Prime Minister Justin Trudeau delivered his “whatever it takes” moment this past week during the throne speech. Adding, “Now is not the time for austerity.” Cue the fiscal bazooka. Trudeaus 17 page speech promised a plethora of spending, most notably an extension of Canada’s emergency wage subsidy. The program will be in place until at least Summer 2021 and is expected to cost an additional $40B. Further, the popular CERB program, which has since been rebranded the ‘Canada Recovery Benefit’ will increase back to $500/ week, up from the initially proposed $400/ week. Yes, it’s raining loonies in Canada. Canada’s budget deficit ballooned to $148B from April to July, that’s up from just $1.6B a year ago. Of course, this begs the question, how will it all be repaid? To no surprise, Governor General Julie Payette is recommending a wealth tax, suggesting the government would “identify additional ways to tax extreme wealth inequality, including by concluding work to limit the stock option deduction for wealthy individuals at large, established corporations, and addressing corporate tax avoidance by digital giants.” You could see this coming from a mile away, it’s an easy sell politically, but in reality, won’t move the needle. No amount of

As if this year couldn’t get any stranger, look no further than the Canadian housing market. Six months into a global pandemic and a crushing recession, home sales have never been stronger. National home sales activity ripped, jumping 33.5% from last years levels. The increase was a new record for the month of August, and the sixth-highest monthly sales figure of any month on record. I don’t recall reading any forecast back in March or April that had called for anything remotely close to this type of feverish activity. In fact, even the most bullish and self-interested Real Estate lobbyists could not have dreamt this up. Now, don’t get me wrong, i’ll be the first to suggest these numbers should be taken with caution. There is undoubtedly some pent-up demand that could soon fizzle. Buyers were clearly desperate to upgrade their living situation after spending months confined at home. The thought of working from home indefinitely, and the threat of a second wave forcing people to hunker down in what could be a long winter prompted a rush of purchasing activity. Unfortunately the unexpected tsunami of buyers were met with low levels of inventory, creating bidding wars and higher prices.

As the saying goes, a rising tide lifts all boats. That was certainly the message Bank of Canada Governor Tiff Macklem was hoping to hammer home in his latest press conference. “We will be supporting the economy through the full length of the recovery, helping to bring it back to full capacity with full employment,” Macklem said. Policy makers “agreed that as the economy shifts from reopening to recuperation, it will continue to need extraordinary monetary policy support.” Extraordinary is becoming ordinary. The Bank of Canada has pledged to keep interest rates pinned to the floor well into the future, and said it will continue to purchase $5B worth of government securities on a weekly basis. Of course, for every action there is a reaction. Mortgage rates have been forced lower, with 5 year mortgage rates below 2%, a sea of liquidity is stoking concerns about inflating an already frothy housing market. When asked by Reuters journalist, Julie Gordon, if he had any concerns about re-igniting a housing bubble, Macklem responded, “we think a considerable amount of this strong rebound in housing activity reflects pent-up demand. We’re not extrapolating going forward from these recent numbers.” In other words, the Bank

Wage subsidies and debt payment holidays have done a fine job in covering up the perils of  bloated household balance sheets. According to recent Government data, households lost a combined $21-billion in employment compensation in the second quarter, but they gained $54-billion in government transfers. In other words, disposable incomes were up nearly 11% and savings rates surged by 28%. It turns out life is pretty good when you don’t have to pay your bills and the Government strokes a cheque to sit at home. That’s certainly keeping the housing market steady. Home sales across Greater Vancouver enjoyed a 37% increase in August when compared to last year, as buyers look to enhance their living standards amidst what is, at least on paper, the worst recession in living memory. The surprising strength of the market is creating a self-enforcing positive feedback loop that is reminding buyers that even in the worst of times nothing can interrupt a multi-decade real estate bull market, not even a pandemic. However, it’s not all rainbows and butterflies. While the Trudeau Government remains committed to ensuring wage subsidies continue to flow, it appears OSFI, the Canadian banking regulator is ready to pull the plug. The debt