Riding right

No doubt now. Up she goes a month Monday. Interest rates rise again on Wednesday, July 11th, and Ontario’s new preem gets some of the credit. Government of Canada 5-year bonds jumped like an excited gland on the news of a Tory majority Thursday night. So did the dollar.

Howcum? The financial markets think Doug Ford, despite his inexperience, gaping deficiencies, personal family issues, past indiscretions and the fact he was elected on populist slogans instead of policies (does any of that sound familiar?) means a better economy for the nation’s largest province. Likely they’re right. The Upper Canadian Dippers were ready to tax housing, tax investors, tax businesses and tax the rich (more). The size and cost of government would increase. The country would turn left as our major trading partner veers right. And wall-to-wall deficits for four years.

So, Ontarians dodged that bullet. Now Ford says he’ll cut electricity bills, gas taxes, income tax, real estate tax and halt the march to a $15 minimum wage. Less government, lower taxes, more money left in consumer pockets to spend on goods and services and in businesses to expand and hire. Growth. Markets feed on it.

Growth brings expansion and inflation. That fuels rate increases, especially now.

Forget NAFTA, trade wars, household debt levels and a staggering housing market. The Bank of Canada sees instead a country with a stable employment rate, decent job creation, a growing trade surplus, a major trading partner hungry for imports, a new pipeline and the fastest wage growth in six years. The jobs numbers on Friday may have sucked a bit (a loss of 7,500), but the big news was a 3.9% annual spike in average hourly wages – the biggest surge since the lights went out in 2009.

“The bank,” says a BeeMo economist, “is still good to go.”

The increase will be the fourth in less than a year, with one more to come in 2018. Surely five hikes will be enough to show the rates-will-never-increase crowd on this pathetic blog that they’re delusional. Normalizing rates – not raising taxes – is the single most effective tool possible for bringing housing values back to earth.

The second best is apparently electing Conservatives.

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Tories think they have Alberta in the bag, by the way. The reinvented Conservative party with their retread leader, Jason Kenney (I knew him when he was a moister), has high hopes of unhorsing NDPer Rachel Notley in an election expected next year.

Can’t come soon enough. Sure, the price of domestic oil has bubbled higher lately thanks in part to T2’s Big Pipe, but the Alberta economy is still squishy. Unemployment in Calgary – at 8% – is considerably steeper than the national average, and the high-paying energy jobs have simply not returned, even as oil climbed from $27 a barrel back to the $70 mark.

And look at the housing market. Sheesh. A mess. Sales are down again this month (16%) while prices have dropped (median is 5% lower). Real estate peaked a decade ago and has crawled around on its knees since.

And things are getting worse. 2018 so far has been disastrous for sellers and evidently too scary for buyers. Most of the houses listed this year remain unsold. Of almost 10,000 properties available so far at any time since January, just 4,200 have changed hands. Prices have dipped overall by less than 10%, unlike condos which have lost 14% of their value since the market topped out four years ago.

Cowboy Dippers have not slapped on all those housing taxes their socialist brethren in BC love, but rising mortgage rates and the B20 stress test have erased any benefit higher oil brought to Calgary or Edmonton. Of course the Alberta NDP increased corporate taxes and has managed to goose the provincial debt, so Kenney’s Cons will have considerable repair work to do, if they take office in a year.

Evident, I hope, to the young commies in the steerage section, is the intersection of politics and economics. Social justice, free drugs and having the government look after your kid are all great, but they mean higher taxes, fewer entrepreneurs and more debt (which is nothing but increased future taxes). Over the last few years Canada has drifted further left. Governments have expanded their role and influence in people’s lives. The federal debt is mushrooming $100 billion and the current government has given up trying to balance the books. Now we have a population expecting that couples be paid for having babies and retirees collect money just for being old.

Doug Ford is an uncooked politician who opportunistically sized power and caught the populist wave. As imperfect as he may be, the markets believe this was a far better choice than the other guys. He and Kenney are the new centurions of the right. Infidels beware.