Decoupled

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Chrysler to slide into bankruptcy today. The National Post no longer a daily. Almost 80,000 new jobless in a single month. Political biker babe Julie Couillard’s famous frock sells at auction for a fifth of what she wanted.

The world has certainly turned into an interesting place. And I didn’t even mention the WHO moving to pandemic Defcom 5 or the US economy plunging a scary 6% in the first quarter.

Amid this, believe it or not, Washington says there are signs the economic slump is ending, which the stock market apparently has bought.  The Fed just confirmed interest rates will stay at zero. In fact, a leaked central bank report says negative interest rates may be necessary in the months to come. Given the current levels of joblessness, deflation and despair, the best rate, it asserts, would be minus half a point.

Imagine. Banks paying you interest to borrow money. Is this a wonderful time, or what?

The flip side however, is when governments go insane, as they are now, it’s for a reason. American policymakers are spending $10 trillion they don’t have, running up the biggest debts in the history of man and making money free because they fear a deflationary spiral.

This has been the sweaty thing at night now for many months, and despite the Polyanna statements from politicians, the threat’s grown. Officially, 8.5% of Americans are out of work, but the real rate’s believed to be twice that. In fact, in Indiana, 25% of workers are idle, while in swaths of California, the jobless number is 20%. Those are not far off 1930s levels.

Prices and wages continue to decline right along with the cost of money.

But in all this comes the mother of decoupling.

The lowest interest rates since ever are clearly seducing the weak. Real estate sales have been shockingly robust. Buyers are paying full price. Mortgage brokers say they haven’t been this busy in two years. First-time buyers are maxing out.

Ironically, the one thing that caused our current financial Armageddon – credit – is making a big comeback, thanks to government policy. Suddenly debt is cool again. Not an hour goes by that someone doesn’t email me gloating about their new loan rate. People are falling over each other to lock into 5-year mortgages at 3%, not stopping to think they’ll be renewing at two or even three times that level. Home values are actually rising because buyers can afford to pay more thanks to cheap money, thanks to government. It’s false inflation in the jaws of deflation.

And it will not end well.

We cannot borrow our way to health. Even when bereft politicians plead. Or date babes.

Excuse me. Going to plant carrots.

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On the Road: If you’re hanging out in the Okanagan region on Saturday, join me at the HoweStreet.com Money Expo. The day-long unbuttoned celebration of greed and mammon happens at Kelowna’s Coast Capri Hotel. Registration is free at the door, and make sure you get there by 8:15 am – unless you’ve had enough of me.

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For today’s blog, “Pandemic preparedness,” go here.

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For Garth’s latest podcast, go here.

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103 comments ↓

#1 [email protected] on 04.29.09 at 8:40 pm

The negative interest rate sounds interesting. if I lend a friend 10 bucks, they would no longer have to pay back 10 bucks, more like $9.95.

How can we make money with negative interest rate policy?

#2 Mountain Girl on 04.29.09 at 9:01 pm

Thank you, Garth.
I thought I was time-travelling back to being one of the lone voices of questioning amidst a panicked stampede of 2006 home-buying. A house on my street in inner city Calgary (a simple, 2-storey house with not much of a yard) just conditionally sold for half a million dollars.
Granted, it took a few months for that to happen, but it still makes my head spin.
Somebody out there is gloating about the great deal they just got on that house.
Mon dieu.
Has nobody learned anything from the last year? Foreclosures and personal bankruptcies are all way up and yet people are lining up with exactly the same circumstances and asking for the same situation. I don’t understand this thinking at all. It completey baffles me.
It’s not safe to plant a garden in Calgary until late May/early June, but I’m with you, Garth – I’ll start my seeds indoors and spend the summer puttin’ up a motherload of preserves and enjoying the fret-free sleep of a frugal renter’s life.
Sheesh.

#3 lgre on 04.29.09 at 9:04 pm

Unfortunately its a sad story all around, the sheeple are too dumb to see what is going on, regarding the stock market…I’m sure most investors know what’s going on but dont really care by the looks of it. I doubled my TFSA in the last 3 months so that’s good news..lol

I guess most of the Canadian Banks in the next 5 years will be in the same predicament as their U.S counterparts..wait for it sheeple..along with high mortgages we will be bailing out the Canadian Banks..

#4 TS on 04.29.09 at 9:14 pm

Hmmm…. let’s think about this for a moment…. if I was in the US the Fed in the near future may pay me 0.5% to borrow money… so I borrow it…. then invest in government secured T-bills with a 2.5% yield… and ‘make’ 3% without any risk (unless the US goes belly up).

And we ask, “Just how desperate are things getting?”

#5 ts harpoon on 04.29.09 at 9:15 pm

“Washington says there are signs the economic slump is ending, which the stock market apparently has bought”…Nothing but raptures of optimism and I am getting sick and tired of hearing that we are coming out of the recession.

Here, at Greater Fool Land we have “productive worry” where individuals use their concern as a motivational tool to solve their problems.

That is why we we need more Garth Turner.

#6 Jonathan on 04.29.09 at 9:18 pm

It definitely worries me.

This can only end ugly.

My question is whether the government will ever fess up that rampant inflation is their only hope out of this mess… and that investors who lock in to long term bonds or hold cash will, at least one day in the future, be royally screwed.

#7 Jon B on 04.29.09 at 9:30 pm

My guess is that the long anticipated dramatic fall-out from the addictive credit drug will take longer to materialize given the new image put on borrowing at low low rates. I think you’ve got another solid 5 years ahead of you on this blog Garth.

#8 hal smith on 04.29.09 at 9:35 pm

It won’t be over till the last sucker has a jagnormous 35 year mortgage, a line of credit , a credit card, and a car loan. When the last sucker can’t take on any more debt and/or the bank won’t lend to him any more it will be over. We’ll all be screwed.

#9 Chris L. on 04.29.09 at 9:53 pm

Is the interest rate really material when you still have to come up with the cash to repay the loan? What does it matter if it’s 0.5% or -0.5% when you’ve made an agreement to repay a debt? I’ll never get it. Without a warranty to a life-time of low interest, that 2.5% prime rate or -0.5% makes no difference. If you borrow $500k for a house you still have to come up with that cash to repay the institution and how many man hours is that going to take? I’ll never understand these people and why they are so willing to commit decades of their lives to housing. I’m in talks now with a friend and I don’t think I’m making headway. She wants to buy up right now and I’m trying to convince her to buy down or else get a house with an in-law suite. People are so whinny and spoiled, they’ve never truly experienced hardship and I suppose they’d like to delay that as long as possible. Without pain, one can’t appreciate comfort. It’s like the kid that has too many toys and can’t even bother to open the next, let alone consider thanking the giver. Compare this to the youngest kids that play more with the boxes the toys come in, then the contents. I still wonder why this surprises people. Happiness comes from a mysterious place, the rest of the time we just try to amuse ourselves with meaningless things.

#10 Bottoms_Up on 04.29.09 at 9:54 pm

The ‘negative’ interest is a mis-nomer. They would effectively decrease the rates on long term debts while holding short term rates the same. This effectively squeezes the two rates closer together, and can be ‘extrapolated’ to say the rates are ‘negative’.

#11 john m on 04.29.09 at 10:06 pm

Every day the future looks worse and the crash more severe. Im puzzled by what reasoning the mortgage companies are handing out these dollars in such a faltering economy when no job is secure?..and when property values are dropping at an increasing rate (how is an accurate value of a property achieved?).Kind of reminds me of “the postal code appraisals”.But then how can they lose when their coffers are replenished with our tax dollars and the risk brought to bear on the taxpayers? I agree Garth this is not going to end well!

#12 Mike B on 04.29.09 at 10:07 pm

I don’t think in any way we will borrow ourselves out of this depression . Other things will happen b4… namely a war or some global calamity that will force us to save like the years of WW2 … That is what we NEED not more Wall/Bay street economics. One economist quipped ” if only” there was inflation when asked about the low int rates causing inflation. It is deflation they are worried about… I can tell you there is no deflation in RE in Toronto. Even clunkers are selling for close to asking… The horror … the horror!!!

#13 Nostradamus jr on 04.29.09 at 10:13 pm

and this World Pandemic = a World Deception

or the NWO policy…reducing the world’s population

…China 1.5 Billion….50 million unemployed

…India 1.15 Billion….no stats available

…Japan 127 Million….no stats available…large elderly population though

Mexico 110 Million….no stats available

U.S. 385 Million….unofficial 20% unemployed

Ontario 11,400…..unofficial +20% unemployed

Western Canada…..safe

…..and thanks to a previous blogger….take Vitamin D instead of a flu shot.

#14 Cendrine on 04.29.09 at 10:15 pm

I get it. My SIL gets it. No one else in the family gets it. What to do? How do you plan for such a grim future when your spouse and most of your extended family won’t even acknowledge that things could get very bad?
This will have to be a private DIY plan for survival. I’ve been reading Sharon Astyk lately and I admire her optimism and practicality – a real antidote for these tough times.

After getting through this move, my plan is to start gathering/preserving food, as I used to do. I will be planning for emergency preparedness and energy needs this year as well (hope we don’t have a blackout before then). SIL is great at long range planning and setting goals. Together we can work on a basic plan to help our families. I just can’t stand feeling helpless when everything is going to hell in a handbasket and I can’t talk to anyone about it because no one will take my opinions seriously.

#15 Shawn on 04.29.09 at 10:23 pm

What about getting a five year mortgage on a paid-for house at 3.9% or less and investing that in a group of five year bonds that pay say 6%. The braver you are the bigger spread you can find.

2% spread is not much until you realise you would be getting 2% on the bakn’s money. You would be like a Bank. And if brave you can probably find yield investments paying at least 10%.

Done in moderation for someone with a Paid for house and who is very strong financially this could be a good boost. Probaly beats a reverse mortage all to heck for seniors.

I have not been brave enough to try this… (Okay, the truth is my wife won’t let me)

#16 lgre on 04.29.09 at 10:38 pm

“My question is whether the government will ever fess up that rampant inflation is their only hope out of this mess… and that investors who lock in to long term bonds or hold cash will, at least one day in the future, be royally screwed.”

at the end we may all be screwed, whether you have a big mortgage you can barely afford or a big bank account eaten away by inflation..another brilliant move by the elite.

#17 gold bugger on 04.29.09 at 10:46 pm

It’s perfectly rational for people to buy when you think about it: Every time the piper asks for payment, debtors are bailed out by government. Why should this time or the next time or the time after that be any different?

Is it fair? What’s fair in life? I’d like to see sound money but I’ll be dead before we get it.

More likely, runaway inflation will prop up the nominal value of a home. People will FEEL like they aren’t losing money (or maybe even feel like they’re making money) on the buying and selling of their homes. And we savers will sit around wondering why we bothered to horde our savings all these years.

Savers will be wiped out. Debtors will be redeemed.

What’s crazy is to think it’ll be any different any time soon.

Sad, really.

#18 Lance on 04.29.09 at 10:50 pm

“if I was in the US the Fed in the near future may pay me 0.5% to borrow money… so I borrow it…. then invest in government secured T-bills with a 2.5% yield… and ‘make’ 3% without any risk (unless the US goes belly up).”

Yup.

But meanwhile, the price of your t-bills drops and you are actually receiving a negative yield on invested capital (if you try to sell you’ll sell for less than what you purchased for and received in interest to date). If you hold through to maturity, but by then we might be in an environment with 5+% inflation in which case the your yield of 3% is still yielding a negative return.

Who gets the last laugh?

#19 raj masrani on 04.29.09 at 10:55 pm

I think that that i personally have sold these buyers 3 years ago, and now they have refinanced at least 2wice, and are still in debt an have now idea how they got there.

#20 nonplused on 04.29.09 at 11:02 pm

Negative yields! Weee! We truly can dream any dream if we double up on the meds!

So does this mean grandma’s bonds are going to start producing negative income for her? Instead of getting a tiny cheque each month from her bond portfolio she’s going to get a call from the collection agency? “Hey maam, we all got problems see, but you have $100,000 in government t-bills and you are late with your payment. Now send in the $500 in and I don’t have to sent Guido by for tea, see. Get my meaning?”

When they get up to 10% it might be a nice line of business. Borrow $100,000, sock it away in a CDIC insured account, and collect $10,000 per year! As long as the banks aren’t paying minus 11% it might work!

We have to find a way to get these nutbars running the show off the stage. Any new group of morons at this point has to be better. This is truly insane!

Unless of course the purpose was to get everyone to cash in all their bonds, bank accounts, t-bills, what have you and pile up the money under the mattress, which is what you may as well do if the interest rate is zero.

Or buy canned goods and durables. Buy all the stuff you can stuff in your house. At least you don’t have to pay the bank to hold it for you.

I wonder what the Chinese are going to think of having to pay to hold treasuries.

Side note: anyone notice the government’s new internet campaign to get everyone to plan for 72 hours self sufficiency in an emergency? I got directed there from my work intranet site.

http://www.getprepared.gc.ca/index_e.asp

They are giving us all year to get prepared but the message is kind of weird coming from big brother. They want us to stock pile water, non perishable food, emergency lighting and radios, cash believe it or not, all the usuals. The government of Canada is now a encouraging survivalist behaviour. What’s up with that?

#21 nonplused on 04.29.09 at 11:11 pm

Woody Harrison as Charlie Frost has a great new blog in support of the upcoming movie 2012 that may offer some end of the world humor to those interested. Check out the animation.

http://www.thisistheend.com/

I vote for economic collapse due to monetary policy Charlie!

#22 Barb the proof reader on 04.29.09 at 11:30 pm

What a relief, I thought that “sweaty thing at night” was just me.

#23 Da HK Kid on 04.29.09 at 11:33 pm

Yes sir, another round of teaser rates to replace all the Alt A and Option Arm loans coming due over the next 2-3 years so after they implode we see another 2-3 year of them on these 5 year fixed.

The death spiral of debt is going be a long brutal one with people not knowing what to do and then wondering how they feel about government and policy players.

It will all be a shame and public opinion after the fact will be based on revolt, but what will you have left to revolt with when the only person hiring is the national guard.

I’m afraid we here on Garth’s page will be the ultimate minority and we’ll have to booby trap our carrot crops to keep them.

Run to hills cats! Or like me hang out in SE Asia where the cost of living is so cheap, and savings on hand so abundant, and domestic product and services so available that a spectator is what we will be.

My once active return to Canada is now on the back burner for a decade or forever! Sorry fellow Canucks but it is what it is!

#24 Steve on 04.30.09 at 12:07 am

Man, all that I can say is that I am more than happy that I did not get into real estate at the time and especially last year in Calgary. Granted Alberta will probably weather things a bit better but only on the condition that the price of oil goes up past $80 or so /barrel.

That being stated, I am very concerned that a central bank will be at 0% or lower. Correct me if I am wrong but did Japan not attempt the same thing and got no where with that tactic? I must concur that when the central private bank to finance a nation in taking a loss on income, this is more than just a bad thing that is occuring.

I will discuss with my wife after we have our first son, which should be in a couple of days, about buying MRE’s and also getting a little garden growing in our apartment. She is a little bit aware of what is going on. However, she has more important issues to think about, our son for example. When this is over, the birth, I will try to talk with her about it in a very serious manner.

Better to be paranoid and prepared than to be ignorant and caught with your pants down. Remeber the ant and the grasshopper fable. I’m starting to think more like an ant now.

#25 Greg in Victoria on 04.30.09 at 12:41 am

Negative interest rates are the equivalent of a tax on holding money. The idea behind negative interest is not to give money away for free (or better than free like it might sound at first blush) but to try to compel those with cash to spend it to increase demand. The idea is that if borrowers are not prepared to borrow and spend a tax (in all practical respects) on savings in the form of negative interest rates will encourage those with savings to spend it – better to spend it than have it get taxed away (paradoxically the same effect on spending as inflation). Have a look at a recent NY Times article on the subject.

http://www.nytimes.com/2009/04/19/business/economy/19view.html

#26 WakeUp on 04.30.09 at 12:49 am

Interest rates will remain low for a while so you could get a variable mortgage for now and when you see that rates are headed up you could switch to a fixed 5 or 10 year mortgage.

This strategy would probably get you a good rate for 15 years.

#27 . . . fried eggs and spam . . . on 04.30.09 at 1:00 am

“. . . the WHO moving to pandemic Defcom 5 . . .” — Any bets when Stage 6 starts? Try this week sometime! Then (I understand) it becomes a global pandemic.

“. . . Is this a wonderful time, or what?” — For a few — the elite — yes, it is wonderful, as their profits become thicker.

For most of the rest of us, it’s adequate, nothing more, and for those who have lost almost everything, they aren’t even reading this.
——
#122 Barb the proof reader on 04.29.09 at 8:43 pm — “ . . . talks about known problems with flu shots. I don’t think anyone should be taking flu shots. Who is profiting off them..”

The answer is right here! — http://tinyurl.com/dyusuy

I ‘spose somebody’s gotta make a remedy for this endemic trashemic pandemic, so what about chicken soup?! — http://tinyurl.com/dyp6qx
——
Ten US states whose economies are outperforming Uncle Sam’s. — http://tinyurl.com/cb8mqs

#28 Chris S. on 04.30.09 at 1:22 am

Consumers of the world, consume!

#29 Mitchell Cardno on 04.30.09 at 1:31 am

Here is a pretty shocking video of Southern California’s foreclosure homes. The video is titled “Foreclosure Alley” and is ~12 min in length – a great watch!

http://www.silverbearcafe.com/private/11.08/foreclosure.html

#30 robert on 04.30.09 at 2:16 am

I am absolutely disgusted by this situation; there is a massive fiscal fraud underway and no one seems to be accountable. Central banks are devaluing national currencies by the wagon load in order to keep the money changers happy. By promoting continual massive indebtedness, they are enabling the banks to print “future dollars” which are devaluing our circulating currency. I submit that the only result can be a massive surge in inflation as these “future” dollars confuse normal market forces. The current real estate bump is a prime example since by promoting low interest mortgages, they are only ensuring that the current bubble is prolonged til some greater calamity brings it all down. If someone were to dip a hand into my bank account and take away 10% every month, it would be a criminal act, but if the governments and central banks do it, it’s called fiscal stimulus. I feel like we are on the Titanic after the berg has been struck and the authorities are re-shuffling the deck chairs. My worry is how many lifeboats are there, and who’s going to be in them. Until easy credit is abolished, this mess will never be cleaned up, merely postponed. The whole thing is absolutely disgusting; this is not the country that our pioneers and veterans fought to build.

#31 Vancouver_Renter on 04.30.09 at 4:19 am

I’m getting tired of all the condescending and sympathetic advice by economic simpletons who are completely unaware of historically reasonable measurements such as price-to-income, price-to-rent, debt-to-income, and mortgage rates. I call their approach in life “rear-view mirror investing”. Given it has been working up to this point, it will therefore continue to work! Houses tripled in the last few years, so they’ll triple in the next few years! It’s that simple in their minds.

This renewed optimism and strength in Vancouver real estate just means that I get to play the fool for yet another year in the eyes of my family members, friends, and colleagues. It’s another year of being lectured by concerned and gloating homeowners on the merits on real estate ownership.

According to everyone around me, I’d better buy now while there is an opportunity to get in or I will be priced out of the market FOREVER. If I don’t buy, and continue to rent, I am the laughing stock of the masses. The black sheep. The contrarian loser who is too ignorant to take from the horn of plenty.

It seems like the entire economic and social system is stacked against anyone who stops drinking the kool-aid, sobers up, and recognizes that prices are insane, ownership makes no sense, and risk is extreme. Even the government is hellbent on bankrupting our children and grandchildren to ensure that I am proven wrong.

If I ever abandon my belief and jump into the market, I’m quite convinced that I would be the “greatest fool” – the last holdout that marks the very top of the market before its precipitous free fall.

So I’ll just stick to my convictions and hope for sanity to someday prevail. But above all else, I dream of vindication. I’m tired of hearing, “Oh, they’re r-e-n-t-e-r-s” as if we are the equivalent of economic lepers.

#32 young & foolish on 04.30.09 at 4:34 am

Jonathan has a good point about potentially extreme inflation following government’s desperate attempt to prevent deflation ….. .. it’s natural to expect a re-pricing of assets after such an irresponsible credit expansion.

What is most unfortunate is the danger to savers and to the responsible. Cash may indeed be devalued, and higher taxes are almost certain.

#33 Comfortable in a coma on 04.30.09 at 4:50 am

Today I had a conversation/argument with an otherwise intelligent woman, who was very thankful the recession is over.
She said the price of her home hadn’t fallen because she had invested in a good area.
Then she said……… It’s different here in BC! (her words)
I just smiled and said “Yes, you are probably right, the recession just happened to the rest of the world.”
She agreed and walked away happy. Baaa!

#34 Maurice on 04.30.09 at 6:14 am

Morning Garth: If you had that picture on the cover of your book it would sell a lot better than with the Ewe.

#35 Casual observer on 04.30.09 at 6:28 am

“plant your carrot”
Nice!
Next you’ll tell me you’ve got big radishes.

#36 David Bakody on 04.30.09 at 7:06 am

Interest Rates @ -1/2 % fine but governments will find money to take from the taxpayer ….. look at this that just arrived in mail box.

Halifax Water ( we are HRM and have the HST) Hello Ontario?

Base Charge Water ………. $37.00
Water…(used)………………$35.00
Environment Protection ….$72.27 !!!!!!
Waste water Management.$28.26

………………………………..$173.05

Two people using little or no water, last bill ( 90 days) was $143.00 …..

This ladies and gentlemen is just the beginning, they will find new ways and means to raise every single bill we get from government (s) and business and that you can take to the bank!

So y`all think you got a deal on home wait till next winter and heating costs are added with heaven only knows what.

For what it is worth I will not water my lawn …. flowers only …… I was raised in the country and we never watered our lawn and it seemed I was cutting grass every other day …….

#37 ca on 04.30.09 at 7:30 am

Potential unemployment numbers for Ohio:

http://www.economicpopulist.org/?q=content/gm-layoffs-will-boost-unemployment-through-roof

#38 hagbard on 04.30.09 at 7:43 am

Anyone know where I can buy mylar bags and whole grains (eg: wheat) in the Windsor area? Time to stock up.

#39 Chris in England at the moment on 04.30.09 at 7:46 am

Credit is making a big comeback because the way most people see it, credit went away and hid for a while but has now been tracked down to its hidey-hole. The dip in the middle, when credit couldn’t be found was the result of the masses being forced to go without, rather than realising credit was an ever-expanding pit and vowing to turn away from it.

Credit is still the main way of buying anything that costs more than a few quid. The only people who will change their method of operation are the ones with assets and no debt, who can truly choose to do things differently. For the rest, credit is a necessity and the system will keep cranking it round as it is easier to repair the machine than to operate and remove the diseased part. In the absence of a viable replacement, there will be a short pause and then the whole thing will trundle on again.

Most people, worried about their jobs or their mortgages, aren’t scratching their heads about how to change the world and its economic systems, they are just intent on being able to pay for everything… somehow, anyhow. They will continue on in the same way for as long as possible until either (a) they dig themselves out of the hole they are in, or (b) fall into it.

It is easy to sit in judgement on other people who don’t seem to “get it” but like us, some of those people might just make a change if they see a chink of light beyond the open door and the chance presents itself. If not, they may remain trapped like so many who don’t see beyond their own little life-bubble, whether it be through ignorance, belief in the system, self-absorption or just plain tiredness due to the daily grind and the lack of opportunity.

Credit has a new lease of life, and many people will grab onto it thankfully if it bobs into view like a lifeboat. For youngsters particularly, living on credit is normal and they know no other way. Assuming there will still be some jobs out there, this is the generation that will happily continue to live on credit, ignoring all warnings, while the rest of us crusty old criticisers shuffle off to the Sunshine Old Folks Home grumbling under our collective breath. Meanwhile, credit will go marching on with the blessing of the many.

I believe Garth is right (and all those here who post in agreement). At some point, the accumulated weight of debt will see people and businesses totter and fall. This latest episode in the drama will be delayed and dragged out as long as possible, but with a dwindling economy in every country and the shrinkage of jobs, there will be less people paying tax and propping up the ballooning sections of society that become dependant on the state. Unable to pay their debts, these defaults will result in even more people trying to cope with less and heading for the breadline, as money they are owed is cut off and more businesses strangle and die.

Everyone on here jumping up and down asking when they should buy? have they missed the boat? – should remember the entirely human instinct to hang on and survive at all costs. This will play itself out over what might be an infuriating length of time but bit by bit the house of (credit) cards will fall. Many people are now in the economic ITU on artificial ventilation, and sooner or later this life support will be switched off.

If money is burning a hole in your pocket, dig a bigger hole and bury it for the summer. I believe the right time to buy RE is when we no longer have to ask each other when the right time is. I think it will be obvious. In the meantime, as so many here say, “pay down debt, save, and wait; your house should be a home not an investment; live within your means, etc. etc”.

Living within your means is the best advice. At some point your means might expand considerably and your choices and opportunities will expand along with them. If you are unencumbered by debt you are absolutely free to go in any direction you please.

[Thus ends the sermon]

#40 Kash is King on 04.30.09 at 8:03 am

Lots of posts here today noticing the fact that regular folks (sheeple) are blithely unaware of what’s going on.

It reinforces my hunch that I need to re-read George Orwell’s “1984″… for whatever good that will do?

#41 pbrasseur on 04.30.09 at 8:21 am

Garth, it’s fine to be colourful and cynical but cynicism cannot replace analysis and to analyse correctly you need to look at negative AND positive aspects of a situation.

Surely you make some good points about governments and their central banks encouraging people getting into debt (especially in Canada where home prices are still inflated).

I’m also worried that government stimulus will not really take effect before this recession is actually over and therefore be wasteful or worse help trigger inflation, not to mention all the problems the huge new government debt will create down the road..

But you also have to consider all the corrections that are taking place as we speak, for example the fact that people are saving more and paying down their debts, inventories have been cut to the bone (accounting for much of the contraction), businesses are cutting cost and becoming more productive, house prices are becoming more affordable, energy costs are down, etc…

All that points to a recovery.

Proof of increasing savings and decreased debts? — Garth

#42 pbrasseur on 04.30.09 at 8:31 am

“Proof of increasing savings and decreased debts? — Garth”

Well that’s pretty common knowledge is it not?

For example,

http://www.nytimes.com/2009/02/03/business/economy/03econ.html

Now I can only assume if people are saving more their debt/asset ratio has to decrease…

Your comment related to Canada, amd you (access denied) article is American. Please prove the statement that we are saving more and paying down debt at the same time. — Garth

#43 doom and gloom on 04.30.09 at 8:36 am

Just sold my home in oakville for 99% of asking in 3 weeks. Like many on this blog I really have a hard time understanding what is keeping this market up. Oh well, I’m now a renter with cash in the bank.

#44 Davinci on 04.30.09 at 8:53 am

My god don’t you get it! Banks create money out of nothing whey they loan it to you! And now they want to pay you to take out a loan!

It’s like you have all lost your fracking minds with your insistence that paper is money.
BANKS ARE PAYING PEOPLE SO THEY CAN PRINT MORE SO THAT PRICES GO UP!
THE POINT OF MONEY IS NOT HOW MANY UNITS YOU HAVE BUT WHAT YOU CAN BUY WITH EACH UNIT!

Here is evidence that more than a few people understand that…

“According to Royal Canadian Mint, which produces Maple Leaf bullion coins, its production quadrupled last year as demand for gold and silver products went up.”
http://tinyurl.com/cduztj

“Sales of 2009 Silver Eagle Bullion Coins are blistering hot, with an incredible record-breaking pace of 9.64 million sold through Monday, April 27, according to the latest US Mint sales stats. More silver eagles have been sold during February, March and even an unfinished April than any corresponding month since the American Eagle series was launched in 1986. What happened in January 2009? It was a great month for the eagles as well, coming in second place behind the record sales in January 2008.”
http://tinyurl.com/cp5hbl

#45 David Bakody on 04.30.09 at 9:02 am

#40 Kash is King on 04.30.09 at 8:03 am

Most do know what is going on and perhaps they are living the old line ” Eat Drink and be merry for tomorrow you may die” and indeed the Roman Empire did die.

I am not sure how many noticed that many people having lost big time in stock market (RRSP’s) just might have thrown in the towel and are spending what is left before another bunch of educated fools blow it.

As mentioned by GT (G&M headlines) we are now share holders in the CAW ….. so let’s see how many people will now eat their own words of buy Canadian. OMG LOL…. this should prove once and for all you can not beat Ottawa …..

#46 Jonathan on 04.30.09 at 9:04 am

Nostradamus jr writes:

“Ontario 11,400…..unofficial +20% unemployed

Western Canada…..safe”

I don’t know. The 401 is still rammed in rush hour in Toronto. I haven’t had a single friend or family member get laid off yet in Toronto. My brother in law was laid off from Magna a year ago but found another FT job last October.

Ottawa is government city, so its obviously good. I don’t think the unemployment exceeds 20% (although it is definitely rising). I’m sure it is over 20% in places like Windsor or some logging/mining communities up north.

I hear BC is in for some tax increases with the Olympics and Alberta is getting pummeled by the fall in oil prices. Alberta’s (and in housing, BC) economy is the most inflated, so it has the furthest to fall if the global economy doesn’t rebound in the near future. Wages and prices for goods/services will have to deflate rapidly, which throws off debt/ income ratios and the economy can go from bad to ugly very quickly. So I wouldn’t call that safe.

#47 lgre on 04.30.09 at 9:14 am

anyone who wants a good feel for government corruption and political/economic agenda should read…The Shock Doctrine by Naomi Klein..after you read Sheeple by Garth Turner of course.

#48 pbrasseur on 04.30.09 at 9:27 am

“Your comment related to Canada, amd you (access denied) article is American. Please prove the statement that we are saving more and paying down debt at the same time. — Garth”

I meant to address North-America globally.
For Canada alone I don’t know really, as you know statistics about anything are difficult to get here.

I would guess that consummer behavior has changed a bit here too although not as much as the US, so far…

Actually, I think you’re wrong. The Canadian savings rate has been 0% for several years, since families had no disposable income after debt servicing obligations. How, then, could they start to pay down debt and augment cash reserves right at a time when joblessness sharply increased? Does not compute, and I have seen on statistical evidence of it. — Garth

#49 Nostradamus jr on 04.30.09 at 9:54 am

Next Nostradamus jr. ….Prediction….

President Obama will decide in essence for the feds to run GM and Chrysler…..for the benefit of the UAW that is so closely tied to the Democratic Party.

Look for tax changes and regulations intended to coax, or coerce Americans to buy from “Obama Motor Companies”.

….You heard it here first….

#50 905er & Spouse on 04.30.09 at 10:19 am

#46 Jonathan

You’re right it’s different in Ottawa

#51 ally ally oxycontin free on 04.30.09 at 10:22 am

Actually, I think you’re wrong. The Canadian savings rate has been 0% for several years, since families had no disposable income after debt servicing obligations. How, then, could they start to pay down debt and augment cash reserves right at a time when joblessness sharply increased? Does not compute, and I have seen on statistical evidence of it. — Garth

And a beautiful [ circa 2005 chart ] illustrates and validates your claim … compliments of RBC, with commentary provided by Derek Holt. See ‘saving rate forecasts, Chart 4′ … And provide me with a cheque for $4.3 TRILLION so I can get the ball rolling on this.

If you anticipate the post-’05 dynamics, the downward trend line would disappear through the bottom of the page.

#52 Bill-Muskoka (NAM) on 04.30.09 at 10:31 am

Well, what do you know? The government and the banks finally are clueing in that investing in the PEOPLE is the way to stability?

Weep not for them because their multi-billion dollar PROFITS have been high for years, at least here in Canada.

Maybe they are modelling it all based on the farmer’s long known ‘investment’ plan…Planting the seed then comes the harvest. For too long their plan has been harvest first, spoil the soil with overuse, and then ask the government and people to subsidize their failed policies.

Gee, I forecast a much warmer winter coming because it would appear that Hell has frozen over! LOL

#53 Jake on 04.30.09 at 10:32 am

#40 Kash,
It is really quite unbelievable to watch Orwell’s scenario playing out before us in so many ways. The party slogan is ringing in my ears at this moment:

War is Peace,
Freedom is Slavery,
Ignorance is Strength.

Can anyone deny that each of these lines accurately describes the situation we find ourselves in today?

Here is a short video with a beautiful speech by John F. Kennedy that highlights the depths to which deception can lead a people when governments and MSM are not held accountable. The speech begins around 2 minutes. Warning there are tones of a conspiratorial nature in this clip.

http://www.youtube.com/watch?v=hhZqhiyG7ls

Thanks for providing an alternative source of information Garth. The honest path is usually not the popular path. People don’t want the truth.

#54 ally ally oxycontin free on 04.30.09 at 10:33 am

désolé, excusez-moi s’il vous plaît

http://www.rbc.com/economics/market/pdf/saverate.pdf

#55 ally ally oxycontin free on 04.30.09 at 10:45 am

#52 Bill-Muskoka (NAM) on 04.30.09 at 10:31 am

‘Morning Bill … Didja ‘twig’ O’Flairity’s new offering on credit cards? Ditto on his TS = FA …

We’re gon’ be permitted a 21-day ‘grace period,’ between the ‘statement date’ and ‘due date,’ afore any late charges are incurred. That ought to keep Judy Watch-yer-valise-valise onside in support of more lazy / crazy misdirected legislation.

If’n yer speakin’ to O’Flairity, tell him that’s what we got AWREADY!

an’ an’ an’ member, you can always get a quick-loan at a paycheque cashing shop.

#56 Jake on 04.30.09 at 10:46 am

#24 Steve,
Hope everything goes well with the delivery. Congrats! Will you be at the Foothills hospital? I am hoping to spend some time there in residency someday. My brother and sister in law both work there now.

ps. Pay the extra $40-$60 bucks for the private room if it is an option. They could very well keep you guys for two nights if it is your first, and the nights can be very long when only a curtain separates you from your neighbour.

pps. Order the epidural early…..your wife may want to try to be brave, but tell her to go with it anyway. It will be the difference between her loving or hating you through the process.

#57 George on 04.30.09 at 10:49 am

Garth, I’m in the states, who’s the slick dude in suit and the woman with speed bags?

Don’t you wish you lived in Canada? — Garth

#58 ally ally oxycontin free on 04.30.09 at 10:55 am

Canadians and Americans spend a similar proportion of their income

Until the mid 1990s, both Canadians and Americans managed to spend less than their disposable income. However, from 1996 onwards, they spent almost all of it, leaving very little for saving. (Canadians and Americans spend a similar proportion of their income – Chart)

http://www.statcan.gc.ca/pub/75-001-x/commun/11-3.gif

#59 pbrasseur on 04.30.09 at 11:07 am

“Actually, I think you’re wrong. The Canadian savings rate has been 0% for several years, since families had no disposable income after debt servicing obligations. How, then, could they start to pay down debt and augment cash reserves right at a time when joblessness sharply increased? Does not compute, and I have seen on statistical evidence of it. — Garth”

Garth – you certainly know Canada much better than I do, that being said we have to think logically, things change, saving rate has been 0 does not mean it still is. In fact it would make no sense if it was.

For the US what is clear is that the savings rate has increased, that’s a known fact, people are now saving and they are consuming less, therefore taking on less consumer debt. Obviously house sales are down which means less people taking on debt, while despites layoffs most are still working, and deflation, for example in energy, leaves them with more $$. Also the gazillions foreclosures have to have an impact as well, after all when someone loses their house they also lose their debt.

All in all, although these corrections involve short term pain for the economy and for individuals, the global situation changes toward something that is more viable to allow recovery.

As for Canada I’m sure these trends are here too, although less brutal and possibly delayed (RE market). For example auto and home sales are down here too, certainly for more than what can be accounted by lost jobs. That means less spending which in turn means less taking on debt and more saving.

I can speak of myself as an example, I’m delaying buying a car and been using that money to save and invest instead. I’m pretty sure I’m not the only one that did that.

#60 Another Albertan on 04.30.09 at 11:19 am

In regards to the pbrasseur/Garth discussion:

Paraphrasing Gary Shilling’s Insight newsletter from March and April 2009… (Da HK Kid can likely corroborate, since it appears he is a subscriber too)

*Please note that Shilling’s points always refer to the US economy. The degree to which this is mimicked in the Canadian economy is the next question.*

If the formatting turns out to look terrible in the final posted version, I apologize.

Everyone else’s mileage may vary drastically…

-consumer spending’s share of GDP leaped from 62% in the early 80s to 71% in the second quarter of 2008

-excess spending multiplies about 1.5x through the economy and boosted GDP by about 0.5% per year

-forecasted savings will go up 1%, meaning 1.5% will be taken off GDP

-therefore we will have slower overall economic growth

Paradox Of Thrift: savings is beneficial for individuals to prepare for contingencies, kids’ education, retirement, etc but if everyone saves, overall
consumption and the economy will be weak.

-was a problem from the 30s until 70s

-from 80s forward, free-spending, big-borrowing, little-saving consumers eliminated this problem

-we believe most of the money in savings will go to debt repayment – the flip side of a savings spree

-the 820B US trade deficit is matched by a net 820B surplus abroad.
-in 2007, US consumers accounted for 18.2% of global GDP, 14.9% in 1980 and 16.8% in 1990
-cannot overemphasize the importance of the US consumer in fueling economic growth in the rest of the world

-for the next decade, expect 1% rise in the saving rate annually. this means a reduction of about 1% in real GDP growth from 3.6% in 82-00 period to 2.6%

-over half of Asian exports ended up in America. have calculated that 1% decline in US consumer spending results in 2.8% drop in US imports which the rest of the world depends on

-on balance, we look for slower economic growth here and abroad over the next decade. Real US GDP gains may average ~2%/yr (instead of 3.6%). And with 2-3% deflation, nominal GDP might not gain at all.

Shilling’s take also includes the idea that inventory reduction is taking much longer in the US to realize. He suspects it is because of how much of the economy was caught flat-footed when things dislocated – it’s not like they were already starting to ramp down. Inventory reduction may well persist past the end of the recession if spending doesn’t recover. (read “you’ve already cut your per-store stock and now you start closing additional stores”)

#61 prairiegopher on 04.30.09 at 11:21 am

While all of you hunker down and plant carrots and stalk squirrels, I’m going to do the only sensible thing. I’m going to buy a Harley(on credit making me 1/2%), find the biker babe in the picture, buy back that dress(on credit making me 1/2%) and ride down the road flaunting my new ride.

Finally, a reasonable comment. — Garth

#62 JamaicanGal on 04.30.09 at 11:41 am

“Just sold my home in oakville for 99% of asking in 3 weeks. Like many on this blog I really have a hard time understanding what is keeping this market up.”

Possibly it’s “the sweaty thing at night “….Dunno what else it could be….

Hope this is a reasonable comment too….;)

#63 Some Guy. on 04.30.09 at 11:45 am

Garth – what does one do with their cash? all this talk has me concerned about the money I have saved thus far…..

#64 Flip on 04.30.09 at 11:46 am

I tried to post this yesterday… but it looks like firefox is not “jiving” with Garth’s blog.

Link from Statcan that gives you amount of people filing for Unemployment Insurance by CMA (Census Metropolitan Areas) in the West – instead of the usual “large provincial numbers”.

Just so you folks can see if it is indeed “different” where you live:

http://www40.statcan.gc.ca/l01/cst01/labor03c-eng.htm

Of notable mention:
Vancouver had an increase of 75% folks filing for pogey (Feb 09 versus feb 08)
Edmonton = 96% Calgary 114%
Kelowna is at 102% up
And Wood Buffalo (Fort Mc Funny Money) a whopping 130%
Even Saskatoon had an upswing of 56% (remember the media is currently reporting Saskatchewan as being the province that is “bucking” the national trend… ya… buck that!)

… and the winner is: William Lake in BC – with 188% more folks lining up at the UI centre.

These numbers don’t include people that have had their benefits run-out, folks that don’t qualify, people that have quit, or the self employed and contract workers that pay into UI – but can’t collect it (ba-ha…) and is a large segment of the trades folks throughout AB and BC…

#65 Diabolo on 04.30.09 at 11:56 am

Can someone loan me a million dollars.. I will return 995,000 immediatly… DEAL ???

#66 CTM on 04.30.09 at 12:02 pm

Hey Garth.

What do you think of Canadian Banks’ willingness to grant unsecured credit lines at the moment?

I’m trying to follow your advice of “boiling down” my credit card to a lower interest rate.

I’ve been a good boy and haven’t taken on any new debt in a long time. Just want to pay less as I pay down…

Cheers. Keep it up. Just finished “After.” Great book!

#67 pbrasseur on 04.30.09 at 12:08 pm

prairiegopher

You should know that girl has been known to cause a bit of trouble :-)

Even more than a Harley ;)

#68 smwhite on 04.30.09 at 12:30 pm

#64 Flip

Thanks for the link, wonder how much house you can buy being unemployed with a zero/minus savings rate?

Those unemployment numbers just add to the list of persons that can no longer afford to buy and now become sellers…

#69 smwhite on 04.30.09 at 12:34 pm

A couple weeks old if you already haven’t seen it…

http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm

#70 Jay Currie on 04.30.09 at 1:45 pm

The whole Chrysler thing is a bit more complicated than the Big “O” would have us believe. Ian Campbell nails it:

http://www.stockresearchportalblog.com/2009/04/chrysler-filing-for-chapter-11-protection-likely-this-afternoon/

Even the President of the United States cannot interfere with the working of bankruptcy law.

#71 The_Bigger_Picture on 04.30.09 at 1:46 pm

67 pbrasseur –

This seems to illustrate an alarming situation where women are now allowed to screw up (pun intended) any part of society, institution, or persons career for titillating ‘self fulfillment’. This being more prevalent in large urban eastern cities like hogtown than anywhere else.

If that chick gets a thrill out of being gang-humped by a bunch of criminals, then that’s the environment that she should be restricted to for the rest of her miserable life.

This all shows an absurd and twisted permissiveness that allows some female to compromise national security, the career of an aspiring politician, and any societal progress that might be made from his efforts however minor, for her own thrills — at the same time as castrating the rest of society at large with stupid, politically-correct, mental and legal oppression of male thought.

It seems this was the whole point of the Lie-berals ‘social-engineering’ and gun-grabbing scheme back in 1995.

#72 Future Expatriate on 04.30.09 at 1:56 pm

I tried to tell you a complete crash of all paper and a start from the beginning by returning to a real standard, would be infinitely preferable to any kind of crap they’d invent to keep the Ponzi scheme going a bit longer.

Sometimes you just have undo the wrong and start all over.

#73 PTDBD on 04.30.09 at 1:58 pm

Budget? Budget? We don’t need no steeenkin budget.

The fine art of prestidigitation,
unlike unbridled titilation,
requires that the magician redirects attention
in tandem with irrational disbelief supsension.

No need to budget, scrimp and save
We will print all the money that you crave.
Ignore the swiney, coughy, phlegmy things!
Look, look! The bright, magical Olympic rings!

#74 Aston on 04.30.09 at 2:15 pm

I’ve been bearish on real estate ever since I started thinking about homeownership back in 2005… turns out I was a few years ahead of my time.

While I agree with most of the arguments here — rates have nowhere to go but up, higher inflation is on the horizon — the sentiment on these blog forums is bleak and, well, unhelpful. Buy a home, it’ll go down in value and you’ll be screwed. Save your money, and it’ll be devalued and you’ll be screwed. Honestly, what’s the best course of action at this point, besides growing your own food and building a bomb shelter??

I have a slightly less bleak of how things will turn out: housing prices will come down in Canada (30% at the most), but most likely the coming inflation will keep nominal prices high. We’ll all be poorer, but at least the numbers will remain large on paper.

So buy now, don’t buy now… either way, we’re all screwed.

#75 dd on 04.30.09 at 2:27 pm

“But in all this comes the mother of decoupling.

Buyers are paying full price. Mortgage brokers say they haven’t been this busy in two years. First-time buyers are maxing out.”

Well … there are a lot of people that do not read beyond the front page. People what to be spoon fed.

#76 dd on 04.30.09 at 2:34 pm

“Suddenly debt is cool again.”

The bubble should have popped in 1998, however there was a bail out. It should have popped again in 2003, but the the fed lowerd rates for too long. And it should be popped now but the fed buying up bonds to reflate the economy.

A snowball gaining speed and size going downhill.

#77 dd on 04.30.09 at 2:39 pm

#17 gold bugger

“And we savers will sit around wondering why we bothered to horde our savings all these years. Savers will be wiped out. Debtors will be redeemed.”

Really? Savers will have the cash to buy up assets on the cheap when the implosion happens again and again. Debtors … that is what they are … broke.

#78 dd on 04.30.09 at 2:45 pm

#2 Mountain Girl

“Has nobody learned anything from the last year?”

People only see what the prices were last year and think this is a deal. They are not looking at the long term and maybe asking “could this downturn go longer than the short term?”

Planting a garden … Can’t do it in a highrise. Buy ag commodities instead.

#79 Chris in England at the moment on 04.30.09 at 2:59 pm

Jake #56: “pps. Order the epidural early…..your wife may want to try to be brave, but tell her to go with it anyway. It will be the difference between her loving or hating you through the process.”

Good God! Doesn’t she have a mind of her own? Having a baby is perfectly normal (yes I have, as it happens) and this type of decision can safely be left to us women without being debated by men first, accompanied by recommendations, helpful hints and user instructions. Anyway, with all these doomsday clouds approaching we will soon be back to popping ‘em out on the veranda while we peel the potatoes! Good luck Steve and Mrs. Steve. May it be a magical experience (with or without the cussin’).

#80 Future Expatriate on 04.30.09 at 3:41 pm

Garth, Sheeple arrived today in the States. Can’t wait to devour it.

Thanks so much!

#81 Got A Watch on 04.30.09 at 4:13 pm

Savings rates in the US have spiked up sharply in the last little while. I think Canada is probably similar, the stats being lagging, have not shown it yet.

How could savings not rise in a new age of frugality? The “Paradox of Thrift” be damned. Individuals don’t worry about that, only economists looking at the macro picture.

If you think you are losing your job, or close to it, most people, except the reckless would cut back on spending and try to save some. Wouldn’t you?

#69 smwhite – Any page at StatsCan that covers savings rates in Canada? Anybody know where we would get this info?

#82 Grumpydawgs on 04.30.09 at 4:19 pm

In #8 Hal asks what will happen when everyone already owns one of everything and is in debt up to thier eyeballs. Gee Hal, thats already happened hasn’t it? Isn’t that what created this whole bubble in the first place. House prices inflated because money got progressivley cheaper ( cars too) and the prices just matched the lower payments. But, now that rates are at zero, that game is over. Expecting price appreciation because of low intrest rates is a game thats already been played. Lets get real, the cost of servicing a mortgage will always be in the banks favour. Institutions get to play arbitrage games with the carry trade, you and I are always going to get stuck with the bills. Negative intrest rates are a REALLY BAD thing. It means your currency has zero value. Buying a big ticket item with worthless paper is like a child pouring tea from her play set. The idea that your purchase has any value is strictly an Alice in Wonderland mentality, and the rabbit is you.

So the government wants us to buy buy buy and a few suckers are falling into the well, so what, not everyones so stupid and it shows in this morning numbers which show that real estate prices have fallen again for the eigth straight month. Balloons and BS can’t suppress the facts forever. Anyone who has bought real estate at anytime in the past 8 months has lost money. It doesn’t matter what you pay for something, the day it’s yours it goes back into the general inventory, the market doesn’t care what you paid.

An auction is only as successful as the activity of the buyers it attracted and if you put in a winning bid on a property it doesn’t mean that the house is worth anything close to that. It only means that a few suckers got together and decided to have a pissing contest. Fact remains that you probably paid too much.

#83 Got A Watch on 04.30.09 at 4:22 pm

# 14 Cendrine, #31 Vancouver Renter – Don’t lose heart. You know your common sense is right, your friends are just delusional. You can discuss these issues here on this Blog, and similar places, you don’t have to tell your friends you are a closet bear, they won’t know (unless they read the Blog and recognize your name, which seems unlikely, given their viewpoints).

You will be vindicated. Not that will be of much comfort, as the economy will be sunk by then, but you will get the last laugh, even if you don’t feel like laughing by then.

I too have a friend in Vancouver who thinks this recession is no big deal, and he is now unemployed (laid off). LOL. Talk about denying reality. It must be the drug induced haze.

If Vancouver is the last to feel a global recession, then it will probably be the last to exit the same. Lagging behind is not a good thing when comparing economies.

#84 Canned Goods and Buckshot on 04.30.09 at 5:19 pm

Steve,

Good luck with the delivery.

Jake,

Puffy chest aside, only a medical student would offer clinical suggestions over the internet with out a work-up of the patient.

#85 David on 04.30.09 at 5:45 pm

One of the characteristics of asset bubbles such as housing are the attempts to keep the bubble from deflating. Forestalling the agony of the correction is symptomatic as is the false optimism of the sucker’s rally. It will all end badly and there will be plenty of false bottoms on the hard landing awaiting those who believe otherwise.
Zero interest rates will not fix a negative savings pattern nor make over priced homes debt sustainable over the long term. A big case of win today, because tomorrow it may rain. In reality the forecast will be for high winds and hail and people buying homes at peak bubble prices are in for a very painful lesson down the road.
The home as store of family wealth and the wealth effect of ownership will certainly get a reality check in the years to come.
This may not be an actual Depression as our parents knew it, but collectively we are experiencing the longest sustained economic downturn in two generations. The zero interest rate policy is not fostering anything like a robust recovery or new job creation. The high paying full time jobs being lost will not be instantly replaced and most likely are gone forever.
The party had to end sometime and like any party there will always be a few stragglers that show up two minutes before the police arrive.

#86 Two-thirds on 04.30.09 at 5:54 pm

Are our banks really different (than those in the US)?

“Accounting Standards Board allows Canadian banks U.S.-style markdown relief”

http://finance.sympatico.msn.ca/investing/news/businessnews/article.aspx?cp-documentid=19500171

I guess the mentality in our financial world now is: “if you can’t beat ‘em…”

Thus this no-longer-free market will have guaranteed better Q2 results for the banks. Just change the rules, voila! Financials have recovered.

Didn’t these people’s mothers taught them where liars go?

#87 Nostradamus jr on 04.30.09 at 6:19 pm

Last 5 Detached sales, north vancouver

MLS # V763064…ask $1,269,000…sold $1,375,000

MLS # V762088…ask $748,000…sold $752,000(busy street)

MLS # V751043…ask $1,350,000…sold $1,260,000

MLS # V759289…ask $819,000…sold $795,000

MLS # V761182…ask $724,000…sold $750,000

…No bubble here, Toronto is more expensive on a per sq ft basis…Vancouver may be even cheaper than Calgary or Edmonton.

#88 SSS on 04.30.09 at 6:19 pm

@#82 Grumpydawgs

Very good comments!

#89 . . . fried eggs and spam . . . on 04.30.09 at 6:43 pm

#20 nonplused on 04.29.09 at 11:02 pm — “I wonder what the Chinese are going to think of having to pay to hold treasuries. . . . are giving us all year to get prepared but the message is kind of weird coming from big brother. They want us to stock pile water, non perishable food, emergency lighting and radios, cash believe it or not, all the usuals. The government of Canada is now a encouraging survivalist behaviour. . . .”

Russia and China have agreed to strengthen military capabilities, co-operate and work together; both are building nuke power plants to supply electricity for citizens of Iran and Pakistan (I recall that there are two plants in each country to be built), and with new oil and gas reserves being found in Iran, chances are that sooner or later Israel will cry foul — over nothing — and the planet will subsequently head into WW3.

Designed, of course to take attention away from ever-larger debt levels, crumbling economies and infrastructures, incurred by countries and sheeple alike and none of those debts can ever be paid back.

Too much debt and can’t pay it back? Create and have a war! War is the cure-all for everything!

Start quietly by convincing sheeple and govts. to build up huge debt loads, pull the cards out from underneath and have the economic crunch almost immediately, plenty of banks go broke, mass unemployment worldwide leading to riots and civil unrest, pandemic combined with the Olympics and when all is said and done . . .

With a very loud voice, claim Pakistan and Iran have WMD (which they don’t) and are a danger to humanity, and must be eradicated!

After all, it worked so well in Iraq and that was a complete success, so it must have been good! Proof: Sadaam and his nookular weapons have gone bye-bye.

That is when the shit hits the fan, and flies straight back in our faces, except average people / sheeple didn’t start the fire — someone else did, but we get the effectsm whether we like it or not.

#90 David on 04.30.09 at 7:10 pm

Nostradamus Jr. interesting post on Vancouver real estate. Wish you could provide a list of the people who top ticked Nortel at the height of dot bomb bubble. They probably just took their huge losses and went off into that good night. The fact that there are still financial idiots out there should not be cause for encouragement.

#91 Boombust on 04.30.09 at 7:10 pm

“It reinforces my hunch that I need to re-read George Orwell’s “1984″… for whatever good that will do?

You mean some people don’t know that Osama Bin Laden is “Goldstein”?

#92 Boombust on 04.30.09 at 7:13 pm

“If Vancouver is the last to feel a global recession, then it will probably be the last to exit the same.”

FYI, Vancouver (and BC) has ALWAYS been the “last in” and the “last out” of recessions.

Perhaps an eekonomist out there can tell us why?

#93 timbo on 04.30.09 at 7:35 pm

something to ponder as you look at the blogs tonight. Nails the problems we face right on the head be it may it is from southern california.

http://www.youtube.com/watch?v=BiqEacwADlE

#94 OttawaMike on 04.30.09 at 7:53 pm

Blogmaster Garth,
The National Post letters section was particularly harsh and cruel to you today after yesterday’s book excerpt and accompanying critical editorial.
Some of these letter writers seemed to be from your past.
You seem to have rhino thick skin, ne’st pas?

Is the Post still publishing? — Garth

#95 taxpayer like you on 04.30.09 at 8:34 pm

I got tired of everybody asking – including Garth.

Did anybody think to google “canadain savings rate”?

You get

http://www40.statcan.gc.ca/l01/cst01/indi02a-eng.htm

Stat up to last 1/4 2008. Up from 3rd 1/4 2008 and from year before.

Pretty poor showing for a bunch of bloggers…….

Garth – do you consider this proof?

No. The claim was savings are up at the same time peronsl debts are down. I have seen no evidence of this correlation. — Garth

#96 Chris in England at the moment on 04.30.09 at 8:35 pm

According to the BBC website, “Bankers made an “astonishing mess” of the financial system and the effects will be felt for generations..”

****************************

“They are clearly using a brain system that has a different day job, so to speak.”

No, not the bankers, the parrots (couldn’t resist it).

http://news.bbc.co.uk/1/hi/sci/tech/8026592.stm

#97 POL-CAN on 04.30.09 at 9:06 pm

# 89 fried

Parkistan has WMD – nukes – as in NFW

Iraq, Afganistan, Yugoslavia, Vietnam and Korea do/did not.

It seems rather odd to me that since nukes were invented no two countries that have them have gone to war with each other. Perhaps there is something to that deterance factor?

Amerika, GB, and their NATO puppets like to pick on countries with the least ability to fight back because war is profitable in more ways then one.

Attacking “weaker” opponents means the loss of their men can be minimized thus keeping the sheep quiet at home.

Perpetual war = perpetual profit

Here is a case for why going to war this time will not save the economy like it did after WWII:

http://ashizashiz.blogspot.com/2009/04/gdp-war-inflation-micalculation.html

#98 Barb the proof reader on 04.30.09 at 9:07 pm

#83 Got A Watch: “# 14 Cendrine, #31 Vancouver Renter – Don’t lose heart.”

I agree, you can’t tell people things they don’t want to hear. Although it would be tough to have a spouse who disagreed on this. But Cendrine it sounds like you have found a way. Good for you, stick to your plan and enjoy your independent view, even if in silence. Your comments here can be your pent up frustration “release valve”. You can’t control the things you can’t control.

DH and I know many people who have already, and are still, planning on buying amidst all this. They have fallen for the continuing hype, thereby hoping to overcome their recent losses with new purchases. Do you think they’d actually listen to majority of their friends? Nope. Ignore them and carry on, and don’t let them influence you otherwise.

#99 taxpayer like you on 04.30.09 at 9:25 pm

OK everybody, now we google “canadian personal debt
load” and we get this:

http://www.vifamily.ca/library/wealth/famfin08.pdf

Your choice to believe or not. Up to Q3 2008 canadian debt load is up and heading to an intercept with US debt load.

Garth still in the lead……

#100 Nostradamus jr on 04.30.09 at 9:33 pm

#92 Boombust

>>FYI, Vancouver (and BC) has ALWAYS been the “last in” and the “last out” of recessions.

Perhaps an eekonomist out there can tell us why?<<

…As a professional Economist/Forsoothist I can comment on why not this time for Vancouver/Hongcouver….why
….because it’s different this time.

…Hope that helps…

#101 TrueGritCalgary on 04.30.09 at 10:48 pm

#29 Mitchell Cardno, that is some amazing footage in the video. I can’t believe they are actually throwing away the entire contents of a house. If I was one of the guys cleaning out such homes, I would have a couple of buddies, driving around right behind me with a UHaul, to pick up this stuff and resell it. This video, along with the one Garth posted yesterday of perfectly good houses being torn down, puts a new spin on our so called “disposable culture”. I thought I had seen everything……………..until now.

#102 ally ally oxycontin free on 05.01.09 at 6:31 am

COLUMN – Drowning in debt: the long-term cost of crisis: John Kemp

Thu Apr 30, 2009 7:42pm INDIA ST

http://in.reuters.com/article/economicNews/idINIndia-39350620090430?sp=true

#103 Aston on 05.01.09 at 2:26 pm

timbo: that was a great video, I actually watched the whole hour. Guess I’m not getting much work done today!