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Well, this thread's definitely convinced me that the bubble's going to pop soon, but I'm not convinced it'll be that apocalyptic. If you look at the US in 2007, the hardest-hit areas were those that were already suffering economically: Detroit, Phoenix, and so on. The major metropolitan centres recovered relatively quickly. I'd expect that Vancouver and Toronto 5 years from now will still be vibrant cities. The market correction'll still be good news for those of you looking to buy a house, though.
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Feb 18, 2013 20:09
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Orange_Lazarus posted:Any chance Canada would offer Visas to people willing to buy foreclosures/property if/when the bubble pops? You would think "Hey Americans! Hate paying for healthcare? Well now you don't have to just buy a house in Canada!" would be an easy sell and a simple way to get prices back up after a pop. We already give very preferential treatment to people like that in the immigration process. As I understand it, being willing to invest 500k+ in Canada is just about a sure ticket to entry- sometimes rich immigrants will pledge to start up small businesses just to get them to the front of the line. Maybe you could loosen the standards even further, but that runs the risk of a big public backlash if the government is seen as selling vast tracts of Toronto off to the Saudis or Chinese.
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Feb 18, 2013 21:10
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Dr. Witherbone posted:So, this just came up on CBC. I imagine that housing prices, like wages, are "sticky downwards." That is, it's going to be very hard to convince someone to sell their house at a loss or for less than they think it's worth. Similar to how, even when rational economics might suggest you should accept a wage cut, people just don't like doing that. Once wages/housing prices have reached a certain level, they want to stay there out of inertia.
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Mar 19, 2013 15:40
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at the CREA insisting that if you ignore Vancouver then everything is peachy. Even I know that's ridiculous. Ignore part of the market and the overall market is better!!!!!! 
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ocrumsprug posted:The arguments for restrictions typically have the following features: The argument for restricting foreign ownership sounds simple enough to me. It would reduce housing prices and make housing more affordable. I think everyone can agree that's a good thing. Stop fixating on the race aspect for a second. Nobody's bringing up restrictions on immigration, are they? The proposal is to stop the influx of foreign capital, not people. Can you be racist against money? Why? That presumes that the "default" is a total lack of capital controls. Of course, there's a lot of neoliberals who'd like you to believe that, but there's no reason it should be so. Asian countries suffered a great deal during the 1997 crisis, in part because they had removed most barriers to capital flows. Big inflows of speculative money in the early 90s caused bubbles in equity and real estate markets (sound familiar?); when the bubbles popped, the capital fled even faster than it had arrived, causing an economic collapse. Now, Canada is not Thailand. I'm not saying we need to impose foreign ownership restrictions. But it's a tool that's available to us to help manage the housing bubble; we shouldn't throw it away so quickly.
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Apr 8, 2013 15:26
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Throatwarbler posted:If people who already own houses(70% of households) thought that reducing housing prices was a good thing, what's stopping them from selling their houses for those reduced prices? Are you new to this planet or something? People like money, and try to get as much of it as they can. We can't change this, so we work with it.
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Apr 8, 2013 15:40
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ocrumsprug posted:Will it? Can you quantify how much foreign investment exists, and a percentage affect it has had own home values in Vancouver or Canada? That's not a simple request at all, that's a matter for in-depth economic analysis that's beyond my skill and, I'm guessing, way beyond yours. I'm not going to bother Googling around to see if anyone else has done that research either; that's too much like schoolwork. If you wanna know the exact numbers so badly, find out yourself. But your own intuition should tell you that foreign investment in the housing market can only have a positive impact on housing prices. Foreigners can't sell homes they haven't bought, and they can't take money out of our housing market unless it's money they put in. The influx of money can only result in inflation. To make explicit that this has nothing to do with race, imagine that instead of Chinese people buying homes, someone was using a money printing machine to buy up new homes with newly-minted cash; should we shut them down?
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Apr 8, 2013 16:43
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Lexicon posted:This is the most hilariously unhelpful analogy I've seen in quite some time. We shut down counterfeiters for reasons entirely unrelated to their impact on an asset class' pricing level. I don't think you really "get" analogies.
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Apr 8, 2013 17:46
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Lexicon posted:Right back at you. Analogies are supposed to strengthen one's argument, not entirely devalue it (your post was pretty good up until that point). Fine-able Offense did a great job explaining what I meant by that analogy- the point was that foreign money flowing into the current Canadian housing market is driving up prices, not because it may happen to come from China, but simply because it's new money that wasn't in the system before. Foreign investment, if it isn't properly managed, is distortionary and harmful. ocrumsprug posted:You are the one claiming that it is simple, intuitive even, to see that this would fix something. I am just asking you to show your work. The data you need to prove your point doesn't exist, so you can probably save yourself some Googling. I did attempt to "show my work" in that post, but you chose not to quote that part for some reason. You're getting awfully hung up on the fact that the CMHC doesn't track foreign home-buyers. FO seems to think that 8-10% of sales were to foreign owners. Depending on the elasticity of housing demand, that may translate to more or less than an 8-10% price rise (probably more); it certainly will not cause prices to fall. ocrumsprug posted:I don't believe that I am negatively impacted, if my landlord is some guy that lives in Taiwan or some dude that lives in Burnaby. House prices can be bid up just as easily by some Toronto fatcat banker, Calgary oil baron or overly leveraged Vancouver real estate agent, as it can be by some nouveau rich Asian. Housing prices aren't decided by the buyer; they're decided by the bidders. All of them. And the more bidders there are for a given house, the higher the price goes. Would you like me to show my work? Because this can be proven mathematically. The rich foreign investors are no worse than the oil barons, but they are in fact competing with the oil barons (and the house flippers, and the families who need a place to live) to buy up a limited supply of property. We can't legally outlaw Albertans from buying houses in Vancouver, although China is taking measures similar to this to cool their own domestic housing market. We can, and plenty of countries do, control foreign investors entering the market.
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Apr 8, 2013 19:16
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dethslayer666 posted:I'm not an economist, so I could be wrong on this explanation, but yours is definitely wrong. Ugh, I was hoping nobody would notice this. You`re right, but so am I. No new Canadian currency enters circulation when a foreigner decides to invest- you`re right there, of course. So the inflation that occurs is clearly not a result of an increase in the general money supply. That doesn`t mean it doesn`t exist, though. Consider the Vancouver housing market in isolation, partitioned off from the rest of the economy. Here, if a foreigner chooses to invest in the Vancouver housing market, that actually does introduce Canadian currency to the (local real estate) market, which otherwise would not have been spent on property. So inflation occurs, localized to the property sector, and a bubble develops. quote:If foreign investment was inflationary, we'd see a general rise in prices, not just in housing. Of course foreign investment can be inflationary (Greece, Ireland, Spain, etc) but with free capital controls, independent monetary policy and a floating exchange rate (like Canada) it mostly creates an appreciation in the value of the Canadian dollar. Incidentally, this is what investment in the resource sector did over the last 10-15 years. It`s not so simple. Imagine you`re a rich foreign businessman with a lot of money burning a hole in your pocket. You want to invest it so as to get the highest risk-adjusted returns possible, and decide (for any number of reasons) that Canada is a good place to do so. How will you invest it? In government bonds? The returns are too low. In a private business? Not liquid enough. You want to be able to get your money out of Canada quickly if things go south. In the stock market? Sure, if that`s your thing, but the TSX isn`t big enough for everyone to buy into. There`s really not a lot of ways to invest a big sum of money, get good returns, and not be tied down. The housing market (in Canada particularly) is a very attractive candidate. Returns were very high. It`s pretty liquid, and not terribly risky: people will always need property, and it`ll always be valuable, unlike, say, stocks in companies, or exotic financial instruments. quote:What foreign investors buying housing in Canada does is decrease the supply of housing available for Canadians. Demand exceeds supply and prices rise to a new equilibrium. Hopefully you see by now that really, this is the same was what I was saying.
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Apr 8, 2013 21:28
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Throatwarbler posted:Come on, this isn't "in depth economic analysis" here. 1 post above mine you said I meant everyone in this thread. Do you not agree it's a good thing? Most people, I imagine, would be in favour of deflating housing bubbles if it was explained to them, but opposed to anything that lowers their personal house's price. Guy DeBorgore fucked around with this message at 04:08 on Apr 9, 2013 |
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Apr 9, 2013 04:06
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Kafka Esq. posted:Ahem, so - when the bubble crashes, what happens? Housing starts and occupancy are roughly the same short of an oversupply of condos in the downtown core, so builders will make houses still. (I am actually more familiar with BILD, having worked with their chair for a while, and I don't see any reason to doubt they'll still keep building out the GTHA in the event of a condo crash.) There will be a short term market shock from the condo bubble bursting, and it might drag down prices a bit. However, we're not really afraid of any kind of runaway bullshit like the Americans are we? The economy won't take as much of a hit, people will still make mortgage payments, CHMC will remain solvent, they're not overleveraged with crazy mortgage derivatives.. Difficult to say. Our banks aren't overleveraged but our household debt is pretty high, and it'll only go higher when asset prices start collapsing. Like Paper Mac said, this housing bubble by itself wouldn't be that threatening. We're still in a pretty drat good position to handle it (relative to e.g. Thailand in 1997). It's the international context that's extra worrisome. etalian posted:Either way is there even such a thing as a gradual bubble crash? Bubbles happen all the time, we only hear about the big dramatic ones. It is possible for them to deflate relatively harmlessly. In Canada's case I'm not optimistic, though.
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Jun 20, 2013 17:53
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ocrumsprug posted:Actually the thing I noticed was it knew exactly that 34.7% of the population makes at least $66,132. However what percentage makes at least $171,684... i dunno less than 32% or something. The infographic helpfully explains that this is due to limitations in StatsCan's data.
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Oct 22, 2013 06:55
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colonel_korn posted:haha no kidding, I was at UW myself about 10 years ago and for most of my time there I rented a house with four other guys, paying about $400/mo each. That was about average, I think the most anyone would seriously consider paying for rent at the time was maybe $500/mo, and in the summer a lot of people were looking for cheap sublets closer to $300. Granted that was 10 years ago but I doubt that the average is much higher these days, especially given that students are paying more tuition now too. $800/mo is ludicrous to expect students to pay, heck I'm employed as a postdoc right now and I would have to think about paying that much for a one-bedroom, let alone to split a place with someone else. You probably wouldn't pay $20k/year to go to UW either, but the school is still bursting with international students paying that much. That's who the new student condos are aimed at.
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Jan 20, 2014 16:04
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eXXon posted:Rents in Waterloo did not change much while I was there (03-08) nor have they changed much since after a quick glance at the rental boards: https://listings.och.uwaterloo.ca/Classifieds/Search/Results. I suspect the reason is because unless you have one of the shrinking number of RIM jobs (ha ha ha) in Waterloo or some other well-paying semi-permanent position, there is almost no reason to live there other than to study at UW/Laurier. $800/mo is nearly double the typical rate of a single-room sublet (example: co-op housing across the street from campus is $425-450 per room per month, http://www.wcri.coop/Housing/rates.aspx). I still live in Waterloo and this is a really skewed view of the rental market. Yeah single-room sublets are super cheap compared to apartments, that's because you're subletting a single room. Those are both big compromises that come with a bunch of downsides. So when it comes to apartments, you're not just competing with other students (as with sublets) but you're also competing with actual families who need a place to live. A 1-bedroom apartment (not a 1-room bachelor pad, an apartment) in Waterloo starts at $800/month and goes up quickly. That video said the dude was renting his condo for $1600/month, obviously that's a stretch (it is a blatant sales pitch after all) but not totally outlandish. Sure you were a poor student when you were living here but not everyone in the city is. RIM's downfall hasn't hurt the tech sector as much as you'd think, there's still Google and SAP and D2L and Kik (and that's just the tech companies I can name off the top of my head). But yeah I guess that if you're not working there, or at one of the other major employers in the region, or working at one of the universities, or unless you're studying, or unless you actually grew up here like some of us did, there's no reason to live in Waterloo.
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Jan 20, 2014 18:21
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eXXon posted:The marketing pitch specifically targeted renting 2 bedroom condos to UWaterloo students at $1600/month, not full-time professionals. Oh, I actually skipped the last 30 seconds of it so I missed this- yeah that's a really ridiculous pitch. Not that I'd expect much better from any other 1:30 internet video pushing a particular investment.
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Jan 20, 2014 20:04
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Kalenn Istarion posted:Issuance of notes to institutional investors, mostly. In which case those institutions would also be exposed to the auto loan market? Would the bonds be backed by all of Ford or just by Ford Credit?
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Oct 24, 2014 20:19
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It's a little bizarre to see posters who wouldn't trust Ben Bernanke if he said the sky was blue, applauding Hal_2005's walls of financial jargon. They must be reacting to the tone rather than the content. I have a pretty strong background in econ and a bit in finance and I can hardly discern much a point out of any of it. This post in particular seems like total gibberish to me: Hal_2005 posted:The 4th horseman is bail-ins. Where the system itself no longer has enough liquidity or pledgable assets to give for repo markets to function properly. The only reason the TALF and TARP programs worked was because the Federal Reserve was able to offer money for all forms of toxic debts and their overlying swaps/derivs/clo's that let people trade and give credit on their gross balance sheet strength vs. their net balance sheet strength. A "bail-in" for those who don't know is when a distressed bank or other financial institution is recapitalized by imposing losses on shareholders and bondholders. I.e. a bailout but using private money instead of taxpayer dollars. If that sounds fairer and less open to moral hazard than the taxpayer-funded bailouts of 2008, that's because it is. The legal and regulatory mechanisms to carry out bail-ins didn't exist in 2008, but since then there's been a great deal of work to prepare for them. That's what the first sentence and the last link mean. The bit in the middle has nothing to do with bail-ins. The second sentence appears to be describing a liquidity crunch, not a bail-in, which if anything is a tool for preventing liquidity crunches. I don't follow the markets so I don't know what he's referring to with "blowouts" "semi-hourly market breaks" or "STRIPs" except to say with 100% confidence that they're unnecessary jargon. Nor do I know anything about Canadian investment funds blowing up this weekend, or what that has to do with the Greek bond market, except that I have no idea how we got there from "bail-ins." On a side note, if anyone would be interested in a global financial governance thread, I just finished writing an essay for a class on the topic so I would totally try to contribute/could do the OP if there's enough interest.
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Dec 16, 2014 19:04
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ductonius posted:The bank certainly carries responsibility in the situation as a party to the contract, and furthermore carries greater responsibility as the party with the greater resources and capacity to understand the financial situation in the deal. How could the bank possibly understand the borrower's financial situation as well as they do? For a major loan the bank knows what your income is, your credit rating, your major assets and liabilities, and that's about it. For a $2000 credit card I'm sure they don't even know that much. They arrive at some actuarially-determined interest rate which will make the loan profitable given some % default rate. The bank can't guess which borrowers will default and which won't, they just know some of them will. The borrower has vastly more information about their financial situation. Especially for a piddling entry-level credit card. The borrower should have a much better idea what their overall assets-to-liabilities situation is. The bank might know what it is on paper, but the borrower knows whether their rich Aunt Mabel is going to kick it next month, or whethecr the kids are going to need braces soon. What you do with your credit card will depend on what you expect your future cash flows to be and you have a *far* better idea of that than the bank does. quote:This is why bankruptcy courts routinely tell unsecured creditors like CC companies to go pound sand. No, that's because unsecured is a financial term meaning "if the borrower goes bankrupt, the court could tell you to go pound sand." Hence the high interest rates. It's not a punishment, it's just the rules of the game. Lexicon posted:Just... don't. Investing with leverage is a risky enough proposition, and this is not the way to go about it. Guest2553 posted:What would you do with the money that could make it worth it, unless you're already deep in the hole and trying to save on interest? Using it as leverage to invest is bad with money I know you guys are talking about credit cards, and in general this is super good advice. But I'm a tremendous pedant about financial stuff so I gotta point out that a university education is an investment made with leverage, and one which still has excellent returns.
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Jan 1, 2015 18:31
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Xoidanor posted:The general gist of it is that banks shouldn't be awarded for handing out loans that they themselves don't expect to get paid. That's the business model of a loan shark. etalian posted:Yeah a good amount of the real estate crash is just the banks being greedy and throw underwriting common sense to the wind. I think you guys have some pretty big misconceptions about banks and bank policy. I know those are pretty boring, technical fields, but if you want to criticize the banking system and be taken seriously you gotta be precise with your criticisms. Like, banks can't tell whether any given loan will be paid back. On an individual level the borrower has a much better idea than they do. Banks expect that some proportion of loans will go into default. They've got all sorts of complicated financial models, but those mostly say "For a client has income of A and net assets of B, we can charge X% interest rates and expect the loan's future cash flows to be Y, with a Z% chance of default." If a bank actually knew which loans wouldn't be repaid, they wouldn't make those loans in the first place. So, how could you stop banks from making "predatory" loans without also screwing over the people who legitimately want, need, and can afford a loan? Keep in mind that predatory borrowing is a thing too. Since the bank only gets a snapshot of my personal finances, I can trick them into giving me a loan I actually can't afford, then declare bankruptcy and avoid having to repay it. This is a scam that's as old as finance itself and still goes on today. Point being, if banks can't even reliably filter out the scammers, then how could they possibly be expected to filter out people who are financially illiterate? Everyone has a good credit score until they ruin it... There was a ton of predatory lending that happened in the run-up to the real estate crash. But it wasn't caused by "banks being greedy." Banks were greedy in 1997 and they'll still be greedy in 2017. Like I said above, the NINJA loans and sub-prime mortage bubble can be explained by the incentives facing banks, and the policies and institutions that shape those incentives. So the takeaway is that, if you're actually interested in preventing a future financial crisis, then subjecting insurance companies to greater regulatory scrutiny is one good place to start. And this is actually being done in Canada and the US. You can't outlaw people from being greedy, you just manage it. PS: Banks carry less overall risk when the economy is weak, not more. When times are good you can justify giant leverage ratios to your creditors and regulators by pointing to your profit margins. When times are bad, not so much.
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Jan 1, 2015 20:12
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ductonius posted:It's the consumer that goes to the bank/CC company asking for credit. The bank is the party that has the greatest control over whether they actually get it and they have the capacity to *find out* any piece of information they want before they give the consumer any loan. You're the one who's trying to assign responsibility, not me. I'm looking at this like a public policy problem, because that's what it is. When a loan goes into default, it's like a traffic accident. Both parties suffer. One or both could be responsible. Insurance companies, police, and traffic courts all exist to assign blame, because that's important to determine who compensates who for that particular accident. The financial equivalent might be a bankruptcy court. But from a public policy perspective, it doesn't matter who's responsible, it matters what conditions lead to accidents. Maybe there's one particular street where pedestrians keep jaywalking and getting run over. Each individual pedestrian is clearly responsible for their own accident; they were negligent when they decided to run across the road without looking both ways. But from a policymaker's perspective, it still makes sense to put a crosswalk and signals in that spot. A certain amount of negligence is going to happen regardless. Basically my point of view is, don't hate the player, hate the game.
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Jan 1, 2015 20:26
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Hey CI, I'm just sharing my perspective, not saying you need to share it. Although if you're interested, I've got a friendly wager for you. How about, for the next five years, I'll keep doing the boring practical work of improving bank regulation, and you keep spamming this thread with impotent rage. Then we can check back with each other and see who's done more to rebalance the relationship between Canadian citizens and their financial system. Sound good?
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Jan 1, 2015 21:08
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Xoidanor posted:uuuuuuuuuhhhhhh Yeah, sorry, I totally contradicted myself there. The first bit you quoted was meant to be describing how banks work ordinarily. E.g. when they're pushing credit cards on consumers. During the sub-prime bubble there were particular conditions that made it so that banks stopped caring whether loans would be repaid. The issuing banks were selling off the mortgages almost immediately so they didn't care about doing their due diligence. The banks buying the mortgages didn't care either- they were being pooled into AAA-rated securities, AIG was underwriting the risk of default, and the banks themselves were too big to fail. So under those specific conditions, at the height of the bubble, banks were making loans they knew were bad. You might already totally understand this, in which case sorry for the confusion. quote:I'm in a complete agreement about it being a policy issue. These reoccurring financial bubbles are a feature of regulation having been made ever more lax for over 3 decades in a row. Having capital free and loosely regulated is dangerous, especially when it comes to banks since they're not risking their own capital in their dealings, just their liquidity. This is extremely problematic during over-valuation bubbles since stockholders don't actually stand to risk anything as banks are too big to fall in most modern countries and cannot go belly-up. They'll make hay on dividends leading up to the bubble, wait until the stock-value normalises after the crash and then make their exit. There is no incentive not to do this so of course it keeps happening. Yuuuuuuuuuup. When countries dismantled their capital controls en masse it gave banks a huge degree of leverage over policymakers, and really set the stage for undermining regulations like the Glass-Steagal act. There hasn't been much press about it but since 2008 there's actually been a huge international effort led by the FSB to end the need for taxpayer bailouts and it's made a lot of progress. The idea is to regulate too-big-to-fail banks such that, if they DO fail, they can be "bailed in" by imposing losses on their creditors and shareholders. Sounds obvious, right? That's what happens to ordinary firms when they go bankrupt. The problem is that bankruptcy processes take years to play out, but financial contagion from a failing bank (e.g. Lehman Brothers) can travel around the world in a few days. So you basically need processes in place to wind up institutions with $600 billion balance sheets in a single weekend. It's a big undertaking, but if it works then hopefully the next financial crisis will come and go without any need for big publicly-funded bailouts. What I find interesting is that this solution is basically being developed by the global financial elite- wealthy white guys wearing suits at the G20, the IMF, Finance departments and central banks. And it's all based on very orthodox economic theory about avoiding moral hazard. There's even provisions for firing all the senior managers of a failed firm and clawing back bonuses (although I suspect that's more to appease the public). I'm not saying we should be grateful to them, but it's a bit unexpected to see this coming from (roughly) the same global financial elite who oversaw the dismantling of capital controls... Guy DeBorgore fucked around with this message at 21:37 on Jan 1, 2015 |
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Jan 1, 2015 21:28
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LemonDrizzle posted:How exactly are shareholders supposed to be bailed in? They obviously lose out pdq because when the news about the bank's problems gets out, the share price will crash - what further penalties are they expected to face? Shareholders just get nothing. Them's the breaks. With unsecured creditors it's a bit more interesting. The value of their debt might just be written down ("Oh, you're owed 10 million? You get 5, be happy"). But a lot of the time what happens in resolution (the technical term for the bankruptcy-esque process we're talking about) is that a bank gets split up into a bridge institution (which keeps on carrying out all the critical functions needed to preserve the stability of the overall financial system) and a "bad bank" which has the remainder. In that case, the new "good bank" might be capitalized by converting some of the bondholders into shareholders of the new bank. So it would be, "Oh, you're owed 10 million? Well sorry, we're putting that into a bridge institution, but you can have some shares of the bridge institution instead."
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Jan 1, 2015 21:53
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etalian posted:The CMHC is sure the next year will still be good for the Alberta housing market: It looks like that article's talking about projections that were released November 18th, so they would've been developed way before the oil price crash. I'm sure they'll release an updated projection as soon as their next order of red ink gets in...
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Jan 2, 2015 02:50
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PC LOAD LETTER posted:The banks successfully lobbied for much if not all of those incentives, policies, and often times their choice of regulators to run those institutions. Yeah, I saw Inside Job too. You're right, but this is still only part of the story, and IMO the most boring part anyway. For starters: in pluralist democracies, everyone is always lobbying voraciously and greedily for their own interests, banks included. If the National Flower-Growers Association somehow acquired the same clout as bankers, we'd be knee-deep in government-subsidized tulips in no time flat. But banks have clearly been more effective at lobbying than most other groups in recent times. Are they somehow greedier than everyone else and therefore lobby harder? No, of course not, clearly there's systemic reasons for why politicians listen to bankers and not to flower-growers. E.g. the dismantling of capital controls, and the rise of electronic finance, make it very easy for capital to seek out the laxest jurisdictions, so that any country whose politicians didn't listen to the bankers suffered real economic harm because of that refusal. Another question, which is IMO way more interesting, is why did the deregulation and globalization of finance lead to an American housing bubble, instead of a European equity bubble or something else? Hint: It has to do with China's current account deficit and the international role of the dollar. It's not that bankers aren't greedy, it's just that some posters fixate entirely too much on their greed. And then they ask themselves, "how could we prevent such a crisis from happening again?" And the only answer they can come up with is, "By preventing bankers from being greedy," and then they realize that's impossible and become nihilists filled with impotent rage.
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Jan 2, 2015 18:23
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PC LOAD LETTER posted:I don't think negligence or incompetence had too much to do with it. Not at the VIP level anyways. Neo-liberal/LF policies weren't being seriously pushed by European countries onto their own citizens 3 decades ago, that is a relatively new development. You realize 3 decades ago is 1985? Six years after the election of one Maggie Thatcher?
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Jan 2, 2015 18:33
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Yeah, it's a real mystery why everyone doesn't just invest their savings into S&P 500 trackers. Well, unless they have debts to pay off, but obviously you do that before investing. And really, who has debt these days? Not like taking on debt is important or useful at all. Of course, many poor people have enormous credit card debt, payday loans, that sort of thing. But that's entirely due to spending on flatscreen TVs (source: anecdotes told in BFC) and certainly doesn't represent a perfectly rational way of smoothing consumption when you have a low income and few assets. Well, and of course everyone should also be maxing out their RRSP/TFSA/401k/TLA contributions prior to investing in the stock market. But seriously, who can't afford to do that? Nobody PT6A or Rick Rickshaw knows, that's for sure. Yep, I'd definitely say that if everyone invested properly, they'd all have more money. If only because you need to have more money in order to invest properly.
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Jan 5, 2015 18:08
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computer parts posted:Note that the original post had nothing to do with debt and literally said "stuff your money under your mattress". No it didn't, it said "don't expect anything of your investments." Which might well be sound advice for someone lured by tales of easy 8%/year returns: don't expect much, because 2% of that's going to inflation and another 3% to various middlemen. Anyway multiple people took that as an opportunity to weigh in that poor people wouldn't be so poor if only they had more investments.
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Jan 5, 2015 18:20
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OK, here's another way of putting it: y'know how a couple pages back I ruffled a bunch of feathers by saying that bankers aren't particularly greedy, they're just rationally responding to structural incentives that favour an overgrown/underregulated finance sector? Well that sword cuts both ways. It's not like poor people are mentally incapable of properly responding to economic incentives. There's a huge number of studies done on the poorest of the poor showing how they behave very rationally, even when that results in counterintuitive behaviour. For some people, hyperbolic discounting is perfectly rational. Heck, for some people, the lottery really does represent their best chance of getting rich. People are poor for structural reasons and behave differently as a result. To listen to the BFC crowd, you'd think it worked the other way around. There's no evidence for this whatsoever. The closer you look at "irrational" spending decisions, the less irrational they seem. The person who would be perfectly well-off if they weren't wasting a chunk of their paycheque simply disappears the harder you look for them. edit: I seriously will start a finance thread at some point and stop derailing this one. I do like following the housing news here, I just don't know enough to contribute! edit2: OK, last thing before I have to run to class. "Rational" in economics doesn't mean "dying with the most money possible," it means "being as happy as possible under the circumstances." A TV is probably the cheapest way to entertain yourself in today's society, and poor people do in fact have leisure time (often much more than rich people!). So spending half your paycheque on a flatscreen TV might be a very sound investment indeed. Guy DeBorgore fucked around with this message at 18:51 on Jan 5, 2015 |
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Jan 5, 2015 18:44
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blah_blah posted:You can basically make anything rational by cherry-picking the utility function. And the idea that most humans are 'rational actors' was pretty thoroughly destroyed by Kahneman and Tversky. True, but I don't think these are big problems for my argument. To the first point- I think people deserve the benefit of the doubt; if there's a plausible set of preferences which makes someone's actions rational, we should probably assume they're acting rationally. So cherry-picking is justified to an extent. To the second point, my understanding is that the irrational behaviours economists refer to is universal, "part of human nature" so to speak, and not a result of poor education or a lack of individual self-discipline or whatever. I don't think there's any evidence that the degree to which a person acts rationally is an important determinant of their wealth or income. But I know very little about behavioural econ so I might well be wrong here.
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Jan 5, 2015 22:50
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That graph is legitimately worrying but not as alarming as the OP makes it sound. They say it shows that Canada's "exceeded the worst of the US bubble in terms of debt loading," which isn't particularly meaningful since the 2008 crisis didn't have much to do with excessive household debt. Well, not at the macro level anyway- the problem was a certain segment of the market that had unaffordable debts, and a lot of TBTF financial institutions who were heavily exposed to that market. Looking at aggregate debt levels is misleading. Anyway, what's so unbelievable about someone with $100k income having $160k in debts? If I'm correctly interpreting that stat.
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Jan 9, 2015 04:05
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Two links that don't say anything like what you said, followed by a paragraph of gibberish, finished off with a ludicrously specific prediction ("Oil will trade at 44-47/bbl for a few years"). Hal_2005 everybody, he'll be here all night or until someone makes him take his meds.
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Jan 15, 2015 03:53
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That was a very clear and well-put explanation, I'll admit I haven't been giving you nearly enough credit. And vice-versa, I'm well aware the falling oil price will hurt Norway economically and force them to cut back on government spending, undergo a painful and slow deflation, draw down on their sovereign wealth fund, or some combination of all that. You said, specifically, that the fund was in danger of "going bust," i.e. wiped out, and it's nowhere near that point. Drawing $21b from $860b is only 2%, I think even a fund that size could return enough to beat 2% + inflation. I agree they'll likely have to dip into far more than that in the coming years but there's no chance of them running through the whole thing anytime soon.
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Jan 15, 2015 04:55
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Kafka Esq. posted:I have to say, CI, but you've created quite a thread. It's basically Canadian Economy. Slap a couple of macroeconomic explanations in an OP and a couple links to good posts in the Canadian finance/investments thread and you've got some high quality here. Good god I hope you're not serious.
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Jan 30, 2015 17:01
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Professor Shark posted:Living in a lovely apartment in a university town taught me that whatever piece of paper the landlord had you sign isn't worth poo poo, it's only slightly more legally binding than the contract used car dealerships have people sign saying that they're interested in buying a car today My lease says I can't have a visitor stay for more than 14 days per year without the landlord's "express written consent." Even better, they made me sign a separate piece of paper when I moved in saying they could kick me out if they suspected any illegal activity, "including smoking marijuana," even if they don't meet the legal standard of evidence. I'd love to see them enforce those provisions, but of course I pay my rent on time so they don't give a poo poo about how many visitors I have over and all the weed I smoke. I do worry a bit about all the people in the building with worse language skills than me who don't understand all the rights Canadian tenants have, they're the ones who could really get shafted.
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Jul 27, 2016 14:25
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namaste faggots posted:http://www.macleans.ca/economy/bank-of-canada-keeps-interest-rate-at-low-0-5/ its been 3.5 years since you started this thread and still no crash starting to doubt your credentials as an economic analyst, CI
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Dec 8, 2016 15:02
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