Mark Carney Probably Can't Leave Fast Enough …

As we have previously pointed out, the 'central banker of the year' (if not the decade, nay, century!) was very likely to have proved to have exceedingly good timing by vacating his chair at the Bank of Canada and moving on to the BoE. His great record as Canada's chief monetary central planner consisted in leaving a housing bubble and a household credit bubble of unimaginable proportions behind.

Alas, he is still there, and the bubble is beginning to look a bit frayed around the edges:


Herbert Crockett called Cairo, Geneva and New Delhi home in his four decades as a human resources executive with the World Health Organization. The Prince Edward Island native invested closer to his roots in 2005.


With Toronto on the verge of what turned into a colossal building spree, the 75-year-old retiree bought a C$904,000 ($878,000) one-bedroom suite in the Trump International Hotel & Tower. Eight years later, the 65-story skyscraper is complete, exuding Manhattan-style glamour.

For Crockett, fellow investors and Canadians alike, the glow is fading as home sales tumble, Bloomberg Markets magazine will report in its April issue. They say they’re worried that Canada’s debt-fueled expansion will stall before a global recovery can revive exports — a slowdown that would blemish Bank of Canada Governor Mark Carney’s record just as he begins his new job as head of the Bank of England on July 1.

“If the city is any indication of what’s going on in the country, it’s over-reliant on its housing sector,” Crockett says, pointing out a window of a downtown coffee shop to dozens of cranes swinging across the skyline. “I’m afraid of a condo crash, and then what will happen to all the investments?”


Toronto is awash in real estate. There were 144 skyscrapers under construction in late February, more than in any other city in the world, according to SkyscraperPage.com. Proposals for new condos reached 253,768 units at the end of the fourth quarter, up 10 percent from a year earlier, Toronto-based research firm Urbanation Inc. says. Four luxury hotels, each featuring condos, have opened in the past two years.


The projects keep coming. Frank Gehry, architect of the landmark Guggenheim Museum Bilbao in Spain, plans three towers. The highest, at 85 floors, would be North America’s tallest residential building.


Crockett, who lives in Crozet, France ,  says he’s losing C$7,000 a month amid the glut. He says his Trump suite, which guests rent through the hotel reservation system, is occupied about a quarter of the time. He’s suing Donald Trump and the developers for C$2.9 million for misrepresenting investment returns. About two dozen other buyers have brought similar cases.”


 


(emphasis added)


Say it ain't so! A 'blemish' on the flawless record of this irreplaceable tireless bureaucrat, just before he sallies forth to delight the benighted shores of Albion with 'NGDP' targeting? Couldn't they have waited a few months before building North America's tallest residential building in Toronto?


There's more:


 


“The weakening property market is just one sign that Canada’s economy, which everyone from International Monetary Fund Managing Director Christine Lagarde to Carney himself has touted as a model of stability, is stalling.


As recently as September, the World Economic Forum ranked Canada’s banking system the world’s soundest for the fifth straight year.

 

Such performances likely helped Carney, 47, land his new post. British Chancellor of the Exchequer George Osborne called him “quite simply the best, most-experienced and most-qualified person in the world to do the job” in the surprise Nov. 26 announcement.

Now, as the former Goldman Sachs Group Inc. banker prepares to cross the Atlantic, Canada’s households are burdened with record debt, and third-quarter growth, at 0.6 percent, was the lowest in a year. Canada is scheduled to report fourth-quarter gross domestic producton Friday, with economists surveyed by Bloomberg News forecasting no change in growth. Moody’s Investors Service weighed in on Jan. 28. It downgraded six banks the WEF had lauded, saying debt and soaring home prices have left Canadians vulnerable to more bad news.

While Canada may get stellar marks for navigating the global credit crisis, it did so with a borrowing binge, says Benjamin Tal, deputy chief economist at the investment-banking unit of Canadian Imperial Bank of Commerce.

“We basically borrowed our way out of this recession,” Tal says. “Now, it’s payback time. We will be in for a period of long, slow growth.”


 


(emphasis added)

Wait a minute, didn't Krugman tell us that 'borrowing one's way out of a recession' is the very thing to do? How can it possibly go wrong?

It seems to us that while Carney is preparing for a soft landing of his own posterior in a comfy chair at the MPC in England (where they evidently still believe his tweaking of Canadian interest rate in a downward direction indicates that he must be some sort of demi-god), the rest of Canada will be in for a potentially very hard one. And then they can't even fire him anymore.

 


 

Canada Bubble

Bubble trouble in Canada, via Bloomberg.

 


 
 

 
 

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