American Debt Explained

[msj]

Its a shame because credit can be very useful, unfortunately many people rich and poor abused it and put us in the mess we're in today.

It's not all about people borrowing money the never should have borrowed.

Lenders should never have lent the money, and wouldn't have if they didn't wrap up the risk and sell it.

Then they do all kinds of things to not take the loss.

It's time for banks to take the loss so we can move on.

Edited September 29, 2011 by msj

[blueblood]

It's not all about people borrowing money the never should have borrowed.

Lenders should never have lent the money, and wouldn't have if they didn't wrap up the risk and sell it.

Then they do all kinds of things to not take the loss.

It's time for banks to take the loss so we can move on.

I agree, they are part of the rich people I stated who abused cheap credit. Credit which should have been used to finance production instead of spending on commodities (houses for instance). At least the cdn. Govt has been telling people to get their ass in line when it comes to debt. As far as I'm concerned pretty much the whole country is at fault for their predicament

A little off topic question, if the houses in vancouver are priced ridiculous, shouldn't they have a softer landing if a bubble pops there due to big population, foreign money pouring into real estate, and not much room to expand (mountains, regulations with farmland, etc.)?

[msj]

A little off topic question, if the houses in vancouver are priced ridiculous, shouldn't they have a softer landing if a bubble pops there due to big population, foreign money pouring into real estate, and not much room to expand (mountains, regulations with farmland, etc.)?

Ha, the myth of real estate only goes up because of lack of land. Sure, supply and demand do play a role but give me a break on that excuse.

Something is only worth as much as someone is willing to pay for it.

If Asians are the cause of the high Vancouver prices (and I don't think they are) then they truly are stupid for buying into such a market.

As for population - yeah, tell that to many different US cities that have seen price declines.

Heard it all before - RE only goes up for this, that and the next reason.

The only reason it has continued to go up in Canada has been the easy money/lending that has continued despite the government coming to its senses twice now (remember, the CPC's are the one's who brought in 40 year amortizations with 0% down).

Edited September 29, 2011 by msj

[blueblood]

Ha, the myth of real estate only goes up because of lack of land. Sure, supply and demand do play a role but give me a break on that excuse.

Something is only worth as much as someone is willing to pay for it.

If Asians are the cause of the high Vancouver prices (and I don't think they are) then they truly are stupid for buying into such a market.

As for population - yeah, tell that to many different US cities that have seen price declines.

Heard it all before - RE only goes up for this, that and the next reason.

The only reason it has continued to go up in Canada has been the easy money/lending that has continued despite the government coming to its senses twice now (remember, the CPC's are the one's who brought in 40 year amortizations with 0% down).

I get that, I was wondering if vancouver would have a softer landing than say saskatoon because of saskatoons easier time of popping up houses due to more availible land resulting in a lot of worthless houses. If a bubble pops. I wonder where the biggest percent fall would be.

I think what will happen in vancouver will be the same as what happened in the prairies during the 1980's, and that wasn't pretty. That would also be good for our american friends to look at because its the same thing only on a much smaller scale. There was a happy ending, 25 yrs later.

[msj]

I get that, I was wondering if vancouver would have a softer landing than say saskatoon because of saskatoons easier time of popping up houses due to more availible land resulting in a lot of worthless houses. If a bubble pops. I wonder where the biggest percent fall would be.

I think it will have more to do with income, jobs, psychology etc...

Vancouver's bubble appears to be bigger than Saskatoon's (link)

Vancouver's economy is also more reliant on real estate.

So, if RE leads Canada (and Vancouver) into a recession it will likely hurt Vancouver more than Saskatoon.

However, other factors such as commodities and jobs could pop the bubble sooner/bigger in Saskatoon so who knows.

Hopefully we can find out soon so Canada can get the process of taking the loss and get this behind us.

[blueblood]

I think it will have more to do with income, jobs, psychology etc...

Vancouver's bubble appears to be bigger than Saskatoon's (link)

Vancouver's economy is also more reliant on real estate.

So, if RE leads Canada (and Vancouver) into a recession it will likely hurt Vancouver more than Saskatoon.

However, other factors such as commodities and jobs could pop the bubble sooner/bigger in Saskatoon so who knows.

Hopefully we can find out soon so Canada can get the process of taking the loss and get this behind us.

If you do some research into farmland values and what went on in the 70s and 80s you'll already know. In the 70s interest rates were reasonable and grain prices exploded causing an increased demand for farmland which raised prices and farmer's debt levels. Then macroeconomic factors took effect, interest rates rose and grain prices dropped, which resulted on defaults on loans for land/equipment purchases and subsequently land prices fell like a rock. To make matters worse, to comply with the canadian bank act, the banks needed more collateral so guys would put up rapidly depreciating land, which eventually bankrupted a lot of the guys who took on lots of debt. In SK the govt tried bailing them out with low interest loans, but prices were too low to pay them off, guys still went belly up, and eventually put the govt in financial hot water. Eventually policy turned from bail out to just let them liquidate. Fast forward to 2007 and its good time charlie in the ag sector. The US govt would be wise to learn this lesson, just let the liquidation happen because it will happen anyway. That episode took 25 yrs, how long will the us and eu take?