Carney LOSES IT After Economist Exposed COLLAPSING Economy!

The Canadian economy, already contending

with inflation, tariffs, and a cost of

living crisis, is also watching a steady

and ongoing slump in the housing market.

>> A new report from Rosenberg Research uh

says that the Canadian economy is on

life support and that the economy

probably shrank in two of the past three

quarters. Carney loses it after an

economist exposed a collapsing economy

growing at barely 1%. The cracks in the

system are raw. The illusion of

stability is gone and every decision

feels impossible. What happens next

could define not just his leadership,

but the financial future of millions of

Canadians.

>> Rather, that other countries are getting

better faster. And there are areas like

inequality where Canada's performance

has deteriorated over the last decade or

two.

>> Something shifted. And it wasn't loud or

dramatic. It was a single phrase that

refused to go away. The Canadian economy

is on life support. When I heard that

from Rosenberg Research, it didn't sound

political or exaggerated. It sounded

clinical and measured, which is exactly

why it hit so hard. For months, we've

been told that the economy is

stabilizing.

>> And we are on a clear recession watch

for 2026. question is, you know, since

the Bank Canada started cutting interest

rates in the spring of 2024,

uh, what's the Canadian economy done

over this time span? And it's barely

better than a 1% annualized growth

performance.

>> But when I look at the numbers, I don't

see resilience. I see an economy that

likely shrank in two of the last three

quarters with growth barely running at

1% even after the Bank of Canada cut

interest rates by 275 base points since

2024.

The Bank of Canada has brought down

interest rates by almost three full

percentage points since 2024. But you

reckon more is needed?

>> Well, uh, the proof of the pudding is

always in the eating. So uh you know the

bank has cut the policy rate uh by 275

basis points. Of course uh the only

people that borrow at the overnight rate

uh are the banks uh and uh nobody

borrows at that rate and uh other

interest rates haven't fallen nearly as

much.

>> That number alone should have sparked a

strong rebound. A 275 basis point cut is

not minor. It is an aggressive stimulus.

It is the kind of move that is supposed

to reignite housing, boost spending, and

restore business confidence. Instead, it

has delivered growth that is barely

above stall speed.

>> And although the population trends have

slowed with the immigration rule

changes, real per capita GDP in Canada

uh is still declining. That has not been

arrested.

>> Real per capita GDP is still declining.

Which means that when you divide the

economy by the number of people living

here, Canadians are effectively getting

poorer.

>> I think we need to ask ourselves, you

know, are we doing better in a more more

holistic sense. So, you know, not just

what GDP tells us, but uh you know,

quality of life, standard of living,

inequality and and so on.

>> So, we came off u rates that were very

elevated. Um, but it's clear to me,

unless the policy lags are just a lot

longer this time around, that if this is

what 275 basis points of Bank Canada

rate cuts delivers, the grand total of a

1% growth economy.

>> If that level of rate cutting only

produces 1% growth, then the obvious

question is, what happens when the next

external shock arrives? If this is the

boost we get from major stimulus, what

happens when the system is actually

tested? Canada's provinces had an

average GDP per capita equivalent to

Alabama back in 2022, but then that

figure shrank over the next two years.

This whole episode has sparked an awful

lot of debate among experts. Some said

GDP per capita is a lousy way to measure

wealth and prosperity. Rate cuts are

supposed to work through housing,

retail, and business investment. Cheaper

borrowing should translate into stronger

activity, but housing has not reignited.

National home prices have been flat or

slightly negative for roughly 10

consecutive months, down about 2%

year-over-year.

>> And I also think, you know, at the end

of the day, we should be asking

ourselves, are we doing as well as we

could be doing? I I think that's the

most important part that I don't think

we should be trying to compete with

Alabama, but rather, you know, I always

thought in sports, I always wanted to be

better today than I was yesterday.

Residential construction spending is not

surging. Retail sales, once adjusted for

inflation, are barely moving.

Manufacturing is down 5% year-over-year

despite a weaker Canadian dollar and

strong US demand that should be lifting

exports. Instead, exports are lower

today than they were in the spring of

2022. And when the most rate sensitive

sectors of the economy fail to respond,

it raises a deeper concern. Perhaps the

traditional tools are no longer as

powerful as they once were.

Well, it's uh you know, Tiff Matlin

wasn't wrong that uh a lot of the call

it structural issues with the economy uh

are developments that transcend uh the

power of the central bank. But at the

same time, if I were in Ottawa and I

were in his shoes, uh I would be doing

all I possibly can. Uh inflation in this

country is not really an issue. Uh

virtually every underlying inflation

measure is comfortably within the Bank

of Canada's comfort zone. Canadians are

stronger at the grocery stores and

grocerers are adapting. So, we're we

we're not dealing with an overstored

market in Canada. There's still uh

plenty uh space for growth. Uh but

things are getting tighter, especially

when it comes to uh discretionary

revenues, the money that people have to

spend at the grocery store.

>> Inflation, which justified earlier

tightening, is no longer the central

threat. Most core measures are within

the bank's comfort zone. So if inflation

is cooling and growth remains weak, the

tension becomes obvious. Cutting further

risks inflating asset bubbles again,

particularly housing. Uh and the economy

is growing below potential. uh and the

Bank Canada's own forecast when you dig

through the details is for this

disinflationary output gap to be with us

uh not just this year but through the

end of 2027.

>> Holding steady keeps households under

pressure as mortgages renew at far

higher rates than those secured in 2020

and 2021.

Raising rates would intensify the strain

on both families and the federal balance

sheet. None of these paths are clean

>> and I think Canada should be taking the

same attitude. You know, we should be

trying to be better than we were last

year. You know, not comparing ourselves

to one of 50 US states. This is kind of

reminds me of the interest rate policy

in the wake of the 2007208

banking crisis. Low interest rates

didn't uh seem to stimulate growth then

at all.

>> This is where a comparison to 1990

becomes unsettling. In 1990, housing

felt unstoppable. Confidence was high.

Prices were climbing. Then the math

broke. National home prices fell 22%.

And in Toronto, they dropped 38% from

peak to TR. The downturn lasted 7 years.

Unemployment climbed above 11% and

mortgage rates hit 14%.

That correction happened when household

debt to income was around 90%. Today

that figure stands at 187%.

We are carrying more than double the

leverage that existed during that

earlier crash. If the earlier downturn

was severe with half the debt, the

question naturally becomes how a system

with twice the leverage absorbs

sustained pressure.

>> Thousands of condos are left unsold. The

Canadian Mortgage and Housing

Corporation says about 2500 new condos

are sitting empty in Metro Vancouver.

That's double what it was last year. And

in Toronto, the CMHC says the weakening

condo market appears to have

similarities to the crash of the early

90s. Escalating costs from material and

labor are some of the factors behind

this market stall.

>> The mortgage data alone is sobering.

Since 2022, mortgage interest payments

have surged above 90%. While principal

payments have fallen roughly 47%.

Canadians are paying significantly more

each month while building less equity.

Total mortgage debt now exceeds $2.1

trillion.

I've kind of taken the other approach

and saying, well, actually not so fast.

the GDP per capita we're doing pretty

well in, but uh other indicators uh such

as wealth and income in inequality

uh deaths of despair and so on, we tend

to actually be below uh the average of

kind of western economies. The federal

government's position adds another layer

of constraint. Federal debt has risen

from $721 billion in 2019 to

approximately $1.29 trillion.

Annual interest costs are around $54

billion, making debt servicing one of

the fastest growing expenses in the

country. High rates strain households

and public finances alike. Lower rates

may ease government interest costs, but

they risk reigniting the very imbalances

that created the current vulnerability.

Now, let's talk about the pressure

cooker that nobody seems to be able to

turn off. Since 2021, Canada has added

about 3.2 2 million people. That is

basically two new Toronto dropped into

the country in just 36 months. On paper,

that sounds like growth. More people,

more demand, more energy, right? But

here's where it gets very awkward. For

roughly every job created, two people

were added. That's not expansion, that's

strain.

>> I think there are um a variety of trends

going on. There's a stronger recovery

one sees in terms of prices in eastern

parts of Canada. Uh but then in places

like um Ontario, especially Toronto and

to the very west in Vancouver or British

Columbia, you see a bit of struggle in

the markets in their march towards

recovery. We told ourselves this would

supercharge the economy. Instead, it has

supercharged demand in a system that was

already stretched. Housing is the

clearest example. Right now, there are

about 421,000 homes under construction

across the country. That's a record. If

you just glance at that number, you

might think everything's fine. Builders

are building, supply is coming, crisis

solved. Except cancellations have hit a

10-year high. Developers are literally

walking away from projects mid build.

Not because they suddenly forgot how to

build houses. Not because people don't

need homes. They're walking away because

the financing math broke. When interest

rates surged, the cost of borrowing

exploded. When pre-sales slowed, that

number stopped working. You can't build

a condo tower on optimism if the

spreadsheet is bleeding red.

>> You know, I looked at uh the UN Human

Development Index, uh which takes into

account a variety of different factors.

Back in the 1990s, we were consistently

in the top three. We're now down to 16th

place in the latest report. There's a

world happiness report, also a UN

initiative. uh just a decade ago we were

the sixth best country in the world

according to that.

>> So what we have now is more demand

colliding with broken financing, more

people arriving, fewer projects

completing, costs rising, confidence

wobbling. This is not a balanced system.

That is a snap point waiting for

pressure to build just a little more.

And nowhere does this feel more fragile

than in Ontario. In fact, it is the

lowest since recordeping began almost

five decades ago. According to Ontario's

financial watchdog, manufacturing jobs

as a share of Ontario's total employment

fell below 10% for the first time since

1976.

>> Ontario is not just another province. It

is the manufacturing heart of the

country. And right now, manufacturing is

already in recession, down about 5%

year-over-year. Exports are lower than

they were in the spring of 2022, and

that should not be happening in a

healthy expansion.

Ontario is uniquely exposed to US trade

shifts. When America sneezes, Ontario

does not just catch a cold. It checks

the unemployment rate. Unlike Alberta,

it does not have a commodity cushion. It

cannot lean back on a surge in oil or

natural gas prices and call it a day.

Its backbone is factories, exports and

crossber trade.

>> We got the uh we got the monthly data um

late last week. Uh the GDP trend is

running at roughly uh 1%. Uh the fourth

quarter sequentially as you mentioned uh

in your preliminary remarks is probably

going to be fractionally negative. And

I'm trying to look around uh for you

know what the source of vitality is

going to be. Uh I'm really quite

surprised that most Bay Street

economists uh have an inflation view or

at least some of them do.

>> Add to that the Canadian dollar sliding

about 4% against currencies like the

Australian and the New Zealand dollar

and you see another signal. Those

countries which are also commoditydriven

have stronger internal demand and higher

rates. Canada, meanwhile, is cutting

into stagnation. Ontario is not simply

slowing. It feels like it's being

hollowed out from the inside.

And the currency market sees this before

most people do. The looney's weakness

has been partly hidden because the US

dollar has had its own issues. But

compare Canada to Australia or New

Zealand, and that picture shifts.

Against them, we're losing ground.

Currency traders are not emotional. They

don't watch political speeches. They

watch growth, rates, and internal

demand. When they price the Canadian

dollar lower against peers, they are

making a quiet statement. Foreign

exchange markets often see what voters

don't. They price in weakness long

before headlines admit it. Now, step

into the shoes of Bank of Canada. It's

not exactly a comfortable place to

stand. So I'm a little surprised that um

uh the Bank Canada is taking such a

stridident approach. Uh I do think that

they will be compelled uh to cut rates

further even from this egregiously low

interest rate. Um and uh I think the

Canadian dollar, which I had been

bullish on tactically, uh is going to

come under some new downward pressure at

the same time because there's a case to

be made that the Fed probably doesn't do

uh anything at all, at least through the

first half of the year.

>> If the bank cuts rates aggressively, it

risks pouring gasoline back onto the

housing market and reigniting the very

bubble that created this debt pile. If

it holds rates where they are, it

suffocates overleveraged households

facing renewals at double or triple

their old costs. If it raises rates, it

detonates federal interest expenses and

squeezes consumers even harder.

>> We're expecting a 5.1% increase in sales

in 2026. Um, so not a huge increase.

>> Over the past year, prices have climbed

in more affordable cities, up almost 7%

in Regina, nearly 10% in St. John's

about 17% in Quebec City. But in big

expensive cities, the slowdown has been

sharp with prices falling 4.5% in

Vancouver and more than 6% in Toronto.

Now focus on the suburbs around Toronto.

Hamilton, Burlington, Oakville,

Ancaster, Dundis, Stony Creek. These

communities exploded during the ultra

low rate years. People moved out from

the city core, chasing space, backyard

offices, and mortgages that felt

manageable at 1.5 or 2%. That math was

built on ultra cheap money. Those

mortgages are rolling over between 2025

and 2027. That is the renewal wave. And

when a household that locked in at 2%

renews at 5% or 6%, the monthly payment

shock is not theoretical. It is

immediate. It shows up in the budget. at

the same day. It is not dramatic yet,

but that's what makes it unsettling.

Carney is cornered between recession and

reinflation. With Rosenberg Research

warning that the economy is already on

life support after 275 basis points in

cuts delivered just 1% growth,

stagnation is no longer theoretical. If

massive stimulus cannot revive momentum,

what will? When gravity returns, it

doesn't tap you on the shoulder. It

resets the system.