CBs and thee

The biggest impact central banks have for most people is setting the cost of money. That’s called interest. It’s what you pay to get money or the amount you receive when you lend it.

The CBs in Canada and the US for decades have worried about inflation, as it jacks prices and wages making money worth less. So they used higher rates to empower money, thereby corralling the rising cost of living. Maybe you’re old enough to remember about ugly inflation in the early 1980s. If so, you might recall 15% GICs and 22% mortgages. The Bank of Canada pulled out all the stops to crash prices.

It worked. Real estate went from boom to bust lickety-split.

Lately the central bankers crushed rates in order to save the economy from virus-induced deflation. Look at today’s Canadian GDP stats. Fugly. The economic crash in the second quarter equaled 38.7% on an annualized basis. Worst ever. And while things have been creeping back in July and August, it will be months (or years) before the jobless numbers restore to early-2020 levels.

What have those cheap rates done? Exactly. Fuel real estate. In fact, the pandemic itself is throwing gas on the housing market, especially the detached, suburban, minivan-infused former cow pastures where children sprout and adventure dies. People want safe. Boring. Fences. Sales in Barrie jumped 84% in July, where the top adrenalin-pumper is bowling and there’s a Polaris in every garage.

Now, more changes coming.

Yesterday, while the Corona president was giving a speech to a thousand people without masks or social distancing the American CB, the Fed, made a big move. Inflation won’t be the main focus anymore, it suggested. Rates won’t automatically start to rise when the core inflation rate hits the long-standing threshold of 2%. Instead, the cost of living will be allowed to grow ‘moderately’ above that, even if full employment is achieved again, leading to wage demands.

A biggie, this is. The policy shift suggests the Fed’s worried about virus backsliding taking place and is signalling it’s prepared to keep rates supressed for a long time. “Yesterday’s action by the Fed likely provides risk-assets with the assurance they need — easy money is here to stay,” Bloomberg reported a Wall Street strategist as reacting. As a result, bond yields went down and bond prices went up. Stocks continued to advance toward record highs (where else is money going to go?). The US dollar declined, which meant commodities like gold advanced. And people kept on buying houses in Barrie even as StatsCan was reporting the economy croaked.

Now, all this means we are getting closer and closer to free money. The implications are legion. As reported days ago, it’s possible to nab a five-year, fixed-rate insured mortgage for 1.5% in some places. (Even the big banks are handing out 1.9% money to everyone with a mask and a pulse.) Now, for the first time, comes a 1.4% one-year home loan – which is less than half the cost of 18 months ago. In fact, this rate for a fixed-term mortgage is cheaper than the cheapest variable-rate loan – another first.

Of course 1.4% is still 1.3% more than the going inflation rate in Canada, which should give everybody pause. Despite higher gas prices, food costs, insurance premiums, communications charges and surging house prices, we’re just a hair above deflation. That’s what keeps our CB boss, Tiff Macklem, up at night. It’s why the Fed’s abandoning its carved-in-stone, anti-inflation mandate, why mortgage money and bond yields have dug a hole and why this is a potential disaster for indebted homeowners and hapless savers.

The inverse relationship between real estate and rates is driving property prices up, taking debt along with it. The amount of money Canadians owe has been swelling relentlessly throughout the pandemic. First from job loss and the inability to service credit card debt. Second, from 800,000 households not making mortgage payments, adding unpaid interest to their principal. And now with an avalanche of new borrowing as people scramble to get cheap home loans and pay record prices for detached houses and space in the boonies.

Money may stay cheap for a few years. But not forever. Big debt could be a big problem. For the nation. For your family. If a second wave hits, lockdowns happen or job numbers reverse… well… you know.

For savers, there’s no place to hide. High-interest savings accounts pay nothing. GICs are a disaster. Bond yields are in the ditch. Unless you already have a big enough pile to finance the rest of your life, there’s no alternative but to swallow some risk and invest in assets with the potential for growth (like equity-based ETFs) or a tax-efficient income stream five times higher than a guaranteed investment certificate (like preferred shares). The best bet for a world gone nuts, where up is down and rules change weekly, is a balanced portfolio (with both safe and growth elements) and one that’s diversified (index holdings and global exposure).

Or, you can blow your savings and take on epic debt to get a fortress in the sticks. Save enough for camo undies.

About the picture: Covid nixed your group yoga class? Well, there’s always dog yoga with Sunny, adopted from an indigenous community and now romping through Red Deer. “He held that dog in the palm of his hand when he adopted it,” says the proud dog-blog parent who sent this to me. “I’ve never known him to love something that much or be committed to something so fully. Imagine if he felt that way about me?!”

 

127 comments ↓

#1 TurnerNation on 08.28.20 at 1:59 pm

1. SECOND WAVE of bankruptcies coming: Here it is ‘Distancing’ is listed. The greatest economic and social weapon ever unleashed. It was dropped on us globally in this current WW3.

https://dailyhive.com/vancouver/canadian-business-potential-restaurant-closures-by-november

2. Predictive Programming as ‘news’ here:. Of course you only “get” CV doing fun stuff.
Only work, to pay off our new debts Comrade. You know how human trafficking works, they tell people work to pay off debt, then they will be free! Except the captors keep levying on new “fines” – added to debt. Any of this sounding like our current rulers’ plan, anyone?

The logical step after this story is a COVID (Certification of CV ID — papers please), To control our movements. This is what they are selling here. I expect the entire story is a ruse to implement the next layer of control. Cannot prove this but watch what they use it for…

https://www.blogto.com/eat_drink/2020/08/visitors-brass-rail-strip-club-gave-fake-contact-information/

3. WATCH your Food supply for more and more government control. I’ve heard this is a goal in the New System. This and our travel rights of course (As after Sept 11). The New Green deal economic weapon to be dropped could restrict many forms of travel.

From Stockwatch.com:
The Financial Post reports in its Friday edition that the Retail Council of Canada (RCC) on Thursday pushed back against calls for the government to step in and regulate the relationships between supermarkets and their suppliers. Financial Post staff report that the RCC was responding to a group of associations representing farmers, food processors and independent retailers that on Wednesday wrote a letter asking Ottawa to commit in the upcoming Throne Speech to start work on a grocery code of conduct. Advocates say a code of conduct would help by laying out rules and fair business practices, such as how stores charge fees to get products on their shelves and levy fines when products are late or insufficient. The RCC said government intervention could lead to suppliers charging grocers higher prices, which would then lead to higher food costs.

#2 Adrian on 08.28.20 at 2:07 pm

Hi Garth, so to understand, you’re saying the Fed is trashing the dollar because deflation is a more clear and present danger than inflation?

#3 Grandv!ew on 08.28.20 at 2:07 pm

How do you hide from the impact of the “worst case scenario”, even if you do not own real estate?
Does anyone else believes it will be this bad? Is this alarmist scenario? Property market going down by 40% will be devastating to the country and pretty much everyone else living in Canada.

https://twitter.com/hmacbe/status/1299381262596165632

https://t.co/vLjukL4CBq?amp=1

#4 DownToFinance on 08.28.20 at 2:22 pm

Garth, how are low interest rates a “potential disaster for indebted homeowners”? Will they not be the beneficiary of outsized house price appreciation fueled by cheap debt?

Also, hope the BOC is finally cluing into the fact that CPI is completely decoupled with the middle class cost of living:

https://financialpost.com/news/economy/that-sinking-feeling-canadians-losing-faith-in-price-index-and-that-has-central-bankers-worried

#5 Captain Uppa on 08.28.20 at 2:24 pm

You forgot to mention paying 2M+ to live a stone’s throw from a homeless shelter and safe injection camp.

#6 Dolce Vita on 08.28.20 at 2:26 pm

Yup, 2nd Quarter GDP got rolled back in $ terms to about SIX YEARS AGO, 2014-04 = $1,988,404 million vs. 2020-04 = $1,989,784 million.

Won’t be a recovery fueled by exports any time soon, per StatCan:

“…sharp quarterly declines in major trading partners’ economies, such as the United States (-9.1%), the United Kingdom (-20.4%), France (-13.8%), Italy (-12.4%) and Japan (-7.8%)…third-quarter GDP is expected to rise.”

THUS, a recovery will rely on the Cdn. Consumer which seems still reluctant to spend and that has had a SAVINGS EPIPHANY (impending death will do that to you) StatCan Canadian economic accounts key indicators:

HOUSEHOLD NET SAVING = $416,136 million, a whopping 28.2% savings rate (vs. 4th Qtr 2019’s $47,268 million, 3.6%).

Incidentally, Gov Canada the opposite (“We took on debt, so Canadians wouldn’t have to”) but look at the number:

GENERAL GOVERNMENT NET SAVING = – $420,160 million (vs. 4th Qtr 2019’s $11,204 million).

Well, looks like the Cdn Consumer spent $4,024 million thrown their way by Gov’s or 0.96%, talk about STINGY.

———————————

I agree Garth about the rates and your economy timing BUT the Cdn Consumer will have to rescue the economy…and so far, they are in no mood to spend, they would rather SAVE IT ALL.

See what happens. Hope Springs Eternal.

PS:

On StatCan’s “third-quarter GDP is expected to rise” GLEE CLUB homily…good luck with that, ya, it might go up…the question is “by how much”?

#7 Oracle of Ottawa on 08.28.20 at 2:28 pm

This is probably the worst liked market rally ever. Only a hand full of tech giants is creating this bull market. The majority of S&P 500 stocks are treading water or sinking. And it ain’t going to turn around anytime soon. But as Garth says where else do you park your money.

#8 Classical Liberal Millennial on 08.28.20 at 2:29 pm

How is inflation at that level when the price of essential goods has gone up so much??

#9 Dolce Vita on 08.28.20 at 2:38 pm

Today, reading the StatCan “Gross domestic product, income and expenditure, second quarter 2020” report I noticed something I never read from them since Signore COVID-19 came to town, the use of these words…at least once in EVERY report subtitle:

decline
falls
contract
deteriorates
drops

only 1 “rise” in a subtitle ref. to Household Savings (accompanied by “fall” in ref. to Corporate Earnings, same subtitle).

They searched on Thesaurus websites high and low for synonyms to:

SNAFU.

It would have been easier to just put that in every report subtitle instead.

—————————-

https://www150.statcan.gc.ca/n1/daily-quotidien/200828/dq200828a-eng.htm

#10 truefacts on 08.28.20 at 2:48 pm

Question for Garth…

Why are housing prices going up so quickly here in Ottawa, but raw land (upon which one can build a house) don’t seem to be going up????

#11 Jimmy Zhao on 08.28.20 at 2:56 pm

yeah, it’s funny how the ‘official’ inflation rate conveniently excludes the stuff that keeps going UP: gas prices, food costs, insurance premiums, communications charges.

#12 TurnerNation on 08.28.20 at 3:02 pm

USA online brokers also offer Fractional Shares. This and the Robinhood crowd is driving the popular names upwards I bet. Eschewers of advisors/advisers. Shades of 1999-2000.

Segmenting a marketplace is a viable expansion strategy – to gain market share.

https://www.schwab.com/fractional-shares-stock-slices

#13 FreeBird on 08.28.20 at 3:05 pm

Are some RE agents in BC already starving?? Maybe leave them a donation bag…you know in case.

https://www.thestar.com/news/canada/2020/08/24/who-does-this-bc-realtor-accused-of-snatching-fruit-from-garden-during-house-tour.html

#14 From Mississauga with Love on 08.28.20 at 3:06 pm

The CB might be abandoning inflation in order to let it loose so the value of the government debt can be deflated in real terms. otherwise how can countries afford it?
now that works well for business owners (they can jack up prices) and hourly labor, but sucks for flat-salaried employees. When was the last time an employee got a 5% raise without a promotion?
also, i still fail to understand how inflation is 0.1% here. The price of everything I am buying, goods or services, is skyrocketing. The more “discretionary” the service, the higher the cost increase (e.g. some kid activities increase 50-100%). How is inflation this low with the CB numbers?? this is mind boggling.

#15 PBrasseur on 08.28.20 at 3:07 pm

Consuming tomorrow’s (presumed) wealth, that’s essentially what’s left of the Canadian economy. Now government is trying to fix this mess by printing money. If you don’t think this will end in a major crisis you haven’t been following.

Major problems for the CAD and our standard of living in not so distant future.

Welcome to Argentina north!

#16 Guelph Guru on 08.28.20 at 3:08 pm

It’s so confusing.
A couple of days ago we were worrying about the various cliffs coming up. Now the FED has signaled the party to go on.
Recession is in progress, people are saving pennies while purchasing groceries but gobbling up million dollar houses.
Nothing makes sense anymore. No point trying to predict, things are out of your control.
Better stay balanced and watch the circus.
Was hoping to see all the naked folks when the tide goes out. I guess I have to wait a couple of more years.

#17 IHCTD9 on 08.28.20 at 3:16 pm

I think it was Penny Henny here who linked us dogs to a Class Action Lawsuit regarding CRT tv’s a few years back. I applied to the suit via the link PH provided.

I just got an e-transfer for 20.00 lol!

A severely belated thanks! :D

#18 Ferry Boy on 08.28.20 at 3:17 pm

156 YouKnowWho on 08.28.20 at 9:20 am

#147 Ferry Boy

my point in my posts was that Canadians have been very complacent in the levels of personal and government debt being accumulated.

————-

Complacent?

I think we need to look into the thesaurus for another word choice. There is a new religion in town(world) in case you haven’t noticed – and it’s called “DEBT IS YOUR FRIEND”

Trudeau is clearly looking at the ratio and debt on Federal level only, and therefore set it my way – that there is easily 500B of debt spending room, and possibly up to 999B….you’re FREE to spend on the LAND Minister!

Is it me or is it starting to feel like order/chaos instead of left/right?

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

As a reminder there is only one tax payer/mortgage payer. All has to be paid for by the same households.

The only way out of this (for the politicians) is run some inflation to reduce the impact of the debt. Its how Britain reduced its WW2 debt pile. The electorate/unions/special interests will not allow draconian cuts and taxes wont work ..to the extend required. So QE it is ..in my humble opinion. And “we are all in this together” meaning US, UK, EU, Canada etc

If someone has another opinion of how this is going to end I would (respectfully) like to hear it

#19 Jacques Shellacque on 08.28.20 at 3:20 pm

the cost of living will be allowed to grow ‘moderately'”

So…inflation then. Conveniently helps the deeply indebted as well, and a useful signal to governments to turn up the spending taps. I think this calls for a separate article on how to deal with the coming bubbles.

#20 Joseph R. on 08.28.20 at 3:22 pm

#11 Jimmy Zhao on 08.28.20 at 2:56 pm
yeah, it’s funny how the ‘official’ inflation rate conveniently excludes the stuff that keeps going UP: gas prices, food costs, insurance premiums, communications charges.

—————————————————————
The Consumer Price Index (CPI) contains all of the things you mentioned, save for insurance premiums because they are based on individual circumstances:

https://www.bankofcanada.ca/2020/08/understanding-consumer-price-index/

#21 crowdedelevatorfartz on 08.28.20 at 3:23 pm

@#165 Per-Tater
“Unproven theories says the guy who expects hyperinflation. It’s all out there, if you’re too lazy to do the work that’s on you.”

++++

I dont expect hyperinflation.
I expect Hyper Taxes after Trudeau is finished with the Canadian economy.
Too lazy to do the work?
Hardly how I’d describe my past 8 months.
I’ve been working 7 days a week for months, keeping several other peeps employed during these trying times..
Too busy to read a book of fiction.
As I said.
Just give us the Coles Notes version.

#22 Job on 08.28.20 at 3:23 pm

GDP down by 40%, yet rent prices and house prices in the YYZ are increasing mad.

#23 Dolce Vita on 08.28.20 at 3:25 pm

ONE last thing on today’s 2nd Qtr GDP report (sorry Garth wordy I know but worth it I think):

POOR STATCAN.

They obviously cannot explain the 2nd Qtr CANADIAN CONSUMER HOUSEHOLD SAVINGS EPIPHANY $416,136 million (+28.2%).

Thus, when in doubt, throw the kitchen sink at the conundrum (StatCan speaking out loud about the “epiphany” amount, of course, in %’s and not $’s):

——————

“Declines in household spending were pronounced and widespread, affecting both goods (-8.4%) and services (-16.7%).

Outlays for durable goods fell 15.8%, the steepest drop ever recorded.

Substantial declines occurred in purchases of new passenger cars (-37.8%), new trucks, vans and sport utility vehicles (-26.4%), and used motor vehicles (-23.9%), reflecting closures of car dealerships, income uncertainty, and reduced transportation needs as working remotely became more widespread for some professions.

Outlays for semi-durable goods fell 13.0%, led by garments (-25.3%), clothing materials (-38.3%) and footwear (-20.3%). [Personal Note: good I will not see Tilley Hats in Italia for some time to come, or The GAP or H&M or Aritzia or Zara, grazie Sig. Covid]

Outlays for non-durable goods fell 3.6%, after rising 2.9% in the first quarter. The decline in outlays for services (-16.7%) was attributable to food, beverage, and accommodation services (-45.6%) and transportation services (-79.2%).”

——————

And here I was cheering on gains in Retail Trade etc. over the past few weeks.

Balloon, burst, fall to ground, thump.

Come on already you STINGY CDN CONSUMERS, spend…it’s the only way out of this economic mess thanks to the

DAMN VIRUS.

Tomorrow, going out to my local Italian supermarket and buying anything Cdn I can find, same on Amazon.it (well, except for Tilley Hats = Italian fashion seppuku).

Every little bit helps.

#24 Adrian on 08.28.20 at 3:26 pm

Garth, I do like your writing and appreciate your advice. This is one of the more confusing posts I’ve read here. I believe I’m reading: “inflation spurred, might not work. Deflation a possibility. If so look out?”

Scary — maybe the FOMO is justified. Maybe not!

#25 Linda on 08.28.20 at 3:28 pm

Let’s say deflation actually occurs. What would that do to markets? If money becomes more valuable, would investing still be the best option? Would deflation not in some measure reduce the risk of running out of money for those on fixed incomes?

#26 Billy Buoy on 08.28.20 at 3:37 pm

As I have been saying for years…The CENTRAL BANKS cannot raise rates or the entire house of cards collapses.

Buy it all, run it up. 2% inflation is a complete JOKE.

The CB have NO CLUE whatsoever and like everyone else in politics (yea right they are independent..hahahha)they will continue their verbal gymnastics and triple talk to save their own asses or else they know they will be finally held ACCOUNTABLE for the GREED and MESS they have made over the past 30 years at least.

It’s EVERY PERSON for themselves in today’s world.

Isn’t it just Dandy?

FREE markets, price discovery what a freakin JOKE!

#27 willworkforpickles on 08.28.20 at 3:39 pm

The BoC and Fed are becoming quite the idealists. Hope for the best expect the best.
They speak in terms as if the pandemic is going away, full employment restoration and everything returning to normal is due. The sheep love it and buy every word of it.
Their projections are virtually seen through the rose colored glasses of a return to normalcy and soon.
Gullible sheep need to wake up and stop banking on the fed and boc’s every word.
The evidence that the pandemic will persist, unemployment’s going higher and supportive money printing to infinity is going to be inflationary/stagflationary is out there.
Remember…unemployment and low productivity levels are pushing the limits 3 times that of the last recession.
The Fed and Boc are in unchartered waters of combined support money printing to infinity…and unemployment and low productivity figures never before experienced having near and mid term implications nobody wants to consider……Yet!
Now more than ever, the BoC and Fed are unable to project quarter to quarter outcomes.

#28 Phil on 08.28.20 at 3:40 pm

From Mississauga with Love

I still fail to understand how inflation is 0.1% here. The price of everything I am buying, goods or services, is skyrocketing. The more “discretionary” the service, the higher the cost increase (e.g. some kid activities increase 50-100%). How is inflation this low with the CB numbers?? this is mind boggling.
———————————————————-

The rate of inflation has to be artificially lower that the actual amount because government pensions and other obligations are indexed to inflation. If the actual cost of living was reflected in the statistics the servicing costs would be greatly increased.

#29 Dolce Vita on 08.28.20 at 3:45 pm

“dog yoga with your pooch”

Wholesome if it weren’t for the deer antlers not hidden well enough behind the TV (hope that’s a synthetic polar bear hide tucked away to the right of the quasi-hidden deer antlers).

GREAT photo, man and his dog.

Heartwarming in these troubled and uncertain times.

-Thanks Garth and dog yoga guy!

#30 ElGatoNerodeYVR on 08.28.20 at 3:58 pm

I think (occasionally and this is one of those rare times) that we are looking at a false narrative. If a good part of the population is $200 away from insolvency it is safe to assume that most of their net pay is going towards necessities ( housing and food) . Don’t know about anyone else but here the cost of groceries and household necessities has shot up some 20% over last year and on the “other side of the river ” where most of the working people actually live (Surrey,Langley,Abby ,Pitt Meadows) the housing is selling like hotcakes at no discount .
That tells me that in practical terms the actual cost of living,true inflation is going waay up for a significant portion of the population.
Invest accordingly.

#31 Dave on 08.28.20 at 3:59 pm

Things started with gas prices dropping at night…Creating long lineups. Why would every gas station do this if it was a competitive market.

Virus is here….everyone is locked up.

War drums are beating….China is facing major financial and trading destruction.

This will cause major inflation rapidly

#32 Neo on 08.28.20 at 4:00 pm

Garth,

So you still think these low rates are temporary? You’ve been saying that for over 10 years now.

No Central Bank is going to willingly hike rates for any extended period of time. End of story.

We are Japan…The entire globe is now Japan…..

#33 Billy Buoy on 08.28.20 at 4:07 pm

25% of all personal income in the USA comes from the government.

What is the % in Canada? I bet its even higher.

Thanks middle class for YOUR taxes to pay for it ALL.

Who is to blame Middle Class? The CLUELESS CENTRAL BANKERS who now think inflation is GOOD for you yet have no idea there are bubbles in Real Estate, the Stock Market based on how they determine the inflation rate as it’s not in their best interest to do so.

Enjoy being a member of a soon to be banana republic?

At least the ones south have far better annual weather.

Thanks again MIDDLE CLASS for paying for everyone!

Go high end or low end. The powers that be have made it no other way…. I say STARVE THE BEAST.

#34 Keith in Rio on 08.28.20 at 4:12 pm

Do not buy stocks, ETF’S, or anything else from the paper shuffles on Bay and Wall Street.

Hold currency and trade forex. At least you’ve got real money in your hands instead of worthless paper.

Buy government bonds with the yields you need and hold them to maturity.

I started doing this 20 years ago.

“Kanaduh” a country that once stood for domething and offered promise, stability and security isn’t, but s forgotten nightmare.

I could not be happier. Going south again in 2 weeks.

#35 Happy Housing Crash Everyone! on 08.28.20 at 4:16 pm

#13 FreeBird

Are some RE agents in BC already starving?? Maybe leave them a donation bag…you know in case.

https://www.thestar.com/news/canada/2020/08/24/who-does-this-bc-realtor-accused-of-snatching-fruit-from-garden-during-house-tour.html
___________

What do you expect from SHYSTERS!

#36 UmiouiuS on 08.28.20 at 4:19 pm

#17 IHCTD9 on 08.28.20 at 3:16 pm
I think it was Penny Henny here who linked us dogs to a Class Action Lawsuit regarding CRT tv’s a few years back. I applied to the suit via the link PH provided.
I just got an e-transfer for 20.00 lol! A severely belated thanks! :D
********

Moi aussi ..!! Let’s party hearty .. PHenny is invited.

#37 IHCTD9 on 08.28.20 at 4:21 pm

#21 crowdedelevatorfartz on 08.28.20 at 3:23 pm
@#165 Per-Tater
“Unproven theories says the guy who expects hyperinflation. It’s all out there, if you’re too lazy to do the work that’s on you.”

++++

I dont expect hyperinflation.
I expect Hyper Taxes after Trudeau is finished with the Canadian economy.
Too lazy to do the work?
Hardly how I’d describe my past 8 months.
I’ve been working 7 days a week for months, keeping several other peeps employed during these trying times..
Too busy to read a book of fiction.
As I said.
Just give us the Coles Notes version.
——

I think the main bone of contention with MMT is the idea that the government should just print whatever currency it needs instead of raising revenue thru taxes and bond sales. If inflation gets too high because of all the free money being pumped into the system, they just tax the money back out of circulation.

I have to wonder how that last part would work out in the real world. If Trudeau printed off 500 billion and spent it into the system, and was then faced with an inflation problem; could you see him getting all medieval with a salvo of new taxes? He’d be out on his @ss the very next election.

Also, folks can and will avoid/evade taxation, they’ll hide their stash offshore, they’ll leave. They may also riot. Macron found out the hard way twice – once when he taxed the crap out of millionaires (they started leaving en masse) and again when he jacked taxes on gas (yellow vest riots). He spent years trying to raise revenues and just got less of them.

Exactly how reliable is taxation for extracting money out of folks? IMHO, the CRA would need a tactical wing armed with automatic weapons to make taxation reliable. For MMT to work, they’d need to see inflation coming a mile away, and get on it immediately. I have my doubts that you’d get much out of folks very quickly without getting your government tossed out of power post-haste.

#38 Stinking Albatross on 08.28.20 at 4:24 pm

To: Erin O’Toole (the Canadian Andrew Scheer)

Congratulations on your first week as leader!

#39 KITTYKABOOM on 08.28.20 at 4:41 pm

Collectively the 2x of us earn 200K a year. It wasn’t always this way, but has steadily crept up over these last few years to this level.

We rent a quiet suburban 4BR home 50% below market rate if we were to “buy” it now. We pay down debts monthly of a modest amount. We live within our means and have thousands in surplus cash a month. We can live on a single income in the home we occupy and have 6-figures+ of cash, 6-figure pension NPV’s and a mixture of investments to spare. We both drive paid for cars in OK condition. The definition of dual incomes, no kids and BOTH of us with indexed Government pensions. WE ARE RESPONSIBLE.

With still another 30 years to work, we hold $350K in XBAL — a 60/40 ETF asset allocation split with CDN, US & Intl exposure. Dollar Cost Average at ~20.50/unit. Saw a dip this year during the spring as the market blew up, but rebound so far. A little light on S&P exposure, so missing out on the bull run in “tech” directly versus holding an S&P 500 ETF directly. Investment so far, ~12.5% rate of return since inception over ~2 years, ~7.1% annualized return. The definition of BALANCED. Did make out handsomely on some USO and OIL.U earlier this year during contango.

Everywhere I look, and by every visual measure of the Jonses, I am falling further and further behind those who have owned Real Estate during the last 8 years and have continued to use inflation and their HELOC’s to finance a materialist lifestyle — cheap, easy leverage that apparently has 0 consequences as long as they can service the monthly — and deferrals even if they CAN’T service the monthly.

In this CMA, 14% price appreciation was running this year alone (pre-COVID), and has been running double digits the last 5 years here. Neighbour buddy makes their 10%+ a year on their 500K home with a measily 25K down as long as they can service the note monthly — all from run-away housing market inflation based on no fundamentals of purchasing power. The neighbourhood turns over every 4-5 years as mortgages come due, and people sell, cash out their 150-200K in equity even after fees and such, and move along with their trunk full of cash to the next inflationary neighborhood. Meanwhile, my cash is tied up in tax efficient accounts, earning 7% with no chance to borrow against it — its working money, but effectively inaccessible.

The neighbours, every one on the street, spends like drunken sailors — new cars (not Kias, but something with German or Japanese flare), new driveway interlock, new landscaping, new clothes, pool/hottubs, take out 4 days a week for large families, newest phones, gadgets galore. They are the definition of money velocity.

On the surface, they are “better off” by every measure of our materialistic society. Meanwhile, I do my own oil changes, negotiate with Rogers yearly to keep telecom pricing in check, and buy the meat that’s on sale each week at the grocery store (NOT LOBLAWS). Maybe I’m old-school? Maybe I have a middle-class mentality? Maybe I’m cheap. Maybe I’m value oriented, but I believe in personal responsibility.

The CMHC boss may have the right words for this market gone mad (and I agree — housing doesn’t and fundamentally cannot always go up), but the truth is those who have held in the last 8 years have made out like bandits on initial investments of 25K and have the goods and access to cheap borrowing facilities to show for it, while all I can do is stare at an account balance with a lot of digits in it in a home I can’t paint, a lawn I can’t fix with a 10+ year old car.

I’m throwing in the towel. There is no moral hazard in this country anymore. Money for nothing. Risk ON.

We’re having a 5BR home custom built for us outside this insane CMA. So what if I spend another thousand a month on housing costs versus renting — I end up owning it eventually (no mortgage) and from a cash flow perspective I only need to carry the tax load into the golden years, plus a bit of maintenance. With 30 years of price appreciation (with downside periods as well), I think I’ll be able to afford to re-shingle it, or replace the AC and furnace without having to eat cat food on saltines.

Meow. :)

#40 Dwilly on 08.28.20 at 4:47 pm

….and 5% gold, just in case, and because there’s no appreciable downside. :)

#41 YouKnowWho on 08.28.20 at 4:48 pm

– we won’t pay you anything for lending us your money, because we control money, so we don’t need or want your money Regular Joe. We just print more and lend ours instead.

– lucky for you, you will pay us low % interest on the HUGE amounts you’re going to need to borrow now, because that will insure the interest dollars banks earn grow or worse case remains the same – profit margin baby. Gotta look after them banks!

– thanks to low % interest set by CBs as instructed by politicians, governments are going to pay less on money they are borrowing from future generations that isn’t theirs to borrow and spend in the first place. As a result they can borrow way way more.

Sounds like the perfect scam to me. Let’s party!

#42 cramar on 08.28.20 at 4:50 pm

Crap! I thought I might have invented dog yoga last year. When doing any yoga on the floor, our beagle has a proclivity to flop herself on top of me. This could be “dog yoga” I thought after seeing a feature on “goat yoga” in the U.S.

On another topic, the summer stock market rallies look like they are on borrowed time! On life support, with no correction of any significance whatsoever since March. The clock is ticking!

#43 @learn2investkid on 08.28.20 at 4:57 pm

Garth, are you aware of the growing trend of kids providing stock advice on TikTok? Check out the twitter handle @tiktokinvestors. These kids have no clue but are getting popular. I dare you to watch 10 videos in a row and not throw up.

#44 AM in MN on 08.28.20 at 5:15 pm

All fiat currencies in history have ultimately collapsed.

If there weren’t any Central Banks to distort the economy, people would find other ways, although things like private gold back currencies can be manipulated as well and booms and busts occur, there’s no way around human nature and greed.

Still, if the CB was to follow the biblical principle to conduct your business using units of honest weight and measure, the inflation rate would need to be 0%.

Unemployment will drop when CERB & EI stop paying people not to work. Lot’s of lower paying jobs out these. In a free market, the number of jobs would equal the number of people willing to go to work.

Also distorting the market is the fact that about 1 in 8 children and their mothers have married the government who takes the role of daddy. If that were to be cut back and people forced to raise their own families, taxes could be reduced and the free market could thrive.

Covid threw a monkey wrench into it, but only short term. The long term issues are still with us, and not going to get solved anytime soon.

Demographics play a big role is supply and demand as well. Lot’s of old people looking to invest for a return, no need to buy anything big. Compare that to the early ’80’s and household formation numbers.

In general, it would be best to let the market operate freely and cut back on the central planning.

#45 Armpit on 08.28.20 at 5:17 pm

I have a funny feeling Interest Rates will remain low and Inflation will increase to over 6 percent the next year.

#46 crowdedelevatorfartz on 08.28.20 at 5:29 pm

@#37 IHCTD9
“For MMT to work, they’d need to see inflation coming a mile away, and get on it immediately. I have my doubts that you’d get much out of folks very quickly without getting your government tossed out of power post-haste.”

+++++

Printing billions of $$$$$ to toss around everywhere is “Modern”?
I thought the German Reich tried that 100 years ago.
Massive inflation and the financial ruin of millions of lives started the Nazi party.
Zimbabwe, Venezuela today, but a smaller version of socialist insanity.

Let’s all hold hands and watcvh Trudeau burn through billions with his “as yet to be announced” green agenda.
With the lick spittle , lap dog Freeman nodding her head in rapt agreement with every hair brained scheme he comes up with.
Trudeau’s quest to go down in the history books will be assured.
A trillion dollars in Debt and climbing…..

Either he taxes us to death or the Canuck buck will be worth $0.50 by 2024 and Alberta will be well on its way to Wexit

#47 Stone on 08.28.20 at 5:34 pm

Ontario freezing residential rent increases for 2021.

It’s good to be a renter. Thanks for continuing to subsidize my rent, landlord! Love Ya!

#48 Ponzius Pilatus on 08.28.20 at 5:34 pm

#128 YouKnowWho on 08.27.20 at 10:39 pm
Trump CRUSHED IT tonight!
————-
Not according to the viewership ratings.
He acted like his advisers pumped him full of Valium.
https://ca.news.yahoo.com/biden-tv-ratings-trump-dnc-rnc-convention-speech-nielsen-185313115.html

#49 Camille on 08.28.20 at 5:36 pm

Do you hold bonds for income?” Alice eagerly asked. Everyone laughed. “Are you dreaming?” the desk head replied. “The coupon is subtracted from the principal, not paid out. But why own a bond, if it doesn’t pay interest?” replied Alice. “As long as yields continue declining, even at negative rates we hold bonds for capital gains. If you want dividends, go ask the equity folks.”
But on opening a door marked “Fundamental Active Equity”, she came across an empty trading floor. That team was closed last month – they’d been underperforming for decades,” said Otto. “What was their problem – did they buy overpriced stocks?” Alice asked. “That’s exactly what they didn’t do!” replied Otto. “They stuck with value, and as everybody knows value sucks. If you want to outperform, you’ve got to show your FANGs.”You’ve sacked all your fundamental investors, who manages your equity portfolios” asked Alice. “Nobody, exactly. All the money is passively invested in index funds. As they say, ‘if you can’t beat the market, at least you can replicate it.’ But that means nobody is assessing the stocks’ fair value. It sounds like the market’s on autopilot,” said Alice. “We don’t buy stocks for capital appreciation, but for dividends, unless you believe in unicorns” said Otto.
Slightly abridged from:
https://www.reuters.com/article/us-global-economy-stocks-breakingviews/breakingviews-chancellor-wall-street-is-firmly-in-wonderland-idUSKBN24A219

#50 Brian Ripley on 08.28.20 at 5:37 pm

Here is my post “Deflation Probability” from June 28, 2020 with charts:
http://www.chpc.biz/history-readings/deflation-probability

DEPRESSION DEFINITION (Wikipedia)
​(✓) = now occurring in various global economic centers.

Depressions are characterized by their length, by abnormally large increases in unemployment (✓), falls in the availability of credit (✓) (often due to some form of banking or financial crisis (✓)), shrinking output (✓) as buyers dry up (✓) and suppliers cut back on production and investment (✓), more bankruptcies (✓) including sovereign debt defaults (✓), significantly reduced amounts of trade and commerce (✓) (especially international trade (✓)), as well as highly volatile relative currency value fluctuations (✓) (often due to currency devaluations (✓)). Price deflation (✓), financial crises (✓), stock market crash (✓), and bank failures (✓) are also common elements of a depression that do not normally occur during a recession.

#51 Cottagers STAY THE HELL AWAY! on 08.28.20 at 5:51 pm

What the hell is wrong all across this country with these mentally defective out-of-towners making entitled visits to OUR home towns and beaches?

https://www.thestar.com/news/canada/2020/08/26/bc-residents-fume-as-out-of-town-visitors-monopolize-local-beaches.html

STAY THE HELL AWAY!

(It’s raining all weekend in Muskoka and the Kawarthas anyway, so you’re even more of an inbred southern hillbilly idiot if you come up here now)

#52 TurnerNation on 08.28.20 at 5:53 pm

The future. I said it again yesterday, why our global elites want our DNA. Swabs. Mail it in for fun. Iceland’s “CV testing” company is a genetics firm.

Why: farmers control their livestocks’ breeding, feeding and movements. As do ours.

This is decades of masterful planning and incremental rollout and mind programming. Enter: New System.
And you were distracted by Snapchat filters.

https://twitter.com/globalnews/status/1299421968047931392
@globalnews
“It’s a DNA vaccine that’s been produced by using computer modelling and artificial intelligence. We think it would be an effective vaccine to protect people from COVID-19.”

#53 Shirl Clarts on 08.28.20 at 5:54 pm

#39 KITTYKABOOM on 08.28.20 at 4:41 pm

Oh No!!!! All those years of prudence and you are going to buy a house? Now!? At the height of the market? Are you going to buy a boat, too? I’m reading your story and thinking “Oh another troll perhaps?… or he’s bragging, sounds for real maybe? Now he’s bitter about the neighbours?… he’s a hypocrite? … ALL OF THE ABOVE!”

#54 looking up on 08.28.20 at 5:59 pm

Is it my impression or has the tone of this blog been slowly shifting to “By trying to avoid FOMO in real estate I did indeed miss out by not buying real estate”

#55 Greg on 08.28.20 at 6:00 pm

Well, our strata insurance just increased by ~770% so I’d say inflation is alive and well in the B.C. Interior.

#56 YouKnowWho on 08.28.20 at 6:01 pm

#4 DownToFinance

——————-

Yup.

Why do we put trust in this CPI number? Why should we really?

CPI is probably as trust worthy as the RE Frankenumber

https://www.greaterfool.ca/2012/11/22/frankendata/

One day they will just come out, make a tweak to CPI and in a blink we have just 1 quarter inflation of 69%. Then back to 2%. Why 69%? Because it’s fun.

#57 Reximus on 08.28.20 at 6:08 pm

#46 crowdedelevatorfartz on 08.28.20 at 5:29 pm

Germans did that on purpose, spitefully didnt want to pay the war reparations with regular marks

#58 Steve on 08.28.20 at 6:34 pm

Garth, I can live in and enjoy my house with the nice yard and gorgeous views, everyday.

And the best part of all is that it pays me 1,600 per month income outside of summer and in the summer 8k per month.

I have people begging me to pay me more for a “foot in the door”

#59 Andy Stumpf on 08.28.20 at 6:38 pm

If (when) COVID comes back bigtime in the autumn, what does the government do? Bring back CERB? $2000 free every month?

#60 saskatoon on 08.28.20 at 6:38 pm

it ain’t money, garth.

it’s currency.

#61 Abolitionist on 08.28.20 at 6:41 pm

Turner Nation:

Thank you for your comments. Your analysis and predictions have been prescient and are appreciated.

#62 useless on 08.28.20 at 7:16 pm

We need to change the way inflation is calculated to reflect actual inflation. The real rate of inflation has been closer to 10 percent for the past decade but the Government and its indebted citizens cant afford a higher interest rate.

#63 McSteve on 08.28.20 at 7:27 pm

I was a sucker that locked in a 5 year fixed mortgage for 2.81 a little over a year ago…with a credit rating of 885, think I can get some of this free money? Didn’t think so…

#64 Adrian on 08.28.20 at 7:28 pm

Ok so, after thinking about this all afternoon, let’s all maybe not assume high inflation is going to take hold immediately. Let’s see what this coming cliff brings!

#65 Penny Henny on 08.28.20 at 7:33 pm

#17 IHCTD9 on 08.28.20 at 3:16 pm
I think it was Penny Henny here who linked us dogs to a Class Action Lawsuit regarding CRT tv’s a few years back. I applied to the suit via the link PH provided.

I just got an e-transfer for 20.00 lol!

A severely belated thanks! :D
////////////

Shite!
I haven’t gotten mine yet but I asked for a mailed check.
Will let you know.
I did get the funds for the lawnmower class action though

#66 willworkforpickles on 08.28.20 at 7:47 pm

The greater in greater fool is intensifying with each passing month with each and every institutional interest/mortgage rate drop.
Its going to levels/depths for that matter that are truly astounding.
I’ve been reading messages here from the beginning.
Have read Garth Turner Sun news columns prior to the existence of this blog going back some 40 years.
The greatest fear I’ve seen among posters on this MB the past 10 years has hands down been the fear of interest rates. Interest rates rising. Interest rates falling (RE prices rising). Interest rates not moving at all.
The one many rebuff…recoil with abject disdain, horror and denial to at the very mention of is of interest rate increases.
Such posters wear their guilt of being greater fools on their sleeve over this.
Nonetheless the greater fools of now are becoming the greatest fools of all leveraging to the hilt paying extreme gasbag prices at gleeful rates of 1.5%.
With an average mortgage of $4000.00 per month…slip in an overnight turn of the screw and it can become double that at renewal time. Have it sit there for any prolonged period and watch what it does to sales and prices (reversal). Five years on with a mere increase to 4%…payments north of $10,000.00 monthly should see bankruptcy trustees sitting pretty all over again.
Mention any potential near or mid term rate increase with sound reasons for why they may be forthcoming and you’ll be met with a wall of denial fear and loathing…as well as the – it can’t happen, not to me…not to me it can sentiment. Total conscious shutdown denial and mental rejection of the bloodletting and loss that can follow.
Fear can do that to people. It has and will again.
FOMO (fear of missing out) can soon afterward morph into FOLE (fear of losing everything).

#67 gary on 08.28.20 at 7:52 pm

#1 TurnerNation:

That was brilliant. A year ago, I would have laughed at you. But now, the image is getting clearer.

#68 Tasha Green on 08.28.20 at 8:02 pm

Useless, this can’t afford higher interest rates is BS talk by many maybe not from you but by many.

They have been paying higher interest rates it is called prepaid interest in the $400,000 to $800,000 more in just the last 20 years or so. So they think they have saved paying interest but they just paid it a different way.

Also, because they agreed to pay these sky high real estate, artificially inflated price, they are now paying much higher property taxes due to much higher property assessment by the city, MPAC. They are also getting screwed much more on their house insurance and their CMHC mortgage insurance.

This is all because of low interest rates keep down for decades now well below the real inflation numbers and true market levels of interest rates not those set by central banks and bond buying QE etc.

#69 Nonplused on 08.28.20 at 8:02 pm

“Second, from 800,000 households not making mortgage payments, adding unpaid interest to their principal. ”

We now have 2 real estate markets in Canada, 80,000 people trying to get in and 800,000 people who will soon have to get out. Forewarned is forearmed.

#70 Arctic Gringo: Qalunaaq on 08.28.20 at 8:11 pm

First mistake: Barrie
Second mistake: Polaris
Third mistake: Using CERB money to buy that Polaris!

Bonus Round: my household rent to decrease by 2% effective Sept 1st, and my ownership dividends for same place I rent are still strong.

#71 Moonshine on 08.28.20 at 8:18 pm

Garth, save us from Justin Trudeau…

#72 Ponzius Pilatus on 08.28.20 at 8:42 pm

#46 CEF
Printing billions of $$$$$ to toss around everywhere is “Modern”?
I thought the German Reich tried that 100 years ago.
Massive inflation and the financial ruin of millions of lives started the Nazi party.
Zimbabwe, Venezuela today, but a smaller version of socialist insanity.
————–
CEF, I beg you, pleeese stop misquoting German/Nazi history!
It kinda makes your whole arguments stooopid!

#73 Billy Buoy on 08.28.20 at 8:44 pm

Ironic moment of day….

A CUBAN friend of mine texted me to remind me this was the day of MLK “I have a dream” speech. Aug 28, 1963.

A CUBAN….

#74 Upenuff on 08.28.20 at 8:51 pm

#51 Cottagers STAY THE HELL AWAY! on 08.28.20 at 5:51 pm
What the hell is wrong all across this country with these mentally defective out-of-towners making entitled visits to OUR home towns and beaches?
______________________________________________

Same in BC, Shuswap Lake, the Super Value parking lot is packed…. 9 Alta plates for every BC plate, people shoulder to shoulder inside shopping…. no masks, just lots of sunshine…. No one saying a thing, the locals only positive economy is based on the Albertans coming to their vacation spots…… money makes the world turn…..

#75 kommykim on 08.28.20 at 8:52 pm

RE: #8 Classical Liberal Millennial on 08.28.20 at 2:29 pm
How is inflation at that level when the price of essential goods has gone up so much??

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

Because the way they measure inflation is BS. For example, take Campbell’s soup prices. Let’s say Campbell’s soup goes up by 20%. Instead of adding this increase into the basket of goods, the government says, “consumers will switch to no-name brand” therefore they are now paying the same or less for their soup.

#76 Missihippi on 08.28.20 at 8:53 pm

Please do tell, man in the photo, how do you get your armpits so smooth and hairless??! Everyone, grab a dog!

#77 Drinking on 08.28.20 at 8:58 pm

#30 ElGatoNerodeYVR

Cost of groceries are insane in Cowtown; gas jumped up 10 cents overnight etc, nobody cares any longer; as another poster stated; rates will never rise or the house of cards will fall!

#78 Stone on 08.28.20 at 8:58 pm

#49 Camille on 08.28.20 at 5:36 pm

———

I really enjoyed that.

#79 First time poster on 08.28.20 at 9:01 pm

I would be really curious to know what the average mortgage amount is in the GTA?

#80 Upenuff on 08.28.20 at 9:03 pm

On another note….

Went to a Ford dealership and kicked the tires on a F-150 truck. The salesman told me it has been crazy, they cannot keep product on the lot, they are flying off the shelves. On the left coast here, they cannot believe how busy their summer has been. He tells me that they usually have lots of vehicles left until October… not this year….. Covid Crazy!

#81 jess on 08.28.20 at 9:04 pm

name change?

https://www.reuters.com/article/us-canada-trump/operator-of-trump-international-hotel-in-vancouver-files-for-bankruptcy-idUSKBN25O31N?il=0

#82 Ronaldo on 08.28.20 at 9:09 pm

An increase from current 1.5% to 3% will be like an increase from 11%to 22% in the early 80s. Think it won’t happen? Think again. Imagine your mortgage payment going from $4000 to $8000. That should be enough to scare the pants off of anyone. What sense does this all make anyway? Sheep been lead to slaughter I say.

#83 Drinking on 08.28.20 at 9:14 pm

I am not so sure that interest rates will rise but for those interested here is an interesting story on what David Dodge thinks about all this: https://nationalpost.com/news/politics/john-ivison-free-spending-trudeau-government-floats-into-choppy-seas-without-fiscal-anchor/wcm/3b4b2888-f3e4-4227-b02c-21b8fa6ff6a3/

#84 crowdedelevatorfartz on 08.28.20 at 9:15 pm

@#57 Reximus
“Germans did that on purpose, spitefully didnt want to pay the war reparations with regular marks”

++++
Doesnt matter WHY they did it.
The Result was crushing hyper inflation AND the rise of Nazi’s

#85 Balmuto on 08.28.20 at 9:35 pm

Low interest rates over the past decade have been the driving force behind the price gains in bonds, stocks, real estate, gold, Bitcoin, etc. What happens when rates go up? Debating over which asset class to invest in is like re-arranging chairs on the Titanic.

#86 AACI Homedog on 08.28.20 at 9:36 pm

In dog we trust. And, apparently by the photo above, as well as other dog moments that I enjoy, dogs trust us as well. Enjoy the last weekend of August, dogs !

#87 Cici on 08.28.20 at 9:36 pm

Apparently bunkering down in the boonies isn’t a sure bet against contracting COVID-19:

https://globalnews.ca/news/7304111/prespatou-coronavirus-exposure-alert/

#88 gfd on 08.28.20 at 9:41 pm

Fitch Ratings issues new warning over federal spending, government debt
The Canadian PressAugust 27, 2020, 6:28 p.m. GMT-4

OTTAWA — A major global credit rating agency is issuing a new warning about federal debt that it says may become more difficult to tackle once the pandemic passes.

Fitch Ratings downgraded Canada’s triple-A credit rating in June, dropping the country to an “AA+” rating over what it called “the deterioration of Canada’s public finances” due to COVID-19.

The decision came out before the Liberals released an updated outlook in early July for federal spending, which projected a deficit of $343.2 billion and a debt of over $1.2 trillion.

Those figures were before the Liberals promised last week to spend $37 billion to revamp income support programs for hard-hit workers.

Fitch says in a note that gross government debt will be 120 per cent of economic output, which is “significantly higher” than the median for a double-A rating.

The ratings agency says it expects government spending to drop sharply starting in 2021, but the current growing deficit will make reining in spending and the debt more challenging over the medium-term.

But it is also sending a signal about the political dynamics on Parliament Hill, with a looming speech from the throne that will outline a recovery plan that will require the Liberals to gain support from enough opposition MPs to win a confidence vote, or plunge the party into a federal campaign.

Fitch says it’s uncertain whether the Liberals and Prime Minister Justin Trudeau could capture a majority in a federal election. Newly elected Conservative Leader Erin O’Toole “presents a new dynamic,” the agency wrote, noting his leadership platform included a pledge to balance the budget.

“Regardless of which party is in power after 2020, the government faces deep fiscal and economic policy challenges and risks,” the Fitch note says.

The government has had to sharply ramp up spending since March when the pandemic swept into Canada, forcing the closure of businesses and workers ordered to stay home to slow the spread of COVID-19.

Those restrictions have since been rolled back, and economic output grew in May as a result.

On Friday, Statistics Canada will release gross domestic product readings for June and the second quarter of 2020. The average economist estimate is for a drop of nearly 40 per cent in GDP for the second quarter compared to the same three-month stretch in 2019, according to financial data firm Refinitiv.

Fitch expects the economy to remain subdued and unemployment to remain high for the rest of the year, just as the federal government projected in its July economic snapshot.

Since then, some of the key political players have changed. Bill Morneau resigned as finance minister and was replaced by Chrystia Freeland, “who quickly announced the new spending measures,” Fitch wrote.

The Liberals are proposing three new benefits for workers costing $22 billion, to help those who don’t qualify for employment insurance, and easing access to EI at a cost of $7 billion.

The Canada Emergency Response Benefit, previously budgeted at around $80 billion, will be extended by four weeks at a cost of $8 billion. The latest federal figures show spending on the CERB surpassed $70 billion by the middle of this month.

New spending measures are expected this fall when the government updates spending plans. The Liberals have yet to introduce a budget for the fiscal year.

“We expect spending pressures to remain pronounced while unemployment remains high and economic activity subdued, and Canada’s decentralized fiscal framework, especially its large intergovernmental transfers, will increase the complexity of any fiscal adjustment,” the ratings agency wrote.

“Failure to place consolidated gross general government debt/GDP on a downward path over the medium-term could lead to negative rating action.”

#89 willworkforpickles on 08.28.20 at 9:43 pm

#51 Cottagers STAY THE HELL AWAY!
Been talking to a friend who owns near a cottage i have in cottage country (Muskoka’s)…tells me the traffic out of the GTA up the 400 hiway has been heavy all summer like he’s never seen it before. Southern hillbilly inbreds heading north by the thousands for a big square dance we suppose. Swing your partners dosey doe.

#90 Leftover on 08.28.20 at 9:46 pm

Who blinks first?

I say Germany, who will stop the presses in the EU sometime next year, possibly causes EUR to become the world’s reserve currency if Biden doesn’t follow.

Then we’re in it up to our ears.

#91 Ace Goodheart on 08.28.20 at 9:58 pm

It is possible to borrow millions of dollars to purchase a house.

It is not possible, on an average salary for the area where the house is located, to ever pay for it.

No one I know has millions of dollars to lend. If they did, they would never lend it at 1.5% to some underpaid goof ball who wanted to purchase a massively over priced crappy house.

Is anyone asking, where are all these millions coming from?

Other people’s 0.6% bank GICs?

Your 10 year old’s “high interest” savings account with the $100 in it that she got from her Grandmother for her birthday?

Who do you know who has more than a couple of thousand dollars in their bank account?

We usually have about $5000 in our account at any given time. I have yet to meet a bank teller who has not been surprised by that. We are always told we should invest it. Usually in mutual funds. We are told “that is a lot of money.”. They are shocked when we refer to it as “walking around money”.

So obviously not many people have even 5K in their accounts.

Does anyone wonder where all these millions come from?

Our government through magic and fairy dust potions, “creates” the money and loans it to banks at 0.25%.

Banks then loan it to us at 1.5%, making money on the spread.

Why do they loan so much?

You can’t make money charging interest at 1.5% unless you loan a lot of it.

We have governments addicted to money printing.

#92 Entrepeur on 08.28.20 at 9:59 pm

“Money” earned, taxed is not the same as “debt/deficit turned into printed money,” my take. Misled equation.

Money earned then taxed is money that supports government at different levels. Which means what people live by, stand by, support.

But debt, especially mortgage debt, is not money, someone’s dream, same as deficit. Then turned into printed money.

To me that is like taking control. “Cerb shutdown/deficit to a new system.”

As for the deficit clock: Build a debt and a deficit clock (side-by-side like a two-headed snake), But have the locals build it, ones who do not believe in debt/deficit and are the true taxpayers.

TGIF

#93 YouKnowWho on 08.28.20 at 10:05 pm

#48 Ponzius Pilatus

This is why Trump has a point on fake news. The numbers were not in when this was published. So they are reporting wrong numbers.

Your article says 23.6M for Biden, and they had plenty of time to compile this 23.6M number since Biden spoke.

Final numbers 23.8 Rep Fourth day Trump speak came in. Above Biden.

Suddenly Biden ratings are revised now to 24.6M?

Something is fishy. What? They needed until Trump speech was finished to compile Biden numbers?

The Trump show was much better – end of story. White House “TRUMP 2020” fireworks. No masks. It was impressive.

#18 Ferry Boy

———————-

Yeah, I hear you. Many are saying that.

But then there is deflation pressure, and as noted inflation is weak 0.1% even with that questionable CPI measurement.

Then others note that F-DEBT….I mean, F paying it off.

The truth is there are a few options for this. And none of them are pleasant. It’s a rectal exam, just few choices of apparatus!

#94 Long-Time Lurker on 08.28.20 at 10:45 pm

>For Garth & Co.

Warren Buffett’s favorite market indicator soars to record high, signaling stocks are overvalued and a crash may be coming

Theron Mohamed
Aug. 27, 2020

-Warren Buffett’s preferred market gauge hit a new high on Wednesday, suggesting US stocks are overvalued and a crash may be coming.
-The “Buffett indicator” compares the stock market’s total value to quarterly GDP to assess whether it’s overvalued or undervalued relative to the size of the economy.
-The ratio reached a historic 183% on Wednesday, reflecting the breathless stock rally in recent months and the plunge in second-quarter GDP.
-Buffett said it was a “strong warning signal” when the indicator peaked before the dot-com crash.

Warren Buffett’s favorite market indicator surged to a record high on Wednesday, signaling stocks are overvalued and a crash could be around the corner.

The so-called Buffett indicator is used to gauge whether the stock market is overvalued or undervalued relative to the size of the economy. It’s calculated by dividing the combined market capitalizations of a country’s publicly traded stocks by its quarterly gross domestic product, and expressed in percentage terms….

https://markets.businessinsider.com/news/stocks/buffett-indicator-hits-record-high-signals-stocks-overvalued-2020-8-1029539539#

#95 MF on 08.28.20 at 11:06 pm

KITTYKABOOM on 08.28.20 at 4:41

Yup. A lot of us are in the same boat. It’s frustrating.

Do it. Buy as much as you can with as much leverage as possible. Seriously. The central banks seem to have no other strategy other than permanent bond buying with money that doesn’t exist and low, zero bound, overnight rates.

I’m sure moving forward the central banks will buy another 4 quadrillion of bonds and manipulate the interest rates downward so everyone can borrow for a trillion dollar 2 bedroom soon. Oh yeah and then they will drop the overnight rate to -20%…all while “cautioning” us about borrowing too much. Lol. Just Lol.

See Powell cave to Trump in 2018 to drop the rate? It was telling. A really bad move that eroded credibility and gave support to all these conspiracy theorist idiots/doomers/gold bugs/anarchists and the like. The prudent and sensible who believe in the system (yes we understand people make errors with policy) were left frustrated.

So it’s obvious. They seem to have backed themselves into a corner and are trying to inflate their out, while trying to keep the wealth effect from bloated asset prices in place. Any time they try to reduce asset purchases (and let the real bond market function) interest rates start to rise immediately -and stocks and re suffer. It’s like a Dr that has no other options after foolishly prescribing anti biotics for years and years to his/her patient. Now when the patient is still sick, the antibiotics aren’t working anymore, instead of weaning off the patient, they prescribe an even bigger dose.

Buy the house if you want it. As big as possible. That family income is great and you will do well.

MF

#96 the Jaguar on 08.28.20 at 11:06 pm

Is that Dharma Bum’s kid in the photo? And why would he think the kid would love him less than the air borne dog? The dog is the beneficiary of all that love because his father showed him how to express it. How to feel it. How to be grateful to have love in his life. Enough said.

#97 crowdedelevatorfartz on 08.28.20 at 11:07 pm

@#91 Ace Goodheart
“We usually have about $5000 in our account at any given time. I have yet to meet a bank teller who has not been surprised by that. We are always told we should invest it. ”

++++

I stopped going to bank tellers probably 5-10 years ago.
Bank machines only have digital advertising….so far.

The sales pitch at the wicket is relentless.
I always have between 5 and 10k in several bank accounts.
“You have a lot of cash in your account!”

“5k isn’t a lot of cash and its non of your business. Save the sales pitch kid. I already have my money invested with professional money managers.”

If the sales pitch continues …..
I tell them ,” Stop the sales pitch. I’m not interested. If you continue…..I will close my account and move everything to your competitor across the street…..
( that usually gets a few sideways glances from the other tellers)

Sales pitch …..Oh-vah.

#98 Ponzius Pilatus on 08.28.20 at 11:14 pm

#90 Leftover on 08.28.20 at 9:46 pm
Who blinks first?

I say Germany, who will stop the presses in the EU sometime next year, possibly causes EUR to become the world’s reserve currency if Biden doesn’t follow.

Then we’re in it up to our ears.
————–
If Trump wins and continues to isolate the US, that will create a power, economical and political vacuum.
Who will fill it, is the question.
China, EU or Russia?
Place you bets.

#99 TurnerNation on 08.28.20 at 11:20 pm

So I heard NBA players walked off the job at least for a while? That leaked info supposedly from the late 1960s I repeated here, that in the New System, which was to be rolled out one winter’s night – it was, into a March Monday – in the end only soccer would be permitted?
Let’s see:
– NBA work stoppage.
– Blue Jays team banned from the Country.
– CFL football league was cancelled.

Enough evidence or mere unprecidented one-time coincidences. And we are but 6 months into the global rollout of Phase 1 of the New System.
September is Harvest Season and the Global Government is coming for our rights and assets. Hold on.
We are living in the Un-free land.

#100 TurnerNation on 08.28.20 at 11:42 pm

I might be up to 8 fans. Best thing I hear today, EVERY news story of 2020 is fakery. Consider this.
But why? Do you ask why the local junkie smashes your car’s windows looking for spare change at night? Do you lie awake agonizing? No. It’s the way of the system. Deal with it.
Them and us. Know them. Else, No us.

#101 Two-thirds on 08.29.20 at 12:26 am

No, free money is not what comes next… Negative rates are.

The Economist recently published a special report on this, worth a read. If CBs can take prime rates to 20% and to 0.2% freely, why not -0.2%?

What would prevent CBs from going negative? Who would stop them from doing so? (particularly if, as it’s likely, they do so in a coordinated fashion, a la 2008…)

Besides, if near-zero rates turbocharge the stock market, negative ones would send it hypersonic, would they not? So what is not to like about them?

The last (lost) decade has shown that conventional CB tools are now seemingly obsolete, and that the age-old relationships between inflation, employment, and rates are no longer cast in iron. Brave new world, it seems.

The world has indeed changed. Savers lost. Grashoppers rule, ants drool. We can no longer play the game with old rules.

If you can’t beat ’em, join ’em.

(pass the scotch, please)

#102 Balmuto on 08.29.20 at 1:35 am

It’s obvious now. All of Pro Sports hates Trump. The truth hurts for Trump-chumps.

#103 Federinka Costalanko on 08.29.20 at 2:46 am

DELETED

#104 NSNG on 08.29.20 at 3:06 am

CNN Has Turned Itself Into America’s “Baghdad Bob”

https://www.zerohedge.com/political/cnn-has-turned-itself-americas-baghdad-bob

Hilarious meme army retaliation

#105 Shirl Clarts on 08.29.20 at 4:17 am

#55 Greg on 08.28.20 at 6:00 pm
Well, our strata insurance just increased by ~770% so I’d say inflation is alive and well in the B.C. Interior.

^^^^;^^^^^^&^^^/^^^^^/^^^^

Yup. you’re getting scammed, as are we all.

Hey Competotion Bureau! Yeah you! GET off your ass, do your job and punish these crooks. its getting ridiculous and you should be embarrassed.

#106 Shirl Clarts on 08.29.20 at 4:25 am

#76 Missihippi on 08.28.20 at 8:53 pm
Please do tell, man in the photo, how do you get your armpits so smooth and hairless??! Everyone, grab a dog!

^^^/&^^&^^^^^^^////^^^^^

I can assure you, he’s grabbing that dog wrong. Shame, Garth.

#107 Arcticfox on 08.29.20 at 4:29 am

About that official CPI rate:

https://chapwoodindex.com/

#108 Sandy Knox on 08.29.20 at 5:56 am

Freakonomics, we’re in a recession, which would be real if we weren’t plunging into debt with Trudeaus wild spending. Is it ever possible to ask people to budget? No, Teudeau voters used CERB to buy $1000 t shirts instead. So far so good. So what if GDP is down 50%? Trudeau thinks the socialist in the US are steering him straight with MMT. They’d like to try it but no one down there is crazy enough to go there. Perfect Trudeau can experiment on us. 100% taxation, it’s a given. Go home, nothing to see. Trudeaus got it.

#109 BillyBob on 08.29.20 at 7:08 am

#95 MF on 08.28.20 at 11:06 pm
KITTYKABOOM on 08.28.20 at 4:41

Yup. A lot of us are in the same boat. It’s frustrating.

Do it. Buy as much as you can with as much leverage as possible. Seriously. The central banks seem to have no other strategy other than permanent bond buying with money that doesn’t exist and low, zero bound, overnight rates.

I’m sure moving forward the central banks will buy another 4 quadrillion of bonds and manipulate the interest rates downward so everyone can borrow for a trillion dollar 2 bedroom soon. Oh yeah and then they will drop the overnight rate to -20%…all while “cautioning” us about borrowing too much. Lol. Just Lol.

MF

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

So if you have it all figured out, instead of constantly stating your frustration why not DO something to take advantage of these circumstances? Take your own advice and leverage up the wazoo to get that SFH you so obviously long for? Or choose a market you actually CAN afford? You have pretty clear choices but you never give the impression you actually exercise any.

Reminds me of the folks constantly whining about how equity markets are “rigged” and “propped up with fake Fed money” and so on. But when it comes to actually putting real skin in the game by either going long or short – not quite as brave as their words and elaborate theories.

Talk is cheap. I don’t know ANY successful investors who haven’t lost as well, myself included. But you have to be willing to lose to even have a chance at winning.

So in the end these types just sit on the sidelines and console themselves with (in their minds) clever hindsight analysis. And grow more bitter by the day as they realize their fear has caused them to miss out.

Agree or disagree with their capitulation, at least “kittykaboom” is adapting.

#110 Steven Rowlandson on 08.29.20 at 7:20 am

Wage growth won’t make a difference until minimum wage workers can buy their first home for 3 years pay or less.

#111 Get ready ... on 08.29.20 at 7:41 am

Arctic Fox #107:

Shadowstats has been tracking this longer and more comprehensively

http://www.shadowstats.com/alternate_data

#112 Channel Surfer on 08.29.20 at 7:44 am

Trudeau creating a debt crisis based on an evaporating dream of a standard of living which precedes him. Instead of protesting the collapse of Canada’s economy people borrow to try and maintain a standard which no longer exists. It’s sick, it’s twisted, it’s evil. It’s everything Conservatives are calling out and leftist media buries from the public conscience. Sad.

#113 YouKnowWho on 08.29.20 at 8:13 am

MF, KITTYKABOOM,

With you 100%

Shocked that with 176% consumer debt, unemployment gone wild, mortgage flakes galore this house of cards still stands.

As with any house of cards, eventually it has to collapse. That’s what our responsible logical minds tells us. Deferrals have bought them time. Are they using the time wisely? Have we called this game result too early? NOW is when the deferrals end. CERB ends. Business start really folding. Few will try to pull through the holidays before throwing on the towel Dec 27th or in January.

The other thing is that a roll back to 2018 or 2016 or 2014 prices is still out of touch with fundamentals vs. Avg incomes.

Key thing is to live your life. Enjoy it. Have fun. Truth is owning a home has a big cost with time. And it is the most valuable asset we have. $1m (now $2m) homes and you scrape ice and snow off your car? You don’t have an indoor pool? Gym? View of your neighbour’s house from your living room window. View of a brick wall from your bedroom window like you sleep in a prison? Flooded basements when it rains. Yeah…not worth it.

I live in a stellar unit. Looking at sky, trees, lake, horizon. View alone is psychologically strengthening. It is a moment of meditation when I look out any of the windows. Hammock on one balcony. Outdoor livingroom on the other. Pools indoor and out. Killer location. Walk, bike, drive, whatever you want. Everything under my nose.

I never owned a lawn mower, snow blower, power washer, a car snow scraper, rake, plunger.

I keep saying to myself I should buy a house. I could. But on a list of features it would remove so much from my life, I would need to spend $3m+ to have the house give me features I enjoy right now. And some are just irreplaceable with a house.

Now forgive me, I have absolutely zero house work to do this weekend. Have to get started by walking over to the bakery to get some hot bread right now then plan what we’re going to do with all this free time I don’t have to spend taking care of a house.

#114 YouKnowWho on 08.29.20 at 8:29 am

#107 Arcticfox

———————-

Could CEOs salaries be a reflection of real inflation perhaps? :-)

CPI is just a ruler, where a human being controls the units on it.

This is a fact I realized only when I got to observe children play.

Humans want to win. And in any game we play, we want to find an advantage, including through deception. Humans will do everything possible to win down to manipulation, cheating, lying, etc.

Markets humans create are not subject to any rules of physics, or science. Not pegged to any fixed unit of measure, and for a reason. Everything is defined by a human and can be redefined by a human in the game of finance or real estate.

Now…let’s play! Here is the CPI….because we say so. Here is the value of a dollar…because we say so. Here is the interest rate….because…well, we say so!

#115 Boomer Bill on 08.29.20 at 8:30 am

#109 BillyBob on 08.29.20 at 7:08 am

Truer words were never spoken!

#116 Phylis on 08.29.20 at 8:30 am

#75 kommykim on 08.28.20 at 8:52 pm
RE: #8 Classical Liberal Millennial on 08.28.20 at 2:29 pm
How is inflation at that level when the price of essential goods has gone up so much??

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

Because the way they measure inflation is BS. For example, take Campbell’s soup prices. Let’s say Campbell’s soup goes up by 20%. Instead of adding this increase into the basket of goods, the government says, “consumers will switch to no-name brand” therefore they are now paying the same or less for their soup.
—————-

Yes and the classic resizing/repackaging game. Bacon common size seems to be 375g now. Even concentrated juices have shrunk in size and have more water in them. Don’t forget the bread pan shrinkage and throw in a pricing scandal, but that’s not inflation, eh? The magical mystery basket filler data could easily be posted to provide transparency. Are they sending miracle shopper to nofrills on double coupon day to the discount cart with a points card?
(Yes i know this is only one component of the index.)

#117 Mark the Carney, Carney on 08.29.20 at 8:36 am

#101 Two-thirds on 08.29.20 at 12:26 am
No, free money is not what comes next… Negative rates are.

The Economist recently published a special report on this, worth a read. If CBs can take prime rates to 20% and to 0.2% freely, why not -0.2%?

What would prevent CBs from going negative? Who would stop them from doing so? (particularly if, as it’s likely, they do so in a coordinated fashion, a la 2008…)

Besides, if near-zero rates turbocharge the stock market, negative ones would send it hypersonic, would they not? So what is not to like about them?
—————————————————————-

It astounds me how many people think negative interest rates are for borrowers and not lenders. Negative interest rates mean you have to pay a bank to put your money there or banks have to pay to borrow from CBs. It does not mean banks pay YOU to borrow money from them….

Garth, you need to post a blog on Economics 101.

#118 Uncle Al Sinclaira on 08.29.20 at 8:43 am

#79 First time poster on 08.28.20 at 9:01 pm
I would be really curious to know what the average mortgage amount is in the GTA?
—————————————————————-

On a 10 foot lot with a 7’x7′ garden shed, 1.25 million.
On a 10 foot lot with a 8’x8′ garden shed, 2.25 million.

#119 Stubble Jumper Jim on 08.29.20 at 8:46 am

#77 Drinking on 08.28.20 at 8:58 pm
#30 ElGatoNerodeYVR

Cost of groceries are insane in Cowtown; gas jumped up 10 cents overnight etc, nobody cares any longer; as another poster stated; rates will never rise or the house of cards will fall!
—————————————————————

Time to grow a garden and start riding a bike…

#120 David Hawke on 08.29.20 at 9:26 am

TurnerNation, Spot-on!

#121 YouKnowWho on 08.29.20 at 9:33 am

#117

Honestly, who here thinks the debt is intended to be paid off? Any debt. Personal. Provincial. Federal. Canadian or American or European.

And so, any answer that helps the debt grow and be carried is what is likely to happen for now.

Beyond that? “Don’t worry about it. We likely won’t be in office by then.”

We eat out because we don’t want to do the dishes. We use dishwashers even though odds of asthma in our children increase significantly by doing so. All because we want someone else to clean up the mess.

Well, someone else will clean up this mess, our children. Who gives a crap about children anyway? They can’t vote!

#122 jal on 08.29.20 at 9:34 am

Inflation is only good for those who can increase their income to keep ahead.

#123 Dharma Bum on 08.29.20 at 10:22 am

#96 The Jaguar

Is that Dharma Bum’s kid in the photo? And why would he think the kid would love him less than the air borne dog? The dog is the beneficiary of all that love because his father showed him how to express it. How to feel it. How to be grateful to have love in his life. Enough said.
——————————————————————-

Nice of you to say.

I guess I was being a bit self deprecating with that comment. That’s just my feeble attempt at humour.

#124 mattbg on 08.29.20 at 11:10 am

#120

You are right, of course. I’m just amazed that so many people get angry when you suggest that this is going to cost their children (and probably their grandchildren). And that’s all it is: anger, rather than refutation.

This is where poor financial education really hurts everyone: as a voter, you should understand how a deficit is paid for and how that deficit rolls into the federal debt and is funded and rolled over.

We can’t be a serious country and make massive debts an issue of warm-hearted vs. cold-hearted character, which is how it is shaping up (and, to some extent, the government encourages). I’d be OK if the risks were being priced in, but the current approach basically kicks it down the road and makes it somebody else’s problem
to deal with in future – someone who will be later framed as mean and cold-hearted for making the necessary cutbacks. It is terrible governance.

#125 Dharma Bum on 08.29.20 at 11:35 am

There seems to be a renewed surge in the “wealth effect” illusion, notwithstanding the devastation of so many jobs, incomes, and prospects caused by the virus.

In addition to the welfare payments now being received by many and used for frivolous consumer spending (toys, etc.), consumer spending is being ramped up by multitudes of homeowners who are hearing that the value of their existing houses are skyrocketing.

The many people who have not taken a direct hit from the virus fallout,( i.e., have kept their jobs, have lower expenses due to WFH, are not eating in restaurants daily, not buying new clothes so often, not sending their kids to daycare or summer camps, etc.), actually “feel” richer.

Those that have a significant equity stake in their homes and who also have decent balanced and diversified liquid asset portfolios have actually BENEFITTED from the pandemic. At least they perceive themselves to have.

Ergo, time to invest even MORE, like maybe in a second home. Or, just go nuts and buy crap like cars, electronics, snowmobiles, ATVs, motorcycles, house renovations, etc.

I know first hand that the kitchen renovation business is going totally gangbusters. Cabinet companies and countertop (granite, quartz, marble) fabricators cannot keep up.

Building material supply companies are backordered on all the basics like drywall, siding, stone, lumber, and so on.

People are buying, building, renovating, and remodelling like there’s no tomorrow.

Engineering companies, land surveyors, excavation companies, and homebuilders are heavily booked out for a year or so.

It’s not that these people have suddenly hit a jackpot. They just feel empowered because they perceive that their existing asset bas has significantly increased in value, so they believe they are secure in taking on more debt to fund these new expenditures.

Now, back to dogs.

#126 George S on 08.29.20 at 2:43 pm

#62 Useless said:
We need to change the way inflation is calculated to reflect actual inflation. The real rate of inflation has been closer to 10 percent for the past decade but the Government and its indebted citizens cant afford a higher interest rate.

If the inflation rate was actually 10% per year for a decade then everything would be 2.6 times more expensive than it was in 2010. (you can calculate it for yourself on your iPhone) For example a 2020 Toyota Corolla would be $52,000 instead of $20,000, Gasoline would be $2.60 or more per litre, a can of beer would be about $5.00 or more. I don’t think you can find anything that has gone up by 2.6 times in the last year except for real estate in certain very tiny areas of Canada.

#127 Mike from Canmore on 08.29.20 at 3:46 pm

#99 #100 TurnerNation

Maybe you should rename yourself to TurnerNation FC

from;
Mike from Canmore United heehee