[Discussion] Will the Next one be the Worst Recession in History?

[redhdlois]

7 minutes ago, c00kies said:

Is that where you got your water?  

Might be a good idea......

[Warhippy]

1 hour ago, Jimmy McGill said:

^ this. 

 

The threshold for obtaining personal debt has to be much higher. Its so easy to get a homeowner line of credit and high credit card limits. 

 

One thing people may not realize is you can call your credit card company and just flat out ask for a lower rate. I've done it a couple of times, about 1/2 the time they've said yes and lowered it. I pay it off every month tho so that could be part of it but its worth a try if people haven't done it. 

They literally throw credit increases at my wife and I.  every few weeks a new piece of mail "pre-approved increase sign here" every time I use the bank ATM "Approved increase click here" or do easy web banking BAM right in my face.

 

No thank you....

[JM_]

8 minutes ago, Warhippy said:

They literally throw credit increases at my wife and I.  every few weeks a new piece of mail "pre-approved increase sign here" every time I use the bank ATM "Approved increase click here" or do easy web banking BAM right in my face.

 

No thank you....

throw in a predatory 8 year car loan and a time share and now we're cooking 

[redhdlois]

16 minutes ago, Warhippy said:

They literally throw credit increases at my wife and I.  every few weeks a new piece of mail "pre-approved increase sign here" every time I use the bank ATM "Approved increase click here" or do easy web banking BAM right in my face.

 

No thank you....

Remember the good old days when our parents saved up to buy the new colour tv or couch??
When I was just starting out on my own, first job, etc. In the mid 70’s....it was very difficult to get a credit card.  My how things have changed.   I remember getting my first credit card, had to fill out an application, etc. To get $300 credit limit at Eaton’s.

had to establish my credit before being approved for a Mastercard or Visa.

Now they set up booths at universities to hand out credit cards.   
Throw credit at people, keep the economy going. 
Can’t wait for interest rates to rise....I would hate to be one of those people that are maxed out on everything.  

[Gurn]

I've mentioned it before but; as a guy with no debt and a few savings accounts, RRSPs and a tax free savings plan, I almost welcome a large interest rate hike.

Then I'll be able to pay a little bit of cash for a lot of things that people borrowed a lot of money to originally buy.

 

It will be bad for a lot of people, but as long as it doesn't get bad enough that people resort to theft and violence, I'll be better off than I am now.

Edited January 14, 2020 by gurn
lot of money

[Gurn]

Also mention, again, one of my biggest peeves is the number of "credit/solvency" agencies advertising that they can reduce your debt by "up to 60 or even 80%.

 

Why the heck is that allowed? They bought or borrowed, why let them off the hook? Doesn't that just encourage everyone to borrow large sums then renege on paying?

[Ray_Cathode]

15 hours ago, Warhippy said:

Have been reading a lot of paperwork and reports coming out recently indicating that the next Great Recession is not only inevitable, it is already starting to happen.

 

I don't want to be all doom and gloom but the 3 key factor weighed against this are

 

• Over valuation of stock, property and asset
• Geo-Political issues such as Mid East conflict and trade wars
• Personal/Consumer, Business and Corporate Debt levels.

 

Now there is very little any government can do to avoid such issues, as much of it is based on market forces that are well outside of their control, consumer and personal debt levels are based on a persons inability to live within their means.  Trade wars...well we've read about those for the last 17 months and the US seems happy to engage under the current administration without cause or worry to their own interests.

 

I have posted a few links to read over, and while I know most are all US based it still holds weight.  But am truly interested in a discussion here as I know there are a number of people on this site well invested in the real estate market, business and financial markets or personal banking and would love to hear what they have to say about this

 

https://www.ccn.com/the-next-recession-wont-be-triggered-by-a-housing-market-crash-economist/

 

https://www.thebalance.com/could-the-great-depression-happen-again-3305685

 

https://www.stlouisfed.org/on-the-economy/2019/october/consumer-debt-new-peak-depends

 

https://www.ccn.com/buffett-indicator-warns-stocks-doomed-worse-crash-than-2008/

 

https://www.federalreserve.gov/releases/chargeoff/chgallsa.htm

 

https://www.axios.com/world-total-debt-load-91ab8c0a-db67-40cb-940e-a36ac58b629f.html

 

https://www.ccn.com/66-rate-cuts-fuel-dangerous-bond-market-bubble-in-2019-when-will-it-pop/

 

So in all honesty.  What is everyone's thoughts on this?  Please, try to keep this as partisan free as possible because if this mess hits the fan it won't care for party status or choice of team.

“I don't want to be all doom and gloom but the 3 key factor weighed against this are

 

• Over valuation of stock, property and asset
• Geo-Political issues such as Mid East conflict and trade wars
• Personal/Consumer, Business and Corporate Debt levels.

Now there is very little any government can do to avoid such issues, as much of it is based on market forces that are well outside of their control, consumer and personal debt levels are based on a persons inability to live within their means.  Trade wars...well we've read about those for the last 17 months and the US seems happy to engage under the current administration without cause or worry to their own interests.”

 

Actually, the first and third items above are directly controlled but the FED expanding credit via the banking system. These FED activities are responsible for creating bubbles in the economy.  When the government creates vast amounts of credit at low interest rates people line up to take the cheap money and use it to invest in anything that might yield a greater return than the interest cost.  The vast amount of government created credit has to go somewhere and essentially there are only two capital pools large enough to support it - real estate and the stock market. Since there is a limited supply of sound investments, the low interest rate combined with massive credit being available results in people making poor choices.  In real estate a low interest rate causes people to take on mortgages they cannot afford at normal market rates, if a person can only afford a two thousand dollar mortgage (at say 3% interest - he can afford a home worth twice as much as he could at 6%) - and many people expand their debt up to the amount of payments they can afford. But what does that do? Well, the supply of housing is somewhat inflexible - it takes time to build new housing - so that results in massive price inflation of existing stocks - see Vancouver and Toronto. As the great economist, Thomas Sowell, points out in “The Housing Boom and Bust”, this effect is compounded in areas with extensive zoning restrictions that limit the provision of increased supply - most of the bust took place in the six states with the most extensive zoning restrictions.  Now government compounds this problem by (in the US, for instance) providing guarantees to people who otherwise could not afford to buy, through quasi government entities Fannie Mae and Freddie Mac. In addition, Democrats such as Frank and Dodd, lobbied and threatened banks and credit unions (even organizing threatening protests at the homes of bankers) to grant these unsupportable mortgages. Theses operatives directly coerced the management of Fannie Mae and Freddie Mac to grant these mortgages, bad mortgages that were included in tranches sold fraudulently to banks and institutions all over the world. Obama later appointed Dodd and Frank to investigate the very problem that they were instrumental in creating.  Of course, they levelled the blame directly at the very institutions they had coerced, and used that to lever vast new regulations of a banking industry already drowning in regulations that coerced them into doing business they should never have been in. 

 

Stock market bubbles burst on an accumulation of unmet, unrealistic expectations. Now their do tend to be survivors from these bubbles. Because of the vast sums involved it results in the creation of huge businesses that would be unlikely to be created in an entirely free market - think eBay, Amazon, Google etc.  The vast amount of capital made available to these businesses allowed them to drive competition out of business - think department stores, book stores and so on. I am not arguing that those businesses are not great innovations, but that their near monopoly status is probably at least in part enabled by their access to vast amounts of capital at low cost. The other side of that equation is the huge numbers of business failures that accompanied their success.  The unseen, of course, is the vast amount of government debt accumulated to finance it all.

[Chicken.]

26 minutes ago, redhdlois said:

Remember the good old days when our parents saved up to buy the new colour tv or couch??
When I was just starting out on my own, first job, etc. In the mid 70’s....it was very difficult to get a credit card.  My how things have changed.   I remember getting my first credit card, had to fill out an application, etc. To get $300 credit limit at Eaton’s.

had to establish my credit before being approved for a Mastercard or Visa.

Now they set up booths at universities to hand out credit cards.   
Throw credit at people, keep the economy going. 
Can’t wait for interest rates to rise....I would hate to be one of those people that are maxed out on everything.  

I agree with the craziness of handing out credit cards like candy these dyas, but I think the interest rate hike will mostly effect people with mortgages that are above their means of income when it comes time to renew. I guess it is also hard for me to fathom people that utilize their credit cards like a loan on day to day expenses.. but they must be out there. there should be a highschool course on fiscal responsibility and personal finance. would be a heck of a lot more useful than most of the courses I had to take.

[redhdlois]

9 minutes ago, gurn said:

Also mention, again, one of my biggest peeves is the number of "credit/solvency" agencies advertising that they can reduce your debt by "up to 60 or even 80%.

 

Why the heck is that allowed? They bought or borrowed, why let them off the hook? Doesn't that just encourage everyone to borrow large sums then renege on paying?

This should be available only to those with a legit reason why they can’t pay their bills, not because they chose to spend, spend, spend.  
Supports people being irresponsible, there’s no accountability.

That ad on tv for credit resolution of that contractor that was $100K in debt, but now says he is in the black about the same amount.??   He should have to re-pay some of what was written off IMO.

[redhdlois]

2 minutes ago, Chicken. said:

I agree with the craziness of handing out credit cards like candy these dyas, but I think the interest rate hike will mostly effect people with mortgages that are above their means of income when it comes time to renew. I guess it is also hard for me to fathom people that utilize their credit cards like a loan on day to day expenses.. but they must be out there. there should be a highschool course on fiscal responsibility and personal finance. would be a heck of a lot more useful than most of the courses I had to take.

Agree.......unfortunately our society promotes spending far more than being responsible.

One of the most useful things I learned in school, grade 8 I believe it was, we were taught how to fill out our income tax return.  I totally agree that school should be teaching students a lot more life skills.

[AV's Coin]

How much of the increase in property values is just the devaluation of the dollar? This is something my brother mentioned to me a few days ago.

[Violator]

I have been hearing recession for atleast a year and have been waiting for it to happen.

[Kragar]

5 hours ago, Jimmy McGill said:

whats the actual alternative? we haven't had a PC/CPC government thats not rung up the debt since the 50s. The joke of it being viewed as partisan is they all do it because we all like the election time goodies, whether its social programs or lower taxes, its going to cost us all.

 

Household debt is the biggest impact on daily lives, thats the one that scares me the most. And its in most peoples control. Of course there are people on the margins that have to, but for the rest of us how many run a tight household budget? how much of that debt was unnecessary? But how much of our economy is based on superfluous consumer spending? that tug of war is going to produce the next recession imo. 

Exactly.  No one, including politicians, is interested in austerity.  As much as right leaning parties in our countries claim conservatism, they love to spend about as much as the others.

 

We have squandered control over retirement money to our governments (CPP, Social Security), paying these moron bureaucracies to provide us with substandard results, only because too many people are too weak, lazy and/or ignorant to do it themselves.  If the collective we would save dillingently, we would not need those programs, and the unfunded debt they bring (unsure if CPP is similarly unfunded as SS).

 

Household debt is scary.  Heard an awesome quote the other day, addressing the YOLO crowd.  YOLO is wrong. You only die once... you live every day until then. If you aren't managing you life in accordance with those facts, more often than not, it's gonna get ugly at some point.

[JM_]

1 minute ago, Kragar said:

Exactly.  No one, including politicians, is interested in austerity.  As much as right leaning parties in our countries claim conservatism, they love to spend about as much as the others.

 

We have squandered control over retirement money to our governments (CPP, Social Security), paying these moron bureaucracies to provide us with substandard results, only because too many people are too weak, lazy and/or ignorant to do it themselves.  If the collective we would save dillingently, we would not need those programs, and the unfunded debt they bring (unsure if CPP is similarly unfunded as SS).

 

Household debt is scary.  Heard an awesome quote the other day, addressing the YOLO crowd.  YOLO is wrong. You only die once... you live every day until then. If you aren't managing you life in accordance with those facts, more often than not, it's gonna get ugly at some point.

the austerity you choose will be far better than the one thrust upon you, thats for sure. 

 

What it would really mean in Canada is actually not too bad if we dealt with it today - a 2-3% rise in the GST and cutting back on some entitlements by 10% or so and we could actually start chewing into our federal debt. Does someone have the spine to do that? dunno.

 

The CPP is actually fairly well run, so we're lucky up here for that - but there is a sizeable gap in future needs thats going to have to be dealt with, probably by payroll tax increases. 

 

 

[Kragar]

9 minutes ago, Jimmy McGill said:

the austerity you choose will be far better than the one thrust upon you, thats for sure. 

 

What it would really mean in Canada is actually not too bad if we dealt with it today - a 2-3% rise in the GST and cutting back on some entitlements by 10% or so and we could actually start chewing into our federal debt. Does someone have the spine to do that? dunno.

 

The CPP is actually fairly well run, so we're lucky up here for that - but there is a sizeable gap in future needs thats going to have to be dealt with, probably by payroll tax increases. 

 

 

Yup.  The only concern with the plan is cutting entitlements... people feel entitled to it all, right?

 

Wasn't there some strike recently, I think in France, where they wanted to make people work a couple years more before collecting, but only apply it to those not close to retirement (maybe to those currently under 40???).  Sounded like a pretty minor change to me, and a large portion of the country stopped working in protest.  I'd like to think we are more accommodating this side of the Atlantic, but politicians can play the polarization game and stall damn near any solution... kinda like we've seen in the last 10, 20 yrs.

[Lancaster]

1 hour ago, redhdlois said:

Remember the good old days when our parents saved up to buy the new colour tv or couch??
When I was just starting out on my own, first job, etc. In the mid 70’s....it was very difficult to get a credit card.  My how things have changed.   I remember getting my first credit card, had to fill out an application, etc. To get $300 credit limit at Eaton’s.

had to establish my credit before being approved for a Mastercard or Visa.

Now they set up booths at universities to hand out credit cards.   
Throw credit at people, keep the economy going. 
Can’t wait for interest rates to rise....I would hate to be one of those people that are maxed out on everything.  

To be fair, credit card interest rates are already sky high at around 20%.  

I remember getting caught by my first credit card at age 18.  Messed up my credit for years as being an unemployed student makes paying bills a tad difficult.

 

Interest rate increases will be affecting mortgage holders, investors, business, etc.  Both positive and negative.  

Your mortgage payments goes up $200 per month, not life altering, but a PITA.  Your income focused portfolio will probably take a hit in terms of valuation, but ultimately be beneficial for most people savings up money (take the capital loss for tax purposes maybe).  

Those taking out loans by using their own properties (HELOC, 2nd mortgages, etc) and investing with them will be really screwed.  Monthly payment will increase, sharp decline in home values, investments, etc.  Could start a cascade of defaults on those who are over leveraged.  

[redhdlois]

8 minutes ago, Lancaster said:

To be fair, credit card interest rates are already sky high at around 20%.  

I remember getting caught by my first credit card at age 18.  Messed up my credit for years as being an unemployed student makes paying bills a tad difficult.

 

Interest rate increases will be affecting mortgage holders, investors, business, etc.  Both positive and negative.  

Your mortgage payments goes up $200 per month, not life altering, but a PITA.  Your income focused portfolio will probably take a hit in terms of valuation, but ultimately be beneficial for most people savings up money (take the capital loss for tax purposes maybe).  

Those taking out loans by using their own properties (HELOC, 2nd mortgages, etc) and investing with them will be really screwed.  Monthly payment will increase, sharp decline in home values, investments, etc.  Could start a cascade of defaults on those who are over leveraged.  

Yes, I meant bank lending rates in general.  Credit card cash advances are about 25%.....not sure how much those payday loan places charge.
People that squeezed into a mortgage will be hurting (even more), adding more and more credit card debt.

I owe nothing so would love my money to be earning more interest!!

Edited January 14, 2020 by redhdlois

[canuktravella]

Not everyones in debt. Ive saved up 68k to buy either a acre in kootneys in June and build a cabin or a whole house in New Brunswick with 20 acres and water front for 67 k or 45 k. in Europe for a small apartment that I can reno. After this yr no more expensive rent in Victoria, can bartend in kootneys in nelson or at ski hills and only have to pay 400 a yr in property tax. Work hard and invest in real estate can't go wrong. 

[Warhippy]

7 minutes ago, canuktravella said:

Not everyones in debt. Ive saved up 68k to buy either a acre in kootneys in June and build a cabin or a whole house in New Brunswick with 20 acres and water front for 67 k or 45 k. in Europe for a small apartment that I can reno. After this yr no more expensive rent in Victoria, can bartend in kootneys in nelson or at ski hills and only have to pay 400 a yr in property tax. Work hard and invest in real estate can't go wrong. 

As a heads up, Nelson area and the Kootenays in general are actually mirroring the Okanagan for prices so find property while you can.  As for work, it is actually lower per capita in terms of wages than the Okanagan

[PhillipBlunt]

6 hours ago, Ryan Strome said:

 and before I get attacked for being on my phone while I'm driving I'm driving down a County Road in the middle of nowhere it would only be myself I would hurt and I think a few of you would be pretty happy about that LOL

Where exactly are you, Strome? Are you not worried about an errant moose?