Ludwig von Mises Institute Canada has a nice little rundown on the soon-to-be-exploded Canadian housing market. For you Swedes – take a good look at the dip-turned-rally in 2008, because we have the EXACT same pattern in housing prices. Basically, customers weren’t tapped out completely so when our respective central bank morons dropped interest rates to near-zero levels in 08-09, they more or less guaranteed that we would have one final spurt in the housing market, creating many more thousands of future bankrupcies. Congratulations, douche-bags, you did it! The US story will soon be hitting Sweden, Norway, Finland (but, but, but the Scandinavian economies are doing so well!!!), as well as Canada and Australia (but, but, but the commodity-based economies are doing so well!!).
The same events happening all over the globe will happen here as well. For a number of years now Canadians have been on a debt-fuelled spending binge. Wiley Coyote has already ventured off the cliff and it’s only a matter of time before he looks down.
Take two seconds and guess WHY the economies where the bubbles have not yet popped seem to be doing so well. And then, read my lips/keyboard : DEBT. BASED. CONSUMPTION. IS. NOT. SUSTAINABLE. It is a cheap loan on the future. In Sweden, we’ve had an increase in debt per annum of between 10-20.ooo SEK per man/woman/child. Now, most elderly people have likely not leveraged up to their necks, considering they have probably paid down their mortages the last 40 or so years. But imagine what this means for everyone else – if this additional debt is jammed into just a small fraction of the population, that means that those that are in deep shit, are in shit so deep they are going to drown in it.
On a related note, known gold-hater but wonderful loudmouth Karl Denninger has just gone out and done a debt/growth comparison for the US for the last decades, and stumbled upon a quantative proof that Keynesianism is dead, because additional debt DETRACTS from economic growth, not adds. Basically, what he has shown is that adding debt to the system does not as a whole do anything but increase current consumption and reduce future consumption, on an aggregate basis. No additional “GDP” was generated beyond the increase in debt – in fact GDP minus the additional debt oftend ended up being negative. Now, I would like to add to Karl’s thesis that this remains so because more and more loans have gone into non-productive assets. Giving out loans to business is perfectly fine, assuming you have the money and that it is REAL MONEY (not fractional-reserve fiat). Lending to profitable business can increase productive output, while lending for consumtion CANNOT. Borrowing is a way of funding new business, however in a sound economy the annual increase in loans would be modest, if not zero. Why? Because you would have a fixed money supply, and old loans would be paid back approximately at the same rate that new loans where taken out. Only as the savings rate increased would more loans be created, since this would increase the real pool of savings (google “Shostak” if you want to know what that is).
So, thats another read-my-lips moment for those who still have some vague idea that government borrow-and-spend can ever be good for the economy. The answer, douche-bags, is NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO! If you didn’t get that, I can change it into a language of choice. Now, obviously no politician will ever read this blog, so you will simply have to imagine me shouting at a cardboard cut-out of your least favourite state apparatchik. So, to sum up, all housing markets that have not yet seen significant declines are going to CRASH AND BURN. Except Germany, who for some reason refused to have a housing bubble at all. Those darn Germans. If they could only stop with this “One World/Europe Government”-crap, I could give them two hoorays for being the least crappy country in the West.
P.S. I am on the record from early 2009 for saying that the Swedish housing market was going to blow up, that our central bank did it, and that the debt levels of the West were going to cause a massive explosion. You may feed me milk and cookies if you want more predictions of the future D.S