As Linda was walking into a Vancouver branch of the BMO yesterday, a house in tony West Van, a few clicks to the north, was being sold. In fact, it was the biggest deal of the day, in which the relieved seller – an offshore Chinese investor – was bailed out of a flip gone wrong. Over the 12 months he owned the place, eight of which the property languished on the market, the guy lost $1.1 million.

Unknowing of this, Linda (a wealthy woman who rents) ran into her account manager.

“He told me that the bank is forecasting stable prices and perhaps a small softening based on what’s happening in China. He then asked if we were getting ready to buy yet. I told him that we were happy renting especially since a home we desire in the neighbourhood we like would cost between $1.5 to $2 million. He then inquired if that was our budget. As you know Garth, we could certainly ‘afford’ – whatever that means – a home in that price range. I told him however, that it wasn’t in the cards because we weren’t interested in a fat mortgage. I kid you not Garth, he looked absolutely offended as if I’d launched a personal attack. Then, [email protected] (I’ve wanted to use that moniker for a while…), who had overheard this conversation told me that I really should be looking at a house as an investment since house prices always go up. And I replied, well until they go down. She looked at me as if were from another planet and said well, not in Vancouver. At that point I realized that I was from another planet – the one inhabited by sane people.”

It was another week when sanity left the room. The growing disconnect between what’s happening on the streets of the nation, and what we’re being told by institutions and ‘experts’ is sad and profound. No wonder so many are losing our way.

For example, in the midst of a credit bubble and historic heaps of debt, big banks are hacking the cost of borrowing. This week Linda’s bank – BeeMo – sucked a half point from its 5-year mortgage to achieve the lowest level in history, 2.99%. Hours later TD came up with a six-year home loan at 3.79% and one for seven at 3.99%.

Just what we need. Cheaper money. Excess borrowing. Worse family balance sheets. Increased risk. If this doesn’t make you worry a little more about the economy, you don’t understand. Personal debt as a share of the GDP is at historic levels – high enough to have international agencies warning us. More borrowed capital pouring into real estate will only make the inevitable correction uglier, the aftermath darker. And as housing’s share of the entire economy swells, we’re set up to become California North – a state that played the real estate card and lost.

Ironically, you’d think the banks would get it. Days ago I told you about RBC’s internal stress test, probing to see if it could survive a 25% price crash. The CEO says the bank can, but the very test belies great concern. So, is the competition for short-term profits and scooped-up market share more important now than structural financial integrity?

Duh.

As the real estate market comes under stress in real life, in fact, those companies who have grown fat on its bloated carcass just can’t seem to quit. Why, here’s Royal LePage chomping on an appendage right now.

The real estate marketing conglomerate’s CEO managed not to gag as he told reporters, “Widespread calls for a major real estate correction in 2012 simply can’t be justified.” In fact LePage scored a lot of headlines in the past 24 hours with a bold forecast that housing will stay strong, prices nationally will jump 2.8% (not 2.5% because that doesn’t sound scientific enough), and both Vancouver and Toronto be more expensive places by this time next year.

Based on what? Nothing, actually. Just the status quo. Low rates and ‘industry momentum.’ Of course, what Mr. Soper counts on is a slavish and incompetent media reporting his views uncritically, unleashing a new tide of hormones. Horny young couples, soothed by an ‘expert’ opinion will tank up on newly-cheapo mortgages and get lubed into a sexy new condo or semi in a former cornfield.

And he’s right. That is just what happened. Once again CP, Postmedia, the CBC, CTV and others proved there’s no longer room for critical thought in reporting. No second opinions. No opposing views. No counter-arguments. No filter for the corporate propaganda. And I heard nobody asking Royal LePage what the methodology was for its forecast.

As such, it’s utterly consistent with the path this society is now on.

It’s in the media. In the financial system. In the bank branch on the corner. There is only one investment asset in Canada. Only one place to put your money. Only one goal. One object of desire. Just one prize young lovers seek. One rock the old cannot release. A single inbred assumption so ingrained that when you question, people are startled. Upset. How could you?

Yes. It’s a Nortel moment.

Run.