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Politics : Canadian Political Free-for-All -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (13557)	11/4/2009 6:43:56 AM
From: axial	Read Replies (1) \| Respond to of 37203

Hi Swan - Thanks for the informative post. Being politically and economically agnostic, I sometimes agree with Diane Francis, sometimes don't. "Left wing wacko" is good ;) So the pointer from your appraiser neighbour is appreciated. [Incidentally, if you get a chance, ask him about the effect, in the seventies, of eliminating mortgage-sponsored inspections on new homes. Can you say Leaky Condo? Mike Holmes?] This statement by Francis caught my eye: "The question is why should taxpayers be involved in this when it shoots them collectively in the foot? Why shouldn't banks have skin in the game? And homebuyers? If not, why shouldn't they share the upside with taxpayers? This amounts to a subsidy to our highly profitable commercial banks, real estate developers and speculators. The greater good would be served if housing prices fell to where a fair and unfettered market dictates, thus squeezing out real estate inflation and creating sound ownership opportunities.' --- Now doesn't it seem we're between a rock and a hard place here? If we follow US practice, first the lenders fail, the banks fail, a crisis is precipitated; government steps in, taxpayers bail out and subsidize everyone including banks, lenders and homeowners. If we follow Canadian practice, we simply eliminate supporting all the middlemen, except for the insurers. Government and taxpayers underwrite everything. Shouldn't we be questioning the assumption that everyone should have (can afford) a house? That's US policy, but is it wise? Is it prudent? Why don't we have a vibrant rental sector? It appears that we, like our American neighbours, are distorting our economics in favour of affordable housing. To a certain extent, that is acceptable. But when it begins to introduce meltdown and default risks that will penalize taxpayers for decades, something is wrong. So while I agree with Francis' major point about risk, I'm not so sure about her US-style solutions; we've already seen how they can fail. I think the answer lies elsewhere: in economic policy and systemic risk management. Jim

To: Cogito Ergo Sum who wrote (13557)	11/5/2009 7:09:12 AM
From: axial	Respond to of 37203

Swan, I think the following bears on the discussion... this is in the 'States, where the crisis is already quite advanced: Property Values Set to Fall 43% from Current Depressed Levels - snip - "While the federal government has deep pockets, at some point the persons who take out the mortgages will have to pay them. At that point the market should follow the pattern described above by the trend line. Reality bites. Prices for real estate are ultimately determined by our income, and if the trend represents a match of income and price, then the picture of the trend line is the picture of our future." seekingalpha.com Jim