MonsoonWind wrote:

allow me to correct a somewhat misleading impression you have expressed in this (above) and an earlier post. Canada and

...

The buzz phrase among policy makers and public alike after WW2 was "populate or perish". If we do not populate this country

...

means of relieving labour shortages as these occur but as a broadly based contribution to nation building.


Indeed you push back the "event horizon" a few decades than I. And I would guess that the same theme can further be pushed back all the way to the respective founding eras of Au/CA. The theme is: immigration policy has always been rational. At different times, different groups of peoples were imported based on the need of the nation at the time and their race/religion/wealth/education and of course each individual were screened for health and general fitness. It's pretty much a given that every wave of immigrants brought in people who are on average healthier, harder working or better educated, and more honest/less prone to criminality and welfare dependence than the domestic population. It's not a biased/bigot remark just the simple fact that immigrants are rationally screened and selected but you are kind of stuck with those who were born into citizenship. Even the immigrant-specific benefit programs (such as free English lessons) were easily proven to be cash positive since it brings the immigrants up to speed (i.e. become taxpayers) faster.

We were happy and grateful with what Canada had to offer. And I hope (but getting a bit disappointed in the last few years) Canada appreciate what we gave in return.

michael63 wrote:

it was the recent inrush I was referring to [after 2008], be interesting to see what his father's impression is.

I'll be checking out with my friends once golf season starts in the spring. going to be some interesting conversations as we wait our turns on Vancouver muni's.


Having not been living in Canada for close to 10 years now (I do miss it!). I would preface by saying I don’t push my following argument with too much conviction.

I was just contesting your particular jargon “leverage”, (perhaps) not your central idea. I do agree that hot money coming from HK/CN/IN has a distorting effect on real estate. The main idea as C.A. pointed out is “affordability”.

But leveraged? I don’t think so. Would Canadian banks lend money to foreigners, non-residents or even residents with an income based on off-shore sources? Don’t think so. Would HK banks lend money to anyone to speculate on off-shore (Vancouver) real estate? Don’t think so. Unless I am mistaken, Vancouver prices are bid up by individuals who pay in cash. “Cash” is not leveraged. Perhaps there’s such a mechanism? Someone who brought a house in Canada can list the asset as collateral in a leveraged investment venture in Shanghai? I kind of even doubt that. Basically you are dealing with Asian capitalists etc who is moneyed but nonetheless risking his own money.

Unless you find this scenario to be true: Chinese or Indian SWF are buying up blocks at a time and holding them for speculative purpose. But you know what, while SWF are sort of other people’s money (OPM), they are essentially deposited money not borrowed money, so it’s still not “leveraged”. Which is an important point, while hot money, distorted prices etc are not so desirable; the damage in case of a bubble bursting will be relatively contained since the underlying investment was not leveraged.

And to C.A., in other forums I often use the 2-letter domain names in place of spelling out the countries: jp, cn, tw, de, es, etc. From now on I will use ca for Canada and C.A. for you, ok? Anyway, my respect for you should be well known, I didn’t think I needed to spell everything out?

Oh as for hockey. I consider it to be football (soccer) of the frozen north, it’s of course incomprehensible to anyone living in warm habitable climates. Which is why, next to ice-fishing, it’s a badge of Canadianess to play it.

MonsoonWind wrote:
ding73ding wrote:
BUT. With Harper and Rudd in power in CA and AU respectively. I think AU is going the right way while CA is wobbling if not slipping headlong into vestigial organ status.

Could you explain why? I find the above observation very interesting.

Well again, being only the most casual observer, I’m somewhat guessing, here goes...

Rudd seems to be very much a pragmatist. I know him more from the cn pov, but what I hear from very occasionally from au media is that his dealing with China is based on au’s national interest. While both Bushes were also good to China, they both chose that path out of convenience (senior) or negligence (junior) at the same time letting USA slipped downhill on their watch. Rudd seems to be more focused on national interest and deal with China accordingly.

Harper is simply the worst of what democracy has to offer. Combining the operational cunning of Karl Rove and hypocritical moral mask of Bush jr, he’s highly successful of making fools out of the opposition parties. His weapon of choice: emotional issues such as race, religion and sexual mores. He has absolutely no strategy on dealing with the economic crisis, which is admittedly not a burning issue, since indeed, the financial system wasn’t on fire and China and BRIC had cushioned the commodity/resource prices. But other than congratulating himself for the accomplishment of his predecessors, can’t he also exploit the opportunity smartly? Everyone, even the USA, is at least acknowledging the world order is evolving. Harper isn’t just content with being the 51st state of the USA (which is a self-inflated delusion, a protectorate is more realistic), he’s not even catching up with the requirement of being the 51st state in the 21st Century.

In short, I think Rudd is focused on forward-looking policies and un-burdened by Cold War ideologies, while Harper stays in power by political games and blame-storming.

And I need to add: why I point my spear at the whole country not just at Harper.

Both Liberals and Conservatives have had plenty of time to work out their respective intra-party problems, it's time they put up some respectable candidates. The fact that they have not and the people let the political shenanigans grind on and remain oblivious to the long term problems that Canada has to deal with... YIKES!

Just one example to link to the distractive sub-thread. Both ca & au will have to think about how to deal with cash-rich Asian investors. Neither whining about it, nor beating up colored people in back alley will be enough.

That is good stuff = thanks ding for the wonderful posts.

The only thing I would add to the discussion is the point you make about non-leveraged inflows that still help to distort local asset prices. This is a tough situation, and one that cannot be addressed through monetary means (tightening interest rates or lending regimes don't have any impact) nor indeed fiscal means (unless the government decides to provide 'subsidies' to locals versus foreigners for the purchase of land)

In these cases, non-tariff barriers are imposed much like the capital controls that plague various parts of Asia. In my opinion, the apparent price stability of such regimes hides latent economic weaknesses that are all too easily exposed when the regimes are removed. That at least is one of the less obvious reasons driving asset prices in Asia higher whenever capital flows are eased open.

What do you all suggest as the means of avoiding asset bubbles in the above situation ?

CA (with your permission, without the period separation )

Chan Akya wrote:
That is good stuff = thanks ding for the wonderful posts.

You are way too kind


The only thing I would add to the discussion is the point you make about non-leveraged inflows that still help to distort local asset prices...


Hehehe, I baited and he bit.


In these cases, non-tariff barriers are imposed much like the capital controls that plague various parts of Asia. In my opinion, the apparent price stability of such regimes hides latent economic weaknesses that are all too easily exposed when the regimes are removed.


Well are you baiting me now? Ok I bite

What I suggest is exactly what you fear: government imposed barriers to foreign investment. History shows that, while there are some problems and risks with throttling capital flow, those countries that throw their doors wide open has suffered worse results.

But CA (ok no dots) raised a legit point, limiting capital flow is not a complete solution on its own. There are two ideas:

(1) the Mongolia track: just keep the door closed forever, don't play the globalization game. Be self-sustainable and stay out of sight of bigger and scarier foreign powers. It's only a viable option if (a) your country is debt-free and therefore truly master of your own destiny and (b) your country doesn't have oil, diamond, fresh water, timber or lies on critical land path/sea lane to such resources. I would suggest this is the way forward for Iceland and Greece.

(2) the China track: use capital control only as delaying tactic not a final solution. The key strategy is build up your core strength, reduce dependence on any foreign powers, e.g. China is proving that she is not critically dependent on export to US market. You can gradually ease up on capital control but not for ideological faith, but do it based on the proverbial facts-on-the-ground.

Take a less ideologically controversial example: in the 90s there were tremendous pressure on the Canadian financial industry (slight distraction: how can "ice hockey is (not) a sport" be considered debatable while no one dispute the oxymoronity of "financial industry"?) where was I? Ok in the 90s, there were tremendous pressure for Canadian banks to "modernize" meaning become AIG/Lehman/Citi juniors. We (suffering customers of the Canadian banking cartel) were all told that it's only a matter of time big scary American banks will invade and eat us alive as light appetizers. The cartel and the Liberal government just play delay for years, dragging their feet for the "necessary" reform. And guess what, in less time it took them to figure out how to play the game, the game was over. And now they are trying to keep their faces straight while saying "it looked too good to be true".

To this end, I am thankful that Harper was too busy bashing gays and Muslims than to implement his "kiss every square inch of American ass" program.

And... linking to your recent masterpiece: Hair of Damocles' sword Please, AQ, don't mutilate this thread.

You were, rightfully, shooting flaming arrows at inept government officials, the Paulsons and Geithners. But are you trying to get your audience to extrapolate to the conclusion that the public sector is necessarily inept and the free market is the final solution to anything and everything? Paulson's book actually contained some honesty that you neglected to mention:

From Businessweek (boldface are mine):

Henry Paulson recalls dining with some of Wall Street's most powerful bankers on June 26, 2007, not long before the credit bubble burst. "All were concerned with excessive risk taking in the markets and appalled by the erosion of underwriting standards," he writes in his penetrating memoir, On the Brink. Yet they felt forced by competitive pressure to make loans they didn't like, the former U.S. Treasury Secretary says.

"Isn't there something you can do to order us not to take all of these risks?" was the gist of a question posed by Chuck Prince, who was still running Citigroup (C) as the bank bumbled toward disaster.

That comment encapsulates the bizarre situation that enveloped Paulson as he struggled along with Federal Reserve Chairman Ben Bernanke and New York Fed chief Timothy Geithner to save the free-market system from itself.

You can fault the Fed, the Treasury or other governmental agencies and GSE, but the root of the problem is free oh-so-free-it's-whacked market.

ding73ding wrote:
And... linking to your recent masterpiece: Hair of Damocles' sword Please, AQ, don't mutilate this thread.

I hear you, ding. However, I've quoted your post in the thread Hair of Damocles' sword so as not to deprive atimes.net readers of it.

From atimes.net, "The Sword of Tim Damocles":

ding73ding wrote:
MonsoonWind wrote:
ding73ding wrote:
BUT. With Harper and Rudd in power in CA and AU respectively. I think AU is going the right way while CA is wobbling if not slipping headlong into vestigial organ status.

Could you explain why? I find the above observation very interesting.

Well again, being only the most casual observer, I’m somewhat guessing, here goes...

Rudd seems to be very much a pragmatist. I know him more from the cn pov, but what I hear from very occasionally from au media is that his dealing with China is based on au’s national interest. While both Bushes were also good to China, they both chose that path out of convenience (senior) or negligence (junior) at the same time letting USA slipped downhill on their watch. Rudd seems to be more focused on national interest and deal with China accordingly.

Harper is simply the worst of what democracy has to offer. Combining the operational cunning of Karl Rove and hypocritical moral mask of Bush jr, he’s highly successful of making fools out of the opposition parties. His weapon of choice: emotional issues such as race, religion and sexual mores. He has absolutely no strategy on dealing with the economic crisis, which is admittedly not a burning issue, since indeed, the financial system wasn’t on fire and China and BRIC had cushioned the commodity/resource prices. But other than congratulating himself for the accomplishment of his predecessors, can’t he also exploit the opportunity smartly? Everyone, even the USA, is at least acknowledging the world order is evolving. Harper isn’t just content with being the 51st state of the USA (which is a self-inflated delusion, a protectorate is more realistic), he’s not even catching up with the requirement of being the 51st state in the 21st Century.

In short, I think Rudd is focused on forward-looking policies and un-burdened by Cold War ideologies, while Harper stays in power by political games and blame-storming.


DING,

MAY I join CA in complementing you on recent posts. THEY HELP clarify something that has mystified me.

Could I also suggest that there are reasons why Harper and Rudd have such disimilar leadership styles (not discounting personality differences).

1. HARPER leads a minority government. GIVEN the unavoidable trade-offs and compromises with other factions within parliament (along with the need to placate dissodent members of his own) It would be Difficult for a government like that to work to an agenda. Their energies would be spent just surviving. By contrast Kevin Rudd's party holds a majority of seats in the Lower House of our Parliament and the support of every factio within his (Labor) Party worth having. Much easier for a government like that to remain focused on government business.

2. THE Canadian economy is so integrated into the US one that I imagine it to be almost an extension of it. Possibly, Canadian policy makers have long reached a concensus that they are powerless to revive Canada's fortunes until a br0ad upturn eventuates in US. By comparison 4 of Australia's 5 biggest trading partners are Asian countries; India having pushed the US from 4th into 5th position of ranking just last year. It allows our politicaql economy to perform more like a national economy instead of the appendage to a larger regional one: denying Australian governments the excuse that they are powerless to manage.

Harper's choice of the politics of innuendo and blame may well be a reflection of his government's weak, even hopeless situation. Having stated that, the lack of posative leadership and strong government in Canada can only make a bad situation worse.

Ding raises an interesting point - albeit way too early in my day for me to make proper sense of it. In any event, the notion that government servants are NECESSARILY inept is actually central to my thesis about markets.

Paulson ran a private company decently and through much turmoil in the markets. Whatever one may say about Goldman Sachs, I don't think any of their counterparts lacked respect for them, nor did any of them have illusions of what GS would do if they were on the opposite side of any trade.

Paulson makes the interesting point that the bailout of Mexico in early 1995 by Clinton-Rubin was actually designed to bail out Lehman Brothers (not Goldman Sachs as had been thought at the time) because of their large one-way bet on the Mexican economy / bonds / peso. The company that emerged from the crisis therefore had a "false" expectation of a government bailout in future - and accordingly behaved in that fashion. When you had Paulson in the fray, the decision matrix actually changed.

This is central to our understanding of why Lehman failed. It wasn't the invisible hand of government that killed it, but simply the lack of one. Warren Buffett had turned down an investment in Lehman according to the book by Andrew Ross Serkin, so the company's fate was sealed by its failure to raise new capital in 2008 (well, insufficient quantities of it anyway).

Separating that from the onus of risk taking in banks is a different discussion, and one that goes to the role of central bankers per se. Maintaining the stability of the banking system was key and the Fed failed in this respect. They knew, more than anyone else, that inflows from Asia were skewing the interest rate picture and with that backdrop it was impossible to avoid an asset bubble.

They failed to take action for political reasons, not economic ones (the whole Greenspan continuum followed by the Bernanke imbroglio).

Chuck Prince was a lawyer, so it is natural that he looked for ways and means of making certain aspects of risk-taking ILLEGAL rather than implementing prudential means to curbing risk. He failed as CEO, and nearly took the bank down with him. Capitalism takes no prisoners - which is why he was ousted. And yet, both Bernanke and Geithner have their jobs intact still.

CA

Michael wrote:


In the mean time Hong Kong and the rest of Asia keeps bidding up the price of real estate. We now have least affordable ratios in the country. [factored on average income/average price] and lots of people are not happy about it. when working professional couples cannot afford to buy because foreigners with leveraged money are skewing the market the sh*t will hit the fan eventually.

Recessions do that to people, everybody is everyones friend when thing are good, but when thing turn down things get tense. I live in a very mixed neighbourhood, I can get on the local buss and count 10 different ethnic groups. So I am quite concerned about how this could play out. One of my workers, is fixing up a place in a Punjabi neighbourhood, lots of unemployed youth just hanging out, mostly OK but things get nasty often enough to make everybody wary.

Hi All,

Just giving an Australian perspective on this, we are in a similar situation although I would also say the baby boomers self indulgence doesn't help. Property prices and the costs of living in Sydney are huge and they shouldn't be. Alot of it in my opinion is money from Asia and also so called investment properties for the Baby Boomers. The fact that most young people in particular face a lifetime of renting, with all the negatives and instability that go with that will cause resentment. That most affordable places to live, even for associates in Financial firms are not that close to the city indicates how tough a lot of the rest have it.

The money from Asia is particularly dodgy as basically the plan is to buy alot of housing, hence inflating demand and then cramming as many international students into it as possible, illegally of course (3 or 4 people in a room, I know two house close to my place where 6 Koreans live in one room and have for a year) and then charging them an inflated rent (a rent equal to the one person staying in the room rather than 3 or 4). This in turn inflates the rent for everyone else.

This insane when there are plenty of empty apartments etc (although generally poor infrastructure around them thanks to pathetic state government and opposition). It is just dodgy business and a lack of regulation. One girl I know did an accounting degree as previously this was the easiest way to earn permanent residence, then she bought about 4-5 house and crammed them full of students from the mainland. She doesn't have to work, she lives a very nice life of this income. Basically it is just rent seeking in my opinion. People are starting to resent this not to mention most of these rentals are only advertised in Characters and specifically don't want people of other ethnicities applying. Not to mention dodgy landlords doing all sorts of illegal and controlling things because no one knows their rights.

But it isn't just this. Driving is another example. The amount of Hk or Mainland students I know that never bother going for their driving test or simply buy a fake license in China and transfer it here. People driving around with full licenses when they have never ever driven a car before and also have absolutely no understanding of the traffic laws here. I've had big arguments with friends over this especially when they drink drive.

Alot of the international student economy is a scam. Recent changes has basically made it alot harder for students studying very basic courses at private colleges to gain permanent residency which has annoyed alot of college operators and also students. Apart from a few genuine cases I really couldn't care as in my opinion alot of these courses only exist to funnel students towards PR and alot of the students only do these to gain PR. Not as bad in universities, especially as accounting no longer offers easier access to PR than other degrees. Australia has made alot of money from this sector but it should be smaller than what it is as I feel it has reached its peak and bubbled due to lack of regulation and the immigration racket.

I've gone on a bit of a tangent but just to be clear this whole area needs to be better structured, more regulated and actually have a clear mandate about what it is trying to achieve. I support the immigration of students and the free flow of money from Asia into Australia and vice versa I just feel the system needs to be redesigned or it wont last another decade or two. For example restrictions on the number of residential properties a non-citizen can buy, especially a student, however for an expat worker possibly no restrictions. If not these issues will cause growing friction and not just between Western and International students but also local first and second generation Australians. As all good economics is concerned with the incentives, the monitoring and the punishments need to be realign to create a better outcome.