"The [Canadian] dollar slides briefly below 70 cents US"
January 2, 2016 9:11 AM   Subscribe

Garth Turner, current real estate curmudgeon and former politician, makes his predictions for 2016. Some are genuine predictions, others not so much. Dear old Garth does this every year, with mixed results. (2014, 2013, 2012)
posted by anothermug (14 comments total) 6 users marked this as a favorite
 
Garth's been predicting the the fall of housing prices in Canada forever. He's going to be right one of these years but it hasn't happened yet
posted by thecjm at 9:28 AM on January 2, 2016 [3 favorites]


I get all my predictions from Criswell. Also all my pastdictions where he was mislead. Also, I predict pastdictions will be come a word in the future.
posted by jeribus at 9:50 AM on January 2, 2016 [5 favorites]


ISIS shocks everybody.

How? By converting to Christianity?
posted by Splunge at 11:16 AM on January 2, 2016


How? By converting to Christianity?

I'm going to go with static electricity.
posted by srboisvert at 12:51 PM on January 2, 2016 [5 favorites]


With Garth and real estate it isn't so much the stopped clock comparison so much as a stopped calendar being right once every 7 years.
posted by GuyZero at 2:38 PM on January 2, 2016 [1 favorite]


With Garth and real estate it isn't so much the stopped clock comparison so much as a stopped calendar being right once every 7 years.

To be fair the previous government did everything in their power, much of it deeply irresponsible, to keep interest rates low and that bubble full of hot air. Harper knew quite well who his demographic was and how to cater to their nearsighted selfishness.
posted by mhoye at 2:47 PM on January 2, 2016 [4 favorites]


To be fair the previous government did everything in their power, much of it deeply irresponsible, to keep interest rates low and that bubble full of hot air. Harper knew quite well who his demographic was and how to cater to their nearsighted selfishness.

I'd say it was the opposite. The central bank sets rates, and they're extremely separate from the federal government. I think Harper and Flaherty were moderately pissed at how this affected housing prices - Flaherty went so far as to call Manulife about their low rate offer. Interest rates are a fairly blunt tool, and in this case the housing market is a side effect. The Harper government took some steps to reduce large mortgage leverage, including reducing the maximum amortization period from 30 years to 25.

Low rates benefit the young more than the old. A low rate has been seen to hurt the older conservative base, the 'savers' who both have their houses paid off and sit on low-risk investments like bonds and dividend-paying large cap stocks like banks.
posted by jimmythefish at 4:39 PM on January 2, 2016


I'd say it was the opposite. The central bank sets rates, and they're extremely separate from the federal government. I think Harper and Flaherty were moderately pissed at how this affected housing prices - Flaherty went so far as to call Manulife about their low rate offer. Interest rates are a fairly blunt tool, and in this case the housing market is a side effect. The Harper government took some steps to reduce large mortgage leverage, including reducing the maximum amortization period from 30 years to 25.

Low rates benefit the young more than the old. A low rate has been seen to hurt the older conservative base, the 'savers' who both have their houses paid off and sit on low-risk investment


I'd tend to agree. Although for several years this drove up the price of blue-chip, dividend-paying stocks (like Canadian bank stocks, along with stable REITS. The energy trusts are now, well...). But it also meant that even safer investments like government bonds and GICs were in the crapper for people who just wanted a low-risk investment that they could understand and might slightly outpace inflation with their retirement savings.

As much as I disliked the Conservatives, Flaherty did step in to chastise BMO as well as Great West Life, as jimmythefish mentions, for obscenely low interest rates on certain mortgage offerings. Heck, they even got rid of the FORTY YEAR amortization period on mortgages.

What Turner's concern is (and it's a valid one - the timeline on it coming to fruition is anyone's guess right now, stopped clock, yadda yadda) is that a hike in the BoC's key interest rate will cause problems for people who took on a variable-rate mortgage on a flimsy financial footing.

All of this being said, the Conservatives (sorry, the Harper Government TM), in the wake of the 2008 financial crisis, didn't say "Well, hey now. Borrowing is historically cheap - like, stupid cheap - and we have a whole heap of infrastructure to rebuild/create that's been a long time coming. Let's be visionaries and get shit built!"
posted by mandolin conspiracy at 6:47 PM on January 2, 2016


I've always enjoyed reading Garth's blog, but remember to take it with a grain of salt and a wink.
posted by blue_beetle at 7:10 PM on January 2, 2016


slides briefly below 70 cents US ...

It was happier there for ... what, three decades? A period when Canada was measureably (down here, by gut) at its best. Don't try to keep up with the neighbors, Canada, they're nuts. (There's a reason we're called 'Yanks'.) Get rid of that tar baby, and come back home. Remember that your friends on the border love ya.*

* Not as much as we would if you'd actually export your *good* beer, eh.
posted by Twang at 7:14 PM on January 2, 2016


It was happier there for ... what, three decades? A period when Canada was measureably (down here, by gut) at its best. Don't try to keep up with the neighbors, Canada, they're nuts. (There's a reason we're called 'Yanks'.) Get rid of that tar baby, and come back home. Remember that your friends on the border love ya.*

We were fortunate enough to take a trip to NYC in June 2011 when CAD was $1.04 vs. USD (at least when I converted some cash as our spending money)...but yeah. I grew up with a relatively weak Canadian dollar, and it had its benefits as well.

But it's been a wild ride before...

Return to a Floating Rate (1970 - Present) [pdf]:

The currency moved up to the US$1.03 level during the summer of 1976 in volatile trading, but the election of a Parti Québécois government in Quebec on 15 November 1976 prompted markets to make a major reassessment of the Canadian dollar’s prospects. Political uncertainty, combined with softening prices for non-energy commodities, concerns about Canada’s external competitiveness related to rising cost and wage pressures, and a substantial current account deficit, sparked a protracted sell-off of the dollar.

[...]

...the Bank Rate touched 14 per cent by the end of 1979. Against this backdrop, however, the Canadian dollar steadied and ended the year close to US$0.86


* I dunno. There's some pretty kickass US microbrews happening.
posted by mandolin conspiracy at 7:53 PM on January 2, 2016


For its part, the IMF urged Canada to establish a new par value. Fund management was
concerned about the vagueness of Canada’s commitment to return to a fixed exchange rate, fearing that the float would become permanent as it had during the 1950s. The IMF also feared that Canada’s action would increase uncertainty within the international financial system and would have broader negative repercussions for the Bretton Woods system, which was already under considerable pressure. Canadian authorities declined to set a new fix, emphasizing the importance of retaining adequate control of domestic demand for the continuing fight against inflation.


We were monetary badasses back in '70.
posted by mandolin conspiracy at 8:00 PM on January 2, 2016


Garth's been predicting the the fall of housing prices in Canada forever. He's going to be right one of these years but it hasn't happened yet

Not to defend Turner overmuch, but the fact that Canadian real estate prices (the truism that all real estate is local notwithstanding) haven't collapsed to anything like a reasonable long-term trending level is almost impossible to believe when you look at the numbers.

But yeah, much like Garth, I've been expecting it for at least 5 years now, and thus far, it still hasn't happened. I still think it will -- like the last times the market got overheated and collapsed, in the 80s and early 90s -- but I'm not holding my breath.
posted by stavrosthewonderchicken at 11:51 PM on January 2, 2016


> they even got rid of the FORTY YEAR amortization period on mortgages.

Harper's team introduced the 40 year amortization period. I'll give them credit for walking back a bad decision, I guess.
posted by anthill at 8:37 AM on January 3, 2016


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