2 replies to this topic

[dave]

I had to smile when I read yesterday that German Chancellor Angela Merkel praised Canada for not living on borrowed money. It reminded me of a phrase I heard someone say on t.v. a year or two ago: “We are all living in a lend, extend, and pretend economy".

Check out the credit market summary data table on the Statistics Canada web site: The 6th line from the bottom is the “Total funds raised equals total funds supplied”. At the end of 2011 it was 4.82 trillion $. In 2008 this number went up by 457 billion $, in 2009 it went up by 200 billion $, in 2010 it went up by 279 billion $, and In 2011 it went up by 174 billion $.

This historic credit bubble/financial mania which the citizens and the governments of the so-called advanced economies of the world have created for themselves over the last 40 years and the big economic crash that eventually will occur as a result of this gigantic bubble is going to make for a great movie sometime in the future.

[Blue Knight]

dave, on 18 August 2012 - 03:24 AM, said:

I had to smile when I read yesterday that German Chancellor Angela Merkel praised Canada for not living on borrowed money.

Ms Merkel also said that Canada "should serve as a model for Europe". I couldn't agree more!
We all -nations and individuals- should live according to our means.

[Bugs]

Blue Knight, on 19 August 2012 - 07:53 PM, said:

Ms Merkel also said that Canada "should serve as a model for Europe". I couldn't agree more!
We all -nations and individuals- should live according to our means.

Canada is only 'less bad' than other countries. It isn't as if we're an exemplar of anything. Consider this:

Quote

Nearly three times more condo high-rises are being built in Toronto than are being built in New York City and nearly seven times more than in Chicago, according to Bloomberg News.
This development boom, and accompanying price increase, is not about housing to meet a sudden surge in population. It is not about an economic boom. If it was, Calgary and Edmonton would have 128 cranes, like Toronto does, building housing and pushing up all prices. Instead, this is taking place in Toronto and Vancouver where economies are moribund.
Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised. What is going on here is a deluge of hot money from abroad that is creating an artificial, and potentially dangerous real estate bubble. This mania happened in several other countries -- where it was shut down -- and has spread to Canada. Officials here have been urging restraint, but that is not the solution. A ban on foreign buying of residences is the only solution.
http://www.huffingto..._b_1438892.html

We have quite a real estate bubble growing in Canada, a bubble created by lots of cheap money and government guarantees that enables lenders to lend without risk. The chickens just haven't come home to roost yet.