It would be the largest wealth drop in decades.
During the pandemic, the wealth of Canadians rose.
This surprises many, because the pandemic coincided with massive economic disruption, lockdowns, and wrecked supply-chains.
What happened of course is that the federal government spent a massive amount of money, and the Bank of Canada enabled that spending by rapidly increasing the money supply.
Since fewer goods were being produced, but there was more money in the system, it had to go somewhere.
And much of it went into housing and into the stock market.
This generated a surge of wealth, even as underlying economic conditions eroded.
But almost all of that increased ‘wealth’ was due to rising home prices.
That is not sustainable, as no economy can permanently avoid the need to actually produce real things.
And now, much of that wealth is set to evaporate.
According to an RBC report, $900 million of that wealth has already been eroded, and the total loss will be $1.6 trillion.
Here are the main points from the report:
“Canadians amassed $3.9 trillion in net wealth during the pandemic, largely due to a real estate boom that drove home values 52% higher.
In a sharp reversal, roughly $900 billion of that has been lost as housing markets retrench under the weight of rising interest rates and weakening financial markets.
And the pain isn’t over. We expect losses to net wealth to total $1.6 trillion in quarters ahead, leaving Canadians feeling less wealthy and less confident about spending.
The bottom line: The dramatic decline in net wealth, combined with rising prices and higher interest rates, will cut roughly $15 billion from household spending in 2023. This is one of the factors that will drive Canada into a recession early next year.”
One essential point is that this declining wealth is happening amid the declining value of our money.
Thus, the ‘wealth’ that Canadians have doesn’t go as far, and our money is worth less and less every day.
This is the inevitable consequence of policies that are based on fake economic growth rather than real production.
You can’t impose carbon taxes, restrict the energy sector, dissuade investment, and then expect to cover that up by printing a bunch of money without serious consequences.
As I often say, economic reality can be evaded for a while, but not fully avoided.
Sooner or later, reality reasserts itself, and that is exactly what is happening in Canada now.
Spencer Fernando
Photo – YouTube
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