Harper and Joe Oliver must’ve seen some pretty nasty stats since they pulled the trigger on surprise rate cuts. Economics 101, governments cut rates when they see the economy is in trouble, or needing a lift. Canada has been trying to do this for a decade, and the effects are wearing off. We call that diminishing marginal returns in the geek worlds of finance and stats. That’s geek talk for, “the more you do it, the less it works.” And it holds true every time, a fact Stephen Harper is seeing in livid colour these days.
His game plan is to try to hold the fort together long enough to attempt an election win in the fall, but my gut tells me he won’t make it that far without something big and ugly blowing up in his face. After all, it’s not like he has all kinds of levers left to pull, he’s plumb out of levers and down to trying to keep the real estate bubble rising for another 9 months, so he’ll try that.
In the land of oil, Calgary is in full blown panic mode, Fort Mac has imploded entirely, but don’t wait for the news to tell you that, it went dark the last 3 weeks. They’re only too happy to declare the end of the world when it isn’t, but the scare is in and the story sells well, but when it actually gets real, like it is now, the lights go out and the story is buried. You won’t hear much about Fort Mac for a long time, it’s now the failed state that needs to be kept under wraps, you know, the handicapped child born to royalty that ends up in some orphan home where nobody knows who the child belongs to. Sad really, we don’t help our weak, we hide them.
And in Vancouver, the party rolls on, at least in real estate, where the partygoers are mad drunk and getting drunker by the day on the elixir of Joe Oliver’s cheap money for the masses. Nobody cares what anything costs, they only care what it costs per month. A friend works in car sales, he tells me the dealers now try to get buyers to tie all their debts into one payment the dealer arranges through its finance company. Yeah, debt is the real industry in Canada, not cars, or anything else, because it pays extremely well.
In keeping with that thought, a quick contemplation of high paying jobs and industries will confirm that talking people into exorbitant amounts of debt usually makes you a lot of money, or at least a comfortable living. Consider car real estate agents, mortgage brokers, financing companies, and even car salesmen(successful, who sell lots of cars), and big ticket item sales. Yes, getting people to buy things they can’t afford does pay well, because it keeps the economy growing beyond its means, and that’s critical at this juncture because if we had to live within our means, the system would collapse overnight.
Which brings me to my topic, Canada isn’t having a great 2015 so far. It’s done its best to indebt the people to the hilt, and succeeded wildly, but now the party is ending, one city at a time. First it was the smaller towns, then mid size cities, and then larger cities like Montreal and Ottawa, and now we’re down to only two, the big two, Vancouver and Toronto. Of course, everyone assumes they’ll stand forever, but they won’t, they’re just the last to fall.