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It will be lost on none of you that Vancouver, Toronto and their environs form the foundation of the current government’s political base. When the Liberal caucus gathers, the discussion surely is regularly hijacked by tales of woebegone home shoppers, because so many of those members of Parliament representtwo of the most expensive housing markets in the world.

Because we demand evidence that our elected representatives are working on our behalf, and because we are among a handful of societies that are obsessed with property, politicians end up feeling compelled to make the cost of owning a home “cheaper.” Since there tends to be too little supply to keep up with insatiable demand, these policies end up subsidizing buyers who don’t need the help, freeing them to join bidding wars. If you think this tinkering is mostly harmless, let’s review how we got here.

In 2008, the global economy crashed. The Bank of Canada dropped interest rates to the edge of zero, inviting Canadians to help with the recovery effort by taking out a mortgage. This created a feeding frenzy in Vancouver, Toronto and some other big cities where fundamental demand was already strong. Bankswere happy to help their clients keep up with the sky-high prices, as most of the risk was backed by the federal housing agency.

Governments, especially the one in Ottawa, were supposed to give the central bank a hand. Their job was to replace private investment by running large, short-term deficits. The fiscal authorities also were supposed to use their regulatory and taxing powers to keep borrowing from getting out of hand.