Carney AGAIN Threatens To Walk The Walk – “The bank is clearly uncomfortable with keeping interest rates below inflation when household debt continues to grind higher.”

editorial cartoon care of Jeff Murdock

“Bank of Canada governor Mark Carney elected today to keep the benchmark target for the overnight rate unchanged at one per cent, a level held at since September 2010.
Despite standing pat for the 13th consecutive policy session, the central bank offered a few hints that the outlook has improved enough to consider raising interest rates sooner rather than later.”
This “sent a clear signal that rates may not stay there a whole lot longer,” BMO economist Doug Porter noted. … “The bank is clearly uncomfortable with keeping interest rates below inflation when household debt continues to grind higher, and with the economy poised to reach capacity by early next year,” Porter said. “At a minimum, the bank will be raising rates …sometime in the first half of next year.”

CBC 17 Apr 2012

That’s now… what… five? six? times that Carney has formally warned Canadians about excess borrowing; all the while household debt load has continued upwards.
– vreaa

34 responses to “Carney AGAIN Threatens To Walk The Walk – “The bank is clearly uncomfortable with keeping interest rates below inflation when household debt continues to grind higher.”

  1. That would be “talk the talk”. He is *never* going to “walk the walk”.

  2. It’s live! I just can’t imagine…

    Well, just another way to ramp up some debt, I guess.

  3. Why doesn’t this “business friendly” government place non-RE industry on an equal footing with RE by removing all the indirect support in place fore RE? And why doesn’t non-RE industry complain?

    Those policies must be responsible for redirecting quite a few investment dollars away from non-RE. It’s not all about the interest rate.

    • Ralph Cramdown

      There’s plenty of pork and subsidy outside the real estate industry.

      • “Owners do tend to show more community and civic involvement than renters”

        Ralph, intuitively this sounds true. But I wonder if there is actual supporting evidence? In societies where renting is the norm (e.g. Switzerland), are people in fact less civic-minded?

        Certainly the absentee owners that have permeated Vancouver RE are not involved in the community…

    • Cuz many non-RE businesses are owned by those who also own houses/condos/investment properties. Supporting RE is one of those “no-brainer” policies that can only help a party’s electoral prospects. At least until the whol Ponzi scheme implodes.

      Spending a lot of time in the comments sections of bubble/bear blogs like this, one might get the impression that most people know that we’re in the midst of a destructive RE bubble. But, as the anecdotes posted here daily demonstrate, it is the opposite. Most people do not think like the majority of regular commenters here. Most people are blissfully unaware that RE holds any risk whatsoever, and still believe a house is “the safest and most important investment you’ll ever make.” Therefore, government’s myriad subsidies for RE are largely viewed as positive, and can only benefit the politicians who suport them.

      Such supports can even be dressed up in free market garb, such as “encouraging families to become owners” and “enabling renters to stop paying the landlord and start paying themselves” and “spurring development” and “removing supply constraints”. (Remember Georege Bush’s “ownership society”? Ironic how otherwise decent Bush-hating Canadians have embraced what was perhaps the most destructive, misguided, and wantonly materialistic of W’s policies. But I digress.) With ownership rates reaching 70% in Canada, there just is no downside for governemnts hosing tax payers in order to “support home ownership”, regardless of political stripe.

      • Ralph Cramdown

        Well, there ARE advantages to an ‘ownership society’ (I HATE the term and concept, too). Having a large fraction of the population living in tenement slums or favelas is clearly undesirable, and owners do tend to show more community and civic involvement than renters (causation?). But some people aren’t cut out for home ownership, especially in a white collar, specialized society of symbol processors. They’ll just allow the place to deteriorate through ignorance and neglect, and get ripped off by the trades, as they’re not even capable of judging whether they’re getting quality work, never mind a fair price. Condo living is one solution, but that just transfers the problem to a board of amateurs, with bigger and more complex maintenance issues, with the end result being that owners get ripped off for a constant sum per month, rather than irregular ones.

        The downsides of home ownership are never stressed. The government doesn’t say “We provide small incentives to entice you into paying $4-500,000 interest over your lifetime.” Labour mobility is impaired, or workers are forced to lose 7%+ of the value of their houses when they relocate. The average high school or university grad doesn’t have enough math and grasp of the concepts of inflation, compounding and opportunity cost to make informed, rational decisions. So it goes.

      • theragingranter

        Agreed in full Ralph. There are advantages to society when people feel that they own a piece of it. But of course, all the other factors you list tend to reduce that “value added” back down toward zero. It ends up being a zero sum game at best. At worst, you’ve created an RE bubble by making it too easy to own, and suffer the inevitable burst.

    • I can believe that. But what about the theory that “it’s not just about interest rate” – there are other factors affecting the level of business investment, such as competing investments, low returns, risk (no CMHC for business loans), … ie. the “push” side, or whatever the proper term for this is.

  4. Look at it this way, the bank will likely raise rates within the next couple of thousand years.

  5. Seems more promising this time given that half of his excuses are questionable. Europe out of recession that soon? SEriously?

  6. Long time, no speak guys. So, why exactly is this news?

    Other than exhaling a little hot air from time to time, Carney and co aren’t gonna do squat. I can’t say I blame him though. Hey, he’s a bonafide rock star now anyway. IMHO, the time to have done something came and went a long time ago. Everyone has already gone ALL IN. I suppose everyone has been warned though, but this doesn’t mean much. With global markets now teetering on the brink once again (despite all MSM reports to the contrary), central banks are going to have to adopt a more accommodative stance once again just to keep the house of cards from collapsing upon itself. I guess, given where we are, that means maintaining the status quo for several more years, maybe longer (think Japan all over again). Oh joy. What exactly everyone has been doing during the last 3-4 years is beyond me.

    I know some of you want TPTB to ratchet rates up over night and put all the leveraged up RE mogul wannabee hotshots through the meat grinder, but that ain’t gonna happen this time around. Remember, the asylum is now being run the inmates and their crooked friends and relatives. That being said, many of those chumps you all want to see fail (how screwed is that, huh?) are going to wind up in the poor house anyway (but will possibly stick you and many other more responsible folks with the big fat bar tab). So, if this is what you all want, then dig in. Enjoy.

    The coming deflationary death spiral that’s coming is going to be a doozie. Banks will have to continue to borrow at near zero rates (while continuing to “charge” savers for the privilege of stashing their cash with them), increase fees and other charges and possibly impose drastic cuts to lending across the board while our govt looks for more ingenious and creative ways to part the rest of us from our hard earned money via increased taxes on everything under the sun, blatant currency debasement and undoubtedly countless questionable (if not borderline illegal) bailout and/or stimulus programs which wind up helping no one but a select few that just happen to be in the right place at the right time.

    In regards to the most recent govt money grab…I have to say that confiscating TFSA accounts belonging to individuals who traded up a storm post 2008 financial crisis (and in several cases made 100, 200, even 300% or more) is a serious low blow. For them to come in gangster style and grab 100% of the money (less the $5000 annual contribution) as opposed to the standard amount you would typically owe in cap gains tax is simply outrageous.

  7. Vreaa, I have an image that you might like to add to this post:

  8. Since there are signs that RE market trends in some parts of the nation may be reversing despite the low rates, Carney does not want to raise rates at this point to avoid being blamed for the eventual downturn which might already have started on it’s own anyway.

  9. Mark Carney: “Wolf!”
    Farmer “Sheep!”
    Mark Carney “The Wolf is coming!”
    Farmer “I know, but I am more scared of the Sheep!”
    Mark Carney “The Wolf is Here!”
    Farmer “Too late. The Sheep already ate our lunch!”
    Mark Carney “Shut up, Farmer….this is serious!”
    Farmer “I know it is. I said sheep scare me!”
    Mark Carney “Maybe we can discuss this over lunch”
    Farmer “Sure, what’s on the menu? I’m starved!”
    Mark Carney “It’s Lamb chops”
    Farmer “Screw the herd…..let’s eat!”
    Mark Carney “Wolf!”
    Farmer “But I have indigestion”

  10. The 5 year yield went up by 15bps so it sounds like there was some effect.

  11. 😀 seems timely enough

  12. Financial Times:

    Mark Carney, the governor of Canada’s central bank, has been informally approached as a potential candidate to replace Sir Mervyn King as head of the Bank of England in June next year.

    Now you know who dictates Canadian monetary policy.

    • I expected that for some time now, but I had the geography wrong.
      It was a farce that Black had to renounce his Canadian citizenship in order to pledge his loyalty to Queen E, the same monarch for Canada.

    • “Now you know who dictates Canadian monetary fiscal and finance policy”

      That’s better 🙂

      • Renters Revenge

        Good “fix” (what a freakin’ joke). GS rules the world.

      • Thanks!

        I’ve formulated some more heat-maps for Van’s HPI.

        Percent Range -/+
        Light 0 – 4%
        Mid 5 – 14%
        Dark 15 – 25%

        Positive Gain Y/Y
        Negative Gain Y/Y

        Next, I’m looking for sales stats for these areas…then I can see what’s really going on and compare it with Toronto. It already appears that condos are in distress for Van and TO, however the real ramification will be lost equity for many 2-4 bedroom owners, who are suppose to be the next detached buyers 2-5 years out. On top of that, we have record student loan debt and youth unemployment rising—potential (or lost) first time buyers in 2-5 years.

        Once the property ladder becomes disrupted, it’s a whole different ball game.

      • @CanadianWatchdog the REBGV publishes a comprehensive regional breakdown of sales, listings, and sales prices for sub regions, however it’s not immediately available through a link on their website. You can usually troll Realtors’ websites to find legacy copies for download. Google might be the best way.

  13. pretty good movie for those with time – oddly fitting in this spot

    as a sideline if you’re watching, note how much stuff costs

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