Bank of Canada increases overnight rate target to 1 per cent • Hacker News Board

Re: Bank of Canada increases overnight rate target to 1 per cent

#201

Post by randomdata » Thu, Sep 07, 2017, 2:43 PM UTC

tostitos1979 wrote: post #67

akgerber wrote: post #10

Relatedly, the Toronto housing market that kept shooting up even as the US hit its 2008 housing crisis now have hit their top: https://www.bloomberg.com/news/articles/2017-09-06/toronto-h...

Toronto's property market is insane. I am still seeing condos (e.g. Gibson near North York center) being priced at 600K+ for 1+1 and larger units well over 1 million dollars. Not sure who can afford this. Places as far as Vaughan and Milton are expensive. We're talking decent detached houses (slightly above starter home) for over 1 million.

Milton is completely understandable given that it grew by 34% in just 5 years[1] and is the sixth fastest growing community in Canada according to Statscan. That is a considerable amount of pressure on existing housing stock. Vaughan gained nearly as many people in absolute numbers, although being larger city means smaller growth as a percentage.

[1] http://www12.statcan.gc.ca/census-recensement/2016/dp-pd/pro...

Re: Bank of Canada increases overnight rate target to 1 per cent

#202

Post by randomdata » Thu, Sep 07, 2017, 3:05 PM UTC

asdf33323 wrote: post #56

refurb wrote: post #46

This will be very interesting to watch. The Toronto real estate market has already started to correct. Prices are down 20-30% seconds nice earlier this summer. A ton of people eager to buy "before prices go even higher" are getting creamed. Interest rates going up will only make this worse. Hold on tight!!

Prices aren't down 20-30% - you're referring to average sales price. Big difference. It's been attributed to the sales mix (people opting for condos/townhomes)

It is also worth noting that there was exceptionally abnormal growth[1] early in the year. The average price for July only brought it back to trend. It will be interesting to see what August numbers bring.

[1] http://creastats.crea.ca/treb/images/treb_chart05_xhi-res.pn...

Re: Bank of Canada increases overnight rate target to 1 per cent

#203

Post by _5ysi » Thu, Sep 07, 2017, 3:23 PM UTC

e_d_e_v wrote: post #191

_5ysi wrote: post #189

Earlier quoted context omitted.

> By artificially keeping rates near 0%... I agree with your sentiment and artificially is a powerful word for conveying that. But strictly speaking the rate the central bank sets for lending new money is artificial, or fiat, no matter what we decide it should be (So long as it is > 0).

You could set the rate for lending new money algorithmically based on a set of other observed statistics of the credit markets. Then it would not be artificial or fiat. The algorithm might be artificial but the rate itself would not. This is not (to my understanding) how it usually works.

I would say the rate is still artificial. If windows were the only allowed OS and Linux and Apple users were regularly jailed, I think we would say the price for windows was artificial, no matter if it were set by a government approved algorithm or not.

My point is that the connotation we associate with the word artificial varies with our opinion of the legitimacy of the monopoly in question. People who are disinclined toward the federal reserve will read artificial differently from those who think it does a good job.

Re: Bank of Canada increases overnight rate target to 1 per cent

#204

Post by nickik » Thu, Sep 07, 2017, 4:53 PM UTC

FooHentai wrote: post #184

nickik wrote: post #85

Earlier quoted context omitted.

I'm sorry but you seem to have no idea about the what and why of montary policy. A central bank has to conduct montary policy for the economy as a hole. Attempts by central banks to 'clamp down' on bubbles have generally been catastrophic. Also the low interest rates are simply not just 'artefically low' because of central banks. The montary effect of the interest a central bank sets is determained by the difference…

>Additionally the idea that all these things are bubbles is quite suspect in a lot of places there is real demand for property. What do you define as 'real demand'? There are three main areas of demand for housing property: 1. People requiring shelter (i.e. people who will purchase a property to live in themselves) or 2. People purchasing property to extract rents (landlords) or 3. People purchasing property to later…

I dont know if something is a bubble or not. At some time in the future the value will be lower then now, is that in 1 year or 10 years, or never. Nobody knows that. That however had nothing to do with montary policy. If you want to crack down on the third class of buyers to protect the others from price volatility or other things that is something else that I dont have a opinion about.

Also, investment however flawed is simply not the same as a ponzi scheme.

Fundamentaly however you have to realise that low interest rates are not artefical. If the natural interst rate were as high as in 2006 with the rates we observe now we would see a massive collapse of the money supply and a recession worse then the great depression. Interest rate in the hole world have been going down since 1970. A recession itself depresses real rates, because investment is simple not as profitable.

The idea that the central bank can indepentenly fix housing bubbles and create stable demand is just flawed, its simply not possible. Its the wrong tool for the thing you want to fix.

The central bank could simple start buying and selling property instead of bonds, but that just replaces stability in one market with instability in another.

Re: Bank of Canada increases overnight rate target to 1 per cent

#205

Post by Froyoh » Thu, Sep 07, 2017, 5:01 PM UTC

On a side note, can you believe it's been 10 years since 2008 economic crisis?!

Re: Bank of Canada increases overnight rate target to 1 per cent

#206

Post by nickik » Thu, Sep 07, 2017, 5:09 PM UTC

caoilte wrote: post #97

nickik wrote: post #85

Earlier quoted context omitted.

I'm sorry but you seem to have no idea about the what and why of montary policy. A central bank has to conduct montary policy for the economy as a hole. Attempts by central banks to 'clamp down' on bubbles have generally been catastrophic. Also the low interest rates are simply not just 'artefically low' because of central banks. The montary effect of the interest a central bank sets is determained by the difference…

> A central bank has to conduct montary policy for the economy as a hole. Attempts by central banks to 'clamp down' on bubbles have generally been catastrophic. Which is why Central Banks don't make sense as independent arms of Government. Bubbles are very very dangerous (as we all discovered in 2007/8) but they cannot be fought with interest rates alone. It takes a combination of government regulation, legal reform…

Bubbles are not by themselfs a problem. The property bubble in the US started collapsing in 2006 and by itself had no impact on employment or GDP.

Just as after the great depression when everybody believed overspeculation on the stock market had been the problem. Economist have studied this for 70 years and the practically universal conclusion was that montary policy errors was the real problem.

In Australia montary policy did not fail and they did not experiance a recession, the have not had one since the early 1990s. Whatever housing prices might do.

Simularly the stock market crash of 1987 (just as big as the one in 1929) did not even cause a blip in GDP.

Montary policy might have caused a little boom between 1926-1929 but if you really believe that the reslution of that boom required the US economy to contract by 30% then you are totally misguided. The problem was a contractionary montary policy.

The same goes for 2008, montary policy was the problem. Its the same story, everybody blames bubbles and speculators but economist have increasingly rejected this view.

Your story of 1926-1929 is basically the Rothbardian story, even his the majority of his studends and others influenced by him have since rejected this story. Its an intellectually dead idea that refuses to die because it perfect for the political left to demand control over all markets. Exactly what you advocate.

An independend central bank focus on macro economic stability should only have one job, stability of nominal demand.

Outside of that we can have political debates about how much banks and markets must be controlled.

Re: Bank of Canada increases overnight rate target to 1 per cent

#207

Post by megaman2 » Thu, Sep 07, 2017, 7:02 PM UTC

acchow wrote: post #180

megaman2 wrote: post #150

Earlier quoted context omitted.

Unless I'm reading the reports wrong, according to the Toronto Real Estate Board (TREB) the average price of a detached housed in the "416" (Toronto) area in July 2017 was $1,304,288. In August it was $1,191,052. So that means a -8.7% change from July to August alone. Numbers for recent months - Detached houses in "416" area code: August: $1,191,052 July: $1,304,288 June: $1,386,524 May: $1,503,868 April: $1,578,542…

You are talking average selling prices going down. We are asking about examples of actual prices of homes going down. They are not the same thing. The price of homes can actual stay flat or even go up while the average sold price goes down.

Yeah, I get that - I was responding to a comment above about the "sales mix" between detached, townhouses, and condos. The data I referenced directly contradicts the assertions made above that the price declines were due to shifts in the "sales mix" between those three types of homes. Sure, you could argue that the prices declines were shifts within the detached housing market, but I haven't seen anyone provide data on that.

Re: Bank of Canada increases overnight rate target to 1 per cent

#208

Post by FooHentai » Fri, Sep 08, 2017, 1:05 AM UTC

nickik wrote: post #204

FooHentai wrote: post #184

Earlier quoted context omitted.

>Additionally the idea that all these things are bubbles is quite suspect in a lot of places there is real demand for property. What do you define as 'real demand'? There are three main areas of demand for housing property: 1. People requiring shelter (i.e. people who will purchase a property to live in themselves) or 2. People purchasing property to extract rents (landlords) or 3. People purchasing property to later…

I dont know if something is a bubble or not. At some time in the future the value will be lower then now, is that in 1 year or 10 years, or never. Nobody knows that. That however had nothing to do with montary policy. If you want to crack down on the third class of buyers to protect the others from price volatility or other things that is something else that I dont have a opinion about. Also, investment however flawe…

>I dont know if something is a bubble or not

I was responding specifically to your statement:

>Aditionally the idea that all these things are bubbles is quite suspect

I agree with your point that monetary policy may not the right place to solve a property bubble. I disagree only with the assertions that property bubbles might not currently exist and that bubbles can never be easily identified.

>Also, investment however flawed is simply not the same as a ponzi scheme.

It is if the return on your investment is solely dependent on the continued input of other people's investments.

>Fundamentaly however you have to realise that low interest rates are not artefical.

I am not arguing that they are. Are you confusing me with another poster?

>The idea that the central bank can indepentenly fix housing bubbles and create stable demand is just flawed, its simply not possible. Its the wrong tool for the thing you want to fix.

I agree.

Re: Bank of Canada increases overnight rate target to 1 per cent

#209

Post by anthony_barker » Fri, Sep 08, 2017, 6:48 AM UTC

wyatte wrote: post #153

mgbmtl wrote: post #146

Earlier quoted context omitted.

> "Canada isn't facing a housing bubble as much as they are facing a debt bubble." Are you sure? I've seen articles mentioning increasing debt in general, but that's mostly tied to mortgages, which isn't a big deal (unless rates rise quickly, which is unlikely). For example: http://www.cbc.ca/news/business/canada-credit-cards-transuni... "[credit card] delinquency rates in British Columbia and Ontario dropped by 2.1…

As I understand it, housing is out of control in Toronto and Vancouver which accounts for most of the averaged out increase in Canada's housing prices over the last 8 years. These out of control cities are experiencing the increases because of foreign purchasers pushing up the prices (they may only account for 5-10% of purchases, but that money has impacted all pricing through competition). And Canada is a great plac…

1) rates were kept low to keep the Canadian dollar exchange rate low 2) Chinese and foreign investors loaded up on real estate and locals also jumped on the band wagon 3) condos are 2x per sq ft as expensive to build as regular housing 4) building regs in Van and Toronto push everything to condos 5)low rates and mortgage insurance helped fuel the boom 6) tax policy also fueled it 7) as does immigration policy and bad transit systems 8) productivity gains in construction for the past 20 years are basically flat. Driving up relative cost of construction to other goods

Summary: govt created a housing bubble let's see what happens.

Re: Bank of Canada increases overnight rate target to 1 per cent

#210

Post by EternalData » Fri, Sep 08, 2017, 4:41 PM UTC

emodendroket wrote: post #93

EternalData wrote: post #89

Are inflationary measures in an age of technological deflation and rapidly shifting consumer baskets still really a valid view into inflation?

Have you stopped buying fuel or food?

I don't buy fuel (don't use a car) and aside from the rates set by the electricity provider (essentially a monopoly provider in California) and public transit provider (a city monopoly), fuel costs don't affect me and I actually choose to spend a higher amount with discretion since I moved to the Solar Choice program.

Food is such a small part of my discretionary spend (I buy grains in bulk, specifically quinoa, and greens from the farmer's mart).

Looking back at my spend, the majority of it is in technology that is undergoing massive deflation, or my pet hobby of collecting rare books (neither of which is accounted for in the basket).

I am probably an edge case, but the point remains -- the basket that is set seems outdated. I can't imagine that people are spending as much on food as you think. ex: "USDA data shows that in 2010 Americans spent 9.4 percent of their disposable income on food"