Are Sold sings just for Real Estate or are government selling off their countries under the table.!

In case you haven’t been following the news recently the world is gradually reaching a point where it runs out of money. Caused by years of excess spending with little regard for long term fiscal stability various governments around the world are reaching crunch time. Simply put we have been borrowing to enjoy benefits we can’t afford. Of course this will pan out in one of two ways, 1. Governments default on their debt obligations, that’s a bit like you defaulting on a mortgage payment, or 2. Governments will decide to allow themselves the ability to raise their debt ceiling (I.E. borrow more) and the dice will be rolled one more time.


The scenario in either play out isn’t actually that good although 2. will feel better than 1. 2. Will feel better because government belt tightening will be muted and social security payments etc will continue to be made. However, the long term scenario looks bleak as the more you borrow the more you have to pay back. I am of course largely referring to the USA in the comments above, although you don’t have to look very far to see similar events taking place in almost every western nation, Europe and the UK being quite evident of similarities. The US government is due to literally run out of it’s ability to borrow more some time in the 2nd week of August. Notice I said it’s ability to borrow more, it’s being incorrectly referred to in the press at the moment as the govt running out of money. This statement is incorrect as the government if the USA is actually printing the money it is spending. There is a limit set by congress on how much it can print and that’s the limit that is going to be hit some time in early August.

Why does this all matter, after all w are Canadians and the Canadian economy is doing great ! ..hmm. What’s driving the Canadian economy? We are largely an exporter of either auto sector parts, small materials (Ontario) or raw material (Mid West). Both require growth of demand by consumers for continuance. No we cannot escape! Consumers growth (I.E. buying things) happens for two main reasons, 1, they feel rich or 2. there are more of them. The ‘I feel rich’ crowd has largely left the building and the only argument left is the second one, and here you could argue quite convincingly that sometime in August the world population will cross the 7 billion mark for the first time. So raw material demand is likely to remain OK but it will suffer if the world slips back into a recession. The jury is till out on this but watch this space. The USA is caught between a rock and hard place and any short term feeling of euphoria is likely to be fairly short lived.

This writer is concerned that the governments will again take the easy path preferring to pat themselves on the back and say phew, job well done, when in fact they are delaying the inevitable. As painful as it may be, we have to start living within our means and that means everyone. Canadians, Americans, Europeans etc . The resultant knock on effect for the real estate market in Canada if we do not will not be a good one. For now, all is OK and the world moves along. Watch this space, we’ll report back often.

Ian

Filed under: Barrie Community InformationStatistics

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