Foolish

A week ago, when the world was ending, this blog was overrun with fearmongers and bad advice. The morons at S&P had just downgraded the debt of the world’s richest country, where the most profitable corporations live, and which produces the global reserve currency. Suddenly we heard rumours European banks were about to keel, and investors stampeded for the exits. It was classic panic.

I wrote: “Why would people drop their pants over a 5.5% market decline, rushing to turn paper losses into real ones, buying bonds yielding next to nothing, just so they can make less than they were before and pay a higher tax rate on it?

“Because they’re fearful. They do not see a floor in front of them, just a yawning, gaping, economic chasm leading surely to a rerun of the Thirties. But there’s none. This is not a systemic financial collapse. It’s no Stockageddon. America’s not insolvent when the world rushes under its skirts for safety. No depression coming. Hold the locusts and the plague.

“It was just a crappy day, likely followed by some more. And then it gets better – because companies are profitable, the economy’s expanding, emerging markets still emerge, technology is rampant, nations are woven in response and every politician alive just got cuffed on the side of the head.”

As you know, since then markets recovered. The TSX had one of its best weeks in a long time, gaining 3%. As I stoke this saucy blog, Dow futures are ahead and commodities (including gold) lower again. Bond prices are up, yields down. Doomers looking a little foolish.

What changed in a week?

The Fed spoke. Interest rates will stay low for two years, at least in the US. This means the longest period of the cheapest money in American history continues. That helps keep corporate costs down and profits up, supporting equity markets. It also speeds setting a floor for the battered real estate market Stateside, a prerequisite to serious economic growth.

We also got news of more fat earnings – from companies like Apple, Disney and Cisco. Remember, almost 70% of corporations have surpassed profit expectations this year, and CEOs are sitting on a trillion in cash. These guys have created operations which are more efficient, leaner and global than ever before.

Last week the Europeans started getting their act together. Central banks bought the bonds of  reprobate countries like Italy and Spain. No banks failed. And it dawned on more people that this is a radically different time than in 2008. Then we had big banks wobbling and falling under the weight of toxic debts. This time we have indebted sovereign states – nations which can solve their problems simply by raising taxes and creating revenue. It’s not that politicians can’t. They just lack the stones to do so. But that may soon change.

And speaking of politics, the Republican-Tea Party masses just confirmed their collective nutbar status by boosting Michele Bachmann into the contenders’ circle for the 2012 Presidential nomination. The 55-year-old Congresswoman has core beliefs that would bring the 1930s wafting back. Slashing taxes and forcing a mandatory balanced budget. Massive spending cuts, including to health care and public pensions. No increase in the debt ceiling and, had she been prez, a decision to let Citibank, General Motors and Chrysler fail.

In a country with way, way too many people out of work and the middle class decimated by a real estate depression, this kind of robber baron thinking suggests the right-wingers are massively out of step with  mainstream thought. And markets like that. The last thing the US (and Canada) needs is a mess of bible-thumping, laissez-faire, protectionist pilgrims with their burnished fingers on the levels of power.

Worst of all, pilgrims hate stimulus. And more stimulus is what we’re about to get.

In short, at the pit of last week markets were down about 16%. Equity investors and stock mutual fund holders were sliced and diced. Bond investors, in contrast, made money. Those with a balanced portfolio lost about one-quarter of what the markets did, and will recover much faster. Folks who have cash and use it to buy great companies (through ETFs) caught in the stampede will likely not regret it.

So, I’ll say it again. There is no systemic financial collapse. No stockapocalypse. No bankrupt America. No depression. No 2008. Fear and greed will continue to spin, but no news there.

Remember. In balance and diversity, there is strength.

Damn, that sounds like some New Age crap. I’m swearing off yoghurt.

210 comments ↓

#1 Dad on 08.14.11 at 8:36 pm

All that has happened will happen again. The retreat into isolation and “austerity” happened in the gilded era once, and this new gilded era of unsurpassed wealth inequality may just follow suit. Balance the country or watch the balance fall out. IE: Raise taxes and bring back the WPA, or watch consumer spending disappear for a decade or more.

#2 timo on 08.14.11 at 8:42 pm

http://photoshoplooter.tumblr.com/

foolish?

#3 tigerbaby on 08.14.11 at 8:43 pm

> It has nothing to do with colour. Or race. It has everything to do with culture …

on the other hand on Chinese blogs there might have been some cultural discussions regarding

http://www.cbc.ca/news/canada/ottawa/story/2006/07/03/ott-warmemorialpee.html

http://www.dailymail.co.uk/news/article-1220579/Carnage-Shame-drunken-student-caught-urinating-war-memorial-mass-pub-crawl.html

http://www.guardian.co.uk/uk/2010/aug/20/urinate-sex-war-memorial-blackpool

http://www.adelaidenow.com.au/news/south-australia/female-cop-urinated-on-war-memorial/story-e6frea83-1226099213713

#4 Kilt on 08.14.11 at 9:06 pm

Hey Garth.

Bombardier Preferred, series D. See anything wrong with these. Look to be yielding 8% at current prices. I have yet to determine if they are cummulative. They have dropped 10% in the past few months.

Kilt.

Always a good idea to stick with the best quality, which means banks and insurers. — Garth

#5 TS Harpoon on 08.14.11 at 9:10 pm

Garth.

Eric Margolis has a message below. It may not be about
systemic financial collapse,a stockapocalypse, a bankrupt America or a depression but rather a good take on the facts and how we got in this situation.

Thoughts?

http://www.ericmargolis.com/political_commentaries/break-the-power-of-big-money.aspx

#6 Debt's Dark Embrace on 08.14.11 at 9:13 pm

It is impossible to have a 1930’s style depression here in this day and age. Central banks and governments world wide are working together to fill the potholes in the road ahead. We have social programs like healthcare, ei, oap, cpp, welfare, etc which did not exist in the 30’s. Nobody here is gonna starve and die. There will be volatility and bumps in the road ahead but we will not go over the cliff. What we will have a change in lifestyle for many and slower growth, but no 30’s style depression.

#7 FerrisWheel on 08.14.11 at 9:13 pm

Hi Garth,

Love reading your posts. Keep it up. I kind of disagree with the following:

“So, I’ll say it again. There is no systemic financial collapse. No stockapocalypse. No bankrupt America. No depression. No 2008. Fear and greed will continue to spin, but no news there.”

I just watched “Inside Job” on Netflix and I have to say that America is on the road to trouble. You also have to listen to the following rant:

http://www.theatlanticwire.com/business/2011/08/dylan-ratigans-howard-beale-moment/41072/

The good ole USA needs to get its house in order and until that happens we will contine to see this Financial instability and volatility. I do agree with your recommendations on dividend paying stocks (loved your book).

Ciao,
FerrisWheel

#8 Screwed in BC on 08.14.11 at 9:26 pm

So all is well Garth? Tell me what are you smoking, Garth.

More convincing arguments. — Garth

#9 bullion.bunny on 08.14.11 at 9:27 pm

So, I’ll say it again. There is no systemic financial collapse. No stockapocalypse. No bankrupt America. No depression. No 2008. Fear and greed will continue to spin, but no news there.

Wrong!

That was convincing. — Garth

#10 dd on 08.14.11 at 9:31 pm

No 2008,

Sure, however europe is now contending with their banks and governments. Socgen – one of the biggest banks in France is leveraged 50 to one. This bank holds are the toxic debt from Greece, Spain, Portugal, and Italy. It is on the verge of default. Why else are euro countries banning short selling (but it will not work). Their are questions now being raised about UK debt and banks.

So you have the central bank in europe buying up bonds from Italy and Spain. This is not a good thing. It means nobody want to buy their debt at current prices. It means that the central bank of europe is printing money. How is this a good thing?

The major industrial countries of the world are still in rise of double dip, especially europe, US, and UK. And it seems like if the governments don”t keep on with this stimulus – money printing, the wheels will fall off of the economy.

With $60 – $100 trillion in US debt alone,(not to mention trillions in euro debt) along with zero growth prospects for the western world, the trillion or so in profits really cant add much to the negative sentiment of the market.

No, no 2008. Get used to it. — Garth

#11 Smoking Man on 08.14.11 at 9:34 pm

Human Nature:

On Saturday went grocery shopping with Miss Smoking Man, she thought she had it all figured out, then when the cart was almost empty at the check out, reality set in, it was as if she just lost a child. Her estimate on how many bags she needed was off by two. She had to buy 2 extra bags costing a whopping 5 cents each….which just killed her inside.

Not 3 hours later she is feeding 100 dollar bills into slot machines like there is no tomorrow, max betting giggling and laughing.

Try and put that into a risk model Mr. University PHD math guy……

Human nature, because it is difficult to turn into a mathematical equation is often ignored, and under valued or done wrong. Take the 2008 market meltdown. I was building Bermuda Swap risk calculators( Fanny and Freddy) and sending the shock value to 1000’s of computers on a grid. Returning the calculated results in blinding speed. It worked perfectly math vetted and approved by Top USA PhD mathematicians.

The Investment Bank in Charlotte I was on contract with share price went from 60 dollars to 5 cents. Inside 4 months, Why? they ignored human nature. The board, the management did not study or understand the herd in their own markets….They relied on ratings agency’s and mathematicians to measure risk.

That’s why I feel for Garth everything he says about real estate is mathematically perfect correct, and very logical, yet housemegedon has not materialized, just keeps getting pushed forward, probability seems high to a math guy. But not to me, I have studied and observed how the Canadian Herd and markets react to news and other forces, I put the probability to about 35% which real sucks for my kids and their peers..

Many posters here are taking swipes at Garth as their patience is wearing thin waiting for the big crash. Garth never really acknowledge or understand there is a huge difference between the human nature in the herd south of here (most could not find Canada on an map) , and the herd in his own back yard.

But mathematically speaking Garth is 100% correct with his views on Canadian real estate.

But his take on the markets is bang on all fronts with respect to today’s post.. Good one…

#12 Makaya on 08.14.11 at 9:39 pm

“In a country with way, way too many people out of work and the middle class decimated by a real estate depression”

I’m sorry to tell you that you’re getting it wrong (or at least backwards). The real estate market collapse in the US is just a consequence, not a cause. What has decimated the middle class in America is the all those high paying jobs shipped to China and other developing countries. To maintain an illusion of “middle class” living, people have compensated by borrowing more than they could afford, helped by the Fed’s monetary policy since 9/11 and predatory lending by the banks. Once these debts couldn’t be paid back, the house of cards collapsed and here we are now…

What you fail to understand is that the world has changed. The middle class is disappearing, and faster than you think, in Western Countries. The high paid industrial jobs are not coming back. They are gone, all with the knowledgeable and well qualified manpower that came with it. They have been partly replaced by low paying, no qualification required jobs. How can you build a strong future on such weak foundations.

The multinational coporations are making profits. I would say of course, how could they not? They have divided their cost of manpower by 50 (the difference in average salary between China and the US) and yet are still selling in “rich” markets at the prices. And how have people been able to buy all those goods produced in overseas? By debt. The crisis we are living today is the consequence of the choices we made in 1994 during the GATT negotiations to open our borders to countries like China and let our workforce to compete with people paid $50 a month. That could only lead to a disaster. Who are these corporations going to sell their stuff to once the middle class will have completely disappeared in America?

Some people saw that coming back then and if you really want to understand what are the root causes of the economic problems in western countries, I would strongly advise you to watch the premonitory interview of Sir James Goldsmith, made by Charlie Rose. You’ll see that he got everything right and he even predicted (in 1994!) the mess the derivatives would bring to the world…
You will also see how blind the politicians were back then (and how they still are) during his debate with Clinton’s chair of economic advisors, who is now on Obama’s team.

This is a 6-part interview and I would strongly encourage you and all the blog dawgs to watch it. It help you understand why we’re in such a mess and why it won’t get any better for a long time, if ever…

http://www.youtube.com/watch?v=4PQrz8F0dBI

Sir James Goldsmith passed away in 1997. Too bad we didn’t listened to him back then.

Nice speech, and I know all about Goldsmith. The reality is that US middle class wealth disappeared between 2005 and 2010 due to the collapse in real estate values. The cause of that was the concentration of personal wealth in one asset class, a path Canadians are pursuing. BTW, protectionism is no solution. — Garth

#13 BrianT on 08.14.11 at 9:39 pm

Garth is correct that you will not have a systemic financial collapse as long as you have government officials cooperating with each other is taking unlimited amounts of taxpayer capital to stave off any such collapse. What you get is a long drawn out economic mess, which the USA has had for about 30 yrs (interrupted by a few bubbles which blew up and then burst). This mess has been pretty good for the top 10% and the investor class in general, so you do hear the “let them eat cake” comment a lot.

Just to be clear, this is not a social justice blog. — Garth

#14 T.O. Bubble Boy on 08.14.11 at 9:48 pm

But – maybe the market recovered simply because the computers told it to?

http://www.slate.com/id/2301413/

As the traders say (apparently) – Risk On!

#15 Observer on 08.14.11 at 9:52 pm

The Fed spoke. Interest rates will stay low for two years, at least in the US. This means the longest period of the cheapest money in American history continues.

They can speak all they want about short term rates….so what. If inflation begins to surge (which wouldn’t surprise me) then all bets are off. Garth, it’s all theatre for public consumption, but something tells me that you already know that.

#16 Stefan on 08.14.11 at 9:55 pm

me thinks we’ll need a lot more deflation before QE3 is announced. mish makes a few good deflationary points in this blog post:

http://globaleconomicanalysis.blogspot.com/2011/08/yes-virginia-us-back-in-deflation.html

#17 vyw on 08.14.11 at 9:57 pm

Domestic aggregate demand is the main issue here and a massive jobs stimulus is needed if the economy is to recover. Fiscal austerity will only lead us into another recession.

But there’s another issue and that’s the consumer, business and provincial/local Govt debt. These groups are trying to reduce debt and for good reason. Why pay the bank 19% credit card interest when the BoC rate is 1% and variable mortgages are 2%?

I wonder – Garth (and dawgs) – if the federal Govt could/should act as a banker and loan money @ 0.25% directly to provincial and local Govts to help them with their budgets and stimulus efforts? I’m talking about $50 – $100 billion a year for the next 2 years?

News flash: The government is in deficit. It has no money. — Garth

#18 GregW, Oakville on 08.14.11 at 9:59 pm

Hi Garth, (It’s positive, but sorry it’s not about houses)
re: “I’m swearing off yoghurt”
& How is your heart health?
FYI, You could add this stuff to your yoghurt if you like.

I heard the formulator, a Medical Doctor, of this
ProArgi9-plus stuff speak last week in Mississaguga.
Seem some Nobel prices have been given out for some of the work going into the stuff.
It has L-arginine and a few other interesting good things to help get the most out of it.

If only some of what I heard is true, it is worth looking into.
http://www.amiraclemolecule.com/checktoday-proargi?PHPSESSID=76e76383d724f9fcddd1c0453f3c0d3c

Has anyone else has any expericance with this stuff?

#19 Hovering on 08.14.11 at 10:01 pm

world gov

wiki it

#20 Tim on 08.14.11 at 10:08 pm

The US is hurting because they offshored their high paying manufacturing, and to a lesser extent, some of the white collar work. The subprime crises is a symptom of a deeper problem-not enough jobs, and certainly not enough good paying jobs with benefits. Even most Americans can understand this, but no one has come up with a solution of how to create jobs. They pissed away much of their stimulus money, bailed out the banks and gave the bankers bonuses for nearly destroying the world economy. Nothing will change significantly until more high paying jobs are created, as 70 percent of the economy is based on consumption.

Meanwhile on the west coast, due to low rates, there have been no significant price declines, and those who bought property continue to be rewarded with low mortgage rates. How long have homebuyers benefited from rock bottom rates? About ten years- half the amount of time it takes to pay a mortgage

#21 GregW, Oakville on 08.14.11 at 10:09 pm

Hi Garth, Can your electric generator at the bunker run on hydrogen too?
An Article
Optical Antennas Improve Hydrogen Production.
“Hydrogen is viewed as a potential carbon-free replacement fuel for automobiles”
http://spectrum.ieee.org/green-tech/solar/optical-antennas-improve-hydrogen-production

#22 Waiting for the sun on 08.14.11 at 10:12 pm

What does the Fed think of the upcoming economy, for them to pledge the zero interest rates for The next 2 years?

What does the ECB think of the upcoming economy, for them to ban shorting, and buy bonds for the PIIGS?

Obviously they think things are bad….

#23 Bottoms_Up on 08.14.11 at 10:12 pm

#3 tigerbaby on 08.14.11 at 8:43 pm
—————————————–
knock, knock, knock, McFly……the whole ‘urination in public’ thing is about PARENT’S PERMISSIVENESS.

Not about acts of people randomly peeing in public. In the past I have been known to pee in public places (albeit discretely).

Repeat after me….the culture urination issue is about parent’s permissiveness, parent’s permissiveness, parent’s permissiveness.

Whatever this is about, stop it. — Garth

#24 Cognizant on 08.14.11 at 10:13 pm

SocGen more leveraged than Lehman? That can’t be good.
http://www.zerohedge.com/news/50x-leverage-and-2-tier-1-capital-socgen-truly-paragon-balance-sheet-invincibility

#25 Ausben on 08.14.11 at 10:16 pm

Could it be argued that large corporations sitting on trillions of cash isn’t actually a good thing?

Rather than investing in new capital equipment etc for future growth large corporations are now more risk averse and want cash reserves as cover while waiting to see which way the economic environment evolves.

Debt is bad. Equity is bad. And we’re plunging into hyperinflation and depression. This blog has flipped. — Garth

#26 squidly77 on 08.14.11 at 10:19 pm

Though i am not as confident as you, America will not fail.
The European union however will not survive. Watch BAC, GS and especially MS.

#27 squidly77 on 08.14.11 at 10:22 pm

Morgan Stanley is in trouble.

#28 Makaya on 08.14.11 at 10:25 pm

Nice speech, and I know all about Goldsmith. The reality is that US middle class wealth disappeared between 2005 and 2010 due to the collapse in real estate values. The cause of that was the concentration of personal wealth in one asset class, a path Canadians are pursuing. BTW, protectionism is no solution. — Garth

The wealth that disappeared between 2005 and 2010 was virtual (or paper) wealth. To have real wealth created, you need a producing economy, which we no longer have.

Protectionism is no solution, that’s what the economic advisor on the interview said and she has been dead wrong like most of the politicians back then. Nobody is preaching hard core protectionism here, and if you had watched the entire interview, you would have heard him saying that he was for free trade. The only difference was that it could only work between countries that share the same economic development (similar cost of workforce) and similar respect for the rule of law. China manipulates its currency, and has applied discriminatory regulations against western companies. It’s only free trade when it’s from China to Europe and America, not the other way around. This has decimated our industrial base, our middle class, our communities, and our future economic outlook. And there are still *µ$£ out there to say that opening borders to China was a good thing…

Ideology is what’s killed our economy. It’s hard to argue with deaf and blind people…

‘The wealth that disappeared between 2005 and 2010 was virtual (or paper) wealth’ – wrong, actually. These folks worked hard and invested in their houses. A market freefall wiped that equity away. You are a protectionist, without doubt, and the erection of more trade barriers, along with government austerity, helped turn deflation into the Great Depression. No solution. — Garth

#29 Onemorething on 08.14.11 at 10:26 pm

what Garth is saying here kids is the blindsidedness of 2008 will not happen again so dont think of massive sell offs at once, think of the volatility to continue for years at least 5 more!

Deflation, stock market downturn, more QE, holes in RE that were never dealt with will be once and for all.

Wrong to made right, partially employed work force to increase 3 fold and by 2017 or so we might evolve to a more simpler time where lifestyle decisions are completely different, boomers have finally downsized and RE is at affordable rates on one income (or two partially employed) at 3.5x income avg.

AUS RE major correction along with CAN RE, China slowdown will put deflation into full swing again, rates will stay low until RE assets have taken nose dive as again we cant let the banks fail or not make money.

Developing countries in Asia etc. will suffer on the lag as usual but might look at raising rates before developed.

The only question I have right now in my mind is if the USD will capture interest during this new deflationary period or will global currencies just all devalue to pick up the printed money factor and global competitivenss of East vs West.

All I know is the end game is 1940-1960 starting 2020.

The technology today will be implemented quicker so companies can run leaner and meaner at that means commodities will reach of level of sustainability driven by the end user.

Just my opinion!

#30 VancouverContrarian on 08.14.11 at 10:39 pm

So if the equity markets are doing great, what is the impetus for the real estate market to collapse here in Canada? I’m not in real estate (renting, though dealing with the social stigma thereof here in Vancouver) and have a balanced portfolio and wondering what my next step is, if any.

The stock and housing markets in Canada are not closely correlated. — Garth

#31 Michelle on 08.14.11 at 10:43 pm

@#18 GregW-Oakville

L-arginine is synthesized in the body and can be found in a wide variety of food sources including, peanuts, chickpeas, soybeans, cereals, milk products, coconut, meats such as pork, chicken and beef, seafood and my favourite, chocolate. It’s much better to eat a balanced natural diet than to over-supplement with individual amino acids and risk interfering with the functions of other amino acids in the body.

I wish health was as easy as one single ingredient!

#32 Cristian on 08.14.11 at 10:44 pm

“The morons at S&P had just downgraded the debt of the world’s richest country”

“If the US Government was a family, they would be making $58,000 a year, they would spend $75,000 a year, and are $327,000 in credit card debt.
They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year.
These are the actual proportions of the federal
budget and debt, reduced to a level that we can understand.”
– Dave Ramsey

So much for “the world’s richest country”…

“The Fed spoke. Interest rates will stay low for two years, at least in the US. This means the longest period of the cheapest money in American history continues. That helps keep corporate costs down and profits up, supporting equity markets.”

The way they did it in Japan, you mean? For the last 20-something years? Yep, that is indeed the recipe for success.

But wait! it gets better:

White House Press Secretary Claims “Unemployment Benefits Could Create Up To 1 Million Jobs”

Real Clear Politics notes Unemployment Benefits Could Create Up To 1 Million Jobs

“I understand why extending unemployment insurance provides relief to people who need it, but how does that create jobs,” Wall Street Journal’s Laura Meckler asked Jay Carney at Wednesday’s WH briefing.
Carney responded: “Oh, uh, it is by, uh, I would expect a reporter from the Wall Street Journal would know this as part of the entrance exam.”
“There are few other ways that can directly put money into the economy than applying unemployment insurance,” Carney said.
Carney answers the question: “It is one of the most direct ways to infuse money directly into the economy because people who are unemployed and obviously aren’t running a paycheck are going to spend the money that they get. They’re not going to save it, they’re going to spend it. And with unemployment insurance, that way, the money goes directly back into the economy, dollar for dollar virtually.”
“Every place that, that money is spent has added business and that creates growth and income for businesses that leads them to decisions about jobs, more hiring. So, there are few other ways that can directly put money into the economy than applying unemployment insurance, Carney said.
So there you have it. The unemployed create jobs. If only we had millions more unemployed we could create millions more jobs simply by given the unemployed more money.
I suppose we could triple unemployment benefits and create three times as many jobs on the theory that the unemployed would still spend every penny of three times as much money.

As for the Teaparty “nutbars”, they are right. Sooner or later what they want to do will have to be done. Either through political will, or simply because at some point in the future the United States will run out of creditors. When, nobody knows, but it will, because no one can live on credit forever. If this is done orderly, it will be 1930 again. If it is done disorderly, forced by circumstances (lack of creditors) it will probably be much worse than 1930. For the US and Canada too.

#33 not 1st on 08.14.11 at 10:46 pm

Factoring in for inflation, the stock market indexes are at nearly the same levels as they were 10 years ago, and this is after trillions of stimulus and cheap money were poured into the system. Lost decade?

And now you think that tax increases, austerity measures, cutting entitlements is going to usher in a new golden age? Pass the pipe all around.

No Garth, you are way off in your macro view. Why do you pump a view that there is no evidence at all to support? Call yourself a contrarian then or something, but there are no facts on the ground to support your view.

Simply put, if entitlements are cut back in the U.S and Europe, it will be revolution. Heck the french farmers dump manure all over paris when their subsidies were just talked about. The same thing will happen when medicare, SS, military spending, state budgets are cut in the U.S.A.

Now try your other solution, raising taxes aka sales tax. It leads to a revolt as well since the tea party and republicans will block any attempt. Europe has no taste for tax increases either and riots will ensue just like we have seen. Even if they miraculously get an increase through, consumers are tapped and will be pulling back big time, hence non-discretionary purchases dry up and that will go right to the DJIA.

And while we are on topic, lets examine those trillion dollars on corporate balance sheets that is just waiting to be put to work in the economy. Most of it held by a few mega corporations, virtual monopolies and some others who got direct TARP funds. Look up GE and Caterpillar. Some of these are already engaged in massive offshoring of their operations. Fact is that trillion will never see the light of day in the U.S.

#34 Aussie Roy on 08.14.11 at 10:46 pm

Aussie Update

McMansions set to suffer as govt green energy rating takes affect

http://www.couriermail.com.au/life/homesproperty/federal-government-green-scheme-to-hit-price-of-mcmansions/story-e6frequ6-1226114052440

Don’t bet on intrest rates falling, soon.

http://www.news.com.au/money/property/dont-bet-on-an-interest-rate-drop/story-e6frfmd0-1226114908234

TROUBLE IN PARADISE: Airlie Beach is idyllic, but investors in a Meridien development have their doubts.

http://www.couriermail.com.au/life/homesproperty/meridien-sues-boathouse-apartments-buyers-for-refusing-to-settle-over-doubts-on-point-of-airlie-project/story-e6frequ6-1226114325667

DISASTER-fuelled hikes in body corporate fees have forced many unit owners to jettison their properties at a loss, while new buyers are becoming wary of the hidden costs of unit ownership.

http://www.couriermail.com.au/money/money-matters/rising-body-corporate-fees-sting-queensland-unit-owners/story-fn3hskur-1226114345371

Another high profile property developer goes bust.

http://www.propertyobserver.com.au/residential/warren-anderson-seeks-to-overturn-bankruptcy/2011081251141

Tasmania, Australia’s least expensive property market, has become even cheaper.

http://www.propertyobserver.com.au/residential/tassie-even-more-affordable-as-sales-volume-shrinks/2011081151117

#35 GARTH, GOVERNMENT, AND MONEY CREATION POWERS on 08.14.11 at 10:46 pm

“News flash: The government is in deficit. It has no money.” — Garth

Yet, our “representative” government (i.e., the Bank of Canada) retains the power and legal right–unlike the American government–to CREATE ITS OWN MONEY.

Garth, buddy, how can you say that the government here has NO MONEY when it is well within its jurisdiction to create the stuff?

Food for thought :)

Learn how it works. This is an false comment. — Garth

#36 Bast on 08.14.11 at 10:49 pm

Yikes. Remind me not to buy in Kelowna…
http://www.calgaryherald.com/Jonathan+Bacon+dead+following+mass+shooting+outside+Kelowna+casino/5254503/story.html

#37 vyw on 08.14.11 at 10:49 pm

#17
Deficit fighting is just a recipe for more unemployment, deflation (of debt-based assets) and possible recession – at least at this stage IMHO

The federal Govt controls the currency and it can assume the debts of the provinces and local Govts or act as a banker on infrastructure loans so that these junior Govts have the capacity close their deficits and to spend.

#38 BrianT on 08.14.11 at 10:54 pm

#12Makaya-IMO you are giving politicians and economists way too much credit (ethically speaking)-this isn’t rocket science. The reality is that both groups have been paid very well to promote the economic situation you bemoan, so that is the bottom line. Also, a very high % of the citizens harmed by this do not want to hear the facts so I wouldn’t worry about any of it.

#39 Onthesidelines on 08.14.11 at 10:59 pm

“The reality is that US middle class wealth disappeared between 2005 and 2010 due to the collapse in real estate values. ”

Bullshit. Middle class wealth was already on life support, levereged to the hilt by a housing bubble which turned homes into ATM machines. Real money was already long gone.

All economies run on consumption. Consumption requires disposable income of which there is less and less in advanced economies. There will be no recovery until the increasing wealth disparity is halted and a more equitable wealth distribution within societies is brought about. Not something that is likely to happen anytime soon nor peacefully.

Ah yes, the USSR. Fine economic model. — Garth

#40 Iam on 08.14.11 at 11:00 pm

Keep your debt ratio low and get the on with your life, stop waiting for the sky to fall. The market was made by the rich for the rich and manipulated by the rich to take money from the middle class. The whole system is volatile and run on emotion.

#41 Makaya on 08.14.11 at 11:02 pm

“‘The wealth that disappeared between 2005 and 2010 was virtual (or paper) wealth’ – wrong, actually.”
Are you saying that the Real Estate market in the US was not in a bubble and that a lot of the ‘wealth’ created was out of thin air?

“These folks worked hard and invested in their houses.” Are you saying that none of these folks have been using their house(s) as ATMs, which helped drive the economic boom pre-collapse?

“You are a protectionist, without doubt, and the erection of more trade barriers, along with government austerity, helped turn deflation into the Great Depression. No solution.”
Actually, I’m not protectionnist at all and I would fully support a totally open free trade market between Europe, the US, Canada, Australia, New-Zealand, Korea, Japan and probably a few others. These countries have in common a similar level of development. Corporations would compete only on better operations, increased productivity, innovation, etc, and not on low cost of labour, zero respect for the environment, undervalued currency and no respect for copyrights, patents, etc.

If the erection of trade barriers was such an evil thing, why did China put so many of them? Why is it so difficult for western coporations to work there? It doesn’t seem to have worked that bad for them… No protecting our economies is and has been proven to be very naive. We just have to look at the latest unemployment numbers in the US.

How do the US feel now China is giving them lessons on how to manage their public finance?

#42 tigerbaby on 08.14.11 at 11:03 pm

> #23 Bottoms_Up on 08.14.11 at 10:12 pm

whatever you think it is about, the end result is that we also pee in public, and on war memorials no less …

#43 Observer on 08.14.11 at 11:04 pm

Worst of all, pilgrims hate stimulus. And more stimulus is what we’re about to get.

So who has a greater sense of entitlement Garth? The kids in the streets of Britain or the “too big to fail” firms? You wonder why there is so much synicism out there? What kind of example is being set for young people, who are being told one thing while the halls of finance do something else for their cronies? (believe me some of those kids deserve whatever is coming to them)

They are vacuous criminals without valid excuses for their anti-social nihilism. Mind you, they fit right in with this blog today. — Garth

#44 Michael Motorcycle on 08.14.11 at 11:05 pm

1.)If gold does peak at 2500/$ with the end of the year, will the US dollar remain trending down?

2.)I want a sideways trend in the real estate market for 3-4 more years to shake selling confidence, will this be so?

3.)When is the next book? – you have too much free time for a post a day.

Cheers.

#45 jboy on 08.14.11 at 11:05 pm

Hi Garth,
Love your blog (a little too much…)
One thing I that kinda confuses me – weren’t you saying previously (around the 2008/09 economic crash) that America was done…now you’re saying don’t bet against them Yanks. Or is it more that USA isn’t the be all and all like was since post-WWII to 2007?

Other than that, thx for having this blog!

#46 Robins on 08.14.11 at 11:16 pm

Fearmongers, liars and cheaters. That’s right, signs of the global phenomena. It’s far away and impersonal, until someone falsifies his year of birth to circumvent the stringent rule of Voix Nouvelles 2011 session that all candidates must be born after 1979 January the first.
Lie is good. Lie is acceptable. If caught, just claim that it is typo.

#47 Nostradamus Le Mad Vlad on 08.14.11 at 11:26 pm

-
Accurate and good post Garth, but I take a slightly off-centre approach by joining up different sentences:

“It also speeds setting a floor for the battered real estate market Stateside, a prerequisite to serious economic growth. These guys have created operations which are more efficient, leaner and global than ever before. But that may soon change. The last thing the US (and Canada) needs is a mess of bible-thumping, laissez-faire, protectionist pilgrims with their burnished fingers on the levels of power. Worst of all, pilgrims hate stimulus. And more stimulus is what we’re about to get.”

Goggling shows real US unemployment is 41.6 percent. Not sure whether it includes underemployed, but those who have given up looking altogether probably didn’t participate.

Until NAmerica gets 85% or more of their people working and producing stuff again, making good wages thus buying the stuff they have just made, the present situation may change for the better for businesspeople, but for the average Joe and Jane, it will take a major paradigm shift.

The sentence “But that may soon change.” — There is a vast chasm between ‘may’ and ‘will’ — one of those two will be right, ‘tho no one knows when. One thing that can’t be taken into account is the unknown, which covers a vast array of ‘maybe’s or ‘might have been’s.
*
#11 Smoking Man — “Human Nature:” — The Doors song People Are Strange comes to mind. As long as People Are Strange, we’re all out to lunch!

#168 Killer Chicken or Imploding Boomer? — Thanks for the link and update. Would be nice if Fair Trade replaced Free Trade — we have something they want, let’s set a fair price with negotiated yearly upgrades.

Until the politicos started butting horns and nitpicking over details, the lawyers got involved costing taxpayers an arm and a leg which exist under free trade, not necessarily under fair trade.
*
8:10 clip Libyan Army retakes Misrata; Missing 218 votes are where? Would y’all like another conspiracy theory? Click the link! 5:50 clip NAmerican m$m blacked out — radiation levels high over Pacific; A+A Anarchy plus Austerity.

Anonymous Curious to find out whether TPTB set this up as a front to instigate violence; 9-11 The revelations won’t quit embarrassing the WH; Looming food shortages caused by things well beyond our reach (like HAARP), and ET Speaking of space markets and stock planets.

Fake Aliens Plus the Winnipeg Blue Bombers win next year’s NASCAR; So it continues England last week, now Spain; Philadesphia Temporary curfew for kids; GW? and Green Tax con.

Infographic and Charts Bland coloring, ‘tho; 6:30 clip Who killed economic growth? QE Great for da rich, sux 2 be poor but where is average? US Debt Fantasies Translated from space gibberish; Interesting If the UK does join the EU and replaces the pound with the Euro, the Channel Island \s, where my brother and I grew up, would lose their tax-haven base; 1892 Banxters Manifesto of 1892; Ron Paul, the US Fed and massive robbery.

The non-participation rate is not the unemployment rate. — Garth

#48 waterloo Resident on 08.14.11 at 11:27 pm

The simple fact is that the U.S. spends way too much more than they bring in in taxes, simple as that. That is the reason for the rating downgrade, it has nothing to do with the profitability of private corporations.

And the tax rate in the U.S. is too high, far too many companies moving their head offices to other countries just for lower tax rates, even Canada is considered a “safe haven” compared to America when it comes to taxes.

So America needs to desperately cut their taxes AND spend within their means, even if this means massive suffering for the masses.

((““In a country with way, way too many people out of work and the middle class decimated by a real estate depression”)) :
Hey, its not all that bad, 80% of the people still have jobs, so their HAPPY and smiling.

((“had she been prez, a decision to let Citibank, General Motors and Chrysler fail.”)):
Hey, that’s PURE CAPITALISM, and in a purely capitalist society the strong eat the weak, there is no “socialism” to bail out anyone, not even good companies like General Motors or CitiGroup. So I do agree that those companies should have gone down the toilet, declared bankruptcy (without bailouts), and then come back to life after the bankruptcy leaner and meaner than ever before, that is how PURE capitalism works.

#49 tigerbaby on 08.14.11 at 11:34 pm

> what is the impetus for the real estate market to collapse here in Canada …

overweighting of society’s resources in one industry make us less competitive overall … don’t you think we would be in better shape if people had taken the cheap money and invested some in R&D or productivity gains instead of putting it all in RE?

> free trade … only work between countries that share the same economic development (similar cost of workforce) …

the fundamental issue is that the productivity and knowledge gap between us and “them” is shrinking. first world trading block does not solve this issue if we keep on mis-allocating the resources …

#50 kitchener1 on 08.14.11 at 11:35 pm

These guys have created operations which are more efficient, leaner and GLOBAL than ever before.

Cisco let go off 6000 (mostly domestic US workforce). Apple outsources IPhone etc.. to Foxxconn in China. Foxxcon employes 1million plebs, many of which will be looking for new jobs soon as foxconn announced they will be bringing in robotics that might mean 10% less staff. They to are concerned about “labour costs”. The Plebs were asking for a raise, what they think? their kings or something asking for $1.25 and hour from $1.00.

Right now its still inflation vs deflation out there in the market place.

Here is some real irony for you folks out there.

Companies making great profit, they outsource their operations to low cost centers overseas. Now their profit grows, balance sheet looks good. Their compettion does the same, balance sheet all good.

So they will still buy that software,server,network switch etc.. from each other, stocks continue to look good.

But the man/woman on the street is getting killed– no wage growth, huge debt ratios to income, cost of living and essentials are still going up. Not good for growth.

Im still saying watch Europe. The respective govt’s still need to get approval from their parliments to do the whole euro bonds thing.

to those that trade– set your stop/loss and be ready to excute on Aug 25-26. The bank short selling ban expires on the 26, watch for some extreme volatility those days.

#51 waterloo Resident on 08.14.11 at 11:37 pm

#12: Makaya: ((” What has decimated the middle class in America is the all those high paying jobs shipped to China and other developing countries. To maintain an illusion of “middle class” living, people have compensated by borrowing more than they could afford, helped by the Fed’s monetary policy since 9/11 and predatory lending by the banks. Once these debts couldn’t be paid back, the house of cards collapsed and here we are now…”
………”The high paid industrial jobs are not coming back. They are gone”.))

—— EXACTLY, wow, you hit the nail on the head with that one !!!

#52 Mackie on 08.14.11 at 11:38 pm

I think GT gives the U.S. way more credit than they deserve, and underestimates the importance of holding gold and silver.

#53 noname on 08.14.11 at 11:42 pm

http://www.chpc.biz/Plunge-O-Meter.htm

HOW TRUE IS THIS??????

#54 Mighty Moose on 08.14.11 at 11:45 pm

the west has innovation and technology, which will always be in demand; but if more anne more jobs go down the tubes, and even if rates are low the avg sfh will have a tough time to make ends meet.

this is chess not checkers.

#55 meggie on 08.14.11 at 11:46 pm

The last thing the US (and Canada) needs is a mess of bible-thumping, laissez-faire, protectionist pilgrims with their burnished fingers on the levels of power.

Garth-why do you so frequently take shots on Christianity? It smacks of bigotry and lessens your credibility as a professional author. Are you Christ-aphobic?

The US evangelical-republican, god-guns movement is wholly dangerous. This bears little resemblance to Christ. – Garth

#56 Helicopter Ben on 08.14.11 at 11:56 pm

#6 DEBTS DARK EMBRACE “It is impossible to have a 1930′s style depression here in this day and age. Central banks and governments world wide are working together to fill the potholes in the road ahead.”………….. I couldn’t Disagree more, Deflation will always follow inflation, yes the central banks can prolong the process but can never ultimately stop it, they are not wizards, In fact they cause the whole mess and should be done away with. its just a question of how many Zeros on your paper money will it take to buy a loaf of bread before Deflation happens. I am surprised how every one here is in an agreement that the credit bubble caused the housing bubble, well guess what folks there is more to the story, it caused a stock bubble as well along with almost everything else, the whole world is gorged on bad debt, its unsustainable and cant last too much longer. printing money is the easiest way out so thats where we are headed in the short term, inflation ultimately leading to Deflation. Many millions died form the last depression in the states and they knew how to farm and be more self reliant, there is way more of us now and we dont know “F ALL”.

#57 Kaganovich on 08.14.11 at 11:58 pm

Here’s Roubini claiming that Marx was probably right:

http://www.alternet.org/newsandviews/article/649635/mainstream_economist%3A_marx_was_right._capitalism_may_be_destroying_itself

No duh.

#58 from kits on 08.15.11 at 12:03 am

well said tonight… enjoyed once again.

I’ve love to see an article showing what can happen to a real estate market by showcasing Japan.

I’m a bit dated on my info but from 1991 to 2005 Japanese real estate fell 23%…I have a hard time things have changed there at this point.

bear market? the thing with everyone reading this is we are thinking in terms of 6 months, 1 year, 2 year but Garth’s blog posts is something that will slowly creep up on us and we’ll be years in before we start to notice.

I strongly believe real estate will not just drip 60% in 2 months and all hell will break loose, this will be a nice long, drawn out torture fest….

debt is the worlds problem right now!!!! how is it any different in Canada? it’s not, just hasn’t happened yet

#59 Kaganovich on 08.15.11 at 12:07 am

For the blog dawgies who can’t stand to get their dose of gloom from us, the credentially starved rabble, here is a compilation of doom coming from various parts of our ‘establishment':

http://www.nakedcapitalism.com/2011/08/guest-post-austerity-and-runaway-inequality-lead-to-violence-and-instability.html

Check out the pictures at the end. The powdered wig and knickers set should be taking their cue any moment now.

#60 Marnic on 08.15.11 at 12:15 am

“This time we have indebted sovereign states – nations which can solve their problems simply by raising taxes and creating revenue…”

Garth, you can do better than that. Apparently the US cannot raise taxes, as evidenced by the “agreement” on the debt ceiling fiasco. And if it really was that simple, why would all those Eurozone countries in debt up to their eyeballs not have done it long ago? Here you go, pay more tax everyone, look, problem solved…

It will occur, of course, sooner than default – which will guarantee higher taxes. — Garth

#61 Marnic on 08.15.11 at 12:18 am

Oh, and as for Europe having its act together…that was a joke, right?

You missed the word ‘beginning.’ On purpose, obviously. — Garth

#62 City Slicker on 08.15.11 at 12:19 am

Garth, if US corporations are doing so well, why are there some many unemployed in the US and so many middle class suffering?
Doesn’t add up.

It’s called capitalism. — Garth

#63 Coho on 08.15.11 at 12:22 am

Excellent posts Makaya!

Indeed, good paying jobs are going going gone. The trade-off has been cheaper consumer goods like clothing, appliances, electronics and other gadgetry. However, housing, food, energy, transportation, vehicle costs (the major stuff) continue to rise. It has been a dime gained, and a dollar lost for those whose jobs have been outsourced. Lotsw of talk about higher taxes, but what is the net gain, if any, of taxing fewer people more?

It appears heads of some soveriegn states have been given bad advice and false promises by their handlers. Perhaps Obama has been sold the biggest lie since he’s head of state to the world’s biggest economy. “Debt is good. Don’t worry, we have a way out planned for you. It’ll only appear that you and your fellow leaders are running your countries into the ground. Trust us, we’ll lift you/America back up”, come whispers of deception from the shadows…

#64 AACI Home Dog on 08.15.11 at 12:36 am

#11…Smoking Man

woo hooo….you have learned to spell correctly !
(that really was you, wasn’t it ?)

#65 LS on 08.15.11 at 12:40 am

H.K. Apartment Sellers Cut Asking Prices

Derek Ma and his family in May sold two of their eight properties in Hong Kong, doubling their money in four years. They’re struggling to sell the other six.

“We have been trying to offload more, but many sellers are now cutting prices,” said Ma, 36, whose portfolio includes units mainly in the upscale Mid-levels and Island South districts. “There’s definitely a softening in prices.”

http://www.bloomberg.com/news/2011-08-14/h-k-apartment-sellers-cut-asking-prices-as-surge-ends.html

#66 Tamsen on 08.15.11 at 1:16 am

How will demographics (aging Baby Boomers = less spending) in North America play any role in whether there may be a double-dip in not only real estate but also the stock market? Thanks.

#67 a prairie dawg on 08.15.11 at 1:30 am

- Stupid this outfit is, bite you I will. -

#68 uk lad on 08.15.11 at 1:40 am

as long as countries have negative savings rates it is immpossible to have any recovery.peoples savings are destroyed, hence there is no capital base to invest, which means the government assumes that role with QE.

sorry garth, stimulus (printing money) does not create wealth. wealth is consuming less than you produce and saving the difference. wealth is not debt.

so gold dropped a few dollars, big deal, i repeat once again the dow measured in gold is down 86% since 1999 tell me thats incorrect.

returns on your portfolio 6% 7% etc are meaningless when the canadian dollar is loosing purchasing power by more 15% per year measured in gold.

crisis over, you seem to think so.
i beg to differ, the next few years will not be about making money, it will be about attempting to preserve the wealth you already have.

Which is exactly what I have been showing you. — Garth

#69 Calgary on 08.15.11 at 1:45 am

I don’t think the world is going to end but the good times are not coming back for a while…debts around the world have to be paid with both consumers and goverments spending like fiends. That is why the markets are so nervous…who can afford to bail out France or Italy? Also consumer spending makes up a sizeable chunk of GDP both in US and Canada. Top that up and experts can’t decide if we are going to get inflation of deflation. Decisions, decisions….

#70 Sebastien on 08.15.11 at 1:57 am

Quick question:

If austerity doesn’t work, how did we get out of the market depression of 1920-1921?

http://www.thefreemanonline.org/featured/the-depression-youve-never-heard-of-1920-1921/

http://en.wikipedia.org/wiki/Depression_of_1920%E2%80%9321

#71 SafetyBear on 08.15.11 at 2:24 am

“As I stoke this saucy blog, Dow futures are ahead and commodities (including gold) lower again. Bond prices are up, yields down. Doomers looking a little foolish.”

Maybe wait a little longer before we signal the all clear?

#72 SafetyBear on 08.15.11 at 2:29 am

@ #12 Makaya. I agree completely. You’ve also obviously read ‘No Logo’ too. Garth, US wealth disappeared between 2005-10 because of the collapse in property values for sure. But Makaya’s reasons given are also a big factor in the erosion of the middle class which continues through boom and bust.

#73 Kilt on 08.15.11 at 2:40 am

Sound Advice !

Thank Garth.

Kilt.

#74 WhenDoWeCallItQuits on 08.15.11 at 2:59 am

And when do we (under what circumstances) admit that more stimulus is wrong and start looking for alternatives? This experiment has been going at least since 2002 with miserable results. If it was a scientifically conducted experiment, it would have been cut long time ago … It is irresponsible, and unsustainable, to keep crying for more stimulus over and over again. There must be a plan B, and Zimbabwe is not an option.

#75 A on 08.15.11 at 3:03 am

Garth, I love reading the positiveness you put on your blog posts each day, nothing like waking up to a bit of sunshine.

But, your point of “Last week the Europeans started getting their act together.” needs to be researched further. I live in Europe, and work in London UK and can tell you, this is not the case at all. The ECB is not telling the whole story and the “man on the street” can tell you in one word what’s happening here: “Rubbish”

This isn’t a situation one can analyse from across the pond, it’s very bad.

Anyone that thinks else wise does not live here.

#76 Jon in Cowtown on 08.15.11 at 4:22 am

Amazing Garth for a man with such lucidity when it comes to RE to miss the boat so thoroughly on the larger picture. I agree with you on one thing however, don’t sell the US short. If the American people do wake up, watch out, the impact on the markets might not be so positive. The question becomes when will they wake up, 2008 was the first wobble, this last week was the second, when will the third and the fourth be? Not long I suspect.

As always with all due respect.

#77 Betty Danin on 08.15.11 at 4:27 am

According to spaceman’s prediction he made on Saturday’s 640 am Toronto radio show Canada, U.S. and Mexico will have one common currency called the amero and we will all have a big drop in our standard in living coming soon with riots in the streets and social disorder and chaos. What do you think Garth Turner?

Junk economics. The Amero is a myth. — Garth

#78 Deliverator on 08.15.11 at 5:00 am

The reality is that US middle class wealth disappeared between 2005 and 2010 due to the collapse in real estate values. The cause of that was the concentration of personal wealth in one asset class, a path Canadians are pursuing.

Really? Look at this graph again, and explain it if you can.

http://www.wikinvest.com/image/GDP_growth_with_MEW.png

BTW, protectionism is no solution.

Tell that to the Japanese, the Koreans, the Vietnamese, the Chinese and all the other mercantilist nations in the East. Allowing these countries free access to our markets when at the same time the barriers to entry into theirs are prohibitive is like handing your pistol to your robber and expecting him to give you your wallet back.

#79 jane54 on 08.15.11 at 5:18 am

I have to agree with the posters that say the poor employment situation is here to stay, especially for the middle classes. This is the new reality. We have indeed exported most of our jobs. My children will not enjoy the lifestyle that their father and I have. Our son with two degrees is stuggling already.

So this generation borrows because it wants their parents’ lifestyle now and these kids have only ever known good times so how could they end, they ask themselves.

No good jobs means no middle class life which means debt and and/or poor living standards. And things will get worse.

My brother is a graphic designer and he says now that layouts and finished work is done in China and emailed back to Canada. He can’t compete in price and maintain his Toronto home and lifestyle.

I am an academic but there is nothing stopping universities from buying in podcasts of lectures from India for peanuts compared with my salary and benefits.

So it is not only factory jobs that are going but professional ones too. All going to the global lowest cost provider. No wonder corporations are fat with record profits. All the money is moving up to the top tier yet they don’t seem to consider what will happen when their western customers can’t buy their goods and services any more.

We have opended Panora’s box.

#80 Conflicted Pumper on 08.15.11 at 5:43 am

Yes, daily 400+ point swings in the DOW are a sign that everything is fine.

#81 Young Old Fart on 08.15.11 at 6:31 am

What a great week to make money! Love it!!

My comment or thought I have is this. I have the opportunity to travel all over this great small world of ours. Whether I am in Switzerland, South America or Sudbury, every now and then I get an urge to chuckle when I think of the goldbugs and their very real belief that one day all financial transactions will be with gold.

In fact, last week while sitting at a small restaurant patio overlooking the Zurich See having lunch with my banker, on settling the bill I asked her, shall we pay with Francs or perhaps a 1/10th oz wafer. When she looked at me puzzled I mentioned the goldbug belief that soon all “fiat” money would end and soon we will only use gold. Of course she said, why not? As gold is a commodity, perhaps the shop keepers will accept a can of oil or soya beans as well? To say she thought the idea ridiculus is an understatement.

Don’t get me wrong. Gold is a great investment but like any other, do not fall in love with it. I hold bullion myself but have slowly been taking profits since $1400 per oz.

Try to imagine paying for a tank of gas in Lincoln Nebraska, groceries in Berlin, a pack of cigarrettes in Turkey or a beer in Sydney with gold nuggets????

It is a big world out there gold bugs, get your head out of your…. gold safe…. and have a look around.

#82 Robert Dudek on 08.15.11 at 7:29 am

Sold PHYS last week a bit early but it looks like I will buy it back cheaper this week. My stock portfolio gained about 3% last week – bought some cheap oil and gas dividend plays after the huge sell-off Monday. They bounced back nicely.

More money printing ahead means that the gold bull market is intact – sorry Garth.

#83 keny65 on 08.15.11 at 7:30 am

Yeah…about bible thumping freaks controlling all levels of power…I think your being naive or a jesuit co-adjutor…read up on the jesuits and how they have been circumventing royal courts and governments since their creation…Any idea who Viet D Dinh is?The creator of the patriot act,a jesuit from georgetown university,created it before it was actually needed?!??!??!??!??!?!Then was implemented after the false flag attack of 9/11.This is just an example of the worldwide web of power of the jesuits…check out the most powerful man on earth…the black pope,Peter-Hans Kolvenbach.The united states will not crash for the only reason that the us military is the jesuits own worlwide police and they still need to implement their end game.

Jesuits. Jews. Banksters. Chinese. Keynsians. The elites. Corporate oppressors. Market manipulators. I think this blog has sunk to a new low today. — Garth

#84 debtified on 08.15.11 at 7:33 am

Garth, with all due respect, how can you be as bullish on the equity market as you are bearish on the real estate market? Aren’t they both heavily reliant on debt?

I am just looking at Japan’s index and I can’t help but wonder what you see in North American equities that make them so much better and more immune to prolonged downturn than Japan’s.

#85 Robert Dudek on 08.15.11 at 7:35 am

re: young old fart

Paper or electronic money is good for spending, but gold is a store of wealth, who cares if you can’t use it in the local grocery store – that is not its purpose.

But I prefer closed-end funds with real (not paper) gold in them like PHYS that can be bought and sold in minutes with no markup.

Spending your depreciating fiat instead of something that holds its value makes rational sense – why wouldn’t you want to get rid of fiat before it loses even more of its value.

#86 Robert Dudek on 08.15.11 at 7:42 am

Carney is right, UI benefits are a form of stimulus. This money will be spent in the economy, therefore boosting aggregate demand. This leads to more jobs.

But investing in infrastructure (also fiscal stimulus) is a FAR BETTER way to create jobs, because it allows society to be more productive going forward.

#87 bigrider on 08.15.11 at 7:44 am

“Interest rates will stay low for at least two years- at least in the U.S”

They will therefore stay low in Canada for the same and our RE market will continue to rage…much to the chagrin of us RE bears.

#88 HouseBuster on 08.15.11 at 8:03 am

If house prices are absurdly high doesn’t that mean rent is also ridiculously high?

#89 timo on 08.15.11 at 8:07 am

http://video.cnbc.com/gallery/?video=3000038689

good interview, 100% chance of a recession.

#90 Kevin on 08.15.11 at 8:14 am

“it dawned on more people that this is a radically different time than in 2008.”

Did you seriously just say “it’s different this time?”

After spending countless blog posts ridiculing real estate speculators for using the exact same argument?

Sovereign debt is different from corporate debt. Does that elude you? — Garth

#91 timo on 08.15.11 at 9:11 am

Sebastien
Quick question:
If austerity doesn’t work, how did we get out of the market depression of 1920-1921?

your quoting from an author that also believes:

As a matter of property rights, business owners should be able to legally “discriminate” just as private homeowners can. In practice, there are all sorts of clearly “discriminatory” practices to which few people object. Once we precisely define what we mean by “bad” discrimination, we see that the free market contains automatic financial penalties for it. There is thus neither a right nor need for government intervention to remedy unfair discriminatory practices.”

http://mises.org/daily/5396/Walmart-and-Discrimination

#92 Rudolf on 08.15.11 at 9:17 am

I am a novice when it comes to investments in the stock market – but I have followed the headline catching events after S&P changed its US credit rating. Except that many hobby speculators dumped their stocks and started to run for the exit – none of the negative predictions have actually materialized as of now.

The downgrade has not resulted in higher interest rates for consumers as predicted – and investors have returned in part to place their bets in the stock market again.

What I cannot understand is that the action of one private credit rating agency has had the influence to trigger a global meltdown of stock prices. But even more surprising is the fact that a short pep talk from the US President was able to reverse the downward trend around the globe at least momentarily within minutes after his speech had been broadcasted.
Where is the rational?

#93 debtified on 08.15.11 at 9:28 am

#3 tigerbaby AND #23 Bottoms_Up

Whatever this is about, stop it. — Garth

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

Yes, it’s time to end this discussion. You both have a point. I am an immigrant from Asia (not Chinese but dated them) and can confirm these so-called “cultural differences”.

Bottoms_UP, you are not wrong with your observations. Your mistake is to point it out and mention it on this blog. What were you trying to achieve?

Tigerbaby, I felt the same way as you did but I don’t see the point of getting into “this-culture-is-better-than-that-culture” argument. The key to getting along is focusing on the positive – all cultures have good in them.

#94 timo on 08.15.11 at 9:44 am

when austerity hits watch the peoples reaction.
snark

language warning
http://www.youtube.com/watch?v=8kbNb4YNT3M&feature=related

#95 Diana on 08.15.11 at 9:58 am

Is it just me, or is the crazy out in force today?

Garth, thank you for writing this blog on your own dime every day and sharing it with us. I look forward to reading it in the morning with my coffee. It has inspired me to learn more about investing and investment products as well as giving me a frame of reference for the inevitable sound bites and press releases about our economy.

The comment section by turns amuses and horrifies, and I wish people with dissenting views could manage to make their points without drowning their comments in equal parts vitriol and smug, but I guess you can’t have everything.

So, thank you again for wading through that to continue posting. There are those out there who do appreciate it, and enjoy.

#96 Daisy Mae on 08.15.11 at 9:59 am

“So, I’ll say it again. There is no systemic financial collapse. No stockapocalypse. No bankrupt America. No depression. No 2008. Fear and greed will continue to spin, but no news there.”

Alot to absorb. How can so many of us be so off-base so much of the time?

#97 Nemesis on 08.15.11 at 10:05 am

“Jesuits. Jews. Banksters. Chinese. Keynsians. The elites. Corporate oppressors. Market manipulators. I think this blog has sunk to a new low today.” — Hon. GT

Simplex/false meta-narratives are an axiomatic feature of ‘interesting times’, GT.

Accordingly, as regards ‘political risk’ – I wouldn’t wager against the, “bible-thumping, laissez-faire, protectionist pilgrims “…

#98 BDG-YYC on 08.15.11 at 10:09 am

Jesuits. Jews. Banksters. Chinese. Keynsians. The elites. Corporate oppressors. Market manipulators. I think this blog has sunk to a new low today. — Garth
___________

You left out: evangelical-republicans, god-guns movement, vacuous criminals, tea party nutbars, pilgrams, doomers ….
:-)

No I didn’t. They’re the accusers. — Garth

#99 Kilby on 08.15.11 at 10:16 am

Real Estate, Victoria. August 8th to 15th (7 days) Victoria only (Including Victoria West) 25 new sales.

Penticton, including all rural areas. 843 active listings.
Last 7 days, 10 new sales. Most expensive, a 1,268 sq. ft. concrete condo across the street from Okanagan Lake built in 2008, sold for #393,000 after 188 days on market. (court ordered sale)

#100 Daisy Mae on 08.15.11 at 10:20 am

“We also got news of more fat earnings – from companies like Apple, Disney and Cisco. Remember, almost 70% of corporations have surpassed profit expectations this year…”

“Surpassed expectations”?

Isn’t this because consumers have, indeed, been buying. But they’ve been using credit to do it….and consumption is falling. This will be followed by repayment of these debts. And then what? What happens down the road with mortgages reset and consumers are maxed out?

A ‘greeter’ friend at Walmart tells me people are spending, alright — on food. A necessity.

#101 this is wonderland on 08.15.11 at 10:21 am

Felonious Munk Presents: Stop It B!

http://www.youtube.com/watch?v=tRmZ9zH-mYM&feature=player_embedded

#102 Daisy Mae on 08.15.11 at 10:31 am

“If you are burdened with $10,000 debt or more, you may now call…..”

This is a debt consolidation firms radio commercial sounding ever so urgent –they intend to save the world. Promising to get the debt reduced and/or eliminated (?) so that clients can continue to….chaaarge!….to their hearts content. A vicious circle.

#103 Bottoms_Up on 08.15.11 at 10:31 am

#18 GregW, Oakville on 08.14.11 at 9:59 pm
———————————————-
Stay away from any product promising too much. If it’s too good to be true, then it is.

Here’s what I found on arginine (people that use “L” as a prefix are not true scientists…all amino acids are “L” for ‘life’, and represents the orientation of the molecules chemical groups in space).

It appears that a diet high in arginine can replenish glutamine levels and may enhance the function of the immune system (this is proper science with an actual citation):

http://www.ncbi.nlm.nih.gov/pubmed/16889936

#104 Westopia on 08.15.11 at 10:31 am

Not to worry a about the Iowa straw poll results. It’s a little known fact that Ron Paul was a VERY close second. There is hope yet.

America, if you want prosperity to return, vote Ron Paul in 2012!

But first, let RP bring you a nice, cleansing depression. — Garth

#105 ruraldude on 08.15.11 at 10:32 am

#32 I’d just like to add that when the left leaning wacko Vice president of the United States of America chastises the Tea Par tiers as terrorists because they want to have a balanced budget, than I guess they deserve the judgment they will bring on them selves.

#106 Daisy Mae on 08.15.11 at 10:49 am

Bast on 08.14.11 at 10:49 pm “Yikes. Remind me not to buy in Kelowna…”

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

I believe the Bacon brothers actually live in Abbotsford….

#107 Harvard Grad on 08.15.11 at 10:51 am

Oh Yes, everything is fine. As long as Germany and France pay for the reckless nature of their neighbours to the south, what’S to worry! I predict riots in Berlin and Paris when the average tax paying citizen finally caves and gets pissed that their tax dollars are supporting other nations debt problems. They can work until their dead but they must support early and carefree lifestyles of other nations..please, that’s like asking Canadians to pay more tax to support the American Debt crisis.

If you have any doubts about the true crisis in the States, read the weekend article from Barron’s – Town’s across America are filing Bankruptcy and that is not a concern! 1 in 7 are receiving food stamps – if this isn’t a crisis, what is! The states took in 2Trillion and spent 3 Trillion – and that’s with a “T”…

In 2008 we just pushed the can down the road – and eventually this game will fool nobody!!

Equities anybody?? Sheesh!

#108 T.O. Bubble Boy on 08.15.11 at 10:57 am

Warren Buffet published an Op-Ed in the NY Times on why taxes should be raised on the super-rich (specifically, on investment income):

http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html

To quote Mr. Buffett:
” I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.”

#109 Tony on 08.15.11 at 11:07 am

I’m seeing the opposite i think this will be much worst than anything we saw in the 1930’s. People were willing to work in the ’30’s if there were jobs. Today people just live off the country. Likely a sucker’s rally up to 12,400 area on the DOW then an 80 percent loss down to the 2,500 area over the next 5 to 7 years. I simply don’t understand how even one person could be long this market.

Do you expect corporate profitability to fall by 80%? Evidence? — Garth

#110 Aussie Roy on 08.15.11 at 11:14 am

Aussie Update

In three of the cases – the US, UK and Ireland – declines in home values began 6 to 9 months prior to unemployment rising. In the other two cases – NZ and Spain – the declines in home values more or less occurred simultaneously with the rises in unemployment.

In no case did unemployment rise before home prices began falling.

http://www.macrobusiness.com.au/2011/08/unemployment-and-house-prices-revisited/

UK – London House Prices Plunge on Financial Turmoil

Asking prices in the capital dropped 3.4 percent from the previous month, when they decreased 1.4 percent, the U.K.’s biggest property website said in an e-mailed report today. Nationally, values fell 2.1 percent, a second consecutive monthly decline and the largest since December.

http://www.bloomberg.com/news/2011-08-14/london-house-prices-plunge-as-financial-turmoil-takes-its-toll.html

Not a gold nut but I do like history.

On this day, August 15th, 40 years ago, President Nixon announced the end of the Gold Standard and the end of the Bretton Woods international monetary system.

http://www.youtube.com/watch?v=iRzr1QU6K1o&feature=channel_video_title

#111 avenirv on 08.15.11 at 11:15 am

Makaya,
i think the american middle class is not competing with china but with the american companies in china.
just 2 weeks ago, GE, which payed no tax in 2010 for billions of $ profits, anounced it moves its historic first manufacturing unit to china. so NOT the chinese are building manufaturing units but the american companies moved and move them there.
big difference, it is not china’s fault. can you tell whose ?

#112 Marnic on 08.15.11 at 11:17 am

Sovereign debt is different from corporate debt. Does that elude you? — Garth

When sovereign governments bail out massively over-leveraged corporations to the tune of trillions on the “too-big-to-fail” basis, are they not simply converting corporate debt to sovereign debt? Doesn’t sound all that sustainable to me somehow.

#113 Daisy Mae on 08.15.11 at 11:20 am

“We also got news of more fat earnings – from companies like Apple, Disney and Cisco. Remember, almost 70% of corporations have surpassed profit expectations this year…”

So this is it? Profit margins are up for Apple, Disney and Cisco because they’re buying supplies/materials from each other?

Of course, I guess these same supplies/materials are being manufactured by employed workers maxed out on credit and holding toxic mortgages….

Are we ‘going to hell in a hand basket’? LOL

Love this blog!

#114 Daisy Mae on 08.15.11 at 11:34 am

Further to the ‘Bast’ comment:

The ‘Red Scorpions’ are a lower mainland gang and this was a targeted hit in Kelowna.

#115 DJH on 08.15.11 at 11:35 am

“There is no systemic financial collapse. No stockapocalypse. No bankrupt America. No depression. No 2008. Fear and greed will continue to spin, but no news there.”

Sounds like it’s time to forget about the usual doom and gloom on this website and consider purchasing a house. Ten years from now prices will be much higher.

And you base that on what? — Garth

#116 realitybytes on 08.15.11 at 12:02 pm

“…the next few years will not be about making money, it will be about attempting to preserve the wealth you already have.

Which is exactly what I have been showing you. — Garth”

You know, GT chooses his words carefully, despite his cutting and abrupt style.

The main thing the doomers have wrong is the timeline. Things are changing very quickly from a historical perspective. However, the change can seem slow from the frenetic perceptions of those living in the present.

People over-react to the cracks in the foundation. Life will go on in the palace for a long time.

I think we (as a society), are in for a long bumpy decline, but I agree with what Garth has said previously…to paraphrase… none of us reading this today will be around to witness any wholesale systemic collapse.

No point building a bunker, unless maybe it’s for your great grandkids, or you’re allergic to sunlight.

In the mean-time, find ways to make money, avoid debt, and take advantage of the volatility with a balanced, practical approach… like the man says.

#117 Kilby on 08.15.11 at 12:24 pm

#100 this is wonderland.
Thanks for the Felonious Munk….Maybe all politicians and central bankers should watch it. Forwarded to everybody in my address book…………..

#118 Dubble on 08.15.11 at 12:36 pm

Garth, here is a different outlook on corporate profits. Worth a read.

http://www.oftwominds.com/blogaug11/corp-profits-doomed-8-11.html

Interesting that most of the doomers on this blog call for a disintegration of the $US, and you post an article claiming corporate profits are meaningless because the weak dollar will rise. — Garth

#119 MasterBootLicker on 08.15.11 at 12:43 pm

To put things simply. If a family with two parents both lost their jobs, maxed out all their credit cards and now are 6 months behind on their house payments. Then one of the parents went to the bank, lied on an application and was able to raise the limit on their credit card . They then proceeded to pile on the next years expenses onto that raised credit card, extending their spending spree for another 12 months. Who on this blog would be convinced that their problems had been solved and it was smooth sailing ? And who would see that they had just kicked their problems down the road for another 12 months ? Well, I just explained what the debt ceiling fiasco in the U.S has accomplished. Nothing has been solved. Corporate earnings have risen due only to inflation and massive employee layoffs in the tens of thousands . Interest rates are below 0% with rising unemployment. 8 million factor jobs have been shipped overseas in the past decade where these companies avoid paying taxes, and these jobs are replaced with either minimum wage or government employment, neither producing any economic growth. Inflation is running wild but since the fabricated government CPI excludes food and energy, their propaganda numbers keep people in the dark.
2.5 trillion in U.S QE and stimulus only created 3% GDP. Without, it would have been -1% to -3%. Now the question is in 2012 what will they do for an encore to stop GDP from going negative ? In Media there is certainly one reality that is promoted. But then there is the parallel and real reality. The economic collapse has only been extended to avoid such a negative event before a presidential election. Lets see what 2012 brings and lets see who is right. More QE, huge inflation, a shrinking economy and brush fire wars all over the middle east, calls for a new reserve currency, is what I am seeing. Why, because this is what the bankers have done over and over throughout history.

Governments are not families. Nations have the ability to set their own revenues. I know this simple myth appeals to the Tea Partiers among us, which is why they are patently dangerous. — Garth

#120 GARTH, GOVERNMENT, AND MONEY CREATION POWERS PART II on 08.15.11 at 12:49 pm

“Learn how it works. This is a false comment.” — Garth

Garth, buddy, I do know how it works; I’ve known for quite some time:

Article 18 of the “Bank of Canada Act” clearly states that our government has the power to create money to finance federal projects on a near interest-free basis.

It may, if it wishes, lend money to the provinces and municipalities as well.

But our government CHOOSES NOT to do this.

Essentially, the federal government can EITHER create its own debt-free and interest-free money OR borrow it AS debt, with interest from private banks.

The provincial and municipal governments can CHOOSE to borrow, at low interest rates, from EITHER the Bank of Canada (GCM) OR borrow from the private banking system at substantial interest rates (BCM).

AND GUESS WHAT CHOICE OUR GOVERNMENT MAKES?

You guessed it, buddy boy: Some 95% of our money is created as BCM.

The federal Finance Minister needs to direct ol’ Mark to create a larger percentage of what constitutes the money supply each year (more GCM).

Garth, why would you want it otherwise?

I can only think of one reason: Because you (most likely) make boatloads from investing in the very same private banks that are creating BCM–lending our government funds at substantial interest.

Patriotic? Hmmm.

Food for thought :)

“Article 18 of the “Bank of Canada Act” clearly states that our government has the power to create money to finance federal projects on a near interest-free basis.” Wrong. The BoC is not a federal government department nor can it create money at the behest of Parliament. The web site you copied this from is incorrect. — Garth

#121 bill on 08.15.11 at 1:15 pm

full moon or something I reckon Garth.
good blog today.

#122 Moneta on 08.15.11 at 1:33 pm

Actually, I’m not protectionnist at all and I would fully support a totally open free trade market between Europe, the US, Canada, Australia, New-Zealand, Korea, Japan and probably a few others.
——
What’s so wrong about being a protectionnist? As long as we accept the concept of countries, protectionnism is a must. That’s what nationalism is about! Just like there is good debt and bad debt, there is good protectionnism and bad.

Maybe some regions working together as a country is synergetic, but maybe it’s destructive for Canada. Maybe Canada is depassé and should not exist. Maybe on a consumer society basis it makes absolutely no sense keeping Canada together… maybe we should just go free trade and free markets and let either China or the US pick up what they want and leave the rest. Just like we do in the fruit and veggie section.

But maybe if we do this, the US will just take the oil and use Alberta as their national dump. As you can see the law of unintended consequences is real and this is why I am so sick of hearing the same simplistic memes:

Protectionnsim is bad
Free trade is good
Free markets are good
Socialism is bad
Capitalism is good

It’s not black or white out there. The question we should be asking ourselves is whether keeping Canada together still makes sense and if it does, we have to accept that there will always be costs associated with keeping a country working. This is something free traders and globalists hate and defines as a waste of money.

#123 Makaya on 08.15.11 at 1:33 pm

@avenirv
I’m not saying anything different and if you watch the interview I referred to in my first post, Goldsmith said exactly the same thing too. The multinational corporations have been the ones lobbying for free trade with China, with the sole objective of reducing their cost of labour and increasing their short term profits. They have been very successful and as Garth keep pointing, they are now full of cash, but they are no longer investing it in America…
We have to recognize that China has been a master in exploiting the greed of western corporations. Now, some of them are starting to regret their move over there as they are now seeing Chinese grown corporations competing with them with their own technology. It was very naive to think that the local partners and technology transfers requested by the Chinese government before a western company can establish there would not backfire at some point…

I would love to hear somebody explain me how the increase of unemployment in the US is not linked with the ever increasing trade deficit with China. Below is the evolution of the trade deficit with China since 1994 and the end of the Uruguay round of negotiations on GATT.
(in million $)
1994 -29,505
1995 -33,790
1996 -39,520
1997 -49,696
1998 -56,927
1999 -68,677
2000 -83,833
2001 -83,096
2002 -103,065
2003 -124,068
2004 -162,254
2005 -202,278
2006 -234,101
2007 -258,506
2008 -268,040
2009 -226,877
2010 -273,063

The surplus of $273 billions of products China sold to the US have been manufactured by plants in China that employs millions of workers (good for them!). Where do these products were coming from before?

As I said in my previous posts, these jobs are gone, the world is now a much different place it used to be 20 years ago. We can still believe that we’ll get out of this mess by printing more money, or get ourselves into more debt. Or we can stop being naive and start protecting what’s left of our industries before we’ve lost them all.

The only long term solution is coming back to a good producing economy. And the only way to do that is to:
– protect our economies from China, which has an unlimited supply of cheap labour we would never be able to compete with.
OR
– force China to let its currency to float freely and stop manipulating it, force them to respect intellectual property, copyrights, patents, etc. and force them to provide the same access to its market as they enjoy in Western countries.

Here is an article from 2007 of trade barriers in China. As anything changed since then?
http://www.nytimes.com/2007/03/29/business/worldbusiness/29iht-lavin.1.5070188.html

One way or another, we have to defend our economies…

#124 DJH on 08.15.11 at 1:36 pm

“There is no systemic financial collapse. No stockapocalypse. No bankrupt America. No depression. No 2008. Fear and greed will continue to spin, but no news there.”

Sounds like it’s time to forget about the usual doom and gloom on this website and consider purchasing a house. Ten years from now prices will be much higher.

And you base that on what? — Garth

I base that on confidence in the USA and Canada. We’re smart, industrious, competitive and the best the world has to offer. We will do well in the future.

#125 Smoking Man on 08.15.11 at 1:36 pm

Garth said
“And speaking of politics, the Republican-Tea Party masses just confirmed their collective nutbar status”

See Garth this is why your forecasts are always off. You don’t look at or try and understand the herds brain.

Labelling Tea Party folks as nut bars , may feel good and keep you out of dodo when attending cocktail parties with the higher ups on the food chain, but they are a force and growing. Whether they are logical or not, is irrelevant. Because of their growing popularity their un conventional ideas is why I am so bullish on Canada, big money fears them, that fear will translate into huge American pools of capital bombarding Canadian shores… .driving up bonds, and sending yields to the cold cellar.

#126 EdmontonJim on 08.15.11 at 1:51 pm

‘The wealth that disappeared between 2005 and 2010 was virtual (or paper) wealth’ – wrong, actually. These folks worked hard and invested in their houses. A market freefall wiped that equity away. You are a protectionist, without doubt, and the erection of more trade barriers, along with government austerity, helped turn deflation into the Great Depression. No solution. — Garth

Wealth should be measured in quality of life and consumption, rather than dollars and production – which is potential wealth only.
When things are consumed, but not produced in equal measure, this results in a net loss of wealth. Likewise if things are produced, but never enjoyed, they shouldn’t count as wealth.
2008 destroyed wealth in some very real and scary ways as follows:
– Banks began to approve debts that were beyond the debtors ability to pay back – that is they approved the consumption of wealth beyond the capacity of production. (I’d call this ‘bad debt’)
– The resulting loss of general wealth spurred higher prices and more bad debt.
– The rising prices, combined with human greed, induced people into investing their production into these rising assets, and even promising future production into these assets.
– This glut in production of certain assets resulted in a surplus of production that would never be consumed, (I’d call this wasted production)
– Meanwhile, banks were sapping wealth through interest payments, people started to realise that they had sacrificed other types of wealth for one type, and wanted out. Bad debts began to default.
– Banks, realising this, aggressivly marketed bad debts as “wealth”, and people traded the future wealth promised to them for worthless scraps of paper. This is fraud.
– When people realised the products sold by the banks were worthless, and stockholders realised the assets of the bank were overstated, they cried foul. Some banks took the money and ran (went bankrupt), or cried to the government.
– The government, feeling obligated to preserve the system to prevent chaos, bought bad debts and subsidised wasted production, sociallizing the loss in wealth.
In the end, wealth wasn’t so much ‘lost’ as it was stolen, wasted, or misplaced. People worked hard without producing wealth, bankers consumed wealth without producing any, and let others do the same, and others produced actual wealth, only to have it stolen or defrauded from them.
Don’t get me wrong, I believe banks and governments do produce wealth, by facilitating commerce and providing security. But when bankers, or anyone else, enables bad debts or wasted production, we need to realise they are stealing or destroying real wealth that people worked to create.
But I’m not preaching without presenting some solutions. There are ways to protect yourself from losing wealth, to help stop the destruction of wealth, and to feel better about yourself. Some principles to live by:
1. Be generous with your time and money. Volunteers produce more wealth than will ever be measured, and a loaf of bread is worth more to the hungry than gold. You will be paid in goodwill and self-improvement, which can never be stolen from you.
2. Do not succumb to fear and greed, and be wary of the same. Fearful people covet what they own, greedy people covet what they don’t. Both attitudes spread like disease, both destroy wealth, and both attract thieves.
3. Live within your means – this doesn’t mean spend only what you earn, it means spend LESS that you earn. Advice that was given to me is to take the surplus and build a heritage fund. These will be funds that you never intend to spend, and couldn’t care less if the funds never grow. This is a proof to yourself that you were a responsible citizen of the world – you gave more than you took. Your children can do what they want with it, but if you taught them well, they will leave it where it is, and add to it, or they’ll set up a scholarship trust in your name or something.
4. Let sustainability be your goal. Nothing lasts forever, but proper management can produce sustainable cycles and avoid painful revolutions. Change is inevitable, but it’s better to change voluntarily, than it is to be forced.
5. Decide for yourself what is valuable to you, and focus on that. Keeping up with the Joneses means letting someone else dictate your wealth. Good luck with that.
6. Lastly, don’t be a protectionist; competition determines the distribution of wealth, but it takes cooperation to produce wealth – It’s not a zero-sum game. Protectionism leads to wasted production, not wealth (but I would support sanctions against exploitation and theft).

#127 Cookie Monster on 08.15.11 at 2:03 pm

#62 City Slicker on 08.15.11 at 12:19 am

Garth, if US corporations are doing so well, why are there some many unemployed in the US and so many middle class suffering?
Doesn’t add up.

It’s called capitalism. — Garth
————-
Ouch, that is a scary comment. It’s comments like this that make me believe that the next world war fighting against socialism will be fought on both sides of the Atlantic.

To blame business for peoples suffering is a huge misunderstanding of economics and business in general and why jobs even exist in the first place.

So economic freedom and property rights are to blame for peoples suffering, they’re the evil doers?

#128 BrianT on 08.15.11 at 2:06 pm

This blog is at the point where anyone who simply points out the numbers behind the USA fiscal situation is categorized as a “doomer”, “tea partier” or simply a wingnut. Look-if the USA can somehow fix their incredible fiscal mess, Canada could easily keep a housing bubble inflated. Neither is likely, but one is miles more of a reach than the other.

#129 Cookie Monster on 08.15.11 at 2:18 pm

#79 jane54 on 08.15.11 at 5:18 am
Reading you post it seems that your graphic designer brother is not competitive, your son’s degrees are useless to earn a living and your skills as an academic are obsolete.

The situation you describe is the result of complacency due to non innovation and status quo, this is how we’ve always done it attitude. Your competition are taking your jobs and doing them cheaper because they are innovating and competing, so you’re all losing.

If you’re not saving money for society you’re wasting it. If you not building products, building infrastructure, saving energy, producing energy, growing food, adding value or making the world a better place, then you’re not contributing, you’re consuming.

If you’re paid more than you’re worth, if your contribution is costing society more than it returns, your days are numbered, and rightly so.

#130 Cookie Monster on 08.15.11 at 2:23 pm

#79 jane54 on 08.15.11 at 5:18 am
PS, I’m sure you’re all very nice and well meaning people, it’s just something to think about.

#131 maxx on 08.15.11 at 2:28 pm

#86 Robert Dudek on 08.15.11 at 7:42 am

“Carney is right, UI benefits are a form of stimulus. This money will be spent in the economy, therefore boosting aggregate demand. This leads to more jobs”

With all due respect, Carney is only marginally correct in that pronunciation. UI benefits will go to essentials like rent, cut-price food and heavily discounted goods, for the most part. There will not be a huge profit margin in that line item, only more public debt and few, if any, jobs.

As for infrastructure, yes, it is good to undertake such maintenance as required, however, it strikes me that the funds earmarked for this line item also serve the dual purpose of assuaging a stratum of society that would no doubt give full vent to their frustration, should they be out of work for long.

#132 Marnic on 08.15.11 at 2:32 pm

#127 Brian:

Come on, let’s not worry…it’s only 14 trillion or so!

#133 Kaganovich on 08.15.11 at 2:33 pm

#123 Makaya

I agree with you. Have you had a chance to read Ha-Joon Chang yet?

#134 Junius on 08.15.11 at 2:43 pm

Mark Cuban has a different perspective on “Asset Allocation” and diversification. Interesting contrary perspective:

http://blogmaverick.com/2011/01/24/wall-streets-new-lie-to-main-street-asset-allocation/

#135 jess on 08.15.11 at 2:46 pm

“the west has innovation and technology”

Are patent wars productive? So much cash spent on years of suing each other , is costly and could end up stalling innovation.

#136 Junius on 08.15.11 at 2:48 pm

#11 Smoking Man,

Re: Human nature

You said, “Garth never really acknowledge or understand there is a huge difference between the human nature in the herd south of here (most could not find Canada on an map) , and the herd in his own back yard.”

I agree with much of what you said but I do not think Canadians somehow have a different “nature” than Americans. That is part of the “It is different here” narrative that I think is hogwash.

What was different is timing. Canadian real estate historically follows the US by about 3 years. Their dip started in 2005 and our market began to slide in 2008. However the relaxation of the CMHC rules and emergency interest rates brought the Canadian market back and we saw it propel upwards in late 2009 and for 2010. Now it appears to be running out of steam as the low interest rate environment is “priced in.”

It may be that we are still waiting for our “Minsky Moment” to pop our bubble or it may just gradually slide and begin to fall if we are indeed in recession in the Fall. In any event, it is the timing of events that is different in Canada, not the nature of the people.

#137 maxx on 08.15.11 at 2:51 pm

#122 Moneta on 08.15.11 at 1:33 pm

Excellent post.

#138 Kilby on 08.15.11 at 2:52 pm

# 105 rural dude.
Interesting watching the tea party in action. The majority of them are low income, low education levels and they are the ones that will be hurt the most if the Tea Party ever got in a position of power. It seems to be their God given right to pay no taxes at all and while most of the revenue the government(s) take in appears to be poorly spent. We all have to contribute, not just the working poor and middle class. A large percentage of the people that have taken the most from our countries are the ones that feel that they should not pay to maintain them. If the Tea Party ever got into power (shudder) it would be the majority of there fervent followers that would suffer the most.

#139 Junius on 08.15.11 at 2:57 pm

#57 Kaganovich,

Roubini is making an important point. Marx has always had it correct that left alone Capitalism would highly concentrate and destroy itself. The irony of the Tea Party and much of the libertarian movement is that they are going to destroy what they seek to preserve.

There are only 2 reasons to justify capitalism. The first is it properly acts as the engine of innovation in producing better goods and services. The second is if it creates a more efficient allocation of resources.

In order to maintain and innovative and efficient economy we need proper regulation to prevent monopolistic and predatory market practices and resource allocation that ensures society as a whole benefits from the system.

Of course, the problem is that neither of these conditions are being maintained. Regulation has broken down in the financial markets and the benefits of the system are being proportioned unfairly. This is why Marx is relevant today.

#140 Harlee on 08.15.11 at 3:08 pm

Diana #95
Thank you for saying what you said in your post. You said exactly what I would say,but in a much more eloquent way than I could,so it was a pleasure to read.
It can’t be easy for Garth to have to read some of the ill-formed opinions that are posted on this site. His writings (and answers!) are appreciated though.

#141 Two-thirds on 08.15.11 at 3:17 pm

Well, it seems today is “tin-foil-hat” day here, so here is my contribution to it:

The mess we have gotten ourselves into will be solved, sometime in the future, by making money obsolete.

Currencies will disappear, being replaced by biometric-linked “credits” that will have identical value, anywhere in the globe.

No more banks, no more cash. Equality for all men.

Bliss.

Except for the one-world government that will have control over credits and by extension, our lives.

That’s a comfort. — Garth

#142 Bill Gable on 08.15.11 at 3:24 pm

Mish had a a scary stat for you today.

I am always harping about leverage.

Try this on for size –

Over to Mish ” BNP Paribas leveraged 27:1

Jean-Pierre Chevallier reports on his Business économiste monétariste béhavioriste blog, that BNP Paribas leveraged: 27!.

The real leverage of BNP Paribas is … 27.2!

Indeed, the French bank counts in its equity item 2: Undated Super Subordinated Notes eligible as Tier 1 capital which are actually a form of liabilities related interests subject to some conditions.
Chevallier posts a series of graphs taken from consolidated financial statements to support his claim.

Société Générale Leveraged 50:1

Yesterday Chevallier reported Société Générale leveraged: 50!
The real leverage of Société Générale is… 50!

Indeed, the French bank counts in its equity item 2: Equity instruments and associated reserves which are actually different forms of liabilities related interests subject to some conditions.

Equity published in item 1: Sub-total equity, Group share should be reduced by Equity instruments and associated reserves (item 2) to determine the true equity at fair value (item 3) i.e. 22,535 billion of euros.

Total liabilities are equal to total assets (item 4) less the true equity at fair value (item 3): 1,135.473 billion of euros.

So, the leverage is the ratio of total liabilities on equity: 50.4 i.e. a Tier ratio at 2.0%.

Société Générale did not respect the rules of prudential borrowing as they were defined by Alan Greenspan.
As above, Chevallier posts a series of graphs taken from consolidated financial statements to support his claim.

Blaming the Shorts

What did officials do in the wake of share price collapse? You should know the answer, blame the shorts!” –

http://tinyurl.com/3vwqham

#143 Junius on 08.15.11 at 3:25 pm

Great chart on house values per square foot in the US. Note that the top end is $400.00 per square foot. Quite the comparison with Canada – note the homes and condos in my Vancouver area list between $500-1,000 per square foot.

ttp://www.creditsesame.com/blog/how-much-hous-can-you-buy/

#144 Junius on 08.15.11 at 3:28 pm

#135 jess,

Agreed. The patent system is a mess. It is now used to thwart more innovation than it protects. Yet another example of how we have allowed larger companies to game the system instead of forcing them to create better products.

#145 Junius on 08.15.11 at 3:29 pm

#122 Moneta,

Good post. Not said enough. I am also tired of this black and white view of the world. Some days it feels like everyone watches Fox News and has lost the ability to think.

#146 munch on 08.15.11 at 3:29 pm

Garth

Sorry to say it, but you’re in for a big surpise, when you go down to the wood tonight.

But, keep up the good work nonetheless

Regards

Munch the Great

#147 Junius on 08.15.11 at 3:32 pm

#62 City Slicker,

For an interesting view on what has happened to the middle class or more how our current corporations are failing us see this from the Washington Post:

http://www.washingtonpost.com/business/economy/steven-pearlstein-blame-for-financial-mess-starts-with-the-corporate-lobby/2011/08/08/gIQA3zMlDJ_story.html

#148 BC Bring Cash on 08.15.11 at 3:33 pm

Canadians should look to Ireland to see what we are about to experience in our Real Estates bubble about to pop. Very similar circumstances. Record level of consumer debt for example.
http://theautomaticearth.blogspot.com/2010/08/bubble-case-studies-ireland-and-canada.html

#149 Moneta on 08.15.11 at 3:35 pm

There are only 2 reasons to justify capitalism. The first is it properly acts as the engine of innovation in producing better goods and services. The second is if it creates a more efficient allocation of resources.
——–
I’d say that’s another meme.

A huge amount of consumer products in our houses today exist thanks to NASA and other government money.

#150 SRV ES339 on 08.15.11 at 3:36 pm

Yes Garth, all is well now that Ben has committed to zero interest rates for two years, and more “accommodative” measures (QE) should market conditions warrent… yes, your money is safe in the market as long as a privately owned corporation (The Fed) is willing and able to prop up the market.

… and Gold is up $20 on the day without a bit of help from Ben… hmmmm!

#151 Blacksheep on 08.15.11 at 3:40 pm

Garth,

“The BoC is not a federal government department nor can it create money at the behest of Parliament. The web site you copied this from is incorrect “-Garth

So the BoC is like the Fed, in that if it is NOT a Federal government department, It MUST be privately owned?

Blacksheep

OMG. This blog is toxic stupid today. — Garth

#152 Jon in Cowtown on 08.15.11 at 3:41 pm

What’s really going on according to Ben Bernanke as captured in a bar:

http://mobile.theonion.com/articles/drunken-ben-bernanke-tells-everyone-at-neighborhoo,21059/?source=patrick.net&mobile=true

#153 avenirv on 08.15.11 at 3:48 pm

MasterBootLicker said:
“2.5 trillion in U.S QE and stimulus only created 3% GDP. Without, it would have been -1% to -3%. Now the question is in 2012 ”

do you say the QE and stimulus were succesful ?
practically you say the QE lifted GDP by 6% ?
this is huge….
i think obama would love you.

#154 Junius on 08.15.11 at 3:57 pm

#149 Moneta,

You said, “A huge amount of consumer products in our houses today exist thanks to NASA and other government money.”

Agreed. 100%. Gov’t also has a role to play in pure science among other things.

I begin the question from the perspective of why do we tolerate a system of private property and unequal distribution of wealth. I believe those are the primary justifications.

#155 jwkimba on 08.15.11 at 4:01 pm

If house prices are absurdly high doesn’t that mean rent is also ridiculously high?

Uhm, no because people don’t Lust over rentals. There has always been a premium to owning – you pay a little more to own, but you get to own it so it was ‘worth it’. Now the premium is double, or sometiems triple the cost to rent he same asset. Brand new condo complex has 1bed+den (650s.f.) selling for 379k. Or rent it for $1400. Eitehr way you get a brand new unit on the same building. You decide! P.S. Taxes ~300/mo, HOA ~250 to start, subject to rise rapidly.

#156 Smoking Man on 08.15.11 at 4:07 pm

Tea Party mentality…

Best way to describe it is, say you sit down for a good game of poker. Crack a few joke everybody likes you. Win a few lose a few it’s a game, still palls.

Then all of a sudden smiles on ylady luck ou and after a while youhave got everyone’s chips.
Been their done that…..

The friendship is over, they want you hide…

Tea Party is all those disgruntled opponents now wanting to change the rules, not cause the game is bad, only cause they are lossing.

And they have guns, the constitution and god on their side……..

#157 Smoking Man on 08.15.11 at 4:12 pm

Blacksheep you are so wrong

http://www.bankofcanada.ca/about/who-we-are/history/

BOC is owned by the Canadian people, unlike the private federal reserve

#158 Smoking Man on 08.15.11 at 4:18 pm

If you don’t want to read the link here is the info, stop making a fool of yourself

Constitution of a Central Bank for Canada,” became the framework for the Bank of Canada Act, which received royal assent on 3 July 1934. In March 1935, the Bank of Canada opened its doors as a privately owned institution, with shares sold to the public.

Here to stay
The first Governor of the Bank of Canada was Graham F. Towers, a thirty-seven year old Canadian who had extensive experience with the Royal Bank of Canada both in Canada and abroad. He had appeared before the Macmillan Commission on behalf of the chartered banks. He would guide the Bank for twenty years.

Soon after the Bank opened, a new government introduced an amendment to the Bank of Canada Act to nationalize the institution. In 1938, the Bank became publicly owned and remains that way today.

#159 disciple on 08.15.11 at 4:22 pm

Garth, if I may interject my vantage point:

Sovereigns are a collection of municipal, provincial and federal corporations. (Not immediately obvious, but how can you argue otherwise?) Therefore:

Sovereign governments = corporations.

And if we assume that:

Debt = Debt (Corporate bailouts are PROOF)

Therefore, for all intents and purposes:

Sovereign debt = Corporate Debt

I just proved it mathematically.

#160 GARTH, GOVERNMENT, AND MONEY CREATION POWERS PART III on 08.15.11 at 4:22 pm

“The BoC is not a federal government department nor can it create money at the behest of Parliament.” -Garth

Garth, buddy:

If you made this statement between 1934 and 1938, you would have been right.

However, in 1938, ownership of the Bank of Canada was transferred to the Canadian taxpayer. The Minister of Finance holds the entire share capital issued by the Bank. Ultimately, the Bank is owned by the people of Canada.

This info. is from the BoC’s own website:

http://www.bankofcanada.ca/about/who-we-are/

Maybe we’re talking about different financial institutions?

Food for thought :)

The elected government does not set monetary policy. Fact. — Garth

#161 Thetruth on 08.15.11 at 4:25 pm

Funny how many on this blog stopped talking about the coming RE correction and melt.

Interest rates at ZERO in the states until 2014 at the least. Canadian rates aren’t going anywhere either.

Worst case scenario in Canada now is stable prices in the major cities for the foreseeable future.

#162 Utopia on 08.15.11 at 4:34 pm

#95 Diana on 08.15.11

“Is it just me, or is the crazy out in force today?”
———————————————————
Saturday was a full moon…..Good post today Garth.

#163 Thetruth on 08.15.11 at 4:35 pm

And on Japan….

Business is so concerned with their zero growth or little above it. Why? What do you expect from a mature economy with negative population growth?? Sure Real Estate and domestic equities suffer because of the loss of population but life goes on and society there is very happy.

In Canada, if you have 1-2% population growth per year, expect 1-2% economic growth. So really, we are in the same place as Japan if you exclude the population growth. Only difference is we have massive immigration to keep up our RE prices in the cities and a stock market supported by resources, financial industry ‘monopoly’, and Garth’s cheerleading.

#164 MasterBootLicker on 08.15.11 at 4:38 pm

153 avenirv

I am simply stating that without massive money printing now and into the future this western economy is going into the tank. They are only postponing the eventual collapse and eventually will print the dollar into hyperinflation if this course is maintained

#165 Lostinthewilderness on 08.15.11 at 4:52 pm

#106 Daisy Mae,
I believe the Bacon brothers actually live in Abbotsford….

The remaing 2 brothers are currently in jail. John( killed in Kelowna) was out on bail waiting trial. Ma & Pa Bacon sold the Abbotsford family home last fall and live in Port Moody . One of the others shot( in crtical condition) in Kelowna is a full patch Hells Angel from White Rock BC a cohert of John Bacon.Interesting part of this story is anyone who has tried to commute thru Kelowna at 3 PM on a summer Sunday afternoon has got to wonder how the shooters got out of city center undeterred by our ever vigilant RCMP. SUV located 25 kil north of Kelowna burned out.Probably weren’t speeding so didn’t get pulled over in a radar trap.

#166 Nostradamus Le Mad Vlad on 08.15.11 at 4:55 pm

-
“This bears little resemblance to Christ. – Garth” — Indeed, look at the disdain the Christ treated the money changers with (scroll down a little).

Never mind. Soccer season — the EPL and others — has started again, which is far more interesting and unpredictable than any of the other BS happening here!

As far as I know, govt. debts are debts govts. owe to their citizens, and can be postponed indefinitely. Deficits, however are a different kettle of fish and should be repaid ASAP.

If I’ve messed up, please correct.

#167 Imstupid on 08.15.11 at 5:13 pm

The modern day nomad

Buy a new home live in it for 6 months to get cra off your back. While living their put deposits down on two homes closing 6 months apart from eachother and 6 months from original home. You sell the first one, move into the second while putting deposit on another. And continue live for free and have 100k cars on driveway.

I met one today. I couldn’t believe it. Wow talk about playing with fire. Even if a correction doesn’t occur this person only needs to have real-estate stall for a couple of years to be wiped out. He has deposits on 4 properties at the moment, 2.5 million total value plus home he lives in at moment, no job or savings since it is easy money. Wow…

#168 Ultraumatic on 08.15.11 at 5:39 pm

Are you seriously suggesting, Garth, that corporate greed and the offshoring of labour had nothing to do with the decline of household wealth in the US between 2005 and 2010? You also seem to have contempt for anyone who fell prey to this ultimate breakdown in the social contract between employer and employee.

It’s a wonder you ever left politics. Your unwavering belief in the pleasant smell of your own farts, not to mention the size of your gut, would allow you to fit right in with the other swine that belly up to the trough in Ottawa.

Oink, oink, asshole.

Dear blog visitors: I have quietly deleted a large number of posts similar to this today. My crime was expressing opinions which run counter to the groupthink of the conspiracy crowd. If their purpose is to convince me I have better things to do than write this blog and take their abuse, they might soon be rewarded. — Garth

#169 Cookie Monster on 08.15.11 at 5:46 pm

Kaganovich and Junius, hey Marxists know it all thieves, why not combine your millions of dollars earned running your own businesses for so many years and start buying up all the businesses that you think you know how to run better to better servie society and equalize the wealth!

What’s that? You’ve never run a business. What’s that? you’re both only university academics who only read books on theory and are completely void of any real world experience. What’s that? You’re both brainwashed mislead Marxist ideologues, freedom hating communists.

Why don’t you two geniuses go prove your theories where they’re still trying to implement them? Even Cuba has finally realized Marx was a dip shit. It’s to bad so many academics in first world countries most benefited by freedom are still so dumb and blind.

I have warned you before about purely ad hominem arguments. Do this again and you’re history. — Garth

#170 MasterBootLicker on 08.15.11 at 5:47 pm

As I stoke this saucy blog, Dow futures are ahead and commodities (including gold) lower again.-garth

How is that relevant ? The dow is trading below where it was back in 1999. Throw in inflation and its more than 40% below that level. How can a pathetic one day dow futures quote be of any use to even the most dim witted investor? The down has gone nowhere but down for the past 11 years period. Gold has gone up over 700%. Even a Central Bank planner can see this comparison.

To be accurate, Dow up 213.88 pts today. I honestly know nobody who has held an index for 13 years, so your comment is of little value. — Garth

#171 MasterBootLicker on 08.15.11 at 5:51 pm

168 Ultraumatic
Yes, your post is uncalled for and a distortion of the truth here. Pleasant, now how can you be so misleading.

#172 Kaganovich on 08.15.11 at 5:54 pm

139 Junius

Agreed. But we’ll see how well the system makes out with dwindling oil resources and frontiers, not to mention the glaring lack of trust busting and extreme wealth inequalities like you said. Economic stagnation and social unrest is what I expect. Have you read much John Bellamy Foster?

#173 Cookie Monster on 08.15.11 at 5:56 pm

Junius, Marxist supporters are jealous losers who have never accomplished anything in their lives by the power of their own mind, dedication or freewill, they are weak minded dependents who wine about the inequalities of life only wanting to destroy the creators of wealth, the businessmen, the industrial enterprises for reasons of pure jealousy.

Marxists want to punish the successful people because they’re successful. It’s a sick mentality that stems from another metal sickness of mysticism, a total disconnect from what’s real, a lust for suffering and punishment of the good, a desire to see everybody equally shabby and down trodden. It’s a pathetic sick mentality.

#174 arctodus on 08.15.11 at 6:04 pm

http://ourfiniteworld.com/2011/08/08/fall-of-the-soviet-union-implications-for-today/

Ya’ll keep thinking that Garth (and various minions)

Please keep the vodka imbibment to a minimum in the future (so that you can observe just how wrong you have been)

I do enjoy the various posts despite my cynicism.

#175 Markey on 08.15.11 at 6:14 pm

Warnings of the housing bubble are hitting the mainstream media. Two articles today in MacLeans and in Moneyville. See http://www2.macleans.ca/2011/08/15/this-may-get-ugly/ and http://www.moneyville.ca/article/1037949–how-long-can-home-prices-keep-rising .

#176 Ultraumatic on 08.15.11 at 6:19 pm

DELETED

#177 Kaganovich on 08.15.11 at 6:24 pm

169 Cookie Monster

Your comment sounds desperate. I run a business and haven’t been involved in academia for almost a decade. Taxation and regulation would do a far better job of equalizing wealth than Junius and I buying up firms to run them IMO. Communism was never about hating freedom according to what Marx published, it was a about an economic sphere constituted by a free association of producers, summed up in spirit by the motto ‘From each according to ability, to each according to need’. That these noble ideas were butchered and smeared by Stalin et al. is by no means a disqualification of them. I have read some Hayek and Rand, but I find some of their ideas distasteful and uncivilized, especially the unadulterated worship of traders. Anyways, everyone on the blog knows you are a free market zealot, and I, like the rest, am okay with that…but, as Garth has pointed out, your ad hominem attacks only reveal you to be thin-skinned and easily threatened. Perhaps the force of Marx’s writings had an impact on you in your early days? I don’t know, of course, but even the most conservative of my interlocutors that have read Marx can appreciate the significance of his ideas despite their disagreements with them. Thomas Frank had an interesting article entitled ‘The Age of Enron’ in the August edition of Harper’s Monthly. He makes a good case for regulation. It may provide a reasonable counterpoint to your ideas without mentioning Marx. Or you may just get a good laugh!

#178 Cookie Monster on 08.15.11 at 6:29 pm

Seems the big government collectivists are getting worried now, they’re desperately trying to stifle Ron Paul by suppressing his outstanding second place finish in the Iowa straw poll this past weekend losing first place by only 150 votes on 4,500 to Michelle Bachman. Government shills are attacking capitalism and individual freedoms and property rights.

Nulification is a huge threat growing fast now in the USA. See the TAC – Tenth amendment center.
See http://www.tenthamendmentcenter.com/

The tenth amendment reinforces the US constitution premise that any rights not explicitly granted to the US federal government are retained by the individual states and/or the people. Nulificaiton is the states’ right to denounce and repudiate any and all unconstitutional laws passed by an overzealous federal government when they overreach their powers beyond the limits set by the constitution.
This is going to be a huge issue for the US federal government. States are going to fight back.

#179 dddd on 08.15.11 at 6:36 pm

Vancouver east true story – comm dr area – much older hse (lot value subtract 15k) went up at 799. my friend and family, who were renting the whole house (a smaller older house w zero bling) for a song at 1400.
he got the notice a week ago, already packing for the move to the burbs (kids are old enough to care)because there “is nothing available” round here in the right price range (to rent). it’s a shame nice ppl get hurt in this.
oh , and it sold for 840, virtually instantly and with perfect liquidity.
regardless of the trends of the country or region, the supply of cdn mainland LAND west of boundary road is small and 100% absolutely inelastic, and it is the thing being bid up.
House prices go up and down, a lot in vancouver city will most always be a good buy it seems. 850-860 for a 33′ east van lot – wow But thats the same thing i said for a 430k lot on kits point a while back – it’s now prob closer to 2 mil.
our plan is to replace the house w a duplex so our kid can have a chance to live in the city too. we will sell 1/2 when we no longer want to live in the city but not before.

from an east coaster who started a career in ONT and worked around the us and world, as i sit on my oceanside deck and watch the spectacular pacific sea life and perfect whitecapped mtns, i thank my lucky stars i get to live and play here daily. bpoe is a blowhard but the acronym rings true with me and lots of others (in the summer at least!)

#180 DeanB on 08.15.11 at 6:43 pm

@garth re:
>I wonder – Garth (and dawgs) – if the federal >Govt could/should act as a banker and loan money >@ 0.25% directly to provincial and local Govts to …
>
>News flash: The government is in deficit. It has no >money. — Garth

And a bank leverage 20:1 hasn’t lent out money it doesn’t have?

Can you recommend a book or website that can explain to the toxically stupid peep the concept on moola.

Money! Money! Money! Where the heck does it come from?

#181 BrianT on 08.15.11 at 6:49 pm

#122Moneta-You forgot to mention that taxation is very bad and government spending is very good.

#182 Onemorething on 08.15.11 at 6:53 pm

#175 I like this renter quote in the second article

“Oh, and next time you are at a cocktail party, being teased about renting by some debt-laden MBA or hedge-fund manager, remind the antagonist that your personal balance sheet is deleveraged, liquid and safer. That should give them pause.”

#183 Moneta on 08.15.11 at 7:08 pm

Can you recommend a book or website that can explain to the toxically stupid peep the concept on moola.
—–
You can start with the BoC website:

http://www.bankofcanada.ca/about/who-we-are/

I really like this explanation:

Special type of Crown corporation

“The Bank was founded in 1934 as a privately owned corporation. In 1938, it became a Crown corporation belonging to the federal government. Since that time, the Minister of Finance has held the entire share capital issued by the Bank. Ultimately, the Bank is owned by the people of Canada.”

Then you have:

“The Bank is not a government department and conducts its activities with considerable independence compared with most other federal institutions.”

I like the word “compared”. LOL!

http://www.bankofcanada.ca/about/faq/

But when surfing the site, keep an open mind because some of those working there don’t understand what they are doing either…

A couple of years ago, a person from the BoC gave a presentation on money to school-aged children and their parents during March break and assured us that we could never have inflation like they did during the Ming Dynasty because today they don’t print anymore… it’s all done electronically. LOL!!!

#184 TurnerNation on 08.15.11 at 7:25 pm

TD Bank to acquire MBNA Canada’s credit card portfolio

2011-08-15 08:04 ET – News Release

Mr. Tim Hockey reports
Toronto-Dominion Bank’s TD Bank Group (TD) and Bank of America Corp. have signed a definitive agreement under which TD will purchase MBNA Canada’s credit card portfolio, as well as certain other assets and liabilities. TD will pay a modest premium on an expected $8.5-billion of credit card receivables at closing.
“We are very pleased to be acquiring MBNA Canada’s credit card business. This acquisition will position TD as a top card issuer in Canada,” said Ed Clark, group president and chief executive officer, TD Bank Group. “We’ve consistently said that we will seize good opportunities that make strategic sense, fit within our risk profile and are financially attractive. This franchise brings new customers to TD, provides attractive additional options for our customers and is a great complement to our existing high-growth credit card business.”
MBNA Canada is the country’s largest MasterCard issuer. This acquisition will significantly build on TD’s existing Canadian credit card business, which has successfully grown to approximately four million active accounts. With this transaction, TD will add 1.8 million active accounts to its base.

#185 Cookie Monster on 08.15.11 at 7:26 pm

Kaganovich, I’m not thin skinned, I just like to rip on you jokers once in a while.

#186 Snowboid on 08.15.11 at 7:30 pm

121 bill…

I agree, but here in Canada the effects are always felt a bit later than the US. Or maybe it’s all those new hydro smart-meters causing brain-wave interference.

Even the regular, average ‘nutbars’ seem to have gone off the deep end.

I don’t think GT expected such a response from his lucid conclusion: “Remember. In balance and diversity, there is strength.”

I can only surmise a large number of the riders forgot when to get off and are now taking it out on the driver. It would be no surprise to see him give up and walk away.

#187 Devore on 08.15.11 at 7:39 pm

Here’s a solution for those in the US who feel they are not paying enough taxes.

#188 timo on 08.15.11 at 8:02 pm

I love your books Garth and love your blog,

but soon I might need medication. Everyone I throw out ideas and listen to what is expressed but this is getting a little weird.

funny but weird. Maybe it is time to throw up some censorship.

#189 Nostradamus Le Mad Vlad on 08.15.11 at 8:07 pm

-
Reasons “The Only victim was the Value & Reputation of the “Paper” U.S. Dollar! (Gold trades Against the Dollar)”; The Sequel POV which shows an incoming tide (RE and fiscal downturn which swamped most) in 2008, but now the tide is going out (2011 and on); 1:45 clip Paul Krugman Lost In Space (needs help fast!); Fannie Mae Up to no good.

Brownie Points? Seems mass protest may be venturing forth in other directions; Banks — Covering Their Butts and handing the leftovers to taxpayers; Economy Fading into a police state; US Social Security The math doesn’t add up; Caligula’s Economy in Florida; Silver Manipulation Break the cycle! 6:48 clip West Pasco, Fla. deepening depression; Six Companies that changed the world; Soros says EU should boot Portugal and Greece out, but why did Sarkozy force Ireland to take a second vote?

1:36 clip Alien invasion direct from CNN (so it must be true), which is designed to help the world’s economies get better. Is this planet part of a pantomime? Rioting For Fun Rebels with a clue; BART cuts off cell phones to avoid disruptions; Revolution is underway, and people are mighty pissed; NATO and US Can’t keep their hands to themselves.

Palestine Others are using under-handed methods to try and stop an independent Palestinian state; Children in US in for tough education; Smoking Pot Don’t drink and drive — Smoke Shit and Fly! Pentagon vs. Beijing New plans; Cause of Riots = Price of food.

#190 Harlee on 08.15.11 at 8:28 pm

That post at 168 reminds me what it was like being 10 years old on a schoolyard in a tough neighbourhood. Come to think of it the 10 year olds back then were a little more articulate in their insults than this post at 168 was. Just don’t get too discouraged Garth. There’s still some of us out here who appreciate your efforts.Really.
#176 DELETED ? Thank goodness!

#191 Daisy Mae on 08.15.11 at 8:29 pm

Smoking Man on 08.15.11 at 4:18 pm re: Constitution of a Central Bank for Canada.

”…became the framework for the Bank of Canada Act, which received royal assent on 3 July 1934. In March 1935, the Bank of Canada opened its doors as a privately owned institution, with shares sold to the public….”

Thanks, Smoking Man. Interesting. We can’t possibly know everything all the time…

#192 ClaudiusEmperor on 08.15.11 at 8:31 pm

Hey cookie monster,
Have you actually read ‘The Capital’ from Marx?
It is laughable that you comment on something you have not even read. Read it and then comment. The guy is much more serious economist than the helicopter ben or greenspan (intentionally lowercased here).

As for the main reason of the current crises I absolutely agree that it is the outsourcing.

The greed of the corporations and the lack of regulations (heavy taxes on outsourcing…) caused this mess. The bottom line for each corporation is profit and cost reduction. Specially in the short term ‘bonus’ culture where the management cares only about the next bonus and the next 3 months.

It started towards the end of 90-es and since then is a constant slide down. The low interest rates kept the things ‘cool’ for a while and then everything collapsed.
Having extensively researched the falls of empires in the past I am absolutely convinced in the future decline of the West. There is no reverse, the West will go down for at least another 15-20 years. Until we level as a standard of life with the East/Asia.

Or until the protectionism/self preservation instincts kicks in. The only way out of this for the remains of the middle class in the West is the protectionism, the end of free trade and the restoration of trade quotas. Non-free trade is not bad at all, it is the way to preserve our way of life, Donald Trump is absolutely correct on this one.

Downplaying the outsourcing is a great mistake and short sighted, this is the mother of all evil. This is where highly paid jobs are lost, this results in less spending and less low paid jobs as well. There is no fix for this. Period. Except the end of free trade.
A truly patriotic and free will-ed US president would do it. It will be painful, he/she probably would be assassinated.

Everything in West stores 25 years ago was made in the western countries. It was of high quality, the workers enjoyed great lifestyle. All this is gone. Forever.

What we see in London, UK is just the beginning, it is an indication of how our society is changing. Nobody, note nobody in this ‘politically correct’ age is looking at the deep roots of the problem – the declining lifestyle of the pure westerners/soon to be poorer.

‘It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness’ Karl Marx.
Remember this well.

It is not up to a journalist from CNN making millions or up to Garth Turner or the British Prime Minister to call the people on the street names, to judge them or even to try to group them by intention and believes.

It is very easy to be judgmental and very difficult to put yourself in the shoes of the others. Garth, if you were born in the London ghettoes what would be your view of the world, would you be different than the people on the London’s streets? I beg to differ.

It is our society that is causing this, the outsourcing, the TV, Lady Gaga, Facebook, the non-caring parents and politicians. It is a cancer that is spreading.

This is simply the beginning of some very interesting and very dangerous times. I personally do not envy our children and the world that we will leave them.

#193 Daystar on 08.15.11 at 8:31 pm

Hi, Garth.

You truly have attracted some nasty comments today. Its times like this that remind me personally of valuable lessons learned. Whenever I find myself under attack personally or otherwise, it means one of 2 things. Either I deserve it (we aren’t perfect, after all and humility has its place)…. or I’m right where I need to be, coming into my own true power. Many a time, I was simply attracting attention someone else wanted for themselves. I was diverting their “lime light”, as they say. Their challenges had nothing to do with me personally at all, really, it was all about them (ego tripping) and what they coveted or aspired to become for themselves.

I think back on all the greats in history who were literal masters in their field regardless of their vocation and they were always under challenge, always had others who wanted that “shot at the title”, wanted the fame, fortune, glory, status, prestige… of another and it almost always ends the same.

Those who are in over their heads before they even begin to think of challenge often have no clue as to how outclassed and outmatched they really are (whatever happened to questioning first? Seems to be a much more candid and polite start as a student of the game). Often, they serve only themselves, driven by ego more than anything. They have not learned the simple lesson, “stand for something or fall for anything”. With wills poisoned by mere self interest alone, such opponents defeat themselves before they begin and its often spotted and decided by their tone right from very start.

“Only those who have everyone’s best interests at heart have the potential to be masters at debate.” Think about just how true a statement this is for a moment and you will know with certainty why you contrast, like black and white, like fire and water to those who trash talk with nothing else to offer. Naturally, it helps to know what one is talking about in order to win a debate, but my point is that if one doesn’t have the best interests of the rest in mind (self included), one really won’t be knowledgable, having not looked for the solutions that are best for us all to begin with. Having not seeked, one does not find.

Otherwise, it helps to be positive about the outlook of the world economy as it helps one to spot opportunities but one should prepare for tough times regardless as opportunities exist there as well. I can’t see a world depression or systemic collapse happen, even if Europe went the way of the U.S. financial crisis of 06′ on but I can see the possibility of a U.S. recession and commodity slowdown and what would this do to North American markets?

Your advice is wise, Garth. Balance. Diversifcation. And it works for a good chunk of the population, but it won’t work for us all and why? Because 40% of us live from cheque to cheque. Because a further 10 to 20% or more (I’m guessing) have less than $100,000 in equity and so, there just isn’t that much to diversify. Its safe to say that well over half the population isn’t a candidate for bonds or preferreds or equities with real estate as their first entry level into investment and what will happen to them, what is their saving grace? Buying a real estate wealth trap? For many unfortunately, their solution is to die broke or near it. That is unfortunately their solution to the problem which isn’t a terrible, terrible thing as long as they don’t go hungry, or without a roof over their heads, this is Canada and we are fortunate if not with the families we were born into, the nation from which we call home.

But… for those who are have’s instead of have nots, your advice is wise Garth. Real estate is a loser now for what could be 6 or 7 years, perhaps a decade depending on whether the government allows the market to self correct or artificially stimilate it once more. One should not have all their equity in one basket, be it equities in general, bonds, ETF’s, gold, cash, real estate, you name it and you preach it well so my unsolicited advice is… keep on keeping on.

In closing, I can’t help but think of the teachings of another master (“be like water” – Bruce Lee, wups, thats not it) and it has to do with right speech. Do not lie, or gossip, or back bite, smear or defame, but do not use the truth as a form of brutal honesty (I know, I know, coming from me of all people), for our words have have the potential for great power and should not be abused.

There are really only 2 simple rules to follow when one looks at what this master had to say in his philosophy and practice concerning speech. 1)Never say anything that isn’t true or can hurt or harm someone. and 2) always try, if possible, to say it with kindness. (I cannot help but to think that understanding the laws of impermanence (change) play a dramatic, invaluable role with the second rule) Ironically, the master’s life life then and his teachings now are constantly challenged to this day.

Just for fun to readers, who am I referring to and what is the relevance relating to debates and arguments put forth in a blog such as this?

#194 Smoking Man on 08.15.11 at 8:43 pm

#193 Daystar on 08.15.11 at 8:31 pm

next time dummy down the words a bit so a simplton like can me can understand what the f you just said..

1)Never say anything that isn’t true or can hurt or harm someone. and 2) always try, if possible, to say it with kindness.

Sopken like a true tax farm slave, your brilliant writing perfect gramer means you went all the way re education system congrats.

heheheheheheheh

#195 Daisy Mae on 08.15.11 at 8:47 pm

“Dear blog visitors: I have quietly deleted a large number of posts similar to this today. My crime was expressing opinions which run counter to the groupthink of the conspiracy crowd. If their purpose is to convince me I have better things to do than write this blog and take their abuse, they might soon be rewarded. — Garth”

Tempers are running high because everyone is worried, anxious, stressed…

I’ve noticed an HUGE increase in chest pains in Emergency at our hospital among those in their forties. Worried about job security, finances, their futures — everything.

By the way, KGH was crawling with police today. Four injured Red Scorpions admitted….and one Bacon bro in the morgue.

#196 TurnerNation on 08.15.11 at 8:59 pm

Meanwhile, over at the Junior Blog:

“I am in a predicament where I don’t know exactly where to turn to for advice. My parents are in a negative financial situation. My father has a mortgage and a loan secured against their home. The mortgage has been paid, however the loan has gone into default and a legal proceding with the bank is in progress. I’m just graduating from my MSc and returning home after living away for a few years at school so much of these financial issues are news to me.

In order to fix their problems, my parents wanted to regroup both their loan and mortgage into a new morgage backed against the property. However, their credit is poor and they are unable to secure a mortgage anywhere. So what they have asked me to do is apply for a new mortgage in my name for the amount of money. So from my understanding, the property would be in my name, as would the mortgage, and my parents would continue to pay the new monthly amount althought I would ultimately be responsible for the debt”

http://forums.redflagdeals.com/help-parents-want-me-secure-new-mortgage-debt-1070336/

#197 Dan in Victoria on 08.15.11 at 9:00 pm

Hey Lorne
Most americans can’t afford a $1000 emergency.
30% of americans have zero $$ in non retirement savings.
50% of americans would struggle to come up with $2000 in a pinch.
I wonder how close we are in Canada.
I see this behavior every day in friends and relatives.
http://money.cnn.com/2011/08/10/pf/emergency_fund/

#198 Timing is Everything on 08.15.11 at 9:00 pm

If their purpose is to convince me I have better things to do than write this blog and take their abuse, they might soon be rewarded. — Garth

illegitimi non carborundum

—————————————————-
collective nutbar status … Amen, Brother.

—————————————————
Garth, just 4 U…

“Keep your stick on the ice.” – Red Green

#199 Junius on 08.15.11 at 9:05 pm

#169 Cookie Monster,

I see you are letting your ideology do your thinking for you again.

First of all, as I have stated before, I run a very successful company. I also do well financially. However I run a very disruptive business in a heavily consolidated industry. From my vantage point I see first hand that most large corporations have no interest or ability to innovate. They spend most of their time and money engaged in anti-competitive behaviour.

I have also stated that I am a capitalist but more in the Schumpeter way of believing in “creative destruction.” I also agree with Adam Smith in Moral Sentiments that we need to guard against the destructive nature of capitalism.

The comment on Marx came from the fact that Roubini had made this comment. Do you think he is a Marxist as well?

The key point is Marx predicted that capitalism would break down because the capitalists were too greedy. When you look at Rupert Murdoch you are seeing precisely what he predicted. When you look at the riots in London you also see the stress on society when people on the bottom or even in the middle feel that the system isn’t fair.

Those of us who still believe that a fair capitalist system can be created take this warning seriously. Those of you who call people names and dismiss them as misguided are our biggest problem because you are naive.

If you can still look our financial system after the break down of the past few years and claim that unfettered free market capitalism is the best system possible then you are not a thinking person. It should be obvious to everyone that we need to heed this warning and look at re-establishing trust and credibility in the system. We certainly won’t get there by giving more control to big business.

#200 Cookie Monster on 08.15.11 at 9:09 pm

#192 ClaudiusEmperor on 08.15.11 at 8:31 pm
No I’ve not read Das Kapital by Marx or his Manifest der Kommunistischen Partei (The Communist Manifesto). I’ve never read the Koran or the bible either, should I? Do you find fiction helpful? I can see from your post that you do not understand the benefits of free trade. Enough said.

#201 Devore on 08.15.11 at 9:27 pm

#199 Junius

The key point is Marx predicted that capitalism would break down because the capitalists were too greedy. When you look at Rupert Murdoch you are seeing precisely what he predicted. When you look at the riots in London you also see the stress on society when people on the bottom or even in the middle feel that the system isn’t fair.

And what exactly in the UK, where half of GDP is government spending, reminds you of the hardnosed competitive greedy capitalism Marx was talking about? Maybe they need more social programs to lift up those on the bottom.

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#203 ClaudiusEmperor on 08.15.11 at 9:54 pm

Cookie Monster #200

I am just politely noticing that you are commenting on something and somebody that you definitely have not read. I can hardly call ‘Das Kapital’ a fiction.

As for the bible I hardly recommend reading it. It teaches some moral. ‘Don’t be greedy’ is very applicable testament here. We need some moral these days to survive.

As for the ‘free’ trade: There is no such thing as free trade, free lunch, free…. free is the only the cheese in the mousetrap. It will be a free trade when the base is the same (salaries, prices,…) so the competition is just.

———————————————-
Devore#201

Significant part of the ‘government spending’ is to serve the huge debt that UK has. This goes right into the pockets of the rich.

There is some serious unemployment in UK, the riots are in the poorest areas of the cities. There is no doubt that this to some extent is due to the outsourcing by the UK companies. So the companies make money by outsourcing, then they pay little taxes, the government reduces the social programs because ‘these are difficult times’. So the poorest get screwed more and more. Vicious cycle with no end.

The politicians tend to conveniently forget that citizens of a country have some responsibilities to each other’s well being. With great power and freedom come great responsibilities. Outsourcing should be banned by a law. The companies that practice it – heavily taxed. So they would not dare it. This by the way would help great deal in preserving the technology advantage of the West. Achieved with the creativity and hard work of generations.

#204 Bottoms_Up on 08.15.11 at 9:58 pm

…they might soon be rewarded. — Garth
—————————————–
Garth, sorry to hear you’re being so abused. Those posts are disgusting and obviously meant to try and hammer you down because you’re providing a service helping Canadians that runs counter to those with vested interests in maintaining the herd mentality.

You have helped me figure out the best course of action in buying real estate, and given me hope in my financial future with ‘Money Road’.

Keep up the good work and true public service.

#205 ClaudiusEmperor on 08.15.11 at 9:59 pm

I wanted to say:

‘‘Don’t be greedy’ is a very applicable commandment from the testament here’, somehow got truncated.

#206 Cookie Monster on 08.15.11 at 10:09 pm

#199 Junius on 08.15.11 at 9:05 pm
You’re friggin kidding right? The problems in the UK are not due to free markets, they’re pulling the plug on massive amounts of social dependents, the political elite have practically destroyed their society, it has nothing to do with business and everything to do with bloated government and socialism.

The businesses that don’t innovate or compete should soon fail, so what, that’s fair. When you say they spend more of their time being anti-competitive, what do you mean? That they are braking laws, committing fraud, engaged in slander, lobbying government for rules and regulations, all in order to stifle their competitors rather than compete fairly.

The notion that greed is wrong or that greed is a trait only known by successful business men is absurd, last I checked it’s part of human nature and a basic necessity for survival. There’s nothing wrong with wanting more or wanting better to strive to improve one’s self and success as long as its done ethically. Greed does not mean immoral. Rupert Murdoch may be greedy, but he may also be immoral. Frank Stronach is also highly driven, but I’ve not know him to be immoral, quite the opposite, he’s a shining example of morality and all that is good in society, business and economics.

#207 Utopia on 08.15.11 at 10:10 pm

Dear blog visitors: I have quietly deleted a large number of posts similar to this today. My crime was expressing opinions which run counter to the group-think of the conspiracy crowd. ~~Garth.
——————————————

Sorry to hear the commentary is getting so abusive Garth. It is a real shame but perhaps not a complete surprise.

The internet and blogosphere are polluted with similar commentary and an excess of insulting remarks every day now. The same repetitive negative thought patterns keep materializing everywhere I look.

Much of seems hateful and angry but I think it is based on fear.

I can only wish those writers were just Bots (that is easier to forgive) but I suspect most are real people leaving some of the more argumentative and insulting words each day.

Few seem to be thinking for themselves anymore. More victims than participants in the conversation, they just regurgitate the usual fear-imbued nonsense that permeates much of the web lately. I would love to know the demographic of those folks who have become so obsessed with such negativity.

Perhaps it is just a sign of the times though.

When the President of the United States himself makes a major address and suggests financial collapse is imminent if certain conditions are not met by the opposition then you can only wonder where true leadership has gone.

Where is the confidence building speeches of the past where our leaders instead made calls for everyone to row together? “We can get out of this mess” they would intone if only we would pull together like a team.

Perhaps we have all just become too cynical.

Sadly, the negative message is coming right from the top and the public is taking it’s cues from the expressions of “no confidence” that are repeated there nearly daily.

The wrong signals are being sent.

So I do not think it is your daily posts that have really riled up the readers Garth. The responses are more a reflection of some very deep concerns amongst a younger population who feel disenfranchised and hopeless. They cannot see answers to our pressing and very real problems.

They do not see opportunity in loss either.

What I think is happening is more a reflection of declining sentiment and mood as the economy heads back into a recession. We have turned dark in our thinking and some are expressing that in very stark terms.

Younger people especially, having never seen hard times, seem to be feeling ripped off some how. They feel betrayed by a system that might not work for them as it did for their parents. They see that past entitlements will be eliminated and lost.

And they are justifiably angry. It is all they have known.

I went back and looked at todays article. Read it twice actually. It was a terrific posting in my opinion. Timely too and not a bad reflection of what is taking place today.

Some of the comments it elicited just seemed so mixed up though and while I objected to many there is just no time in a day to answer them all.

I wish I could say that some of them were only splitting hairs in the interpretation of what you wrote but that is not really the case. The frustration is palpable and the feelings of a lack of confidence in our collective future is overwhelming.

There seems to be a real obsession with this small group who only see negative outcomes as they combine mixed and disconnected information before weaving it into an end-of-the world apocalyptic conclusion. They connect all the wrong dots and only see hopelessness instead of opportunity.

We call them Doomer’s dismissively but perhaps we should listen to what they are saying. I think the kids are scared to be honest and only see personal losses and difficult futures as an outcome of the correction that is now underway.

In many respects they are right.

I am guessing those who are leaving some of the more hostile remarks are fairly young too. Many of them have not likely ever seen a recession and are venting from a perspective where they feel they have no input or control over the situation except by loudly voicing their concerns on blogs like this.

Your site may reflect a kind of poll of the mood in the country as our youth do not understand how these kinds of difficult times do eventually resolve themselves.

There is no doubt we live during a period of exceptional change though and therefore many of the concerns that are expressed here are quite legitimate.

Sadly though, it does not help that some Uber-negative public personalities have recently taken center stage in the media or that some popular media outlets pollute the airwaves with fear and paranoia of the future while pandering to the lowest common denominator.

The kids don’t seem to get that all recessions eventually work themselves out. They end. We survive it and move on. It is not ever an easy transition but neither does the world end as a result.

Usually there is more barking than biting. Just noise.

They kids also seem to not appreciate that there are terrific buying opportunities on the horizon and that we are living in a time when we have a once in a life-time chance to get some bargains at historical lows (it is coming everyone, so get ready…you will not regret it if you seize the moment).

The personal attacks are really disheartening though and I feel bad for you on that account as you have made a terrific contribution to the discussion over the years. Your daily comments would be missed I assure you.

Perhaps it is just the whole anonymous aspect of blogging that has created this environment of public disrespect and sadly it is manifest almost everywhere now.

I notice some sites now insist on real names.

They are acknowledging that we all still live in a real society and that writers tend to restrain their more outlandish commentary when they post as who they really are.

Not sure what the answers are here.

We do live in negative times. I would sure miss this blog if it disappeared, but to be honest Garth, I would not blame you for ending it as it has become so personal lately.

And that, sadly, would bring an end to one of the last places where some sanity still survives and basic decorum is still expected by the host.

What a loss.

#208 Daystar on 08.15.11 at 10:11 pm

#194Smoking Man on 08.15.11 at 8:43 pm

Nope! Drooped out. I spell ok ’cause I’m the DIY guy (an’ thats the hippiespeak one naturally uses to communicato’ the author of best sellers) but anytink fer u bud, I’ll ajust 4 u k.

wattch yer tone k, cause our environments produce us and regression/progretion iz a 50/50. Observe your reaction in action pic r battles yzly n spare the lefties cuz awareness is ware it begins dude.

http://www.youtube.com/watch?v=FM0Pl80Zf00&feature=fvsr

lolol, this white guy in a suit’s got the answer.

http://www.youtube.com/watch?v=YYjBQKIOb-w&feature=related

#209 Blacksheep on 08.15.11 at 10:15 pm

Responses to my post # 151
———————————————————
Garth with:

OMG. This blog is toxic stupid today. — Garth
———————————————————
Then Smok’in dude #157

Blacksheep you are so wrong

http://www.bankofcanada.ca/about/who-we-are/history/

BOC is owned by the Canadian people, unlike the private federal reserve
———————————————————
Then Smok’in dude adds #158,

If you don’t want to read the link here is the info, stop making a fool of yourself.
———————————————————
Dude,
It’s obvious you can’t spell, but I thought you could read.
Did you not see the question mark?

See, I don’t know the answer to the question, THAT’S WHY I FRIG-GEN ASKED GARTH!!!

It called humility, try it some time.
———————————————————
Garth You wrote,

“BoC is not a federal government department”

Seems reasonable enough to me if you say it’s NOT FEDERAL, to conclude its’ likely PRIVATE.

Why the names guys?
Garth I understand your trying to police YOUR blog, but you could try treating people how you wish to be treated.

take care
Blacksheep

#210 Utopia on 08.15.11 at 10:31 pm

#200 Cookie Monster to #192 Claudius Emperor….

“No, I’ve not read Das Kapital by Marx or his Manifest der Kommunistischen Partei (The Communist Manifesto). I’ve never read the Koran or the Bible either, should I?
——————————————-

Yes you should. Those, amongst many others, are required reading and offer tremendous insights into the society we live in.

Without the perspective of the genius of the past you are only left with a thin skeleton of random disconnected thinking that pervades the present.

Not that we have no good thinkers today….it is only that they get lost in the competition of the multitudes of discordant voices that infuse the media and pollute otherwise good minds.

Go and read. You will be better armed for the debate.