turdrockfromthesun
Banned
We'll force 'em! That'll show 'em!
In any event, I find it shocking that people choose to have children but then cannot afford to buy a detached, semi-detached or townhouse within 1/2 a mile of the Yonge subway. If everyone could just get a modest little 3,000 square footer within a mile of the Yonge line, we could tear down the Gardiner, no problem.
WE ARE IN A CONDO BUBBLE - no doubt! TAKE NOTE - bubles are discovered RETROPECTIVLEY!
Let me, the Turd, give an example: As in, "We were such idiots! It's so obvious now! How did we allow sub-prime mortgages? We got all these people who could afford mortgages when interest rates were low, but when interest rates went up, they could not afford to renew, and the market TANKED to below the value of the debt secured by the mortgage- that is to say, people will walk away from their condos as it will be cheaper than paying off a debt that's higher than the value of the mortgage- or, as they said in the 1990's -negative equity."
This is from Wikipedia:http://en.wikipedia.org/wiki/Bubble_(economics)
An economic bubble (sometimes referred to as a "speculative bubble", a "market bubble", a "price bubble", a "financial bubble", or a "speculative mania") is “trade in high volumes at prices that are considerably at variance from intrinsic values”.[1] The intrinsic value is a theoretical calculation that aims at reflecting the fair value by taking into account hypotheses of future returns and risks.
The cause of bubbles remains a challenge to economic theory. While many explanations have been suggested, it has been recently shown that bubbles appear even without uncertainty [2], speculation[3], or bounded rationality [4]. Most recently, it has been suggested that bubbles might ultimately be caused by processes of price coordination [5] or institutionalization [6]. Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often identified only in retrospect, when a sudden drop in prices appear. Such drop is known as a crash or a bubble burst. Both the boom and the bust phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic bubble can fluctuate chaotically, and become impossible to predict from supply and demand alone.
Economic bubbles are generally considered to have a negative impact on the economy because they tend to cause misallocation of resources into non-optimal uses. In addition, the crash which usually follows an economic bubble can destroy a large amount of wealth and cause continuing economic malaise. A protracted period of low risk premiums can simply prolong the downturn in asset price deflation as was the case of the Great Depression in the 1930s for much of the world and the 1990s for Japan. Not only can the aftermath of a crash devastate the economy of a nation, but its effects can also reverberate beyond its borders.
Another important aspect of economic bubbles is their impact on spending habits. Market participants with overvalued assets tend to spend more because they "feel" richer (the Wealth Effect). Many observers quote the housing market in the United Kingdom, Australia, Spain and parts of the United States in recent times, as an example of this effect.[citation needed] When the bubble inevitably bursts, those who hold on to these overvalued assets usually experience a feeling of poorness and tend to cut discretionary spending at the same time, hindering economic growth or, worse, exacerbating the economic slowdown. Therefore, it is imperative for the central bank to keep its eyes on asset price appreciation and take measures to curb high levels of speculative activity in financial assets.[citation needed] This is usually done by increasing the interest rate (that is, the cost of borrowing money).
When the bubble occurs in equity markets, it is called a stock market bubble. It is usually very difficult to differentiate a stock market bubble from an ordinary bull market except in hindsight.
THE TURD HAS A WORD: Ok, so, the central bank, (1) in a rightful panic about inflation in housing prices, increases interest rates, which stops many from being able to renew mortgages, resulting in catrophee. OR (2) in a rightful panic about popping a bubble and all that will cause, and being mindful not to wipe out load of home owners, keeps interest rates low, prices climb, inflation soars, and eventually, the bubble pops but for different reasons, except now, there are even more people who are wiped out and the 'rate of wipe-out/ asset vaporization is even higher. Fun, eh?
