Juggling Dynamite

As Toronto speculators gobble up supply, some industry ‘players’ are calling on government to remove part of the Ontario Greenbelt to free up more land. This is a nightmare on pretty much every level.  (Also see:  Millennials may never get out of their parents’ homes). Supply is not the problem. Once prices mean revert, the market will be awash in sellers looking to liquidate.

“Buying based on the expectation prices will rise further is the quintessential feature of a housing bubble…Investment mania is the root cause of the escalation in house-price gains, and this appears to be the case among homeowners and investors in Toronto. This activity often creates the illusion of shortages when bubbles are inflating, even when there is evidence to the contrary of a booming housing construction industry. Once these types of housing bubbles burst and prices slump in the years that follow, complaints of shortages are rarely heard again until the next bubble begins to emerge.”  See:  Toronto’s runaway housing market heading for paralysis

As self-absorbed, myopic bankers have destroyed the global financial system, they have co-opted the public purse and urged the rest of us to buy more risk in the hopes of breaking even. What these risk sellers don’t acknowledge however, is that unlike them, we the people, will not be rescued from the fruits of reckless financial choices. When we wager our savings or take on too much debt, we individuals are left holding the loses. ‘Too little to save’, no one will bail us out.  This is why, in real life, we individuals have very low risk tolerance.  Yet the financial sector profits by prodding and bating us into harm’s way every day, in every way.  Resistance is essential, now more than ever.  We each must keep our wits and personal discipline about us.

If Goldman or GM gets into financial trouble – even with their favored lending rates – the feds bail them out. If the man in the street is unable to pay his mortgage, he loses his house.

This unfairness is at the heart of today’s economic system. It’s also the source of the discontent felt – but maybe not fully understood – by the masses and the current administration.

See:  Unleashing Wall Street, Feb 22, 2017

This quote of the week is from the new book by former analyst at the Federal Reserve Bank of Dallas, Danielle DiMartino Booth, “Fed Up: An insider’s take on why the Federal Reserve is bad for America (2017).   It sums reality very well.  The time to devise a plan is before the next crisis swamps asset markets and reveals capital shortfalls once more.

“While easy money has kept Wall Street and the wealthy afloat and thriving, Main Street isn’t doing so well. Nearly half of men eighteen to thirty-four live with their parents, the highest level since the end of the Great Depression. Incomes are barely increasing for anyone not in the top ten percent of earners. And for those approaching or already in retirement, extremely low interest rates have caused their savings to stagnate. Millions have been left vulnerable and afraid.  Perhaps worst of all, when the next financial crisis arrives, the Fed will have no tools left for managing the panic that ensues. And then what?” 

–Danielle DiMartino Booth “Fed Up:  An insider’s take on why the Federal Reserve is bad for America (2017)