Consequences

When he was zipped and steady, Bill Clinton thought everybody should buy a house. In 1994 America made a commitment get home ownership levels from 64% up to 70% of the population. In that year governments and banks started to undo lending requirements, working especially hard to shove more low-income people into mortgages.

It worked. By the end of 2004, with George W. Bush pumping ‘the ownership society’ and subprime lending in full flower, 69.2% of all Americans owned a house. Of course, this came with record levels of debt. So when the pool of new buyers ran out and cheap interest rates rose the next year, housing imploded.

You know the rest of the story.

This week came news the ownership rate has plunged back to 1998 levels – under 66%. It’s now forecast it will sink to 62% by 2015, or where it was 30 years ago. Of course, all the debt remains. It’s why there are 18.7 million vacant homes (two million of them are for sale), and why more than a quarter of all families have negative equity, owing more than they owe,  unable to sell.

Sales of existing homes are on track to hit 1997 levels. New home sales are slumping. Incredibly, half of all the 3.8 million houses now on the market in America are empty.

What does this tell us?

Hmmm. Lots, in a country where flagrant pro-real estate policies have resulted in a 70% ownership level and world-class piles of steamy fresh debt.

A dramatic increase in the number of people buying houses without a dramatic increase in income is doomed to fail. Just a matter of time. As you may have noticed from Friday’s news, the Canadian economy contracted last month – which is the opposite of growing. A few months of that is called a recession, which means fewer jobs and less money to go around. This is not good.

So why have house prices risen here with so many people herding to buy?

Simple. We did what the Yanks did under Clinton and Bush. We dropped interest rates to emergency levels (as the US did after Nine Eleven), and kept them there far too long. Low rates meant people could borrow more money, then spend more. So real estate values shot higher – all on the back of debt.

Second, we lowered lending standards. Mortgage amortizations lengthened and down payments shrank. Zero-down home purchases became common, and today our big ‘conservative’ banks will even spot you the money to buy. We have no-doc mortgages for the self-employed, 125% mortgages for everyone, while the feds encourage lending to people with no money by wiping away banks’ risk.

So now the average down payment is just 7%, two-thirds of all new condos in Toronto are going to speculators, it takes 70% of a family’s income to carry the average house in Vancouver and we’ve passed $1 trillion in mortgage debt. But, praise be, we hit 70%.

There’s no doubt where all this is going. By keeping rates low, expanding the reach of federal mortgage backing, raising tax-free RRSP withdrawal limits for home purchases and subsidizing first-timers’ closing costs, the Harper government is just like Clinton’s, but without the bodily fluids and all those endorphins. And where’s the fun in that?

The basic flaw: not everyone should have a house. Shelter may be a human right. Granite counter tops aren’t.

As the world holds together with gossamer threads tonight, contemplating what could be, it’s worth remembering how we got here.

Are you ready?

 

205 comments ↓

#1 shanks on 07.29.11 at 10:07 pm

Garth when will they learn? “no comments” almost never means getting there first!

#2 2MKid on 07.29.11 at 10:08 pm

First

#3 squidly77 on 07.29.11 at 10:13 pm

Cerberus is watching as we prepare to open Pandorahs box.

#4 squidly77 on 07.29.11 at 10:14 pm

A U.S. downgrade is almost certain.

#5 Mr. Reality on 07.29.11 at 10:23 pm

You are going to hear the “R” word in the news a lot more lately. Get ready for a fun ride to the bottom! Especially if you are shorting like me!

Short away!

Mr. Reality

#6 The Emperor's Clothes on 07.29.11 at 10:32 pm

Speaking/listening to my co workers at lunch today about Vancouver real estate prices.
EVERY ONE of them insisted ” vancouver is different”, “prices are stronger than ever”, “asian buyers will keep driving prices up”.
Not one of them would listen to any contrarian ideas about a “bubble” or a “bubble burst”
I felt ill.

#7 Bottoms_Up on 07.29.11 at 10:50 pm

Garth, all these years of this blog and we’ve never discussed ‘The Money Pit':

http://en.wikipedia.org/wiki/The_Money_Pit

A great movie in it’s time, and I highly recommend it as a rental if one hasn’t seen it. It really highlights just how expensive home ‘ownership’ can be.

On a similar note, the CMHC stats are out, prices in Ottawa have never been higher (but employment is at 525,000 almost an all-time high, and unemployment is at 5.6%)

#8 Mr.Spock on 07.29.11 at 10:50 pm

Why is it so hard to understand?
Infinite growth based on finite resources is not logical.
Call me when someone invents warp drives and finds the dilithium crystals to run’em.
In the mean time, enjoy the sputtering lurch to decline.

#9 kimi on 07.29.11 at 10:53 pm

Most people will follow the herd. I do believe that when the states sneezes, Canada catches a cold. Its the mind set, where no one learns, its like an empedemic: one watches others fall and then they fall themselves. Its about belief, and belief is contagious.
The true genius lies it those who question thier beliefs, those who are aware, those who don’t follow the herd… and like Lisa said yesterday… ‘its the ones who comment who make this blog interesting’… I have to agree, and a champagne cheer to all those who “think” and “deliver” knowledge outside of the box.

#10 Math Teacher on 07.29.11 at 11:02 pm

Clinton and Bush, Jr. made sure that (almost) every American became a home “owner”, and now Barak Obama is making sure that every American is able to get a college degree … It’s easy to guess where it’s all going … Oh yes, lest we forget that during the DotCom Era every American became an investor.

#11 kimi on 07.29.11 at 11:03 pm

Spell error … I meant: true genius ‘lies’ with those who Question thier beliefs.
The people who aren’t programmed, lost in texting, lost in group think, lost in media, lost in luis vitton, lost in granite counter tops, etc. Those fringe people who are actually awake, unlike the rest, if you realize the power in being aware, you can capitalize on stuff the masses buy into and awaken those who are looking for the truth.
Geez I sound like … a simplified version of Garth… LOL!!!!

#12 Min in Mission on 07.29.11 at 11:07 pm

“The basic flaw: not everyone should have a house. Shelter may be a human right. Granite counter tops aren’t.”

And there, simply, is the entire issue. People have lost track of the difference between “shelter” and “house”.

#13 The Fascist Conservatives? on 07.29.11 at 11:08 pm

Canada has a Fascist leader? Harper who seems to HATE the free markets and thus hates democracy? Harper has allowed the banks to loan people who have no money the money for homes they can not afford by backstopping the risk onto the taxpayer in a Fascist manner . The Fascist conservatives? have allowed the banks to lend out over $1,000,000,000,000.00 or one trillion dollars into the Canadian housing ponzi. Will the Fascist conservative? change their ways and become conservative? I doubt it. Is Harpers goal to distory Canada? Why doesn’t Harper like or allow the free markets to work?

#14 Smell The Coffee on 07.29.11 at 11:08 pm

Every house holder in Vancouver is a millionaire … on paper anyway.

Thats not enough. You too can be a billionaire!

Its easy. Just change your single Canuck dollar for 100 million Zimbabwe dollars. Ten buck = one billion. Voila, your a billionaire … on paper.

Its that easy.

Since 1980 their have been 20 national currencies that have hyper inflated away their debts … all the way into bankruptcy. The USA is next.

#15 Steevo on 07.29.11 at 11:09 pm

duh?

http://business.financialpost.com/2011/07/29/americas-great-recession-even-greater-than-thought/

#16 timo on 07.29.11 at 11:10 pm

fantastic post and right to the point.

keep your money safe and try and stay 1 step ahead

#17 poco on 07.29.11 at 11:11 pm

The link below was on the sidebar of the link Turner Nation (#150) posted yeterday—it kind of fits with the theme of the post tonight—-not as drastic as the USA

According to the English Housing Survey, the share of owner occupiers fell to 67.4% in 2009/10, down from 70.9% in 2003 – the seventh consecutive annual decline. And while many people still aspire to buy a home eventually, renting is fast becoming a more suitable option for the younger generations, the report revealed.

http://citywire.co.uk/money/house-prices-stable-as-demand-plummets/a512196?ref=citywire-money-latest-news-list

#18 disciple on 07.29.11 at 11:12 pm

That painter is a true professional. He must have done this before, obviously….

In principle, I guess the angle of incline and downward force vector created from his weight is working to keep him steady but it all depends on the coefficient of friction between the rubber footings and the concrete ledge. Likewise for the aluminum top edge with the wall. Of course, there is momentum to worry about with each paint stroke that could jar the bottom footing loose and away from the ledge, the same for the top.

Back to real estate: a driving analogy since I’ll be on a road trip starting in the morning for the long weekend…
The faster you’re going, the more severe the correction in steering when you turn the wheel. That’s why I believe a horrific crash in prices and sales is looming in Canada across the board.

#19 Bill Gable on 07.29.11 at 11:13 pm

If you read what Moody’s said today, carefully, they basically said “we know the jig is up”.

Now, when the deal falls through in Washington, they will cobble something together, after the ‘default’.

That is when it gets really interesting.

Watch Asian Markets and how they open on Monday.

Bet your bottom Dinar, Mr. Turner will have a screen glowing deep in the bunker, tea in hand, and the latest Stephen Harper CD on the player (NOT!).

This is going to be interesting.

#20 Ex-Cowtown on 07.29.11 at 11:15 pm

The U.S. debt ceiling is a non-issue. Political theater at it’s most idiotic.

The larger issues are European defaults (real live ones, not imaginary political posturing by U.S. politicos) and the looming re-recession.

Can’t legislate those issues away.

#21 Kaganovich on 07.29.11 at 11:16 pm

Junius (from the last post)

Your comment about what needs to be done led me to think you may find this article interesting, not to mention being in tune with your assessment of the FIRE industry class:
http://globalresearch.ca/index.php?context=va&aid=25759

#22 Devore on 07.29.11 at 11:16 pm

Australia has followed a very similar pattern, with home ownership levels topping 70% as well. Their real estate marker is falling off the rails as we speak, so we can see first hand, again, how quickly and tragically things can turn around, with everyone helplessly watching, scrambling for explanations and excuses. There too, pumper keep telling everyone that its different here, everyone wants to live here, there’s a shortage of housing (laughable), and rents and wages will rise to meet housing prices, making for a soft landing (yeah, and there will be a pony in every back yard). Price drops of 40% on the gold coast are isolated and contained, nothing to see there.

Yet, we, as a nation, are still clinging on, even though many markets are already being taken behind the woodshed, with hot areas propping up the average prices. eventually, even national numbers will show a down trend, and by then it will be too late to get out for anyone who got seduced by granite in the last few years.

#23 45north on 07.29.11 at 11:18 pm

As the world holds together with gossamer threads tonight, contemplating what could be, it’s worth remembering how we got here.

97 years ago the world was on the brink of World War I, the feeling was that if there was a war it would be short and sharp. Five years later, Europe lay exhausted, its princes dethroned ( except Great Britain ) and its men killed in battle.

#24 nsqt on 07.29.11 at 11:18 pm

We (as a society in whole) have developed a “I deserve this no matter what the cost is” attitude…….as Dr. Phil would say……How’s that workin out for ya?………..Looking around, I would say for a lot of people it is not working out to well…..

I am amazed at how many people do not even have any basic concept of investing….their answer (excuse) is….”I have no interest in it”…….I guess you can lead a horse to water but cannot make him drink…………Garth….keep the info coming….enjoying this blog in Annapolis Valley Nova Scotia…….When are you coming back again?

#25 disciple on 07.29.11 at 11:20 pm

Monoatomic Gold. ORMUS. The invisible metal that is also weightless. Used by Black Ops for decades in flight technology. The goal of alchemy, the philosphers’ stone. That was what I was preparing your minds for earlier today. The reason behind gold’s value. If you’ve never heard of this before, well, now you know. A new age dawns for humanity, freed from the shackles of the scientific dictatorship. Are you ready?

#26 Lisa on 07.29.11 at 11:32 pm

At least the U.S. debt ceiling theatre show illustrates to the common Canadian the scary discomfort of being maxed out. Gotta make anybody with debt squirm. We little guys are lucky, however. When we get near our personal debt ceilings, the banks & credit card companies kindly raise it for us. It’s the people who pay down their credit card bills every month who are considered “deadbeats”.

#27 Timing is Everything on 07.29.11 at 11:48 pm

Are you ready?

Arborite Forever!

#28 Get Real on 07.29.11 at 11:48 pm

#14 Smell the coffee

Are you on drugs? Prescription or otherwise

#29 Peter Pan on 07.29.11 at 11:58 pm

Garth, you reveal the symptoms, but you ignore the causes… Look at the composition of the CMHC’s Board of Directors… Most of them are an integral part of the Property Ownership/Real Estate Sales/Development Lobby…

http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_004.cfm

When any crime is committed and you want to know who is responsible, the first question to ask is “Who Benefits”…

#30 Debtfree on 07.29.11 at 11:58 pm

Of course, all the debt remains. It’s why there are 18.7 million vacant homes (two million of them are for sale), and why more than a quarter of all families have negative equity, owning more than they owe, unable to sell.
Did you mean owing more than they own ? oh well one thinks stevie is distorying canada. Right now I’m glad we’ve got a confederation . Stevie will need permission from the provinces and territories to destory anything fascist or not . How come no one calls you on your typos Garth ? Yet they jump all over anyone else that jumbles it up now and again . And am I the only one that has noticed that you’re always first on the blog . Just having a little fun . Can’t wait till your new book comes out. Have you had a look at ” the singularity is near ” by Ray Kuzweil ? pure gold.

#31 Bottoms_Up on 07.30.11 at 12:12 am

you know agents are hurting when they start using their signs to advertise garage sales:

http://ottawa.kijiji.ca/c-buy-and-sell-garage-sales-FREE-DIRECTION-SIGNS-FOR-BORROWING-W0QQAdIdZ301756820

#32 timo on 07.30.11 at 12:17 am

#20,Ex-Cowtown,

The U.S. debt ceiling is a non-issue. Political theater at it’s most idiotic.

The larger issues are European defaults (real live ones, not imaginary political posturing by U.S. politicos) and the looming re-recession.

Can’t legislate those issues away

right there with you on that.

Talked to friends in Greece and a blackmarket tax-revolt is underway. That is where things will really begin to heat-up as debt default is real and the US has cds’s in play that cannot possibly be covered.

Everything else is a sideshow.

#33 not 1st on 07.30.11 at 12:21 am

Why oh why didn’t we spend the last decade decoupling ourselves from the americans. if they want to shoot themselves in the face, go ahead, but we are still too tied to their economy and we are going to get some of the blast.

There are a billion chinese and a billion indians who want our resources. Someone get a brainwave and start trading at least half our resources with them.

#34 Harlee on 07.30.11 at 12:23 am

Bottoms_Up @ #7
Actually, I prefer “Mr. Blandings Builds His Dream House”from 1948. From what I’ve read the producers ,as a promotion for the film,financed the building of 73 “dream homes” across the US. I wonder if any of those old homes are still standing?

#35 Jon B on 07.30.11 at 12:35 am

The most valuable assets I own are the liabilities I don’t have. Chew on that over the long weekend.

#36 kimi on 07.30.11 at 12:35 am

Lisa …. It’s the people who pay down their credit card bills every month who are considered “deadbeats”.
—————————————————–
Ouch, that would be me… your on a roll, Lisa… Good on ya!

#37 Nemesis on 07.30.11 at 12:36 am

Ready? Yes.

#38 Samuel on 07.30.11 at 12:57 am

Perhaps a recession would be good for housing in that it will prolong ZIRP. In the meantime I rent a $1.85m home in West Point Grey for $3,500 per month.

#39 Rich Renter on 07.30.11 at 1:02 am

Recessions happen to other people who lose their jobs, it becomes a depression when it’s you.
Regardless of what happens in Washington, we are set for at least a decade of very ordinary times. What annoys me the most about Canadian’s attitude to RE, is that we could see what was happening in the US yet not only did we try and avert a similiar outcome, we’ve done our utmost to better them.

#40 Larry on 07.30.11 at 1:18 am

John Templeton said in 2000 that real estate would drop 75%.

The professor from bear’s chat said in 1999 sell your house and buy gold, when hits $5000 you can go and buy 100 houses.

#41 terces on 07.30.11 at 1:26 am

I’m in the Shuswap on a holiday right now. This quote is out of a little newsletter called A.M. Salmon Arm Weekend:
Median price drops $40,000. Inventory of single homes is moving down gradually in the North Okanagan-Shuswap region from 835 homes for sale in June of this year compared to 880 last year. Meanwhile, the median price of a single family home dropped from $358,000 to $318,000 over the past year.

#42 CoreyMC on 07.30.11 at 1:39 am

You got to admit the ‘powers at be’ have done grade “A” job at keeping the RE thingy going up until now. I wanted to say it was all over last spring, but I knew it was premature. Now it is time, get ready, the show is about to begin! And no I’m not a doom and gloomer, I just know when it is an end to the cycle because I’ve been apart of the housing porn thru the whole process in western Canada. Didn’t need Garth to see this coming.

#43 Larry on 07.30.11 at 1:39 am

some of the problems caused by low interest rates

http://www.silverbearcafe.com/private/bubble.html

#44 Kitchener1 on 07.30.11 at 1:44 am

Want an eye opener about US real estate?

this is from Mish’s blog

http://globaleconomicanalysis.blogspot.com/2011/07/foreclosed-475789-sq-ft-keybank-center.html

A 23 story office building in Cleveland (yea i know but still) sold for 7.1 Million US or $15 a sq foot.

http://www.newsnet5.com/dpp/news/local_news/cleveland_metro/keybank-center-auctioned-off-for-7-15-m

Now what will that buy you in crack-couver? 3 side by side tear downs? LOL

Really, its getting to the extreme

You cant even frame up a proper garden shed for $15/sq foot, or a single car garage.

There is probely more money in aluminum and copper scrap in that 23 storey building then 7 million dollars.

#45 SmarterThanYouLook on 07.30.11 at 1:45 am

Who cares if there are over $1 trillion in mortgages? Canadians hold over $1 trillion in cash. It’s covered.

http://www.financialpost.com/news/Canadians+sitting+trillion+cash+mountain/2044036/story.html

All this hand wringing for nothing. Posters need to get a hobby.

That article is two years old. — Garth

#46 Christopher on 07.30.11 at 2:20 am

when the E.I.benifits run out they just go for disability benifits in my town! What is up with this financial plan? Bankruptcy is also the next popular choice for the people I have been talking to in the last few months. loc interest only to pay for the car maxing out credit card and no hopes for a job that pays like the last one. Lets get the ball rolling show us the money?

#47 Christopher on 07.30.11 at 2:22 am

benefits:oops had puplic schooling

#48 AACI Home-Dog on 07.30.11 at 2:28 am

“It’s why there are 18.7 million vacant homes (two million of them are for sale), and why more than a quarter of all families have negative equity, owning more than they owe, unable to sell.” GT
I think you meant, “owing more than they own” ?
….another good article though….

#49 john on 07.30.11 at 2:31 am

Great post Garth….It is good to listen to someone who keeps events of the past as a reference point for todays housing market.

To anyone saying USA will default in the near future, give your head a shake. The only discussion taking place in the house and senate is about deficit reduction and NOT debt reduction. BIG difference there.

Once the debt ceiling is increase, QE3 is some shape or form will start for certain. Who else in their right mind will buy US treasuries. Once the FED starts QE3 the commodities will start flying. Stagflation here we come.

#50 Mr Buyer on 07.30.11 at 2:37 am

#25 disciple…freed from the shackles of the scientific dictatorship…
You must be joking. The only prominent world leader I can recall having a scientific background at all was Margret Thatcher ( attended Oxford in 1943 and graduated in 1947 with Second Class Honours in the four-year Chemistry Bachelor of Science degree; in
her final year she specialised in X-ray crystallography). Her contribution to mankind was taking the lead on the CFC issue and the damage CFCs were causing to the environment (adverse impact upon the Ozone layer) with little or no regard for the economic consequences Britain would face as a result of unilaterally limiting widespread use of CFCs(chlorofluorocarbon). I think you are simply baiting people such as myself. Scientists must assume power so they can better serve humanity.

#51 reality guy on 07.30.11 at 2:40 am

Garth its all about timing, the gold bugs must be laughing at you right now.

Obama’s administration is so predictable. They will not make a decision until the 11th hour. And will try to blame the GOP for all this. But I predict they will be two days late or two days after the deadline before they make a deal. (there will be no default, that all BS / Scare tactics the Obama administration is using on the average dumb American). What is scary is the lack of leadership in their government.

That means the market has several more days for some panicking before a deal will be reached.

Both sides are so close and yet so far. I feel both bills doesn’t do enough to cut debt. But that just me.

Its interesting times, I’m getting ready to start buying into the market and diversify my portfolio now. If the market plunges next week, I view it as a nice buying opportunity to get some solid cash rich companies.

As for gold, next week may be time to lighten up on that gold portfolio and diversify your portfolio.

After this Fiasco is over, its going to be interesting how the world will view the american dollar. HOw risky is their debt when their political system can hold you ransom? Is these Fiat currencies the way to go?

#52 a prairie dawg on 07.30.11 at 2:55 am

@ #23 45north

It might just take another World War to peel the under-35 adolescents away from their Wii’s and their X-Box’s. Maybe the over-35 crowd might get off the HGTV channel for a couple minutes as well.

C’mon you closet warcraft wannabes. Stop pretending to fight in a war playing Socom or Medal of Honour on a tv screen in your Mom’s basement. Pick up a real gun and get in the game.

Kill a commie for mommy.

Right…

Never gonna happen.

They’ll surrender like the French faster than you can say “poser.”

OK, I think I’ve offended enough people for one evening.

#53 WI Boomer on 07.30.11 at 3:22 am

so…Looks like everybody thinks the Ritz is going to hit the fan?

Could be right. Could be wrong, too. The US Debt mess is the result of House Porn gone awry, too many tax cuts, idiots elected to office.

You guys have much of the same disease, except your house porn hasn’t crashed…yet. Stay tuned, you’re set up for the same mass stupidity. A few more months of business slow downs and your Ritz will be looking at the same fan.

Should be an interesting week in the US. Will be get our stuff together, or roll over like a blighted fish? Stay Tuned, this could turn uglier. Debt sucks, wether it is an individual’s mess or a country’s mess. Just remembner the siutuations we are in were mostly OUR own making.

#54 Aussie Roy on 07.30.11 at 3:29 am

“In Vancouver and we’ve passed $1 trillion in mortgage debt.”

Interesting stat, the whole of Australias outstanding mortgage debt is 1.15T AUD. You almost have that amount in one city – WOW.

If this stat is correct it leads to the question, where are all the mortgage free cashed up Asians, after all they buy in cash dont they?.

If such a huge amount of mortgage debt doesn’t show people that prices in Van are driven by credit, they simply aren’t looking hard enough.

Aussie Update

Australia’s households are very cautious at present, witnessed by the second highest savings rate since
1986 and this will play a major role in the outlook for the retail and housing sectors in the coming year.

By the way when economists here say we are saving it doesnt mean we are, they also include paying down debt as saving.

http://www.folkestone.com.au/assets/Research-Report/RConsumer-SentimentJuly-2011.pdf

So what drives house prices – debt and emotion. The emotion is changing and so is the demand for debt, where do you think Aussie house prices are heading in the next few months?. Maybe the home lending figures can give us a clue.

Home lending tumbles to 34-year record low

http://www.heraldsun.com.au/business/home-lending-tumbles-to-34-year-record-low/story-fn7j19iv-1226104638521

#55 bromance on 07.30.11 at 3:35 am

Things are getting rough down here in the US. We’re scared, depressed, and clueless. We do know that this political drama will end the way it always does-with us bent over. Businesses are failing right and left. Insurance rates, food, and healthcare skyrockets as the economy sinks into the mire. My business just treads water, where it used to be a cash cow. A friend of mine, just a few years ago, was just slightly cash flow negative and I warned him numerous times to do something about it. Well now his property taxes and health insurance rates have soared, his equity has sunk, and his wages have stagnated. His car broke down and he bought a clunker that just cost him more in repairs. Credit card debt balloons. Another friend, an attorney, would not layoff one of his secretaries, because she had been working with him so long. Now he’s chewed through his $140K 401K and his business will fail within weeks. Both of his employees will be belched out into a horrific labor market. I guess I am imploring those that can make adjustments now, make them. Myself and my 2 friends didn’t and now we teeter on the brink. Our options are gone. They’ll go over the falls soon, with me to follow in a year or two. I know there will be no miracles. QE3 is on the way and will mean rising stocks as cost get a new wind in their sails and scoot higher. Wall street will augment as we atrophy. Unfortunately it one of those things you have a hard time fathoming until you see it up close and/or it happens to you. Then it all too real.

#56 timo on 07.30.11 at 4:36 am

Phoenix having an inventory of over 120,000 empty or foreclosed homes, Holt expects “a tidal wave of foreclosures” will soon hit the market

http://finance.yahoo.com/real-estate/article/113212/phoenix-epicenter-housing-crisis-marketwatch?source=patrick.net&mod=realestate-sell#yfi_pf_main

Saying that only 30% of troubled loans have been resolved, she predicts that over the next six years as many as one out of every five mortgage holders in the country could lose their homes.

but remember housing always goes up

#57 Aussie Roy on 07.30.11 at 4:48 am

Sorry my mistake 1T mortgagea in total not just Van.
Ooops

#58 Van MD on 07.30.11 at 6:18 am

Hi Garth, is there a source for the ” average down payment is just 7%”? I’m considering using this as an argument in a Chinese Canadian RE forum. The only source I could find said the average DP was 30% according to “CAAMP” http://www.canequity.com/blog/2011-05-report-5-7-million-canadians-now-have-mortgages-owe-860-million/ Thank you!

#59 David B on 07.30.11 at 6:46 am

Am I ready yes …. well kind of, because who really knows how deep the knife will cut? But this I nose …. I smell bad news bears coming from Mr. Harper’s Ottawa.

#60 big T on 07.30.11 at 7:39 am

it would seem in most western societies a hardcore 30
percent are incapable of home ownership for various
reasons, if the owning class revert to a new renting
class it will destroy generational wealth, and create a
new middle class financed with off-shore money..

#61 not 1st on 07.30.11 at 8:03 am

Good ol U.S.of A? How did they get so powerful and how did they get such a big economy? Answer, they borrowed from about 3 future generations to finance this one. They are so done like dinner.

http://www.msnbc.msn.com/id/43929476/ns/business-stocks_and_economy/

Another of your absolutist and wrong comments. Why do you wish the US to fail? Do you have any idea what the consequences would be for your family? — Garth

#62 Trillion is the new Billion on 07.30.11 at 8:26 am

Dearest Dogs,

Before you agree with Obama’s (and Garth’s) idea that trillions more debt is a good thing, check out what a trillion dollars actually looks like:

http://usdebt.kleptocracy.us/

And here’s what it can buy (at current valuation):

http://www.youtube.com/watch?v=at3MNu8BRwQ

Food for thought :)

Disingenuous. Careful. — Garth

#63 TurnerNation on 07.30.11 at 8:44 am

“Austerity” (I don’t even know what this means but hey the media repeats it over and over again) is coming to Toronto!

If they cut 10% off city staffers or cut 10% of pay, expect Toronto houses to drop by the same. I imagine these employees make up a decent chunk of the local economy.

And…the first thing an invading army does is seize control of the media (to better control the people). A sickening terror attack on free speech:

http://www.cbc.ca/news/world/story/2011/07/30/libya.html

NATO bombs Libyan state TV transmitters
The Associated Press Posted: Jul 30, 2011 7:25 AM ET Last Updated: Jul 30, 2011 7:25 AM ET Read 5 comments5 Back to accessibility links
Supporting Story ContentStory Sharing ToolsShare with Add ThisPrint this storyE-mail this story.Related
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SPECIAL REPORT: Crisis in Libya
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End of Supporting Story ContentBack to accessibility links Beginning of Story ContentNATO warplanes bombed three Libyan state TV satellite transmitters in Tripoli overnight, targeting facilities that have been used to incite violence and threaten civilians, the military alliance said Saturday

#64 Herb on 07.30.11 at 8:44 am

#52 a prarie dawg,

… to peel the under-35 adolescents away from their Wii’s and their X-Box’s. Maybe the over-35 crowd might get off the HGTV channel for a couple minutes as well.

That might be an entirely sufficient war aim compared to a few we’ve seen recently.

#65 BrianT on 07.30.11 at 8:44 am

#51Reality-It is pretty clear how the world views the US dollar-look at any dollar/Swiss franc chart-it ain’t pretty for the USA. We need a derogatory term for any investor that buys Swiss francs-maybe Frankhugger.

#66 BrianT on 07.30.11 at 8:48 am

#49John-They have already said that bondholders have first priority. Technically, they call any failure to pay out contracted obligations as a “default” so if guv employees,etc. take a temporary reduction that is a default.

#67 GregW, Oakville on 07.30.11 at 8:50 am

Hi Garth, A couple links about keeping your blog up and running, just in case. At lease one of them anyway ;) ;)
http://spectrum.ieee.org/telecom/internet/building-a-subversive-grassroots-network
http://spectrum.ieee.org/nanoclast/semiconductors/nanotechnology/viagra-on-steroids-made-possible-by-nanotechnology

#68 Herb on 07.30.11 at 8:56 am

#55 bromance,

and there will be no answers beyond blaming the victims.

#69 Q on 07.30.11 at 9:03 am

Is anyone else sick and tired of the tiny minds in Washington holding the rest of the financial world hostage? Why all this BS about raising the US debt ceiling, when anyone with a single digit IQ or better knows that a really bad deal (for the taxpayer) was cut behind closed doors weeks ago? Did any of these selfserving, bottomfeeders consider just managing on the money they have? If they spent 10% of the time they waste debating about raising the debt, on cutting overhead and living within their budget (maybe even reducing same…) the US would be in far better financial shape. All governments should be forced to make do with the monies they steal from the taxpayers and if they want to borrow in our names, they should follow the Swiss model and be required to ask permission via ballot. Anyway, beautiful day today at the lake…think I’ll go out and buy a new boat that I don’t really need…and charge it to Harper……what’s good for the goose…

#70 uglybungaloft on 07.30.11 at 9:05 am

Why are consumers not protected from builders that depict their homes on lots the size of Scarlett O’Hara, fictional Tara estate? Consumers are protected from this kind of crap advertising in stores, why not when buying a home? If the builder is building on postage size lots why than do they depict the home as if it was on an estate lot?

#71 Mr. Lee on 07.30.11 at 9:57 am

I may not like what the US has become. From a bastion of hope and opportunity to a shadow of its former self. However, 70% of Canada’s (yes, that includes my province of Alberta) trade goes to Estadas Unidos. If the US should experience large economic woes, WE WILL FEEL THIS MORE THAN ANYONE. SO PLEASE WAKE UP TO THAT FACT.

Secondly, Harper the Conservative the Liberals. It does not matter. Politics and politicians adopt the policies of one another in order to keep the facade going. Are they to blame or are we? If our political servants were to tell us what the real issues are as well and what must be done to solve them, would “we the people” thank them or crucify them. Just look at the housing market mentality. How many people feel that it is no bug deal to borrow 500, 600, 700 K on a house? Does that strike anyone as being in tune with reality.

So, as to Mr. Turners question, “Are you ready?”. Sadly, a great number are not.

#72 arctodus on 07.30.11 at 10:27 am

Another of your absolutist and wrong comments. Why do you wish the US to fail? Do you have any idea what the consequences would be for your family? — Garth

Garth, Garth, Garth….tsk, tsk….
Wishing is for children on christmas eve or for guys viewing girls on a beach……

What any human on earth thinks at this point in history is completely and utterly irrelevant.

The US WILL fail as a nation state, as will nationstates now worldwide. The center will not hold in a world post peak energy. If people would study physics, environmental science and a wide view of deep history most would see that clearly.

Economics and finance generally are a farce played out in a world that freely gave us 250 million years of stored biological energy in an eyeblink (1 century)…..

It allowed us monkeys to develop “professional fields” like finance and law and interior design…..we will now see such arenas torn asunder…as they were all farce in the real world anyway.

But remember…depending upon where you reside on earth may affect how fast the collapse hits you directly.
But hit you it will..

It must suck to be you. — Garth

#73 Bottoms_Up on 07.30.11 at 10:29 am

#58 Van MD on 07.30.11 at 6:18 am
—————————————-
The average downpayment for first time buyers is 7%. The higher figure includes all sales (‘move-up’ buyers that use their current equity as a dp).

We have heard this confirmed by mortgage brokers that frequent this website.

#74 Utopia on 07.30.11 at 10:34 am

#121 Peakoilist to #97 Utopia on 07.29.11

“Thank you for the reminder about all the things that I still have to do..what a list ! I have none of that stuff together. We only have until next Tuesday”
————————————–
Ha,Ha. Yes, only four shopping days until the next credit collapse. At least it falls after most peoples payday. Be sure to take some cash out and hide it in your mattress (I am kidding).

#122 Lucy to #97 – Utopia

“Love your posts! The last six months I’ve been building a library, the information available to people constantly amazes me”
———————————–
You have a library of my posts? Yikes, now the pressure is on. I will have to start behaving more responsibly on the site……hope you don’t save my bad comments.

There were a few.

#75 JO on 07.30.11 at 10:38 am

Our situation is the result of the disastrous economic philosophy being practiced by most in gov’t and central banks/establishment: Junk economics where debt is subisdized by robbing savers and pensioners (financial repression -see IMF guide online) in order to maximize the amount of debt which in turn inflates housing prices and other asset prices while also exacerbating the reduction in the buying power of the middle class income.

Why ? – Maximizing debt and creating the resulting asset price inflation feeds the establishment: senior execs in banking, finance, insurance and RE get filthy rich, and politicians maximize tax revenue with which to spend on friends.

This junk economics model has been in force the world over including here. Now, the inevitable credit contraction/stagnation has arrived. With it comes less aggregate demand and less GDP/Income with which to service the inflated debt taken on during the debt bubble. Asset prices collapse, unemployment spikes, and gov’t assets are typically sold off to bankers or affiliates at pennies on the dollar. Got to love it: they get rich while the debt counterfeiting operation expands, then use the inflated contractual claims against our incomes and asset prices to strip away everything for nothing. Ah, yes, welcome to the wonder of the highly leveraged, fractional capital, fiat money system where debt growth apparently equates to economic growth and the appearance of prosperity.

As most of the recent homeDEBTRENTERS are going to find out over the next 4-5 yrs, they never owned anything as we are all renters. They have been merely paying inflated rent to the gov’t and banks to speculate on the house price while being subsidized by savers and retirees/pensioners.

It is all ending the way it usually does and should: In financial tragedy and debacle.
JO

#76 Utopia on 07.30.11 at 10:48 am

I just bought a knitting machine at a yard sale. Two of them actually. Now I know it is not manly to own one but I figure, what the hell. I am not the insecure type.

These are amazing pieces of technical know-how. So many moving parts and they are as new as the day they came out of the factory. The nice lady even gave me her books, wool and all the miscellaneous bits and pieces.

Cost me twenty dollars total. Nobody else wanted it she said. Clothes are just so cheap these days that even the guild has run out of younger members and will eventually disband as they are all elderly. Seems a shame. All the knowledge will be lost….but I will be ready.

When the boats stop coming from China, I will make my own socks.

#77 Utopia on 07.30.11 at 11:23 am

#54 Aussie Roy on 07.30.11

“In Vancouver and we’ve passed $1 trillion in mortgage debt.” Interesting stat, the whole of Australia’s outstanding mortgage debt is 1.15T AUD. You almost have that amount in one city – WOW”.
——————————————

Ok, now I just had a “wow” moment Roy. Your dollars are roughly equal to our own. That trillion dollar figure for Canada represents our national number, not just Vancouver.

But you are saying Australia, with a population of only 23 million people versus Canada’s 35 million actually has more than a trillion in outstanding mortgage debts??!!!

This is more like a “holy crap, Batman” moment. I really cannot believe how out of control your market is down under. Even after reading so many of the stories and news items you have so kindly forwarded to us, I am still astonished.

I can only imagine that the Great Australian housing reckoning will eventually be right up there with Ireland’s and Iceland’s busts.

Of course, you guys can afford it. You are a commodity nation and that will blunt some of the major trauma. But cripes, mate. What is a disaster you have coming.

#78 Utopia on 07.30.11 at 11:29 am

#55 Bromance wrote….

“I guess I am imploring those that can make adjustments now, make them. Myself and my 2 friends didn’t and now we teeter on the brink. Our options are gone. They’ll go over the falls soon, with me to follow in a year or two”
—————————————
Warning noted. Sorry to hear things have gotten so bad down there. I puzzle over why your recession is not officially being called a depression yet. What else could it be?

#79 Golden Stewie on 07.30.11 at 11:36 am

#62 Trillion is the new Billion,

No one should really want the US to suddenly default, it would be catastrophic for everyone. If the parasite (The US) dies the host (the rest of us) often dies aswell.

Gold back at inflation adjusted (old CPI data) levels ($5k) would be good, gold at $10k and more would mean we really are into guns and ammo time…..

However it is still a good visualization.

#80 Abitibi Doug on 07.30.11 at 11:38 am

If the object of the whole exercise last decade was to increase home ownership, why not make houses more affordable? In the older neighbourhoods of all towns and cities, you see smaller houses including those war time bungalows. Isn’t it odd that family size has gotten smaller over the last 50 years or so but houses have gotten bigger? That’s the root cause of this problem that led to the mess we’re in today.

#81 arctodus on 07.30.11 at 11:46 am

It must suck to be you. — Garth

Why Garth…I didn’t know you cared (wink).

I do note however that you do not refute my assertions?
It really does “suck” if I am correct.
Because my assertions are based on real world facts (or as close as a regular guy can surmise based on research) and not on the imaginings of “economic analysts” it does not harbinger well for the future.

I am a small business owner and am part of this little experiment gone awry we call growth economics…so I am more than a little concerned….

But I am not delusional as are so many…..the housing sheep are perhaps the worst, but even so called “bear” analysts for the most part do not understand just how fragile is the house of cards we are part of.

I would hope that a hard eyed look at the facts would assist many folks in making truly prudent decisions about their futures

A World made by Hand truly is coming…we can just hope that we do not have to knit socks suffering from radiation poisoning?

http://www.businessinsider.com/bob-moriarty-peak-oil-passed-2011-7

#82 Print debt-free money? on 07.30.11 at 11:53 am

Garth,

This may sound like a silly question: But why doesn’t the US government just start printing their own interest-free money?

Why can’t the government take back its money creation power? away from the Fed?

In other words, why should (any?) government be forced to borrow money into existence (with interest) when it has the power to create its own?

It has worked in the past, under various presidents, why not now?

Food for thought :)

#83 Killer Chicken or Imploding Boomer? on 07.30.11 at 12:05 pm

Utopia/Aussie Roy – Oz has a more widespread housing affordability issue than Canada. Oz’s five major markets (Sydney, Melbourne,Brisbane,Perth, Adelaide) comprise
about the same population as Canada’s (TO, Montreal,
Van, Ottawa, Calgary) in a country of smaller total
population, and only Vancouver has an index to match those markets. The Oz mortgage debt should not surprise.

#84 mousey on 07.30.11 at 12:06 pm

Pretty depressing stats in the entries today. For what it’s worth I think the US is going to have a mini economic implosion. I say mini because, it’s too big to fail, but not so big that it can’t get eaten aound the edges and lose a limb or two. If they don’t solve the debt crisis with a deal to raise the debt ceiling, they can draw on other resources to temporarily stave off the disaster. I agree that the US crisis is mostly a political drama and democrats and republicans are using the issue to tear each other’s eyes out. It’s called demoncracy and at times it does resemble a train wreck in slow motion.

Back to real estate in the quiet sunny crime free hamlet of Vancouver westside. I’m being sarcastic here as my rag top was slashed a few weeks ago and my blue tooth got ripped out a week later. About two months ago, two houses on the next street were listed. The one on the double lot sold in about 1 week for about 1.7 million which was either asking price or close to it. Its single lot friend on the other side of the street, bordering an alley sits on the market unloved (except by the owners) who cling to asking at about $1.5. Also, a few signs have gone missing – I’m thinking no sales because no appetite for crap houses on single lots priced beyond lot value. The lot value listings go quickly and the orange fencing and bull dozers are pretty much there within weeks. Interestingly, the three new green houses, all with lane way houses still sit unsold at 33rd and Cambie. They are listed around 1.6 -1.7 million. They have been for sale since the Olympics. They do sit on a major traffic artery into the city, but they are beautiful, new, have 3,000 square feet, and sit accross the street from Queen Elizabeth Park which is a real jewel. Why no buyers for these three houses? Haunted by evil sea monkey? I don’t get it. There have been several tear downs and newly builds on other busy arteries such as Oak Street that have been listed and sold, but these puppies continue to languish.

At the risk of sounding like a broken record, will somebody with the Canadian government please take note of the relationship between the housing bubble, interest rates and lending practices and do something about it! The inertia on this issue in Ottawa is completely mystifying. Lot’s of talk and no action. Can’t raise rates because of effect on the economy? Balderdash! We are going to get a kick in the behind anyway.

#85 TurnerNation on 07.30.11 at 12:11 pm

Attention Doomers and Little People: US corporate profits are up up up and set to rise further.

We are living in the greatest wealth transfer of little peoples’ (our) money to corporations sice the Great Depression. “War of Terror” is latest scam, but it’s working! Follow the leaders. Buy good stocks on their dips!

U.S. Corporate Profits Strong On Asian Growth
By MARILYN ALVA, INVESTOR’S BUSINESS DAILY
Posted 07/29/2011 06:37 PM ET

As the U.S. economy showed new signs of weakening Friday and the nation’s debt woes dragged on, corporate profits continued to cruise ahead.

Part of it was due to strength from outposts in the Asia-Pacific.

With 65% of firms in the S&P 500 reporting Q2 earnings as of Friday, profit rose a blended 10.3% vs. the year earlier, according to Thomson Reuters.

Excluding the weakest link — banks, and especially Bank of America (BAC) — profits are on track to rise 18.3%, the seventh straight quarter of double-digit growth. It would be the smallest gain since the end of 2009 as comparisons get tougher

http://www.investors.com/NewsAndAnalysis/Article/579994/201107291837/China-Fuels-Corporate-Profits.htm

#86 Snowboid on 07.30.11 at 12:18 pm

#56 timo…

Phoenix is an interesting city, where you find some neighbourhoods with only a few foreclosures or empty homes, and others that are almost deserted. But many believe they are ‘rising from the ashes’.

Most Phoenicians welcome the influx of Canadian buyers, and the dollars spent during the six months they reside there. It’s surprising the number of Canadians already there with many from Alberta, some from BC and a few from Ontario.

Although most RE ‘experts’ believe prices may go down further, in the last few months some areas have seen small increases.

It would be disastrous if all the foreclosed homes went to auction at once, but this isn’t likely to happen.

In most cases these foreclosures are high-risk investments due to damage (seen and unseen) by former owners, transients, or being left vacant during the hot summer.

The number of ‘flippers’ seems to be decreasing as they head for the better odds in Vegas.

However, surveying the damage done there in the past few years from RE ‘porn’ gone wild is a clear indicator of the near future for RE in Canada – it’s not pretty!!

#87 JoeTheBruce on 07.30.11 at 12:26 pm

How many paranoid schizophrenics actually visit this blog? Counting the number of people leaving comments should give you a pretty good idea.

#88 Timing is Everything on 07.30.11 at 12:35 pm

#38 Samuel

Good for you!

http://tinyurl.com/3mqslfz

http://tinyurl.com/3dsl76n

#89 terces on 07.30.11 at 12:36 pm

Here is another fearless prediction.
First an observation: The US is waaay ahead of the rest of the world in their real estate collapse. In some US Cities the price pendulum has swung about as far as it can. While countries like Canada and Australia have been able to resist the downturn, the US has been deleveraging like crazy.
And now the Prediction: The US will come out of the downturn waayyy before many other countries and will be viewed as a strong nation, relative to the other countries that are collapsing. There could be somewhat of a benefit to Canada as the US is our largest market. But the real estate downturn in Canada will hurt badly and the negative wealth effect will be in full force, long after the US is well into recovery mode.

#90 GrimBot on 07.30.11 at 12:38 pm

People in Toronto are now learning the reality that basic mathematic s and political rhetoric do not mix. After having voted for the absolutely impossible campaign promises of Rob Ford….no service cuts, no tax increases…and balancing the books by finding $2 Billion in ‘gravy train’ waste….voters are now discovering that after spending $2Milion for an extensive KPMG audit there is no quick fix…and there was no ‘gravy train’ after all…..DUH! People are now surprised?

Ford is now proposing massive service cuts and a 3% tax increase. It was evident from the outset that his platform couldn’t pass a basic mathematics test. It amazes me that Toronto voters are now up in arms….I guess they were simply too stupid and/or uninformed to cast an intelligent vote in the fall of 2010.

Ontario voters will soon go through the same situation with the Tim Hudak (i.e. Mike Harris light) Conservatives and their outlandish promises. The result will probably be a Conservative government in Ontario and massive program spending and the selling of government assets to look like the budget problem is being addressed.

We have 4 years of Harper slashing and burning to come….what is left after that time is anyone’s guess.

The stupidity happening in the US boggles the mind. Anyone with even a few live brain cells can see that unless the US increases taxes it is absolutely impossible to have a balanced budget. Over the past 60+ years only Clinton was able to have a balanced budget during part of his tenure of president. Since the 1950s every other president has added substantially to the national debt of the US.

Time and time again voters are duped into voting for platforms that make absolutely no economic sense. The recipe for electoral success seems to be drive-by smearing of political opponents…saying as little as possible about real intent…and wrap candidates up in some stupid slogan that emotional, uninformed, and gullible voters will buy. Hell….it worked in Germany in the 1930s….and it’s worked in the West for decades.

Democracy is wonderful….if it wasn’t for the stupidity of voters.

#91 The American on 07.30.11 at 12:48 pm

At #73: arctodus, I honestly do recall laughing this hard in over a year. Good luck with your little theory. Let us all know how it doesn’t work out for you. As Garth said, “It must suck to be you.” You really don’t GET it, nor do you comprehend all economies and currencies are relative. Canada hasn’t made that minor adjustment yet.

#92 Grammar Police on 07.30.11 at 12:53 pm

“distory”, “empedemic”, “Since 1980 their have been 20 “, “your on a roll”, “probely”, “no bug deal ”

I’m finding it increasingly hard to recommend this page to other people who may be interested in the subject due to flagrant abuses of the English language. Since the majority of commenters here seem to think of themselves as having superior intellect to the overleveraged masses, it would help if they avoided basic spelling and grammatical errors.

To me – even the most truthful statement is rendered virtually meaningless when it is composed of errors in composition. Please run your posts through Word and fix the squiggly lines before hitting Submit.

#93 Killer Consequences on 07.30.11 at 1:05 pm

There are 5 major areas in ones environment that need to be watched:

1 – Household
2 – Relatives/Family
3 – Town/community (surrounding area)
4 – Country
5 – International Affairs

Old timer here however changing name for this post. I have been too busy to comment and read through the mountains of comments everyday so just lurk at Garth’s then a handful of the rest. If the old regulars guess me no worries, for I have a story to tell.

Last night while sitting in a parking lot of a corner store, a Mercedes pulls beside me and parks. the driver was 50 at the most. I chatted him up and asked him if he was a doctor. Nope, Lawyer, Nope … Real estate agent… He bounces out of the store with only a bag of cubed ice … The area I was at is surrounded with (that quiet bedroom community) 1M plus houses. One can only surmise *his home was close by* My next thought was “How deep is this poor guy on the debt wheel?”

Is everything as peachy as it seems?

Just peel back that first layer and lets look. A few years back GF got into some real troubles just trying to keep head above water… was forced to survive with VISA card. She is in the trades and when things turn in the housing industry they can turn sharply.

2 months ago after sitting down and hamming out all options, she was forced to declare bankruptcy on a $35,000 credit card. This is the only debt she had/has, however, even after not applying any more to the outstanding balance for over 2 years it was becoming impossible to keep up with the interest payments (even at min payments) Work for her has dried up and things are starting to look bad. she had to miss a payment and guess what those blood suckers do? they raise the interest percentages…. Well they can raise it all they want now for Visa can choke on it.

The bankruptcy officer/lawyer laughed when he compared her limit to his for his was only 20K as offered by his bank and he is fully employed. She still had $12K credit ceiling if she wanted to go shopping.

Back at Christmas time my mom told me that they were in hock $60K and had the house on the market for 300K. they are 3 hours out of Vancouver. to this day no offers have come to them and the “house as a retirement plan” is NOT working out. the house has been on the market for 10 months now.

The surrounding areas (Vancouver Lower Mainland) is stalling on the housing front. I can see it on front lawn signs… Cobwebs are getting thick on them now. Our governing bodies are so out of touch with reality and who they work for that it is only a matter of time before more and more people wake up to the fact that this charade of “riches” will be over. Then the tax base will be shrinking as more people hit the UI lines.

GF was working at a RE Agents office last month and was chatting up one of the agents. sales have falling off a cliff he said. a couple of his friends (who work in other offices) have had to look for part time work to supplement the RE selling. He told her that it is only a matter of time before the big bust is here. Then he said something that surprised her, “the MSM news is sugar coating everything, if they told the truth of how bad it is here and in the states people would be really worried”

And this brings me to the real reason I wanted to write today.

Garth, you seem to be getting very soft in your words of the day. You have stopped hammering on what S,F,C, have been up to. You seem to be soft on telling it as it is, while you carry on with the same old song day in and day out. Have you changed your tune from the realities of “how to survive” to lets just muddle through and this to shall pass? today’s post is a nice “are you ready” account, well from what I had to post I have the feeling that many people aren’t ready for anything.

Garth I have to hand it to you, you have been pounding away day in and day out on this blog, and you never miss a beat. When you say that this “pathetic blog” gets attention from the faithful I understand what you are saying. Hang in there, I am sure during that from now til the end of the year things are going to be getting interesting.

ps, how are the carrots growing? The seeds we planted this year died in the wet cold spring…

#94 dd on 07.30.11 at 1:05 pm

Oh look the US is falling back into a recession … just as predicted (but not on this site).

#95 dd on 07.30.11 at 1:15 pm

#4 squidly77

“A U.S. downgrade is almost certain”

Squid, where have you been? Do you think investors are waiting for the bond agencies to down grade the US debt? It is already happening. Too funny.

#96 Davey Boy on 07.30.11 at 1:18 pm

Dear Garth, do you see the debt crisis in the USA resolving before the deadline? Secondly has all the posturing create secondary long term consequences in the global economy even if a resolution is met in time. Really enjoy your blog, it is the main reason I opted not to buy in Vancouver, so for all the criticism you receive know that there are people who are grateful for your expertise in these matters.

#97 Cookie Monster on 07.30.11 at 1:27 pm

Shelter may be a human right.
——
Shelter is not a right, it’s necessary maybe, but it’s not a right. Like food, healthcare and education are not rights either, they’re nice to have, but they are not rights.

In order for these things to be rights they must be given to people who do nothing at all to help themselves, which means the resources must be taken from someone else who is successful in order to give resources to people with nothing who do nothing.

So the only right anyone has is the right to work and to keep what they earn, to be unencumbered by government and unassailed by society. Everyone has the right to pursue happiness, not the right to happiness.

#98 An Cat Dubh on 07.30.11 at 1:50 pm

Zombie banks(banks bailed out by US taxpayers) are bulldozing many “foreclosed” homes in the US. This they assume will prevent homes from losing more $$$.
I say bulldoze the banks while you’re at it.

http://www.bloomberg.com/news/2011-07-27/bank-of-america-donates-then-demolishes-houses-to-get-rid-of-foreclosures.html

#99 Timing is Everything on 07.30.11 at 1:52 pm

#54 Aussie Roy
#78 Utopia

Yes, over $1T for the whole of Canada.
————————————————-
…May explain a few things?…Eh Roy. ;)

http://www.youtube.com/watch?v=whjNr-hjr7E&feature=player_embedded

http://theinspirationroom.com/daily/australian-stereotypes/

#100 Sail1 on 07.30.11 at 2:43 pm

The basic flaw: not everyone should have a house. Shelter may be a human right. Granite counter tops aren’t.

Keep telling it Garth, I couldn’t agree with you more. We need good tenants. Home ownership is not for everyone. Renting is a smart option.

#101 The InvestorsFriend (Shawn Allen) on 07.30.11 at 2:44 pm

U.S. DEBT YIELDS DECLINING!!

It’s interesting to note what is happening in U.S. Treasury yields over the past week or so. The yield on 1 months bills rose from (effectively zero) 0.01% to 0.16% (still barely above zero). But the yield on 10-year treasuries FELL from about 3.00% to 2.82%. You can see these here
http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

It seems idiotic to me that in reaction to this debt crisis institutional investors have driven the yield on the 10-year notes down. When Greece and other countries face a debt crisis, their yields or interest rates soar. Sure, the market is confident that the U.S will pay it’s debts (so am I). But shouldn’t it be a bit less confident than it was a week ago, a month ago? And shouldn’t it worry about inflation if the U.S. decides to print money to pay off the debt?

And what about the rise in the yield on the short-tem money. Okay that is in the right direction at least. But let’s look at this. Previously at 0.01% interest the interest on $10 million in a 30 day bill was $1000 in a year of less than a $100 in a month. This is completely laughable as a return but the reason people accepted it was that if you had $10 million in cash you had to park it someplace and banks don’t guarantee deposits that large so you put it in T-bills just for the safe-keeping. You did not put your $10 million in there to collect a $1000 per year or $83 per month.

And now the rate is 0.16%. So now you will get $1,333 per month on your $10 million. To the extent that people fear a temporary delay in collecting back their $10 million, this $1,333 seems small compensation. I would say a few institutional investors decided they would risk keeping their money in a bank or moved it to corporate commercial paper.

We should not assume that these treasury yields are in any way rational. The institutions that invest in these are creatures of habit (and they are often mandated to invest in these “safe” bonds) and they find it difficult to switch to alternatives on short notice. We could see yields change (RISE) a lot in the months ahead as the institutions adjust to a new reality (One where the U.S. Treasury can no longer be quite so blindly trusted to meet its obligations on time no matter what).

Investors are seeking safe haven. There is nothing safer than US Treasuries. — Garth

#102 TurnerNation on 07.30.11 at 2:55 pm

Best Place on Earth?? A food bank in
Whistler? Record numbers?

Changes considered at food bankOperators may have to reduce amount of food given due to increased use Social Services
July 28, 2011

Jennifer Miller
[email protected]

Food bank use in Whistler dropped for the first time this year during July, but the drastic increase in need aside from this month has the operators considering reducing the amount of food given to each individual.

While July numbers are slightly below stats from the same month last year, there has been a “drastic increase in visits” at the Whistler Food Bank during the rest of 2011, said coordinator Sara Jennings. There have already been more visits to the food bank so far this year than during all of 2010, she added.

Because of the increasing costs for the Whistler Community Services Society (WCSS) to run the food bank, Jennings said she and others at the society are discussing ways to find savings. One option is to cut down how much food is given to each user — a measure that has already been taken at many food banks across Canada, she said.

#103 The InvestorsFriend (Shawn Allen) on 07.30.11 at 2:57 pm

U.S 30-day Treasury Bill yields.

Further to my last post about the yield rising to 0.16% for 0.01%.

Is it really rational that the market has said in the face of the potential delay in getting their money back from the U.S. treasury.

“Okay, last week I was happy to give you my $10 million for 30 days in return for just $83 in interest (and mostly for the safekeeping you provide), but now I see all this talk of default, so now if you want me to lend you my $10 million for 30 days (and I see you are no longer as safe as I thought) I want $1333 as risk compensation.”

I mean laugh-out-loud! What good is $1333 as compensation for the risk that they delay giving me back my freakin’ $10 million! I could default on my own obligations if my millions are tied up with you Uncle Sam and you decide not to give it back right away.

But this is what the market has said. And the market is never wrong, right? Especially the bond market, right?

#104 Bill Gable on 07.30.11 at 3:26 pm

Notice the subtle, just below the surface enmity, for our American neighbors, as some people are actually pulling for the US to do a face plant.
Mr. Turner told you why that is a bad thing for us smug little Canucks – but still people don’t get it.
If your major trading partner is bust, you are too. China isn’t or won’t be ” the new engine” to save the world.
The planned economy of China is a disaster.
Are you ready?
Like the man says, pay attention. Glued.

#105 Timing is Everything on 07.30.11 at 3:40 pm

#93 Grammar Police

I don’t care as much as you. However…

If dawgs use Firefox…

Tools tab->Options->Advanced->General tab->
click the ‘Check my spelling as I type’ option.

You can even use a Canuck dictionary if you wish as an ‘add-on’. Spell check as you type, right as you comment on this pathetic blog. Red squiggles made easy.

https://addons.mozilla.org/en-US/firefox/addon/canadian-english-dictionary/

#106 Bill Gable on 07.30.11 at 3:42 pm

How bad are things in New York City?

“Cops have busted a group of oddball poachers in Prospect Park — a band of vagrants that was trapping and eating ducks, squirrels and pigeons.

Parks officers wrote four tickets — two for killing wildlife and two for illegal fishing — totaling $2,100 in fines during a two-day period last week.”

#107 Dan in Victoria on 07.30.11 at 4:01 pm

Hi KC
Good to see you’re still here. Was wondering about you.
I’ve been sitting back like you just watching the circus.
INTERESTING.
Have cut back on work to just about zero, no use chasing it downhill.
Spent some time up island and on the west coast, anyone who has any sort of critical thinking skills should be able to see what is unfolding, prime camping spots not fully booked.
Fewer people at the marinas,
Guides not booked
prices starting to creep lower
Resturants, these are nice high end joints on the water half full at dinner time etc.

Are you going to have the farmers market?

Any how heading out now for a few more days of re and re.

#108 TurnerNation on 07.30.11 at 4:42 pm

Dear up-and-coming blog dogs (aka the 99%-ers), the following posting names are still available for your posting use and pleasure. Reserve yours today.

Da fire in my belly
Glug glug glug
Bunker-vision
Worst Place on Earth
Stephen Who?
Fuddleduddle
I see Debt People
Rumours of War
And then we cheeched
My other car is a Hummer
It’s just a matter of a trickle down

Reserved: Blog Dog Carney

#109 Burnt Norton on 07.30.11 at 4:50 pm

#85 mousey on 07.30.11 at 12:06 pm

Re: townhouses on Cambie & 33. Same for a row of tony new brownstones on Alma and 6th. No movement for months. Too pricey.

Attached sales appear to be toast, even in prime areas. Thx to Garth I got out just in time. Won’t be long before detached follows suit. I feel badly for friends with $1M mortgages. The other day even my banker admitted the presence of a “massive RE bubble” in Van. 6 months ago he said there was a stampede of young professionals looking for financing ASAP to avoid being priced out. Oops.

#110 Coho on 07.30.11 at 5:00 pm

In order for these things to be rights they must be given to people who do nothing at all to help themselves, which means the resources must be taken from someone else who is successful in order to give resources to people with nothing who do nothing.

So the only right anyone has is the right to work and to keep what they earn, to be unencumbered by government and unassailed by society. Everyone has the right to pursue happiness, not the right to happiness.

The fact that many people have been disenfranchized of the rights/opportunity stated in the second paragraph leads to the predicament you describe in the first paragraph.

When government STOPS representing the best interests of central bankers, multi-national corporations, monarchies, etc and STARTS representing the people who elected them to office, then there’ll be ample opportunity for all to be able to carve out their own living and not have to rely on “free” handouts which are not free. They are not “free” because people that once had good jobs no longer have them because their jobs have been outsourced to China and India. They’ve been stripped of 40K – 50K jobs in return for 10K in handouts. That is not free money. The price they’ve paid is very heavy, but corporations are happy because their profits continue to soar.

And on the other end is the horrendous amount of interest we pay to the hidden puppet masters behind the central banks. People need to wake up. It cannot end well when from one end, the majority of people cannot make ends meet because they’ve been disenfranchised of decent jobs and thus opportunity, and raped by the interest we pay on the national debt which is owed to the ruling class, on the other. The interest alone is killing us, let alone paying the actual principal off! They’ve got us by the knackers!

Touting how successful one is during these times is being cocky, imo. There are many good qualified talented people sitting on the sidelines because of globalization and exploitation of cheap labour overseas. Perhaps for some of the smug ones still unaffected, their grief is just around the corner.

Western countries are done for. China, India, etc is where the party is now. And anyone who thinks he or she can accumulate a tidy sum for themselves and KEEP IT while half the people don’t pay tax or are in need of government handouts, will get a rude awakening.

#111 kc on 07.30.11 at 5:30 pm

Hi Dan

Are you going to have the farmers market?

Nope, that is unless we get killer weather and very late September Indian summer. the spring was very bad for planting, too wet and cold. planted over 700 feet of corn and doubt we will get 1 ear. (plants are barely 6 inches tall) still hope for the beans and maybe some peas. Only things that are doing good are the peppers, tomatoes in greenhouse and the squash in the fields. hoping to be able to get a late crop planted end of this month thou.

On your journey about the island, did you go to top North? wondering how things are going there. West… port Alberni? hurting?

#112 Victoria on 07.30.11 at 5:34 pm

I know many many people in Victoria who are taking pay cuts to keep their jobs.

How long is this charade going to continue?

#113 GTA Girl on 07.30.11 at 5:36 pm

Was in Yorkville area of Toronto. So many condos going up. Prices fro $1.8 to over $10mil….?

Absurd. When you can buy a reno’d house up the street for little over $1mil. And they aren’t selling as fast.

No person w/money would see value in those condo purchases. They can’t write off payments, taxes are stupid high. Inventory is too much.

Toronto isn’t NewYork. We don’t have the population to warrant these prices.

Why would I buy a $10mil condo in sad Toronto?

#114 Helicopter Ben on 07.30.11 at 5:36 pm

Kinda funny how everyone is focusing on the states recently and bringing up points like they are in trouble cause of the debt ceiling. that isnt the problem and you are getting your news from tv. their problem is unfunded liabilities, they arent payable year over year without getting into trillions and trillions of debt which will compound itself as their aging population gets closer to retirement. its no longer a democracy as lobbyist has taken over the white house, corruption is rampant and jobs have been exported east. all done on purpose to move closer to a one world currency. there is no balancing the budget the numbers they show you are a lie, you could tax everyone 100% and you wouldnt even come close to balancing the real budget. they are eventually going to steal their social security as they were supposed to just hold onto it for the citizens and pay them back when they retire, instead they spent the money right away and will renag on that promise, they will also start to steal their 401ks, making them invest back into the debt that wont return much of a profit like they did in argentina and ireland. the U.S. only REALLY exports its debt and not many countries want it anymore. as the U.S. economy continues to erode they will spend less and less which in turn will slow down the eastern countries exports which will lead them to buy even less of american debt which will cause interest rates to rise. meanwhile inflation will continue to rise as they print more money to pay for all their bills causing a viscous circle of other countries buying less of american debt leading the u.s. to print even more. as you can see there isnt much of a solution , the people are bloated with debt, have no jobs and taxes and inflation are going up and up. the american government has taken many steps already to move towards a military state, you couldnt pay me to live there. there is a lot of nice places to visit and many nice people there, but the government has allowed all this to happen, i do not wish for them to fall, but i wont deny the facts of what is happening either.

#115 arctodus on 07.30.11 at 5:43 pm

#92…..your optimism is common….based upon wishful thinking and unfounded. But you are in the vast majority.
Congrats.

#116 The InvestorsFriend (Shawn Allen) on 07.30.11 at 6:02 pm

WHY CAN’T The U.S. PRINT MONEY TO PAY IT’S DEBT?

Printing money adds to the U.S. debt . So money printed to pay debt leaves the debt unchanged.

But, this is an accident of history.

The U.S. counts its paper money as a debt (and the electronic variety that the Fed creates is counted as a debt as well).

This made sense when the treasury had an obligation to exchange paper dollars for Gold.

It no longer makes sense.

Paper money is not a debt of the U.S. government. There is no promise to re-pay paper money, ever. Money is simply accepted by all of us as legal tender the thing by which we exchange goods and services and keep track of our share of the real wealth (the goods and services we could buy).

If the U.S. simply recognised that its paper money and money the Fed creates is no a debt at all, the U.S. debt drops by $3 trillion.

Think about it, paper money is not a debt of the U.S. federal government. They have made no promise to pay off that paper dollar with anything, ever. Therefore, it’s not a debt.

Well, I have to go now, I gotta call the President and let him know. I may start by calling the Treasury Secretary. Garth have you got his cell phone number handy?

#117 Imstupid on 07.30.11 at 6:15 pm

#10 Math Teacher from last post

I’m not angry, I’m simple trying to tell you that you have no idea what you are talking about. Just like most on this site that leave comments. Your a math teacher, try teaching calculus to 6 year olds. It’s the same thing as most people have the financial intelligence of 6 year olds. I understand that his formula is not written correct, but you must understand the investment theory that it comes from. I don’t you understand it and that’s why you post such ridiculous comments.

#118 Imstupid on 07.30.11 at 6:18 pm

I don’t think you understand

#119 Cato on 07.30.11 at 6:24 pm

Clinton & Bush were cut from the same cloth. Doesn’t matter what ideology holds power the end result will always be the same. Unsustainable debt leading to default leading to institutional failure. Its written in our genes.

I view the US and Canada as two neighbours living side by side in an exclusive neighbourhood. Lets call them Mr. White & Mr Blue. White works a white collar job, Blue is a worker bee.

White has a high earnings potential, he’s a bit of a prick but no-one on the block can compete with him once he puts his mind to something. White hit a rough patch and got into debt. He picked up a few bad habits over the years like partying all night and skipping work. Now the bank is knocking at the door, lenders are worried and threatening to cut up credit cards. But the lenders see the earnings potential of White and want to work with their friend. He’s made them alot of money in the past. They decide instead of forcing him into bankruptcy they can force him into rehab. Get him back into shape doing what he does best, making them rich.

Blue has a much lower earnings potential then his neighbour. He probably shouldn’t be living in the same neighbourhood but Blue inherited a trust fund and this allows him to pay for a lifestyle he normally could not afford. Plus, White always liked his neighbour and has given Blue alot of odd jobs over the years. The relationship was so comfortable that Blue simply never bothered to look for work outside the neighbourhood and relied on White to supplement his trust fund income. Blue also has money problems but refuses to admit it. Blue is desperately hoping White gets his act together and hopes things go back to the way they were. Blue doesn’t deal with change very well.

Now White is headed to rehab whether he wants to or not. He’ll fight it to the bitter end but eventually his creditors will win out and force him to change his ways. When White gets out of rehab Blue probably won’t recognize him. Instead of giving Blue his old job back the new White will likely be competing with Blue for work from the new neighbours moving in down the street. Blue is too out of shape to keep up with not only White but everyone else on the block and will probably just sit in the back yard drinking beer living off the trust fund. Eventually the trust fund income will start to dry up and the neighbourhood will kick Blue out.

Now who is really the screwed in this scenario, Blue or White? I would say its Blue who has the bleaker future. White will always have the income potential to live in the best neighbourhood, regardless of debt. Its Blue who does not deserve the life he is accustomed to unless he can figure out a way to earn income that doesn’t involve White.

Canada is in trouble, much more so than the US. I won’t bet against the US but I’m not so sure about Canada. Take away our US trade advantage & you’ll find Canada becomes a much harsher place. We become a country similar to those in south america where status in life is determined by who has access rights to resources. Its a world where gov’t, not free enterprise, chooses who in society gets to be a winner and who will be a loser. This false economy Canada has been living under over last few decades is about to come crashing down hard and the country isn’t ready for change.

#120 TurnerNation on 07.30.11 at 6:25 pm

Little People are bugging the elite leaders again! Keep them away. Our glorious leaders and their burgeoning democracies?

http://www.torontostandard.com/the-sprawl/losing-it

It was that, or Ford had totally flipped off a six-year-old and was trying to fudge his way out of it.

So it was that a CTV’s Naomi Parness, sitting in his office, tried to ask the mayor what had really happened. The mayor turned pink and started laughing. His press secretary did the only reasonable thing under the circumstances: She started waving her hand in front of the camera. Batra’s plan was to spike the footage, and render it unsuitable for air. We know this, because she explained what she was doing as she did it.

“You’re done!” she said. (Wave, wave.) “See? You’re not going to be able to use it, because I’m just going to keep talking.”

#121 avenirv on 07.30.11 at 7:16 pm

GTA Girl ,
because you make >50 million a year.
but you forgot something, a condo there was sold for >20 milion. you see ? all depends what 1 milion represents for you.

#122 Live Under Your Means on 07.30.11 at 7:20 pm

111 Coho on 07.30.11 at 5:00 pm

In order for these things to be rights they must be given to people who do nothing at all to help themselves, which means the resources must be taken from someone else who is successful in order to give resources to people with nothing who do nothing.

So the only right anyone has is the right to work and to keep what they earn, to be unencumbered by government and unassailed by society. Everyone has the right to pursue happiness, not the right to happiness.

………………….

The fact that many people have been disenfranchized of the rights/opportunity stated in the second paragraph leads to the predicament you describe in the first paragraph.

When government STOPS representing the best interests of central bankers, multi-national corporations, monarchies, etc and STARTS representing the people who elected them to office, then there’ll be ample opportunity for all to be able to carve out their own living and not have to rely on “free” handouts which are not free. They are not “free” because people that once had good jobs no longer have them because their jobs have been outsourced to China and India. They’ve been stripped of 40K – 50K jobs in return for 10K in handouts. That is not free money. The price they’ve paid is very heavy, but corporations are happy because their profits continue to soar.

And on the other end is the horrendous amount of interest we pay to the hidden puppet masters behind the central banks. People need to wake up. It cannot end well when from one end, the majority of people cannot make ends meet because they’ve been disenfranchised of decent jobs and thus opportunity, and raped by the interest we pay on the national debt which is owed to the ruling class, on the other. The interest alone is killing us, let alone paying the actual principal off! They’ve got us by the knackers!

Coho – totally agree with you. Don’t know who wrote the 1st 2 paras but he/she sounds like a libertarian.

#123 timo on 07.30.11 at 7:22 pm

http://globaleconomicanalysis.blogspot.com/2011/07/canada-gdp-declines-3-largest-drop-in.html

“it’s not temporary.

Europe is now in austerity-mode, US cities and states are cutting back, the odds of more fiscal stimulus in the US are roughly zero, the US might (and should) lose its AAA rating, Australia is a basket case on the bursting of its property bubble, Canada has the second or third largest property bubble next to China and Australia, the bond market is targeting Italy and Spain, Brazilian defaults are soaring, China is overheating and needs to slow, yet the average economist is looking for a robust second-half. Go figure.”

we have been found out!!!

Fire up the bulldozers and head for Vancouver.
:)

#124 Cookie Monster on 07.30.11 at 7:31 pm

#111 Coho on 07.30.11 at 5:00 pm
Exactly, well said. So many people are out of work and now have no hope of ever finding a good job because the good jobs are gone or continue to go. But who can blame them? Businesses are relocating to India or China in order to increase their profits and/or to remain competitive, if they don’t make these changes now to steady themselves their competition will and then they will be bled dry by being uncompetitive remaining in a country with overbearing socialist expenses.

In Canada, both the CPP and EI should be scraped from government responsibility altogether. Then the government could simply stop worrying about all the shortfall and mismanagement problems they’re facing.

Insurance companies should run insurance programs such that if people want to buy it, they can, they would pay premiums that would adjust to the insured persons claim history, job sector and risk profile. I would personally never buy it, since I can always get a job. The same goes with the CPP, it should be optional as well, as a small business owner I need that money today as I’m sure many other employed people and their employers do too. The loaded costs of all these mandatory programs really add up on an employer and their customers who ultimately foot all costs, plus HST.

Then of course there’s the federal and provincial income taxes, and any additional pension and benefits programs. These all add up too. So with this in mind, no one should ever blame a company for leaving Canada or the USA for more friendlier jurisdictions. Why would any business locate here? I’ve noticed usually the government has to pay a new businesses to locate here, such as an auto or jet engine manufacturer via subsidies or special deals.

Anyone who thinks that businesses who leave are just greedy and just leave the country to be hurtful or spiteful, is absurd. No company wants to leave a country once they’re established, moving costs a lot of money and is very disruptive to their operations. Anyone who owns a mutual fund or has CPP contributions or owns stocks and bonds should know that business greed is your friend, and should not mind if a business behind these vehicles does all it can to remain profitable, since profits are rewards for doing things right, the market likes a business that’s profitable. Apple makes money because people like what they are doing, the same goes for Exxon. No one forces us to buy gas.

#125 wes_coast on 07.30.11 at 7:51 pm

to #83 Print debt free money,

Printing money is a trick that many countries have tried in the past and it has doomed them to eventual demise. The consequence of printing more money is that every dollar you hold in your pocket is diluted down and worth less. This causes inflation whereby your money can buy you less and less. The US and many other nations have done this since 2008 to fight off deflation which they deem to be the mother of all economic traps. (This is why the US dollar continues to devaluate and why commodities that trade in US dollars are inflating) Germany also did this once in history and the result was hyperinflation, the decimation of the German middle class and the rise of Hitler. Printing money to pay back debt it risky.

#126 Killer Chicken or Imploding Boomer? on 07.30.11 at 7:52 pm

118 Imstupid. Maybe I can help.

Percentage is unitless as a represents a ratio where the numerator and denominator have the same units. The ratio is then multiplied by one hundred to arrive at “per
cent” or per one hundred value.

The figure of ninety has a unit of years. Math teacher says Garth doesnt indicate this, but it must be so. Thus we take 90 (years) – your age (years) and divide by 100
(years) then multiply by 100 (unitless) to get the percent answer. Likewise, we can eliminate the unit “years” from all figures leaving only numbers. At this point you can also eliminate the two 100s as well.

Not sure why it was an issue as most agree its a good
guideline.

#127 young & foolish on 07.30.11 at 7:54 pm

*Sigh* …. so much bile on this blog, but we still love it … especially the Garthisms, like “housing maybe a right, but granite countertops aren’t”, and “If you must buy real estate, make sure it has positive cash flow”

Honesty, common sense, and wisdom with a twist!

Thanks again Garth, for being there for us …

#128 The InvestorsFriend (Shawn Allen) on 07.30.11 at 8:09 pm

FED BALANCE SHEET

Show3s Fedweal Reserve notes, i.e. money as Fed Debt

http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab9

Bring on the debate folks. U.S. money is not debt of anyone and not of the federal government. No promise or expecation for it to ever be redeemed by the Fed for anything.

Calling it debt don’t make it so.

It ain’t been debt since it was redeemable in Gold.

And that’s a good thing.

When the print more they cause infaltion. But in no real sense does the U.S. go into debt when it prints money.

#129 Utopia on 07.30.11 at 9:08 pm

#115 Helicopter Ben

Then you will be glad to know Ben that our CPP investments are real and span the globe. The fund has been growing and had a good year all in all.

Here is the annual report:
http://www.cppib.ca/files/PDF/CPPIB_ARsummary_2011.pdf

You will probably feel more assured knowing that payments are not merely coming out of the consolidated revenue fund from revolving tax incomes, but rather, are based on real invested money.

#130 Oasis on 07.30.11 at 9:12 pm

Investors are seeking safe haven. There is nothing safer than US Treasuries. — Garth
_________________________________________

gold is safer. it’s risen against the US Dollar, and treasuries.

Safe means safe, not speculative. — Garth

#131 Moneta on 07.30.11 at 9:16 pm

Utopia on 07.30.11 at 10:48 am
I just bought a knitting machine at a yard sale. Two of them actually. Now I know it is not manly to own one but I figure, what the hell. I am not the insecure type.
——
I’ve been shopping for those. Sewing machines are cheap these days so I’ve been thinking that over the next decade, it might make sense to get back into the schmatte business. So maybe it’s time to load up on industrial machines.

Just a thought…

#132 The InvestorsFriend (Shawn Allen) on 07.30.11 at 9:21 pm

U.S. dollar bills are not debt!

Wikipedia explains about paper money of “federal Reserve notes”

http://en.wikipedia.org/wiki/Federal_Reserve_Note

They say:

“Once the notes are put into circulation, they become liabilities of the Federal Reserve Banks and obligations of the United States.”

And the Notes are supposedly backed up by the assets of the Fed.

Two points:

1. It’s simply not true, they simply are not debt because no one who holds a paper dollar is owed anything by anyone by virtue of holding that paper dollar.

2. This in itself is not a problem. The government no longer promises to give Gold for paper dollars. In fact they don’t actually promise ANYTHING. Implicitly they are TRUSTED not to print the dollar into oblivion but they have not promised anything about that. Dollars have value because they are legal tender and are accepted as such.

Printing money dilutes its value in terms of the goods and services that can be bought no doubt about that.

My main point is, that the official legal debt of the United States is being over-stated. They include “federal reserve notes” as debt and these notes (dollars) simply are not debt.

When money is created by the Fed, the value of money is diluted is diluted and they pretend that the debt of the United States is increased. But the creation of money does not require the United States to pay anything, ever. Therefore it is not debt.

Yes, the U.S has too much debt and there is the unfunded liabilities. But the actual debt owed is well below the debt ceiling. On top of that I believe about half of the debt is owed to the government itself.

If I owe $million but I owe to myself, it’s not the same as owing it to quido.

Am I going to have to keep stating my case all night here? Does everyone agree my logic is impecable?

Could someone phone the President and let him know?

#133 Utopia on 07.30.11 at 9:37 pm

$124 Timo said…..

“We’ve been found out!!!”
————————————–
Actually Timo, Mish Shedlock has taken an interest in Canada for quite a long while now and his prognosis is not one that will make anyone comfortable, particularly where our housing bubble is concerned.

He makes for a good read and if I am not mistaken, he follows this site to keep abreast of what is really happening on the ground.

I agree with his remarks regarding stimulus spending. In fact, our low interest rates are our only real form of economic intervention at this time. We are about to lose that as rates begin to return to historical norms.

This does suggest our housing market will suffer and we will experience and asset deflation here at home. It is unclear if it will be as severe as that now underway in the US but I am not holding my breath.

There is a very big worry on the horizon in this regard. You may have noticed incidentally that commodity prices have dropped on news out of Washington that the debt ceiling issue is still unresolved. This could well continue as growth worries dampen speculative interest.

China itself is a huge wildcard. We just don’t know how there situation is going to evolve and the information that comes out of that country is spare to say the least. Some follow shipping reports as one example though that might indicate what kind of export volume is taking place.

Please consider that it is not just assets (homes, for one) in Canada that will see a correction and downdraft, but that we will experience a double hit if resources decline on news of a slowing global economy. That means that provinces could be hurt by falling royalties at the same time our dollar is soaring above the Greenback.

You might almost think it a perfect storm. Make no mistake though….it is deflationary and that will be our nations real concern if growth here tapers off and GDP continues to fall.

I cannot in fact imagine how we will avoid recession here given all the issues percolating now in debt and credit markets. The US in particular, as our primary trading partner, is just treading water and looks to be set for much slower growth. The ECRI amongst other indicators have been suggesting this for some time.

Consumption, savings, investment in new plant and equipment, inventories and worries over the debt overhangs in so many states and cities are all sending very worrying signals.

It is time to get prepared, get out of debt and fortify yourself against an economic outlook that is beginning to look fairly gloomy.

Time may be short.

#134 Robins on 07.30.11 at 9:37 pm

They didn’t care, Garth. By the time $hit hits the fence, they would have left the office for some cushy jobs in high places.

Respect to you, Sir, for having the courage to pen down an honest view. 94% of your readers are Canadians. Other bear/RE blogs have resorted to spybots first from India and then USA to boost their rankings. Your popularity speaks volume.

#135 Standard Deviation on 07.30.11 at 9:53 pm

Was down in phoenix the other week and spent some time talking with the locals. Rumour has it that there are so many Park models that have been abandoned because of the recession that trailer park owners are prepared to sign over the units for a nominal fee $1 as long as you pay the rent. Of course that is the low end of the spectrum, but even the multimillion dollar mansions have decreased in value by an order of magnitude.
Having lived in a number of countries and bought into housing in all cases let me assure the disbelievers that losing money on a house is not a black swan event, it is a highly probable and personally experienced event. Keep up the good work Garth.

#136 The Greenback! on 07.30.11 at 10:11 pm

To “wes_coast”:

Thanks for the response, but that wasn’t really my question.

The issue is this: government wouldn’t have any debt if it was actually creating the money, instead of borrowing it into existence from private entities…like the Fed.

Remember, the US government doesn’t print its own money; it hasn’t since 1913.

Heck, even Canadian money is made in Germany by a private company called Giesecke & Devrient; however, unlike the US, the Bank of Canada still retains the power to make the moolah…but it hasn’t exercised this right since the 1970s.

The inflation you talk about is actually a (hidden?) tax–even Helicopter Ben has admitted as much.

A benevolent government (in control of its own money) would not implement such a tax by devaluing its own currency…by continually running the fiat presses.

Food for thought :)

#137 Math Teacher on 07.30.11 at 10:11 pm

#118 Imstupid

#10 Math Teacher from last post

I’m not angry, I’m simple trying to tell you that you have no idea what you are talking about. Just like most on this site that leave comments. Your a math teacher, try teaching calculus to 6 year olds. It’s the same thing as most people have the financial intelligence of 6 year olds. I understand that his formula is not written correct, but you must understand the investment theory that it comes from. I don’t you understand it and that’s why you post such ridiculous comments.

Stupid,

Are you kidding me? What “investment theory”? About 11 years ago, when the dot com bubble burst, a friend who (as everybody else at the time in Canada) was heavily invested in NORTEL was advised by his “financial adviser” (when NORTEL stock went from $125 to $15 per share): “It’s time to buy!!!! NORTEL is a sound company ….” He did, and the stock went to $2 … That’s an illustration who “investment theories” devised by “investment professionals” work. I much rather listen to the contrarian point of view of Mr. Turner.

#138 Utopia on 07.30.11 at 10:16 pm

#90 terces on 07.30.11 at 12:36 pm

“Here is another fearless prediction. First an observation: The US is waaay ahead of the rest of the world in their real estate collapse. The real estate downturn in Canada will hurt badly and the negative wealth effect will be in full force, long after the US is well into recovery mode”.
—————————————-
That is a reasonable prediction Terces and it is one that I agree with. You are closer to the truth than you know.

#139 timo on 07.30.11 at 10:38 pm

#125, cookie

your take on a caring private sector to run Employment insurance and Canada pension is fascinating.

With more and more privatization you do realize it will be taken by the ruling 10% if profitable. You do not have a free-market when 10% of your population controls 90% of the wealth and if you do wow.

People are starting a march to Brussels in Europe for the fact that the caring private sector banking system is forcing debt payments only countries that impoverish its citizens. 50% unemployment due to casino speculation is pissing off alot of young peoples dreams. A state must put safeguards in to protect the population from speculation and EI and CPP are pillars.

google spain march on brussels and understand what is going on. You do not have to agree with it but understand. We are going to see things change because you cannot buy or talk your way out of 40-50% unemployment.

#140 The InvestorsFriend (Shawn Allen) on 07.30.11 at 11:10 pm

To the Greenback at 137.

Come on now, the Fed may be a priate company in form. But we all know that it is in substance an arm of the U.S. government.

The Fed Chair is appointed by the U.S. government. All profits go to the Treasury.

Only Whacko nutbars are concerned that the Fed is a private company. It’s not, not in substance at least.

#141 timo on 07.30.11 at 11:13 pm

http://thebureauinvestigates.com/2011/07/30/giant-grain-trading-company-accused-of-cornering-uk-wheat-market/

when free markets are owned.?!

snark…just had to throw this out…dont pile on:)

#142 Johnny Debt on 07.30.11 at 11:15 pm

It’s time you were all aware of an even greater threat to the citizens of Raincouver…

Regard the carnage to take place after the collapse of
the Lower mainland real estate market…

As hoards of Starbucks baristas,Cactus club waitresses , personal trainers and Yaletown wannabe actressess lose their jobs as the property default hits
Lotusland…

Precious Chihuahuas,Ornamental Corgi’s, pugnatious pugs and bulimic bulldogs will be released into the wild of Coal harbour and Yaletown to fend for themselves as their blond and augmented breast owners abandon feeding them in favor of paying their Strata fees , hydro bills, and even…dare say…feeding themselves…

Packs of these mini-predators…crazy with hunger will
attack the remnants of civilization who venture out on the streets of Van in search of jobs or latte’s…..

Whole fleshy portions of ankles will be gnawed and gnashed by these former canine status symbols…

Fear will grip the city as squirrels,pigeons and crows disappear while “FiFi” terrorizes the West end!!!!!

#143 eddy on 07.30.11 at 11:20 pm

video-

Black Texas Man Buys $300,00 House For $16, & White Neighbors Are Mad

http://www.resistance2010.com/video/black-texas-man-buys-300-00

#144 Johnny Debt on 07.30.11 at 11:46 pm

From Richard Russell…long time financial guru…

“Confusion reigns — in spades. Therefore, I’m staying with the bull market that I trust. And the bull market I’m referring to is the bull market in gold.

I’ve studied bull and bear markets for over half a century. In my experience, great extended bull markets, such as the current ten-year bull market in gold, don’t die with a wheeze and a whimper. They die amid excitement, torrid speculation and finally the wholesale entrance of the retail public. I’ve yet to see any of those characteristics in the current gold bull market. Therefore, I’m trusting history, and I’m sitting (in) the gold bull market.”

Mr. Russell’s best-before date was 1961. — Garth

#145 BANKS SLOWLY CUTTING PERSONNEL - Brace for Impact. on 07.31.11 at 12:16 am

work for a major Canadian, suddenly 2 weeks ago, some contractors were terminated (2 weeks notice) even their contract was just renewed, and all open FTE position were frozen, no more hiring, looks like managers and directors had no choice, the directive came from far-far above, you guess from people who know what is soon coming
Prepare and Brace for Impact.
Stop all all all all spending for next 3 months now.
Move to safer investments (if cost is reasonable, otherwise is too late)

#146 BPOE on 07.31.11 at 12:29 am

Looks like America cut a debt deal just in the knick of time. Either way gold and Vancouver going higher. The US has proved without a doubt that the Emperor has no clothes. Oh yeah and have you heard the other news? NO INTEREST RATE HIKES for Canadians.
Was talking to some fellow boomer buddies and the discussion of housing came up. Guess what. NO ONE IS EVER GOING TO SELL. Why would you sell an ATM machine and a HOME and rent and lose your ATM machine. Makes no sense

#147 TurnerNation on 07.31.11 at 12:38 am

ABC Reports Tentative Debt Ceiling Deal Reached Between GOP And Obama
Submitted by Tyler Durden on 07/30/2011 – 22:55 Debt Ceiling Medicare White House
This could very well be another red herring like the NYT article from two weeks ago that proved to be a dud, but for what it’s worth according to ABC’s Jonathan Karl, the White House and the GOP have just reached a tentative deal as follows…

http://www.zerohedge.com/

#148 Helicopter Ben on 07.31.11 at 12:42 am

#130 UTOPIA…… Yep i was aware of that, i am not planning on it to be there when i retire though cause it is a ponzi scheme, i am not saying they are doing it to make a profit, but with our aging population i dont see how the middle class can support the baby boomers through out their retirement without significant tax hikes, juts like the states a 3rd of our citizens will be retiring soon and thats a big swing from going to paying the bulk of taxes to living off other peoples, i know there is a funded CPP i just dont think it will be big enough to sustain it self, i could be wrong. unfortunately the states didnt fund theirs. if the government wants us to save for our retirement i dont understand why they dont let us have our own money? its complete crap they take it from us and tell us how and when we will receive the money. i can do a better job with it then them, get out of my life and my bank account. #133 INVESTOR FRIEND. ….. Money created by the Fed, and is a privately run company that is owed interest so yes money comes from debt. same when the states issue bonds, nothing more than an IOU with interest,a promise to pay with the backing of taxes or your future sweat. it comes from a place of minus, there is 0 need for the states to have the federal reserve, central banks are supposed to control the amount of money in circulation and uphold its purchasing power, it has failed miserably and i dont think its done by accident. them printing a lot of money dosent always translate into inflation though, depends if it makes it to the man on the street, if it just sits on the banks deposits it doesnt create a ,lot of inflation from what i understand. Fiat Money is a depreciating asset until they allow deflation to happen and they are dead set against it as ben bernanke stated he would drop money from a helicopter to stop deflation from happening. I am reading a book right now called the “great reflation” and its about just that, the stimulus is their attempt to stop deflation and reflate the economy, the citizens stopped spending money so now the government steps in to try to fill the void. of course the governments money is your tax money so if the nation is broke so is the government, so its a ridiculous idea. Mortgaging the future many times over to just keep your head above water.

#149 Cookie Monster on 07.31.11 at 12:45 am

#140 timo on 07.30.11 at 10:38 pm
What you see as pillars I see as anchors. At the very least I think people should be allowed to choose whether they want to participate or not.

There will always be a top 1% or 10%, and a bottom 10%, the main concern is that people are free to work as hard as they want or as little as they want to become whatever they want and that means property rights, low taxes, small government if you believe in freedom.

The banks in Europe are hardly private or free market. I would protest them too if I lived there.

#150 dd on 07.31.11 at 1:04 am

“gold is safer…” Safe means safe, not speculative. — Garth”

Fact: All fiat currencies go to zero. Gold hold purchasing power.

Fact: We live in dollars. Who cares? — Garth

#151 timo on 07.31.11 at 1:17 am

don’t pile this is hard to believe but I have to post this even though it might make me look like a total
nutbar….

the Fed, limited by congress due to the debt ceiling, asks the poor private banks, at low interest of course, to provide small bridge loans to states to keep things moving while things get straightened out.

and if that has a hair of truth is how a private concentration of wealth can now buy up all crown assets in the name of free enterprise.

not saying this is going to happen ,just that it passed my desk and scared the sh^t out of me. I am going out to buy some banana’s….

http://thebureauinvestigates.com/2011/07/17/bureau-recommends-the-new-let-them-eat-cake/

http://www.zerohedge.com/article/broke-new-jersey-seeking-225-billion-bridge-loan-9-jpmorgan-emergency-funding

#152 wes_coast on 07.31.11 at 1:19 am

Investors are seeking safe haven. There is nothing safer than US Treasuries. — Garth

I think this statement used to hold water when the US was on the gold standard or the decade or two after they got rid of it. In the era of Ben Bernanke they have shown they are willing to pay back the principle on a US treasury with a devalued US dollar. Had anyone bought a longer term US treasury in Canada they would have lost 40 percent (numbers not exact) due to the exchange difference. Think of how pissed off the Chinese must feel right now. Loan the US all this money when the dollar was high only to get repaid with dollars that are 40 percent (number not exact) lower. Even with their currency peg they have still lost out. Everyone keeps freaking out about US default but they already have partially defaulted by printing money. Ask the Chinese government – they took a bigger hair cut then the 21 percent for the Greek bondholders.

It is demonstrably true. US Treasuries rule. — Garth

#153 Jack Sprat on 07.31.11 at 1:46 am

We Americans as a whole think you Canucks are sometimes cute and funny with all your conspiracy theories, rampant paranoia, and misinformation. In fact, we welcome it as a form of cheap, passive-aggressive entertainment. We recognize the massive inferiority complex many Canadians have on nearly every level imaginable; hence the constant obsessiveness you posses for our country as you look South across your boarder at a land for which everyone in the world looking to immigrate chooses to move. Statistics prove it. It is absolutely incredible the extent of American concepts, American pop culture, American music, American fashion and shopping, American food, and American technologies that you enjoy on a daily basis, yet you differentiate yourselves only by not being American. This is very sad. I’m not saying every now and then we Americans don’t enjoy a little Justin Beiber (well, we really don’t like the little twit) or AM radio, but we do give credit where it is due. We do not project the disdain toward you on any level that you project toward us. You’ll rarely if ever in your lifetime hear of an American downing a Canuck, because we simply just don’t care (honestly, this is true). Have you earned our interest? I guess this is why many of you are so angry all of the time. We actually like it when you ramble on in your misguided “news” and on in your small-minded rhetoric as if you truly understand anything on a global scale. We view it as a form of cheap, and we do mean “cheap” and laughable entertainment. Here’s hoping for more to come! Please keep it going! Cheers!

But you like coming to this miserable passive-aggressive, oversexed, impotent blog? — Garth

#154 GTA Girl on 07.31.11 at 4:16 am

#122- people who make money are largely not stupid. buying a $20 mill condo in Yorkville neighborhood is not equivalent to buying a similar condo overlooking Central Park in NewYork. Rich Americans look for a deal and value for money.

Making millions of dollars a year doesn’t mean you suddenly no longer care about resale and value. If no other condo is worth $2,000/sqft+ then a sucker was born. The recent sale was more about hype rather than new values. And/or about parking illegal money in our country. Which is a problem we’ve discussed.

A condo is the exact area of a city, cannot be worth 1000% more than a house of the same size. Land is normally always worth more than a box.

The new condo market is a ponzi scheme. Resales of older condos are showing this to be true.

#155 Crash Callaway on 07.31.11 at 5:35 am

“Zipped & steady”
Rumor has it a new golf competition in honor of Bill is being added to the Pro golf circuit. I believe it’s going to be called;

” The Zipper Open “

#156 Imstupid on 07.31.11 at 7:26 am

#127 thank you

137 Math Teacher

Firstly, we were discussing percentage of net worth a home should represent based on age. How did the discussion move to nortel? If you want to go down this road we can.

Investing is actually quit easy, if you remove the fundamental flaw that usually leads to failure, emotion. The problem is that 99% of investors find themselves getting greedy and not realizing when it’s time to sell because the numbers no longer make sense. With every bubble, it’s always the same you have people that believe it’s different this time. Just like housing now, I can prove mathematically that it will correct. When it corrects I can’t determine, or how much it will correct. The .com bubble was no different, the writing was on the wall, the companies were appreciating in value without earning a dime. It was fueled buy emotion and greed, and the potential profits were too good to be true.

Here is housing today

8 times household income in Toronto.
Deduct 7% as average down payment
Double that number to factor in total repayment including interest
That equals 14.88 years of gross income
Multiply 14.88 by 1.5 to factor in income tax and property tax
The result 22.32 years of gross income to get the present net income to buy the sfh in Toronto.
Even with a 30 amortization you would have 7.68 gross income to live.

It’s impossible it can’t be done. Anyone that disagrees is a fool.

#157 Scot on 07.31.11 at 9:10 am

The banks were still obligated to check on mortgagor’s ability to pay. They didn’t because they simply wanted mortgages to bundle in sleazy deals to the rest of the world. Put blame where it’s due….Wall Street bankers.
Not Bill Clinton.

#158 The American on 07.31.11 at 9:42 am

At #90 and #139: Terces and Utopia, I agree with your comments completely. Now, has anyone asked the question, “Why is the U.S. so far ahead of the curb with the real estate correction?”

Speaking of real estate, and not the debt crisis, I was reviewing several downtown Toronto listings this morning. Very interesting. I’m comparing downtown Toronto areas to downtown Seattle, and on a price per square foot, Seattle is still considerably more expensive. This is the case, even after having fallen about 27%. Who knows… Maybe its just the premium one pays for West coast living. Its curious and fun to compare markets. What really stands out is how much less property taxes and HOA dues are in Toronto and Canada in general.

#159 Beach Girl on 07.31.11 at 10:48 am

What is in the future for young people. No job security ever. Series of endless contract, part time jobs which one must exhaust oneself to get. That is a job in itself. I am glad to be past the age of caring, personally. A late fifties kid. WOW, were we lucky, without knowing it. I see a lot of stress and mental illness coming down the road. Like being a hamster in a cage and never given time to rest, physically or emotionally. I never see it getting better. More than half of my friends my age are scared to death. You can smell it. Living in quiet desparation. Living below your means is alright, if you have any means.

#160 TurnerNation on 07.31.11 at 10:53 am

Good news for Preferred share shareholders: TD is increasing their monthly account fees. A few billion in quarterly profits is not enough, apparently.

https://www.tdcanadatrust.com/accounts/pdfs/fees.pdf

And: reduced reduced in Whislter, on realtor’s ads.

http://whistler.kijiji.ca/c-PostersOtherAds-W0QQUserIdZ4334620

#161 eddy on 07.31.11 at 10:55 am

this video covers various subjects including IMF, Banking, Libya:

Why Gaddafi must die!

http://www.youtube.com/watch?v=zCnFBqVwhw8&feature=player_embedded

#162 Steven Rowlandson on 07.31.11 at 10:55 am

What does it profit a man to get a job that pays too little and then go out and try and buy a house that costs too much? Surely it is folly to obtain that which one can not afford.

#163 ballingsford on 07.31.11 at 10:57 am

Just got back from a vacation in PEI. The countryside was lovely, gently rolling hills with lots of greenery! Couldn’t believe how much cigs cost though. Between $26 – 30 bucks for 2 packs and the province doesn’t even have HST. Hard to find a good rib eye steak to barbeque too. The Island’s gently rolling hills and the beaches are beautiful though!

Glad to be back home! Rib eye steaks are on sale this week at Farm Boy, and the Ontario corn is ready!

Yum yum!!!

#164 dd on 07.31.11 at 11:27 am

#151dd

Fact: All fiat currencies go to zero. Gold hold purchasing power.

Fact: We live in dollars. Who cares? — Garth

The government loves you. You are part of the majority that allows the government to promise and spend more than revenues. This is called inflation. Thanks for taking the hit.

A constant myth among metalheads is that gold investors are anti-establishment, and politicians/governments desperately don’t want citizens to own ‘real money’ since it threatens the existing monetary system. You flatter yourselves. Nobody cares. — Garth

#165 Killer Chicken or Imploding Boomer? on 07.31.11 at 11:45 am

155 – …..ahead of the curve….from whatever spotty info
I have seen, some American cities have very high taxes,
but that state may have very low taxes (sales, income),
or vice versa. I believe the latter is applied more so in
Canada.

They get you one way or the other, and from the
standpoint of a Canadian wanting to buy in the US and
live part-time or retire there, it must be carefully
considered.

#166 Derek R on 07.31.11 at 12:05 pm

#154 Jack Sprat on 07.31.11 at 1:46 am wrote:
We Americans as a whole…

This is the sort of supercilious rant that Englishmen of a certain type normally write about Scotsmen. Are you sure you’re American?

#167 Basil Fawlty on 07.31.11 at 12:07 pm

” “gold is safer…” Safe means safe, not speculative. — Garth”

Fact: All fiat currencies go to zero. Gold hold purchasing power.

Fact: We live in dollars. Who cares? — Garth”
You care Garth and you tell us how you care nearly every day. You suggest getting out of real estate if you are highly leveraged, you suggest the purchase of preferred shares and corporate bonds. You suggest these things to enable people to turn a profit and maintain their hard earned capital. All investments are measured in dollars and can be turned back into cash through the market. Why is gold any different? People have made fortunes over the last 11 years and are free to convert their holdings of gold, silver or copper into cash at any time.
Sure we live in dollars, but this does not mean we have to keep our investments in cash.
I’m sorry, but I do not understand your argument.

The argument is simple. Gold is not safer than money. Money has purchasing power now. Gold only has such power when converted into money. And gold is volatile. Hence, for most people, money is safer than gold. — Garth

#168 yukon don on 07.31.11 at 12:08 pm

#93Grammar Police on , stop your whinning and just leave , like Da and all the realestate pushers. No one here is saying they are smarter than any one else , they just have enough common sense to know a huge bubble when they see one. Nit picking posters with your dictionary. Oh and on a britter note , rented 70 acres 5 bedroom house , 4 min drive , 10 min walk to ok falls , yet totally private , with a lifes work of sustainable living at our door step. 0h ya million dollar view from property on ok river. I think this spells good luck renting. Oh I dare mention the price , 15% or less of financing the payments , we are now calling our selves caretakers. The site is about being smart with money , why rush to buy when price is dropping like a stone. DA is busy reducing prices and begging listers to price lower , or begging buyers to make an offer. The Okanogan , led by rec , retirement and spec buyers is dropping like a stone. DA come back and tell us how Kelowna will always go up……..

#169 Junius on 07.31.11 at 12:13 pm

Great post on Washington’s Blog on what Adam Smith would really think of our economy and monetary policy:

http://www.washingtonsblog.com/

#170 Junius on 07.31.11 at 12:18 pm

#154 Jack Sprat,

You said, “We Americans as a whole think you Canucks are sometimes cute and funny with all your conspiracy theories, rampant paranoia, and misinformation.”

There is no such thing as “Americans as a whole think”. You are the most intellectually divided group on the planet. There is nothing you all can agree upon.

One thing we can all agree upon is the the “land of the free” line needs to be taken out or all your public literature. You are now the land of bank slaves and the politicians the banksters own. Get used to it.

#171 Helicopter Ben on 07.31.11 at 12:25 pm

#154 Jack Sprat. the U.S. being broke is an conspiracy theory? where in the states do you live? gated community? and most americans couldnt name more then 2 cities in canada besides even locate them how in the world would they know what we think? i saw a poll showing 85 % of americans couldnt locate germany on the map if the name was taken off. i doubt there is a consensus on what we think, as we and the rest of the world dont exist and neither do their problems as they dont pay attention, your living fact as you dont seem to have a clue. Mind you there is some very smart people there but as a whole they dont know which is way up.

#172 dd on 07.31.11 at 12:41 pm

#166dd

..gold..

Nobody cares. — Garth

You just confirmed that gold is not in a bubble. Thanks.

I know you have a man crush. But I do not move global markets. — Garth

#173 Cowboy on 07.31.11 at 12:48 pm

Jack Sprat, you really are a Prat,
don’t know where to begin, so I won’t bother…

#174 Kevin in Winnipeg on 07.31.11 at 1:03 pm

“The basic flaw: not everyone should have a house. Shelter may be a human right. Granite counter tops aren’t.”

The real crime here is against those responsible enough to save a good down payment and are now priced out of the market by the irresponsible ones. Winnipeg has now moved into the unreasonable range and looks like this will continue for some time.

#175 Behavioral Finanace on 07.31.11 at 1:38 pm

TheBigLebowski,

Last time I checked the Fed reports to the Congress and not to JP Morgan or Goldman. The Feds mandate is to maintain high level of employment by whatever means necessary.

#176 Behavioral Finance on 07.31.11 at 1:45 pm

wes_coast

I highly doubt China is upset that they are being underpaid on their debt as their economy is making a bundle on the other side of the ledger, which is selling Chinese made goods to America. Their trade surplus dwarfs the debt that USA owns China.

#177 Behavioral Finanace on 07.31.11 at 1:47 pm

TheBigLebowski

Please don’t forget that whatever money the Fed makes goes back to the Treasury.

“In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury.”

#178 Mister Obvious on 07.31.11 at 2:06 pm

#170 yukon don

You complain about the “grammar police” and yet your post is essentially unreadable.

Its not that I think you have nothing to say. But it’s too much effort tripping over broken prose trying to grasp some meaning. Life is too short.

People learn to skip over bad writing very quickly. If Garth wrote that way he would have zero readers.

#179 Jkam9 on 07.31.11 at 2:36 pm

A friend manages the Toronto properties of a large, Hong Kong based investment firm. They started acquiring condos in Toronto during the mid 90’s and at their peak last year, owned over 600 units. This year, for the first time ever, they started selling their units and are down to 350. He doesn’t know if they will sell any more of them or continue to rent them out, but he does know that they opened an office in Atlanta and are interested in acquiring apartment buildings there. Is the “smart money” selling high and buying low? Sure looks like it.

#180 Mister Obvious on 07.31.11 at 2:39 pm

#161 Beach Girl

I’m even a bit older than you are and haven’t the slightest concern for the young and their supposed lack of ‘job security’.

I figured out early on that every job I ever had existed because someone else was taking a capital risk. That marked the end of my self importance.

There wasn’t a scrap of job security for me when I was in my twenties. Employment was spotty and uncertain. I learned to save and prepare for the ‘unexpected’.

Aw, those poor, self indulgent young people. They have what I don’t anymore. They are resilient, full of potential and still flexible enough to pull their heads out of their own backsides.

They have exactly the same two choices I had:

(1) Moan your life away
(2) Get busy making a difference.

#181 simkev on 07.31.11 at 2:49 pm

The argument is simple. Gold is not safer than money. Money has purchasing power now. Gold only has such power when converted into money. And gold is volatile. Hence, for most people, money is safer than gold. — Garth

Money is volatile …just like gold …. gold can be easily converted into cash … it is a very liquid investment …. and you can choose which currency to convert it into at the time that you need cash! … Money is not safer ….it is easier …. and I am NOT a P.M freak either. – Kevin

Money changes in value according to inflation – which currently is 3% annually, and can be recouped easily through conservative investments. Gold can change that much in a few days. Stop beating a dead horse. — Garth

#182 Tony on 07.31.11 at 2:52 pm

Like i said before many months ago on this blog Canada will be in recession around year end. America while they lie like a rug about their GDP will admit they’re back in the recession they never came out of later in 2012.

#183 betamax on 07.31.11 at 2:53 pm

#159 TheBigLebowski: “Why do you reference Clinton and Bush ? Like they were instrumental in creating the housing bubble.”

Both Dems and Repubs enacted policies to encourage ‘the ownership society’. Execs at Fanny and Freddy after the crash complained that high level politicos regularly exhorted them to promote more mortgages being taken out by increasingly risky buyers.

They were all complicit, at all levels.

#184 Snowboid on 07.31.11 at 2:59 pm

With all the displaced anger in this comments section, here is some funny news from Kelowna:

http://www.castanet.net/news/Real-Estate/63473/Some-honest-Okanagan-statistics

Apparently the real estate correction in Vancouver and Richmond will temporarily dampen their market and “leave the Okanagan alone to recover steadily over the next few years.”

This RE expert will at least have his second income at the local comedy clubs!

#185 Tony on 07.31.11 at 3:19 pm

#145 Johnny Debt

In case you haven’t noticed the whole world went broke. Eons ago people had money to chase things. Today it’s different so the end result will also be different.

#186 The InvestorsFriend (Shawn Allen) on 07.31.11 at 3:23 pm

Simkev at 183.

At the risk of angering the Gold gods.

Consider that the value of Money or its utility to pay your bills is very stable over say a 30 day period or even up to about a year.

If you need money for a credit card payment, house downpayment in 30 days or for next month’s rent or next months mortage or even next month’s groceries or to buy a car next month, you can be be absolutely sure that the amount of money needed will not change for some of these (a rent contract, a fixed mortgage payment) and even for grocercies you can be highly confident that the grocery bill etc. will not change much (if beef prices are up you can substitute chicken as well).

Inflation, despite all the rhetoric has been reasonably tame in the past year and decade.

Now consider Gold, the amount of Gold needed to purchase a car has plummeted in the past ten years and even 3 months. Equally it could rise dramtically in the next 30 days. If you have major bills due in 30 days it would be risky to hold all your wealth in Gold.

That is the simple point.

Gold may hold value over a thousand years but over 30 days or ten years it is demonstrably much more volatile in purchasing power value than is cash. These last ten years it rose dramtically in value in terms of real purchasing power. In the 80’s it fell dramactically.

i.e. Garth is 100% right

Garth please note me down for one brownie point for that!

#187 waterloo Resident on 07.31.11 at 3:24 pm

I don’t think Canadian home prices will drop, at least not in my lifetime, and not in Garth Turner’s lifetime. yes, we will go in to a period of slow economic growth, but still our home prices will continue to go up because of our 2-million new immigrants coming in each year will hold up our housing prices.

Immigrants this year will be about 230,000, comprising about 47,000 families, of which about one quarter will be in a position to buy a home within three years. Try harder next time. — Garth

#188 The Federal Reserve is PRIVATE. on 07.31.11 at 3:50 pm

To #141 The InvestorsFriend (Shawn Allen):

I understand where you are coming from, but using phrases like “we all know” and “whacko nutbars” ain’t an argument.

Geesh, I don’t know how many times I must say this.

Here’s exactly what you said:

“Come on now, the Fed may be a priate (sic) company in form. But we all know that it is in substance an arm of the U.S. government.”

Essentially, this is a self-contradictory statement: For how can you have an “arm” of the U.S. government that is not controlled by the U.S. government?

This is the definition of “private”.

Obviously, the Fed and the government “interact” with each other…but this isn’t the issue: It is one of control.

Here’s a short clip of Greenspan himself openly admitting that the Federal Reserve is above congressional control–beyond the control of U.S. law.

http://www.youtube.com/watch?v=ol3mEe8TH7w

The Federal Reserve cannot be a “branch” of the U.S. government if it isn’t subject to U.S. law.

Here’s another point: In 1982, Lewis v. United States, 680 F.2d 1239 proved that the Federal Reserve system (while its chair may be appointed by the President)…is absolutely a private enterprise.

http://www.globalresearch.ca/index.php?context=va&aid=8518

Shawn, buddy, you have presented no facts. Just conjecture and name-calling.

This is not rational, nor is it an argument.

Hopefully, you can respond reasonably, without the simplistic rhetoric and name-calling.

Food for thought :)

#189 jess on 07.31.11 at 4:17 pm

Apple /exxon makes money because people like what they are doing

…option back dating, tax deference,outward domestication ,environmental damage
=

The SEC found that London-based Diageo plc paid more than $2.7 million through its subsidiaries to obtain lucrative sales and tax benefits relating to its Johnnie Walker and Windsor Scotch whiskeys, among other brands. Diageo agreed to pay more than $16 million to settle the SEC’s charges. The company also agreed to cease and desist from further violations of the FCPA’s books and records and internal controls provisions.

=================

Going DutchHow drinks giants spirited away Johnnie Walker label from UK tax liabilities by a technique known as outward domestication

Monday 2 February 2009 Article history

=====
This new scientific code of conduct, however, sends decidedly mixed messages about what may or may not be released by scientists. On one hand, the code declares “Science, scientific assessment and other similar technical activities shall be conducted with the fullest transparency allowed by law, from the planning stages through completion of the work.” On the other hand, the code forbids disclosure of any information by scientists contrary to –

“agreements between MMS and its partners [i.e., oil companies] relating to use, security, and release of sensitive, confidential, proprietary, and administratively controlled, deliberative or personally identifiable information and data provided to the MMS.”

“This scientific code leaves the oil industry in charge of what information the public may see about development of the Arctic,” stated PEER Executive Director Jeff Ruch, noting that the vast majority of data consists of industry submittals, estimates and monitoring reports. “An MMS scientist would also have to be a Philadelphia lawyer to know what he or she could publish or disclose under this new code.”
http://www.peer.org/news/news_id.php?row_id=1291

#190 BPOE on 07.31.11 at 5:03 pm

Check your mailbox folks as the cheques are in the mail. Cheap money arriving daily. You see folks, the banks are letting the good times roll so any Canadian with a credit card should be receiving low low low interest rate Visa cheques in some cases as low as 1%. Use this leverage to buy your gold stocks on pullbacks or your first downpayment on a home in Vancouver. I have been pounding the table for sometime now about interest rates being lowered. This free money being sent to you from the banks is the first step in a 2 step process being engineered by the banks. Look for more credit coming your way. Folks, when you read statements about interest rates going higher ask yourself why are the banks sending me 1% intrest credit card cheques if they’re raising rates. Their not folks and you can take that to the bank

#191 The InvestorsFriend (Shawn Allen) on 07.31.11 at 5:06 pm

I don’t know the nature of the ownership of the Federal Reserve banks.

But I think it is effectively controlled by the government through regulation.

It’s mandates are to control inflation and the economy including unemployment.

I don’t think that its private ownership by member banks is relevant.

The ownership of the Federal Reserve does not seem to have any bearing on the federal debt and the ability to create money.

I think we can be reasonably confident that the federal reserve bank cannot for example print money for the benefit of its owners.

#192 Patz--Agent Will has left the building on 07.31.11 at 5:06 pm

RE Agent Will Wertheim has rather suddenly pulled up stakes and left town–town being Vancouver. I don’t know him personally but have appreciated the stats he published every week on his blog. My impression of him from his postings was good. He wasn’t always “on” like most realtors seem to be. He seemed like a genuinely decent guy who tried to give his clients good service. Which is part of what makes me wonder why he left the city he seemed to think was such a great place.

I’m going to miss his stats which were nicely organized to give a good picture of Van RE every week. I wish him well wherever he and his family are off too. And I’m damn curious about why he left. Hope it doesn’t mean Vancouver might be headed for a dip. :)

#193 wes_coast on 07.31.11 at 5:20 pm

To The Greenback post #137:

Physical paper money is called currency. Most money is created in the form of deposits and subsequent loans on those deposits in our fractional reserve system. The Fed and the Bank of Canada can create money without ever printing another paper bill. Paper bills are currency. Money is currency plus deposits. I am not a specialist in fractional reserve banking but regardless – nothing can be had for free. Expansion of money creates inflation. Spending more than you take in creates debt. You can’t bridge the revenue gap by printing money because inflation would run rampant. With all due respect, if your suggestion was so perfect in its simplicity why would the US be 14 trillion in dent right now. I am sure they would have thought of the idea.

#194 Painted Toenails on 07.31.11 at 5:28 pm

Played Squash this morning and heard a Realtor talking about how sloooow sales are. They mentioned the have had multiple sales go sideways this month because the buyers low-balled so much that the sellers became insulted, dug in their heels and each deal died.

They think it’s a buyers market and have told everyone they should be rushing to take advantage of this slowdown. In one case a low-ball offer was a hun less than asking.

I figure they should have countered a bit and taken it.

Symphony Splash tonight! Cold beer is in the fridge, wine is chilling and the BBQ is ready for a sizzling steak or several. Good friends coming by later. We’ll listen to the music as it wafts over the water towards us. Best weekend in Victoria, always.

#195 DML on 07.31.11 at 6:04 pm

#154 Jack Sprat

For an American who doesn’t care about Canada you
sure have a lot to say on the matter.I guess irony
is not one of your incredible American concepts.

#196 timo on 07.31.11 at 6:51 pm

so,

while US business and consumer tries to balance its books from a huge asset bubble deflation, the federal government just cut spending and is cutting social programs.

inflation ? no
deflation? yup

Here comes reality
Housing prices are going to crash with a tax revolt and debt revolt.

People are going to panic save due to the realization that retirement is now in doubt.

When it finally dawns on the middle class that the party is really over and it will be many,many years before things get better hoarding instead of spending will be the norm. People will not take risk and the generations memory will be forever tainted.

Enjoy the commodity bubble because inventories are about to start really growing. Oil prices do not go up if people cut down on driving to save money.

Here in Canada we can thank god that wages will always go up.

Tourism, vacation property and manufacturing will see record profits from our high dollars competitive advantage.

Mining, forestry and energy will expand in leaps and bounds due to the wonderful fact that the cost of labour has no impact on profits.

The financial and IT sectors will be pillars of growth that will have no problem competing with open markets. These markets are going to grow wonderfully with austerity by the way.

We should attract a huge influx of new investment from abroad due to our low operating costs and competitive advantage due to our wonderful dollars rise.

I cannot wait to see the huge growth announced when states start cutting budgets and lower benefits to the working class and poor.

Confidence will run wild and resentment will not form.

history from 1937’s try at balancing the books does not factor in.

history from Japan twice trying to claw back spending in their housing bubble has not meaning either.

life is good.

A history lesson,

http://www.youtube.com/user/ProfSteveKeen?feature=mhee#p/a/u/0/OWGDWYB5KZ0

#197 simkev on 07.31.11 at 7:10 pm

Thank-you Garth and Shawn
For your feedback regarding gold vs money, inflation etc…. all very good points indeed.
…anywho not going to be buying PM’s anytime soon ….kinda overvalued right now and volatile…. just like residential real estate!

#198 Mr Buyer on 07.31.11 at 7:24 pm

#191 jess … what are you saying exactly. I am not aware of any ‘scientific code’ protecting oil companies(I must have missed that entire course)

#199 TurnerNation on 07.31.11 at 7:29 pm

Gold & Silver off tonight. I told you, sell/short silver at 40.

#200 disconnect on 07.31.11 at 7:37 pm

This post is getting long in the tooth, but here it goes.
As some have asked before, how to make some money from this situation – Canadian home price correction, etc. We all can’t be John Paulson, and the Canadian situation will be different then the US. Some things that come to mind:
– lower debt
– if you can’t lower your debt, lock in your rates
– lower position in Canadian banks
– lower holdings in Can $
– short Rona
– short ? (any suggestions or other trades?)
My gut feeling is the impact on Canada will be profound. We are not a ‘reserve currency nation’, resource wealth comes with a cost and takes time and up front capital etc.
To the folks that go on about all the ‘cash’ Canadian investors have and thus the large Mortgage debt is no problem: the folks with the debts ARE NOT the ones with this money. There is allot of wealthy Americans and that did not stop their housing correction. With respect to Canadian banks, the impact (I think) will be felt via the wider economy. If the Canadian Goverment needs to cover large mortgages losses, they will need to raise taxes and borrow more (i.e., compete with the private sector for capital), both bad for the economy. Plus, how have banks faired in other countries that experienced a property melt-down, not so good. We just can’t ‘print’ money like south of the border (we could try, but it would be a disaster). One needs to get ready.
ps . Nova Scotia has a balanced budget (so they say), go figure, but the tax load there is nasty.

#201 TurnerNation on 07.31.11 at 7:53 pm

Even “condo king” Brad Lamb is selling his Toronto condo…

http://www.theglobeandmail.com/life/home-and-garden/real-estate/done-deals/the-condo-king-sells-his-own-home/article2112809/

#202 TurnerNation on 07.31.11 at 8:05 pm

#146 BANKS SLOWLY CUTTING PERSONNEL – Brace for Impact. on 07.31.11 at 12:16 am

Ahem.

http://news.ino.com/headlines/?newsid=68979818578280

Report: HSBC plans to announce 10,000 job cuts
8 minutes ago

HSBC plans to announce thousands of job cuts on Monday as part of an ongoing cost-cutting program announced in May, according to media reports. HSBC spokesman Neil Brazil in New York declined to comment on the report.

#203 ballingsford on 07.31.11 at 8:05 pm

Yahooooo, vacation is over and it cost about $4500 but I don’t owe a cent to anyone. It really sucks being a renter! LOL!

#204 Utopia on 07.31.11 at 8:53 pm

I don’t know about anyone else, but between the Gold-Huggers and all the discussions of fractional reserve banking, cartels and what REAL money actually is….I am honestly exhausted.

Seems like so much tail-chasing. Round and round and round.

#205 Lead Paint on 07.31.11 at 9:18 pm

They just announced a debt deal…. no default. PM’s going down, life goes on.