Yet Another Delusional Bubble Blower
Canada is home to one of the most egregious housing and credit bubbles in the world – a legacy of its former central bank governor Mark Carney, who is now blowing a similarly dangerous bubble in the UK as governor of the Bank of England. For some background information on this, see:
Carney’s Legacy: Canada’s Credit and Housing Bubble
Mark Carney: If There is a Bubble, It’s Not Our Fault
Stephen Poloz, the new bubble blower at the helm of the Bank of Canada. He does look a bit loopy actually.
Photo via vida.org
After having slashed interest rates to the bone in Canada and instigating a mortgage credit and consumer lending boom that has inter alia led to one third of Canadians complaining that they can no longer sleep properly due to worries about their huge debt loads, Mr. Carney is now presiding over this in the UK:
The BoE’s current base rate is the lowest since the central bank was founded in the late 17th century – click to enlarge.
Stephen Poloz picked evidently up where Carney left off. While the data on Canada’s housing bubble are plain as day to anyone with a set of eyes and an IQ temperature above 80, the comedian who has become Mr. Carney’s replacement as governor of the Bank of Canada somehow just can’t see it. This is highly reminiscent of Ben Bernanke’s frequent denials in 2006 that there was a housing bubble in the US, even as the bubble became so freaking obvious one literally had to be in a coma not to see it. From a tweet by Forex Live in December last year:
We’re not sure were Mr. Poloz gets his information from. Maybe there is a Canada in some parallel universe in which there is no housing bubble and he was referring to the data from this alternate dimension. It’s either that, or he’s delusional.
With the end of the oil boom – another price distortion that has resulted from global central bank policies and that has come to a sudden ignominious end after years of malinvestment – Mr. Poloz quickly entered the global currency war by slashing Canadian rates and giving the housing bubble yet another shot in the arm. Toronto home prices have soared by about another 10% over the past year, so consumers can now leverage yet more phantom wealth to buy things they don’t need with money they don’t have. Sales of Valium should benefit as a side effect.
Canada’s narrow money supply M1 since the mid 1990s. This is not unlike the money supply explosion in other countries since the abandonment of the gold exchange standard in the wake of Nixon’s default in 1971 – click to enlarge.
We conclude that Poloz is a worthy successor of Carney: he has grasped the latter’s bubble legacy with both hands and proved he can produce even an bigger bubble. He also seems to have “succeeded†in producing a touch of price inflation. In reaction to a surprisingly strong surge in Canada’s CPI, he was quick to present a solution to this particular problem: the Bank of Canada will simply ignore it.
