Killing the messenger

I'm not surprised the American government would like to see Wikileaks shut down. What I'm surprised at is how easily non-government actors fall into line to help out.

Fundamentally, Wikileaks is a news gathering organization, and yes, a quarter million classified documents is news. Wikileaks didn't break confidentiality by publishing the documents, because they aren't required to hold these documents in confidence. Sure, the US government of the time wanted to keep the New York Times and Washington Post from publishing the Pentagon Papers, too, but life is filled with disappointments.

Now, as private organizations, Amazon and PayPal are under no obligation to help Wikileaks work, but I don't think it's unreasonable to ask what principle Wikileaks has violated to earn this sort of exceptional scrutiny. I can't think of one, myself - they received confidential documents, and they're publishing them.

Anyway, they can continue to be found here. Twitter has proved extremely useful, as their opponents try to play hide and seek with the site, but since this is an IP rather than domain name, it should hold solid.

As for my title, well, some take it more literally than others.  Can you still collect a paycheck from the University of Calgary after advocating the murder of a newsman?  Apparently so.

Seen in the Wikileaks dump

Here's a memo relating a conversation between a State Department official and the then-head of CSIS, Jim Judd. Judd expresses concern about the about-to-be-released video of Omar Khadr's interrogation by Canadian officials. The specific concern was that:

...the images would no doubt trigger
"knee-jerk anti-Americanism" and "paroxysms of moral outrage,
a Canadian specialty," as well as lead to a new round of
heightened pressure on the government to press for Khadr's
return to Canada.

But not to worry, reassured Judd. The Canadian government could hold firm on being deaf to the concerns of citizens.

What else we got?

Regarding Alexander Keith's IPA

Dear Labatt's:

If I wanted to drink Ontario piss water, I already have plenty of options. I guess Corb Lund is right, again.

Congratulations, Toronto!

On the heels of Calgary electing a progressive, urbane young Harvard-educated professor, Toronto also commits to a new direction.

Rob Ford, fat f*ck.

Rob Ford isn’t repugnant and offensive because he’s fat. Being fat is only one part of a full package of traits that trigger disgust and apprehension in anyone who doesn’t pick fights with the press, doesn’t assault his wife (charges dropped), doesn’t lie about getting shitfaced and telling off civilians at a football game, doesn’t call AIDS your own f*cking fault, doesn’t praise Orientals for working like dogs, doesn’t drive impaired in his natural home, Florida, and isn’t a boorish, backward daddy’s boy. And he’s fat.  [asterick in place of the letter "u" is mine - Don]

I'm sorry, that's His Worship, Mayor Rob Ford, fat f*ck.  Enjoy!

Congratulations, Obama and Harper!

The American and Canadian governments have avoided the embarrassment of trying Omar Khadr.  Now they don't have to explain why throwing a grenade on a battlefield when most of your compatriots have been killed by the attacking force can be called murder, why a child soldier should be tried as an adult, and how being buried under a pile of rubble didn't prevent Khadr from throwing the grenade in the first place.  Further, they won't have to explain why they began torturing Khadr while he was still blind and broken from the battle.  The Canadian government won't need to explain why they didn't provide consular services to a citizen.  They won't need to explain why they made no effort, unlike every other western nation, to repatriate a citizen from Guantanamo.

So, to everyone involved in this case who have self-awarely sacrificed Khadr on the altar of saving face, eat a bag of dicks.

Happy, happy surprise

I met Naheed Nenshi over twenty years ago, working long days on a campaign until late each night, when I would give a few members of the team a lift home in my old rattletrap of a car.  I don't doubt some of his committment to safe, reliable public transportation was formed while he listened to the whine of my engine struggling up 36th Street, drowning out the strains of Pachelbel or Meatloaf, depending on the evening.

As I write this, Naheed is showing a 6000 vote lead with about half the polls counted, though given Barb Higgins' early lead, I don't think it's safe to call it over yet.  But Calgary seems on the verge of making an excellent decision, very possibly electing a whip-smart, visionary young man.  Tell him "Duke" says hello.

Edited to add: Congratulations, Naheed!

To virtually no one's surprise

It turns out the Tories are a bunch of lying liars who lie.  I still can't figure out why they've bothered.  Do they really have such an ideological hate on for the long-form census that this is the hill they're willing to die on?

You know, during the 2006 election, I kept hearing how the Sponsorship scandal was evidence that the Liberals had become too arrogant, and how some bench time would remind them they need to answer to Canadians.  It seems like less than five years in government, and the Conservative government is well overdue that same lesson.

I understood their battle on the long gun registry.  Never mind that it's many degrees cheaper to administrate than it was to set up, or that law enforcement agencies were lining up to beg the law-and-order party to keep the registry as a tool in the police arsenal.  Never mind all that, because the Conservatives had made a commitment to their base, and in particular to the farmier portions of their base.  It's tough to entirely fault them for attempting to follow through, even if they got involved in some pretty ugly tactics in the process.

But the long form census?  Who did they promise this scrapping to?  Who cared about this issue, until the Conservatives decided it was a good idea?

Well, as we discovered today, no one cared, outside of a few nutty constituents who warmed up their pencil crayons and sent the government a good scribbling.  I don't doubt a couple of those came pre-packaged with tinfoil and hat assembly instructions, to help out.

So I ask again, without irony or preconceived answer.  What am I missing on the benefit side of the calculation, that the Tories continue to feel is worth this ever-steepening political cost?

Funny/Sad

The Fraser Institute sends Paul Wells an invitation to a $200-a-plate fundraising lunch, using data produced from the long-form census in the pitch.  Four days later, they send another fundraising request, bragging about being on the cutting edge of wanting to tear up the mandatory long-form census.

Drink up!

Surprise!

British PM David Cameron comes out and calls Gaza a "prison camp".  Someone call Stephen Harper and let him know that you can be a Conservative without giving Benjamin Netanyahu a "ready, aye, ready" every time Israel's government does something stupid or mean.

Gooooooooooooooooaaaaaaallllllll!

A right-wing wacko explains why soccer is anti-American, and therefore beloved by the liberal media.  Sure does make me want to cheer for the USA side, to make tea partiers crazy.

Crazy Talk

I am almost certain that this is just nonsensical blog talk, as opposed to serious consideration.  Why the CBC is reporting this merger talk nonsense, already rejected by the leader of the Liberal party as "absurd", as anything but punditry wankage is beyond my understanding.

Calgary Grit has made the arguments and done the math, and if the only point of an NDP-Liberal merger is to win the election, well, there's no reason to believe that the merged party would accomplish that (though a Liberal-Conservative merger would be tough to beat).  (Forgive the huge poach from that post, Dan, but I think your point here needs to be widely understood.)

Let's run a quick experiment on the 2008 vote totals. Let's say 80% of the Liberal vote decides to vote for the new Liberal Democrats and their catchy Red and Orange colour scheme, 10% votes Conservative, and 10% stay home and watch American Idol. For NDP voters, I doubt the transfer would be quite as fluid - after all, the new party would be led by a Liberal and if NDP voters really cared about stopping Harper or being in power, they'd just vote Liberal in the first place. So, maybe half of them go along with the deal, a quarter vote green, and a quarter stay home. In terms of popular vote, that would actually work out to a 73% vote transfer to the new party, similar to the PC-Alliance merger rate.

So what would be the end result of this?

CPC 163 seats
LD 93 seats
BQ 50 seats
Other 2 seats

Hell, let's assume 80% of both Liberal and NDP voters join the new party, with the others just staying home - not a single former Liberal casts his or her vote for the Conservatives. The end result is still a narrow 7-seat Harper minority.

For the record, as longtime readers know, I favour the "catchy Red and Orange colour scheme".  But the rest of the merger idea is just dumb, and seems once again timed to distract from real issues dogging the Conservatives.  Could the Liberal Party be more dimwittedly self-destructive?

Edited to add: Evidentially, prominant Liberals agree with me, and are stepping hard on this foolishness.

"But nobody else has to!"

This is the thinking, rejected by kindergarten teachers everywhere as a sign of social immaturity among their charges, that passes for Israeli foreign policy these days.  Israel is rejecting the UN's request for an investigation of Monday's flotilla raid:

An official in the prime minister's office said there is "no case in recent history" where a democratic country's army involved in the deaths of civilians in an overseas operation has been subjected to an international investigation.

Since most democratic countries' armies aren't killing civilians overseas as a rule, this may be objectively true.  But let's remind ourselves of one Canadian experience with it, which resulted in murder charges and a half-decade of national soul-searching.  So maybe, instead of telling us what they won't do, Israel's government could tell us what they will do, and maybe they could try to sound at least a little apologetic while they're at it.  Except that contrition would suggest the possibility of guilt, and it seems that the golden rule of Israel's foreign policy is to never, ever admit fault.

Isolation

So, perhaps my initial reaction was too strong, too angry, and certainly too unrealistic.  However, I've been clear enough about my feelings that I have objected to much of Israel's behavior toward its neighbours in the occupied territories and beyond over the last decade.  I've said as much on this blog on occasion.  I believe that Israel's government prefers bullying its neighbours to learning to get along with them.  I'm offended at how strongly the world believes that Iran's nuclear ambitions are a threat to world peace, but that Israel's current possession of nuclear weapons isn't, as if the former wasn't a direct result of the latter.  I haven't faced accusations of anti-Semitism, which I appreciate, and yet I've seen other more popular writers face that charge when they write similar things on their own blogs, so clearly I haven't been the staunchest defender of the current Israeli government.  In fact, watching moderates in that government being held hostage by an extreme right owning the balance of power in nearly any coalition keeps me from supporting Proportional Representation in Canada.

So what I have to say now might be dismissed as easily as the fellow interviewed by Global yesterday at the Legislature protest, who said the right things and sounded perfectly reasonable, except that he was wearing a Palestinian keffiyeh over his nose and mouth, obscuring his face, and honestly, could you look more like a scary terrorist to anyone who might have otherwise been sympathetic to what you were saying, you idiot kid?  I digress.

Israel, you're losing friends.  Some of that is for dropping on to a humanitarian aid ship in international waters, guns-a-blazing, in order to enforce a blockade that large swaths of the world are already unsympathetic toward.  But some of it is for your flat denial to acknowledge that you've done something wrong, for your attempt to portray peaceful international political activists as terrorists, and for your continued attempts to claim hatred is the only reason anyone would not unquestioningly swallow your version of events as the unvarnished truth.

There are more ships coming to run your Gaza blockade.  It is probably true that these six ships you boarded on Monday were more interested in bringing world attention to the blockade by loudly defying it than they were in delivering aid.  When the next ships come, you had better find a diplomatic solution.  No tank, no airplane, no nuclear warhead is going to guarantee your long-term security.  That comes from peace, trade, and interdependence.  Your isolation works against all of those things.

Missed opportunity

You know, if we were ever going to take the opportunity to stand up for our NATO allies in Turkey, telling Netanyahu that he was being held here while we investigated his government's attack of a ship flying a Turkish flag in international waters would have been a good chance.

Alternet has a short-and-sweet article to unspin the nonsense Israel's press relations office has been trotting out all day.  And Salon asks "Just ponder what we'd be hearing if Iran had raided a humanitarian ship in international waters and killed 15 or so civilians aboard."  Hat tip to Pogge for the latter.

Friday Night Videos


Via POGGe, via Stageleft, your Friday night video. Enjoy the phat beats of the lying liar (or possibly forgetting forgetter. Will he be asked which one by reputable media?) Jason Kenney.

When they're done asking him about this disagreement between his words and the verifiable facts, will he get out of the way of MPs trying to find out exactly how complicit Canada is in torture? Please? Because I really think we should know.

When even the bank sounds bearish, what's on the horizon?

A CIBC economist has predicted that Canadian housing prices are due a correction, albeit slow and steady over the next couple of years. Given that the bank has a vested interest in the bullish side of the real estate business (Step one, issue mortgages. Step three, profit!), this can't bode well.

But don't worry, the Chief Executive of Century 21 Canada says everything's fine, and he'd have no reason to lie.

Over? OVER?!? It's not over until we say it is!

First of all, I have to say something you'll rarely hear on this blog: Stephen Harper's government is right. Taxing banks in order to create a bailout fund is a very bad idea. Primarily, it will destroy whatever small sense of moral hazard remained in the market. Not only will a bailout be expected, it'll be guaranteed, so go ahead and continue whatever ridiculous derivative inventing and market manipulation you like, knowing there's absolutely no downside. Responsible institutions get to pay for the mistakes of the irresponsible ones.

This is a better idea, producing big downsides for shareholders and bondholders of irresponsible banks, as well as upper management that is paid heavily in options. It also would make unwinding a failed bank instead of bailing it out more attractive, because the liability side of the final ledger would be missing all of the bondholders that would otherwise expect first claim to the bank's assets.

The market's shedding another percentage or two of its value today, approaching the low point of last Thursday's panicked selloff and immediate bounce. We might be watching the slow deflation of another market bubble, fueled by emergency interest rates and worldwide government debt spending at a rate that can't be sustained. We need to be ready for more choppy waters ahead. We need something smarter than the proposed bank tax.

Finally, a reason to follow Twitter

Best feed ever.

Now she tells us

Helena Guergis, yesterday:

I feel as though they've thrown the rule books out the window, that they're not respecting due process at all. I find it very undemocratic.

Gee, ya think?

The ball in the Prime Minister's court

The Speaker's decision is pretty clear - when it comes down to it, the House has the right to insist on whatever documents it wants.  However, he's given the government two weeks to find an accommodation with Parliament about how to release these documents and still protect the national interest.

One of two things will happen now: 

The Prime Minister will take seriously the decision, and will begin to negotiate with the opposition leaders to find that middle path. 

Or, the Prime Minister will consider the two weeks an opportunity to play more games, trying to work around this decision. 

The first choice would be good for Canada.  The second would not.  Guess which one of these paths I think this particular Prime Minister will take?

Decision Day?

I was hoping to be safely tucked back into my own domain before another election brought about Gaffe-o-Meter IV: The Gaffinating, but there is some buzz that the Speaker's decision regarding the contempt of Parliament motion made weeks ago might send Canadians to the polls.  However, I will do what I need to do, if the Prime Minister decides that it's easier to ignore his own fixed-date election legislation for the second time rather than respect the institutions of Canadian democracy.

However, I don't think things will happen as fast as all that.  Then again, I never seem to see it coming until we're on top of it, so what do I know?

As Bear604 always liked to write, "For those of you scoring at home"

Two weeks after banks bumped mortgage rates 6/10s of a percent, here comes another quarter.  This will be a wilder ride than even I thought.

On a four hundred thousand dollar mortgage (not an unreasonable amount of loan to buy a pretty boring run-of-the-mill single family detached house in Edmonton), in two weeks your debt servicing costs just went up by $3400 a year - almost $300 a month.  If there are two more fortnights like this before your mortgage renewal date comes up,  you'll need to come up with an extra $850 a month, so I hope your family income has gone up by $30,000 a year since your last renewal so you can convince the bank you can afford that.

Update, April 27: here's another 0.15%, rounding the increase to a full percentage point in a month.  It's possible that even the bears don't know how far this can go.

Good news at last

The Oilers have the first draft pick in the 2010 entry draft, so that was totally worth sucking all year long.

Here I am

If it wasn't for messing around with the blog, I'm sure I would have something pithy and entertaining to say about Rahim Jaffer or Dave Taylor.  I'll see what I can come up with later today.

Meanwhile, this generic template is very much like my original back in 2002, so I might have some fun with it before I return some variation of blinding red and orange.

Today's the day

Blogger stops supporting FTP transfer on the first of May. I've been using FTP transfer to publish my blog for nearly a decade. I also have my own URL and several side pages. So, long story short, this is going to be interesting.

Fortunately, no one reads me any more except me, so no one should notice if I break everything. Wish me luck!

Edited to add: It didn't go as well as I'd hoped, and now it seems I can only manually change the pages at revmod.ca.  This will be my temporary home until I have the time to repair it all.

We will now begin our descent. Fasten your seatbelts.

I don't think I'm a genius for predicting interest rates were due to rise, but apparently many people were surprised by this sudden turn of events, and are responding to the change by.... er, assuming a mountain of debt while they're still allowed to. But don't worry - this couple won't spend more than they can afford. They're both personal fitness trainers! I gather that's a lucrative career.

So, today. A day later. The Conference Board of Canada says that twenty percent of Canadians can't afford their housing. But instead of laying the responsibility on the shoulders of housing inflation completely disconnected from the rest of the economy, "The report found that private-sector developers have tended to focus on building homes that are aimed at higher income Canadians." Just to be clear, one builder in Edmonton will sell you a 1200 square foot house in Leduc for $320K. Going by a standard affordability calculation, which says that historically a house should cost about three times the family's annual income, this would be aimed at higher income Edmontonians, the average family earning just over $90K/year. But I don't think anyone is mistaking 1200 sq. ft. as a mansion, nor Leduc as a lucrative location. In other words, I think the Conference Board of Canada is smoking crack.

The easy money has been flowing, and it's kept housing prices hyperinflated. But this isn't the tulip bubble - the Conference Board's report makes clear that overpriced homes have real consequences for real people. The piper will have to be paid. The day will arrive sooner than anyone seems to think.

International news

So the United States finally has public health insurance.

What? Really?

Okay, so the United States finally has universal health coverage.

No! Really?

So, I'm led to believe that the United States finally has health coverage extended to many more people. Yes? Whew!

Anyway, David Frum explains the difference in the interests of the Republican Party and the Conservative Entertainment Industry, and how the health care bill illustrates that the former is paying the price for the selfish interests of the latter. Gosh, that's too bad, Republicans! Boo hoo hoo! Maybe if you'd call out Glenn Beck's bullshit or quit apologising to Rush Limbaugh, this wouldn't have happened! But you didn't! Boo hoo hoo!

And now, Inflation

Just a week ago, analysts were expressing concern about the rising dollar and inproved job situation, and hoping for an interest rate increase much sooner than September, Mark Carney's hoped-for date of moving from zero. Those analysts are worried that, while we all want the economy to recover from recession (and for jobs to appear in greater numbers), if we overshoot, we can move into an inflationary spiral.

Well, this morning, StatsCan reported 2.1% inflation for February, much higher than expected. The Bank of Canada really only has one lever to pull, and so I expect interest rates must start upward sooner than Carney wanted. If the supply of essentially free money in the economy isn't choked off, too many dollars will continue to compete for too few goods and services, and inflation goes much higher than anyone wants.

The only good news in this situation is that after Carney's extensive promises of holding the rate through the summer, it won't take much of an interest rate hike to have an overcompensating psychological effect. This good news is its own bad news as well, though - the recovery is still fragile enough that even a shot across the bow could shatter it. What's a Governor of the Bank of Canada to do?

I think, in having to choose between a little medicine now or a lot later, the correct choice is obvious.

Either way, we're rapidly reaching the end of fire sale interest rates. This will have an obvious cooling effect on the housing market. And since I think the housing market is already hyper-inflated (Follow the full story here, here, here, here, and here), this is another reason why a little medicine now beats requiring a lot later.

Generational theft

In the face of a growing deficit and lower oil and gas prices, the provincial government has elected to return to the sort of fire-sale royalty rates we charged for our oil and gas before Ed Stelmach was elected leader of his party on the promise of a review of those rates.

So, unlike other jurisdictions that have responded to major recessions with one-time infusions of cash into their economies, Alberta is responding to an oil-price-related slowdown of our overheated economy with a price cut on our resources that will forgo $363 million in revenue for each of the next two years, and unknown amounts beyond that, while hoping to deplete our finite resources more quickly. In fact, if they don't, this policy will be called a failure.

Because the only thing better than leaving our children with a debt burden is making sure they don't have the natural resources to sell in order to help pay for our greed. Hilarious!

Another reason I preferred Stephane Dion

POGGe has been pointing out occasions when Israeli Apartheid Week, described as a "pro-Palestinian teach-in" on university campuses across the country and indeed around the world, has exposed several of our nation's leaders as anywhere between timid mouthers of platitudes to rabidly pro-Likud and pro-occupation and expansion.

Among the first set are people who are frightened by the use of the word "apartheid". Ontario legislators unanimously passed a resolution condemning IAW, claiming among other things that

The term "Israeli Apartheid Week" incites "hatred against Israel, a democratic state that respects the rule of law and human rights, and the use of the word 'apartheid' in this context diminishes the suffering of those who were victims of a true apartheid regime in South Africa," said [Ontario Tory MPP and resolution mover, Peter] Shurman.

Compare this to Desmond Tutu, who aparently is willing to diminish his own suffering, because he compares Israeli government policies to apartheid, arguing that they neither respect human rights nor the rule of law in their relationship with the Palestinian people, whatever the Ontario Legislature might say.

Which brings me to the title of my post. Micheal Ignatieff has condemned IAW, implying it is anti-Semetic, racist, and intolerant. Never mind that his earlier descriptions suggest he understands the situation on the ground just fine; this most recent statement regarding IAW shows he is willing to be cowed by a sufficiently strong lobby. At least our current government is honestly taking a side in the conflict, even if it is the side of the oppressing government.

Calling Israel's policy in the occupied territories "apartheid" is certainly tough language. But condemning that language serves to stifle the debate, to stifle criticism, not the other way around as Ignatieff claims.

Dear Olympic attendees who got curling tickets as part of a package instead of events you really wanted to go to:

I'm sure you don't know any better, but this is unbelievably rude. So is this. Would you scream and yell at golfers about to take a swing, or as the first article suggests, ring a cowbell through a figure skating routine?

It's partially the venue's fault for not having someone holding up a "quiet, please" sign. Although if it turns out there's an electronic board that flashes "Make Some Noise", I'm going to have some strong words for VANOC.

A true test to see if Danielle Smith is as savvy as everyone says - will she say "Thanks anyway"?

My one-time M.P., crazy-ass Myron Thompson, is now sitting on a Wild Rose Alliance constituency association board. So, lucky them.

This has the potential to be interesting

In the face of the Wild Rose Alliance becoming a force in Alberta politics, and watching neither the provincial Liberals nor the NDP (who I continue to dutifully belong to and donate to, barring a better alternative) show any desire to renew themselves after taking an election pounding that was at least partially self-inflicted, I'm ready to hear other ideas.

So is the Alberta Party.

(Thanks to Dave Cournoyer for the heads-up about the twists and turns in the Renew Alberta saga.)

Math

I'm becoming increasingly concerned about the changes Flaherty announced on Tuesday, so I've been crunching some numbers. I posted large swaths of this in the Edmonton Real Estate blog comments section this morning, but I thought it bore repeating here:

I'm more than a little concerned that the delay before the change will create a bubble all its own, quite aside from any debate about a current bubble. Surely there are some first-time buyers out there who are going to rush in while they can still get more money/debt based on the variable rate. And I'm also sure there are lenders who will happily give them those loans calculated at absurd variable rates while they still can.

At ING's posted variable rate of 1.95%, according to their own calculator:

On a family income of $50,000, they'll lend someone $375,000 with payments of $1233 a month. At their five year fixed rate (still a low 3.89%), payments go up to $1629. At a still historically below-average rate of 6%, this family will now be paying $2120/month, over half of their gross income, on this mortgage.

$100,000 gets me $780,000 with payments of $2567/month. 3.89% raises that to $3388. And 6% takes us to $4409 - once again, over half their gross income, so God help them if one of them goes on maternity leave or long-term disability.

The banks will do this because they have no skin in the game - they're securitising the debt the same way American banks did, and it's all guarenteed by you and I through the CMHC anyway.

So quite aside from any bubble I might currently see us in, we're going to have a hard landing when this pool of mad-rush driven buyers dries up, and another when the rates go up, as they inevitably must.

Changes

Jim Flaherty has announced a few changes to CMHC rules in the hopes of deflating a bubble that he insists doesn't exist.

Some people may chalk up the timing of this announcement as the government wanting it to be ignored in the face of Olympic fever. I think it shows how quickly we've gone from zero to consensus that Canadians are living with a housing bubble, and that the government wants to curb that talk as quickly as possible, without curbing the market.

Unfortunately, the talk is due to an actual housing bubble, and the market has to curb to end it. Flaherty's changes will only force the people closest to the edge to take a step back, and not much of a step at that. I think we'll see more at the budget, if the talk doesn't slow between now and then.

Edited to add: The CBC article linked above keeps changing as details emerge and reaction is considered. One reaction at the end of the article almost knocked me out of my chair:

"This is a little bit late in telling Canadians we need to be more cautious in taking out a mortgage," Royal Bank chief economist Patricia Croft said in reaction to Flaherty's announcement.

Though she stopped short of calling Canadian real estate in bubble territory already, she said the April 19 date for implementation is actually likely to cause more short-term stimulation of the market, as people scramble to get in under the deadline.

"If you wanted to buy a house, wouldn't you now do it before April?" Croft asked. "It's even more evidence that house prices are going to cool down later this year."

When you hear a banker, for whom profits come from issuing mortgages and securitizing the debt, tell you the market is inflated, run for the hills. Run for your lives. That, or Patrica Croft deserves a medal for honesty in the face of her employer's short-term self-interest. Or, she's hoping to have some deflationary effect herself, better sooner than later in the eyes of even the financial industry.

The last actually seems most likely. It's entirely likely that banks have looked at the wreckage wreaked by the housing bubble and burst in the United States, and would just as soon avoid the worst of that, even at the expense of a few short-term dollars. Consider it a side benefit of having a financial system operated by a tiny oligarchy - they have the luxury of looking beyond the next quarter's profits.

Before the market tanks...

... it's fun to celebrate a little something. Congratulations to Alexandre Bilodeau on Canadian gold!

You read it here first

The Wall Street Journal yesterday asks interesting questions about a Canadian housing bubble.

Canadian Economy Death Watch, part 2

In the United States, the inevitable failure of sub-prime lending threatened to pull down banks and insurance companies directly, and the ensuing recession managed to bring the car industry to the brink. In Canada, our banks may be huge sub-prime lenders, but backed by the government via the CMHC, the bubble looks isolated from the rest of the economy (so long as the massive extra government debt paying off the investors in securitized mortgages isn't considered part of "the economy", even though it's inevitable that it'll result in increased taxes for reduced program spending). When it all spins apart, will only the foreclosed-upon, and the Canadian taxpayer, carry the burden?

Well, the construction industry would certainly struggle - no one will be interested in buying a new home in a deflationary market. That would trickle down into the rest of the economy. So would layoffs or wage rollbacks in the public sector, a possible step toward balancing a CMHC-caused deficit. (Never mind that public sector workers had no part in causing the problem, unless that public-sector worker is Jim Flaherty.)

A few extra mortgage defaults, caused by wage cuts or job losses, will add to the snowball. Alberta is already dealing with the highest rate of mortgages in arrears in the country, adding a hundred a month from under a thousand for over two years now, breaking 3500 in November (the PDF really has to be downloaded to be readable). Many more motivated house sellers makes for a weak and even deflationary housing market. Lather, rinse, repeat. Spread the recession around to the retailers of everything from soup to Nutz.

Short of stocking up on gold and guns, and hiding in your bunker trading recipes for squirrel stew, what can we do, individually and collectively, to protect ourselves from this? I don't pose the question intending to answer it. I also don't pose it rhetorically. I'll be spending the coming days and weeks asking some very smart people. I'll let you know if the answers are useful. Do I need to point out that I think selling your real estate, particularly property you don't actually live in, particularly in the most overheated markets, would be an important step?

Danger

So, Mrs. RevMod and I have been doing some househunting, and we were both shocked at the size of mortgage we've been pre-approved for. We've also been wondering why the housing market in Canada hasn't suffered the massive deflation of the American market. Even as we've gotten closer to buying, we've been researching the answers to these questions, and we've reached the point of stepping back from the precipice. Allow me to share what I've discovered.

Former Tory and eventual independent MP Garth Turner is the author of Going Rouge Greater Fool, a book and weblog dedicated to tracking the Canadian housing market as we rush toward what he sees as its inevitable decline. Now, my politics certainly don't match his, but he's spent a lot of time thinknig about the housing market, so he can't be ignored. Further, unlike almost every one of the real estate "experts" that are quoted in the newspaper (presidents of local real estate marketing organizations, bankers, CMHC or government representatives), he doesn't have any particular self-interest (beyond what I expect are investments that reflect his view of the future). He, and others I've found through reading him, have pointed out some problems on the horizon for Canadian real estate:

- Wages have been stagnant through the entire rise of the housing market since the turn of the century, significantly raising the ratio that measures affordability (median house price divided by the median household income) People have been assuming greater amounts of debt to buy these homes, because debt has been cheap and easy throughout the period. They're willing to take on that greater debt because they believed through the boom that geometrically increasing prices on real estate would continue in perpetuity (a falsehood made obvious in the last couple of years), and they believe now that there's something unique about the Canadian market that shelters us from the real estate devaluation that's happened so sharply in the United States and elsewhere (resource-based economy, conservative banking practices, magical Canadian pixie dust).

- Far from being conservative, our banks are lending out absurd amounts of money to most anyone who asks, and then securitizing the debt. Those of you who have paid any attention at all to the American real estate meltdown will recognize this practice - banks would issue mortgages to people at attractive teaser rates, with absolutely no concern about the ability of the borrower to pay it back. They then would repapckage the loans into mortgage-backed securities, to sell to investors who were more than happy to buy a security that was backed by the solid Fannie Mae and Freddie Mac. The banks would then have to issue more mortgages to continue to have debt to package into securities.

The reputation was that these loans were only issued to people on the edge, people who shouldn't have been issued credit cards, much less mortgages, but as we've since discovered, many many people in all sorts of income classes were issued too much debt, and the availability of this seemingly easy money had a rapid inflationary effect on housing prices. That led to the speculative market in housing, which led to overconstruction, and all of this continued to feed prices, so long as no one got off the merry-go-round. But of course, perpetual motion machines don't exist in nature, and neither do they exist in a real economy.

Let me say this again, because it's important. Your bank will lend you money - more than you think, because they'll sell the debt to someone else. The debt is guaranteed by CMHC, an arm of the government, which means when the housing bubble deflates, we're all going to be on the hook as taxpayers to make sure the investors continue to get paid. The bank, therefore has no interest in screening you to make sure you can pay back the loan - they have no skin in the game. This is the very recipe that cooked up a huge bubble in the American housing market.

- The government may see the bubble coming, but it has vey few good choices. If they make outward noises that it's a bubble, they ignite the selling that'll pop it. That goes for more subtle signs that they know it's a bubble, like tightening the CMHC qualifications. They could raise the prime interest rate, but that can also be seen as a warning about the housing market, and it comes with a second problem - a higher interest rate slows growth, which would be a good policy to deal with housing, but a lousy idea in the rest of the economy. The point is that beyond a certain threshold, there's no good way to slowly let air out of the bubble. Really, the government can only leave it be and attempt to quietly prepare and even hedge for the worst (buying up the mortgage-backed securities now might be cheaper than paying them out later, for example), or they can try to keep the bubble inflating in the hopes of passing the problem on to the next government. That's obviously an irresponsible choice, but knowing how Prime Minister Prorougey McAutocrat has behaved thus far, it's the most likely choice.

So, to conclude, Mrs. RevMod and I have decided that this may be the wrong time to buy, that Canada's real estate market isn't immune to the trouble that incinerated the American market, and that it'll do no harm to rent a while longer while we watch from the sidelines and perhaps get other debts out of our way while the interest rate is still so low.

As a postscript, I want to link to the Edmonton Real Estate blog as well. The authors are Edmonton realtors, and don't have the same pessimistic view I have of the long term prospects, but they also don't seem to have the same starry-eyed optimism I've heard from every other realtor or sales centre associate I've spoken to over the last few months. It's worth a read on occasion if you're interested in more detail and in the perspective of thoughtful people deeply involved in this market.

Update, Sunday evening: The Globe and Mail's cover story this weekend uses the dreaded word "bubble", but only to deny one exists. The alarm bells started going off for me reading the sidebar:

Residential mortgage debt as a percentage of personal disposable income has been rising since the early 1980s.

But thanks to lower mortgage rates, the debt service ratio - a measure of how well Canadians can afford their monthly interest payments - was trending downwards until a couple years ago.

And since the banks losses on mortgages in Canada are so small as to be insignificant, they have steadily continued to dole out more in mortgages each and every year.

To recap this with a slightly different spin, for the last couple of years Canadians have taken on decreasingly affordable mortgages, even while interest rates are at historic lows. The government's default insurance exposure is likewise increasing. And, to do the math, on a half-million dollar home, the 5% down payment is $25,000, but a 3.15% CMHC insurance premium is added to the mortgage, making the debt nearly $490,000. It will take very little downward pressure to leave these homeowners with more debt than house, which encourages defaults, which begins the dominos tumbling. I say again, we're headed for a very uncertain and scary time, and Jim Flaherty can try to cool the market come budget time by raising the bar for entry, or he can stay on the sidelines while an entirely predictable crash takes a lot of Canadian futures with it.

That can't be right

So, there are in the range of thirty-five thousand commercial flights in the United States daily - thirteen-and-a-half million in 2008. That's one hundred and eight million flights in eight years. In that time, two whack-jobs - one with a theoretically-exploding shoe, the other with theoretically-exploding gaunch - have tried and failed to blow holes in two planes. I'm going to say maybe eight hundred passengers between them. To keep another approximately one hundred people a year alive from being bothered with foiling the incompetent plots of underpants-burning idiots for the next eight years, we're going to walk through strip-search machines, take even less carry-on luggage, and sit still without so much as a magazine like so many (twelve billion over eight years) misbehaving elementary school children during the last stretch of our flights.

Going by my estimate of four hundred people per flight, a plane would have to blow up every four days to approach the death toll by automobile on US roads. If the point is to save lives, it seems to me you could have much more positive effect by slowing down the top speeds on roads than you can by going through a greater inquisition at the gate. And meanwhile, my estimate assumes someone actually manages to ignite their hat or shirt or what-have-you, which, going by the first two attempts, really isn't that easy to do. Right now, the death toll by exploding clothing on planes is zero. Zero!

I suppose what I'm suggesting is that we could stand to not overreact. But governments love to overreact - it deflects accusations of failure.