Perhaps the Bank of Canada should refrain from crediting the accounts of the chartered banks. Perhaps interest rates should be set by the free market.
Why do we rely on central planning and then act surprised when it doesn’t work?
Is it because, unlike the former Soviet Union, Canadians can’t comprehend a monetary system independent of the state?
The Russians imported “jeans and rock ’n’ roll” and that was that. Today, the world has nothing to compare its monetary landscape with. The supply chain has yet to be priced in cryptocurrencies or some kind of blockchain technology, so in the meantime, we’re all at the mercy of the Federal Reserve Bank of the United States.
Meanwhile, in the GTA, detached houses are increasing 32.5 percent compared to 2016. Townhouses are up 28 percent, and condos are up 19.2 per cent.
But there is a “supply crunch” according to the experts. People want to live in the GTA and so it’s simple supply and demand.
While true to some degree, double-digit real estate price increases have to do with inflation, that is, an increase in the money supply.
Through pyramided bank debt, Canadians have borrowed their way to higher prices. And with 70 percent of $2 trillion in consumer debt in mortgages, it’s little surprise that housing prices have exploded the way they have.
Policy-makers will, of course, get the problem backward. They will witness the economic slow-down, not as a consequence of unfettered bank credit based on no real savings at all, but as a problem fixed by more spending and borrowing.
But will the follow-up to the last financial crisis permit the Canadian government to adopt the American-solution of trying to re-inflate asset bubbles? Or will the next crisis be much worse?
Will the propaganda then justify higher interest rates as necessary to the economic recovery? Monetary and fiscal stimulus have always been tools on the table. Higher rates have always fuelled economic recovery. Oceania has always been at war with Eastasia.
It’s in the state’s interest to direct blame from itself and onto others. In Toronto’s case, as is in Vancouver, the foreign buyers are to blame.
While some estimate the impact of foreign buyers of Canadian real estate at 5%, others disregard these numbers as pure statistical manipulation or imagination.
However large their influence, it hasn’t stopped the Bank of Canada from doing whatever it wants. And without any transparency.