Canada's Bubble Reaching Critical Levels... Collapse imminent?

[Economy 52,842]

http://www.thebubblebubble.com/canada-bubble/

 

Canadas economic bubble may now be reaching a critical point with 3 major bubbles at play:

 

HOUSING: after prices rising 130% since the year 2000, condo/home construction consistantly above population growth, and inflows of foreign investors from China buying up property as a way to store wealth artificially boosting housing with rising vacancy rates, this bubble could burst at anytime

 

CONSUMER DEBT: At a debt of 163% of income, Canada has one if the highest consumer debt loads in the world. Retail has been robust resulting in high credit card debt. Much of it is mortage debt also. The Central Bank talking about lowering rates further to stimulate sluggish economy could further aggravate the debt imbalance

 

COMODITY BUBBLE: This bubble has already burst. Canada is highly dependtant on oil, natural gas and the prices went bust. This is already having an impact on business investment

 

Some howver disagree Canada is in an economic bubble. They claim healthy middle class wages help keep high home prices affordable and that tight lending standards in Canada prevent bad loans. The recovering US should help non energy exports and should the economy still enter recession, Canada is financially solid enough to induce stimulous.

[Red 99,106]

Isn't every country in this situation tho

[ARTPOPdidntflop 3,987]

let's move to mars 

[Economy 52,842]

Isn't every country in this situation tho

ummmmm no.

 

Many Countries had a housing bust and/or deleveraging after the 2008 crisis which led to a correction in imbalances in housing and consumer debt levels

 

In Canada banks never failed and kept lending and combined with low interest rates, home prices never had a correction, they just kept rising...

 

And because the economy didnt crash as bad here, consumer confidence didnt drop as much so consumers were less cautious so they kept piling on debt.

 

Theres a few other Countries in a simmilar boat like Scandinavian Countries that also didnt get a correction in the crisis. Australia is even more simmilar to Canada because they also had a commodity boom gone bust as well like Canada (in their case it was mining not energy)

[Red 99,106]

ummmmm no.

 

Many Countries had a housing bust and/or deleveraging after the 2008 crisis which led to a correction in imbalances in housing and consumer debt levels

 

In Canada banks never failed and kept lending and combined with low interest rates, home prices never had a correction, they just kept rising...

 

And because the economy didnt crash as bad here, consumer confidence didnt drop as much so consumers were less cautious so they kept piling on debt.

 

Theres a few other Countries in a simmilar boat like Scandinavian Countries that also didnt get a correction in the crisis. Australia is even more simmilar to Canada because they also had a commodity boom gone bust as well like Canada (in their case it was mining not energy)

I say that cause if you switch Canada to Brazil in the text it still makes a lot of sense. 

During 2008 the government did everything they could so people could have an illusion the crisis did not reach this country, they reduced taxes so people could buy things like never before and now that things are back on track, housing (seriously, I live in an apartment now that has just one bedroom that was the same price from a three room apartment in my hometown back in the day), inflation, gasoline, life cost, basically everything is skyrocketing meanwhile the industry and economy is free falling and some people are having trouble with maintaining the lives they had during the fiscal changes for the crisis. And if that wasn't enough, there is a drought since mid-2014 and the rivers are basically dead, forcing the thermoelectric usines to work (thanks to the non-existent development of new fonts of energy other than water and oil), influencing in the price of electricity and making the industry even lower.

It seems to me that almost every country nowadays have the same problems in their way: life cost (whether it is with housing, services, retirement...), balancing consume/production and energy resources   

[Economy 52,842]

I say that cause if you switch Canada to Brazil in the text it still makes a lot of sense. 

During 2008 the government did everything they could so people could have an illusion the crisis did not reach this country, they reduced taxes so people could buy things like never before and now that things are back on track, housing (seriously, I live in an apartment now that has just one bedroom that was the same price from a three room apartment in my hometown back in the day), inflation, gasoline, life cost, basically everything is skyrocketing meanwhile the industry and economy is free falling and some people are having trouble with maintaining the lives they had during the fiscal changes for the crisis. And if that wasn't enough, there is a drought since mid-2014 and the rivers are basically dead, forcing the thermoelectric usines to work (thanks to the non-existent development of new fonts of energy other than water and oil), influencing in the price of electricity and making the industry even lower.

It seems to me that almost every country nowadays have the same problems in their way: life cost (whether it is with housing, services, retirement...), balancing consume/production and energy resources   

every country has problems, but not all quite the same way

 

For instance in the US the severe recession fixed a lot of their imbalances. People spent less and so they have less debt now... home construction slowed after the housing bust and as the population grew, the oversupply imbalance was corrected etc

 

The economy goes through cycles and if the Government tries to prevent the economy from taking breathing room when it needs to, it can cause the downturn part of the business cycle to be worse because you accumulate more imbalances

 

The US did the same thing... they tried to artificially prop up their economy too much after the 2001 recession. Rates were left low for too long and borrowing, construction etc was out of control...

 

the boom eventually went bust when after years of boom all that was left was too many houses built, too many new cars produced, too much consumer debt etc

 

In Canada, there never was a big cyclical correction for 15 years already. And in our case (like Australia as well) were also dependant on resources whose prices have collapsed and that will put a lot of additional pressure on the economy

 

Although both Canada and Australia have good Government finances so if a crisis occurs, at least the Government has fiscal room to do something about it

 

Also Canada has the advantage of an improving US which takes 75% of its exports... growth in exports can help offset any declines in the domestic consumption part of the economy... so theres a chance the imbalances will be corrected gradually rather than 1 big crash

[craig 680]

People have been saying this so long, if it happens it will be like the line: "a stopped clock is right twice a day."

[Economy 52,842]

People have been saying this so long, if it happens it will be like the line: "a stopped clock is right twice a day."

lol i know. I myself dont know... I mean it depends...

 

the thing is with economic imbalances and bubbles, usualy something has to trigger thek to pop and so far nothing has... Bubbles only burst on themselves usualy once they reach an unbelievable size

 

thing is, as overvalued as real estate is in canada, a bank crisis is unlikely because the loans havent been bad loans so defaults and stuff arent likely...

 

its simply a matter of too much construction and prices distorted by years of low interest rates and not having a correction for a long time

 

consumer debt is also dangerously high

 

they been saying it for a long time and so far nothin has happened but that doesnt mean they arent right about the risks. The imbalances are there and the numbers speak for themselves

 

another dangerous trend is chineese buyers. They have a thing for investing in property as a way to store wealth. In China whos housing has been showing bad signs lately has a lot of chineese buying land overseas instead and Canada is one of their favourite places due to its long term stabiliyy and a lower currency makes that even more attracitve now

 

vanciuver in particular has a lot of chineese buying land and toronto starting to see more of it too. That will help artificially keep real estate hot in both prices and demand even if naturak demand within Canada is no longer there. And that could ultimstely make the imbalance worse