Show time

On Friday, as the mighty Royal Bank warned of a ‘painful correction’ for some Canadian real estate markets, I mused (the winsome coquette that I am) on whether my work here might be done. After all, it’s been a dusty and lonely trail. Three years ago I said only time separated us from a date with reality, that our house lust and real estate porn would not end well, and smart people should diversify.

That day has come. If you can’t see the risk bubbling around you, and ignored my endless bleatings, well, show time.

Pathetically regular readers will know over the past year in particular I’ve tried to highlight some safer havens. Corporate and government bonds to hedge against equity risk. Bank preferred shares for a stable flow of tax-smart income. ETFs to harness growth without the penury of mutual funds or the capriciousness of stocks. Real estate investment trusts as a massively better alternative to buying a rental condo. The proper way to harness my hot little offspring, the TFSA. Even small apartment buildings with a cap rate beating the TSX.

And with each article, the haters have descended to trash the asset described. I’d say yesterday’s posted comments regarding income-producing real estate was a case in point. And not a day passes without a drive-by calling me out because house prices have yet to go to zero.

This might suggest I should quit. But screw that.

Instead, it underscores how much myopia surrounds us. People who see risk everywhere – even in owning equity in banks, government bonds or a fully-rented sixplex – continue to immerse themselves in the greatest risk of all. Real estate debt. Despite overwhelming evidence this is the wrong time to leverage, they simply can’t help themselves. They’re victims of a herd mentality that’s taken us all to the point where (as I wrote yesterday) it is technically impossible not to lose money buying a house.

But I won’t repeat. Too late now.

What I will remind you of is why the rest of this year could be toxic for those among us who’ve chosen to have most of their net worth in one asset at one address in one city.

In order for real estate to appreciate and overcome the massive buying costs and lost earning power of your equity, we need economic growth and rising consumer confidence. The odds of this happening are fading fast. For example, we’re one month from a federal budget which will be the beginning of an austerity period few people voted for. As needed as it may be, expect cutbacks, and consequences.

More troubling is the prospect of a global slowdown, and what that means to a trading nation like Maple. I mean, have you been paying attention to what’s going on in that place past Newfoundland?

On Friday the rating agencies nailed Greece again, and it looks all but certain it will hit the wall in the next few weeks. On Saturday, Italy’s outlook was revised to ‘negative’. Big deal. Italy is a huge economy, and a world leader in womanizing. And in Spain’s elections, the ruling Socialists were spanked by voters who don’t like either insane unemployment or belt-tightening government measures.

In fact, this is the problem. There are too many people in all these countries who think like Canadians – they want it all. That means papering over debt, ignoring signs of financial stress and looking to government to backstop personal lifestyles. So, some fear (count me in), that public rebellions like we just saw in Spain will lead to the failure of austerity programs, more countries defaulting, and a mama of a mess.

After all, it’s one thing to blow off Belgium (also downgraded) or those nuts in Iceland. But when Spain or Italy wilt, the dominoes fall. This is why stocks markets plopped on Monday, with more plopping to come.

It’s also why houses have no upside potential, and a huge pull downwards. Lower global growth is not about the Greeks. It’s about oil, car and potash exports. It’s a reason why household incomes in Canada will flatline, why our banks are tightening up on credit and why a $700,000 bungalow in Scarborough suddenly looks ridiculous.

Some people say developments of the past few days will retard interest rate increases in Canada. That could be. Mark Carney may wait until the autumn, knowing as he does what’s coming. But those who think this will stoke house prices, and jump in, will know regret. Cheap rates sure didn’t save America. They won’t save anyone’s over-mortgaged butt here, either.

My hope is that some people heeded my words, and have prepared. The trip ahead could be a long one. The best way through is not hiding in cash or silver bricks in your garage, but in assets that will pay you to own them.

Got any?


#1 TurnerNation on 05.23.11 at 9:27 pm

First!!? :) :roll: 8)

site is slow

#2 HouseBuster on 05.23.11 at 9:29 pm

The fat lady is singing.

#3 Gord In Vancouver on 05.23.11 at 9:36 pm

Some people say developments of the past few days will retard interest rate increases in Canada. That could be. Mark Carney may wait until the autumn, knowing as he does what’s coming.

No interest rate hike in late 2011/early 2012 = more tightening of mortgage rules as Carney/Flaherty have already hinted that a bubble is present.

Hopefully, this will lead to 20% minimum down/max 25 year amort. limits.

#4 unbalanced on 05.23.11 at 9:39 pm

Another great write up as usual. Thanks !! Whats coming down this May or autumn won’t be pretty.

#5 Rainbird on 05.23.11 at 9:42 pm

In 1981 interest rates spiked to 24%.

What happened at that time to cause interest rates to rise?

At that time our Government could not stop the interest rate rise; CSB were @19%.

But now we all talk about how BofC is controlling interest rates.

How is it different now?

Rates rose to cool inflation. It worked. — Garth

#6 TaxHaven on 05.23.11 at 9:50 pm

You do have IRREPRESSIBLE faith in the maintained purchasing power of the $CDN so I will assume you lean to the view that the world economy will greatly slow and that prices of ALL kinds – not only those of Canadian residential real estate – will be forced down via deflation.

This should be essential thinking for everyone: deflation via demand destruction or inflation by monetary expansion.

I’m a inflationist (or stagflationist), but I applaud your suggestion of investing in residential rental property. It might offer a smidgen of hope that one can stay ahead, not of the assumed ‘traditional’ price inflation in goods (and wages, they HOPE…), but of the more evil form of price inflation generated by too much paper “money” chasing too little economic growth and too few reasonably-priced assets.

From my safe perch here overseas, I can’t quite comprehend the mindset of Canadians about real estate. I know they are incurable optimists. I know they have infinite faith in the power of government and in income-maintenance programs. And they will all follow each other over the cliff even as they, desperate to sell, chase that very last real estate fool…

But get it through your heads, guys: real estate is NOT going up for years and years and years. And even if it rises a little in nominal terms you’ll be far behind in real wealth…

The $259K heritage building looks like a bargain!

#7 Vancity on 05.23.11 at 9:51 pm

But im in Vancouver and it’s the best city in the world to live. Prices here only go up. Besides we’re about to win the Stanley Cup! Just one more reason to spend $2million on bungalow.

#8 Mr. Reality on 05.23.11 at 9:58 pm

Shorting the markets never felt so good!

Watch commodities fall off a cliff this summer, especially after QE2 is ended officially.

If you are not in low risk investments, cash or shorting the market…………well the fall of 2008 should of taught you a lesson. Maybe you sheeple need to learn twice!

Mr. R.

#9 mississaugasold on 05.23.11 at 9:59 pm

Today is 1 week before closing on my house that I sold. The buyers came over to inspect the home or measurements or something.

Small world, I will not go into details but I technically know the buyers, small world indeed.

Anyways, the mother of the young couple who bought my house was saying how in real estate you will always make money and hopefully the house will go up another $100k in 2 years as mine did.

I had to bite my tongue and just smile and keep my opinions to myself, be nice and just make sure they still love the house now that I have fully moved out.

So far, I love renting and quite honestly I can see this lifestyle for a while once I get my finances and investments set up.

#10 Crazy on 05.23.11 at 10:01 pm

No way rates will go up, and it has nothing to do with Greece, or whatever said here. It is because money is worthless.

#11 Boycott on 05.23.11 at 10:04 pm

Make the crash quicker…spread the message.

#12 shanks on 05.23.11 at 10:04 pm

Got Any? Yup, thanks to my Dads and your advice! at least my meager savings are glowing (er, growing, too much radiation) despite the drop in commodity prices.

lets hope for the best (and build LOTS of roof top and back yard greenhouses).

#13 Lisa on 05.23.11 at 10:06 pm

Can’t wait! Looking forward to seeing what the Conservatives have planned…they certainly have been patient in waiting through minority governments to unfurl it…now is the time. I think it will surprise everyone…they have some big changes up their sleeves. Buckle your seatbelts!

#14 Crazy on 05.23.11 at 10:06 pm

Regarding high interest rates in the 80′s, Garth said:

“Rates rose to cool inflation. It worked.”

How did it work? Everything is more expensive today than back before they hiked rates in those days.

No way they will do it again. If they were going to do it, they would have done it a long time ago. Carney keeps threatening, but it is a rouse.

Bernanke is pledging to end QE2. But that does not mean QE3 is not around the corner. He will QE to infinity, and Carney will try to follow as discreetly as possible.

#15 Utopia on 05.23.11 at 10:07 pm

Your article today is a thing of beauty Garth.

Well said and so timely too. Yesterdays extreme negativity towards owning income producing assets struck me dumb. I was not quite sure where to begin as the objections rained down from every quarter.

Yikes. Does everyone love debt and hate income now?

I am an optimist at heart though. In every storm cloud there is a silver lining and even bad economic circumstances breed new opportunity. Often they provide more upside potential than those available during the so-called boom-times for those nimble enough to adjust.

Revenue property may well be one of those bright spots if you are very selective and judicious in the coming years. I wish I was younger actually and had the energy to do more.

I sometimes notice that when people get into a negative mood over one asset class it seems to infect their thinking about all others. They are then repulsed by investing altogether and that is unfortunate.

For them. Not me.

Right now though, for example, we are seeing a shift from equities and back to bonds, from the risk trades and into defensives including Gold stock and others that offer dividends. Full time investors are not sitting idly by waiting to lose money….they are shifting focus and getting prepared for what may come. Getting set up for the next opportunity trades to be more precise.

The mantra is again to be concerned more with the return OF our investments over a return ON our investments. Nonetheless, opportunity abounds and the Bears and Shorter’s are coming back out of the woodwork.

Some of the biggest money is to be made at times like these. Yes, it is risky. There is always risk when reward is sought.

But it sure beats sitting at home in front of the telly and crying to Granny about opportunity lost rather than seizing the bull by the horns today.

#16 Crazy on 05.23.11 at 10:08 pm


No rate hike this May, or this year. Bet on it.

#17 Guy_in_Regina on 05.23.11 at 10:14 pm

Glad you’re staying on Garth. Public discourse needs you.


#18 Snowman on 05.23.11 at 10:16 pm

#2 HouseBuster

“The fat lady is singing.”

She does indeed.

Now, enough with arts, back to RE. Where were we, oh yeah; note to self: buy RE that will pay you to own it, hmmm makes sense, let renter pay the mortgage and put some change in you pockets as well. Not bad advice … for once.

#19 Utopia on 05.23.11 at 10:22 pm

#5 Rainbird

For perspective on what was going on back then and how “it” got cured you should look into the efforts of the Federal Reserve Chairman of the day.

Paul Volker in his approach to fiscal and monetary policy was widely credited with having killed the inflation genie but he did so with the blunt tool of punishing interest rates.

At the time many believed he was destroying the economy and the middle class, much as people today think Bernanke is leading America into damnation.

In retrospect he is credited as a bit of an economic genius and some would like to see his like return to power.

For what its worth, a high interest rate policy today would definitely kill the American empire as debt levels are just too excessive. But that was then and this is now.

#20 Patiently Waiting on 05.23.11 at 10:31 pm

I agree that when examining the facts that real estate prices do not line up with economic fundamentals, and I believe that this real estate orgy will eventually end badly (and no one would be happier to see that day of reconing than I). Howver, “markets can remain irrational longer than you can remain solvent”, and there seems to constantly be another way to kick the can down the road. Most recently in my hood, the influx of asian buyers has been unprecidented, and prices have shot through the roof . . . for example, a home sold for approximately $600,000 more than it was purchased for only 12 months ago, another nearby home is asking about 1 million more than what he purchased about 14 months ago (no renos – nada), and a newly built home asking 2.8 mil will profit the builder nearly a cool mil (assuming it sells near asking). The hot asian money has driven everyone in Vancouver mad, as all seem to have adoptd Gordon Geko’s mantra “greed is good” . . . My wife and I have now been priced out of our own market as we patiently waited for the inevitable correction that just never seems to arrive . . . I am beginging to wonder if the HAM really does make it different here . . . WTF. . .

#21 FranSix on 05.23.11 at 10:43 pm

While Canadians are engaged in a collective navel gazing exercise over housing prices, deflation has yet to run its course.

If your currency is devalued there are very few options open to you as a way of preserving capital and providing a return. All western countries opted for currency devaluation as a way out of the depression.

#22 45north on 05.23.11 at 10:51 pm

Too late now.

yep, it looks like sales will be down year-over-year for a whole year, prices will follow

here’s our missionary bringing the light to those who dwelt in darkness:

Because here I was last night, hurtling through the prairie blackness, as the wind and snow gathered force against the hulking grille, trying to find Weyburn.

judgement day is at hand

#23 Hoof - Hearted on 05.23.11 at 10:53 pm

#20 Patiently Waiting

Where’s the hood ? Here in BC?

I am seeing a major flatline , listings rising…. SOLD signs fading. Its quite eerie…

#24 Mark on 05.23.11 at 10:54 pm

“Watch commodities fall off a cliff this summer, especially after QE2 is ended officially.”

The commodities could also rise significantly after QE2 ends, because investors will no longer have a buyer to sell their US treasury bonds to and will need to seek out other sources of investment. Commodities and commodity equities should be major beneficiaries of this.

The world of investing cannot be expressed as a binary, “QE = commodities go up, no QE = commodities go down” sort of world.

#25 Jon B on 05.23.11 at 10:58 pm

I would think owning a profitable business could be considered “an asset that pays to own it”??

#26 Joseph [original] on 05.23.11 at 11:00 pm

People are resisting the advice to diversify into other assets because they spurned their parents’ advice in the 1990′s to invest in real estate and instead bought into the trend of purchasing high tech stocks they knew very little about. Everyone I know lost a huge amount of their earnings from that decade when the tech market crashed. This is why after the crash, people ran back into real estate in droves, driving the price of houses upwards for a decade. Real estate is simple to understand and they saw that home ownership benefited their parents greatly their entire lives. And houses will never crash to zero value like Nortel. People eschew the advice to diversify because in effect, “They’ve been there, done that.” Not going to do so again with promises of 8 percent returns. People will continue to eschew ETFs and stick to real estate irregardless of what happens to Italy, Greece or Ireland. Can’t say I blame them.

House. com. — Garth

#27 Hoof - Hearted on 05.23.11 at 11:01 pm



They gave up control long ago .
WTF do they care ?

Many have fat salaries….or great pensions…and can pull the rip cord anytime

All they do now is damage control.

I think Harper has a bullseye on a lot of civil servants…or more like he will have no choice.

If the OTPF is already feeling stress, what must the other pension funds feel?


Garth….I don’t think many are slagging REITS.

I’m simply saying rental options will explode, far more choices…like couches in living rooms….which is not that uncommon.

#28 GTA House Hunter on 05.23.11 at 11:08 pm

Is Mississauga becoming another Vancouver?
Garth, Mississauga is going on the bidding war path….just went to a few open houses and easily people are bidding up 5-10 % over ask.
3 bedroom semi’s are being sold for $450 K.Where is this going.I see you bashing Milton/Oshawa/Brampton….but never Mississauga.Are these prices sustainable ?
Is there a Cdn. website for more info on Pref. shares ?

#29 Debtfree on 05.23.11 at 11:12 pm

@ #5 rainbird in 82 I bought a nice house . The bank owned it and couldn’t wait to get rid of it . The interest rate was 21and 3/4 % . I gave them a stink bid and refused to talk to them any further . Even the re agent thought and said I was nuts . She said, I can’t believe you’d buy a these insane interest rates . I said the interest rates have only one way to go and that was down . It was the easiest money I had ever made to that date .
Now the pendulum has swung to the opposite direction .
We are imho standing at the cross roads once again and there is huge opportunity .

#30 Ex-Cowtown on 05.23.11 at 11:12 pm

My wife and I had a heart to heart about buying a house again after being renters for the past two years.

We’re going to take the plunge….. in June 2013.

It may be safe to go back in the water by then.

#31 Jason on 05.23.11 at 11:21 pm

Italy’s “outlook” was set to negative, however its bond rating remained the same and both Fitch and Moody’s have their outlook on Italy set at Stable – keep in mind Italy’s fiscal policy is currently more conservative than that of France, Germany and Britain ie., 3% fiscal deficit. Yes growth is small in Italy, as it is in the rest of Europe but its no Greece or Portugal, its got a huge manufacturing sector, a large materials sector and its banks are in solid shape – better than those in the UK and Spain. Its unemployment rate is 8% – same as here. I don’t see Italy as a domino in the house of cards (although we don’t speak much of France and Germany which are well exposed to Greek debt) they call Europe and btw who even cares what S&P have to say – the same people you stamped US subprime MBS as AAA, plz ?!

#32 49 on 05.23.11 at 11:27 pm

Living in Victoria, I’ve always enojyed watching the large ships in the Juan de Fuca Straight going to and from the far east. In the last several weeks, the container ships have been shockingly empty. In one case, a ship was floating so high the props could be seen piercing the water’s surface. I know this is only anecdotal evidence, but the only other time I saw such a multitude of empty ships was in the fall/winter of 08′ & 09′.

#33 Tim on 05.23.11 at 11:35 pm

Nearly Half of Americans are Financially Fragile
The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?” In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable.

#34 Chaddywack on 05.23.11 at 11:38 pm

House 24x 120 lot in my area. List price $750k, realtor told me he expects it to go a min $100-150k over asking in the next day or two.

Gotta love Vancouver!!

#35 Utopia on 05.23.11 at 11:50 pm

#22 45North wrote…..

“Judgment day is at hand”
Holy Mackerel 45North, do you just have a good memory from the past or do you keep an inventory of comments handy for ready reference?

I remember the posts of that day like they were written yesterday. I also recall having written some of the scariest comments and predictions I have ever made on this site at that time. All still valid in my opinion but that is a long, worrisome story.

One of my personal favourite posts ever written was on that day by a blog-dawg who may no longer be with us. In regards to a visit to Weyburne Saskatchewan he wrote…..

#97 sk76driver on 11.18.10

“Latest contest………

2nd prize: 2 TRIPS TO WEYBURN!!!!
3rd prize: 3 TRIPS TO WEYBURN!!!!

WANT to move to Weyburn….that is some funny shit right there…..”

Oh Lord!! I laughed so hard I almost puked. Then I did.

#36 JohnnyBGood on 05.23.11 at 11:50 pm


Unless some new economic growth engine (e.g. IT in the late ’90s) fires up the economy, slow growth in the West seems likely until we come to terms with all the outstanding debt.

I was not encouraged by a feature article entitled “Smart Jobs” in the latest issue of Wired. The article attempts to give the impression that there is something of a renaissance occurring in American industry based on technological innovation. And to a certain degree, that’s true. But where are the new jobs featured in the article? Cotton. Textiles. Aerospace. Software. Avionics. Medical products. IT…

Everything old is new again.

It goes to show how desperate things are in the US when the publishing world’s vanguard of high tech tellings touts cotton as evidence of America’s economic rebirth.

The crux is that older industries, such as textiles, are being revamped with the latest IT, biotech, green, etc. technologies. And high tech could make American manufacturing more competitive. And as I’ve said in previous comments, I think the Southern US could be a major source of competition for Canadian jobs. Never mind China or Mexico.

But, what the article doesn’t address is the fact that other countries can implement many, if not all, of the same technologies as the US in their own manufacturing sectors, thereby greatly reducing any new advantage the US might have.

Is this the best we can hope for as a new growth engine in an ever-increasingly competitive world: adding new technology to the same old industries? What we really need are whole new industries. Ironically, high (but not too high) oil prices would help America become more competitive. But then high energy prices will also dampen growth. And let’s not forget the debt thing.

So, slow growth? Looks like it for now. What would slow growth, higher competition for labour, stagnant wages, and Western deleveraging—not to mention a Chinese setback (?)—mean for obviously overvalued Canadian real estate?

But rates will stay low, right? Well, I would argue that historically low rates are not a sign of a vibrant economy. They are a sign of an economy on life support. And yet, more and more Canadians are taking it as an opportunity to go even deeper into debt.


#37 Nostradamus Le Mad Vlad on 05.23.11 at 11:54 pm

Show time. Did Harold Camping get raptured, and is now the star of the show? Not bloody likely!

“. . . the haters have descended to trash the asset described. But screw that.” — Shit rises to its own level of incompetence (the Peter Principle), so if the haters are happy with what they have, let them gorge on it.
3:17 clip Nice song about the apocalypse. Fast moving pix with good beat.

Commercial RE Goes with an earlier link, but separate story. Euro Doom and China launches gold ETFs.

Pix and Story Detroit, and Chinese mfg. slows. Goldbugs (and all PMs) — this one’s for you. US Default? Why not? Nothing else works. Mind you, it will throw the planet a major curveball, possibly coinciding with the polar shifts.

DSK – No accident, and 10:29 clip Worldwide nuclear implications of a meltdown.

Idaho First sentence is good, but the Chinese are looking at taking a small chunk out of it, and Idaho Two. Putin He knows something is up. Iran Tehran has Obama nailed.

Next For US Not tornados, oil spills, hurricanes — western states could be flooded from massive snow packs. GW? Not necessarily.

10:20 clip Cdn. activists (CDN.?) will try to arrest dubya in Oct., supposedly for war crimes.

#38 debtified on 05.23.11 at 11:58 pm

#63 Tim on 05.23.11 at 10:31 am

Falling rent? Where? I want in!

Answer: Fort McMurray

Personal Experience:
2008: $2,300 | 1bdr furnished | <600 sq.ft.
2009: $1,700 | 2bdr unfurnished | <700 sq.ft.
2011: $1,995 | 2+1 furnished | 1,000 sq.ft. w/ 2 months FREE!

Feels good to be a renter. Lots of homeowners I know who rent out a room to subsidize their mortgage have seen their asking price reduced from $1,600 back in 2007 to $1,000 this year.

#39 Alex Musulin on 05.23.11 at 11:58 pm


You hit it right on the head. The bubble is here and it’s going to burst soon. Those that buy at the top of any market are going to feel a lot of pain. The demographics of Canada speak for themselves and now that the baby boomers are starting to retire, they will find it difficult to find the “greater fool”. This is not to say that there is no hope in real estate, but it is to say that one must be very, very careful if they intend to buy soon, and if one is selling, do so quickly and don’t wait too long because you’re too stubborn to accept an offer that you feel is not “quite high enough”.

#40 Devore on 05.23.11 at 11:59 pm

#126 supermike

When your little kid keeps asking when we are gonna have a house with big backyard like her classmates and friends, it is not a easy question for a dad.

So rent a house? If you think renting a condo is cheaper than buying it, renting a house is nearly half the cost of owning it.

#41 a prairie dawg on 05.24.11 at 12:25 am

@ #7 Vancity

“But im in Vancouver and it’s the best city in the world to live. Prices here only go up. Besides we’re about to win the Stanley Cup! Just one more reason to spend $2million on bungalow.”

- – -

Like the Olympics did for condo sales?

Do they add ‘extra’ fluoride to the water in BC?

#42 Aussie Roy on 05.24.11 at 12:25 am

The best way through is not hiding in cash or silver bricks in your garage, but in assets that will pay you to own them.

Excellent statement Garth, I would also add.

Or they save you money by owning them.

When yields get compressed and the vast majority of participants buy to speculate on ever increasing price appreciation its time to be carefull.

Ask any RE mania infected person about rental yields or affordability compared to wages, you get a blank look or a statement like “yields dont matter its all about capital growth”.

This of course leads back to the 1st paragraph above.

Aussie banks lost 3% yesterday some rebound is to be expected but I expect them to continue to drift lower as the housing mania turns to a debt nightmare. Australias Minsky moment is approaching.

I have not seen an article yet to paste a link but the Australian Future Fund is selling Telstra shares (their largest cow from dividends) and buying Queensland apartment blocks, even Australias own sovereign wealth fund has now caught the global house price flu.

#43 Young Old Fart on 05.24.11 at 12:52 am

#8 Mr. Reality on 05.23.11 at 9:58 pm

……well the fall of 2008 should of taught you a lesson. Maybe you sheeple need to learn twice!


That fall was caused by a specific reason. Everyone talks of another crash. Really? Did the banks do it again?

At this stage I would love to see GIC interest rates sky rocket to where they were earlier. from 1965 to 1980 they steadily climbed from around 5% to 10 %. From 1980 to 1990 they jumped around, up to the 17% mark in Aug, Sept & Oct of 1981 then slowly settling back down to around 10% by 1990. We have been in a slow decline to present rates since then…

Will the rates climb back to those levels? Great returns for GIC’s and easy sleeping at night if they did. It may be a good time to start laddering GIC’s as part of your portfolio. Sure, rates are down now but if they hit those past levels…..

#44 Westopia on 05.24.11 at 1:23 am

Willem Buiter, the chief economist with Citigroup Global Markets in London and a former member of the Bank of England’s monetary policy committee, has provided the Toronto Globe and Mail with something of a timeline for Greek default.

“For ECB chief Jean-Claude Trichet and other leading voices inside the central bank, any form of sovereign debt restructuring or senior bank debt restructuring is like swearing in church,” Mr. Buiter says. “This denying the inevitable only makes things worse when they do happen. Adequate preparation apparently is not taking place in Frankfurt. In arguing so vehemently against defaults, the ECB has a deep self-interest, because of its massive exposure to peripheral Europe’s sovereign debt. This includes €76-billion worth of direct bond holdings, as well as a much larger, undisclosed amount held as collateral for loans to European banks”

Conspicuous in its absence is any mention of the ECU trying to “print” its way out of the problem – which besides default, seems to be it’s only option. Hmmm, default or price inflation = silver bricks a good idea, me thinks.

#45 td6969er on 05.24.11 at 1:49 am

#26 and #24 are bang on Garth. Just ask #20 if he was right and how impossible it is getting back into VCR once you’re out. There was a window from Nov ’08 to March ’09 to make a killing out here. If you bought. Or held. But selling killed you. Reality is a home is more than a bed and toilet. It’s a castle and safeguard and a better than nothing savings plan. For 98.9% of us. And in VCr everyone wants in out here from everywhere. Just the way it’s always been. From my 1st house in ’70. Sold Windsor for $8k bought in Vcr for $28k and thought it was nuts-until I looked at the mountains and ocean again. Now it’s worth $2mill. Forget the bs-show me returns on RE over 40 years and the stock market. If you pick the right stocks-right. Reality is, especially in VCR, nothing else is more bankable. And tax free as a principal. There’s a vested mutual interest out here-and 1.??? billion people also want it at your back. Rates are only going up a bone chilling .25% per year capped at 2.5 yrs. Get the picture–can’t and won’t happen. The US would be over. $20 trillion owed at 8% normalized
interest-bye bye American pie. Race to the bottom.
Who can hold their breath the longest? Anyone in VCR that sold in “09 has left 50% on the table, 100% on the Westside. Garth is right about RE being non liquid-takes 3 months min in/out. The window was 5 months 2 1/2 yrs. ago out here.
But only land is hot. I can’t unload 2 condos in Burnaby for the life of me.
BUT as I travel all over Canada you are right Garth about what’s happening and will happen. Whether it’s Alta or Niagara it’s in for a 30% haircut and morbid for years.
So if you’re paid off good on you and cover the nut but if not do get out now. 2 years will seem like a honeymoon from now.

#46 Dennis Koutoudis on 05.24.11 at 1:53 am

People should actually target real estate investments in Greece, Italy and Spain especially in the times we are going through.
11 reasons to do so:

#47 Nick on 05.24.11 at 2:12 am

“There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What the hell is water?””

Canadians are swimming in real estate risk. They just can’t articulate the concept yet.

#48 shanks on 05.24.11 at 2:13 am

Garth, when this housing crash happens (i checked out your graphs from the other day), will the ‘economy’ sputter and then carry on, more or less the same minus the imaginary gains and lost ‘profits’, or will it really collapse for a long number of years?

#49 Thetruth on 05.24.11 at 2:21 am

#16 Crazy

I’ve been saying for almost 2 years now that rates won’t rise until January 2012. Garth can verify this via my past posts.

Reason is the most obvious (and most overlooked) and people tnd to focus too much on details.

As i said over a year and half ago, the vast majority of home mortgage loans in the US will be reset by the end of the year!! Simple isn’t it.

Then, expect much inflation after January 2012. Stocks will bea good bet after that but the smart money is already there.

If Canada fails to follow suit with US interest rate increases: expect our currency to crash which in turn will… increase gas and food prices. Wage pressures will be muted due to Canad having the highest per capita immigration rate in the world (270+ countries).

If Canada follows suit with increases: housing will suffer a correction followed by a melt. Economy will slow.

Expect: a middle ground; smaller increases in rates than the US, lower CDN dollar vis a vis US dollar. Lower standard of living in the new Canada.

#50 confused and a little crazed on 05.24.11 at 2:41 am

24 mark,

commodities could take a hit in the short term b/c the vast run up is hugely influenced by speculators…Since people are seeing a continued probs around the world consumption may be reduced temporaily…greece/ portugal/ Quebec/ manitoba/ Mississipi/ Missouri/ japan. i do not think these areas are very productive right now.

however gold seeemingly will retain its value b/c it corresponds to fear. i not saying you are wrong but i think it will go down…how much??? hard to say

#51 Daystar on 05.24.11 at 4:08 am

Excellent piece once again, Garth.

This Japanese thing makes me nervous. If one cares to check the video, the dude from TD makes mileage of the fact that Japan’s -3.7% GDP quartery is a mere .7% averaged through 4 quarters, so whats the worry… right? (Its .9%, actually, but whats a couple points to a market pumper)

Try the simplistic fact that “the great East Japan earthquake” didn’t take place until March 11th of this year, making the impact of the earthquake a mere 20 days worth of a 90 day quarterly. Extrapolated, it means -3.7% GDP is really only 22.3% of the real “instantaneous velocity of the economy” … assuming Japan would have had a zero growth quarterly without a shaker.

I doubt that Japan is crawling along at 4.5 x 3.7% = an exact negative 16.65% of the next full quarterly, there would have been some recovery of production but they will be in negative double digits in their following quarterly that will for some known/unknown reason and that will roil markets 3 months from now, of this I have no doubt.

This is the primary reason why I see the event in Japan rocking the world. Its a black swan event that will take 2 or 3 quarters for its full impact to sink in from Japanese corporations to Japan’s government coming in with negative dismal numbers and as the ugly numbers come in, optics turn to Japanese public debt and say, “My. Oh, my. Trade surplus’s have given Japan an escape hatch from running up so much public debt. With that gone, where will they turn to now?”

As Utopia has mentioned earlier, Japan’s debt problem has been a slow moving event. Japan is what, the third largest economy in the world, with a huge money supply. It’s like being a Titanic with a small rudder, taking its economy forever to react to building now near unsustainable mountains of public debt. Well… they just hit an iceburg and I don’t think the world knows the full extent of just how much damage the hull has taken. Their public debt to GDP ratio is tops in the western world at an estimated 225% debt to GDP. Did I say western world? Try the whole world.

Note that these numbers do not include provincial/state levels of debt. Canada should be around 80 – 82%, and the U.S. should be right around 100% nominal intergovernmental debt to GDP. Just to reference, take a look where we stack up on the list but Japan tops it and the reason why Japan hasn’t gone bankrupt (50% of every taxed dollar in Japan now goes towards interest on debt), is primarily because of two factors. 1) 70% of Japan’s public debt bonds are domestically owned and 2) they run trade surplus’s.

Yup. Surplus’s… until recently. (and as nominal GDP shrinks coupled with potential currency declines, what happens to Japan’s already “top of the world” public debt to GDP ratio?)

Gulp. God help them now.

The business world know’s how this plays out. Japan will lose a few points of manufacturing market share (or more) over such a steep drop in exports, potentially permanently. Japanese corporate expenditures are likely to shrink. It could death spiral for them economically and to top it off, power is a main concern there now. According to this link:

32 of Japan’s 54 nuclear power plants are now shut down and power outages are frequent. Lights are flickering on the Titanic. World inventories are building in commodities. Japan hit an iceburg, Europe’s papered over debt house of cards is sprouting flames and Chindia’s inflation/interest rates are biting into disposable income/equity… it has to be. The U.S. housing 6 year long recession is still searching for bottom.

Are bull commodity investors so cock sure confident equities are the place to be right now?

#52 Daystar on 05.24.11 at 4:27 am

#24 Mark on 05.23.11 at 10:54 pm

When QE2 ends, how will this effect the money supply and thus, the U.S. dollar which most commodities are priced in… exactly?

#53 I pity the fool who drinks soy milk on 05.24.11 at 5:28 am

#26 Joseph [original]
I, unfortunately, am one of the people you speak of. Thankfully, I lost several bidding wars in late ’09 and early ’10, only out of pocket for several expensive and useless home inspections. Finding this blog was an epiphany, and led to a lot of reading and researching and hopefully a financial future free of indentured servitude. Thanks Mr. Turner.

#54 bill C on 05.24.11 at 5:32 am

For some time I have questioned this possible bubble.
But after hearing what I heard on the weekend its almost certain we will be in trouble very soon.
I hear from a 30 year old couple they just bought a small new home in Milton for 400000. They close in 6 months and they believe it will be worth 480 or 500 when they close. They will live in it for 6 months and take their profit.
OH OH. My fiance and I did this in 90.
Well guess what it didnt go up. Within a year it decreased 25%. Many people lost their life savings in this pipe dream. This is deja vu.

#55 ripa on 05.24.11 at 6:05 am

I’m in The Land Down Under & little scared of what’s to come.
But not scared enough to dump 3 quarter of a Mil’ on timber, asbestos & dead grass.
I may not have much, but have cash & no debt, I can sleep easy at night.
Good Night & good luck.

#56 bigrider on 05.24.11 at 6:16 am

“penury of mutual funds’

Seriously, can you say ‘exaggeration

#57 David B on 05.24.11 at 6:25 am

So where do you stand?

Nearly half of Americans can not raise $2,000 in cash in 30 days!

#58 bigrider on 05.24.11 at 6:27 am

#26 Joesph(original)

What part of Italy you from ?

#59 bigrider on 05.24.11 at 6:28 am


Glad you mentioned that besides being the Kings of House humping, Italians are also the worst womanizers on the planet. Greeks a close second.

#60 Macrath on 05.24.11 at 6:58 am

#15 Utopia
Your article today is a thing of beauty Garth.
Agreed, The next book should be something truly special.

#61 Atomic on 05.24.11 at 7:06 am

#24 Mark on 05.23.11 at 10:54 pm

““Watch commodities fall off a cliff this summer, especially after QE2 is ended officially.”

The commodities could also rise significantly after QE2 ends, because investors will no longer have a buyer to sell their US treasury bonds to and will need to seek out other sources of investment. Commodities and commodity equities should be major beneficiaries of this.”

I would agree with Mr. Reality (05.23.11 at 9:58 pm).
We have already had a commodity surge. Our TSE has gone from 11,000 to 14,000 over a six month period. Apparently the strongest upswing in several decades. Our economy must be booming.

#62 jerry on 05.24.11 at 7:16 am

I wish we something like Zillow here in Canada. It was a great site for capturing actual “selling’ prices on USA homes.

Why don’t we have this in Canada?

#63 Victor on 05.24.11 at 7:28 am

In the past week, 2 married couples that I know have bought new homes. One purchased in a trendy part of downtown Toronto, the other in the suburbs. The closing dates are months away and both have yet to sell their PRESENT homes before they jump into bigger homes.

I really don’t know what they’re thinking and I fear they will be in trouble given the small down payments they have on these purchases.

One couple somewhat gleefully was saying how they were hoping to find a greater fool to buy their present home at an inflated price. I resisted the urge to tell him to look in the mirror.

#64 TurnerNation on 05.24.11 at 7:41 am

Ah this loathesome blog :)

#65 Kevin on 05.24.11 at 8:03 am

I don’t understand why the Conservatives have to introduce all these austerity measures, programs cuts, and layoffs to slay the deficit.

Prior to the economic downturn, we had a balanced budget. Then Harper introduced all these “stimulus” programs to spur the recovery. This new spending put us into deficit.

Now that we’re on our way to recovery and they want to eliminate the deficit, why isn’t is as simple as just STOPPING the stimulus spending, and going back to the way things were? Why do they all of a sudden have to cut programs and staff that were here back when the budget was balanced?

Can anyone explain?

#66 SMOKING MAN on 05.24.11 at 8:06 am

Cheap rates sure didn’t save America. True


Because 85% of the wealth in the USA is in 15% of the hands.

In Canada wealth is far more distributed. And wealth is and will accelerate coming to our shores as the fear of Ron Paul becoming Prez and Europe collapsing,

Canada is safe harbor for capital right now, and that means Re will be stable.

It’s different here. It really is.

#67 Dom_Now_in_Zürich on 05.24.11 at 8:22 am

Sorry posted it on the wrong article…meant for this one.

i keep seeing all these comments on the doom and gloom of the EU and how it will die a slow death.

I must say I just got back from Milan a few hours ago and was amazed at the number of big buildings being built and what a change it has seen in the last 20 years since I was last there. Went out for dinner on Sunday night with the family and everywhere was jammed with happy, smiling people spending lots of money. Admittedly a lot of people used plastic to pay but after hearing all the doom and gloom reports on this blog about the EU i have to say i was expecting a black hole of recession and despair….it was the exact opposite.

Spain is definitely reeling…in southern Spain lots of tourists have fled but the Spanish are smart…noticed a huge increase in the number of Russian billboards and advertising so obviously the Spanish know who has the money.

Have traveled Europe extensively in the 2 years we have lived in Switzerland and I don’t know where you all get the idea that it is going somehow wrong here? France and Germany had tremendous growth through YTD and Switzerland is humming along (no debt period)

Real Estate here is wonderfully affordable compared to what i am hearing about Vancouver and Toronto.

Just some anecdotal info as I think the shit will hit the fan a hell of a lot harder in Canada vs Europe..

#68 SMOKING MAN on 05.24.11 at 8:30 am

#65 Kevin on 05.24.11 at 8:03 am

I will take a shot at that. It’s ideology. Harper is driven by the model of survival of the strong and smart. His answer to deal with people that fall down or don’t measure up is to make more jails to get the problem out of view. He is a tyrant, he came from no money and worships and listens to those who have it. Deep down inside his little brain he feels not worthy, he is driven to climb the hierarchy by listing to bad men. He puts on a strong face and his core of support are the beer drinking un educated pick up truck, tail gate party guys who his policy’s will eventully screw the most. He is a good politician, and when he axes some civil servants. The beer gang will have a tail gate party, not knowing that they are next. 1010am and 640 am will be thrilled(read between the lines)

I was going to vote for Jacks party but got cold feet when they gave me the pencil.

I did vote for his party because I have money, not because I like him.

The lib in my riding was iggy.

#69 David B on 05.24.11 at 8:33 am

Soon the real crunch will come for many ……

#70 Mr Buyer on 05.24.11 at 8:40 am

Japan has been labouring under ugly numbers for quite some time. Ugly numbers are not going to cause a run on the banks here any time soon. I think the significance of 70% of the debt (I think it is a little higher) being held domestically can not be over estimated (it did not happen by accident). I understand group think can lead to less than intelligent behaviour but it is something quite different over here. This country is tested by fire at least once or twice a generation. There is also a good deal of savings here as well. The federal tax rate was a complete joke up until a few years ago when it was doubled from 5% to 10%. There is talk of increasing the tax rate to cover the costs of the earth quake and not one single person I know has complained. Anyone I asked replied that all of Japan must contribute to the recovery from the disaster. This tsunami would have paralyzed most other countries. There was a manufacturer that supplied chips to all the car manufactures here. This company was destroyed by the tsunami. All the car companies sent workers to the chip manufacturer and it was back in production 5 or 7 days after the disaster. This whole country is a team. They know AUSTERITY very well. Short of the whole island being destroyed I can not see Japan lying down. I am guessing the reason 100% of the debt is not held nationally is the funds were used to hold foreign debt (I am only guessing). This country is tested every 10 or 15 years. The relative lack of natural resources is a concern at the front of every Japanese citizens mind. It is said that the hugely subsidized farming sector here exhists because of the political of influence of the farmers. I am not so sure. These farmers are the most productive in the world. The country knows you can not buy bread with paper money in a crisis so they maintain the farming sector rather than allow it to be decimated by cheaper rice imports. After being here as long as I have I have come to the understanding that we were crazy to try and compete with the Japanese in the 70s and 80s. They still have exercises in each park at 6am during summer break. Most of the kids and parents get up and go to the park and do calisthetics to the same music that was broadcasted 60 years ago. It may be quite different in Tokyo but not out here in the countryside. If you really want to cook up a scenario that wipes out Japan it will have to include the Japanese people not supporting the government in a crisis, and asking for the 70% of the national debt back. I just do not see that happening. I would not have said that before I lived here but these people do what must be done for the good of the many.

#71 refinow on 05.24.11 at 8:56 am

# 3 Gord from Vancouver, be carefull what you wish for.

Reducing amortizations to 25 years and restricting downpayments to a minimum 20% will all but eliminimate the entire first time homebuyer market. |It will also squeeze a large percentage existing homebuyers from ever being in a position to upsize, since they will no longer qualify for the mortgages they currently possess or have enough equity to make the more up.. Next if you can’t buy without 20% down you will no longer be able to refinance beyond that either, (We are almost at that point anyways), so there goes the debt consoliditions that were enabling a lot of homeowners to think they can afford their current homes, so now they must sell.

Add the people looking to downsize to capitilize on their new found wealth, accompanied with the empty nester boomers whos kids have run out and bought 4 bedrooms homes they cant afford, and we suddenly have a glut of homes on the market with no buyers….

I dont think 20% down will actually help the situation, it would be like putting out a fire with gasaoline!!!

#72 Ex-Cowtown on 05.24.11 at 9:00 am

#68 SMOKING MAN on 05.24.11 at 8:06 am
Cheap rates sure didn’t save America. True


Because 85% of the wealth in the USA is in 15% of the hands.

In Canada wealth is far more distributed. And wealth is and will accelerate coming to our shores as the fear of Ron Paul becoming Prez and Europe collapsing,

Canada is safe harbor for capital right now, and that means Re will be stable.

It’s different here. It really is.

Sorry to burst your BC Bud fueled bubble, but Canada is insignificant on the world stage. We are not a “safe haven”. We are a commodity based statistical anomaly that has SO FAR avoided the worst of the international meltdown. OZ was there with us, but it finally causght up to them and now we stand alone.

Unfortunately, we’ve been irresponsible and used cheap interest rates to create our own homegrown problem with our RE bubble. As it continues to meltdown, 25% of our GDP is at risk. And the oil sands can’t stop that train in it’s tracks.

Also please remember that our cost of production on our oil is very high, with many projects needing $80/bbl to break even. Natural gas is even worse, with the gas projects needing $6-7/mcf to BE and the price stuck in the $4 range.

Any if Taliban Jack and Unicorn Liz had their way, the taps would be shut off tonight at 6:00, 6:30 in NFLD.

We’re OK for a while, but RE can shoot most of us in the foot, and be fatal for many outside a few small sectors of the economy.

#73 BrianT on 05.24.11 at 9:00 am

#26Joe-Everything you wrote was likely written on some US blog circa 2006, and it sounded as plausible then.

#74 Mr Buyer on 05.24.11 at 9:01 am

The Japanese do what must be done for the good of the many for sure but they are not overly charitable. There is a famous animation here that plays anually. It is about a brother and sister that slowly starve to death after the war. There were families all around that had food but barely enough to survive. The Japanese know they must work in order to avoid that situation. They expect work from each and every individual. They understand life is a full contact sport. They are not dreaming of easy street. 60 to 70 hours a week, week in week out, decade after decade (even during the excesses of the housing bubble). Hard core.

#75 S-J on 05.24.11 at 9:08 am

#15 Utopia.

I was also surprised by the negativity towards income properties yesterday. We left Victoria a few years back, having sold one house for a good price and have since invested this money in building some revenue properties in Nova Scotia – mainly duplexes (but with the option of selling off each side individually, if we want).

We have a wonderful property manager, who finds us great tenants. They also pay good money for a new building.

We are certainly feeling more comfortable sitting here with some income generating properties than we would be with the one property we could afford in Victoria right now.

#76 BrianT on 05.24.11 at 9:10 am

#51Day-True, but Japan does have huge foreign reserves they can cash in when needed.

#77 BrianT on 05.24.11 at 9:15 am

#45TD-People don’t look at the math-a comparable appreciation would take your place to 143 MILLION in the next 41 yrs. Literally only billionaires could afford the place. Not impossible, but you have to wonder what gold would be priced at under such a scenario.

#78 Jim on 05.24.11 at 9:20 am

Yes, the Japanese are brilliant.
Also model humanitarians.

end sarc.

#79 alex on 05.24.11 at 9:23 am

royal bank warns of “painful correction” where can I read more about this story?

#80 Jim on 05.24.11 at 9:34 am

Oh I forgot, the Japanese are wonderful environmentalists.

now end sarc.

#81 Utopia on 05.24.11 at 9:43 am

#32 49 on 05.23.11

Living in Victoria…….I know this is only anecdotal evidence, but the only other time I saw such a multitude of empty ships was in the fall/winter of 08′ & 09′.
OK, that is interesting. Inbound empty or outbound?

#82 Daisy Mae on 05.24.11 at 9:44 am

“Hopefully, this will lead to 20% minimum down/max 25 year amort. limits.”

Exactly. Steven — the ‘economist’ — should never have messed with it.

#83 vortex on 05.24.11 at 9:44 am – a nice title for a book……

#84 Painted Toenails on 05.24.11 at 9:54 am

Mr. Buyer – thanks for your observations about the Japanese mindset. Very interesting.

My good friend is married to a Greek. They hear from back ‘home’ that things are quite desperate and the level of anger is at the boiling point. For the first time in years they aren’t going back to see family right now, it’s just too tumultuous. They did however, buy a place in the States.

Still can’t unload their house in Surrey, despite 3 tries and a bsmt reno.

My boyfriend can’t unload his place outside of Vic either.

Only Vancouver of this gooey mess is holding. Everything else is dripping and leaking like an 80′s built condo.

#85 disciple on 05.24.11 at 10:02 am

Smoking Man – I would like to answer your question, it’s an easy one for me, but I don’t know if you can handle the truth:

History repeats itself because those in power stay in power by keeping the rest of us uninformed and uneducated about economics. Shhhhhh!

Canada had an approximately 100 Billion dollar back-door bailout to the banks in 2008-2009. The media did not tell you, did they? That was your money, your future labour and prosperity being handed over to the private banking families that OWN you. Harper must cut back now to give that money back to you. Sounds dumb, doesn’t it? But this is the insanity called the debt-money fractional reserve banking system that keeps our society liquid, keeps the illusion of wealth alive.

#86 disciple on 05.24.11 at 10:06 am

If you play the game of greed and fear,
And look for dangers there and here,
Trying to capitalize on disaster and distress,
In order to pay for your wife and mistress,

You will find neither joy nor glee,
You will be neither happy nor free,
Your ancestors already warned you, so take heed:
If you play the game of fear and greed.

#87 BAD on 05.24.11 at 10:18 am

According to this article:

Canadians trail only Aussies in quality of life: Study

Canada ranked first in terms of access to affordable housing!

I haven’t read the actual study, just the article, so if anyone knows what the expression “access to affordable housing” actually means please let me know.
Does it mean government subsidized rentals, or is the study implying that housing in Canada is generally affordable?

#88 Abitibidoug on 05.24.11 at 10:21 am

I read that recently Mark Carney said some off the record comments about the not so rosy prospects for the world economy going forward. It looks like the writing’s on the wall, and it doesn’t look good for anyone hoping to see more big increases in house prices.

#89 Daisy Mae on 05.24.11 at 10:22 am

Well, I’m learning alot following this blog. I can’t convince family and friends, however. Altho’ my son is now sitting up and paying attention. It can be, without a doubt, very confusing.

I look at my aging dishwasher and realize it’ll need to be replaced eventually — perhaps sooner than later. I no longer look at the replacement as an ‘investment’ of sorts — such as ‘new and improved’ — but rather, as just an expense. My neighbours are renovating their interiors — ripping out the carpeting and replacing it with hardwood, for example. Re-doing their landscaping, spending copious amounts of money on labor and materials. Cashing out GIC’s to pay down their mortgages….and I wonder. (sigh)

#90 Mister Obvious on 05.24.11 at 10:23 am

#15 Utopia

“Yikes. Does everyone love debt and hate income now?”

In a word… yes! Income requires diligence and responsibility. Debt is brainless.

#91 disciple on 05.24.11 at 10:23 am

With billions of dollars and the entire military-industrial complex at stake, with decades of market development and corporate dictatorship built upon a rigged system of financial skullduggery that only a fool cannot see, do you really think that your mind-controllers would allow the fate of all of this to be decided by a simple federal or provincial “vote”? Are you serious, or just misinformed? If you believe your vote has anything to do with anything, then perhaps, even I (a disciple of common sense) cannot help you break free from your spiritual chains.

#92 Mr. Plow on 05.24.11 at 10:24 am

#38 debtified

$1,000 to rent a room! I bet it feels good to be a renter, that is a heck of a deal.

I bet they are running out of vasoline in Fort Mac. Or maybe they just don’t use it.

#93 Omnivore on 05.24.11 at 10:39 am

Quick question for the Canadian(s) above living in Japan or other permanent residents in other countries being taxed on worldwide income: Been living in Japan, and am about to cross the 5-year point, where I’m considered a permanent resident (in the eyes of the taxmen, not necessarily for immigration, and liable for tax on WORLDWIDE income). Any of you Canadians ever had to deal with this? Yes, I realize that a lot of people might not declare anything, but I’d prefer to at least know about the possible crap before I hit 5 years, and make my decision from there.

I’ve been able to contribute to TFSAs (never declared non-residency in Canada if this matters?) and RRSPs with savings and income already in Canada, based on my showing Canada my taxslips from here. But I don’t even know if this is the right way to do things, and what I should adjust in paperwork on both sides and investing my little nest egg if Japan decides to tax my Canadian stuff, and I’m guessing they don’t care about TFSAs-past or future contributions. Will talk to an accountant later, but perhaps one of the knowledgable blog dogs here might know the deal.

#94 Utopia on 05.24.11 at 10:52 am

#79 alex on 05.24.11 at 9:23 am

“royal bank warns of painful correction. Where can I read more about this story”?
OK, that’s funny Alex. I am glad I am not the only one who is usually out to lunch with searches. Try this (it will work).

Google “royal bank warns of painful correction”

#95 cynthia on 05.24.11 at 11:03 am

Dear Garth:

I can’t help make a comment about “people wanting it all”.

Those who want it all are not “the people”.

Have you forgotten that banks blew themselves up, in the US, the UK, Ireland, Iceland, Germany, the Netherlands, Belgium, Spain and also Italy and I forgot a few others, like Greece, Switzerland.

That governments now need to find the money to remain solvent, is called austerity.

#96 April on 05.24.11 at 11:04 am

#79 Alex
That story was broadcast on one of the local newscasts on May 20th so you may find it in the back copies at the library. .

#97 Fractional Reserve on 05.24.11 at 11:27 am

An observation on the state of real estate affairs in the US from the President of the Old Speculators Club, Jack Tierney.

“U.S. residential real estate will never come back to its one-time prominence. And it’s not strictly a matter of over supply due to improvident building and financing. The great middle class, prosperity’s sin qua non, is on its death bed and won’t be resurrected. Great jobs at great pay for the blue collar class are gone and won’t return. “We think and they sweat” is a cute idea but not enough individuals think to support a burgeoning economy. There are plenty who sweat but at wages that dim any hope of a return to multi-TVs, multi-cars, multi-6-packs, and multi-vacations at the shore.”

#98 PEI Red on 05.24.11 at 11:29 am

#65 Kevin on 05.24.11 at 8:03 am

Pretty simple, when you try and pay back however many billion borrowed to bail us out of economic armageddon, you have to increase cash flow (taxes) &/or decrease spending to pay it all back. It’s not like the money was just sitting in a vault somewhere waiting for something to do. I don’t know where Harper got the money from, I’m not that well educated on monetary policy, but he borrowed from Peter to pay Paul.

Welcome to budgeting 101, if you can figure this out you’ll have a solid financial future. (Spend less than you make…that’s the secret to amassing wealth.)

#99 BrianT on 05.24.11 at 11:33 am

Kunstler is good today-the major problem facing the USA is Armstrong and his EPO use-meanwhile the grifters burn down the house

#100 Cato on 05.24.11 at 11:41 am

Greece and Ireland are just the prelude. No democratic society will accept austerity willingly. The mob will simply usurp any austerity measures and hand power to whoever tells rabble want they want to hear. Voters of Spain have spoken – solution to failures of socialism is … even more socialism. Buy a few more years on backs of next generation, and hopefully pass mess to them. Scary thought, we could be witnessing the fatal flaw in democracy.

Human nature is predictable. Western governments won’t willingly bring down monetary tightening necessary to avert crisis. Sure, rates might rise slightly to appease bond markets but they won’t rise fast enough to quell inflation.

Bond markets are the ultimate authority – they destroy governments and its what those who hold power fear above all else. When Keynes came along the patted themselves on backs, thinking they had finally found a way to escape accountability and do as they please. World went to fiat, debt could then be expanded at will and passed to future generations.

On personal level we see end result of human behaviour everyday. We pass people living lifestyles they cannot afford, financed by a system of debt that never should have existed. Same can be said of societies – none are going to march into austerity willingly. Unlike individuals, under fiat system countries never actually go bankrupt. They just print & finance themselves buying their own debt. We’ll see defaults in the Eurozone because countries like Greece no longer have control over currency (and hence ability to print). The US is a different story, it can monetize itself into a currency crisis and it seems fully intent in doing so.

This is the time where investment strategies of boomers & younger generation need to diverge. When we finally get through this economic transition stage should finally be set for greatest equity bull market in history. The trick is preserving wealth between then and now against governments who will do anything to finance lifestyle society feels entitled to. This will mean unpredictable taxation. So while I own personal residence, I don’t trust holding easily taxed assets like RE as investments. Boomers can hold them,Gen X & Y should not. We need to keep wealth mobile & be prepared to move capital to greener pastures if necessary when time comes.

#101 vreaa on 05.24.11 at 11:45 am

Two amazing examples of Vancouver RE price action:

Dunbar Sale Example –
5,089sqft SFH; 55×165 lot; $5.18M

South Granville SFH Example –
Price Rise Of 120% In Two Years

#102 SMOKING MAN on 05.24.11 at 11:46 am

#85 disciple on 05.24.11 at 10:02 am

I know all about fractional reserve banking and how money works.
Put 10 bucks in the bank and they can make out of thin air 100 and lend it. The guy who gets your 100 puts it in his bank and his bank can no lend out 1000 made out of thin air and so on.

The true value in any economy is labour, withhold it in mass and billionaire could not get his grass cut. People do have power but people are stupid, our education system insures that. That’s why people like me take advantage of stupid people, and hey they love for it.

It’s a beautiful thing. Anyone who is nice to you want’s something form you.

Now as far as the real estate and bank ponzy scheme goes it still has lots of room in Canada. I agree whole heartedly and most of Garths post. But timing is everything, it aint time just yet.

Crunch time will be 2014

Remember I have a crystal ball :)

#103 SMOKING MAN on 05.24.11 at 11:53 am

2 HouseBuster on 05.23.11 at 9:29 pm
said “The fat lady is singing.”

She is but because of Europe, the pending demize of the US dollar, and scared rich people in the usa, buying up CDN bonds

The BOND SHARK is going to eat her in one bight
Hence mortgage rates here will drop like lead in Jupiter’s atmosphere, and we will need to find a new fat lady.
for 2014

#104 claudia on 05.24.11 at 11:55 am

About the people in Europe who want it all, “Cheap shot, Garth”.

I rather agree with Paul Krugman of the New York Times:

“So it was the bad judgment of the elite, not the greediness of the common man, that caused America’s deficit. And much the same is true of the European crisis.

Needless to say, that’s not what you hear from European policy makers. The official story in Europe these days is that governments of troubled nations catered too much to the masses, promising too much to voters while collecting too little in taxes. And that is, to be fair, a reasonably accurate story for Greece. But it’s not at all what happened in Ireland and Spain, both of which had low debt and budget surpluses on the eve of the crisis.

The real story of Europe’s crisis is that leaders created a single currency, the euro, without creating the institutions that were needed to cope with booms and busts within the euro zone. And the drive for a single European currency was the ultimate top-down project, an elite vision imposed on highly reluctant voters.

Does any of this matter? Why should we be concerned about the effort to shift the blame for bad policies onto the general public?

One answer is simple accountability”

For the whole article:

#105 RobRob on 05.24.11 at 11:59 am

I’m sure relieved to know you are going to continue on with your good work. God only knows how many financial blunders you have helped folks avert being drawn into. Well done, Garth Turner

#106 Mr Buyer on 05.24.11 at 12:00 pm

In a previous post I said the national tax rate in Japan was previously 5% and recently moved up to 10%. I should clarify that is the sales tax (not income tax). The income tax rates here are very low relatively speaking as well. We have kids and a home based biz so we fair very very well at tax time. The income tax system in graduated as it is in Canada and is quite hefty at the upper end of the scale. Canada and Japan have a tax and pension agreement of some sort. I have a Japanese accountant that lived in Canada for a few years. From what I understand, if it is declared in one country it will not be taxed in the other but I am not an expert. Rule of thumb is to declare everything in the country you reside in at the time (consult an expert really). As for permanent residency in Japan it is not automatic after 5 years (not after 8 or 9 in some cases). I was informed that I would be recieving a permanent residence visa next when I obtained my last married visa. I still had to obtain married visas for 3 years after I got married.

#107 vreaa on 05.24.11 at 12:00 pm

It’s rough for both employers AND employees in over-expensive Vancouver:

“Trying to hire for my IT based business was impossible in Vancouver, we have given up. People wanted ridiculous salaries, just to keep their heads above water. We can’t make the numbers work. We have set up shop in Halifax.”

“A few months ago I applied for a pretty advanced software engineering position at a local company. I realized that if a potential employer here asks you why you live in Vancouver they are just setting you up to expect a crap pay.”

#108 Hoof - Hearted on 05.24.11 at 12:07 pm

I guess BPOE and CrowdedElevatorFartz did get to Vegas.

I wish them well on their honeymoon.

PS should we all chip in an send them something….any ideas …..AirWick and Wall Street Journal?

#109 Hoof - Hearted on 05.24.11 at 12:15 pm

#43 Young Old Fart

IMHO….the banks di squezze blood out of a stone..GLOBALLY…the golden goose is no more.

They did what NO army could have, it was like a guerrilla/terrorist attack, the difference is our own Gov’ts acted as a collective Judas.

Now, we will see Gov’ts topple(Greece..Italy..Ireland) etc.

The economic hitmen have done their job in 3rd world countries…now the rest of the world is their oyster.

#110 Cellar Dwellar on 05.24.11 at 12:15 pm

@#59 Bigrider

Glad you mentioned that besides being the Kings of House humping, Italians are also the worst womanizers on the planet. Greeks a close second.”
Hmmmmm. You also forgot the Portugese, Spain and France.
Wow ! womanizers and (excluding France for now)failing economies…..Perhaps their “priorities” are the problem?
Is it a coincidence ? I think NOT !

#111 Daystar on 05.24.11 at 12:23 pm

#70 Mr Buyer on 05.24.11 at 8:40 am

Interesting perspective on Japan. I like it. However… they are an aging population (I think the average age is 45) and the size of their public debt cannot be understated. The thing to really note about Japan is that they are going to run some negative GDP quarters and the next one, I would be surprised if its not double digits I really would. For every story of a factory getting back online producing chips in a week, there’s one of a factory reduced to rubble, obviously unlikely to produce again.

Things are hardly well there and while one talks about 30% (or less) of their debt bonds being owned by foreigners, its 30% (or less, I cribbed 30% from a news link, but one never knows with the accuracy of media these days) of an estimated 225% debt to GDP, clocking them into an estimated 67% foreign owned public debt to GDP range should Japan’s debt be 30% foreign owned. Readers, thats the same scenario as Italy. The U.S. has a better intergovernmental Foreign held debt to GDP ratio, in the low 50′s which for some reason is enough to send gold to the moon.

The Japanese are resilient, they’ll get through it, yeah, of course. But lets remember that while they have a history of dramatic recoveries from ashes, Japan has never been so large an economy as it is today meaning their drama effects the world like never before and there is simply no escape from 20 years of bad real estate political policies fuelling a monsterous RE bubble which they wouldn’t allow to correct through at least 15 long years of central bank rate policies of at or near zero and I believe this is the event that has just now just brought it full circle to haunt them.

Japan is now a nation that is going to be forced to borrow from foreigners like never before, for reasons that should be clear. They need to rebuild, and they will be running trade deficits, quite possibly through a double digit GDP quarterly. Do readers here really think their debt burden risk won’t be priced in with higher rates, and what will the causal effect be?

Thats a great deal of debt to raise rates on…

#112 vanrant on 05.24.11 at 12:24 pm

“9 million (BC Medical Care Cards) cards in circulation for a population of 4.5 million”

Heaven help us and our medical system! Rid of duel citizenship.

#113 Cellar Dwellar on 05.24.11 at 12:28 pm

@ #107 Hoof
HAH ! Well …. what happens in Vegas stays in Vegas. Lots of elevators there :)

#114 Cellar Dwellar on 05.24.11 at 12:30 pm

@#107 Hoof.
Instead of an Airwick and the Wall St Journal.
How about a Frebreeze candle and the Eatons Catalogue ?

#115 Mr. Reality on 05.24.11 at 12:46 pm

#89 Daisy Mae on 05.24.11 at 10:22 am
Well, I’m learning alot following this blog. I can’t convince family and friends, however. Altho’ my son is now sitting up and paying attention. It can be, without a doubt, very confusing.

I look at my aging dishwasher and realize it’ll need to be replaced eventually — perhaps sooner than later. I no longer look at the replacement as an ‘investment’ of sorts — such as ‘new and improved’ — but rather, as just an expense. My neighbours are renovating their interiors — ripping out the carpeting and replacing it with hardwood, for example. Re-doing their landscaping, spending copious amounts of money on labor and materials. Cashing out GIC’s to pay down their mortgages….and I wonder. (sigh)

I hear you. It’s as if people don’t think and just do. And when their actions cause financial collapse they blame somebody else…….

They are called sheeple. They do not think, they follow blind.

Mr. R.

#116 AG Sage on 05.24.11 at 12:53 pm

>#89 Daisy Mae on 05.24.11 at 10:22 am

We actually sat down and made a capital equipment spreadsheet, put each major appliance/home computer/car/furnace/ac/etc in a column, put in the date of service (this is interesting to go dig up) the estimated cost to replace it now, researched the estimated lifespan, then wrote a little program to plunk the estimated future replacement cost into the right vertical date line below in the same column. Added up the lines horizontally for how much we needed in cash savings each year to cover everything. We thought we were sitting pretty until we did this. It was pretty sobering.

Budgeting expecting to get lucky, isn’t budgetting. It’s wishful thinking.

The question we haven’t yet answered for ourselves is this money part of the recommended 6months income to have on hand or not? My gut says no, or at most only half of it can be counted as it.

#117 City Slicker on 05.24.11 at 1:30 pm

“The best way through is not hiding in cash or silver bricks in your garage”

Garth does this mean you’ve turned into a gold bug? I notice you didn’t say gold bricks. Gold is showing great strength as usual, and as far as waiting to see if QE2 will be ending June, who cares the damage is already been done.
And those countries you mention will only avoid/delay default if they keep printing. This won’t end well no matter how you look at it, grab some gold!

#118 west coaster on 05.24.11 at 2:06 pm

garth do you have any advise on a place to open a self directed tfsa i have been to the bank and want to get higher returns than the savings account they are offering however they want 29 bucks a trade plus a fee to transfer to another institution does have anybody have advise on a good place to have a self directed tfsa?

#119 disciple on 05.24.11 at 2:09 pm

Gold is said to be a hedge against inflation. Let me shoot that one down with some common sense: So, after the hyper-inflation, your 1oz is now worth 20,000 fiat fancy-printed paper rectangles or more. Assuming someone has 20,000 paper rectangles, who is going to give you 20,000 fiat fancy-printed paper rectangles in whatever denomination? Wouldn’t they rather want a place to live? Or a loaf of bread? Fools!

#120 Kevin on 05.24.11 at 2:13 pm

@Smoking Man (#102):

“I know all about fractional reserve banking and how money works. Put 10 bucks in the bank and they can make out of thin air 100 and lend it.”

LOL! That’s hilarious! Sorry to burst your bubble, but no, you clearly have no idea how fractional reserve banking works.

Banks cannot create money “out of thin air.” Fractional Reserve banking means if you put $10 in the bank, they can lend out $9 of it to other people (at n% interest), while still telling you you have $10 in the bank. THAT is “Fractional Reserve” banking. No money is created out of thin air, it’s just an accounting trick.

#121 Vancouver_Bear on 05.24.11 at 2:15 pm

#7 Vancity on 05.23.11 at 9:51 pm

Who told you that everybody wants to live in Vancouver…when I travelled in USA, Asia and Europe majority of ppl had no idea where Vancouver is….some never heard of such city….

#122 france on 05.24.11 at 2:17 pm

#10 and #14 Crazy-

You seem so scared……

#123 Vancouver_Bear on 05.24.11 at 2:18 pm

#10 Crazy on 05.23.11 at 10:01 pm

If money become worthless… out! It means inflation and double digit interest rates…..educate yourself before posting…..

#124 TheBigLebowski on 05.24.11 at 2:20 pm

As I have mentioned for years . There will be a meeting similar to the Louvre Accord of 1987, and the Plaza Accord of 1985. All countries will get together and revalue and devalue currencies against one another and default on at least 2/3 of their debt. A new reserve currency will be introduced, possibly the U.S dollar once again, but for this to happen it would have to be backed by something, not just fiat. If you can accept that this is coming, and with Greece, Italy, Spain, Portugal, making defaults more apparent, its not so far fetched to mention this now. The next step a person must take is to protect what they have from such a global reset.

#125 Devore on 05.24.11 at 2:23 pm

#100 Cato

If there is one thing we have learned in the last 100 years, is that in a democratic/socialist/keynesian society (but I repeat myself), once a course of action is chosen, if it does not work, the only remedy is to stay the course and increase speed. In other words, if something fails, it’s only because we’re not spending enough money on it fast enough.

#126 france on 05.24.11 at 2:25 pm

#19 Utopia-

“For what its worth, a high interest rate policy today would definitely kill the American empire as debt levels are just too excessive. But that was then and this is now.”

Fiscal responsibility should be taught in grade school and is every citizen’s responsibility. If some need to be forced into it, so be it. The screw of rising rates needs to start turning now- people have already been warned repeatedly.

#127 TheBigLebowski on 05.24.11 at 2:25 pm

118 disciple
Yes, a loaf of bread and a place to live in the worst case scenario will take precedence short term. But once a reset has taken place, a return to some sort of transactional store of wealth always rises to the surface, and 6,000 years of history tells us gold has stood the test of many collapses and renaissance.

#128 VICTORIA TEA PARTY on 05.24.11 at 2:31 pm


Right on, Garth, and to many of your posters, for your thoughts.


I hope the Harperites are taking extra care for whatever austerity plans it may have in what will have to be a major budget rejig.

Presented the right way an austerity plan will work, namely, to inflict financial pain on one and all.

It is DEGREE of cuts that will determine whether the public response will be one of co-operation or civil disobedience.

This is an important economic juncture in which we find ourselves. We have to be able to fend for ourselves, keeping in mind that we are a trading nation first and foremost. This will be tough, so Mssrs. Harper and F. have but one chance to get the new government’s four year economic agenda just right for the times.

It’ll be a tough act. Look at our trading partners: the US, Europe, Japan and China. What they have in common is deteriorating growth prospects, to put it gently. For some, the future seems catastrophic. Speaking of which…


A little history now about this latest Icelandic volcanic eruption. It comes from one of the country’s most active and, history shows, most dangerous:

WIKIPEDIA has the details:

“The (Laki volcanic) system (associated with the Grímsvötn volcano that is now erupting) erupted over an 8 month period during 1783-1784 from the (nearby) Laki fissure and the adjoining Grímsvötn volcano, pouring out an estimated 14 km3 (3.4 cu mi) of basalt lava and clouds of poisonous hydrofluoric acid/sulfur-dioxide compounds that killed over 50% of Iceland’s livestock population, leading to famine which killed approximately 25% of the population…

The Laki eruption and its aftermath has been estimated to have killed over six million people[5] globally, making it the deadliest volcanic eruption in historical times. The drop in temperatures, due to the sulfuric dioxide gases spewed into the northern hemisphere, caused crop failures in Europe, droughts in India, and Japan’s worst famine.”

As well, the French Revolution of 1789 is thought to have been a by-product of this two-year ordeal.

Wikipedia reports on the latest, 2011, eruption:

“On 21 May 2011 at 19:25 UTC, an eruption began, with 12 km (7 mi) high plumes accompanied by multiple earthquakes…The ash cloud from the eruption rose to 20 km (12 mi), and is so far 10 times larger than the 2004 eruption, and the strongest in Grímsvötn for 100 years…
During 22 May the ash plume fell to around 10 km altitude, rising occasionally to 15 km…On 23 May, the eruption was releasing about 2000 tons of ash per second, totalling 120 million tons in the first 48 hours…The 2011 eruption of thus qualified as 4 (VEI4) on the Volcanic Explosivity Index (VEI), releasing more ash in the first 48 hours than Eyjafjallajökull released during its entire 2010 eruption.”

While this latest eruption takes its course, the Eurocrats in Brussels, the weather-types in Britain and the white-knucklers who run Europe’s airlines, are all busy downplaying this eruption. Listening to them is like hearing the smooth prattle of a snakeoil sales force. It’s nonsense.

Meanwhile thousands of passengers await home-bound flights from airports in the UK and, soon, Northern Europe.

This story will quickly become an economic disaster for an already weakened EU region should the winds blow to the south and the ash keeps pumping.

#129 disciple on 05.24.11 at 2:32 pm

“Investing” is thinking about the future. But, who’s future? Yours alone? Do you live on an island? Your future is in a hole 6 feet down and 15K’s of funeral fees later. Make your world better NOW. Invest in various forms of labour and technology that will help our children learn from our mistakes, even if some of us haven’t. I have personally removed all of my investments away from all derivative, credit and equity risk, and put it in consumer goods, industrial and communications and technology on the International scene. Since North Americans have embraced the easy money of the financial parasite class, the real wealth potential now resides in the emerging markets.

#130 BrianT on 05.24.11 at 2:39 pm

#111Van-The reason for this rampant fraud is that everyone in the system benefits-the only important thing is to keep as much of the info from reaching the taxpayer as possible.

#131 BrianT on 05.24.11 at 2:44 pm

#110Day-You are missing the fact that Japan has huge foreign reserves that will be sold when needed. Who is Japan supposed to sell their US garbage to-The Bank of Canada can’t buy all of it, but we will try.

#132 kilby on 05.24.11 at 2:49 pm

Today…What does this mean???

Dear Mr. Kilby,

The Bank of Canada targets a low and stable inflation rate of 2 per cent. Low inflation means lower interest rates.

Sustained low inflation is self-reinforcing. If businesses and individuals are confident that inflation is under control in the long term, they do not react as quickly to short-term price pressures by
seeking to raise prices and wages. This helps to keep inflation low.

When inflation is low, consumers and businesses are better able to make long-range plans because they know that the purchasing power of their money will hold and will not be steadily eroded year after year.

While it is difficult to predict where interest rates will be in the future, the Bank stated in its April Monetary Policy Report that the current projection includes a gradual reduction in monetary stimulus over the projection horizon, consistent with achieving the inflation target.

Louise Rickey
Public Information Office/Service de l’information publique
Communications Department/Département des Communications
Bank of Canada/Banque du Canada
234 Wellington, Ottawa, On, K1A 0G9
[email protected]
T: 1 800 303-1282
F: 613 782-7713

#133 TS on 05.24.11 at 2:58 pm–condos-condos-everywhere-sales-reach-record-in-april

#134 disciple on 05.24.11 at 3:00 pm

Overpopulation is a popular myth. Peak Oil is also a myth reaching its peak just before the US opens up Alaska and the Rockies reserves. Lesson #6 perhaps? Hmmm….A house made with $50,000 worth of materials said to be worth $600,000 is also a popular myth.

#135 jess on 05.24.11 at 3:01 pm

nostra…did you watch the report on cbc regarding tamiflu?
The Basel rule is part of an overhaul of bank capital and liquidity standards designed to prevent a repeat of the financial crisis. Investment banks’ extensive use of borrowed funds was blamed by Federal Reserve Chairman Ben S. Bernanke for contributing to the financial crisis.

Leverage Disclosures

#136 disciple on 05.24.11 at 3:04 pm

#119 Kevin…

You won’t be laughing when you learn the truth. It’s not $9 but $90. Smoking Man is absolutely correct. Perhaps now, you will educate yourself and see from whence the fraud is perpetuated…if you have any other questions, I’m here to help…

#137 Vancouver_Bear on 05.24.11 at 3:33 pm

#32 49 on 05.23.11 at 11:27 pm


#138 this is wonderland on 05.24.11 at 3:51 pm

62 jerry
I wish we had something like Zillow here in Canada. It was a great site for capturing actual “selling’ prices on USA homes.
Does anyone know what it take to get a sight like this started. Would you have to have a real estate licence to compile the information or would there be other ways around extracting actual selling prices.

#139 Hoof - Hearted on 05.24.11 at 3:59 pm

#119 Kevin

You are correct…the banks money doesn’t come out of thin air.

It’s pulled out of their arses covered in vaseline and gerbil droppings.

#140 Hoof - Hearted on 05.24.11 at 4:03 pm

Heed the advice of another blogger .

The Tsunami in Japan will create an economic ripple effect…more latent but looming….ie supply shortages…..that will affect the bottom lines of several large corporations..likely in Q3 and Q4.

#141 jess on 05.24.11 at 4:05 pm

Fiscal responsibility should be taught in grade school and is every citizen’s responsibility”…

how does one account for the unaccounted system

…”when instantaneous transfers of money become a reality, there will be no time interval between
purchase and supply making it difficult to establish
an audit trail of the transaction.”

Private jail bosses ‘putting profits offshore to avoid tax’
by Laurie Hanna, Daily Mirror 23/05/2011

PRIVATE jail bosses paid from the public purse are putting profits offshore to avoid tax, MPs will be told this week.

Firms making millions out of the privatisation of British justice are not paying their due, says a Prison Officers’ Association report.

Taxpayers pick up the bills for land and buildings of these jails. But the people running them have parent companies which the POA has traced to tax havens such as Jersey and investment banks.

The report says: “Billions of pounds of taxpayers’ money is being diverted from essential public service provision that could benefit society as a whole.

Read more:

#142 HouseBuster on 05.24.11 at 4:05 pm

The BOND SHARK is going to eat her in one bight
Hence mortgage rates here will drop like lead in Jupiter’s atmosphere, and we will need to find a new fat lady.
for 2014
Not even rates at 0% will stop this housing train wreck.

#143 this is wonderland on 05.24.11 at 4:12 pm

Hi Garth,

I know that you have been asked this a few dozen times but can you please comment on land prices.
I am specifically wondering about currant land prices around Nobelton, Schomberg, Mt Albert and WhitChurch-Stouffville area. Will there be a correction or is this just a pipe dream.


#144 Bobby on 05.24.11 at 4:17 pm

I’m looking for a condo or townhouse in Ottawa. Lots and lots for sale, and many are empty. No rush to buy as I want to wait until the government unveils it’s first budget as a majority.

No doubt, there will be a downsizing of the bloated civil service so with that, a glut of Ottawa properties coming for sale.

It’s going to get ugly out there.

#145 BPOE in Vegas xoxoxo on 05.24.11 at 4:23 pm


The Volcano is good news…

Its actually a crew digging a tunnel through from China.
This will allow more HAM $$$ and HAM-sters to get their investments here and keep RE prices high.

Good times ahead….
(PS Can ya lend me a few bucks for the slots…)

#146 jess on 05.24.11 at 4:28 pm

The success of investment in China continues to attract large volumes of capital. However, market reforms and generous incentives for FDI, including tax concessions, preferential terms for leasing of land and property, and guarantees for repatriation of foreign exchange, have also
encouraged Chinese investors to move money offshore and then bring it back to China disguised as foreign investment or “round-tripping.”83 This is an issue of great concern for China’s MOFCOM, the State Administration of Foreign Exchange, and the State Administration of Taxation, since even by conservative estimates as much as a quarter of China’s official FDI is actually masked as Chinese funds coming home to take advantage of preferential tax and other government policies.84 Estimation of actual volumes of round-tripping is very difficult, largely because investors who recycle their funds in this manner are unlikely to report their activities to the authorities.

Naomi Rovnick in Road Town, Tortola
May 19, 2011
Wealthy mainlanders are increasingly sending their offshore income home via the British Virgin Islands to avoid paying tax in a trend that has entrenched the Caribbean haven as China’s second-biggest source of foreign investment, experts say.
..But Beijing wants to clamp down on the British Virgin Islands shielding a staggering 900,000 companies corporations.

#147 Mr. Plow on 05.24.11 at 4:50 pm

#133 disciple

$50,000 in materials! HA!

If you can build a house for that, I would suggest getting into the home building business.

I will back you if you are short on cash, but I need to see that you can build for that cost first.

My email:

[email protected]

#148 ballingsford on 05.24.11 at 4:54 pm

Glad to hear that you aren’t leaving Garth! My spouse has been saying we should buy this house or this house and I keep saying that we are in a bubble and the prices will come down. I say to her “Would you just read Garth’s blog for 2 weeks and let me know if you still think we should buy?”. So far, she hasn’t taken me up on it.

Just his past weekend as we drove by them, she said, “I like this home.” and further on she said “I like this home. Should we buy?”. All I could do was smile and say “I like those homes too but they are a bit expensive. The bubble burst is coming”. They were both over the $550,000 price here in Ottawa.

I tried again to see if she would read your blog for 2 weeks. No taker yet.

Anyway Garth, I haven’t given up hope on her reading your blog! If you quit, then she’ll never get the chance to understand where I’m coming from.

I would only accept your resignation from this blog if you got back into politics and helped fix the mess we are in! We’ll need to wait another 4 years for that to happen though, I guess.

Garth for Finance Minister, Go Garth Go!

#149 Devore on 05.24.11 at 4:55 pm

#131 kilby

When inflation is low, consumers and businesses are better able to make long-range plans because they know that the purchasing power of their money will hold and will not be steadily eroded year after year.

This might even be correct, if interest rates were not artificially set. Today interest rates are low not because of consumer and business preferences (time value of money) but because the market is flooded with money, making it cheap. This money will make its way into where it can get into easiest, for highest return, and that is not into capital projects, but rather into speculation and high leverage in commodities and equities.

Interest rates in the free market, for example business loans and private lending, are not low, and availability of credit very tight. Only government sponsored credit markets are enjoying low rates.

#150 Junius on 05.24.11 at 5:05 pm

#133 disciple,

Oil is a finite resource. You can question the timing of Peak Oil but you cannot declare it to be fiction.

Have your read Jeff Rubin’s book, “Your World is About to Get a Whole Lot Smaller.” Might be a good start.

#151 Josh on 05.24.11 at 5:11 pm

#117 west coaster

check out questrade’s tfsa:

#152 kilby on 05.24.11 at 5:15 pm

#148 Devore. That was from Mark Carney’s office this morning, I thought it hinted at no increase on the 31st……

#153 Junius on 05.24.11 at 5:15 pm

#117 Westcoaster,

I like Qtrade for a self directed TFSA account.

#154 Coho on 05.24.11 at 5:32 pm

Canada had an approximately 100 Billion dollar back-door bailout to the banks in 2008-2009. The media did not tell you, did they? That was your money, your future labour and prosperity being handed over to the private banking families…

Yep…bailouts for the big fish and austerity for the little fish. We pay so others can play.

The triple reactor core meltdown at the Fukushima Nuclear Plant is projected to cost $200 billion. The Nuclear Power Industry is only obligated to kick in $10 billion. This is the total amount of “insurance money” being paid out. Guess who pays for the remainder. Correct. It is us cattle. Say “Moo”.

#155 smoking man on 05.24.11 at 5:48 pm

OCD just reported. Canadians are number one in wages housing affordability quaility of life. Ah ha bubble heads. The property vergins will eat this up.

what is worce than being dyslexic. Answer. Being dyslexic hand half blind trying to post via a blackberry where you can’t see what you type and no spell checker

#156 Bill Grable on 05.24.11 at 6:00 pm

I think people are quick to bury MP’s in misplaced invective. You try maintaining two homes, and living on a Jet, flying home to massage the faithful, and if you are lucky, see the loved ones. That’s not counting making the Whip happy, so, believe me – it sounds glam. It’s damn tough – albeit with some perks, like free dry cleaning, and keys to Garth’s secret bunker under the Speaker’s Chair.

#157 Ken on 05.24.11 at 6:17 pm


Just want to say that your blog is compulsive reading. I dont agree with everything you say but you offer an excellent perspective on the whole housing market. We have been in Vancouver several years now and never wanted to buy simply because we felt it was to expensive etc. Also fair to say that some people have been very condascending about fact we are renting. But we followed our instincts. I worked and my wife stayed at home to raise our son which has been a rewarding experience for them both. We could have both been working, leveraged to the limit owning a house but we chose not to. Your insight, perspective, comment, analysis and honesty have saved a great many people from financial oblivion.

#158 eltabarnacos on 05.24.11 at 6:18 pm

who is going to give you 20,000 fiat fancy-printed paper rectangles in whatever denomination? Wouldn’t they rather want a place to live? Or a loaf of bread? Fools!


Well lets say you are a landlord, would you accept toilet paper (20 000 rectangles) from a renter or an ounce of real physical Gold??

In Zimbabwe you can only buy a loaf of bread if you HAVE GOLD!!! Nothing else can buy you bread! Put that in your pipe!

Utah just legalized Gold and Silver as currency, Mexico bought a couple tons of Gold, China buys Gold and silver and tells their citizens to stack up toO!! (they are over a billion in China, right?) , Greece thinks about returning to Gold and silver money, Lybia has minted its own Gold coins for currency where they pay 0.17$ for a liter of Gas, and there is so much more to learn, so much more is coming!!!

#159 eltabarnacos on 05.24.11 at 6:23 pm

if you put $10 in the bank, they can lend out $9 of it to other people (at n% interest), while still telling you you have $10 in the bank. THAT is “Fractional Reserve” banking. No money is created out of thin air, it’s just an accounting trick.

I think that s wrong, I think if you put 10$ in the bank, the bank loans 100$ instead.
There is a 10 to 1 leverage

#160 TurnerNation on 05.24.11 at 6:48 pm

An update for this petulant weblog – a REIT that cares…?

Boardwalk Real Estate Investment Trust will provide 160 rental units in partnership with the Alberta government for those directly displaced by the Slave Lake fire.

The apartments, which are located in Edmonton, will be discounted approximately $1,800 per rental unit (on an annualized basis), a significant reduction to the market rental rate in Edmonton, and will be provided with flexible rental terms.

“We are pleased to work directly with both Alberta Housing and Capital Region Housing Corp. to contribute housing for victims who have lost their homes in Slave Lake as a result of the unimaginable tragedy that has taken place,” said Sam Kolias, chairman and chief executive officer of Boardwalk. “In conjunction with the extraordinary efforts already provided by the Alberta government, we are pleased to support their efforts with the contribution of 160 housing units available immediately in both Edmonton and Grande Prairie.” Mr. Kolias also added, “We commend the Province of Alberta for their prompt response to this unprecedented emergency situation.”

#161 Snowman on 05.24.11 at 7:03 pm

#39 Alex Musulin

“The demographics of Canada speak for themselves and now that the baby boomers are starting to retire, they will find it difficult to find the “greater fool”.

It may be hard for them to find the “greater fool”, but maybe some of them don’t need to find one, maybe they ain’t as strapped for cash as some may suggest.

Here is what may turn out to be doom and gloomer’s worst nightmare:

“Over the last decade, many studies have attempted to quantify the magnitude of the wealth that will transfer between generations. In Canada, it has been estimated that Boomers stand to inherit
approximately $1 trillion over the next twenty years”

Scared yet?

#162 disciple on 05.24.11 at 7:05 pm

Let me be crystal clear, oil is abiotic, meaning that it DOES NOT originate from plankton or biological matter. I have read enough books on the subject, thank you very much. I suggest you read subject material that is not written by economists who are still in the banking business. Try googling the hydrocarbon composition of our the other planets and moons to get a taste of what you haven’t been told. Were there dinosaurs on Titan? (There were none here on Earth, but that’s too advanced a topic for you at this point – I’m patient).

#163 Mr Buyer on 05.24.11 at 7:09 pm

Here in Japan all car manufacturers surpassed 50% production maybe 10 days ago and that number is increasing. It will not be long. 50% of the robots on the entire earth are in Japan and that number is climbing.
Japan’s population is expected to decrease to about 80 million by 2050 (they currently feed 60million with their own production). All the reactors are never running all at once. The factories are the first to get power even during rolling black outs. There are two more reactors being built outside our city and another in the planning stage. There are electric car charging areas all around our little town and they are pouring large amounts of cash into the hydrogen economy. They have and continue to embrace nuclear power and do so as they have no choice (energy and resources are their soft spots). I am left wondering if Japan will be able to continue securing the natural resources necessary to run their factories. The end of the age of oil is not a myth by any stretch of the imagination as well as the population explosion (4.5 billion when I was a child, 2 billion more in my lifetime. This growth rate will never occur again on the earth. We reached peak oil within 150 years or so and the present rate of consumption will not make it a bell curve). Economies based upon continued growth will have to be modified at some point over the next 20 to 40 years. I have a feeling Japan is already preparing for these eventualities, I just wish we were as well. It seems who ever arrives at the next destination first is usually in the best shape in the long run. The Japanese know this in spades.

#164 Cellar Dwellar on 05.24.11 at 7:15 pm

@ #133 Disciple/
50k worth of Materials for a 400k house?

Are you INSANE!?!?!?
When was the last time you bought a sheet of plywood?
Or a stud? or a breaker? or 8ft of 1/2 inch copper pipe?
50k worth of materials MIGHT get you the concrete foundation. drain tiles, sump, and the house barely framed…….
What do you use for toilets? Home Depot buckets?

#165 Mikey the Realtor on 05.24.11 at 7:16 pm

It’s not show time yet, I see that you are finally coming around and admitting to yourself and the blog pups that low rates are staying put much longer.

Sales may be slowing but prices are not, with rates staying low prices will remain high even with sales pulling back. Expect 2016-17 before prices are pulled back enough for most of the pups to deem satisfactory.

#166 Cellar Dwellar on 05.24.11 at 7:18 pm

BPOE in VEGAS xoxoxox

Where did you bury CrowdedElevatorFartz?
In the desert?
Or in the backyard of the house you bought for 10 cents on the dollar?
Real estate ALWAYS goes up up up

#167 Junius on 05.24.11 at 7:25 pm

#148 Devore,

I agree with you on rates. It amazes me the number of people come onto this Blog everyday and announce that rates will not be going up. Of course they completely fail to come to grips with why they are so low. If they understood that they can only stay down as long as gov’ts are prepared to keep buying each others bonds and going further into debt. This cannot continue for much longer.

The end of this nonsense is not far away. It will not happen next week or next month but it could happen later this year. As we begin to return to a “real” or “free” market in bonds rates will rise. They could rise much faster than some people predict. Furthermore once they do they could rise for many years to come.

#168 Daisy Mae on 05.24.11 at 7:32 pm

“Reducing amortizations to 25 years and restricting downpayments to a minimum 20% will all but eliminimate the entire first time homebuyer market…”

If it does, the first time buyers are obviously not financially prepared to purchase.

The 25-year amortization has been around for many, many years. And it worked.

#169 Nostradamus Le Mad Vlad on 05.24.11 at 7:35 pm

#130 BrianT and #139 Hoof – Hearted — Interesting posts re: Japan. Leap 2020 may be correct in stating the second half of 2011 is about to get a whole lot nastier.

Japan could demand the US buy back their debt holdings, China may offload 2/3 of theirs and the world will end up going the way of Harold “Rapture” Wotshisname. Don’t forget austerity — coming soon to a country near us (ours)!

All of a sudden, I’m beginning to feel a bit Greek!

#134 jess — “nostra…did you watch the report on cbc regarding tamiflu?”

Hi Jess. No, I didn’t see it as I hardly watch the boob tube anymore but would these be the links — Tamiflu Two clips.
3:06 clip Church of End Times goes with . . . Sssshhhh . . . U-No-Whoo!

Austerity American Style “This may well be what Obama was hoping you would not notice while he dangled a dead “Bin Laden” front of you all. “Austerity” is gov-speak for taking more money from you.” Next stop — Kannaduhhh!

Rigging Elections How To Fool People All Of The Time (use Diebold!).

Marmite a.k.a. Vegemite down under is now illegal in Denmark. Too healthy.

Broke WaMu becomes five billion dollar tax break for hedge funds. Hey, I’ve got a hedge!

Ahmadinejade He is basically right, but no one wants to admit this.

Now it is clear why dubya called the constitution “. . . just another goddamned piece of paper.”

Legalize Drugs as Holland and Portugal have done, and crime rates drop.

Russian Support for Palestine.

More Utahns canceling 401Ks. Due to PMs being made legal tender?

Globalization leads to unsanitary food practices.

Energy Shortages Spreading “All that money wasted on wars, Israel, and Wall Street could have built Thorium Cycle reactors in 130 American cities.”

#170 jess on 05.24.11 at 7:35 pm

between 1928 and 1933 fell by 25.9%, but the Case Schiller 10-city composite and 20-city composite data shows that since 2006, home prices have fallen by 32%.

The case stems from a wider U.S. probe of illegal tax shelters. Prosecutors said the defendants used shelters named “Short Sales,” “Short Options Strategy,” “Swaps” and “Homer,” to generate fraudulent tax losses for at least 931 wealthy individuals.

The scheme generated $1 billion in phony tax losses, Manhattan U.S. Attorney Preet Bharara said in a statement. Daugerdas earned more than $95 million; Guerin made $17 million; Field received $18 million and Parse earned $6 million, Bharara said.

#171 Utopia on 05.24.11 at 7:38 pm

#93 Omnivore said…..

“Been living in Japan, and am about to cross the 5-year point, where I’m considered a permanent resident (in the eyes of the tax man, not necessarily for immigration, and liable for tax on WORLDWIDE income)”

Try this for starters:

There are agreements and treaties between many countries when it comes to income and taxes. Very transparent. Your income abroad may not be so secret as you suspect. Implications are it could affect your CPP long term and eligibility under other Canadian programs.

Taxes naturally come into play here as do health, EI benefits etcetera and your standing as a resident can be affected. Best to get familiar with it quickly or you could be in for a surprise later.

For your specific circumstances read the following outline documents from the Department of Finance. They know more about you than you think they know already.

Seriously, Governments take taxes and foreign income very seriously and those earning income abroad come under special consideration. That means you get the microscope and are subject to being monitored.

Now bend over Sunshine! Time for a tax checkup.

#172 TurnerNation on 05.24.11 at 7:45 pm

#91 disciple on 05.24.11 at 10:23 am

I enjoy your posts; while they are a little bit over the top, your premise is sound. As Harper has said we have “global obligations” now (going broke as with the others??) and a local vote will not change a thing. Bread and circuses for the masses, always.

vortex nailed it….House .com what a great book title ;)

#173 disciple on 05.24.11 at 8:00 pm

20 years ago I bought a townhouse for $50,000. I wonder then how much of that was for the materials? Copper, lumber, concrete, PVC, and hardware prices are currently inflated. I deal in absolute terms, whereas you still play the inflationary game of fear and greed.

Last post for today so I should also add that I do not believe in the long-term viability of PM as a currency, they are transient at best. New technology will save us.

#174 eltabarnacos on 05.24.11 at 8:01 pm

Cellar Dwellar
50k worth of materials MIGHT get you the concrete foundation. drain tiles, sump, and the house barely framed…….

He is right, a basement is built for 11 000$ including labour so lets say 8 000$ for foundation.
Then you need a few drywall piece at 10$ a sheet, some 2×4 at 2$ each, 2k for kitchen, 2k for bathroom.
50k is a LOT of materials!!!

#175 Mr Buyer on 05.24.11 at 8:01 pm

This post concerns the rolling black outs here in Japan. I have been told that for some reason to do with the foreign contractors hired to set up the electric grids being from countries with different electric systems, Japan is effectively cut in half with respect to electric power. They say there is a Tokyo grid and an Osaka grid. One grid is fifty hertz and the other is 60 hertz (the trains actually go through a powering down and power up when they pass from one grid to the next). We have had no power fluctuations at all during the course of the current disaster.

#176 Daisy Mae on 05.24.11 at 8:07 pm

“I hear you. It’s as if people don’t think and just do. And when their actions cause financial collapse they blame somebody else…….

They are called sheeple. They do not think, they follow blind.”

Yes. Re renovating, people just follow interior decorating trends…which is always a very successful marketing ploy. LOL

#177 Daisy Mae on 05.24.11 at 8:11 pm

Well, Garth, I haven’t seen many comments from you today. Are you just shaking your head? LOL

I went straight to scotch. — Garth

#178 Utopia on 05.24.11 at 8:24 pm

#166 Junius said……

“It amazes me the number of people who come onto this Blog everyday and announce that rates will not be going up”
What amazes me even more is that they never have a good reason. They just say it for the shits and giggles I think.

Honest to God I don’t know why they even bother because they cannot offer a rationalization for their bland mindless statements.

I am always open minded for any good argument but it is waste of time to read a stupid remark along the lines of………

“You are wrong Turner! Carney is in bed with the conspirators and Bernanke and the TPTB and the Cabal of the Rothschild’s Trilateral Commission empire of globalist and killers under the rule of the Royal clan of Illuminati Fish Mongers Incorporated (incidentally managed and run out of the very tidy and neat backseat of a rusty 57 Chevy owned by our very own good friend NLMV who may really be the chief conspirator behind the Zionist program to take over the world!!!!

Whew! OK, maybe I am exaggerating just a little but you probably get my drift. There is always a conspiracy somewhere and if you just look hard enough you just might find “THE TRUTH”.

No interest rate hikes…..well….just because ok?

HaHaHa….HaHaHa..erk…Ha [gag]..HaHa….[Cough, erk]

#179 jess on 05.24.11 at 8:28 pm will the conservatives bring in a national regulator?

Transparency International blamed an overall lack of political will for the OECD’s anti-bribery convention making no progress with signatory countries in encouraging their businesses to stop using bribery as a tool in foreign dealings.

It specifically notes Canada’s lack of nationality jurisdiction presents a “serious obstacle” to allowing Canadian prosecutors to pursue citizens accused of bribery or corruption abroad.

The scathing report follows similar findings by the OECD in March that called for Canada to step up the job of investigating and prosecuting the bribery of foreign public officials by Canadian companies….”

#180 BPOE in Vegas xoxoxo on 05.24.11 at 8:49 pm

#165 Cellar Dwellar

He is talking to Jimmy Hoffa at the MGM

#181 BigAl (Original) on 05.24.11 at 8:54 pm

And yet, companies keep hiring younger and younger people in top positions. How exactly does this play out?

19 year old, worked at CN one year now. Was hired fresh out of high school to control train movements – now is a manager at $150K/year. Lots more of these examples.

Forget about anyone over 40 not getting a job – try anyone over 30 now.

#182 Mr Buyer on 05.24.11 at 8:56 pm

I am straying too far off topic so this will be my last post concerning Japan (I really want to get a house without it taking a huge drop in value after paying through the nose for it. I am looking for a home not an investment but I want to keep as much of our cash as possible). I have pointed out often overlooked or easily dismissed strengths of Japan. I would like to finish by saying Japan is also a work in progress. It seems during the first moments of the Fukushima reactor disaster Prime Minister Kahn ordered sea water stop being poured into the reactor based upon his scientific advisors’ concerns. It seems they were debating the likelihood of ‘recriticallity’. 20 or 30 minutes passed before they resumed introducing sea water into the reactor (I think they added boric acid to decrease the likelihood of ‘recriticallity’). That 30 minute lapse in cooling was the result of not previously considering this scenario and having policies in place beforehand. So the Japanese are indeed human. I am confident every nuclear power station worker in Japan has since been advised to have boric acid on hand and use it (or another suitable substance) if they find themselves in a similar situation. The placing of the reactors near the sea was because every nuclear reactor needs a heat sink and large bodies of water serve that purpose. I cannot understand why the sea walls were not larger and there was not more redundancy and survivability built into the cooling system. I can only guess economic concerns had an undesirable effect upon the construction of the facility (it is my belief that there are some instances in which traditional economic constraints must be suspended, nuclear power is one such instance. Responsible engineers and scientists must hold sway). There was another little town that had a mayor who survived a previous tsunami in the area many years ago. The town is situated in a small valley between two mountains. This topology can amplify the size and effect of a tsunami. The mayor insisted upon a huge sea wall and gate that made him very unpopular in the area. Through considerable effort his wishes were implemented and the town was saddled with this massive eyesore. The gate was closed upon warning of the impending tsunami last month and even that huge structure had a small amount of water go over the top, but the town stands unscathed while others nearby were washed away. Reflection, adaptation, reflection, adaptation.

#183 BPOE in Vegas xoxoxo on 05.24.11 at 8:57 pm

#168 Nostradamus Le Mad Vlad

Re Japan

..especially ” just in time” production

That’s why I think there is an undercurrent in the markets…this economic tsunami will hit later and stocks will tumble.

CEO’s etc will delay or fudge numbers so their stock looks good?

I had seen a YoutTube report…right after it.can’t find it..perhaps try searching.?? .it was by an investment advisor who called this soon after the original tsunami happened .

#184 Cellar Dwellar on 05.24.11 at 8:58 pm

@#173 etalbarncos(sp?)
He is right, a basement is built for 11 000$ including labour so lets say 8 000$ for foundation.
Then you need a few drywall piece at 10$ a sheet, some 2×4 at 2$ each, 2k for kitchen, 2k for bathroom.
50k is a LOT of materials!!!
Not in Vancouver.
Where are you Guess-timating these material costs. The US ?

#185 Utopia on 05.24.11 at 9:13 pm

#142 this is wonderland
Sorry. No discount on farmland.

In fact it is the one property type that is still increasing in value in this country and for some very good reasons.

Farmland (provided it is quality and arable) is in very hot demand right now. If you do a search on Google you will see what I am taking about.

This is a really serious object of investor affection at the moment and relates primarily to the commodity boom in foods as it relates to growing populations, dwindling protein supplies, water limitations abroad and the squeeze on basic essential resources.

This is much discussed on investment websites too so no shortage of commentary is available if you are interested in knowing more. Look for yourself. Acreage costs have steadily climbed even while costs per square foot of nearby SFD have declined.

The trend is just not going to melt away anytime soon either. Rather, it is going to accelerate in the coming years so if land is your primary interest then you need to start paying attention.

Investors want to own quality arable lands that are able to produce much demanded crops and have good access to water resources, irrigation, rail and road links or nearby grain storage facilities.

Cropland ownership is HUGE right now. It is growth idea.

#186 xindai shan on 05.24.11 at 9:25 pm

#160 Snowman,

It is hard to top your great flex of intellectual muscle, but 1 trillion dollars divided by ~10 million boomers averages roughly $100,000 per inheritance.

For the millions of boomers with no savings and no pension plans, one hundred grand should easily fund twenty to thirty years of retirement.

#187 Utopia on 05.24.11 at 9:56 pm

#132 TS

Yes TS, thanks for that link on condo buying mania in the Toronto region. I read with interest that….”Condos make up six out of every 10 new homes sold in the GTA so far this year”

So that is what it has come down. Actual home ownership is now officially beyond the reach of the majority of people. Six in Ten can’t buy houses. You all get shared boxes in the sky.

So your resident population buy condos instead. They think it is normal. Soon they will buy cardboard shelters on the subway just like in Japan. Or perhaps the next big thing in Toronto for real affordability will be the rights to own a piece of a steel shipping container.

Happy days are here to stay! Hell, they already do it in Vancouver. If I sound disgusted it is because I live on the sad bald prairies where most people I know do not pay more than 800 monthly on shelter costs. Even that sounds high to some with access to good alternatives on the farm.

Last year I “let” a house for a mere 500 monthly (total costs all in). A whole house for Cripes sake! Good one too. All of it just for me. Garage included, huge garden space, peace, serenity and privacy plus good neighbors with lots of attitude and plenty of ammo to boot. They even kept their own chickens……..who could complain about that?

Why would anyone live like a sky-rat in Toronto?

#188 Utopia on 05.24.11 at 10:33 pm

#126 TheBigLebowski wrote (without any hard data of course because as usual his information is just based on random unprovable thoughts spewed by the precious metals crowd….)

“6,000 years of history tells us gold has stood the test of many collapses and renaissance”

Give it a rest already. There is not a 6000 year history of data on any commodity. Not for Gold, not for Silver.

There is however snapshots of history in the modern scientific examinations on the carbon-dating of sample extracts from dead people. Like the Pharaohs.

Also on old bones, ancient pottery and lumps of coprolites (that is fossilized shit for anyone who is really curious).

Silver and Gold do NOT have a 6000 year history in the human record. Where is your evidence ?

#189 Mr. Reality on 05.25.11 at 1:11 pm

#164 Mikey the Realtor on 05.24.11 at 7:16 pm
It’s not show time yet, I see that you are finally coming around and admitting to yourself and the blog pups that low rates are staying put much longer.

Sales may be slowing but prices are not, with rates staying low prices will remain high even with sales pulling back. Expect 2016-17 before prices are pulled back enough for most of the pups to deem satisfactory.

Hey look another realtor pulling a number out of his arse. Such a rare thing these days! 2016-17 based on what? CREA numbers?

Mr. R.

#190 Kevin on 05.25.11 at 1:47 pm


[Re: Fractional Reserve banking]

Sorry, but it just doesn’t pass the sniff test. You and Smoke are claiming that if I deposit $10 in the bank, they turn around and lend $90 to other people.

How, exactly?

Say I’m the bank. On the first day I open, I have $0 in my vault. Then you come along and open an account and deposit $10. Now I have $10 in my account. Then Jane comes along and wants to borrow $90.

How, exactly do I lend her $90 when I only have $10 in my vault? Don’t you understand? The bank PHYSICALLY does not have the cash. The money literally does not exist to be lent to Jane. It just plain isn’t there. The bank only has $10.

I know what you’ll say, they just “create it.” The make an entry in a ledger spreadsheet somewhere.

And how, exactly, does Jane buy a house with this “ledger entry?” At the end of the day, her builder doesn’t accept “ledger entries.” He only accepts cash. And the bank doesn’t have the money. They do not have the power to create cash out of nothing. Only the Bank of Canada can print money. The rest of the banks can only lend what is in their vaults.

#191 Daystar on 05.25.11 at 7:49 pm

Politically, this is a headline for those who understand why votes were initially publically subsidized in the first place. What follows next are bills passed that repeal and replace existing gag laws, as well as the elimination of corporate donation caps, combined with caps on union donations. The only uncertainty is the timeline of when these bills will come to pass. Harper’s agenda is all to easy to predict (in the narrowly focused narrative concentrating on handicapping opposition party finances/advertizing). The only question in my mind at this point is if there a Canada 5 years from now to see these bills coming to pass.

As for real estate and escalating national average prices, we are in May. April was the last of the big push of home buyers trying to squeeze in a mortgage before CMHC regulation changes, specifically from 35 years to 30. May numbers will be off both in terms of value and volume more than any other reason due to CMHC changes. The markets most effected will be urban areas, specifically the big six cities in Canada.

As for home values rising into April, it should really come as no surprise. High end homes have been the ones that have been moving in Canada and it should be predictable to see this growing percentage of high end homes being sold at higher values. This is the consequence of the wealth effect of Conservative real estate policies over the last 5 years. However… we are at the tail end of this effect.

If readers and bloggers alike wish to look at the U.S. example of high end homes selling like hotcakes especially so in the last good year of real estate into ugly 05′, they will find evidence to support it. The U.S. RE bubble had the same wealth effect supporting higher sales volumes/values of high end homes specifically at the end of the bubble so really, it should come as no surprise that it happens here in Canada. This wealth effect pattern repeats itself in all RE bubbles from the Japan to the U.S. … to Spain.

I just wanted to add as well, that those of us who believe the federal government wishes for real estate values to rise, should think again considering what I have to say. It is utterly predictable how housing valuations will behave from tighter CMHC regs and credit tightening in general. Its nothing more than a mathematical equation, truth be told. (someone please dare me to prove it) Why would our Conservative government actually want a correction in housing? Why would our Harper government want to create a correction in real estate? Because its deflationary.

Without deflation in real estate, considering where the Canadian and U.S. dollar is as well as the future value of commodities overall (except for gold), inflation is sure to rise.

Lets suppose for a moment that commodities fall in value overall, that a world wide slowdown is approaching (commodity inventories are building in energy and base metals, thats a fact). All the reasons for it are there. High inflation in Chindia, Japanese shortfall in production, European austerity (heck, you can see it in Canada now, the nutty Conservatives in Alta thought it prudent to cut the entire public education budget by 20% over one year… more on that later), U.S. real estate still finding a bottom, the reasons are there. The only question remains how bad it could get. (If Japan lays a double digit GDP quarterly, it will be bad)

If the U.S. dollar rises due to world uncertainties combined with the end of QE2, commodity valuations will fall as most are priced in U.S. dollars. If this is coupled with supply inventory buildups, commodities could face a rout, possibly by late fall. This would crash the Canadian dollar, just like it did in 08′. A plummeting Canadian dollar would be very inflationary, especially if it was led by a rising U.S. dollar leaving the loonie dead in its tracks and even though it would be partially offset by the steep devaluation of commodities, it wouldn’t be enough.

Deflation has to put the brakes on inflation caused by tumbling currencies somewhere and that somewhere will be housing. The consequences of real estate staying strong through this scenario would be devastating due to nothing stopping inflation from running wild, potentailly out of control depending on how far the loonie tumbles compared to the greenback. Under this scenario, real estate becomes the sacrificial lamb to keep inflation in check so the government reasons, its better that they do it through CMHC than through higher interest rates. Its either real estate values come down through tighter regulations or interest rates go up to keep the government in borrowed money as well as keeping inflation in check. Even so… interest rates are likely to still go up regardless and its effects on real estate would force values down even moreso keeping inflation in check.

If homeowners/buyers really thought government treated high residential real estate valuations like a sacred cow, they were foolish. We are not an island. What blows my mind is why nearly 40% of the population voted for a government that created a real estate bubble not from earnings, but from easy credit. Don’t they know easy credit won’t last forever?

Ask yourselves… what government/bank in their right mind would lend hundreds of thousands of dollars or more to consumers to buy an asset at or near its peak? Isn’t that a sure way to the major loss of public money if its widespread over a long enough timeline?

Banks without lending risk… and governments who have an agenda quite different than serving the public trust… thats reason enough and find it the hard way, we will.