We are heading towards the end of 2009 and the Canadian real estate market is on fire. Record numbers of sold homes, record prices, bidding wars… All this is happening while we are coming out of the worst recession in 90 years.

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Price controls have been suggested as a solution to a myriad of problems in economic policy. Sadly there isn't much evidence that they've ever achieved their goals.

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Past recessions and recoveries were mainly dependent on American consumption patterns, because of the sheer wealth of the country. Its 300 million or so citizens decided the economic fate of the world thanks to relatively large disposable incomes. However, with the emergence of BRIC (Brazil, Russia, India and China) countries and the EU things have changed and rather than 300 million people, 3 billion people now have an influence on consumption of goods and services. That is why the effects of the current recession are also heightened, but will also be the catalyst of a much faster recovery than past history suggests. With the amount of government intervention and support, it is only a matter of time before confidence in the markets returns. Once the US recovers, the world will follow and so will 3 billion consumers.

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It's confirmed. The United States of America has suffered the largest home price decline in the western world over the last two years. The Economist provided a house price index which compared America's 15% house price drops (based on the S&P/Case-Shiller national index) to a number of other developed countries. This goes a long way to explaining the recent financial collapse and government takeover of mortgage companies Freddie Mac and Fannie Mae.

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What is the Beige book and why is it so important for our economic outlook?

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