Don’t bet against America

Well, so much for Debtageddon. At least for this week. Dow futures jumped the better part of 200 points Sunday night. Gold fell twenty bucks. Oil gained a dollar and a half. It was all so predictable – except to the tin foil set who wasted millions of brain cells and a week on this blog telling us the world as we knew it was about to end.

America is insolvent, bankrupt, done like dinner – that was the chant as fools mistook a political crisis for an economic one. That the richest nation on earth with the planet’s biggest economy would be unable to meet its bills was a joke. If the US has a giant problem, it’s not that it spends too much, but taxes too little. Anyone not blinded by ideology or poisoned by gold can figure that one out.

I sure hope nobody reading this pathetic, disposable blog shorted the market for Monday morning, or loaded up on bullion at a Scotiabank branch Friday. If you did, bend over. Like I said, never bet against America.

Now, let’s take a moment and update on a couple of characters we’ve met here. Like Wendy, who was being urged by her realtor and mortgage broker friends to retain a rural rental property, borrow against it, then use that as a down payment on a property which would be 80% mortgaged. In other words, 100% financing – for a single mom.

“This,” says Wendy, “is the response I got from the mortgage broker when I told her I wanted to put a pause on the refinance of my acreage, any thoughts on what she is saying?

Hi Wendy, I’m no financial planner but if you track market conditions and predictions like we do then you could see that the market is predicted to stay stable in 2011 and boom in 2012 and 2013 similar to what we saw in 2006-2007.  These are stats right on CMHC’s (Canadian Mortgage and Housing Canada) the governments web site.

I think you need to find a new financial planner. — Lisa

Whoa, Wendy, where have you been? Did nobody tell you there was a real estate boom coming? I mean, this is straight from the mouths of the only horses who matter – CMHC and “the government.” Thank god we have local mortgage brokers who are tuned into market conditions, tracking predictions and all the other hard stuff. Otherwise we might think these flatlining prices, job losses, mounting debts and stagnant incomes actually meant something.

Wendy. Babe. Never talk to Lisa again, okay?

Now, here’s Andrew who dumped his fortune into a condo in Vancouver because, as you know, real estate prices only go up. He starred in a posting here some months ago in which I might have called him bad names. Happily, he’s found Redemption. Praise be, brother Andy!

Hi Garth: I thought I’d update you, and the blog on my story from April. I did get around to listing my condo in June, and finally signed the selling papers 2 days ago. It was listed for 7 weeks. There was only 1 offer that I finally took about $13k under asking including giving concessions for 2 upcoming special assessments totalling $8k over the next 5 years.

Asking: $379k, Offer: $366k

After I paid this year’s assessment, and realtor fees: Yikes.

All in all, a very distasteful experience… I am now totally debt free and it feels awesome. My g/f and I moved into a swank waterfront condo where the condo fees are $400/month and rising.
I want to thank you for providing an alternative to the common real estate mumbo-jumbo, and saving me from even further losses in the future. All the best, Andrew

Well, in case you missed the news, Vancouver real estate’s officially topped, and has begum the greasy slide back to that dark, sad place we call ‘the mean.’ Post-riot Chinese money is ebbing, locals are emasculated by debt, the BC economy’s stalled and there simply are not enough idiots left to put down two million for a stucco-over-wood eyesore on a ‘premium flat’ lot the rest of the country would find suitable for an unscheduled whiz.

How do I know this?

Ha. It’s Mesozoic. I read all about it on Craigslist.

Unconventional Offer for Adventurous Home Owner (Vancouver)

Date: 2011-06-26, 8:16PM PDT
Reply to: [email protected] [Errors when replying to ads?]

This offer is not for everyone. Those of you who have saved every penny for most of your life to afford a down payment and currently work around the clock to make mortgage payments, I commend you on your efforts, but this post is not for you.

Do you own more than one property? Do you have so many rental homes with no mortgage payments, yet you still feel unfulfilled? Tired of your illegal tenants whining that there are rats in the walls? Have you always wanted your own dinosaur? Now is your chance my friend.

In exchange for one of your properties, I will be your personal dinosaur for one year. I will be at your beck and call, 24 hours a day, wearing a dinosaur costume. The type of dinosaur is negotiable. I can babysit your children (references upon request), scare the mailman, wash dishes, entertain and impress your guests, and much more. (No sex stuff though, sorry.) I will make realistic dinosaur sounds, eat what the particular dinosaur eats and maybe even sit on a fake dinosaur egg, if you are so inclined. I am well educated, fluent in English and French (as well as dinosaur), can play several musical instruments and have no criminal record or outstanding warrants.

All this and more. This is the only way you will ever have your pet dinosaur, and the only way I will ever be able to acquire a house in Vancouver.
Serious offers only please.

Thank you.

175 comments ↓

#1 Raj on 07.31.11 at 10:15 pm

Well, I knew that it was just a drama.The ending was
predictable.

#2 Bottoms_Up on 07.31.11 at 10:19 pm

Here’s the CMHC stats website, I’d be curious to see if anyone can find where they say the market is going to boom in 2012 and 2013:

http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/stda/index.cfm

#3 Stefan on 07.31.11 at 10:19 pm

Hey Garth. Can you comment on any possible US Treasury bond market crash later this year, and how it might impact Canadian bonds. Thanks!

You mean the one you made up? — Garth

#4 TurnerNation on 07.31.11 at 10:22 pm

After its upgrade this embryonic weblog has tested free of VDs (Virtual Diseases). :mrgreen:

#5 HouseBuster on 07.31.11 at 10:25 pm

Anyone with half a brain knew there would be a deal so I’m surprised at the strong upside reaction. There may be a good short scalp setup tomorrow morning before 10:00 am for the Dow and S&P. More debt isn’t the answer to the problem.

#6 Bottoms_Up on 07.31.11 at 10:26 pm

#205 ballingsford on 07.31.11 at 8:05 pm
————————————————
My mortgage and tax payments are the same as what I would pay in rent, and I’ve made $1000/month (net of maintenance and selling fees) over the past 20 months just for ‘owning’ my own home!

Wow, it really sucks being an owner. LOL!

#7 Steven Rowlandson on 07.31.11 at 10:39 pm

Since politicians won’t stop borrowing and won’t pay down the debt there is only one way to restore sanity and that is to pull the plug on the lot of them.

#8 Bottoms_Up on 07.31.11 at 10:39 pm

Ok, 1st page under Resale prices (for 2012) proves that Lisa was lying:

http://www.cmhc-schl.gc.ca/odpub/esub/61500/61500_2011_Q02.pdf?fr=1312166261850

#9 The Emperor's Clothes on 07.31.11 at 10:44 pm

“debtageddon” avoided.
Next stop,
Euro-ageddon. Italian shoes on credit anyone?

#10 Dclipse on 07.31.11 at 10:45 pm

Well, in the building where my wife and I are renting (Lower Lonsdale – North Van) a 2 bed condo was for sale for few months for a whopping $629,000. Crazy price compared to GTA where we moved from. Today, they had open house and a new price of $609,000. A $20,000 price drop. Another $300,000 or so and it will be worth it.
It’s slowly starting to happen.

#11 wonderwoman on 07.31.11 at 10:46 pm

#6
My mortgage and tax payments are the same as what I would pay in rent, and I’ve made $1000/month (net of maintenance and selling fees) over the past 20 months just for ‘owning’ my own home!

Wow, it really sucks being an owner. LOL!

That is due to overnight interest virtually at zero, meaning, you’re not paying interest on borrowing. All that free money transferred from good depositors like us (earning nothing in the bank) will end with increase in interest rate. A couple percentage up, and your mortgage will double, good luck holding on to your home while we cash in on real estate crash. That’s when the transfer of money happens again and this time into rightful hands.

#12 vyw on 07.31.11 at 10:47 pm

It might be a good time – it’s not too late – to lock in some profits in gold and silver with prices are these historic highs. Enjoy the gains. Why not?

Re Vancouver. I don’t think we’re at the top yet. Not til interest rates start to rise. The SFH market might take a breather through the fall (ala 2010), but absent BoC rate increases, average and median prices will continue to rise as long as there’s solid demand and modest supply.

There’s also one other factor to consider re Vancouver. There’s almost no more undeveloped land available save for agricultural lands which are supposed to be preserved. Vancouver’s SFH stock as a percentage of housing stock (around 35%) is low compared to other CDN cities. This won’t prevent a market correction – which has happened in the past (1981, 1990, 2008) due to interest rate increases. Remember that in late 2007, the BoC rate was 4.5% – RE in all major CDN cities including Vancouver started to fall in spring 2008 (well before the financial crisis of fall 2008). WHen they crashed the rates in Feb 2009, Vancouver RE prices started to climb.

Interest rates are the key IMHO.

#13 Tim on 07.31.11 at 10:48 pm

Don’t bet against America? The country where the average white person has 20 times the wealth as the average black or Hispanic. The country where people are being duped by a small group of billionaires who control the media and have convinced many of the tea party whackjobs that taxes cannot be raised, even though many unemployed people are living in tents.

You mean the country that funds ours? — Garth

#14 Dorf on 07.31.11 at 10:48 pm

“Serious offers only please.”

- You first.

I like the “sex with a dinosaur” idea, though. I’m going to set that up for next weekend.

#15 Oasis on 07.31.11 at 10:49 pm

OMG! gold is down $22 from it’s ALL TIME HIGH. what a horrible place to have put your money the last 10 years.

for stocks to go higher, the USD must go lower, and that means higher gold prices. get used to it. there’s no SAFER place to put your money that GOLD!!!

#16 Is inflation a tax? on 07.31.11 at 10:49 pm

To Garth:

Do you think that inflation is a tax?

To Wes:

You are still missing the point, buddy!

The ANNUAL INTEREST on the U.S. debt is almost HALF A TRILLION.

This is one HUGE reason why we spend more than we take in…well, there’s also the imperialism too ;)

Needless expenditures, that only hurt America.

Try to get understand: Why does the U.S. owe anyone anything, when it has the constitutional power to create its own debt-free money?

It’s because this power has been taken away from it…in 1913.–now it must BORROW ALL MONEY it uses into existence.

The powers that be (i.e., oligarchy) benefit from this type of financial ‘ponzi’ system; the majority of us don’t.

To Shawn:

Sorry to be rude, but it doesn’t matter “what you think” about the nature of the Federal Reserve.

I can think that the moon is made of cheese…but this don’t make it so.

Please present some facts to back up your sentiments.

Geesh.

Food for thought :)

#17 kimi on 07.31.11 at 10:52 pm

I do believe that ‘Don’t bet against America’. They have a huge population, life in the US ‘price wise’ is bliss compared to us Canadians…. eg ‘price of alchol, clothing, food, gas etc.
They (US) will rise up … my question: will it be after ‘WE’ (Canada) falls?

#18 the Phantom on 07.31.11 at 10:53 pm

Hey there Garth, fellow blog dogs (and lurkers):

Leave it to another member of the RE community/ mortgage broker hawkers to do that, now, all too familiar rectal pluck and furnish numbers and opinions that so conveniently square with their end state of transferring real estate from one owner to another in order to trigger a commission and/or deriving whatever benefit the brokers receive for drawing up a mortgage for a new homeowner…

Is there no shame anywhere? (And I’m not even referring to the dinosaur wannabe here!) Sheeeeesh!!!

the Phantom

#19 timo on 07.31.11 at 10:56 pm

yahoo! the headlines will be wonderful

http://www.joliet.lib.il.us/digitization%20projects/The%201930s/Depression.htm

#20 Aussie Roy on 07.31.11 at 10:57 pm

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.

Amen to that brother, It’s almost impossible to explain to them we live in a debt based fiat currency world not some fantasy BARTER world as described in Walras law of finance. It reminds me of those who thought the world is flat, even though the majority would seem to believe it, doesn’t make it true. Roll on the awakening I say, the sooner the better.

How anyone can think markets are always in equilibrium after living through the dot com bust the Japanese bubble and of course that little disaster called the US house bubble is the definition of delusional thinking.

http://en.wikipedia.org/wiki/Walras%27_law

Aussie Update

It’s not the MEGA mortgages that are the problem in Australia but the banks margins – LOL.

http://www.dailytelegraph.com.au/news/rudds-man-in-choice-move-on-banks/story-e6freuy9-1226105183220

Private debt hits housing market – Who would have thought?.

http://www.theage.com.au/business/property/private-debt-hits-housing-costs-20110731-1i6bj.html

New home sales drop the most in 5 years

http://www.theage.com.au/business/new-home-sales-drop-most-in-five-years-20110801-1i778.html

With recent negative press even from Aussie banks about the negative influence that negative gearing has on the housing sector, will the govt finally act on the Henry tax review completed back in 2008.

http://www.abc.net.au/news/2011-07-28/tax-summit/2814526?section=business

Australian House porn icon set to lose a bucket of money, what message does this send to the flippers?.

THE production company behind Channel 9′s DIY renovation hit, The Block, is set to take a financial hit from the sale of the show’s houses.

The four properties in Cameron St, Richmond will be auctioned on August 20, with agents quoting $800,000 to $880,000 for the three single-fronted residences.

The double-fronted property renovated by Melbourne’s Josh and Jenna is being advertised for $900,000 to $990,000.

Watercress Productions paid about $950,000 each for the dilapidated Victorian and Edwardian houses, including stamp duty.

The four couples have each spent more than $100,000 renovating the properties, though that fails to take into account the second storey added to the single-fronted houses, which would have cost upwards of $200,000, pushing their cost to around $1.25 million each.

Advantage Property Consulting’s Frank Valentic said that once holding costs were taken into account, each house would need to raise between $1.3 million and $1.4 million to break even.

http://www.heraldsun.com.au/news/more-news/blocks-houses-set-to-make-a-loss/comments-fn7x8me2-1226105140248

#21 Joseph [original] on 07.31.11 at 10:59 pm

Nothing has changed in regards to the US defaulting tonight. All they did was raise the debt ceiling high enough to kick the can down the road another 6 months, after which the US will be at it again, with the recommendations of bipartisan committees leading the way. We’ve had these bipartisan committees giving receommendations to the US government ad nauseaum now for two years, all of which were rejected by one side or the other. The opera isn’t over yet.

The US is not a high-debt nation so much as it is a low-tax jurisdiction. This will change. — Garth

#22 wes_coast on 07.31.11 at 11:00 pm

Oh man someone beat me to the punch on my dinosaur plan. Back to the drawing board.

#23 Best place on meth on 07.31.11 at 11:03 pm

“I sure hope nobody reading this pathetic, disposable blog shorted the market for Monday morning, or loaded up on bullion at a Scotiabank branch Friday. If you did, bend over.”

Makes no difference what happens tomorrow because next summer gold will be another 15-25% higher than it is now.

I’ll gladly bend over for that.

#24 Buford Wilson on 07.31.11 at 11:04 pm

Taxes are already too high in the US. Higher than outsiders think.

They need to reduce spending. And at the same time cut tax rates sharply to stimulate the economy.

It’s the only way to solve the debt issue.

US personal tax rates:
* 10% on taxable income from $0 to $8,500, plus
* 15% on taxable income over $8,500 to $34,500, plus
* 25% on taxable income over $34,500 to $83,600, plus
* 28% on taxable income over $83,600 to $174,400, plus
* 33% on taxable income over $174,400 to $379,150, plus
* 35% on taxable income over $379,150.
No GST, property tax deductible, mortgage interest deductible. — Garth

#25 Utopia on 07.31.11 at 11:12 pm

Well Wendy, your Realtor is a ding-dong. I have to say I am not impressed by her use of the word “boom” in reference to 2012. Even CMHC is not daft enough to say that.

On the other hand, the current 2nd quarter CMHC Housing Market forecasts and updates do say that their economists believe we are in “balanced market” conditions (as if!).

Furthermore, they predict that unemployment will decline to 7.2%, that housing starts will increase in many markets in 2012 and that immigration will rise on strong economic growth and improving employment prospects. They also suggest that prices in places like Vancouver will increase through this year and next.

Sadly they may be correct on that last point although I cannot imagine how it is actually good news. What they are also telling us is that rates are likely to remain low and the insanity will continue.

But they don’t put it in those terms. The confusion over at CMHC is that they think housing prices will rise because rates are low but that rates will be low because economic growth is weak.

I don’t know what they smoke over there.

Keep in mind Wendy….what goes up must come down.

Here is a link to a selection of the .PDF files by region courtesy of CMHC. I suggest you use your head when reading them though and give more weight to their reservations than to the bullish outlook.

This is still about using your own head and divining the tea-leaves for yourself. And ask yourself this question…Do you believe the economy is going to see a major expansion given all the global economic headwinds? Seriously…..do you see a boom coming?

If so, then do like so many others have done already and throw caution to the wind and buy to your hearts delight. Then ask an American how that worked out for them.

Forecasts and analysis: Canadian Housing Market Outlook
http://www.cmhc-schl.gc.ca/en/hoficlincl/homain/foan/index.cfm

And remember Wendy. Canada is one of the last bubbles remaining………and we are not special.

#26 Tim on 07.31.11 at 11:14 pm

From James Howard Kunstler:
Whatever other conclusions can be drawn from the great debt ceiling debate of 2011, the main one seems to be that this country can no longer govern itself. Our reverence for the constitution appears to be inflated along with everything else in the USA these days: gas prices, waistlines, cable TV bills.

#27 Tim on 07.31.11 at 11:14 pm

Whatever other conclusions can be drawn from the great debt ceiling debate of 2011, the main one seems to be that this country can no longer govern itself. Our reverence for the constitution appears to be inflated along with everything else in the USA these days: gas prices, waistlines, cable TV bills.

#28 dodgedbullet on 07.31.11 at 11:21 pm

Bollocks, I didn’t get my TD waterhouse account opened in time (noob to investing)….

#29 Utopia on 07.31.11 at 11:21 pm

#11 Wonderwoman said….

“That’s when the transfer of money happens again and this time into rightful hands.”
———————————–
You have moxy Wonderwoman. Go Girl. You are right in guessing that the subsidy paid for home ownership in the form of cheap rates is a loss to savers and a benefit for buyers.

Just for the moment. Then the tide will turn again.

#30 Basil Fawlty on 07.31.11 at 11:21 pm

Suffering sheep dip, lets see if all this debt ceiling/budget talk is making any sense to those of us in the peanut gallery. So to put things in perspective, as of 30 seconds ago the outstanding US debt was $14,723,560,000,000 (most people don’t make this much in a year). The US is borrowing $6B per day to meet current spending and interest on the $14.7T. The expected deficit for 2011 is 1.6T, which will put total debt at $16.3 by year end. The debt ceiling has been increased by $2.1T in return for $1.5T in spending cuts over 10 years, which is about $150B per year. So, annual spending cuts are equal to 9.4% of the present annual budget deficit, its a drop in the bucket. This means the new annual deficit will be in the neighborhood of $1.45T.
Some commentators are suggesting that the US has met a monster called debt saturation. The new debt will not create the economic growth necessary to pay off the existing debt, which means more borrowing and/or printing. How can all this be dollar positive?

Why do people here have trouble understanding taxes will increase in the US, as they did in Canada with the GST? The cleaned up our deficit in a hurry and actually reduced the national debt. Then Mr. Harper was elected. — Garth

#31 M3 on 07.31.11 at 11:23 pm

Garth,

Housing boom, bust or stall, the average Canadian employee has been trounced over the past ten years.

I work at a large CA firm where the starting salary for a new grad has actually gone down in the last ten years, along with salaries for most staff. (Profits are up, of course)

When real inflation is taken into account (not the Government provided hogwash) the purchasing power of “average” Canadians has been decimated.

The only people running our economy these days are the rich. One look into my partner’s office proves it – Coach Bags, Tiffany Jewelery, Harry Rosen suit. Price does not phase these people.

Contrast this to my densely populated neighborhood where the dollar store is the hottest shopping destination around and Target wouldn’t even deign to replace the Zellers store as the area wouldn’t be able to support it.

The middle class is dying in Canada. It is a slow, agonizing death caused by inflation and debt-fueled consumerism.

I invest accordingly. Your readers should too.

M3

#32 Uki_one on 07.31.11 at 11:24 pm

To #10 Dclipse on 07.31.11 at 10:45 pm:
“Another $300,000 or so and it will be worth it.”
That means 309000 for a 2-bedroom condo ?

I rent one in Mississauga in new building, and from my experience it is not worth that much. I can hear neighbor upstairs flashing his toilet, full building of dogs and cats. Also, management has keys from your unit ( this is by law as I was told ). I would not pay more then 170000 if I decide to buy, and that is the fair price for the small box in a sky… But why would I bother to buy it ?

#33 not 1st on 07.31.11 at 11:24 pm

Only Garth and the delusional equity markets would cheer another couple trillion added to an insolvent nation’s debt load.

Mark my words, this is the day when we will look back and say, remember when the U.S. had that chance to right its fiscal books back in 2011 and didn’t. In 2030, that deficit load will be north of 20 trillion, and overall liabilities in the hundreds of trillions. And this is what we call a model economy?? who are the real tinfoilers?

#34 The InvestorsFriend (Shawn Allen) on 07.31.11 at 11:26 pm

To Number 16, Is Inflation a Tax?

Well it erodes purchasing power so I think it is a sort of tax or drain on the value of cash under a matress. Many forms of invesment tend to go up with inflation although in a lumpy fashion.

#35 Ryan on 07.31.11 at 11:28 pm

I live in Ottawa which is probably the least overvalued city and the market in most of the city has totally died. I live in a downtown condo and there haven’t been many sales at all in the downtown area in the last 3 months or so. Don’t believe CREA or whoever says that market is still rising. It is being distorted by a few sales. The market is in the process of a major decline here.

#36 Ex-Cowtown on 07.31.11 at 11:40 pm

# 12 – vyw

A jump in interest rates isn’t strictly necessary. When the market has stretched past the breaking point it will collapse even if rates stay low.

The rising rates will merely turn a rout into a conflagration.

#37 The InvestorsFriend (Shawn Allen) on 07.31.11 at 11:42 pm

Is a U.S. dollar bill a debt owed by the U.S. government?

(If so who is the debt owed to and how will it be repaid)

No one took up my point yesterday that a U.S. dollar bill, or it’s electronic equivalent created by the Fed is not really a debt of the U.S. government even though it is counted as such.

The facts I offered were that Federal Reserve notes are COUNTED as part of the $14 trillion debt.

The reason they could not simply print money to get around the debt ceiling is that they WRONGLY count printed money as part of the debt.

Here is the Fed balance sheet.

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

This shows Federal Reserve Notes or money of almost one trillion and shows it as a liability of the Fed.

Mostly I offered not facts but pure logic to demonstrate that a dollar bill is not really a debt of anyone, not the Fed and not the United States Government.

Here again is the argument:

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 $1 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.

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 even 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 and they PRETEND that the debt of the United States is increased. But the creation of money does not require the United States to later pay anything, ever. Therefore it is not debt.

It may be convenient to count printed maoney as debt that way all deficits add to debt. But fundamentally a dollar bill is not a debt and calling it a debt does not make it a debt.

This is important given all the knashing of teeth about debt. And yes I know about unfunded liabilities. Yes, the U.S. has too much debt. BUT the part of the debt represented by Federal Reserve Notes (dollar bills) is simply not debt.

Does my logic make sense? Can anyone challenge this logic?

#38 nonplused on 07.31.11 at 11:47 pm

The US is a low tax jurisdiction? No, I don’t think that’s the problem.

They do have a spending problem though. But it ain’t cheap being the world’s policeman.

The debt ceiling thing was just melodrama. Now the peons can rush to the mall in the glorious knowledge the financial problems have all been fixed because they said so on TV, and the government can continue to pile on the debt.

Fact is they take in 2 trillion dollars a year in taxes in the US. Any other country of 300 million would be able to figure out how to run their government for that. That they need to borrow another 1.5 trillion dollars a year indicates a spending problem, not a tax problem. Laffure curve and all that.

Not sure why anyone offering to be a dinosaur for a year for a house would only consider “serious offers”.

Because unlike you, they have a sense of humour. — Garth

#39 Short the Markets ! on 07.31.11 at 11:53 pm

Short the markets after the dead cat. Covered my shorts on the S@P , gold and silver on Friday. Wanted to hold Gold and silver short a little longer but never have money in the markets on the weekend depending on the situation. Long weeksends forget about it. The Stock market IMO is nothing more then a pump and dump ponzi scam to to steal money from the masses. Mutual funds are for the dummy masses but now even they don’t fall for that scam since they have no money and every penny goes to housing expenses.

#40 Coho on 08.01.11 at 12:08 am

Well, I guess the US government decided to order themselves a few cases of whiskey to keep the party going. Gold down, oil up, Dow this, Nasdaq that, as the future is mortgaged and the middle class continues to be decimated. It’s all good.

Maybe some seniors and baby boomers just care about things holding together for another 10 or 20 years until they become worm food and leave the upcoming generations with the tab. Like pulling an eat and run!

Don’t bet against America? Is America going in the right direction? The middle class is still getting hosed. It’s now a 17 trillion debt ceiling and it’ll keep going up. And it’s not just about dollars. The Constitution is getting trashed. Peoples’ freedoms are constantly being chipped away at. Anyone paying attention can see America is being weakened from within and without.

It is the only country founded upon freedom and liberty, which has made it a target of the tyranny running world affairs. Stroke her ego. Get her to play global cop and to spend all of her resources on war. That should give us an idea about what’s in store for the USA and of freedom loving people everywhere.

#41 not 1st on 08.01.11 at 12:11 am

Garth, there is no way in hell the american people will accept a tax increase anything like we have (had) here in canada without as full scale revolt.

And in Canadam it wasn’t the little GST that saved our bacon from the fire, we also underwent a lot of austerity with many programs being cut to the bone. But we canadians were reasonable people and knew time had come to bite the bullet. The americans will have to accept both tax increases and austerity programs to get its books in line. They could have done that right now, but chose not to so its politically impossible unless they get a president and congress who will fall on their sword. Not likely.

#42 Debtfree on 08.01.11 at 12:15 am

Jack Jack jack sprat from yesterday . You really have a narrow view of not only our confederation but your united states . Where I sit in my beloved Canada . I look north to see your union . And few years go by when we don’t hear your whining of please let us build a road to your country( Canada) so we can drive through and hook up to your grid so we too can have power projects and sell the power to someone other than the palins. What a joke the capital of the largest under developed state in the union (owned and operated by your oil companies) and you can only get there by boat or plane . That IS when the weather permits . It’s so cute when your youngins see the bright lights of northern canada, south of your border . Stocking up on a years worth of chinese crap at the great wall mart . We see it weekly pickup truck loads some times with trailers . Oh before I forget I have to thank you for taking and making Celine Dejong a U.S citizen . Most of us a grateful .

#43 Robert Dudek on 08.01.11 at 12:15 am

A temporary drop in the price of gold means nothing, of course.

It’s back up around 1615 as I write this.

#44 mid-Ontario on 08.01.11 at 12:16 am

Garth, stick to RE and its “slow melt” theory.
You truly do not seem to see that the USA is doomed.

Obama walks on to the stage at the 11th hour after every politician in the US has had his/her say on Debt Ceiling “crisis”.

Obama whips out the shiny new platinum credit card and amid the cheers from both houses and CNN, states firmly that this new card will look after all mortgage payments for 2 years.

They all cheer. Even you Garth. You just don’t get it!

Seriously, you should run for the Liberals in Ontario as they carry us into the biggest debt in Provincial history with their own cheerleaders all around them.

Give me a break.

#45 MPM on 08.01.11 at 12:28 am

I just went through the same thing as Andy in the Westend of Vancouver. Luckily I bought in 2003 just before the craziness began and F got his hands on the market.

Our assessment in Jan was 365K for our 1bdrm and den, we listed at the end of Jan for 369K. Mid feb we dropped to 359K, nothing. After the new mortgages rules we dropped to 349k, nothing. Then at the end of Mar we dropped the price to 329k and received one offer for 315k, settled at 320k and had to pay a 2k assessment. This was after 50 showings – although our place was older and was not ‘open concept’, also had 6 stairs split level – so it catered to a certain buyer.

Ninety percent of the listings that came on at the same time as our apartment are still listed, we were the only ones to drop our price. I noticed the other day that finally after 6 months 40% of those listings are finally dropping the price – something we started :)

The upper end in Vancouver is insane, I see the forsale signs by my brothers place in Kerrisdale, then 2 weeks later the sold signs. But the bottom of the market in Vancouver is dead. The market is completely out of kilter when that happens.

Debt free, investments, rent of $1500 for a 2 bedroom (1960s Sinatra tower by the lagoon) and saving almost 2k a month. Thanks Garth!

#46 Alan on 08.01.11 at 12:29 am

VYW,

Finally, someone that can provide a reasonable arguement for Vancouver housing. No more buildable land unless you move into Agricultural reserves is correct! Vancouver is surrounded by mountains, water and the USA to the south. Anything East of Vancouver is considered Agricultural land for the most part and that’s why land values and property prices should be defencible. You are also correct that the only thing that can derail stable property pricing is a massive increase in mortgage rates. At the moment rates are and will continue to be in the 3 percent variable range.

So once again, simple economics by those who wish to debunk Vancouver’s resilient housing is proven to not apply here! There, I’ve said it like I’ve been saying it for the last three years on this blog!

#47 Nostradamus Le Mad Vlad on 08.01.11 at 12:33 am

-
The grizzlies gratefully declined our invitation to sup with us pathetically worthless humans, saying they had many other scientific whoopsies to attend to, notably spontaneous defaults and “Oh shit, we’re outta money again”.

Nevertheless, the splendid bbq went ahead Saturday afternoon, followed a great concert (70s – 80s – 90s rock – R&B and blues), following which we didn’t know whether we were teens or old farts again.

Plenty of mountain lions, black bears, wolves, cougars (the bigger version of the puddytat model), elk, moose, deer and some humans doing stupid animal tricks made for a terrific weekend.

BTW, the snowpack for winter just passed is still at least twenty feet thick at the peak of the ranges in the Slocan Valley. Here, too? New Denver is where all the parties were. The town (pop. 500) is struggling to recover. Wait ’til next year!
*
#3 squidly77 on 07.29.11 at 10:13 pm — Something else to consider about Cerberus.

#59 David B on 07.30.11 at 6:46 am– “I smell bad news bears coming from Mr. Harper’s Ottawa.” and “Then Mr. Harper was elected. — Garth” — What else can we expect? He’s got us by the balls now, more than happy to grind us into the dirt.
*
1:57 clip Live faster, die younger. Encourage seniors to smoke sticks of dynamite! 3:09 ckip Debt ceiling may have been raised (Masterpiece Theatre), but it cannot stop the inevitable. Sheeple’s emotions play a much larger role than politicos. Gremlin Rumblings This is the one that could cause a possible mega-tsunami.

8:15 clip Global economic doohinkies? With the animals talking to one another, I wouldn’t bet against this as it could invoke this. Yep, ordinary people are hopping mad; Unconstitutional But the politicos run the country and make decisions; Iceland F&%k you, banxters; Chart Closer to the real US unemployment stats; Stranglehold Remember BP?

#48 Future Expatriate on 08.01.11 at 12:43 am

I think the Progressive Caucus and the Tea Party are going to unite tomorrow, send “Satan’s sandwich” down in flames, and I think Obama is going to be smart enough and just strategic enough to refuse the 14th amendment route and let the right wing suicide against itself and the debt ceiling. Let’s see:

A. The deal fails, Obama uses the 14th, America and the MSM forgets in 3 seconds, and he deals with an impeachment the rest of his term and a GOP screaming how he’s cutting benefits for grandma (as THEY wanted).

or

B. The deal fails, he lets the debt ceiling crash (because the US was headed for a double-dip depression anyway that he WOULD have owned) and America removes and recalls every last right winger in power that crashed the ceiling. For the next twenty years at least.

Hoover (GOP) owned the first Great Depression, and the result was 16 years!! of Democrat FDR.

It’s a no brainer. Time will tell if Obama is that smart.

I think he is.

#49 Alan on 08.01.11 at 12:45 am

EX Cowtown

“market stretched beyond…” I appreciate that there are markets of real estate and not all markets are alike. The problem here is that people like Garth have been taking what appears to be sound business and economic thinking and using that to predict the boom and bust of real estate in general terms. Where it may be different today (yes, it may be different) is that while highly leveraged real estate can lose money easily with even a mild correction in RE prices, most people don’t sell because of a perceived paper loss on the the one place that keeps a roof over their heads. Unlike paper assets that have liquidity, those investments are looked upon as pure investments, something to be bought and sold at a profit or loss. This is where Garth misses in any of his calculations and why he has been so wrong in any of his Great Real Estate Doom and Gloom predictions for YEARS!

Lastly, people are realizing that having their money in a hard asset like real estate can also be an investment vehicle that may appreciate over time and while most house purchasers may not have hundreds of thousands of dollars to invest in publicly traded stocks that can just as easily lose all their money (Enron, Brex, World com, Nortel) at least they can buy into something that they can derive some use and also provide a vehicle to put some of their monthly pay check into. The reality for most Canadians is they fail to save money independently. Real estate for most has been their only savings because they were forced to make a monthly payment and despite the fact that it’s mostly interest, eventually it gets paid off.

#50 timo on 08.01.11 at 12:45 am

Because unlike you, they have a sense of humour. — Garth

lol, love this blog. Jerry springier wanna-bee.

you must be starting to really shake your head now Garth.

Here I will help to calm your nerves.
real-estate prices always go up and stock markets never speculate.

#51 Killer Chicken or Imploding Boomer? on 08.01.11 at 12:47 am

37 Shawn – always enjoy your challenges. Hmmm lets think about this one…..OK I run a country which has nothing. So as chief/prez/PM I print some money, decree it “legal tender” and get the hospital, school and road built (its a small country). And of course I pay the workers for it using all the money I printed. The real
wealth of the country has increased by that dollar value,
which is now stored in the hospital, school and road. But
wait, the workers now have savings (in cash) in the
amount of that dollar value. But the country as a whole
does not have double the wealth. So the currency shows
as an asset to the workers but correspondingly must
show as a debt to the issuer.

#52 Golden Stewie on 08.01.11 at 1:03 am

“#199 simkev on 07.31.11 at 7:10 pm yesterdays blog.
…anywho not going to be buying PM’s anytime soon ….kinda overvalued right now and volatile…. just like residential real estate!”

Sorry its nothing like residential real estate.

Gold has been rising for 10 year and still large investors (hedge funds, pensions etc) are MAYBE 1 or 2% invested in any form of PMs. How many people do you know who have any PM’s? When all your friends are talking about how much gold they have, sell.

Hardly a bubble by any stretch. Yep it volatile, so what. Residential real estate isn’t volatile just now, its just going down!

Even if the pension funds invested to the levels GT is recommending (15%) the price of PM will go into orbit.

US policy to “increase exports” can only happen if they devalue the currency by continual printing of currency. US$ will continue to devalue against all currencies and especially PMs for the foreseeable future. Not only do they have no option, its their plan. Be invested in US$ at your peril.

70% of all the bonds issued last year were bought by the Fed, NO OTHER BUYERs.

US bonds now are like the last days of Bernie Madoff, great if you get out in time!

Garth I totally understand your position, you run an investment firm, totally entrenched in the “system”. if you dont believe in the “system” you might as well close the doors.
Just like Rome, the US empires days are numbered, there wont be a sudden collapse tomorrow, just a slow painful death for anyone with assets denominated in US$.

PM will go to to orbit over the next few years (measured in US$), that doesn’t necessarily mean the case will be the same in all other currencies, but its a fair bet.

#53 Phil Indablanque on 08.01.11 at 1:14 am

I just renewed my 1 year lease for the 3rd year in a row without an increase. Renting sucks.

#54 Ryan on 08.01.11 at 1:19 am

The rates aren’t going to rise. There is no way they are going to rise any time soon. The next move by the BOC will be to LOWER rates sometime next year. Will this stop a crash in the housing market? Probably not. She’s going down anyways.

Rates are not going down. — Garth

#55 Aussie Roy on 08.01.11 at 1:19 am

Buford Wilson on 07.31.11 at 11:04 pm

Taxes are already too high in the US. Higher than outsiders think.

They need to reduce spending. And at the same time cut tax rates sharply to stimulate the economy.

It’s the only way to solve the debt issue.

US personal tax rates:
* 10% on taxable income from $0 to $8,500, plus
* 15% on taxable income over $8,500 to $34,500, plus
* 25% on taxable income over $34,500 to $83,600, plus
* 28% on taxable income over $83,600 to $174,400, plus
* 33% on taxable income over $174,400 to $379,150, plus
* 35% on taxable income over $379,150.

No GST, property tax deductible, mortgage interest deductible. — Garth

Australian Taxation

a. 10% GST on ALL items except non prepared food and financial services.

b. Large tax on all fuels (up to 40% of pump price)
(current price $1.37 per litre – 4.5lts per gallon)

Income tax rates

0 – $6,000
Nil

$6,001 – $37,000
15c for each $1 over $6,000

$37,001 – $80,000
$4,650 plus 30c for each $1 over $37,000

$80,001 – $180,000
$17,550 plus 37c for each $1 over $80,000

$180,001 and over
$54,550 plus 45c for each $1 over $180,000

Plus an additional 1.5% medicare levy.

Planned carbon tax of $28 per tonne.

Yes there are a number of middle class welfare programs these to some degree offset this high tax rate by rebates.

The most common form of tax minimisation practiced here is to hold a loss making investment property because any loss from a cash flow (investment properties etc where interest 7% and holding costs are more than cash flow yield 4%) can be used to offset personal income tax liabilities.

Capital gains tax 15%

I’ve always been amazed how most cannot see how this very common practice has pushed house prices well above affordable levels for most owner occupiers. Unlike the US our own mortgage payments are not tax deductible, just all the others.

So as blind freddy can see this encourages house investors to pay off their own housing loan by withdrawing equity from their yearly loss making RE holdings. This system works a treat when house prices are rising (so you are able to remove equity) but if they stop rising TSWHTF. Remember the key here is hold for a loss, all profits come from house price appreciation.

Another effect this has is to make it appear that only high net worth individuals (those who live in a house mortgage free) hold most debt. Seriously if the tax system is geared that way what did they expect?. Are these highly leveraged infestors really high net worth individuals just because their assets and liabilities are structured this way, of course not. Surely they realise that the way they calculate net worth requires using mark to market housing prices, silly me I forgot house prices never go down there is no bubble so there is no risk of prices ever falling.

Govt, banking and economists have falled to see that the above tax policy has any influence on peoples financial choices or how this policy may have affected house prices. I’m pleased to report this is changing evident by the recent comments by the ANZ’s CEO.

http://www.smh.com.au/business/negative-gearing-unhealthy-says-anz-boss-20110602-1fiz8.html

Personally I believe in the case of Australia that it wont be an increase in tax rates (although the effect is the same) but a winding back of the middle class welfare gained over the past 10-15 years or removing some of the current tax deductions. Currently our house infestors cost $6-$9B in the form of tax exemptions gained on their normally taxable income (wages).

Is it really any wonder the average Aussie is battling to make ends meet?. The last straw was when new mortgages reaching their peak on a national basis of 6.7 times average annual incomes. Or was it this proposed carbon tax which will suck out billions of dollars out of our productive economy and into the hands of govt. Probably both.

#56 Ty on 08.01.11 at 1:38 am

Any American politician who runs on higher taxes as a fix to the debt problems will have their career end, and go into business doing a left leaning blog.

#57 Derek R on 08.01.11 at 1:39 am

#37 The InvestorsFriend (Shawn Allen) on 07.31.11 at 11:42 pm wrote
Is a U.S. dollar bill a debt owed by the U.S. government?

… …

But fundamentally a dollar bill is not a debt and calling it a debt does not make it a debt.

This is important given all the knashing of teeth about debt. And yes I know about unfunded liabilities. Yes, the U.S. has too much debt. BUT the part of the debt represented by Federal Reserve Notes (dollar bills) is simply not debt.

Does my logic make sense? Can anyone challenge this logic?

Shawn, why would anyone challenge it? It’s just basic commonsense to anyone who has read up on Modern Monetary Theory. Of course dollar bills aren’t debt. They’re just beer tokens that can be used to pay your taxes. And for that purpose it doesn’t matter whether they’re made of paper, wood, or gold. Still just beer tokens.

#58 Midas on 08.01.11 at 1:57 am

Peter Schiff: bearish and bullish scenarios for precious metals related to the debt ceiling:

http://lewrockwell.com/schiff/schiff131.html

…it is likely that the US will be downgraded by one or more ratings agencies. The effect will be massive because the world’s largest pension, mutual, and sovereign wealth funds typically mandate investment only in AAA-rated securities. A downgrade of US debt means those funds must immediately sell off their primary reserve asset. The effect of this cannot be overstated, and gold would be the first and best refuge for an onslaught of orphaned capital.

#59 The American on 08.01.11 at 1:59 am

At #13: Tim, where do you get your information? Sure, the U.S. has its problems, but Jesus H. Christ on a cross!!! Are you kidding me? Are you really THAT naive and are you being fed propaganda to a level that you truly believe that what you speak is the “norm” vs. the extreme? Anyone can quote extreme cases, Tim. This is precisely what you’ve done.

At #21: Garth says, “The US is not a high-debt nation so much as it is a low-tax jurisdiction. This will change.” So very true, Garth. So very f*cking true. I have every confidence we will begin taxing the “rich” (over $250,000 in income as a single person) at a higher EFFECTIVE tax rate than what has been seen in the past four or five decades. This is the ONLY way to make this debt situation work. Oh, and they WILL make it work. No default anywhere in sight. No way. No how. Not ever going to happen. Mark these words.

#60 Amarillo on 08.01.11 at 2:19 am

Amarillo reporting from Van Isle. Saved 40% on fuel by taking the US Interstate here from Alberta instead of taking those pathetic goat trails in Canada that we call the #1 and #3 Highways. Plus the US Ferry to Victoria from Anacordes is cheaper than the BC Ferry.
Real estate not movin’ here on the Isle. Lots of for-sale signs. Construction is slow per local contractor I know. But herb sales are still doing fine.

#61 Bilbo Bloggins on 08.01.11 at 2:53 am

I love the smell of fear (VIX) in the morning.
Great opportunity for buying quality ETFs and equities late last week while the ignorant folks soil their Depends.
Hope you guys had as much fun shopping as I did.
Bring on the new week!

#62 BPOE on 08.01.11 at 3:05 am

America is finished period. Gold down 20 bucks is no big deal. You don’t invest in the market looking at every single up and downtick you invest long term. 3,6, 9 and 12 months from now check where the price of gold is and then decide who knows whats going on. Vancouver goin up folks and gold is $2000 in 12 months. You see folks this “deal” is nothing more than a smoke show. The markets will rally next week. Don’t buy into them. Buy into the pullback on gold

#63 bcPaul on 08.01.11 at 3:13 am

Even if the US had Canada level taxation, the tax revenue would increase by about 1 trillion.

So without MAJOR cuts in spending, the US debt will never be paid off. And what politician is going to cut when nearly everyone is employed by the government?

And look at Canada: Every level of govt. is in massive debt. So our taxes are far from high enough.

And I only wear a tin-foil hat on leap years.

#64 Carp on 08.01.11 at 4:40 am

Visiting family in Vancouver this week. Richmond, BC to be exact. I passed by my old street and WOW. Everything is being torn down for mega asian homes … absolutely crazy. This town sure doesn’t feel like its heading towards a meltdown from seeing what people are building. But then again, I see what 600K buys you and what a piece of crap – they can keep their swamp and I’m going back to pre-cambrian rock and awesome weather in a week.

#65 Ben on 08.01.11 at 4:43 am

Return of 20% Home Down Payments Looms

Hopeful homebuyers may soon need to shell out more money upfront before being approved for a mortgage.

The public comment period concludes Monday for potential mortgage-related provisions spawned by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Among the potential outcomes is that homebuyers could be required to front a higher down payment — as much as 20% — before they can legally qualify for a mortgage loan.

http://finance.yahoo.com/news/Return-of-20-Home-Down-tsmf-506551024.html?x=0&.v=2

#66 tran, Calgary on 08.01.11 at 5:40 am

http://www.smh.com.au/business/shut-the-gate-why-cashstrapped-landowners-are-selling-the-farm-20110731-1i6g6.html

Buy a farm instead of a house. Now, where can I buy good farmland in Canada?

#67 tran, Calgary on 08.01.11 at 6:04 am

http://www.wealthwire.com/news/headlines/1526

The U.S. is bankrupt.

#68 Devore on 08.01.11 at 6:23 am

US personal tax rates:

In the US today, 51% pay no net federal taxes, after deductions.

Taxes WILL go up, but not after a dramatic showdown that will eclipse the debt ceiling one, because no party will be willing to hang itself if it’s seen as the one that did the raising.

#69 Tim on 08.01.11 at 6:33 am

Why do people here have trouble understanding taxes will increase in the US, as they did in Canada with the GST? The cleaned up our deficit in a hurry and actually reduced the national debt. Then Mr. Harper was elected. — Garth

Unfortunately Garth no matter who would have been elected at the time of the bailouts would have run huge deficits because thats the way the shadow gov’t works. Furthermore in this article you actually advocate higher taxes on citizens. Thats like saying we need higher minimum payments on our maxed out credit card bills, more taxes = more enslavement a very bad idea and one that cripples the average Joe worker

There were no bailouts from 2005-2009. Government spending, the deficit and the debt all increased. Look it up. — Garth

#70 ken in TN on 08.01.11 at 6:38 am

#24 – The marginal tax rates are correct. The magic is in the phrase “taxable income” Half of American workers pay no taxes at all. 70% of all tax revenue comes from the top 10%. Corporations go offshore to remain competitive because of a 35% corporate tax rate. Garth is correct about the need for more tax revenue, unfortunately our taxes are driven by political forces, not logic. Ever thus.

#71 Rob now in Nova Scotia on 08.01.11 at 7:20 am

So, the debt ceiling dog and pony show is now over and Garth declares victory?! What brand is your coolaid? America still has the largest debt on the planet and that is the real problem. The little dog and pony show did nothing to fix the real problem. Don’t bet against America, eh? Well, Garth, 2,000 years ago I’m sure there were people who said never bet against Rome. Sorry to disagree but Empires can and do fall.

#72 detalumis on 08.01.11 at 7:26 am

#31 don’t feel bad about Target not taking over your Zellers store, I live in Oakville which supposedly has one of the highest incomes in the country and they aren’t taking over our Zellers either.

#73 eaglebay on 08.01.11 at 8:19 am

#30 Basil Fawlty

The cancellation of the Bush tax cuts alone would take care of the current deficit.
A few more taxes and there goes the debt.
Of course the US Government spendings would have to be reduced and under control.
Now, “democracy”, may screw things up.

#74 Bottoms_Up on 08.01.11 at 8:34 am

#35 Ryan on 07.31.11 at 11:28 pm
—————————————-
Unfortunately Ryan, your anecdotal evidence is in direct contrast with published results for the Ottawa market:

Employment is up to 525,000.

Sales are up 5.6% y/o/y and also up m/o/m.

Average prices are up 8% y/o/y and also up m/o/m.

http://www.cmhc-schl.gc.ca/odpub/esub/64187/64187_2011_M07.pdf

#75 Jamaican_Gal on 08.01.11 at 8:56 am

@72, Rob

“Don’t bet against America, eh? Well, Garth, 2,000 years ago I’m sure there were people who said never bet against Rome. Sorry to disagree but Empires can and do fall.”

I was thinking the same thing. History is littered with superpowers being brought to their knees. America is in serious trouble and they know it. To make matters worse, in order to bring Obama down (race is a big factor) there are certain factions (Republicans, the Tea Party) who will do anything to destabilize the country! And they are powerful players. It’s like cutting off your nose to spite your face…

http://www.nytimes.com/2011/08/01/opinion/to-escape-chaos-a-terrible-debt-deal.html?hp

Excerpt:

“There is little to like about the tentative agreement between Congressional leaders and the White House except that it happened at all. The deal would avert a catastrophic government default, immediately and probably through the end of 2012. The rest of it is a nearly complete capitulation to the hostage-taking demands of Republican extremists. It will hurt programs for the middle class and poor, and hinder an economic recovery.”

#76 vyw on 08.01.11 at 9:03 am

#36
yes, some markets ie Kelowna, Calgary, Victoria are declining and haven’t benefited from the low rates. Vancouver and Toronto are at record high prices and some other cities – Ottawa, Montreal, even Halifax appear to have strong markets.

I can only speak to Vancouver and this is only my opinion. There are some factors to consider:
1. I mentioned that Vancouver SFH is a low percentage of the housing stock – about 35% vs the national average of over 50% – the source is Stats Can 2006 data.
2. net immigration and in-migration from other provinces aredemand factors
3. location in the Pacific Rim – 12 hours by plane from HK, Shanghai, Tokyo, etc; 2 hours from LA, SF
4. emergence as a global city and thus global housing values – YVR is still cheap compared to HK, Tokyo, Sydney, San Francisco

But the main reason IMHO is interest rates. The Vancouver market had already started to correct in spring 2008; the BoC had raised rates to 4.5% in late 2007. In the fall 2008, the market basically froze – no demand – and even with low supply, o sales and the market fell further. But rather than allow markets to fully correct, our BoC decided to crash rates to 0.25% in Feb 2009 and the housing market turned upwards.

There was a seasonal pause last fall (2010) but demand has been strong this year and SFH supply is modest at best. As a result, median prices for SFH are up about 13% YOY. In some preferred neighbourhoods like Vancouver West side, median prices are up 30% (tax-free) YOY.

One indicator of a top for me is the emergence of speculators and greed. At this time, however, the supply is modest – in my view, this suggests that homeowners ‘fear’ being priced out if they sell. They have to be in a position like that fellow who cashed out for $2.7 million last month. But even in his case, I wouldn’t be surprised if the developer bull-dozed the old house and put the lot back on the market for $3.5 million in the spring.

BoC policy is in sync with the Federal Reserve and Bank of England. GDP growth is low (or negative) and unemployment is high. Real rates are negative (1% vs CPI 3%) but may not be going up for some time.

#77 Basil Fawlty on 08.01.11 at 9:27 am

“Why do people here have trouble understanding taxes will increase in the US, as they did in Canada with the GST? The cleaned up our deficit in a hurry and actually reduced the national debt. Then Mr. Harper was elected. — Garth”
Seeing is believing. The US just moved contrary to your prediction. In addition, the American consumer is financially maxed out and it’s hard to get blood from a stone. Then you have the outsourcing and massive giveaways (bailouts) to the bankers.
How much tax revenue can you get out of a population earning $10/hour, if they are not part of the 45 million on food stamps?

#78 arctodus on 08.01.11 at 9:32 am

I smile every time I read this blog…that is the goal right Garth?

Bet against America?…..h….s bells, I will bet against the entire economic structure of the human enterprise….America is small potatoes.

I am not even a gold bug but it is laughable when people predict a “crash” in PMs given the world economic situation……debt ceiling debate or not….

Anyone check what the current price of gold is right now?……forgetaboutit…….the bull continues unabated…..and it will for now because the economic situation will NEVER get better.

C’mon Garth…lets have at it…..a debate about the real reason for all the, what did you call them again?….”headwinds” the world economy faces.

More like a cat 6 planetary hurricane and the world economy is a grass shack with a bunch of drunken monkeys living inside professing sage knowledge and predicting light tradewinds and perhaps a shortage of corona,…..all the while the skies blacken and the wind force increases and all other animals take cover.

Full scale demand destruction of energy use is now in effect in western nations….this confuses dumb monkeys because they expect the price at the pump to go skyward if “we really were running out”…silly monkeys…..we are now on the far side of the adjusted hubbert curve and your lives will never, ever be the same.

We debate (at least the semi informed do) about “inflation-deflation” not understanding that they are two sides of the same coin.
It is hilarious when I hear that “austerity” measures will now save the USA…or that supposedly Canadians “cut to the bone” back in the day to hammer the deficit.

Sorry monkey kind…cutting to the bone will come and none of you can fathom what that means…..ultimately it means the complete collapse of the entire infrastructure of modern life……entitlements (so funny)….try no medical system….try no economic support whatsoever form the government….in the end try no government at all (unless you count the local warlord perhaps)……

Who exactly told you that the world owed you anything anyway?, where did you get the idea that the government actually had wealth?, did you actually think that you would live out your life in soft cushioned comfort?…..You are in for an awakening brothers and sisters…

Spiral collapse can happen and it is and will with accelerating regularity worldwide now…..why blog jockeys and economic pundits still can feel superior right now is that their electricity is still on…..just wait as the grid starts to fail as the downslope of energy supply tightens.

I think I smell boiling frogs……better check the woodstove.

#79 the_apocalyptic_one on 08.01.11 at 9:44 am

DOW vs. Gold

Even at 12,000 the DOW has not gotten back to where it was in 2008. Even when it is 14,000, investors will only have recovered, in non-inflation adjusted dollars, to the point where the market started sliding. In inflation adjusted dollars, the DOW would probably need to be around 18,000 to reach a break even point, and that is not happening anytime soon. So the 16 Trillion the FED has handed out to private corporations plus bailing out Fannie, Freddie, GE, AIG, GM, Chrysler, Goldman Sachs, Citibank. B of A, JP Morgan etc. etc. etc. has not even managed to bring us back to 2008, and now you suggest that raising taxes will do the trick!
LOL! And the world did not have Eurozone nukes waiting to go off back then. Plus the fake debt induced so-called prosperity of India and China which will also be revealed to be paper tigers in due time.

Since 2008 gold has nearly doubled and silver quadrupled. These PM’s keep making higher highs and higher lows, one does not have to be Einstein to figure out which direction they are heading.

Simple math, ain’t it?

All Empires eventually die: Babylon, Persia, Greece, Rome, Mongolia, Ottoman, Britain are all examples of empires that rotted from within and gave up the ghost. Denying that this is happening to Empire America will not change the fact one iota. The higher the debt goes, the more violent and extreme will be the end game, wait and see! Apocalypse is around the corner and sticking heads in the sand ain’t gonna make the inevitable go away.

#80 Monday Morning Oracle on 08.01.11 at 9:53 am

Didn’t you say the US will be downgraded, so we should move into AAA Canadian bonds? Isn’t that a sort of bet against America?

#81 ris ames on 08.01.11 at 9:56 am

It’s Just a Ride

If the government really wanted to stimulate the economy …and create jobs…the solution would have been to give CONSUMERS the tax break, so they can go out and spend more, buy more, create demand …and create jobs as companies expand to meet that increased demand. That’s how the economy REALLY works. Not by cutting the amount in consumers’ pockets: to the contrary.

#82 Bet against America on 08.01.11 at 10:06 am

The Dead cat bounce was short lived as investors sold into the FED induced dead cat. I love when the FED manipulates the market since I take full advantage and SELL. The DOW is now in the RED and it’s been just over half an hour of trading. SHORT USD , SHORT S@P and BET AGAINST America as ASIA IS THE NEW SUPER POWER OF THE WORLD.

#83 TurnerNation on 08.01.11 at 10:09 am

Dow is off ~250 points from its highs now.

#84 Bet against America on 08.01.11 at 10:15 am

HSBC bank to slash 30,000 jobs worldwide

http://www.theglobeandmail.com/report-on-business/international-news/hsbc-bank-to-slash-30000-jobs-worldwide/article2116130/

We need a depression and short to mid-term deflation to correct this bubble we are all in. Housing should be 20% downpayment and Prices need to fall 50% + as well as everything else including wages. We are living in hyper inflation right now and more inflation will not solve our debt problem.

#85 To Shawn on 08.01.11 at 10:22 am

To Shawn:

Read my comment from yesterday (and above), and stop quoting wikipedia!

In terms of your comment above: It begs the question: What is money?

Food for thought :)

#86 Helicopter Ben on 08.01.11 at 10:27 am

Since when did PM owners become day traders, you warned of us 20 dollar down turn? lol, maybe if you are a weekly trader in SLV or GLD then maybe sell, but short term trading in metals is a tough way to make a living, so this doesnt prove any points of i told you so, more like grasping for straws. I have always said the debt ceiling wasnt an issue and doesnt solve anything, so wether they got a deal done or not doesnt matter as they are putting a band aid on an open wound. This massive Debt that North America is in especially in the states is the problem and leaves them extremely vulnerable to any downturns, equivalent to getting a cold and dying as their immune system is down. there either has to be deleveraging of debt or print their way into hyperinflation to pay their debts. the fed has no room to move, if they try to pump the system with more liquidity they risk high inflation, not enough and they have deflation. the economic world today is unsustainable as its a one way street. Money flows east as cheap goods flow west. china buying the u.s. dollar is causing asset and real estate bubbles there as they have to expand their money supply as they buy u.s. dollars this leads to high inflation as they have more money printing then the u.s.. This allows interest rates to stay low for america leading to speculation in the stock market housing bubbles of their own and massive debt, this is going to pop one way or another, a slow burn process that will end fast when the day arrives. it seems the so called doomers look at the economy at a macro level and knows how it will end (albeit Deflation or Hyper) , but the people who call us doomers seem to look at the economy at a micro level saying look the debt ceiling was solved everything is ok

#87 Short the Markets ! on 08.01.11 at 10:35 am

Martin D. Weiss Ph.D. has been bang on. He was screaming short all the bank stocks and mortgage brokers well before many of them crashed .

http://www.moneyandmarkets.com/day-of-reckoning-tomorrow-46267

#88 Helicopter Ben on 08.01.11 at 10:38 am

Money = Debt its a fact. everyone is entitled to their own opinions not their own facts. ……………………………………………………………………….Money, Credit and the Federal Reserve Banking System

Conquer the Crash, Chapter 10 By Robert Prechter

… Let’s attempt to define what gives the dollar objective value. As we will see in the next section, the dollar is “backed” primarily by government bonds, which are promises to pay dollars. So today, the dollar is a promise backed by a promise to pay an identical promise. What is the nature of each promise? If the Treasury will not give you anything tangible for your dollar, then the dollar is a promise to pay nothing. The Treasury should have no trouble keeping this promise.

In Chapter 9 [of Conquer the Crash], I called the dollar “money.” By the definition given there, it is. I used that definition and explanation because it makes the whole picture comprehensible. But the truth is that since the dollar is backed by debt, it is actually a credit, not money. It is a credit against what the government owes, denoted in dollars and backed by nothing. So although we may use the term “money” in referring to dollars, there is no longer any real money in the U.S. financial system; there is nothing but credit and debt…………………………………. heres a link to the rest of the article http://www.marketoracle.co.uk/Article24482.html

#89 thinktank on 08.01.11 at 10:39 am

Garth, Garth, Garth … wow …. you sound like a high school cheerleader … IMHO this has been your poorest post to date … you’ve GOT to be kidding … “Dont bet against America” ?? ..LOL … c’mon give your readers some credit. Im adjusting client portfolios as I speak and the markets initial enthusiasm (like yours) is already beginning to fade, gold is beginning to bounce and the latest ISM just printed at 50.9 …missing massively from the expected 54.6 consensus. Since you are a fan of facts here are a few quotes for you from some of the leading economists is the U.S. (John Mauldin being one of them)

“Consumption is not prosperity. The credit-addicted family measures its success by how much it is able to spend, applauding any new source of credit, regardless of the family income or ability to repay. The credit-addicted family enjoys a rising “family GDP” – consumption – as long as they can find new lenders, and suffers a family “recession” when they prudently cut up their credit cards.
“In much the same way, the current definition of GDP causes us to ignore the fact that we are mortgaging our future to feed current consumption. Worse, like the credit-addicted family, we can consciously game our GDP and GDP growth rates – our consumption and consumption growth – at any levels our creditors will permit! ”

and here is the final sobering quote many of your readers may or may not know ….

“Let’s say we cut spending and/or raise taxes by $200 billion a year for 6 years. That is more than 1% of GDP each and every year! Go back to the first chart. That means that potential GDP growth will be reduced by over 1% a year! Every year. We would need to rely upon private GDP growth, which has been flat for almost 15 years! The growth of the last 11 years has been a government-financed illusion.”

Those are from a U.S. perspective and those are VERY current (within the past 10 days ahead of last nights “deal”) – I know you agree with the 1st comment about consumer debt … but without continued government spending (i.e. DEBT which is all they have done again) .. the U.S. is a chair on 3 legs. I suppose ones time frame is relevant – you always seem to be very vague on your outlooks as to “when” your predictions are supposed to play out and for how long.

finally … I AM NOT a gold bug (far from it but it has rewarded myself and clients handsomely over the past few years) nor am I a doom and gloomer either – there is a famous mantra in trading it goes like this “trade what you SEE not what you THINK” … like you I have opinions on a macro scale as do you … but I try not to shake my “pom poms” like you …
Still like your blog but I think you should really stick with your specialty – real estate – where I still tend to agree with about 90% of your forecasts although your timing certainly leaves one with more questions than answers.

I expect a snappy comeback so if you actually allow this somewhat “challenging post” to filter through – Im ready … I can take it !

I’m just happy you are not my advisor. — Garth

#90 Tim on 08.01.11 at 10:53 am

RE #61
Amarillo, no, you are the naive one my friend:

Wealth Gap Between Whites and Minorities Reaches Record High
http://www.delawareonline.com/article/20110801/NEWS/108010341/Wealth-gap-between-whites-minorities-reaches-record-high?odyssey=mod%7Cnewswell%7Ctext%7CHome%7Cs

Study by the Pew Research Center from an analysis of the US Census Bureau revealed that
White households 20 times the median wealth of Black Households and 18 times that of Hispanics.

The median wealth (the median is a midpoint, with half the population above it and half below it) of white U.S. households in 2009 was $113,149, compared with $6,325 for Hispanics and $5,677 for blacks.

Oh, good old America, the land of opportunity and equality lol!

#91 Neo on 08.01.11 at 10:53 am

Garth…Garth…Garth…

When will you learn. You attempted to slam Gold AGAIN and you are being proven foolish again. Yes, it was down 20. But by the end of the day it will be right back to $1,630. Dow Futures were 200 points up, now they have reversed 240 points to the -42. There are systemic problems that are being ignored. You as well as Congress are solely focusing on the deficit and not on the DEBT. The problem is this agreement doesn’t even address the deficit much less the National Debt. Let’s see, this “recovery” was propped up by Keynes stimulus that has worn off and not produced anything but governement spending adding to GDP while businesses sit on cash and don’t hire and consumers continue to deleverage and save. Both positions will worsen with austerity since that isn’t a pro growth position. Most on here understood the ceiling would be raised and at the same time they would do nothing to address there short-term and long term fiscal and debt issues. We also know they are in a position given there World Reserve status to just print money so they can never go bankrupt in a traditional sense like every other country that doesn’t have that luxury. But, Garth, don’t confuse that with any path to prosperity. At the very best, they will have a decade of stagflation. What is more likely is we will see further and further revisions to GDP until they show Q1 and Q2 2011 were negative starting with Q3 reports this Fall and a double dip will be a forgone conclusion.

On one hand you critique home owners for taking on so much principle which is destined to be an albatross once rates envitably rise as incomes and equity stagnate and decline. Yet, the U.S. is at 100% debt to GDP and going higher. They have been running budget deficits and trade deficits for decades now and there economy is slowing down or tepid. There “principle” which they are ignoring will have escalating costs as interest rates normalize and they won’t be able to service them without printing more money. How is Gold going down in this environment Garth? Gold is telling you there currency is trash. The bond market is telling you the stock market is overvalued. The U.S. is still going to be downgraded by S&P but not Moody’s. That will have minimal short term impact as the U.S. bond market is still a global safehaven and can absorb global liquidity do to it’s $10 trillion size. But the U.S. is still 5-10 years from recovery given austerity, national debt, budget deficits, trade deficits, unemployment and weak GDP growth. If what they are in lasts 10-15 years in total. There is another name for that.

#92 Not Doomed. on 08.01.11 at 11:03 am

OOOPS…guess that post lasted…what? A good six hours.

Gold Up legging. Stocks tanking.

Buy US. Sell PM’S is going to go down as one of the worst investment calls ever.

#93 Helicopter Ben on 08.01.11 at 11:03 am

Good video link. bob chapman talks about U.S. economy and Gold Standard…………..http://www.youtube.com/watch?feature=player_embedded&v=RuVuRD0rRCE

#94 TurnerNation on 08.01.11 at 11:09 am

$USD and US bonds soaring so far today as Dow is off 250+ points from its opening highs. Never bet against the USD! The #1 currency for oil, weapons, and drug trades worldwide.

Speaking of which, over in the “best place on Earth”… expect to see realtors lining up soon? ;)

Free crack pipes to be handed out in Vancouver
The Canadian Press Posted: Jul 31, 2011 12:04 PM ET
Health officials in Vancouver already distribute clean mouth pieces for crack pipes, but not the pipes themselves. CBCHealth officials in Vancouver say they will launch a pilot project later this year to distribute clean, unused crack pipes to drug users.

While heroin users can pick up clean needles from needle-exchange programs or the city’s controversial safe-injection site, crack pipes are more difficult to come by.

http://www.cbc.ca/news/canada/story/2011/07/31/bc-crackpipes.html

#95 T.O. Bubble Boy on 08.01.11 at 11:10 am

Why do people here have trouble understanding taxes will increase in the US, as they did in Canada with the GST? The cleaned up our deficit in a hurry and actually reduced the national debt. Then Mr. Harper was elected. — Garth

2 *major* differences:

1) Canada was moving away from Mulroney’s Conservative government, so the political tides were already heading left. In the U.S., the exact opposite is happening: moving away from Obama towards Tea Party anti-tax nutjobs — no way that any tax-increasing bill will get voted through these days.

2) The North American economy was heading into the technology boom of the 1990′s, where incomes increased significantly and tax revenues boomed as a result. If there is a boom coming in 2012-2020, it will not be in North America.

Even if you add a sales tax in the U.S. (which I agree is one of the many changes that would instantly help solve the deficit/debt problems), consumer spending may drop by the same amount, wiping out the benefits.

Increasing taxes on investment income (capital gains, dividends, etc.) and wiping out tax breaks for high-income earners (such as mortgage interest deductions) would be an appropriate way to capture more tax revenue from those that actually have money in the U.S.

Consumer spending did not drop as a result of the GST. Why would it in the US? — Garth

#96 Short the Markets ! on 08.01.11 at 11:18 am

Well, so much for Debtageddon. At least for this week. Dow futures jumped the better part of 200 points Sunday night. Gold fell twenty bucks. Oil gained a dollar and a half.”

What was that Garth? The Dow is now in the RED and Gold in the green. The money changers can play all the games they like but smart money is leaving the US by the billions of dollars. Money will leave Canada if they don’t increase interest rate to 7% and stop this credit bubble. NA needs deflation and those indebt need to pay their bill. The free lunch is over and people need to pay the tab they can not afford. Stupid corproate conservatives ruined Canada.

#97 Mr. Reality on 08.01.11 at 11:19 am

Garth

“I sure hope nobody reading this pathetic, disposable blog shorted the market for Monday morning,”

The market is down = shorting was a good idea actually.

Shorting is the best thing you can do right now. We have peaked and the macro picture is getting uglier everyday.

Short the S&P 500 and the TSX and sit on your hands and watch the consumer driven economy dissolve before your eyes. Next recession coming to a country near you.

Remember kids, its more fun making money on the way down than looking like a deer in the headlights!

Mr. R.

You should know better than to make predictions about daily market action!

I didn’t. Shorting is a dangerous, risky action no amateur should indulge in. — Garth

#98 T.O. Bubble Boy on 08.01.11 at 11:21 am

This is interesting… as a result of Moody’s digging into the finances of various public entities in the U.S. (a part of the overall assessment of the US AAA rating), several cities and agencies will get downgraded:

http://www.ritholtz.com/blog/2011/07/will-aaa-public-finance-issuers-be-downgraded-due-to-review-of-u-s-aaa-rating/

Hey, CMHC, did you notice that many of these downgrades are to various mortgage bonds???

#99 Interest rates must go UP ! on 08.01.11 at 11:37 am

LOL garth your don’t bet against American is falling harder then even I could imagine. OIL is now down a buck and a half as investors are taking full advantage and selling. The corporate conservatives are a threat to Canadians are Canada and will lead us down the road to ruin. My wife and I have been having serious talks to leave this stupid country for a country that favours hard work/saving and has an open and free market. Investors/hard workers/savers are having enough of NA and many will leave this stupid country in economic ruin. Raise interest rates now or face economic ruin. Let those with no money go bankrupt now.

#100 Larry on 08.01.11 at 11:46 am

Garth, looks like you were wrong about gold again. Already bounced back from that brutal pullback of $20.
Raising the debt ceiling only means more money printing out of thin air, inflation, and more bullish for gold. This is basically sealed $2,000 gold, and maybe by year end.
Thx

#101 kilby on 08.01.11 at 11:51 am

Last weekend there was an open house in our building at the foot of Lonsdale in North Vancouver. I bedroom 600 sq.ft. It is on the second floor and will have an ocean view until the developer builds another building right in front of it. Looks nice, but like ours it has poor finishing. Stainless and granite not much else, 1 parking and no street parking allowed. Price is $539,000! We rent the same for $1,600 per month. We would buy that unit for…maybe $239,000 seems that would be appropriate. Building has been for sale along with a twin tower next door for well over a year and looking at the storage locker use we have about 35% lived in this building and maybe 15% next door. When you ask the developers/realtors how many are sold, they reply “confidential” Easy to see where Vancouver is going…..

#102 waterloo Resident on 08.01.11 at 12:02 pm

Hey, what’s wrong with my TIN-FOIL HAT, I think it looks cute !
Nah, just kidding, I don’t believe in that doom and gloom stuff either.
But the one thing that is true is that America has a problem with ‘entitlements’, they owe more money to the future old generation then they get from taxes, and now THAT is the true train wreck that is coming our way.

Oh crap, the Dow is now down 125 points due to bad news about how manufacturing is falling back into recession. Oh well, who would have guessed? It goes up and down like a YO-YO, kind of fun to watch isn’t it?

I read that there are foreclosed homes can be bought in America for less than $10,000 each. WOW, I want to get me one of those, just so I can get away once a month and plop my butt down on some place far away from here. So I’m going to look into that, I would like some place down South, either in the SouthWest or SouthEast, but not Florida as the non-resident taxes are 10-TIMES higher than it is for residents, so a $10,000 foreclosed home in Florida might cost me $20,000 in taxes each year just because it WAS valued at $100,000 BEFORE the foreclosure, and Florida is known for never wanting to reduce their tax rate on any of their properties.

so, does anyone know of any good web sites where I can buy foreclosed homes for $10,000 or less?

#103 squidly77 on 08.01.11 at 12:10 pm

Any Gold/Silver Bugs care to share their sell price with the readers of this blog?

#104 waterloo Resident on 08.01.11 at 12:14 pm

for anyone thinking about investing in gold ( GLD ), have a good look at this instead: FXF its investment in the SWISS currency ($xsf)

http://stockcharts.com/h-sc/ui?s=FXF&p=D&yr=3&mn=0&dy=0&id=p23239801089

http://stockcharts.com/h-sc/ui?s=$XSF&p=D&yr=3&mn=0&dy=0&id=p86071097030

– as you can clearly see from this 3-year chart, the Swiss currency is peaking, probably NOT a good time to buy right now, so wait. And Gold is probably also going to fall a little bit too, here’s the Gold chart for GLD:

http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=3&mn=0&dy=0&id=p27800593587

As you can see, GLD is not ‘peaking’ like FXF is, so it might fall a bit but that will be a buying opportunity. FXF will probably fall a lot and I don’t know if it will begin going up again like Gold will.

#105 waterloo Resident on 08.01.11 at 12:20 pm

Oops, its 12;20 pm and the Dow is now down 130 points, not up.
What’s up with that?
I thought that the solution to the debt crisis would make the markets go up?

#106 Rocket Boy on 08.01.11 at 12:29 pm

The states a model for the world – where 1 in 7 is receiving food stamps? Where they have scrapped the NASA program obviously over money, but no one sqwacks. Where cities and towns are unable to pay their debts and Cali has restored to giving out I.O.U’s in lieu of payment…

The states just bought time, unemployment that should read 22% and G is right, lets not cheer on the destruction of the good ole U.S of A…for we would turn into a 3rd world country in a matter of months.

One issue with some of the bloggers, obviously the majority are renters or previous owners who decided it was time to cash in the chips. If you hate buying – so what, if you hate renting, so what. It’s a personal decision. Just like the guy who wears socks with sandles….

I rented, now I own. I bought way before the bubble started to brew. We have just a few short years remaining – I’m locked into historically low rates and figure with abit more planning. I will be mortgage free before my renewal comes up. Majority of mortgage holders lock into 5 year fixed rates and a sudden surge in rates doesn’t make a diff at first.

This debate is senseless. Of course, the market is way over-valued. Most can see that, but as I said before. I own for shelter, period! It’s wood, concrete, bricks on land that I technically don’t own. But my vision of retirement will be mortgage free with plenty of years of savings to afford my sailboat and trips to the south pacific.

If you worry about house prices – you really have nothing to worry about then.

I worry if my french toast is too soggy – ha! That’s a true topic of discussion.

#107 Cory on 08.01.11 at 12:39 pm

All of this “Days of Our Lives” US Debt drama!! is proof that democracy is completely dysfunctional. As long as politicians are chasing votes to stroke their egos and power hungry ways, debt will never be reduced nor will any defecits…not in any “real” substantial ways anyway.

#108 The InvestorsFriend (Shawn Allen) on 08.01.11 at 12:45 pm

Is a Dollar Bill a debt of the U.S. government?

That is the question, To call it Debt or Not to Call it Debt

See my diatribe at number 37

Derek at 58 makes the point that printed money does not add to wealth put can be used to pay workers to build a hospital. Conceded. New paper money does not add to wealth. It creates new claims on the existing real wealth of the world. It is inflationary. But that does not make it a debt . If a debt when will it be prepaid and how? In fact the Fed sometimes extinquishes money as when it sells a bond it earliuer bought with printed money. But there is no obligaltion to extinquish the money that way. Ever.

Killer Chicken at 52 agrees paper money is not debt of the U.S. government.

Number 86 Not Shawn, I don’t see where you have addressed the question. Is a dollar bill in rality a debt of the U.S. government?

If the U.S. goverment never has to redeem Federal Reserve notes (dollar bills, money) in any way shape or form why count it as part of the debt.

Apparently not all debts are created equal (like men). I mean a debt I NEVER EVER have to pay is a debt in name only, no?

Who will brave to weight in on this intellectual debate?

#109 timo on 08.01.11 at 12:47 pm

http://video.cnbc.com/gallery/?video=3000035718

housing on the rebound …?

#110 The InvestorsFriend (Shawn Allen) on 08.01.11 at 1:17 pm

Ben at 89, my post at 108 crossed yours in the ether.

I am not using the opinions of others to support the argument that a U.S. dollar is not a debt of the U.S. government.

The facts I use are:

There is not promise to pay back a U.S. $100 dollar ever in anything but maybe five twenties. You do not appear to disagree in fact you quote someone who claims:

the dollar is “backed” primarily by government bonds, which are promises to pay dollars. … If the Treasury will not give you anything tangible for your dollar, then the dollar is a promise to pay nothing. The Treasury should have no trouble keeping this promise.

Thank you Ben, that supports my argument nicely.

I then use logic to point out that if a dollar never needs to be redeemed or paid with anything like Gold and in fact never needs to be redeemed then it is not debt. There is no promise behind a U.S. dollar except an IMPLICIT promise to control inflation (hold the value of the dollar reasonably constant over shorter time periods) and not print it into oblivion.

I agree with all those that might say a dollar has no intrinsic value. In fact it’s value is set in the market place by all of us and heavily influenced by interest rates. When inflation heats up that is the market bidding down the price of a dollar.

My simple point is that a dollar bill is not in any real sense a debt of the United States government and yet they count it as such.

Refute that, anyone?

#111 Young Canadian on 08.01.11 at 1:20 pm

I don’t know what the futures said last night, but the US markets are clearly down midday. Gold dropped a tiny bit, but was in record territory leading up to today. These are just relatively meaningless short-term fluctuations anyway, so why point them out? They could be negated by the end of the day.

Imagine if I just got my Mastercard limit increased to allow me to make payments on my Visa for the time being and my wife and I make a promise to ourselves to live within our means from now on. I guess that would mean we’re on a clear path to success, too? Great, I like the cockeyed optimism……

#112 The InvestorsFriend (Shawn Allen) on 08.01.11 at 1:22 pm

Garth at 95 said:

Consumer spending did not drop as a result of the GST. Why would it in the US? — Garth

Well duh, because people would have less money. Or the amount they have will buy less, if 5% is earmarked for a GST. A GST makes things less affordable. You have heard of supply and demand curves?

You present no data to support your contention that consumer spending did not drop in Canada as a result of GST. I thought there was a recession around the time of introduction. Besides with all the variables in the market it would be impossible to prove that the GST did not cause spending to drop from the unkowable level that it might otherwise have been

Sure the U.S. needs a GST at some point. But it will likely temporarily depress the economy.

I was chairman of a House of Commons Parliamentary committee tasked with the job of analyzing the response to the GST in terms of consumer spending, overall economic consumption and the inflationary impact of the tax. Our report was published in 1993, two years after implementation. The study was quite exhaustive and involved hearing from numerous experts and economists across the country. Despite simplistic and uninformed assumptions, there was found to be no measurable impact. That’s my data. What’s yours? — Garth

#113 Mr. Lee on 08.01.11 at 1:26 pm

The United States will remain it preeminent economy in the global economy for some time. The question over US dollar supremacy will remain though. Hence the rush to precious metals and the like, a more realistic outcome will probably revolve around currencies being traded against a basket of commodities to determine their respective values. Gold and Silver will be part of this but not exclusively. We will not go back to carrying gold Sectaries any time in the future.

As for the Americans reading this Blog, please urge your Federal Government to stop spending over 51% of your Federal Tax revenue on the Military. This is choking you as a country. This is not a Defence budget but a Military Budget. America contains 5% of global population and spends 50% of the global military budget. This is an abomination to your Republic, and must stop. As our largest trading partner and friend I say that true friends tell each other the truth and do not tell each other what they want to hear.
God Bless America

#114 Killer Chicken or Imploding Boomer? on 08.01.11 at 1:28 pm

37 Shawn – also found this

http://www.bankofcanada.ca/wp-content/uploads/2011/01/boc_balancesheet1210.pdf

Almost $58B cdn bank notes in circulation. Top RHC under liabilities.

#115 arctodus on 08.01.11 at 1:30 pm

Any Gold/Silver Bugs care to share their sell price with the readers of this blog?

$10,000.00 Canadian dollars……but I will only accept payments in beaver skins and steel axeheads….

seriously though…that is the issue that few fail to grasp….no one should “invest” in PMs……that is not their purpose….

I have no doubt we will see 10,000 US dollar gold easily…..and what it means that Gold is still a tradeable asset and a US dollar note is worthless.

Maybe the salt trade or the cattle (chattel..look it up) trade will replace the paper nonsence as things really start to implode.

#116 TurnerNation on 08.01.11 at 1:40 pm

Is this smoking man(churian)’s licence plate?

http://tinyurl.com/3q6jpd9

#117 TurnerNation on 08.01.11 at 1:50 pm

Investors Fiend: go away you are embarassing yourself. You are a lightweight trying to run with the big blog dogs.

#118 Helicopter Ben on 08.01.11 at 2:03 pm

#110 investor friend….. because bonds are issued to lets say china that are an IOU with interest, money today is debt, as when they sell those bonds they then in turn print money. so every time they print money they owe more then what was actually issued, this is my understanding of it anyways unless i am reading your question wrong. so how could they ever issue money and not have debt? also the debt does have to be paid back otherwise why would countries buy their bonds? and if they just pay their debt like you say in cheap money this leads to high inflation which cripples the man on the street and destroys the economy after the initial bubble is over. you are basically saying the u.s. dollar isnt debt, but that dollar came from bonds and china who holds trillions worth obviously disagrees with you as you cant have one with out the other. national deficits are debt no?

#119 Phil on 08.01.11 at 2:03 pm

Stop with the progressive cat calls Garth. Taxing the rich would do jack squat.

http://blogs.wsj.com/wealth/2011/04/11/can-taxing-the-rich-erase-the-deficit/

The real problem is with the 47% of people who pay no tax.

Its easy to see that a flat tax would do the trick (everyone would pay the tax, and the rich would pay more as they spend more money), and also massive spending cuts to the military and entitlements.

Where did I say tax the rich? — Garth

#120 the_apocalyptic_one on 08.01.11 at 2:07 pm

Consumer spending did not drop as a result of the GST. Why would it in the US? — Garth

Consumer spending would have dropped dramatically because of GST had manufacturing not been shifted to China and people still had to pay domestic manufacturing prices, and if tariffs had not been removed due to supposed free trade. Almost all goods were more expensive in the 80′s than they are today except for housing and cars. TVs, computers, electronics, utensils, even clothing costs less today than back then. It is because labor cost has pretty much been removed from manufacturing (think slave labor) that goods are cheaper and people can buy the same amount or more than in the 80′s before GST. My first computer was over $4000, a 32 inch TV was $1500 in 1994 dollars – how many people would be consuming if they had to pay those kind of prices today for manufactured goods? And how many people would be consumers if not for a dozen credit cards, HELOCs and 2nd and 3rd mortgages? There was disposable income available in the 80′s and 90′s to absorb the GST hit from the IMF. No such cushion exists today anywhere in the Western world, particularly among the US consumers. They can’t even afford slave labor prices anymore which is why Walmart sales are going down, no the consumers will consume less if hit with GST in the States.

On the other hand if US corporations like GE start paying their fair share of taxes instead of hording them in tax free havens, the US debt problem could be fixed overnight. The chances of hell freezing over is much better than any such hit on the bloodsucking multinational corporations.

#121 Dorf on 08.01.11 at 2:08 pm

Garth, I just bought two copies of your book for a couple of friends. Normally, I would let them drown like every other douchebag, but I really like them, so I am going to save them from themselves. They won’t listen to me, so I got them the book.

Everybody else on the planet won’t listen to the voice of reason these days either. They are too busy with their face stuck up the stinkhole of the sheep in front of them.

It’s just too bad I have such a big heart, there is a plethora of people out there with no education that know all the answers, just waiting to be preyed upon by someone with an inkling of knowledge or better.

They are just so goddamn dummmmmmm, but they are also so sure of themselves and so confident of their decisions, which are ultimately dummmmmmmm.

#122 the_apocalyptic_one on 08.01.11 at 2:13 pm

#103 squidly77 on 08.01.11 at 12:10 pm

Any Gold/Silver Bugs care to share their sell price with the readers of this blog?

When 50 ounces of gold can buy an average priced house or 1000 ounces of silver can do the same. Till then hang on for the ride. It’s almost there in the States, Canada will see that day in a couple of years.

#123 jess on 08.01.11 at 2:13 pm

so this is where the gold went

blinging up the yacht
A gold-plated super-yacht that is claimed to be worth a staggering £3 billion ($4.5 billion) has taken the title of the most expensive in the world.

30-metre long History Supreme yacht is adorned with 100,000 kilograms of gold and platinum that covers more than half its surface and even comes with a statue made from the bone of a T-Rex dinosaur.

#124 Dorf on 08.01.11 at 2:15 pm

Furthermore, I can’t believe there was one living breathing thinking human being that thought the USA would default. Everybody knows it is a political move to stun the average sheep into believing the rhetoric being fed to them in a doggy bowl.

Tip for the mentally dozy:

We all know that these greedy, money hungry pigs that run the government are all heavily invested and that they are really there to serve their own purposes and they are really trying to manipulate the system to their own benefit, right?

Defaulting on the national debt would serve to FINANCIALLY PENALIZE THEIR PERSONAL INVESTMENTS, right ?

So, having the Carte Blanche in your right hand, and all the media at your side, why would you not lay it on the table and look like a hero, all the while filling your pockets with both hands, while everybody else is still reading the headlines and trying to comprehend them ?

#125 Kitchener1 on 08.01.11 at 2:16 pm

@ waterloo resident

http://www.homepath.com/

its the fannie and freddie mae foreclosure website, they sell homes with a clear title.

#126 Big Companies That Pay NO TAX on 08.01.11 at 2:24 pm

Garth, buddy,

You want taxes to go up in order to fund more government debt: But what taxes are ya talkin’ about?

Here’s a list of companies that PAY NO FEDERAL INCOME TAX:

Exxon Mobil (19+ billion in profits) received a 156 million TAX REFUND

Bank of America received a $1.9 billion tax REFUND

General Electric ($26 billion in profits) received a $4.1 billion TAX REFUND

Chevron (10 billion+ in profits) received a $19 million TAX REFUND

Boeing received a 124 million TAX REFUND

Citigroup (4 billion in profits) paid NO TAX

Additionally, individuals and companies who DO pay tax actually “BAILED OUT” many of these companies…giving them billions upon billions of dollars.

Unbelievable.

No wonder you say we shouldn’t bet against America; why would you place a losing bet when the game is rigged?

Shall we sustain the corruption, so that those who benefit from it continue to do so?

Like you…and me?

Food for thought :)

#127 TurnerNation on 08.01.11 at 2:27 pm

DAX (Frankfurt) “flash crash”?

I’m not a fan of these National Enquirer-esque zerohedge (or seeking alpha) type of blogs but this is an interesting chart:

http://www.zerohedge.com/news/dax-flash-crash

Chart:

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/draghi/DAX.png

#128 HouseBuster on 08.01.11 at 2:29 pm

For those who think housing can’t go down with low interest rates:

“Evidence is mounting that weakness in the new home sector is accelerating even with interest rates on hold,” said Harley Dale, HIA chief economist, in a statement.

http://www.bloomberg.com/news/2011-08-01/australia-newly-built-home-sales-fall-most-in-5-years-hia-says.html

#129 gumshoe on 08.01.11 at 2:35 pm

When Dr. David Foote wrote that the condo market was doomed he referred to the insanely small squre footage that would drive ‘baby crazy’ FTB’s out of the market in search of nesting material.

Only a ‘D.I.N.K’ would think that a condo would be adequate to shore up a relationship with a soon to be ‘baby crazy hormone monster’.

And he was right. In a recent article in the Vanc Sun a poll found that an increasing number of condo girls and boys were practising their parenting skills by sublimating the baby urge with an huge number of teeny little dogs. Who do they think they’re kidding?

The response was ‘dogs are cheaper than kids’ , how pathetic! Is that what you bought into?

‘Dogs are ‘easier to raise than kids’, HUH? You don’t ‘raise ‘ a dog!!

Playing house is ‘mommy natures’ way of telling you that the hormone volcano is building. Condo’s are a dead end, in more ways than one. As Foote said, “functionally obselete’.

Pay too much now and watch your money burn. And yeah, what’s the deal on those cray high strata fee’s? Who gets all that dough every month?

#130 Helicopter Ben on 08.01.11 at 2:36 pm

#110 Investor Friend…. The debt owed must be deemed repayable otherwise other countries wont buy their bonds and interest rates will skyrocket, leaving everyone including the fed unable to pay their bills unless they go QE to infinity and hyperinflation. how is this an argument? yeah i dont need to pay my rent but their is consequences if i dont. the dollar bill is tied to the hip of bonds , so wouldnt you agree their issued bonds is debt? i think i may be reading your question wrong or something cause this is simple and asinine to think they dont have to pay their debt back as they will become a 3rd world country over night if they dont, and if you have read any history books you would know that printing your way out of problems has never been a solution and leads to hyperinflation and death of empires. so if the united states wants to hold onto the world reserve currency and have the luxury and ability to print money they must keep their promise of backing their debt with tax payers money. if they print too much other countries wont want their debt and this is already happening. the only reason the united states is still a first world nation is cause of its dollar being used in daily oil trades. they enforce this to other countries by threatening to starve out countries and though brute force with their industrial military complex. thats why they go to war so often.

#131 eaglebay on 08.01.11 at 2:49 pm

#90 Tim on 08.01.11 at 10:53 am

How about a comparison including Asians?
How about small business ownership and self employment? Along the same lines.
SBOs create more employment than any other organizations.
Would be interesting to know.

#132 not asian on 08.01.11 at 3:01 pm

In the month of June there were:

9 homes sold above $5m in Vancouver Westside alone -1 of them was over $10m and sold in 3 days.

9 homes sold above $5m in West Vancouver.

Most of the buyer’s realtors are “guess what nationality?”

There is a LOT of money coming into Vancouver. It dosen’t appear this will ever dry up. Condo prices will drop, but if you have land, the sky’s the limit here in Vancouver and for the next foreseeable future. Good luck to anyone who tries to dispute that. I don’t have $10m or even $1m, but I guess there are a lot of people who do and want to live in Vancouver. Do interest rates really affect them? I don’t think so.

#133 eaglebay on 08.01.11 at 3:07 pm

#99 Interest rates must go UP !

“My wife and I have been having serious talks to leave this stupid country for a country that favours hard work/saving and has an open and free market. ”

If you find one of those countries, please let us know.

#134 Snowboid on 08.01.11 at 3:08 pm

102 waterloo Resident…

Can’t tell if you are joking about the under $ 10K foreclosures, but if you are serious it’s not likely you will find anything liveable for $ 10K, but if you want to look there are tons of websites (try Zip).

Here is an excerpt from a listing for an $11K, 1954 vintage 700 sq ft townhouse in Phoenix…

“This one bedroom, one bath townhome is an handyperson special. The previous owner took the kitchen and bathroom with them when they left. Home needs some rehab”

Signs of mould problems in photos, HOA (strata) fees $ 160 a month.

After looking at dozens of foreclosures in the Phoenix area last fall, I don’t recommend them unless you are or know a good contractor.

Also looked at dozens of homes that had been purchased at auctions and ‘renovated’ by amateur flippers and they were so bad we even had to laugh as we walked through them.

We ended up looking at owner-occupied conventional sales only, still got a deal at about 1/3 of what the home was worth at the peak.

If you want a half-decent SFH in a reasonable area within the ‘Valley of the Sun’ would recommend looking around $ 100K and higher. Condos can be had for less, but the HOA fees are usually quite high.

The folks we met from Ontario paid about $ 160K for a 1300 sq ft townhouse (casita) backing onto the golf course. HOA fees are about $ 250 a month. Nice area, nice homes.

#135 Devore on 08.01.11 at 3:09 pm

#52 Killer Chicken or Imploding Boomer?

So the currency shows
as an asset to the workers but correspondingly must
show as a debt to the issuer.

No, it must show up as a liability. To the entity issuing currency, the currency is a liability, whether it is a central bank or a regular bank. That liability is balanced by an asset. For a central bank the assets can be anything, typically their government’s debt, often also gold. Since the financial crisis, pretty much every type of paper known to man has made its way to central bank balance sheets.

#136 West Coast on 08.01.11 at 3:11 pm

from:

http://www.theglobeandmail.com/news/world/americas/us-lawmakers-line-up-to-vote-on-brokered-debt-ceiling-deal/article2116181/page1/

- more than $2-trillion in spending cuts.

- the agreement was “all spending cuts. The White House bid to raise taxes has been shut down.”

- deficit cuts, probably taken from benefit programs like farm subsidies, Medicare and the Medicaid health care program for the poor and disabled.

from:

http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/spending-cuts-may-salvage-us-credit-rating/article2115598/

- Spending cuts will do little concrete to help an economy that is struggling to maintain momentum two years after a recession that, according to new data, was significantly deeper than previously thought.

- State and local governments, scrambling to live up to balanced-budget laws amid weaker revenue as a result of the economic downturn.

- many of the country’s biggest publicly traded companies have reported strong earnings

#137 Devore on 08.01.11 at 3:25 pm

#76 Jamaican_Gal

To make matters worse, in order to bring Obama down (race is a big factor) there are certain factions (Republicans, the Tea Party) who will do anything to destabilize the country!

Your logic is being blinded by hatred and faction affiliation. Lets see, you play for the blue team, ya? And red team is a bunch of yahoos and neanderthals?

Republicans, and Tea Party, didn’t hijack their political offices, they were voted in. They were voted in by voters. They were voted in on a specific agenda and promises. They were voted in to do a job. They are now doing the job they were elected to do.

Did I mention they were elected?

It’s not like they promised ponies and rainbows, then turned around and became monsters.

#138 jess on 08.01.11 at 3:35 pm

ratings

“systemic uplift” is a ‘measure’ of what a government might do and how likely it is to do it.

http://golemxiv-credo.blogspot.com/

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

18 institutions accounted for more than half of the $1.8 trillion losses reported by the world‘s banks and insurance companies.”
==

http://www.bankofengland.co.uk/publications/speeches/2010/speech420.pdf

IReland
NAMA revealed that three of the top developers are responsible for €8.4bn of the debt.

http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/jul/29/ireland-property-crash-nama-list

#139 The InvestorsFriend (Shawn Allen) on 08.01.11 at 3:44 pm

Despite simplistic and uninformed assumptions, there was found to be no measurable impact (of the implementation of GST). That’s my data. What’s yours? — Garth

Yes, and why should one expect to be able to measure the unmeasurable. Also GST replaced federal manufacturing tax, therefore blunting its impact.

To conclude that a GST in the United States would have no impact on consumer spending goes against the fundementals of supply and demand. You raise prices and consumption falls, all else equal. GST in the states would add to prices since there is no federal manufacturing tax that it would replace. But the impact is not measureable since all else is never equal.

In my world the laws of arithmetic and basic economic rules trump the sort of opinions-pretending-to-be-facts that come in a political report.

Well I guess you can deduct several brownie points from my account for this.

#140 The InvestorsFriend (Shawn Allen) on 08.01.11 at 3:49 pm

U.S. Treasuries deemed safe haven.

Garth said U.S. treasuries are the safest asset. Market agrees. Yield on 10-year U.S. bond fell another 7 basis points today to just 2.74% from about 3.0% a couple weeks ago.

The market is betting with its wallet that inflation in the U.S. will be very low.

I would like to see if the Fed has been buying. But I suspect it is simply institutional investors buying this safe asset. They may be proven wrong . It will be a very poor investment is we get much inflation. But so far the market votes that the treasuries are not only risk free as to default risk but also the market is voting that there will be low inflation.

#141 Utopia on 08.01.11 at 3:59 pm

I have to admit I honestly do not know where we are all headed next. The markets are confused too. None of it is rational at the moment except insofar as the volatility has created a great deal of wealth for those who caught the swings.

And losses for everyone else.

Perhaps this is a day traders paradise (if you can figure out what will happen next….most cannot). The thing is, it is all looking like a rigged game now with high frequency trading in charge of the action.

Even the computer experts cannot seem to divine the logic behind the new algorithms that are being run lately. The game seems to be changing too quickly for even those experts to keep up.

My response?

I decided to take the time to go shopping. Picked up a box of heirloom vegetable seeds at a huge discount then I added another 200 jars to my home canning kitty and a thirty liter cheese making pot.

Like I said, I don’t know where this is headed anymore. It can’t be good though. Between Europe, China, Japan and the US, the global financial system is sure to blow eventually. Each one of them is faltering or showing cracks in it’s own way.

We are truly living in terrifying and dangerous times where money is concerned and stability is at risk. Triggers are set everywhere. I would call this environment a field of economic land-mines.

When ones blows, the rest could all go off as an outcome. My concern now is only with how I will personally cope with a crisis should one eventually arise. Can’t control the world, just my own space.

So I will just prepare in my own simple way.

#142 JRH on 08.01.11 at 4:31 pm

HaHa Good one #116 TurnerNation http://tinyurl.com/3q6jpd9

#143 Cato on 08.01.11 at 5:05 pm

The US has balance sheet problem with no easy solution. Democrats seem to suggest raising revenue would be a simple matter. I’m not convinced meaningful changes could be made on the revenue side. Ever notice how little tax “american” corporations pay – Apple, GE , Microsoft et. al. http://wallstreetexaminer.com/uploads/graphic846.png

Tax the rich might be an easy campaign slogan but in the age of globalization gov’ts ability to tax capital has been effectively neutered. So that leaves spending side the only viable option and they’ll have to cut deep to bring bond vigilantes under control. This debt ceiling fiasco just kicked the can one last time, austerity is coming in 2013 when the bond vigilantes show up. The world economy will be just fine, its the middle class that will end up slaughtered.

Its time for Canadians to start worrying about the economic storm brewing in our own back yard. We frankly don’t sit very high up the ladder of US concerns. It shouldn’t be surprising more americans can name a president of Mexico than a Canadian PM (then again, how many Canadians can name a Mexican President). We aren’t the center of importance that many Canadians have been led to believe.

Here is why the US will be just fine in the long run. There are 300K Canadians in the bay area (silicon valley). These aren’t people content working McJobs with no ambitions in life, many represent the cream of the proverbial crop. I know from experience most are there not out of choice, they are there because our domestic business environment is so toxic. When people around the world think of the land of opportunity they think of America, Canada doesn’t even rate in the top 10. This attracts a certain breed of individual. The types who grow economies & pay far more than their fair share – these are the real job creators. They are the ones that western civilization is built upon, and not only do we not attract them we do a pretty good job of driving them away.

Canada is well regarded as an immigration destination but what makes us attractive is our social infrastructure. Like it or not we tend to attract those seeking a social safety net, which ordinarily a country can absorb but now we can’t. The problem is we’ve tagged along on US coat tails for so long that we can’t compete on our own merits and we’ve set the stage for a spectacular fall. Unlike the US, we don’t have the economic base to lead a recovery. Once the housing cycle starts to crack we won’t pick ourselves up nearly as quickly as the US and the implications for Canada are pretty profound.

#144 Killer Chicken or Imploding Boomer? on 08.01.11 at 5:10 pm

135 Devore – yes “liability” is the “more correct” accounting term. To a regular bank, currency is a reserve, not a liability. If you deposit currency in the bank, it belongs to the bank. You now have a deposit which is a liability to the bank.

#145 T.O. Bubble Boy on 08.01.11 at 6:34 pm

Looks like HSBC is betting against America and Europe, and doubling-down on the BRIC countries:

http://dealbook.nytimes.com/2011/08/01/hsbc-to-cut-25000-more-jobs/

Here’s the fun part:
“The job cuts come as HSBC reported decent earnings in the second quarter. On Monday, the bank said that profit rose 36 percent to $9.2 billion in the first six months of this year, up from $6.7 billion in the same period last year.”

So, $9.6B in profit over 6 months, and that still means 30,000 jobs get cut.

Those 30,000 ex-employees can maybe smile a little bit when they see HSBC get wiped out by bad loans in China.

#146 eaglebay on 08.01.11 at 6:42 pm

Chopper Ben

America’s debt is mostly own by, or due to, Americans.
Not such a big worry.

http://globalpublicsquare.blogs.cnn.com/2011/07/21/who-owns-america-hint-its-not-china/

#147 T.O. Bubble Boy on 08.01.11 at 6:47 pm

Canada’s sub-prime market is seeing looser and looser lending standards:

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/08/equity-program-enhancements.html

Gotta love ING’s $1M mortgage with no proof of income!

#148 TurnerNation on 08.01.11 at 7:21 pm

Ok Doomers here’s your top 100 list: time for shopping!

http://www.newsbad.com/story/survival-100-items-disappear-first/july20114118

1. Generators (Good ones cost dearly. Gas storage, risky. Noisy…target of thieves; maintenance etc.)
2. Water Filters/Purifiers
3. Portable Toilets
4. Seasoned Firewood. Wood takes about 6 – 12 months to become dried, for home uses.
5. Lamp Oil, Wicks, Lamps (First Choice: Buy CLEAR oil. If scarce, stockpile ANY!)
6. Coleman Fuel. Impossible to stockpile too much.
7. Guns, Ammunition, Pepper Spray, Knives, Clubs, Bats & Slingshots.
8. Hand-can openers, & hand egg beaters, whisks.
9. Honey/Syrups/white, brown sugar
10. Rice – Beans – Wheat
11. Vegetable Oil (for cooking) Without it food burns/must be boiled etc.,)
12. Charcoal, Lighter Fluid (Will become scarce suddenly)
13. Water Containers (Urgent Item to obtain.) Any size. Small: HARD CLEAR PLASTIC ONLY – note – food grade if for drinking.
14. Mini Heater head (Propane) (Without this item, propane won’t heat a room.)
15. Grain Grinder (Non-electric)
16. Propane Cylinders (Urgent: Definite shortages will occur.

#149 jess on 08.01.11 at 7:25 pm

…and don’t forget the brazilian consumer ,who carries

a HSBC credit card in their wallet.

slova-parazity!

The $14bn rescue came after another bank, VTB, gained control through a hostile bid, only to uncover bad loans valued at $9bn – a third of the bank’s assets.

Bank of Moscow’s former head, Andrei Borodin, has fled the country, and a warrant has been issued for his arrest.

The bank was used by ex-Moscow Mayor Yuri Luzhkov to fund property projects.

#150 Golden Stewie on 08.01.11 at 7:34 pm

“squidly77 on 08.01.11 at 12:10 pm
Any Gold/Silver Bugs care to share their sell price with the readers of this blog?”

Thats like trying to hit a moving target. As long as Governments keep printing money they dont have expecting “future growth” and future generations to pay for it Ill hold.

However to try to answer your question It will be at least a few multiples higher than it is just now before I even think about it.

Its still SOOOOO underbought its not even worth discussing yet.

Another good sell indicator is when my local crappy newspaper devotes as many column inchs to the PM metals market as they did (and still do) for real estate :-)

Total global above ground silver stocks are estimated at about 1 billion ounces. Ie the total worlds supply of silver is about $40 billion dollars, think about that number and compare it to the sums of money thrown about in the world media for how much debt there is.

#151 TurnerNation on 08.01.11 at 7:39 pm

FIRST!! In pointing out that SUV in the picture is not an American car…it’s a Mitsubishi. 8-O

#152 timo on 08.01.11 at 7:41 pm

#147 T.O. Bubble Boy

is that not a hint about the market?
they see a storm so throw out the bathwater to keep
shareholders happy.

#153 jess on 08.01.11 at 7:42 pm

cato ..

Reinstating the taxes for the rich from the Bush era , how could small businesses be affected if most small businesses bring home <$250,000 /year.?

"Exactly how many people are employed by small business owners who earn over $250K/yr?"

Out of the 17 million small businesses in the usa, how many even have employees, are s-corporations

The U.S. Small Business Administration | SBA.gov
http://www.sba.gov/ – CachedSimilar
SBA.gov is the official website for the U.S. Small Business Administration, dedicated to providing support to small businesses across the nation.
————————–

Ireland in crisis: One in four have a part-time job onlyThe Irish domestic economy shows no sign of growth; some 300,000 people have seen their income drop by 50% and 25% have a part-time job only. How can the country ever recover
The most chilling statistic of all to emerge in the last seven days is that one-in-four private sector workers now only have a part-time job to keep them going.

And the gap between public sector pay and private sector pay has widened with the former going up by 3% since 2007 and he later dropping by 6%, mainly because private sector workers have had their hours cut, according to a report by economic consultants Indecon.

The report says that before tax the average public sector worker earns €871 a week while the average private sector worker earns €602 a week.

The report, the first to examine the toll the recession has taken on household income, says 300,000 people have seen their incomes plummet by about 50%.

"Individuals and families who previously had full-time reasonably paid jobs and who are now dependent exclusively on social welfare face the biggest challenge from the downturn. …"

http://www.guardian.co.uk/business/ireland-business-blog-with-lisa-ocarroll/2011/aug/01/ireland-part-time-jobs

#154 Robins on 08.01.11 at 7:49 pm

@#149
Mississauga realtor who died while his client, who embezzled his own companies billions in China, escaped during a kidnap… according to chats online they flipped real estate using numbered companies to wash-rinse-export the clean stuff.

So I doubt that ING’s is the only one offering M$ mortgages without any proof of income.

His was like a cinderfella story of a guy landed here in 2004 of humble beginning. Worked as a landscaper for a couple of years before becoming a re-agent. When he went missing last March, he owned and sold his $1.4M home and upgraded to a $2.4M home.

#155 The InvestorsFriend (Shawn Allen) on 08.01.11 at 8:10 pm

131 Helicopter Ben

I confirm you can’t read.

I state that Federal Reserve notes as in $20 and $100 dollar bills are not a real debt and you come back and argue that I am wrong that United States bonds are not debt that must be repaid.

I never said a word about bonds I was abundantly clear and repetitive that I am saying it’s own currecy is not a real debt to a country, yet they count it as debt.

He who holds $1000 bond will get paid back in cash. So that is a debt of the United States.

He who holds a $100 United States paper money, already has said cash and there is nothing for the United States to pay back. Hence the $100dollar paper money is not a real debt of the United States, yet they treat it as such.

I just wiped out a Trillion of debt for United States by pointing out that its currency is not a real debt. Where is my reward for this?

#156 Helicopter Ben on 08.01.11 at 8:19 pm

#148 Eagle Bay ……..Yep but i dont see the difference if its china or social security its money they owe that they will never have, i honestly dont know how long this will be allowed to go on, its obviously unsustainable and there will come a day where people and countries refuses to buy american debt as low interest rates return isnt worth the cheap money that is being payed back. i dont know the numbers but from what i understand everyone is buying short term bonds ( T BILLS) and the mature date is around the corner. no one wants to buy long term bonds as you mine as well give your money away as you are losing big time through low returns and high inflation. after QE 1 and Q2 the states bought more of their own debt , more then china and japan combined. kinda like you going to the bank depositing an IOU cheque to your self to pay your bills, if this isnt dire i dont know what is, japan has already tried this in the 90s and they have been in deflation for 20 years. QE Stimulus is doing less and less. As J . Anthony Boeckh says in his book the great reflation …. ” IN THE EXPANSION OF 2002-2008 IT TOOK 10 TRILLION OF CREDIT TO GENERATE JUST 4 TRILLION OF GDP. THE ECONOMY HAS BECOME LIKE A HEROIN ADDICT, NEEDING INCREASING DOSAGES TO GET THE SAME HIGH”. With every new stimulus here on out it becomes less and less effective. I am far from an expert on the subject, dont know that much really i just read books on it but it seems to me that there isnt a solution, just a ticking time bomb that nobody is sure when its going to go off but it will wether its in the next year or 10 i dont know, just know its coming. and i am betting on high inflation i could lose big time if deflation comes , theres a chance to come out of this extremely well off if you guess right how it will end, you will get creamed either way if you are diversified in stocks as hyperinflation and deflation both destroy your wealth in stocks unless you are an expert.

#157 Nostradamus Le Mad Vlad on 08.01.11 at 8:25 pm

-
Happy BC Day, Simcoe Day (Ontario I think) and any other province day. Sunny, clear and blue skies with the Snowbirds doing a gig over Okanagan Lake.
*
Mfg. slides further; Garth vs. Putin Includes the term ‘parasites’, and Russia – Syria; 2008-09 never ended — it is a constant, slow-motion replay; Dumb and Dumber or Angry and Angrier? Lansdowne Partners sells US$850 mln. stake in GS. They do god’s work, don’t they?

2% Cuts before next election, plus other links; More Wars, Please! Our economy only has three wheels on the wagon; China Dr. Phil, Dr. Oz and Dr. Oprah could, theoretically, sort this mess out. WW3 is an option; Double Dip with chocolate fudge nut coating; Meet The Flintstones Technically, it’s another name for the 17-country AAA debt club, but debts are mostly payable to their own citizens, so they don’t have to be paid at all; Middle Class Collapse “Let’s take the simple solution. Foreclose on the entire government.” wrh.com. A novel, new concept which may just work! Dead Meat Consumers, that is; Italy Burning The Vespa has crashed but Rome sank eons ago, and was rebirthed again; Debt Ceiling Progressively repealing. Seems Obama’s popularity #’s are slipping.

This alone will rankle plenty of US citizens. Also the link I posted for squidly yesterday, about George Soros owning Cerberus, and trying to bring gun control into the US; PC add-ons Good link; US and UK Dictatorships Mebbe it’s time to toss these turkeys on their big, fat asses into the street, then tar and feather them; Libya and what the paid-for and controlled western m$m won’t report; CC and higher taxes “So, the “Deal” won’t raise taxes, but plans to create dozens of new ones out of thin air, literally in the case of the carbon tax!” wrh.com; 4:56 clip Rage here, there and everywhere; Psychopaths ‘R’ Us Help! Call in the three doctors again! Interfering The west continues to do what it does best.

#158 Helicopter Ben on 08.01.11 at 8:29 pm

#151 investor friend, yeah maybe i cant read, i wont lie i have no idea what you are talking about. maybe garth or someone else can answer your fringe question

#159 Daisy Mae on 08.01.11 at 8:37 pm

Dorf: “We all know that these greedy, money hungry pigs that run the government are all heavily invested and that they are really there to serve their own purposes and they are really trying to manipulate the system to their own benefit, right?”

We are so damn lucky to have Garth — a man of integrity….so honest, so straight-forward. What a refreshing change from all the crap we’re being fed daily.

#160 dec3ptiKon_ on 08.01.11 at 8:55 pm

Garth, stop being such a CREEP!

Are you capable of communicating with members of the female population without referring to them as “babes” or other similar terms?

You end up losing credibility and looking like a creepy old undersexed man.

Stop it.

Thanks. I had no idea that’s how you measure credibility. Say, are you hot? Sound like it. — Garth

#161 bill on 08.01.11 at 8:59 pm

Any Gold/Silver Bugs care to share their sell price with the readers of this blog?

sure squid. I started buying gold and silver when they were 276 and 9.50
sold the pm’s at 800 and 20 .
bought gold and silver miner/explorers with that and have been trimming them and buying encana and will start buying cnq at some point.

#162 reality guy on 08.01.11 at 9:00 pm

LAYOFFS….

Rim laying off several thousand workers

HSBC is going to layoff 30,000

who is next. Probably means less people able to service their bloated mortgages.

I hope they all saved for a rainy day. Cause they may be out for quite some time (like the states, layoff for several years)

http://www.ibtimes.com/articles/190503/20110801/hsbc-layoffs-goldman-sachs.htm

#163 Title Match: Ben vs. Shawn on 08.01.11 at 9:10 pm

title match:

helicopter ben vs. shawn allen.

the crowd goes silent.

allen spews some incomprehensible gibberish.

ben defends.

counter-blow.

ben wins by a freakin’ landslide.

no contest.

food for thought :)

#164 Rural Rick on 08.01.11 at 9:35 pm

“If the US has a giant problem, it’s not that it spends too much, but taxes too little. Anyone not blinded by ideology or poisoned by gold can figure that one out.”

Brilliant wish I had said that. Thanks Garth
For you insight, wisdom, and awesome writing.
As true artist with a few simple strokes you reveal a masterpiece.

#165 HouseBuster on 08.01.11 at 9:51 pm

#5 HouseBuster on 07.31.11 at 10:25 pm
Anyone with half a brain knew there would be a deal so I’m surprised at the strong upside reaction. There may be a good short scalp setup tomorrow morning before 10:00 am for the Dow and S&P. More debt isn’t the answer to the problem.
———————————————————-

Am I good or what?

#166 brainsail on 08.01.11 at 9:57 pm

#145 Cato on 08.01.11 at 5:05 pm

I’m not trying to hit on you but I’m very suprised at the 300K number of Canadians living in Silicon Valley. My wife and I are expats living in Austin TX AKA Silicon Hills since the late ’80s and work in high tech. We recently learned that following the 2011 Canada Day celebrations here that 7K Canadians live in the Austin area. Wow, that many? That number was based on the latest census.

Two weeks later, a house three doors over was bought by a Canadian and was followed by his girl friend who is a real estate agent from Toronto has been asking my wife how to get a work permit and a green card. Good luck with that one.

So, for all the the years that we have lived here and that includes alot of business travel to NY and Silicon Valley we have never run into an other Canadian except for our new neighbors and a couple we met sailing in the BVI’s several years ago. Where did the 300K number come from?

#167 nm on 08.01.11 at 10:02 pm

Can you tell me when in the 24h spot price gold fell $20?

#168 Off the River on 08.01.11 at 10:12 pm

While I certainly wouldn’t bet against the American economy recovering, I don’t think it’s going to happen sooner rather than later.

America has lost it’s manufacturing base and the debt levels for all levels of society are obscene. Canada is not far behind and only the high price of oil and other natural resources have ept us afloat.

Harper has to do somehting about our debt, and we as Canadians have to do something about our debt. I personally think the fiat currency model is not working and that we have to rethink the way we handle currencies.

Perhaps a gold standar, perhaps a basket of gold, silver and commodoties would end the printing press going on right now.

I certainly won’t be surprised if gold hits $2000 an once within the year.

#169 WI Boomer on 08.01.11 at 10:39 pm

Whoever is the resident TAX expert up there on US tax rates?? Get a grip, please.
US Tax rates, including corporae taxes are really quite reasonable.
Looking at our own 2010 tax rates for our combined incomes-after funding our TAX Deferred 401-K savings vehicles (which one can deduct from this years taxes), and after taking what FEW tax deductions we have as we have no mortgage to deduct on low 6 figure income

THE EFFECTIVE FEDERAL TAX RATE—– 16%

WISCONSIN EFFECTIVE TAX RATE——-5.159

There, that is the TOTAL TAX GRAB on EARNED (Salaries)
There are consumption taxes like sales tax rate of 5.5%
Investment income rates are far lower than EARNED iuncomes.
Garth is quite correct, we are not a HIGHLY taxed country. Franly, I think that is quite acceptable. I can buy my own health insurance, life insurance, casualty insurances. Rates on TAXES could go up 100%….then I would pay 32% Fed 10.3% state 11% sales.
Could do it, and then we could REALLY attact our debt problems as a nation. Gee, we’d be taxed like…, like…, Canada??

Oh, those Bush Tax cuts benefited me about 3% a year. Big Whoop!

Wendy-

Run away as fast as you can from that Realtor & Bankster “friend”

#170 Soylent Green is People on 08.01.11 at 11:59 pm

That’s HarperCON to you.
.
.
.
.
http://www.unseatHarper.ca
.
.
.
.

#171 Market Toppy? Top? Topped? – “The listing price is now $3 million and they have not had a single offer.” | Vancouver Real Estate Anecdote Archive on 08.02.11 at 8:34 am

[...] Another $300,000 or so and it will be worth it. It’s slowly starting to happen.” – Dclipse at greaterfool.ca 31 July 2011 10:45pm — National RE commentator Garth Turner calls Vancouver market top: “Well, in case you [...]

#172 Brett on 08.02.11 at 12:31 pm

Consumer spending did not drop as a result of the GST. Why would it in the US? — Garth

Wow another brilliant economic lesson from garth…increasing the cost of something does not decrease the demand for it.

im sure all the cross border shoppers in buffalo are just there for the fresh air.

I gave evidence to support my statement previously. What’s yours? BTW, cross-border shopping due to currency fluctuations has little to do with sales tax levels. The basic point remains: the US needs a mechanism similar to a value-added tax in order to raise revenues its personal taxation system lets through. — Garth

#173 Brett on 08.02.11 at 1:24 pm

I gave evidence to support my statement previously. What’s yours? BTW, cross-border shopping due to currency fluctuations has little to do with sales tax levels. The basic point remains: the US needs a mechanism similar to a value-added tax in order to raise revenues its personal taxation system lets through. — Garth

Garth, your “evidence” was a report produced by the conservative party, the same party who introduced the GST, thats much like drug companies conducting studies on the safety of their drugs. Economists are notoriously wrong and lack common sense.

We can see in the US where 2 states that border each other, where one has a sales tax but no state income tax, and the other the reversed situation, we see people taking advantage of this…living in the income tax free state, and cross border shopping in the sales tax free state. obviously this has nothing to do with currency, sine they both use the US dollar. i could give you a million more examples all of which are just based on the common sense that people are cost sensitive, but i suppose your “experts” from that 1993 parliamentary committee blind you to reality.

FACT- consumer spending would have increased at a greater rate had the GST not been implemented- how do i know that?- because the spenders would have had more cash to throw away-duh.

Only your basic point has some validity, a VAT tax is needed, but only if it comes with a reduction, or better yet elimination of income tax and capital gains tax. tax consumption, not production.

The evidence was the report of an all-party House of Commons committee. It was not a Conservative document, so you are incorrect and may have a thin grasp of how Parliamentary committees function. Consumption taxes are inherently fairer than taxation of income, but one will never replace the other. — Garth

#174 Brett on 08.02.11 at 1:55 pm

“have a thin grasp of how Parliamentary committees function.” -Garth

Thanks for the compliment Garth, for thankfully i have no idea how Parliamentary committees function, everyone should be so fortunate.

My circumstantial evidence trumps your circumstantial evidence, for mine is based on a deep understanding of the ancient philosophical foundations of the greek stoics and bullchitology.

“lowish” flat taxes and VAT’s in east euro and other places, this is the future of growth. then again US corporations basically pay zero tax, through offshore shells, so as long as they can maintain that play, perhaps USA Inc will still produce some meaningful GDP.

#175 Steven Rowlandson on 08.02.11 at 9:27 pm

Don’t bet against America?
Are you kidding? America like Canada is dead and gone!
Only the myth and legend remains.
Cause of death: Democracy, communism, new world order, political correctness, national debt, funny money and real estate hyper inflation.
There is probably more but I don’t want to write a book.