The underclass

When I was a child, in the late Palaeolithic age, my high school principal father made ten grand a year. He had four kids, a wife at home, a dog and two cars. And a cottage. The two-storey house they bought in Toronto in the 1950s cost $18,000, or 1.8 times the household income.

The last house to sell on that same street went for $849,000. Even if those who bought it have an income of $180,000 – twice the Toronto average – the house would cost 4.7 times earnings. That’s slightly above the level at which the US real estate market collapsed in 2006.

How can people afford such homes? Or the $1.2 million plain-vanilla digs in Vancouver I mentioned yesterday – the one with 20 competing offers earlier this week?

Because they can finance it, of course, on the most generous, debt-friendly terms in human history. To buy the $849,000 home requires only 5% down ($43,000), and then a monthly payment of just $3,000 (5-year VRM, 35-year am). That means any bank will give you such a whopper mortgage with an income of about $120,000. It also means the house then costs 7 times household earnings.

See what I mean? That old house of mine can still be purchased by a high school principal. But this time it comes with a price that’s been wildly inflated by the ability to borrow your brains out, unprecedented leverage, and a debt that will probably never be repaid.

Oh yeah, and danger. Should a five-year mortgage swell from the current 2.85% back to the historic norm of 8.2% (and it will in the next few years), monthly payments just about double, even with a dumb 35-year amortization. (By the way, at that rate a homeowner would pay $64,000 per year in interest and only retire $4,000 in debt. This, kids, is why you do not want a 35er.)

Unparalleled access to debt at unheard-of rates and on astonishing terms through irresponsible banks is largely at fault for obscene house prices. And the pornographers at HGTV. This has resulted in a homeownership rate of almost 70% in Canada, about the highest in world, which continues to climb as the US rate free falls. It also means we now have $1 trillion in mortgages. You have to admit that a thousand billion in loans spread across nine million families is one mama of a burden.

One other thing this price/debt spiral has yielded is a lot of poor people.

They don’t know it yet. But they will.

Seven in ten of us have no corporate pensions. Sixty per cent have no money saved. Just five in ten have RRSPs. And while more have tax-free savings accounts set up, 80% of the money in them is in savings yielding less than the inflation rate. Can you say pooched?

Not a day goes by that I don’t talk in depth with people who own all kinds of stuff, but have no actual money. They may have houses and equity, but no liquidity. And the majority carry big debts at low interest rates which they are just servicing, not retiring. These are all employed, middle-class families with above-average incomes and that mysterious sense of entitlement, now ubiquitous. What they’ll retire on is a mystery to me. Where they plan to find the wads of cash to college-educate their kids is also unknown. But the first thing they all wanna do is buy the biggest, bejesus house they can finance.

I thought of this when reviewing the latest stats on incomes. Only 1% of us make over $169,000, and now researchers are flummoxed that in the past ten years a third of all income growth has gone to these top 246,000 Canadians. Said one of them: “You can’t keep growing an underclass that plays by all the rules, gets a better education, works more and doesn’t get ahead.”

Of course not. The ‘underclass’ is busy watching Property Virgins, then buying houses they can’t afford with money they don’t have, taking on debts they’ll never repay, ending up without enough liquid assets to finance their lives.

So back to my father. He sucked at money, too. But his epoch saved him. Economic growth, continuous wage gains, a defined benefit pension and inflation rescued his generation from itself. That turned real estate in a winning asset class, even when mortgage rates were multiples of those now.

Today, when growth is gone, inflation flirts with deflation, pensions are extinct and incomes languish, it’s only the soma of cheap and free credit sustaining the illusion of wealth.

This doesn’t end well.

245 comments ↓

#1 West Coast on 12.03.10 at 11:14 pm

Just get on with it and sell Canada to the IMF.

#2 mab on 12.03.10 at 11:24 pm

Our leaders will always tell us the truth – not.

In February 2008 Bernake testified before Congress and these were his assessments:

1. Unemployment should peak in 2009 at 7%.
2. The U.S. economy was ‘sound’ in his opinion.
3. The U.S financial system was ‘stable’ in his opinion.
4. He saw no ‘significant’ declines ahead in housing prices and real estate values.
5. The mortgage crisis was ‘contained to sub-prime markets’.
6. He was concerned about inflation and was doing what was needed to contain it.
7. Bernanke state on many occasions a strong US dollar is in the best interests of the U.S.

Let’s review:

1. Real unemployment is now almost 3 years later about 17%.
2. The U.S. economy is actually in a Depression.
3. The U.S. financial system began collapsing 3 weeks after he said it was ‘stable’ with the Bear Sterns collapse.
4. Housing prices have declined about 30%.
5. The mortgage crisis STILL isn’t ‘contained and has spread like wildfire.
6. Now he’s going to purposely create inflation.
7. Now he’s changed his tune? If it still is, why is he devaluing it?

#3 The Apocalyptic One formerly Old is Gold on 12.03.10 at 11:25 pm

Garth, I think you should close this blog down now for a few months or a year, and then start another one called, ‘I Told You So’ … I think all that can be said about what must happen has been said over and over and over yet it falls on deaf ears. So let them wait for the time they must eat cake, which will happen as surely as it has amongst the PIIGS and our neighbors to the South.

#4 MythBuster on 12.03.10 at 11:28 pm

“You have to admit that a thousand billion in loans spread across nine million families is one mama of a burden.”

Another way to look at it: A million millions spread over nine million families. That’s a million per 9 families, or just over 100,000 per family. This does not sound that crushing. It is within 1.8 x average income per blog entry.

Not everyone has a mortgage, which blows your number. — Garth

#5 freedom_2008 on 12.03.10 at 11:37 pm

Hi Garth,

The same report also said that the top 1% average income is $405,000 (see http://www.policyalternatives.ca/publications/reports/rise-canadas-richest-1 ).

I think we can safely exclude Justin Beiber and Sidney Crosby. — Garth

#6 mousey on 12.03.10 at 11:48 pm

Interest rates have flatlined practically at zero and no government (ergo any polititian) has the b***s to raise them. It seems to me that raising rates is the only thing that can stop our current rampant, irresponsible debt addiction. Who in government is going to close or at least restrict access to the debt candy store?

#7 realpaul on 12.03.10 at 11:49 pm

Right you are Garth….people are giving zero thought as to how they are going to fund their retirements. The stock market returns have averaged about 6 to 7 percent ( there will always be someone who gets a bit more) and this is what the average investor can expect over the lifetime of his portfolio. A 50 year old guy , taking out a thirty five year mortgage will be as broke at 85 as he is today…..and probably die on his way to work.

The porn hungry FTB’s will sock away close to zip if intrest rates rise to the historical average anytime along the timeline of the 35 year ‘death grip’.

Both these groups will never save enough to retire if the markets returns the mean average or even a couple of points higher. Lordy…don’t start the conversation about what inflation is going to do to a non indexed portfolio over a thirty year time frame. I’m thinking about thousand dollar banana’s and selling a kidney for a pint in 2045.

If you get 6% return when you retire….you’ll need a million …to live on after taxes..double that in todays dollars. $60,000 will only yield $42 grand net at todays tax rate and then you have all your expenses.

If taxes and inflation continue to eat up as much as they do today and increase as fast as they are today…if food costs and direct costs of living continue to rise sharply…as they have been….then a million is going to seem like a thousand in 20 years and you’ll be eating kibbles in your old age.

Purchasing power is in the toilet, paper money has lost half its value in the past ten years. What will a dollar buy in twenty years? I f history is any indication ( the 1975 dollar buys .19 cents today) then a million is going to be way short of a comfortable retiement. A roof replacement in 2045 will probably cost a million dollars….and zip…there goes your retirement.

Failing to plan is planning to fail.

#8 Nancy on 12.03.10 at 11:49 pm

Remember that this growing “underclass” is indebted to that tiny rich class that is making more and more money.

That’s part of the game. It’s about sucking money out of ordinary people’s pockets to go into rich people’s pockets. The game is stacked.

When people start losing their homes over the next few years, you won’t see any bankers dropping their salaries, or banks losing money (because we underclassers will cover that with our taxes). They’ll just get richer.

How democracy is supposed to survive this I don’t know.

#9 The Other Dave on 12.03.10 at 11:57 pm

Fire sale in the sunshine state, why buy in Toronto when I can rent for cheap and buy in FL for cheap, I live there 1 week of the month mortgage free, my landlord subsidized condo lease in TO is a tax write off to boot. I fly to FL out of Buffalo for $250(including parking), come back with cheap gas, cheap booze, cheap food.

http://www.moneyville.ca/article/901111–why-canadians-are-scooping-up-florida-real-estate

#10 Patz on 12.03.10 at 11:59 pm

No, it doesn’t end well. But it will get better after ____ years/months/days, right? Maybe not.

What we’re witnessing is the physical principal of entropy and physics trumps economics, eventually.

Yeats wrote a poem in 1919 called

THE SECOND COMING

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
this is a pretty good expression of entropy. In a closed system order breaks down towards randomness or disorder.
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Sound like anyone you know or know of?
Etc. …
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

It may not be the rough beast Yeats had in mind but it’s just as mean and ugly.

#11 Aussie Roy on 12.04.10 at 12:01 am

AG Sage on 12.03.10 at 6:02 pm

Aussie Roy on 12.03.10 at 7:59 am

>Speculation over the contents of the policy plan is centring on a widening of the Australian Office of Financial Management’s mandate so it becomes an investor and guarantor of pools of mortgage securities.

How can they look at the mess in the U.S. and even contemplate this? Corruption is about the only explanation a reasonable person can come up with–making sure their banking buddies never take the first haircut, or any haircut at all.

Because, you see “its different here” there is no bubble, there is no risk that prices will go down, everyone knows they only go up. Yep the delusion is also in the “govts party room”.

Aussie Update

http://www.news.com.au/money/property/how-to-burst-the-property-bubble/story-e6frfmd0-1225965493187

http://www.couriermail.com.au/property/southeast-queensland-homebuyer-confidence-low-prices-stagnant/story-e6frequ6-1225965348128

http://www.theage.com.au/business/so-banks-for-the-memories-20101203-18k0u.html

To those making comments about about how different it is in Van. We are still waiting for the details of how this expected price hike is supported by any actual rental yield or income increases. Until then.
“you are going have to face you are addicted to speculative gains”.

http://wiki.fool.com/Speculative

#12 Jsan on 12.04.10 at 12:12 am

How quickly you can lose it all.

This sort of sums up the mentality of allot of people today. They believed that investing in Real Estate was a sure winner and they lived and spent like there was no tomorrow, that was until tomorrow arrived smacking them right between the eyes.

“Though he faulted the conventional wisdom of investing in stocks and real estate for some of his woes, along with poor financial advice, he accepted much of the blame himself.

“We spent too much,” he conceded. “I have a fourth grader, an eighth grader and a girl who just finished high school. I should have kept working and put the money in bonds.”

“Family’s Fall from Affluence Is Swift and Hard”

http://finance.yahoo.com/banking-budgeting/article/111434/familys-fall-from-affluence-is-swift-and-hard

.

#13 EB on 12.04.10 at 12:30 am

Hundreds of thousands of angry, stressed out voters trying not to go under while suddenly finding themselves paying 4-5K a month on their houses and attempting to eat at the same time may be a powerful bloc. Seems like it would be hard for the government to just let the market sort itself out – I expect can-kicking in the form of a wide range of schemes which keep people just barely going.

#14 Wealthy Renter on 12.04.10 at 12:31 am

“I thought of this when reviewing the latest stats on incomes. Only 1% of us make over $169,000, and now researchers are flummoxed that in the past ten years a third of all income growth has gone to these top 246,000 Canadians. ”

Hi Garth,
Isn’t this a little overdramatic? (laugh!) Everybody is Canada is rich, rich, rich in the land of milk and honey cruellers! We are certainly taking care of our children as a developed superpower, ranking just below Portugal in the material well being of kids: OECD Survey

I tend to question everything I read, and this is no exception. But if this is true, this is truly pathetic and pretty conclusive proof that high housing prices and stagnant incomes have been great for Canadians!

#15 Ian on 12.04.10 at 12:33 am

If you haven’t watch this series 1 – 8 you should.

http://www.youtube.com/watch?v=F-QA2rkpBSY

This is in-escapeable.

BTW, don’t worry about our government and our bankers, they are on the same planet as the rest of us.

They are not getting out alive either.

#16 Jsan on 12.04.10 at 12:33 am

Garth and all, I have a question for you. I sent an email regarding the seemingly out of control mortgages being lent to almost anyone with a pulse, I sent this email to the CMHC and others. The response I got from the CMHC has me shaking my head. I gave this example:

http://whispersfromtheedgeoftherainforest.blogspot.com/2010/05/pardon.html

And this was a quote from his response:

“When assessing a mortgage applicant’s ability to pay, a calculation known as the Gross Debt Service (GDS) ratio is used. This is the percentage of gross income required to cover the mortgage payments (principal and interest, based on the qualifying interest rate explained above), heating expenses, property taxes and (where applicable) 50 per cent of condo fees. CMHC mortgage loan insurance is not normally available when a prospective borrower has a GDS ratio above 32 per cent.
The blog post that you referenced in your correspondence claims CMHC has insured a $695,000 loan for a single individual who has an income of $64,000. This would result in a GDS ratio far in excess of the maximum that CMHC can accept. Unless there are extenuating circumstances, such as a family member helping the borrower with the mortgage payments, this situation is highly unlikely.”

I say BS!!! How in the world are people with seemingly average salaries qualifying for ridiculously high mortgages based on the stated criteria above that I was told was followed by a CMHC representative? Do the math and tell me how it is possible?

#17 kevin on 12.04.10 at 12:34 am

Imagine buying a Saskatoon home and having to wait 26 years for your investment to break even in real terms. Can’t happen? It happened in 1980.

Western Canadian Cities House Price Chart 1980-2004 real prices http://saskatoonhousingbubble.blogspot.com

#18 the dude on 12.04.10 at 12:36 am

Is the $169k family income?

#19 Northern_dirt on 12.04.10 at 12:37 am

My parents bought their Suburban home in 1974 for $100,000… Sold it in 2002 for $355,000..

Problem with that is, $100K in 1974 adjusted for inflation to 2002 is $375k… That doesn’t even take into account the mortgage interest (which was around 10percent) or the in ground pool, sauna, extra bedroom, new roof, new windows or finished basement they added. Still my dad says he made a good investment. I don’t want to break his heart pointing out the math.

#20 InvestorsFriend (Shawn Allen) on 12.04.10 at 12:37 am

Imagine someone has a $600,000 mortgage…

They decide to try and pay it down a little faster just in case interest rates are higher in 5 years.

They scrimp and save and find $25,000 in the year to pay it down. That is one heck of a lot of scrimpin’ over $2000 per month! Probably gonna take an extra income to do this.

Anyhow if they toil away and do this for four years they still only whack $100k off the mortgage. And it is still at $500,000! (Okay less a little bit paid off from the normal payments).

The horrible fact is that a huge mortgage like that is almost impossible to pay off quickly.

Just 15 years ago a more normal mortgage was $150,000 and it was not that hard to find $10k or so extra per year and the first thing you knew you had that puppy paid off in 8 to 12 years with a bit of effort.

Forget that these days, when you have a mortgage 4 or more times income, that puppy is basically with you for life. Congratulations, you are an indentured debt slave, and you did it to yourself. It’s hilarious!

God, I am glad I paid off my mortgage and now I own stocks instead of owe a mortgage.

#21 Junius on 12.04.10 at 12:41 am

Thanks Garth. One of your better blogs as of late.

We are a nation of drug addicts. The drug is cheap credit. If we are not shooting up with the crowd we are ostracized and treated with contempt. All so sad.

One day we will look back at these days and wonder what we were thinking. In the meantime we can marvel in despair at the human mind as it clings to the past as reality and fails to grasp the imminent future in front of us.

#22 Midas on 12.04.10 at 12:45 am

An article on commercial real estate:

http://seekingalpha.com/article/239841-commercial-real-estate-where-is-all-the-distressed-property

#23 dark sad person on 12.04.10 at 12:46 am

#26 Nostradamus Le Mad Vlad on 12.03.10 at 1:49 am

Thanks for the links-NLMV
You are a constant source of good info-

The Hyper-inflationist’s here of course-wont be able to understand the smart Lady Ellen-
******************

“A former undercover operative John Perkins recalled events that are strikingly familiar to what we see in Zimbabwe today:”
***********************
I read Perkins book and it really gives you a window into–
Corporate Neocons—>IMF—>CIA–>Seals—>Delta force–>Coercion–>Blackmail—>Assassination—> Currency collapse–>Ousted Government = Puppet inserted Regimes and how they literally rape the resources and exploit the people of those small 3 world Countries-

Such scum and numero uno being Haliburton aka/Dick Cheney and GranddaddyBush’s Oil Company-formerly Standard Oil who was implicated (proven) to be selling Oil to Germany during both WW’s—the gory details of that-can be found in a book called
“Trading with the Enemy”

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

Unlike Zimbabwe, which had to have U.S. dollars to pay its debt to the IMF, the U.S. can easily get the currency it needs without being beholden to anyone. It can print the dollars, or borrow from the Fed which prints them.

But wouldn’t that dilute the value of the currency?

No, says Cullen Roche, because swapping dollars for bonds does not change the size of the money supply. A dollar bill and a dollar bond are essentially the same thing. One bears interest and is a little less liquid than the other, but both are obligations good for a dollar’s worth of goods or services in the economy. If the bondholders had wanted cash, they could have cashed out the bonds themselves. They don’t have any more money to spend, or any more incentive to spend it, when they’ve been cashed out by the government than when they were holding bonds.

Moreover, adding money to the money supply cannot hurt the economy when the money supply is shrinking, as it is now. Most money today consists simply of bank credit, and bank credit is shrinking because banks are deleveraging. Bad debts are wiping out capital, which wipes out lending capacity. QE2 is just an attempt to fill the empty liquidity pitcher back up — and a rather feeble attempt at that. Financial commentator Charles Hugh Smith estimates that the economy now faces $15 trillion in writedowns in collateral and credit, based on projections from the latest Fed Flow of Funds (September 17, 2010). Based on his projections, it might be argued that the Fed could print enough money to refinance the entire federal debt without creating price inflation. (The current inflation in commodity prices is due to other factors, as was discussed in an earlier article”

http://www.webofdebt.com/articles/qe2_zimbabwe.php
**************************

Exactly–it’s as simple as that–
What is happening a greater rate?

Credit is contracting and Capital is being destroyed faster then Money is being created-so how in hell do People see Hyper-Inflation out of that-

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

“The U.S. and Japan are exploring another model: allowing their currencies to expand to meet the needs of their economies. This was, in fact, the original money system of the American colonists. It was revived by Abraham Lincoln to avoid a crippling war debt, after which it was dubbed the “Greenback solution.”

**************************
That is intriguing and the Philosophy is hard to disagree with–in fact our very own Tommy Douglas was among the Pioneers of the Social Credit Money Supply theory-which goes along the same lines as the “Greenbacks”
It definitely has merit and as long as God himself held the keys to the supply and the outflow–
I think this would work-but-
It entails a lot of Religion-Socialism and Goodwill amongst People and the hardest part–
“Responsible Government”

So the Government has total control over the Money Supply and issues a limited supply of Money and Credit and pays each citizen a dividend from the interest paid back by the Credit Market-which would be spent into the economy which would help spur growth and keep people employed-

It would be a constant-although not large enough economic engine that could keep Economic downturns from being so severe and would eliminate bubble blowing by Central Bankers-who–in no way should be in control of any Countries Money supply–

Definitely something that deserves a look at and how could it be worse then what we have-although-I’m all for a Gold Standard that would also pay a citizen dividend in order to halt Monopolization-which is one of the flaws with Gold Standard-being in the hands of private Bankers–

http://www.google.ca/search?q=Tommy+Douglas+Social+Credit+money+supply&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a

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

http://www.bloomberg.com/news/2010-12-02/federal-reserve-may-be-central-bank-of-the-world-after-ubs-barclays-aid.html

So-what we all knew 3 years ago is finally starting to seep into MSM–
Problem is–
The only People that are paying attention to it today are the same People who have known all along-
So the Fed issues Swaps (issued as $)–ships them off to Foreign Banks that can use them to “show” Reserves and the Fed collects interest back-
Sweet deal and failure-is fully backed by Taxpayers–

Zero Hedge uncorked that little caper-the delivery system and the source almost immediately–
TD-is a sharp cat when it comes to hot money flows-

http://www.zerohedge.com/sites/default/files/images/BIS%206.jpg

http://www.zerohedge.com/sites/default/files/images/BIS%207.jpg

#24 Patz on 12.04.10 at 12:54 am

New housing crash trend and obvious severe risks in 15 key charts:

http://housingstory.net/2010/12/01/new-housing-crash-trend/

It ain’t pretty and it ain’t opinion, it’s numbers, ask a mathematician.

#25 Jsan on 12.04.10 at 1:02 am

Please see my above post. I stated how I was in contact with the CMHC filing a complaint as a tax payer in regards to their seemingly outlandish lending standards or lack of them. I was sent a response saying that the CMHC will not insure any loan that is greater than a GDS of 32 percent. This means that the principal AND interest payments on the loan, property taxes, utilities, etc, cannot exceed 32% of their gross income if I read it correctly. That would mean that the mortgage payment amount (principal AND interest) should not exceed approximately 25% of household income. These are all guesstimates but I think you are getting the picture.

I get the feeling that the CMHC is not anywhere close to following these rules. I would suggest that if this is the case, and I am reading this correctly, that this should be submitted to the Auditor General and we should ask for an audit of the CMHC regarding their practices. When you have average house prices in Vancouver running at 1 million dollars, similar house prices in Toronto, Calgary etc. also at average levels greater than half a million and all most likely CMHC backed, than something is really amiss.

#26 Jane on 12.04.10 at 1:06 am

“You have to admit that a thousand billion in loans spread across nine million families is one mama of a burden.”
This is about $100,000 per family to which you responded:
Not everyone has a mortgage, which blows your number. — Garth
So if 70% of families have mortgages (taken from this posting) that is still just under $160,000 per family. I know people who have huge mortgages, but the numbers are not adding up tonight. How many actual mortgages are holding the one trillion in mortgage debt? What percent of our population?

#27 Anotherlowlyrenter on 12.04.10 at 1:06 am

I’ve written this before and I’ll write this again.

I moved to Canada a few years ago. I’ve seen my share of bull markets and bear markets too. I’m financially astute.

I’ve got more than enough capital to buy a house in Toronto and need no mortgage. But I choose to rent. Why? Because I make more money putting the money that would have gone into a house into alternative investments.

I go to open houses and have put in the occasional low bid. I never stand a chance — particularly b/c I add conditions like I want a home inspection — that and I’m outbid by 20-somethings with 5% down. I don’t blame them. If I had no money, I’d be buying too. It’s all upside for them if the market keeps going up, and all downside to the CMHC when it crashes.

If a politician reads this I beg them to consider this, something that our neighbors in the South still haven’t learned: the cure for high prices is not easier credit — it’s lower prices.

All bubbles end — it’s just the timing that’s in question.

#28 Beaker on 12.04.10 at 1:15 am

How much in interest would you have paid on $849,000 over 35 years? I gotta get into this banking business!

#29 45north on 12.04.10 at 1:17 am

One other thing this price/debt spiral has yielded is a lot of poor people.

They don’t know it yet. But they will.

great sense of humour Garth

I read a lot about the shadow inventory in the US. I figure that value of a house once it is delinquent goes to zero in ten years. That is if nobody fixes the roof or repairs the furnace etc then the house is essentially worthless after ten years.

I wonder if the US banks know this?

#30 BDG-YYC on 12.04.10 at 1:19 am

A little chainsaw math … and
PI and a little T and a modest allowance for maintenance and assuming a renewal in 5 years at 8% taken over 35 years and … well … all they have to do is come up with something north of a piddly THREEMILLIONBEFORTAXDOLLARS … 35 years. So let’s say that the buyer is … 40 … they can look forward to having the place paid off by the time they are 75. Probably a good idea to pray for inflation … which is likely a pretty safe bet as far as the stuff that matters goes … higher taxes, higher utility cost, higher fuel costs, higher food costs, etc. As for income … no inflation there … It could really suck to be them.

#31 chris on 12.04.10 at 1:24 am

I am a long-time reader of your blog and agree with everything you say. That said, I have been waiting patiently in Vancouver for prices to come down so I can buy a home and worry that it will never materialize. I am a professional who makes a very good living, yet I can’t afford a home in this city (at least one that I would ever want to set foot in). I don’t understand how others can afford to purchase homes here- people who make a lot less than I do. My secretary actually offered to rent me her basement suite! My worry now is that when China’s real estate bubble implodes, money will come flooding into Vancouver real estate as a “safe haven”. What are your thoughts Garth?

#32 nonplused on 12.04.10 at 1:52 am

No, this does not end well. It’s the perfect freaking storm. Wind is only blowing a bit yet, so no need to board up the windows. So let’s get out the kites and have a picnic.

#33 Derek on 12.04.10 at 1:53 am

This paragraph particularly resonated for me,

I thought of this when reviewing the latest stats on incomes. Only 1% of us make over $169,000, and now researchers are flummoxed that in the past ten years a third of all income growth has gone to these top 246,000 Canadians.

since it sums up the basic problem.

But why on earth should researchers be flummoxed ? David Ricardo showed why it happens back in 1809 with his Law of Rent. The only differences nowadays are that productivity of modern residential property is the number of jobs close to it instead of its suitability for farming and that the landlord is a bank asking you to pay interest on your mortgage instead of a lord asking for rent on your farm.

But then as now the vast bulk of the population ends up handing over a lot of their earnings to a small but privileged elite. Forget trickle down, the real story of the economy is trickle up. Except it’s more of a flood.

#34 dd on 12.04.10 at 1:57 am

…When I was a child…1.8 times the household income…. [now] 4.7 times…

End of story. Don’t need to know more.

#35 Burnt Norton on 12.04.10 at 2:00 am

Anyone who appreciates the importance of access to information without journalistic bias needs to read this article:

http://www.huffingtonpost.com/jim-moore/wikileaks-and-the-myth-of_b_791740.html

Vive le internet libre!

#36 Derek on 12.04.10 at 2:00 am

The reason that your father’s generation did okay is that taxation on the rich reversed some of that flood by taxing the rental income and returned some of the cash to ordinary people in the form of public services, pensions, etc. Changed days.

#37 Nostradamus Le Mad Vlad on 12.04.10 at 2:01 am

-
“. . . vanilla digs . . .” — Never mind vanilla digs; vanilla yogurt with granola and fruit is scrumptious!

“The underclass that’s been wildly inflated by the ability to borrow your brains out, unprecedented leverage, and a debt that will probably never be repaid.”

That, in a nutshell, is what the elite want — ruling over a bunch of serfs, to keep sheeples in perpetual debt (another form of order) and instead of transferring wealth to children or grand-children, instead pass on unrepayable debt loads.

“. . . a lot of poor people. They don’t know it yet. But they will.”

Already a sharp increase in the number of people needing help from food banks, incl. people who still have jobs.

These would be individuals who never learnt the basics — pay yourself first (15% of gross paycheque going into a TFSA or non-registered account), food, then pay all bills off instead of obtaining further debts.

“Seven in ten of us have no corporate pensions. Sixty per cent have no money saved. Just five in ten have RRSPs.” — FWIW, and from what I have discovered here, I wouldn’t even bother with RSPs / RIFs anymore.

Instead I would load up on a TFSA, use monthly DRIPS if possible and invest in junior mining / silver / gold / health / utilities and build up a nice pension plan.

“. . . it’s only the soma of cheap and free credit sustaining the illusion of wealth. This doesn’t end well.”

See the elite. There is no true democracy on this continent anymore; whether we know it or not, we’re headed to our own Iron Curtain. Example.
*
Financial Devil is all over the world.

Curious Copper about to shoot through the universe?

BP Gulf mess is bad, and that’s putting a positive spin on it. Further – ‘quake fault in Gulf.

Nostalgia Anyone recall Route 66?

STOAV New F-35 short takeoff and vertical landing. 2:45 clip.

C-H-F should have taken this road a few years ago.

The elite control the world’s water supplies.

If the IMF thinks it can tell China what to do, then maybe pigs do fly!

RE sux “Now even discounted homes don’t sell. Article plus 2 excellent, simple charts describing the housing mayhem.”

#38 TaxHaven on 12.04.10 at 2:19 am

“This has resulted in a homeownership rate of almost 70% in Canada…”

One point. With near-lifetime unpayoffable loans, it’s not “homeownership”.

It’s RENTING. Renting where YOU pay the taxes and the upkeep.

Call it what it is…RENTING.

#39 Wet Dreams on 12.04.10 at 2:23 am

My wife and I make over 150,000 per year. We roll our eyes at the property virgins who place 20,000 down on a 300,000 dollar condo. Taking on a 280,000 mortgage.

I figure geez lady your 35 years old and you only saved 15,000 and borrowed 5,000 in your freaking life. Man we save that in a month, it took you approxiately 15 years. That means it would take you another 300 years to save that much to pay it back.

My first house in the 1980′s put me in debt for 30,000 dollars, I placed 20,000 down and the government gave a 9000 dollar grant. I rented upstairs for 600 and the basement 350 and lived at my parents. Mortgage payments were about 300 per month but I was collecting 950. Even gaining a profit, I still didn’t like to be in “SO SO much debt”. And I was only 20 years old at that time.

A house close to a school in the east van is asking 1.5 million. The districts average household income is 40,000 dollar. Go figure?

BTW we rent for about 1000 dollars a month including utilities.

#40 Ghost of Tom Joad on 12.04.10 at 2:26 am

Donald Trump is telling it like it is and sticking up for America:
http://www.youtube.com/watch?v=DUJ69qqdLVo

Great song:
http://www.youtube.com/watch?v=3TDwZjJ6Ouc

And of course the most important man alive today – the Great Alex Jones:
http://www.infowars.com

#41 UrbanCowboy on 12.04.10 at 2:26 am

Great and simple way to put it into perspective Garth. The peice of the puzzle I’m missing is what balance/reason/benefit will there be for interest rates to start climbing again when the gov. knows it will lead to the demise of the housing market? Enlighten, thank you.

#42 Jon B on 12.04.10 at 2:28 am

The endgame that doesn’t end well. I just cannot believe it hasn’t ended yet. This grand illusion has serious staying power. I bet the lend and spend orgy goes on for another 5 years at least.

#43 Basil Fawlty on 12.04.10 at 2:30 am

With the amount of credit/debt in the financial system, increased interest rates represent an economic implosion.

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

– Ludwig von Mises

The Ben Bernank should be forced to write this quote on the chalkboard 100 times per day.

#44 AxeHead on 12.04.10 at 2:37 am

“That old house of mine can still be purchased by a high school principal. But this time it comes with a price that’s been wildly inflated by the ability to borrow your brains out”.

Garth, you forgot to mention that this house is now 60 years old! I suppose your parents bought it when it was brand new. Do ya think it has some wear and tear on it 60 years later? Perhaps it was 2X4 constructions and not that efficient to heat given higher heating costs? Somethings wrong when a new house costs 18k but 60 years later, when depreciation is creeping up, now costs 47 times more that the original price.

#45 Snake Pliskin on 12.04.10 at 2:41 am

#8 Nancy on 12.03.10 at 11:49 pm wrote

“How democracy is supposed to survive this I don’t know.”

watch Ireland.

http://www.businessinsider.com/ireland-faces-a-long-road-back-to-economic-health-2010-12

#46 Snake Pliskin on 12.04.10 at 2:53 am

A better link to watch what is coming to Canada sooner than you think:

http://www.businessinsider.com/category/ireland

#47 Dan in Victoria on 12.04.10 at 2:53 am

“Today when growth is gone, inflation flirts with deflation, pensions are extinct and incomes languish its only the soma of cheap and free credit sustaning the illusion of wealth.”

It’s a quiet war with silent weapons.

#48 Debtisforever on 12.04.10 at 2:54 am

I for one, am sure tired of clueless people telling me “You’re throwing your money away by renting.” or “Real estate always goes up.” Apparently I am a loser in the eyes of my inlaws because I haven’t bought an overpriced property yet. When I pointed out I’m saving $1000 a month by NOT buying, all I get are blank looks and some random phrase about how “real estate always goes up.” People are just dumb. I think we all know that now.

#49 Utopia on 12.04.10 at 2:56 am

The other day I had a good rant against our Canadian Banks. It was very well received.

Nobody even bothered to comment on it.

Not even the banks who, as we have discovered, are quite averse to this honest yet repugnant site and feel polluted just reading the squawking, low-life commoner rants of their plebian customer base (speaking just for myself by the way).

So be it. I quite enjoyed my rant and it was a well deserved missive directed at what I firmly believe is misguided policy on their parts. They can lend with abandon after all. They still have a free pass courtesy of CMHC and the Federal Government.

And the banks (after all) already know they are screwing us. And we too know we are getting screwed so I did not add to THEIR knowledge even one small bit with my missive.

I am disgusted though that they continue to promote lending without adequate downpayments. Are they insane?

Nope. Just pragmatic and sensible.

They have no skin in the game. And the current policy of this government allows them to remain aloof while promoting a future debt disaster despite all warnings.

Lord, the banks own economists warn that Canadians are already too deeply indebted. Should that not be a clue that lending activity be tightened up? Lightened up?

The Governor of the Bank of Canada has been warning for almost a year that Canadians are too deeply indebted for crying out loud. Only a few weeks ago he commented to a US audience about this risk and our cumulative national false sense of security when he stated “Pride goes before the fall”.

Gee, do you think he knows something we don’t?

My guess is we had better start heeding the continuous warnings out of the Bank of Canada, out of the Conference Board of Canada, out of Mr Flaherty’s speeches and from the plethora of well researched, documented materials now available online from a thousand media sources.

This site has always been my favorite source natch. It is one stop shopping and covers it all. But there is no excuse for anyone in this country who is really paying attention to be eating up zero down mortgages and buying up R/E at massively inflated prices anymore.

So I had my little rant the other day. I even mentioned pitchforks which was quite a stretch for me considering I have always been kind of a company man and even a regular bank booster.

The half sack of beer helped. I wish I coul use it as an excuse but if I said that I would be a liar. It was just a shortcut to the truth about my real disgust over how our banking institutions are handling themselves now.

They should be ashamed of themselves knowing everything we all know now about gross national and personal indebtedness.

And they should be held accountable when the shit hits the fan. If the Superintendant of Financial Institutions is really toothless, if parliamentarians are so gutless or agenda driven to make real hard choices and if consumers are so poorly educated about the inevitable outcomes ahead then we have a real disaster on our hands.

Right now. Right here. And it is about to get worse for deeply indebted homeowners everywhere.

Why?

Because most of Asia, the Third World and emerging economies have gone inflationary that is why. And capital is flowing out of North America and Europe to catch the higher interest wave elsewhere.

A commodity boom is just adding more power to the inflation driven flight of capital to markets offering better rates and returns as they raise rates to short circuit the impacts of rising prices and wages.

The only thing that will bring those dollars back is interest rate increases on these shores to offset the losses.

And that is why you are right Garth. And that is why interest rates will eventually go back to historic norms over the coming years and why the dewy-eyed newbie buyers are in for a shitstorm of pain and underwater homes.

Too bad. Stupid banks. Now where is my beer.

Waitress!!!!

#50 TheBestPlaceOnEarth on 12.04.10 at 2:57 am

It’s called wealth transfer folks. As long as your parents are homeowners you are going to be fine. Go ahead rack up the credit card buy that car with zero down. Over 1 trillion dollars in inheiritance coming your way. Canadian renters are not going to survive. No savings and no real estate. You can see the future renters already sitting on the street corners begging as the parade of Rolls Royce and Bentleys head to the West Side of Vancouver. Let’s see Garths folks house went up over 50 times in 50 years that makes the Vancouver house in the recent post worth 50 million by 2060. Fact of the matter it will most likely be worth alot lot more. The Asian factor and a large part of the trillion dollar inheiritance heading to Vancouver real estate spells the good times are just beginning. Hard to believe there are people posting here actually negative on Vancouver. People are playing soccer and tennis here right now. It’s showtime folks, the lineups are around the block, get in line or be left behind.

#51 Ghost of Tom Joad on 12.04.10 at 3:06 am

One more post Garth — thanks
NAZI STYLE CHECKPOINTS AT TAMPA BUS STATION:
http://www.youtube.com/watch?v=rEiMvu6svgw&feature=player_embedded#!

#52 betamax on 12.04.10 at 3:07 am

From USA Today: “Retired Americans are racking up credit-card debt like never before”

http://www.usatoday.com/money/perfi/credit/2010-11-21-senior-debt_N.htm

I.e. it’s not just the boomers who are screwed.

A cultural wave of instant gratification has coincided with the biggest credit bubble of all time, and the result is a cluster**** that will eventually define our times. Years hence, when all the unpaid bills have finally come due and all defaults are finally recognized, credit will be a miser’s dollop compared to the current deluge.

#53 Jeff Smith on 12.04.10 at 3:11 am

>#6 mousey on 12.03.10 at 11:48 pm
Interest rates have flatlined practically at zero and no
>government (ergo any polititian) has the b***s to raise them. It seems to me that raising rates is the
>only thing that can stop our current rampant, irresponsible debt addiction. Who in government is
>going to close or at least restrict access to the debt
>candy store?

It’s pretty much a done deal. Deflation! This situation of low interests might last for years to come. However it doesn’t mean those who splurge on debt will be safe. Because with deflation, their livelihoods is threatened. A job loss for an extended amount of time would wipe out a person who is weighed down by debt. This looming threat is probably why Harpie and team just extended the stimulus for an extra 7 months. I am afraid that it might not even solve the problem 7 months from now. Structural unemployment or 8% or whatever you call it might be here to stay for the foreseeable future. Wanna be safe? stay liquid.

#54 Patz on 12.04.10 at 3:14 am

(yesterday) #36 Old is Gold you said:
The mansion at 7 Ruskin Rd. in Winnipeg is a very nice heritage house …blah, blah, etc… Many of the homes were previously occupied by foreign embassies which left in the late sixties and were bought and enjoyed for many years without any upkeep.

Sh*t, I bin hittin’ the vodka too hard. They moved the capital to Winnipeg and I didn’t even notice. Seriously dude, wazzup wid dat? Embassies in the ‘Peg?

#55 somecatchphrase on 12.04.10 at 3:33 am

Crash Course: Chapter 11 – How Much is a Trillion? by Chris Martenson

Imagine a stack of $1000 bills 67.9 miles high!

#56 Signpost in the bushes on 12.04.10 at 3:39 am

I enjoy reading your daily blog and the many comments, although I routinely edit/ignore all of Devil Advocate’s multiple comments after tiring of them.

#57 Brad in Cowtown on 12.04.10 at 3:39 am

I ordered Garth’s book… can’t wait to read it.

One thing he predicts makes very little sense to me. It just seems contradictory.

I saw an interview with him earlier this year where he claimed bullish times ahead for the stock market while housing values will fall at the same time. But the former implies people are growing their portfolios, building their net worth. And since the stock market is a leading indicator of economic conditions, that means employment and wages should improve too. That should translate into an improvement in affordability for potential home buyers, should they be so inclined. And why wouldn’t they be with everyone around them telling them housing is never a bad investment? Granted, rates might be higher, but only if the economic climate allows it, right?
Besides, if people are feeling positive enough to throw money at stocks, why wouldn’t they keep putting money in a “proven” and (perceived to be) safer alternative like housing instead?
I know, I know, maybe I need crayons to show me the picture in more vivid colors. But it seems to me we might see housing maintain its values from people who are willing to buy 2nd or 3rd homes as investments that they will rent out to the people who can’t afford to buy after the rates have popped up. Alot of people don’t have a clue about investing in stocks or bonds, but they know housing. Or they believe they do, anyway.

#58 Tre on 12.04.10 at 3:55 am

They (greater fools) are so screwed, they just don’t know it yet.

#59 The Original Dave on 12.04.10 at 4:10 am

#9 The Other Dave on 12.03.10 at 11:57 pm

Fire sale in the sunshine state, why buy in Toronto when I can rent for cheap and buy in FL for cheap, I live there 1 week of the month mortgage free, my landlord subsidized condo lease in TO is a tax write off to boot. I fly to FL out of Buffalo for $250(including parking), come back with cheap gas, cheap booze, cheap food.

http://www.moneyville.ca/article/901111–why-canadians-are-scooping-up-florida-real-estate
——————————————————-

Ha! I love the name! Welcome.

#60 Timing is Everything on 12.04.10 at 4:11 am

Some folks just can’t except they missed the RE party.
They were a day (decade) late and a dollar ($1,000,000)
short. Move on. Nothing to see here.

epoch…Ha! We’re all in this together. The rules can be changed at anytime…’bank’ on it.
Garth, didn’t you say something about 8 grand a month to keep the ol’ mans diapers changed. I hope you have children, that are just as unselfish. I think I do. Time will tell.

It ends when your dead. It never ends well.

#61 allisun on 12.04.10 at 4:13 am

Mr. Bill, I do not mean any disrespect, but from much hearsay, I feel compelled to inform you that shaving one’s facial hair will be a major step forward towards your goal.

#62 Michelle on 12.04.10 at 4:32 am

Ooh, Patz! I’ve never heard that poem by Yeats. So omenous!
However, I prefer the more populist folk-song by Merle Travis…which I think will soon become the new anthem for the emerging underclass:

“You load sixteen tons, what do you get?
Another day older and deeper in debt!
Saint Peter don’tcha call me ’cause I can’t go…
I owe my soul to the company store.”

It will be sad hard times for many folk I fear :(

#63 virginhomebuyer on 12.04.10 at 4:51 am

Garth get your facts straight and please brush up on current bank mortgage lending policy.

Banks lend on a 5 year posted rate, not a variable prime minus rate as indicated in your blog. That means an individual with an income of $120,000 with $43,000 would only be able to approve for a purchase price of $565,747, not $849,000 as you’ve indicated. This is based on a 35 year amortization and also assuming the individual has zero monthly expenses which is not common.

The posted five-year VRM rate at TD is 2.85%. As we all know there are various means for any borrower to actually get a bank mortgage today with 0% down. My argument stands. — Garth

#64 breeno.net on 12.04.10 at 5:25 am

“The last house to sell on that same street went for $849,000. I doubt the people who bought it earn $1.5 million a year.”

If this is in relation to your father’s 1.8-times-yearly-income house purchase, then you meant to say that you doubt the people who bought it earn $470,000 per year, still an unlikely yearly income.

Agreed. — Garth

#65 Peter Pan on 12.04.10 at 5:35 am

All I know is I will fight tooth and nail against any efforts to increase help the “elderly poor” for the rest of my life…

I’m 40 and anyone who hasn’t been able to save up enough for retirement they know will eventually come is a moron.

I see my peers blowing hundreds of dollars on concert tickets, trips they can’t afford and overpriced designer label garbage. If any of these morons come crying for greater governmental support, I’m sorry… they’ve already sealed their fate.

I’m so sick of people not taking responsibility for their own actions and expecting someone, anyone or government to save their backsides.

#66 Aussie Roy on 12.04.10 at 6:05 am

Aussie Update

Clearance rates – 4th Dec 2010 Auctions major capitals.
Brisbane just keeps sinking. Not to worry “its different there”.

http://www.bubblepedia.net.au/tiki-view_forum_thread.php?forumId=7&comments_parentId=12818

#67 Utopia on 12.04.10 at 6:40 am

Now here is a fun site.

The link is to a page of the Canada Pension Plan that divulges some rough details of where and how the money is invested that makes up the bulk of invested CPP funds.

Why should you care? Because of course so many other countries who have fallen on hard times are using their pension funds to buy up their own national debts, worthless bonds and other obligations.

Think CMHC here and you will get a little inkling of where this is all going.

Now, today of course we appear to have no problems in Canada. And as you will note from the site I appended our pension plan program is well diversified amongst a broad range of bonds, securities, equities blah, blah, blah.

That is today. But what about tomorrow?

Can any of you blawg dawgs guess what Spain for example has done with it’s pension funds? Or Ireland? Or England, or for that matter any of a variety of other countries including Japan?

Can’t guess?

Well kids, they used the money and the national savings in their pension funds to buy up their own domestic debts instead of being broadly invested elsewhere (which of course is a terrific way to get no real investment returns at all).

And that is exactly what will happen here when the cheap money CMHC scheme comes a calling and we are all in the dog-house debt wise.

So while our so-called “strong” Canadian banks go prancing off into the sunset and making us all proud as they grow stronger and bolder in foreign markets, our CPP gang will be biting the bullet, getting it’s sorry ass whipped and be doing exactly as it is told.

They will be selling quality investments around the world and trying to mop up domestic debt. Like CMHC obligations. And they have to. Because that is real money they control and that is where the National purse resides savings wise right now.

God knows the government is knee deep in hooey and billions of debt. Slo where else is the money going to come from?

Aha! Now you get it!!!!

You think this is a joke right? Then Google it.

Read for yourself what other countries that ran into financial problems are doing to bail themselves out of troubles created by a banking/credit system run amok.

Then get angry. Our banks know all of this is in the cards. They do not give a damn. Only the bottom line matters for them because they are after-all really “public companies”.

That means they are beholden to shareholders and investors all over the globe, not to Canadians. Their loyalties are not what you think they are. Not where real money is at stake.

Oh, but they are regulated here you cry!!!!

Yup. So what. That only means they can’t do any damn thing they please on any whim. That regulation still does not confer obligations of loyalty.

And there you have it folks. A little snapshop of the future. And now you might get why that Trillion in domestic mortgage obligations is a problem and why the CMHC portion of 600 or 700 billion is really a much bigger problem than you thought it was.

Bend over. You are about to pay the bill.

#68 Utopia on 12.04.10 at 6:44 am

Oh, about that fun site,…here it is:

http://www.cppib.ca/Investments/

#69 etreamar on 12.04.10 at 7:38 am

…soma of cheap and free credit … Nice One! Thanks for the insight.

“..there is always soma, delicious soma, half a gramme for a half-holiday, a gramme for a week-end, two grammes for a trip to the gorgeous East, three for a dark eternity on the moon…”

#70 sk76driver on 12.04.10 at 9:10 am

Keep going Garth, you won’t reach them all but you will reach a few….

And some…. I have a friend who was living in a house he built 30 yrs ago and it was paid off (worth +/-500k)!

Hard working guy (wife too) 3 kids, they were ok. But they got horny. Saw everyone else building big houses. I tried to tell him, look at the numbers, you are 53 and you are sitting pretty good….free and clear….keep saving for retirement…..

They built a house that was valued at 900k…yup…400k mortgage at 53!!! Sure, beautiful house but…..

I ask the same guy if he has a TFSA. Never heard of it. So I explained it to him and how valuable it was AND that you could put equities in there for growth….

Few weeks later, he tells me he talked to his bank manager and the guy “set him up” with the TFSA’s for him and his wife. Let him use his LOC so his money could “grow”…….

Cue Brando…..”The horror…..THE HORROR!!!!”

People ask me if I built in Mexico to “run away”, I said you better believe it…need to be far away when people start to come asking to borrow money……

#71 Brian1 on 12.04.10 at 9:21 am

We had our tenant meeting with our paralegal. He says that the best he might be able to do is reduce the above guideline request by the lanlord by only .5 %. It is obvious that most work was cosmetic but even experienced construction working tenants were unable to shift his opinion. However he did say that the tribunal’s purpose was to get the long term tenants to leave. I would expand that to that the real estate industry is in control and is trying to make people to buy overpriced condos. They don’t really care about landlords either.
So what use is the rental tribunal? Answer; there is none except as a tool for the real estate industry. The amounts of taxpayer money wasted on this process is tremendous. They should just return to the old way of doing it because, as most of us know on this blog, house prices will fall and therefore rents will follow. Then of what use will be a tribunal. Even now their original purpose is obsolete since 95% of apartments have been turned over since the new rules were implemented. What kind of tenant is left that is of any consequence? They are likely to be very old and will soon die or go to an old age home therebye rendering the precious apartment free to have rents raised to above market rates and try to find a sucker. Imagine, all that taxpayer money wasted to try and reign in the remaining 5%.
It must be jealousy or a desparate real estate industry responsible for wasting all these resources to punish a few stragglers too smart to buy into the phony real estate market. Sure, there are some who have lived in these apartments for 40 years and are still paying $50 dollars a month for a 3 bedroom and parking.(I exaggerate but their rents are low enough to make many jealous). Even the paralegal is smart enough to rent. Anyway, I’ve always known that one day I would have to move and I’ve used the years to prepare but I will still continue to rent.

#72 BrianT on 12.04.10 at 9:31 am

#22DSP-just typing something you read doesn’t prove a point. Listen: there are two parts to the value of any currency: 1. supply of said currency (as you can comprehend) 2. perceived value of said currency-i.e. all currencies are a future claim on assets or earnings of the country issuing them. Part #1 you understand (I assume because your authority figures point it out to you repeatedly) Part #2 is just as important-no country is going to have a strong currency in the long run with huge trade deficits and a weakening economy. pan-th

#73 The Apocalyptic One formerly Old is Gold on 12.04.10 at 9:46 am

#66 Utopia on 12.04.10 at 6:40 am
____________________________________________

Good post! What’s coming is anything but Utopia!

#74 Aussie Roy on 12.04.10 at 9:49 am

TheBestPlaceOnEarth on 12.04.10 at 2:57 am

So now dead people are going to support prices in Van, I’ve now heard it all.

Need a house kill your grand parents. LOL

You are not only completely out of your mind you must also write this stuff with one hand.

To turn a phase ” you are a galah”.
Aussie def, someone that is forever yelling and screaming about something which is ether not important or just doesnt make sense.

http://www.youtube.com/watch?v=LKNH5f3RyMo&feature=related

#75 dd on 12.04.10 at 9:52 am

#49 TheBestPlaceOnEarth

…Vancouver house in the recent post worth 50 million by 2060….

It could. But a meal out would cost $2000.

#76 dd on 12.04.10 at 9:55 am

#18 Northern_dirt

….Still my dad says he made a good investment….

Forced savings

#77 Macrath on 12.04.10 at 9:59 am

So who will be to blame when the smoke clears ? Gov and the Banksters with their ZIRP . These are educated people who know exactly what debt slavery means for the masses. Or do we blame the fools who gorge on cheap credit and save nothing ?
We are witnessing what happens in the U.S and the E.U. So be prepared Dawgs, it`s going to get ugly.

CPP ~ assets 138 billion population 35,000,000
OMERS ~ assets 52 billion membership 370,000

CPP= investment peanuts !

#78 The Apocalyptic One formerly Old is Gold on 12.04.10 at 9:59 am

#65 Aussie Roy on 12.04.10 at 6:05 am
Aussie Update

Clearance rates – 4th Dec 2010 Auctions major capitals.
Brisbane just keeps sinking. Not to worry “its different there”.

________________________________________________
Hey Aussie Roy: My sister lives in Brisbane where she is heavily invested in RE. I have tried to ‘educate’ her time and again but because she has an MBA, she has been indoctrinated into the system even more than the average Joe, and therefore considers herself a ‘know it all’. Please keep posting any news reports or anecdotal information you might come across about Brisbane. I may be able to save her some moolah yet although the chances of her laying off the soma are slim at best. You can even e-mail me from my site if the info is not pertinent to this blog but relevant to Brisbane RE.

#79 BrianT on 12.04.10 at 10:11 am

#66Utopia-YES-this is why you should include assumptions of dramatically increased taxation rates in your RRSP planning. Realistically, the best bet for anybody would be money offshore because this whole mess will be taken out of the hide of the middle class, as you point out.

#80 dd on 12.04.10 at 10:19 am

‘underclass’

Gold, silver, commodites going to all time highs … in a recession.

Why? Collape of the US dollar.

#81 CTO on 12.04.10 at 10:55 am

#49 TheBestPlaceOnEarth

Are you still on this post!? I thought you’d have gone long ago!
The words you say just keep getting crazyer and crazyer. You, in your own distinct way are the opposite of the guy who wants to bury school buses in his back yard.
Garth, I don’t think this trole is for real!

#82 AG Sage on 12.04.10 at 11:06 am

#18 Northern_dirt on 12.04.10 at 12:37 am
>My parents bought their Suburban home in 1974 for $100,000… Sold it in 2002 for $355,000..

He lived nearly rent free for 28 years . . . (Well, as you said, he paid interest on the mortgage as rent. But he had to live somewhere.)

#25 Jane on 12.04.10 at 1:06 am
>How many actual mortgages are holding the one trillion in mortgage debt? What percent of our population?

http://www12.statcan.ca/census-recensement/2006/as-sa/97-554/table/t14-eng.cfm

I didn’t search very hard for newer numbers, so tick up those numbers a percent or two given the trends. So 59% x 0.7 is roughly 42% of households.

Hm, if you were looking for a stable place to move to, higher total outright ownership wouldn’t be a bad measure to look for . . . I hear Newfoundland is nice this time of year ;-)

#56 Brad in Cowtown on 12.04.10 at 3:39 am
>I saw an interview with him earlier this year where he claimed bullish times ahead for the stock market while housing values will fall at the same time.

Large, multinational companies are still considered solid and have good future earnings potential and their stocks are traded in dollars, which are declining in value. Therefore, their stock price is rising to account for that. It’s a bit like gold vs. the dollar, or maybe a better example, crude oil.

#83 CTO on 12.04.10 at 11:08 am

#64 Peter Pan

Absolutely agreed!!!!!

#84 sk76driver on 12.04.10 at 11:13 am

#80 CTO on 12.04.10 at 10:55 am

…The words you say just keep getting “crazyer” and “crazyer”…

…Garth, I don’t think this “trole” is for real!…

Iz yur speelcheque brokin???

#85 AG Sage on 12.04.10 at 11:13 am

#74 dd on 12.04.10 at 9:52 am
#49 TheBestPlaceOnEarth

>…Vancouver house in the recent post worth 50 million by 2060….
>It could. But a meal out would cost $2000.

I was a millionaire once. Before the Euro, we were in Italy and we took the maximum out of the ATM from two different accounts. It was 1.1 million lira. We were millionaires! Then we paid our week’s rent, and we weren’t anymore.

#86 sk76driver on 12.04.10 at 11:17 am

It semes to me taht tsehe tpicos soluhd be caelr. You need to isnevt yuor menoy pporrely. Or else epcext tobrule!!

#87 Aussie Roy on 12.04.10 at 11:21 am

The Apocalyptic One formerly Old is Gold on 12.04.10 at 9:59

G’day buddy. An MBA hey, you SHOULD be able to use that to your advantage. I know sometimes you just want to slap the delusional but it hardly ever works but it does feel good. You need to find the logical spot tired to her education so she can figure it out herself. I would suggest something like, asking her does she think she can raise rents to cover further rate rises, point out to her that this gap becomes larger as interest rates rise. Should she reply ah we have had the places for a while so we can, ask her what she thinks might happen to demand from new investors at such low returns. Are negative yields and relying on just capital growth speculation not investment. Point is get her thinking.

Anyway that is my 10 cents worth, you know her better so you might be able to find that logic button, if it is still functioning.

All states lot of QLD stuff, great links..Check out the various forums, they are all friendly guys and gals. http://www.bubblepedia.net.au/tiki-index.php

#88 Agio on 12.04.10 at 11:23 am

Wet Dream @ 38
My wife and I make over 150,000 per year. We roll our eyes at the property virgins who place 20,000 down on a 300,000 dollar condo. Taking on a 280,000 mortgage.

I figure geez lady your 35 years old and you only saved 15,000 and borrowed 5,000 in your freaking life. Man we save that in a month, it took you approxiately 15 years.
___________________________________________

Aside from the patronization you say you make over 150k per year and save between 120-180k per year? Must be a helluva lot more than 150k.

#89 Junius on 12.04.10 at 11:27 am

#48 Utopia,

You said, “The other day I had a good rant against our Canadian Banks. It was very well received. Nobody even bothered to comment on it.”

Sorry that no one commented. Speaking for myself there was a tremendous amount of bankster bashing on the Blog last year after the bailouts.

I think most of us have been of the view that the bankster class rose to the top of the charts as the primary cause of this crisis a long time ago. If people didn’t comment it was probably because they agreed with it but have seen it before.

There has been no time in human history when so few have done so much to destroy lives through economic greed as our leading bankers have done the past few decades. They will continue to do it until they are properly regulated which will not happen in the current political environment in the US.

#90 BDG-YYC on 12.04.10 at 11:33 am

#25 Jane … How many people have the $Trillion in mortgage debt ?

Chainsaw math and a bit of data =

There are roughly 9 Million households in Canada.
70% own homes … so about 3 million are out – leaves 6 million.
1/3-ish of homes don’t have mortgages so let’s chop off about 2 million or so and that leaves us with about 4 Million households carring the $trillion.

Now those 4 million have mortgage balances that range from almost nothing to almost everything still outstanding. So … very, very, roughly … let’s guess that half have their mortgages more than half paid off and half have less than. The more than half paid for group might average about 75% paid for … and the other half might average 25% paid for so that would mean that 50 % of households with mortgages account for about 75%-ish of the mortgage debt.

S00000 …. and feel free to do the accurate research here … :-)

9 Million households.
3 million don’t own homes – so don’t have a mortgage.
2-ish million own paid off homes no mortgage.
That leaves about 4 million with mortgages
2 million give or take likely owe … $250 Billion.
2 million give or take likely owe … $750 Billion.

So now let’s just do another by guess and by golly exercise using the 80/20 rule of thumb. If 20% of all households owed 80% of all mortgage debt. We could guestimate that 20% of our 10 million households owed 80% of the $Trillion. That would give us 2million households accounting for $800 Billion. Which isn’t far off the outcome from our first little chainsaw exercise.

Probably pretty safe to guess that something between $750 Billion and $800 Billion of the $Trillion is owed by somewhere between 2 million and 2.5 Million households which works out to $350,000 to $400,000 per household. It might really suck to be them considering that their mortgages alone are more than double the price of a home less than a decade ago.

Hmmmm …. wonder where all the HELOCs might be sitting ….

Now … I wonder which segment of the population will be feeling the brunt of the pain if as Garth predicts they have to renew those mortgages at 8% levels over the next few years.

It could really suck to be them.

The rest is chicken feed :-)

Again … feel free to go to the exercise of doing the actual research and let us know what you come up with.

Sooo … very roughly we’re looking at say

#91 Junius on 12.04.10 at 11:38 am

#49 Personwhoisclearlyoncrack,

You said,”Let’s see Garths folks house went up over 50 times in 50 years that makes the Vancouver house in the recent post worth 50 million by 2060. Fact of the matter it will most likely be worth alot lot more.”

You believe that then there is nothing more that need be said about you or your posts. I don’t know what you are selling but it is not in any way connected to reality.

#92 Consider This on 12.04.10 at 11:43 am

$1 Trillion in mortgage debt across 9 Million families (or about 36 Million people)… Yeah, Canada is pretty much f*cked worse than any other country. You do not have to be a rocket scientist to understand those numbers simply do not “pencil out.” Healthy banking system in Canada?!?!? Are you f*cking kidding me? Canadian consumers don’t have a sense of entitlement to the degree of the Yanks? Yeah, RIGHT! That’s one of the best one’s I’ve heard. Canadian RE prices will only continue to go up, or maybe just a “soft landing?” Wait, actually THAT was the best one I’ve heard.

Like I’ve been saying for three years now, it has all been a lie in Canada from the value of our currency to the value of our homes to the value of people’s net worth. It has all be little more than government and political propaganda to try to thwart the inevitable. The inevitable is here NOW, and we better be prepared to pay for our ignorance.

#93 Moneta on 12.04.10 at 11:47 am

2 million dollar house burned to ground 2 months ago in Cumberland, Ontario. I think arson came into play:

http://www.youtube.com/watch?v=cUB1lO_qeHo

Yesterday, another luxury home, recently sold for 900K, burned down:

http://www.ottawacitizen.com/news/Fire+destroys+unoccupied+luxury+home+east+Ottawa/3926979/story.html

It has looked empty for the last 2 years and landscaping had never been done.

Hmmmm.

#94 Junius on 12.04.10 at 11:48 am

#86 Aussie Roy,

I just wanted to thank you for your posts. I find it fascinating how similar the arguments for home purchasing are in Australia to Canada. My favourite is that we are both “running out of land.” Too funny!

Sad though that people in both countries don’t see through the manipulations.

I posted over the summer that I had a friend visiting Vancouver from Australia. He had just bought a new place with his new wife – “The home is always worth more than the day you bought it.” Wow, I thought. It is a global phenomenon.

Please keep up the posts from DownUnder!

#95 PTDBD on 12.04.10 at 11:57 am

Notes from the Underclass

DSP – Your passionate, frequent, frustrated explanations of money creation have forced me to reconsider and re-read your post several times. I’m sorry to say, it still sounds like flim-flam to me, but alas I am a simple person. There are many things that I don’t understand.

I look at a tiny, shiny, one-ounce gold coin and cannot understand why people are willing to pay $1300 Bernanke dollars for it now. It’s so small!

I listen to the bald-headed CNN announcer tell me that Unemployment Insurance payments make the Economy grow. that for each $1 payed out creates a wealth effect of $1.25 to $1.50 in the real economy. (yesterday’s show) I wonder then why The Bernank and the Obama want to eliminate unemployment. Shouldn’t they be trying to increase it? See how stupid I am?

I look at my monthly bills and see them grow exponentially. For example, my monthly bill for moving my crap down the toilet is increasing 5% this year.Why am I so silly not to see the obvious “deflation”? Why do I not receive The Bernank Dividend cheque in the mail? Is it because I live in a cardboard box?
Do you get one?

I hear The Bernank talk like you, but I don’t understand. He says that he can create money over and over and even make money for the Government by doing so. Why was he then standing on the sidelines so long as things went wrong. Shouldn’t he have offered the magic solution then before this whole Financial Crisis was spread across the world?

I hear Politicans saying that they can give tax cuts to the rich AND to the middle classes and that this will grow the economy. Why did Bush’s tax cuts to the rich not grow the economy?

Jeeze, I just don’t get it.
My wallet’s not getting it.
But it seems a certain few are getting it as the rich get richer.

#96 Aussie Roy on 12.04.10 at 12:00 pm

BDG-YYC on 12.04.10 at 11:33 am

GREAT STUFF.

#97 AxeHead on 12.04.10 at 12:04 pm

People who purchase million dollar homes with no income to support it are GAMBLERS. This is not an investment. Want to see where the generation before is investing their wealth? Check out the casino’s or go to Las Vegas – the players are all old! Real estate today = casinos = gambling. Same thing.

#98 Moneta on 12.04.10 at 12:07 pm

So if 70% of families have mortgages (taken from this posting) that is still just under $160,000 per family. I know people who have huge mortgages, but the numbers are not adding up tonight. How many actual mortgages are holding the one trillion in mortgage debt? What percent of our population?
—–
There are around 11 million households. 70% have a house and 60% of those have a mortgage. So this means 4.62 m housholds have mortgages with an average balance of 216K per households. Since the average household makes 65K, this means 3.3X income. So we can assume that a good % have a mortgage at more than 3X income.

A better way to look at it is relative to the US. Our neighbors to the south are 10x more in population. Their dolla amount in mortgages peaked at 10 trillion. Imagine that, 10X more than out 1 trillion with the same 140% debt to income ratio and their real estate makets collapsed.

#99 Moneta on 12.04.10 at 12:10 pm

Forget trickle down, the real story of the economy is trickle up. Except it’s more of a flood
———-
Notice how they used to the words trickle down and not flow down.

#100 Moneta on 12.04.10 at 12:17 pm

This was the destroyed house in Cumberland:

http://www.mariocharron.com/index.php?page=63&Var1=141

#101 DARLENE on 12.04.10 at 12:25 pm

Northern_dirt on 12.04.10 at 12:37 am
My parents bought their Suburban home in 1974 for $100,000… Sold it in 2002 for $355,000..

Problem with that is, $100K in 1974 adjusted for inflation to 2002 is $375k… That doesn’t even take into account the mortgage interest (which was around 10percent) or the in ground pool, sauna, extra bedroom, new roof, new windows or finished basement they added. Still my dad says he made a good investment. I don’t want to break his heart pointing out the math.
*********************************************
You’re right, if you do the math owning a house is at best a depreciating asset. People need to change their mindset. You don’t buy houses to make money, you buy houses for quality of life. And as much as I hate to say it, quality of life costs. You won’t break your dad’s heart by pointing that out. He sounds like a nice man and he’ll still tell you it was worth it because he loves you and you can’t put a price on that.

#102 Alister on 12.04.10 at 12:29 pm

#12 Jsan

Your link shows how $10m can evaporate in RE and equity markets. Big mistake was living beyond his means for too long.

The world is full of mansions built by wealthy people who lost them. Casa Loma in TO. Craigdarrach in Victoria, Vanderbuilts “Breakers” in Cape Cod. You can go to any major city and find these places built by people who lost them because they became a drain on their resources.

The same story plays over and over.

#103 S.B. on 12.04.10 at 12:34 pm

Home ownership is a myth. Cities and towns are incorporated as corporations. As you drive into town the sign most often state this fact.

They charge you rent every year in the form of taxes, you simply RENT land from them. If you do not pay, they take back their land. It’s that simple. What you have is a long term land lease.

We are all serfs living and renting the Queen’s (or King’s) land. She is so important we must gaze at her face on one side of our coninage. Never forget who is in charge…

If you do not pay your rent to the Queen, they will send a polite letter to you. And then another letter, and another, each one becomeing sterner.

Then, nice men in suits will visit your door and perhaps affix a letter to your door.

Then, enforcers wearing uniforms and guns will come to your door to physically throw you off the Queen’s land. They will use esculating levels of violence (beatings, electrocution) up to and including death, should you resist.

Moral: always pay the Queen/King.
Ain’t freedom grand.

#104 TryingToGetOutAlive on 12.04.10 at 12:42 pm

http://www.youtube.com/watch?v=bNmcf4Y3lGM&feature=player_embedded

slightly OT, but funny! (if you can’t understand german and in a politically incorrect kind of way)

#105 xyz on 12.04.10 at 12:59 pm

Cross-posted at VCI but surely relevant here as well…

Next time you think demand is up for places consider this:

Regarding the 100 people showing up to this open house.
I have my suspicious that these are NOT all real home buyers. In fact I have seen ads on Craigslist for people to get paid to show up at open houses as ‘extras’ Like this one I saved cause I thought it might come in handy one day:


Hired for Day (Westwood Pleateau)

…Date: 2010-04-17, 2:56AM PDT

Reply to: [email protected]
[Errors when replying to ads?]

Hired for 6 Hours beginning 8 AM ON Saturday APril 17.

All you need to do is wait in line for a real estate sales event.

Will be compensated for $70.

Please call 604-716-7895

#106 Moneta on 12.04.10 at 1:06 pm

You can go to any major city and find these places built by people who lost them because they became a drain on their resources.

The same story plays over and over.
—-
It used to be that people got themselves mansions once they made it.

Now people are getthing them on credit thinking these homes will make them.

#107 jess on 12.04.10 at 1:19 pm

The Asian factor ??????
In Asian culture the youth are suppose to take care of the old.

“A large percentage of recent immigrant seniors speak little English and live with their relatives. Many don’t have to learn english since so many services are in their own language. Statistics Canada puts the number of immigrants 65 years or older living with relatives at 76 per cent. That number increases drastically for seniors who immigrated to Canada after 1996, up to 91 per cent, — figures that likely coincide with the increase of immigrants from India and China in the last decade.”
http://www.canadianimmigrant.ca/settlingincanada/seniors/article/784

=
Lately in Ontario, i read of 2 cases where children have killed their parents along with other abuses. And not speaking the language has led to other abuses even within their own language community such as marriage /immigration frauds.
====================
Language
For the first time, one Canadian in five was allophone
For the first time, allophones, that is, people whose mother tongue is neither English nor French, represented fully one-fifth of the population of Canada, according to the census. These include Aboriginal languages, which will be featured in the 2006 analytical document on Aboriginal Peoples that will be released on January 15, 2008.
For the first time, more than 1 million people—an estimated 1,034,000—reported one of the Chinese languages as their mother tongue. This was an increase of 18.5%, or 162,000, from 2001. In 2006, they accounted for 3.3% of the total population of Canada, up from 2.9% five years earlier.(statscan)
=======
If one looks at income or earnings in Vancouver and the overall province where are these “wealthy asians”
http://tinyurl.com/2g6pkjr

#108 dark sad person on 12.04.10 at 1:21 pm

#71 BrianT on 12.04.10 at 9:31 am

Part #2 is just as important-no country is going to have a strong currency in the long run with huge trade deficits and a weakening economy.

********************
I’ll ignore the “always” anal part of your comments–

Part 2–

“All” Countries will have a weak Currency-

So what you’re saying is-
In a Fiat system all Currencies will still be relative to one another-
So how can they all be weak?
Weak against what exactly?
Where is the “peg” that you “must”use to come up with this?

All currencies float and compete against one another-
You make no sense at all with that statement–
You could also say-
They will all be strong together-

If you’re talking about affordability-then that is more related to employment (paychecks) or availability of money-

#109 Ret on 12.04.10 at 1:21 pm

#2 Ben Bernake

I am not big on rear view mirror optics but there is a reason why cars have them. Reckless politicians, banksters, and federal regulators can look in them and see the carnage that they have created.

Does anyone seriously believe that the US politicians will take any action to deal with immigration, entitlements, energy, education, deficit, deteriorating infrastructure or job creation crises?

Look at the politician’s track record so far on any one of these threats to the US economy. Politicians refusing to act, paralyzed by endless debate and fear of re-election. Meanwhile the US economy deteriorates with no end in sight.

But we live in Canada. It is different here, right? Social safety net, free health care, solid banks, Carney and Flaherty taking care of business, blah, blah, blah.

Something to ponder. Thomas Friedman yesterday on CNBC speaking about numerous issues affecting the US economy, “when you jump off the ninetieth floor of a building, you think that you are flying for the first 89 floors.”

What an exhilarating ride it so far.

#110 BrianT on 12.04.10 at 1:24 pm

#101-Spectacular houses in general are a major capital destroyer. The house itself almost never increases in value-the land it is sitting on often does. Little dumps on valuable land are always a better bet than spectacular places on less valuable plots.

#111 vreaa on 12.04.10 at 1:29 pm

Market Timer Emotional Capitulation –
“I sold my westside home for around $950K in 2004. Now I can’t afford to buy back. You have to believe the incredible pressure I get from my family to buy. They are ashamed of me. I am severely depressed I will never be able to buy what I once had again. The bulls are right, I am priced out for ever.”

http://wp.me/pcq1o-1Bh

[possibly a fabricated anecdote, but illustrative nonetheless]

#112 Macrath on 12.04.10 at 1:30 pm

A few years back there was the immigrant lady on Sammon ave. T.O., who was told by the bank that she could not have any more cash advances. It was time to pay the money back.
She loaded the basement with BBQ tanks and torched the her house along with 5 of her neighbour`s houses. Two firemen were almost killed by the exploding tanks.

Debt can be very dangerous to innocent bystanders as well.

#113 Herb on 12.04.10 at 1:30 pm

Moneta,

there is another reason why new or nerly completed houses may go up in flames.

You may recall that there was a big fire in the Glebe in the late ’90s that destroyed some new townhouses and a nearby old home. A very good contractor working on our place had only one comment: “Somebody didn’t get paid!”

#114 dark sad person on 12.04.10 at 1:32 pm

#94 PTDBD on 12.04.10 at 11:57 am

I look at my monthly bills and see them grow exponentially. For example, my monthly bill for moving my crap down the toilet is increasing 5% this year.Why am I so silly not to see the obvious “deflation”? Why do I not receive The Bernank Dividend cheque in the mail? Is it because I live in a cardboard box?
Do you get one?

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

First of all-you need to learn that Deflation is a Monetary Phenomena-
Nothing else-

The cost of flushing your toilet is a Political Phenomena-
Called “Taxes”

#115 Aussie Roy on 12.04.10 at 1:37 pm

Junius on 12.04.10 at 11:48 am

Thanks.

Its been great to have this forum, thank you Garth..
Its given me an insight into your market and for that reason I like to share info from Australia. Knowing that it might be interesting for some to see whats going on down here.

I have spent time in Canada but mainly on business over the years usually in the Peg. (Grain industry) I cant comment on other areas of Canada and maybe I was just lucky but I have to say that you guys are some of the nicest people I’ve dealt with anywhere in the world.
Recently my old employer down here was purchased by Viterra. Still find it a bit strange to see that name 50 ft tall on our local silos but thats globalisation and no different to BHP operating all over the globe.

#116 dd on 12.04.10 at 1:39 pm

“Underclass”

Imagine … Governments are failing, in default.

#117 Mean Gene on 12.04.10 at 1:41 pm

Insured mortgages appear to be the problem of inflated housing prices, time to go back to requiring a %25 down payment.

#118 cb on 12.04.10 at 2:00 pm

To the best place on earth guy(or girl!!)

vancouver is not the best place on earth. it rains all the time, the traffic is getting worse and the prices are out of whack. Inherit? An overvalued home with renters popping oout from every corner of the home? Those mortgages will not be paid off in the designed amortization period- I lived in Van. for plenty of years and know plenty of people there. They really don’t make a whole lot more than the average joe- they’re just leveraged alot more than the average joe and live with these same “renters” you talk of (thru suites). Vancouver rains all winter long- it is not Florida!!!

#119 Alister on 12.04.10 at 2:03 pm

#92

Maybe they put the dishwasher on before they left the house?

http://kitchenaidfire.com/

#120 cellar dweller on 12.04.10 at 2:06 pm

#49 TheBest Place on Earth
***You can see the future renters already sitting on the street corners begging as the parade of Rolls Royce and Bentleys head to the West Side of Vancouver. ***

More delusional rambling from the Lotus Eater?
I’m curious, WHO do you think maintains these Endless, Fabulously rich elites in their lifestyles? Other millionaires?
Someone needs to scrub their toilets, wash their cars, dress their children and cut their lawns (which in Vancouver takes about 10 minutes because the building lot is 90% dwelling).
Millionaire maids, hmmmmm reminds me of Post War Germany of the 1930′s or present day Zimbabwe.
Neither place was/is a desirable location to live.
Good Luck schmuck. Switch from Lotus leaves to Crack

Latest utterings from perpetual real estate Huckster Ozzie Jurock ” Voncoober sales down 30% since March, similar numbahs in Calgary. My hot pwop-a-tee of the veek…..Fee-nix!”
God bless Ozzie, he could sell an outhouse to an astronaut.

#121 Taxpayer like everyone else on 12.04.10 at 2:11 pm

16 Jsan – Sorry I dont know either. Sis works for nearby
FI and says they turn down people who dont meet the
requirement all the time.

19 Shawn – Oh there you are! After your gem the other day regarding debt and saving then leaving me to sort it out (yes you were right – if only people would actualy read what you said) I thought I would forward a bill for my time. You can ask blogger XYZ to write the cheque on his “phantom” savings. Giggle…

25 Jane – this is the best table I’ve found yet, but is due for a new data set

http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/tbt/Rp-eng.cfm?TABID=1&LANG=E&APATH=3&DETAIL=0&DIM=0&FL=A&FREE=0&GC=0&GK=0&GRP=1&PID=96272&PRID=0&PTYPE=88971,97154&S=0&SHOWALL=0&SUB=0&Temporal=2006&THEME=81&VID=0&VNAMEE=&VNAMEF=

67 Utopia. I hear ya. But what miracles can we expect from these guys? There basically a government sponsored balanced mutual fund. They are stuck in the same system as everybody else.

#122 TheBestPlaceOnEarth on 12.04.10 at 2:24 pm

Where are all these cheap rentals people keep talking about. Townhouse rental Vancouver $2500 per month and up which will increase every year, even more so when the great mania stage in Vancouver Real Estate starts over the next few decades. $2500 a month = $28000 a year which is $280000 over 10 years and you own nothing absolutely nothing. Show me this Canadian you speak of who doles out $2500 a month for a rent and has a huge basket of SUCCESSFUL investments. Few and far between. Remember folks the mania stage in Vancouver Real Estate has not yet happened. I see we have a jealous Aussie out there, still time to buy mate

#123 Dale Blayone on 12.04.10 at 2:32 pm

A quick observation: Over the past 2 years as I have followed this blog it is interesting to see how the mood has changed … at least slightly, from one of orgasmic anticpation of the RE world imploding (here in lovely Toronto) to one of near apathy. I guess thats why Garth mixes up his posts so much. You can only repeat the same thing over and over so many times. Waiting for the crash, or landing, has been like watching the grass grow or not even. On one hand you have the doomers and on the other side you have the eternally optimistic (you know who I am talking about – Vancouverites). This is not about being right .. its about common sense. To the doomers I would say why don’t you just go eat some ice cream and to the optimistics I would say go take a course in Thermodynamics (there’s something deep!) or just go get a life. I have not lost confidence that this whole RE circus is a load of crap but it is amazing how resilient it is. I don’t know who coined the word ‘Sheeple’ (Garth?), but its bang on … we are !@#$%ing robots operating on someone else’s program. We are driven by fear, greed, pain and anxiety. Is this just a symptom of how we live in our rich part of the world? Generally people are never completely happy no matter how much they have … if they were they would not keep buying Lotto tickets. For me personnally, I am reaching my breaking point and will buy next year regardless of what the market does. I have rented for 3 years and have outlasted the bidding wars, so if the market does start to drop, then at least I have saved enough to survive because for me it is the quality of life and being able do anything with what belongs to me or ‘partly’ belongs to me. I have been prudent and unselfish and I am going to vultch with the best of them come next summer.

#124 Jsan on 12.04.10 at 2:47 pm

Listening to MoneyTalks with Michael Campbell this morning (show airs across Western Canada, out of Vancouver). Michael is always talking, every single week about the huge growing debt of both governments and individuals. I have yet to hear him say one word about the Canadian Real Estate debt or bubble. Today he had on Greg Weldon from Weldon financial (he’s American). Again, they were talking about the European and US debt looming disaster, Greg mentioned that he loves Vancouver, etc. etc. but that Vancouver is among the most overpriced Real Estate markets in the world, and he stated the reality is, the math is, that because of the huge Real Estate overpriced mess in this country, Canadians are totally tied into the worldwide debt mess……….And of course, no response from Michael Campbell on that one. The only time he talks about Canadian Real Estate on his show is when he talks to Ozzie Jurock every week who himself flogs Real Estate.

Again, very typical of our media that basically has a blackout on any coverage that might appear to be negative towards Real Estate which comprises a large bulk of the Canadian medias advertising revenue. Yeah, they are not biased.

#125 Timing is Everything on 12.04.10 at 3:02 pm

#47 Debtisforever on 12.04.10 at 2:54 am

You’re not a loser. You just prefer to rent. Tell them to bugger off.

#126 S.B. on 12.04.10 at 3:13 pm

Good ole USA the “best” system in the world!

Market Celebrates Just Announced Record Foodstamp Usage By Closing At 2010 Highs
Submitted by Tyler Durden on 12/03/2010 16:11 -0500

For those seeking a perfect explanation of what is happening in United Banana States of America right now, then look no further: the just released September Supplemental Nutrition Assistance program data is out and we are happy to report that the number of poor Americans has never been higher – SNAP recipients just hit a fresh all time high of 42.9 million. Naturally, the market celebrates the record number of poor Americans by closing at 2010 highs. No long-winded, somnolent essays, no rants, just observations. These two facts explain everything that is happening in this unrecognizable banana republic. Now that is a five year banana plan you can believe in.

http://www.zerohedge.com/article/market-celebrates-just-announced-record-foodstamp-usage-closing-2010-highs

#127 Aussie Roy on 12.04.10 at 3:18 pm

Mean Gene on 12.04.10 at 1:41 pm

Better still max mortgage based on potential income. Priced as if it was rented. Say annual rental return times 12, for an 8% return, which happens to be the long term average.

TheBestPlaceOnEarth on 12.04.10 at 2:24 pm

I see we have a jealous Aussie out there, still time to buy mate.

You crack me up, yeah I’m jealous of your math and reasoning skills, funny didnt think we had seen any of that from you yet….Be a good boy now run along, the grown ups are talking… LOL.

#128 Dan in Victoria on 12.04.10 at 3:19 pm

Well I haven’t heard a good protest song since the 60′s.
The old farts like me will appreciate it.

Let them eat jelly beans
Let them eat cake
Let them eat sh-t
What ever it takes

( Be warned, real life pictures)

http://www.youtube.com/watch?v=Ke8l_EOOGcg&feature=related

#129 ExExpat on 12.04.10 at 3:22 pm

Given human greed, a bubble will always form in something, be it BRE-X stock, tech stocks, tulip bulbs, or hockey cards. And most speculators lose their shirts – guy in the photo above may be an example, while the smart, lucky, or well informed few make a killing.

As the title of this blog implies, there is always be a greater fool who will come along to pay yet more for a speculative thing, in this case housing, as long as they have access to money. The amount the average person will lose is proportional to how much money they can come up with to put down.

The 1920′s stock boom and bust happened largely because it was the first time the everyday person had access to credit to buy stocks on margin (leverage).

Today may be the first time in Canadian history that virtually everyone has access to a mortgage of 10x their income, and only have to put a small amount of cash down (leverage).

We seem to be a nation of slow learners to not notice this didn’t work out in the US, UK, Ireland, Spain, Dubai, but our turn will come.

#130 BrianT on 12.04.10 at 3:27 pm

#108DSP-IMO you are just wasting everybody’s time-you cannot be that clueless. There is a thing called the Internet and on it you can find charts comparing different fiat currencies to each other over different time periods. Also, you could locate price charts for precious metals and other commodities while you are searching.

#131 Debt Free in the U.S. on 12.04.10 at 3:37 pm

Dear Garth-

Great post. Help me understand, what we as countries, must do to return to those saner times in the 50′s or early 60′s when people in the US paid as high as 91% fed tax rates, and now bitch at a paltry 35%.

How many married couples earns well over 100K a year, and few can save 15% of it?

Why people cannot figure out the Rental Equivalent in home prices, and would be better off saying ” NO” and renting?

Are we building a ” stupider” type of human, or are our educational facilities not dealing with the realities of 21st century life, like credit, its uses, and abuses?
The world is shrinking

#132 Soylent Green is People on 12.04.10 at 3:40 pm

The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke
Elizabeth Warren, Amelia Warren Tyagi

… the two-parent middle-class working family is on the brink of financial disaster. The number of families declaring bankruptcy or receiving a foreclosure against their house has shot up dramatically.

- contrary to popular myth, families aren’t in trouble because they’re squandering their second income on luxuries. On the contrary, both incomes are almost entirely committed to necessities, such as home and car payments, health insurance and children’s education costs.

- When an unforeseen event such as serious illness, job loss or divorce occurs, families have no discretionary income to fall back on.

- The authors recommend a number of useful societal solutions to get families out of this trap, such as legally prohibiting credit card companies from charging grossly unfair interest rates and exposing banks that employ a loan-to-own strategy that steers minority customers to higher mortgage rates with an eye to future foreclosures.

- Warren and Tyagi point out that families buy homes they cannot afford in order to live in a neighborhood with better schools (this is for the US). Their proposed solution, however-to institute a public school voucher system with wider choice-is less carefully thought out. Overall, however, this is a needed examination of an emerging social problem.

Review book for free:
http://books.google.ca/books?id=_IFTf-_9fSsC&printsec=frontcover&dq=two+income+trap&source=bl&ots=ssHJGxqt_M&sig=JJoG8PsIISfFjiMndKp29oKjXoo&hl=en&ei=vJP6TIPmMcm6nAeDxonICg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCMQ6AEwAQ#v=onepage&q=two%20income%20trap&f=false

or watch video:
Elizabeth Warren – The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke
http://www.youtube.com/watch?v=8GHg3GAeQ1Y

#133 Soylent Green is People on 12.04.10 at 3:43 pm

THE TROUBLE WITH BILLIONAIRES: Why too much money at the top is bad for everyone

The glittering lives of billionaires may seem like a harmless source of entertainment. But such concentrated economic power reverberates throughout society, threatening the quality of life and the very functioning of democracy.

http://www.lindamcquaig.com/TheTroubleWithBillionaires/index.cfm

It’s no accident that the United States claims the most billionaires – but suffers among the highest rates of infant mortality and crime, the shortest life expectancy, as well as the lowest rates of social mobility and electoral political participation in the developed world.

Our society tends to regard large fortunes as evidence of great talent or accomplishment. Yet the vast new wealth isn’t due to an increase in talent or effort at the top, but rather to changing social attitudes legitimizing greed and government policy changes that favour the new elite. Authoritative and eye-opening, The Trouble with Billionaires will spark debate about the kind of society we want.

http://www.thestar.com/news/insight/article/859721–excerpt-the-trouble-with-billionaires-by-linda-mcquaig-and-neil-brooks



#134 InvestorsFriend (Shawn Allen) on 12.04.10 at 3:55 pm

When we bought our house in 1995 we used a multiple of 4 times. But it was 4 times our down payment not 4 times our income.

We bought a nice 13 year old two-story in St. Albert, a somewhat upscale suberb of Edmonton. It was nothing special but no dump.

4 times our down payment was used because I needed a 25% down payment ot avoid paying CMHC insiurance which I considered to be a waste of money.

4 times our net income turned out to be about 1 times our family income. The house we bought then (15 years ago) was $135,000. It was paid off eight years later in 2003.

Getting a mortgage that is more than twice your family income has got to be financial suicide. Why? because at that rate if you manage to save an extra 10% of your pre-tax income as an extra payment on the mortgage (and that will be a VERY tall order) that will represent only 5% of the value of your mortgage, not much of a dent.

Getting a mortgage of more than twice your family income is signing up for indentured debt slavery. But don’t worry, you will have that paid off in 30 years or so. Hilarious.

Instead, why not get a smaller place and use the difference to buy some bank shares?

#135 Sand-Piper on 12.04.10 at 4:15 pm

Garth – awesome job –

But I don’t fully agree on this real estate is a death wish – my wife and I bought in 2002 – and then, without even thinking of a possible bubble that was probably just brewing. We searched exhaustingly for a affordable, well situated, convient and family oriented location. We finally chose a home a hour north of toronto (I guess some can guess where that is) anyways – for 200K and 20% down – 2400sq.ft (wife wanted a nice sized home for our expected family) on a 50ft lot..the downside – a drive that added 80km each way to work…but before you scream with laughter – driving from Oakville or Ajax which is 1/2 the distance but cause of brutal traffic – it takes just as long of a commute to the big smoke.

Now – we simply looked at our 25 yr ammortization period and the interest based on a simple sliding schedule and were freaked that it would almost cost us double with interest. Soooooo, we set up a accelerated weekly payment – did a once a month double down (the first 5 years make the biggest impact on cutting the interest monster down).. and I am content that 8 years into our home – we have another 7 before its ours..free from the monster banks.

Is real estate a wise investment..there are always great points on both sides of that fence. When we bought..one basic question was.. if one of us didn’t work – could the other’s income still support the house – and thats how we determined what was reasonably to afford.

Now, this $200K purchase was last listed at around $345K..do I feel any more wealthy..no, cause if we do sell and move somewhere else – those prices have ratched up also. If prices drop by 50% .. we’re still above water – though that would have eaten into our original investment. Since 2005 I have been a frequent reader of “Ben’s Housing bubble blog “in the states..comments in 2005 / 2006 are nearly exactly what is being stated here on this blog today -

Sure, there will be a correction – on the paper side of it – we might even take a haircut – but we live in a house that is ours – I don’t pay someone else’s mortgage – being told what I can and can’t do -and in 7 short years we will be living “rent”free..yes there will be the monthly property taxes and upkeep – but in my book – if priced right – a home to call your own is one of the best things we have done!

Cheers to all those who realize that now is a foolish time to buy – but let’s ponder one idea – if the housing market crashes – do you not think that our civilized world could be turned upside down – does the movie mad max seem more like a possiblity? …scary to think it just might .. be careful for what you wish for..it may come true!!

Take care to all the readers on this blog!

#136 Patz on 12.04.10 at 4:15 pm

A shout out to Garth and the posters here for making this blog a daily must. Thanks to those who provide links to other sources. We come at this from varying biases but keep coming back because we mostly find our outlook expanding.

Clearly TheBestPlaceOnEarth is just trying to rattle our chains—mostly he’s just trying.

To a very few posters: please put in some paragraph breaks into your longer posts for the sake of readability. Long blocks of text are hard on the eyes.

#137 Aussie Roy on 12.04.10 at 4:25 pm

Hugh Hendry December Commentary

Worth a read for another opinion on the state of the global economy and potential risks..

http://www.zerohedge.com/sites/default/files/The%20Eclectica%20Fund%20-%20Manager%20Commentary%20-%20December%202010.pdf

#138 Timing is Everything on 12.04.10 at 4:36 pm

#87 Aussie Roy – said “Point is get her thinking.”

Agreed. I use this technique with my better half, the kiddies too.
I called it ‘Put the bug in their ear’
Then, she comes up with the decision/idea ‘all by herself’
She’s so smart.

#139 realist on 12.04.10 at 4:47 pm

“And of course, no response from Michael Campbell on that one. The only time he talks about Canadian Real Estate on his show is when he talks to Ozzie Jurock every week who himself flogs Real Estate.”

Good one by Greg Weldon, he’s the best guy on there and Campbell kisses his ass. As far as Campell goes , he is pathetic. I asked him by email once why they never had Garth on the show and never ever mention/discuss the word “overvalued” when it comes to BC/Vancouver real estate, but as you say he goes on and on about the world debt ad nauseum and overvalued stocks he took profits on as he brags away.

After several email exchanges with his flunky they got very hostile with and told me to stop listening to the show and cut me off their email list all for asking a simple question about why the lack of open discussion about the obvious extreme real estate prices. Is that not the most assinine juvenile response to a simple question about clarity from both sides on an investment show ?

There is no doubt they hate Garth and have so much invested personally they will never bad mouth Vancouver real estate ever. Most disgustingly bias POS pumpers on the Canadian investment scene.

As far as Ozzie goes, he’s another pathetic joke playing Campbell’s lapdog while pumping another “deal of the week” in the middle of TimBukTwo.

#140 Jack on 12.04.10 at 4:51 pm

what concerns me is that the government, banks and real estate industry will make sure that the foolish housebuyer with a 7 times earning mortgage will continue to be subsidized by $1,000 is dollars of externalities such as artificial low interest rates and eventual bailouts when the house of cards crumble. The prudent investor or the renter will have no such powerful friends in time of need.

#141 CJ on 12.04.10 at 4:56 pm

Yo Jsan — you’re right that Michael Campbell can’t actually talk straight on real estate. Of course as you say that’s because Corus Radio is dependent on RE advertising. Hell, the whole Vancouver business community is hooked in to RE, as is most of the province, his brother the soon-to-be-ex-premier is a developer turned politician, the Olympics were essentially an RE promotion and … you get the idea.

May I suggest that Michael Campbell is actually doing about as well as he can in the circumstances. He certainly bangs on about debt reduction even as the station plays those absurd HELOC ads (“let your home equity work for you”, “this is what yes feels like”). How much further can he go?

Even Jurock, obsessional pumper that he is, actually tries to tell the truth sometimes. At least twice in the past year, I’ve heard him tell callers that if their long-term plan has been to cash out their RE and retire, they should sell now. Both times it sounded like a sudden intrusion of reality cutting through the nonsense.

#142 Patz on 12.04.10 at 5:04 pm

What the hey! If your RE investments don’t work out you could always write a novel. What do you want for Christmas?
http://www.youtube.com/watch?v=c9fc-crEFDw

#143 Aussie Roy on 12.04.10 at 5:19 pm

138 Timing is Everything on 12.04.10 at 4:36 pm

Fantastic, good luck, I will be sure to post any QLD articles, I think might be of interest.

IMHO the way I see the data, Perth, Brisbane and most of Tasmania will be the first to slip down the slippery slope, some would agrue its already begun. Funny the 2 biggest mining states are the first to slide but everyone said they JUST couldnt, some still do.

I look forward (not) to todays announcement of some dam silly scheme by the govt to create an AussieMac, might even cause a flattening of prices or a slight increase but we do so at our own peril. Math is like gravity you can fight it for a while and even with enough momentum accelerate against it but it always wins sooner or later.

#144 45north on 12.04.10 at 5:40 pm

Sand-Piper: talking about his new house: a drive that added 80km each way to work

80km!

added which means that the total one-way trip is more than 80 km!

I’m guessing you live in Innisfil and work in Don Mills. If the price of gasoline goes up you’re a sitting duck unless you can telecommute some days. All lot of people who could work from home are going to decide that they need to be in the office in order to keep their jobs.

Merry Christmas

#145 InvestorsFriend (Shawn Allen) on 12.04.10 at 5:40 pm

Tax Payer like Everyone else at number 121 and other posts thank you for suporting my simple observation that savings for the world as a whole exceed debt.

Other Persons, Sadly, could not understand and remain in the Dark.

By the way to those who bash fractional reserve banking…

The alternative is that banks use no leverage and merely loan out the bank’s own equity money and not loan out the deposits.

The result of that will be you will have to pay to keep deposits in the bank. Why would a bank pay you interest to keep your cash in a vault?

Interest rates to borrow would be much higher since a bank would be lending its own money rather than lending out depositor money.

You would merely set us back a 1000 years or so in human progress. (The Medici family in Italy were using fractional reserve banking for Gold and Silver deposits around 800 years ago).

Not everyone is in debt. Many of us are in savings and investment. Anyone with financial assets in excess of their debts is a net saver not a net borrower.

Those financially successful people may not be well represented on this dicussion Board. (Though they are certainly well resented).

#146 dark sad person on 12.04.10 at 5:43 pm

#130 BrianT on 12.04.10 at 3:27 pm

#108DSP-IMO you are just wasting everybody’s time-you cannot be that clueless. There is a thing called the Internet and on it you can find charts comparing different fiat currencies to each other over different time periods. Also, you could locate price charts for precious metals and other commodities while you are searching.

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

Oh-Ok

I made my way onto the Internet now

But-you will have to interpret the meaning of the price charts for me over the last 25 years-

Wheat is down to 1996 price levels-was the currency just as weak or just as strong in 1996 as it is today?

http://www.barchart.com/chart.php?sym=WZ10&style=technical&p=MN&d=X&x=48&y=12&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

Corn-same thing 1996- weird huh

http://www.barchart.com/chart.php?sym=ZCZ10&style=technical&p=MN&d=X&x=35&y=7&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

Soy beans-back to 2008 levels-wow-wonder what the USD did then?
I’m confused-was it stronger or weaker then today?

http://www.barchart.com/chart.php?sym=ZSF11&style=technical&p=MN&d=X&x=40&y=8&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

Oats price way back to 1987-
So by your measurement scale the USD was at the same strength in 1987 as it is today?

http://www.barchart.com/chart.php?sym=ZOZ10&style=technical&p=MN&d=X&x=46&y=14&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

The price of Cattle back to 2003 levels-
This sure is a roller-coaster peg system you use-

http://www.barchart.com/chart.php?sym=LEZ10&style=technical&p=MN&d=X&x=32&y=11&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

Oil back at 2007 levels-

http://www.barchart.com/chart.php?sym=CLF11&style=technical&p=MN&d=X&x=50&y=9&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

Looking at the USD itself-shows it to be at 1992 levels
So-is it weaker now or stronger?

The CAD at 2007 levels-

http://www.barchart.com/chart.php?sym=D6Z10&style=technical&p=MN&d=X&x=46&y=9&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

The GBP at 1987 levels-

http://www.barchart.com/chart.php?sym=BPZ10&style=technical&p=MN&d=X&x=47&y=4&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

So-there’s the peg system you said to use-
Can you please explain how it works for me-cuz-
like ya say–I’m a “bit” slow

I’m absolutely sure you can decipher the meaning of it all in just a few minutes-

Thanks a lot BrianT

#147 45north on 12.04.10 at 6:54 pm

Merry Christmas!

http://www.youtube.com/watch?v=SXh7JR9oKVE

#148 jess on 12.04.10 at 7:06 pm

#133 Soylent Green is People

…the getta plaque legacy business
maybe they could contribute into the paupers burial fund …the unclaimed deceased are piling up.
======================
Rosenwald (sears)Fund
Unlike other endowed foundations, which were designed to fund themselves in perpetuity, the Rosenwald Fund was intended to use all of its funds for philanthropic purposes. It donated over $70 million to public schools, colleges and universities, museums, Jewish charities, and black institutions before funds were completely depleted in 1948.

The Rosenwald Fund was also one of the original backers of the Tuskegee Syphilis Study. With support from the Rosenwald Fund, an ambitious program had begun to improve the health of African Americans in US southern states in 1928. Emphasis was on treating people with syphilis, then found at a high rate among poor African-American communities.

When the Great Depression began a year later, the Rosenwald Fund was forced to remove its support. The subsequent search by the U.S. Public Health Service for financial support led the doctors to a partnership with Tuskegee Institute, in which they promoted research into the progress of disease. With this change from a treatment program to a medical experiment, the Tuskegee Experiments had begun. They became notorious for their misleading patients in the program and failing to advise them of rights for treatment.
….
Investigators enrolled in the study 399 impoverished African-American sharecroppers from Macon County, Ala., infected with syphilis. For participating in the study, the men were given free medical exams, free meals and free burial insurance. They were never told they had syphilis, nor were they ever treated for it. According to the Centers for Disease Control, the men were told they were being treated for “bad blood,” a local term used to describe several illnesses, including syphilis, anemia and fatigue.(wiki)

http://aliciapatterson.org/APF2004/Granat/Granat.html
======================
… and who are those mystery buyers appear to corner the market in copper or cocoa, store it up in their warehouses , then get those investment houses to create some more mini’s fifths (telegraph)

#149 S.B. on 12.04.10 at 7:11 pm

Pageing T.O.Bubbleboy and WhistlerDude to the blog! We need local updates of wretched excesses from your respective local areas. :P

I was flipping through the Toronto Sun at the barbershop today, and 1/2 the paper contains ads from car dealers. Many of them offer 72 or 84 month financing at up to 8% rate! 8O

I see…they are printing money for themselves: reaping steady yearly returns on a depreciating asset.

Which also made me think: if the dealers and financing companies can command up to 8% rate, why are the banks still giving it away for 3% on a mortgage? Me thinks the banks are not stupid…and will ratchet their rates upwards.

*Ahem* This will not end well…

#150 realpaul on 12.04.10 at 7:15 pm

I’d like to add a nuance of information for those Canadians thinking of buying property in the US or have purchased there already. It is a common urban myth that a Canadian (any foriegner really..we are threated no better than any other) can stay in the US for 180 days without a visa…..this is just plain wrong.

A lot of the people we see being taken aside for ‘secondary screening’ at the border are not being suspected of being terrorists…rather thay have spent more time in the US than allowed and are being refused entry because of their tax status.

The US has a ‘substantial residency’ requirement that asks if it is your intention to reside continually in the USA. The calculation is to take the current calendar number of days you have been in the USA, then add 50% of the days you spent in the USA in the previous year and additionally add 1/6th of the days you spent in the year prior to that.

If this figure adds up to more than 180 days you will have been required to file a tax return. The immigration computers are synched to the IRS data base and if you haven’t filed a tax return…and are judged to have resided in the US under the ‘substantive residence’ qualifier, then you are guilty of a felony under US law.

Many white haired snow birds are being pulled aside at US immigration and confronted with this fact now that technology has caught up and can easily screen out the ‘foriegn tax cheats’.

Keep in mind as well that if you are observed doing any maintenance, painting, or cutting your grass, or work of any kind that you do not specifically have a visa for you can be subject to immediate deportation. Try collecting your rents after a ten year ban on entry.

Thought you’d like to know.

#151 realpaul on 12.04.10 at 7:34 pm

BTW, a popular real estate site Vancouver Condo Info …VCI for short has been pulled. It has been speculated ( reported actually and the issues are in the link) that the operator has endured constant threats of legal action from an ‘unidentied’ Real Estate Board ( draw your own conclusions as to which).

http://www.beyondrobson.com/news/2008/12/vancouver_condo_info_blog_is_dead/

The site was generally a goldmine for opposing the pimps and local media spin. Too bad…the city has zero opposition to the media and pimp spin regarding false and misleading adverts in the real estate space.

From now on Vancouverites only have Garth to point out that the truth is not to be found in the newspapers or from the spin of government pimps and their lackey’s.

Be well Garth…..the world just got a little smaller.

#152 Junius on 12.04.10 at 8:12 pm

#122 Persononcrack,

You said, “Remember folks the mania stage in Vancouver Real Estate has not yet happened.”

Yeah, right. Fear and Greed. Fear and greed. That is all you are pushing.

#153 Basil Fawlty on 12.04.10 at 8:15 pm

Dark Sad One
“Credit is contracting and Capital is being destroyed faster then Money is being created-so how in hell do People see Hyper-Inflation out of that-”
People see the Commodities Index up 65% in 2010. They see gold and silver rising rapidly and they see oil near $90. They also see that the Chinese have increased their gold purchases by 5X in 2010 over 2009, due to their concerns over the falling US $.
The Feds money printing is putting downward pressure on the greenback, which leads to higher prices for those making purchases with that currency.
Firstly, I agree that money velocity has not picked up and that without the money printing interest rates would rise and deflation would be very obvious. In addition, while deflation is not yet obvious in nominal terms, it is obvious in terms of gold.
Having said that, I’m not sure there is a one to one relationship between falling credit and it’s replacement by money printing. For example, QE affects international capital flows since investment capital will leave a low interest rate environment for higher yield. The outflow of money puts downward pressure on the low interest rate currency and hence increases the cost of imported goods. In addition, speculators will borrow dollars at say .5% and then invest in Yen at 2% (the carry trade), which again pushes down the value of the currency. This is currency induced cost push inflation and I don’t see how you can explain this away based on bad weather or other factors, given the number of commodities that are increasing in price.

#154 Nostradamus Le Mad Vlad on 12.04.10 at 8:42 pm

#20 InvestorsFriend (Shawn Allen) — “I am glad I paid off my mortgage and now I own stocks instead of owe a mortgage.”

Ditto. ‘tho I haven’t opened a TFSA yet. Early next year!

#23 dark sad person — Anytime! I take roughly the same view that there won’t be HI, at least for the time being. But life is moving so quickly now, I may have to eat those words at some point in the near future.

“Bad debts are wiping out capital, which wipes out lending capacity. Credit is contracting and Capital is being destroyed faster then Money is being created . . .”

Other than sheeples of the world, it is interesting to see how many bad debts are taken on by big biz., and whether it is a deliberate, concerted effort to instigate depopulation on a mass scale.

Links prior have stated the elite would be content with a world population of one billion or less, which means the rest of us can move on. But life has its own tricks up its sleeve!

#25 Jsan — “I get the feeling that the CMHC is not anywhere close to following these rules.”

Good point. One can look at politics and economics as two separate things, but there is absolutely no doubt they are intertwined and when it is good for the bankers / politicos, they will pull off nasty stunts all over the place, none of which we can do anything about.

#47 Dan in Victoria — “It’s a quiet war with silent weapons.”

Yes, it is a quiet war which is why we never hear the sound of those suffering in silence. More’s the pity.

#51 Ghost of Tom Joad — Great link which clearly shows the direction this continent is headed toward. We may / may not see a conclusion during our current lifecycles, but change is in the offing, one way or another.

#50 TheBestPlaceOnEarth — “Over 1 trillion dollars in inheiritance coming your way.”
– and –
#52 betamax — “Retired Americans are racking up credit-card debt like never before”

One is right, the other not. Guess it depends who is overloaded with debt, and who is overloaded with freedom from debt. Choose wisely!

#60 Timing is Everything — “The rules can be changed at anytime…’bank’ on it.”

That’s what I mean about ‘unexpected events’, most of which will fly over sheeples’ radars — they don’t have a clue as to the reality of life.

But they gotta learn their lessons from their own mistakes.

#86 sk76driver — Well said! What was it?!

#95 PTDBD — “I look at a tiny, shiny, one-ounce gold coin and cannot understand why people are willing to pay $1300 Bernanke dollars for it now. It’s so small!”

Agreed. A TFSA, holding good, value-based stocks / shares which are cheaply bought and sold for a nice profit will benefit one in the long term. We don’t own any precious metals, but will invest shortly in paper shares of mining companies.

#101 DARLENE — “. . . owning a house is at best a depreciating asset.”

Correct, and with property taxes plus constant upkeep / maintenance required, this will be another drain on boomers’ retirement plans.

Perfect retort for renting — Own A Home and Enjoy The Outflow of Cash!

#107 jess — Accurate post and I can vouch for that, as my better half is Asian and I am Caucasian.

The only reason my father-in-law was placed in a nursing home was because of a stroke. He could do very basic stuff, but was unable to climb stairs and other physical labor.

#116 dd — “Imagine … Governments are failing, in default.” — True, but as one side sinks something will replace that empty space.

Everything evens out — it’s just the garbage in the middle, those caught short who will be hurt most, simply because they used their guaranteed freedom of choice to live way beyond their means.

#155 Timing is Everything on 12.04.10 at 8:50 pm

#131 Debt Free in the U.S.

Credit is like a hunting rifle…Ya don’t just give it to anybody.

#156 xyz on 12.04.10 at 8:50 pm

Ummm RealPaul. That VCI post is dated in 2008 and clearly the site has been back and going strong since

#157 john m on 12.04.10 at 8:51 pm

The wisdom of our leaderships that created this mess…….. Clunker math

The person who calculated this bit of information went to high school in Pittsburgh , Pa. He is now & has been a professor at The University of West Virginia in Morgantown , West Virginia for the last forty some years. I never looked at the clunker program in such depth.
Clunker Math
Think of it this way: A clunker that travels 12,000 miles a year at 15 mpg uses 800 gallons of gas a year. A vehicle that travels 12,000 miles a year at 25 mpg uses 480 gallons a year. So, the average Cash for Clunkers transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 vehicles so that’s 224 million gallons saved per year. That equates to a bit over 5 million barrels of oil. 5 million barrels is about 5 hours worth of US consumption. More importantly, 5 million barrels of oil at $70 per barrel costs about $350 million dollars So, the government paid $3 billion of our tax dollars to save $350 million.
We spent $8.57 for every dollar we saved.
I’m pretty sure they will do a great job with our health care, though.

#158 BrianT on 12.04.10 at 9:07 pm

#144DSP-You are all over the map-try to follow the discussion. Your basic premise (I repeat) was that the implosion of the huge amount of US dollar debt will make the relatively small supply of US cash more valuable (let’s call it the Prechter/Stoneleigh premise). As I said, that is one facet to the value of a currency-the supply side. The other facet is what is actually backing the paper i.e. the future earning power of the nation-the US runs huge trade deficits (unlike Japan) and has very weak fundamentals going forward. You predict the lack of supply of US cash will keep the value strong nonetheless-maybe you will be proven correct on this one, even though I don’t think so-we shall see.

#159 pablo on 12.04.10 at 9:41 pm

Jesse Ventura’s Conspiracy Theory regarding control of the worlds fresh water supply. This will scare you stitless!

http://www.youtube.com/watch?v=svRUcX9Q9yU&feature=related

#160 pablo on 12.04.10 at 9:48 pm

http://www.youtube.com/watch?v=99-nuRsmM-c&feature=player_embedded
WRONG LINK ON THE PREVIOUS POST THIS WILL SCARE U SHITLESS

#161 Cookie Monster on 12.04.10 at 9:50 pm

Utopia,
I enjoyed you rant last week and feel much the same way, even worse probably. I see all the damage done to our way of life due to our wasteful public sector spending, too many people getting free rides at the expense of the real economy, a horrendous health care system and public education system akin to slow torture of youth with a boring curiculm catered to the average dolt. I’m sure its worse now.

Now we have global turmoil and people blaming capitalism for all the damage, it drives me nuts.

I’m a capitalist, I’m a small business owner, I’m an equity investor. I’m not benefiting from all this corruption, I’m one of the losers!

I would have liked to have bought a house with cash this summer but I couldn’t part with my hard earned money to pay double for an inflated crap shack. I grew up in Burlington but wouldn’t dare buy a house there today, might as well flush your money down the toilet, no thanks.

Lately I’ve resigned myself to not buying for another five years, I’m thinking of renting in Florida for six months of the year instead. F**k it.

Trust me you’re not alone in your disdain and hatred for government and banks for what’s happened/happening to our economy, I just try to shrug it off like ‘Atlas Shrugged’ it off.

#162 Live within your means on 12.04.10 at 9:55 pm

“When I was a child, in the late Palaeolithic age, my high school principal father made ten grand a year. He had four kids, a wife at home, a dog and two cars. And a cottage. The two-storey house they bought in Toronto in the 1950s cost $18,000, or 1.8 times the household income.”

Laughed when I read the above because it reminded me of an American chap I dated back in the mid-60′s who was in the American military in Plattsburg, NY. His goal was to became a CA and earn $10k a yr. Sounded like big money at the time when I was making $4K, but not enough to entice me continue our relationship!!!.

#163 The Apocalyptic One formerly Old is Gold on 12.04.10 at 10:00 pm

#103 S.B. on 12.04.10 at 12:34 pm
________________________________________________
Good Post / The Queen’s photo may also be seen in all Federal Govt. offices. The Governor General as the representative of the Queen is the head of the country not the PM. Is it all symbolic? When did any person or organization willingly give up power? The sun did not set on the Empire, the emperors got much smarter and transformed political / military colonialism into Economic colonialism. Steal the wealth of the nations without incurring the cost of maintaining an infrastructure to manage them politically. Beyond Genius, utterly diabolical, SPECTRE of Ian Fleming’s James Bond novels could not begin to match the genius of the economic slavery plan devised by banker boys in London / New York / Zurich …

SPECTRE (Special Executive for Counter-intelligence, Terrorism, Revenge and Extortion) is a fictional global terrorist organization featured in the James Bond novels by Ian Fleming.

Truth is indeed stranger than fiction!

#164 Cookie Monster on 12.04.10 at 10:07 pm

Utopia, about our CPP, kind of like a snake eating itself by the tail.
At least we have a pool of savings in CPP unlike the US where their social security was a Ponzi scheme from day one, they only wish they had a pot to loot, they looted their’s as they collected it!

#165 Live within your means on 12.04.10 at 10:09 pm

TOT – I’m in a nostalgic mood because I’ve been listening to PBS Boston – all the folk music from the 60′s. Tho I have a terrible memory, somehow I recall all the words of the songs. And I was not a hippie or into grass back then. Just love the music and words.

#166 dark sad person on 12.04.10 at 10:13 pm

#143 InvestorsFriend (Shawn Allen) on 12.04.10 at 5:40 pm

Tax Payer like Everyone else at number 121 and other posts thank you for suporting my simple observation that savings for the world as a whole exceed debt.

Other Persons, Sadly, could not understand and remain in the Dark.

By the way to those who bash fractional reserve banking…

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

You really are in the dark and it’s so sad because you call yourself an “Investor’s friend” i sure as hell wouldn’t want to be that person–

If there’s more savings then debt-why would they need to use Fractional Reserve Lending to begin with?

Fraction = a part of something-
That something is a Dollar of Savings-
They divide that Dollar into fractions and then lend out those fractions as whole dollars-but there really is–only 1 real dollar-
If the Reserve requirement was 10-1
They could lend out that dollar 10 times-
In Canada-there is no reserve requirement-
They could and probably do-lend that dollar out 15 times-

It’s easy to track the ratio of loans to reserves-
I would have thought a whiz kid like you would at least look before you went ahead and patted yourself on the back–

This chart shows total loans and leases-
Looks to me to be about 6.5 Trill.

http://research.stlouisfed.org/fred2/series/TOTLL

This chart is base money supply-
Looks to be about 2 Till.

Back of the envelope calculation-
Lets see now–
65,000 Billion–minus
-2,000 Billion
knot-
knot-
carry the knot-

Looks to be a reserve ratio of about 3.5% of loans-

Lets calculate this in ratios–

hmmmmm–looks to be lets see

knot-
knot-
carry the knot-

sure am glad i got the sixth grade Uncle Jed-

wow–
96.5–1

Ninety six and a half to One -

This chart is a ratio of non performing loans-it does not include Swaps or any of the other paper instruments that sit on balance sheets with no marked to market value aka “special accounting”

http://research.stlouisfed.org/fred2/series/LLRNPT

Wow–isn’t that strange?

Almost the whole 96.5 in credit is classed as
“non performing”
Meaning 90 days in arrears or has been at one time or still is “and” Shawn my boy-this does not include the
“Paper Market” not marked to value in the market-

Denninger made a cool chart showing what I just explained-but-
He used the Federal Reserve Z.1 Flow of Funds data-which works out the same ratio-

http://4.bp.blogspot.com/_nSTO-vZpSgc/Sy3w4vKmbAI/AAAAAAAAHec/urZBnIvFcxI/s1600-h/cumulative+debt.png

OMFG Shawn!

Isn’t that “sad and dark” what’s a “person” to think about your glowing synopsis now?

#167 Nostradamus Le Mad Vlad on 12.04.10 at 10:22 pm

-
DSP — Comments? “This bond purchase will absolutely not … aid the economy.” It is causing — and will continue to cause — massive inflation, and depress the value of the US dollar right into the ground.” wrh.com.

Uh-oh. Domestic Military Crackdown. “Instructions on how to download the documents, plus other links.” 5:37 clip Climategate — The Agenda, in their own words.

Failure “If there is any way for you to acquire physical gold and silver, please do so now.” wrh.com.

Spain and The Deluge. “Some prognostications on the Euro and what is ahead for all of us — bankruptcy and economic collapse.”

Forgotten Bubble When does it pop?

Dollar slips Jobs? What jobs, and where are they?

Reason “Washington is proceeding at a breakneck — an alarming — pace with plans to politically and militarily polarize East Asia, using the crisis on the Korean Peninsula to do so.” That ‘crisis’ was artificially created by South Korea. Further — Bring back the draft.

Big Brother “As Canadian privacy watchdogs DeepPacketInspection.ca tell us, DPI offer ISPs “unparalleled levels of intelligence into subscribers’ online activities”.”

6:45 clip China advises to buy gold, and also holds 97% of the world’s rare earth minerals.

JPM & Copper “WTF? JP Morgan cannot cover their silver shorts and they are out there trying to corner copper?” wrh.com.

4:47 clip 9-11 Truthers jailed for life?

Freedom No Longer “The Federal Communications Commission (FCC) is poised to add the Internet to its portfolio of regulated industries.”

#168 dark sad person on 12.04.10 at 10:30 pm

Oooops insert this chart below these words

This chart is base money supply-
Looks to be about 2 Trill.

http://research.stlouisfed.org/fred2/series/SBASENS

#169 The Apocalyptic One formerly Old is Gold on 12.04.10 at 10:39 pm

#149 S.B. on 12.04.10 at 7:11 pm

I was flipping through the Toronto Sun at the barbershop today, and 1/2 the paper contains ads from car dealers. Many of them offer 72 or 84 month financing at up to 8% rate!
___________________________________________-_
I just bought a brand new 2010 Hyundai Santa Fe. Hyundai is offering 0.9% over 84 months, I never thought I would ever buy a car over 7 years but the rate they are offering had me asking if it could be financed over 120 months. But 84 months of near free money was too good a deal for me to even consider paying for it any other way. The silver lining for those who don’t need to live on borrowed money is that these days they can borrow a ton of money at near 0% rates – got a credit card offer for 0% over 15 months – who’d have thought we’d see these days! Bank keeps offering LOCs at ridiculous rates, I am contemplating borrowing all I can and investing it to earn higher returns than what I will be charged. Exactly what the big banks have been doing since ’08.

#170 BrianT on 12.04.10 at 10:51 pm

#159Pablo-that is one of the problems long term for Phoenix and Vegas RE-they are slowly draining the water supply with no long term way out (except a lowering of the population base).

#171 Ben on 12.04.10 at 10:57 pm

I’d rather buy penny resource stocks then real estate now.

#172 S.B. on 12.04.10 at 11:04 pm

What this already posted? ★★★★ ☆ ☆ ☆ ☆

Matt Taibbi: Courts Helping Banks Screw Over Homeowners

http://www.rollingstone.com/politics/news/17390/232611

The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This “rocket docket,” as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and laby­rinthine derivative deals of a type that didn’t even exist when most of them were active members of the bench. Their stated mission isn’t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity

#173 JB on 12.04.10 at 11:26 pm

So what if couples want to buy a house more than 5x their incomes. It’s their lives. If they want to stay in debt perpetually, then so be it. There’s nothing any of you can do about it. Very few out there are listening.

If you want to cash in on this “issue”, then go buy preferred shares of the Big 5 Canadian banks. Or stockpile cash, and buy some property in 2014-15

#174 dark sad person on 12.04.10 at 11:43 pm

#158 BrianT on 12.04.10 at 9:07 pm

#144DSP-You are all over the map-try to follow the discussion

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

Huh?

I did exactly what you told me to do-

I pulled up some Historical charts of Commodity prices in order to see how the USD has been deteriorating pegged to Commodities-as you said-
Although i couldn’t see what you meant and still don’t-
And as you could see by those charts its been all over the place and makes a piss poor anchor-

So what happens if/when Commodities crash?
It will make the USD “look” even stronger-when weighed against “prices” when in fact-we all know Currencies are Devaluing-just at different rates but mostly relative-

(Commodities may not crash)
But I “think” they will-

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

The other facet is what is actually backing the paper i.e. the future earning power of the nation-the US runs huge trade deficits (unlike Japan) and has very weak fundamentals going forward. You predict the lack of supply of US cash will keep the value strong nonetheless-

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

OK-

Here’s what I “think”

The US has the majority of the World Food Supply-
They do have the largest Economy in the World-
They have lots of Resources compared to most-
(they have us and Mexico right next door as well)
They have the super duper Military-
They have the Reserve Currency-
(although they’ve lost their Industry)

The US has been in Deflation for 3 years-
The mistake people make is-
They focus on the US and see the deterioration and
they believe China/Germany/SA etc. who are still in Inflation and still low Unemployment and Industry is holding fairly steady-will continue to flow Exports and grow their Economies while the US goes backwards and for sure-this is happening today-but-

I don’t believe this will be the eventual outcome-
I think China/Japan/Germany crashes and Commodities along with them-
Germany exports 80% of their goods into Eastern Europe-ie: the PIIGS/Hungary/Poland etc. and we know all of them are hooped-
Japan is like China-export dependent-
Japan relies solely on Exports-
With the US and Canada and the PIIGS etc. are out of borrow and spend mode-the question then becomes-
Sell what–to who?

I hate to talk about this here-cuz-
G goes off the deep end at the mere mention of the word and it has an adverse effect on 99% of the board and grown men weep and it’s horrible–but-i “need” to use it-

Here;s and example of what makes a Currency “look” like it has value-no matter what-

http://www.barchart.com/chart.php?sym=S6Z10&style=technical&p=MN&d=X&x=47&y=3&sd=&ed=&size=M&log=0&t=BAR&v=1&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump

Switzerland’s Gold:
Ten key questions about Switzerland’s gold

An examination by the World Gold Council

“The reason is simple. With 2,590 tonnes of gold in its official reserves (1) Switzerland is the world’s fourth biggest individual official holder of bullion, after the Eurosystem (2) , the US and the IMF. As of April 1999, gold forms 38.3 per cent of the reserves of the Swiss National Bank (SNB). For many people, both inside and outside Switzerland, there has long been an assumption that the strength of the country’s currency and its economy owes much to its considerable reserves of gold. The link between gold and the Swiss currency has been enshrined in the country’s constitution for more than a century.”

http://www.usagold.com/swissgoldwgc.html

It’s a long read-but interesting and explains what i eluded to above–

Keep in mind-
What does Switzerland really have?
Basically Zip for exports-
75% of their GDP is derived from Banking and most of their Billions of Francs in loans have been lent into the PIIGS/Hungary etc. for now upside down Mortgages
Not a good business-yet look at the CHF strength-

IMO–
Currency Traders/Foreign Bond holders-
Have–
Without Government Decree–locked the CHF to Gold-

Gold has a funny way of showing up at the most inappropriate times-especially when Devaluation is the name of the game-

The US have (they say) the largest Gold holdings in the World-
Currency and Bond trades believe they do and that’s all that matters-

The USD shares that same Golden lock-IMO-

#175 betamax on 12.04.10 at 11:53 pm

#31 chris: “My worry now is that when China’s real estate bubble implodes, money will come flooding into Vancouver real estate as a “safe haven”. ”

When the China bubble implodes, it’ll take their money with it. They’ve had a bubble for years. Do you think rich Chinese are still sitting on mattresses full of money? No! They’re already all in on property with cash and have leveraged themselves further with credit borrowed against equity because property goes up forever.

When the Chinese bubble implodes, there’ll be a massive dissolution of paper wealth.

#176 Bottoms_Up on 12.05.10 at 12:06 am

#150 realpaul on 12.04.10 at 7:15 pm
—————————————–
Your numbers were wrong (it’s 1/3 of the previous year, not 1/2)

And,

You forgot exceptions to the ‘substantial presence’ test:

Exception 1: Closer Connection

An individual who, despite meeting the substantial presence test, maintains a closer connection to a foreign country will not be treated as meeting the test for the current year if:

* The individual is present in the U.S. fewer than 183 days during the current year;
* The individual maintains a tax home (e.g., a main place of business or employment; or, if an individual has no such place, then the place where he/she regularly lives) in a foreign country during the current year;
* and The individual has a closer connection during the current year to a single foreign country in which he/she maintains a tax home than to the U.S.

An individual may generally establish that his/her tax home is in a foreign country by showing that his/her principal place of business or employment and/or abode are located in such foreign country. The tax home must be in existence for the entire taxable year and must be in the foreign country to which the individual claims a closer connection. Thus, the closer-connection exception generally will not apply to the year an individual moves to the U.S.

The determination of whether an individual has a closer connection to such foreign country will generally be made by weighing the individuals contacts with the U.S. against those with the foreign country. Such contacts include the location of ones:

1. regular or principal permanent home
2. family
3. automobiles
4. personal belongings
5. social, cultural, religious and political organizations banks with which an individual conducts routine personal banking activities registration to vote
6. investments

http://www.irs.gov/businesses/small/international/article/0,,id=96352,00.html

Just thought I’d point it out.

#177 45north on 12.05.10 at 12:11 am

John M: Cash for Clunkers : I think this was a terrible program – I watched they youtube videos of engines being destroyed. There is an existing industry that gets the best value out of old beaters. The mechanics that judge the cost of repair versus the likelihood of use. The used car dealers and the people that buy from them. Yeah I know it’s at the bottom of the automobile food-chain but it’s still economic activity that adds value.

I would have been more effective to have raised the cost of gasoline. Let the market figure it out.

#178 Brynn on 12.05.10 at 1:03 am

As sad as it is, Bestplace on earth guy is absolutely correct. You guys dont know what is it like here as you are truly blinded to the fact that there are richer then God asians who buy their kids bentleys for birthdays….this is not a joke in any way. Of course, they will propel houses higher and higher..have you been to crowded, stinking polluted China? Canada is paradise and they know it AND they will pay for it..
and yes, rents in Vancouver are so high, it IS cheaper to buy

Junius et al are know it alls, who don’t know it all…pathetically the truth comes from a realturd like bestplace….

#179 jess on 12.05.10 at 1:03 am

pablo

A protective bubble :

Earth’s magnetic field repels cosmic rays, the solar wind protects the entire solar system. Ions, expelled by the sun in every direction at 1 million miles (1.6 million kilometers) per hour, create a “bubble.” This shield screens 90 percent of the intense, stellar radiation pulsing throughout the galaxy, said the National Aeronautics and Space Administration.
what if both sun and the earth shields are weakening and the earth’s poles are going into a reversal…some think more clouds = cooler earth?
=========================
Tax avoidance schemes

In so-called missing trader fraud, bogus traders open an account in a national carbon registry, buy emissions allowances in one EU country VAT-free and sell them on with VAT added. The trader pockets the VAT without paying it to the national exchequer and the trader goes “missing” (guardian uk May )
Carbon Carousel: European Market a Haven for Tax Fraud
A tax scandal has been rocking the global carbon markets. Ironically, it is emanating from Copenhagen, the city that six months ago hosted the world’s largest climate summit. …
posted by on Jun 15
Carbon Carousel: European Market a Haven for Tax Fraud
Climate Watch Blog
June 15, 2010BY Mark Schapiro
http://www.pbs.org/frontlineworld/

#180 dark sad person on 12.05.10 at 1:06 am

DSP — Comments? “This bond purchase will absolutely not … aid the economy.” It is causing — and will continue to cause — massive inflation, and depress the value of the US dollar right into the ground.” wrh.com.

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

I agree it wont aid the economy and will in fact depress it as it results in aiding speculation and holding Commodity prices up which is a further drag on Businesses and Consumers and sucks away spending on other goods-

Like your link from Ellen B said-
The Fed can absorb this onto their balance sheet and never have to bring it to Market-just keep rolling it over-until the economy starts growing again-

This is where it could get dangerous-if they cannot sop it up fast enough and Bonds start selling down as Inflation comes back-
Years away IMO-

Ben claims they need to keep interest rates low so Business can borrow at cheap rates-
Rates have never been lower and Money has never been cheaper and they’re not borrowing or lending now-so what good will a few % points do-

Of course it devalues the $ and that’s the plan-in order to try and capture more of the Export market-
Very little Money ends up in the real economy which is not Inflationary and like someone posted above-a new record high for food stamp participants and a few million more likely to lose the extended benefit program soon-so they will be added to the list of the food program-

How does anyone see anything Inflationary about that disaster?

The thing most get wrong-is that it doesn’t cause Inflation-obviously-or they wouldn’t have had to do a QE-2
If it caused Inflation then why are they back doing it again?
Because when it runs out of steam-like QE-1 and QE-light did and QE-2 will–it’s back to the drawing board-

It will allow Investment Banks to continue speculating and keeping much need lower prices too high-which will have an adverse effect on what they “say” they’re trying to accomplish-

The danger is when Inflation returns as it “always” does-but only after Deflation has run its course-ripping the false collateral out from under “all” who hold it and discovering what the real price should be-weighed against the real Market-

China-who has been printing like mad-like Japan-Like the Euros and all of them will crash like the US did-

Once the economies pick up again-likely led by China-
Then we need to start listening to the Inflationists- and start selling off Gold but-that’s years away-barring a War or some Technological breakthrough-imo-

#181 Northern_dirt on 12.05.10 at 1:26 am

He lived nearly rent free for 28 years . . . (Well, as you said, he paid interest on the mortgage as rent. But he had to live somewhere.)
…………………………………………………………………………….

If add up utilities, property tax, commuting costs, house up keep + improvements, insurance AND interest… it changes the picture quite a bit.. Not to mention opportunity costs…

#182 Northern_dirt on 12.05.10 at 1:37 am

#101 DARLENE

And as much as I hate to say it, quality of life costs.
………………………………………………………………………………

That’s about it..

#183 InvestorsFriend (Shawn Allen) on 12.05.10 at 1:40 am

Dark Sad Person at 166 ranted again about fractional reserve banking.

The bank lends out only a fraction of the deposits plus equity, a big fraction like 19/20 but a fraction nonetheless. It keeps about 5% of its assets on reseve in cash in case some depositors come by and ask to withdraw their money.

Read any Bank Balance sheet, the loans which were are receivables are smaller than the total of the deposits plus equity (i.e. the savings of depositors and the owners of the bank).

And umm. I believe only one of us has a professional accounting designation. (just sayin’).

Seriously and really fellow, a lot of us have savings and no debt. There really is more savings than debt in this world.

One man’s debt is another man’s savings. Believe it.

And be sure to pay off your debts. Come out of the Dark and join us savers and you too will be Happy.

#184 TheFirstRick on 12.05.10 at 1:41 am

#161 Cookie Monster on 12.04.10 at 9:50 pm
…..

I’m a capitalist, I’m a small business owner, I’m an equity investor. I’m not benefiting from all this corruption, I’m one of the losers!

…..

There is a big difference between owning ones job and being a ‘capitalist.’ It amazes me how many small business owners don’t get this.

#185 BAD on 12.05.10 at 1:46 am

-
More evidence pointing to the fact that the so called middle class is disappearing:

The polarization reflects a decline in disposable income that has hit the middle- and lower-income consumer harder than the well-off.

(…)

The gap between big spenders and spendthrifts was sharply widened by the recession, said Benjamin Tal, deputy chief economist at CIBC World Markets. High-income earners emerged from the downturn with lighter debt loads than mid- and low-income households.

(…)

The average annual income of his typical customer is between $60,000 and $70,000, and Mr. Calvano said he’s opening more stores in better-off neighbourhoods, where the average transaction is $10, compared with $5 at stores in poorer communities. In mid-2009, he raised his maximum price to $1.25 from $1, and this year he’s adding more food products, but keeping their prices at $1.

“We’re not shying away from the middle and upper-middle areas because we know the consumer will accept us,” Mr. Calvano said. “There’s a demand for our type of store.”

A retail class divide

Interesting times we live in, interesting indeed.
-

#186 Rich Renter on 12.05.10 at 1:50 am

The old school era is long over, we no longer live in a world where you save up for something before handing over your cash. It makes no difference nowadays if your buying a house or an LED Tv from BestBuy, credit will take care of you.

#187 Kurt on 12.05.10 at 1:57 am

#90 BDG-YYC – nice analysis, I couldn’t have done better myself.

#188 Nostradamus Le Mad Vlad on 12.05.10 at 2:10 am

-
Deutschmark The natives are becoming restless.

The FDA – Federal Death Administration.

Seven people were trapped in a building due to GW. Plus — 1740.

0:36 and 1:01 clips Two new TV ads which show the socialistic path that Obama (with Soros) is taking the US down.

Infighting in Eurolalaland.

Link in. Sprinkler systems . . . ummm, you figure it out!

Geoengineering Cooking up something else to replace GW with.

Fake Gold ETF’s Deja vue all over again.

Commodities 2011 and Gold squeeze.

HAARP Weather warfare from the History Channel.

Wierd but nice cartoon.

Coinciding with the last sentence of Garth’s current post — “This won’t end well.” — comes “It’s ugly out there”. Covers both sides of the border.

WikiSqueaks An Internet 9-11?

#189 Utopia on 12.05.10 at 2:16 am

“When the Chinese bubble implodes, there’ll be a massive dissolution of paper wealth”.—-Betamax

—————————————————

You have a point Betamax. I have always been amused by the arguments from those invested in the big Chinese cities where we are told 30% downpayments are more than sufficient to protect them from the repercussion of a bursting property bubble.

Not likely. Not when you consider how high those markets have flown. Actually a 30% correction might be downright conservative given the sharp price appreciation over the last few years.

What those folks always fail to consider is that a 30% decline in their R/E markets, means that they just lost all their original investment. EG; the real money that they worked for and saved and plopped down on the table when making what amounted to a speculative bet.

What they will be left with instead is debt instruments and obligations to their banks. That is the day they will be just like us.

And it will also probably be the first day of their first real recession under free market rules. I do think it will come as quite a bad shock to most people there.

#190 realpaul on 12.05.10 at 2:29 am

XYV…I’ll be darned…..VCI is there…only in a new format. Instead of an open forum its become a members only site where public commentary has been restricted…..same diff as being dead to the world. The regular site is defaced with a dated article from CTV

#191 kc on 12.05.10 at 3:01 am

#128 Dan in Victoria on 12.04.10 at 3:19 pm

Well I haven’t heard a good protest song since the 60′s.
The old farts like me will appreciate it.

Hey Dan. That song is what we need more of… good ol’ honest from the heart writing. Kinda goes with the boss’s “my home town” from the 80′s.

Yep I am still here, just not as vocal as I once was… I lurk around and read the day’s words from GT, then skim down the trailings…. Life on the farm has been keeping my ass busy…

Laters all.

#192 Utopia on 12.05.10 at 3:16 am

The Apocalyptic one formerly Old is Gold wrote:

“……..got a credit card offer for 0% over 15 months – who’d have thought we’d see these days! Bank keeps offering LOCs at ridiculous rates, I am contemplating borrowing all I can and investing it to earn higher returns than what I will be charged. Exactly what the big banks have been doing since ’08″.

—————————————————

Exactly. You will be doing your part in reinvesting what essentially amounts to US stimulus money. I have seen the credit card offers too and other “Instant Cash, just sign here, loan offers” too coming from Citi Bank and others.

Keep in mind where the money is coming from in the first place and how large the spreads are for these banks even at incredibly low offer rates.

And it is tempting to think you can take it all and earn double, triple and quadruple interest rates for example in a range of other countries who are currently experiencing inflationary pressures.

Rates are on the rise overseas and in most emerging markets. That is a fact. Inflation is running strongly too and growing as a result of the commodity boom now so it is becoming more attractive for those in the slow growth economies to shift assets into the fast moving economies.

And this is in essence how and why leakage out of the US and Canadian domestic economies of stimulus money and into emerging and developing markets is taking place and why it will accelerate in the months to come.

Returns are simply much higher everywhere else.

Not so ironically the inflows into those economies are causing them to overheat so this in effect builds on itself, generates positive feedback and voila! Inflation is out of control.

Thus you have China feeling very threatened and talking tough on capital controls and you have to respect their position here. As if growth in excess of 9% were not already enough, now they will contend with US stimulus money pouring in and blowing the lid off everything as it is all brought to a rolling boil.

That is why stimulus is a hazard to China. It is like gasoline on a fire and the casualty is going to be the Chinese real estate bubble bursting sometime over the next 2 years.

So before you jump into this kettle with your new easy money I just want you to consider there are real risks in some kinds of overseas investing right now and there is a bubble forming too.

If you can time it then all the power to you mate. Get it wrong and you are now on the wrong side of the trade and deep in debt to a US bank like Citi who extended you cheap easy funds on seemingly relaxed terms.

Easy money always comes with a big price tag.

——————————————————-

#73 The Apocalyptic One formerly Old is Gold on 12.04.10 at 9:46 am wrote……

“Good post! What’s coming is anything but Utopia”!
——————–

Thanks for the compliment Old is Gold, much appreciated.

#193 vreaa on 12.05.10 at 3:56 am

Greg Weldon, Market Analyst, interviewed on CKNW – “Vancouver is among the most overpriced real estate markets in the world. You guys are totally tied into this.”

http://wp.me/pcq1o-1C2

#194 tran, Calgary on 12.05.10 at 4:16 am

Is burning houses to get payouts
the latest trend?

#195 The Original Dave on 12.05.10 at 5:10 am

Why people cannot figure out the Rental Equivalent in home prices, and would be better off saying ” NO” and renting?

Are we building a ” stupider” type of human, or are our educational facilities not dealing with the realities of 21st century life, like credit, its uses, and abuses?
The world is shrinking
—————————————————–

I wouldn’t worry. I don’t mean to sound like an asshole but, the more stupid people there are the better it is for you (assuming that you’re smart investment wise). The stupid people will chase assets until they reach unaffordable levels (you sell) and then runaway at all costs, giving the asset away for free eventually (you buy).

If people were smarter decades ago (which I doubt) it would have given the individual a smaller chance to seperate himself from the pack and outperform investment wise.

Hopefully the public gets stupider and stupider. I will take the next versions of $30 oil, $30 uranium,$8 silver and will thank them in advance. Hooray for stupid people! If you’re house hunting in Canada, you’re one of them.

#196 kc on 12.05.10 at 5:28 am

so, which is it… Chinese money into Canada? or is your “money fund” buying into china?

http://www.chinadaily.com.cn/business/2010-12/01/content_11634566.htm

Overseas money floods Chinese property market
By Hu Yuanyuan (China Daily)
Updated: 2010-12-01 09:42

#197 The Original Dave on 12.05.10 at 5:40 am

I can’t believe some of you still insist on arguing with Dark Sad Person in regards to his deflation argument. Seriously, just learn from what the guy says. He’s 100% right. In fact, people should take notes.

The hyperinflation thing…………………..already happened! We had prices of goods multiply by 40. I believe that is usually when an economy turns from it’s inflation (in the end hyperinflation) to deflation (maybe DSP can confirm this). Ascending prices cannot happen anymore. The market wants lower prices when the public can’t afford the high prices and excessive debt.

Hopefully some of you get it. Economics, investing etc. become much easier when you understand the macro perspective of inflation/deflation. Lower prices are coming everywhere for most goods. Assets do trade higher etc., but that doesn’t mean a return to hyperflation. When the debt machine is maxed out, you get lower prices. Previous depressions are the proof. If you followed what happened during those credit contractions, you probably went into the 2008 crisis in good financial shape and came out of it in great shape. It was all up to you.

If you believe “hyperinflation is coming”, the truth is you have a tough time understanding markets and haven’t read the history books. Hyperinflation can only happen in robust economies when credit is expanding. If it is an economy without credit, like Zimbabwe, prices increase with money printing. People in industrialized countries can go without noticing hyperinflation as they carry several jobs, have no family time, everything costs a lot, their investments go up, they’re stressed out…..doesn’t that sound familiar? The U.S isn’t playing that game anymore. Hyperinflation is done over there….deflation time. In Canada, we’re still in hyperinflation – houses costing 6X household income (that is 2 working people rather than 1 working person paying 2 times income decades ago).

As soon as prices are too much and people, businesses, governments don’t have the cash or the credit to purchase, they tap out and say “I give up”. When we give up, prices come down. How can prices continue upwards if there’s no buying pressure? This is why I say that people who believe hyperinflation is coming are ridiculous. Prices don’t move up unless people can afford it – afford it via cash or credit. People in general have less of both.

I don’t know, the above is very simple to understand. You can offer a rebuttal, but I think it be senseless.

#198 on holidays in USA on 12.05.10 at 7:36 am

BDG-YY
Great post and thanks for putting the effort in to your calculations

From Garth This will not end well, and you say your not a doomer. I think from what I read from this blog the majority of Canadians will be fine. or at least the 3 million with no mortgage

The USA is still chugging along, I am here in a mall and its 11:am no parking spots to be found, the sound of cash rester bells is ker chinging, everyone has bags of goodies. And even though I did not observe everyone, but everyone I did see was paying with cash. But I did the Canadian thing and Charged.

Not sure, but The deals are hot $70 dress pants for $20 and good quality, not like in Canada, like $49 pants for $29.

Rambling now, but I just read something that might support Garths deflation spirl and I was worried after I read it please feel free to comment……

Even with QE2 Americans are hording cash

THE FED ST. LOUIS’
ADJUSTED
MONETARY BASE: So
where’s the excess growth
in the monetary aggregates
that everyone keeps telling
us about? Year‐on‐year the
adjusted base is smaller,
not larger… and it would be
worse were it not for the
growth in “deflationary”
cash.

#199 randman on 12.05.10 at 9:52 am

“I look at a tiny, shiny, one-ounce gold coin and cannot understand why people are willing to pay $1300 Bernanke dollars for it now. It’s so small! ”

Don’t worry my friend …you will,you will

#200 BrianT on 12.05.10 at 10:02 am

#174DSP-Interesting premise but if you look at gold holdings by country compared to GDP the USA looks like it slots in at #5 (behind Switzerland, Italy, Germany and France) http://www.zerohedge.com/article/gold-holdings-country

#201 The Apocalyptic One formerly Old is Gold on 12.05.10 at 10:46 am

This doesn’t end well – Garth
________________________________________________
The author of the following article echoes the same sentiment and connects the obvious dots in a way that the MSM just can’t seem to do.

Goodbye Benefits… Hello “Interesting” Times

Don’t they get it?

It’s truly bizarre to me that the powers that be cannot figure out WHY the average American is growing increasingly disenfranchised with how things are going.

Let’s do a quick review of the facts:

1) Food stamp usage at record highs

2) Real unemployment around 17%

3) Food and energy inflation on the rise

4) Incomes and housing prices falling

5) Wall Street bonuses at record highs

6) The Fed continuing to pumping hundreds of billions of dollars into the banks while proclaiming a “recovery”

Seriously, a second grader could connect the dots here and see how this will work out (hint: BADLY)….
_______________________________________________
#1 West Coast on 12.03.10 at 11:14 pm

Just get on with it and sell Canada to the IMF.

That is going to happen but the question is who will be paying the bill for selling Canada to the IMF?

The answer: it will be YOU (the taxpayers of Canada) that will pay for the purchase, not the IMF – just ask the Irish! The IMF gets Canada, you get the bill – that is how the game is played! Start learning how to enjoy beans and toast now! Austerity is coming, I understand the Feds already stealthily changed the rules for seniors who want to withdraw cash from some of their retirement accounts, they will be taxed to the hilt for doing so – welcome to The Brave New World Order!

#202 OttawaMike on 12.05.10 at 11:35 am

157 john m on 12.04.10 at 8:51 pm
Re:Cash for Clunker math
Lunacy.

You forgot to add the energy used to produce the vehicle. That input is larger than the life cycle cost of fuel for the car.
So when they crush a viable car, they have also wasted a part of that energy input as well.

The US govt. is now paying people to buy energy efficient appliances. I recently overheard a washing machine transaction in a Lowes down in the states and there is a 600$ incentive to trade the old laundry pair in.

Remember the sarcastic Soviet Union worker’s phrase?
We pretend to work and they pretend to pay us.

#203 Basil Fawlty on 12.05.10 at 11:41 am

#189 Dave
“As soon as prices are too much and people, businesses, governments don’t have the cash or the credit to purchase, they tap out and say “I give up”. When we give up, prices come down. How can prices continue upwards if there’s no buying pressure? This is why I say that people who believe hyperinflation is coming are ridiculous. Prices don’t move up unless people can afford it – afford it via cash or credit. People in general have less of both.”
The problem with this argument is that you can not just give up essentials. If you quit buying food you starve.
Be sure to watch The Ben Bernank on 60 minutes tonight.

#204 Oasis on 12.05.10 at 12:14 pm

#189 The Original Dave on 12.05.10 at 5:40 am

I can’t believe some of you still insist on arguing with Dark Sad Person in regards to his deflation argument.
____________________________________________________

ok. so why haven’t stock prices collapsed like Japan?? why isn’t the Dow/ SP down 75% like in Japan? why isn’t the Dow to 3500?

i’ll tell you why. because this isn’t deflation. plain and simple. anyone that thinks so, is clueless.

#205 eddy on 12.05.10 at 12:26 pm

a really great overview of banks:

Joan Veon When Central Banks Rule the World Part 1

http://www.youtube.com/watch?v=8KqJQfDik4g&feature=related

#206 eddy on 12.05.10 at 12:40 pm

this video series is about banking

Joan Veon When Central Banks Rule the World Part 1

http://www.youtube.com/watch?v=vEJdeWvGIZU&feature=player_embedded

#207 Junius on 12.05.10 at 12:41 pm

#178 Brynn,

The continual arguments from you and your pal (or alter ego) BPOE about the Asian horde coming to “save” Vancouver simply demonstrates your fundamental misunderstanding of the causes of the housing bubble.

Clearly we get that your motive is to blow more air into the bubble in order to maintain it for your own private financial purposes be those more real estate sales or whatever.

However nothing changes the fact that the bubble in Canada and in China for that matter has been caused by decades of cheap credit financed by our collective future. The credit bubble is worldwide and there is no decoupling that is going to happen whether you are in Iceland, Ireland, Miami, Vegas, Sydney, Shanghai or Vancouver. It is not an “If” but a “when.”

That you and others see the solution as coming from more money being pumped in is one of the fatal flaws that you and others have right now. Another round of QE2, more tax credits, more stimulus, etc.

At some point soon the Merry-go round comes to a stop. The Chinese have the biggest housing bubble in the world. They have entire cities that are nearly empty and many buildings in Shanghai and Beijing that sit empty.

The wealthy Asian buyer rumour appears to be the last straw in the Vancouver psyche for maintaining hope for the future. No doubt every sale going forward will be held up as an example of what is to come. Another distraction, another slight of hand. No doubt.

Until the market cracks and we realize it was really about excessive debt the entire time. That no matter how many of these buyers really materialize there are more than enough boomers ready to sell to them and move their money to Arizona or Hawaii instead of re-investing in Vancouver. That there are more than enough new properties coming on the market to mop them up. And that everyone in Canada who is over leveraged is screwed.

#208 TheBestPlaceOnEarth on 12.05.10 at 12:47 pm

Hong Kong real estate UP OVER 50% THIS YEAR ALONE. Asians sell their condos and buy Vancouver for dirt cheap. The whole bubble theory in Vancouver is a bunch of bull and scare mongering by persons interested in selling you financial instruments. Rent in Vancouver = Sleepless Nights fretting about the future

#209 dark sad person on 12.05.10 at 12:49 pm

#200 BrianT on 12.05.10 at 10:02 am

****************
Thnx for the link-
Of course-if measured by population and other factors the US is not as Gold strong as Germany or Switzerland etc.

Have a link somewhere written by someone at the Von Mises institute-who explains how Gold “re-priced” and locked could wipe out World debt and still carry commerce-
I agree with that-but we can bet it will be the absolute last thing they do and “if” it happens it will only be because of desperation-

*********************
Original Dave-
Thnx for the backup-cuz I’m about burnt out with the arguing-if people don’t get it by now-I don’t think they’re going to-ever-
You’re right about the tell tale signs of a hyper-inflationary blowoff-
Walmart workers driving Audies and vacationing in the Bahamas then returning home to their $5-700K homes-
That is the exact type of Insanity that is always present at the top of a massive Credit expansion-
1920′s stuff-then the crack up hits-
You’re also right-i believe about “prices” coming down-
We need to keep in mind that most of the Planet is still in Inflation and Ben’s QE are responsible for keeping prices elevated (for now) but it cannot continue forever-but long enough to crucify Consumers-
Real price discovery is ahead of us-
The Market has spoken-

***********************
#153 Basil Fawlty on 12.04.10 at 8:15 pm

************
I agree with a lot of what you say-except prices do not push/pull or cause Inflation-

If people have access to Credit or Cash-then yes-it will keep the game going-but when the well runs dry and affordability/lack of purchasing power/Credit availability/Unemployment meets reality/Mr Market-there is nothing left to underpin consumption and down she comes-
Consumer purchasing power-is “all important” because if we cannot purchase don’t worry-the Elite know that a man with a full belly has many problems-but a man with an empty belly-only has one problem-

We are seeing the end effects of a Hyper-inflationary blowoff-as Original Dave explains-

********************
LMNV-

DSP — Comments?

Answered you at #180-but see G just released it-could see it “not moderated”
Not sure why-Gold isn’t even mentioned-

#210 BrianT on 12.05.10 at 1:05 pm

#201-YES-people don’t even realize what the IMF actually is-it is a coalition of global banks-the MSM has effectively convinced the sheeple it is this benign overseeing force out to solve all the problems of the planet.

#211 Rasputin on 12.05.10 at 1:09 pm

2 thoughts:
1) Garth’s dad bought when interest rates could only go down long term (let’s forget 1980). And houses could only go up, due to the fiat debt inflation cycle.
2) I don’t agree that interest rates can ever get back to 8%. If they did ever western world socialist wasteland welfare state would implode instantly. Every deficit would triple instantly. Heck they are blowing up are the margins now…if the fed loses that war house bubbles and retirement are the last thing we will be having to worry about.

In the 1950s, Canadian mortgage rates varied between 4.25% and 5%, not far off today’s posted rates. Google before you type. It’s less embarrassing. — Garth

#212 Timing is Everything on 12.05.10 at 1:10 pm

#192 Utopia said – “Easy money always comes with a big price tag.”

Ha! Like a guy who marries a rich woman, and spends the rest of his life paying for it. |(

#213 Taxpayer like everyone else on 12.05.10 at 1:19 pm

Ottawa Mike @202:

“You forgot to add the energy used to produce the
vehicle. That input is larger than the life cycle cost of fuel
for the car.”

I would have thought that too. I googled “energy required to build a car” and found this:

http://www.thetruthaboutcars.com/2009/08/cash-for-clunkers-the-environmental-cost-of-a-new-car/

If their numbers are reasonable, it depends on the make and model of the car. Apparently you should keep your old civic. Check the article for yourself and see if any of
their logic is flawed.

First Rick@184

The term “capitalist” should refer to anybody hold owns the “means of production” whether it be plant, equipment, land. It seems to be applied more often to those who hold large amounts of it.

Same thing with “entrepreneur”. Again, anybody with an enterprise for which they assume the risk is an entrepreneur, but I like to apply it to those people with the vision to create. I own small business myself but
restrict myself to the services it provides. So I dont feel I
am so much an entrepreneur – some of the people I work
for are the entrepreneurs.

#214 Junius on 12.05.10 at 1:37 pm

What I find fascinating is the bull arguments remain so consistently within the confines of the two pillars of delusion being (1) it is different this time and (2) buy now or be priced out forever.

If you have not read Reinhart and Rogoff’s book, “It is different this time” you should. The book chronicles 8 centuries of financial folly and every time those 2 arguments are the ones used to keep the bubble alive.

Having exhausted every conceivable argument the “myth of the Asian horde” with a stampede of modern day Genghis Khan’s arriving with suit cases of cash to throw at East Van crack shacks continues to keep the “dream” alive.

The dream, of course, is that you can buy a home anywhere and it will magically appreciate in value. All you need to do are a few easy renovations, add a granite counter top and your financial problems will be behind you.

Every West side home that trades from an Asian buyer pushes the dream further and bolsters the confidence of the dreamers.

This is the slight of hand that really gets me angry. People fail to realize that in every bubble the people who are really hurt are those on the margin who over extend themselves. They think that a $5 million dollar home bought in West Vancouver and somehow think it equates to their crack shack purchase. Not a chance.

These are the people who will be hurt the most. In the pursuit of easy gains they have sold themselves into indentured servitude to the banks. Many are too old to recover. Others are too young to understand. Either way we will have scars for a generation or more. Then will forget and it will start again in some other way.

#215 MikeT on 12.05.10 at 2:02 pm

to Investors Friend S. Allen:
are you areally an investor’s friend? Banks would pay me interest for my money they hold because they will be lending my money to someone else at a higher interest rate. They would make money anyway, even if it costs them to maintain all the bookkeeping, etc.
Plus, if they will charge higher rates (if they weren’t able to practise fractional reserve banking, as they do now), we wouldn’t see this kind of debt abuse that the sheeple is doing! People would simply live within their means, they would save more, we would have a much better and stable world.
Please don’t call yourself an “investor’s friend” – you’re not one.

#216 dark sad person on 12.05.10 at 2:29 pm

Tom Flanagan, a [former] senior adviser to Canadian Prime Minister recently stated “I think Assange should be assassinated … I think Obama should put out a contract … I wouldn’t feel unhappy if Assange does disappear.”
How do you feel about this?

Julian Assange:
It is correct that Mr. Flanagan and the others seriously making these statements should be charged with incitement to commit murder

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

It’s a crying shame and a disgrace-that we have to go outside of Canada to find people who want to do “something”about this neo-con “Prime-minister adviser” POS calling for the assassination of someone in a Sovereign Country without due process of law-

Wake up lazy sleeping Canadians-your kids will reap the effects of your complacency-

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

If calling for the assassination of a private citizen is not a crime in and of it self it ought to be. The University of Calgary should fire Flanagan tomorrow.

I encourage you to phone University of Calgary president Elizabeth Cannon at 403-220-5617 and demand the resignation of Professor Tom Flanagan.

Please Email [email protected] to speak your mind.

http://globaleconomicanalysis.blogspot.com/2010/12/former-canadian-prime-minister-adviser.html

#217 S.B. on 12.05.10 at 2:45 pm

It’s not working….

Home prices falling faster in metro areas
By Janna Herron
Associated Press
12/01/10

NEW YORK — Home prices are falling faster in the nation’s largest cities, and a record number of foreclosures are expected to push prices down further through next year.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday fell 0.7 percent in September from August.

Eighteen of the cities recorded monthly price declines.

Analysts say high unemployment, tight lending standards and millions of foreclosures will weigh on home prices.

“Unemployment is still high, people are afraid of losing their homes and credit is hard to get,” said Maureen Maitland, vice president of S&P indexes.

Still, Americans are gaining more confidence in the broader economy, a new report Tuesday showed. The Conference Board, a private research group based in New York, said consumer confidence rose to a five-month high in November.

Yet the housing market remains depressed.

#218 dark sad person on 12.05.10 at 2:53 pm

#183 InvestorsFriend (Shawn Allen) on 12.05.10 at 1:40 am

Seriously and really fellow, a lot of us have savings and no debt. There really is more savings than debt in this world.

One man’s debt is another man’s savings. Believe it.

And be sure to pay off your debts. Come out of the Dark and join us savers and you too will be Happy.

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

Let’s see the numbers hot shot accountant-

#219 S.B. on 12.05.10 at 3:11 pm

The Sunglasses on head/Blackberry wearing/Durango driving type that Garth mentioned: I know of someone like this.

They tend to be 30-40yrs old, working in a good but easy corporate job especially in Alberta (project manager, land manger, or oil releated). They hang out with the same buddies from work every week, usually at the game. They are one of the guys.

She holds another good corporate but easy job (e.g. project manager, HR specialist, adjuster, recruiter) and still hangs out with the gals from high school days.

They visit ma and pa who still live in a cramped old bungalow watching a TV made in the 80s. The kids have “made it”.

Nothing has changed for these types since high school. It’s work, party, good times! Post to facebook.
A kid or two may come along.
The 2000 sq foot cookie cutter house in the deep deep SE of Calgary is stuffed with the latest in electronics.
Hey, even the appliances tell you: LG brand stands for Life is Good. Surely it is.

Besides his Durango in the driveway, a fun semi-status car like the Mini or a BMW 323i is her ride.

They do not play sports or camp or hunt or even play in the backyard (remember, nothing too hard for these folks. It’s got to be easy: easy job, easy credit, party wih the guys/gals , catch a game, woo-hoo post to facebook.

In reality they produce nothing. During the next corporate swath of cuts both could lose their jobs. The expedible foot soldiers.

They ventured to Garth’s live event once. Heard it was going to be a money grab anyway.
He felt a little out of place, all these people but no TV or game in sight. All this talk of saving, responsibility. Sounds hard. School was along time ago and they have a good paying job – do not need someone to tell them anything. Surely if there is a problem the TV news or guys at work would have told him? Entertaining presentation but does not apply to him.
Why change. Life is good. Follow the rules, colour between the lines and you will always be rewarded, right?

#220 Timing is Everything on 12.05.10 at 3:24 pm

BC…Bring Cash

“55% hike in [BC] Hydro bills to cover ‘much-needed projects’”

“The [BC] government has also mandated Hydro must be an energy exporter to the U.S.,” she said.

http://www.theprovince.com/hike+Hydro+bills+cover+much+needed+projects/3930293/story.html

Ha! BC rate (tax) payers subsidising California air conditioners.

Well, I heat my good ol’ modest house with good ol’ wood from my good ol’ trees on my good ol’ property in my good ol’ wood-stove. (Free fuel – came with the property and every year MY trees get more valuable)

http://www.usedvictoria.com/classified-ad/seasoned-arbutus-firewood_13709058

http://www.usedvictoria.com/classified-ad/firewod-for-sale-250-a-cord_13632607
—————————————————————
And [BC] water is next (I have a good ol’ well)Ha!
R U self suffcient? Get off the grid as much as possible.

They will bleed you dry, little by little…drip, drip, drip…
Owner or renter…ya gotta pay. The trick is to get off the grid as much as possible. If you are in the city ‘proper’ you are doomed to tax and regulation hell.
You will not have any alternatives…You are a captive tax/rate payer.

Sno-cone please…. The circus is in town.

#221 realpaul on 12.05.10 at 3:31 pm

The RCMP has confirmed that corrupt Asians are flush with cash from the dope trade. Gee….and everyone has been so politically correct about exposing this fact that the crime goes on undeterred because of the Canadians fear of hurting someones feelings.

http://communities.canada.com/vancouversun/blogs/realscoop/archive/2010/12/03/asian-organized-crime-operating-cariboo-grow-ops-police.aspx

The RCMP has also confirmed that the money is laundered through the casino’s that they don’t have the time or funding to put an end to.

The corruption of our legal system through the politically correct fear of exposing the truth has the Asian Gang money laughing at Canadian gutless sheepisheness. We actually fund the ethnic lobbies to harrass any organization that points out the obvious. The truth tellers become ‘rascists and bigots’…two words that everyone fears in Canada .

Is anyone still naive enough to suppose that the flood of dope money is skewing the real estate market? Is it not pretty easy to pay top dollar for property when the money is all ill gotten? After all, once it gets past the CRA into real estate the money is clean as a whistle. No one checks for financial origin…..and asking to enforce the law isn’t the Canadian way…right?

Some time ago a reporter asked out loud if it wasn’t the higher the average pay of the growing masses of civil service workers who were skewing certain markets….he got the PC crowd all a titter over that…lets see how this news settles past the block. But the truth is that civil servants making more than $100K p/a have increased in numbers by 21% in the past year alone. Government hiring has made the government Canada’s largest employer, Canada’s only growth industry and the country’s biggest advertiser. So no wonder than things are a bit skewed eh? The latest employment numbers showed that huge numbers of people are ‘giving up looking’…the reality of that spin is that those people have had their EI expire and they no longer qualify. The uptick that showed in the numbers was guess what……….government hiring. Gee I guess taxes will have to keep rising to pay for this smoke and mirror show.

Is the question that we should give the poor immigrants a free pass and let them grow the dope and pimp the crack? They’re poor right….we should turn a blind eye and let them get up to our standards even though we have to hold our noses……Apply the law to everyone else instead and make a big show of it…but leave the poor immigrants alone.

And those pesky language laws should only apply to English speakers…we can’t have English/French labels on the Asian products too. That would make life hard and expensive for the immigrants. But shut down as many residents stores as you can if the labels don’t meet the exacting standards of the langauge police…but leave the Asians alone.

#222 betamax on 12.05.10 at 3:52 pm

#151 realpaul: “BTW, a popular real estate site Vancouver Condo Info …VCI for short has been pulled….Be well Garth…..the world just got a little smaller.”

realpaul, you posted voluminously at VCI until quite recently, so the above sophomoric attempt to deter traffic to the site is pathetic, both in terms of motivation and execution.

I would suggest that such childish deceit is beneath you, but ostensibly it is not.

#223 Seen this in the US and it's in Canada now on 12.05.10 at 4:50 pm

Earnest Hemingway wrote how a person goes bankrupt “‘gradually and then suddenly.” That’s coming for housing in Canada, I have no doubt.

#224 SQUIRREL on 12.05.10 at 5:02 pm

comprehensive HOW TO money management course and tools which explain the REPERCUSSIONS of LACK OF UNDERSTANDING basic economical and financial rules HAVE to be implemented in ALL secondary schools and colleges ASAP. Just to save our kids. Garth could be co-author of this A MUST textbook.

#225 Dan in Victoria on 12.05.10 at 5:07 pm

Timing is Everything @ 220
Elderly man evicted from his property for living off the grid.
http://www.countercurrents.org/ananda041210.htm
And the new CRD law here about pumping your septic tank
(Agree somewhat)
My buddy in Washington State is taxed on his well water
(So he says)
Don’t worry, those leaches haven’t quite got around to the self suffcient types yet….they will.
I remember back in the 60′s when BC Hydro was putting the new transmission line through the Highlands.
They took what ever property was needed, an old couple fought them tooth and nail, Pat … can’t remember the last name.
They of course lost.
I don’t have any tress that I would cut but I get it from WFP on a firewood permit 15 bucks for as much as you can load on your truck, then I grab all the kiln dried floor joist trimmings on the sites
35 bucks last year to heat the joint.
I agree with you though 100%.

#226 AG Sage on 12.05.10 at 5:51 pm

TheBestPlaceOnEarth,

I love you, sir or madame. You are like the chorus at the Greek Tragedy. And that #208 post was so classic I went and popped some popcorn so I eat it while enjoying your missive from the future!past one more time.

#227 Basil Fawlty on 12.05.10 at 5:51 pm

#209 DSO

“I agree with a lot of what you say-except prices do not push/pull or cause Inflation-”
My assumption is that a declining currency will push up the cost of living.
In regards to Tom Flanagan calling for the assassination of the Wiki-leaks founder, the governments affected have nothing to charge him with other than embarrassment, yet Flanagan calls for his murder? Flanagan should charged and not be teaching at any University.

#228 BrianT on 12.05.10 at 6:16 pm

#211Ras-you should question your line of reasoning on part 2. You feel rates cannot go there (8%) because it wouldn’t work out well-by that logic rates should stay as close as possible to 0% for infinity. On second thought-why stop there? Negative rates would be even more fun.

#229 BrianT on 12.05.10 at 6:22 pm

#216DSP and #222Real-all countries evolve. This isn’t Canada any more (at least not the Canada where American draft dodgers like Flanagan could find refuge). The rules of the game are continually changing-just a glance at the news confirms that.

#230 Future Expatriate on 12.05.10 at 6:31 pm

OF COURSE it ends well.

Global conflagration has a lovely way of renewing a planet.

IF there’s anyone left.

#231 jake the snake on 12.05.10 at 7:34 pm

A lot of commenters are asking who is going to fund the retirement plans and health care system for Canada’s increasingly aging population. After all, on top of all the alarming factors colluding against Canadians over the next decade or two, we also have the worrisome inevitability of each and every one of us getting older and living longer.

Answer?
Enter Immigration Canada, every Conservative’s favourite whipping boy/bogeyman.

All those young Indians/Chinese/Malaysians are just itching for real work and a meaningful, fulfilling life in the West. Too bad they’re going to be taxed to oblivion by a bunch of entitlement-laden, autumnal senior citizens rusting above them on the food chain.

#232 Taxpayer like everyone else on 12.05.10 at 7:37 pm

183 Shawn – I see you are still not able to convince blogger DSP. If you would, please let me direct this little exercise to him

218 Dark sad – Do you remember the example of the little town where everybody was in debt? They all owed
somebody else in the town money. I think they used
$100 per person. Then the rich tourist came to town and
by the time he left, everybody was out of debt.

So the question is, were there any savings in the town when everybody was in debt? It would be great to read your reasoned answer, then hear what blogger Shawn
thinks. TIA.

#233 dark sad person on 12.05.10 at 8:28 pm

#229 BrianT on 12.05.10 at 6:22 pm

#216DSP and #222Real-all countries evolve. This isn’t Canada any more (at least not the Canada where American draft dodgers like Flanagan could find refuge). The rules of the game are continually changing-just a glance at the news confirms that

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

Yes-the changes in the rules are the big one-as they fly by the seat of their pants-
Politicians pulling out all stops in order to be re-elected and the Corporate/Banker influence that permeates Government leaves all sorts of open avenues for Corruption and outright disregard for the “enshrined” laws of the land-

They knowingly and blew this Housing bubble-in the face of an unprecedented 3 year Real-estate crash and Credit Contraction by our largest trading partners-
All the while we were being told by our PM that Canada would escape and he would point to the clearly overheated RE Market and say-see-

Last i heard our Politicians and the BOC jobs were to “protect” Canada’s Money Supply and for those who still don’t get it-that includes the “Credit Supply”

#234 dark sad person on 12.05.10 at 8:51 pm

227 Basil Fawlty on 12.05.10 at 5:51 pm

My assumption is that a declining currency will push up the cost of living.

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

Of course it will-but it has no metrics to “increase” money or credit supply-
The only money we have is what we can get paid or have saved-
This can suck our money away from us-because we “have” to have essentials-
But it is hugely Deflationary-as money is taken from other sectors of the Economy and directed into one area-
Velocity is narrowed and falls further-
But how can it do more then suck only “existing” money out?
The Governments wont subsidize high costs-

#235 garthfan on 12.05.10 at 8:56 pm

@#42

I bet the lend and spend orgy goes on for another 5 years at least.

I’ll take that bet. A crisis will be announced when it suits the most powerful people involved, but you will surely run out of ‘greater fools’ before then.

#236 Love this Blog on 12.05.10 at 9:03 pm

#219,

good POST. I’m in that age group, but don’t “conform”. But you are 100% right. Esp the “post it to facebook” part. Gotta make SURE others know how “well” you are doing.

#237 Timing is Everything on 12.05.10 at 9:46 pm

#225 Dan in Victoria

Just put in a new gravity fed septic field system and tank this last spring. Good old ‘drain rock and pipe system’. All certified by the board of health. No pumps, electricity, pressurization, or maintainence etc. required. Simple and it works. And will work until I’m dead and gone (Hopefully 45 years hence) I hired a local contractor that lives in our area, and is fully Gov. licensed. Knows his stuff. I had for 4 different quotes and 4 different system designs (?) I did not go with the cheapest or easiest (to install), but I did go with the the ‘simplest’ design. My property is conducive to a gravity system, luckily. It really was not all that expensive. He did a fantastic job, ‘works’ with the homeowner. ;)

Oh, ya about my trees. I waste little. I milled 5″ wide 3/4″ thick tougue and groove fir for all my floor space. The rest is fuel for heat. I take down dangerous, ‘end of life’ or downed trees due to wind.
And really, it does not take much wood (fuel) to heat our modest house with our new-ish 80-something% efficient Pacific Energy wood stove…built right in good ol’ Duncan, BC.
All we have is electric baseboard (rarely used) so really, wood works, and I just like wood for heating. Luckily we have lots.

We are in our ‘retirement’ home.

cheers Dan

illegitimi non carborundum

#238 mr mike on 12.05.10 at 9:52 pm

#65 peter pan:
Get used to it dude, They have to fund these hundreds of thousands of guy’s somehow…they won’t even be able to afford kibbles.
Yes, it will come out of your wallet, RRSP, or anything you have saved. They will have no choice but to redistribute the wealth from those that saved to those that simply fucked up in life.
They always punish the savers!

#239 Herb on 12.05.10 at 10:12 pm

Are the blog dawgs sleeping since there have been neither peals of laughter nor howls of outrage following Bernake’s appearance on “60 Minutes” tonight?

http://www.cbs.com/primetime/60_minutes/video/?pid=qYmqw6E8qRfGJeL9Je_j_xUSn1Rdq3Aq&vs=homepage&play=true

We are so screwed.

#240 Nostradamus Le Mad Vlad on 12.05.10 at 10:17 pm

-
#179 jess — “what if both sun and the earth shields are weakening and the earth’s poles are going into a reversal…some think more clouds = cooler earth?”

Nicely pointed out. A prior link said the elite was using GW as a scam to bring in a new world wide carbon tax (all the scientists’ so-called research was funded by oil companies), but we’re headed into a time of GC.

Kyoto The wealth re-distribution scheme (via GW) has crashed and burned.

Climategate Seeing the headline by itself places this beyond The Bovine Excrometer — it’s beyond belief.
*
The Boss is slightly unclear on the concept!

Scrambled Eggs sunny side up. Greater demand for precious metals.

New Currency A link from a few nights ago said one person had cornered 80% of the copper market in London, and this may be the reason. Plus gold.

US Fed “The Federal Reserve is neither “federal” nor has “reserves.”

3:42 clip The American Dream — Pay My Rent.

Seems the US Fed and Fraudclosure are destroying a lot more than sheeple here, so this is as good a time as any for a change in cycles — clear out the deadwood, bring in the new.

Piling debts “These developments, coupled with millions cut off from any kind of unemployment benefits, creates the “perfect storm” for massive civil unrest in this country, possibly starting early next year.” wrh.com. That’s when a few million more are on a broke SS system.

Brazil – Good on you!

Wikispaghetti “If this had been a real memo,. they would not have used the phrase “well placed contact”, they would have used the name of the person. This is another WikiLeaks fake!” wrh.com.

5:05 clip BP — Read the headline!

According to the US, NKorea has nukes so look who gave them nukes in the first place!

Do these two go together? Sure!
Do these two go together? Sure!

#241 InvestorsFriend (Shawn Allen) on 12.05.10 at 10:26 pm

MikeT at 215 said:

People would simply live within their means, they would save more, we would have a much better and stable world.

Dude, the world has never been as good or as stable as it is right now. Read some history before you judge today.

Be thankful for the bounty this world provides.

Now go out and earn your share of the bounty.

The best time to be born in the history of the world is definitely today. Tomorrow will be even better.

Life might not be a bed of rose petals. But it’s sure no bed of thorns, not for those that live smart.

#242 jess on 12.05.10 at 10:28 pm

whistleblowers …where would we be without them?

Docs on Pharma Payroll Have Blemished Records, Limited Credentials

http://www.propublica.org/article/dollars-to-doctors-physician-disciplinary-records

========
…”the pharmaceutical company often paid ghostwriters to pen medical studies, editorials and even a textbook that listed physicians as the authors.

The documents—some of which date back to late 1990s—were recently unsealed in litigation over a GlaxoSmithKline product. We saw them after they were attached to a letter released this week [1] by a nonprofit watchdog group urging the National Institutes of Health to crack down on ghostwriting in medical academia. The documents and the letter by Project on Government Oversight together outline several examples of how a major drug company contributed to the funding, writing and approval of material published in medical journals and elsewhere.

The textbook, published in 1999, listed two physician co-authors who at the time were chairs of the psychiatry departments at the medical schools of Stanford University and Emory University, the New York Times reported this week [2] in a piece that focused only on the textbook. According to the Times, it’s the first instance where a book has been criticized for the same issues with ghostwriting and drug industry influence that have plagued medical journals….”

add to this the corrupt practice of TRIAL TESTING DRUGS (co-opted testimony, fake reports).

….
Dear Dr. Collins:

The Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO’s investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government. We take a keen interest in strengthening the integrity of federally funded science, and have particular concerns involving the National Institutes of Health (NIH), which receives around
$30 billion a year in federal taxpayer dollars to fund biomedical research.[1]

We are writing to urge that NIH curb the practice of ghostwriting in academia. As the Director of the world’s largest and most prestigious funding source for biomedical research, you must set policies that require NIH-funded academic centers to ban ghostwriting to strengthen scientific integrity.

You obviously recognize how corrosive ghostwriting is to science. In an interview last year on C-SPAN, you said:

I was shocked by that revelation—that people would allow their names to be used on articles they did not write, that were written for them, particularly by companies that have something to gain by the way the data is presented….If we want to have the integrity of science preserved, that’s not the way to do it.[2]

We couldn’t agree more, and would think NIH policies would prevent such practices. However, based on documents in our possession, we have discovered that the NIH gave $66.8 million in grants over the last five years to a handful of researchers who used ghostwriters for scientific publications. These documents were made public during litigation[3] about Paxil (paroxetine), an anti-depressant sold by GlaxoSmithKline (GSK). Although these documents discuss actions that happened in the past, this behavior doesn’t usually come to light until years after it occurred when the evidence is discovered during litigation, and therefore the practice is likely continuing today.

http://www.pogo.org/pogo-files/letters/public-health/ph-iis-20101129.html

#243 Junius on 12.05.10 at 10:31 pm

#208 Biggestliaronthisblog,

You said, “Hong Kong real estate UP OVER 50% THIS YEAR ALONE.”

Source? Liar.

#244 groundzeropat on 12.05.10 at 10:34 pm

Brother building a new 3 level house in East Vancouver for $1,300,000.00 with $300,000.00 down and $1,000,000.00 mortgage that costs $4800/month.
His Luxury living area is a HUGE 1900 sq/ft. on 2 floors. Plus 3 suites he will rent to offset the mortgage:
1 bedroom in basement 400 sq/ft. $700
2 bedroom in basement 600 sq/ft. $900
Garage rooftop 1 bedroom 500 sq/ft. $1200
He figures he only has to pay $2000/month. He says house prices only go up, interest rates will not increase, renters are plentiful, and thinks the above rental rates are reasonable. It won’t end well.

#245 Junius on 12.05.10 at 10:51 pm

Hey BPOE,

See below. Hong Kong up less that 8%. Lots of talk about a bubble in HK and the Mainland. Never mind between your ears.

http://www.nuwireinvestor.com/articles/hong-kong-real-estate-prices-reach-12-year-high-55012.aspx