Canada in flight: why the world’s richest economy was on the verge of collapse
October 12, 2016, 18:46
Canada is one of the most developed economies in the world, is experiencing a strong decline over the past five years. For the first time in the history of the state’s total debt exceeded the GDP of the country, the volume of which fell last year to $250 billion announced on 12 October by Bloomberg. The government has decided to unpopular a measure to tighten rules for mortgage loans. The consequence of reform will be a technical default of the two “financial engines” of the country — Vancouver and Toronto. Details — in the material RT.
- Reuters
The total debt of Canadians has exceeded the gross domestic product to $1 trillion 610 billion, reports Bloomberg. For a state with one of the most stable economies in the world it heralds the collapse of the financial and social sphere. Over the past five years, the GDP of Canada “lost” about $250 billion and by the end of 2015 amounted to $1 trillion 550 billion.
As explained RT in the Institute of USA and Canada, the country’s economy largely depends on oil prices. Fluctuations in commodity prices and speculation of reduced commodity exports by 17%.
According to a study by the canadian analytical centre of MNP Debt, from April to September 2016, 56% of Canadians are experiencing difficulties in the payment of loans, and 31% of residents are unable to repay the debt on time. For comparison, in 2015, the share of debtors does not exceed 20%.
“The townspeople are forced to take short-term loans to repay existing debts. The increase in interest rates, wage cuts, cuts in social programs — all this makes people spend less, which negatively affects consumer demand,” notes chief strategist MNP Debt Grant Bazian.
The lion’s share of debts of residents of Canada — about 70% — have a mortgage on the real estate market, according to a new National study, statistics Canada. Total credit market debt now stands at $1 trillion 970 billion was a Record and the amount of mortgage financing $1 trillion 290 billion.
A new “housing bubble”
The office of the Prime Minister of Canada Justin Trudeau has decided to tighten the rules of mortgage lending. The authorities fear a repetition of the “mortgage bubble” on the U.S. housing market that triggered the global economic crisis in 2008.
The first rule applies to the mortgage. The government wants to ensure that Canadians who take the credit for acquisition of housing, will be able to repay the debt, even if mortgage rates rise or the borrower loses his job. Now wishing to get cheap credit will have to prove its solvency within six months and pass a stress test at the Bank.
- Reuters
A different rule applies to limit foreign money in the market of canadian real estate. The owner of the apartment or home in Canada who haven’t lived there for years, now not exempt from the 15 percent tax.
The introduction of the new order government pushed too high housing prices in Toronto and Vancouver (average of $490 thousand to $580 thousand), which are rising due to speculation of foreign investors.
The Specter Of Detroit
In 2013, the American city of Detroit declared a partial default due to the inability to serve a portion of their debts. Before the crisis the city was considered a major center of engineering in the United States. The economy struck a decline in demand for local brands of cars, as well as structural errors of the administration in governance and corruption.
Today the largest city in Canada — Vancouver and Toronto (take 3-rd and 4-th place in the ranking of the Economist “the Best cities for life in 2016”) risk the same fate as Detroit, experts say the new York office of Bank of America. The volume of real estate sales fell by 12% compared to last year, by early 2017 figure “gives way” for another 10%, believe market participants.
“Vancouver and Toronto are caught in a vicious circle: Canadians will not be able to buy houses due to the introduction of the floating rate mortgage loan, and investors face high taxes from the state,” — said the chief economist at the canadian unit of HSBC Holdings PLC in Toronto David watt.
Ksenia Chemodanova
