A rare warning from a bank that fuels the housing market bubble

http://www.bnn.ca/full-blown-housing-bubble-economist-alarmed-by-view-of...

There is an article and video clip association the BNN web site.  I thought to myself nothing would surprise at this point in regards to the housing bubble.   Here it is. 

A majority of canadians 54% believe that home prices will NEVER FALL.  Let that sink for a while.  I watch BNN quite a bit it largely unheard to hear a guest use the word panic to decsribe the housing market in any way.  And add to craziness  the artilce at the bottom has a poll.  22% of those clicked the survey thought the prices would never go down.  After reading the article and maybe watching the BNN clip they still think the price will not go down.  My conclousion is this going end so so bady, 54% of the public will not know what hit them. 

This is a gem.  I heard of this event in passing in the media.  I reasearched this event online becasue it sounded to bubble rollcuster ride but I can not find much in the media.  My search was not in vain, so I present to you the rabble viewer an example of mass delusion. 

http://www.macleans.ca/economy/realestateeconomy/a-day-of-insanity-that-...

http://www.cbc.ca/news/business/manulife-housing-debt-1.4127243

Canadian home owners are holding on with fingertips to their homes.  Debt payments are getting onerous.  There is a question to the methodogoly of the poll.  72% homeowners with income over 50,000 would face a percarious econoimic condition if mortages payments rose 10%.  If I am doing the math correctly a current person paying 4000 in a mortage payemnts would be in trouble if they had to pay 400 more a month.  When I read these stories I think Canadians are 1 recession away from an epic economic crisis.  Everything is on credit and economy based on monthly payments that on based on historically low interests.

NorthReport wrote:

And how many years have we been hearing this now?

After all even a stopped watch tells the correct time twice a day!

That is certainly good question, but I will split your question to into 2 parts.  Its dependent on your economic belief.

1.Do you question the existence of capitalist business cycle(recession and boom).  This is standard fare for even capitalist economists.  Look up the business cycle in a google search.

a.  I believe in the business cycle  >>>>>  Jump question 2.

b.  I don't beleive in the business cycle.  A recession can be kept at bay for a indefinite time.  History seems to agrue agaisnt this point of view.  Refer to article below.

http://www.marketwatch.com/story/current-us-economic-recovery-may-end-up...

The chart in article is very powerful exhibit for existence of the business cycle.  When article was written the US was in the 84th month economic expansion.  That means the US in the 94th month expanison today.  3rd longest expansion in the history of the US, in 2019 the US would break the record of 120 months expansion.  Can the US set a record, I not idea.  But that is not the important question, the fact is a recession is coming.  Be it 6 months from now or 6 years from it will happen.

Question 2.  How bad will the recession be.  This debateable.  My personal thoughts on the matter are buttrested by 2 factors.

a.  Debt-  Generally speaking during during a recession debt is destroyed. For example a business or individual go thru bankrupcty, you as indivudual or business which effectively nullify claims ago you.  This of course does happen to everyone but most people buckle down and spend less and try to pay debt off.  If people are losing there jobs and business are closing it makes one naturally wary of spending.  The interesting thing is once you go thru belt tightening and/or bankrucpty you are ready to spend ago and partcipate in the business cycle.  Claims are agaisnt are gone and you get a free start as a cog again it the capitilist cycle.  From the capitalist point of view you have capacity to borrow again and spend again.  Much better than weighted downed by debt which curtails spending.  If things get out of hand a depression is possible.  And the cycle repeats itself. Leverage up and Leverage down followed by Leverage up.

I went thru narrative that is clinical in nature, but process on human beings is one of struggle and pain. 

b.  Government response-  Generally speaking modern governments want to stay in power so they try temper the effect of the cycle above.  Monteray response means that the central back will intervene agaisnt the cycle but lowering rates and print money.  To jumpstart the economy.

In the old days there fiscal reponse(Kenyism), direct spending or tax cuts into the economy by the government.  This still used by the governments but oppossed by conservative thinkers.  And off course buffers like EI and varoius welfare schemes saidly these ideas have been effectively demonized by the right as useless spending.  But in a captialist system they used to provide 1) A buffer to the magnatude of develaging and 2) A scheme of social control to keep the status quo going, desperate people in a democracy can hinder the smooth operation of the capitalist system.  Keep those nasty thoughts of class and where you begin in the economic order in check.

3.  I have talked about the American economy why is this revelant for Canada.   While the US effectively can resist a recession in Canada can not resist a American recession.  The US economy is still largely indepentent of the effects of the world on it.  Last time I checked the US imported 15 of its GDP and exported 10 of its GDP.  Canada has a much more globalized economy with 33 to 36 of the tied to GDP with exports and imports.  With 75 of the exports going to the US.  Its getting really late, so the US buys arounds 25% of other yearly prodcution(GDP).  The important thing is a US recession will drag canada into the mess.

NR   Catchy talking points and boosterism aside, I refer to your comments at the beginning of the post.  Can you back your ideas with some facts and ideas. You know put some meat of those bones. I tried to spell out my views in coherent way, I welcome your ideas and yours thoughts on your prespective.