Canada could be headed for mortgage meltdown, says Merrill Lynch Canad

[bush_cheney2004]

Well, yes the American dollar. (who's cares about Canada anyway?) I'm pretty sure a lot of people worldwide take note of the American economy - or perhaps it doesn't matter any more?

The American dollar was already devalued for several reasons, not the least of which was a purposeful weak dollar policy. As you know, Canadian export growth took a hit while the Americans enjoyed significant growth in exports, delaying or even preventing a recession to date. The US Fed will now begrudgingly accept more risk of inflation vs. collapse of the financial sector absent a government bailout.

[Smallc]

That's still about 50% of GDP or less than most countries in the G8.

According to 2006 numbers from the CIA World Fact Book, IMF, and World Bank, that is far more than 50% of GDP, which was about $13.8T in 2007.

Edited September 25, 2008 by Smallc

[msj]

Here is another take on this issue:

Why the housing market is not set to melt down

[msj]

According to 2006 numbers from the CIA World Fact Book, IMF, and World Bank, that is far more than 50% of GDP, which was about $13.8T in 2007.

Yes, gross debt is at that level but we are talking about debt held by the public which excludes intragovernmental debt and social security debt.

Of course, if we wanted to talk about unfunded social security, medicaid, and medicare then the gross debt is something like $60 trillion.

Maybe Bush and friends should sell the $700B bailout on those grounds - what's $700B when compared to unfunded commitments of $60 trillion?

[Smallc]

Yes, gross debt is at that level but we are talking about debt held by the public which excludes intragovernmental debt and social security debt.

I realize that, but the fact the reported Gross debt (which is what he was talking about I think) is approaching 100% of GDP is a very scary thing. It hasn't ever been much higher.

[bush_cheney2004]

I realize that, but the fact the reported Gross debt (which is what he was talking about I think) is approaching 100% of GDP is a very scary thing. It hasn't ever been much higher.

Sure it has...see WW2. I guess it's fine for the USA to be in hock up to it's eyeballs as long as it means killing Nazis for the Empire. The UK just finished paying back the WW2 debt last year.

BTW, Italy and Japan have far higher GDP debt loading.

Edited September 26, 2008 by bush_cheney2004

[Smallc]

Sure it has...see WW2. I guess it's fine for the USA to be in hock up to it's eyeballs as long as it means killing Nazis for the Empire. The UK just finished paying back the WW2 debt last year.

BTW, Italy and Japan have far higher GDP debt loading.

The highest it has been is 109%. We are now approaching 85%. Its getting quite high.

[bush_cheney2004]

The highest it has been is 109%. We are now approaching 85%. Its getting quite high.

Why are you concerned about the USA when Japan and Italy are over twice that? Why was "quite high" OK in 1945?

[Smallc]

Why are you concerned about the USA when Japan and Italy are over twice that? Why was "quite high" OK in 1945?

Well thats terrible if Japan and Italy are that high. Its horrible because it becomes almost impossible to pay the interest, let alone the principle.

[bush_cheney2004]

Well thats terrible if Japan and Italy are that high. Its horrible because it becomes almost impossible to pay the interest, let alone the principle.

OK..but why do some people only focus on the "reckless" USA when clearly there are other G8 members in trouble. Hell, Canada was up to at least 75% of GDP eleven years ago...with little to show for all the spending....yet seems to have survived.

The USA can easily afford the interest for now.

Edited September 26, 2008 by bush_cheney2004

[Smallc]

The USA can easily afford the interest for now.

Lets hope so.

[bush_cheney2004]

Lets hope so.

And if it couldn't...then what? The world would not end. France also has a higher debt ratio than the USA...is that bad?

Just ask the Russians.....

[Smallc]

And if it couldn't...then what? The world would not end. France also has a higher debt ratio than the USA...is that bad?

Just ask the Russians.....

Its bad that we've come to accept such things.

[August1991]

But it will have an impact - Americans have been living beyond their means for too long at the individual and government levels.

They can no longer rely on mortgage equity withdrawals to consume.

The government will eventually find that it can only rely on the generosity of foreigners for so long.

Eventually interest rates will rise and tax rates will go up too (probably with spending cuts).

The next thirty years are not going to be as good as the last thirty years - for most Americans, anyway.

I can understand how one person might falsely live beyond their means but I fail to see how an entire country of 300 million people could do this.

To start with, and for the most part, individual Americans are lending between each other. Some individual Americans may be living beyond their means but other Americans are necessarily living below their means. As a whole, Americans cannot live beyond their means.

What about foreigners lending to Americans? In general, foreigners are doing this because they see Americans as a better risk or because Americans offer a better potential return than the foreigners can achieve at home. If foreigners choose to lend to Americans, who am I to question their wisdom? You buy your ticket and you take your chances. I assume that foreigners are probably placing their savings in a good place.

Nevertheless, I think the foreigners are right. Americans generate real goods and services of benefit to humanity. If I owned a truck, I'd rather put it on the streets of Los Angeles rather the on the streets of Tokyo for the simple reason that in the US, the truck would generate more income.

Because of this ability to generate goods and services of value, the US is now a wealthier country than it was 10 or 15 years ago. Individual Americans may be in debt to other Americans, and some Americans may be in debt to foreigners, but the accumulated net real wealth of all Americans has increased. America is a richer country than it was last year and it's certainly richer than it was 10 years ago.

As long as Americans produce value and add collectively to their net wealth, then America has nothing to fear. The secret in this is to let individual Americans freely choose.

Edited September 26, 2008 by August1991

[msj]

I can understand how one person might falsely live beyond their means but I fail to see how an entire country of 300 million people could do this.

To start with, and for the most part, individual Americans are lending between each other. Some individual Americans may be living beyond their means but other Americans are necessarily living below their means. As a whole, Americans cannot live beyond their means.

I suggest you look up the term "trade deficit."

What about foreigners lending to Americans? In general, foreigners are doing this because they see Americans as a better risk or because Americans offer a better potential return than the foreigners can achieve at home. If foreigners choose to lend to Americans, who am I to question their wisdom? You buy your ticket and you take your chances. I assume that foreigners are probably placing their savings in a good place.

Sure, and it works fine until the world realizes that the US is just like any other banana republic (see recent bail out mess, see recent changes in rules regarding the shorting of financial stocks).

The US gets away with more than, say, Argentina (see their trade deficit mess earlier this decade) because they have the world's reserve currency.

The fact that they can get away with more because of this status is actually a disadvantage, long term, since it has allowed many in the US to believe that "this time is different" for too many bubbles and too long a period of time.

Nevertheless, I think the foreigners are right. Americans generate real goods and services of benefit to humanity. If I owned a truck, I'd rather put it on the streets of Los Angeles rather the on the streets of Tokyo for the simple reason that in the US, the truck would generate more income.

Because of this ability to generate goods and services of value, the US is now a wealthier country than it was 10 or 15 years ago. Individual Americans may be in debt to other Americans, and some Americans may be in debt to foreigners, but the accumulated net real wealth of all Americans has increased. America is a richer country than it was last year and it's certainly richer than it was 10 years ago.

As long as Americans produce value and add collectively to their net wealth, then America has nothing to fear. The secret in this is to let individual Americans freely choose.

Sure the US produces value. Most countries are wealthier now than they were 10, 20 or 50 years ago. BFD.

It doesn't mean that the US will continue to grow at the rates that they have in the past.

It also doesn't mean that they don't face many challenges such as unfunded commitments for social security, medicare and medicaid which will lead to higher taxes/lower benefits the longer people/politicians choose to ignore this (which will be put off longer now thanks to the current mess).

[August1991]

Sure the US produces value. Most countries are wealthier now than they were 10, 20 or 50 years ago. BFD.

It doesn't mean that the US will continue to grow at the rates that they have in the past.

It also doesn't mean that they don't face many challenges such as unfunded commitments for social security, medicare and medicaid which will lead to higher taxes/lower benefits the longer people/politicians choose to ignore this (which will be put off longer now thanks to the current mess).

msj, thank you for admitting that Americans create net value and that this net value has increased over past the few years.

If an American chooses to work overtime to pay off the loan for the pool and imported widescreen TV, who am I to judge his choices? Is he creating value? Around the world, many people would be envious of his choice. The American's freedom to choose may create debt but it also creates wealth.

[bush_cheney2004]

If an American chooses to work overtime to pay off the loan for the pool and imported widescreen TV, who am I to judge his choices? Is he creating value? Around the world, many people would be envious of his choice. The American's freedom to choose may create debt but it also creates wealth.

Correct.....Microsoft makes more in profit for their operating system on each PC than does it's manufacture in China. Margins are a guy's best friend.

Speaking of widescreens, I am going to purchase three units to watch concurrent football games....don't worry msj..I will pay cash.

[GostHacked]

I can understand how one person might falsely live beyond their means but I fail to see how an entire country of 300 million people could do this.

Because of this ability to generate goods and services of value, the US is now a wealthier country than it was 10 or 15 years ago. Individual Americans may be in debt to other Americans, and some Americans may be in debt to foreigners, but the accumulated net real wealth of all Americans has increased. America is a richer country than it was last year and it's certainly richer than it was 10 years ago.

Many manufacturing jobs have been shipped overseas. Most of your electronics come from Asia. Most of your clothing comes from Asia. IF you find something that says MADE IN THE USA, buy it, then you will be keeping that wealth in the US, however it will be fairly expensive compared to that same item comming from China.

That national debt tells me they are poorer than 10 years ago. If my personal debt doubles in the next year, I will surely not be more richer. But, define the wealth and richness, then we can debate this more.

[msj]

msj, thank you for admitting that Americans create net value and that this net value has increased over past the few years.

If an American chooses to work overtime to pay off the loan for the pool and imported widescreen TV, who am I to judge his choices? Is he creating value? Around the world, many people would be envious of his choice. The American's freedom to choose may create debt but it also creates wealth.

Well no kidding, Sherlock, of course wealth continues to go up over time.

No one has said otherwise.

The question has always been how much is sustainable and how much isn't.

Mortgage equity withdrawals are just one example - how much economic growth has been taken from the future and consumed now (or, rather, from 2002 - 2007)?

Too what extent has loose money led to this credit crisis? Etc

[Leafless]

I can understand how one person might falsely live beyond their means but I fail to see how an entire country of 300 million people could do this.

Canadians do not live falsely beyond their means?

But the impact goes beyond lost sleep and worry. Look at the credit crunch that's resulting in foreclosures south of the border. The situation is so precarious the new head of the U.S. Federal Reserve had to drop interest rates to help ease the strain.

Here at home, insolvency rates are high: 99,000 Canadians filed for personal bankruptcy last year.

People are spending more than they are bringing in. In fact, debt loads sit at 127% of income. Not surprisingly, savings rates are almost nil and we continue to charge, well, just about everything. Canadians put almost $215-billion on Visa or MasterCard in 2006. That's up from about $170-billion in 2004 and $39-billion in 1990.

http://www.creditcanada.com/inthenews/arti...t-Make-You-Sick

[Moonbox]

99,000 foreclosures is about 0.3% of Canada's population, which is low.

Credit card debt, however, is most assuredly out of hand in Canada. This is a combination of poor application standards for mail-out lenders and then mostly just plain stupidity on the part of consumers.

Personally, I don't have a lot of sympathy for consumers who end up bankrupt from $80,000 revolving credit balances and incomes in the mid 40,000 area. If you spend too much money, you end up broke.