[afransen]

Increase interest rates to 20% or above until prices normalize

People would starve, banks would collapse, etc. government would be violently overthrown. Not kidding. And this is why it won't happen.

Have you seen the amount of consternation about 5% interest rates?

People may think I'm crazy but if the above is done, we will see a noticeable change in both economic factors and quality of life

You are correct, but not in the way you think. Canada would be devastated.

 

[Richard White]

People would starve, banks would collapse, etc. government would be violently overthrown. Not kidding. And this is why it won't happen.

It has happened in the 80s. The highest interest rates ever recorded in Canada was 21.75% in 1981.

 

[afransen]

It has happened in the 80s. The highest interest rates ever recorded in Canada was 21.75% in 1981.

Yes, when inflation was at a similar rate. What matters is real rate of interest. You're talking about raising the real rate of interest to over 15%, which is higher than it has ever been, and would promptly cause a depression. Canadian dollars would stop circulating as you would do anything to get those dollars and put them on deposit with the central bank. Where else can you get a >15% real return?

 

[Richard White]

Yes, when inflation was at a similar rate. What matters is real rate of interest. You're talking about raising the real rate of interest to over 15%, which is higher than it has ever been, and would promptly cause a depression. Canadian dollars would stop circulating as you would do anything to get those dollars and put them on deposit with the central bank. Where else can you get a >15% real return?

But it would solve the housing crisis.

When mortgages become unaffordable people will sell their houses faster than a druglord fleeing the country.

 

[afransen]

But it would solve the housing crisis.

When mortgages become unaffordable people will sell their houses faster than a druglord fleeing the country.

Thermonuclear war would also solve the housing crisis. The goal is to do it without causing unnecessary economic or social harm.

When mortgages become unaffordable, people will default on their mortgages, the banks will repossess and sell for less than is owed. Banks will become insolvent and the financial system collapses.

 

[Richard White]

When mortgages become unaffordable, people will default on their mortgages, the banks will repossess and sell for less than is owed. Banks will become insolvent and the financial system collapses

Not my fault people overextended themselves to buy houses they can't afford.

As for the banks, they knew what they were doing.

 

[T3G]

Where will all the people go who will no longer be able to afford their mortgages go?

 

[Richard White]

Where will all the people go who will no longer be able to afford their mortgages go?

Rent.

 

[T3G]

So if all the homeowners start renting... how does that solve the housing crisis?

 

[Richard White]

So if all the homeowners start renting... how does that solve the housing crisis?

Those with multiple properties won't be able to carry them at 20% interest hence opening of supply.

 

[picard102]

You are crazy if you don't believe mass immigration and lack of housing supply leads to increased rents.

You are crazy if you believe people living 5 to a bedroom are the only factor in housing supply and rent issues. Ban foreign ownership and owning multiple properties and we'll be better off.