Further evidence of Canada's sound fiscal footing and the implication for Vancouver's property market

Hi All,

See the post below for some more evidence of Canada's good and improving fiscal situation in relation to the US.

If one is to look back to the high inflation and interest rate era from the 70's to the early 90's, our Federal Gov't was breaking a long tradition of peacetime fiscal austerity and ran huge deficits and incurred a huge debt. This caused an excess of demand for money thus driving up interest rates and inflation.

Debt reduction on the part of the Federal Gov't reduces demand pressure on Canada's debt market thus reducing the need for the Bank of Canada to raise interest rates. Reducing Gov't consumption and paying back deb is slightly deflationary and reduces pressure on the BOC to raise rates. By reducing debt we also reduce the cost of debt service which leaves more revenue or an opportunity for tax cuts which also reduces inflation.

Implications for Vancouver Real Estate

I see this as further evidence of a coming rate cut from the Bank of Canada. An upward valuation of the Chinese Yuan would be the only thing I see that could preclude this. An appreciation of the yuan would make the vast proliferation of cheap Chinese products we have to come to rely on very expensive very quickly, thus raising inflation across the rich world in a heartbeat.

We all know what a rate cut from the BOC will do for real estate here in Vancouver!

Looking forward to hearing what you think!