Quote:
Originally Posted by casper
The Harper government ended up taking action to avoid a severe recession. This government is doing the same. The next liberal government would do the same. If it turns out to be conservative I would hope they do the same.
Tossing people out of their home is bad for politics. Best option is slow downward changes in the cost of housing over time.
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What you said here is exactly what is happening, and what is likely to continue happening. Government will kick the can as far down the road as they possibly can to avoid the deep recession and housing crash. Bare in mind that all this can kicking is what caused the bubble in the first place, and every solution is going to be more can kicking?
Ultimately what is going to happen is that the housing crisis is going to turn into a homelessness crisis - government will be forced to build lots of emergency shelters, lots of "wartime" apartments. This will of course be done with printed money, which will lead to higher inflation. Higher inflation will push up bond rates, which will push up mortgage rates. Rent prices will go up due to everyone being priced out. Mortgage holders will be bailed out in one form or another, which will prevent house prices from collapsing, despite the high rates.
In the end the way that housing will become affordable is through an
inflationary crash - ie. not much change in nominal terms, but a massive decline in real terms. This will prevent most mortgage holders from ending up underwater, but it will reduce everyone's purchasing power.
This is how every debt bubble ends - lots of printed money, lots of bailouts, high inflation.
As much as I wish Poilievre sticks to his word about balancing the budget, ending deficit spending, etc - history has shown that no leader in this position ever does this. Unless his goal is to just run for one term, do the necessary but unpopular things, and then pick a different career in 2029 - but I highly doubt this to be the case. He is still a human being like all of us and when push comes to shove will put his own interests first, which is going to be to get re-elected. And so the solution is going to be inflation, because that is what is going to be most palatable for most people of all the options on the table.
Ultimately we are going to reach a point where the BoC and federal governments are going to have conflicting interests - BoC's mandate for 2% inflation will mean higher rates and less money printing, however federal government will need a lot more money than they can tax or borrow to fund all the programs needed to get out of the housing crisis. I would say there is a relatively high probability that the Bank of Canada Act gets rewritten so the feds can print whatever money they need without any interference from the BoC.