Economy

EXPOSED: The CANADIAN BUBBLE Economy – British Columbia

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by Jeff Nielson, The Phaser.com:

I’m sure that readers both North and South of the border get tired of me talking about “U.S. bubbles” all the time. Yes, they are the biggest-and-baddest bubbles on the planet, but the U.S. is certainly not the only bubble-economy in the West. Conveniently, the mainstream media has just shined its twisted spotlight on my own home province of British Columbia. Let the pumping begin!

Expect’s economy to lead the country again this year and next

Ooh! That headline sounds impressive, unless/until one takes a really close look at what this really means.

First, although the total value of B.C. exports over the past six months is essentially unchanged compared to the same period a year ago, strong growth of new house construction in the U.S. is largely responsible for causing the province’s lumber exports to increase by a solid 6.1%.

Isn’t this great! We’re selling significantly more of a partially renewable natural resource, but getting paid the same amount. That’s not a recipe for economic health, but it is yet one more symptom of the absurd/insane upward manipulation of the USD. The U.S. gets to suck back the world’s resources, dirt cheap, yet again. Except in this case, these dirt-cheap resources are simply a crutch, to slightly delay the complete collapse of the U.S. economy.

The Next Crash in 2016
The U.S. Economy is Dead

Now we get to the real story of this bubble-economy:

From a domestic perspective, while at first glance the major driver of B.C.’s economic growth is reported to be residential construction, consumers in B.C. have been spending more time shopping than in any other province.This observation is supported by the fact that over the past six months, retail sales in the province are up by 6.8% y/y, more than twice the increase in spending reported for the country as a whole.Turning to housing, fuelled by a combination of record low interest rates, strong growth of employment and the largest net inflow of interprovincial migrants since 2007, seasonally adjusted sales of existing homes hit a record high of 10,700 units in February largely on account of exceptionally (+33% y/y) strong sales in Vancouver.

This surge in demand relative to a shrinking inventory of homes for sale caused the month’s supply of homes for sale in the province to decline from 3.2 in January to a ten year low of 3.0 in February.

Given this very strong pattern of housing demand, it is not surprising that average house prices in the province were up by 21.9% y/y in February, the second largest year-over-year increase in more than 25 years.

The BIGGEST HOUSING BUBBLE in Canada. Not a “strong economy”. Note the side effects of any/every housing bubble. There is a temporary “construction boom” as supply is radically over-built. You can’t be buying (and building) 33% more housing capacity, year over year, with a population only growing at 1/10th that rate. Obviously there will only ever be occupants for roughly 10% of these new housing units. The rest of this inventory is simply being “flipped”, by would-be Donald Trumps.

Canada Has a Massive Housing Bubble
 

Canadian Property Price Index:
The Canadian Housing Bubble
Chart Source: GlobalPropertyGuide.com

 

It’s like the game of musical chairs, except in reverse. When “the music stops” the Players don’t find there too few chairs, but rather there is an OCEAN OF CHAIRS, and only a handful of butts to fill them. The party ends, the bubble implodes. This brings us to the supposed “boom” in consumer spending:

…retail sales in the province are up by 6.8% y/y, more than twice the increase in spending reported for the country as a whole.

LOL !!!!!!

All regular readers should know the “drill” now when it comes to debunking all of this “rising sales” propaganda, irrespective from which regime the lies emanate. As a resident of this province, I can tell you that real inflation is somewhere around 20% per year, thanks to the crumbling value of the CAD.

All of these “retail sales” and “consumer spending” numbers are NOMINAL numbers, meaning they are NOT being adjusted for inflation. What do we get when we subtract 20% inflation from the 6.8% “rise” in retail sales? We get the TRUTH. Real retail sales are falling in this province, at an annual rate of more than 13%.

All of this new housing is being built, but there are no new SHOPPING MALLS. Yet another symptom of North America’s “ghost cities”: with vast quantities of empty residential units being constructed, but very little commercial construction, since (real) commerce is shrinking, not expanding.

What are we seeing when house prices skyrocket higher, while incomes are flat? A huge, ugly bubble. What are we seeing when vast numbers of residential units are being constructed, but virtually no new retail/shopping infrastructure is being built? A huge, ugly bubble.

British Columbia is “leading the country”…right over the edge of a cliff. Same propaganda we see South of the Border. Just cut-and-paste in different names and numbers.

:dry:

P.S. This is a good time to remind readers of the greater insanity at work here:

World’s Greatest Investment Mistake: Real Estate over Gold and Silver

Buy low; sell high. Real estate prices are sky-high. Gold/silver prices are at rock-bottom. In a sane world, people in this province (and elsewhere in the West) would be tripping over each other DUMPING their real estate, and buying gold and silver.

———

Jeff Nielson is a writer, researcher & economic pundit who contributes regularly to SGT Report, The Phaser and Sprott Money. You can read more of his insights into all things economic at his own site Bullion Bulls Canada.

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