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I lived in the wrong place

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June 28, 2011 – Comments (2)

A few times I have posted that I thought what I had lived through in my adult life in Vancouver was like a micro economy of what the world economy is facing.

Today there was another article that had a part that caught my attention:

 B.C. has fallen behind the most on investment between 1984 and 2009. The B.C. government can go a long way toward reversing this by keeping the harmonized sales tax, which reduces the tax on investment relative to the old investment-taxing provincial sales tax. The HST will bring the effective tax rate on new investment in B.C. below most of the rest of Canada and will help erase the physical capital productivity gap the province has historically had relative to other provinces.

That period is essentially my adult life.  It as if BC at the perfect storm of economic factors against the economic well-being of the people.  The low investment in that which would improve productivity and jobs, yet the highest rate of immigration in Canada for years, effectively pushing the housing costs to the highest in Canada while wages completely stagnated and even declined.  

I think that the article is missing that the high cost of living probably played a significant role in the decline in investment.  I know that housing ate an enormous part of our household income and we had good household income because my husband had a good job.  I kind of floundered with under employment and job prospects that offered no more pay then if I'd never gone to university.  The cost of a home increased by $150-250k while I was in university and then it was a job market with 100 applicants for every good job.  

When you have years upon years of your youth population struggling to make ends meet, despite being highly motivated people, well, the whole economy struggles because disposable income to spend on those businesses is completely lacking.

I think the high levels of world wide debt will leave the economy sluggish and struggling for years.  I don't see that companies that are doing well are doing well because of booming sales and high productivity, but more through cost cutting, and where the cost cutting is happening is wages, which further sucks the longer term economy dry.

Right now there are a lot of people not paying mortgages or rent who therefore have more money to spend, but once the backlog of foreclosures are processed, those people go back to paying for their housing.

There has also been decades of declining people per sq ft in homes, and people will try and reduce costs by doubling up in housing, so the sq ft per person will decline instead of increase and that will make it take longer for a housing recovery and the jobs that go with it.  I suspect construction will see a huge wage correction as housing bubbles allowed wages to increase at a faster rate then most other sectors.  And of course, all the municipal taxes that went with the housing bubble are gone so there will also need to be adjustments in municipalities which will also mean declining wages.

The article talked about how Canada is relying on its resources and the resource boom, and when that ends Canada will be in trouble.  Canada is a huge country with a low population.  We have more natural resources per person that probably almost any other country in the world and some of those resources are less prone to booms, such as energy.  I suspect energy will remain stable as you still need energy regardless of what is happening in the economy and energy is resource dependent, unlike a factory that can be moved anywhere in the world.  It seems to me there is an abundance of most other resources, so Canada will face more problems with those resources.  Canada also has massive food production capacity, and people have to eat.  Water access is becoming a huge issue, and with that agriculture is at risk to decline and/or increase in cost.  Canada probably has some of the best insulation to this problem in the world.

Moving to the north has been very good for me, but I think overall, Canada will do better then many countries, so I live in a good place now.

2 Comments – Post Your Own

#1) On June 28, 2011 at 2:39 PM, ikkyu2 (99.27) wrote:

This isn't just British Columbia.  It is most of North America.  The situation is hardly unique.

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#2) On June 28, 2011 at 11:05 PM, dwot (43.46) wrote:

It is most of North America right now, but it wasn't most of North America for the last 20 years.

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