Reading List: Covid-19 Real Estate
1. Connor Guy's pick: “The Bank of Canada’s vast experiment in printing money may not end well” by Konrad Yakabuski: https://www.theglobeandmail.com/business/commentary/article-the-bank-of-canadas-vast-experiment-in-printing-money-may-not-end/
2. Dustin Griever's pick: “Higher Than We Ever Saw in the 2008 Crisis”: Why the Coming COVID-19 Mortgage Crisis May Be Worse Than the Last One" by William D. Cohan: https://www-vanityfair-com.cdn.ampproject.org/c/s/www.vanityfair.com/news/2020/04/why-the-coming-mortgage-crisis-may-be-worse-than-the-last-one/amp
3. Dustin's Griever's pick: "Federal deficit could reach $184.2-billion this year based on coronavirus measures, PBO says" by Bill Curry: https://www.theglobeandmail.com/politics/article-federal-deficit-could-reach-184-billion-this-year-on-virus-measures/
Why this information matters to us as real estate lenders:
1. “The Bank of Canada’s vast experiment in printing money may not end well”
BY KONRAD YAKABUSKI PUBLISHED APRIL 14, 2020 https://www.theglobeandmail.com/business/commentary/article-the-bank-of-canadas-vast-experiment-in-printing-money-may-not-end/ Value: This article discusses the Bank of Canada’s decision to engage in quantitative easing, or in layman’s terms printing money to buy back billions of dollars worth of financial securities. The author acknowledges the importance of providing much needed liquidity in the market, but also highlights the consequences of drastically increasing the money supply and its potential impact on the value of the loonie. During the 2008 financial crisis, the US Federal Reserve and European Union conducted similar buyback programs and managed to avoid higher than normal levels of inflation in the wake of it. This came as a shock to many and contradicted conventional macroeconomic theory. The author suggests that Canada may not be as fortunate. The American greenback is a global reserve currency and the Euro is the common currency of a large economic union supported by a few wealthy countries. Canada and its dollar do not share those benefits. Combine quantitative easing with depressed commodity prices and sky rocketing levels sovereign, corporate, and household debt – the loonie could be in for a rude awakening.
2. “Higher Than We Ever Saw in the 2008 Crisis”: Why the Coming COVID-19 Mortgage Crisis May Be Worse Than the Last One
WILLIAM D. COHAN APRIL 10, 2020 https://www-vanityfair-com.cdn.ampproject.org/c/s/www.vanityfair.com/news/2020/04/why-the-coming-mortgage-crisis-may-be-worse-than-the-last-one/amp Value: This article highlights the atypicality of this pandemic as compared to a traditional recession. The fact that there is a physical impediment to consumer spending on top of the loss in confidence could mean that this crisis is deeper and longer than the last one.
3. "Federal deficit could reach $184.2-billion this year based on coronavirus measures, PBO says"
BILL CURRY APRIL 9, 2020 https://www.theglobeandmail.com/politics/article-federal-deficit-could-reach-184-billion-this-year-on-virus-measures/ Value: This article brings up the long-term costs of the government’s and central bank’s stimulus programs. Trudeau has yet to explain how we plan on repaying the $100bn+ in debt we have incurred due to COVID. How will this affect the value of the Canadian dollar and future tax rates?