There was a time when I actually listened to what was coming out of Ottawa. Now, I realize that it is all just theatre.
Take the response of the Conservative party MPs to the increased down payment being required for purchasing a home. While this does making housing less affordable, the claim that it was just a ‘fold in the carpet’ and that the feds’ fear of a banking collapse is ridiculous just isn’t so.
Either they have forgotten 2009, or they hope we have.
A few weeks after Stephen Harper stated that there would be no bank bailouts, the Bank of Canada printed almost a quarter of a trillion dollars to bail out the chartered banks by buying up their unwanted mortgages and funding them. Without that money, three banks were effectively bankrupt (they received more money than their market valuation), and the others were soon to follow, having lost their funding (no one loans money to an insolvent bank).
The prime rate was lowered from over 4.5 per cent to 0.25 per cent, and can’t be raised again, as that would tank the economy.
The accompanying drop in bond interest rates means our pension funds cannot meet their obligations, cash accounts pay no interest, and the available interest rates for owning mortgage paper do not cover the risk of default: This is a tax on everyone who either saves or invests to cover the gambling losses of speculators of all stripes.
Since we no longer have the ability to cut interest rates enough to save the economy, the only other solution to prevent a disaster is to try to cool off speculation in the housing market. Even what is being done may not be enough. We deserve better from Mel Arnold than cheap political theatre.
Richard Smiley
