Better Dwelling’s Opening Statement Before Canadian Parliament’s Standing Committee on Finance

Opening Statement by Stephen Punwasi

Better Dwelling

Appearance before the House of Commons Standing Committee on Finance 

March 24, 2022

Good afternoon Committee, and thank you for the invite.

My name’s Stephen Punwasi, and I’m the chief data analyst at Better Dwelling, Canada’s largest independent housing news source. Some of you might be familiar with my work helping to identify the extent of Canada’s money laundering problems or the global vacant home crisis. For the rest of you, my expertise is in behavioral finance and the levers that impact the price of assets. Today I’d like to talk about cats, but I was invited to speak about inflation so let’s do that instead.

Yes, inflation is indeed a global issue. However, it’s not because of some outside force of nature. It’s due to similar monetary policy missteps rolled out across many countries. Sovereign currency issuers with a convertible currency like Canada can control the value of money and, therefore, inflation. The key issue is that low interest rates have been too low for too long.

At the beginning of the pandemic, central banks were worried about deflation. The Bank of Canada’s primary tool for fighting deflation is lowering interest rates to increase the demand for goods, especially mortgages. The goal is to stimulate demand to overrun supply, creating a non-productive price increase, also known as inflation.

When low rates fail to stimulate enough inflation, central banks roll out quantitative ease (QE). QE is an unconventional monetary policy tool used only to create inflation. It doesn’t shine your shoes. It doesn’t make your coffee. It only has one purpose — to create more inflation.

It does this by flooding the market with money, providing liquidity to credit markets, and driving down the cost of borrowing. After all, supply and demand applies to every part of goods and services, not just the final product.

For the longest time, we assumed low interest rates were a good thing. Cheaper money lowers the cost of debt, right? The perfect example of this is housing. A few months ago, the Bank of Canada set out to prove low rates lowered the cost of housing, and whoops, not what happens. They found consumers adjust their budget to incorporate the excess credit available, thus inflating the price of homes for everyone. Buyers didn’t see lower carrying costs, but they paid a larger principal. For the past 30 years, central banks thought they were making housing more affordable with lower rates. It turns out no one did the math until recently.

Why are these points important? In October, Canadian inflation was at 4.7 points — more than double the target rate. Remember the QE program mentioned earlier? The one with the single purpose of creating more inflation? It was still running at this point, as Canada’s banks literally wrote to clients to say the central bank was recklessly ignoring its own research.

It’s like the Bank of Canada is stepping on the gas and saying the car won’t slow down due to external factors. There is a supply shortage failing to meet demand, is the narrative.

Let’s talk about that demand quickly. This isn’t regular demand, but demand stimulated by low interest rates. BMO estimates a third of existing home sales are “excess” due to low rate stimulus. Sales are just off the record high, not an economically repressed level that needs stimulus. Low rates don’t stimulate selling, though. It only creates more competition to inflate prices.

Once again, the goal of expansionary monetary policy is to create inflation. Demand is supposed to outrun supply to create inflation.

About a third of existing-home buyers are investors, excluding corporate holdings. In Toronto, a quarter of housing is bought by investors — a mind-blowing amount for a market its size. They aren’t fulfilling their passion for being landlords but looking to capitalize on a capital inefficiency. Overstimulated demand isn’t just crowding out end users but turning them into regular and profitable payments for investors.

Cheap credit isn’t just limited to homebuyers with an end-use, but everyone. The more leverage you have, the greater your ability to borrow and exploit a system that lends you money at effectively negative interest rates.

I focused on housing inflation, but the same factors drive inflation across the board. Real estate prices are an essential input cost for the price of all goods. Excess demand, not a shortage of supply, is an intended consequence when flooding a market with money. 

To review, the Bank of Canada lowered rates to create inflation. When they weren’t producing enough inflation, they flooded the market with billions in credit via QE to generate more inflation. Now they think it’s external factors driving inflation higher. We don’t need Nancy Drew to figure out where the inflation actually came from.

Thank you.



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  • Dennis_K 2 years ago

    Well stated Stephen ……. hopefully they are actually listening.

    • Mooncow 2 years ago


      I’d also love to hear your cat insights.

  • Ron Bruce 2 years ago

    Based on these comments, was the Bank of Canada poor at math or aiding and abetting insiders in buying up more Real Estate?

    “About a third of existing-home buyers are investors, excluding corporate holdings. In Toronto, a quarter of housing is bought by investors.”

    I wasn’t aware that you were helping to identify the extent of Canada’s money laundering problems. I keep referring to as my source.

    • Omar 2 years ago

      Are you from Toronto? I feel like they’re still confused about what’s happening and where Vancouver was about 5 years ago.

      Stephen identified the exact gang money laundering and said it’s going through the casinos almost a full year before Canadian intelligence did. Marc Cohodes joked about him being called a racist on Twitter the other day for pointing it out.

      Peter German thanks him in the Dirty Money Report, Cullen Commission used his work as evidence, and my favorite — he argued with Adam Vaughan when he was one of the housing ministers on Twitter, and Vaughan dropped a Transparency International report and says something along the line of, money laundering is the problem in Canada. Was crying with laughter when he points out he helped with the report, and it was written two years before they noticed. ,

      He’s a national treasure. You can tell the outsized scale of his impact by the share of people in the development industry (often who don’t disclose they are), who spend most of their day attacking him. If he was just some random person, they would ignore him. He’s pushing the buttons too close to home though, so they devote a crap load of resources to try and attack him on baseless grounds, and it looks hella desperate.

  • Commonman 2 years ago

    Do we really think that the Bank of Canada does not know about it , or did they do it purposely ? It looks like a simple economics to me.

    • GTA Landlord 2 years ago

      You’re right, and I bet Stephen agrees. At one point an MP aggressively tries to point out the BOC research written by staff isn’t the BOC’s opinion, and Stephen quips, “…basic economics also agrees with that fact.” LOL!

      Would love to see someone with a solid understanding of economics in an elected capacity. Hasn’t really happened since Flaherty.

  • KScuz 2 years ago

    Dude. Thank you for speaking on the behalf of a generation (or more?). The nonsense behind Canadian real-estate greed and scumbag driven prices needs serious attention. I also hope that someone will listen and do the right thing to temper this mess.

  • Paul 2 years ago

    Not once ounce is hyperbole. The records speak for themselves. The BOC contradicts everything they say and pretends no one will remember or is paying any attention.

  • Kate 2 years ago

    Well done, Stephen.
    And, I too, would like to hear about your cats insights!

  • Claire 2 years ago

    I am super stoked that Stephen was invited to speak. I love how he simplifies the dynamics of inflation, monetary policy and QE to the bare bones. He did not mince words, and made the most of his opportunity.
    I would love for well-meaning politicians to be made aware of the consequences these policies are having on the lower middle class, the young, families… and everyone, really.
    But I’m especially thinking of my co-worker: in her 20s, who can’t be with her toddlers because she needs to work from 7pm until 7am to pay for her modest house valued at over 1 million dollars. It’s in a suburb of Vancouver (if it was in Vancouver her debt would be 1.5 million).
    That’s why her toddlers are separated from their mother.

  • Scott 2 years ago

    Absolutely brilliant! The cats out of the bag, Although I think they would’ve rather have heard about your cats.

  • Patiently Waiting 2 years ago

    Stephen. So glad you confronted them head on. Would love to hear what they response was, if any?

    This is an issue that affects so many Canadians and was a clear manipulation of the tools at hand. What can we do to support your narrative and keep the pressure on for answers and accountability?

  • Oleg Feldgajer 2 years ago

    With All That Jazz… How To REALLY Burst Canadian Housing Bubble?

    These are all great points and I agree that it could work in a market comprised of retail home buyers. Unfortunately, this is not the case. The Canadian families are now competing with institutional investors which buy the homes for cash. No mortgage is required…

    I spoke ad nauseam over the last 6 years about FISCAL and MONETARY policies that could help. But without decisive action by the governments (federal, provincial, and municipal) – such recommendations remained… wishful thinking

    Hope, is not a substitute for strategy. And without effective fiscal and monetary policies even the law of supply and demand doesn’t cut it. So, what drives the Canadian housing prices so UNIQUELY into a stratosphere? In a nutshell… quite a lot

    Yes, I covered the inability to write off the mortgage interest payments, just like they do it in the USA. And this goes hand-in-hand with taxing the capital gains at the time of sale – which would have a chilling effect on all speculators…

    I also wrote about the mortgage industry paddling the Smith Maneuver for the last 40 years and twisting itself into a pretzel to promote HELOC loans and allow for 100% leverage on mortgages linked to investment properties…

    But it’s not just Chinese comrades and Russian oligarchs that are looking for safe havens to park their money. Who can blame them for escaping CCP and Putin’s clutches? And they buy houses for cash and at ease – if there are no safeguards to protect Canadian families

    Recently, I added another group of speculators to the fray – the fintech startups. Such are raising hundreds of millions and offering “all-cash” immediate purchases of houses to their clients – in exchange for a significant fee or lucrative lease payments…

    And when billions are raised by all the “Buy Now Pay Later” and “Lease To Own” fintech startups – the young Canadian families and individual home buyers are a no match for such “unicorns” financed by deep-pocketed VCs, CVCs, PEs, and hedge funds…

    So, if tinkering with fiscal and monetary policies is such a taboo – is there anything else we can do… quickly? My answer: ABSOLUTELY. The solution to such abuses is quite simple. It’s similar to the way Canadian employers need to comply with the Labour Market Impact Assessment (LMIA) regulations…

    LMIA verifies that there is a need for the job the employers are offering to foreign workers and that there are no Canadian workers to be hired instead…

    IMHO, similar criteria can be applied (call it Home Buyer Impact Assessment, or HBIA) – to allow institutional home buying ONLY when there is no retail home buyer interested to buy the property and live in it

    Since we already use LMIA to control who has the right to work in Canada and ensure that Canadian citizens are not disadvantaged by the foreign workers – shouldn’t we use HBIA to prevent the abuses of homeownership by foreign and domestic speculators?

    Just imagine, without LMIA, what would prevent greedy entrepreneurs from offering foreign workers to all Canadian enterprises – at a huge discount and much lower wages?

    And yet, we allow foreigners, domestic speculators, hedge funds, and VCs – to take advantage of Canadian families seeking a place to call home…

    Better yet, blockchain technologies would allow the verification of HBIA compliance to ensure that such regulations are being followed by the legal and real estate industries – as intended…

  • slava 2 years ago

    100% Bravo Stéphane.

  • Arthur 2 years ago

    Excellent opening statement……….when can we review your closing arguments Stephen?

  • Huddy 2 years ago

    Careful Stephen….they might freeze your bank accounts.

  • SH 2 years ago

    I wish you had mentioned moral hazard, with overleveraged speculators convinced that the government and Bank of Canada will bail them out in perpetuity. Otherwise an excellent summary of the situation that is easily accessible to a lay person.

  • Gerald Silva 2 years ago

    BRAVO! Stephen.

  • Larry Kazdan 2 years ago

    William Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia

    “When QE was first introduced in Japan in the 1990s, mainstream economists rushed to predict that the massive expansion in central bank reserves would be inflationary.

    Students in every mainstream macroeconomics class, and that means almost all students, would have predicted, based on the nonsense they were learning, that the high deficits and high public debt ratios in Japan at the time, should have driven interest rates sky high, that bond markets should have stopped buying government bonds, that the government should have run out of money, and all the time that these disasters were unfolding, that inflation should have been be galloping towards hyperinflation.

    Nothing like that happened.

    Neo-liberal economists wrote off their mistakes by claiming that Japan is ‘so strange’ that it is a ‘special case’ and therefore not generally applicable.

    Their ad hoc defense was convenient because the Japanese experience with sustained high fiscal deficits, the world’s largest public debt to GDP ratio, close to zero interest rates, and deflation, was totally at odds with their economic theories.

    It was a mind-boggling failure to explain reality.”

    • Omar 2 years ago

      Would be a great point, but we’re seeing the inflation so it’s not the same point. It’s not a warning that QE will result in high inflation, but we’ve already seen QE produce high inflation.

      Japan also used QE to soften the crash in property prices and resulted in decades of futile existence for its young people. Canada used QE while it had the best economy ever to try and prevent prices from falling when they thought it was possible that people would stop buying a home.

      • Larry Kazdan 2 years ago

        Current inflation is caused by supply chain issues and not by QE which did not cause inflation in Japan. Instead of blaming QE and low interest rates, we need to regulate mortgage lending and housing speculation, and substantially increase the amount of non-market housing.

  • DJ_hashtagblessed 2 years ago

    “They aren’t fulfilling their passion for being landlords but looking to capitalize on a capital inefficiency.”

    I LOVE you <3. This is the way that we need to be talking about monetary policy at this point. Stop giving oxygen to the mental gymnastics, word salads, and excuses of late-stage capitalists (including and especially politicians, of course!), and just call it what it is: naked greed and corruption.

  • Odif 2 years ago

    If anyone wants to watch, here is the link, Stephen starts talking around 15:35:

  • Samantha 2 years ago

    Kudos on this, and for shining a light on what’s really going on in Canadian Real Estate, including the money laundering and foreign investment that nobody wants to acknowledge or take ownership of. Australia had a similar problem, so they axed foreign buyers, and suddenly, their real estate is not #2 on the unaffordability list (that’s Canada’s spot right now). Australia’s now somewhere in the middle of a list of 50 other countries. We should follow that example.

  • peter huculiak 2 years ago

    Macklem , the closest warm body after Carney and Poloz left , promotion should have been based on ability not longevity , the world is Lucy holding the ball and Macklem Is Charlie Brown trying to kick the ball , except the futility has cratered the Canadian economy but I’m sure Macklem has a great pension….

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