Maybe the premise is wrong.

For months on this pathetic blog the comments section has teemed with doomers saying Canada is so done. Nobody has any money. Consumers are tapped out. Inflation has ravaged the masses. House prices are hanging by a threat. Cheap interest rates won’t matter a whit. Collapse is coming. Retribution, baby.

Is this so? Does falling productivity spell the end of the Canadian experiment? Did we completely screw over the next generation? Are interest rates falling because the political gods know a storm is coming? Is it inevitable houses will lose half their value because there’s nobody left to buy them?

That’s the meme. But some people ain’t buying it.

It also makes you wonder how the siren song of the nihilists jibes with the facts. The economy’s growing, not contracting. The jobless rate is far from alarming. Real estate values didn’t crash even as rates tripled. Consumers are spending. Corps are making money. Stock markets hit a slew of record highs this year. So, where’s the fire?

Veteran real estate broker Robert Ede is more of a data nerd than most. “The worst is over for sellers,” he concludes as we settle into September. “Buyers are back in the saddle.

“Despite the low level of sales …. Resale prices did not catastrophically drop – as predicted by the ‘sky is falling’ crowd. Prices are off-the-peak by 20%. Mortgage rates are well-established on the down-track. The USA Federal Reserve may actually surprise us with an initial -0.5% drop, perhaps spurring Macklem at the Bank of Canada to “anticipate” -ie look out the front windscreen rather than trying to maintain his CYA data-driven approach based on “looking in the rear-view mirror”.

After three rate cuts and a return to 4% home loans we’re on the way to two more reductions by Christmas. The expectation is for four or five more chops in 2025, taking the bank rate into the neutral 2% range.

Phooey, says the hairshirt crowd in the steerage section. It matters not if they give mortgage money away. Nobody has cash for downpayments nor the income to feed humungous loans. This is the eve of destruction.

Enter the iconoclastic Derek Holt. Hold on, says the rebel bank economist. You got it wrong. There are dangers lurking, but not the once you think. “If policymakers are not careful,” he says, “they risk triggering a big one that hits the economy with powerful effects on inflation and markets. To understand why starts by deprogramming everything you thought you knew about the Canadian consumer from the litany of depressingly bearish voices out there in a point-counterpoint style.”

So, stop reading the comments section. It’s toxic. And consider his argument:

• “A starting assertion is that Canadian consumers have nothing left in the tank to spend. This is patently false,” the economist states. Our savings rate of 7.2% eclipses that of the States (3%).
• This has allowed households to goose their cumulative savings each year to about half a trillion dollars above pre-pandemic levels. “As a result, Canadian households now have almost a half billion dollars in above-trend savings socked away and it continues to grow rapidly”

• This has resulted in a growth of total Canadian household net worth. The incremental gain is approaching $2 trillion.
• Do only the rich have this wealth squirreled away? Nope. Liquid net worth has exploded in all income cohorts, his report shows. Over 75% of consumption is being driven by the top three income groups.
• The CB figures most of this pile of liquidity is in the hands of mortgage-free homeowners. As for that great mortgage reset crisis coming next year, Holt says it’s a nothingburger. Rates have dropped. Defaults are miniscule. Pain has been exaggerated.
• The sauce on all of this is growing pent-up demand, mostly for housing. Lower interest rates should ignite construction, the economist says, and there will be no shortage of folks waiting to snap it up as mortgages drift lower.

Th risk?

“Cut too much too quickly,” Holt warns the Bank of Canada, “and you’ll bring a tsunami of consumer and housing demand to Canadian shores that could swamp boats from Victoria to St. John’s. The result could set the fight against inflation right back to square one especially in light of other upside risks to inflation.”

Those threats are profound. The Trudeau Libs could open a floodgate of spending as they try to change their dismal standing in the polls leading up to the election. Militant union activity could drive wages higher as productivity falls. Combined with a spurt of borrowing and spending by liquidity-rich households we could be back in the soup again.

So, go ahead and worry. Just stop moaning. You’re richer than you think.

About the picture: “Afternoon Garth,” writes Shawn in Chilliwack. “I was at the neighbour’s and this guy showed up to join us. Maybe an apt photo.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.