Ep 40: How Cheap Debt Broke The Old Economy with Carl Gomez

Prices climbed faster than paychecks, bonds rewrote the cost of money, and the old promises of globalization fell apart in plain sight. 

We sit down with Carl Gomez, chief economist and EVP of research at Centurion Asset Management, to map the Great Reset: why term premiums are back, why “higher for longer” isn’t just a headline, and how a K-shaped economy is sorting winners and strugglers by birth year and balance sheet.

Carl brings decades across capital markets and real estate research to explain how a security-first world reshapes inflation, borrowing, and asset values. We dig into the mechanics of bond repricing, the end of the consumer nirvana powered by offshoring, and why models fail when human behaviour shifts under stress. 

Then we get practical: what rising mortgage resets mean for Canadian households, why the math isn't mathing anymore, and how to think about liquidity, risk, and timing when the future carries fatter tails.

The conversation also explores generational pivots in spending and work. Gen Z and millennials are choosing mobility and experiences over 25-year mortgages, while AI squeezes entry-level roles and pushes new skill paths, from trades to creator economies. 

We compare North America’s aging demographics with emerging markets building middle classes, and we unpack how immigration policy whiplash hits growth and housing supply. 

Through it all, we focus on what actually helps: budgeting with stress tests, building compound skills, and demanding policy that raises productivity instead of chasing headlines.

If you’re rethinking housing, career moves, or investments in a higher-rate world, this is your field guide. 

Listen, share with a friend who needs a new playbook, and leave a review to tell us what you’re changing first.

Quick heads up this episode was recorded on February 17, 2026 so while the news may have changed since this conversation was recorded the thoughts and ideas still remain relevant. 

Also everything we talk about in this episode is for educational purposes and vibes only its not financial advice.

Transcript

Setting The Stakes: Prices And Power

Julia Pennella, Host 0:00

Welcome back to Let's Talk Politics, the podcast unpacking power, politics, and the money behind the moves. If you've been scrolling Amazon, buying groceries, or staring at your bank account wondering, how in the hell did everything get so damn expensive so fast, you're not imagining it. The old rules of the economy are broken. The institutions we trusted, and the way we've built wealth for the last 30 years are dead. For decades, we lived in a consumer nirvana. Debt was cheap, trade was easy, and a million dollars actually meant something. Today, you're lucky if that gets you a house in Toronto. And according to top economists and Canada's own prime minister, that era didn't slowly fade out. It ruptured. Today, I'm joined by Carl Gomez, chief economist and executive vice president of research at Centurion Asset Management, to break down what he calls the Great Reset. With over 25 years of experience across capital markets, research, and strategy, Carl has worked from CMHC to Bay Street, specializing in macroeconomic forecasting and real estate analysis, a trusted voice for the Globe and Mail, Bloomberg, the Financial Post, and the Wall Street Journal. He's the expert the experts call to make sense of the market. In this episode, we're breaking down the economics of uncertainty, why the bomb market is flashing warning signs, how Gen Z and millennials are rewriting the rules of how to live and work, and what a K-shaped economy means when the year you were born can determine your financial survival. So, are Canadians addicted to cheap debt? Is the detached house dream just a math problem that no longer works? Is Canada's economy and productivity held hostage to its overinflated housing market? And if the old math isn't mathing anymore, what comes next? Quick heads up! This episode was recorded on February 17, 2026. So while the news may have changed since this conversation was recorded, the thoughts and ideas still remain relevant. Also, everything we talk about in this episode is for educational purposes and vibes only. It's not financial advice. So, let's talk politics and the economics powering them. Carl, thanks so much for joining us today.

Carl Gomez, Chief Economist at Centurion Asset Management 2:37

Thank you very much, uh Julia, for having me as well. Looking forward to our discussion.

Uncertainty And Broken Economic Models

Julia Pennella, Host 2:42

Same. A lot's happening in the world. But what is your political hot take right now? What's weighing on your mind?

Carl Gomez, Chief Economist at Centurion Asset Management 2:48

Well, I think the buzzword for everybody, even financial markets, economics, politics, you go to a cocktail party, uncertainty is the real thing. There is so much going on geopolitically, financially, technologically, in the economy, that uh uncertainty seems to be the name of the game. And it's not just the known unknowns, it's the unknown unknowns that everybody is fixated on these days. So it's uh uh uncertainty to me is the buzzword for sure.

Julia Pennella, Host 3:20

I like that. And this has been a theme that's been coming up with a lot of my economist guests. So I'm curious, like, how do you, when you're crunching the numbers, kind of factor in uncertainty? Like, what does that capture if you can capture it? I know there's measurements, but at the same time, we know markets are often about how people are feeling and we're gonna be getting into bonds too. But yeah, I'm just curious if you can share uh a little bit of insight around that.

From Globalization To Friction And Inflation

Carl Gomez, Chief Economist at Centurion Asset Management 3:46

Well, it's a great question. You know, unfortunately, as an economist, our models aren't built for uncertainty. They are built on certain uh assumptions and premises that we build on and then eventually try to arrive at a conclusion based on these assumptions. The problem is when reaction functions and consumers and businesses don't necessarily do what the model suggests, then you get dislocations and disequilibriums to use a kind of economics parlance. And that's really a function of the fact that we're all human, human behavior can change. So it's a tough time to be an economist that way, given all this uncertainty. But our job is to forecast, and yeah, the crystal balls are kind of cloudy, but we make assumptions. And you know, based on the assumptions that we have, we come up with conclusions. The uncertainty is the wild card, and it's why I call it the tail risk, are very big because the risk can swing either way depending on what happens. But our job is to make certain assumptions and then extrapolate what the conclusions and the strategic conclusions are from there. It's not just licking your finger and putting it in the wind and trying to see where things are going and draw from history. I mean, nobody predicted COVID, and it was hard to say how things arrived that way. But even going back even earlier than that, at the global financial crisis, lots of what we call black swan events, which is the uncertainty that can change the course of where we're going. And that's why sometimes looking at history is a great guide, because we can always look at other historical events and you know try and figure these things out. It it's a great time, I'll say professionally as an economist to try and do that. But at the same time, it's thrown a lot of cold water on our profession as well because the models break down under all this uncertainty, too.

Julia Pennella, Host 5:38

Very well said. And I am a full-blown history nerd. So for me, I'm loving looking at the past to predict the future as best as we can. Prime Minister Carney's message at Davos about the rule-based war world order is over and that uh we're not in this state of transition. But it's really ruptured what our ideas of how economies and trade deals might work out. So I want to point to this with the return of a significant term premium, which had all but vanished for a decade, and we're seeing the shift toward security first supply chains. The global bond market is uh seeing pricing in a higher for longer norm for yields. Can you break down a little bit about what you're seeing around the bond market and how we're seeing this new era of geopolitical friction and massive government debt? Is the bond market correcting itself uh from a decade of low rate distortion? Or are we seeing signaling that fiscal and monetary math of the last 30 years is now maybe broken?

Bonds, Term Premiums, And Higher For Longer

Carl Gomez, Chief Economist at Centurion Asset Management 6:44

I think that's exactly it. The last point there is, you know, one of the things that I think a lot of us have made our careers in the last 30 years, but in the last 30 years, what we did see globally was a situation of globalization. It was an economist dream, you know, specialization, comparative advantage, all of that helped to bring down costs for a lot of things and made trade among countries specialize on their best things. And that allowed a lot of consumer goods, computers, dishwashers, everything. When there's comparative advantage and the lowest cost jurisdiction can provide that the most efficiently, everyone benefits. That's a basic tenet of economics. And so what we did see over the last 30 years is increasing globalization, allowed, and especially a place like China, which rapidly industrialized, still had low labor costs, was doing things efficiently that way, allowed the integration of those goods into the global economy. And we saw basically a situation where the global economy embraced globalization because it brought prices down. It brought uh a form of consumer nirvana in some ways that these goods that we used to get. Anybody who shopped on an Amazon knows robot vacuum you can get now cheaper, things like that. And and that was the situation that we saw for the last 30 years. When we go back to the economics of it all, what it did help to do was drive down inflation. And inflation was a problem back in the 70s and 80s, but all of a sudden, central banks too were wanting to keep inflation low, stable, and consistent. That's a Bank of Canada's only mandate. And for the longest of time, we had very, very low inflation. And the thing about that low inflation is that it also allowed bonds, which are very sensitive to inflation, to reprice to some extent. And what it did, and you kind of alluded to this in your question, is the term premium in a bond, that's basically the cost of the value of it because it's a long-term investment. The premium that you need to invest in that long-term investment came down and basically went away. And so the takeaway from that, from a consumer and business standpoint, is we were blessed with 30 years of declining interest rates, almost to the point over the last 15 years or so, and I come back to our careers where we just got used to having very, very low interest rates. And really, in a big part of it, it was the globalization in the world and in and all of that, and the institutions behind it that supported it that allowed that sort of framework or world to develop. But as Mark Carney said at Davos recently, a lot of these institutions are breaking down. And the United States was the lead institution to provide that. I mean, they were one of the biggest, largest consumer markets, benefited from a more global environment. We brought down barriers to trade to make things more efficient, and the US was a leader of that. But right now, and obviously the current administration in the United States is anti-globalization to some extent. They want to reshore manufacturing and bring things back. That order that we got used to for a long period of time has now broken down. And that doesn't mean globalization completely has broken down, but the globalization that we got used to, led by the United States to some extent, with Canada hitching its wagon to that engine for geographic purposes, it was logical to do, has now broken down. And so one of the consequences of this new order that we're starting to see is that inflation to some extent is kind of back on the radar screens. And Balkons hate inflation. So they are resetting in terms of their rates. We've seen in all since COVID, where inflation got really high for a number of reasons. Basically, we started to see bond prices start to reset. And that's had a run-through effect across markets, asset prices, housing, how people borrow, and everything else. And I think a big part of this, the reset in the bond market is realizing that the last 20 to 30 years of globalization is over and that term premium that effectively went to zero is coming back. And it's coming back because of the risk of inflation, but it's also coming back because now governments are spending like crazy coming out of COVID as well. So that is a bit of a problem for bonds because that contributes to long-term inflation. Central banks don't adjust right now. So without getting too technical, I think that the takeaway here is that in the years that we got used to in the past 20 years are not going to be like the next 20 years because we are resetting because of geopolitics, because the institutions are changing, because of demographics, because of technology, all these sorts of things. And so for humans, it's very difficult to kind of we always make decisions based on our past.

Canada’s Addiction To Cheap Debt

Julia Pennella, Host 11:35

And what's coming to mind for me is as we're talking about globalization and how cheap goods have become, right? Because as we said, offshore labor, different countries have different labor practices, you know, the valuation of their currencies pointing to China, for example, you know, arguments about how they devalue their yen to be able to make their goods um desirable. But I want to lean into the point around inflation and how we're gonna see this market correction. Do you think we as consumers and the market itself have gotten addicted to cheap debt, cheap access to money? And then the reason why I bring this up is there's some, you know, uh influencers I follow, and one of them makes a really strong case how it's actually controversial take, but it's easy to get rich in Canada. Because if you look at it, I can walk into any bank and I will very easily get approved for probably 50 grand of a personal line of credit that I can play on the stock market. And we're also seeing the convenience of things. You can have Kalarna where you can pay for a burrito in increments. So I'm just curious from an economic, broader perspective, what this impact of being obsessed with cheap debt does to that longer impact.

Housing Math Stops Working

Carl Gomez, Chief Economist at Centurion Asset Management 12:53

Well, you know, cheap debt is really just borrowing from your future, right? And I mean, that's what debt actually means. And when the cost of debt was very low, and it was very low coming right into COVID when we had zero interest rates. And so that's just going back five, six years ago, we were just used to being able to take that money and put it into something that maybe I want to spend on a boat or a car. But even from an investment standpoint, what a lot of Canadians were doing was like, well, housing prices were going up really quickly. Makes sense to borrow these cheap rates and buy something that's just going to go on up forever. And that to some extent was a rational choice based on where interest rates were. And not surprisingly, Canadians had some of the highest debt levels in the world coming out of COVID. I mean, we were just over 100% of GDP. Now, a big part of the reason why we had that is because 2010, coming out of the global financial crisis, the bond market broke down, credit broke down in places like the United States, the banking system fell apart, and people were forced to deleverage. They lost their homes, the banks took things over. That happened around the rest of the world, but in Canada, because we have such a sound banking system, the credit juices still were flowing. And they were flowing in a place where interest rates kept going lower and it just made that cost of debt cheaper. And it fueled what I call asset prices, including housing prices going higher. All of that was a rational development, but the party stops when the debt becomes more expensive. And that's why, like now, the housing market, and you can read lots of stories in Canada, is resetting because the cost of debt is not as cheap as it used to be. And that puts a lot of people who took out that cheap debt and now have to refinance, you know, a mortgage has to be refinanced every five years in Canada at a higher rate at the same time that the home that you bought five, six years ago is now valued lower. So there is always a reckoning when it comes to debt. Nothing is free. You are borrowing off your future. And unfortunately, if you were just operating under the mindset of the past 20 years and extrapolating that into the future, you know, house prices always go up, debt's always going to be cheap. You're kind of in a bit of a catch 22 today, because I don't think many people are in the game of forecasting where interest rates are going to go and always believe house prices is only go in one direction. So I think there is a bit of a consequence to that. In my economic outlook, I call it the great reset because everything needs to start resetting based on, and we're just talking on one area, which is global debt markets and global bonds and global trade and all of that to sort of change. Now, that being said, there's still a lot of, and and we can talk about this because I find this very interesting from a demographic standpoint, is a lot of young people today are just seeing a lot of luxury goods that were considered luxury goods back when their baby boomer parents were younger, like going out to eat or fast fashion, things like that, traveling. They see that as something I'm going to invest in my lifestyle with in this environment. And maybe housing now today is too expensive and too much of a luxury itself, where all this other stuff is not a luxury anymore. It's just something that's nice to have. And they're making a trade-off based off of what the history used to be: buy a house, have a mortgage for 25 years, get a same job for 40 years, all of that kind of stability has now changed into, well, if I'm dealing with all this uncertainty, I'm going to make a trade-off. And I find the demographics of that interesting in this environment. It's a it's a new sort of change that's happening. But part of it to me is this reset that's going on in the markets. And young people today, and I can say young people, you know, Gen Zs, even the alphas coming up, but even the younger millennials are making decisions and changes because they're forced to do it in a different way than, say, their baby boomer and Gen X counterparts did before.

Julia Pennella, Host 16:57

Very well said. And I want to lean into that point because I think it is really fascinating. We're seeing this shifting in both consumer spending on, like you said, what is considered a good I want to actually put my hardware, earned money towards. But at the same time, the career paths and trajectories of many Gen Zs are not even going to post-secondary education. But I think there's that shock, and we're going to get into it as well. But like AI, what that means for entry-level roles, and if we're going to see a shift to more tactile hand kind of job seekers of carpenters and construction and whatnot. But two points, and I'm curious about it. So the consumer spending of yes, maybe I'm going to travel and take off a year instead of staying in Canada, what does that do to do you think the domestic market? Do you think other markets, and maybe this is part of a that broader strategy that we're seeing the federal government put forward of the partnerships with different countries, of understanding our dollars might not be staying within our borders? In addition to that, I would argue, depending on where your boomer parents sat in the financial scale, we also know that there's going to be a huge mass inheritance of these homes that are valued over a million dollars that our parents' grandparents maybe bought for 2030. I know there was some information coming out in Japan that's concerned about the mismanagement of what this inheritance is going to do to the future generations. So I'm curious if there's anything you can kind of comment on both sides of, you know, consumer spending, maybe not staying within Canadian borders, but also this like wave of wealth inheritance.

Lifestyle Tradeoffs And Generational Shifts

Carl Gomez, Chief Economist at Centurion Asset Management 18:36

Yeah, it's a great question. And I think in economic circles, the there is this increasingly this view of this K-shaped economy. And the K-shaped refers to the fact that all the people up there who are still spending on luxury goods and all that sort of stuff are the wealthy people who have accumulated great wealth over the past 30 years because rising house prices, rising stock markets. And it's very demographic because the older you are, you start had a better head start on that. So, you know, boomers and some Gen Xers have all that wealth. And it's almost like they're immune to all of the other stuff that's going on. The wealth has given them a bit of a buffer zone. But again, their careers were made at a time when there wasn't a lot of AI and disruption and uncertainty and all that sort of stuff. On the bottom end, you have the unfortunate situation where there are people who don't have equity. They haven't been able to build all that wealth. When you look at it, it's newcomers and young people who are kind of sitting in that position. And I think to your point, for a lot of young people today, the ability to replicate what the boomers did and what some of the Gen Xers did to accumulate that wealth just doesn't seem feasible anymore. Cost prices are, like you said, are so high up. You know, can I buy a single family home with a detached place without a $700,000, $800,000 down payment? Who can save that stuff? And so I think for young people today, they'd made a different decision because they feel more constrained in the job market, have tougher to do it. And to your point, maybe I'm just going to be an influencer and maybe make the big bang if that option is there. But I don't need to be in a corporate job going nine to five. I can work from anywhere, see the world, be able to do all that sort of stuff. Maybe I can take on credit card debt and a little bit of debt here. Mom and dad are got my back. So if anything doesn't happen, I can move in with them. And I think that's kind of where we're sitting right now in the world. The problem with that, though, is it creates a big inequality. And that inequality is growing. Those who have them haven't. So if you have parents who are going to give you a gift, maybe one day give you a big head start in the housing market and stuff like that, you're going to be okay. But if you don't have that, it's just going to be maybe I'm going to switch my gears and lit for experiences. And COVID taught a lot of people experience matters more so because life could be fleeting and all this sort of stuff. So I think in this world, and maybe we're kind of seguing off the original topic of globalization and stuff, but I think the demographics are speaking to this new sort of outlook on life, like the traditional, you know, get married, have a house, have the same job for 30 years, retire with a defined benefit pension plan, have all this wealth locked up. That's not the aspiration in this economy and in this world that I think again a lot of young people will be dealing with. And it's not to say it's a bleak future, but it is very different than the post-war sort of baby boo future that asset price rises with low interest rates allow that generation to have.

K-Shaped Economy And Inheritance

Julia Pennella, Host 21:44

I would even tie it into your point about maybe this is a different kind of great reset that we're seeing with mentality and how we conceptualize money and debt and our our work and future. And I'm curious, I don't know if you know the answer to this, but is this more? Of, like, a North American problem, or are we also seeing this in South America? I am hesitant about that because I think when we are looking at South America, India, China, we're seeing a growing of middle class. So it's like they're kind of catching up. Europe, I'm not too familiar with that market, but yeah, do you think this is more of just a North American mindset, or are we seeing this globally in more, you know, richer countries?

Carl Gomez, Chief Economist at Centurion Asset Management 22:23

It's a great question. And I think it's more of a North America, Europe phenomenon, the advanced world G7, because the demographics are kind of shaping that. In some ways, North America is kind of lagging Europe in this situation. Europe already had a very big wealth discrepancy just from historical landownership and things like that. They also have older demographics and aging populations. There's these old kind of jokes about Italian young men who lived with their families and their parents for years, even when they're in the 30s and 40s. Well, that used to be the trope back then, but now it's starting to be a North American phenomenon as well. And a big part of that is the economy and finances and demographics and everything else. So I think there is that North American, probably advanced country sort of take on things. To your point, well, Latin America, Southeast Asia, the demographics are very different. They're younger populations, and in a place like India, they're advancing very quickly in terms of the economy and the economic growth is creating a rising middle class there. Because for the longest period of time, the wealth discrepancy was huge, like much more significant than North America, right? You had abject poverty. So India has this opportunity to grow a middle class. And because there's so many of them, it's helping to power the economy to some extent. So they're down there on the growth curve where North America used to be. Latin America has some different demographics as well, but they have a younger population largely through fertility rants and things like that. Because in North America, the other consequence, this is something I've just been looking at, is Canada pulling the reins on population growth for non-permanent residents. It's like a bit of a shock to Canada's system because we need immigration to grow. Because in North America right now, especially in places like Canada, but also Northern Europe, the cost of living is so tough. Our fertility rates, nobody's having kids anymore. So without population growth and in bringing people from other countries, our economy takes a bit of a hit as well. We got out of hand a little bit, but yeah, it's a tough situation, I think, for today's North Americans and Europeans.

North America vs Emerging Markets

Julia Pennella, Host 24:42

Well, that's a wrap on this episode. But don't go anywhere. Carl Gomez is sticking around for part two, and we're continuing the conversation on everything economic and political. In part two, we're tackling Canada's record-shattering household debt and asking, is our obsession with cheap debt and borrowing actually killing Canada's productivity? We'll also explore government policies designed for political brownie points rather than economic sense. And for the Gen Z's and millennials watching the GTA housing market prices slowly come down, is now the time to finally buy? Tune in for part two to find out. I'm your host, Julia Pannella. This is Let's Talk Politics, and we'll catch you in part two.