Over the years I’ve heard Americans discuss all kinds of things going on in all parts of the world—various parts of Asia, China certainly, Europe, Mexico, you name it. One place I don’t recall anyone talking about much, aside from avid anglers and hunters, is Canada.
I must presume they know that a rather large country exists on the lower 48′s northern border, but honestly I’d be surprised if most Americans know much about the place at all in terms of its politics or methods of governance. They talk funny and call each other “hosers” and they say “eh” a lot, and supposedly they’re pretty laid back—as evidenced by their good-humored response to our flying their flag upside down at the World Series that time.
We don’t know much about their economy either for that matter, though there seems to be a general sense that they did not suffer quite such serious downturns during this last meltdown, in no small part because the Canadians are regarded as “sensible”, and have, people here think, effective banking regulations that prevent the kind of reckless financial derring-do that created so many problems here. That perception may be about to change.
The reality is that housing prices in Canada have doubled since 2000, but wages have been doing exactly what they’ve been doing here, which is remaining relatively flat. That being the case the engine driving this must be debt. It’s a familiar bubble story by now, or should be. Real estate, of course, and dodgy loans;
The Canadian government requires that buyers only pay 5 percent down payments although this rule is not enforced. However, for buyers who do not have 5 percent, the 6 major banks offer no down payment mortgages or cash back mortgages where they loan the buyer the 5 percent down payment, offering 100 percent financing. The banks also give mortgages to the self-employed and new immigrants without verifying income.
If that has a depressingly familiar ring to it, it’s because it’s all depressingly familiar.
According to Garth Turner, a former Conservative Party Cabinet Minister and Member of Parliament, the Conservative government of Stephen Harper has deliberately created a housing bubble through low interest rates and down payments and long amortization periods that is beginning to deflate…..
…..The federal government has insured all these low down or no down payment mortgages through the Canadian Mortgage and Housing Corporation (CHMC), a state housing agency whose 10 member Board of Governors is heavily represented by the Housing industry — 3 developers, 1 real estate broker and 1 partner in a plumbing, renovation company. The CHMC would be the Canadian equivalent of the US government backed Freddy Mac and Fanny Mae insurance holders. The banks therefore can lend money to house buyers with zero risk. By removing risk from lenders who do not have to worry about the credit worthiness of the borrower, the government has encouraged imprudent lending practices, according to Turner. The Harper government even increased the agency’s insurable loan limit to $600 billion in 2009, an amount larger than the national debt.
There it is again—”The banks therefore can lend money to house buyers with zero risk.”—that lovely little dynamic of transferring private risk and debt to the public.
Turns out Canadian conservatives are exactly the same as ours, as Greece’s, Spain’s, Italy’s, Everybody’s—privatize the profits, socialize the costs. Even if they do talk funny. They’re all hosers, and we’re the ones getting hosed.
There’s a lot more detail at the link, if you’re in the mood to read it, but I’m not in the mood to write it. This crap is getting to where it virtually writes itself.