Marc Goldfried, head of Canoe Financial Fixed Income talks with BNN Bloomberg about dropping yields confirming a weakening economy.
The Bank rate has been 2% for the last five months but the Bank of Canada 2yr and 10yr benchmark bond yields are indeed inverted to the Bank Rate as I have noted on my Yield Curve chart (FEB 2019)
On march 11th 2019, David Larock an independent full-time mortgage broker laid out his "Case for Lower Canadian Mortgage Rates", below edited, but read the whole feature report at MoveSmartly.com
The Bank of Canada acknowledged that our current economic slowdown is now “more pronounced and widespread” than it had previously forecast.
On this last item, my Household Debt chart is in agreement.
Thanks to Jesse Felder @jessefelder and
Tuomas Malinen @mtmalinen for the charts above.
Today, March 13th 2019, the live
Canadian Productivity Chart exhibits a slowdown.
The above sounds like it, but no,
that's not a quote about Canada;
but these are:
Canadian real estate sales are feeling the pinch of higher interest rates, and consumer credit isn’t far behind. Bank of Canada (BoC) numbers show household debt printed a new record high. Despite the record high, the rate of growth continues to slow for consumer debt levels. The decelerating growth is yet another indicator that the credit cycle has peaked. Better Dwelling, July 2018
Market Rate Outlook: One more hike this year plus two more hikes next year. The market is not fully pricing in the next BoC rate increase until December... Canadians are now more sensitive to higher rates than ever before. That means consumption is slowing faster with every 1/4% BoC rate increase. RateSpy.com Sept 2018
Canada's economy is set to slow down even with a NAFTA deal, economists say:
And as my long term chart study of Canadian Debt, GDP, Foreign Direct Investment and Balance of Trade shows, since the credit crash of 2009, Canadian's awesome consumption via debt has not led to higher wage employment production in Canada but to lower wage warehousing and transportation of goods and services that we import to maintain our lifestyles.
"The one-million square foot Toronto centre will be Amazon’s sixth facility in Ontario and ninth in Canada." Financial Post, July 2018
"Stabilization should not be interpreted as the start of another strong rally," they warned (TD Bank economists Derek Burleton and Rishi Sondhi). That's because mortgage rates are on the rise, and home affordability levels have reached their worst levels in a quarter century... in fact historical data shows that over the past half century, inflation-adjusted house prices in Toronto fell for about a third of the time. huffingtonpost.ca, Sept 2018
And for those of you who are under 40 years of age, you might end up changing employers 6 more times before you reach 70 years old.
That’s why, when you finance a real estate purchase, you should double check both your debt AND income amortization to see if they support each other.
If you have to move to a new city to get that better job, make sure your real estate asset can produce a net revenue stream.
Computer technology is already eating jobs and has been since 1990. To survive, get non-routine skill training. Thanks to Futurism.com for the chart below.
The Precarious Generation
Debt has been fueling lifestyle especially in cities like Vancouver and Toronto where extreme speculation, serial flipping and inert local and federal officials stand by with failed policies and ineffective regulations. There is no cop on the beat; it's do unto others what you want.
In less than 2 decades we have gone from a country where the ability to easily change employment or one's residence has evaporated. Now we are pinned to our job and our postal code because leaving either results in lineups to fill our departure.
I suggest that both the opening of access to information via the internet and the collapse of bond yields sponsored and promoted by governments mirroring each other have left us with a country of over-consuming and under-producing populace.
My regularly updated Household Debt Chart includes the FDI-FDO plot which illustrates the point; we are a country of consumers highly prized by offshore producers, a situation that is now entrenched in our behaviour, modified by our regulations. Currently, for every $1.00 of Foreign Direct Investment into Canada, there is $1.27 of Canadian savings being invested offshore where the yield is greater.
The Paradise Papers underscores the problem; greater access to stealth information along with domiciled yield suppression has led to increasing capital flight by Canadians and Canadian corporations unwilling to invest in Canada. This and the vacuum created from interest rate suppression has turned a lot of us into serial house and condo flippers and the ease and return on investment has attracted a flood of offshore money wanting in on the fun.
Those of us who could not or did not participate in the mania have been left with the sorry reality that for the last 10 years, housing costs in the runaway markets have increased by 10-12% per year or more depending on location and product. Wages have not increased to the same degree but balance sheet debt to equity ratios have.
Millennials on Money: 'I am working two jobs right now’
The worsening of (housing) affordability in Q4 (2016) was the sixth quarterly deterioration in a row, the longest run in almost 20 years. National Bank of Canada FEB 8, 2017 Report
My long term chart study of housing starts vs population growth currently projects a 7% Y/Y decrease for full year 2017.
This suggests that indeed more starts could be consumed especially in this low interest rate environment.
Unfortunately the market place is skewed not to what is needed, eg: affordable family units close to appropriate services, but to what attracts non resident owners, flippers and FOMO driven investors who keep throwing greater amounts of leveraged capital at negative yielding and depreciating piles of steel, concrete and wood while governments at every level stand by in fear that they might lose this historic bonanza of property tax and transfer revenue.
My too-far-left radical idea of ending private fee simple land ownership is never going to happen in my lifetime as written. It is my expression of the frustration one feels at the polarity of choice:
Most people are at best only aware of two choices, two patterns, for land ownership – private ownership (which we associate with the industrial West) and state ownership (as in the Communist East).
The Idea of Owning Land by Robert Gilman 1984
"We don't have a national housing policy in this country and we should," "We're probably one of the few OECD [Organization for Economic Co-operation and Development] countries that don't have one."
TheTyee.ca June 2013
Budget 2017 includes new national housing strategy. Canadian Finance Minister Bill Morneau handed down a budget Wednesday, March 22 that includes a new $11.2 billion national housing strategy
Business Vancouver March 22, 2017
Meanwhile the market grinds on. I suggest that individuals should consider investment in themselves rather than negative yielding real estate because there is no guarantee that the debt positions currently being created will be transformed into equity. What is more enduring is the ability to leverage one's skill set into cash flow as the OECD studies show:
The evidence on how well countries are prepared for the digital economy is rather disturbing. The OECD’s Survey of Adult Skills (PIAAC) suggests that more than 50% of the adult population on average in 28 OECD countries can only carry out the simplest set of computer tasks, such as writing an email and browsing the web, or have no ICT (Information and communication technologies) skills at all. Only around a third of workers have more advanced cognitive skills that enable them to evaluate problems and find solutions (OECD, 2013). As a result, many workers use ICTs regularly without adequate ICT skills: on average, over 40% of those using software at work every day do not have the skills required to use digital technologies effectively (OECD, 2016a). Skills for a Digital World OECD December 2016
The Premier of BC Christy Clark is in the news again with her pre-election enticement of no interest loans for 60 months of up to $37,500 to wannabe buyers who need a bigger cash down payment to qualify for a mortgage to purchase real estate in BC's absurd housing market that has been on ice since the summer. BNN Dec 16, 2016
The chart mashup above was prompted by an observation from a reader (S.B.) that the technical structure of the Vancouver housing market is now within momentum levels for a trend change to the downside as soon as the next retest and failure of the recent highs completes; the setup being the "anti-trade". S.B. made earlier observations here "3 Vancouver Views" Sept 2016 and "Simple as ABCD" May 2016; thanks SB.
The evidence of serious downward repricing has this provincial government attempting to goose the demand side of the market with free ZIRP money provided by you and me dear tax payer. Not only will we tax payers supply the down payments to people who don't qualify under the already sub prime CHMC lending standards, but we are additionally collectively subsidizing the banking and mortgage industry that has little or no lending risk and we are continuing to feed the provincial government tax collector via the property transfer tax. "In total the property transfer tax brought in $1.53 billion for the government, $605 million more than budgeted" said BC Finance Minister Mike de Jong CBC NEWS July 2016.
Ontario and Toronto are also implelled to goose the fence sitters into buying into the market:
Ontario land transfer tax rebate doubled to $4K for first-time homebuyers. City News November 2016.
Ontario’s land transfer tax rises from 0.5 per cent on the first $55,000 of a purchase price to two per cent for everything above $400,000. Toronto’s land transfer tax is one per cent on the first $55,000 and two per cent on the rest. Toronto offers rebates of up to $3,725 for first-time homebuyers.
Sousa also announced a freeze in the property tax on apartment buildings while the government reviews how the tax burden affects rental market affordability. (Will landlords pass this along to tenants?)
Political ideology at all levels of government since the post war "invention" of CMHC has destroyed any possibility of a social contract that includes affordable housing as a basic right of tax payers. It appears to me that governments at all levels in Canada will continue to promote and urge Canadians to add even more household debt to their balance sheets that are already at historic levels nationally and globally. Although the Federal Government appears on the surface to be more rational than the provincial governments by warning Canadians who already have high levels of debt, they are not concerned with Canadian Banks who continue to be sheltered by tax revenue from the private sector. What they are concerned with is a RECESSION and THEIR OWN FEDERAL CASH FLOW. Is it irony or finger wagging and buck passing? The government is hooked on the commodification of real estate; it's a cash cow with a golden udder of debt that we are all attached to.
Here is the Federal Government at work:
CHMC Promotions Oct 2016 by the Globe and Mail
- 1992 Allow RRSP withdrawals for home purchase.
- 1999 Allow purchase with only 5% down payment.
- 2003 Remove house price ceiling on insured mortgages.
- 2003 "Green" mortgage insurance premium reduction and environmental incentives.
- 2005 Self Employed can self declare a 15% gross up of income and access all mortgage insurance products.
- 2005 Amortization increased to 30 years on insured mortgages.
- 2006 Amortization increased to 35 and 40 years on insured mortgages.
Warning from the Bank of Canada:
Risk of household financial stress and a sharp correction in house prices.
Some notes from the Satyajit Das videos below:
- Real growth was produced from the Industrial Revolution.
- But since the 1980's, growth has been fuelled by debt.
- An asset's income should pay for its debt.
- In the 1950's $1 to $2 of debt paid for $1 of GDP.
- By 2007-2008, $4 to $5 of debt paid for $1 of GDP.
- China in 2016 needs $6 to $8 of debt to pay for $1 of GDP.
- In the 20th century, population doubled and was an organic driver of growth. Now population does not drive growth.
- Innovation contributes to growth but productivity is falling.
- Now we have a service economy not a productive one.
- Innovation rates are falling dues to lack of R&D funding.
- We cannot repay debt without growth.
Property is an illusion by Satyajit Das
The End of growth as we know it by Satyajit Das - Key themes of his new book "A Banquet of Consequences"
While we wait for the Clinton Trump toss up at Hofstra U. tonight, let's look at some data that affects everyone on the continent, ie: manufacturing wages measured in USD since the gloom of 2009 in Canada, the U.S. and Mexico. I have been showing for some time now, that Canada's net Federal Direct Investment balance has been negative for nearly 20 years and last year it widened significantly.
The chart above shows that Canadian manufacturing wages have jumped 21% in the last 7 years while in the U.S. they have gone up only 12% and in Mexico they have DROPPED 7% to US$2.10 per hour. (no typo - that's US$2.10/hr)
Canadian households have become highly indebted (168% debt to income) via government insured credit and animal spirit peer pressure. The IMF has been sounding the alarm bell at least since 2011 "Households, however, already have done enough borrowing, at least when it comes to real estate. Any further buildup of debt only risks a painful collapse." That's what they said 5 years ago.
Canadians are just $200 away from being overwhelmed by debt, new survey finds Financial Post September 28, 2016
> Calgary-based MNP LLP, said 56 per cent of those polled — up from 48 per cent surveyed six months ago — are close to facing negative cash flow should they take on up to another $200 in monthly debt.
>The online survey of of 1,502 Canadians conducted between Sept. 6 and Sept. 12 also found 31 per cent are already not paying their bills on time, making them technically insolvent, MNP says.
> A survey this month from TransUnion found 718,000 Canadians can’t even absorb a 25-basis point increase in interest rates without being in a negative cash flow situation. One percentage point would drive 917,000 over the edge, the credit rating agency found.
> In another recent study, the Canadian Payroll Association said 48 per cent of Canadians couldn’t make ends meets if they missed just one paycheque – a dire picture of a country living paycheque-to-paycheque.
> MNP said there is some positive news about debt costs. More Canadians now say they are concerned about their debt: 52 per cent, up from 43 per cent six months ago.
The latest sales/inventory ratio suggests that the risk of sentiment change is occurring in Vancouver (not yet in Toronto); but our very high labour cost relative to our U.S. and Mexican trade channels is going to put pressure on the Bank of Canada and the Federal Government to let the CAD/USD continue dropping (Bloomberg May 2016) "Currency depreciations would help many of the U.S.'s G7 partners (Canada, France, Germany, Italy, Japan, UK, & EU) a lot while hurting the U.S. little, if at all. In other words, a G7 currency war would be fine as long as the U.S. remained a pacifist."
A lower CAD/USD will help Canadian exporters to some degree but not enough to compete directly with Mexico and other low labour cost and low-bar regulatory regimes (China, Vietnam, Indonesia etal). A lower CAD/USD will also put more inflationary pressure on import costs into Canada reducing disposable consumer income that will affect consumption of domestic services including the demand for credit while debt repayment schedules may have to have their amortization terms lengthened especially if earnings growth slows.
ITEM: BlackBerry Abandons Its Phone New York Times September 28, 2016 - In recent years, BlackBerry has cut thousands of jobs and closed several operating centers, including one in this city (Halifax), over the last three years. A company spokeswoman declined to discuss any future layoffs.
A lower CAD/USD will not be favourable to the foreign buyers of Canadian real estate who purchased in the last 7 years if their own currencies do not drop as much as the CAD. Will they continue to hold a wasting asset that produces a negative cash flow?
The hysterical mania of buying real estate in Canada will come to an end when we see listing inventories rise, perhaps in 1Q 2017 if a shift from greed to fear manifests.
"Vancouver in Canada has been identified by Swiss bank UBS as the global financial center with the riskiest housing bubble."
"Currently, house prices in Vancouver seem clearly out of step with economic fundamentals, and are in bubble risk territory."
"OSFI tells some banks to test for sharp drops in Vancouver, Toronto housing markets" July 26, 2016 CBC News
“B.C.’s 15% tax on foreign homebuyers could drive money to other parts of Canada” July 26, 2016 Financial Post
"Tory won't rule out a tax on foreign real estate buyers in Toronto" July 28, 2016 Toronto Sun
"Chinese-language media up in arms over B.C. foreign buyer tax" July 28, 2016 Globe & Mail
“Does this set a dangerous precedent in the minds of foreign investors across Canada?" July 29, 2016 Mortgage Broker News
It must be my age, but when I see politicians trying to solve problems via blunt taxation, I move even closer towards being a grumpy old man - death and taxes - they suck, literally. Here are a few ideas while we wait for the July housing numbers to come out next month.
In November 2011, I came across the idea of the APT, the ‘Automated Payment Transaction Tax’ which eliminates the need to file tax or information returns. A year later I posted links to the APT and since then I have continued to encourage media, politicians and potential influencers to at least look at the thesis.
To my dismay I have had insignificant response. I think this is because we have too much tax and are immersed in its complexity and we have not enough death of tired old ideas that should be retired with every generation.
The Automated Payment Transaction Tax
In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/payments system.
The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base.
The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure.
The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost.
Think about the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction tax.
Implementation of this elegant and simple idea in Canada would allow Canadians to create an original, authentic social organization that would eventually be copied by other nations. Let's apply the power of the internet to get this Automated Payments Transaction Tax idea into the public square of discussion and then into application.
Canadians, write your Member of Parliament." Foreign readers take this idea back to your jurisdiction and spark the conversation there. Some country will be first in the implementation of the APT thesis.
In my opinion the APT or a variant of it will happen one day as sure as Uber, Airbnb and Torrents have arrived and driverless freeways will eventually emerge. It’s a peer to peer thing; it’s the internet, it’s inevitable. “Software is eating the world.” Marc Andreessen.
A micro tax on all financial transactions reduces the burden on all individuals and allows our governors to manage our spending requirements in a transparent progressive way. The APT thesis calculations were based on U.S. taxation revenues and expenditures from the late 1990’s. The potential tax base has increased significantly since then; think of the machine initiated equity, fixed income and commodity exchange transactions that go on day and night. Here is a snippet from the 41 Page PDF authored by Edgar L. Feige, Professor of Economic Emeritus, University of Wisconsin-Madison:
The APT tax rate from the original study publication in 2000 achieved the goals of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction tax of only 0.15% on each side of the transaction for a total of 0.3% on any financial transaction.
The APT tax proposed is designed as a revenue neutral replacement for the present tax system. It is emphatically not intended as an additional source of revenue. It proposes to broaden the tax base by eliminating all implicit tax expenditures, all exemptions, deductions and credits while adding to the tax base the enormous volume of transactions representing exchanges of property rights to real and financial assets and liabilities. The flat rate tax required to maintain revenue neutrality is estimated to be in the neighborhood of 0.6 percent if total transactions volumes fall to half of their current levels.
PART II - The Need for Policy Reform
Clearly, a 15% provincial tax on Vancouver housing purchases by foreign buyers will simply move what little demand there is from this sector to other jurisdictions. Hot speculative money whether clean or dirty is transnational.
Look at Canada’s record of Federal Direct Investment; in full year 2015 there was a huge spike in FDI OUT such that for every $1 of FDI coming into Canada there is $1.31 going out to get a better return on Capital and Labour. In short, our Canadian investor class, like most other global players, looks for leverage and arbitrage opportunities outside of Canada. This is a trend that has been widening and unbroken since 1997 throughout the last five federal governments (4 Liberal, 1 Conservative).
Meanwhile after seven years of nitro-fueled Zero Interest Rate Policy, we have only increased our consumption habits and widened our debt load across both private and public sectors. While the private sector binges on low cost credit, our multi-level governance is shifting more to fiscal policy since monetary policy has not worked as promoted. Yes - CPI remains muted, No - we have no control over what consumers will do with easy credit especially since competing governmental departments encourage minimum equity positions when borrowing. After seven years, the Bank of Canada is still trying to figure it out:
With the next renewal (of the “Inflation Control Target”) approaching in 2016, the Bank is focusing its review and research in the following three areas:
1) The Level of the Inflation Target
2) Financial Stability Considerations in the Formulation of Monetary Policy
3) Measuring Core Inflation
We have a failed Canadian central bank policy of ZIRP and NIRP threats that ape the U.S. Fed policy as well mirroring many other central banks since the pit of gloom in March 2009. It’s been a race to the bottom, and here we are.
We have the outdated 20th Century wild west mortgage insurance liability of CMHC which was created in 1946 as an elaboration of previous housing incentives beginning in 1919 (Wikipedia).
We have an irresponsible overpriced exclusionary and predatory real estate industry that obfuscates, monopolizes and fails at basic fiduciary behaviour.
This combination of patchwork policy has failed to get capital investment into productive employment. Instead we have asset valuations that exceed the worst possible, measured globally, and we have settled for consumption and waste. Asset values may look good on a balance sheet in terms of credit worthiness, but the social contract does not serve our collective needs.
Nowhere is there public debate or care about tomorrow except in the tedium of blogs and anonymity. Governance has clearly failed and the media is busy chasing sirens and shootouts. It’s shameful. It’s time for reform and modernization using the tools we already have.
PART III - The Need for Land Entitlement Reform
“The social state is advantageous only when all have something and none too much.” A paraphrase of Jean-Jacques Rousseau from his Du Contrat Social ou Principes du Droit Politique of 1762.
The APT does not solve the problem of the current historic asset valuations in Canadian housing prices which are at crisis proportions and which cannot now be easily solved with ZIRP, NIRP or a revolving door of political ambitions.
Let’s consider the end to private fee simple land ownership and move all our land and territorial limits into the hands of all of us.
Here’s how I see it:
- All land and territorial space inside the jurisdiction of Canada (the Land) would be owned by the Canadian Government (the State) on behalf of Canadian taxpayers (the Tenants).
- The land would be leased to the tenants.
- The state would set the value of the land lease and term according to use.
- Only the improvements allowed on the land are owned by the tenant or transferable to another tenant in an open and free market place.
This simple idea would put an end to the endless inflation of the cost of land since the value of the land would be set by the central organizing body of the state which would assess the needs of the community of tenants and the responsibilities of all of us towards the wellbeing of our health and environment.
The improvements on the land would by definition be valued by their utility and composition of materials all of which are readily assigned value by an open marketplace and would be more prone to deflation than inflation because improvements have to be maintained to retain value.
Valuations would be rational, transparent and immediate. Affordability would be easily controlled. Tenancy agreements on the land would be available to both domestic and foreign users and when combined with the ‘Automated Payment Transaction Tax’ outlined in PART I above, all land lease revenue and all improvement transactions would trigger APT revenue to the state for reinvestment.
How economic inequality harms societies - Richard Wilkinson
"If you want to live the American dream, go to Denmark.”
We humans have accomplished a lot of ambitious and technically challenging projects and have expanded our knowledge base to a degree that suggests we should be able to transform our puny little financial problems in a politically impartial way free of ideology to the benefit of the greater good.
I don’t expect that this post will trigger any change during my remaining lifetime to the status quo of 20th century and older ideas that we remain wedded to, but I publish this because ideas precede action and I am not the only one thinking about this.
According to this December 2015 study by Azoulay, Fons-Rosen & Zivin “Does Science Advance One Funeral at a Time?”, Max Planck’s observation is indeed the way our knowledge base and idea implementation grows.
“A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."
Real Time with Bill Maher
Michael Moore – Where to Invade Next
The aging boom in real estate has been fabulous for sellers unloading risky and depreciating assets. A recent study of "good and bad booms" (abstract below) suggests that as productivity declines over an aging boom, the risk of insufficient collateral becomes evident. The U.S. productivity chart has momentum relative to Canada's.
Abstract: Good Booms, Bad Booms
by Gary Gorton and Guillermo Ordoñez, February 2016
NBER Working Paper No. 22008
Credit booms are not rare and usually precede financial crises. However, some end in a crisis (bad booms) while others do not (good booms). We document that credit booms start with an increase in productivity, which subsequently falls much faster during bad booms.
We develop a model in which crises happen when credit markets change to an information regime with careful examination of collateral.
As this examination is more valuable when collateral backs projects with low productivity, crises become more likely during booms that display large productivity declines. As productivity decays over a boom as an endogenous result of more economic activity, a crisis may be the result of an exhausted boom and not necessarily of a negative productivity shock. We test the main predictions of the model and identify the component of productivity behind crises.
Canada needs stronger business investment
Glen Hodgson, Conference Board of Canada
“2015 was another mediocre year for the Canadian economy, growing by only 1 per cent in 2015 after a technical recession in the first half of the year. The weakest aspect of Canada’s economy this year was the feeble performance of private investment, projected by the Conference Board of Canada to contract by nearly 8 per cent compared to 2014 levels. Much of this contraction is due to the sharp pullback in investment in the oil patch, now expected to decline by 40 per cent over the course of the year. That result for 2015 is depressing enough—but as the chart shows, Canada’s poor private investment performance in 2015 was not a one-time thing.
There’s more to this story than just low oil prices as Canadian firms continue to sit on mountains of cash embedded in their balance sheets. As a result, it is no surprise that we are in the midst of a multi-year period where growth in private investment is weak—the lagging edge of our economy—with little sign of a significant turnaround in 2016. A prolonged period of little or no real growth in private investment is bad news for productivity growth, since it suggests we are missing opportunities to invest in new technology, build our productive base and boost the competitiveness of the Canadian economy. What could prompt stronger investment growth? The growing U.S. recovery should boost demand for Canadian exports and eventually cause firms to invest in order to expand their productive capacity and seize the available export opportunities. But until there is evidence that Canadian firms are responding to a stronger order book, private investment will remain the lagging edge of our economy.”
Global GDP is slumping
Bob Hoye, Institutional Advisors
“The graph of global nominal GDP runs from 1981 to date and covers another “new era” of financial manias. Our era has been fabulous as reckless adventurers have dominated financial markets as well as central banks. As with previous examples, the action has been mainly in financial assets with real estate prices soaring in the financial centres. Although the experiment in ambitious policy has seemed without limit, there was a severe setback in 2009.
The alert to the “Great Recession” was classic. Credit spreads reversed to widening in June 2007 and commodities reversed to weakening in June 2008. The rest as the saying went, was history. At -5 per cent, the current slump in global GDP is almost as severe as the one in 2009. This was preceded by the reversal in credit spreads and weakening commodities that began in June 2014. Central bankers have been charged with preventing contractions. This diminishes perceptions of risk and accounts get leveraged. Throughout history margin clerks have always trumped central bankers. This time around, central banks are highly leveraged.”
Bob Dylan - Things Have Changed
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
Balance Of Trade
Rent Or Buy