Tuesday, March 17, 2015

This is news?

I'm watching the CBC News presented by Wendy Mesley. She's got a scoop for me; Canadian bank BMO is trying to heat up the housing market.

If you live in Canada, you are no doubt well acquainted with the recurring waves of housing bubble hysteria that have been background noise on news programs for the last twenty-five years.

On one level, I empathise with these stories. The cost of housing has gone nuts in some of the big Canadian cities. I remember going with a friend ten or fifteen years ago to look at a place on Baby Point Road in Toronto.

$800,000.

Way over-priced, we concluded.

Today the place is worth three mil minimum.

Is this a housing bubble?

I don't know.

There is certainly an affordable housing shortage. How do you have an average house price of a million dollars and a minimum wage just over eleven bucks an hour and not notice that you have a problem?

What I found disingenuous about the story Mesley was reading was how slyly the story-writer was shifting the blame for a housing bubble onto the banks.

Banks do their mortgage business based on a prime rate they don't set. When banks are fiddling with interest rates it's not because they're conspiring to inflate bubbles; they're angling for market share.

The actual prime rate is something established in Ottawa.

Bubbles are all about politics.

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