I won’t deny that there will be long-term fallout for the actions of our leaders. I am merely saying that the stimulus does seem to be working. The fact that GDP has returned to positive, unemployment numbers have started to shrink, even with stimulus, would have seemed pretty unlikely back in March. There is also a huge psychological impact to having numbers turn positive, investors and businessmen turn from being afraid of losing money to being afraid of losing out on an opportunity. Don’t underestimate that fear. Just as the deflationary cycle can feed on itself causing things to continue to worsen, so to can the upswing. Throw in ridiculously low interest rates and it becomes clear that we are in the midst of a V-shaped recovery, personally I believe it will go well into 2010 probably even 2011 before it crashes out. Yes, higher interest rates will come and yes there will be hell to pay down the road but as an investor the money to be made seems to be on the long side.

As far as housing I am going to predict that these events will lead to a very strong spring market. I think housing prices will hit record average price levels in at least 2 of march/april/may. I won’t take credit for this theory as it’s based on ideas others have postulated. There will be concern that interest rates are about to take off, dissipation of economic worries and pent-up demand should all drive the market.

http://theautomaticearth.blogspot.com/2009/12/december-2-2009-its-foolish-to-ask-for.html

I don’t know the ultimate effect of the Canadian stimulus, either – other than we’ve run up a whole lot more federal, provincial and municipal debt (and this is going to have to be repaid someday). You had to spend money to receive money, so it’s kind of a vicious cycle. And when they vaguely start referencing a ‘second stimulus’, that does tend to make one question about how successful the first one really was.

All I can think of is Japan… the lost decade, and how the same course we’re on didn’t work out very well for them in the end.

Jason and I are speaking of this stimulus.

This is a direct quote from the above article:

“Eleven months after presenting his recession-fighting budget, Mr. Flaherty said in a report Wednesday that almost 60 per cent of $62-billion in federal and provincial economic stimulus measures will be spent this year, and fade out by the end of 2010.

Given the administrative delays with dispersing the money, the bulk of the stimulus made its way into the economy only over the past few months. That momentum likely will carry into the early part of next year, by which point Mr. Flaherty intends to close the taps. The minister on Wednesday set a deadline of Jan. 29, 2010, to allocate the remainder of the federal portion, and insisted that no further measures would be forthcoming.”

I believe you’re closer to the correct about the U.S. U6 unemployment number. At a practical level, though, it’s nasty any way you slice it.

Jason,

Re: the effect of said stimulus- I just don’t know. The monthly numbers can be fairly volatile. I’d sure like to see a trend, but it may take a few months to get there.

Maybe. Maybe we’ll drop back into a recession in 2010, too. I’m saying it’s “unlikely” that we’re in a recovery (I’m not saying it’s “impossible”). In any event, I think I’ll need more data than one month of GDP growth (and that at +0.1%) to be convinced. Recovery = higher interest rates, so I’m game.

Okay, you’ve got me there Peter.

In this particular post, he may not have been but I have seen comments time and again insisting that prices have to fall.

Jason,

I am not sure which stimulus you are speaking of but I can tell you that the US stimulus is actually only 25-30% spent right now with the spending to continue through 2010. The stimulus spending will actually be accelerating going forward.

U-6 unemployment, which I assume you are talking about is actually 17%. Where do you get 22 from?

You can hate it, deny it, spit at it and call it names but the fact of the matter is the economy is turning around.

interesting captcha: visaing FIRST

You make some excellent points, particularly about the withdrawl of the stimulus. It’s good to see that we’re doing much better than our southern neighbor, but our economies are inextricably linked, for sure. I have to admit I am more heartened by this data than the GDP data, at any rate.

Payrolls in U.S. Decline 11,000; Unemployment at 10%

“unemployment rate dipped to 8.5 per cent from 8.6 per cent as both full-time and part-time jobs rose and the number of self-employed Canadians declined”

Here is more specific information from StatsCan :

Unemployment in SK fell by 1.7% month-over-month, but is still up by 39.7% year over year. It looks like more full-time rather than part-time jobs were created too, which is certainly a good thing.

Peter, I don’t think Bookrat was “guaranteeing” that prices would fall, but rather, disagreeing with the TD economist’s comment that prices aren’t “dramatically out of line.” Using 3.5 times incomes as the measuring stick would certainly put them very high almost everywhere.

I think Norm hit the nail squarely on the head. I keep hearing again and again that the market just HAS to crash. You could very well see stagnant or slowly rising prices while inflation eats away at the excess. If you want to say prices are unreasonable or that it’s unfair to new buyers I can accept that but please do not lead people astray by asserting that prices are guaranteed to fall.

Good points, but it’s been a helluva long time since real estate prices have been 3.5 times income in Vancouver or Toronto so clearly, in some markets higher prices have proven to be sustainable. Not saying that’s right, just that it is the way it is.

I am also pleased that our market hasn’t gone completely crazy in terms of further price inflation. Still, we’re probably in the 4.5-5 times median household income range. On the other hand, it’s does feel somewhat better to be 20% below the national average.

‘Not so dramatically out of line’?? The ratio of ‘average house’ to ‘average income’ across Canada is approximately 5.4 … where 3.5 has been considered ‘historically affordable’. In some heavily-bubbled places like Vancouver or Toronto it is significantly higher — between 7 and 8. How is that not ‘dramatically out of line’? Or have the rules changed when I wasn’t looking?

I have been very glad to see that the recent mania (prices going up instead of down) has not impacted the Saskatoon market in the same way as it has in some places, but I still refer to my ‘carrying cost vs. actual cost’ argument … I think that people are only looking at what the mortgage will cost this month and not how much it actually is. Humans are (on the whole) very short-sighted creatures…