Whether you call it a cabin, a cottage, or a lodge, a family weekend retreat is – almost always – a prized possession. The trouble is that, once stripped of sentiment, vacation home ownership camouflages a complex tangle of personal, legal, financial and tax issues that far too many families fail to appreciate. Yes, that vacation home is a sanctuary. But it can also be a source of troubling family discord.
While parents are alive, things generally get sorted. Kids – of whatever age – go along with what they want. The trouble starts when the parents – you – are no longer around.
So with summer in sight, we thought it might be a good idea to survey two sticky matters surrounding vacation home ownership: sharing the property and passing the property to future generations. Both can be explosive and each one requires careful discussion:
Every economic recession in the post-war era was helped, if not caused, by a monetary policy error in which central bankers sat on low interest rates for too long, only to raise them too rapidly and too aggressively to combat sneaking in inflation.
The 1990-91 recession and the housing crash in Ontario were probably helped by too rapid a hiking trajectory by then Governor John Crow.
Even the mother of all recessions was probably deepened by policy overshooting as Greenspan waited too long before he started hiking in June 2004. Note that back then, inflation was already on a clear acceleration path, with core PCE rising from 1.3% in September 2003 to 2% in June 2004. That is, the Fed waited for core inflation to reach today’s target before moving. By then it was clearly too late. When you chase a lagging indicator, you overshoot.
Next Wednesday, at 2:00 PM ET, economists across the globe will be huddled in front of their screens searching through the Fed’s latest communication for answers to a wide variety of questions. Did the Fed hike interest rates by 25 basis points as expected? Did the dot-plot still suggest one more hike later this year? How close is the Fed in starting to reduce the size of its balance sheet?
It’s all very exciting. But for global growth sentiment, and by extension commodity prices and potentially even equity movements, it won’t make much difference if the Fed hikes one or two more times this year, or starts its balance sheet reduction in September or December. From those perspectives policy tightening elsewhere in the world, particularly China, could be much more important.