Brian Romanchuk — Canadian Housing And Perpetual Motion

Why the Canadian "housing bubble" hasn't burst.

Quick summary: it's a policy choice, but this comes with some consequences, like pricing some cohorts like unendowed youth out of the market, and also some uncertainty, like what happens if there is a recession and debt cannot be serviced. 

Moreover, Brian explains why this cannot be modeled. While it is foreseeable as a contingency, the timing is not forecastable. Although this is based on a policy choice and determined by Canadian law and institutional arrangement, it is also generally instructive about how socio-economic systems work regarding finance and government backstops.

Moral: A lot of what is interesting in economics and finance is based on contingencies and therefore not amenable to forecastable modeling. This is the case in the Canadian housing market because is based on policy choices that can change, some of which may not be sustainable politically owing to socio-economic effects. 

Significant social cohorts can't be screwed forever. and it is unknowable when and how they will react politically. On the other hand, trends can persist for a longer time than "seems reasonable" for various reasons that are not quantifiable empirically. Steve Keen got caught out in making a bet on the collapse of the Australian "housing bubble" that still hasn't crashed.

So all that can be said is to agree with (Herbert) Stein' s Law:  "If something cannot go on forever, it will stop." 

But the timing cannot be pinned down in an empirically based model. Non-empirical model are just guessing, and good guesses are not necessarily repeatable. Thinking they are is an example of recency bias, which is right up there in economics and finance, along with confirmation bias and anchor bias.

So Stein recommended letting a process run its course, since it would be self-correcting by signaling it own ending. But this has socio-economic consequences that depend on who gets hurt, how many, and how much political influence they wield. 

Bond Economics 

Canadian Housing And Perpetual Motion
Brian Romanchuk

Brian Romanchuk — Bank Of Canada Hawkishness Ramping Up

Developed central bank hawkishness has been increasing over the past weeks, signalling a new consensus (or groupthink) among global policymakers. Such a shift should not be too surprising, given the biases of central bankers. In particular, the shift by the Bank of Canada is a reversion to historical form; whether or not it will be disastrous remains to be seen.

Bond Economics
Bank Of Canada Hawkishness Ramping Up
Brian Romanchuk

Brian Romanchuk — The Zombification of Canada

A series of policy errors has trapped the Canadian economy in a near-zombie status.|

Household debt levels are high, leading to a fragile system. The only benign way of reducing this fragility is to induce high wage inflation, which is precluded by the unthinking attachment to the inflation target. There is no reason to expect the system to collapse on any particular forecast horizon; rather the economy can muddle along in a low-growth path. The fact that the brain trust that inflicted this low-growth destiny on the Canadian economy in the name of improving economic efficiency is ironic, but this reflects the general failure of modern policymaking. The situation in Canada may mainly be of interest to Canadians, but it does provide yet another data point for the general thesis that trusting the policy preferences of the financial sector is inherently a bad idea....

Bond Economics
The Zombification of Canada
Brian Romanchuk

Rick Salutin — Can we come out now that deficit hysteria is over?

Another news article on MMT. Positive.

The Star (Canada)
Can we come out now that deficit hysteria is over? Salutin

Rick Salutin, columnist

Phil Butler — What’s Wrong in Canada’s Halls of Power?

Justin Trudeau was banking on a Clinton presidency. Now that Trump is POTUS...?

NEO
What’s Wrong in Canada’s Halls of Power?

Phil Butler

Also

Dr. Reynaldo Ileto, a leading Filipino historian, is concerned about Duterte’s survival, should he move too quickly with the regional realignment:

“He cannot break up with the United States too abruptly… he’d be killed.”

For a while, in Manila, we were discussing the pattern established; the way the West treats the ‘rebellious’ countries and their governments: Ukraine, Brazil, and even the former President of the Philippines, Gloria Arroyo.

“Arroyo moved closer to China”, explained Dr. Ileto: “They got her indicted for corruption. Only Duterte managed to release her.”

Antagonizing China, even provoking it into a military conflict, has been the mainstay of US foreign policy in Asia, at least during the later years of the Obama administration. This dangerous trend will most likely continue, even accelerate, since Donald Trump has already taken office.

President Duterte’s stubborn determination to reach a peaceful arrangement with China may put him squarely on the hit list of the Western Empire.

Prof. Roland Simbulan from the Department of Social Sciences of the University of the Philippines confirms what Dr. Ileto suggested above:

“If Duterte moves too fast, he will be overthrown, by the military. He is an outsider. Police and army hold grudges against him. Many top military commanders here were trained by the US, and often even corrupted by the US. Duterte’s anti-US and anti-imperialist policy goes beyond rhetoric; it is real. He is confrontational, he is against the US foreign policy towards the Philippines and the world.”

The Philippines in the Center of Asian Realignment

Andre Vlchek

Ari Altstedter — Money is flooding out of Canada at the fastest pace in the developed world

Money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver.

Canada’s basic balance — a measure of national accounts that spans everything from trade to financial-market flows — swung from a surplus of 4.2 per cent of gross domestic product to a deficit of 7.9 per cent in the 12 months ending in June, according to analysis from Kamal Sharma, a foreign-exchange strategist at Bank of America Merrill Lynch. That’s the fastest one-year deterioration among 10 major developed nations.…

Financial Post
Money is flooding out of Canada at the fastest pace in the developed world
Ari Altstedter, Bloomberg News