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Implications of the Economic Crisis, Free Lecture | Nov 18 | UVic


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#21 D.L.

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Posted 19 November 2008 - 08:30 PM

THanks for the notes Cara. :)

#22 mat

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Posted 19 November 2008 - 09:35 PM

This one caught my attention - Caramia, did you quote Robert Jowl directly?

Global Problems - Local Responses:

1. The development industry should not start new projects, and should be cautious about dumping new stock which could undermine market stabilization.


Bizarre statement - how can a development corporation hold onto stock, and why would any developer do that without a real profit incentive? (Government pay debt interest, and defer taxes?)

There was a Seattle TV news item on last night - a developer had sold 18 out of 23 condos, and after 5 months of trying to sell the rest, resorted to an auction service - he just made cost on the outstanding units.

#23 Caramia

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Posted 19 November 2008 - 10:21 PM

Well, none of my notes could be considered direct quotes. They talked, I scribbled, then today I interpreted the scribbles. So in all things, consider the source. :P

But I think what he was trying to say is that now is not the time to start new projects, even if you can get financing, and if you need to slow down on an ongoing project, while it might not be great for the developer's personal books, the bright side is that keeping the number of units available steady will help stabilize the market.

For further clarification we will have to wait until the recordings become available. Then we will get to see how good my notes really are!

Something he was also alluding to, but I didn't really capture it in my notes was the high cost of using unskilled labour, which apparently is massively inefficient and costly. As development dries up, the skilled labour is becoming available again.
Nowadays most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes.
Oscar Wilde (1854 - 1900), The Picture of Dorian Gray, 1891

#24 househuntvictoria

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Posted 19 November 2008 - 11:11 PM

Well, none of my notes could be considered direct quotes. They talked, I scribbled, then today I interpreted the scribbles. So in all things, consider the source. :P

But I think what he was trying to say is that now is not the time to start new projects, even if you can get financing, and if you need to slow down on an ongoing project, while it might not be great for the developer's personal books, the bright side is that keeping the number of units available steady will help stabilize the market.

For further clarification we will have to wait until the recordings become available. Then we will get to see how good my notes really are!

Something he was also alluding to, but I didn't really capture it in my notes was the high cost of using unskilled labour, which apparently is massively inefficient and costly. As development dries up, the skilled labour is becoming available again.


Thanks for the exhaustive notes Caramia. I think two things stand out above all else: one, there is no credit crunch in Victoria according to RBC--they are growing lending; and two, sub-prime was never the problem, it was a symptom, a signal. There goes two of the most used "reasons why we won't follow the US trend down."

It's a huge issue, and despite my attempts to dumb it down, I haven't got much further insight, but it seems to me from the limited commentary I've read, most of the panel were working hard to not suggest they had any idea what is going to happen next.

#25 Caramia

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Posted 20 November 2008 - 12:11 AM

There were quite a few reasons given as to why we were not following the US trends, and a very good picture of what the Canadian trends were, and why.
If my notes didn't capture that, then hopefully a listen to the recording will.
Nowadays most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes.
Oscar Wilde (1854 - 1900), The Picture of Dorian Gray, 1891

#26 http

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Posted 20 November 2008 - 01:08 AM

That's a lot of detailed notes you've posted. Thank you.
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#27 Mike K.

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Posted 20 November 2008 - 08:08 AM

Wow, those notes are so appreciated :)

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#28 Mike K.

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Posted 20 November 2008 - 08:23 AM

Big difference between now and 1929:
Assets in the federal reserve expanding 1 trillion Sept 24, 2 Trillion by Nov, 3 trillion projected... Federal reserve becoming the big lender.

The Federal Reserve also happens to be a private company that lends money to the US Government with interest!!! The bailout package has a massive string tied to it but nobody in the media and virtually no "experts" speak on the growing debt+interest the US Gov't, and as such the US people, are racking up through "federal" aid packages.

The US bailout package was reasonable value, and as a result everyone wants to be a "US financial sector company" as compared to the European bailout which was not good value so companies receiving money are experiencing falling stocks.

He missed the point. Everyone wants to be a "bad US financial sector company." The good companies, i.e. those that were well-managed and had balanced lending practices, get nothing and are left to contend with the big players who are on publicly-funded life support.

What the US Gov't ought to do, and this also goes for Canada's government, is allow the GM's and Wachovia's to fail, while propping up the companies that were managed successfully by giving them the funding to allow them to open their arms to workers from failed companies.

Know it all.
Citified.ca is Victoria's most comprehensive research resource for new-build homes and commercial spaces.


#29 Newlywednotnearlydead

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Posted 20 November 2008 - 10:53 AM

---> Price will go down but we are not going to see big drops of 30-40% like they saw in S. Florida or Las Vegas.

- Victoria is still a relatively attractive place due to climate etc. and will be seen as a good option for people leaving cities that have been hit harder by this.


If climate has an effect on real estate prices, then why did South Florida and California tank??

#30 househuntvictoria

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Posted 20 November 2008 - 11:12 AM

If climate has an effect on real estate prices, then why did South Florida and California tank??


And why are we falling at a faster rate than they did?

#31 Caramia

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Posted 21 November 2008 - 11:59 PM

lol, maybe the difference from being "a variable" and being "the determinant variable?"
Nowadays most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes.
Oscar Wilde (1854 - 1900), The Picture of Dorian Gray, 1891

#32 Caramia

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Posted 17 December 2008 - 05:30 PM

UVic has finally put the pod-cast up on the web - my notes can be put to the test.

http://dailysplice.c...estrict_to=3330
Nowadays most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes.
Oscar Wilde (1854 - 1900), The Picture of Dorian Gray, 1891

#33 UrbanRail

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Posted 17 December 2008 - 07:50 PM

The Federal Reserve also happens to be a private company that lends money to the US Government with interest!!! The bailout package has a massive string tied to it but nobody in the media and virtually no "experts" speak on the growing debt+interest the US Gov't, and as such the US people, are racking up through "federal" aid packages.

He missed the point. Everyone wants to be a "bad US financial sector company." The good companies, i.e. those that were well-managed and had balanced lending practices, get nothing and are left to contend with the big players who are on publicly-funded life support.

What the US Gov't ought to do, and this also goes for Canada's government, is allow the GM's and Wachovia's to fail, while propping up the companies that were managed successfully by giving them the funding to allow them to open their arms to workers from failed companies.


Mike, what I find interesting is that people that I talk to seem to think that the Federal Reserve is a government entity. Its not, it was formed in 1913 at a secret meeting by some big name company presidents, CEOs, etc. who were given fake names so as to not attract attention to where they were going (Jekyll Island). For some reason the history texts omit this.

Heres are some interesting links about it.
http://news.goldseek.../1095269452.php
http://en.wikipedia....ical_criticisms

#34 LJ

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Posted 18 February 2009 - 09:19 PM

Here is an interesting article, at least I thought so, maybe make you feel a little better.

From Newsweek magazine - Feb 16, 2008----
Worthwhile Canadian Initiative
Canadian banks are typically leveraged at 18 to 1 -- compared with U.S.
banks at 26 to 1.
Fareed Zakaria
NEWSWEEK
Feb 16, 2009

The legendary editor of The New Republic, Michael Kinsley, once held a "Boring Headline Contest" and decided that the winner was "Worthwhile Canadian Initiative." Twenty-two years later, the magazine was rescued from its economic troubles by a Canadian media company, which should have taught us Americans to be a bit more humble. Now there is even more striking evidence of Canada's virtues. Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors.

Yup, it's Canada. In 2008, the World Economic Forum ranked Canada's banking system the healthiest in the world. America's ranked 40th, Britain's 44th.

Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn't grown in size; the others have all shrunk.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada's more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for over consumption that the U.S. code does: interest on your mortgage isn't deductible up north. In addition, home loans in the United States are "non-recourse," which basically means that if you go belly up on a bad mortgage, it's mostly the bank's problem. In Canada, it's yours. Ah, but you've heard American politicians wax eloquent on the need for these expensive programs—interest deductibility alone costs the federal government $100 billion a year—because they allow the average Joe to fulfill the American Dream of owning a home. Thirty -eight percent of Americans own their own homes. And the rate of Canadian homeownership? It's 68.4 percent.

Canada has been remarkably responsible over the past decade or so. It has had 12 years of budget surpluses, and can now spend money to fuel a recovery from a strong position. The government has restructured the national pension system, placing it on a firm fiscal footing, unlike our own insolvent Social Security. Its health-care system is cheaper than America's by far (accounting for 9.7 percent of GDP, versus 15.2 percent here), and yet does better on all major indexes. Life expectancy inCanada is 81 years, versus 78 in the United States; "healthy life expectancy" is 72 years, versus 69. American car companies have moved so many jobs toCanada to take advantage of lower health-care costs that since 2004,Ontario and not Michigan has been North America's largest car-producing region.

I could go on. The U.S. currently has a brain-dead immigration system. We issue a small number of work visas and green cards, turning away from our shores thousands of talented students who want to stay and work here.

Canada, by contrast, has no limit on the number of skilled migrants who can move to the country. They can apply on their own for a Canadian Skilled Worker Visa, which allows them to become perfectly legal "permanent residents" in Canada—no need for a sponsoring employer, or even a job.

Visas are awarded based on education level, work experience, age and language abilities. If a prospective immigrant earns 67 points out of 100 total (holding a Ph.D. is worth 25 points, for instance), he or she can become a full-time, legal resident of Canada.

Companies are noticing. In 2007 Microsoft, frustrated by its inability to hire foreign graduate students in the United States, decided to open a research center in Vancouver. The company's announcement noted that it would staff the center with "highly skilled people affected by immigration issues in the U.S." So the brightest Chinese and Indian software engineers are attracted to the United States, trained by American universities, then thrown out of the country and picked up by Canada—where most of them will work, innovate and pay taxes for the rest of their lives.


If President Obama is looking for smart government, there is much he, and all of us, could learn from our quiet—OK, sometimes boring—neighbor to the north. Meanwhile, in the councils of the financial world, Canada is pushing for new rules for financial institutions that would reflect its approach.

This strikes me as, well, a worthwhile Canadian initiative.
Life's a journey......so roll down the window and enjoy the breeze.

#35 Caramia

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Posted 18 February 2009 - 09:30 PM

Well cool, I guess the guy from the RBC - Tom Siemens - wasn't bullshitting us. Canada's bankers really were being responsible.
Nowadays most people die of a sort of creeping common sense, and discover when it is too late that the only things one never regrets are one's mistakes.
Oscar Wilde (1854 - 1900), The Picture of Dorian Gray, 1891

#36 Newlywednotnearlydead

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Posted 19 February 2009 - 10:59 AM

I would be happy if the banks were as solid as they claim, but if Canada's banks are so rock-solid, why was 125 billion dollars of taxpayer money used to buy mortgages from banks? Accounting for population differences, that's more than the United States spent on their bank bailouts.

#37 househuntvictoria

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Posted 19 February 2009 - 11:05 AM

I would be happy if the banks were as solid as they claim, but if Canada's banks are so rock-solid, why was 125 billion dollars of taxpayer money used to buy mortgages from banks? Accounting for population differences, that's more than the United States spent on their bank bailouts.


It's about cap rates and liquidity. Banks in Canada have regulated loan to asset ratios. By taking $125B off their books, the banks are supposed to be able to lend more into the system. As long as mortgages don't go into default, the GoC figures they'll make money off the deal.

These aren't the same types of bailouts as we're seeing elsewhere, only because the loan default rates are still low.

#38 Newlywednotnearlydead

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Posted 19 February 2009 - 12:02 PM

My guess is that the banks are just going to spend a large chunk of that 125 billion buying the government bonds issued to finance the mortgage purchase program, replacing risky investments with guaranteed investments.

I don't think liquidity is the issue, people aren't borrowing money because they're already up to their eyeballs in debt. Like Mish Shedlock has been saying, banks and consumers aren't borrowing or spending money, regardless of what the government does. IMO, we are adding billions in debt to pad the bottom line of the banks.

#39 LJ

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Posted 19 February 2009 - 09:57 PM

I think HHV has it right. By taking some of the risk the banks are exposed to it will allow the banks to loan money more freely and still stay within their 18-1 leverage ratio.

I would be happier if the government in taking these loans off the banks hands forced the banks to loan the money out in return instead of hoping they would.

The government may make money off these loans but even if they loose some it is still a pretty cheap way of freeing up credit.
Life's a journey......so roll down the window and enjoy the breeze.

 



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