Happy Monday Morning! The Bank of Canada raised rates by another 50bps this past week, pushing prime rate to 5.95% and inflicting more pain on variable rate mortgage holders. We’ll circle back to that in a second. What’s important to note here is markets were fully pricing in a 75bps rate hike from the Bank of Canada and yet they only delivered 50. Tiff had a layup and he didn’t take it. But why? For the first time in awhile, the Bank of Canada has now flagged financial stability concerns. From the October Monetary Policy Report:
There is more to this episode than housing. Will the BOC have to defend the CAD due to GB like dislocation of CA bonds. Will inability to roll-over negatively impact Canadian finances to the point of "no-bid" BOC cannot continue to buy debt and then expect a declining world economy to support their economic needs? Is the "dollar milkshake" theory is spot on? Will USA dollar take multiple countries down of next 24 month period? Will it take Canada out? Will the Trudeau government find willing buyers of their treasuries when the world is seeing country bankruptcies emerge over next 2 years?
I am an immigrant and I am forever thankful for Canada and how it saved me from a country that was at war and from persecution. I also believe bringing 500,000 folks a year is killing us. They can raise interest rates but it won’t stop people from wanting to live indoors. Rent is at an all time high. Also where are these poor folks going to live.
And today we hear that the feds wants to raise immigration levels to 500k annually. Yes, immigrants built this country* but lets consider 'unintended consequences' such as where are they going to live? Of course the private sector can respond overnight and build, build, build when needed. No?
Oh i get it now - the BOC can just print whatever the feds need then spend willy nilly wherever they want. Private sector be damned.
Years ago i thought it made sense to be a long term 'good' landlords and provide quality housing at reasonable prices. Then the endeepee took over and brought in rent control. (yes the Libs supported it too). Inflation be damned - we can only raise rental rates 2% this year - much less than inflation. Goodbye private sector. Hello public-printer go brrr, brrr, brrrrrrrrr.
*after stealing it from the previous occupants (treaties be damned)
I agree there is no plan B... it seems our default attitude it to put up roadblocks to any industrial developments, while relying on external inflows of people and capital to boost our real estate. Home building / real estate is at the centre of our economy now.
I've had trouble in the past getting a handle on how much of Canada's economy is related to Real Estate. The FIRE sector being at 25% of GDP aligns with my intuitions, but I wouldn't be surprised if it's even more. Can you send a link to the source of this estimate?
this is grotesque financial mismanagement by these bankers if they are creating a situation where a major new housing market sales can go down by 96% purely due to manipulation of financing conditions.
There is more to this episode than housing. Will the BOC have to defend the CAD due to GB like dislocation of CA bonds. Will inability to roll-over negatively impact Canadian finances to the point of "no-bid" BOC cannot continue to buy debt and then expect a declining world economy to support their economic needs? Is the "dollar milkshake" theory is spot on? Will USA dollar take multiple countries down of next 24 month period? Will it take Canada out? Will the Trudeau government find willing buyers of their treasuries when the world is seeing country bankruptcies emerge over next 2 years?
I am an immigrant and I am forever thankful for Canada and how it saved me from a country that was at war and from persecution. I also believe bringing 500,000 folks a year is killing us. They can raise interest rates but it won’t stop people from wanting to live indoors. Rent is at an all time high. Also where are these poor folks going to live.
The government is not coordinated at all.
And today we hear that the feds wants to raise immigration levels to 500k annually. Yes, immigrants built this country* but lets consider 'unintended consequences' such as where are they going to live? Of course the private sector can respond overnight and build, build, build when needed. No?
Oh i get it now - the BOC can just print whatever the feds need then spend willy nilly wherever they want. Private sector be damned.
Years ago i thought it made sense to be a long term 'good' landlords and provide quality housing at reasonable prices. Then the endeepee took over and brought in rent control. (yes the Libs supported it too). Inflation be damned - we can only raise rental rates 2% this year - much less than inflation. Goodbye private sector. Hello public-printer go brrr, brrr, brrrrrrrrr.
*after stealing it from the previous occupants (treaties be damned)
I agree there is no plan B... it seems our default attitude it to put up roadblocks to any industrial developments, while relying on external inflows of people and capital to boost our real estate. Home building / real estate is at the centre of our economy now.
I've had trouble in the past getting a handle on how much of Canada's economy is related to Real Estate. The FIRE sector being at 25% of GDP aligns with my intuitions, but I wouldn't be surprised if it's even more. Can you send a link to the source of this estimate?
this is grotesque financial mismanagement by these bankers if they are creating a situation where a major new housing market sales can go down by 96% purely due to manipulation of financing conditions.
Will Canadian real estate have the same path as 1980-86?