Today's the day

Blogger stops supporting FTP transfer on the first of May. I've been using FTP transfer to publish my blog for nearly a decade. I also have my own URL and several side pages. So, long story short, this is going to be interesting.

Fortunately, no one reads me any more except me, so no one should notice if I break everything. Wish me luck!
Comment posted by Don at 9:58 AM

 
We will now begin our descent. Fasten your seatbelts.

I don't think I'm a genius for predicting interest rates were due to rise, but apparently many people were surprised by this sudden turn of events, and are responding to the change by.... er, assuming a mountain of debt while they're still allowed to. But don't worry - this couple won't spend more than they can afford. They're both personal fitness trainers! I gather that's a lucrative career.

So, today. A day later. The Conference Board of Canada says that twenty percent of Canadians can't afford their housing. But instead of laying the responsibility on the shoulders of housing inflation completely disconnected from the rest of the economy, "The report found that private-sector developers have tended to focus on building homes that are aimed at higher income Canadians." Just to be clear, one builder in Edmonton will sell you a 1200 square foot house in Leduc for $320K. Going by a standard affordability calculation, which says that historically a house should cost about three times the family's annual income, this would be aimed at higher income Edmontonians, the average family earning just over $90K/year. But I don't think anyone is mistaking 1200 sq. ft. as a mansion, nor Leduc as a lucrative location. In other words, I think the Conference Board of Canada is smoking crack.

The easy money has been flowing, and it's kept housing prices hyperinflated. But this isn't the tulip bubble - the Conference Board's report makes clear that overpriced homes have real consequences for real people. The piper will have to be paid. The day will arrive sooner than anyone seems to think.
Comment posted by Don at 5:36 PM

 
International news

So the United States finally has public health insurance.

What? Really?

Okay, so the United States finally has universal health coverage.

No! Really?

So, I'm led to believe that the United States finally has health coverage extended to many more people. Yes? Whew!

Anyway, David Frum explains the difference in the interests of the Republican Party and the Conservative Entertainment Industry, and how the health care bill illustrates that the former is paying the price for the selfish interests of the latter. Gosh, that's too bad, Republicans! Boo hoo hoo! Maybe if you'd call out Glenn Beck's bullshit or quit apologising to Rush Limbaugh, this wouldn't have happened! But you didn't! Boo hoo hoo!
Comment posted by Don at 6:41 PM

 
And now, Inflation

Just a week ago, analysts were expressing concern about the rising dollar and inproved job situation, and hoping for an interest rate increase much sooner than September, Mark Carney's hoped-for date of moving from zero. Those analysts are worried that, while we all want the economy to recover from recession (and for jobs to appear in greater numbers), if we overshoot, we can move into an inflationary spiral.

Well, this morning, StatsCan reported 2.1% inflation for February, much higher than expected. The Bank of Canada really only has one lever to pull, and so I expect interest rates must start upward sooner than Carney wanted. If the supply of essentially free money in the economy isn't choked off, too many dollars will continue to compete for too few goods and services, and inflation goes much higher than anyone wants.

The only good news in this situation is that after Carney's extensive promises of holding the rate through the summer, it won't take much of an interest rate hike to have an overcompensating psychological effect. This good news is its own bad news as well, though - the recovery is still fragile enough that even a shot across the bow could shatter it. What's a Governor of the Bank of Canada to do?

I think, in having to choose between a little medicine now or a lot later, the correct choice is obvious.

Either way, we're rapidly reaching the end of fire sale interest rates. This will have an obvious cooling effect on the housing market. And since I think the housing market is already hyper-inflated (Follow the full story here, here, here, here, and here), this is another reason why a little medicine now beats requiring a lot later.
Comment posted by Don at 7:34 AM

 
Generational theft

In the face of a growing deficit and lower oil and gas prices, the provincial government has elected to return to the sort of fire-sale royalty rates we charged for our oil and gas before Ed Stelmach was elected leader of his party on the promise of a review of those rates.

So, unlike other jurisdictions that have responded to major recessions with one-time infusions of cash into their economies, Alberta is responding to an oil-price-related slowdown of our overheated economy with a price cut on our resources that will forgo $363 million in revenue for each of the next two years, and unknown amounts beyond that, while hoping to deplete our finite resources more quickly. In fact, if they don't, this policy will be called a failure.

Because the only thing better than leaving our children with a debt burden is making sure they don't have the natural resources to sell in order to help pay for our greed. Hilarious!
Comment posted by Don at 6:46 AM

 
Another reason I preferred Stephane Dion

POGGe has been pointing out occasions when Israeli Apartheid Week, described as a "pro-Palestinian teach-in" on university campuses across the country and indeed around the world, has exposed several of our nation's leaders as anywhere between timid mouthers of platitudes to rabidly pro-Likud and pro-occupation and expansion.

Among the first set are people who are frightened by the use of the word "apartheid". Ontario legislators unanimously passed a resolution condemning IAW, claiming among other things that

The term "Israeli Apartheid Week" incites "hatred against Israel, a democratic state that respects the rule of law and human rights, and the use of the word 'apartheid' in this context diminishes the suffering of those who were victims of a true apartheid regime in South Africa," said [Ontario Tory MPP and resolution mover, Peter] Shurman.

Compare this to Desmond Tutu, who aparently is willing to diminish his own suffering, because he compares Israeli government policies to apartheid, arguing that they neither respect human rights nor the rule of law in their relationship with the Palestinian people, whatever the Ontario Legislature might say.

Which brings me to the title of my post. Micheal Ignatieff has condemned IAW, implying it is anti-Semetic, racist, and intolerant. Never mind that his earlier descriptions suggest he understands the situation on the ground just fine; this most recent statement regarding IAW shows he is willing to be cowed by a sufficiently strong lobby. At least our current government is honestly taking a side in the conflict, even if it is the side of the oppressing government.

Calling Israel's policy in the occupied territories "apartheid" is certainly tough language. But condemning that language serves to stifle the debate, to stifle criticism, not the other way around as Ignatieff claims.
Comment posted by Don at 8:07 AM

 
Dear Olympic attendees who got curling tickets as part of a package instead of events you really wanted to go to:

I'm sure you don't know any better, but this is unbelievably rude. So is this. Would you scream and yell at golfers about to take a swing, or as the first article suggests, ring a cowbell through a figure skating routine?

It's partially the venue's fault for not having someone holding up a "quiet, please" sign. Although if it turns out there's an electronic board that flashes "Make Some Noise", I'm going to have some strong words for VANOC.
Comment posted by Don at 8:00 AM

 
A true test to see if Danielle Smith is as savvy as everyone says - will she say "Thanks anyway"?

My one-time M.P., crazy-ass Myron Thompson, is now sitting on a Wild Rose Alliance constituency association board. So, lucky them.
Comment posted by Don at 12:33 PM

 
This has the potential to be interesting

In the face of the Wild Rose Alliance becoming a force in Alberta politics, and watching neither the provincial Liberals nor the NDP (who I continue to dutifully belong to and donate to, barring a better alternative) show any desire to renew themselves after taking an election pounding that was at least partially self-inflicted, I'm ready to hear other ideas.

So is the Alberta Party.

(Thanks to Dave Cournoyer for the heads-up about the twists and turns in the Renew Alberta saga.)
Comment posted by Don at 11:08 AM

 
Math

I'm becoming increasingly concerned about the changes Flaherty announced on Tuesday, so I've been crunching some numbers. I posted large swaths of this in the Edmonton Real Estate blog comments section this morning, but I thought it bore repeating here:

I'm more than a little concerned that the delay before the change will create a bubble all its own, quite aside from any debate about a current bubble. Surely there are some first-time buyers out there who are going to rush in while they can still get more money/debt based on the variable rate. And I'm also sure there are lenders who will happily give them those loans calculated at absurd variable rates while they still can.

At ING's posted variable rate of 1.95%, according to their own calculator:

On a family income of $50,000, they'll lend someone $375,000 with payments of $1233 a month. At their five year fixed rate (still a low 3.89%), payments go up to $1629. At a still historically below-average rate of 6%, this family will now be paying $2120/month, over half of their gross income, on this mortgage.

$100,000 gets me $780,000 with payments of $2567/month. 3.89% raises that to $3388. And 6% takes us to $4409 - once again, over half their gross income, so God help them if one of them goes on maternity leave or long-term disability.

The banks will do this because they have no skin in the game - they're securitising the debt the same way American banks did, and it's all guarenteed by you and I through the CMHC anyway.

So quite aside from any bubble I might currently see us in, we're going to have a hard landing when this pool of mad-rush driven buyers dries up, and another when the rates go up, as they inevitably must.
Comment posted by Don at 9:29 AM

 
Changes

Jim Flaherty has announced a few changes to CMHC rules in the hopes of deflating a bubble that he insists doesn't exist.

Some people may chalk up the timing of this announcement as the government wanting it to be ignored in the face of Olympic fever. I think it shows how quickly we've gone from zero to consensus that Canadians are living with a housing bubble, and that the government wants to curb that talk as quickly as possible, without curbing the market.

Unfortunately, the talk is due to an actual housing bubble, and the market has to curb to end it. Flaherty's changes will only force the people closest to the edge to take a step back, and not much of a step at that. I think we'll see more at the budget, if the talk doesn't slow between now and then.

Edited to add: The CBC article linked above keeps changing as details emerge and reaction is considered. One reaction at the end of the article almost knocked me out of my chair:

"This is a little bit late in telling Canadians we need to be more cautious in taking out a mortgage," Royal Bank chief economist Patricia Croft said in reaction to Flaherty's announcement.

Though she stopped short of calling Canadian real estate in bubble territory already, she said the April 19 date for implementation is actually likely to cause more short-term stimulation of the market, as people scramble to get in under the deadline.

"If you wanted to buy a house, wouldn't you now do it before April?" Croft asked. "It's even more evidence that house prices are going to cool down later this year."

When you hear a banker, for whom profits come from issuing mortgages and securitizing the debt, tell you the market is inflated, run for the hills. Run for your lives. That, or Patrica Croft deserves a medal for honesty in the face of her employer's short-term self-interest. Or, she's hoping to have some deflationary effect herself, better sooner than later in the eyes of even the financial industry.

The last actually seems most likely. It's entirely likely that banks have looked at the wreckage wreaked by the housing bubble and burst in the United States, and would just as soon avoid the worst of that, even at the expense of a few short-term dollars. Consider it a side benefit of having a financial system operated by a tiny oligarchy - they have the luxury of looking beyond the next quarter's profits.
Comment posted by Don at 7:23 AM

 
Before the market tanks...

... it's fun to celebrate a little something. Congratulations to Alexandre Bilodeau on Canadian gold!
Comment posted by Don at 10:47 PM