This time next year, the Bank of Canada will be forced to cut rates again to combat recession and deflation, says David Rosenberg. Read on.
— a double whammy since we export 33 per cent of our gross domestic product versus 12 per cent in the U.S. The Bank of Canada has hiked 400 basis points since March. In the past, such a massive rate shock triggered eight recessions, and just one soft landing.Start your day with a roundup of B.C.-focused news and opinion delivered straight to your inbox at 7 a.m., Monday to Friday.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc.
It’s not the interest as much as the level of the principal payments, but let’s just point out that the total debt service-to-income ratio was only 12.3 per cent in the third quarter of 1990 when John Crow had the policy rate pegged at 12.75 per cent. Yet that is what a 3.75-per-cent rate feels like today because of these super-stretched balance sheets.Article content
2. The home price-to-rent ratio at 146 per cent compares to the historical norm of 78 per cent — another two-SD event. By comparison, the peak in the United States during the mid-2000s bubble was 128 per cent. 5. What about household debt-to-income? Among the highest in the world at an incredible 169 per cent. The historical mean is 125 per cent. The peak in the U.S. that presaged the bubble-burst of 15 years ago was 134 per cent.Article content
Canada spent almost twice as much on housing in the past year than on business capital spending . That’s a near-record gap, and approximately three times the historical norm. Everything in the Canadian economic story boils down to population growth, but even here, the population would be declining absent the unprecedented immigration boom. The immigration influx is now running at twice the annual average of the past 30 years. With natural population growth in decline, the immigration boom has exerted an enormous offset, and it’s also exerting strains on the housing market.
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