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Guest Post: Oil & The Looming Canadian Housing Bubble Crash
As the year comes to a close, it is useful to put things into perspective. Sure, California has a love affair with real estate and we go through our traditional booms and busts. $700,000 crap shacks now litter the landscape but there are fewer and fewer lemmings taking the plunge. In Canada there was no correction. In fact, households continue to go into deep debt to purchase real estate. The argument goes that mortgage standards are much tighter in Canada so therefore, they are much more enlightened when it comes to financing homes. People forget that the bulk of the 7,000,000 foreclosures in the US came in the form of standard loans. Garbage loans imploded in more dramatic fashion but people lost their homes because the economy shifted. At that point, it merely meant covering the monthly nut. We were housing dependent and that market contracted aggressively. Canada is housing and oil dependent. And oil just got a big kick to the shins.
In Canadian debt we trust
There was an inflexion point for US markets when household debt surpassed household income. People kept saying it was a liquidity crisis initially but it was truly a solvency crisis. People took on too much debt and were walking on a financial tightrope. In the US, this peaked above 120 percent. Canada is well on its way above 160 percent:
Basically Canadians are deeper in debt relative to their income. And a large part of this debt is housing related. A large part of the economy is also tied to oil and as you may know, oil just took a massive cut:
It was interesting to hear that we would never see oil drop below $100 a barrel. Oil is now trading at $52.84 a barrel. Similar arguments were made about US housing never having one negative year-over-year price drop until we did.
Large part of Canada’s oil is costly to extract
A large portion of Canada’s oil is costly to extract. With oil sands for example oil would need to be at $80 a barrel to make a profit:
I doubt people want to run money losing operations for a long period of time. So it is no surprise that oil rigs are closing:
Fewer jobs and less money. And for a large part of the Canadian economy, much of this money has been flowing into housing. In Canada, there seems to be a cult belief that housing simply will not correct. They are full on drinking the good old tasting real estate Kool-Aid. In the US, we already lived that correction and understand that yes, housing does go through booms and busts especially when debt is used to supplement a lack of income growth. As the debt to income chart shows, many US households were forced to deleverage via foreclosures and bankruptcies.
Home prices out of sync
Home prices are fully out of sync with incomes. Take a look at this rise in home values:
Canada has enjoyed many years of the global commodities boom and now finds itself contending with a market full of debt and inflated housing values. Short of oil rising back up to $80 a barrel and higher Canada is likely going to face some short-term pain. The housing market is due for a correction. Those of us in California realize that booms and busts can occur all of a sudden but the events leading up to this are largely foreseeable.
I’m sure many in Canada assume that home values will simply continue to go up and just because banks check incomes doesn’t mean squat. As the above data shows, households are already deep in the quicksand of massive debt. It is all dandy when everything is going up including oil. When oil gets smashed as it did, it came on quickly. Canada has their versions of $700,000 crap shacks usually in the form of condos. Hey, at least with a crap shack you don’t have to share a common wall. When you look at the Canadian housing market it makes the US look like a frugal uncle.
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dupe, which one is the real post?
The author should have shown the Baker higher Canadian rig count dropping from 391 to 256 in the week ended December 26th.
Wow that is full on carnage. Zerohedge estimates 4-6 months for the fall off to infiltrate the economy.. So spring 2016 should have shaken out the weak and it will be time to buy.
It's just a flesh wound tis but a scratch.
The carnage is yet to come. Our last crash was a real estate bubble, this time it'll be the energy bubble crashes the market. Those lucky Canucks are going to get both at once.
The banks and BoC will do "whatever it takes" to kick the can down the road. Excpect the Loonie to head to 50cents to the US dollaro. Gold priced in Loonies takes off.
Doubt the BoC or the banks can do anything. Deflation will set into Canada, and the Canadian dollar will surge to levels unimagineable, to inflict the maximum of pain on the over-indebted homeowners who have to try and pay back loans with very expensive Canadian bucks. Canada won't be able to depreciate out of this mess.
But Canucks control most of the world's gold industry. So at least they are hedged.
You will often notice doubliing after the 1st of the year. Do not panic. It goes away after a few days.
I'm Canadian, so I can give you an on the ground report. Real estate did begin to crash in 2012-2013, but then something levitated it. Looking back, I'm pretty sure it was China's massive commodities buying that sent prices out of this world. That and real estate reporting organizations changing their method from just averaging the sale prices in a given area, to picking one individual house and calling it "the average."
Matters not, the whole house is caving in now with oil at $52. There's now only two kinds of Canadians, totally awake and comatose. I can hardly wait for the government cutbacks to hit the muni's and provincial safety net jobs. It'll be worse than the Nazis having their party interrupted by Allies barging through the door with guns.
You're fakin, eh? Not a single eh, eh.
Aye see: Australian Real Estate
"I can hardly wait for the government cutbacks to hit the muni's and provincial safety net jobs." +100
My thoughts exactly! Government employees will fight this tooth and nail!
From all the data I've seen, the decline that begain in the middle of 2013 has continued over the past year and a half. And the media and the local RE boards have gone into full-on propoganda mode trying to convince late-comers that there's still life left.
Let me just say, The Iraqi Minister of Information would be proud.
Everyone needs a weekend getaway in Moose Jaw,
or is that Whitehorse?
Oh come on, be venturesome.
http://www.nvivujivik.ca/en/index_eng.htm
Ivujivik Canada's a tidge more off the grid and probably more suitable for some of the guys who haunt this place.
Don't know about internet connections
Then again, all the guys here who want anonymity sure get it by being here, no?
rolls eyeballs
Dirty Little Secret - Bank Repossesion Sales in CANADA can be HIDDEN FROM THE PUBLIC.
This Canadian Turtle would of started a long time ago if banks were forced to disgorge their assets.
Oh HOW I LOVE THOSE NEWFIES. Free flights to high paying jobs and their housing in Newfoundland went as high as Fort McMurray. Well a huge chunk of them just got laid off, and talking to them directly housing is crashing! Seriously $300,000 for a 'water front condo' in Newfoundland?? BTW their island only has 17,500 kilometers of shoreline, I don't think there is a shortage..
Newfies are living proof eating fish is not brain food!
I've worked with a lot of different men, with different nationalities, in physical labour as a supervisor , and let me tell you no one, I mean no one, works harder than a Newfie.
Lord 'Tunerderin Jesus, ders more slng in nfld den ders ice caps in da water! Where ya at By? What ya to?
The most interesting place to take a newfie is to Scottland. "you sound Irsh but theres somethin' wrong with ya, lad"
RE: the article, when someone writes something like
-"So it is no surprise that oil rigs are closing"
-"With oil sands for example oil would need to be at $80 a barrel to make a profit"
Dats real great insight there ya Chucklehead.
Harder, maybe not. How about smarter ?
Greetings from one of the guys who haunt this place ... internet connection is great here... fiber optic.
http://en.wikipedia.org/wiki/Salmon_Arm#mediaviewer/File:Salmon_Arm_Pano...
Been out of the Nazi/USSA 45 years ... never want to even visit there anymore.
Who'd want to live in McDimwits heaven?
Hey DavidPierre ... I am another ghost around ZH and you and I are nearly neighbours up here in Canada so I thought I would say "boo, eh". Currently I am haunting the Vernon area in a more corporeal form.
Internet connection here is good enough for me too.
Back to the article ...
I have family and friends working in tar sands industry and so far still good for them. But a few are a bit worried. So I worry a bit too as I need them making money so they spend money (in residential/commercial construction/renovation) so I can make money.
And as far as a real estate bubble and this article saying there was no correction here in Canada I would beg to differ at least as far as my personal experience goes. I sold out of my condo (I had been in it for about 10 years so sold for many times what I paid) down in the heart of the Fraser Valley back in early 2007, basically at the peak of prices there (friends in similar condos sold for less, both before and after, I sold out). Moved on up here to the Okanagan Valley and not being sure exactly where I wanted to live spent a few years camped out in my parent's basement suite up here. A fortunate happenstance it was because homes I was interested in in 2007 were selling for less in 2010 which is when I bought again (a nice little house with a permaculture garden already in the ground) from people who had built this house at the peak and were more than a little desperate to get out from under in a glutted market. Similar homes are selling for more again now 4 to 5 years later. It wasn't a crash I guess but it was a correction and fortunately I bought in at what seems to have been the bottom.
So I think there was a correction in Canadian housing and depending on which side of that correction someone was on were on dependins on where/when/what the prices paid/sold for were. Similar homes in my area are up from where they were a few years ago. A few years from now who knows but if there is another correction coming down the pipe I am not too worried about it. Currently I am paying my relatively small mortgage off as fast as possible with bi-weekly plus accelerated principal payments and lump sum payments as well. Depending on how sharp this likely correction is I could even rent out the small suite downstairs which is currently used by visiting friends and family but mostly sitting empty.
What is most important is that it costs me far less to make mortgage payments, taxes, utilities, upkeep (which is minimal for now as it's nearly new) and even a few improvents than it would cost to rent a similar dwelling. And still stack a bit of savings too. That's good enough for me and I thank God that I am in a position to hopefully weather another correction ... otherwise the birds of the field will take care of me :)
blah blah blah!
Jees by'e, were you born on a 'raff? You got more lip den a coal bucket! Just had to say the arse fell out of 'er, By'e! As dey say, you can't tell da mind of a squid!
Back in '08, der house buyers were scare as hens teeth. 20-30 per sent drop in da likes of Calgary, even more da furder north you at. 10 Gunshots away in Grande Prairie had 30 per sent.
Seven yeers fore, and dat housing market is blowed up like a blood poison cat! Try tellin people houses on nish ice, but der is deef as a cod! Most Canadians are some stund!!
Shs some lop on da pond now, Buddy. Proper 'Ting is, wait a fair wind and yu'll get one.
Bless yerr cotton socks
BT
:)
Too rite!
Aye, thees were days o' glory and shame. Pride always afore de fall.
Sum be stund still and mor so sins den.
Fair or foul de breez alwees be blown.
Me tanks for yor blessin and de same rite back atchee, Buddy.
DaveyBoy
We Canadians have a sense of Haw Haw too. You'll find signs in plenty of Canadian towns saying something along the lines of:
"Ivujivik, 1890 KM's North"
Of course, there's 350 other towns along the way, but we like to make sure everyone knows how to get to Ivujivik.
Or Regina where if you leave the casio with more than $300 in winnings the Indian Posse will show up and jack you and your car before you can get out of the parking lot.. Add in -30 for 6 months of the year - no wonder the population is only 250,000 and dropping fast..
Try Resolute.
If y'all think those charts in Canooksville are scary (which they are, but they're on the surface, in full view) nobody's paying heed whatsoever to this chart.
Adjusted Monetary Base in the US Financial System is plummeting.
That is a good precursor to causing even softer economic growth and if not stopped soon, outright contraction
http://research.stlouisfed.org/publications/usfd/page3.pdf
Remember, if QE did anything besides make the rich richer, it helped to keep the whole system afloat.
Now, the monetary reigns are being hauled in.
Probably at the same time there's some contraction in the deficit financing....meaning not necessarily that government is spending less, but borrowing less meaning taxing more which means... Less Fiscal Stimulus.
This could just be a repeat of the 20's no?
Why is nobody but me paying any attention?
Yes, my little bearish friends, whilst in the middle of a Liquidity Trap, stimulus turns to contractionary policies?
Oh, forsooth and swoon, could gonna be gettin' bad!
Full employment for the margin desk and collection agencies.
Whass da problem?
'Nuffin' if ya' owns a lotta bonds that stays money good!
Thanks knuks. I was a quart low on forsooth.
I want to thank you for introducing me, to my new favorite ME country in one of your rare AM posts...,
Bukakkastan. Who knew?
True story about Iran. Was in a Journal of Fucked Up Shit or something, but was real and credible.
Because Muslim girls have to be virgins at marriage. Or face some dire consequences. In some places like being stoned to death.....
It noted that teenaged girls in Iran (and I'd assume many other Muslim countries) are exceedingly proficient at giving head.
Humph.
Bukakkastan, indeed.
I understand from good authority that the girl's potential mate is exceedingly skilled at haedus coitus.
**Twisted Pig Alert**
....all hopped up on OTC flu meds and reading your post with the add banner simulataneously flashing to the side "Low commissions and tight spreads"....... mmmmmmmm tight Iranian spreads........
"...proficient at giving head".
Either they or "going Greek".
Natural needs are natural needs, and nature will not be denied. No matter what ideologues want.
Knukles you posted this the other night, and I posted a chart later which you may not have seen that showed what went down: excess reserves at depository institutions. That number has since risen back by $300B from Dec 10 to Dec 17th and stands at $2.655T as of 24 Dec. Click on URL then select 1YR to see latest data.
http://research.stlouisfed.org/fred2/series/EXCSRESNW
"In Canada, there seems to be a cult belief that housing simply will not correct. They are full on drinking the good old tasting real estate Kool-Aid".
Real Estate never goes down...right?
I went to a neighborhood association cook-out in Charlottesville, VA in 2006.
Everybody told anyone who would listen, real estate goes up 25% per year.
yep I live here. It is full on retardation.
The latest craze is to simply not sell. I've talked to a few half wits who planned on moving but they cant sell their house. (because they cant fathom lowering the price) So they just change their plans and don't move.
This one couple cant sell their shit hole in Fort Mc for $600,000. They sold all of the furnature and everything and were ready to move to Edmonton. Now they are moving back.
Retardation
Re-fucking-tardation I tell you.
In 2007 I would sit in the Syncrude lunch room with all the operations asking them why they were not SELLING NOW? All their overtime had been cut and their income was maybe $100K and their houses worth $700k. I explained to them that $700K would buy a 100 room hotel in Saskatchewan with a million dollar a year income. Come on people!! None of them could think to get out. The mortgages were bankrupting them then, and 'big oil' was kicking in $150 K buy in's to get operators to come to the province. Finally Syncrude started hiring cab drivers to run the power plant monitor screens because they decided they only wanted to pay a power engineer 25$ / hour to start. You can't make this stuff up.
Fast forward 7 years and you go to Fort McMurray and it's been overrun by the hutu tribesmens and various ethnicities willing to pile 40 people into each house to make that $700 K affordable.
Canada has quite a bit of space, why pile 'em 20 high?
Residential zoning in Fort Mac is very restrictive and confined within a small area. In other words, supply of living space is very limited despite high demand for workers in the oil patch nearby. There are two kinds of houses: old fashioned single-family residences, 40+ years old, with wide 'California-style' streets and yards, and cramped ("densified") tickytacks built more recently to accommodate the last oil boom. Newcomers to the local job market are often disillusioned to find themselves having to board in shitty, noisy apartments or townhouses with cardboard walls.
Living in Fort Mac is similar to living in Banff or Whistler to the extent that you have a large number of adventurous young people away from home for the first time, making the best money they've ever made, but confined indoors as the temperature is sub-zero for half the year. Add booze and bar fights and 4x4s, and you have a recipe for trouble for a lot of young fools. The single highway into town is FINALLY upgraded after 25 years of speed and alcohol related tragedies. The local RCMP detachment is rarely bored.
With the drop in oil price, some of the stress of living in that place might ease as workers seek opportunity elsewhere.
I don't embrace the broad pessimism of this article. It reminds me of something by Kuntsler, with snide, sweeping generalizations. Different factors affect local markets in different ways and to a different extent. Where I live, the market benefits from the new global cooling trend, as there are not many places in Canada protected from the deep freeze. Places to avoid are bubble centers like downtown Vancouver, where the majority of apartments in some towers sit empty, purchased merely for speculation. Alberta might experience some stress as governrment revenue projections get blown out of the water, but Canada has stable oil and gas supply, whereas America's frakking miracle seems primarily to have been a temporary blessing at best and a marketing sham at worst. When those fields in the Bakken dry up, oilsands will still be there. Ottawa needs to expedite the Northern Gateway pipeline to the Pacific before project costs mushroom and customers look elsewhere.
Ditto on not embracing "the broad pesimism of the article".
Me and mine are doing still doing more than well for now and us hoping and God willing through any difficulties.
As you say ... it is different everywhere (for different but some of the same) reasons.
;)
It isn't about the tar sands buddy (or do you just ignore that debt to income ratio?).
Are you being argumentative out of ignorance, or just pulling my leg? It *IS* about the tar sands and the broader mining sector as a substantial wedge of Canada's real economy. You're familiar with the term Multiplier Effect? Hundreds of thousands of direct jobs in mining entail millions of jobs for all the spin-off industries and services, plus direct investment, plus infrastructure, plus the hundreds of billlions of dollars in royalties that go to pay for your OAS and all the other government programs and social contract obligations to which you and other members of the largely-naive-and-brainwashed electorate are accustomed. Harper's "budget surplus" (if there ever really was one) just went up in smoke. Expect taxes to get jacked accordingly, even as the currency buys less and taxpayers are already deep in the red. The Canadian economy is going into the shitter for the next few years, with terrible consequences for thousands of small businesses and considerable rebalancing of real estate valuations among the most highly indebted neighborhoods.
Bottom line: We need high prices for commodities in order to justify the large capital allocation to produce and tax them, which enables the high valuation of real estate for the people whose jobs enable them to get credit from financial institutions. Where the resource economy goes, the real estate market follows.
As for the debt-to-income ratio, can we at least agree that this is a sweeping generalization based on an average pulled from a bell curve, statistical validity and reliability unknown? Some people should be barred from plastic, having never learned and internalized elementary personal financial management, while others are so tight with cash they squeak when they walk. I happen to know Americans, Canadians and people from other nations who represent both extremes. I'm sure you do too. The media will ignore all the nuances and simply toss around simplistic and easily politicizable figures like that 160%, and that's all the sheeple will hear, never trying to plug things back into appropriate context, never looking at a breakdown of the debt and demographics and other factors.
I'm hearing very negative anecdotes from real estate professional friends, yet the front page of today's Vancouver Sun was "REAL ESTATE RESURGENCE." Does that indicate a market top?
160% is meaningless..but the point many have been saying, is that there is no deeper data. The age, credit ratings, debt, etc of mortgage holders are not available at one site. Every bank may keep track of this stuff for their own internal use, but it is not available to analysts or the public.
Surveying crews in Northern Alberta are already being sent home and by the middle of 2015, high school dropouts in Edmonton may not be able to make $80,000/ year. A second round of oil company cuts will occur in the spring if oil is < $70/ barrel.
Labourer Union wages in Ft McMurray are $ 36/hour...that is UNskilled labour.
Also, the auto debt in Canada is outrageous.
According to JD Power one third of autos being traded in have negative equity, and the average financing is about 6 years and 8 years is not uncommon.
Borrowing for a car can be a good move, but 4 years is the maximum I would go.
Acknowledged, Hoppy. Thanks. We seem to be on a similar wavelength.
On a related topic, I hope ZH brings "bail-in" legislation back into focus in the weeks ahead. Thus far, I see no talk about it in Canada whatsoever, yet the Harper Gov't reportedly endorsed it.
Here's an example www.nocreditchecks.ca
No Credit Checks, No Credit Checks. We finance... Everyoneeee! <Muahahahaha>
It's also the only place in the world where I've seen car payments shown as bi-weekly or even weekly. Gosh, $199/wk to lease a Ford Raptor sounds like a great deal!
Still doesn't stop the hoardes of independant contractors from bullshitting about their pay, citing their gross, when their net is 80% less.
bragging about your before tax income is what its all about here. Tell people you are making 20% more then you really are, then pretend that you don't pay taxes and whoa, you come up with Albertan salaries
I was thinking more along the lines of all the expenses the independant contractors have. A friend of mine does the contract welding stuff, grosses $250k/year, but by the time he makes the payments on his welding rig truck, pays for the Fort McMurray hotel rooms, eats, etc., he's earning, at best, a middle class salary similar to that of a local professional.
Oh that bitter cold slap in 1984 when everyone went to bed with their houses worth $160,000 and woke up the next day with there houses worth $80,000.
THAT would NEVER HAPPEN HERE AGAIN lol!!! ;)
was that 84 .... I thought that happened in 1980 when interest rates on mortgages were in the 20 percent neighborhood .... not that it matters ..... sheep have notoriouly short memories...... could have been the day before and they'd still fall for it.......... they have the '79-80 bust of PM's burned into thier little heads though..
For those interested, an Edmonton based financial advisor is coming out with a much anticipated book in the spring of 2015:
Hilliard MacBeth
When the Bubble Bursts: Surviving the Canadian Real Estate Crash
Without the Chinese buyers, they will find out that real-estate does indeed go down.
Well if everybody would quit buying so much crap at walmart making escapee multi-millionaires all flooding to Hongcover we might be able to find that out at least for that city.
What Chinese buyers? Hasn't it been proven beyond a doubt that Chinese buyers are mostly a myth -- that they're really Canadians of Asian ethnicity taking on mortgages with lots of credit just like everyone else? Vancouver wouldn't be credit/leverage central if actual money was being brought to the table, now would it?
Keep drinking the kool aid...the locals in Vancouver do not have the money to buy homes at current prices and there is no industry that provides thousands of people with 6 figure incomes as there is in silicon valley or other places. Those in the real estate industry spin everything to make you belive all is well but its not, time will tell.
Of course the locals don't have the money. They borrow it. Which is why credit is off the charts, and the savings rate is quite negative in Vancouver.
"CMHC finally releases foreign ownership data on housing — too bad few believe it"
http://business.financialpost.com/2014/12/16/cmhc-finally-releases-forei...
The writer is a total Hoser, eh?
I think it's "ay?"
No such as a collapse in housing...but certainly is true of land...or "Real Estate" as it is now called (for what is land if not "real" yes, yes?)
Someone still owns that...even if it's just the occupants folks.
How am I doing on my New Year's resolution so far anyways?
Shit.
Toques off to Bob and Doug ! Surprised no one brought Dudley DoRight into the comments ... Uh oh
from what i've read canada's bankruptcy laws are draconian compared to the usa
How so?? At present Canucks can include back taxes on a bankruptcy filing...... that in itself is just too sweet.... whether you keep your house depends on the province you live in I believe - and of course whether it is the reason for the filing in the first place..... but how does that compare to USSA laws post Bush Pt 2??
The chart does not have 2 years of data. I don't see data points for 2013 and 2014 which are important since after 2013, CAD has corrected by 20% from January 2013 onwards. Before 2013, CAD had increased in strength by 20% and hence the increased divergence with US. I believe, if we log 2013 and 2014 datapoints, the chart would converge by more than 20% closer which means Canadian Debt/Housing value of about 125-130 will be much closer to US value. USD strength is going to cause global pain as chinese imports become costlier since they are pegged to USD. This slows down Chinese economy which lowers oil demand even more.
Inflation fixes a lot of bad things and maybe that is the way out for Canada. Another 20% currency drop will save the oil sector and most of the jobs. Will also keep fiscal deficit in check. The hamster spin can continue for some more time. Lower Standards of living will be a trade off to save the oil + housing and banking sectors.
Speaking of black gold, Texas tea, Elly May Clampett died New Year's Day.
'Beverly Hillbillies' Actress Donna Douglas Dies at 81
http://www.msn.com/en-us/tv/news/beverly-hillbillies-actress-donna-douglas-dies-at-81-report/ar-BBhs45g?ocid=ansHollywoodReporter11
Serious question, what does a recent home buyer do at say 25-40% underwater,
what is the remedy, just bankruptcy?
So if you are in an deep underwater situation approaching retirement and say you paid on it 10 more
years and prices never recovered, then just wait until income goes down in retirement years and do bankruptcy
when the income is lowest?
In bankruptcy they set irs national spending allowances, almost anyone can qualify for full chapter 7 with typical incomes
of 50-70k against spending allowances, but you have to be real careful with assets. You cant have any assets except annuity and whole
life, everythign else is confiscatable.
I purposely have to take a mortgage that is below national spending allowance which is 1330 a month housing plus
utilities, and they dont allow a cable tv utility.
I am doing whole life and starting laddered annuities. So they can count an annuity as income but in laddering the
income may not be starting until the future by contract and that cant be foreced on you to take it early. This a disadvantage of a
variable annuity, they can force you to annuitize it and take the income, so laddered fixed annuities may work out better for
bankruptcy at retirement age.
Particularly since the SS is emptied in 2024 and all of the population will be in bankruptcy, the housing will probalby
crash to where the bubble started, about 1971. That woudl be about $40k for a house that is now $200-$250k.
What a piece of crap, but my idea is to get real intimate with the bankrtupcy rules, think about annuity and whole life
strategies related to bankruptcy at retirement when in the property hole. With any luck I might live in it many years
squatting like they do.
Any other insights or remedies? Probably nothing can be done but lie down in the snow in alaska like the eskimos did
when they cant support themselves.
Negative Balance Credit Cards maybe have a look there - I've heard it cannot be considered an asset.
Personal bankruptcy is usually the only solid resolution to negative equity. As bankers usually demand increased interest rates on loans in negative equity, thus making extrication from negative equity almost impossible.
Serious answer would be that if you can be 25 to 40 percent underwater close to retirement then you made some bad decisions or had some bad luck and had better start making better ones or wait for some good luck.
Less seriously answer would be that maybe it will be like in "Soylent Green" (aka the novel "Make Room Make Room" and we can go to a "home" for voluntary euthanasia.
Or maybe it will be more like "Logan's Run" and our "lastday" and "renewal" is not so voluntary and comes so much sooner.
Maybe I have watched too many old science fiction movies and read too many old science fiction books.
I'm not sure what you mean by that, any participation in their ponzie is a bad decision.
Their irs rules is a bad decision,
everyone is in a bad decision about now.
If someone stayed in a house a long time which is more than 20 years now since the ponzie started inflating, they may not be in a bad
decision yet but that is luck, if they didnt have to move for a job or divorce or some "rules" like that, is more like luck.
When America sneezes Canada catches cold; is that still true?
The Canadians felt they owned the ice hockey crown and with tar sands they were kings of the wild west.
I wonder what 2015 and 2016 holds for Canada. It ain't Venezuela but it ain't Saudi either.
Nah, when Amirika sneezes some folks get droned.
,,,never was Venezuela and never will be Saudi,,, that has been known already.
Two more points
1. Canadians can't write their interest of like Americans so the debt problem is even worse
and
2. the Canadian government (via the CB) just recently lowered interest rates to boost housing prices (wealth effect) in a desperate attempt to win the upcoming election in the spring. After the election, all bets are off
This doesn't sound like an ATM to me...
3. Unlike the US in the 2007-8 real estate crash where almost every mortgage was non-recourse (the bank could not go after the owner(s) personally, the only collateral was the house itself)almost all mortgage loans in Canada are recourse (the creditor, bank can go after the owner personally) loans.
4. In Canada one cannot wipe out one's credit card debts in bankrutcy anymore. The law changed in the fall of 2010.
Bankruptcy laws are provincial. So you are right; and you are wrong.
Wrong. The Bankruptcy and Insolvency Act, S.C. is an Act of Canada's national Parliament. Most mortgages in Canada are issued by Bank Act institutions, and/or are insured by the Canada Mortgage and Housing Corporation, which operates under federal statute. Hence, most mortgages in Canada, just like in the USA, are functionally full recourse, although dealt with in bankruptcy in an similar fashion on both sides of the border.
Jeezus H Christ don't any of you people talk to CPA's - I like E&Y myself - {maybe I'm just lucky but my CPA is one hot bitch} but to each his own.
Bankruptcy is administered slightly differently and depends on province you live in but cannot list Credit Cards?? WTF Mofo Bankruptcy was invented for CC or Unsecured debt....
http://www.bankruptcy-canada.ca/debts-that-stay
but for the real story call a Trustee in Bankrupcy..... always good to know your options ..... for example if you hear "honey we need a divorce" debt bomb can be an interesting option....
Unsecured debt, including credit cards, but excluding certain types of student loan debt, personal injury debt, child support arrears, etc., is *definitely* eligible for resolution in Canadian bankruptcies.
The bankruptcy law was passed in Ottawa by the Conservative govt.(written by the banks, I'm sure) so this law I'm referring to, has Federal jurisdiction.
Where did you get this information?
3. Not true. Most loans in the USA were also full recourse. The only loans exempted from recourse were purchase money first mortgages, which weren't generally a problem. The major problem with the US housing market surrounded buyers with 2nd mortgages, refinances, or 80/20 subprime packages. On both sides of the border, borrowers who default usually have no additional resources creditors can seize, and end up declaring bankruptcy.
4. Not true either. Credit card debt is treated like any other unsecured debt in the bankruptcy process. Only loans obtained through fraud, judgements for personal injury and child support, and government student loans are non-dischargeable in the bankruptcy process.
Pitz: You may be right on #4 as I am not as fammilar with US bankruptcy laws and many are state's jurisdiction not federal law, but I believe you are incorrect in #3 for the majority of the mortgage loans underwritten in the US pre 2008.
Wow...can a Canadian wipe out credit card debts with plain old insolvency? Like in, I just don't HAVE it, period, so it's not being PAID?
At that point, what does it matter HOW much compounded this-and-that they add to the bill? Add a million a month, who fucking CARES cause I STILL don't have it!
Call me when you're ready to negotiate an actual SOLUTION to the dilemma we find ourselves in, otherwise don't waste my time...
If I were a Canadian in such circumstances, I'd be off the grid as much as possible. Just drop right the fuck OUT of such a ridiculous game. No bank accounts, no seizable assets, underground economy whenever possible-off the books...
Wow...can a Canadian wipe out credit card debts with plain old insolvency? Like in, I just don't HAVE it, period, so it's not being PAID?
Yes. For a first-time bankrupt and assuming no fraud, a discharge from bankruptcy is automatic after 9 months. The bankruptcy process, just like in the USA, requires liquidation of the eligible assets of an estate to satisfy creditor claims on a pro rata basis.
At that point, what does it matter HOW much compounded this-and-that they add to the bill? Add a million a month, who fucking CARES cause I STILL don't have it!
Yeah. Now if spending was engaged in after insolvency was discovered, creditors can certainly argue that there was an effort to defraud, in which case, the courts have agreed and ordered extensions to the time spent in bankruptcy.
For instance, if someone with no job, no income, applies for 5 credit cards, and spends them on obviously frivolous luxury goods, the courts have ordered a longer period in bankruptcy as such is clearly an attempt to defraud creditors. But someone with no job, no income, who uses credit cards for survival, such debt is discharged along with the bankruptcy.
2. Is wrong. Bank of Canada policy target rates have been unchanged in years, at 1%. Likely going lower in the future, but there has been no attempt by the Bank of Canada or the government to goose house prices. In fact the government has been cracking down on CMHC subprime mortgage insurance, which has largely been the driving force behind the past year or two of declining prices nationwide.
Just like in the USA, the peak of Canada's RE market was characterized by a peak in subprime credit. Except in Canada, the government is the subprime guarantor, not the private sector.
1. True. It certainly reduces the justifiable amount to pay for a house, if the financing, after-tax, is going to come at an additional cost. US borrowers in high income tax brackets run into AMT and limits on itemizable deductions for mortgage debt.
Also, most Canadian housing debt is adjustable rate, and as the US experience showed us, rates can adjust very quickly if the bankers so desire.
If Trudeau Jr. gets in, I'm going into hiding.
Canada imports half its oil. Cheaper natgas and gaso makes mortgage easier to pay. There are no ninja loans.
It's not about what Canada pays for oil, it's about CapEx.
Canada is a significant net exporter of crude oil, and only imports oil for the purposes of correcting regional imbalaces due to lack of domestic distribution capacity across such a vast nation.
Not only the Canadian housing bubble...what about the Canadian government spending bubble?
AUSTERITY...forcibly coming to provincial government spending near YOU!
Between 2005 and 2012, according to Statistics Canada, 37,000 Chinese millionaires arrived in B.C. as permanent residents under Immigrant Investor Program (IIP), a federal initiative that invited wealthy immigrants fast entry into Canada in exchange for low-interest loans to provincial governments.
Affluent Chinese students, entrepreneurs, land speculators, retirees, the so-called “rich second generation” of mainland Chinese and astronaut families — mothers and children living in Vancouver, with fathers working in China — are also transforming the region. Their capital is welcome, but there are social and economic costs absorbed by the larger community, and stirrings of resentment.
37k families is just a drop in the bucket of the overall Canadian housing market. Not enough to move the needle. And prices have risen in places where there's no Chinese to be found. So to cite Chinese as being the cause of the bubble, rather than the obvious domestic bubble in low-grade subprime credit (particularly guaranteed by the CMHC) has no root in evidence.
Here they go again. Major Canadian markets are very strong. Cash is flowing in looking for a safe place to park assets and family. The author should revisit this post in a couple of years.
Are you kidding? There's no cash. Only domestic credit. Which is why leverage and indebtedness of Canadian borrowers is over the top.
I live in Vancouver. Does that explain the empty storefronts popping up everywhere? Or the entire floors of office space for rent? Or howabout Starbuck's flagship location on Robson street closing?
Or maybe my friend, who is the director of western canada for a large retail leasing firm telling me their leases are down 50% in 2014, first time ever.
Nice try.
Or the half-empty malls here in Ontario?
The complete exodus of manufacturing?
I live here in Canada and our media and all they talk about is how housing is 'rock solid' and the oil plunge will only be temporary.
Our media is kinda like your media.
I've seen this canadian media of which you speak - definitely out of touch with reality; what was the Bridgette chicks name - "...... something like gold that isn't backed by anything at all unlike the US dollar" yes, so cute and yet so challenged nice hair though..... https://www.youtube.com/watch?v=k8Htfcjk_JA&feature=em-uploademail
OK but oil, keep this in mind Pre-2008 we - the world - were using a billion barrels of oil about every 12 or so days, even if that increases to 18 days per MMM Bbls where is that oil coming from??
Fracking has a depletion curve like a lemming dropping off a cliff, and depends heavily almost exclusively on cheap and plentiful money.
Saudi - they are and have been looking for 100 offshore rigs to replace the oil that isn't coming out of thier primary fields anymore no matter how much water they pump downhole.....
Deepwater is a long shot at best so where is the oil coming from??
Google the source if you wish but last figures I heard on the subject there are 10 calories of hydrocarbons in every calorie we eat in the great western societies ..... no oil no food it doesn't get any more stark than that -
Where do we get electricity these days?? Even if we all get EBT cards are we going to shut down power plants starve and freeze in the dark??
Basically my arguement here is our base level usage will run into a lower limit beyond which lies the civilizational abyss, call it a glass floor if you will; crack through that and all hell breaks loose.
If any of us think we have a grand surplus of oil find out how many billion barrels do we have on hand right now for delivery?? Hell pre-2008 everybody had all the spigots wide open and we were losing ground, even assuming we dropped one third of our usage any downturn will be short lived......
oudinot, in my view, the Canadian mass media (particularly the anglophones) are slightly worse than the American:
One of the most awesome displays of the ability of the Canadian mass media to maintain their LYING BY OMISSION strategy was the way that they "reported" on the Canadian government's sudden jump in budgetary debt after the 2008 financial crises. Apart from a few tiny stories in the back pages of some of the financial press, the Canadian mass media deliberately ignored the over $100 billion provided through various Canadian bank bailouts, which were barely mentioned by the Canadian mass media, much less described as bank bailouts, despite their effects changing the Canadian government's predicted moderate annual budget surplus into a whopping $50 billion deficit.
‘Not a bailout’: the great Canadian bank caper
By Ralph Surette, June 19, 2010.
"You know how wonderful Canadian banks are. They didn’t fail when others did, and didn’t need to be bailed out. We are standing tall among nations in that regard, and the Harper government can stick out its chest and preach the Canadian model of prudence and caution to a profligate world. Even the Americans are agog at our fiscal virtue. ... Does this sound too cute? Here’s the inevitable other side of the story. The banks were actually 'bailed out' to the tune of $125 billion just before and after the 2008 election — in the form of a massive purchase of questionable mortgages and other "rotten paper," in the words of one economist, held by them. This was done through the Canada Mortgage and Housing Corporation, a federal agency. The taxpayer is now on the hook for these mortgages, 40 per cent of which are considered at risk, with more to come if interest rates rise and the economy dips again. But the kicker is this: Hardly anybody noticed. It wasn’t an issue in the election, and the financial press said nothing. ..."
http://www.segacs.com/2011/by-the-numbers-canadas-debt-load.html
Glance at the chart there, to see how the Federal government debt in Canada changed, before and after 2008.
CANADA IS STILL BLOWING BUBBLES!
When a financial bubble popped for much of the rest of the world, Canadians were mostly able to ignore that, and were able to continue to go on borrowing even more money.
http://www.cbc.ca/news/business/average-home-price-rises-almost-10-to-391-085-1.2465695
CBC News, December 16, 2013.
"New data released Monday from the organization that represents home sellers shows Canada's housing market continues to hit new highs, with the average price increasing by almost 10 per cent in the last 12 months to about $400,000."
http://www.ctvnews.ca/business/household-debt-in-canada-hits-all-time-high-but-may-be-nearing-limit-1.1590905
Household debt in Canada hits all-time high ...
By Julian Beltrame, December 13, 2013.
"... The increase means Canadians owe nearly $1.64 for every $1 in disposable income they earn in a year. ... Policymakers are fixated on the debt ratio in part because it was at above 160 per cent that households in the United States and Britain ran into trouble about five years ago, contributing to defaults and the financial crisis that triggered the 2008-09 recession."
BACK ON December 23, 2013, I wrote on the Forum that I used like my personal diary Some Monetary System articles:
"Most of the financial experts that I tend to respect predict that that Canadian bubbles still can continue for another year or two ..."
THEREFORE, about a year ago, I remarked that those financial experts which I respected were saying the Canadian economic bubbles would probably pop during 2015.
The average Canadian does not have the slightest clue to be able to understand what has happened to places like Greece or Cyprus. It is quite surreal to be watching Canada continue to blow bigger bubbles, while most Canadians continue to think the same pre-bubble-popping ways that those in the USA and UK used to think back in 2007.
AS ILLUSTRATED in the chart in the article above republished on Zero Hedge, comparing American HOUSEHOLD DEBT-TO-INCOME to Canadian, the American dropped dramatically after the 2008 financial crises, while the Canadian WAS STILL ON AN EXPONENTIAL GROWTH UPWARDS ... SO FAR ...
Canada is a relatively unique place in many ways, such as it has a publicly owned central bank, but has agreed to never use it since 1974. Instead, since then, Canada has been told what to do by the BIS, under the international banksters' systems. Canada is kind of cruising on autopilot, in the same basic colonial way that it has since it started. Canada still has a relatively small population, compared to its abundance of natural resources. When one looks at almost every factor, both today, and in foreseeable possible futures, Canada is better off than almost anywhere else, as demonstrated by Canadians still being able to operate inside of a bubble of debts that is constantly being blown bigger, with a common popular psychotic psychology due to their awesome level of collective deliberate ignorance, which has been so successfully managed and assuaged through the lying by omission of the Canadian mass media. As hard as it may be to believe, Canadian mass media are even more able to successfully lie by omission than American mass media. The flip side of Canadians being relatively comfortable, and relatively better off than people in almost every other country, is that the average Canadian is more abysmally ignorant, and happier to stay that way, than the people in almost any other country.
Of course, that is why predictions are like those of a useless Cassandra, since Canadians are living inside protected bubbles, which are constantly being blown bigger and bigger, while simultaneously, the psychology of Canadians is quite comfortable to remain within their bubbles of perception too. It is practically impossible for ordinary Canadians to even consider that what banksters like Goldman Sachs did to Greece, et alia, will eventually also be done to Canada too.
E.g.:
http://www.zerohedge.com/news/2013-12-23/former-goldman-banker-head-cmhc-canadas-mortgage-monster
Former Goldman Banker To Head CMHC: "Canada's Mortgage Monster"
In that context, I also REPEAT this too:
http://www.economist.com/news/americas/21574481-disappointing-exports-stalled-investment-and-fiscal-austerity-leave-overstretched-consumer?zid=305&ah=417bd5664dc76da5d98af4f7a640fd8a
Canada's economy on thinning ice
March 30, 2013.
When the world financial system collapsed in 2007, triggering a global recession, Canada recovered faster than any of the other members of the G7 group of large developed countries. Its banks remained solid, while low interest rates encouraged consumers to borrow and spend. But five years on, consumers are showing signs of flagging. The economy is set to expand by a paltry 1.6% this year. So the authorities are casting around for another source of growth. The trouble is they cannot seem to find one. Governments, both federal and provincial, is trying to curb deficits swollen by stimulus spending. Companies are restrained by uncertainty prompted by Europe’s woes and the stand-off over fiscal policy in the United States, Canada’s main trading partner. Exports have still not returned to their pre-recession peak. As for consumers, after 11 consecutive years in which household spending has exceeded disposable income, they are deeply in hock. Just over a year ago, Craig Alexander, chief economist at Toronto-Dominion Bank, predicted the debt build-up “is going to end in tears”. ...
The United States took 73% of Canada's exports (and provided 62% of its imports) last year; Canada sells relatively little to faster-growing markets in Asia and Latin America ...
"As Canada Collapses, Do We Need to Ask Why?
So Canada, the bright light of Western industry along with Australia, is now showing signs of wavering. ... the presentation of the impending collapse is being reported in the same way as all the Western economic collapses: with wide-eyed astonishment. At some point this sort of astonished rhetoric must begin to grow stale, even, well ... unbelievable. We are supposed to slap our collective forehead and ask, "How could this be happening?" But, in fact, we already know. ... Central banking monopoly money stimulation has taken down Western economies from Europe to the United States and beyond. And after a full century of central banking mayhem it is impossible to believe that the leaders of this failed economic environment can have any doubt left about its destructive tendencies. ... In the meantime, countries and economies continue to collapse like so many raggedy scarecrows subject to a high wind. That wind is the result of monetary inflation. ... Notice how that Economist article NEVER mentions central banking policy ... The proximate cause of Western troubles is money printing.
Canada's inevitable destiny is the rational outcome of an irrational system.
Conclusion:
It seems certain globalist factions actually want
a Western industrial collapse, because that shall
make it easier for East and West to merge within
the context of one industrial and monetary policy."
Canada is already legally preparing to act like Cyprus:
http://www.zerohedge.com/contributed/2013-03-30/canadian-government-offers-bail-regime-prepares-confiscation-bank-deposits-ba
AND, THE SAME STORY AGAIN:
http://economicsfortherestofus1.blogspot.ca/2013/03/canada-plans-for-it-own-cyprus-scenario.html
Canada Plans for its own Cyprus Scenario
March 27, 2013.
Savers around the world have been watching the Cyprus scenario unfold as depositors money is quite suddenly up in the air. Canadian savers may want to know that the government there is making its own plans for a Cyprus style scenario. Talk about a Canadian Economic Action Plan! In the event that a “to big to fail” bank were to approach collapse in Canada, it would appear that the money deposited in the banks could be taken and then used to keep the bank viable. The following words can be found on pages 144 and 145 of Jobs Growth and Long Term Prosperity – Economic Action Plan 2012 as tabled in the House of Commons by the Hon. James Flaherty, Minister of Finance on 21 March 2013. This is otherwise known as "the budget:"
http://www.budget.gc.ca/2013/doc/plan/budget2013-eng.pdf
Systemically important banks will continue to be subject to existing risk management requirements, including enhanced supervision and recovery and resolution plans. The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation time lines will allow for a smooth transition for affected institutions, investors and other market participants.
Before drawing conclusions, what do these words say?
First – “systemically important banks”. This means banks that are perceived as being too-big-to-fail (TBTF). The Office of the Superintendent of Financial Institutions (OFSI) identified six banks in Canada as being systemically important within the last week. They are the Royal Bank of Canada, the Toronto-Dominion Bank, the Bank of Nova Scotia, the Bank of Montreal, the Canadian Imperial Bank of Commerce and the National Bank of Canada. This was a bit of a surprise to some observers, as it had been thought that only the RBC was TBTF.
Second – there is discussion of a “bail-in regime.” You should start getting nervous here. A bail out is when an outsider gives the institution in trouble more money so it can keep going. A bail-in is when money from within the institution is used for the bail out and then those whose money was taken are given something in return. Typically, those who have their money taken are offered shares in the institution in the hope that the institution will prosper again in the future and the shareholders can still have value.
See http://tinyurl.com/c9ds5b9
Third – we see the words in the unlikely event that a systemically important bank depletes its capital. In other words, if a bank suddenly goes broke. This could be due to unforeseen loses such as a complex derivative contract that failed. See a simple explanation of derivatives at http://tinyurl.com/blhtc3q
Fourth – there is the phrase the very rapid conversion of certain bank liabilities into regulatory capital. The words “certain bank liabilities” is a fancy way of saying deposits. When you deposit a hundred dollars in a bank, this shows up on their spread sheet as a liability. So what this phrase says is that bank deposits could be taken up and used by the bank and it could be converted into regulatory capital. Regulatory capital is another way of saying banks must keep a certain amount of money on hand for meeting daily requirements such as withdrawals for deposits. The minimum amount that must be kept on hand is determined by the regulator. In this case the regulator is OFSI.
So what does this all mean?
In short, it says that if a Canadian bank suddenly finds itself in financial trouble, money from depositors can be taken in a “bail in” and used to keep the bank solvent. Those who had their money taken would be given shares in the bank or some other form of compensation such as bonds.
Should you be worried?
The document does not say so, but in such desperate circumstances, it might be assumed that the deposits taken would be those that have more than $100,000. Account below $100,000 dollars are guaranteed by the Canadian Deposit Insurance Corporation. So, small account holders should be OK.
Canada is not alone in doing this. The UK and the USA have a similar plan they discussed in December of 2012.
See http://tiny.cc/z4jcuw
This is economics for the rest of us!
Enjoy the ride in the new economy.
http://www.zerohedge.com/news/2013-03-28/guest-post-cyprus-deal-and-unraveling-fractional-reserve-banking
The Cyprus Deal And The Unraveling Of Fractional-Reserve Banking
I posted this reply there:
... I feel it is important to emphasize that is because the People DO NOT WANT TO UNDERSTAND. In the Canadian context, I have been working on THAT problem directly for about three decades, through the political contribution tax credit. My activities included a couple of court cases against the Canadian government regarding the laws controlling the funding of politics, which spanned about fifteen of those thirty years. Here are links to my continuing current work on those topics, in the Canadian context:
http://www.marijuanaparty.ca/article.php3?id_article=215
http://www.marijuanaparty.ca/article.php3?id_article=413
Since I actually have discussed these issues face to face with tens of thousands of people, from all walks of life, for a few decades, and I made a serious effort, during my court cases, to track down every authority on these topics that I could find in the library, I believe that I am relatively qualified to assert that, in fact, more than 99% of the general population in most of the world always act like Zombie Sheeple, who do not want to understand the monetary and taxation systems that control their lives! Perhaps some small percentage could literally be unable to understand anything, however, most of the people could understand, IF they wanted to. The crucial point is that they DO NOT WANT TO UNDERSTAND! That is superficially a completely irrational attitude, but still, those ARE the real social facts! Inside the context of THOSE SOCIAL FACTS, and SOCIAL HABITS, "The Unraveling Of Fractional-Reserve Banking" may reasonably be expected to become an opportunity to replace it with something worse. ... While I agree with the article linked immediately above regarding what it says, I do NOT agree that the outcomes will necessarily be in any ways better.
It would take a prodigious series of political miracles for the vast majority of the Zombie Sheeple to do anything else than allow the next system of organized lies, backed by coercion, run by the next set of ruling classes, to develop to become even worse than the fractional reserve banking system was. After the current pyramid scheme collapses, the most probable projections are for another one, even worse, to be implemented in its place, because 99% of the people will continue to not want to know anything about that, and not want to do anything about that.
It is almost impossible to understate how bad things already are, and even more impossible to understate how much worse they are probably going to get. Indeed, I would emphasize that by asserting that money is always backed by murder, and that the runaway insanities of the monetary and taxation systems surround deeper runaway insanities regarding the murder systems and death controls, which again, the overwhelming majority of people do not want to understand, and do not want to do anything about, except continue to participate within those systems as Zombie Sheeple, who act like political idiots.
After working directly on these problems for several decades, I am currently convinced that 99% of the people will continue acting like brain dead political idiots, because they have been conditioned to want to be like that. The tiny fraction of 1% that made and maintained that system of social habits have every possible advantage to keep things like that. Of course, I probably will continue to waste my time to attempt to change that social situation. However, in reality, I have been defeated, or rather reduced to an apparently permanent stalemate situation. That is basically why I spin my wheels in the mud by bothering to post some of my kind of bla, bla, blah on the Zero Hedge Web site. At least with that select audience, there is some tiny fraction of the 1% of the people who actually want to understand how the monetary and taxation systems really work.
It continues to be quite sublimely paradoxical that almost everybody worries about their money, and how to make it, and how to spend it, BUT almost nobody wants to understand the SOURCE of that money, nor the MEANING OF THAT SOURCE! Therefore, we are living inside of a fractional reserve banking system that 99% of the people do not understand, and do not want to understand, and do not want to do anything to change it. Therefore, we are a long way from having enough of the people care enough to learn about that, and want to do something about that. We are nowhere close to the kind of social tipping point where, say, 10% knew and cared, instead of less than 1%.
Personally, I like to day dream about some future when 5% of the people really cared, and another 20% supported them, in order to have the political will to change the fractional reserve banking system, which is actually ENFORCED FRAUD. However, these days, that seems to be quite a ridiculous day dream to entertain. Instead, we are on a runaway path towards the current systems collapsing into chaos, followed by more genocidal wars, along with democidal martial law. Meanwhile, on that path, it looks like 99% of the population will continue to want to understand nothing about that, and do nothing to effectively change that!
By far the most probable REAL future is that the vast majority of the people will continue acting like Zombie Sheeple, and after they have been fleeced to exhaustion, they, and their lambs, will be massively slaughtered off. However, that probably will not make any difference, because they will continue to want to ignore that, and do nothing about that. ... I have not enjoyed learning about that, and have attempted to change that, but that is that!
A humorous treatment of some of the issues you mention such as not making use of the BoC. Can't stop replaying the question to Paul MArtin and instead hearing him say "money IS measurement backed by murder" !!!
Oh Canada Movie
Militarism the supreme ideology, necessarily, as artificial selection superseded(?) natural selection, with the economy built on that... caused a few heads to explode at my family NYE. They sooo don't want to know!
"They sooo don't want to know!"
LOL! An aweful lot of people posting comments on on Zero Hedge make similar comments. As you already know, MEAN BUSINESS, I have practically made it my profession to attempt to tell people things that they "don't want to know!"
Interesting piece, although quite simplistic. It's typical of those who view Canada as a simple little place with mounties, eskimos, and little else but oil. Many of the comments here reflect that fact as well; idiotic crap like being rolled by the Indian Posse after you leave the Regina Cansino. Fact is, Indian violence in Canada effects virtually nobody else but Indians. There seems to be a history based reality for Indians around these parts; don't fuck with whitey and keep your crap on the Res or the slum. For the rest, stay out of the slum at night, and you've got a bigger chance of being rolled by a meteorite than you do by "Indian Possy".
As far as housing, Canada has two grossly inflated markets, both of which have little to do with oil; that being Toronto and Vancouver, but being such massive markets, they scew the data. Toronto condo prices need to collapse, as they are grossly overbought, and based solely on cheap mortgage rates. Vancouver is more complicated, as it's Real Estate is driven largely by foreign investment. Oil has very little to do with either of these markets. Clearly, the writer, taking a silly superficial view, doesn't know this. Funny, how some people think they can slice and dice a country's whole economy based on a few charts.
Ontario, by far the largest province population wise benefits somewhat from oil, but manufacturing and finance are the main engine. A funny thing always happens, when commodity prices fall, the Canadian dollar does too, and suddenly Ontario begins to boom because its products are more competative. When commodity prices are high, the CND goes up, and Ontario (and Quebec) suffer, so much so that leftist politicians make great hay in Ontario bashing the resource industry and especially oil.
With oil down, Alberta and Saskatchewan will take a beating by mid year. Sask only has 1.13 million people, and Alberta about 4 million, in a country of 35 million so not that big a deal nationally. Alberta will suffer more than Sask, because the Sask economy is far more diverse. But, any commodity slump will hit both of these hard. Toronto and Vancouver not so much. Also, Real Estate in Sask and Alberta is much cheaper than Vancouver and Toronto. For example, I live in a 1700 square foot 1987 bungalo with attached garage which is well kept which I purchased for 230K 2 years ago. The same house would cost maybe $400K in Saskatchewan's biggest markets, and would cost $400 to rebuild. So yeah, some Sask and Alberta families will be stressed by mid year, but keep in mind that most of those I know in the patch have paid off their homes in 10 years or less, and most own revenue properties as well just because they can. Your average oil patch family has been bringing in between $150k and $200K for years now. If they get laid off they may have to sell two of the three snow mobiles, the 40 foot fifth wheel, maybe the quad, and even the 18 foot ski boat ... and no more 2 or 3 tropical trips a year. But, they'll weather it.
Alberta, being very Oil and especially Nat Gas based will suffer, as will a modest number of Oil based manufacterers in Ontario.
The greatest impact in Canada will be government debt, because the federal government derives great revenue from Alberta oil; that's where the kicker will be, and we'll see deficit financing again.
So, basically, I call bullshit on the article. The most devistating thing to happen to Canada would be a global, and primarily a USA recession. Now that, will spread the pain from coast to coast and will hit Toronto like a sledge and most everyone inbetween.
As far as housing, watch Toronto and Vancouver, as that's where the crash will happen ... But not in Vancouver if foreign capital keeps investing; it cares little what the world economy is when it's an Asian billianaire simply finding a nice safe place to park more cash than god has.
Whelan: You don't know what you are talking about, whatsoever, visa vi the Indians. The Indian bands in Ontario,with sympathy from the provincial and federal govts , have basically stopped mineral exploration because of their greedy land claims.If the Indians blockade your mining property or vandalize the equipment -which they do all the time-becauswe the company has not met thier monmetary demands the police won't stop them for the politicians don't want to alienate the Toronto area urban voters (who control the vote) as the stupid sheeple love the Indians and sympathjize with them.
In Kirkland Lake Ontario the Indian bands are knocking on doors of businesses demanding 17% of all proceeds. The businesses compalins but the cops won't do anything.
That's entirely true, but has nothing to do with Regina Saskatchewan, nor about Indian violence. Land grabs, holding up resource development, and crazy White hippies longing to get banged in a teepee is a different matter.
Last I checked Ontario was in Canada as well as Saskatchewan.
You don't regard destroying business machinery, blockading workers from mining properties as non violent?
Please.
Agreed, I deal with native bands almost everyday using government sanctioned extortion to go after my work, (oilfield construction) the oil companies pander to them so my equipment gets hauled home and meets theirs on the way in. Usually after about 2 or 3 days, I get a call to come in and finish the job because their equipment is all broken down and the useless fucks don't show up for work. Only with the caveat that I have to bill through the Indian band and pay them a percentage. I can't wait for the big crash when all the free money dries up and they can go back to running through the bush trying to spear a moose.
I prefer using a 35 Whelen! Fuck the spear.
It's funny you think they'll actually make a spear and go after a moose. That's far too much like work. They'll ask our government to spear it for them, and no problem, the taxpayers will. No questions asked. This country is far too dependent on government. 4.1 trillion in debt total of federal, provincial, and municipal. I actually don't mind the low oil prices, being from Sask I'm sick of feeding money to Quebec and Ontario, the wonderful setup our country has for 'profit sharing'. Fuck the easterners.
Whelan: Not sure where you live, but have you checked housing prices in Calgary? Which is the 3rd largest city in Canada. Not to mention the fact that most of the speculative vacation home buying in the BC interior was from people who used their home equity(bubble money) from their overpriced Calgary homes to finance lakefront property of which they are completely underwater on. +1 on the fact that the article is oversimplified tho'
Calgary home prices are still pretty reasonable compared to Toronto and Vancouver. Calgary is a big up and coming commodities based financial center with growing foreign involvement; it's the Houston of the North. With the hedging done by mid and lrg energy firms, there may be more resilience there than expected. Depending on the firm, some will be making a killingn on low Nat Gas and Oil prices as well ... they are now buyig super cheap oil and gas and delivering at prices that are way higher and locked in for up to two years. In the past the blood bath has usually been in the micro caps and start ups, which hits the oil patch first ... then begins to trickle into the general service industry (but that's more of an Edmonton problem I think).
I have a relative who is an agricultural commodities merchant ... with his main commodity price tanked he's making a killing because he is delivering at prices that were set long ago at much higher rates. His spreads are huge ... and thus his profits and his bonuses are climbing by the day.
There will be Real Estate pain, but I'm thinking not as much as some think.
My guess is summer 2015 will tell the story for AB and SK.
But the results of that hedging will flow to the shareholders, who accepted lower returns up-front, in exchange for the stability that selling production forward through hedges offers. Most O&G firms are overwhelmingly owned by non-Albertans, and there's no reason why they'll continue to pay Albertans top dollar to work for them when the market is glutted with laid-off/downsized talent.
Just an addendum: Virtually all oil from Ontario east is imported from the middle east. That means $52/barrel oil on top of a low CND stimulating the manufacturing sector. CTV is reporting a 12 billion saving for consumers alone in 2015. She's a complex machine of pushing and pulling parts.
Canada produces oil from projects like Hibernia in Eastern Canada. And yes, imports from the Middle East, or more specifically, Venezuela will get cheaper. But $12B is a drop in the bucket compared to the dividends and mortgage interest payments made to the Ontario-domiicled national banks that will no longer be arriving from the Alberta oilfields. Or all the business that will be lost by Ontario firms in supplying the oilsands with equipment or supplies. Or all the Newfies who no longer will be sending huge sums back to Newfoundland in exchange for their labour in the projects.
And the manufacturing sector will have a hard time ramping up given the high probability of a much higher Canadian dollar in the not-so-distant future due to debt deflation arising from falling house prices, decreased consumption, and an increased savings rate. The issues in Ontario manufacturing are far deeper than just the dollar -- high real estate costs for workers are still a huge problem along with an uncompetitve tax structure, excess electricity costs due to OPG mismanagement, etc.
Too bad no manufacturers are left in Ontario. Our hydro rates push them all away.
The thing about Ontario booming again with a low dollar is that they have lost a lot of the industrial capacity they once had. It's not like they can turn around and bring back a company that moved to Mexico or China, once they're gone, they're gone. It will take a lot of investment to bring back the industrial jobs that Ontario once had, do you think the banks will be willing to invest given they're taking a big hit on oil investments?
I think the biggest factor in Ontario manufacturing is the proclivity of voters there to favour leftwing governments who squeeze the manufacturing sector with taxes and regulation. Federal corporate taxes are low, but provincial taxes are too high.
Most of Ontario's large and mid cap firms derive great income from over-seas operations, but they report in Ontario and office in Toronto. That repatriates a lot of profit.
These same businesses will not repatriate manufacturing though, except that they use Ontario as a huge distribution center for shipment to the USA; and low Federal corporate taxes and CND ensure that that will remain and not move to the USA. Plus, there is still a lot of final assembly and packaging that goes on in Ontario. Chinese crap assembled in Ontario ... what a racket haha.
I'm not at all suggesting that Canada can't get crushed, nor that Real Estate can't go through a brutal correction ... but the Canadian economy has some very complex push and pulls that tend to balance things a bit.
Summer 2015 will likely tell the tale. My Sask provincial government is already tightening in anticipation.
Whelan, Is that you cousin? My mom was a Whelan out of Corner Brook!
I agree with your analsis. Toronto and Vancouver are the big markets and the rest of the country has been rattling along in its usual fashion (less Alberta of course). Canada is a huge net exporter, and oil prices give much on one hand while taking away on the other.
Government debt will be the problem.
Haha sorry, ain't your cousin. 35 Whelen is my favorite moose and elk killer.
@35 Whelen- thank you for your valuable insights.
God, please keep this bubble inflating, for at least another year or two. In residential new home construction (Ontariowe), most tradesmen are pulling in about $150000.00/year. From what I've been hearing, the last couple years have been slow.
As long as they keep bringing in a quarter million economic immigrants each year...Here's to 200k in 2015 :) bang bang
Most immigrants to Canada bring nothing more than enough cash to buy a used Honda, and first and last months' rent on a rental appartment. The rest of their lifestyle is earned or borrowed, just like every other Canadian.
I just wish people would read a bit. History is there for a reason, it shows us what could happen and it does not mean it won't happen again.
Well, didn't England recently run out of bricks because their housing market is so robust? Why doesn't Canada help them out by sending them some of that cheap oil and fracking sand? They can make some kind of asphalty-composite utility building 'block' to meet the fevered demand...
If I understand it correctly, most Canadian homebuyers have to refinance their mortgages every 5 years, even though many of them have a 25 [edit: I first thought it was 40 years; don't know why I thought that] year overall amortization schedule. Interest rates are also usually a percent or more lower than in the US.
If I've got that right, although monthly payments would be lower even on higher overall purchase price, the effects of a downturn would hit the markets earlier than in the US. In the US, once you close your loan, as long as you keep making payments nobody ever looks at your financial situation again. What happens when Canadians lose their jobs in a downturn, houses lose value due to the same downturn, they can't sell because they're underwater, and they have to renew their mortgage loan?
If values and wages only ever go up, and there's never a wave of job losses, everythng should turn out just fine.
You're generally correct, although its even slightly worse than you state. 40% of the mortgages in Canada are overnight-adjustable ARMs, with the adjustment rate solely at the discretion of the bank (ie: not linked to a neutral reference rate such as LIBOR or Fed Funds as was common in US ARMs).
Wow. My first mortgage (US) had an adjustable rate. It could go up or down a maximum of 1% on the annual anniversary, but couldn't change more than 5% one way or the other over the life of the loan. Interest rates actually changed in those days, though, so that provision made me nervous. I refinanced in 2003 because I was sure rates were going to go up. Well, in my defense, they probably should have. But while I was able to lock in a great rate then, and have an even lower fixed rate on my current mortgage, it's not really saying much because rates have trended mostly downward anyway.
In Canada they can change your interest rate whenever they want, based on nothing?
Only on floating rate mortgages. Most people I know have locked in because of the low rates and fear of them rising. For Home Mortgage Credit Lines (Real Estate Backed ATM haha), you can lock in part, and let a portion float. There are a number of creative combinations you can set up, including business/mortgage/credit lines with a portion locked in and a portion floating. So far, those with floating rates have been the winners ... so far.
Competition among banks and mortgage firms keeps them pretty honest because there are very few firms, not like the USA where there are hundreds. Any bank or mortgage company jacking rates up without due cause would lose market share in days.
Very interesting. Thanks for the information!
I'd "green" ya but the italics in your first sentence prevent that, unfortunately.
Longest you can lock in for is 5 years......
I just locked in a 10 year term.
Nope, I just turned down a 10 year term on a revenue property in favor of a 5 because the rate was lower.
Banks do offer longer than 5 year terms, but usually at a pretty significant penalty rate as there is a minimal marketplace for long-term CAD$ debt, and the Canada Interest Act effectively makes mortgages longer than 5 years open as soon as the 5 years is up (or something to such effect).
If you go and price out 25 year term mortgages in Canada, the rates are horrendous, and uneconomic for most borrowers. We're talking 8% for 25-year versus 4% for a 5-year term.
"In Canada they can change your interest rate whenever they want, based on nothing?"
Yes, on the adjustable rate loans which are linked to "Prime", a rate set by the lending institution itself at its sole discretion -- not a 3rd party, independant benchmark like LIBOR. Competitive forces, of course, keep such "Prime" rate in check, but if a crisis were to develop that impaired lenders' access to funding, ala the 2008 financial crisis in the USA, the lenders can immediately proceed to flog the borrowers for as much as they want, almost without limit, until the loan either is paid off (refinanced, etc.), or defaults.
Its a very powerful tool the banks carry around if ever they were run into funding concerns. Limitations on the rate changing on adjustable rate loans are practically non-existent in Canadian retail consumer lending products. When US bankers come to Canada and are properly educated on how our system is truly structured favourably for long-term bank profitability, they practically crap themselves with excitement.
Thanks. That adds to my understanding, too.
I have a sister who is now a Canadian citizen, with a mortgage. I read these stories and try to get some insight from her, but unfortunately they aren't very financially savvy people. They've been doing just fine and haven't had any problems, but they are the sort of people who would be surprised by a downturn.
I'd "green" you too but you've got the italics in your first sentence too.
Hmm... that is not my read on it... for example the CIBC Prime rate is set by the cost that is incurred by CIBC to get funds from the Bank of Canada..
Further control by the BOC is done as follows"
"The Target for the Overnight RateThe Bank carries out monetary policy by influencing short-term interest rates. It does this by raising and lowering the target for the overnight rate.
The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or "overnight") funds among themselves; the Bank sets a target level for that rate. This target for the overnight rate is often referred to as the Bank's key interest rate or key policy rate.
Changes in the target for the overnight rate influence other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar.
In November 2000, the Bank introduced a system of eight fixed dates each year on which it announces whether or not it will change the key policy rate."
http://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-r...
Remember the total population of Canada is around that of California further there are only five major banks in Ca.... it's a small heavily regulated market.... really not exciting enough to warrant fecal matter in ones trousers......
It is going to be very interesting to see how the Canadian society deals with this fairy tale reality they have created for themselves.... I am dual citizen and have lived in Ontario for several years..... Love the people (and the health care system..... ) hate the cold.....
Chartered banks (ie: CIBC) don't borrow from the BoC, they borrow from the market, depositors, etc. Borrowing from the BoC, just like borrowing from the Fed's discount window, would be considered a sign of profound weakness.
"Prime" (the rate set by each individual bank) often moves in lock-step with the BoC, but sometimes not. For instance, it has ranged from 150bp over the BoC policy target, to today's 200bp, and sometimes even higher. Additionally, an individual distressed institution could, to gain liquidity in their asset base, raise it dramatically higher unilaterally. While a bank that issued a book of floating loans liked to LIBOR and a fixed spread, could not unilaterally raise LIBOR to defease short-term funding concerns.
And you're absolutely correct, the Canadian banking system is highly correlated. If results for one bank are bad, results for others are usually bad and vice versa. With the exception that CIBC historically ends up with the most spectacular flame-outs when things go wrong.
CANADA's housing market is way over priced, but the houses keep selling in the best areas and the listing duration is still short in high demand areas like Toronto, Ottawa, Montreal, Vancouver. Many of the homes in the burbs are not selling and are sitting on the market for indefinate periods of time which is causing more foreclosure than normal. Canadian Chartered Banks require 20% down to approve
a mortgage so the subprime buyers with no money down can't get in the game. Underwriting standards are more strict since the USA subprime debacle and our Chartered Banks did not engage in subprime
borrowing or the derivatives so they avoided getting nuked. Scotiabank did engage in the subprime culture on US banking, but they did not do the same things in CANADA. Only Scotiabank got TARP monies for US leveraging and the remainder of the Canadian Chartered Banks were wise to stay out of it. In brief, our housing is not going to implode anymore than it already has and this article is off-the-mark on prognostication.
CMHC insured subprime mortgage buyers are a dime a dozen in Canada, or at least have been for the past decade. With downpayments at one time as low as 0%, but now 5%. So it is not true that 20% down is required.
It is true that Canada's banks do not engage in subprime, but the CMHC most certainly does (despite their denials) when it provides guarantees against loans with down-payments of such minimality that the chartered banks wouldn't touch such with a ten foot pole. CMHC provides subprime mortage insurance and re-insurance of third party insurers of approximately $900B out of a $1.1-$1.3T marketplace, so their presence and force in the market is massive and cannot be understated.
The key difference between US and Canadian banks is that US banks played a game of duration mismatch, ie: borrow short, lend long. While Canadian banks run matched books and merely collect spread and fees. This is why Canada avoided the collapse when the long end of the funding curve blew out in response to curve inversion circa 2005-2008.
Ask yourself where the money is coming from to buy those properties? When that stops the market crashes. The average Canadian is taking on more and more debt because they want to buy a home but its only the off shore buyers with suitcases full of cash that have no troulble paying whatever the price is to buy a property. Yes, there was no sub-prime market in Canada which is why it did not suffer the same fate as in the US but a different market has formed where the off-shore money is the problem. How many peole do you know that have 1 million or more to buy a home?