Canada to issue first U.S. dollar bond in more than a decade

[jk]

Re: Canada to issue first U.S. dollar bond in more than a decade

Wouldn't taking on debt going into an inflationary period act as a hedge on cash making negative interest? I wonder if this is the time to leverage into income generating property. You would need the skill set to make it a business for yourself. But I don't think it is a stupid idea.

i would be a terrible landlord, but if you have the temperament it is definitely a good idea. you get fixed rate financing, and you make a killing on the value of your mortgage shrinking, while the value of your income-generating properties will at least roughly track inflation. even if the real value of the property diminishes slightly [as happened to real estate in the '70's], you more than make up for it by the win on the liability side of the ledger.

[LargoWinch]

Re: Canada to issue first U.S. dollar bond in more than a decade

But the irony is a Nation State is taking on debt in a depreciating currency. Why wouldn't it work for and individual. I have too much in cash. Wouldn't taking on debt going into an inflationary period act as a hedge on cash making negative interest? I wonder if this is the time to leverage into income generating property. You would need the skill set to make it a business for yourself. But I don't think it is a stupid idea.

I agree with you goadam1, but remember that the economy is collapsing and de-leveraging big time.

So, taking on debt, or in other words leverage, in order to attempt to repay it with devaluated dollar is not advisable in my opinion in this kind of environment.

[LargoWinch]

Re: Canada to issue first U.S. dollar bond in more than a decade

while the value of your income-generating properties will at least roughly track inflation.

That is not true however if you own property which is subject to rent control.

[cobben]

Re: Canada to issue first U.S. dollar bond in more than a decade

"a Nation State is taking on debt in a depreciating currency. Why wouldn't it work for and individual"

Sweden did this last year already, and the Swedish Debt office ( = Treasury) openly announced that they were buying SEK as a speculation as it was seriously undervalued. They have a mandate to do this within defined limits to reduce the crown's cost of borrowing. So far so good . . .

Sure it works for individuals too, but it is speculation, so there are risks.

The JPY carry trade was profitable and apparently "risk free" for many years, the $USD carry trade now starting up may well be also.

[jtabeb]

Re: Canada to issue first U.S. dollar bond in more than a decade

i've mentioned this elsewhere but it seems relevant here:
just did a cash-out refi. majority of funds just refi'd my 1st mortgage and the balance i had on my [floating rate] equity line, locking in the interest rate. a good chunk of the cash out is paying for a geothermal heating/cooling system which will get me off oil - an inflation hedge as in place of oil i'll be [efficiently] using electricity, the price of which i expect will track nuclear energy and natural gas. so that's an option as long as you expect to remain in your current home for a substantial period. [if oil rises as we all expect, it ultimately will contribute substantially to the resale value of your home, as well.]

Excuse me, but who the F*CK will be able to afford a home in the future that doesn't have one already?

[wayiwalk]

Re: Canada to issue first U.S. dollar bond in more than a decade

As far as putting money into rental properties - I think the big unknown for the future is how high property taxes may rise in the very short term, ie, 2 to 3 years out.

One of the bigger benefits I expect of my recent refi/principal reduction was to ensure that given a decrease in my income (reduced hours/salary) and increased property taxes, I can withstand significant adverse changes in each.

[raja]

Re: Canada to issue first U.S. dollar bond in more than a decade

I guess I could do the same. Maybe now is the time to take out a big, fat mortgage. Wouldn't I be shorting the dollar domestically?

So, you get the big loan, the dollar devalues in the coming years, and you now owe the bank pennies on the dollar?

But the government loves the banks, right?
Do you think that the powers that be would stand idly by while the banks take that tremendous hit? :eek:

One solution would require that all bank mortgages be paid back in the "new dollar". Then, you're screwed.

[jk]

Re: Canada to issue first U.S. dollar bond in more than a decade

So, you get the big loan, the dollar devalues in the coming years, and you now owe the bank pennies on the dollar?

But the government loves the banks, right?
Do you think that the powers that be would stand idly by while the banks take that tremendous hit? :eek:

One solution would require that all bank mortgages be paid back in the "new dollar". Then, you're screwed.

the old loans, worth pennies, become miniscule parts of the banks' balance sheets. the new loans, in the tiny dollars, dwarf the old loans. that's the point.

[bpr]

Re: Canada to issue first U.S. dollar bond in more than a decade

the old loans, worth pennies, become miniscule parts of the banks' balance sheets. the new loans, in the tiny dollars, dwarf the old loans. that's the point.

Who takes out the new loans? Holders of foreign (appreciated) currencies seem like the only likely candidates. As jtabeb puts it:

Excuse me, but who the F*CK will be able to afford a home in the future that doesn't have one already?

Verrocchio's post is worth re-reading.

Yours is -- for now, at least -- a hypothetical question, at least in the northern hemisphere, so regard any answer to it with skepticism. So, having disclaimed prescience, I should next acknowledge that should inflation become rampant, national governments could issue new currencies and require all debts to be paid in the new currency. This would prevent mortgage holders from paying with an inflated currency. This is the argument made on another thread a month or so ago and is, by the way, consistent with the New Financial Goals of becoming debt free, having six months of cash on hand, and investing heavily in PM. The chief reason given for government requiring that debts be repaid in the new currency is that government will take care of the banks.

However, this argument overlooks the time dimension. The policy machinery of government does not respond swiftly to changes in inflation. Inflation must reach an obviously painful level before the political will necessary for the radical action of issuing a new currency can be mustered. This means that mortgage holders will, certainly in the early stages of what may become a virulent hyperinflation, be able to repay their loans with cheaper dollars.

If you accept this line of argument as plausible, then you would like to know how much cheaper and for how long. These would be interesting topics for discussion if the iTulip community can get past the simplistic idea that the government won't allow banks to be adversely affected by inflation.

I'm a little confused by that last sentence. Is he saying that yes, the government will allow banks to be adversely affected, or no, there's a way to beat the banks with this. Seems to me that this argument allows for a window of time between the onset of inflation and the enactment of bank-protecting legislation.

[SuitablyIronic]

Re: Canada to issue first U.S. dollar bond in more than a decade

I do not know any safe, sure way to make money for honest people of limited means other than hard work, and even that is getting more difficult these days.

I have tried the following argument with friends - What would happen if you borrowed money from someone, then gave that money to someone else without doing anything with it yourself? Easy to see that you must lose money.

But if you phrase the question differently, now you borrow from a bank and 'invest' in Real Estate or the Stock Market, it is possible to magically make money 'if you're clever enough'.

This belief that you can make money without doing any work is profound and widespread. Is the Canadian Government trying the same thing? Essentially gambling with the taxpayers' money?

[goadam1]

Re: Canada to issue first U.S. dollar bond in more than a decade

So, you get the big loan, the dollar devalues in the coming years, and you now owe the bank pennies on the dollar?

But the government loves the banks, right?
Do you think that the powers that be would stand idly by while the banks take that tremendous hit? :eek:

One solution would require that all bank mortgages be paid back in the "new dollar". Then, you're screwed.

What new dollar? If it comes to that, then I imagine I have a host of other problems. I'm not going to do anything like I suggested. But a Nation State is borrowing money in dollars because they will be worth less in the future.

[WildspitzE]

Re: Canada to issue first U.S. dollar bond in more than a decade

another nail in the coffin for the strong us$ camp.

By the mises institute via zerohedge.

[MulaMan]

Re: Canada to issue first U.S. dollar bond in more than a decade

I thought those Canadians where "socialists" - it really pisses me off when government officials try and do what is correct for thier people and not themselves.

Also, home prices could still go down significantly in many markets and your inflation play could turn into a very long term hold so be sure your happy living in the home for a long time.

[flintlock]

Re: Canada to issue first U.S. dollar bond in more than a decade

Safe and honest money. lol, ha, good one.

I don't need to take out a mortgage. I'm debt free. I own three properties. One is undeveloped land in western Mass. and non are income generating. I hate debt.

But the irony is a Nation State is taking on debt in a depreciating currency. Why wouldn't it work for and individual. I have too much in cash. Wouldn't taking on debt going into an inflationary period act as a hedge on cash making negative interest? I wonder if this is the time to leverage into income generating property. You would need the skill set to make it a business for yourself. But I don't think it is a stupid idea.

I think it makes perfectly good sense in your case. Just as long as you have liquid funds to pay it off, not other Real Estate, etc.

[flintlock]

Re: Canada to issue first U.S. dollar bond in more than a decade

I do not know any safe, sure way to make money for honest people of limited means other than hard work, and even that is getting more difficult these days.

Same conclusion I've come to. The pittance I've been able to save over the years barely keeps up with inflation when you consider the money I've lost trying to beat it.