Light vs dark

Tomorrow’s inflation report’s expected to be a yawner. Stuck in the mid-2% range. The central bank won’t be jacking or hacking rates for a while. Maybe all year. The housing market will sit on life support. The economy will slither along. No recession. No eruption.

That’s the consensus of the boys in the Bay Street bank towers. Economists see 2026 as a hold, mostly. So, hang on to your job. Don’t try to sell your house. Stick by your equity ETFs and balanced portfolio. You’ll be cool.

Others, however – some of them wandering into this blog to use our gender-neutral rest rooms with organic hand sanitizer – seem to living in another, darker, end-of-days word. This is what structural collapse looks like, they say. Get ready. It’s all going to burn down.

First, a few words from the economist we like to follow (because he’s usually right), Scotia’s Derek Holt. Then let’s bring in a voice from the steerage section, where the animal spirits dwell.

Yo. Holt, what’s coming?

“We expect the economy to gradually gain traction through fiscal policy, distance from initial trade shocks, and an eventual release of pent-up demand for cap-ex, consumption and housing investment,” he says.

Hmm. This implies the Carney government knows what it’s doing and will jolt the country with its build-big-stuff agenda, leading to more confidence so people (and businesses) start spending again. If that’s true, then wise people would move from cash to investment ETFs, or buy a nice house from a desperate seller before brighter days come.

Holt also says our zero population growth “is an exaggerated shock” and that we should stop being led around by the earlobe by the American president. Just relax about the trade deal, he adds.

“The most likely CUSMA scenarios are a successful negotiation or a protracted period of annual reviews. The economy can adapt to either scenario. Almost 90% of Canadian exports to the US are tariff free and CAD has depreciated 16 cents from its 2021 peak.”

Now, let’s turn to why we’re all gonna die. From the perspective (of course) of a young person who cannot afford property in Vancouver, which roughly equates to civilizational erasure.

Here in Vancouver, we are witnessing the unwinding of one of the largest asset bubbles in modern history,” says Tron. “For two years, excess has been deflating. The first phase was dismissed as a temporary correction, with confidence in a swift rebound. That complacency is fading. We are entering the second phase: a sharper repricing driven by disbelief, forced selling, and panic.”

But this is not just about real estate. It is a proxy for, well, everything.

“Markets eventually bottom—but only after leverage is purged, valuations reset, and sentiment fully capitulates. This downturn is compounded by structural stress. Deficit spending has expanded sovereign debt to dangerous levels. Inflation remains elevated, growth is softening, and labor markets are weakening at the margin. Geopolitical tensions persist. Artificial intelligence threatens displacement across both entry-level and professional roles.

“Meanwhile, a strained fiat system faces rising interest costs and mounting entitlement obligations. Servicing accumulated debt is crowding out productive investment and eroding fiscal flexibility.

“For years, investors were urged to buy at historically unaffordable valuations under the assumption that liquidity would remain endless. That regime is over. Capital is no longer free, and excess is being repriced. The adjustment will be painful—but it is the unavoidable consequence of prolonged distortion and speculative excess. Cycles were never repealed.”

The light vs the dark.

Thinking we live in extraordinary times is part of being human. Almost always we don’t. But we believe we do. Especially the young, thick on learning and thin on experience. It’s easy to take a crappy housing market as a symbol of capitalistic failure and societal retribution for speculation and excess.

Not understanding capital markets or monetary policy helps foster the sinking feeling debt will cream the system, deflate assets to zero and bring in a great reset. Underestimating central banks and embracing the myth of crypto leads to the ever-popular and always-failed conclusion that fiat money is doomed, leading to the repricing of every asset and the crushing of most.

Lots of drama. Sweeping themes. Get out while you can, they suggest. Watch it all incinerate. (Of course, things would be peachy if Tron could afford a house in Kitsilano. But, you know…)

Are there things to worry about?

You betcha. We’ve been ragging on AI here lately. And Trump. MAGA. House prices are lower now, but still stupid. Public finances are a mess, and voters still have their hands out. There are brainwashed traitors in Alberta. Apparently we cheat at curling, too. And Holt may be naïve about the trade talks this year. All is not perfect in the Dominion.

However, this is not the end. Not even close.

Remember that whatever happens will be determined most by your own actions. Not fate or macroeconomics. Just you.

About the picture: “Mandatory (but sincere) suck up,” writes Carl. “I’ve been reading your blog since 2013 when it was shown to me by a friend.  At the time, we were both millennials navigating this strange newfound thing called a steady income.  Your blog hammered into my mind the importance of diversification, compound interest, and the importance of life’s simple things. Thanks for your dedication to your blog, it’s nice to have some sense in a world that often makes very little! About the picture:  Jersey (Australian Shepherd/Blue Heeler) is addicted to all things that move, she has a particularly weakness for thrown snow chunks.  Joey on the other hand (Appenzeller/Lab/German Shepherd) is happy to observe, so long as there are some treats and pets in it for him after.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.