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AndrewB

The real apocalypse of 2012

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I'm a staunch believer in the apocalypse of 2012. However, it has nothing to do with Mayans, sunspots, or neutrinos overheating earth's core. It's an economic disaster caused by the collapse of the Canadian real estate market. Even though the subprime lending crisis caused the U.S. real estate market to lose over a third of its value, Canada's market has continued its upward march with barely a hiccup. Many people falsely believe that Canada has a solid banking system and strict lending requirements. These people may be surprised to learn that Canada is currently the world's largest holder of subprime mortgages, and currently has a higher debt-to-income ratio than the U.S. In an attempt to prevent a "pop" of the real estate bubble, in 2008 Prime Minister Stephen Harper ordered a relaxation of mortgage lending rules, allowing 40-year and zero-down-payment mortgages to be approved. This propped up the real estate market and allowed debt to pile on unabated. The reasons for this were entirely political. Stephen Harper wants to be known as the man who steered the Canadian economy through the worst world economic crisis in decades. He wants to do this so that him and his Conservative Party can win a majority in the next election. And so the unrestricted mortgages continued until 2009 when they were tightened to 35 years and 5% down, and after some dire warnings about Canadians debt levels by independent economists, mortgages were restricted again in 2010 to 30 years and 5% down.

Unlike in the U.S., Canadians cannot lock in their interest rates for the entire term of the mortgage; the maximum term is 5 years. If the interest rates are higher in a few years then homeowners will be forced to refinance at the new rate. We currently have historically high debt-to-income ratios and historically low interest rates. It's inevitable that interest rates will rise by 2 or 3 percentage points, maybe even 5 or more. When this happens, the financial strain on Canadian households will become unbearable, the avalanche of defaults and foreclosures will begin, and the day of reckoning will have arrived. It will be a crisis of cataclysmic proportions. The U.S. crash will look like a fender-bender in comparison.

Stay/get the FUCK out of Canadian real estate. I know that's what I'm doing.

http://www.financialpost.com/Subprime+mortgages+alive+here/2784846/story.html

http://www.windsorstar.com/business/Consumers+warned+brutal+reckoning+ahead/3972687/story.html

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That guy should have had a regular stock broker.

None of this is surprising. Canada is curiously a land where laws don't get made. That has all kinds of advantages for things (no pat-downs for us and we can legally eat all kinds of things Americans can't), but it also helps stuff like this happen. Where we have rules we every so often get conservative governments that think businesses can do no wrong. Bleh.

This kind of stuff makes me wonder if we could avoid recessions by holding guns to the heads of business types and forcing them to hire and lend as they were before. Yeah, absolutely retarded idea, but sort of an interesting one.

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AndrewB said:

Stay/get the FUCK out of Canadian real estate. I know that's what I'm doing.

Or conversely, wait for it to crash and for property prices to plummet and then get the fuck in. That's what I'll be doing.

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I really haven't been looking into the evidence behind the 2012 apocalypse thing but I believe in it anyway. But not enough to discontinue my savings for a house next year. It is however, my reasoning to get super fuckin hammered on my 22nd birthday (dec 20th 2012, one day before the end) I really hope the whole thing is reminiscent to the events depicted in Doom.

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I'm trying to figure out what will be the best place to be so I can watch people being stupid while also having some good beer on that day.

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