Mortgage brokers made the news yesterday talking about the Bank of Mom (and Dad). More on that in a moment.
The big report that CAAMP turned out also gave us some scary insights into the housing market, which continues to stir loins. Here’s what we know.
So far this year 425,000 properties have sold, and the average price was just over $400,000. (The typical Canadian property is now $419,699, and the median US home price is $209,700.) The aggregate value of these houses was $173 billion.
Where did this giant pile of money come from?
Well, all but 50,000 of those families took out a mortgage, but half of them signed up for a HELOC instead – which is roughly the same thing. In other words, 94% of the buyers arranged financing and just 6% bought with cash. That suggests almost all of the buyers were new to the market, or moving up to more grandiose digs.
How much did they borrow?
The best estimate seems to be $113 billion, which works out to an average of $282,000. That seems reasonable until you layer on this fact: 49% of all of the buyers (or 210,000) so far this year were virgins, who certainly would not have had an average down payment of $120,000.
Of course, some of the move-up buyers carried old mortgages they needed to discharge and replace with new ones, so the brokers figures we added about $90 billion in net new mortgage debt during the time of the study. That’s an average of $10 billion a month – in fresh borrowing.
This is happening as mortgage rates are at record lows, as you know, and when house prices have crested. There\s no doubt whatsoever that when all of these people come to renew their mortgages in two or three or five years, they’ll be paying more. And, as a result, their houses will probably be worth less. It’s hard to fathom the additional risk Canadians are accepting every week, as they gorge on cheap money.
But there’s more to worry about. The wrinklies, say the brokers, are now massively subsidizing their over-educated, under-employed offspring, luring them out of the basement with fat cheques.
The brokers say Mom & Dad are handing off an average of $10,000. In fact, when it comes to down payments, we’re told that half the money is saved and the rest comes from the parents, from another loan or borrowed from an RRSP. So, yes, we’re clearly in an age when most people think nothing of buying real estate with gobs of leverage, since they fully expect prices to go up forever. God help them.
And how about the thinly-veiled message from the mortgage dudes that parents actually have an obligation to get their kids into condos and fat mortgages? Says the association head, Jim Murphy: “I think there are a generation out there of retired people or people getting close to retirement who have a lot of wealth and there will be a transfer of wealth and that is including assistance on their home.”
Transfer of wealth? But all the surveys we’ve seen show that a majority of the Boomers have accumulated jjust a fraction of what will be needed to keep buying thirsty underwear for the next three decades. Fully half say they’ll need to sell their own houses and downsize or rent in order to free up retirement cash. Seventy per cent do not have corporate pensions, after all, and for a lot of Boomers they won’t even see any OAS until they hit 67 – the age when stuff starts falling off you.
So is this largesse just an extension of the helicoptering times we’re now in, or is it a bribe to get the 26-year-olds out of the furnace room? Beats me. (My offspring have cold noses, waggy tails and 10-inch-long hair growing from their butts.)
The other big issue, of course, is what all these gifted down payments may be doing to the real estate market. As you know, the feds killed off long amortization and raised mortgage qualifications in the specific hope of keeping people without money from buying houses they couldn’t really afford. The theory was that would cool sales and ultimately reduce the pressure on prices, once the moist virgins realized that without a wad of savings they simply wouldn’t be able to borrow.
Well, kiss that one goodbye. The kids are loose.
What an interesting life lesson this will be.
169 comments ↓
Hey Garth,
I was looking at a graph of my profits from some of your recommendations and I’m so happy to have found you!!
Private debt, specifically mortgage/HELOC debt, is the biggest threat to Canada bar none. Forget the public debt, the terrorists, the Russians and the Chinese. Private debt will hurt far more Canadians in the next ten years than all the others put together.
“Boomers have accumulated just a fraction of what will be needed to keep buying thirsty underwear for the next three decades. ”
Thirsty underwear…. LOL
Wealth was created, now it is being passed on. That leaves people like me in a bad place. No wealth is being passed on to to me and I’m not HAM. Might be a blessing in disguise if Garth is right about the future but I sure wish I had some digs to call my own.
Well, all but 50,000 of those families took out a mortgage, but half of them signed up for a HELOC instead – which is roughly the same thing. In other words, 94% of the buyers arranged financing and just 6% bought with cash. That suggests almost all of the buyers were new to the market, or moving up to more grandiose digs.
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Did by any chanve the 6% come fro Vancouver and Toronto ????/
HAM anyone ????????????
Hey why is TD bank all of the sudden increasing my variable interest rate on my line of credit by 0.5%. Did I miss something with interest rates??
Breaking news from twitter:
Keystone has just been rejected.
(Looking for more details – will update)
There goes one of the three “booming” real estate markets.
Thoughts go out to all the Canadians who will be affected.
Mark #151,
“I think you’re confusing the operation of a central bank, which can create or destroy money willy-nilly, with that of the…………..commercial banks”
“As for the claim of deception….how rude!”
——————————————————-
Save your outrage as your arguing with the Bank of England and Bank of Canada / Wiki, not me. This is not my opinion, it is what one finds if one researches money creation.
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
http://en.wikipedia.org/wiki/Money_creation
“Through fractional reserve banking, the modern banking system expands the money supply of a country beyond the amount initially created by the central bank.”
“There are two types of money in a fractional-reserve banking system: currency originally issued by the central bank, and bank deposits at commercial banks:”
“1. central bank money (all money created by the central bank regardless of its form, e.g. banknotes, coins, electronic money)
2. commercial bank money (money created in the banking system through borrowing and lending)- sometimes referred to as checkbook money”
“When a commercial bank loan is extended, new commercial bank money is created if the loan proceeds are issued in the form of an increase in a customer’s demand deposit account (that is, an increase in the bank’s demand deposit liability owed to the customer).”
“As a loan is paid back through reductions in the demand deposit liabilities the bank owes to a customer, that commercial bank money disappears from existence.”
“Because of this money creation process by the commercial banks, the money supply of a country is usually a multiple larger than the money issued by the central bank”
Excuse the cut and paste, but had to make a point.
First? Yah baby!
Beats me. (My offspring have cold noses, waggy tails and 10-inch-long hair growing from their butts.)
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So cute, my three offsprings have long tails and purr on my chest when I watch tv.
Best quality time there is, for me at least.
Here’s the Keystone news:
http://www.cnn.com/2014/11/18/politics/senate-keystone-vote-tuesday/index.html?hpt=hp_t1
Republicans can raise it again after January but the odds of success are not good based on this result.
http://www.thestar.com/business/2014/11/18/walmart_meets_with_employees_in_wake_of_proposed_layoffs.html
Walmart Canada said Tuesday it has eliminated 210 jobs at the company’s head office in Mississauga and at regional and district operations.
The job losses were due to organizational changes and will not affect store operations, according to a statement released after management met with employees at the Toronto Congress Centre.
“Walmart Canada’s stores are not impacted by these changes which are limited to the company’s head office and field management structure,” according to the release.
About 1,400 employees will continue to work at head office.
“It is difficult to say goodbye to colleagues who are affected by this change. We are extremely grateful for their contributions and will ensure they are treated with the respect and dignity they deserve. Affected associates will receive competitive severance packages and access to strong career counseling services,” the release went on to say.
The theory is buy high sell higher
Chinese buyers are real here, some of them have Permanent Residency status here, so Garth assumed that they’re locals. But they’re not!!!
There’s a term for permanent residents. ‘Canadians.’ — Garth
Transfer of wealth? But all the surveys we’ve seen show that a majority of the Boomers have accumulated just a fraction of what will be needed to keep buying thirsty underwear for the next three decades.
Yes, Garth, transfer of wealth.
Let’s break the Boomers down into 2 groups: Cash Rich (i.e. no mortgage, generous pension, investment portfolio), and Everybody Else.
Some Cash Rich Boomers have kids. Some do not.
Of those with kids, some of them give lump sum down payment money to their offspring. They’re the ones who are showing up in these statistics. Some of them do not give money. I’m grateful to my dad for blocking my mom when she floated the idea of giving money to me to buy property.
Then, out of Everybody Else, I guess some of them pull money out of their HELOC or re-mortgage their own houses or pull some other kind of debt magic to help their kids make the down payment. These ones also show up in the statistics, but obviously this is no “transfer of wealth”.
Here you go Dominoes Lining Up:
http://www.cbc.ca/news/world/keystone-xl-pipeline-rejected-by-u-s-senate-1.2838677
[…] Source: http://www.greaterfool.ca/2014/11/18/parents-3/ […]
“I think there are a generation out there of retired people or people getting close to retirement who have a lot of wealth and there will be a transfer of wealth and that is including assistance on their home.”
No, in fact the stats and the surveys by banks clearly show that older people generally have little in the way of liquid assets, and most of their wealth is tied up in housing.
This habit of goosing your home with a HELOC to allow your kids to buy into the same asset class is clearly a positive feedback loop. It’s another factor in the rise of home prices. As any engineer knows, runaway positive feedback does not end well.
Check
Keystone failed before Obama could veto
Garth, when Canadian house prices finally come down, do you expect a crash a la USA, a slow descent, or a UK-style dip followed by Mark Carney and thus more housing inflation?
Hi Garth
This is all fantastic news for a renter sitting back and waiting for the sky to fall. I love hearing people are continuing to feed at the debt trough, keep going sheeple!
I can’t wait for the day to buy a house that is 50% off from a realtor or mortgage broker. Karma is cool.
Mr. R.
Hurt`n Albertans will not be pleased with the Keystone rejection along with oil at 74.26..
So what is this now…
the 9th or 10th time Keystone has been voted down?
#22 Mr. Reality
I’ve been waiting 10 years
Instead of parents giving money to kids for house downpayment, they should give this money for a TFSA, RRSP, or non-registered account, with a balanced portfolio.
@#14 North Burnaby
Old news, get used to it. Move on.
#8 Blacksheep
Great post! You’re 100% correct. It took the BOE long enough to see the light, but better late than never!
Cheers!
@ # 11 Dominoes lining up
“Republicans can raise it again after January but the odds of success are not good based on this result.”
What do you mean chance of success is not good based on this result, they needed 60 votes and got 59… they were off by one vote.
Garth, what do you think the chances of a sustained period of negative interests are in Canada and the U.S., much like Japan?
Zero. — Garth
Debt is simply a deferment of future consumption to today. It will have to be paid for eventually.
No generation has the moral right to burden the next with debt. And yet, that is the society we have.
We are a deeply immoral nation. At one point, we weren’t. Hard work was rewarded, and foolish ones punished. But now we bail everyone out and tell everyone we no longer have to wait but can buy whatever want now. I believe the basis for all this is our money system. We don’t have honest money that reflects actual WORK that went into producing it (gold and silver), we have fake paper money that can be printed at will and in infinite amounts (completely disconnected from reality).
In my experiences, I was raised by an old school family with good values. I’d say 1/10 kids or less my age have similar character. They’re all flaky, unreliable, lie, backtalk, cheat, steal, don’t form long term relationships, obsessed with short term pleasures like their phones and drugs, disrespectful to their parents, selfish and most frightening and DANGEROUS of all in a democracy: a desire to conform with their peers. And these are only some of the characteristics I see.
Of course, I never point this out and get along well with others. But I could never raise my kids to behave like the majority I see now. It’s bordering on what I would call psychopathic, where everyone disregards the consequences of their behaviour as long as they get some temporary pleasure or benefit from it. Try holding a conversation with people today – it’s impossible without being interrupted by people staring at their phones.
Who are you talking to? I’m right in front of you offering you the human experience! We’re becoming the BORG and we don’t even realize it. Resistance if futile.
Hello World..
From a Galaxie Note 4
I guess Kylie the Millennial’s entitled attitude was representative of a lot of what’s happening out there. Cool, if the parents want to, understand the risks, and are able, but I suspect a lot of the parents ponying up cash don’t realize they themselves need it as a safety buffer for retirement, and that if they hit hard times later their kids will have little to offer in terms of help. Sucks to be poor when you’re young, but dire to be poor when you’re old.
#29 VanDammeCouver
“What do you mean chance of success is not good based on this result, they needed 60 votes and got 59… they were off by one vote.”
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It’s not about math, it’s about politics, which you don’t seem to get, VanDammeCouver.
This is a big and unexpected bonus to the anti-Keystone side.
Obama can now fortify his position, saying he supports and respects this Senate’s decision. So what if the next one says something else (which is far from assured)
It will now be much, much easier to veto any Republican bills next year.
Plus, two months of talking heads and victory parades for the anti-Keystone side.
Read this if you have doubts:
http://insideclimatenews.org/carbon-copy/20141107/house-can-gop-override-obama-keystone
http://business.financialpost.com/2014/11/17/is-helping-children-buy-their-first-home-becoming-the-next-parental-responsibility/
Scott Hannah, the Vancouver-based chief executive of the Credit Counselling Society, cautions parents really need to encourage children to save at the same time as they are giving them money.
“You really want them to have some skin in the game,” he said. “The worst case I’ve seen was a woman who came to me and said she helped her son with a $150,000 down payment and that got [her son and his wife] into a $600,000 home. They ran up a line of credit, because once you have a home you can get a line of credit. They couldn’t manage it and the parents bailed them out of that. I told her ‘if you don’t help your son get financially independent, he’ll be coming to you in his 40s.’ The line went silent and she said ‘he’s 43′.”
#25 Arfmoocat
That sucks. It really sucks to have to wait so long to get what you want. But is it what you need? Or do you want it because you see others increasing their net worth at an unsustainable rate of return?
The only reason someone would gorge on debt for an asset is because they believe the asset will be worth more. If the average detached toronto home increases at 5% that’s nearly 50k a year. Do you realize how hard it is for the average family to save 50k a year? When the music stops, reality will set in.
Keystone? “It’s a no brainer”, our Steve told us. Apparently not.
And while it’s true parents will use their HELOC to provide their kids with the downpayment, I think they do it just as often to lower the financing requirement and payment so nobody knocks on their door to co-sign the mortgage. They don’t want the responsibility or the tax complications, especially if the kid & his squeeze don’t stay together too long. They see homeownership as a sort of stability they can offer the kids. The proverbial “start in life”. But it could be the albatross around their neck if they don’t have some measure of financial maturity. A few trips to Costco loading up the flatbed with “stuff” to fill the house and low and behold the credit cards are racked up. A very slippery slope.
#22 Mr. Reality
” I’ve been waiting 10 years”
I hear ya fella. I figure we will be waiting another 10-15 years for this market to bottom out depending if deflation truly takes hold.
The beauty of this scenario is you will never get to experience the feeling of negative equity. These mommy and daddy millennials are in for a real big shock.
Buy at the bottom, patience is a virtue.
Mr. R.
Cato the Elder —
Enough with the endless repetition of sophomoric Randian crap.
Sir Garth:
The only way parents sleep well is if they know that their children are sleeping well. Remember you said that a “home is where your family is”?
Private debt, specifically mortgage/HELOC debt, is the biggest threat to Canada bar none. Forget the public debt, the terrorists, the Russians and the Chinese. Private debt will hurt far more Canadians in the next ten years than all the others put together.”
Sure, but it will also enrich certain Canadians beyond their wildest dreams. Can you say “outsized bank profits!”. Can you imagine the TSX moving up to an index level of 50,000 in the next decade after the past 15 years of relative stagnation?
Remember, for every borrower, there is a lender. If the borrowers suffer, well, by definition, the lenders must be getting relatively richer.
“Garth, what do you think the chances of a sustained period of negative interests are in Canada and the U.S., much like Japan?”
Extremely likely. But won’t help homeowners all that much as risk premia against loans, even at zero % BoC policy rates, are likely to tick higher. And of course, if you followed the Japanese experience, house prices went down for many, many years and may still be going down. Not a happy situation for homeowners, despire the BoJ’s ZIRP.
Mark, dude. You on drugs? — Garth
“Hey why is TD bank all of the sudden increasing my variable interest rate on my line of credit by 0.5%. Did I miss something with interest rates??”
Canadian retail borrowers are, in general, becoming less creditworthy as house prices drop and job prospects dry up. That is why TD is increasing the rates on the line of credit products. I got one of those letters as well, despite a pristine credit record and my particular facility barely being drawn.
My conclusion: go long Canadian bank stock, because higher risk premiums against a significant portion of their asset base is likely to be the norm going forward.
#31 Cato the Elder
When you were a kid, some old fart said the same thing about you generation. The cycle continues.
“When the music stops, reality will set in.”
The “music” stopped last year in the GTA and throughout the other major Canadian housing markets. The only “increases” in prices seen these days are on account of a shift in the sales mix — the houses that the Realtors are actually transacting in, not because individual houses are rising in price.
You can see this in most statistics published by government. Inflation being practically non-existent. Tax collections down significantly. The employment situation weakening. Banks becoming increasingly desperate to lend out money to the increasingly limited pool of credit-worthy borrowers. A domestic stock market that is practically on life support. Only the Realtors in a few major cities are still trying to cling to the delusion that prices are rising, but most of us who have been observing the market and actually have our ears to the ground know better.
i see this all the time: some parents are able to help and have the resources but many do not. Quite a few are lending money to help broke young ones lever up on overpriced RE at record low rates and yet many of these parents have pathetic rrsp/ liquid assets.
It is absurd and just wait when this market stalls out. These people will go out with their hands open looking for a bail out at the expense of the rest of us.
Even more sad, quite a few of these kids are getting money from mom to buy poorly built condo garbage in Toronto and surrounding area. As a prominent UofT professor of architecture has stated, in less than 10 years most of these places built in the last 10 years will be slums with collapsed market values.
What a debacle awaits
JO
Re. #55 PEI reader on 11.17.14 at 10:19 pm
Is that whole PEI “come from away” people thing from yesterday part of the same cultural ethos as “stay where you be and I’ll come where your at” thang……or was it, “Stay where you’re at and I’ll come where you’re to.” Garth any other sayings like this I can add to my linguistic quiver, and how can I apply this to my investments?
‘Beats me. (My offspring have cold noses, waggy tails and 10-inch-long hair growing from their butts.)’
Haha!! Best kind of offspring there is in this whole wide world :)
How long are the oil sands going to be around? In my opinion, more than enough justification for CANADA to build a refinery and keep those jobs HERE rather than piping raw material across a continent for someone else to do it.
I’m 56, divorced with one 32 year old daughter. The financial advisors say if I died she would be a millionaire. What is she doing about it? She’s married, two kids bought a third house, works hard and lives a good life.
The point is that not all kids are basement dwelling leeches. Some are but many more work hard, raise families and enjoy a great Canadian lifestyle. I also believe that there will be a lot of money changing hands via inheritances soon as Boomers do what they can to help their kids.
Boomers Rock!
#31 Cato the Elder
Hey Cato, your rants are on the verge of becoming psychotic… maybe this is a good time to take a break?
We appreciate your contributions, make a tea and enjoy life buddy…
“Mark, dude. You on drugs?”
Okay, after re-reading my comments, I should have, in hindsight, confined them to Canada. US interest rates are likely to rise on a significant basis well before Canada’s do.
Why? Because the US has so much foreign debt that there is a built-in source of foreign demand against US-domiciled production. China, Japan, and other foreign nations will inevitably use their US Treasury investments to go on a shopping spree for US-made goods and services, creating inflation in an otherwise deflationary US domestic economy. Higher rates, and the accompanying currency devaluation will be required to reign such in.
Contrast this with Canada, which has relatively little foreign debt. As Canada’s housing market deflates, there will be significantly reduced domestic demand. And, of course, with the (relative) lack of foreign debt, very little foreign demand. Hence, Canada will be able to run ZIRP for far, far longer than the USA. The USA is into its 6th year of ZIRP post-bubble collapse. Conservatively, Canada could at least equal that and exceed it significantly.
Re. #42 Mark on 11.18.14 at 9:21 pm
Japanese demographic of an aging society with close to zero immigration ( a $trillion or so sitting with pension funds) makes it way different from US/Canada…..call it a controlled descent…
Hands up why governments love housing booms?
brokers figures we added about $90 billion in net new mortgage debt during the time of the study. That’s an average of $10 billion a month – in fresh borrowing.
Now hands up? Got it yet?
Debt is asynchronous. You borrow now. The bank “prints” $300K and hands it to a boomer who spunks it all on vanity products in the service sector which are either of no real value or if they are they are manufactured overseas.
Then the millennial gets their first pay check and their first mortgage bill. And that keeps going for 25 to 30 years.
So the economy gets the instant sugar hit followed by a 30 year come-down. It’s a fiscal drag, baby (boomer).
It all works great. Until demographics shift and suddenly your money supply collapses. You have to do stupid stuff like cut rates to rock bottom to try and shock the corpse. But it’s bad because it encourages idiots to leverage instead of encouraging smart people to produce wealth.
Then that wears off too. And your money supply collapses.
Good luck downsizing. Some of you will. Many won’t. Ka-ching.
“How long are the oil sands going to be around? In my opinion, more than enough justification for CANADA to build a refinery and keep those jobs HERE rather than piping raw material across a continent for someone else to do it.”
Oil sands are here to stay. Production is at a lower long-term all-in cost than the newly fangled hydro-fractured shale wells, with far fewer depletion issues to boot. Being able to use the same set of infrastructure for 50+ years of reserves, versus building infrastructure for wells that deplete after 2-3, has its advantages.
As for refineries, why build in Canada when refineries near the demand centres, particularly in the United States, are under-utilized and sitting idle? Sounds like a waste of investment capital to me.
http://www.biv.com/article/2014/11/nobel-economist-housing-bubble-formula-shows-vanco/
#4 ILoveCharts:
Wealth was created, now it is being passed on.
No it wasn’t. Debt was created that looked like wealth, now it’s collapsing back in.
#39 + #44 Spot on. His generation pile on the debt and the criticism.
Mark – I don’t think Canada can run ZIRP. If the US put rates up guess where I’m putting the cash portion of my savings? In the then tanking CAD or the ascendant USD?
31 Cato the Elder:
I agree with your post wholeheartedly. Gen Y and the younger generations have no soul. And as for all of thus conformity..I don’t get it either. It’s like communist Romania: don’t be different! People who are different stir the pot and we don’t want that.
Having said that, it’s not like they learned how to properly deal with problems. The only solution was to have their parents, the schools ban something. Scarf might choke you? Ban them. Don’t go up stairs cause you may fall. Every one gets a ribbon. I could go on…sigh.
There’s so much more to say but I’m getting depressed just thinking about it.
“10-inch-long hair growing from their butts”
Brings a tear to the eye….
First time poster longtime reader. Thank you Garth for your insights. The fact as you mention about Baby Boomers lending down payments to their kids without really paying credence to their own finances for retirement is a bit puzzling. Until you realize it’s all about the Bank of House. I’ll bet many of the boomers giving their offspring money for down payments will want to sell and downsize, and reap profit, in the near future. With a depreciating asset (house) This could get very interesting soon.
Cheers.
Re: #4 ILoveCharts on 11.18.14 at 7:21 pm
In reality next to no wealth was created. Wealth can only be created by someone who sells a property or properties and rents or uses the money for something other than real estate. The logic being the person who sells a house to buy a bigger house is as stupid as the person who gambles at casinos and has a big winning session so the person ups the stakes and bets more.
“Debt is asynchronous. You borrow now. The bank “prints” $300K and hands it to a boomer who spunks it all on vanity products in the service sector which are either of no real value or if they are they are manufactured overseas.”
Banks don’t “print” money. They have to borrow it. But the rest of your thesis is correct — the entire process of lending and borrowing creates a taxable revenue stream to the lender, which, in turn, creates tax revenue for the government.
It has often been said that by the time one is done paying off a house, they’ve actually paid for 4 houses. If you figure the normal tax rate of 33% on interest income, it can be said that the government actually gets one of those “4” houses, the bank shareholders get another, and the bank’s depositors/creditors get the other 2.
“Mark – I don’t think Canada can run ZIRP. If the US put rates up guess where I’m putting the cash portion of my savings? In the then tanking CAD or the ascendant USD?”
Higher rates tend mean weaker currencies, as rates tend to only rise when a currency is weakening by way of inflation. Will you really go out there and chase yield in a declining US currency increasingly prone to inflation? Probably not good for your portfolio, and especially bad on an after-tax basis.
In the words of Charley Brown, noted scholar, ‘outside the box thinker’, and lousy football player – “Holy Crap”.
I apologize for being rude, Mr. Turner, but this post today was beyond stark.
I am not sure why we are not running news stories about some of the numbers in the RE markets as the LEAD at Six O’Clock. (*of course TV is drawing dwindling audiences, but that’s another story).
Maybe it’s because the CREA boys buy a TON of advertising?
No, of course not, that is just a coincidence.
I had to to wash out Charley’s mouth with soap after he read some of the stuff that CREA has been pushing.
It’s just about like something from Orwell. If you are going to lie, make it a BIG ONE and keep going.
I find it all rather unsettling.
I love my home country Canada, but lately we’ve become a bit of a joke. Really selling houses back and forth and bragging about it. Phew that sort of thing will give you a headache, and then there’s Steve-O
Anyways sitting right in the heart of oil country and while there are no big moves yet its getting eerily quiet in some respects. However, Joe 6 pack does seem to know the price of oil these days, and my favorite comment came saturday morning when I heard the price went up over a dollar overnight.
I think you said it well Cato with your #31 post.
I know from my line of work we have become a very unproductive and inefficient nation and that bothers me, and I have worked in many industries, provinces, and a territory. What am I to do about it? I can change me and try to have a positive impact on others, but beyond that this ship is gonna sail its course. For those who aren’t prepared its gonna be a blood bath, but I have a feeling none of them are reading Garth’s blog.
I have heard some people say here how if the were to be laid off they would be in hot soup fast. I don’t get it average hourly wages here are some of the highest in the world.
I did see an email today that was reminiscent of the bumper sticker from the 80’s “Please god let there be another boom I promise not to piss it all away” followed by “So have you?”
Its gonna be interesting to see how the dust settles on this one
#114 Mark on 11.18.14 at 1:07 pm
“Currency depreciation is DETRIMENTAL to all economies. Especially in Japan, where they import almost ALL of their raw commodities.”
Great post. ”
Totally wrong, the currency depreciation allows for a spike in export-led growth, as Japan in the 60s-80s(until the PLaza agreement), along with increased domestic consumption as foreign products/trips become too expensive for the locals….
Some commodity import industries will suffer, but with the price of oil in the tank (yukyuk) and the nukes about to be switched back on, your Japanalysis is way off….
You know what really says “different”? Old people moaning about the young having no values like in their day.
Yeah that’s it guys. http://lmgtfy.com/?q=irony
Furballs rule!
Keystone: timing & circumstance. IF the USA hadn’t been able to pull significant oil of their own via fracking plus the discovery of new oil fields & if there wasn’t an oil glut (due to the world wide economic slow down) then Keystone would have been a slam dunk & if that happened to ride roughshod over the environment, too bad. Should the USA suddenly ‘need’ the oil Alberta is trying to flog see how fast those pipelines get approved. There’d be skid marks on the paperwork. Who knows? Maybe we will find other, better ways to heat our homes & produce our goods & can keep the oil where it is. Time will tell.
The price of housing is what the market will bear. Canada’s housing market is finally crumbling with some notable holdouts, but some places will always hold value & garner premium prices. So prices may drop from current highs, but presumably not below the cost of replacement. So what does it cost to build a new place these days before markup? Based on insurance estimates for cost replacement, quite a lot.
However, costs can go down for other reasons – deflation being a goodie. Doesn’t have to necessarily be monetary, either. Canada has 9 million Boomers. if 70% of them need to dump the house in order to have retirement funds to live on, that has got to have an effect on how much a house will be able to sell for. Though one must ask, if they all of them are selling, who the heck to & further, where the heck are they going to live once they have sold? Maybe they’ll all of them rent the condos being built in Toronto, or rent back the house they just sold, always presuming the new owner isn’t planning to live in it, of course.
Another day, another 6pm “news” story on Global Vancouver.
A developer is grinding Vancouver City Hall on his application to build a larger residential tower( part rental, mostly sales).
“Enhanced Suites”
250 sq ft apartments.
Yup.
250 sq ft.
Affordable housing has come to Vancouver.
#45 Mark on 11.18.14 at 9:29 pm
================
TSX on “life support”??????????
@#47 Willie Hoser
“Is that whole PEI “come from away” people thing from yesterday part of the same cultural ethos…….”
++++++++++++++++++++++++++++++++++++
Nah, its just the narrow mindset of the majority of Islanders that have never been more than 50 miles from where they were born labelling everyone they dont know….”from away”.
Kind of like that xenophobic country Japan. Where foreigners must report to the police every six months to have their visas restamped. A catholic priest that has lived in Japan for over 40 years has challenged his non resident status.
Even Japanese children of parents who have moved away for work and then returned are treated as “tainted” and treated as pariahs.
Narrowmindedness isnt just a PEI “trait”
If 50,000 out of 425,000 sold did not need any mortgage,
that’s 12% cash purchase not 6%.
How did you get 6%?
Half, as I said, used HELOC financing. Same thing. — Garth
There’s a term for permanent residents. ‘Canadians.’ — Garth
Nope.
“A permanent resident is someone who has been given permanent resident status by immigrating to Canada, but is not a Canadian citizen. Permanent residents are citizens of other countries.”…
“When you become a Canadian citizen, you are no longer a permanent resident.”
http://tinyurl.com/3d2h9p
Canadian enough for me. They chose here. — Garth
Great picture Garth. Says a lot about that man and woman.
And Canadian Property is double the price of an American Property. Says a lot about Canadians. Mind you, in fairness to Canadians, Canadians are just following the same path as the Americans, the Japanese, the Europeans already went on ahead of the Canadians before they were Financially blown to he11.
#Racoons?… #ParentalUnits?… #WhoNeedsAMortgageBrokerOrHELOC… #WhenYou’reFederallyLicensed… #ToGMOtheGROW…
http://youtu.be/hek9b0Zyl1M
[NoteToSnowBoid: Now you know why I can’t leave the OkiNogan during the winter like you CivilizedNomads… for if I did, who’d mind the Plantation?… Or worse, resuscitate and rehabilitate the Racoons? NoteToGT: “My offspring have cold noses, waggy tails and 10-inch-long hair growing from their butts.” – Hon. GT… I am positively thrilled, AuldPol – to learn that your progeny chose the RCN… vs. those other… well, you know… OtherBranches. EtymologicalNotesFromAnUnrelatedHairyAss: http://nobadgekillick.blogspot.ca/p/navy-speak.html ]
Parents should never help kids with down payments. But most will, in school we are taught to compete, our kids success is a reflection of our success.
Now the more you live life worried about other people’s opinions about you, the bigger the deposit.
If you’re like me and give no shit what people think , drive a pick up with roll down windows, standard transmission you know the kids will get nothing. Even though I could pay cash for each one for a home almost anywhere in the city.
If they never learn the leason of hunger, they will never have anything.
Plus, extremely posable that half the loot you give them will be lost after the divorous.
Let them fight over it after you die.
There’s a term for permanent residents. ‘Canadians.’ — Garth
Nope.
“A permanent resident is someone who has been given permanent resident status by immigrating to Canada, but is not a Canadian citizen. Permanent residents are citizens of other countries.”…
“When you become a Canadian citizen, you are no longer a permanent resident.”
http://tinyurl.com/3d2h9p
They chose here. Canadian enough for me. — Garth
#41 Mark on 11.18.14 at 9:19 pm wrote;
Remember, for every borrower, there is a lender. If the borrowers suffer, well, by definition, the lenders must be getting relatively richer.
Whoa, that’s the point at which the smell of b*llsh*t got a little too strong!
First “for every borrower, there is a lender”. Really? I don’t think so. If that was true there would be no problem. Unfortunately it’s more like “for every 100 borrowers there is a lender”. And if each of those borrowers has to cut their consumption by $1000 per annum the lender has to increase its consumption by $100,000 per annum to compensate. And increasing consumption is not how the average lender got “relatively richer”. Not Going To Happen.
Secondly, there may be a dollar lent for every dollar borrowed but I doubt very much that there is a dollar saved for every dollar borrowed. Haven’t you noticed that the Canadian savings rate has dropped off as the Canadian debt/GDP ratio has risen?
No, the only way to explain how the debt has been financed is the explanation offered to you by Blacksheep and JimH. There is no way that it has been financed out of savings.
And when it has to be paid back, the toll in bankruptcy and human misery is going to be huge. Partially self-inflicted of course but still huge.
#54 ben
————–
Great post
So….
Calgary Oct 2013 Average: 458k
Calgary Nov 2013 Average: 459k (+1k)
Calgary Oct 2014 Average: 488k (+whatever)
Calgary Nov 2014 Average: 475k (-13k)
Is this the beginning of a trend reversal in Calgary?
“TSX on “life support”??????????”
Absolutely. With the exception of the bank stocks, practically everything else is dead. The public has little to no enthusiasm for stock investing, instead preferring to speculate in houses. Brokerages are literally giving commissions away in an effort to drum up business, any business. The largest mutual fund in Canada, the XIU trust (S&P/TSX60 iShares Fund), has shed a significant amount of assets over the past few months.
The index level of 14,9k still is not above the 15,2k first reached in 2008. And the dividend yield relative to the 10-year or 30-year GoC T-Bond has almost never been higher. The Canadian IPO market is basically dead. So yeah, “life support” sounds like an apt phrase used to describe it all. But don’t despair, the best buying opportunities come when things have spent a long time in relative underperformance or stagnation.
TSX return YTD, 12.6%. Twelve-month return, 14.6%. Beats every housing market in the country, and furnishes more evidence you are wrong. — Garth
#32 Smoking Man on 11.18.14 at 8:25 pm
Hello World..
From a Galaxie Note 4
…………………………………………..
For gods sakes what are you a 14 year old hello kitty girl from the valley.
Garth – The headlines continue to say the ‘average’ price is up year over year and October was the best on record in recent years. This despite the numerous (failed) measures by the FEDS to slow down the orgy. As such, debt is on the rise even if not as fast as last year or the one earlier. Do your friends in Ottawa intend to pump the breaks once more or are they are content with Mr. O’s hands off approach? What can the GreaterFool Blog’s Department of Intelligence Gathering report?
Sorry about the double post Garth…Lost my connection and didn’t know if my post was received. cheers.
#41 Mark on 11.18.14 at 9:19 pm
Sure, but it will also enrich certain Canadians beyond their wildest dreams. Can you say “outsized bank profits!”.
Can you say – increased Canadian bank dividends???
Mark # 62,
“Banks don’t “print” money. They have to borrow it.”
—————————————————-
You keep repeating the same tired story.
You clearly ‘missed’ my post # 8, because you have no viable explanation why the Bank of England and Bank of Canada / Wiki sites, completely disagree with your claims.
Why not refute the reasoning provided by these sites?
Come on Mark, your the guy whom always answers questions no one asked, yet now runs, when caught in a deception.
#78 OMG the best on 11.18.14 at 11:39 pm
#32 Smoking Man on 11.18.14 at 8:25 pm
Hello World..
From a Galaxie Note 4
…………………………………………..
For gods sakes what are you a 14 year old hello kitty girl from the valley.
…….
Ha sort of,
by day, a calm cool shit together wierdo IT dude that talks to himself.
By night, as drunk trying to write a book, it’s shitty.
By weekend, someone who should never have access to an atm machine and JD, and ear buds.
“Secondly, there may be a dollar lent for every dollar borrowed but I doubt very much that there is a dollar saved for every dollar borrowed.”
By definition, every dollar that someone borrows, is somebody else’s savings. As is easily explainable, the chartered banks have no ability whatsoever to conjure up money out of thin air. If savings do not exist, then loans cannot be made. Assets at a chartered bank must equal liabilities + shareholders equity.
“You clearly ‘missed’ my post # 8, because you have no viable explanation why the Bank of England and Bank of Canada / Wiki sites, completely disagree with your claims.”
Those sites/Wikis refer to a very technical aspect where the central bank, but not the chartered banks, can, as a matter of monetary policy, either enlarge or contract the money supply. They do not apply to non-central bank participants in the economy however, such as chartered banks. Of course, significant abuse/misuse of such policy measures will create inflation or deflation that will eventually require policy action to correct if a currency is to remain viable.
Can you say – increased Canadian bank dividends???
Yup!
TSX return YTD, 12.6%. Twelve-month return, 14.6%. Beats every housing market in the country, and furnishes more evidence you are wrong. — Garth
Sure, but still not back to 2008 levels (15,2k). And so many index constituents are trading at levels more typical of 2009. Take out the banks and the rest of the index looks pretty ugly. But my comment was mostly on the topic of investor enthusiasm towards the stock market, which is, at the moment, quite minimal and very pessimistic. Don’t you lament at almost every blog post that an overwhelming majority of TFSA’s are stuffed with GICs sold by [email protected] instead of, at the very least, some exposure to stocks?
When people tell their 24 year old to move out on their own I bet that most do not get any financial help from the Mom & Pop bank. He/she is really on their own.
#55 Mark…”As for refineries, why build in Canada…”
Jobs for Canadians in our own land: so the youth can have a piece of land; have families to carry on; to support the old and our system. That way small businesses are created to satisfy the individual needs and wants.
One of the meanings for democracy is “belief in or practice of social or economic equality for all people.”
Food prices on Vancouver Island have risen so high that one steps back in shock. How can a family afford these prices? They can’t.
http://www.biv.com/article/2014/11/nobel-economist-housing-bubble-formula-shows-vanco/
Here you go all you vancouver haters…. Guess you can go get some sun lamps for your basements suites cause your probably going to be renting till your 50, go make some more tinfoil hats and pray to your Garth turner housing crash closet shrine …. So glad I bought 5 years ago !
I wish my parents had $10,000 for me when I was buying my first house. Or going to school. Or at any point.
Actually to be fair my ex-father-in-law was really good to us. I don’t begrudge the deals he gave us at all, even though it was never “free” money the exchange really helped as I was putting his daughter through school, and I mean a big help, he was certainly trying to help. But my dad? Nothing. I moved out when I was 19 because they bought a house that didn’t have a bedroom for me.
In retrospect though I’m the only one of the kids not still on hand-outs, and we’re all well over thirty. Maybe they did me a favor.
To be fair my dad slid me a little money when I was in school, which at that time was probably a big deal for him. But it didn’t even cover what I was paying my grandmother (his mom) in rent. She was on CPP.
These days they slide my nieces and nephews all kinds of cash, and it used to piss me off because my kids don’t get nothing but ridicule. But then one day it dawned on me, the other grandchildren go out of their way to entertain my mom. My kids go to school and get good grades and compete in sports. My mom has no time for that, so the models and the actors get the money. She is entertaining herself.
And that’s the point boys and girls. Mom and dad don’t give you money because it’s good for you. They give it to you because it’s good for them, or to control you. Unless you need the money for drugs, say “no” if you can because otherwise there is a string attached. Even if it’s just to get you out of the basement at any personal cost to yourself. Don’t take dad’s money.
This doesn’t apply to all parents, but if the money comes with an instruction say no.
DELETED
PEI is the best place on earth 60 days a year unless you
like lots of bad weather.Thats a lot of Canada. I was thinking Windsor area warm and close to less expensive US products.
Yes the homeless basted deserves to be marginalized ,their crime, didn’t understand the lesson.
Spit on them, they deserve it. We drive by in our lexis.
Chuft at our mastery of following the rules, indigent to pain, we are the ones deserving …
Humanity sicks. ..I killed 26 ounces of JD, and four glasses of wine…
I bet I can still fly a space ship..I’m from the planet Nectonite.
It sucks there too…..
Love is the only way this journey is posable. ..
I can’t belive I spelt everything perfectly. .
It’s oviousky the new phone.
TSX is overpriced just like the housing market, only difference between US and canadian stock is canadian stock have a lot of miners and commodities producers which are getting hammered because of falling commodity price.
Building refinery’s in Canada not going to happen. Right now Koch Industries holds leases on about 1.1 million acres in the tar sands. The Keystone XL pipeline when it is built will benefit this company to the tune of $100 billion because they own the refinery’s in the US where the oil will end up.
The Koch Bros. are also the main machine behind the Republican Party almost to the point that they run it.
Noble economist said “Prediction is impossible” and his housing bubble “formula shows Vancouver resistant” More housing doublespeak?
http://www.biv.com/article/2014/11/nobel-economist-housing-bubble-formula-shows-vanco/
Am I reading that right. Prediction impossible; yet, a formula predicts Vancouver is resistant?
For what it’s worth, the TSX back in 2008 reached 15,200 with the help of RIM which was trading north of $100 and had a market cap that exceeded RBC.
#87 Mark on 11.19.14 at 12:18 am wrote:
By definition, every dollar that someone borrows, is somebody else’s savings.
Funny thing about definitions: sometimes they’re wrong. Like this one.
As is easily explainable, the chartered banks have no ability whatsoever to conjure up money out of thin air.
True
If savings do not exist, then loans cannot be made.
Not true.
Assets at a chartered bank must equal liabilities + shareholders equity.
That is absolutely true. and it explains why the preceding sentence is not true. Whenever a loan is issued the bank gets a loan liability in the form of an agreement to deposit $X in the borrower’s account immediately and a loan asset in the form of the borrower’s agreement to repay the $X plus interest over the next 20 years (or whatever). The bank doesn’t need savings (or even money) to do that. It just needs the loan asset to equal the loan liability — or even better to be worth more than the loan liability.
Actual money is only needed if the borrower withdraws cash from the account. Which may happen. But it normally doesn’t. Everyone does electronic transfers from one bank account to another nowadays. And for well managed banks the total amount being transferred from Bank A to bank B roughly matches the total amount being transferred from Bank B to bank A. Any difference is only pocket change. Banks like A and B can easily handle it from the shareholder equity. Or if they prefer they can fund it by a loan (created without savings by the process described above) from another bank.
So the banks don’t need savings to make loans. They only need money to pay cash to account holders on demand, whether they are savers or borrowers. For all other payment transfers they just need competent accounting.
#87 Mark on 11.19.14 at 12:18 am
“And so many index constituents are trading at levels more typical of 2009.”
Which ones?
Noted on the daily drive today, nearby “new” condo development (in the middle of nowhere South-ish Surrey), and now going on 3 years since completion, has just added “NEW LOWER PRICES” signage and “ONE HOME REMAINING” to their billboard signage out front. I’m thinking they might actually mean “One Home Remaining in our initial offering of units for sale… from 2 years ago”? Given you can’t have “lower prices” (plural) on only one unit, yesss? Perhaps there are yet more units still unsold and being held back, but they need some reason for a sucker-er-buyer to believe it’s THE LAST UNIT! Hurry lemmings, before you’re priced out of the market! LOL.
Key points:
1) Anyone who already bought one of these units woke up on the day the signage guys showed up to “redecorate”, to the realization their home just dropped X% in value overnight, independent of any outside factor. I can imagine a flurry of lawsuits in the not-too-distant future from hordes of pitchfork-wielding disgruntled condo owners, and yes, although baseless I can still see it happening. CAVEAT EMPTOR.
2) This is only the 2nd time, EVER that I’ve seen a development advertising price drops on a new build, first time was just a few weeks ago, and was a full-page ad in the local paper describing 20% plus discounts from previous ask price on a different condo project. On this one road, in @ a 40 block span, we’re into the 5-6th year of an osb cornflake tract home building orgy. No future price pressure here folks! / sarcasm off.
#62 #87 Mark
And response #87 Blacksheep
Mark, the very special role of the banks, whereby loans create deposits without recourse to reserves, is beautifully summarised here and in the complete Cullen Roche/Paul Krugman exchange:
http://pragcap.com/banks-are-special-the-ins-outs-of-money
This on the difference between “inside” and “outside” money is also interesting and useful:
http://pragcap.com/understanding-inside-money-and-outside-money
Hey Garth,
Don’t worry about the price of oil, it’ll eventually go back up when the shale oil fraud is revealed. The cost of production is way higher than the price of oil (even before this recent slump): very few of these companies are profitable, and many of them are seriously in debt. The only reason shale oil companies have taken off is (1) their interest payments on the debt is so low, (2) people WANT to believe America can be energy independent and have this whole new industry, and (3) wall street types make money off of transactions and mergers of shale oil companies even if they aren’t profitable.
I’m not some big doomer, when shale oil is exposed it won’t tank the economy, there’s probably only a couple hundred billion dollars of shale oil company debt floating around (unlike the TRILLIONS of sub-prime mortgage debt back with the GFC). But it will create a frenzy in the oil market. The Saudis know this.
Seriously?
Are you guys for real?
10 years in and prepared to wait out another 10 or so for your pipe dream to become a reality?
L.O.L.! I’ve got to stop passin’ through this joint.
There is no receding tide in this economy, just advancing wave after wave. Learn to ride the tide or you’ll miss the boat.
It is what it is boys. Suck it up. Do whatcha gotta do. Hopefully you won’t have any regrets although I highly doubt it.
3 things the government has done that should make Canadians very angry:
1}Lowering interest rates and Qe which causes deflation and transfers wealth from savers to bankers and government
2}Allowing foreign buyers to speculate in the real estate market to make it unaffordable for working families.
3}Allowing huge amount of immigration of skilled and unskilled workers to Canada to benefit big business and corporations so they can pay lower wages,benefits and pensions because an abundant supply of workers with very few jobs.Just ask any educated young person and an unskilled worker and see what they say?
Lets all sing Oh Canada!!!
Another loser blaming immigrants. — Garth
Boy, there sure a lot of armchair CEOs on this forum. Can’t be helped I guess, it’s human nature to formulate an opinion. Very dangerous in this regard though.
What is it about the free market that people don’t understand? It’s an organic process. We don’t need someone determining what should and shouldn’t be provided by the market. If you have an idea, go out and try it. But quit postulating about what will or won’t work based on statistics. That’s exactly what has gotten us into this mess. Politicians with little to no idea about certain industries passing detrimental legislation.
You can’t start a business from some ivory tower. You need to be on the ground floor in a scrappy fight to the death with your competitors. Look at how often even billionaires WITH business experience fail because they think they can just buy up a company or throw money at an issue and it will work. It often doesn’t. Imagine what it’s like for politicians who have no sense of reality and have never worked a day in their lives, suckling at the government teat with no fear of failure – very scary overconfidence results.
I think it might be television that did this, but I’m not sure because I wasn’t around before. Look how often there is ‘trial by media’ nowadays when it comes to legal issues. A kangeroo court of public opinion swirls around even the most minor accusations, which often prove to be false. Yet, the person’s reputation is tarnished forever.
I definitely think it was a more ‘peaceful’ time with less people spitting out their opinions before television. And when they did, you probably got more well thought out opinions because they weren’t parroting lines they heard for 3 hours while watching the news. People actually had to sift through information and critically think about what it might mean. Not anymore.
We are borg!
http://www.cbc.ca/news/canada/new-brunswick/saint-john-real-estate-market-worst-in-decades-experts-say-1.2839669
This is reality in the maritimes right now.
DELETED. This is not a gold blog.
Transfers of wealth from boomers will happen at a meaningless time. I’m 27 and my parents and in-laws will be around for30+ years and I hope they are. That means any inheritance will come at a time when I’m reaching retirement age. I hope they spend it on themselves and likely will.
What housing bubble?
Garth you good pal, Garry Marr is pushing a story from CIBC that says the supply is welll warranted. ;)
http://business.financialpost.com/2014/11/19/housing-bubble-begone-turns-out-we-just-might-need-all-those-new-condos-and-houses/
Just hold your breath, It’ll be worth it.
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/attention-retirees-sarnia-has-100000-homes-to-spare/article21637964/
So is this largesse just an extension of the helicoptering times we’re now in, or is it a bribe to get the 26-year-olds out of the furnace room?-Garth
Want the kids to move out of the house?
STOP cooking with cheese!!!
and give them 10G’s
“Jobs for Canadians in our own land: so the youth can have a piece of land; have families to carry on; to support the old and our system. That way small businesses are created to satisfy the individual needs and wants. “
Poor allocation of capital, such as investing in an industry which clearly already has overcapacity in North America, will not sustainably create jobs. Some of the most profitable companies in the world have examined the prospects of building additional refining capacity in Canada and have found such to be uneconomic on anything but an incremental upgrade basis of existing facilities.
Whenever a loan is issued the bank gets a loan liability in the form of an agreement to deposit $X in the borrower’s account immediately and a loan asset in the form of the borrower’s agreement to repay the $X plus interest over the next 20 years (or whatever). The bank doesn’t need savings (or even money) to do that.
Banks aren’t allowed to counterfeit, so yes, the bank does need savings and money to do that. How else would they actually disburse the funds for the loan?
Look, if banks didn’t need to borrow the savings of savers, then why do they even bother borrowing at all? Why not get into the business? Fact is, non-central banks need to borrow every dollar they lend out, and they do this by borrowing from depositors, from shareholders, and from various facets of the bond market.
I agree with Mark about the TSX. If you look at it sector-by-sector, it’s mostly financials that have done well the last few years. Look at that sector’s chart, and you wouldn’t think that 2008 had been any kind of a big deal. Other sectors- including energy- have not for the most part yet recovered.
Further to the above: this is obviously good news! Quite possibly yet more gains ahead for Canadian equities.
Coming to a country near you.
http://www.businessinsider.com/7-things-middle-class-cant-afford-2014-10
Re: #107
DELETED. This is not a gold blog.
Understood. But I’m not sure how we can talk about the ramifications of a near zero interest rate policy without talking about it’s effect in the precious metals market.
Sure, real estate is affected massively by it as people take on more and more debt. This will lead to huge bankruptcies in the future. But what happens when there’s a sovereign debt crisis, and the bankruptcy happens at the level of nations? I think people deserve to know that the effects in the precious metals market will be catastrophic.
Anyways, on the real estate side – a flipper/real estate investor I know who makes a living at it (not an amateur) recently said he sold ALL his properties! He said he thinks we’ve peaked. He’s on the ground level and interacting all the time with realtors so I’m sure he has some good insights. This is in the GTA. So, I advise caution to any near-term purchasers.
There will be no sovereign debt crises – at least of sovereign states that matter. If one did occur, gold would be no refuge. Nor will there be ‘huge bankruptcies’ because of consumer debt. Your Randian comments are repetitive and obsessive. — Garth
Mark # 112,
“Banks aren’t allowed to counterfeit, so yes, the bank does need savings and money to do that. How else would they actually disburse the funds for the loan?”
“Look, if banks didn’t need to borrow the savings of savers, then why do they even bother borrowing at all? Why not get into the business? Fact is, non-central banks need to borrow every dollar they lend out, and they do this by borrowing from depositors, from shareholders, and from various facets of the bond market.”
—————————————————-
Your far to knowledgeable, to act this ignorant.
At least Shawn’s persona put some effort into it, some spin. Your just repeating the same, Joe six-pack perspective, hoping it will get traction. You really need to find some quality material or maybe more achievable target?
I would consider this one a loss and move on before you lose all credibility, like poor Shawn : (
On the topic of the post, I know a couple who are semi-employed, living in a big beautiful house. Her parents had won the lottery (I guess it does happen) and given them a down payment for a house. Not “cash,” mind, to use for education, travel, whatever the kids felt prudent…nope, “a down payment for a house.” A big down payment, too, particularly for people our age. It would have been too much money for them to reject even with that big condition, and of course the temptation to leverage it was too great.
The result is that they now live in a house that was a lot more than they needed, and have difficulty making the payments without feeling stress about paying for everything else. It happens to be located in a region where employment prospects are not great, and they have also lost their ability to relocate for work. I’m sure that they’ll be fine as I consider them to be bright people on balance, but it will be a big set-back. And it wouldn’t have been necessary except for the parents’ insistence that the money be used for real estate.
Does “owning” a home, or a piece of dirt make a life?
No, never did. Does having a job, or “career path” make a life? No, but it helps you obtain the means to develop a life.
Without a means to pay for your own upkeep you are merely a floater, a useless eater in the world. Once you develop a job, or a career path, you really don’t need to be tied down with owning a place. You don’t where you will end up. Married, single, or shack-up a ‘house’ does NOT make a home.
I don’t see the big urge to ‘own’ in such a fragile, and ever changing world as we are currently. Hey, if you are set in a career, have substantial means, and ‘want’ to own anything, review your options, your situation and go for it.
Just remember, DEBT is not wealth! DEBT is not the way to wealth. Peace of mind is far more valuable than anything else – the pearl of great price.
You are in the final analysis totally responsible for your own actions. Act wisely.
“What an interesting life lesson this will be.”
As if life teaches any lessons to the ignorant. They will continue living their lives oblivious to whatever happens.
3 things that I’ve read in the comments that prove this:
1. thinking that central banks intervening with QE and emergency rates made their life worse.
2. believing that a real estate “crash” is coming in the near future and are willing to “wait it out”.
3. believing that banks and real estate agents are the reason why house prices have risen.
#14 North Burnaby on 11.18.14 at 7:48 pm
Chinese buyers are real here, some of them have Permanent Residency status here, so Garth assumed that they’re locals. But they’re not!!!
There’s a term for permanent residents. ‘Canadians.’ — Garth
———–
Not trying to nitpick, but PRs are technically not Canadians because they still have their Chinese Citizenship and passports.
China does not allow dual citizenship.
Also, PRs cannot vote and can be deported.
And you care, why? People choosing to be in the lengthy process of gaining citizenship deserve our admiration. — Garth
“Your far to knowledgeable, to act this ignorant. “
What’s ignorant about merely stating the fact that the chartered banks run balance sheets with Assets (ie: loans) = Liabilities (ie: deposits/other borrowings) + shareholders equity?
The truly bizarre and ignorant claim is that the chartered banks conjure money out of thin air. As though they’re going through the enormous effort of borrowing money from the marketplace, all in vain. As though deposits (ie: loans from customers) don’t matter. I know the money creation powers of central banks, ie: exchanging newly created cash for high quality but otherwise illiquid collateral, has received a lot of press over the past few years. But that’s no excuse for not understanding that such power is solely vested in the central bank for the execution of monetary policy. Lame attempts at insulting me on the strength of “information” gleaned from conspiracy theorists isn’t very polite either.
@ #49 Observer on 11.18.14 at 9:38 pm
How long are the oil sands going to be around? In my opinion, more than enough justification for CANADA to build a refinery and keep those jobs HERE rather than piping raw material across a continent for someone else to do it.
——————————–
Agree
More condos needed to keep up with immigrant demand, CIBC says
“Ask any real estate developer in any of Canada’s major cities about the risk of overbuilding, and the first line of defence would be immigration and its critical role in supporting demand,” CIBC economist Benjamin Tal said in a report Wednesday. “It turns out that at least for now, this claim is more valid than widely believed.”
http://www.cbc.ca/news/business/more-condos-needed-to-keep-up-with-immigrant-demand-cibc-says-1.2840234
Exactly what I’d expect a mortgage-granting bank to say. — Garth
I have to confess that I have been thinking of helping my 20 year old out sometime in the future, but he’s
far too young to be saddled with real estate. I would prefer he enjoy his 20’s, while socking away
a nest egg.
Besides, real estate is far too spendy right now. Hopefully Smoking Man will still be around to identify
the RE dead cat bounce caused by all the basement dwelling blog dogs’ buying frenzy. ;)
And you care, why? People choosing to be in the lengthy process of gaining citizenship deserve our admiration. — Garth
——————————————————————
Wong Garth, they don’t deserve admiration because they want to gain citizenship. They deserve admiration because they come to this country, work, pay taxes, and make Canada prosper and competitive.
I can totally relate to this statement. Had to wait 4 years for PR card, and 5 years for citizenship. After all this hassle and the time i have spend working and making my living in Canada, and in turn making Canada prosper because of my hard work, only fool will call me non Canadian.
I bet most people who love to label immigrants as non Canadians, have immigrant ancestors.
@ #55 Mark on 11.18.14 at 9:47 pm
As for refineries, why build in Canada when refineries near the demand centres, particularly in the United States, are under-utilized and sitting idle? Sounds like a waste of investment capital to me.
—————————————
The reasons are many:
1. added jobs in Canada -> people need jobs.
2. resource security -> no more importing crude & refined oil products into Canada
3. political -> can’t ship oil en mass to the US if they block it
4. Increased taxes -> more taxes by adding value to a raw product, and more taxes collected by more people with jobs.
5. Better return on oil & oil related products -> rather then low highly discounted end of the line pricing.
6. More money stays in the country.
…there are lots more reasons as well.
Or maybe all those reasons are terrible and it is better just to hope the US keeps allowing Canada to ship oil to US controlled refineries.
“Assets (ie: loans) = Liabilities (ie: deposits/other borrowings) + shareholders equity”
Mark,
How are variable mortgages, LOC financed? Is it strictly short term bank assets, like deposits and short term GIC?
Recently I see more and more (and bigger) variable rate mortgages (vs 5y fixed a few year ago). Does a bigger demand for variable rate loans explain TD raising the LOC rates (because diminished credit worthiness is individual and shouldn’t be across the board)?
“The reasons are many:”
Creating “jobs” just for the sake of creating “jobs”, with massive malinvestment, doesn’t do anyone any good. Remember the GM bailouts? They spent practically millions of dollars per ‘job’, in an industry which really wasn’t economic in Canada. Much better to use the resources to develop production in sectors for which there is a worldwide shortage of capacity, than to create overcapacity and huge losses.
Canadian imports of refined products are relatively minimal on the balance. And there is no guarantee that exporting refined products would actually garner any incremental returns over and above exporting crude oil product. Especially if such hypothetical new refineries are high-cost operations, which they would be as greenfield sites.
As I said earlier, the industry has studied this question over and over again, and has mostly found that there is not acceptable ROI in downstream refining, especially since Canadian refiners have adequate capacity to serve the needs of Canadians. Price differentials are largely based on transportation costs and quality, and even refined products would have to overcome such.
Re: #121 Son of Ponzi
And you care, why? People choosing to be in the lengthy process of gaining citizenship deserve our admiration. — Garth
************
Many of the people that come here from abroad and take the time to learn Canadian customs and study our history know and understand MUCH better our democratic form of government. I have seen several television shows where they interview new Canadians vs those born here and their knowledge of things like civil liberties are vastly superior.
The REAL problem is birthright citizenship. Conferring a privilege upon birth which you do not have to EARN means that many people shirk their civil responsibilities. They grow up their entire lives without any real understanding of why we have a free country (RIGHTS that PROHIBIT government power). Many vote for ‘feel good’ policies because they are ignorant of the consequences. I like Switzerland because you don’t automatically get citizenship at birth. You must reside within the country for many years, as well as perform things like military service, before the PRIVILEGE is conferred to you.
Something along those lines would go a long way to preserving Canadian traditions.
#104 Rexx Rock
3}Allowing huge amount of immigration of skilled and unskilled workers to Canada to benefit big business and corporations so they can pay lower wages,benefits and pensions because an abundant supply of workers with very few jobs.Just ask any educated young person and an unskilled worker and see what they say?
——————————————————-
I can’t speak about the unskilled workers, but I can speak of the TFW “skilled” workers, and let me tell you for the most part they are not skilled. Generally they have unsafe work habbits, and lack of trade knowledge. I have worked with many and am convinced most have fake tickets.
I am now way against immigrants, or someone wanting a better life, but my first hand view of the TFW program is blatant abuse by big business and governemnt backing their needs
“Exactly what I’d expect a mortgage-granting bank to say. — Garth”
Why?
Is CIBC in building business now? why cheering for more building which might create oversupply and diminish the worth of the collaterals down the line?
And you care, why? People choosing to be in the lengthy process of gaining citizenship deserve our admiration. — Garth
************
But mabey they dont want citizenship, mabey they want the freedom to go back to china anytime they want, and the freedom to own assets in china.
You can’t be that dumb. Can you? — Garth
“CHEAPER THAN RENT!”
http://realtor.ca/propertyDetails.aspx?PropertyId=15013981
Yes: you, too, can live in an Oshawa post WWII “temporary housing” ghetto for $150,000!
@ #129 Mark on 11.19.14 at 1:12 pm
“The reasons are many:”
Creating “jobs” just for the sake of creating “jobs”, with massive malinvestment, doesn’t do anyone any good. Remember the GM bailouts? They spent practically millions of dollars per ‘job’, in an industry which really wasn’t economic in Canada. Much better to use the resources to develop production in sectors for which there is a worldwide shortage of capacity, than to create overcapacity and huge losses.
Canadian imports of refined products are relatively minimal on the balance. And there is no guarantee that exporting refined products would actually garner any incremental returns over and above exporting crude oil product. Especially if such hypothetical new refineries are high-cost operations, which they would be as greenfield sites.
As I said earlier, the industry has studied this question over and over again, and has mostly found that there is not acceptable ROI in downstream refining, especially since Canadian refiners have adequate capacity to serve the needs of Canadians. Price differentials are largely based on transportation costs and quality, and even refined products would have to overcome such.
————————————-
You are comparing the benefit of a private business to the benefit of a whole country. That is a different discussion.
apologies,
my last post was unfair.
i just found out that the unit contains a kitchen backsplash.
Mark #122,
“The truly bizarre and ignorant claim is that the chartered banks conjure money out of thin air. As though they’re going through the enormous effort of borrowing money from the marketplace, all in vain. As though deposits (ie: loans from customers) don’t matter. ”
————————————————————
Very tenaciousness Mark but we all know, rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.
I’m persistent too.
(My offspring have cold noses, waggy tails and 10-inch-long hair growing from their butts.)
That’s no way to talk about your kids.
“Is CIBC in building business now? why cheering for more building which might create oversupply and diminish the worth of the collaterals down the line?”
CIBC doesn’t care about the value of the collateral, as CMHC has insured basically every loan on the balance sheet that has any risk (short of nuclear war) of defaulting. Actually the banks probably prefer lower housing prices, as falling prices tend to increase the risk premium they can charge on loans to increasingly less credit-worthy borrowers. Additionally, lower prices are likely to expose the Credit Union sector, a significant player over the past decade in the mortgage credit bubble, as being relatively cavalier in their risk-taking attitude (ie: my local Credit Union was advertising 0%-down mortgages long after CMHC withdrew insurance for them, hence, they must have been writing the loans without CMHC subprime mortgage insurance!).
“You are comparing the benefit of a private business to the benefit of a whole country. That is a different discussion.”
Not really. It is most certainly not to the benefit of the country that we build capacity that is already, in North America, in surplus. Investment dollars in Canada are already relatively scarce, and much higher returns are to be had investing in upstream, or investing in other sectors altogether. Additionally, Canadian refiners already fully serve the needs of Canadians, with some minor regional imbalances which are corrected through either exports or imports, whichever may be appropriate.
Firms like Cenovus have swapped equity positions in US refining operations, for equity in Canadian upstream assets, to reduce overall portfolio risk and to capture the benefits of economic exposure to refining. Efficient movement and allocation of capital creates a heck of a lot more jobs and economic growth than the central planners merely saying, “Canada needs more refineries to compete against idled USA capacity”.
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.”
That’s not a loan then. That’s a nothing. Usually people borrow money to actually do something with it, ie: build something, buy something, etc. Additionally, to perform a transaction, the bank would still incur a requirement for shareholders’ equity, which, again, is a liability of the bank. As the risk-weight of such an asset would not be 100% for the purposes of regulatory capital. And besides, the bank still has to compete with other banks for that money to be deposited, and that deposit is someone’s asset.
Don’t confuse the whole “money multiplier” thing with banks creating money (which they don’t, as the balance sheet must balance…). If anything, its bank depositors or creditors to the bank that are the culprits in the whole system on account of their making unsecured loans to banks, while banks mostly deal in secured credit.
#108 bob the builder on 11.19.14 at 9:44 am
I hope they spend it on themselves and likely will.
I hoped the same for my parents, but one died and the other just got too old to spend it. Kinda sad but a lesson to those who notice …
“Mark,
How are variable mortgages, LOC financed? Is it strictly short term bank assets, like deposits and short term GIC?”
Yes, exactly. So if, for instance, there was a run on short-term assets, guess whose interest rates will skyrocket in response?
The key difference between the Canadian banks and the US banks in the 2008/2009 crisis, was that the Canadian banks were chock-full of short-term assets (adjustable rate loans) for which the rates could be adjusted to defeat a bank run. The US banks were overloaded with long-term assets, and ended up destroying all of their equity attempting to liquidate them in satisfaction of short-term creditors.
Hence, Canada’s big banks survived the bank runs of 2008/2009 perfectly fine. The US banking sector ended up being destroyed.
As it turned out, the Canadian banks did have some minor short-term liquidity problems, which were resolved by the BoC agreeing to temporarily liquefy approximately $100B of CMHC-insured subprime mortgages, and lowered interest rates. Minor policy interventions compared to TARP, TALF, QE, and the ongoing continuation of ZIRP in the USA.
Attention retirees – Sarnia has $100,000 homes to spare
http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/attention-retirees-sarnia-has-100000-homes-to-spare/article21637964/
#141Mark
You could use some readings about fractional reserve banking.
Banks can make loans without money leaving, what matters is the transfers between banks.
I will get a loan from bank A to buy a house, ‘money’ goes to account of the builder in bank B. Someone takes a loan from bank B and pays to the builder in bank A, so no ‘money’ is transferred between banks but new loan, asset and liability is created out of nothing. The asset and liability being virtual not physical ‘money’.
This is why M1 – the physical money printed by the central banks is much less than M2 – the deposits. Go to BOC and the FED web sites, there is pretty good explanation how this works.
If people go and try to withdraw the money it gets interesting… as there are no physical bank notes printed to support the deposits. Deposits are like stock market – big valuations justified by small transactions.
Money multiplier is important, it drives the difference between printed money by the central bank and derivative ‘virtual’ money (e.g. credit card ‘money’, deposit ‘money’ ), the higher it is the more virtual ‘money’ exists and hence inflation is higher.
In ‘ideal gold bug sound money’ world banks would loan predominantly from their capital, not from deposits.
In real world having higher deposit requirements and having real interest rates helps. As with these negative interest rates and small reserves to loan ration when (not if) the money multiplier jumps we will be in big trouble, inflation will come out of nowhere and it could be big.
RE#129 Mark on 11.19.14 at 1:12 pm
“The reasons are many:”
Creating “jobs” just for the sake of creating “jobs”, with massive malinvestment, doesn’t do anyone any good.
Agreed. People need to get away from calling businesses “job creators” and start calling them “profit creators”. A well run business will do all it can to avoid creating jobs while maximizing profits. Jobs are a liability on the balance sheet.
Canadians missed the opportunity to seriously profit from their oil resources when they rejected Trudeau’s nationalization plan.
Mark # 141,
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.” – Blacksheep # 137
“That’s not a loan then. That’s a nothing.”- Mark # 141
—————————————————-
You will find the above statement I posted, in this Bank Of England Quarterly Bulletin, released 2014 Q1. On the opening page, half way down, left hand side, in bold print.
An I Quote:
“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.”
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pd
Clearly, you’re not as smart as I thought.
OK, send in the next guy, maybe he’s better : )
Well there’s good debt and there’s bad debt.
They who take no risk get no reward. The greatest mistake you can make in life is to continually fear you will make one.
#93 Smoking Man on 11.19.14 at 1:16 am
Yes the homeless basted deserves to be marginalized ,their crime, didn’t understand the lesson.
Spit on them, they deserve it. We drive by in our lexis.
Chuft at our mastery of following the rules, indigent to pain, we are the ones deserving …
Humanity sicks. ..I killed 26 ounces of JD, and four glasses of wine…
I bet I can still fly a space ship..I’m from the planet Nectonite.
It sucks there too…..
Love is the only way this journey is posable. ..
I can’t belive I spelt everything perfectly. .
It’s oviousky the new phone.
_____________________________________________
Smoking Man you’ve wasted your money on a crappy Samsung phone or you don’t know how to use it!
Counted two grammatical errors, not counting the ….’s.
Three spelling errors.
Note: I did not count Nectonite as a spelling mistake.
But carry on my friend. Try to learn how to use the spell checker and grammar checker. It will help your writing technique.
BTW Samsung is hurting!
http://www.cnet.com/news/samsung-to-cut-smartphone-models-by-nearly-a-third-in-2015/
What the FED is doing with QE is to print new money to give to the banks in exchange of old treasuries with the agreement for banks to buy new treasuries with these new reserves. Hence suppression of interest rates allowing the government to run deficits with money that leak from the Fed/QE to the banks to the treasury department to the people to the companies/importers and out to the foreign counties and producers who subsidize de facto that deficit.
Exporting inflation to put it bluntly.
If by some reason foreigners stop accepting dollars or reduce that acceptance and some of the money starts flowing back…. now you understand the look of the POTUS face at the last G20 meeting.
Japan is worse, no doubt, Europe is in much better shape, despite the critics. Simple rule, follow the Germans and the Chinese.
Canada drove some significant assets inflation due to government policies and to support valuations the inflation in other areas will follow, more significantly in food and commodities. What we see as oil prices drop is I believe temporary, if US can hold real inflation in check at the price of a depression or at least severe recession, Canada would need to devalue.
Maybe this is the nature of the game – all currencies sinking together with ups and downs between them but overall trend down.. down.. down…
So dollar is strong because the yen is week, next week euro is strong, dollar is week, etc..
with no end in sight.
If real interest rates are again allowed it gets really, really interesting.
My take is that we will see inflation that will be played down and no interest rates increases until we burn all the deposits. and then…
#133 meofios on 11.19.14 at 1:25 pm
And you care, why? People choosing to be in the lengthy process of gaining citizenship deserve our admiration. — Garth
************
But mabey they dont want citizenship, mabey they want the freedom to go back to china anytime they want, and the freedom to own assets in china.
You can’t be that dumb. Can you? — Garth
_____________________________________________
Your both correct. They want the best of both worlds. They love their homeland just as any person does. They come here for the comfort and safety of a free land. It is not necessarily the land they would envision growing old dieing in!
Oops, dropped the f, as in pdf.
Here is a functioning B.O.E. link:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
#124 TnT
Immigration to Canada has been steady for decades. Why do we suddenly need more condos for immigrants, when unit construction is already at sky-high all-time levels? Maybe they all used to live on the street.
#103 };-) aka Devil’s Advocate
I am becoming more and more convinced that you are right. All we need to ‘normalize’ the situation is a quick drop in the value of the Ca dollar. That’s it.
We might have very high prices for very long time without significant decline.
I was thinking on buying in 2009, after the 15 % dip before Flaherty dropped the 0-40 bomb, I should have bought but unfortunately I was reading this blog.
Even if a decline materializes it would be small and meaningless.
At least I heavily invested and benefited from the stock market (and, the horror, some gold)
Now I am looking to move to cheaper places (Europe, Southern states) with better weather, Canada is becoming ridiculously expensive and unattractive.
The sheeple need to be steered with positivism.. so they lose their shirt while others are gaining.
I am done with advisers who want just to sell the next book.
““Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.””
And the borrower takes that money out, and does stuff with it. But the bank still has to borrow the money in the first place from someone to allow for that money to be withdrawn. There’s nothing that absolutely requires that a loan be used to create a bank deposit. In fact, most people wouldn’t rationally take out a loan, merely to fund a bank deposit of the same characteristics/duration/terms.
There’s no denying that the money multiplier effect, ie: leverage, does exist. But this does not relieve banks from the requirement of balancing their balance sheets, and that is, borrowing money from the public and from shareholders in sufficient quantities to fully fund the loans that a bank makes. Hence, the bank is not creating money. Although confusion over how commercial banks operate certainly makes for great conspiracy theory, there is nothing particularly special, nor privileges conferred onto banks versus other leveraged participants in the economy.
“Canadians missed the opportunity to seriously profit from their oil resources when they rejected Trudeau’s nationalization plan.”
I personally trust the markets and the whims of corporations that have to actually produce stuff and account for their cost of capital, far more than I trust a politician with some grandiose and likely disastrous scheme for socializing Canada’s energy resources. Besides, Canadians already benefit enormously from O&G resources. There’s a tax collector with his hand out in the Alberta oilpatch almost everywhere you turn. If anything, private energy sector investors have been the real suckers in the whole O&G game over the past 20-30 years.
#132 Mike S
No, CIBC is in the lending business. Like we saw in the US, CIBC is a “loan originator”, but instead of offloading the loan to a secondary market immediately, our loans are fully guaranteed by the government. The collateral is irrelevant, and only originating more loans matters.
for the snowbirds on here, does a cdn person buying a piece of vacant land/or house in the usa for personal use get labelled a us person? other than us property and cap gains tax is there anything else?
thx.
#148 AKA Devil’s Advocate
Weighing one’s options is also about knowing what, and when to buy something.
Take stocks XOM is probably a better ‘buy’ right now than JNJ, to give an example. Though no promises, the record would indicate that to me.
Take Real Estate. Would I buy at near record high prices in an extremely LOW interest environment? Maybe not, unless there was distressed seller, some negotiation, and I liked the house.
Many a person were made by ‘taking a chance.’
#119 Retired Boomer-WI
Great comment, and so true!
Looks like CIBC is trying to convince us that we need MORE condos (to support immigrant demand):
“Immigrants already represent about 70 per cent of Canada’s population growth at the moment — and half of those who come to Canada are in the prime homebuying age range of between 20 and 45.”
https://ca.finance.yahoo.com/news/more-condos-needed-keep-immigrant-154626882.html
That article ought to get Canadians all riled up against HAM, and in turn spark more condo purchases. Meanwhile in the US, which has a higher immigrant rate, multifamily starts are declining, and single-family units are on the rise: http://www.cnbc.com/id/102198479#.
#112 Mark on 11.19.14 at 10:43 am wrote
Banks aren’t allowed to counterfeit, so yes, the bank does need savings and money to do that. How else would they actually disburse the funds for the loan?
Of course they aren’t allowed to counterfeit. And they don’t. But then they don’t need to because they rarely have to disburse the funds for the loan. Generally they just have to make an electronic transfer to another bank.
Look, if banks didn’t need to borrow the savings of savers, then why do they even bother borrowing at all?
On the odd occasion when they are asked to disburse funds, they have the choice of withdrawing cash from their reserve accounts at the central bank, borrowing it from other banks or using money deposited by their savers, whichever is cheaper for them. Savers are just a cheap source of cash for them but not a necessary one.
Why not get into the business?
I’d love to. Unfortunately there are government regulations which are very difficult for an ordinary entrepreneur to satisfy, so it won’t happen. That’s probably a good thing.
Fact is, non-central banks need to borrow every dollar they lend out, and they do this by borrowing from depositors, from shareholders, and from various facets of the bond market.
A venture capitalist behaves like that. A peer-to-peer lending service like http://www.Zopa.co.uk or http://www.Prosper.com behaves like that. A bank doesn’t.
http://posnorm.com/2014/11/19/canadas-largest-industry-real-estate-rental-and-leasing/ intresting data graph.
for the snowbirds on here, does a cdn person buying a piece of vacant land/or house in the usa for personal use get labelled a us person? other than us property and cap gains tax is there anything else?
thx.
————
Absent some visa issues, not for buying the property, but for being physically present in the US for the requisite number of days.
Christopher Mewhort, EA
‘The greatest mistake you can make in life is to continually fear you will make one.’
I disagree
not learning from your mistakes is worse
also, believing your own lies is a huge mistake
Lying to other people is part of ‘the game’, lying to yourself is in-excusable
Remember folks – successful people do what un-successful people don’t do.
#155 Mark
… and deposits it (or gives it to someone who deposits it) in another account. The money does not leave the system, unless it is in cash form, or deposited in a foreign bank. Are you saying all loans could be withdrawn to cash? Not possible. The (cash) money is not there, just the electronic bank-created money.
A chartered bank has a license from the government to create legal money through loans. No one else can do this. This comes with many requirements and responsibilities. Like any business, a bank requires capital. They cannot lend to themselves. They cannot lend money endlessly and recklessly, because they must comply to capital ratios. They must maintain certain amount of cash for withdraws. It’s not a free-for-all, like you imply. The controls on bank lending are regulatory and legislative. But the fact remains, extensively documented on any Central Bank web site’s “education” section, when a loan is made, the matching money is created along with it. Asset and liability. A bank will keep lending money, regardless of how many deposits it has, as long as it meets its regulatory requirements.
Savings are at all time lows, even negative, but borrowing is at all time highs. How does this happen, according to you?
RE#155 Mark on 11.19.14 at 3:08 pm
I personally trust the markets and the whims of corporations that have to actually produce stuff and account for their cost of capital, far more than I trust a politician with some grandiose and likely disastrous scheme for socializing Canada’s energy resources.
Norway has gotten way more out of their oil resources than Canada ever has or will. Nationalization works if it is done early enough and done right. It is too late for Canada because we have already sold the farm.
#112 Mark on why not to build refineries in Canada.
I believe that our raw resources should be refined in Canada so Canadians can benefit from them. Not the big corporations.
#165 devore on 11.19.14 at 6:51 pm wrote
Savings are at all time lows, even negative, but borrowing is at all time highs.
Well said, devore! And I agreed with the rest of your comment too.
Mark – fractional reserve borrowing. They take your deposit and pretty-much magic up the rest. I see from another of your posts you think a dollar lent is backed by a dollar borrowed. Oh boy, are you in for a surprise.
Your govt don’t control the money supply directly. They control it indirectly via interest rates (which doesn’t work). The banks control the money supply.
“Give me control of a nation’s money and I care not who makes it’s laws” — Mayer Amschel Bauer Rothschild
Mark I’ve read a few more posts to other readers also. Sorry IMHO you are totally wrong. Have you not heard of fractional reserve banking? On one post you mention the money multiplier which suggests you have, but other parts make me think you haven’t. Let us know!