If Mark Carney had hailed a cab after his speech Wednesday afternoon, a few hours before the riots, and asked where he could buy a dime bag, he’d be half way there. After all, it’s just a 15 minute ride out from the iconic Convention Centre building along East Hastings, past the hookers, the sad sea of humanity milling in front of the ancient Carnegie Library, the perforated bodies splayed on the sidewalk and the alleyways, the pushers, the pimps, through a downscale Chinatown and into a working-class hood crouching near the flyway to the Second Narrows bridge.

There the erudite central banker could have climbed out and stared at a small example of what he has done to a city – render it utterly unaffordable.

The house above, at 2556 Trinity Street, frame covered with a coat of stucco, was built 60 years ago. It has two tiny bedrooms, one bath, contains just 940 square feet and is butt-ugly. It was listed in March and sold in two days to a realtor who paid $773,000. Now it’s back on the market, this time aimed at Asian buyers – at the ‘lucky’ price of $888,000.

That’s an increase of 15% in 75 days, and multiple offers are expected. Says blog dog Doug: “It’s one thing for Joe Public to be speculating on real estate, but when realtors are effectively buying and selling to each other pocketing the commissions or cutting them out completely while inflating the price adds another level to the pyramid and one more ball in the air.”

So what does this cheeky flip have to do with Brother Carney?

Well, I guess the same as the 25.7% annual increase in Vancouver prices over the last year, taking the average property (including condos and crack shacks) to $832,000. Single family detached homes average more than $1 million. In fact, according to Coldwell Banker this week, the average two-bathroom, four-bedroom house in Van – the kind you can’t get rid of in Mississauga – now sells for $1.546 million.

Speaking of the godless GTA, prices there are up 9% in a year when inflation was 2%, and the average SFH in 416 is now valued at just under $800,000. Actually, according to Carney himself (in his big speech yesterday), house prices across Canada have catapulted ahead more than 30% since the financial crisis of just over two years ago.

During that time household incomes have flatlined, unemployment’s stayed mired north of 7%, family debt has hit an all-time high, savings have gone to zero and mortgage debt has bloated.

We all know why. Carney brought the crack. Canadians got stoned.

After all, the inflation rate currently is 3.3% and you can get a variable-rate mortgage for less than three. That makes it free money. Small rodents now qualify for financing on some bungalows. Not only this, but zero-down lending is more readily available than a $50 trick, while every major Canadian bank will loan hundreds of thousands of dollars to people with no savings.

What Carney told us following the financial panic were emergency interest rates are still in effect, feeding the biggest housing bubble in Canadian history. They’ve allowed naive and inexperienced first-time buyers to jump into bidding wars, throwing around wads of monopoly money, knowing they can get at least 95% financing. Virtually free money has fuelled not only greed and speculation, but also engendered a sense of housing entitlement. Suddenly property virgins expect granite, SS and a nicer first house than their parents secured after decades of moving up.

Worse, it’s the price thing. Escalating values and swampy incomes have resulted in this mountain of debt which Mark Carney knows will have to be repaid (or defaulted on) at far higher interest costs. Ironically, when rates go up, prices will go down. Equity will flit away, putting a lot of those buyers under water. People will feel less wealthy as houses lose altitude, likely cutting back spending, and squeezing the economy.

Is this how you expect the Bank of Canada to manage things?

Hmmm. It’s now widely believed that when America’s central banker did the same thing after Nine Eleven (Alan Greenspan), dropping rates enough to fuel a housing explosion, he gassed a bubble so big its bursting blew up the middle class. Does Carney know this?

Of course. He even said yesterday some house prices are now “extreme.” But he left something out. Action.
It’s hard to see what master is served when average people can no longer afford average houses. When, with resentment and hostility, the locals watch helplessly as neighbourhoods are consumed by wealthy foreigners. When dumb kids are seduced into homes they don’t deserve and debt they don’t understand. And when we’re all played – set up for the inevitable and painful trip back.

Monetary policy. Stones not included.

Ironically, riotous citizens just did to Vancouver real estate what their banker dares not. It made for great TV in China.