“There’s no question that Canada’s gigantic housing bubble is going to burst. It’s just a matter of when.
Housing prices in Canada have more than doubled in the last 10 years, and in cities like Toronto and Vancouver, prices are up more than 140 per cent. But the soaring prices have nothing to do with wages which have remained relatively flat during the same period. What’s really driving housing prices is debt. Low interest rates and lax lending standards have created a speculative frenzy that’s pumped up a monstrous asset-price bubble that threatens to crash the economy and send unemployment skyrocketing.”
“We’ve seen it all before, right, in Ireland, Spain, UK, the US and now Canada. And every time, the government twiddled its thumbs while the little guys were ripped off by speculators. On May 22, 2012, the Organization for Economic Co-operation and Development (OECD) called on the Bank of Canada to raise interest rates saying that “negative real short-term rates are stoking a housing bubble.” Naturally, the recommendation has been shrugged off, as has any attempt to stiffen lending rules to put a damper on speculation. So, what should we make of this? Why are policymakers–who have access to the same data as us– refusing do anything to mitigate the effects of what is likely to be a very excruciating meltdown? Could it be that it’s all part of a plan to use the crisis as a means to dismantle the welfare state and reduce Canada to 3rd world poverty? Yup. That sounds about right to me.”
- excerpts from ‘Canada’s Housing Market Smackdown’, Mike Whitney, eurasiareview.com, 15 Jun 2012 The author “writes on politics and finances and lives in Washington state.”
[hat-tip to S, who sent this link via e-mail]
We are in agreement that there is a large bubble, agree it will inevitably burst, but disagree that there is a “plan” to induce a “crisis” and then use it for political advantage. Policymakers have far less control than people imagine. We believe the BoC and the politicians would dearly love to organize a soft landing (they benefit from the status quo, after all) but that they’ll be unable to do it.
Also, in Canada, the little guys have been the speculators, too… every housing market participant has been a speculator.