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Most Splendid Housing Bubbles in Canada, November Update, after Bank of Canada Ended QE and Put Rate Hikes in Sight

December 21, 2021

Most Splendid Housing Bubbles in Canada, November Update, after Bank of Canada Ended QE and Put Rate Hikes in Sight

Home prices spike in a few cities, “pause” in some, drop in others. Vancouver prices are below August levels.

In an amazing development for the Canadian housing market where prices have relentlessly exploded higher – fueled by money printing and interest rate repression that started in March 2020 – prices in November didn’t explode higher in all cities, but only in a few, and “paused” in some, and declined in others. In the most hyped red-hottest housing market of them all, in Vancouver, prices were below the peak in August.

So maybe this is just a seasonal breather in those markets. But last year and for most of this year, there were no seasonal breathers in Vancouver or any of the other major markets, the whole thing just went exponential, fueled by the Bank of Canada that was printing money and repressing interest rates like there’s no tomorrow.

But this is tomorrow.

The Bank of Canada announced its first taper decision in October 2020, over a year ahead of the Fed. It let repos and short-term Canadian Treasury bills mature and run off the balance sheet without replacement. It ended other smaller purchase programs. In October 2021, it ended QE altogether, and is no longer adding to its holdings of Government of Canada bonds. And it has put rate hikes on the table.

Throughout this 14-month period since the taper announcement, the BoC has pointed at the excesses in the Canadian housing market that resulted from the BoC’s reckless asset purchases and interest rate repression.

And inflation in Canada has reached the worst levels since 1992, as measured by CPI in November (+4.7% year-over-year).

…click on the above link to read the rest of the article…

The Most Splendid Housing Bubbles in Canada “Pause” after Bank of Canada Ends QE, Starts Unwinding its Balance Sheet

November 20, 2021

The Most Splendid Housing Bubbles in Canada “Pause” after Bank of Canada Ends QE, Starts Unwinding its Balance Sheet

Home prices fell in Vancouver, Ottawa, and Montreal; were flat in Toronto, other cities for the first time since 2019.

So this is something that hasn’t happened in the Canadian housing market since 2019: The Teranet-National Bank House Price Index for October, released today, failed to rise from the prior month.

The index for Vancouver, a red-hot housing market, fell for the second month in a row, something the market hasn’t seen since September 2019. The indices for Ottawa and Montreal also fell. The index for Toronto was flat for the month, as were the indices for some of the other cities.

What has changed that caused this “pause,” as it is now being called, in one of the biggest housing bubbles in the world?

The Bank of Canada got hawkish.

For a year now, the BoC has repeatedly cited the craziness in the Canadian housing market – a historic spike in home prices – the result of the BoC’s crazy asset purchases and interest rate repression.

The BoC started tapering its purchases of securities a year ago by ending its MBS purchases and tapering its purchases of Government of Canada bonds. It then shed nearly all its repos and short-term Canada Treasury bills, ended other smaller programs, and tapered its GoC bond purchases multiple times. Then in October, a suddenly hawkish Bank of Canada ended QE entirely and surprised markets by moving the next rate hikes forward. Meanwhile, inflation in Canada hit an 18-year high.

Total assets on the BoC’s balance sheet, as of last week, fell to C$496 billion, down 14% from the peak in March.

…click on the above link to read the rest of the article…

Bank of Canada Tapers Weekly QE To C$2BN, Sees Lift Off In “Sometime In Second Half Of 2022”

July 14, 2021

Bank of Canada Tapers Weekly QE To C$2BN, Sees Lift Off In “Sometime In Second Half Of 2022”

As expected, the Bank of Canada took another step to normalize the emergency levels of stimulus, when it announced that it is tapering its bond purchases from C$3BN weekly to C$2BN, in what it hopes to telegraph is a sign of optimism about the speed of the recovery. Naturally, it kept the rate unchanged at 0.25%.

“The Bank is maintaining its extraordinary forward guidance on the path for the overnight rate. This is reinforced and supplemented by the Bank’s quantitative easing (QE) program, which is being adjusted to a target pace of $2 billion per week. This adjustment reflects continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook,” the bank said in a statement, which while echoing the Fed in claiming that while “the factors pushing up inflation are transitory” their “persistence and magnitude are uncertain and will be monitored closely.”

Looking ahead, the BOC is maintaining guidance that economic slack will be absorbed in the second half of 2022, suggesting a rate hike won’t occur until then. There remains significant surplus capacity in the economy. And while vaccine progress and easing lockdowns are encouraging, the spread of variants remains a risk.

“The Governing Council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s July projection, this happens sometime in the second half of 2022”

…click on the above link to read the rest of the article…

The Most Splendid Housing Bubbles in Canada: Even the Bank of Canada Gets Nervous and Tapers

May 20, 2021

The Most Splendid Housing Bubbles in Canada: Even the Bank of Canada Gets Nervous and Tapers

House prices in the largest markets have gone nuts amid “extrapolative expectations and speculative behavior,” as the Bank of Canada put it.

The first thing to know about the housing bubble in Canada is what the Bank of Canada has been doing, after its furious bout of QE: In October last year, it tapered purchases of Government of Canada bonds by one notch and also ended buying mortgage-backed securities. In March, it started unwinding its liquidity facilities, citing “moral hazard” as reason. In April, it tapered by another notch its purchases of Government of Canada bonds, citing “signs of extrapolative expectations and speculative behavior” in the housing market.

The assets on its balance sheet have now dropped from C$575 billion in March, to C$478 billion as of May 12:

House prices have truly gone nuts.

In the Greater Toronto Area (GTA), house prices spiked by 3.0% in April from March, and by 12.3% year-over-year, and have nearly tripled over the past 15 years, according to the Teranet-National Bank House Price Index today.

The index tracks prices of single-family houses through “sales pairs,” similar to the Case-Shiller Home Price Index in the US, comparing the price of a house that sold in the current month to the price of the same house when it sold previously, often years earlier. By tracking how many more Canadian dollars it takes to buy the same house over time, the index is a measure of house price inflation.

In Greater Vancouver, house prices jumped by 2.0% in April from March and are up 9.4% year-over-year. The Bank of Canada’s pandemic magic has completely turned around the housing bust that had started in mid-2018. The index has more than tripled in 15 years:

…click on the above link to read the rest of the article…

The Secret

May 17, 2021

The Secret

The secret is out. It can no longer be denied and it’s up to each and everyone of us to help bring the secret to the forefront of public awareness.

For the mainstream financial media won’t do it, indeed they allow the guardians of the secret to continue to deny its existence.

For years those of us who have been critical as to the negative consequences of easy money policies, QE in particular, were dismissed and mocked as “QE conspiracists” and even as “swashbuckling pirates of free market capitalism” by central bankers directly including yours truly:

It’s easier to mock and ignore with a Tweet and then go into hiding versus engaging in substantive debate.

But the lid just got blown off the false narratives that have been propagated by central bankers from Powell on down with his now infamous claim that “Fed policies absolutely don’t add to inequality“.

Of course QE adds to inequality. Even the Bank of Canada just sheepishly admitted it:

But the real hammer just dropped by one of the most successful investors ever, billionaire Stan Druckenmiller. Not only does QE add to inequality it is the main driver:

“I don’t think there has been a greater engine of inequality than the Federal Reserve Bank of the United States”.

Watch this clip for it lays bare not only the brutal reality of how the Fed has reshaped the country for the benefit of the rich, but also who will pay for the consequences:

The data Druckenmiller is referring to is as obvious as the light of day:

…click on the above link to read the rest of the article…

Bank of England Now 2nd Central Bank to Taper, After Canada, but Denies Tapering is “Tapering,” also Following Canada

May 7, 2021

Bank of England Now 2nd Central Bank to Taper, After Canada, but Denies Tapering is “Tapering,” also Following Canada

The Big Taper starts one central bank at a time. But you gotta keep the markets from swooning with a bit of welcome delusion.

The Bank of England’s Monetary Policy Committee (MPC) today announced that it voted unanimously to maintain its policy rate at 0.1%. But in terms of its asset purchases, it took the trail the Bank of Canada blazed last November and then widened in April: tapering.

The BoE announced that the blistering pace of its asset purchases would be “slowed somewhat” – tapering the bond purchases from £4.4 billion a week to £3.4 billion a week – but that this tapering was an “operational decision” that “should not be interpreted as a change in the stance of monetary policy.”

This “is not a tapering decision,” emphasized BoE governor Andrew Bailey during the press conference. The reason this tapering is not “a tapering decision,” he said, is because the BoE left its target for the final level of QE assets unchanged.

Unlike the Fed, the BoE doesn’t have an open-ended QE, but had set a target of bringing its holdings of UK government bonds to £875 billion and its holdings of corporate bonds to £20 billion, for a combined target of £895 billion. And at the meeting, the BoE didn’t change these “fixed amounts,” as Bailey put it.

Obviously, denying that tapering is tapering was designed to mollify the markets with a welcome dose of delusion, and it worked: the UK’s stock index FTSE 100 rose 0.5% for the day.

However, when the members voted on maintaining the target of £895 billion, it wasn’t unanimous, with eight members voting for maintaining it, and one member, outgoing chief economist Andy Haldane, voting to lower it by £50 billion, to £845 billion.

…click on the above link to read the rest of the article…

The Taper Next Door: Bank of Canada Cuts Bond Purchases by 25%. Total Assets Drop by 13%. Rate Hikes Moved Forward, Possibly July 2022

April 25, 2021

The Taper Next Door: Bank of Canada Cuts Bond Purchases by 25%. Total Assets Drop by 13%. Rate Hikes Moved Forward, Possibly July 2022

Housing craziness is front and center.

The Bank of Canada, which already holds over 40% of all outstanding Government of Canada (GoC) bonds – compared to the Fed, which holds less than 18% of all outstanding US Treasury securities – announced today that it would reduce by one-quarter the amount of GoC bonds it adds to its pile, from C$4 billion per week currently, to C$3 billion per week beginning April 26.

In its statement, it pointed at the craziness in the Canadian housing market – “we are seeing some signs of extrapolative expectations and speculative behavior,” it said.

Back in October, the BoC made the first reduction, tapering purchases of GoC bonds from C$5 billion per week to C$4 billion, and it had stopped adding mortgage-backed securities, of which it had never bought many to begin with.

In March, the BoC announced that it would unwind its liquidity facilities, thereby reducing its total assets by about 17%, from C$575 billion at the time, to C$475 billion by the end of April. And this has progressed as planned.

The BoC cited “moral hazard” associated with this central bank craziness as one of the reasons for the unwinding of its liquidity facilities, what are now mostly repurchase agreements (repos) and short-term Government of Canada Treasury bills. Its total assets dropped by 13% over the past month, to C$501 billion on its most recent balance sheet through the week April 14:

The total amount of the assets has declined because the BoC is unwinding its liquidity facilities. The largest remaining categories are the term repos and the short-term Treasury bills. As they mature, the BoC gets its money back, but doesn’t replace those securities, and the balance declines…

…click on the above link to read the rest of the article…

Bank of Canada Now Owns 40% of Government of Canada Bonds. Fed a Saint in Comparison. Taper on the Table

April 7, 2021

Bank of Canada Now Owns 40% of Government of Canada Bonds. Fed a Saint in Comparison. Taper on the Table

“Makes you wonder if there’s a potential mid-QE-life crisis taking shape in Ottawa”: strategists at the National Bank of Canada in a note that would be hilarious if it weren’t so serious.

The Economics and Strategy shop at the National Bank of Canada, the country’s sixth largest bank, sent a missive to clients today that would be hilarious if it weren’t pointing at such a serious and massive issue: It celebrated “40,” referencing a 40th birthday, but instead of a birthday, it referred to the Bank of Canada’s ballooning holdings of Government of Canada (GoC) bonds, which will hit a stunning 40% of all GoC bonds outstanding this Friday.

By comparison, the Fed holds 17.6% of all Treasury securities outstanding: It holds $4.94 trillion in Treasury securities, of $28.1 Trillion outstanding. We – that’s the universal “we,” meaning “a few of us” – complain about the Fed’s crazy buying of Treasury securities and all the distortion and craziness this causes. But compared to the Bank of Canada, the Fed looks like a saint.

The Bank of Canada announced a couple of weeks ago, citing “moral hazard” associated with its central bank nuttiness, that it would unwind its crisis liquidity facilities, and that this would reduce its total assets by about C$100 billion, or by about 17%, from C$575 billion at the time, to C$475 billion by the end of April. In October, it had started a mini-tapering of its purchases of GoC bonds and is jabbering about tapering its GoC bond purchases further. And its total assets have started to drop over the past two weeks:

…click on the above link to read the rest of the article…

wolf richter, wolfstreet, bank of canada, liquidity, qe, quantitative easing

Bank of Canada Announces Balance Sheet Reduction, Suddenly Worried about “Moral Hazard”

March 24, 2021

Bank of Canada Announces Balance Sheet Reduction, Suddenly Worried about “Moral Hazard”

“Once crisis tools have served their purpose, central banks should scale them back.”

The Bank of Canada will unwind its crisis liquidity facilities, will further reduce its purchases of Government of Canada bonds, which it already started tapering in October, will let short-term assets “roll off” the balance sheet when they mature, and will as a result reduce its total assets from C$575 billion now to $C475 billion by the end of April, announced Bank of Canada Deputy Governor Toni Gravelle in a speech today.

Most of the speech was focused on the reasons for the QE and liquidity programs that the Bank of Canada unleashed starting in mid-March last year, in a two-fold role: In its role as “lender of last resort,” to deal with the “extreme stress” in the markets, as liquidity dried up and markets weren’t functioning or had “seized completely” as everyone was trying to sell everything in a mad “dash for cash.” And in its role as provider of stimulus as the economy that was spiraling down.

But these actions ballooned the balance sheet fourfold, to C$575 billion, and it created the possibility of “moral hazard.”

“Moral hazard emerges whenever market participants or other economic actors feel that they can engage in risky behavior without bearing consequences if things go wrong,” Gravelle said, a year after moral hazard became forever the guiding principle of the markets.

But moral hazard can be limited “by ensuring that such actions have a predetermined expiry date or are unwound when they’re no longer needed,” he said.

“Once crisis tools have served their purpose, central banks should scale them back to show that they are emergency measures and don’t reflect business as usual,” he said.

…click on the above link to read the rest of the article…

wolf richter, central banks, bank of canada, wolfstreet, canada, housing bubble, mortgage bubble, interest rates, qe, quantitative easing

Canada’s Mortgage Lenders Have Set Aside a Record Amount for Bad Loans

January 16, 2021

Canada’s Mortgage Lenders Have Set Aside a Record Amount for Bad Loans

It’s odd to see it occur while almost every market reports record home sales.

Canada’s real estate markets are booming, but lenders are preparing for mortgage losses. Bank of Canada (BoC) data shows the allowance for credit losses due to mortgages reached a record high in Q3 2020. The record was reached with the biggest surge in the annual rate of growth since the Great Recession.

Today’s data point is the allowance for credit losses, specifically for mortgages. You might have already guessed what this is – the amount banks set aside in the event of non-payment. When lenders expect a loan has become unrecoverable, they have to add more money to this pile. We’re going to be looking at the aggregate amount across all lenders.

The amount set aside for losses has climbed to a new record high, and is growing unusually fast. Allowances reached $3.9 billion in Q3 2020, up 22.01% from the previous quarter. This represents an increase of 54.11% when compared to the same quarter last year. It’s not just a record high for dollars, but also the highest rate of growth in over a decade.

Biggest Growth Loss Allowances Since Great Recession

Mortgage loss allowances at Canadian lenders grew at the fastest pace since the Great Recession. There’s been consistent growth since 2018, but the annual rate of growth has been tapering. That is, until the most recently reported quarters. Both Q2 and Q3 in 2020, showed a very large surge in growth. It was Q3’s annual growth that was the largest print since 2009 though.

…click on the above link to read the rest of the article…

Huge Debt Payments Come At Worst Time Possible For Canadian Drillers

July 8, 2020

Huge Debt Payments Come At Worst Time Possible For Canadian Drillers

The collapse in oil prices has significantly deteriorated Canada’s oil companies’ finances and has made repaying their debt more challenging. Over the past decade, Canadian firms have borrowed money to survive the previous oil crisis of 2015-2016 and boost production post-crisis. But now the second price collapse in less than five years is leaving Canada’s oil patch, especially the smaller players, extremely vulnerable as debt maturities approach.

This year, the oil crash coincides with the highest-ever annual debt maturities in the Canadian energy sector, according to Refinitiv data cited by Reuters. In 2020, oil and gas firms have to repay US$3.7 billion (C$5 billion) in debt maturities, up by 40 percent compared to last year.

The debt pressure adds to the Canadian energy sector’s new predicament with low oil prices, low cash flows, and low overall demand for crude oil due to the coronavirus pandemic.

Some companies are set to default on debts, while others are looking at restructuring options and refinancing. Banks are not generally too keen to own energy assets. But the banks may be the ultimate judge of who can refinance, who can stay afloat, or who can go belly up in this crisis, legal and industry professionals told Reuters.

Some of Canada’s oil and gas firms had not overcome the previous crisis when this one hit.

According to Bank of Canada’s recent Financial System Review—2020, the COVID-19 crisis led to widespread financial distress in all sectors, but “Canada is also grappling with the plunge in global oil prices, which hit while many businesses in the energy sector were still recovering from the 2014–16 oil price shock.”

The energy sector has the most refinancing needs over the next six months, at US$4.43 billion (C$6 billion), and faces the most potential downgrades, according to Bank of Canada.

…click on the above link to read the rest of the article…

Central Banks & the Hidden Agenda to Control Society

July 3, 2020

Central Banks & the Hidden Agenda to Control Society

We will be releasing this report this week which includes, as part of the Great Reset, the push to eliminate currency to move toward a digital currency world where they can track everything we do and allow for drastic increases in taxation. They have been suddenly justifying this by claiming that viruses can live on surfaces. So after using money in coins or paper since 700 BC, we have suddenly determined that money is too dirty and we need only digital money to be safe in the future.

The Bank of Canada is the latest to move towards this Gates coalition to control the world population in every way possible. They state on their website:

The Bank of Canada is embarking on a program of major social significance to design a contingent system for a central bank digital currency (CBDC), which can be thought of as a banknote, but in digital form. This project will require us to break new ground. It will take into consideration a wide variety of factors, including policy considerations, diverse stakeholder needs, difficult technical challenges and the development of a technical architecture to realize a CBDC pilot system.

The future will never be the same. We are staring in the face of a totally new fascist type of authoritarian state. Anyone who disagrees is immediately called a “conspiracy nut” or a “right-wing zealot” because they will never debate the issues — they simply prefer to attack the messenger.

When Economic Depression Follows Pandemic, No Time to Waste

April 19, 2020

When Economic Depression Follows Pandemic, No Time to Waste

What the Bank of Canada and IMF see coming will demand bold stimulus.

On Vancouver’s Robson Street, the Club Monaco outlet is boarded up to prevent looting. Photo by Joshua Berson.

It is still sinking in that the end of the pandemic will not be the end of our troubles. On the contrary — we will likely see the end of the pandemic overlap with a full-scale economic depression, with COVID-19 waiting to make recurrent comebacks. Amid a global economic collapse, Canada will have to postpone hopes of recovery; for the foreseeable future, we will be in damage-control mode.

The IMF’s best-case scenario assumes that the pandemic “fades” in the second half of 2020, and “containment efforts can be gradually unwound,” permitting some economic rebuilding. Even so, “the global economy is projected to contract sharply by -3 per cent in 2020, much worse than during the 2008-09 financial crisis.”

Strikingly, the IMF implicitly endorses a program that is socialist in all but name:

“The immediate priority is to contain the fallout from the COVID-19 outbreak, especially by increasing health-care expenditures to strengthen the capacity and resources of the health-care sector while adopting measures that reduce contagion. Economic policies will also need to cushion the impact of the decline in activity on people, firms and the financial systems reduce persistent scarring effects from the unavoidable severe slowdown; and ensure that the economic recovery can begin quickly once the pandemic fades.”

The IMF approves such policies in many of the advanced countries as well as in China, Indonesia and South Africa. It argues that “Broad-based fiscal stimulus can preempt a steeper decline in confidence, lift aggregate demand, and avert an even deeper downturn. But it would most likely be more effective once the outbreak fades and people are able to move about freely.”

The best-case scenario?

…click on the above link to read the rest of the article…

Bank of Canada Announces Provincial, Corporate QE

April 15, 2020

Bank of Canada Announces Provincial, Corporate QE

While the Bank of Canada kept its overnight rate at 0.25% as expected – as the alternative after three consecutive rate cuts would have been to cut below its effective lower bound of 0.25% and go NIRP – the central bank – which announced that the outlook is too uncertain at this point to provide a complete forecast – did surprise markets by joining the unprecedented QE bandwagon, when it announced that just like the Fed it would launch $10BN corporate QE (just investment grade for now, thank you, junk bonds coming next), while throwing in $50BN provincial QE to boot. It also

Some details, from the report:

The Bank is also announcing today the development of a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.
These measures will work in combination to ease pressure on Canadian borrowers. As containment restrictions are eased and economic activity resumes, fiscal and monetary policy actions will help underpin confidence and stimulate spending by consumers and businesses to restore growth. The Bank’s Governing Council stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.

…click on the above link to read the rest of the article…

Loonie Dips After Bank Of Canada Emergency Rate-Cut, Launches QE

March 27, 2020

Loonie Dips After Bank Of Canada Emergency Rate-Cut, Launches QE

The Bank of Canada has just gone full-Fed-tard by slashing rates to just 0.2% and launching a commercial-paper-buying program and has committed to buy C$5bn Canadian Treasuries per week…

Negative rates next?

Full Bank of Canada Statement:

The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. This unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.

The spread of COVID-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices. The pandemic-driven contraction has prompted decisive fiscal policy action in Canada to support individuals and businesses and to minimize any permanent damage to the structure of the economy.

The Bank is playing an important complementary role in this effort. Its interest rate setting cushions the impact of the shocks by easing the cost of borrowing. Its efforts to maintain the functioning of the financial system are helping keep credit available to people and companies. The intent of our decision today is to support the financial system in its central role of providing credit in the economy, and to lay the foundation for the economy’s return to normalcy.

The Bank’s efforts have been primarily focused on ensuring the availability of credit by providing liquidity to help markets continue to function. To promote credit availability, the Bank has expanded its various term repo facilities. To preserve market function, the Bank is conducting Government of Canada bond buybacks and switches, purchases of Canada Mortgage Bonds and banker’s acceptances, and purchases of provincial money market instruments. All these additional measures have been detailed on the Bank’s website and will be extended or augmented as needed.

Today, the Bank is launching two new programs.

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