I read just about everything written by Michael Lewis, starting with Moneyball, through all the sports and financial tomes he published. He has interesting perspectives and is a good storyteller. The sports stuff is good entertainment and thought-provoking, the financial stuff is a little chilling, and his latest pronouncement on Canadian housing as outlined in an article in MacLean’s adds to an already disturbing picture of market manipulation on a grand scale leading to the destruction of liveability in much of Canada’s urban landscape. The recent revelations of casino money-laundering in B.C. only adds to the feeling that there are subterfuges being used to skirt both the letter and the spirit of laws and to pervert the market mechanisms that are supposed to provide a measure of affordability for those residents who need to work and live in our communities.
Studies seem to indicate that foreign ownership is not the major problem, but that doesn’t entirely eliminate the phenomenon of overseas capital as one of the exacerbating factors, especially when it appears that there are “underground banks” in play and that real estate developers constitute the largest group of those flushing large quantities of cash through the gaming system. Also in play is the accumulation of debt by those signing up for mortgages, some of which may not be within the realm of realistic repayment, particularly in case of a retrenchment of the market where the asset might become less valuable than the sum of the debt incurred to purchase.
The U.S. is being run by a clique of bandits who have assumed the reins of power and are busy ensuring that the satisfaction of their greed, as well as that of their puppet masters, is being satisfied to the detriment of society and the environment. We in B.C. have toiled under a government for the past decade and a half whose main mission seemed to be sequestering the benefit of the commons for the benefit on party donors, many of whom are in finance and real estate, either directly or indirectly. This has generated a socio-economic structure where there has been a pretty thorough decoupling of any relation between housing costs and salaries/wages, meaning that a lot of folks can’t afford to live anywhere within reasonable proximity to where the jobs are, and that, increasingly, jobs go begging because there is no one around to work them as they flee what are unrealistic markets for housing. The knock-on effects of twisted markets are being felt outside the urban centres as people sell out of the rich markets and take the resulting cash to lower-cost areas, but the real estate and finance people follow them, and prices rise sharply with the arrival of these newly-wealthy real estate refugees, pricing the locals out of their own market.
Real estate people love it, as both buying and selling causes the honey to stick to their hands, bankers love it, because the create money from nothing and take it back in as a representation of real wealth, and officialdom seems loathe to anything other than minor tinkering for fear of alienating powerful constituencies and not wanting to be tagged as having caused the pain that will inevitably result from a marketplace that is so out of kilter. However, that pain will come, and experience teaches us that those with the greatest political clout will be those who feel it least, while those who have pawns in the game will take it on the chin. After all, unless you live in Iceland, you haven’t seen any of the people responsible for the last crash held to account for it. The prospects for the next “correction” don’t seem all that rosy either.