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Technical Recession? It depends on where you are in this country and in your life. In Canada there are only 4 provinces where average earnings are greater than the average and the 4th, Ontario, barely makes the cut (chart of June 2015 data - 2 months lag). BC didn't make the cut and BC and Ontario are home to the bubbliest cost of accommodation in the country. So I think we can say that earnings have not been the driver of housing costs. The Bloomberg piece below does suggest that current economic policy in the last decade has been, if anything, ideological.

Canada's Economic Slide in Five Charts
Bloomberg, September 2, 2015
By Christopher Flavelle

Tuesday's announcement that Canada's economy shrank for the first two quarters of 2015, putting the country into a technical recession, puts a little more strain on the ruling Conservative Party's claim of sound economic management, the core of its campaign for next month's federal election. What's more interesting is how long the party has been able to hang on to that mantle.

The charts below show Canada's ranking on the most basic economic indicators relative to other developed countries, first for 2006, when Prime Minister Stephen Harper's Conservatives took office, and then for the latest period for which data is available. For each indicator, the country has slipped.

Individually, any of these economic indicators could perhaps be explained away as the result of adverse circumstances, or just plain bad luck. Taken together, they force the question of how exactly the Conservative government has strengthened Canada's economy after almost a decade in power.

The answer is probably in the final chart, which shows that Canada now spends less of its gross domestic product on social programs than any member of the Organization for Economic Cooperation and Development save for three (Iceland, Estonia and South Korea). Shrinking government has been the overriding goal, and chief accomplishment, of the Conservatives' tenure. Whether you agree or not with the wisdom of that shift, the other charts suggest it hasn't done much for Canada's economic performance.

This doesn't necessarily mean the Conservatives will lose; voters may not trust the other parties to do a better job. But the government's claim to have run the economy well doesn't stand up to a comparison against other OECD countries, and that was true before this week. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Original Post Here

If China is the Commodity Engine
Canadian resource exporters will have to add more value.

"Working Class Hero" John Lennon

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It's a myth that banks lend their reserves in some money multiplier style fashion and that the Central Bank can control the rate of inflation directly by steering the banks to act in precise ways. Hat Tip to Cullen Roche

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When it comes to net worth, what the stock market is to the US, housing is to China. Hat Tip to Zero Hedge

When the world is suffering from insufficient demand, however, clearly the problem we face today, income inequality and excess savings are the problem, not the solution. There may be plenty of good investments that are not being funded in the US, but the reason they suffer from lack of funding, unlike in the 19th Century, is not because capital is to scarce or too expensive. Capital is actually too plentiful, and this shows up in the speculative flows that have driven global stock and bond markets to unreasonable levels. It is weak demand or political gridlock that prevents productive investments from being made. Hat Tip to Michael Pettis

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1) The Expanded Art World
"...the global market is up to twenty times as large as it was in 1990."

2) The Art World’s Gone Global
"...the next big collectors will emerge from Russia and China, yes, but also India and various Arab emirates."

3) Art Is the New Asset Class
"...it’s a trillion-dollar asset class that in many ways works a hell of a lot like real estate."

4) Diversification As a Safety Valve
"...there’s a constant process of mini-corrections, as some genres rise while others fall.)

5) The Japanese 
"...there’s plenty of other clueless money in the market... the hedge-fund guys are the new Japanese."

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"Christie's racks up $745m in one night (a record) and the bubble keeps inflating: This week's mega-auctions are once again reaching obscenely high prices, with a Barnett Newman selling for $84.2m and a Bacon triptych close to that. Why is there no sign of a crash?" Jason Farago, May 14, 2014 TheGuardian.com

Jason answers his own question with:
1) There is only one art world now,
2) Enough people believe the hype,
3) You've got to put your money somewhere,
4) Art isn't part of the real economy,

Many of these properties (Art Galleries along Granville St) have been purchased by offshore owners and as a result the average gallery space on the street is more than $10,000 a month. This increase combined with the decline in art sales makes it is easy to see why the migration (of Galleries) away from the area. Of course a few of the major galleries remain run by the same owners, like Heffel Fine Art Auction House – the key word here being ‘auction’.  Along with ownership changes of these properties, the market has changed to reflect the demands of offshore buyers with deep pockets.

Clips from the movie "Exit Through The Gift Shop"

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"War" by Edwin Starr (Original Video - 1969)

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• Walmart will be closing marginal locations, about 9% of total in China.
• Hangzhou’s Grade A office buildings at the end of 2013 had average occupancy rate of 30%. 
• Hangzhou (fourth-largest metropolitan area of 2.5+ million people) faces “burgeoning swaths of empty apartment units.” 
• “It seems that the 30% price cut in Hangzhou (residential prices) has really changed the way Chinese people (nationally) think about real estate". 
• The real estate market in Hangzhou looks like it has just passed an inflection point... people’s mentality has changed.
• Now, the problem of no buyers is spreading across the country... China’s residential markets are becoming inelastic. People aren’t buying because they believe prices will decline further.
• Rich Chinese, now interested in foreign holdings, are also shunning their home market. Middle class Chinese are also largely out of the market.
• Many private developers had gambled that property prices would rise faster than interest rates, but that now looks like a losing bet.
• China is at the point where problems are feeding on themselves. Pessimism about property, which accounts for about 15% of China’s gross domestic product, is beginning to affect the broader economy. “Without question, everyone thinks there is a bubble.” 
• “The banking system and the shadow banking system are becoming concerned about exposure...  and refuse to provide credit to developers... forcing them to cut prices. If this persists, it will turn into a vicious loop.”

The extent of China's soil pollution, long guarded as a state secret, was laid out in an official report that confirmed deep-seated fears about contaminated farmland and the viability of the country's food supply. Nearly one-fifth of the country's arable land is polluted, officials said in the report, shedding unexpected light on the scale of the problem—a legacy of China's three decades of breakneck economic growth and industrial expansion.

In April 2013, the discovery of unusually high quantities of cadmium in batches of rice grown in Hunan—the country's top rice-producing region, as well as a top-five producer of nonferrous metals like copper and lead—set off worries about farmland and sent prices for Hunan rice tumbling by as much as 14%. Continue Reading at the Wall Street Journal.

VICE: The Devastating Effects of Pollution in China (Part 1/2)

VICE: The Devastating Effects of Pollution in China (Part 2/2)

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Debt servicing is another potential source of vulnerability. LGFVs will need some combination of cash or financing to repay maturing debt. If refinancing, LGFVs could, depending on market conditions, have to pay higher interest rates. Over 50 percent of subnational government debt was expected to mature by the end of 2012 based on  NAO 2011 (China’s National Audit Office). However, most infrastructure projects were not expected to generate significant cash flow for 10 years or even longer. Land sales, operating profits (such as highway fees), local fiscal revenues, or inter-governmental transfers could help repay part of the maturing debt. However, it is likely that a majority of the maturing debt was either rolled over or repaid by new borrowing. The recent update from NAO (2013) confirms that much of this debt was serviced with new borrowing (gross issuance was much higher than the increase in the stock of debt). Specifically, gross debt issuance was equivalent to more than 50 percent of 2010 local government debt stock in the past two years, but the net debt stock increased only by 13 percent. According to NAO (2013), about 40 percent of 2010 debt stock was either repaid or reclassified as private debt. It is not clear how much LGFV borrowing contributed to debt repayment, but given tightened credit restrictions on new LGFV loans in 2011–12, a fairly big share of LGFV borrowing likely went to servicing maturing debt.

IMF Working Paper Fiscal Affairs Department and Asia and Pacific Department Fiscal Vulnerabilities and Risks from Local Government Finance in China Prepared by Yuanyan Sophia Zhang and Steven Barnett Authorized for distribution by Steven Barnett and Martine Guerguil January 2014

A senior Chinese auditor has warned that local government debt is “out of control” and could spark a bigger financial crisis than the US housing market crash. Zhang Ke said his accounting firm, ShineWing, had all but stopped signing off on bond sales by local governments as a result “We audited some local government bond issues and found them very dangerous, so we pulled out,” said Mr Zhang, who is also vice-chairman of China’s accounting association. “Most don’t have strong debt servicing abilities. Things could become very serious.”

The International Monetary Fund, rating agencies and investment banks have all raised concerns about Chinese government debt. But it is rare for a figure as established in the Chinese financial industry as Mr Zhang to issue such a stark warning. “It is already out of control,” Mr Zhang said. “A crisis is possible. But since the debt is being rolled over and is long-term, the timing of its explosion is uncertain.”

Mr Zhang said many local governments had invested in projects from public squares to road repairs that were generating lacklustre returns, and so were relying on financing rollovers to pay back their creditors. “The only thing you can do is issue new debt to repay the old,” he said. “But there will be some day down the line when this can’t go on.”