Friday, January 27, 2012

Flaherty guilty of more than just chutzpah

The notion that Harper has put the Canadian economy on a stronger footing is so laughable one hopes that the people supporting the idea or either Tory Toadies or just grossly uninformed. In other words, one hopes that they are not that stupid.

Whether it be Bloomberg, the Economist, the IMF, Paul Krugman and Mark Carney, many are worried that Canada's housing market is headed for a crash and potential for such a crash is by far the biggest threat Canada's economic health.

Of course the main reason the cost of housing gone through the roof since 2006 is the Conservative government decided pour fuel on an already red hot real estate market. The Conservatives extended the mortgage amortization period from 25 years to 30 years in February 2006, extended it to 35 years in July of 2006 and extended it yet again to 40 years in November 2006. During this period they also reduced the needed down payment on second properties from 20% to 5% and allowed for 0 down on one's primary residence. Ever since the down turn, Jim Flaherty has been scrabbling to undo the damage his past actions have done. Flaherty first reduced amortization period from 40 years to 35 and again mandated a 20% down payment on secondary properties and 5% on primary properties in October 2008 and on March 18th 2011 he reduced the maximum amortization period to 30 years. Never once acknowledging that it was he who raised the amortization period to begin with, Jim Flaherty has repeatedly said that reducing the amortization and increasing the minimum down payment was the right thing to do. "In 2008 and again in 2010, our government acted to protect and strengthen the Canadian housing market,". It too bad for all of us that Flaherty is guilty of more than chutzpah. For one thing, since 2006 Canadian mortgage and housing corporations liabilities have gone from 100 billion to 500 hundred billion. If the housing bubble bursts and Canadians start defaulting on their mortgages, the Canadian tax payer will be picking up the tab. The Canadian government guarantees all that debt.


Alison said...

The irony is that if Paul Martin hadn't left our fiscal house in such good order, the Cons wouldn't have got their majority. Their level of incompetence in money management is something to behold. Flaherty and Harper are monumental hypocrites.

WesternGrit said...

I've been talking about this for years. Great post. Not sure if you're followers of Garth Turner's blog, but he argues this very well... and he backs it up with a lot of facts...