up those rates.

#117 Belcarra on 09.18.17 at 12:09 pm

Oops, I meant: 1.148

#118 Old Dog on 09.18.17 at 12:46 pm

So let me get this straight. The younger gen is complaining about the seniors using resources, coming from a generation that has a new record $2.007 trillion in debt. That’s funny. How many resources do you think you’ll be using when you’re a senior. And yes you will get there some day.
Judging by what I read on this blog there’s going to be a lot of Canadians hungry for government services in 30 years. Our only hope is we import a lot of hard working immigrants to cover those future costs.
Talking about seniors, those who have been frugal and invested all their lives certainly add more to their communities than they take out. Are seniors like Garth a drag on their community? I think not. Put that stupid house greed away if you can’t afford it and follow some sensible advice like Garth doles out free.

#119 Ian on 09.18.17 at 12:47 pm

Started reading Ray Dalio’s new book today. I highly, highly recommend you dogs get a copy!

https://www.amazon.com/Principles-Life-Work-Ray-Dalio/dp/1501124021/ref=sr_1_1?ie=UTF8&qid=1505753243&sr=8-1&keywords=ray+dalio

https://www.bloomberg.com/news/articles/2017-09-17/ray-dalio-says-he-s-ready-to-give-away-bridgewater-s-secrets

#120 Ian on 09.18.17 at 12:50 pm

Brainard, Evans, and Dudley all getting aboard the dove train:

https://www.bloomberg.com/news/articles/2017-09-14/fed-officials-admit-they-ve-lost-some-credibility-on-inflation

#121 Rexx Rock on 09.18.17 at 12:55 pm

The 5 year fixed rate ,I predict will go between 3.5% to 4.5% in the next couple of years if T2 is still making Canada strong and prosperus!Heck we only had low rates for 8 years.Give it time.

#122 T on 09.18.17 at 1:03 pm

#95 MF on 09.17.17 at 11:44 pm

You are incorrect. Senior doesn’t mean dead. Seniors in my family golf every day, have new cars, eat out often and travel.

What you refer to as senior I believe you mean to be the final years of a normal lifespan. Usually this also means a long term care facility. Ever priced one out? It’s over $5000 a month per person.

Now – I provide advice on your immigration situation as I was in the same situation recently. At some point you have to pull your pants up, stop whining, and do what needs to be done. Hard for us millenials to do but I think you have it in you.

#123 aa6 on 09.18.17 at 1:24 pm

Canada has been socialist for ~50 years now. And it does have the feeling that we are entering the endgame.

When tax rates are this high, and still the governments are desperately trying to raise taxes.. it shows the true financial trouble they are in.

#124 AGuyInVancouver on 09.18.17 at 1:25 pm

#3 Mark
-1980 called, they want their interest rate theories back.

#125 Ponzius Pilatus on 09.18.17 at 1:28 pm

#81 waiting on the westcoast on 09.17.17 at 8:00 am
#36 Doghouse Dweller on 09.16.17 at 5:54 pm says… “The party’s not over in Europe with almost all countries now in negative rates.”

I think a lot of the individual countries have lowered rates not because their economy is doing poorly but because they don’t want their currencies to rise against other Euro currencies. Once Draghi starts pushing rates up, many of them will normalize as well.
————-
What “other Euro currencies”?

#126 maxx on 09.18.17 at 1:39 pm

#24 Dan.t on 09.17.17 at 4:46 pm

“…now the herd slowly getting interested in and wanting to know more about the stock market and growth assets…not there yet but it will happen. First a lot of pain to come. Those debt pigs, have fun paying off your 1.2 mil rancher, that should really only cost 430k…if you had to qualify at 6%.”

Relevant post – definitely trending fast. Wait until the “herd” realizes en masse the potential (and increasing daily) cash flow lost on a non-monetized/non-performing asset.

As money becomes increasingly more scarce and thereby more valuable, the smug who “held out” are in for a ton of regret of the shoulda, coulda, woulda variety.

The herd is getting wiser by the day to cash flow, debt and retirement made in the hell of poverty.

Realtards ought to start dusting off the old resumés.

#127 Dups on 09.18.17 at 1:45 pm

If our economy is doing as good as they say. Why is this happening?

http://www.ctvnews.ca/canada/food-bank-visits-in-toronto-back-to-recession-levels-report-1.3594721

#128 Victor V on 09.18.17 at 1:45 pm

Canadians looking for answers from the Bank of Canada after rate hike takes nation by surprise

http://business.financialpost.com/news/canadians-looking-for-answers-from-the-bank-of-canada-after-rate-hike-takes-nation-by-surprise

#129 FahtCoot on 09.18.17 at 1:49 pm

**Email I received** (Great time to buy AND sell apparently lol)

Hey Everyone,

The Fall Market has started off strong! Buyers are out in full force, much like they were in the spring. Multiple offers are all over the place which means we’ll be seeing prices start to climb over the next 2 months.

If you have a Home/Loft to sell, Let us know right away for a Free Home Evaluation and Let us show you how we’ll get you more money than the average realtor.

As usual, here are this weeks Peter’s Picks! and if you’re looking to buy, lets get out and start looking, the next 7 weeks are going to go fast and then the market takes a break for the winter. The Top 3 are AMAZING.

#130 Asterix1 on 09.18.17 at 1:49 pm

“Britain’s debt time​bomb: FCA urges action over £200bn crisis”
https://www.theguardian.com/business/2017/sep/18/britain-debt-timebomb-fca-chief-crisis

– £200bn (330 bnC$) of consumer credit amassed by households in Britain.
– Consumer credit is rising at just under 10% a year, at a time when wages are falling at 0.4% a year when inflation is taken into account.
– interest rates could rise off their record lows of 0.25% as early as November

When you compare our population with the UK and our consumer credit debt, damn, we are brutal in Canada….

#131 Dolce Vita on 09.18.17 at 1:54 pm

“net worth went down (by $10 billion), because of falling real estate values”

‘Been waiting for that to happen. The days of:

Extend and Pretend [take your pick: HELOC, 2nd Mortgage, et. al.]

coming to an end, finally…

even in YVR with unit sales at 50% of what they were a mere 124 days ago and an average price at near break even from 1 year ago (and only because of a large $ value 6 BD detached sale skewing the average value well beyond the median value 30 days ago; i.e., probably negative vs. 1 year ago otherwise).

Forget about this will not end well, this will end up as the:

largest asset wealth loss in Canadian history and all of it, RE.

I am all for it. These bad economic players will be purged from the Cdn. economy for at least a decade languishing in unsustainable debt and unable to get credit from anyone, even the BofM.

Creative Destruction, you have to love it.

#132 Dolce Vita on 09.18.17 at 2:08 pm

“But what if it’s not?”

“may be (sort of) permanent”

Honestly Garth, for a former Finance Minister and now Über Investment Adviser, that was near exasperating.

You know what is coming.

Stop beating around the bush and call it, a recession fueled by a massively indebted population unable to extricate itself out of debt due to unprecedented RE asset devaluations to come and unsustainable debt payments due to rising interest rates, to double soon enough.

Come on, sprout a few and call it (I know you will eventually, you almost did today).

And when you do, for the Love of God, can I please see an English Springer Spaniel in your daily dog image [my favorite pheasant hunting dog].

#133 fancy_pants on 09.18.17 at 2:23 pm

raising rates is the manly way to control inflation as it eats debtors. QE is the godless way as it eats savers.
supper time.

#134 jess on 09.18.17 at 2:27 pm

How did U.S. taxpayers do on their bailouts?

” Taking just one small piece of the trillions in bailouts, the TARP investments from the $700 billion fund, the payments back to the government amounted to less than a 4% return. That was almost the same return the U.S. received on its bailout of AIG, which was entirely separate from and in addition to TARP. That means the US financial system pocketed a secret subsidy from taxpayers of more than 36%.”

read here and compare what Buffet made!
https://bettermarkets.com/newsroom/financial-reform-newsletter-how-badly-did-americans-suffer-due-wall-street-caused-financial

#135 fancy_pants on 09.18.17 at 2:30 pm

QE doesn’t control inflation but it allows a debt driven society to continue to grow when productivity doesn’t

the whole monetary framework is a folly. It requires constant expansion.

in a nutshell, hyperinflation or harder collapses are coming as high rates are no longer sustainable

#136 Vas on 09.18.17 at 2:55 pm

“#43 MF on 09.17.17 at 7:05 pm

I have a question:

If the population is aging, wouldn’t that mean that the demand for bonds would go up (because they are “safe”)?

Wouldn’t that drive down interest rates?…..”

Have started reading this blog a few weeks back and this is my first comment here. Couldn’t help myself from responding to this.

Increasing demand for bonds decreases the yield on the bonds and not necessarily the interest rate on them. On the other hand, increasing the interest rates will give more leverage for the govt as the demand for the bonds increases. They can borrow more to service their old debts instead of trying to repay them.

Seeing how you tend to support RE investments in the current bloated markets, it’s no surprise that your understanding of money market and macroeconomic concepts is questionable.

Vas
35MON

#137 Ian on 09.18.17 at 2:57 pm

Just tried to short Home Capital Group. Rejected at Scotia iTrade “stock unavailable”.

Oh I see…so I guess they hogged it all to short on the pro desk?

Brokers here suck. I hate banks!

#138 nick on 09.18.17 at 3:00 pm

There is no question that global growth has been primarily fuelled by massive debt, which is growing at an unsustainable pace.

We’re all screwed when the fat realtor sings.

#139 Dups on 09.18.17 at 3:14 pm

Here goes the CAD:

http://business.financialpost.com/news/economy/bank-of-canada-deputy-governor-says-exports-and-business-investment-broadening

Jobs going to Mexico again:
http://kitchener.ctvnews.ca/striking-cami-workers-seek-job-security-and-commitment-1.3593961

#140 T on 09.18.17 at 3:26 pm

#113 Smoking Man on 09.18.17 at 10:26 am
It’s bad enough that globalists are trying to turn 4 year old boys into girls via educational industrial complex. In Ontario if you bitch about it. They take your kid away. They want to take it a step further with hormone treatment.

I’m calling the machine will try and remove all of John Wayne and Bruce Wills die hard movies from the earth.

—–

With every post you show yourself to be falling further into your own abyss.

You have had some valid points and good calls in the past but now you are just a ranting lunatic.

Get over yourself. Try posting some useful information rather than this lunatic fringe material you keep pumping.

Hormones, government turning our men into women, too far into the JD, aliens.

You, sir, are an idiot. An embarrassment to us all. I don’t even share this website with my friends anymore, I’m too embarrassed to admit I read anything with your point of view and ‘insights’ included in it.

Once upon a time I found you amusing. Now I just feel sorry for you and your family.

#141 n1tro on 09.18.17 at 3:29 pm

Got out of Nvidia for $20/share gain. Got to love algos trading with themselves based on news feeds.

#142 jess on 09.18.17 at 3:39 pm

s.african election scandal …sound familar?

http://www.independent.co.uk/voices/bell-pottinger-pr-scandal-lobbying-government-journalists-fake-news-good-people-immoral-a7952706.html

#143 Brett in Calgary on 09.18.17 at 3:46 pm

I am just about 40 and I dream of day when the average house price was 3x the average wage like it was 1981/82.

Porsche on 09.17.17 at 8:55 pm

When I was 40 a 7% mortgage was a dream.

https://beta.theglobeandmail.com/real-estate/the-market/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/?ref=http://www.theglobeandmail.com&

#144 Stan Broock on 09.18.17 at 3:54 pm

Not good.

https://ca.finance.yahoo.com/news/banking-watchdog-sees-huge-red-flag-canadas-economy-165834662.html

#145 AGuyInVancouver on 09.18.17 at 3:55 pm

#123 aa6 on 09.18.17 at 1:24 pm
Canada has been socialist for ~50 years now. And it does have the feeling that we are entering the endgame.

When tax rates are this high, and still the governments are desperately trying to raise taxes.. it shows the true financial trouble they are in.
_ _ _
Spare us the drama. North America was its economic zenith in the 1950s and 60s when tax rates for the wealthy were far, far higher than now.

#146 Gravy Train on 09.18.17 at 4:07 pm

#119 Ian on 09.18.17 at 12:47 pm

I just put a hold on the book at the library; I’m fifth in line! :)

#147 Screwed Canadian Millenial on 09.18.17 at 4:19 pm

@#137 Ian

Marc Cohodes must have shorted all available stock lol. Scotia didn’t want to make a market? Little late to be shorting it now at ~$14 no? Marc’s been bashing that stock since it was in the $50s. I guess if it is near the end and still going to 0 but who knows what’s gunna happen. This bubble has lasted far longer than I ever expected.

#148 n1tro on 09.18.17 at 4:26 pm

Currency manipulation? What currency manipulation?

https://finance.yahoo.com/m/f0151688-7caa-3f53-abfb-605cdfc97ea5/hsbc-jury-to-weigh-if-forex.html

#149 Toronto Dweller on 09.18.17 at 4:27 pm

Millenial here checking in. I have no problem with seniors drawing from the Govt services in their golden years, most of you did the hard work and put in the time and well deserve it. I think the issue with our generation is that we won’t have the same benefit as you do. Falling labour participation, contract work, outsourcing and TFW just does not translate into us putting the money into the kitty for our future. The answer is DIY through RRSP’s and TFSA’s just what the ‘ol Gartho has been preaching all along. But even with those financial vehicles I am not sure we would be able to enjoy a decent retirement as inflation is real, way too real.

#150 Screwed Canadian Millenial on 09.18.17 at 4:32 pm

@#127 Dups

If our economy is doing as good as they say. Why is this happening?

http://www.ctvnews.ca/canada/food-bank-visits-in-toronto-back-to-recession-levels-report-1.3594721

———————

Because it’s not. The economy is absolute sh*t for most people.

Idiot politicians are focused on GDP which is the worst measure to focus on for the average person. Even the elites at Davos agree.

Living Standards Better Growth Gauge Than GDP, Davos Forum Says
https://www.bloomberg.com/news/articles/2017-01-15/living-standards-better-growth-gauge-than-gdp-davos-forum-says

#151 MF on 09.18.17 at 4:35 pm

36 Vas on 09.18.17 at 2:55 pm

Sorry pal I think I asked a valid question.

Coming from a science background, where there are proven physical and mathematical laws that always behave the same, I can tell you that economic theory is 100% joke and guesswork or educated guess at best.

nothing is more pathetic than someone like you trying to say they know more about economics than someone else. Basically means they think they know how to guess better.

MF

#152 Happy Housing Crash on 09.18.17 at 5:10 pm

Dups on 09.18.17 at 1:45 pm
If our economy is doing as good as they say. Why is this happening?

http://www.ctvnews.ca/canada/food-bank-visits-in-toronto-back-to-recession-levels-report-1.3594721
_______________________________________
The housing bubble created by the dirty SHYSTERS has forced people into poverty. SHYSTERS are starving children while they convince people to financially murder themselves. Truly SHYSTERS are scum.

#153 JLaw on 09.18.17 at 5:26 pm

For what its worth, I’m under 40 and have never thought there would be a future where interest rates wouldn’t go up. The term ‘historically low interest rates’ has been used ad nauseum. Its a choice not to listen. And my father has reminded me over and over again how they almost lost our house in the 80s when their mortgage rate hit around 17%, with four very young kids to house and feed. If someone under 40 doesn’t get it, they’re choosing not to get it, and their parents are being willfully blind to what they’ve already gone through. In which case, you reap what you sow.

#154 Matsebula on 09.18.17 at 5:35 pm

Food bank use in TO at recession-era levels.

https://www.thestar.com/amp/news/gta/2017/09/18/food-bank-usage-in-toronto-back-to-recession-era-levels-report-says.html

Beginning to get ugly now with the over-mortgaging.

#155 Fuzzy Camel on 09.18.17 at 5:50 pm

Some news from the dusty construction site streets.
Kaitlin subdivision, not saying where.
Small batch of about 20 houses, fair sized, upper six figures. Averaging about 5-6 appraisers per house for half the subdivision. New Canadians, bought them 2 years ago to reassign. Well, they had to take full possession, couldn’t unload them.

Here is where it gets good, big time liar loans to close the deals. 5-10 houses sitting empty, closed, no one moved it.

They can’t sell them, so they are now resorting to renting them out. Yup, renting out a high six figure house to people in this area where rent is max $2k per month. You do the math.

So far these amateur landlords have been getting burned too. Seen at least a dozen new houses trashed in less than a year. They get sad, disheartened, and try to sell without repairing. Guess the allure of being a landlord wore off when the hardwood got destroyed.

Well, no one is buying, at least at their price.

Going to be interesting when rates top 2%.

#156 TnT on 09.18.17 at 5:55 pm

4 out 5 Doctors testified that smoking does not cause cancer.

Doctors in favour of planned tax changes urge Ottawa to forge ahead.

http://www.bnn.ca/doctors-in-favour-of-planned-tax-changes-urge-ottawa-to-forge-ahead-1.859276

If it’s in the News it must be true right?

#157 the ryguy on 09.18.17 at 6:04 pm

#118 Old Dog on 09.18.17 at 12:46 pm

“Our only hope is we import a lot of hard working immigrants to cover those future costs.”

——————————————————

I don’t at all look down on seniors. I do look down on idiots, and you Old dog are certainly an idiot.

You name me one country that has done better in the modern welfare era with bringing in massive amounts of immigrants?

You cant. Before you open up the liberal playbook and call me racist, xenophobic, nationalist or whatever terms you fools have; there are hundreds of studies that show just how badly it goes when you try and force integration. Language, culture & IQ levels matter. Read the bell curve. Hey old dog, if we dropped you into Tokyo how many years before you would feel Japanese?

“oh but diversity is our strength”. Shut up. Either you are a mouth breathing fool that just mindlessly repeats dogmatic absolutes, or you have not spent 1 minute researching what you claim to know. Either way, shame on you.

#158 Mike in Toronto on 09.18.17 at 6:36 pm

#143 Brett in Calgary

I’m 41 and if houses were 3x salary, I could pay cash.

#159 Manitoba Whale on 09.18.17 at 7:06 pm

#143 Brett in Calgary on 09.18.17 at 3:46 pm
I am just about 40 and I dream of day when the average house price was 3x the average wage like it was 1981/82.

Porsche on 09.17.17 at 8:55 pm
When I was 40 a 7% mortgage was a dream.
*****

At the age of 40 I think we can all agree:
7x the average wage home price
or 7%+ interest rates equally suck

#160 Adrian on 09.18.17 at 7:06 pm

If you understand Professor Steve Keen’s arguments regarding the difference between banks-as-intermediaries (the “Loanable Funds” model of banking) vs. banks-as-originators (the “Endogenous Funds” model), you would realize that the world has “turned Japanese” and cannot raise interest rates for the same reason Japan hasn’t been able to do it for the past 25 years: when everyone tries to deleverage bank debt at the same time, it causes a deflationary depression.

Banks create bank deposits when they make new loans. When people pay off those loans they destroy the deposits that have been circulating as money and shrink GDP. The only way to prevent this is massive increases in government deficits, since that’s the only other way money is created. Quantitative easing doesn’t work, as that simply inflates asset prices on Wall St. without boosting the circulation of money on Main St.

Remember, Canada hasn’t had our financial crisis yet. The debt-to-GDP ratio is over 150% and “credit” (= net new debt created this year) is over 10%, which is the danger zone identified by Richard Vague as being the historical prerequisites for a financial crisis. Canada is currently risking precipitating the very crisis our government is hoping to prevent. At a minimum, raising rates causes the recession that “normalized” rates will be used to reverse. In other words, we are currently repeating the 2005-2008 US experience: rates go up from ~0%, assets stagnate & fall, the economy stagnates & falls, rates go back down…

https://renegadeinc.com/none-blind-will-not-see/

#161 Tbone on 09.18.17 at 7:08 pm

#158 mike
I bought my first house in 1980 .
It cost 100k
My wife and I made 10 k per year each
We had a healthy down payment even though we earned squat.
We ended up ok .

#162 JimmyQuest on 09.19.17 at 1:00 am

#36 OffshoreObserver on 09.17.17 at 6:18 pm

Before the heft of my post, please allow me to speak about my handle: “OffshoreObserver”

Why not apply to become Garth’s goto guy in Asia. Maybe write a weekend column in between sipping brewskies on the beach and livin’ large….just watch out for the crocs when surfing ok son?

http://www.telegraph.co.uk/news/2017/09/14/british-man-killed-crocodile-washing-hands-sri-lankan-lagoon/

#163 IHCTD9 on 09.19.17 at 10:31 am

#42 Stone on 09.17.17 at 6:50 pm

Gouvernment debt problem? Please! Let’s not all be naive. Gouvernments don’t have debt problems.
___________________________

Governments do have a debt problem, because they have to roll it over on a continuing basis and pay interest on it.

“Debt servicing”

In Ontario the cost of interest on our debt is essentially tied with the cost of education. It won’t be too long before interest costs at todays rates on current debt levels will be the number 2 most expensive line item on the Provincial budget after healthcare.

Now, you can bet your @ss that this is a BIG problem. That’s because the SHTF only when we can’t make the payment – no matter if we owe 10.00 or 10 Billion.

#164 IHCTD9 on 09.19.17 at 11:00 am

#159 Manitoba Whale on 09.18.17 at 7:06 pm
#143 Brett in Calgary on 09.18.17 at 3:46 pm
I am just about 40 and I dream of day when the average house price was 3x the average wage like it was 1981/82.

Porsche on 09.17.17 at 8:55 pm
When I was 40 a 7% mortgage was a dream.
*****

At the age of 40 I think we can all agree:
7x the average wage home price
or 7%+ interest rates equally suck
__________________

Depends if you’ve got cash to put down. If you’ve got a hundred grand to put as a down payment, I’d take the high rate low price scenario any day.

You have some control over how much interest you pay, but the sale price of the house is cast in stone.

In 2001, our house was bought for 1.5X income. Started at 6.4% and dropped to under 2% low, then finishing up at round 3%. 14 years to pay off easy as pie.

Then again, there is a kid down the road who bought in 2016 at the same 1.5X income range, and his monthly payment now is less than HALF of what I paid 16 years ago on the same mortgage value. His mortgage payment is cheaper than rent.

So it’s not all bad news these days. Of course, if you made the decision to pursue work in the GTA or YVR – well you can kick your own dumbass for that maneuver, as you stuck it to yourself.

#165 IHCTD9 on 09.19.17 at 12:25 pm

#157 the ryguy on 09.18.17 at 6:04 pm
#118 Old Dog on 09.18.17 at 12:46 pm

“Our only hope is we import a lot of hard working immigrants to cover those future costs.”

——————————————————

I don’t at all look down on seniors. I do look down on idiots, and you Old dog are certainly an idiot.

You name me one country that has done better in the modern welfare era with bringing in massive amounts of immigrants?
__________________________________

Of course the answer is none.

But you would do well to accept the situation for what it truly is.

If Canadians were still getting married at a reasonable age and having 3+ children per family, then there would be little to zero immigration. It’s been over 40 years since Canadians produced enough children to replace themselves.

The fact is Canada has long ago doomed itself to replenishing its population via immigration. That is the way it’s going to go or the entire Canadian welfare state goes kaput eventually due to lack of revenue.

Immigration will double or more in the next 10 years because it has to. They’ll be brought in and expected to work and pay the taxes in sufficient qty. to keep the system limping along.

Like it or not, and realize it or not – but Canadians themselves are the ones to have made this decision. Many Canadians have said “No” to the cost and responsibility of parenthood for decades. Many more had families but only 1-2 kids.

I am guilty myself, I have 2 kids, I could have had 3 but felt two was more “manageable”. Kid number 3 will be an immigrant somewhere down the road. That’s just the way it is.

The above is a realistic view of the situation. The lack of immigration will mean immediate population decline followed by government insolvency. Robots don’t pay taxes or spend money, economic activity would drop off.

If you don’t like immigration (and who does really?), but don’t want to live in the Tundra version of Greece, then you should be advocating hard for an OUTSTANDING incentive for born Canadians to start having kids again, and to have 3+ kids. You’ll need to advocate for the formation and maintenance of the family unit. You’ll need to raise the status of parenthood once again. Everything we’ve done in Canada lately works to undermine these things – Good luck.

Old Dog is right with regards to who is going to have to pay the bills in the future. It sure won’t be hoards of young kids born of Canadians by birth will it?

#166 IHCTD9 on 09.19.17 at 12:45 pm

#153 JLaw on 09.18.17 at 5:26 pm
For what its worth, I’m under 40 and have never thought there would be a future where interest rates wouldn’t go up. The term ‘historically low interest rates’ has been used ad nauseum. Its a choice not to listen. And my father has reminded me over and over again how they almost lost our house in the 80s when their mortgage rate hit around 17%, with four very young kids to house and feed. If someone under 40 doesn’t get it, they’re choosing not to get it, and their parents are being willfully blind to what they’ve already gone through. In which case, you reap what you sow.
__________________________________________

I wish all Canadians had the wisdom displayed above. I wish that all ears and eyes were open like Mr. JLaw’s

Instead most are dumb as stumps.

“The way of a fool is right in his own eyes, but a wise man listens to advice.”

#167 IHCTD9 on 09.19.17 at 1:20 pm

#123 aa6 on 09.18.17 at 1:24 pm
Canada has been socialist for ~50 years now. And it does have the feeling that we are entering the endgame.

When tax rates are this high, and still the governments are desperately trying to raise taxes.. it shows the true financial trouble they are in.
_______________________________

I agree, long way to go still though if the bond markets’ faith holds out. Trudeau is the single most socialist PM Canada has ever had, and he’s doing massive damage to the entire economy and anyone who works outside the bloated trough feeding public sector for a living.

That’s why I’ll be voting for T2 while insulating my household from the fallout. Trudeau has us on a one way trip to National insolvency, might as well get it over with quick.

Go Trudeau!

#168 IHCTD9 on 09.19.17 at 1:30 pm

#145 AGuyInVancouver on 09.18.17 at 3:55 pm

Spare us the drama. North America was its economic zenith in the 1950s and 60s when tax rates for the wealthy were far, far higher than now.
________________________________

…and overall tax and government load on the bulky working and middle classes that built this country was way, way, WAAAY lower than today.

Trudeau and his socialist prepubescent non-gender airhead Caucus are dooming the youth and new immigrants of Canada to abusive tax loads to cover future public sector gluttony and debt servicing.

Come to Canada where you can slave your butt off so Cops and Teachers can earn what they deserve.

That’s the future, it’s obvious, some may choose to look the other way…

#169 IHCTD9 on 09.19.17 at 2:04 pm

#42 Stone on 09.17.17 at 6:50 pm

So here’s my take on minimum wage. Gouvernment mandates an increase of minimum wage. Ripple effect occurs as businesses adapt to this and increase prices. Increased prices force higher earning wage earners to knock on the bosses door for an increase. Value of gouvernment debt dimishes as a result. Gouvernment now pays the equivalent of pennies on the dollars they owe. Rinse and repeat.
______________________________

^ This is ridiculous.