The bête noire

PREGNANT modified

Later this week the nation’s real estate cartel will unveil its latest stats. No mystery there. Sales flat and prices up. This is deflation at work.

Yesterday we parsed the latest data on jobs and wages. The labour participation rate is falling and so are income gains. Lots of layoffs and 1.3 million out of work. Expensive Boomers being punted for cheaper kids. More deflation.

If you have the bulk of your net worth in a house, if you lack cash reserves or have a honking big mortgage, pay attention. As I’ve been saying here for a long time, deflation is the bête noire you should lose sleep over, not the buy-now-or-buy-never trash talk of the housing industry.

It’s already happening in some places. The latest Bloomberg Markets Global Investors Poll found people are overwhelmingly worried about deflation ripping through the euro zone. Three-to-one, investors fret more about that than inflation. It’s already nailing Portugal, and in the entire 18-nation zone, inflation at just 0.7% is only a third of what the central bank is striving for.

As the Financial Times points out this week: “If low inflation were to turn into outright deflation, governments would find it much harder to manage their outstanding debts. Falling prices might also induce shoppers to delay purchases, weakening demand and threatening recession.” In response, the European central bank will probably cut interest rates to 0% and deposit rates to less than that. Money in the bank, in other words, would be penalized.

Deflation happens as demand falls or the supply of money or credit contracts. Ultimately it brings the price of goods and services lower, and wages along with them. Things cost less, but people have less money with which to acquire them. It’s the polar opposite of inflation, when incomes grow but because everything costs more, people are no better off.

In modern economic theory, inflation’s okay because it means demand is chasing supply and the economy’s growing. Deflation is bad because demand trails supply, making money more valuable but reflecting slack in the economy. So in Canada, for example, when you have 29,000 job losses in one month with reduced wage gains, despite historically low interest rates and after five years of government deficits, you have to wonder. Where’s this puppy headed?

Many will balk at my first sentences today. After all, when house prices go up, isn’t that inflationary? Sure it is, but a hallmark of deflation is that the cost of living doesn’t decrease for average people (as was pointed out in yesterday’s comment section). Houses cost more, but people are buying them with credit, not cash. That credit represents future earnings, not money generated at present. It doesn’t reflect the actual economy, but rather what people expect the future to bring (and if it doesn’t – if they lose a job – they’re screwed). Same principle for those insane 84- and 96-month car loans.

Governments are no better. Virtually every one of them in the country is currently in deficit, the political equivalent to household debt at 164% of income. Debt’s fine, if you can make the payments, and governments can always raise taxes to cover the shortfall (just look at the current Ontario Liberal election budget). But in the absence of continued economic growth (and inflation), more deficits, taxation and personal debt all spell trouble ahead. We’re pulling demand from the years to come for stuff we want to consume now, because we lack the ability to pay for it. This is why credit has exploded.

All of this debt comes with a cost. Current cash flows are consumed by monthly payments. Families owe more, make no more, and have less to spend. The local Staples down in the mall closes because of poor sales and 22 people lose their jobs. The economy dips a little, but nobody’s cost of living falls. This is how houses can cost more while the people buying them, and the community, are diminished.

Inflation and deflation are occurring at the same time. It’s a lousy combination. You pay more but earn the same, and worry about your job. On a societal level, risk is shooting higher. When most people own houses and shoulder substantial debt, while saving and investing precious little, they’re sitting ducks for trouble. Layoffs, restructurings, tax grabs, failed marriages, aging – take your pick.

Just imagine where our economy would be today without all those mortgages, car loans and government borrrowings. The bloating of credit – drawing wealth from days yet unlived – only works to bridge hard times when it’s followed by a surge of growth.

Six years after the crisis, house prices and debt have careened higher. And here we are, seriously jawing about deflation. I hope that worries you a little.

208 comments ↓

#1 Jas Girn on 05.12.14 at 6:16 pm

So true!

#2 ThanX on 05.12.14 at 6:20 pm

Thanks as always Garth for your perspective!

#3 Joe on 05.12.14 at 6:20 pm

Really I don`t see any grow….everywhere they push you to buy or take a mortgage….just to consume…..
what else we can buy…everyone has cell , iphones, cars, mortgage (almost everyone)….
We stop consume our life comes to stand….funny…
comes to the question: what is the sens of life…just economy and consumerism…?

#4 Happy Renting on 05.12.14 at 6:30 pm

Add in that all this instability induces savers to save even more (unwise to buy a new toy or go out for dinner, when you can save your dollars in case you get kicked out into the street by your employer and never find comparably-paying work again.) Another store closes, more people lose their jobs, lather, rinse, repeat. :(

#5 Nathan on 05.12.14 at 6:32 pm

“government borrrowings” eh Garth?

#6 Happy Renting on 05.12.14 at 6:36 pm

But hey, how about that market surge today? Everything I own is in the green, nice to see!

Being an investor and a shareholder (main beneficiary of all those people getting offshored/replaced with cheaper labour) is probably the brightest economic spot I see in the days ahead. Sad, because lots of people don’t have that.

#7 killaboy on 05.12.14 at 6:38 pm

What if I have no debt? Should I still be worried?

#8 Entrepreneur on 05.12.14 at 6:39 pm

Scary times, hang onto your seatbelts. Correct me if I am wrong but we have been warned to pay down our debt? That was the warning in the eighties and nineties (Reader Digest?). The debt people have won (politicians included) and have control over the savers so how can economy survive with this attitude. Cash is King and will come to the rescue but the politicians don’t understand that concept or don’t want to.

#9 takla on 05.12.14 at 6:40 pm

Ive been saying this for some time,stagflation,stagnant wage and job creation and riseing consumer costs on essentials{fuel in particular},housing,food production shortfalls due to weather and the fall in the Canadian dollar on imports.
I questioned the reasoning that the u.s “recovery” was in full swing even as the banking industry was being reflushed with printed{counterfeit} moneys.
But the banks didn’t go along and start lending these funds as the consumer is strapped,over leveraged and getting wise to the sceme!…….my next prediction is huge inflation is around the corner…get your seatbelts fastened!

#10 mike slocum on 05.12.14 at 6:49 pm

So to protect against deflation its preferreds, REITs, cash in the bank and employment..is there anything else I can do?

#11 Willy on 05.12.14 at 6:50 pm

The real question is..how long the deflation is going to last?

#12 Finally on 05.12.14 at 6:52 pm

Record high for DOW. Parked 20% of my overall equity investment in cash ready to buy if the market tanks. Is that smart?

#13 Mister Obvious on 05.12.14 at 6:52 pm

“Six years after the crisis, house prices and debt have careened higher. And here we are, seriously jawing about deflation. I hope that worries you a little.
———————————–

It worries me much more than a little. And yet, the party goes on here in sunny Vancouver.

Construction still booms everywhere, the high end restaurants are full, the Porsche and Lamborghini dealers have expanded and Nordstrom’s new store is on track to open soon in the heart of downtown.

It’s a beautiful spring day and the aloof, cold hearted denizens of my fair town seem in uncharacteristically fine spirits.

“Full steam ahead” says Captain Smith…

#14 marquis de sale on 05.12.14 at 6:54 pm

So, where do I move my diversified portfolio to combat deflation?

#15 hohoho on 05.12.14 at 6:54 pm

> … Money in the bank, in other words, would be penalized …

secure storage costs money, and it also applies to money storage. the only reason you actually get more money back is because of …… fractional reserve banking

#16 Derek R on 05.12.14 at 6:55 pm

Deflation scares me. Imagine that everything is cheaper except your debts but you have even less money to pay for anything than you do today. That’s deflation!

#17 DreaminInTechnicolour on 05.12.14 at 6:56 pm

Great post tonight. When will people start getting it ? The roof over their head that folks just bought on credit does not belong to them – it belongs to the lender and the insurer. Until the roof over their head is paid off in full- the lender and the insurer call the shots – and one better keep paying the mortgage or face having to sell if one loses their job, marriage etc. Wake up Canada – you’ve let the banks, realtors and the government’s mortgage insurer own you. It doesn’t feel as nice – when you don’t get to call the shots – does it ?

#18 kommykim on 05.12.14 at 6:59 pm

RE:And here we are, seriously jawing about deflation. I hope that worries you a little.

Not really. I’ve got bonds (For deflation) and equities (For inflation) in my balanced portfolio which I can liquidate at a moments notice.

#19 Arbutus Corridor Property Values; MLS® Home Price Index Explained; | The Resider Blog on 05.12.14 at 7:06 pm

[…] The bête noir [Greater Fool] […]

#20 DocInWaitingRoom on 05.12.14 at 7:08 pm

http://m.huffpost.com/ca/entry/5311149

Canadian consumers stressed as they have spent several years salary plus are in the hole with helocs, mortgages and rising energy costs taxes too.

Salaries reducing, jobs lost, plus more to come including interest rates.

With 3d printers now printing homes soon 10% jobs will be lost as well in construction and homes will cost less to buy.

Have fun with your newly updated granite temple show it off to your dogs.

In 10 years let me know what your energy bill is lmao

#21 Son of Ponzi on 05.12.14 at 7:09 pm

#196
Ralph
The tragedy of commons. Or community gardens.
http://www.richmond-news.com/news/friday-feature/time-to-stop-fencing-around-theft-issue-1.1054480

#22 screwed on 05.12.14 at 7:11 pm

The scenario you’re painting is exactly one of the reasons why real estate sales are strong.

Banks penalizing for deposits. Is already happening here in Canada. Banking fees are atrocious but hey, bankers need to eat too. It will get worse.

So what to do with cash? Peruse Craigslist for good quality 2nd hand items that are no depreciating as much and buy real estate.

Now don’t come with your “balanced portfolio” nonsense. If you don’t hold it you don’t own it. It’s always been the same. Now you see it, now you don’t.

Whatever I have parked or built is tangible and I can watch it rot away or trade it, share it, rent it our or have fun with it myself.

I’m also creating my own bank. Why have the cash in a place that’s charging me for the service of keeping it on a digital account sheet? Makes no sense.

The Feds and CBs need to flood main street with cash, not Wall Street. All those trillions sloshing around are not doing anything for the main street economy.

Lets get hyperinflation, blow the balance sheets to Kingdom come and pay off the debt with chickens.

That’s been done before as well. Italy ca. 1935

#23 saskatoon on 05.12.14 at 7:15 pm

hey agg,

hopefully you saw my comment from yesterday’s post–a few from the bottom.

looking forward to hearing your answer, if you can spare a few minutes.

#24 randman on 05.12.14 at 7:16 pm

Mr Obvious

Don’t forget to include that sparkly new Tesla Showroom
on Robson…..stopped in yesterday nice car at $78,000

#25 Smoking Man on 05.12.14 at 7:25 pm

Boy did I get chirped yesterday pointing out what institutional education is really all about.

I read posts from confessed teachers, none would challenge the judger of judges, the brilliant analytics of my great mind. I could not get them to take the bait, (spelling and grammar.) They’ve been around and know better than to take me on.

Real Estate is fueled by first time buyers, everyone knows it. Shut that tap off and the whole house of cards come crumbling down.

Today our first time buyers are young, obedience certificate toting idiots who’s brains have been tricked into thinking they are smart.

The skill learned, they the have mastered the yellow highlighter, memorized and regurgitated crap that they will never use in the real world.

We are all monkeys in a play, we wear costumes and play the role we have be programmed to play.

A blond walking by a construction site, her spectaculos are bouncing beautifully. The construction workers making Slurpee grunting, animal sounds as she walks by.

The suits on Bay Street watching the same sexy curves, are thinking the same thing as the construction workers but pretend she doesn’t exist.

Both sets of men have the same shit between their ears and could have easily been programed to do each other’s job.

They have been trained to act that way based on the perception they learned in school.
On Planet Mind switch, if our institutions and praised and honored the grunt, and chastised the geek. The construction worked would not notice the Blond, and the Suits on Bay street…

The world is just one big play, actors and actresses. The Stupid and smart all sharing the same brain.

Lucky for you dogs, you have a Great Smoking Man who watches it all and reports it..

#26 Trojan House on 05.12.14 at 7:25 pm

“Governments are no better. Virtually every one of them in the country is currently in deficit…” And in debt up to their eyeballs. Most of the countries in the world are in a ‘sovereign debt crisis.’ This is borrowed money they will never be able to pay back.

“But in the absence of continued economic growth (and inflation), more deficits, taxation…” The key word is taxation. When governments, in a sovereign debt crisis, run out of money, they start to raise taxes. This is also deflationary. The number one reason why they want to raid your bank account.

“Inflation and deflation are occurring at the same time…” It is called stagflation. Asset prices rises, while everything else declines.

#9 takla – you’re right about stagflation but you are completely wrong about huge inflation. Garth is right. We are heading down a deflationary tunnel. The Great Depression was deflationary, so takla, you may want to predict soup kitchen lines, etc…

#27 bob dog on 05.12.14 at 7:33 pm

As an American friend once told me. The only thing you really need to invest in is guns.

#28 sheane wallace on 05.12.14 at 7:36 pm

#12 Finally on 05.12.14 at 6:52 pm
Record high for DOW. Parked 20% of my overall equity investment in cash ready to buy if the market tanks. Is that smart?
—————————
If you are are an active trader maybe.

If you are investor don’t sell, DOW would be at 30 000 in 3-5 years, maybe sooner.

It is not that stocks are worth more, but the money /aka currencies/ worth less (to be precise 1 millionth of crack shack in To/Van).

As house prices can not fell (the whole banking system would crash along with the government) expect stellar inflation instead.

Gold is capped at this point but 5 % won’t hurt in long run.

#29 Millennial-Falcon on 05.12.14 at 7:36 pm

All is well in BC ! Lots of work to go around! the restaurants and bars are full , the lambos and Ferraris are out cruising in the sunshine. All the tradesman are out at the Roxy on the weekend living the dream! Sorry IT guys, you should go grab a hammer and join a union!

#30 sheane wallace on 05.12.14 at 7:40 pm

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

Chapter XX: Interest, Credit Expansion, The Trade Cycle, § 8 : The Monetary or Circulation Theory of the Trade Cycle

#31 Standard Deviation on 05.12.14 at 7:46 pm

This short term strategy that business is currently going through, foregoing experience for the sake of cost is widespread in Canada. This is becoming more obvious every day when dealing with companies and people who clearly have no idea how to do their job or who pays for their wages. Integrity and morality do not exist on a business plane anymore, business attitudes are increasingly moving further right than Attila the Hun, and loyalty from the workforce should dissipate totally within the next few years, which will put service into the torture chamber area and ultimately allow more robots to undertake work and customer interactions and even less people? Yet, we have Captains of industry and people in authority sucking money from the system faster than a turbo charged Dyson, all the while maintaining a sense of entitlement that belies reasonable behavior; yet expecting; nay demanding, Jane and Joe average save more, spend more, borrow more and do as they are told. Penury and servitude will prevail in the long run with this model.

I too believe this current economic model has run its course and we need something new and improved that supports more than just the bottom line and vested interests. Otherwise, society will suffer:……. history over the last 3000 years has shown the outcome time and time again.

#32 Cici on 05.12.14 at 7:47 pm

I don’t know about, but I don’t want to eat bullets.

#33 x-moose on 05.12.14 at 7:48 pm

Perhaps the problem is that people buy stuff when price goes down, as opposed to when they need it. Falling prices is in no way scary and keep borrowers honest forcing them to repay debt in full. Of course indebted governments much prefer to inflate their way out and it it far more politically convenient to raise rather than lower wages, though the former will be done quickly enough to maintain purchasing power and the former will be done way too fast to the same effect.

#34 Shawn on 05.12.14 at 7:55 pm

The Nature of Debt

I’ve tried to glean a modicum of understanding about debt… Like a lot of things it it’s good in moderation and bad in excess.

Here is my understanding gleaned from much reading and thinking on the topic.

Some individuals have always ruined themselves with debt since probably the beginning of recorded history.

In general, debt can be seen as a transfer of the right to consume or expend today in return for the obligation to pay it back later.

The rich and various savers have an excess of money or “claim-checks” on the goods and services available and they lend this to borrowers.

Some borrow to invest in a farm or business that produces a positive return over and above the interest cost and both the borrower and the lender win.

Some people borrow to consume today at the expense of consuming less in the future. Unless their wages rise this can be bad idea.

Some borrow to buy a long-lived asset like a house that offsets rent payments and which can be a reasonable thing to do as long as the debt is not excessive.

Everything that is bought on credit is actually produced today so, drawing a circle around the earth, credit encourages more consumption and production today. For the world as whole that consumption is not borrowed from the future. (One family can borrow from others to be paid back in the future, The government can borrow from its richer citizens to be paid back by tax payers of tomorrow, one country can borrow from another to be paid back in future, but it is not possible for the earth as a whole to borrow consumption from the future)

Borrowing and lending are how the economy shares from those with excess to those without, but those with the excess expect to be paid back with interest.

Most of the time it all works out well in aggregate although there is always some percent of the population that flames out on debt.

Debt cannot be labeled as automatically bad. The ability to borrow has surely increased the average quality of life and global GDP for hundreds of years now.

There is probably very few if any rich people who have not used debt in some fashion to arrive at their riches. Be it borrowing for an education or to start a business or expand a business, most rich people have used debt.

Every once in a while debt can build up too high, not only for individuals but in total and too many people start to flame out on debt and (horrors!) even the rich suffer as the debt is not paid back. This can cause a slow down in GDP and world production and consumption can fall.

#35 TurnerNation on 05.12.14 at 7:58 pm

So much for headin’ West young man.

Step aside. Robots and cheap imported workers.

http://www.cbc.ca/news/technology/canadian-farmers-invest-in-robots-to-work-smarter-not-harder-1.2639960

“Dairy farmers Gerhard and Heather Ritzema used to be tied to routine. They would milk their cows three times a day, every day, often starting before breakfast, whether the cattle were ready or not.

It meant they had to rely on a big staff if they ever needed or wanted to be somewhere else. If their two sons had an after-school event, for example, it would have been impossible for both parents to attend.

Six months ago, however, their Seaforth, Ont., farm became the latest dairy to install robotic milkers, as well “

#36 Smoking Man on 05.12.14 at 8:06 pm

Further to my earlier post.

It’s easy to unmask the all the actors.

Take 20 construction workers, 20 Bay street suits, add a few preachers and teachers into the mix.

Strip em all down to Speedo bathing suits, put em in a bar and get em all hammered.

Bring in 20 exotic dancers, and presto, you will not be able to tell who does what for a living.

The only characteristic that will be obvious will be the gents that God was gracious too, and the guys not so lucky hiding….

We’re all the same…

We just wear different costumes.

#37 Retired Boomer - WI on 05.12.14 at 8:13 pm

The US went through the housing deflation / depression, now it is your turn!

Went to an AARP retirement seminar today. Interesting.
The people at my table were all well prepared for retirement, debt free, most had a pension of some kind, as well as 401K or ROTH savings (the same as TFSA). It was not however a universal with all in the room.

One guy, whose 40 year olds had only saved about 40K for retirement, told his kids not to worry, spend it.

What kind of advice is this when US social security payments are on track to drop by 25-30% within 20 years?
Plan on that cat food diet, or die early – your choice there.

Do NOT expect “Rich People” to bailout your lack of planing, stupidity, or profligacy. Yes we can, and should raise taxes somewhat, but there is a limit.

Houses didn’t save the US population, and will probably be a millstone around many middle class Canadians as well.

No DEBT is the best debt – BY FAR!! pay it ahead, so you won’t lose your behind

#38 Beth Murray on 05.12.14 at 8:22 pm

Re: Failing CDN loonie this Friday.

Did anyone notice BNN after 5pm today trying to bluff through the fast drop in Friday’s loonie value (vs. USD) by stumbling and muttering through vague problems in the “Ukraine”? …..”yes, yes, as the Ukraine settles down so our loonie is ‘shooting back up”….nothing about our CDN unemployment information…nothing to see here…just keep walking to your job…

#39 Fix or Fall on 05.12.14 at 8:23 pm

This used to be such a positive blog. Now everyday I come here this song goes through my head.

https://www.youtube.com/watch?v=fqcn_TPu4qQ

#40 Sheane Wallace on 05.12.14 at 8:23 pm

#26 Trojan House

#9 takla – you’re right about stagflation but you are completely wrong about huge inflation. Garth is right. We are heading down a deflationary tunnel. The Great Depression was deflationary, so takla, you may want to predict soup kitchen lines, etc…
———————————————
You wish,

Deflation would be wonderful.
– Your money would be worth more tomorrow.
– Economy picks up, look at that stock market, productivity must be up!
– Unemployment is going down as well.

You are in Nirvana…

Except it is all smoke and mirrors.

It is not IF but WHEN the inflation shows up, everyone would be amazed at how high would it go.

Increasing monetary base 4 times for now with no means to reduce it has consequences.

We just have not seen them yet.

Poor Chinese and Japanese, they must have not heard that deflation is coming so these poor souls stopped buying treasury bills, stupid they.

Now Belgium would get all the benefits from the deflation/with their purchases of 50 billions+ per month!

#41 Beth Murray on 05.12.14 at 8:24 pm

Also, did I have a nightmare…or is that Saxony Court monster home for bad taste is back on the market for $1? That was the property that was auctioned twice – I think?

#42 Cici on 05.12.14 at 8:25 pm

Oops, something weird happened to my post, which was directed at you #27 Bob dog…

So here she goes again: I don’t know about you, but I certainly don’t want to eat bullets.

Guns are fun (well, not always), but let’s be practical…they’re almost as useless as gold, even if you know how to use them.

#43 Sheane Wallace on 05.12.14 at 8:28 pm

What is happening is the preparation for the currencies and debt reset.

Everyone is trying to find a better seat in the lifeboats without rocking the boat too much.

The boat will sink one way or another, it is a predicament.
And when the music stops…

#44 Freedom First on 05.12.14 at 8:30 pm

Yes, deflation got you worried? Does inflation worry you too?

Well, over the years Garth has been guiding us in how to handle our finances in a way to keep us in the best possible financially protected state at ALL times. This is whether we are experiencing the Bull markets, the Bear markets, deflationary times, inflationary times, pregnancy times, job loss times, schooling times, sabbatical times, illness times, retirement times…..etc.

Thanks for all your advice and help Garth. I love the result, as I believe the best financial offense to be a good defense(financial castration prevention), equal to having as little financial vulnerability as possible, with the most sustainable financially principled plan with the best odds possible of on growing wealth.

Lastly, [email protected] with the pleasant demeanor and engaging smile……well, hate to break it to you, she will cut your LOC, Heloc, repossess your beamer, and foreclose on your RE with a razor sharp edge and without even a backward glance as you lay bleeding on the street. Welcome to financial reality. It’s here.

#45 William of the North on 05.12.14 at 8:32 pm

You are describing currency devaluation…..plane and simple. The whole fiat currency paradigm is failing. Countries are “competitively devaluing their currency” to remain competitive in the global market. The average person sees it as a rise in consumer prices.

It’s all been done before….just not every country at once.

#46 Sheane Wallace on 05.12.14 at 8:36 pm

#42 Cici

as useless as gold..
………………………………………..
Not a gold bug, but: can I have your gold, please?
Don’t have any? Even a gold ring? I thought so.

#47 4 AM Sunrise on 05.12.14 at 8:40 pm

#40 Cici on 05.12.14 at 8:25 pm

You’re not supposed to eat the bullets, silly, you’re supposed to use that gun to steal somebody else’s food, or farm, or chickens. That’s ultimate doomer scenario, anyway. I don’t believe in it myself. Not when I hear about stories of resilience and community in dead zones like Detroit or Stockton.

#48 Frankie Reeves on 05.12.14 at 8:42 pm

IGA marketplace on Robson street in Vancouver, changed the packaged date to a best before date on meats and poultry. The date is also smaller. Just in time for bbq season… Sign of a streched food industry?

#49 Mishuko on 05.12.14 at 8:45 pm

Correct me if I’m wrong, but deflation is the decrease of money supply, increased prices of essentials (gas and food even a house?!?) and decreased cost of luxury items… Hmmm seems to me Canada is already in deflation as I see all these fancy finance/incentives to get a motor vehicle that you can barely afford.

What needs to change is the mindset that we ‘deserve’ this and that and need to earn it. Like the one day I’ll earn the italicized print of Garth. Then we can start being an economic engine of development. Such as our forte, resource gathering, but in a novel way that is sustainable all the while providing economic benefit to the backers and citizens. One day… maybe not in my life time though.

#50 Smoking Man on 05.12.14 at 8:47 pm

MH370 Solved

Former Canadian defense minister…..Speaks

So I’m going to Vegas again, the bastards want to talk me , they don’t like things in me book.

I am making a case to keep them in before publication.

http://www.dailymail.co.uk/news/article-2535698/Aliens-walk-theyre-refusing-share-technology-change-warring-polluting-ways-claims-former-Canadian-defense-minister.html

#51 takla on 05.12.14 at 8:50 pm

re trojan #23 “Takla your wrong about huge inflation”………..I prey your right Trojan!I think we are now in beginning of a deflationary bust that will eventually lead to more central bank lending{more QE}and inflation.IF the U.S dollar begins to lose its world researve status with current geo-political climate that’s when all bets are off the table

#52 Whinepegger on 05.12.14 at 8:52 pm

Garth, something that has not been mentioned at length is the effect that globalization will have on this deflation cycle. I agree that we are in a deflationary phase in regards to wages but I don’t see the corresponding drop in prices. With globalization, if North Americans are unwilling to pay the prices asked, goods will be sent offshore to a place willing to pay the going rate.
Real estate may fall in value but affordability will not become easier because wages will have fallen in lock step. Who will own RE? http://www.bloomberg.com/news/2013-04-25/blacktone-buys-atlanta-homes-in-largest-bulk-rental-trade.html
http://www.occupycorporatism.com/obama-helps-chinese-investors-purchase-us-real-estate-to-compensate-for-2008-crash/
I’m warning my young adult children to prepare themselves for a time when North America is seen globally as nothing more than a banana republic. This will not end well.

#53 Larry1 on 05.12.14 at 8:58 pm

I was more concerned with deflation when David Rosenberg was scaring people about it years ago. Now he seems to be on the other side of the argument.

Anyhow, if there is Canadian style de-leveraging it would be deflationary. Canadian Govn’t Long bonds would be a good place to be.

If deflation happens you don’t want to be a Debtor (one with a mortgage) since you will be paying back the debt in money that’s worth more today than it was yesterday. The converse it true – hence the long bond – you want to be debtee (bond owner, creditor, or bank) since you lend out and get paid back in money that’s worth more when you get paid back.

Deflation can cause negative equity to grow in RE to the point where people start walking away from their mortgages. The debt stays the same, the value of the property decreases, and the interest payments are growing in real terms. This is trouble for the banks… To fight this the GOC will do all it can – lower rates and institute QE infinity. Again, good for long bond holders.

I dunno, the risk is low I think, but there is a risk. What happens in the USA I think will trump whatever happens here in the north. In the US, I think inflation and higher rates is more probable, but I’m no economist, just a fool typing on this pathetic blog.

#54 Ben on 05.12.14 at 9:06 pm

“Falling prices might also induce shoppers to delay purchases”

Trotted straight out of their econ class. Lots of things fall in price (computers, cars, clothes) but we buy them when we think we need them.

You know why they hate deflation? Because the system we have needs constant inflation to make it tenable via a continuous soft default on fiat as a store of value.

Deflation is here to stay because the boomers are no longer young enough to qualify for credit (thank god). Hopefully prices will continue to drop and the “debt age” is dead in the water, and along with it the banks.

Also it’s called stagflation!

#55 Ronaldo on 05.12.14 at 9:08 pm

#7 Killaboy – ”What if I have no debt? Should I still be worried?”

Worrying is a waste of time and energy and it causes you to go grey early and have ulcers. Besides, 99% of what you worry about doesn’t take place and the other 1% you can’t do much about anyway. So, don’t worry, be happy.

#56 East Van on 05.12.14 at 9:12 pm

Vancouver Real Estate Doomed. Literally.

http://www.theguardian.com/environment/2014/may/12/western-antarctic-ice-sheet-collapse-has-already-begun-scientists-warn

Head for the hills.

#57 Renting in Vic on 05.12.14 at 9:14 pm

Just for fun:

http://www.cbc.ca/news/canada/british-columbia/vancouver-s-most-expensive-teardown-1.2640603

#58 pinstripe on 05.12.14 at 9:18 pm

I wonder if todays blog is referring to the financial climate in Ontario.

In Alberta there is no indication of any deflation whatsoever. Many high paying jobs available and workers are in short supply.

#59 Kris on 05.12.14 at 9:20 pm

Why is everyone saying we have a free market economy when the gov is constantly interfering with it.
I have no debt and am a saver so why am i constantly getting punished by these crooks in Ottawa.
As a saver, is there anything i can do to protect my measly quickly disappearing savings ?????

#60 Inglorious Investor on 05.12.14 at 9:24 pm

Why is deflation bad and moderate inflation good?

The reason that deflation is “bad” in today’s economy is because of the way our monetary system (and thus our entire economy is structured).

In our current system, currency units/credit get created BEFORE they are actually collateralized by real wealth. This credit becomes debt when it is spent (via credit cards) or deposited in a bank account (e.g a bank loan). Then people in the real economy must create real wealth in order to pay back the debt.

The problem is, banks create virtually all of the ‘money’ in the economy. So almost of our money is actually debt. Because money is debt, almost of our our money has interest charges attached. But the banks ALSO create the money that gets paid as interest. Therefore, in actuality, the banks create their OWN profits, which become money (collateralized) via the work of the people.

New money must be created to pay back old debts, because ALL money is debt, money must be created at an ever faster rate to service the existing debt. This is where inflation and compound interest come from.

Our system has a perpetually receding horizon, whereby the “faster” the economy grows, the farther away the horizon of debt retirement becomes. We can never generate enough wealth to retire the debt because the more wealth we create the more money the banks will create. Money always gets created faster than the economy grows. Or at least that’s the goal.

Banks like a certain target rate of inflation (e.g. 2, 3 or whatever percent) because this allows banks make profit while the economy grows as a manageable pace.

But sometimes this does not happen, and the economy sinks into deflation. For banks and most economists, deflation simply means that not enough new money is being created to service existing debts. With the banking system levered up to the sky, this represents real risk of default and even systemic collapse. Because just as money creation compounds on the way up, the destruction of money via debt default/retirement destroys money compounded on the way down.

This is why [email protected] wrote that now famous missive “Deflation: Making Sure It Doesn’t Happen Here.”

HOWEVER, if our monetary system and our economy were based on WEALTH, rather than debt, then deflation would be a GOOD thing. Because classical deflation is a symptom of a more PRODUCTIVE economy where goods become less costly via higher efficiency, thanks to things like technology and better production techniques.

Our current debt money system does not create wealth. IT WASTES IT!

There is nothing wrong with credit, loans and debt. But if loans were based on existing wealth rather than future wealth, then the money that gets lent out would be REAL actual money, the value of money would be stable, and we the people would not be constantly trying to catch a horizon that recedes faster the faster we chase it.

#61 Ben on 05.12.14 at 9:28 pm

Inglorious investor has it nailed. The end can’t come soon enough, bring it on. Not that it will as these psychos will just pump credit harder.

#62 DR on 05.12.14 at 9:30 pm

Leslieville row house. 951K. 14 feet wide. Did that just really happen

#63 Ben on 05.12.14 at 9:30 pm

Mishuko – you don’t get Garth in italics when you do a good post. You gotta hit the sweet spot somewhere between him considering you unworthy of reply and feeling sorry for you because you are dumb. :-)

#64 Abin Batince on 05.12.14 at 9:32 pm

Dear Gartholomew, don’t want to be a grammar nazi but “Bête noir” should be “Bête noirE”.

And great post as usual!

#65 KommyKim on 05.12.14 at 9:34 pm

RE: #43 Sheane Wallace on 05.12.14 at 8:28 pm
The boat will sink one way or another, it is a predicament.
And when the music stops…

Music? I thought we were on a life boat!

#66 don on 05.12.14 at 9:39 pm

#60 INGLORIOUS INVESTOR. SO WELL SAID I COULD CRY

#67 Steve on 05.12.14 at 9:40 pm

Yesterday’s example… Find it a bit hard to believe that in IT contractors in GTA make less than full timers. Contractors charge generally a lot more per hour as they don’t get all those benefits of full timers. But at the end contractors still make more on average once everything is taking into account. The trade off is the uncertainty.
It is more likely Brad would be replaced by someone named Rohit working in India for a fraction of the cost of Brad. This is what big banks are doing. Remember RBC’s recent story? Now TD does just that. Couple of weeks ago at TD Wealth IT department internally they announced that IT support contractors will be replaced by guys working in India through Tata Consultancy Services. Plus for new software development they would also hire a team through Tata Consultancy Services. Banks make huge money, are subsidized by taxpayers (ex. CHMC), and still refuse to contribute to the economy by hiring more local people (both full time and contractors). That’s the problem.

#68 crowdedelevatorfartz on 05.12.14 at 9:45 pm

@#11 Willy
How long will deflation last?

It depends on the govt in charge of the money.

Japan’s been dealing with deflation for about 20 years……….

#69 sheane wallace on 05.12.14 at 9:45 pm

#65 KommyKim

The music did in fact play while Titanic was sinking.
When it stopped.. You know why…

# 60 Inglorious investor is absolutely correct.
This is why credit money are doomed and real money and wealth are the future. Future in which money can not be created out of nothing.

#70 Mr Reality on 05.12.14 at 9:49 pm

When the children of the boomers are not replacing themselves…….deflation

Its amazing how Japan for the past 20 years has been the template for a number of Western countries and very few people see it.

Mr. R.

#71 sheane wallace on 05.12.14 at 9:52 pm

#68 crowdedelevatorfartz on 05.12.14 at 9:45 pm
@#11 Willy
How long will deflation last?

It depends on the govt in charge of the money.

Japan’s been dealing with deflation for about 20 years………
……………………………………

By drowning in debt while maintaining large trade surpluses.

Now Japan is a bug in a search of a windshield, they will be the first to crash/dept 220 % of gdp….

We don’t have their time window though as we are far less productive, have not trade surplus but deficit and are steadily loosing highly paid jobs. The fun will hit in 3-5 years.

#72 crowdedelevatorfartz on 05.12.14 at 9:55 pm

@#65 KommyKin

“Music? I thought we were on a lifeboat?”

+++++++++++++++++++++++++++++++++
You havent seen the movie “Titanic”? The music stopped when the ship tipped verticle and then plunged to the “deeps” as the Newfies would say.

The lucky ones were in the lifeboats………

#73 Old Man on 05.12.14 at 9:55 pm

Anyone have a pet dog? Caesar could care less as they soon will become 2nd rate under the Quanto’s Law. He is proposing legislature for all his jackboot dogs who are in service to the military and police. Anyone who harms his dogs will face 6 months to 5 years in prison; he is reforming again! ” Its no wonder that truth is stranger than fiction. Fiction has to make sense. ”

– Mark Twain

#74 sheane wallace on 05.12.14 at 10:06 pm

#67 Steve

It could be fixed very easy. Canadians could withdraw their savings from the top job outsourcing banks.

It is that simple.

#75 OttawaMike on 05.12.14 at 10:07 pm

Good chart here on Cnd debt :

http://www.huffingtonpost.ca/2014/05/12/stressed-consumers-canada-target-moodys_n_5311149.html?utm_hp_ref=canada-business

Posting this link Saves Aggregator some time doing what he loves, making charts.

#76 Shawn on 05.12.14 at 10:07 pm

Writer Worried About Debt

A very famous writer recently worried about debt. He wrote:

The progress of the enormous debts which at present oppress and will in the long-rum probably ruin, all the great Nations of Europe has been pretty uniform. Nations, like private men, have generally begun to borrow upon what may be called personal credit, without assigning or mortgaging any particular fund for the payment of the debt; and when this resource has failed them, they have gone on to borrow upon assignments or mortgages of particular funds.

And who is this writer who worries that the countries of Europe are headed for financial ruin? It’s Adam Smith. And how recent did he write this? In a book published in 1776.

And is it any less worry today?

#77 45north on 05.12.14 at 10:08 pm

governments can always raise taxes to cover the shortfall (just look at the current Ontario Liberal election budget)

well they can always raise taxes but there is no guarantee that revenues will also rise. People and companies with money have options like voting with their feet. The guy in Woodbridge with a $400,000 mortgage doesn’t! Hudak doesn’t have a clue, he says he’s going to reduce the deficit but promises that it isn’t going to hurt. He needs to take some risks – like announce specific programs that will be cut – that way if he actually gets elected he can actually do something.

Freedom First : [email protected] with the pleasant demeanor and engaging smile……well, hate to break it to you, she will cut your LOC, Heloc, repossess your beamer, and foreclose on your RE with a razor sharp edge and without even a backward glance as you lay bleeding on the street.

pretty funny

I don’t think that the banks collectively have a clue about who they will be in case of deflation. Who they will damn well have to be. In the US, there have been many many foreclosure moratoriums. Mark Hanson says they have hurt the supply of houses and the people that live in them but they (the moratoriums) have pretty well run their course.

#78 Two-thirds on 05.12.14 at 10:10 pm

Deflation. Back on the menu.

Loaded the portfolio some months ago with REITs, prefs, and bonds. Plus a few equity ETFs that are now near highs – Perhaps it is time to sell in May and go away – for the US and Canada equities at least…

Another canary in the coalmine is the almost uniform rush for luxury carmakers to introduce “entry-level luxury” vehicles. M-B, Audi, BMW, etc. they now have (or will soon offer) small, sub-$35k machines, with laughable lease rates – think $350/month, maintenance included.

Although China’s specific market demands undoubtedly play a role in this trend, in North America, these econo-luxe offerings were unthinkable pre-2008 – why would the rich want to “buy” a $30k small car? CLA, really? Not long ago while traveling in Mexico I saw a couple of Audi A1s!!! The A3 is coming here soon, and a Cadillac ATS can be had (leased) for $350/month. Is affordable “luxury” luxury at all?

Of course, when one considers that a Honda Civic or a Hyundai Elantra can be leased for $180/month, someone paying twice as much for their “luxe” wheels must be loaded, right?

Being rich is not what it used to be. First-world problems…

#79 Smoking on 05.12.14 at 10:11 pm

Money out of thin air, systems broken.. Bla

Is know one frightened of aliens that walk amongst us…

Might be even be posters on this pathetic blog……

#80 sheane wallace on 05.12.14 at 10:23 pm

all of the big corporations have bunch of ‘temporary’ workers from India each of them handling 10 offshore resources to do our jobs for 70 % onshore pay, 20 % offshore.

I am sure Steve’s staff will vigorously reject the accusations and Steve could even sing us ‘Let it be’, the guy is a soft soul and likes Beatles.

While our kids fresh from university stand no chance.

Stopped in Tim Horton’s on the weekend, all the staff temporary workers, it seems only american chains employ Canadians (Starbucks for example).
Well I guess I am having Starbucks from now on, it is better anyway,

#81 Shawn on 05.12.14 at 10:24 pm

Money and Credit

Inglorious Investor

I believe that the latest thinking is indeed that ALL money is credit. All of it. See Money the unauthorized Biography for example and see the links to recent Bank of England articles posted here.

So Money is debt and credit and wealth is wealth.

Money is itself not wealth but rather a claim check that can be redeemed for real wealth being goods and services and land and such.

Someone remarked that our paper money is like a gift card that can be used any place.

A gift card is an obligation of a store. As one buys something with a gift card the obligation of the store is extinguished.

Bank money which is a credit in a bank account is an obligation of the bank. As one spends money on a debit card the obligation of the bank to you is transferred from being to you to being to the store.

A $20 bill is government sanctioned thing that can be used to pay taxes. As a result it is accepted by all stores and businesses. This bit of paper that can be used to pay taxes is freely traded for face value, accepted by all. One rarely if ever actually pays taxes with paper money. Instead one pays the taxes with bank money transferring the obligation of the bank from you to the government.

Our current system of money works very well indeed. But be my guest and go off to some island and try your system of money based on real wealth (say fish). Let us know how you make out.

If you amass a stockpile of dried cod will you lend that to others without interest?

And won’t you expect to get paid back in fish to be caught in the future?

Rather than bemoaning the perceived failings of our money system one is best to focus attention on amassing wealth which is usually not money but which is measured in money.

Now, I must go and check the day’s gains from the stock market.

#82 Nemesis on 05.12.14 at 10:25 pm

#Hubris&HistoryLessons #SoSimpleEvenTheIntellectuallyChallengedCanGraspThem #FamousLastWords #ItEndedWellThatTime #FeelingLucky?

#Hubris

http://youtu.be/qhUByERf7iE

#HubrisMeetsGodzilla

http://youtu.be/DRMLFy67VEw

#ArtMocksPoliticalHubris [FreezeFrame# 04:54s for IronicContext – But, by all means, watch the whole thing, SatlyDogz. Noel would be VeryPleased,]

http://youtu.be/d6SfjD_E0WA?t=4m54s

[NoteToGT: NoelCoward would remain on LordBeaverbrook’s PunishmentList in perpetuity for that. Never mind. Noel had the last laugh as it were. I wonder what TheKinks would make of all that?… Oh. Right: http://youtu.be/gw8anpk2QsY . Sorry, AuldPol – that’s the VeryBest I can do tonight. GlobalLightning14.]

#83 Trojan House on 05.12.14 at 10:26 pm

#40 Sheane Wallace

I don’t think there will be any huge inflation, let alone hyper. Our system is such that governments will continue to try and raise taxes, or raid bank accounts, which is deflationary. Government debt will get so high that they will not be able to honour it. This is deflationary. Also, the federal gov’t are the only ones that can print money. What happens to the provinces & municipal governments? They can’t print. So, how do they pay their debts? Again, taxes raise. Once the jig is up, they collapse. Deflationary.

#60 Inglorious Investor

Unfortunately, money is not debt. Money can be anything as long as it is accepted by the people and they have confidence in it. It could be pigs if everyone accepted it and had confidence that you would accept it back. What we’re seeing here is the collapse of currency. Currency is not money.

Our system cannot be based on wealth it has to be based on productivity. How productive a people of a nation are creates wealth. Right now, governments around the world are killing productivity of its people by increasing its taxes on them. France is a good example of killing productivity by taxing pretty much everything that moves.

Also better technology and production techniques leads to job losses because usually better technology means a robot or machine can replace human beings. Ask auto workers how they feel about robots. This leads to unemployment which leads to less spending, which leads to companies having to reduce their prices, which leads to more unemployment, which leads to lower prices, more unemployment, less spending…

However, I do agree with you that the system does not work and needs to be changed. But who’s gonna do it? Today’s career politicians? Forget it. They’re too busy drinking from the trough to give a crap about you and me. All they are worried about is getting re-elected so they will promise just about anything to get there. No, unfortunately, the system will collapse before anyone gets it and there’ll be a lot o’hurtin people.

#84 John on 05.12.14 at 10:28 pm

Thanks for your work, Garth.

Do you think the increasing gap between rich and poor has something to do with deflation? The money in the system is moving only towards the rich, I mean only the super rich. If middle class has no more disposable income, the sales will be affected.

I agree house prices have a play part to play in the misfortunes and bad decisions taken by a lot of people. However, this story is not only about Canada. A lot of people including prudent savers are been taken to the dryer by governmental policies.

Disclosure, not a fan of NDP policies either.

#85 Martin on 05.12.14 at 10:28 pm

So, If we are headed or are in deflationary times why in the heck do we need that god damn balanced portofolio and carry risk even if minimal. Just keeping cold cash should be the strategy for the time being.

Income, diversification and growth. — Garth

#86 For those about to flop... on 05.12.14 at 10:36 pm

#57 just for fun .
Would you believe that I am currently working on a house that a developer paid 4.1 million to bulldoze it and build a new house .Things are that f$&ked up in Vancouver !

#87 For those about to flop... on 05.12.14 at 10:44 pm

#59 Kris .
I am just like you I have no debt and try to be a good saver but I feel like I,m missing out in life because I don’t use credit to get ahead in life .
I feel like I should be rewarded for staying out of debt and saving ,not being punished .

#88 Bottoms_Up on 05.12.14 at 10:45 pm

Small gas station owner in a suburb of Ottawa dropped the price today to 1.09 (about what we were paying a year ago)….line ups, street shuts down, people can’t get to neighbouring strip malls etc.

People are mad, and in dire straights, if they need to go through hell to save $10 on gas:

http://www.ottawacitizen.com/News/ottawa/Ottawa+station+owner+lowers+prices+send+message/9831854/story.html

#89 Bottoms_Up on 05.12.14 at 10:47 pm

#79 John on 05.12.14 at 10:28 pm
————————————–
You said it, the middle class is the lube that keeps the economic engine turning, and the middle class is tapped out….

#90 Joe2.0 on 05.12.14 at 10:54 pm

Mid Sept 2015 is when it hits the fan.
Remember my words.
Downsize and reassess what really matters.

#91 Romeo Jordan on 05.12.14 at 10:57 pm

Westside of Vancouver is getting flooded with fresh For Sale signs.

#92 shawn on 05.12.14 at 11:06 pm

Withdraw Money From Bad Banks?

Sheane Wallace says we can teach banks a lesson about outsourceing jobs:

Canadians could withdraw their savings from the top job outsourcing banks.

*******************************************
Sure and why not withdraw from all banks that beave badly. that is all of them right.

Okay, you first Sheane. Take out all your money and take it home. Give up the convenience of debit cards and cheques.

P.S. what is your address and how much will you have on hand when the burglar stops by?

#93 saskatoon on 05.12.14 at 11:17 pm

#60 Inglorious Investor

“But the banks ALSO create the money that gets paid as interest. Therefore, in actuality, the banks create their OWN profits, which become money (collateralized) via the work of the people.”

Isn’t it the case that there isn’t enough money in the world to “pay back” all existing debt, PLUS interest?

Essentially, “bankruptcy” is systemic, and necessary?

P.S. Nice comment, by the way.

#94 TheCatFoodLady on 05.12.14 at 11:28 pm

Maybe the scariest aspect of all this is not really having a firm sense of where this is all heading. It’s often hard enough figuring out our own personal road maps, which tend to change as our life circumstances change; but when we don’t feel we have a larger scale template within which to set our own planning – yikes!

If we read any amount of history, we know this is far from the first time we’ve been on the edge of various razors without a balancing pole – human history follows cycles. Not a one of us here can ‘save the world’. The best we can do is see to our own future well being & try not to become a burden on those coming behind us.

Like it or not, taxes will rise, commodity prices will cycle & job markets move, disappear, change – it is what it is. It’s always been a dynamic world; I just wish it wasn’t quite so fast moving – but that’s more a function of my age than anything else. For our kids? Prepare them for a world of constant, fast paced change as best we can & trust me, most are more aware of that than we give them credit for being. The other big thing is teaching them fiscal basics. We can’t force them to follow fundamentals but we can make sure they know them.

For we older types now finding ourselves childfree, debt free or almost & still maintaining reasonable health – time to seize the day! And you don’t have to mortgage the farm to go to Bora Bora to find heaven on earth. Open your eyes – we live in one of the most stunning countries in the world & we’re surrounded by awesomeness many people envy & will pay a pretty penny to enjoy.

Friday morning, I spent $10.05 on some fresh buns, fruit & salad – money I would have spent on food anyway. The Main Squeeze & I wrestled our trusty steeds downstairs & had An Adventure. 6 km. of leisurely biking brought us from the Limestone City to the granite of the very edge of the Canadian Shield at the Kingston Mills lock station.

The locks aren’t open yet – we had the place to ourselves – a private heritage site for the day – how cool is that? We watched water roaring through a hydro intake & over a waterfall. We saw salmon & carp trying to get up the falls. We shivered at the dark gorge; the water looked scary & fast. We scoped out fishing sites.

We spent an hour or more slowly climbing through a wooded trail at the edge of the gorge. We ended up on top of a stunning granite ridge – just us, the mosses & wild flowers & pine trees & overhead – a dozen or more lazily circling hawks.

For several precious, completely carefree hours, we were King & Queen of our own little, perfect world. No money, but no worries & no debt. No money – monthly cash flow is always tighter than a duck’s butt but we have our cushion for later & we have room to handle both inflationary & deflationary pressures.

Next morning, we went fishing nearby – I finally decided to get a fishing licence after years of watching The Main Squeeze fish. Up at 0430 & lines hit the water by 0600. Watching a sunrise by a riverbank while listening to bird song? Felt like we were in our own little kingdom again. It took me five hours but I caught my first fish – okay, a half pound mud cat but I felt like I’d landed a 40 lb. musky. Remembered why I’d liked fishing as a small tyke. Again, save for the cost of my licence & an hour spent rounding up worms outside – completely free.

The sense of peace & freedom – priceless.

#95 Victor V on 05.12.14 at 11:35 pm

Check out the facebook comments following this Toronto Life post about another bidding war in the city.

https://www.facebook.com/torontolife/posts/10152019458135213

Can’t make this stuff up.

#96 StatsFreak on 05.12.14 at 11:41 pm

So what does a person do with a bunch of cash during deflationary times? Will cash still be king? or should I own raw land or something out in the boonies?

#97 Somble on 05.12.14 at 11:41 pm

Yes, houses these days are purchased with cash, so there is not so much borrowing from the bank. It is the influx of these rich immigrants who can afford houses in Toronto.

#98 Happy Renting on 05.12.14 at 11:41 pm

#67 Steve on 05.12.14 at 9:40 pm

Sounds like the trend finally hit I.T. Contractors used to be paid more than full-time employees due to lack of stability, benefits, and the often short-term nature of their contract. Since the GFC (or even before?), contractors now take similar (or lower) pay than employees, no compensation for the instability, lack of benefits, short-term nature of the work. The labour market is tough and companies are squeezing payroll. Unless you’re in an in-demand area, you take what’s on offer because if you don’t, there are 10 other desperate job seekers who will. It’s a sign of how things are getting worse and worse for the average employee.

#99 Tony from Calgary on 05.12.14 at 11:50 pm

Inflation and deflation cannot occur at the same time:

Inflation = either money/credit supply and/or velocity is increasing while goods are stagnating, money/credit supply and/or credit is stagnating while goods are decreasing, or money/credit supply and/or velocity is increasing while goods are decreasing.

Deflation = either money/credit supply and/or velocity is decreasing while goods are stagnating, money/credit supply and/or velocity is stagnating while goods increase, or money/credit supply and/or velocity is decreasing while goods increase.

When you aggregate all the money/credit supply and/or velocity within an economy against all the goods created/consumed in said economy, you’ll get one of the above outcomes. Period.

Don’t confuse people by suggesting they’re happening simultaneously – they’re not. Prices may be increasing (“inflating” if you must – a stupid and confusing way to explain price fluctuation), but we are moving towards an overall trend of deflation where credit will become unavailable, prices will fall, but wages and *purchasing power* will fall faster.

A house that was $500k may fall to $250k (50% reduction), but if the bank will not lend you and money (i.e. issue a mortgage) and your wages have fallen drastically, that house is now likely even less affordable to you than when it was $500k. Even more insidious is that prices can still increase during deflation when whatever few dollars remaining are forced to chase scarce resources (e.g. food during a drought during a long deflationary period)… so there may be less dollars overall and lower prices on an aggregate basis, but the amount you spend on needs (food, water, electricity, etc.) may become a larger part of one’s overall budget, further making houses and today’s massive mortgages unsustainable.

I would avoid referring to changes in prices as “inflation” or “deflation”, as it is like calling a sneeze a cold; you’ve made the symptom into the illness. Check economics texts before the 80’s and you’ll see the way inflation and deflation are described are in changes in the money/credit supply and velocity of money, NOT changes in prices (which can occur regardless of money supply or velocity of money, such as changes in consumer preferences).

Lastly, perhaps you should do a blog post on what interest rates really are and why they spike during deflation Garth. Interest rates are the risk premium one is paid on the capital they have lent out. As deflation gets worse, risk of default increases (hello Greece!), and thus all the talking heads who love to assure everyone interest rates won’t be going up here in Canada because the government won’t allow it have no idea how international bond markets operate and how capitol truly flows. The Canadian government will not defend record-low interest rates when bong vigilantes are demanding record-high rates due to fear of sovereign defaults around the world while Russian/NATO as well as Japan/China tensions ratchet up further…

-TFC

#100 Cici on 05.13.14 at 12:02 am

#47 4 AM Sunrise

LOL, I know, I know…But if everyone’s stealing and firing at each other, ultimately they will be eating bullets.

Funny thing is, if we spent more time trying to help each other out instead of profiting from and exploiting each other, we’d probably be a lot better off.

I know, I know…such socialist ramblings are not appreciated on this blog ;-(

#101 Happy Renting on 05.13.14 at 12:02 am

#10 mike slocum on 05.12.14 at 6:49 pm
and
#14 marquis de sale on 05.12.14 at 6:54 pm
and
#59 Kris on 05.12.14 at 9:20 pm
and
#85 Martin on 05.12.14 at 10:28 pm

What to do with deflation on the horizon (the seven points, not the body hair thing):

http://www.greaterfool.ca/2013/12/13/choices-6/

#102 randman on 05.13.14 at 12:10 am

Inglorious investor

Brilliant…..but wasted on the sheep…..there is is no teacher quite like experience…

There is one big “experience” coming our way

#103 Saskatoon-Living on 05.13.14 at 12:12 am

Income, diversification, and growth – Garth

I hope you’re talking about slow growth stocks Garth ie: REIT’s, Utilities, or anything that acts like a bond; since inflation is slowing real growth in the US.

#104 Andrew Woburn on 05.13.14 at 12:21 am

Meet the chip that wants your job:

“neuromorphic” chips—so named because they are modeled on biological brains — designed to process
sensory data such as images and sound and to respond to changes in that data in ways not specifically
programmed…. and lead to machines that are able to understand and interact with the world in humanlike ways.

http://www.technologyreview.com/featuredstory/526506/neuromorphic-chips/

If you don’t like that idea much, we have ways to deal with you.

‘Killer robots’ to be debated at UN

“A killer robot is a fully autonomous weapon that can select and engage targets without any human intervention. They do not currently exist but advances in technology are bringing them closer to reality.”

http://www.bbc.com/news/technology-27343076

This ain’t science fiction anymore, folks. Maybe its fifteen or twenty years away but how old are your kids?

#105 Ray on 05.13.14 at 12:28 am

In reading the media we’ve been offered many dire warnings about a clear and present danger that is stalking the global economy. They are not referring to a possible looming stock or real estate bubble (they see few threats there). Nor are they talking about other usual suspects such as global warming, peak oil, the Arab Spring, sovereign defaults, the breakup of the euro, Miley Cyrus, or a nuclear Iran. Instead they are warning about the horror that could result from falling prices, otherwise known as deflation. Get the kids into the basement Mom… they just marked down Cheerios!

#106 lurker on 05.13.14 at 12:34 am

The difference this time is that we’re playing with fiat currency, not backed by anything tangible, and the biggest holders of debt are the governments who have the ability to print more.

Why wouldn’t they just inflate away their massive debts?

Also, re: inflation… we have it now, they’re just under reporting it to justify the massive devaluation of the dollar. Look at the prices of food, houses, gas etc. Purchasing power is disappearing.

You can tell things are getting rough by how many positive spin articles are being written to explain the horrible numbers. – Blame the weather.

#107 Jay Currie on 05.13.14 at 12:37 am

East Van…read the paper. Small section of Antarctica, 1000 years out, all unverified computer models…I wouldn’t panic quite yet despite MSM’s best efforts to spook you over a bunch of unproven models. Relax, buy waterfront.

#108 BCD on 05.13.14 at 12:42 am

#27 bob dog on 05.12.14 at 7:33 pm
As an American friend once told me. The only thing you really need to invest in is guns.
____________________________________________

Amen. . .but most Canadians don’t understand that. They fail to realize what a HUGE gun culture there is in Canada. If the average Canadian knew the “types” of people who own guns in Canada they’d be wanting to get their own.

As for deflation. . .bring it on. . .we have plenty of money in the bank, secure wages, and no debt. Would love to see the price of luxury goods go down and the line ups in restaurants thin out so that only the people who can afford to eat out are eating out. It’s about time the savers get some perks no matter how small.

#109 Scalgary on 05.13.14 at 12:53 am

Great post today Garth!

#110 Blacksheep on 05.13.14 at 12:57 am

“Our current system of money works very well indeed. But be my guest and go off to some island and try your system of money based on real wealth (say fish). Let us know how you make out.”

“Sure and why not withdraw from all banks that beave badly. that is all of them right. Okay, you first Sheane. Take out all your money and take it home. Give up the convenience of debit cards and cheque” “P.S. what is your address”
——————————————–
Straw man much? Your as subtle as a sledge hammer.

“For one to be effective, one must avoid the temptations of fruit that hangs low” Sun Tzu.

http://en.wikipedia.org/wiki/State-sponsored_Internet_sockpuppetry

http://en.wikipedia.org/wiki/Operation
_Earnest_Voice

#111 Onthesidelines on 05.13.14 at 1:04 am

“We’re pulling demand from the years to come for stuff we want to consume now, because we lack the ability to pay for it. This is why credit has exploded.” – Garth

A correct but painfully obvious observation, I dare say. And, I would add, rather useless without any further attempt at some sort of understanding of the route cause(s) of this globally wide-spreading phenonomenon.

You can’t fix what you don’t understand.

#112 Nemesis on 05.13.14 at 2:12 am

#JustForFun. #&History. #StrangerThanFiction.

http://youtu.be/-yyZY1aauxk

#113 deno on 05.13.14 at 2:23 am

Just another HAM story:

http://www.nytimes.com/2014/05/12/opinion/follow-the-money-china-style.html?ref=opinion

#114 Waterloo Resident on 05.13.14 at 3:11 am

Want to know WHY real estate won’t crash?
Its because idiots like the ones HERE, that’s why.

Just look at how many guys are posting things like :
Quote: “I cannot wait for homes to fall 10 to 15%, then I will swoop in and get me a bargain, my chops are watering with the thought.”

Everyone is thinking of buying on the dips, so if the prices dip just a bit, guys here go out and buy them and push the prices back up.

THAT is why prices won’t fall.
Prices will only fall once MOST of the people are like me.

This is what I say: “Who cares if prices fall or not, my rent is a heck of a lot cheaper than a mortgage and I’m saving a bundle by simply renting, plus I can follow the job market with no worries.”

Now when you begin to see people talking about how they don’t care what the prices are, how they prefer to rent for the mobility, and they love saving money by renting instead of buying, THEN that will be when prices for homes finally start to fall. Until then IDIOTS will keep the prices high.

#115 Londoner on 05.13.14 at 3:46 am

I see you didn’t post my earlier comments or answer my question. I guess we won’t get to find out why you think Canada is entering a deflationary cycle but that within 5 years that will turn around so as to accomodate a rise in interest rates.

#116 Buy? Curious? on 05.13.14 at 4:26 am

How long is this going to go on for? Not how the system manages to inflate house prices but all this discussion about factors that may or may not affect it. I mean, it’s been six years of this blog continuing to bleet on about a correction yet nothing predicted here has happened yet. “This will not end well.” Pfft. It’s stupidest line ever. For gawdsakes, people are asking Smoking Man for advice! And his answers aren’t half bad either.

If you’re renting now, you’ll probably be renting forever. It’s like my buddies who wanted to live the playboy lifestyle in their 20’s, now in their 40’s come across as creepy. Short term benefits at the expense of long term gain. When I run into one of these guys shuffling along The Path and they’ve lost their looks and are starting to let themselves go, I feel bad for them. They have no one to go home to. It’s exactly the same feeling with those that rent. “Oh, you’re moving again? Yeah, I can’t help. I’ve got to take the girls to ballet and get the BBQ ready for tonight’s 2 annual Buy? Curious? Neighbours Appreciation Night.”

I figure since I bought two years ago, my place has appreciated about 10% (conservative estimate). I won’t be selling anytime soon and when it’s paid off, I’ll rent it out and travel. I wonder how well people who decided to rent and wait out the market will do. What do you think rents will be in 10 years?

It’s easy for Garth to talk like he handing out the 10 Commandments, he’s part of the most selfish generation in human history. I’d like hear how he do it now starting from zero.

https://www.youtube.com/watch?v=rOQ8hDQZgFQ

#117 West Coast on 05.13.14 at 4:32 am

http://www.pbs.org/newshour/bb/piketty-takes-on-inequality-in-capital/
Garth…hope you are doing well…is it time for us to be reading Thomas Piketty’s book Capital in the 21st century?

#118 Londoner on 05.13.14 at 4:41 am

#44 Freedom First

Lastly, [email protected] with the pleasant demeanor and engaging smile……well, hate to break it to you, she will cut your LOC, Heloc, repossess your beamer, and foreclose on your RE with a razor sharp edge and without even a backward glance as you lay bleeding on the street. Welcome to financial reality. It’s here.
_____________________________________________

You think front line retail bank staff have any say in whether your house gets foreclosed or your car get’s repo’d? Don’t be so hard on them. They’ll be in the firing line to lose their jobs should any of what you describe happen, which btw won’t.

Canada is not in a deflationary cycle at the moment. At most it may be experiencing disinflation.

ECB considering negative deposit rates to tackle low inflation is only the start. The Central bank of any fiat monetary system will implement whatever policy it can to encourage inflation during a period of low productivity. This is their mandate.

#119 Ontario's Left Coast on 05.13.14 at 6:53 am

#36 Smoking Man

What’s all this about construction workers in Speedos? I had always assumed is was cigarettes you were smoking… Who knew?

#120 jess on 05.13.14 at 7:11 am

affuenza -shameful indeed

Ehud Olmert, ex-Israeli PM, sentenced to 6-year jail term …
http://www.cbc.ca/…/ehud-olmert-ex-israeli-pm-sentenced-to-6-year-jail-term-1.2...
46 mins ago – Ehud Olmert accepted bribes linked to a real-estate deal, court found … At the centre of the case was the Holyland housing development, .
==========================

Inside lavish Holyland, marble floors and flowing fountains
By ABE SELIG
LAST UPDATED: 04/08/2010 02:28
“Everyone who lives there is a millionaire, they’re not just ordinary people.”
http://www.jpost.com/Israel/Inside-lavish-Holyland-marble-floors-and-flowing-fountains

#121 Inglorious Investor on 05.13.14 at 7:33 am

#81 Shawn on 05.12.14 at 10:24 pm

“Our current system of money works very well indeed.”

Yes, it works very well at transferring the wealth generated by the people in the hands of the bankers, who generate none. A shame you don’t see that.

—————————-

“But be my guest and go off to some island and try your system of money based on real wealth (say fish).”

Are you serious or just offering a specious response?

Trojan Horse at #83 has it correct when he says, “How productive a people of a nation are creates wealth.” Right. Wealth comes from productivity. We the people use our creativity, inventiveness, technology, energy and work to produce goods and services. These goods and services impart value to our currency. Bankers create currency with no value. The value comes from us.

Rather than transfer our wealth to bankers who create no wealth, money should be based on wealth. Bankers should earn a fee for the value-added services they may provide. They should not be allowed to strip-mine the people because of an old scam they once set up with governments.

—————————

#93 saskatoon on 05.12.14 at 11:17 pm

“Isn’t it the case that there isn’t enough money in the world to “pay back” all existing debt, PLUS interest? Essentially, “bankruptcy” is systemic, and necessary?”

Yes. That’s correct. There is not enough money for everyone to pay back their own personal debts, so some do go bankrupt. Systemically, our monetary system is, basically, designed to destroy itself. Then they issue a new currency and start again.

———————-

Oh, gotta go check my stocks now. We all know that stocks are real assets, right? Their value comes from the surplus value of the creativity and hard work of the people who work at publicly traded companies.

#122 Detalumis on 05.13.14 at 7:39 am

Cat food lady you cannot prepare for a life of fast paced change, it’s physically impossible. I was an IT worker who lost my job to Bangalore before it came out in the media. It very likely saved my life. The workplace is so bad now that I would see 30 year olds that had the hollow eyes, depression and bad health of people 20 years older all from the horrible work environment that we expect people to work under today. I’m talking stuff like 24/7 on-call (uncompensated) and constant lack of sleep. It just ain’t possible to prepare or adapt. Kids are not a special species and youth doesn’t last all that long under those conditions.

The bank executives who do stuff like donate money to art exhibitions or put their name on hospital lobbies and refuse to hire Canadians or treat the ones they have as worse than dirt, are actually sociopaths, they lack a moral compass.

You also suffer from what I call the “poverty is a virtue” syndrome. Watching the sunrise, stopping to smell the roses and fish is only possible because we live in a society that spends 20K a year on health care for people over 80, 10K at 70, cheap drugs for all at 65 here in Ontario, LTC subsidized at 45K a pop, disability benefits, all made possible by money extracted from people who are paying something called taxes. You and your squeeze my dear are actually a net drain to the economy and a huge burden. In places like the Philippines you would be living a hard scrabble life, glorious sunsets, sandy beaches but certainly living hand to mouth.

#123 TurnerNation on 05.13.14 at 8:07 am

Gold is only $3700 shy of its loony target. I long for the day I can tell my landlord to shove it with fiat money and pay them in shavings of gold from a small pouch I wear on my waist, using my gold-shaving tool. Now this will be progress!

#124 yorel on 05.13.14 at 8:19 am

Friend of mine just rented a condo in Toronto for $50 a month under asking and a free storage locker. They asked for this and the landlord went for it. Sign of…?

#125 Sheane Wallace on 05.13.14 at 8:28 am

#92shawn
Why have money in the bank? Invest them.

#83Trojan House
Are you implying that the government would default on its debt? It would not happen. Precisely because the debt is high, it would be inflated away. And BTW Garth said that bank accounts are safe so no raiding. Raising taxes is not deflationary as the government spends it instead of you saving it.
You got it backwards.

#126 Linda Pearson on 05.13.14 at 8:29 am

#94 TheCatFoodLady on 05.12.14 at 11:28 pm

For your lyrical account of early morning fishing, I wish you tight lines always!

#127 Aggregator on 05.13.14 at 8:59 am

US Retail Sales – Chart

Hence the decline in electronics. I guess the Canadian government needs to pump more money into high tech jobs, like that $120 million grant to the GG Commander-in-chief's Waterloo campus, so Canada can export air hockey robots to the world. Video

#128 Shawn on 05.13.14 at 9:00 am

Thomas Piketty’s book Capital in the 21st century

This book has been mentioned.

I plan to buy it but from what I can see Chapters brought all of one copy into Edmonton (West Edmonton Mall). None in stock at three Chapters / Indigo that I visited.

I understand some will use it to moan that the rich are getting richer.

I was thinking to use it as more of a “how-to” book.

I understand that the gist of it is that investors tend to accumulate ever more wealth while those who remain in debt spin their wheels.

It is what it is.

There are the wages of labor and there are the wages of capital.

I think a reasonable goal is to reach the point where your capital makes more than you do (or could if retired) by working.

#129 Shawn on 05.13.14 at 9:01 am

Being correct is not a popularity contest. eom

#130 Shawn on 05.13.14 at 9:01 am

What is a bête noire?

#131 Miracle on 05.13.14 at 9:04 am

April retail sales in America was .1% vs .4% expectations. Q2 GDP still expected to be 4%. Experts.

#132 Stickler on 05.13.14 at 9:05 am

Great post!

“Just imagine where our economy would be today without all those mortgages, car loans and government borrrowings. The bloating of credit – drawing wealth from days yet unlived – only works to bridge hard times when it’s followed by a surge of growth.”

Well put indeed.

I’m thinking stagflation.

The difference between a recession and stagflation: The prolonged period of slow economic growth is coupled with high rates of inflation.

Inflation is the ongoing increase in prices for goods (necessities -> utilities, food, energy, taxes) and services, but it can also be described as an ongoing decrease in the buying power of money.

#133 crowdedelevatorfartz on 05.13.14 at 9:09 am

@#71 Sheane Wallace.

Total agreement.

My poor choice of words.

I should have said Japans’ been struggling with deflation for about 20 years……

Falling population and trying to spend their way out of it.

Perhaps our only saving grace will be our rising population (what with all those foriegn workers paying taxes).
I dont care who bolsters the CPP cat food fund, just so long as there is money for the kitty.
Road kill is starting to look mighty yummy.
Recipies anyone?

#134 crowdedelevatorfartz on 05.13.14 at 9:16 am

@#121 Detalumis

“You and your squeeze my dear are actually a net drain to the economy and a huge burden……..”
+++++++++++++++++++++++++++++++++++
I detected a note of “jealousy” perhaps ?

The eskimos used to put the aged and infirm out on ice flows and let nature deal with them.

We cant do that anymore.

Global warming

#135 Londoner on 05.13.14 at 9:25 am

#115 Buy? Curious?

How long is this going to go on for? Not how the system manages to inflate house prices but all this discussion about factors that may or may not affect it. I mean, it’s been six years of this blog continuing to bleet on about a correction yet nothing predicted here has happened yet. “This will not end well.” Pfft. It’s stupidest line ever. For gawdsakes, people are asking Smoking Man for advice! And his answers aren’t half bad either.
_____________________________________________

That might be because the fundamental economic analysis presented on this blog is incomplete. Today a post about deflation. The other day it was about how rates will most probably be higher in 5 years time. However there’s no explination on how you will get from point A to B or what variables will impact the path that gets you there. The commentary is also very focused on only a few aspects (e.g. home prices) and avoids describing the economic environment in the prediction.

People renting now can buy now or they can buy in the future. What they buy and where will largely be dependent on variables other then just prices.

But then why do people ask for advice on a forum with anonymous commenters? Why don’t they do some analysis and draw their own conclusions? Maybe they they like to be told what to do and take comfort in believing what other people tell them. Maybe that way they won’t feel scared and alone if things go wrong.

#136 rosie "moving forward" in the knowledge that, "this won't end well" on 05.13.14 at 9:33 am

Agenda 21, “Can’t we all just get along” instructions, courtesy of the MSM.

http://www.news1130.com/2014/05/07/warm-weather-prompts-condo-etiquette-reminder/

#137 Just the facts Ma'am on 05.13.14 at 9:37 am

#36 Smoking Man on 05.12.14 at 8:06 pm
Further to my earlier post.

It’s easy to unmask the all the actors.

Take 20 construction workers, 20 Bay street suits, add a few preachers and teachers into the mix.

Strip em all down to Speedo bathing suits, put em in a bar and get em all hammered.

——————-
I’m pretty sure the tan lines will give them away.

#138 Just the facts Ma'am on 05.13.14 at 9:55 am

#78 Two-thirds on 05.12.14 at 10:10 pm
Another canary in the coalmine is the almost uniform rush for luxury carmakers to introduce “entry-level luxury” vehicles. M-B, Audi, BMW, etc. they now have (or will soon offer) small, sub-$35k machines, with laughable lease rates – think $350/month, maintenance included.
———————————————
I don’t see this as a canary in the coal mine at all.
The luxury brands are simply trying to snag the customer sooner then they could have before. Get them into the fold so to speak and when that lease is up lease them another. Customers for life.
The other side of it is for many people today if it’s not a luxury brand they’re driving then they must be unsuccessful.

Joke for today-
What’s the difference between a Mercedes and a cactus?
Ans- The cactus has the pricks on the outside.

#139 High Plains Drifter on 05.13.14 at 9:58 am

I suggest all the spying going on in society is far more costly than the nuisance it is touted, to just the bad guys. With spying comes the compulsion to act and if you are acting with third party resources, such as taxes, fees, and profit skimming, that third party may not feel the value the spy agency feels. The parties being spied on resist and mislead, perhaps horror on horror, they are lowly sheeple. This hairball must be kept from the funders but of course they find out, so Quando the first class dog must be invented.Save the puppies. What about ultra loud dog whistles, 40 days Jerry.

#140 :):(Ying Yang on 05.13.14 at 10:06 am

#50 Smoking Man on 05.12.14 at 8:47 pm
MH370 Solved
Former Canadian defense minister…..Speaks
So I’m going to Vegas again, the bastards want to talk me , they don’t like things in me book.
I am making a case to keep them in before publication.

http://www.dailymail.co.uk/news/article-2535698/Aliens-walk-theyre-refusing-share-technology-change-warring-polluting-ways-claims-former-Canadian-defense-minister.html

……………………………………………………………………….

Really Smoking Man? You don’t believe this stuff do you. Who is going to talk to you in Vegas? Stay by the poolside and have a drink my friend. Play hard and fast with the cards. Weather is great out there now. Try the bar at New York I think it was Nine Irishman and go have a steak at Gallagher’s Steakhouse there, fifty bucks and fantastic taste. They just had some construction last year and its all done now.

#141 Inglorious Investor on 05.13.14 at 10:11 am

#93 saskatoon on 05.12.14 at 11:17 pm

In my previous post, in response to your question I mentioned how some go bankrupt because there is not enough money for everyone (individuals, companies, etc.) to pay back their debts.

However, bankruptcy is not a bad thing per se. It cleanses the system of inefficient producers and malinvestment. Remember that any thing (including money) can only have market value if it has scarcity (and of course, demand).

#142 Inglorious Investor on 05.13.14 at 10:26 am

#124 Sheane Wallace on 05.13.14 at 8:28 am

“Raising taxes is not deflationary as the government spends it instead of you saving it.”

Savings are not a bad thing, as savings are really just deferred spending (the money will be used for future needs) and for investment.

Furthermore, the more government takes the less the people have to save, spend and invest. While we need a certain level of government, and that government must be funded via taxes, we must try to keep as much money as possible in the hands of the people to whom the money actually belongs.

I believe that, overall, markets know better than governments where money should flow. Far less of it will be wasted.

#143 Kilby on 05.13.14 at 10:48 am

Joke for today-
What’s the difference between a Mercedes and a cactus?
Ans- The cactus has the pricks on the outside.
——————————————————————-

That’s borrowed from the old Corvette joke book!

#144 Holy Crap Wheres The Tylenol on 05.13.14 at 10:52 am

Yesterday we parsed the latest data on jobs and wages. The labour participation rate is falling and so are income gains. Lots of layoffs and 1.3 million out of work. Expensive Boomers being punted for cheaper kids. More deflation.
_______________________________________________

Just talked to a business associate of mine he to runs his own company. He chirped to me his new philosophy about cost analysis and savings. What you said Garth pretty much summed it up. Punt the boomers and bring in the millennials. Problem is the more expensive boomers have the experience and the young ones don’t’. I am not saying that every newbie out there can not replace an experienced staff person, some can. However those that are smart enough and talented enough will demand wages closer to the boomer pay scale so whats the difference. I have seen this before with another corp, they did a wholesale clean-out of boomers, brought in newbies at half the cost and ended up losing customers left right and center. They ended up bringing back a few of the boomers that wanted or needed their jobs and eating crow. It was a tough lesson in economics verses common sense. The wisdom gained though experience is invaluable.

#145 Ralph Cramdown on 05.13.14 at 11:08 am

#115 Buy? Curious? — “I figure since I bought two years ago, my place has appreciated about 10% (conservative estimate). I won’t be selling anytime soon and when it’s paid off, I’ll rent it out and travel.”

Oh please, until you do, continue to stop by here and bore us all with your bourgeois middle-class tales. “I bought a house, and then prices went up!” Please, go on. Maybe you could talk about the minivan, the neighbours, and your childrens’ schoolmates and their parents?

#146 MP on 05.13.14 at 11:16 am

#42 Cici – “Guns are fun (well, not always), but let’s be practical…they’re almost as useless as gold, even if you know how to use them.”

Buy a hunting license. Some of us don’t buy meat in a grocery store.

#147 G-Dawg on 05.13.14 at 11:17 am

Meanwhile energy sector stocks are screaming up on earnings announcements. 38% and climbing YTD….. I had the pleasure to see this in the 80’s when Canada fell into a hole and job losses were peaking……it’s deja vu all over again. Better days are being firecast…but the market is a leading indicator and may be 18 to 24 months ahead of main street….so look for lots of misery ahead while the stock market outoperforms real estate by a large margin. It will be very frustrating to watch your house value tank while you’re stuck and unable to get liquid into the surging stocks…….I suggest a drinkers diet to get past what is to come…..stagflation is really ugly if you’re caught in between and not nimble enough to get your balls out of the vice.

#148 Ralph Cramdown on 05.13.14 at 11:18 am

#139 Inglorious Investor — “However, bankruptcy is not a bad thing per se. It cleanses the system of inefficient producers and malinvestment.”

Look, it’s pretty obvious that you bow down to your great gods who wrote their magnum opii back in the 1930s or thereabouts. But maybe read the newspapers and keep up to date? GM and Chrysler both went through bankruptcy, and their plants didn’t stop producing cars for even one day. Airlines go through bankruptcy (some of them more than once) and never even cancel a flight.

Lets talk about today’s world, rather than your economic gods’ tales of a gold standard world without Chapter 11 restructuring.

#149 Dean Mason on 05.13.14 at 11:26 am

Deflation has been happening for savers for the last 30 years.

GIC’s, term deposits, Canada savings bonds, government bonds were 15% to 19% which were excessive but not at that time.

Even if you look at more normal levels of interest rates on GIC’s, term deposits, Canada savings bonds, government bonds, federal, provincials just 15 years ago, they were in the 5.50% to 6.50% range.

Now in 2014, they are about 40% to 60% lower in the 2.60% to 4.15% range.

We may see again 2007 to 2008 level interest rates on GIC’s, term deposits, government bonds, federals, provincials of 4.00% to 5.00%.

They will not last long as another recession or economic downturn will come and force them down again.

They call it the new normal but it is not for just interest rates, unemployment, pay, wages and salaries etc.

#150 Son of Ponzi on 05.13.14 at 11:36 am

Inglorious Investor,
Sind Sie ein Österreicher?

#151 Son of Ponzi on 05.13.14 at 11:45 am

You mean “cygne noir”?

#152 Bottoms_Up on 05.13.14 at 11:46 am

#59 Kris on 05.12.14 at 9:20 pm
————————————
Yes, invest it in the stock market.

#153 Bottoms_Up on 05.13.14 at 11:48 am

#113 Waterloo Resident on 05.13.14 at 3:11 am
————————————————-
I agree, for a long time there has appeared to be some pent-up demand for housing.

So with price dips, people start buying.

A real catalyst is required to really drop prices, such as a major change at CMHC, changes in bank lending practises and/or significantly increased interest rates. Or, a whack of sellers with urgency.

#154 Old Man on 05.13.14 at 11:55 am

Smoking Man save your money and pay $9.95 for a Prime Rib dinner including wine at the Mad Onion just across the road from the MGM. Be sure to check out the show at the casino as its special.

#155 BCD on 05.13.14 at 11:58 am

#115 Buy? Curious? on 05.13.14 at 4:26 am
It’s easy for Garth to talk like he’s handing out the 10 Commandments, he’s part of the most selfish generation in human history. I’d like hear how he would do it now starting from zero.
_____________________________________________

I agree. One of the things that most annoys me is how many rich Boomers take credit for all the wealth they have accumulated–as if they are somehow superior to everyone else, when the fact of the matter is that a lot of it boils down to “luck” and “timing”. Kevin O’leary is a good example of that.

Starting from zero today is vastly different then it was back in my parents day.

Ah, the young… — Garth

#156 Bottoms_Up on 05.13.14 at 12:00 pm

#107 Jay Currie on 05.13.14 at 12:37 am
——————————————–
Actually, 40-year long observations, plus expert knowledge of the current conditions of the western Antarctica ice shelf, combined with new models, is showing that over the next 85 years the seas will likely rise at least 1.2 metres, and possibly over 3 metres. Not good.

#157 Buy? Curious? on 05.13.14 at 12:30 pm

#143 Ralph Cramdown on 05.13.14 at 11:08 am

“Oh please, until you do, continue to stop by here and bore us all with your bourgeois middle-class tales. “I bought a house, and then prices went up!” Please, go on. Maybe you could talk about the minivan, the neighbours, and your childrens’ schoolmates and their parents?”

Ha! Good one. But isn’t that what everyone wants? A happy family, a nice home, and enough money to do whatever I want whenever I want?

#158 Aggregator on 05.13.14 at 12:36 pm

#146 Ralph Cramdown

GM and Chrysler both went through bankruptcy, and their plants didn’t stop producing cars for even one day.

Oh please. It was a Chapter 11 followed by an economic action plan to keep their plants running by allowing more deadbeats to buy cars with auto subprime loans, and now that every deadbeat who wanted a car owns one and North American dealers' lots are stuffed with inventory they can't sell, they're resorting to fake recalls just to refrain from laying off workers.

And if that's not bad enough, what are dealers going to do with all those leased cars coming back to the market?

Mercedes dealers in U.S. could be overwhelmed by wave of off-lease vehicles, remarketing boss says

NEW YORK — Mercedes-Benz USA expects its dealership network to be overwhelmed by a tsunami of off-lease vehicles at some point, forcing the brand increasingly to sell those vehicles through non-Mercedes dealers.

“We’re going to be having something like 200,000 units coming back at some point,” Stephen Nicholson, the company’s remarketing manager, said during a panel discussion Monday at a conference here.

Yep. 200,000 units returned by those deadbeat American teens who wanted to pose as a rockstar-pimp for a couple of years — only to come back to toss the keys back to the dealer. Thanks playa!

#159 NotAGreaterFool on 05.13.14 at 12:56 pm

Race to the bottom

http://business.financialpost.com/2014/05/13/investors-group-mortgage-rate-canada/

#160 Zeeman1 on 05.13.14 at 1:01 pm

Holy shit Garth:

http://business.financialpost.com/2014/05/13/investors-group-mortgage-rate-canada/

#161 saskatoon on 05.13.14 at 1:14 pm

thanks inglorious,

seeing that the monetary system is self-destructive, what can i do to protect my family’s wealth?

i.e., solutions?

#162 takla on 05.13.14 at 1:21 pm

the pin in this grenade will be pulled when the interest rates start there march upwards,think of them as a beach ball being held under water,as your arms weaken the ball rises,maybe not the best analogy but..
A large % of our population is leveraged well beyond their personal net worth and when that ball starts riseing and those good folks visit [email protected] to rewrite their next mortgage term that’s when the next flood of forclosure will hit hard.
So weve got demograghics,ageing pop. against us,riaseing interest rates and weakening economies and deflation….hum….Is our fate to die of a thousand cuts??

#163 Inglorious Investor on 05.13.14 at 1:23 pm

#146 Ralph Cramdown on 05.13.14 at 11:18 am

“GM and Chrysler both went through bankruptcy, and their plants didn’t stop producing cars for even one day. Airlines go through bankruptcy (some of them more than once) and never even cancel a flight.”

Governments shouldn’t meddle in the economy. They especially should not bail out bad companies. All that does is protect the incompetent, causes more waste, and fosters corruption.

When a company goes bankrupt, if the market perceives there is still profit potential in the business, then investors willing to take the risk will step in, resolve the bankruptcy, get rid of the bad management, restructure the business as needed, and carry on.

If the market perceives there is no value, the business will be left to die, as it should.

This has nothing to do with religion. It’s called capitalism.

#164 Inglorious Investor on 05.13.14 at 1:25 pm

#148 Son of Ponzi on 05.13.14 at 11:36 am

I don’t adhere to any particular school of thought. I do my own thinking and analysis.

#165 HD on 05.13.14 at 1:37 pm

100 Cici on 05.13.14 at 12:02 am

#47 4 AM Sunrise

LOL, I know, I know…But if everyone’s stealing and firing at each other, ultimately they will be eating bullets.

Funny thing is, if we spent more time trying to help each other out instead of profiting from and exploiting each other, we’d probably be a lot better off.

I know, I know…such socialist ramblings are not appreciated on this blog ;-(
.

——————————-

Wouldn’t that be great? I’m afraid it is not that simple though.

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

Best,

HD

#166 HD on 05.13.14 at 1:38 pm

#129 Shawn on 05.13.14 at 9:01 am
What is a bête noire?

————————–

Black beast

Best,

HD

#167 Andrew Woburn on 05.13.14 at 1:47 pm

Hedge fund titans are testing the quality of US democracy

“John Paulson made his fortune by taking a massive short position against the US housing bubble. Today the hedge fund billionaire is betting that the US political system will fail. This time he has company. Other billionaires have launched a lawsuit to force the US Treasury to pay shareholders vast sums from the government-sponsored housing enterprises that it bailed out in 2008. ”

http://www.ft.com/intl/cms/s/0/7a51a4fc-d6ae-11e3-b251-00144feabdc0.html#axzz31cFBmPXl

#168 Pope SnugglyJiggledBums the 666zd (aka Nosty) on 05.13.14 at 1:53 pm

Interesting 15 min. clip about the current state of the world.

The organizer and driving force behind all of this stuff (Brzezinski), the two forces behind Obama (Rockefellers and Soros), what roles China, Russia and Iran play along with Sudan and Pakistan, and a whole lot of other stuff. Apologies to Rob Ford for the crack / cocaine comment.

#169 jess on 05.13.14 at 1:58 pm

perfidy? sounds so shakespearean

Geithner’s :“Barofsky’s desire to prevent perfidy was untainted by financial knowledge or experience.”
http://www.thedailybeast.com/articles/2014/05/13/speed-read-the-juiciest-bits-from-timothy-geithner-s-new-memoir.html
==============
Geithner’s Other Ad Hominem Attacks on Barofsky
By William K. Black

http://neweconomicperspectives.org/2014/05/geithners-ad-hominem-attacks-barofsky.html#more-8206
self-regulating through “stress tests.”

“AIG, Fannie, Freddie, Lehman, the Irish banks, and the big three Icelandic banks all passed stress tests shortly before they collapsed.” …
http://neweconomicperspectives.org/2014/05/geithners-single-revealing-sentence.html

By William K. Black

#170 BCD on 05.13.14 at 2:02 pm

And the party just keeps getting better and better!

http://www.cbc.ca/news/business/investors-group-unveils-3-year-mortgage-at-1-99-1.2641367

#171 Fortune500 on 05.13.14 at 2:02 pm

Free houses for everyone!! We are richer than we think!!

http://www.cbc.ca/news/business/investors-group-unveils-3-year-mortgage-at-1-99-1.2641367

#172 sotiri on 05.13.14 at 2:43 pm

Mortgage rates in Canada just fell below 2% for the first time ever

http://business.financialpost.com/2014/05/13/investors-group-mortgage-rate-canada/

Garth, what do you think ?

More deflation, more debt. Not a positive sign. — Garth

#173 happity on 05.13.14 at 2:56 pm

“inflation’s okay because it means demand is chasing supply and the economy’s growing.”

This is the theory put in N America economic text books in the late 19th century. It’s basis is monetary policy where there is nothing backing the fiat paper currency.

Every such currency has a life span of about 40 years, Wikipedia has a long list of them. Ever heard of the continental?

Inflation is ok for the money printers, but eventually indebts the people.

Andrew Jackson knew this, but politicians have the memory span of a squirrel. From his time until 1913 how was america built for the most part on a gold standard and without income taxes?

There will never be a gold-standard or asset-backed currency again in a major society. — Garth

#174 Shawn on 05.13.14 at 3:22 pm

Banks Create No Wealth?

Inglorious Investor at 120 said:

Rather than transfer our wealth to bankers who create no wealth, money should be based on wealth

******************************************
“Bankers who create no wealth”. Nice sound bite.

So, if a bank lends money to a farmer at the start of the season for seeds and supplies which enable the farm to be productive, the farmer has created all the resulting wealth and the banker has created none?

The banker who lends money to create a profitable food processing plant has created no wealth?

The banker who finances the home builder has created no wealth?

Your views, comrade, seem seriously misinformed. Worse there are people on this Board who believe you… and who have their wrong-headed beliefs reinforced by your words.

Well, meanwhile the job at hand is to become rich(er).

I do find your views entertaining however. And they allow me to see that much education is needed. I am doing my bit.

Some will learn, some will not. Some will be rich, some not. It will ever be so.

#175 happity on 05.13.14 at 3:32 pm

There will never be a gold-standard or asset-backed currency again in a major society. — Garth

The USA is no better than your worst example of teen hormonic debt in house it can’t afford.

No one wants the $us anymore, so what will replace it?

I’ll take it. And so will the rest of the world. — Garth

#176 takla on 05.13.14 at 3:43 pm

RE garth”there will never be a gold standard or Asset backed currency again”
Never say never garth,that leaves one open to “I told you so’ senerio
As a matter of fact the Chinese among others are looking at just such a thing.Gold,and commodity backed
Of course with our current world debt theres not enough above ground gold to fully back a reserve currency…unless gold recieved a new valuation..10x,20x,..100x current value.cant happen you say??
Seems most of our troubles began when Nixon{another little elf} took up of the Gold Standard and opened up the spending spigit.Now we had deficit after deficit …. accumulating into the trillions,never had that with the gold standard now did we.
Now if an old school bricky/biker can put the pieces together we are all in trouble

Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. Never. — Garth (did I mention never?)

#177 dan on 05.13.14 at 3:44 pm

New mortgage at 1.99% is here. Who did not buy will never buy and will spend the rest of his/her life in the rented basement. How long this proletarian blog is going on? And all the time the crash is behind a corner?
How long ladies and gentlemen?

#178 dan on 05.13.14 at 3:48 pm

So what is the next step? Redistribution of wealth? You wish that? You better go to Scandinavia, weather is almost as bad as here…

#179 Ronald McRBC on 05.13.14 at 3:59 pm

#166 Pope SnugglyJiggledBums the 666zd (aka Nosty) on 05.13.14 at 1:53 pm

Interesting 15 min. clip about the current state of the world

—-

Come on pope, you can do better than that, Tarpley is disinfo of the lowest order. We want the good links, like the old days, have you been replaced?

#180 brainsail on 05.13.14 at 3:59 pm

Speaking of gold…

“Why you should short gold now: BofA technician”

http://www.cnbc.com/id/101669239

#181 drifting away on 05.13.14 at 4:09 pm

and for the first time ever since I started reading this blog in 2009, I’m actually thinking that the crash/correction/shit-hitting-the-fan scenario that is talked about so much won’t happen. It’s been too long already. Almost 10 years since cheap money showed up and house prices started going up like crazy. Not even the GFC was able to hurt Canada’s housing market. It made a dent that was quickly repaired by the government and RE kept going strong. Now we have a finance minister who doesn’t care, banks competing for the lowest rates, builders building like crazy, and most importantly… a population base that firmly and truly believes that it is different in Canada. People won’t change their minds in regards to gorging up on debt and being house poor but able to comfortably fit into society by not being different.

This is what goes on in this beautiful country:

http://business.financialpost.com/2014/05/13/investors-group-mortgage-rate-canada/

“Joe Oliver, who took over from Flaherty, has said he has no plans to intervene in the setting of mortgage rates, calling it a “private” decision by lenders.”

consumer debt under control…. yup….

“Another lingering threat from even lower rates could be ramped up consumer debt which has finally shown signs of finally coming under control.””

and warnings, warnings, warnings, red flags, cautions, etc…. only to see a couple of hours later an article on the same media outlet saying how RE is going strong in Canada and that bank analyst X, or chief investor Y, doesn’t understand where the warnings come from since the market is healthy and balanced. Nobody knows what’s going on… like Benny Tal said … flying blind.

http://research.cibcwm.com/economic_public/download/if_2014-0403.pdf

I’ve started to believe that the government would never ever let the RE market tank. Even if oliver says that he won’t intervene… if things arent going well (meaning if RE is tanking) there will be intervention. It is unthinkable that in a city like Vancouver or Toronto where RE is so crucial, people are gonna be abandoned by the government and be left to the mercy of the banks. This is not the USA.

I’m not buying. I will keep saving, investing, and being liquid. But I can’t keep believing and/or hoping for a change when there are no visible signs of trouble… at least not here in Vancouver. Construction everywhere, radio commercials comparing getting a mortgage to getting a smoothie, and apparently there’s plenty of disposable income cause malls and restaurants are packed, and luxury cars abound. This won’t change, it won’t come to a screeching halt. There won’t be blood running through the streets. It just won’t happen.

Going for a drink. Bye.

#182 jess on 05.13.14 at 4:12 pm

‘right to be forgotten’ request”

Today’s decision is binding on courts across the 28-nation bloc.
Google must remove personal data if requested, EU court rules
By Aoife White

…”Links and information in the list of results must be erased” where a person’s fundamental rights are harmed by the posting of personal information online and where there is no public interest in publishing it, the EU Court of Justice said in a statement on a ruling Tuesday.

==============
what about:
Nosey Smurf, Gumfish and Foggybottom and those implants!

http://www.cbc.ca/news/world/glenn-greenwald-says-nsa-bugs-tech-hardware-en-route-to-global-customers-1.2640317

#183 Shawn on 05.13.14 at 4:13 pm

Zero interest Rates

Question: To what amount does the value of any financial asset approach as long-term interest rates approach zero?

Answer: infinity

Any further questions?

#184 Andrew Woburn on 05.13.14 at 4:14 pm

Further reason to think the USD isn’t going down anytime soon as long as it can keep winning the “least ugly” contests.

“Russians ditch ruble en masse, data shows”

http://www.reuters.com/article/2014/05/12/us-russia-rouble-cenbank-idUSBREA4B02820140512

#185 :):(Ying Yang on 05.13.14 at 4:17 pm

#152 Old Man on 05.13.14 at 11:55 am
Smoking Man save your money and pay $9.95 for a Prime Rib dinner including wine at the Mad Onion just across the road from the MGM. Be sure to check out the show at the casino as its special.

………………………………………………………………………..

Smoking Man is a meat eating carnivor that eats Man meat, thick juicy steaks the size of small countrys. Been to this place it was at Hooters, mind you the show is good! The prime rib is good for the ten bucks but the steak at Galaghers, its worth the $$. Come on Smoking Man spend the cash, you will never forget this steak!

#186 takla on 05.13.14 at 4:22 pm

Garth..LOL..somehow I picture you on the floor ,kicking,fists floundering and screeming at the top of your lungs,never,never,never,never,…lol,relax its the old finace minister in you,dont want to reinjure your leg,its riding season!….I know you know than who ever controls the money printer controls the world,backed by gold will let our mother earth control the money printer,,,better system??Lets put it to a vote!

#187 Son of Ponzi on 05.13.14 at 4:26 pm

After working over 30 years for a bank, I have to agree with Inglorious.
They are robbing Paul to give to Pete.

#188 Condo Minion on 05.13.14 at 4:47 pm

This might be a harbinger:

Profits down 85% year over year for this furniture retailer.

http://www.thestar.com/business/2014/05/13/leons_furniture_profit_down_from_year_ago.html

#189 Ralph Cramdown on 05.13.14 at 4:56 pm

#161 Inglorious Investor — “Governments shouldn’t meddle in the economy.”

Generally speaking, the reason governments meddle in the economy is because, back in the old days, they didn’t, and people found the result intolerable. So now they do.

The perfect free market system does not end up with healthy competition all around, safe products and low prices. It ends up with unsafe products, monopolies, price fixing and collusion.

One can certainly argue whether particular examples of government interference are a good idea, or warranted. But to say that there is no place for government control is to be ignorant of history. And even if the ideal system was one without meddling, as long as other jurisdictions meddle, yours must too, or else the other guys win and your guys go broke.

#190 earthboundmisfit on 05.13.14 at 4:58 pm

@141 Kilby
What’s the difference between a Harley and a Hoover?
A Hoover has the dirt bag on the inside.

#191 saskatoon on 05.13.14 at 5:16 pm

#173 Shawn

to try to defend I>I> here:

no…banks have not created wealth in your example–they have issued debt.

wealth does not equal debt.

this might be okay if the banks had the loaned money to begin with…but this isn’t the case today–as has been documented here.

maybe we are just defining wealth differently?

how can wealth be created when bank deposits are the direct result of loans themselves?

essentially, it is the farmer’s labour that is REAL; his labour brings wealth.

the bank (nefariously) siphons the farmer’s labour off…and pockets some of the kickback.

#192 Stickler on 05.13.14 at 5:20 pm

here is a harbinger:

“Joe Biden’s Son Joins Board Of Largest Ukraine Gas Producer”

…yea the VP’s son. With a name like Hunter you know he is a doosh.

#193 Inglorious Investor on 05.13.14 at 5:22 pm

#173 Shawn on 05.13.14 at 3:22 pm

“So, if a bank lends money to a farmer […] The banker who lends money to create a profitable food processing plant […] The banker who finances the home builder has created no wealth?”

You got it, Shawn. Good for you.

Since you seem to understand banking so well, then you must understand that what banks actually do vis-a-vis loans is they allow borrowers to monetize their own actual wealth (e.g. assets, future income) without having to sell it. By doing so, bankers help facilitate the wealth creation process. But they don’t actually create any wealth themselves. The borrowers create the wealth via their work. And it is also this work that imparts actual monetary value to the interest charges, and thus the profits, that the banks collect.

The people on this blog who agree with me on this are the ones who get it.

I may not be “rich” by your standards, but my present net worth is about 1.7 million, and will be significantly higher in the years ahead. So, the part about the goal being to get rich(er)? Yeah, I agree with you.

Only, I don’t think that personal wealth should be the ONLY goal. I’d like to see society as a whole get richer, rather than fall into debt peonage while inequality spikes to medieval levels. Maybe that doesn’t matter to you, but it matters to me.

BTW: Bought some AVO today at $17.50 (2 cents above the low). Closed at $20.27. Is that what you mean?

#194 Happy Renting on 05.13.14 at 5:31 pm

#121 Detalumis on 05.13.14 at 7:39 am

To keep things in perspective, The Cat Food Lady says their income from Ontario Disability covers rent in a building with used condoms and syringes in the yard… in KINGSTON. I’ll take my chances with soul-sucking employment, and I’m pretty sure 99% of people would, too. Her household might currently be a net drain on the system, but I’ll bet she would prefer it to be otherwise.

It’s disingenuous to look at TCFL’s current situation only and not acknowledge any previous years where high taxes may have been paid (net-giver years.) Also, she’s co-produced and raised several new tax payers for the system, which is a contribution to society.

I agree that much of employment nowadays is unsustainably draining on workers. TCFL’s message of thrift is relevant if one is going to work only as long as needed to save a large enough lump of income-producing capital, then get out alive.

#195 Condo Minion on 05.13.14 at 5:48 pm

And yet another home retailer has sales spiralling downwards:

http://www.thestar.com/business/2014/05/13/rona_reports_firstquarter_loss_of_166_million_revenue_down_82_per_cent.html

Good thing these stores have the weather to blame.

Not sure I agree. Q1 in this retail sector is usually slow, and these are significant drops from before. Plus, like a lot I think, I and people actually went to such places more this winter, looking for salt and ice melter and shovels.

Where did all the spending money go to?

#196 Nemesis on 05.13.14 at 6:01 pm

#Never? #CallMeSuperstitious,But…

http://youtu.be/AJvleGF5rlk

#197 sheane wallace on 05.13.14 at 6:03 pm

#140 Inglorious Investor

Agree.

#198 sheane wallace on 05.13.14 at 6:09 pm

#173 Shawn

You conveniently forget about rigging of LIBOR, Commodity markets, including Comex, CDS (aka financial weapons of mass destruction), the mess with derivatives, front running clients (banks have quarters with not a single day of trade loss!), overcharging customer fees, the mortgage mess, etc. all delivered by the same banks.

Apparently they do god’s work (Lloyd Blankfein).

#199 sheane wallace on 05.13.14 at 6:14 pm

#188 Ralph Cramdown

On the contrary. The governments are these days a tool of the bankers. Everything is made to serve a single goal – the banks profits.

Would you defend CMHC? Or Harper importing temporary workers and protecting corporations?

#200 sheane wallace on 05.13.14 at 6:31 pm

I’ll take it. And so will the rest of the world. — Garth
…………………………………..
It seems that is not the case with the Russians. China and Japan buy no US bonds any more.

If an alternative swift system is developed (and this is not a complex task) why would one need dollars?

#201 Zeeman1 on 05.13.14 at 6:41 pm

So about that deflation thingy Garth:

I have yet to see one thing that’s less expensive this year than it was last year. Just about everything, except mortgage rates, has gone up.

Where is deflation occurring?

#202 Dean Mason on 05.13.14 at 6:53 pm

Investors Group mortgage rate at 1.99% for 3 years is a variable rate.

It is not a fixed rate. This looks very similar to what was happening in the U.S. before their housing bubble burst in 2007 to 2008.

They had 2.00% to 2.50% teaser rates that were for 2 years or so and then shot up to much higher rates in the 4.00%, 5.00%, 6.00% etc. depending on the contract.

The lowest 3 year fixed rate today that I could find is 2.79% which is offered by Home Trust, Pace Savings & C.U., First National Financial.

The lowest variable today that I could find is 2.50% from Home Trust, Steinbach C.U., First National Financial excluding Investors Group’s 1.99% variable 3 year mortgage.

#203 Aggregator on 05.13.14 at 6:59 pm

#194 Condo Minion – And yet another home retailer has sales spiralling downwards

All explained in this one chart.

And that folks is exactly why if banks stop lending the entire economy spirals downwards. Now watch how many immigrants (debt slaves) they expedite into Canada this year and next.

#204 Retired Boomer - WI on 05.13.14 at 7:00 pm

Today, Tuesday started selling off my stock gains today.

Get it “off the table” then count it. This Bull has gone on long enough, time for a rest. besides it is May.

Bete Noire (Black Beast?) Not sure I understand, but one of numerous things I don’t understand.

I do understand peace of mind, in whatever state you find yourself. Priceless.

Good day here in the pines, hope yours was as settling

#205 Old Man on 05.13.14 at 7:14 pm

#171 happity – the old gold standard has been replaced by oil and natural gas called regime change. The NATO countries are lining up with military troops to fly into Nigeria to find those kidnapped girls. The mystery group who did this terrible deed are not even Muslim and Nigeria has a huge military, so what gives? This will cause a huge uprising when all is said and done; its about the oil and gas deposits. Oil reserves alone are the 10th largest in the world.

#206 Trojan House on 05.13.14 at 7:17 pm

#124 Sheane Wallace

Governments WILL walk away from their debts. The system will crash as more of the taxes they collect will be going to pay the interest on their debt, pensions (which take away a huge % of government revenue) and other needless or wasteful programs.

Taxes are deflationary because it takes money away from the only people that can sustain an economy – the people (remember I mentioned that the wealth of a nation is created by its people?). If 70% of your income went to paying taxes, how could you afford paying for anything but the essentials? Forget your all-inclusive expensive vacation in the Dominican. Want that new wide-screen TV? Forget it.

Sure the government spends the money it collects, but as we all know, the more they collect, the more they waste. Didn’t the feds “misplace” a few billion dollars a couple of years ago? What about corruption and fiscal mismanagement? Ontario is a classic example of both.

Every government in history has collapsed because of raising taxes to pay for their corruption and fiscal mismanagement. The American Revolution is a classic example. That was about “taxation without representation.” In other words, it got so bad in the US at that time that the only option for the people was to revolt against the tyranny of taxation.

#207 BrainOfEngland on 05.13.14 at 9:05 pm

All those homes owned outright by older owners. All those homes nearly owned outright by equity rich. There is the weakness, and the SOLUTION for the banks and Gov.

The values of such homes have been bid up to crazy insane valuations, buy others paying more for comparable homes, month after month, year after years.

When they let the Global Real Estate Bubble go, from US, Canada, UK and Japan, the banks will make fortunes lending on houses that have crashed in value by 50%-60% or even more. Writing volume fresh new mortgage to well positioned younger buyers. The projected profits in this are immense. Staggering. (Eg those profits for banks and Gov in tax revenues for next 30 years, whilst also allowing those new buyers to have some money left to, you know, spend in the economy.)

$250K, $500K, $1m dollar+ homes owned outright or by the equity rich don’t make banks much money. At some point, in my opinion, the banks will want to get fresh debt on those homes.

And those who bought into “renting is dead money” with their jumbo-mortgages will either keep repaying or lose out, and switch from owners to renters themselves. The complacent owners who think they own homes outright worth fortunes now, are in for a shock.

Outright owners who just treat their home-as-a-home, and don’t pat themselves on the back about its value, will do fine even into the heavy crash.

#208 Derek R on 05.13.14 at 11:30 pm

#203 Retired Boomer – WI on 05.13.14 at 7:00 pm wrote:
Bete Noire (Black Beast?) Not sure I understand, but one of numerous things I don’t understand.

Yes, literally, it does mean Black Beast. But what is the deeper meaning?

Well, it’s something that you personally fear. As Wiktionary puts it: An anathema; someone or something which is particularly disliked or avoided; an object of aversion, the bane of one’s existence. And yours is probably different from mine.

So deflation is the “bête noire” of this article.