RSS Feed MenuMy National Post column this weekend details for Canadian readers the amazing incentives to borrowing offered in the United States.
Step two after a Canadian-style currency depreciation should be a shift to a Canadian-style approach to home finance. The first shift will encourage work; the second shift will encourage saving.
Unfortunately, the ideas President Obama seems eager to import from Canada are not these right lessons, but instead two wrong lessons: the need for higher taxes and more government control of the health care system.
It’s as your children’s teachers tell you: You can only teach those who want to learn.
RioRancho // Dec 5, 2009 at 6:35 pm
I am curious – why has FOX chosen to stir up fear about a the falling dollar? My company exports about 1/3 of what we make and we could not be happier about the situation. For the average American who does not travel abroad, and whose major expenses are for housing, utilities, and food, there is no decline in purchasing power.
LB // Dec 5, 2009 at 9:11 pm
First of all FOX abandoned sound reason a long time ago, now they seem more interested in joining whatever bandwagon seems to be passing by.
Secondly the Falling Dollar would, in all likelihood, lead to a moderate to pretty dramatic rise in inflation. Especially given how much of the economy is dependent on imports. However what Frum is saying is that Despite the initial pain that such a move would cause, in the long run it makes domestic suppliers economically viable spurring economic growth. The US also has another advantage in that it is still the largest economy on the planet, a low dollar could certainly bring in a flood of foreign investment which is good way to balance things out.
I think the big problem for the US is the lack of a coherent way to produce targeted legislation. In Canada the process is still messy but it’s a walk in the Park compared to whatever you would call the US legislative process.
Carney // Dec 6, 2009 at 10:41 am
Inflating the currency is not a serious proposal for prosperity.
Frum’s idea about tightening lending requirements is much more sound. More relevant however is the need to realize that the government and a host of other pressures literally or effectively forces lenders to hand out loans to un credit worthy non whites, in effect forcing lenders to take on toxic bad debt or be accused or even prosecuted for “redlining”. Bush and Rove pushed this hard to win over Hispanics, and the Left of course did not want to be outbid in this effort to buy votes either. None of these laws, regulations, or institutions have been called to account or ever publicly recognized outside a few blogs and faint (loudly shouted down) hints. Unless and until the RACIAL motive for this mortgage fraud is widely acknowledged, and the public policies and cultural expectations and pressure groups driving it are dismantled or de-fanged, this will happen over and over.
Also, we must face our dependence on oil for transportation fuel. Note that thanks to OPEC restrictions on production, the per barrel price rose 1,400% from 1999 to 2008, a crushing tax on the world economy. Oil is dominated unfixably by OPEC (the Mideast has 70% of world reserves and is expending its reserves at a slower rate than the non-OPEC world), so it is imperative to wean ourselves from it to some other fuel for transportation. The most practical and affordable fuel to transition to is alcohol fuel. See http://www.EnergyVictory.net for more info.
RioRancho // Dec 6, 2009 at 10:53 am
Carney – your suggestion that minorities caused the financial crisis is the trifecta: offensive, stupid, and wrong.
Carney // Dec 6, 2009 at 12:16 pm
RioRancho, your knee-jerk browbeating is exactly what intimidates most nice, mild-mannered people and will effectively prevent the problem from even being recognized, let alone solved.
Meanwhile, the facts do not care about your feelings – they continue to exist even if you pout and stamp your feet. Half of black borrowers and 40% of Hispanic borrowers got subprime loans, compared to less than a fifth of whites. Sub prime borrowers are drastically more likely to go into foreclosure – a whopping 19.4% do. And the big growth in homeownership over the past decade, much boasted about by politicians, happened heavily among Hispanics.
RioRancho // Dec 6, 2009 at 1:08 pm
Carney – sure you want to double down on this?
Subprime lending peaked in 2006. Middle- and upper-income borrowers accounted for more than two-thirds of high-rate mortgages issued in that year. And more than 55 percent of such loans went to white borrowers.
During the period of 2004 to 2006, whites had more subprime rate loans than all minorities combined.
What do these 4 places have in common? Rapid City, SD; Napa, CA;Manchester-Nasuha, NH;Bay City, MI? All four are >85% white, all four were are among the top 20 metros hardest-hit by the mortgage meltdown.
See the WSJ, Oct 11, 2007 – a prime target for subprime lending was wealthy white folks buying second homes.
ltoro1 // Dec 7, 2009 at 11:31 pm
The following statement included in David Frum’s article is incorrect. “Capital gains on the sale of a principal residence are untaxed, so long as the buyer reinvests in another residential property.”
In fact, if you have live in your home for 2 of the last 5 years before you sell the home, the capital gain is excluded from income up to $250,000 for single filers and $500,000 if married filing a joint return. You do not have to invest the proceeds into another property. If you own investment property (whether residential or non-residential) you can engage in tax free exchanges of property where you effectively sell your current property and buy a another property to defer capital gains taxes.
ltoro1 // Dec 7, 2009 at 11:38 pm
Carney, RioRancho, I’m not going to touch the race issue, but suffice it to say it public policy (whether loose monetary policy, tax policy, lending standards, etc.) channels more capital into housing than would otherwise be the case, then the price of housing will rise until we are alll subprime borrowers or the bubble pops. In this case both occured. Consider Napa, CA. Prices got so high there that typical middle to upper middle class people could no longer qualify for or afford a typical 30 mortgage with a 20% down payment and a fixed interest rate.