Not so rich

WEALTHY modified modified

Paul’s buying a $1.3 million house in a sexy hood within 905 (not the one that blew up this week, amid hand-written notes of despair). “It’s actually a good deal,” he says bravely, thinking the property’s appreciated considerably since he did the deal a few months ago.

Well, he went to one of the big banks for a mortgage (the green one). The eight hundred grand he arranged came at a good rate – 2.4% – plus [email protected] threw in another $300,000. “Just for things you might need, or whatever.” That piece of the loan isn’t amortized, and can be taken with interest-only payments, also secured by the house. In other words, it’s a borrowing of 85% of the full value of the property, but still not considered a high-ratio loan. So no CMHC insurance.

That’s not all.

“She also offered me an amortization on the $800,000 portion of 30 or 35 years,” Paul reports. Going long would drop the monthly from more than $3,500 to less than three grand. “It was tempting.” But, of course, there’s a cost to lower payments. With a standard 25-am he’d owe $675,700 at the end of the term, and with a thirty-year am, $703,000 would remain – even after making $187,000 in payments.

Now, you may have thought Ottawa banned long-amortization mortgages. Once pegged at 40 years, they were chopped back to 25 by the same Harper government that goofed by extending them in the first place. But that was just for “high-ratio” mortgages – those where the purchaser has less than 20% to put down.

The Harperites, as you recall, also banned CMHC from insuring seven-figure houses which means Paul has to come up with at least a fifth of the purchase price. No problem there, because he’s selling elsewhere and moving up. But in this case the bank is offering him an 85% financing without requiring a CMHC insurance premium and also extending the forbidden fruit of a l-o-n-g amortization. The effect is twofold: monthly payments are less, so on his income he qualifies to borrow more.

There ya go. More evidence wealthy people get a better deal than poor ones. Just like investors paying half the tax on their financial asset income as workies do on their paycheques. But that’s not the point of this post, rather to confirm that real estate is also eating the rich.

Two years ago a minority of uninsured loans (on million+ properties or deals where buyers had more than 20% to put down) had amortizations of more than 25 years. Last year that climbed to 58%, and it’s currently estimated to be 63%. That means almost two-thirds of borrowers – mostly of expensive properties – are opting for loans giving them the lowest monthly payment, even when it means they slow debt repayment.

The Bank of Canada worries about this. It should. When ‘rich’ people buying ‘carriage trade’ homes struggle with their monthlies, it’s just more proof we’re all getting over-extended. In its latest Financial System Review, the bank said: “To help lower the large mortgage payments typical of higher loan-to-income ratios, an increasing proportion of uninsured mortgages have been amortized over more than 25 years. The resulting slower repayment of debt leads to a higher aggregate level of household indebtedness.”

And there’s more. As pointed out here a few times lately, more and more high-end homebuyers (properties over a million) are slipping into the Holy-Crap category (a technical term) of indebtedness. A majority in the GTA owe 450% or more of disposable income, and in YVR it’s four in ten. So, it’s not just the young and feckless who are borrowing beyond their means. The old and fecked are catching up fast.

So let’s put this in context. Five-year, fixed-rate mortgages have descended into bottom-feeding territory. Who ever thought 2.11% would be offered by mortgage brokers? After all, inflation is running perilously close to that, meaning this is akin to free money. At these levels, borrowers can trash home loans at a rate unknown a decade or even five years ago – if they keep amortization periods at 25 years or less. Instead, we’re seeing the opposite, as yesterday’s graph showed. The aggregate of debt is rising wildly, even as borrowing costs decline. So, imagine what happens when rates eventually turn.

Bigger loans and longer ams, meaning lower qualifying incomes, plus add-on lines of credit and higher debt ratios are the dirty secrets of the house-wealthy. When the tide goes out, the naked will be known.

 

238 comments ↓

#1 jay on 06.30.16 at 7:12 pm

More economic news from ground zero .https://betterdwelling.com/city/vancouver/its-not-just-you-vancouver-housing-up-172-income-just-10/

#2 RANDY on 06.30.16 at 7:14 pm

I blame 40 years of brainwashing in Liberalism

#3 Garth Help! on 06.30.16 at 7:15 pm

What does [email protected] stand for?

#4 TraderX on 06.30.16 at 7:16 pm

Garth,

Those rich people have simply taken your advice and utilized the 2.25% mortgage as long as possible, to then invest in those preferred banks paying 6% or such… they do read your blog.

Good Trades
X

Nice try. But I have never advised a long am. — Garth

#5 paulo on 06.30.16 at 7:20 pm

first ha and yes look out for the turn its coming and many will drown

#6 Zoe on 06.30.16 at 7:20 pm

I think this cute puppy has been on the blog before. Worth another visit!

#7 Victoria Real Estate Update on 06.30.16 at 7:20 pm

VICTORIA’S HOUSING MARKET HAS LOST GROUND COMPARED TO THE REST OF CANADA IN RECENT MONTHS

This is nothing new to Victoria. We saw a 4 year stretch (2010-2014) where house prices in our city fell significantly (15-20%) while markets across the rest of Canada made strong yearly gains. Some markets gained 30-40% over the same period of time.

Strong yearly price gains is the only thing that should have happened in every Canadian city from 2010-14 with lower and lower 5-year fixed mortgage rates and, quite possibly, the most lax mortgage lending standards in the world. Even with all of that price-boosting stimulus in place, Victoria’s market managed to lose all of that ground.

Based on the most recent data from the Teranet Bank house price index, house prices in Victoria have gained only 1.9% over the past 3 months (since February 2016), compared to a much stronger gain (3.8%) made by the rest of Canada.

. . . . . . . . . . . .House Prices. . . . . . . . . . . . .
Percent Above/Below February 2016 Price Level
. . . . . . . . x = Canada, * = Victoria . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 4.0% . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .x. . .
+ 3.5%. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 3.0% . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 2.5%. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 2.0% . . . . . . . . . . . . . . .x. . . . . . .*. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 1.5%. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 1.0% . . . . . . . . x . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 0.5%. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
….0%. . . *x. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 0.5%. . . . . . . . . . . . . . . *. . . . . . . . . . . .
. . . . . . . . . . . . . * . . . . . . . . . . . . . . . . . .
– 1.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . .
————————————————————————–
. . . . . . .Feb.. . . March. . . .April. . . . May . . .

(source: Teranet’s index) link

As I’ve said many times, there is a 100% chance that current market conditions will change. We could have a market favouring buyers within a matter of months. This can easily happen when you have a housing bubble as we do in Victoria.

Also, as we saw happen in Victoria twice since 2008, rising prices in one month can’t be used to predict the direction of prices in the next.

In other words, a falling market can begin at any time.

#8 Victoria Real Estate Update on 06.30.16 at 7:23 pm

VICTORIA’S HOUSING BUBBLE IS MASSIVE – PERHAPS THE BIGGEST IN CANADA

Based on this important bubble-measuring data (second chart), Victoria’s housing bubble may be the biggest in Canada.

The chart clearly shows that, in 2013 and 2014, buyers in Victoria who took on new mortgages stretched themselves even more than in Vancouver and Toronto.

If we consider the percentage of new mortgages that were taken out with extreme loan-to-income ratios (of at least 450%) over the past 3 years, then we must conclude that Victoria’s housing bubble is at least as inflated as bubbles in Vancouver and Toronto.

THE LEVEL OF DENIAL RUNNING HIGH IN VICTORIA

If you hear Victorians talking about Vancouver’s housing bubble, you’ll likely also hear them talk about how Victoria doesn’t have one.

It makes me laugh.

#9 VanMan on 06.30.16 at 7:24 pm

the kicker… “when rates eventually turn”… decades from now?

#10 JSS on 06.30.16 at 7:26 pm

If low interest rates are screwing the economy, then it is time to change this.

Enter higher interest rates.

#11 Victoria Real Estate Update on 06.30.16 at 7:26 pm

The link in my first post didn’t work.

(source: Teranet’s index) link

#12 The oldies need to know on 06.30.16 at 7:26 pm

Seriously what does [email protected] mean?

#13 Nero on 06.30.16 at 7:28 pm

How low can T bond yields go ?
and for how long will they remain there.

Those my friends are the questions.

Pass me my…ahhh F@#* it……

#14 The Wet Coast on 06.30.16 at 7:29 pm

My Grandfather said never trust Banks, Governments or Railways. He saw the depression where most of his neighbors lost their farms because of excessive debt, government policy and fickle railways. Not sure about the railways but here we go again.

#15 For those about to flop... on 06.30.16 at 7:30 pm

O.k so some of you will know the score but I will update anyway.

Jimmy will not be first in Euro 2016 as his side Poland lost to Brazil expats Portugal.

Anyway here is the chart I was talking about this morning before rushing of to work.

http://imgur.com/77PV2pV

It shows the median age of the population in Europe with Germany being the old dogs and Turkey being,well the young Turks with a 16 year gap in between.

The main reason I was rushing to get to work was so I could earn my fair share for a go fund me page I set up so the Metrosexual Messiah can get a hand transplant, so he can shake two world leaders hands at the same time without it being so awkward.

I got two quotes,one for a brain transplant and one for a hand transplant, since he couldn’t figure out how the three of them could shake hands at the same time.

The hand transplant was much cheaper so I’m gonna go with that one…

M42BC

#16 Sebee on 06.30.16 at 7:33 pm

I used to believe that rates will increase. Now I am starting to believe they never will.

#17 Jimmy on 06.30.16 at 7:33 pm

[email protected] = the Newfoundlander at the bank.

#18 Mike in the Okanagan on 06.30.16 at 7:34 pm

Will the tide ever go out? It feels like the ocean is just rising.

2016 is shaping up to be a real lame duck year for investing. Yeah I’m diversified and global. Up a whopping 1% year to date.

#19 nonplused on 06.30.16 at 7:37 pm

I’m thinking nobody should be buying a $1,000,000 house unless they can do it cash. I’m not saying they should do it cash, but using Garth’s rule of 90 they probably need $2,000,000 in net assets to really afford a $1,000,000 house. Sure they can put only 20% down and keep the other $1,800,000 in a nice tasty balanced portfolio, but $1,000,000 houses are not for the poor.

#20 A Canadian Abroad on 06.30.16 at 7:38 pm

Debt is slavery. Debt does not, and never will, equal wealth.

It’s fine to hold diversified assets (inc RE) but holding a single asset (RE) is very risky.

Every asset has it’s ups and downs. In the stock market, at least you have liquidity, but in a down RE market liquidity can be rare.

Paul, just make sure you don’t have all your eggs in one basket. Buy some mutual funds, ETF’s or stocks.

#21 steerage steward on 06.30.16 at 7:41 pm

With the recent silliness in the world, this story reminds us there are plenty of people working to make it better.

http://www.nytimes.com/2016/07/01/world/americas/canada-syrian-refugees.html

Happy Canada Day Garth, keep up the good, and entertaining, work.

#22 TB on 06.30.16 at 7:42 pm

#3: The Nice Lady @ The Bank

#23 I'm stupid on 06.30.16 at 7:45 pm

#3 [email protected]

The nice lady at the bank

#24 rainclouds on 06.30.16 at 7:45 pm

Dont think we need interest rate increases here in the B.P.O.E. to blow this up.

The caca is hitting the fan. Steaming coiler on Premier Cleavage’s doorstep almost every day. She is back pedaling into Georgia Strait to join the other oily sardines with every revelation.

Feds are also gonna have to act, “studies” ain’t gonna cut it. Natives getting pissed.

Almost Pitchfork time, genie is definitely out of the bottle………

#25 I Stand Corrected on 06.30.16 at 7:51 pm

Wow Mr. T, that was coincidental. I was at the Coal Harbour TD in YVR this morning and the guy at the counter in front of me was questioning what this interest only payment was that came out of his account that caused him to go into his overdraft. The teller explained that it was part of his new mortgage. I was wondering how that could be. Now I understand. Thank you!

#26 Self Directed on 06.30.16 at 7:52 pm

#3 Garth Help! on 06.30.16 at 7:15 pm

What does [email protected] stand for?
—————————-
The Nice Lady at The Bank

#27 common sense on 06.30.16 at 7:52 pm

“when rates eventually turn….”

One day, some day, in our lifetime?

Out on the course today, talking to an old university buddy and he laughed when I asked “Ever imagine paying over $800,000 for a house? At any age?”

He also laughed when I said “Think rates will ever go up allowing so many to crash and burn in housing, RRSP’s TFSA’s, a majority over 55 with not enough time to recoup their losses? Really, what would governments do to support all those out of luck with no where to turn??”

WHAT a MESS people have gotten themselves into based on the inaction of governments….

You either pay me now or pay me later….but one thing is constant. You are going to pay….

HAPPY CANADA DAY EVERYONE AND A WONDERFUL 4TH FOR BOOM AND OUT AMERICAN FRIENDS!

#28 WallOfWorry on 06.30.16 at 7:52 pm

Now that Brexit is in the past, and the stock market is behaving like it never existed, should we not see the Fed raise rates two more times this year? That would be two times for the whole year. There really is no reason why they shouldn’t…after all of the posturing that they have done? Additionally, even if Brexit follows through, it will take two years to get through the process. If they don’t raise now, that would suggest that they won’t raise rates for another two years? That makes no sense. So raise in July and then again in December? Makes sense no?

#29 Raincouver on 06.30.16 at 7:53 pm

http://omnyapp.com/shows/lynda-steele-show/how-big-of-an-issue-is-money-laundering-in-vancouv

#30 Ronaldo on 06.30.16 at 7:58 pm

For the gamblers, a long am with low variable makes sense. Why risk anymore than you have to. Houses are a commodity for trading now are they not? Plus, they go up forever. And, the government is not going to do anything to cause you to lose your hard earned equity. At least that’s what Kristy and Trudy have said. So, go for it.

#31 acdel on 06.30.16 at 8:05 pm

Sorry Garth; off topic!

This country is doomed. For those who are not bright enough to get it, please do not even respond to this link or response, I just do not want to hear your idiotic leftist rhetoric that you wish to spool, you people live in la,la, land. It is your opinion like this is mine. Good-luck in the future.

Although I think Trump is a nutcase, I can certainly understand why people will vote for the possible future President of USA.

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/federal-court-overturns-ottawas-approval-of-northern-gateway-pipeline/article30703563/

#32 Richey Rich on 06.30.16 at 8:07 pm

Garth,

Those rich people have simply taken your advice and utilized the 2.25% mortgage as long as possible, to then invest in those preferred banks paying 6% or such… they do read your blog.

Nice try. But I have never advised a long am. — Garth
————-

Actually, the rich use leverage more than the workies.

Those taking out our bigger and longer mortgages know that they while they may have the cash to pay off debt, there is no point doing so when they can use that extra cash for other investments.

The potential gain is much bigger for the rich when they leverage on a 2 million house than a workie on the a 500k house.

Also, foreign capital can access big local mortgages if they have 35% down. If the prices go down, they just bail and leave the locals with the bill. With that escape hatch, why risk their own money…

The rich are rich for a reason…

#33 mark on 06.30.16 at 8:09 pm

we have been talking about higher interest rates, and how preferred shares are going to do so well, but were still waiting to see both must be going on 1/2 a decade now?

#34 Thomas on 06.30.16 at 8:13 pm

I got into the housing market 10 years ago…buying a new build townhouse in the GTA suburbs for $275k. The Mrs. and I actually qualified for a $500k mortgage but I said that I only wanted to have a big enough mortgage that one of our salaries could afford (which came in handy a few years later when my wife quit her job and went back to school).

When our family grew and we needed a bigger place, we bought another new build in 2014 for $850k. When it came time to sell our townhouse in 2015 we got $550k for it. Now 2 years after purchase, our new build is worth approximately 1.2 million and we only have a $280k left on our mortgage on it. That’s $920k of total equity in 10 years on approximately $350k paid out over 10 years of mortgage payments.

I know the smart thing to do is to sell and bank all that cash given the impending burst but we are planning on staying here for at least another 20 years so I could care less about market fluctuations. In fact, I would love it if there was a huge crash so I can pick up a rental property…something I should have done years ago.

#35 Shawn on 06.30.16 at 8:14 pm

So, How Can a Bank make a 15% ROE lending Money at 2.4%?

Is it magic? No.

Is it because they conjured up the loan from thin air through the magic of fractional reserve banking and electronic money? Nice try, but no that is not it. (Because once the house is purchased that deposit belongs to the seller and is a liability of the bank upon which it might even have to pay interest).

Well how do they do it then?, tell us already!

The answer lies in low deposit rates combined with massive regulator-sanctioned leverage.

Let’s say the deposits pay 0% but cost 1% after administrative costs of running the bank and after estimated loan losses.

So the bank nets in this case 1.4% before income tax and about 1% after tax.

Now making 1% on your own money is very poor. But the bank can fund the loan with say $14 of depositors money for every dollar of its own share owners equity.

Voila, 15 times leverage leading to 15% ROE when the loans only make 1% per year.

But are banks allowed to leverage 15 times? Yes, although the regulator is supposed to insure that the leverage is not so large that the bank risks going bust in hard times, the regulator will in fact allow 15 times leverage on residential mortgages. In fact on CMHC mortgages I understand they allow UNLIMITED leverage although there are other caps and overall leverage constraints that might limit it to more like 25 times rather than infinite. On uninsured mortgages the banks are allowed less leverage, but still substantial.

I recently looked at Royal Bank and its actual true leverage of assets divided by common equity was over 19 times!

But the regulators use a concept called risk-weighted assets to pretend that Royal’s common equity ratio is more like 10% for more like “only” 10 times leverage. Bank analysts and credit rating agencies go along with this risk-weighted concept and call the leverage 10 times even when it is really closer to 20 times. But the funny thing about risk is that it is just that. It CANNOT be measured precisely. That’s why it’s called risk.

It’s Regulator sanctioned extreme leverage.

Banks can make 15% ROE even with very thin gross profits on loans due to the magic of extreme leverage. Most of the time it works well. But as Buffett would say, even a one in a hundred chance of a blowup in any year means that eventually there will be a blowup.

With deposit rates hitting the zero level, you would think we must be at the floor for mortgage rates. Though higher leverage or negative deposit rates could move it lower yet.

Am I predicting a bank blowup? No, but the risk is somewhat greater than zero.

#36 NEVER GIVE UP on 06.30.16 at 8:17 pm

FINALLY SOME ACTION!
The scumbags in the real estate industry just lost their self governance!
MORE ACTION NEEDED!

http://www.theprovince.com/business/real-estate/christy+clark+shakes+real+estate+industry+with+more+self/12025721/story.html

#37 Wack on 06.30.16 at 8:17 pm

Thanks Garth for your financial opinions and blunt talk it is appreciated and is a rare commodity in this country.

I’ve even steered my millennial son to your blog, to make sure he hears a good dose of financial bluntness!

And yes, he is a small part of the house horniness, but a modest house, 25%dp, (a little help from ma/pa, but lion share him & wify) bsmt suite income. No crazy new car pmts and yes a small growing portfolio , auto deposits, (cause you’re just gonna buy crap with it anyways if you don’t) Just saying it can be done with a little discipline or a lot!

Anyways, I’ll repeat what others have said, if you get frustrated by idiots comments, monetize this blog and hire a moderator. I do also learn from others experiences written here and am sometimes entertained by the idiots, or your responses to them! Take care!

Happy Canada Day! Still the best country in the world!!@

#38 Vundo on 06.30.16 at 8:20 pm

#3: [email protected] is the nice lady at the bank. The one who will sell you mutual funds with a 2.2% MER if you don’t know any better.

#39 Self Directed on 06.30.16 at 8:21 pm

For the past 18 months the markets have been like a jagged line on a Richter scale. Up Down. Up Down. I wish it was 2012 again. The US was in full recovery… nothing but up swing. So much uncertainty now.

#40 Andrew Woburn on 06.30.16 at 8:22 pm

This is about as concise a summary of the root problems with the European Union as you will ever find.

“He argued that the Europe Union model — unlike the federalism in Canada and the U.S. — would ultimately fail.

His view was succinctly put this way: A monetary union with free mobility of labour operating in Europe could not work without a banking union, since governments would eventually need to support and regulate distressed banks.

But since a banking union requires stronger economies to support weaker ones, that would in turn require a fiscal union with transfers made between member states and the control of taxing power handed to the European level.

And since spending and tax policy is an expression of sovereignty, ultimately the EU must become a political union to support a fiscal, banking and monetary union. Except that no European member state would ever agree to secede sovereign powers, as was done in Canada and the United States when they became nations.”

http://business.financialpost.com/fp-comment/jack-mintz-without-serious-change-the-eu-is-doomed

So you can have a regional common market of cooperating sovereign nations or you can have a federal state with common currency and centralized political/fiscal governance. If you try to park somewhere in the middle, eventually the wheels fall off.

#41 Lulu on 06.30.16 at 8:23 pm

When interest only mortgage not working, maybe generation mortgage will be in place very soon, Aren’t we very similar to the 90’s Japan housing market except today rate is so much lower than before. Sales in the Vancity and Ontario is shrinking every month, wonder how long will this last?

#42 John on 06.30.16 at 8:24 pm

The greater fools were all over our friend’s hood, in a uniquely forested and rare nook in west Mississauga, this May. Frenzy. Bully offers. Hundreds of thousand over asking. No conditions. Few listings. Come June. The frenzy seized up. Did the shoe drop? Honest realtors know the score. Given Garth’s report on credit issuing roulette it looks like the last drips of the IV are being administered. The proof is on the little dots on MLS which seem to be stuck on the screen. And this in the inner 905! Tic toc

#43 genxbiz on 06.30.16 at 8:26 pm

I wonder how long the levers of fiscal and monetary policy can be manipulated to make the economy do what we need it to do.

#44 ww1 on 06.30.16 at 8:26 pm

#3 Garth Help! on 06.30.16 at 7:15 pm
What does [email protected] stand for?

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

The Nice Lady @ The Bank …

There is a nice list (not mine) of other acronyms here :

http://tinyurl.com/hsa6dre

#45 The Great Gazoo on 06.30.16 at 8:28 pm

Another sign that we are in a bubble. Hopefully Janet hikes rates at least once this year, this madness cannot continue.

Garth, take Sunday off, you earned it.

#46 mouldy in YVR on 06.30.16 at 8:43 pm

Garth …hope you are planning to have a good summer break …..away from the blogs, the dawgs and the craziness of current times …….
“Sirius rises late in the dark, liquid sky
On summer nights, star of stars,
Orion’s Dog they call it, brightest
Of all, but an evil portent, bringing heat
And fevers to suffering humanity”..Homer

#47 NEVER GIVE UP on 06.30.16 at 8:46 pm

ACTION NEEDED:

1. Allow crystal clear transparent sales data on previous sales and everything to do with a property and the sale.
Not hide everything so we have to hang on to our realtors coattail to find out a few tidbits if we sit on our hind legs and bark!

2. Time and date stamp all offers and counter offers and make them available to the public and verifiable. This will end phony realtors telling everyone they are holding a pile of over asking offers. There should be a time when offers will be opened in public and all non winning offers should then be scrutinized by all concerned. There should be a shill registry whereby all offers are registered and names of frequent offers are investigated for legitimacy. (There will be no end to the insidious thievery of a dirty industry staffed with Thugs. We just have to try to control it.)

3. Charge a 50% capital gains tax on non taxpaying Canadians or foreigners with a sliding scale using a reasonable income tax paid to coincide with the value of a home lived in or owned. ( for example someone should possibly be declaring a 6 figure income if they are owning an $800,000.00 home.)

4.Use those capital gains taxes as a dedicated tax for social housing.

5. End the CMHC. If the banks cannot trust a borrower why is the government doing it for them? Vote Buying, that’s why.

6. Tax unused housing at a rate of 50% of the reasonable value of the rent. Exempt those who are seniors who are travelling. Make a few reasonable exemptions but make it punishing to go through a review. If a home is not lived in then there is no one contributing to the local economy. People who live in a neighborhood are spending in local restaurants and shops. They gas up their cars and participate in the economy. People should not be using real estate as a parking place or a laundry for money.
We can use hotlines and electrical meter data to verify.

7. There are many other tools to possibly use. The main goal is to stop the housing futures market.
Housing is for Living not Profit. Make investor immigrants bring brains and money to new business ventures not house pumping that damages the future of our young.

#48 Entrepreneur on 06.30.16 at 8:56 pm

I shake in my boots just reading the blog. A person has to be in a make-believe world when signing on the dotted line and/or high hopes that this foreign investment and/or money laundering scheme carries on. It is amazing what money does to a person. As for Premier Christy Clark she had two terms to do something about the problem. Get someone in now to do the job correcting and efficiently as soon as possible. No more 2 months from now or a year, time is up, a long time ago.

I don’t want Mark Carney back #88 Peter if he gets fired in England as on the video. I think he has dyslexic because when in Canada experts said to raise the interest rates but he did the opposite, lol.

#234 NoName in Blog “Careful”…The Winchester 94 okay, but for hunting that comes with experience and target practice, know what your rifle can and cannot do plus how to handle, carry it with no bullets in. It is best to take your time aiming and shooting for accuracy (for other reasons too) so not want to damage more meat than have to. The picture does not bother me but that comes with experience being around rifles.

As for the other video on individual outrage killings, if only we live in a where disputes, etc. can be solved rationally but people are so emotionally upset with the anger, disgrace; whatever, they want “eye-for-a-eye” action and result. Now if I saw this my reaction would to tackle if can’t someone else could. Plus, mental issues should be a red flag for owning a gun.

Killings will continue but the use of weapon(s) (or use of rounds) should not escalate to add “fuel to the fire” or two negatives does not make it right or positive. But is the states too far away from this approach, but start small and work on it. It can be done (had chalk thrown at us if we ever said can’t). If don’t next tanks.

#49 Say What? on 06.30.16 at 8:59 pm

“So, imagine what happens when rates eventually turn.” – Garth

——————————————-

Garth, you’ve talking about higher rates for years. It hasn’t happened. And for the very reason you’ve stated. Everybody’s pickled in debt. Everywhere. Central bankers worldwide will not allow rates to go up. It would be disastrous. Does anybody really believe that rates can ever go up?

#50 Craigster on 06.30.16 at 9:06 pm

anyone else noticed Garth has returned to “stick to his knitting”, as they say in Britain, after his arrogant and dismissive comments earlier in the week about the 17m Britons who voted against the anti-democratic hegemony of the EU?

As of today, I’ve stopped reading what was previously a valuable and valued blog.

This blog is “valuable and valued” when I agree with you and “arrogant and dismissive” when I don’t? Funny guy. Don’t forget your hat. — Garth

#51 salonist on 06.30.16 at 9:08 pm

one asset strategy,
degree, iou

#52 IM in C on 06.30.16 at 9:13 pm

Interest rates are not going up. There is just too much money out there already, and the supply is going to go up!

#53 Shawn on 06.30.16 at 9:18 pm

Do Low Rates Mean We Can Off The Mortgage Quickly?

Garth said: At these levels (2.4%, 2.1%) , borrowers can trash home loans at a rate unknown a decade or even five years ago…

*****************************************
That would certainly be true if the mortgage was the same size as years ago.

And yes, it is true that a low interest rate mortgage gets automatically paid down faster in the early years than a high interest mortgage.

But the HUGE size of today’s mortgages wipes out these benefits entirely and then some.

In the old days (say 1990 or 1995) you might have a $100k mortgage on a single family home in say Edmonton and pay about $10,000 per year on it with a 25 year amortization. If you got a $10,000 bonus and whacked it on the mortgage you made a really nice 10% dent in the mortgage.

But today it might be a $500,000 mortgage with payments of $30,000 per year or whatever.

Now a $10k bonus paid on the mortgage hardly makes a noticeable scuff (it’s just 2%) in the mortgage let alone a dent. Even $20k to account for inflation hardly dents the mortgage at 4% of principle. In the first example $10k paid off 10% of the mortgage. Now it takes $50k to do that.

My view stated here before is that today’s jumbo mortgages are almost immune to getting paid off early. Maybe out around year 15 or 20… but lump sums before that hardly dent the beast.

I agree, try to limit to a 25 year amortization. If you go 35 you will be extremely hard pressed to pay it off much under 35 years. Indentured slavery, anyone?

I referred to the pace of trashing mortgages when rates are low, obviously. Principal reduction can be 50% of monthly payments whereas with a 12% mortgage they are 10%. — Garth

#54 BAIL ME OUT , I'M TOO BIG TO FAIL on 06.30.16 at 9:18 pm

DELETED

#55 BAIL ME OUT , I'M TOO BIG TO FAIL on 06.30.16 at 9:24 pm

M42BC…what does this mean ?

#56 WUL on 06.30.16 at 9:27 pm

Honourable Mr. Garth Turner, M.P., P.C., O.T.W.F.B.*:

I chime in from Ft. Mac here in the hinterland only to extend my wish that you and yours enjoy a swell Canada Day.

And to those just south of us, a dandy 4 July.

WUL

* Outta This World Financial Blogger

#57 Metaxa on 06.30.16 at 9:28 pm

@ steerage steward :

thank you for posting that.
I wouldn’t have caught it otherwise and I truly enjoyed reading it.

Reading the comments was illuminating, especially compared to other online comment sections.

#58 For those about to flop... on 06.30.16 at 9:38 pm

#49 BAIL ME OUT , I’M TOO BIG TO FAIL on 06.30.16 at 9:24 pm
M42BC…what does this mean ?

/////////////////////////

It is my current GAP code.
Gender,Age,Province.

Next year I could decide to have a sex change and move to Ontario and my GAP code would be F43ON.

I will have to run this by my wife first.

Our American cousins have a GAS code…

M42BC

#59 cecilhenry on 06.30.16 at 9:42 pm

If a have 1,000,000, and invest in preferreds at 6% with a mortgage for $1,000,000 at 2.5%, do I get a 3.5% investment return with a free house at the end??

Is this the logic?? What’s the catch.

In any event, million dollar houses scream poverty, and declining living standards, not wealth.

Everything else gets cheaper with progress (a million dollar computer in 1960 is $400 now), why is this an exception???

#60 toronto1 on 06.30.16 at 9:43 pm

@ Mark #33

yesterday you called my notion that cap tax rate will hit 75% preposterous. What and see– before the federal budget there were talks about raising this on secondary properties on a sliding scale based on sold value– similar to the way estate taxes are calculated. It got cut at the last minute.

I also expect CRA to get real aggressive with those that flip or re sell assignments or those that purchase and sell within exactly a year period. The govt has left a lot of money on the table. How do you think T2 infrastructure action plan is going to be funded?

All these people cheering for govt intervention are wrong– the govt never met a tax it did not like. Thats an easy give me and in the Liberals socialist paradise anyone with two properties in considered “bourgeois” .

on a different note check out http://www.cbc.ca/news/business/cp-layoffs-derailment-risk-1.3652528

CP laying off 500 maintenance workers due to slowing volumes– rail and ports are harbingers for economic activity– folks don’t realize how much of our imports actually travel from ports via rail across country.

#61 Metaxa on 06.30.16 at 9:49 pm

@ #2 Randy:

I blame 40 years of brainwashing in Liberalism

If you go back 40 years you are in 1976.
So our 30th sitting of Parliament.

Just using good old round bar talk figures the Liberals governed in 18 of those years while the PC/C parties governed in 19.

So, if less than half the time was Liberal brainwashing, what happened the other larger half?

Brain wasting?

#62 rainclouds on 06.30.16 at 9:49 pm

#21 steerage

Great Canada Day /Independence day link.

A US newspaper article about Canadians helping middle eastern refugees.

Good Choice!!!

#63 Colin Baskinginit. on 06.30.16 at 9:51 pm

I’m a real dummy I guess. To me the idea of paying $3500 a month for thirty years would be a lifetime of soul sucking slavery. Todays emergency rates will rise at some point and these fools will end up eating grass. God…the idea of no vacations, no outings, reduced children, zero savings…that all sounds like so much fun…but I’m opting out. Starve he beast I say…..don’t support the dreams of politicians….support your own.

I can’t tell you how sweet life is living and working in Thailand. I just got back from a week in Bali, we go often, it’s cheap. We travel around this region frequently due to our increased disposable income….housing is super cheap, food is super cheap, travel is super cheap, clothing, cars and etc’s are all super cheap. I’ll be flying to Laos for a long weekend….enjoy the gardening on the house you’ll have to die in to ever make a profit. Meanwhile I swim every day in a 50 meter pool over looking an incredible city where life never ends due to credit failure. We got sunshine every day and tax cost is less than a third of Canada…it’s 15% flat for foreign corp execs….with no CPP or EI grab.

Did I say the perks were unbelievable? Why would any right minded person decide to enslave themselves for a suburban house that eats their dreams and sucks away their life and soul…..to pay a government that couldn’t give a shit whether you’re dead or alive.

#64 X on 06.30.16 at 9:52 pm

Hoping Bill will put a cap on the am periods at 25 yrs….reel in some of this stupidity. All people care about now is the monthly payment, that’s it.

As to some of this other funny business/lending that is going on… how do you stop banks from over lending? I mean in the example given, CMHC isn’t on the hook, it is all the banks responsibility.

And how does the gov’t pull all of this off and not look like the bad guy….may help to be able to implement some further RE rules and regulations….

Still not expecting much from Mr. Morneau on this though. Actions speak louder than words.

#65 GrayJayFlyer on 06.30.16 at 9:58 pm

Was in the Lower Mainland, where I grew up, for a few days this week (I left in the late 1970s). We still have the family home; its in a suburb 16 miles east of the city centre. Subdivision was built out in the late 1950s. Working class district when I grew up, large lots with small, sturdy, plain-looking affordable bungalows. At least 25% of the district has been knocked down and replaced with 3-car-garage, media-room-in-the-basement monsters, and the pace has accelerated. The house next door, also original and due to be knocked down, just sold for $1.3 million. So buying a lot alone in the burbs outside of Van proper is already over the paltry $1 M CMHC limit. Justin should do something about raising that limit, non? :-)

Garth is correct…this is Canadians doing it to themselves, drunk on cheap and abundant credit that flows like the mighty Fraser.

#66 Brian Ripley on 06.30.16 at 10:00 pm

The BoC SLO & BO surveys suggest that credit tightening is occurring and opinions of lenders are similar to 2007 prior to 2008-09 when the brakes were applied, chart here at top of page: http://www.chpc.biz/history-readings/china-shop-bull

Now that we have had the Brexit surprise and Euro banks have joined the Japanese and Chinese banking turmoil, I suspect we will see more rigor applied to loan ratios in Canada if we can trust the meme that Canadian banks are fiscally conservative.

#67 WallOfWorry on 06.30.16 at 10:09 pm

If we want to moderate the real estate sector why don’t we just raise interest rates? It was just a short while ago that we were hearing about these prophecies of how the Canadian homeowner was going to be decimated because the US was on a slow yet steady path of increasing rates? Maybe we are focusing on the wrong problem? After throwing Trillions of liquidity into the market maybe we have to ask ourselves why are we seeing GDP growth at 1% and over $12 Trillion dollars of sovereign debt at negative interest rates?

#68 BOOM! on 06.30.16 at 10:20 pm

I really love an irrational panic! Queue the stock market last Friday & Monday. By Monday afternoon I started noodling around to put some of my idle cash (from Jan-Feb) where I couldn’t get my limit prices on some stuff.

Managed to get it working on Monday, and by Today my portfolio had fully recovered, with enough extra to fully pay for my new roof & patio door.

Thanks, panic sellers, I love your kind!

I’ll look now at some of the things I think might have run about as far as valuations should take them and cull some stuff. Not much ‘free cash’ available right now.

M64WI

#69 Kat on 06.30.16 at 10:21 pm

Hello I have just started following this blog and really enjoying it. I would like to ask as someone new to wanting to invest etc how I get started what to read and the like. I keep getting told to have a balanced portfolio and a trusted advisor. Okay, so how do I find one and how do I figure out what a balanced portfolio is. I have been taught to save and that is it, I would like to learn how to make money on my earnings so I can be set for my retirement. Thank you if I get a response.

#70 the Jaguar on 06.30.16 at 10:22 pm

#3 Garth Help! on 06.30.16 at 7:15 pm
What does [email protected] stand for?

Several have commented that this represents “Nice Lady @ the bank”, however I think it really means “New Lady @ the bank”, which is an acknowledgement to the fact of the constant revolving door where it applies to bank employees. New face every week. No wonder….it is more or less a slaughterhouse. That spelling might not be correct, but you get the general idea.
Alert::::sensitive type may not wish to read the rest of this post::::
Case anyone cares….just returned from a few days in “B.C. Interior” and can confirm nothing has changed. Never mind the Madison avenue advertisements about Kelowna and its magic. The real truth is something else and well hidden from prying eyes. (Not just talking about how ‘dirty’ Lake Okanagan is….) Just download the movie ‘Deliverance’ for clues.
Surprised war hasn’t broken out on the border of Alberta and BC given the complete cultural differences. Lazy people. Drug culture. Larceny everwhere you look. Never mind Muslims versus Christians. BC versus Alberta is an education. Understand that anyone tuning in from east of Manitoba might be scratching their heads at these comments. They do nevertheless represent reality.
If Alberta joins up with the USA the business will head to Flathead lake, Montana, USA.

#71 AB Boxster on 06.30.16 at 10:26 pm

#139 young & foolish on 06.30.16 at 9:42 am
We are not going back to the “golden age” of yesteryear ….

It wasn’t that great, kid. — Garth

————————————–

I don’t know Garth.
You know, years ago there were actually some good bands and good music you could hear live. And you could even find and afford a ticket.

Today you can’t get close to touching a ticket at Tragically Hip concert because they are somehow immediately all sold out ,yet magically available on Ticketmasters partner site, milliseconds after they all sold out , for only 10 times the face price.

And at least years ago, if you did not the have cash to travel elsewhere, at the very lest you could grab a crappy tent and go camping.
Now in BC, because of electronic advance reservations, the travel outfits are buying up all available campsites and reselling them to visitor at twice the price. So that BC locals can’t even camp in their own parks.

Real estate agents used to be just folks trying to sell a house and they took a reasonable fee. Now they are crooks, doing the most unethical deals they can, all in the effort to make more coin.
Screw ethics, screw what’s right, screw my clients if they are too stupid to understand or see through our lies. Its all about the dough.

Why does everything that seems to be useful, get fked up by someone to acomodate those with more greed, or so much money that the average guy is screwed?

Frankly, for many things, yesteryear was a far preferable time.

#72 BOOM! on 06.30.16 at 10:29 pm

Oh. Where are my manners? Everyone, have a delightful Canada Day tomorrow, as we look forward to a delightful 4th of July.

May the weather cooperate, wherever you’re reading.

#73 rknusa on 06.30.16 at 10:41 pm

re: When the tide goes out, the naked will be known.

Not the banks

almost three-quarters of CMHC’s outstanding mortgage insurance is low-ratio (i.e., 20% equity or more). That’s largely because banks have been buying portfolio insurance in gobs to insure against defaults even on low-risk conventional mortgages.

#74 Garth Help! on 06.30.16 at 10:42 pm

Thanks ww1 and all the other “blog dogs” who helped me decode Garthisms and his love of acronyms!

#75 Pooh on 06.30.16 at 10:54 pm

Agree that a rate turn will change the tides, but in no way is that ‘the’ needed variable.

We’ve seen that low rates have had some stick for some time now, which could just as easily continue well into the future.

But any bull thinking that’s their safety indicator is asking for it. Ask Japan.

#76 WUL on 06.30.16 at 10:57 pm

Garth:

If I may, a comment on a comment from yesterday.

$$$$$$$$$$$$$$

#198 Michael Hwang on 06.30.16 at 7:15 pm

“My colleagues and I here in Calgary are amazed at the fact that house prices have not really moved much since the economic challenges started affecting our city.”
_______________________

I have argued for months now about this.

The “average house price” is the average transaction dollar value of a real estate purchase. So this year’s $484K transaction value is the same as last years’.

But what are the purchasers’ acquiring for those dollars spent?

A nicer property perhaps. The average “home price” tells you what people are paying for real estate. It does not tell you anything about the “land” that people are acquiring for that price. I suspect the purchase price is buying finer digs.

Revisit Garth’s post about the mansions in Priddis, AB. $2MM faux mansions going for $1.5 MM.

But, what do I know?

Dawgs??

#77 Dividends on 06.30.16 at 10:58 pm

Garth, could you, on a future blog run through a case or two of dividend taxes relative to a savings account?

If you make 100k the dividend tax is 25%?

If you make 80k the dividend tax is 11%?

Compared to 45% for a Tangerine savings account?

#78 Long Branch Apprentice on 06.30.16 at 11:00 pm

Money is losing it’s value, plain and simple.

Hence the flight to real assets.

Real estate aside, there is no flight. — Garth

#79 barnz0rz on 06.30.16 at 11:09 pm

Got a letter the other day from MBNA. Was told my CC rate was going up from 9.99% to 14.99%. Called to ask why, was told they raised their rates on all their rewards cards. But I don’t have a rewards card. Was then told my account was being changed anyway, no specific reason. I suggested I would be paying off the balance and closing the account. The responce: “Sounds great”. I’m a 16 year card holder and never missed a payment, even when my balance was $20K +.

#80 Smoking Man on 06.30.16 at 11:16 pm

#72 Long Branch Apprentice on 06.30.16 at 11:00 pm
Money is losing it’s value, plain and simple.

Hence the flight to real assets.

Real estate aside, there is no flight. — Garth
……………….

Going to have fake bear with Garth tomorrow, You coming?

#81 Smoking Man on 06.30.16 at 11:33 pm

Shit; should have said fake BEER spelling is a problem for me.

But it wont stop the next best thing form Hunter S Thompson. Thank you dogs for pointing out the similarities

Shit like spelling is so over rated.

It’s all about the story……no Mather how much your mind fking teachers told you to dot the “I” and cross the “T’s”

Usless morons they are

#82 Linda on 06.30.16 at 11:41 pm

Have to say, I am deeply impressed by the dogs ability to hold that many sticks of wood at once! Be a good companion to bring along on a camping trip.

Funny how there always seems to be a loophole. So long term mortgages were banned but – loophole – so people can still get them. I’m at a loss as to why people in Canada would want one unless they can somehow get a deal where the interest rate is locked in for the 30/35/40 year term. Then it might make sense. Otherwise, just a way to separate fools from their money.

#83 Dan Duran on 06.30.16 at 11:42 pm

So it looks like he has 40% equity + a line of credit – no problem here. And what’s magic about loan-to disposable income ratio? At 450%, even if the rates were to triple, the interest cost would be about 30% of income. Reasonable (depending on lifestyle choices). Because just as well, there’s nothing magical about amortization. No reason to own the home outright when you die, so somebody else can enjoy it for free. As long as you have good equity (say 50% or more) and you can pay the interest and be happy in your little corner of the paradise, who cares? Should Steve or Justin or Stephen or Garth care about how you spend your money?

#84 Metaxa on 06.30.16 at 11:58 pm

@ #69 Kat
Hello I have just started following this blog and really enjoying it. I would like to ask as someone new to wanting to invest etc how I get started what to read and the like. I keep getting told to have a balanced portfolio and a trusted advisor. Okay, so how do I find one and how do I figure out what a balanced portfolio is. I have been taught to save and that is it, I would like to learn how to make money on my earnings so I can be set for my retirement. Thank you if I get a response.

There will be as many opinions on this as there are people. Here is what I would do if I were starting out in today’s climate.

1) read all the archived issues of this blog.
2) read the same at canadiancouchpotato.com.
3) read everything at getyourshittogether.org (honest, its a financial site)

4) Start saving into your regular bank account.
5) Start asking friends/family/co-workers how or who they use to handle their money.

6) When your savings equal one year of living expenses take half of that and either see a financial planner or embark with a robot advisor and start. Begin. Do it.
7) Start with TFSA’s
8) As soon as you know the difference between a financial planner and a financial advisor you are well on your way to winning.

9) Its not rocket science, you can do this.

Personally I tire of worrying about this or that so I use an advisor who works for one of the old wealth management firms that are now owned by a large chartered bank. She is connected to my community and is highly unlikely to scram for the bigger money in a larger city. Once a year I sit with an independent financial planner who looks things over and makes any suggestions he feels needed.
Works for me.

You probably should stay away from the bank/credit union advisors as they are told what to ush and its not always what is the best offering available.

Somewhere in there you could contact Garth’s day job and find out what their minimum investment is to get going…you could do far worse.

don’t be afraid of paying someone for the advice/work they do…especially in the beginning but also do not be afraid to walk if you are no longer comfortable. You should come out of every meeting with all your questions answered and a general good feeling about going forward. If anything causes you angst and it isn’t addressed that is alarm bell time.

#85 meslippery on 07.01.16 at 12:10 am

What does [email protected] stand for?
nice lady @ the bank.
Now what is YVR?( York van river) like van down by the river.

#86 Self Directed on 07.01.16 at 12:12 am

#69 Kat on 06.30.16 at 10:21 pm

Hello I have just started following this blog and really enjoying it. I would like to ask as someone new to wanting to invest etc how I get started what to read and the like. I keep getting told to have a balanced portfolio and a trusted advisor. Okay, so how do I find one and how do I figure out what a balanced portfolio is. I have been taught to save and that is it, I would like to learn how to make money on my earnings so I can be set for my retirement. Thank you if I get a response.
————————-
Dear Kat,

Yes, the blog is addicting. Garth can be your canary in the mine-shaft, so to speak. He offers great perspectives on past, present, and future.

I think he’s vague about the “How” on purpose. Not ethical to tell you specifically “What” to buy. You won’t find stock picks here. Just puzzle pieces that you can put together slowly as you read. Don’t worry. The puzzle gets easier once you build the frame first! :)

Yes, balanced and diversified is Garth’s Mantra. Read this post: http://www.greaterfool.ca/2014/05/15/the-millennial-portfolio/

After you start learning more about investing, you might decide to do it yourself, instead of getting an advisor. You can learn all about index mutual funds and exchange-traded funds (ETFs) here:
http://www.canadiancouchpotato.com/

Many banks offer online trading accounts. For example, you can open a WebBroker account with TD that links to your online banking, so you can move money to and from accounts. Fill up your Registered RRSP and TFSA accounts first! Tax free and Tax deferral accounts are your friends! If you have extra, then build up a non-registered account. Basically, you can build your own portfolio. Careful with the Capital Markets! Don’t go buying up a bunch of stocks you are not familiar with. The fees and uncertainty will kill you.

But you also have to decide your asset allocation. (i.e. weighting of each). I thought this link explains it well… with a little video near the top.
http://www.investopedia.com/terms/a/assetallocation.asp

Hopefully, I’ve given you some direction and ideas, without my own personal bias or influence.

#87 AisA on 07.01.16 at 12:18 am

It is amazing the incredulity I confront when I explain to people after seven years of living there, that Canada does things exactly like Greece… did… before shtf.

#88 Madness on 07.01.16 at 12:22 am

I’m pretty sure the pup in that picture is a better “branch” manager than the one at Paul’s bank.

#89 NotAGreaterFool on 07.01.16 at 12:26 am

So Garth, what is your call on the housing market? Does it remain as “slow thaw” or are you seeing more swift corrections/adjustments?

#90 Ronaldo on 07.01.16 at 12:45 am

#38 Vundo on 06.30.16 at 8:20 pm

#3: [email protected] is the nice lady at the bank. The one who will sell you mutual funds with a 2.2% MER if you don’t know any better.
—————————————–

Maybe she should be called ‘The naughty lady at the bank’.

#91 Alex on 07.01.16 at 1:14 am

Garth, Thanks for sharing.

It looks like based on economic fundamentals this is a real disaster brewing. However, it looks like the governments have every policy possible to keep the party going including dirt low interest rates, unregulated foreign investors, no oversight over real estate/mortgage agents and zero transparency. I think the goal was to put every band aid on real estate to keep the value rising and hope that the economy can turn the tide to catch up or justify the exorbitant prices. I don’t think pricing will come down or interest rates will increase as the fall out would be too much for many Canadians even though simple economics would tell us that it would be inevitable.

#92 Metaxa on 07.01.16 at 1:21 am

@ Kat again:

Thought of a few more things…may apply, may not.

Imagine hockey being played with five, six or more pucks. Goalies would have difficulty figuring out which puck to watch.
Or baseball…has one ball at a time, one pitcher, one batter. Imagine if you were the batter and you looked out to the mound and there were four pitchers, all winding up and throwing at your strike zone. Some sliders, some fastballs, some sinkers, so…chaos right?

So your income is that bat, your debts are those pitchers and your monthly payments are those balls coming at you. Be way simpler to face one at a time.

the point being, if you are just starting out you don’t need a bunch of payments ongoing. If you have to put it onto a credit card you probably don’t need it.

I keep one credit card, RBC Rate Advantage. you don’t find it widely offered but ask, see if its for you. I imagine you have to qualify. No points, no miles but my interest rate is 7% so if I ever do have to carry a balance that is way better than 19.9% right?

Look up the true definition of frugal. It doesn’t mean what most folks think it does. If you need boots for your work it makes way more sense to buy a single pair of Red Wings at $200 than to buy $70 Wal Mart boots five times over the same period that the Red Wings last.
Be frugal, not trendy ,spend thrifty.

A really good restaurant once a month, not a series of crappity ones each week.

look after yourself too. A lot of folks get old and rich but they live on Metamucil and hate. Don’t allow yourself to go there, it hurts you and those around you.

give a chunk away every now and then…just enough so it causes you to pause and it makes a difference to the recipient, who or whatever that may be.

Don’t take any advice from anyone who includes “Get a divorce” as part of their financial advice, freely doled out in online comment sections.

I’m here all week, try the pasta, tip your server.

#93 NoName on 07.01.16 at 2:01 am

HAPPY CANADA DAY

https://youtu.be/TjYLIxWbH_E

#94 Looney Baloney on 07.01.16 at 2:17 am

@jimmy #17
Better to remain silent and be thought a fool than to open thy mouth and remove all doubt.

#95 Mark on 07.01.16 at 2:38 am

“Also, foreign capital can access big local mortgages if they have 35% down. If the prices go down, they just bail and leave the locals with the bill. With that escape hatch, why risk their own money…”

There was an example I gave the other day, as a quote, where a foreign national accessed 100% financing from Canadian banks. A rare case most likely, but still explains how certain foreign nationals can own extravagant housing while there is no evidence of “foreign inflows”.

“almost three-quarters of CMHC’s outstanding mortgage insurance is low-ratio (i.e., 20% equity or more). That’s largely because banks have been buying portfolio insurance in gobs to insure against defaults even on low-risk conventional mortgages.”

Obviously because of the strong returns in RE 1996-2013, a lot of mortgages originally issued as high-ratio, on account of the appreciation, have become low-ratio mortgages.

But it is true that the banks have been very aggressive in buying CMHC subprime mortgage insurance, even on mortgages which may seem to be high quality. The banks know that a Canadian RE decline of 40-60% from peak (2013) prices is quite likely and have positioned their portfolios accordingly to benefit. CMHC subprime mortgage insurance can be thought of as a low cost “put” option.

“CP laying off 500 maintenance workers due to slowing volumes– rail and ports are harbingers for economic activity– folks don’t realize how much of our imports actually travel from ports via rail across country.”

Yeah Canada’s railways are decrepit, even the “main lines”, and I’m sure the sector could swallow $100-$200B of investment easily. Along with the telecom sector.

The key for policy makers is creating the policy incentives for this to happen as RE crashes as a source of economic demand in the economy. ZIRP alone won’t revive the Canadian economy, IMHO, in the post-RE crash period.

#96 Gotme Thinkin on 07.01.16 at 3:43 am

Canada has become an economy of debt.

http://www.bnn.ca/News/2016/6/30/How-Canadas-hot-housing-market-is-propping-up-GDP-growth.aspx

with RE as the major driver in our economy we might as well Brexit ourselves from any global aspirations …we mean nothing except to trade houses back and forth to each other.

I wonder when cabbage will be $15 a head…soon I think

#97 30 yr am, low rates, paper millionaires... on 07.01.16 at 4:44 am

To the low interest rate forever posters, a 30 yr am means for the first 15 yrs you are payng back mostly interest; thus, most of your principle is intact.

So if you think nothing will mess up your on paper wealth IN THE NEXT 15 years you need to see someone…things like recessions, job loss, maybe an interest hike, you still need that therapist. Then you have to sell to monetize.

Crazy debt RE obssesed people…not one economic cycle yet where they have prospered…15 years is a LONG, LONG time.

#98 Dave in Kincardine on 07.01.16 at 5:26 am

The logic is sound to get into the housing rat race with monster debt. By not playing you lose, so take a chance on winning big. Yes if you are caught when the music stops you lose it all but at least there is a reasonable chance of winning. Nothing ventured nothing gained. The real brilliant ones will see equity build quickly and shift to safer assets later- TFSA, RSP, Open investment accounts. Certain RSP’s are creditor proof as well- seg funds.

#99 Gregor on 07.01.16 at 7:52 am

Happy Pride Week Everyone!!

Enjoy the day today and the parade on Sunday :)

#100 For those about to flop... on 07.01.16 at 8:47 am

I was going to try and write something ageist,sexist and racist in an attempt to get banned from the blog to join the celebrations.

Then my wife kindly pointed out that it was not Banada day ,but in fact Canada day.

Anyway ,to all the people banned from the blog since last July 1st…Happy Banada Day…

M42BC

#101 Steerage bilge on 07.01.16 at 9:25 am

#81 Smoking Man on 06.30.16 at 11:33 pm
Shit; should have said fake BEER spelling is a problem for me.

But it wont stop the next best thing form Hunter S Thompson. Thank you dogs for pointing out the similarities

Shit like spelling is so over rated.

It’s all about the story……no Mather how much your mind fking teachers told you to dot the “I” and cross the “T’s”

Usless morons they are


Not buying it. It’s pride week and you have naked bears on your mind….

#102 Gromler Somchai on 07.01.16 at 9:35 am

#63 Colin Baskinginit. on 06.30.16 at 9:51 pm

We got sunshine every day and tax cost is less than a third of Canada…it’s 15% flat for foreign corp execs….with no CPP or EI grab.”

This is nonsense…top thai marginal tax rate is 30-35%
http://www.rd.go.th/publish/6045.0.html

unless of course your salary is really low, or your company is not ahem ***ahem reporting your full income…

#103 Gromler Somchai on 07.01.16 at 9:50 am

#63 Colin Baskinginit. on 06.30.16 at 9:51 pm
…. We got sunshine every day…”

More nonsense….

“Ministry places all provinces hit by rains on flood and landslide alert”
http://englishnews.thaipbs.or.th/ministry-places-provinces-hit-rains-flood-landslide-alert/

#104 young & foolish on 07.01.16 at 9:54 am

Hey Blog Dogs …. you’ve heard it everywhere …. “growth” is slow …. without government intervention (spending) we would likely slide into severe deflation.

Debts as far as the eye can see … and maybe helicopter money on the way ….

In this version of a “free market”, the government plays a central role.

#105 Bank of Millennial on 07.01.16 at 9:55 am

#23 I’m stupid

[email protected] – The Hot Lady at the Bank? Serving up mortgages with a side of horny.

#106 young & foolish on 07.01.16 at 9:59 am

“Canada has become an economy of debt.”

Hahaha …. not only Canada my friend ….

No, the government does not run like your household budget (never has, and never will).

#107 WalMark of Sadkatoon on 07.01.16 at 10:04 am

happy canada day ppl

some of u need a beer

or 10

#108 Garth lets get real on 07.01.16 at 10:04 am

Its almost all Foreign Money in Canada causing problem #1 . Stop that completely or tax the hell out of it and everything else will normalize fast. Who cares if theres a correction for a while, thats life. Idiots that buy when they know the market has already gone up a ton, shouldnt be buying in the first place. If they get whacked , too bad.

Bubbles have to be popped or it gets worse.

Vancouver up over 30% YOY ?? Does anyone actually believe that was caused by local buyers with salaried jobs ? Low rates ?? Move up buyers ?? LOL!

Only foreign money can move a market that fast, that big. Lets get real here folks. Enough with the BS excuses about low rates, etc. Canada is a money laundering target because of crooked government as well! They are just as much criminal . i.e. Christy Clark !!

#109 young & foolish on 07.01.16 at 10:07 am

“It looks like based on economic fundamentals this is a real disaster brewing.”

It’s politics first, “economic fundamentals” are malleable.

#110 young & foolish on 07.01.16 at 10:26 am

What do “million dollar houses” mean?

a) Debt slavery
b) More money in the system
c) Increasing wealth gap
d) All of the above

#111 For those about to flop... on 07.01.16 at 10:55 am

Not too sure why they are making such a big deal about the Canada Day fireworks display out in Surrey.

There are fireworks out there every night.

Or as the RCMP likes to call them ,”targeted shootings”…

M42BC

#112 Rexx Rock on 07.01.16 at 11:22 am

Victoria Real Estate,you need to get your facts straight.A Gorden Head house near U Vic has gone up over $250,000 in 4 years.I know because I live here and seen the prices skyrocket.This place is the next Vancouver,get used to it.

#113 TurnerNation on 07.01.16 at 11:43 am

Globe mail homes section full of bidding wars.

Laughing here. Wanna earn 10% with monthly payouts? DIV.TO (recently increased divvy) and PRV.UN (Reit). Accumulating at these levels or lower.
I’m a semi pro kids don’t try this at home.

#Yieldhound.

#114 jay on 07.01.16 at 12:14 pm

http://blogs.wsj.com/moneybeat/2016/06/30/sterling-and-gilt-yields-slump-as-bank-of-england-suggests-easing-over-summer/

#115 TurnerNation on 07.01.16 at 12:29 pm

Fine something more conservative.
Pimco global income fund – PGI.UN. 8%, paid monthly, recently increased payout.
Uppa upp. Atsa the Boy. Everything in a TFSA.

#116 macroman on 07.01.16 at 1:12 pm

Hey Boom, Flop says you have GAS.

Maybe to match the Gasbag of a realphony estate we have in the Hinterlands.

Happy Nations Bday to us and you

#117 For those about to flop... on 07.01.16 at 1:37 pm

O.k ,so today at Euro 2016 we have Wales /Ace Goodheart vs Belgium/ Mark.

Belgium will be favourites but if they lose Mark will argue it’s because the team has been in decline since its apex in 2013 just like Vancouver and Toronto real estate.

The winner will take on Portugal/ Brazil expat in the semifinals.

Also check out the waiter in the background of the Peruvian President inauguration speech…

M42BC

http://www.dailystar.co.uk/news/latest-news/526976/Waiter-Peru-Manuel-Fawlty-Towers-awkward-glass-of-water-President-s-speech

#118 jess on 07.01.16 at 2:11 pm

outcome——>anger feeds the trump beast

san fran 57% of the homes are over 1.m / or a tent —tech tax proposed

http://www.modernluxury.com/san-francisco/story/tech-workers-evict-kindergarten-teacher-mission-apartment-using-appliances

…”Every week brings new outrages, whether it’s the tenant in North Beach who, it emerged this week, received a notice informing him that his rent was increasing from $1,800 a month to $8,000, or the kindergarten teacher whose building was bought by two tech workers and, it was revealed this month, is now facing eviction for nuisance violations that include “using appliances”.

#119 Victoria Real Estate Update on 07.01.16 at 3:37 pm

# 112 Rexx Rock

The facts are exactly what I posted – with links to data from the Bank of Canada and Teranet’s index.

In typical housing bull (realtor?) style, you’ve made outrageous claims that are backed by nothing. It’s laughable.

This happens a lot on Garth’s site. Claims of a house down the street that has increased in price by an outrageous amount but no verifiable data to back the claim.

At the beginning of 2015, the media had published quotes from local realtors who said that buyers from
China were moving the market. I called BS. The facts showed that only 0.68% of all sales in Victoria went to these buyers.

Realtors love to say things to being on the fear of missing out. If one this is proven wrong they will find something else.

The wealthy Chinese buyer thing was proven wrong for Victoria so they moved on to something else – that Victoria was going to be the next Vancouver.

Facts. That’s what my posts are about.

Note that Teranet’s index doesn’t include resales that have been renovated since last being sold. If a house has undergone major renovations ($120 k, for example) and then sells for $120 K more than it did 4 years prior, there is no gain in value. This is why the Teranet index leaves renovated properties out.

However, the main point of this post is that a link to verifiable information must be provided to back any claim, otherwise it will be considered false information/realtor FOMO.

In 2008 you probably would have heard realtors talking about how it was different in Victoria and how it was the new Vancouver and how buyers from China were moving the market. That proved to be false. Since 2008, house prices in Victoria have only gained about 7-8%, much less than the rate of inflation.

It isn’t different in Victoria.

#120 Mark on 07.01.16 at 4:05 pm

“Hence the flight to real assets.”

Real estate only behaves as a ‘real’ asset when the debt against it is at reasonable levels. In a flight to real assets, real estate can go down significantly on account of the cost of finance rising.

Contemporary Canadian real estate is only priced at such levitated levels because of the extreme willingness of Canadians to lend. Much of this relates to the extremely unbalanced portfolios held by Canadians, typically, as Garth tells us routinely, heavy with GICs, cash, and other fixed income assets which are used by banks to fund mortgages. Remember that every dollar lent by Canadian banks must have first been borrowed from the banks from savers.

Take away that willingness to lend because of, for instance, a flight to real assets, or speculative enthusiasm in other assets (silver is quite the rocket today, eh?), and real estate can fall significantly.

#121 Mark on 07.01.16 at 4:09 pm

“must have first been borrowed from the banks from savers.”

slight correction. “must have first been borrowed by the banks from savers”.

#122 Good Times 2020 on 07.01.16 at 4:45 pm

Lets recap for the all the renters, and cashed out former homeowners:
* no black swan event will prompt a decline as you already had the crash of oil and recession watch in Canada and prices marched upwards
* no interest rates hike in the foreseeable future as even this blog has finally acknowledge that global economic conditions are week and Yellen is a big tease
* unmitigated flow of foreign capital and every increasing immigration rates will eat up any potential over supply in house
* most importantly, your governments want the party to continue and care more about offending anyone that actually doing the right thing

You know have to hope and pray that the very government that is dependent on housing for 25% of its GDP will enact meaningful measures to cool the market.

If this intervention is your best hope, then you might as well throw in your towel. All past efforts to cool the market have failed – they simply prompted prices even higher. Expect the same surge in prices following the conclusion of T2’s ‘deep dive’ into housing data with meaningless measures

#123 BOOM! on 07.01.16 at 4:55 pm

#116 Macroman

Well, since here in the states, we don’t have “provinces”
we can’t vey well use Flop’s GAP code.

We here in the lower farty 48 states must therefore use a GAS code. Alaska & Hawaii as well, but I haven’t recognized posters from those fine places.

As for me having GAS depends. Oh, was that a pun?

Warm, sunny day here, time to exercise that old topless nag. Enjoy the holiday!

Looks like markets settled down prior to the long 4th of July holiday. Good thing, it was quite the good week!!
We shall see what all that ECB liquidity brings next week.

M64WI

#124 Pale Ale on 07.01.16 at 5:14 pm

#8 @VREU

I also find it laughable when people compare Montreal and other stagnant markets with Vancouver and Toronto and have the impression that prices are “reasonable” here and they “don’t have much to correct” just because they are not exorbitant like those cities. The fact that they’re /currently/ stagnant doesn’t mean they aren’t stuck in a very high place.

Teranet shows prices in the city have grown 51.85% in the last 10 years alone. Inflation in that period was 17.41%.

According to CMHC the only reasons for the current stagnation are demographic and economic (i.e.: demographic decline, low wages, anemic economy)

Prices in the city would have to go back to 2007-2008 levels for them to go back to the mean.

#125 conan on 07.01.16 at 5:22 pm

There are only so many times you can go to well of quantitative easing. Do world class economists think it is some kind of unlimited well? I can see it now , one day we are fine, the next day it’s Mad Maxian.

There is no plan. We are only led by the one percenter sheep and we are the sheeple.

#126 mike trike on 07.01.16 at 5:48 pm

Thanks for those Dividend stocks TurnerNation. Keep em coming..

#127 Mark on 07.01.16 at 6:07 pm

“This is why the Teranet index leaves renovated properties out.”

But how does Teranet “know” that a property has been renovated or not? And the definition of ‘renovation’ may very well be problematic as well.

The big problem with Teranet is that it is a low-pass filter. Basically its years behind what is actually happening in the market because its methodology makes it a sort of non-reno-adjusted moving average. So not only would Teranet tend to overstate prices in an environment of significant widespread residential re-investment, but Teranet numbers are likely to exaggerate prices at the end of a boom, and understate prices at the tail end of a long depression. Not too terribly useful for someone trying to assess the state of the current market.

#128 rainclouds on 07.01.16 at 6:19 pm

#112 RexRock “Victoria Real Estate,you need to get your facts straight.A Gorden Head house near U Vic has gone up over $250,000 in 4 years.I know because I live here and seen the prices skyrocket.This place is the next Vancouver,get used to it.”

What’s your real name? I want to report you to the independent superintendent of Real Estate for producing false or misleading information. And unethical behaviour.

New Game in town, your industry bullshit wont wash anymore.

#129 TurnerNation on 07.01.16 at 6:24 pm

Really, I don’t think blogdogs have recovered from this blog’s reference to Atsa the Boy. I know I did not.

#130 Bobby on 07.01.16 at 7:20 pm

For #112 Rexx Rocks,

You must be a new realtor. Your comment is meaningless as it doesn’t stipulate the supposed initial price of the house. Was it a $350 K house that went up $250 K in the 4 years? If that was the case that certainly was a significant appreciation. However if the same appreciation was for a $2 million house, then the rise is insignificant and is just mirroring inflation. I know the Victoria market well and have access to sales data. Believe me, there are not the bidding wars some realtors would have you believe. Many are selling for less than asking. A bid of $10k over asking is not a bidding war by any means.
The recent auction that failed to meet the reserve price is an indicator of the real market, not what realtors would like you to believe. With the new transparency rules that are coming, I suspect there will be fewer competing offers that were supposedly out there.
The problem with most realtors is they believe their own hype. With the changes coming to the real estate industry many will be back flipping burgers or pumping gas.

#131 jess on 07.01.16 at 8:00 pm

According to El Mundo, the suspects consist of six Russians, a Ukrainian lawyer, and a Spanish citizen.

https://www.europol.europa.eu/content/russian-money-laundering-criminal-network-dismantled
….” in the last few years, the dismantled ring has laundered, in Spain, an estimated amount of EUR 62 million through property investments.
The criminals used offshore companies that offered high-interest loans and mortgages to Spanish and foreign customers to hide financial operations and investments. The investigation found that the companies had links to tax havens and to professional “front men” known for money laundering.
codenamed “Usura” has resulted in the arrest of 8 suspects and the seizure of 191 real estate properties, alongside 142 financial products such as bank accounts, around EUR 120 000, including several EUR 500 banknotes, numerous mobile phones, IT devices, and business-related documents. In total, 19 premises searches were carried out in various locations in the Tarragona province and Barcelona, which involved over 180 Guardia Civil officers.

The criminals’ modus operandi involved the use of off-shore based shell companies offering high interest rates, deferred payment loans and mortgages to Spanish and foreign customers so as to justify dodgy financial operations and property investments. The investigations have revealed links to companies located in numerous tax havens, as well as links to various professional frontmen, known internationally for their involvement in laundering. In addition, further links to well-known Russian criminal networks dedicated to legally, illegally, unlawfully and illegitimately acquiring companies – methods known as “Raiders” and commonly used by Eurasian criminal networks in the 1990s – have also been found.”

#132 mouldy in YVR on 07.01.16 at 8:22 pm

#29 Raincouver
Thank you for posting this……so, so true………
What are we thinking?

#133 Smoking Man on 07.01.16 at 8:34 pm

Tomorrow morning dogs.

http://www.belfountainstore.ca/

What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth

#134 Smoking Man on 07.01.16 at 8:56 pm

Was heading up to http://www.belfountainstore.ca/ today, got side tracked after a brutal day at the office. Ended up blowing some steam off at woodbine, had a tip off on a horse race. as always I missed it exactor by a nose. Stick to Forex is all I’m thinking.

So I’m out having a Smoke, got a red phoenix cyoty ball cap on. I large black male approaches. Instantaneous panic sets in, what if he figures out I’m a Trump supporter. He offers me twenty five cents and asks for a smoke. I take the quarter, why not.

He’s says “nice hat”, and complains about losing all his money, Out of nowhere with a heavy Jamacian accent, it’s like the bugger could read my mind, “I like Donald Trump” he said.

Now I know what garth is talking about when referancing depends.

I play it cool imagining a double cross, a too bit trick to get a confession out me. He’s just looking for an excuse the hammer this out of this white boy,

“no , no dude, he’s a racist, why do you like him.” I said.

“No man, dis is lies from da tv, he’s good man, we bring all the refugees, dy take my job. Trump is a good man, Trudeau no good” he said.

I lite his smoke and he walked away mumbling things.

A black man living in liberal Canada, who probably doesn’t have WIFI who’s only source of info is probably MSM or the barber shop.

And I thought, that’s a good sign for Trump. That just clinched the election.

Dr Smoking Man
Phd Herdonomics.

#135 salonist on 07.01.16 at 8:59 pm

linda
Roxanne
hallelujah

https://www.youtube.com/watch?v=YrLk4vdY28Q

#136 Blacksheep on 07.01.16 at 9:00 pm

Mark #120,

“Remember that every dollar lent by Canadian banks must have first been borrowed from”

“slight correction. “must have first been borrowed by the banks from savers”.
————————————
Wow…your LYING so much, even YOUR getting confused.

#137 Smoking Man on 07.01.16 at 9:15 pm

#133 Smoking Man on 07.01.16 at 8:34 pm
Tomorrow morning dogs.

http://www.belfountainstore.ca/

What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth
…….

I have a yellowing old tarnished jock strap from the hockey days. will that do?, oh I have flip flops two.

But then a again.

I don’t know man, I’m a risk taker though. Huh?

Got to think this threw…….I’ve attacked her policy’s on twitter. I may even made some personal remarks about her needing a noise job.

Wynee is going to be there? everyone one knows lesbians frighten me. What if she has an army of over weight brush cuts and she spots me. THAT’S HIM GIRLS

On the news , a near naked man wearing only a jock strap and flip flops was chased out of town by a pack of wild beats.

Just so you know, my sons girl friend painted the rainbow flag on my white board. And it’s still there.

See I’m hip……

#138 Spectacle on 07.01.16 at 9:18 pm

Re:
#17 Jimmy on 06.30.16 at 7:33 pm
[email protected] = the Newfoundlander at the bank.

———–
Also the 6 newest weekly ice cream flavours at the Famous long weekend Part at Garths Place::

http://www.belfountainstore.ca/

[email protected] means
T= Tangerine
N= Neapolitan ( an international fave)
L= Lingon Berry ( only in Canada)
@ = Apple cinnamon WalNUT Crunch
T= Toffe Baileys
B= Blueberry

——
On another Note:
#133 Smoking Man on 07.01.16 at 8:34 pm
Tomorrow morning dogs.

http://www.belfountainstore.ca/

What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth

* This weekend only, should Smokey risk a show up…… They mix them all up, and serve up ” Rainbow”
Enjoy the Day Off everyone. Also, Thanks Mr “G”

#139 Sorry...VREU on 07.01.16 at 9:22 pm

I’m sorry my dear but you just have no idea about how much money and new people with money are coming here.
I truly feel sorry for you as i do for myself as we’ve both missed out of ever owning our own home.

#140 For those about to flop... on 07.01.16 at 9:23 pm

#135 Blacksheep on 07.01.16 at 9:00 pm
Mark #120,

“Remember that every dollar lent by Canadian banks must have first been borrowed from”

“slight correction. “must have first been borrowed by the banks from savers”.
————————————
Wow…your LYING so much, even YOUR getting confused.

///////////////////////////////////

Well, Marks team Belgium was knocked out of Euro 2016 by Ace Goodhearts ,Wales.

The reason Mark was assigned Belgium?

He’s full of ” chocolate”…

M42BC

#141 AB Boxster on 07.01.16 at 9:38 pm

http://news.nationalpost.com/news/canada/judge-dismisses-impaired-driving-charges-because-it-took-cops-over-three-hours-to-return-drivers-turban

This decision seems majorly screwed up.
While I can have a measure of sympathy for the guy, as perhaps losing his turban is important to him.

However, I have no sympathy that he has beaten a DUI charge because of this.

But somehow, in the left wing PC world, because he feels bad that he had to sit without his turban for 3 hours, in the back of a police car, now society in general is less safe as we let another intoxicated driver back on the road.

When this guy drives drunk again, and kills a family of 4, I’m sure the judge will fall back on her brilliant decision, to release this guy, because during his last binge, his turban fell off.

Because, while it is obvious to some, it sure ain’t obvious to me what one thing (losing a religious symbol) has to do with being convicted of drunk driving.

I guess its no wonder the cops would rather shoot first, and worry about the fallout later with judicial decisions such as this.

This is what comes from a Charter of Rights, with no accompanying Responsibility.

His religious ‘rights’ were violated and this overrides any responsibility he has to society. Thanks for a great document T1.

The judiciary is certifiably nuts.

#142 Lee on 07.01.16 at 9:51 pm

If you want an affordable sfh near Toronto you must go north of Aurora/Newmarket to find stuff around $700000. Some spots in Oshawa and Brampton are under this. Otherwise, learn how to share an elevator with strangers.

#143 Smoking Man on 07.01.16 at 10:40 pm

Spending Canada Day night at Southside Johnnys

Photos here

http://dyslexicsmokingman.blogspot.ca

#144 Entrepreneur on 07.01.16 at 10:48 pm

Heaven and hell, good and evil. Had a friend say that good people start something but the evil come in and take over. So true here from the top to the bottom.

#93 NoName…answered you in #48 on the Winshester rifle…don’t know if that was what you wanted or it was overkill.

Anyways, Happy Canada Day to only the good people in Canada.

#145 Smoking Man on 07.01.16 at 10:48 pm

People complain about everything these days.

Just thank your lucky stars you weren’t born as a urinal.

Philosophy from the bottom of a empty pitcher of beer. WAITRESS NOW!!!!!

#146 Tony on 07.01.16 at 11:39 pm

Re: #28 WallOfWorry on 06.30.16 at 7:52 pm

Not exactly, as we saw the huge spike in silver and to a lesser extent gold was buy on the rumour then Europe lowers their interest rates, sell on the news. So rates will go lower no matter what the June jobs report is. The big question is will the FED and bankers stop monkey-hammering gold and silver and let gold hit 3 to 5 thousand this year and silver surpass 100 dollars an ounce? Only time will tell, just like everyone believes the plunge protection team will buy the market indexes instead of selling them short to profit. I believe in the end it will all come down to profit not ethics.

#147 Smoking Man on 07.01.16 at 11:44 pm

By my drunkin quest to save the urinal I’ve pissed off 1/2 the population. I forgot about the poor toilet.

Being a urinal saviour is going to get me branded a Sexist.

Do you see how complicated life is these days.

Ahhh tomorrow morning for rainbow ice cream at garthos store. I’m bringing body gaurds.

#148 Victoria Real Estate Update on 07.02.16 at 12:47 am

# 139 Sorry…VREU

Lame comment.

I’ve never talked about the details of my personal financial situation on this blog.

Yet, in typical realtor fashion, you write lies and BS. It’s entertaining so I encourage you to keep it up. You’ll probably use another name if you write another comment.

You provided no proof to back your claim that a lot of people with money are moving to Victoria. You probably would have heard that in 2010 also, right before house prices in Victoria fell 15-20%.

Within the last two weeks I posted an example of a house that had been sitting on the market in Victoria for over 3 months. The realtor described it as being in good condition.

It proves that Victoria’s market isn’t performing the way that several realtors had claimed on this site. There are other examples as well.

As I wrote in another post, house prices in Victoria are only approximately 7-8% higher than in 2008, despite the fact that mortgage rates were slashed from near normal to emergency levels since then. That means houses in Victoria have lost a lot of intrinsic value since 2008. The price information is based on Teranet’s index.

Victoria real estate has proved to be a crappy investment since 2008, despite 7 years of emergency interest rates.

I’ll post a chart showing the performance of Victoria’s market since 2008 for you and others who could probably use a refresher.

#149 Stock Shock on 07.02.16 at 12:50 am

So glad I’m long on maple. TSX world leader. 218 percent on TCK.b ! Utilities up double digits, energy, gold etc etc. Only a fool would be in a balanced portfolio today. Stock pickers will Hoover in money the more anxiety gets built in to real estate…happens every cycle.

#150 3s on 07.02.16 at 3:52 am

It’s all too big to fail. America will show you this year why the rise in rates was a false start…

#151 NoName on 07.02.16 at 8:47 am

#93 NoName…answered you in #48 on the Winshester rifle…don’t know if that was what you wanted or it was overkill.

for someone who calls it self Entrepreneur, you do come across very close minded. go re-red you comments and answer me why did you bring mental health in an equation. blanket statement for “everyone”, because few mental or radicalized morons did what they did.

The sporting stores are selling them up here now and if anyone carrying one of those I would think that person is a trouble person and/or looking for trouble.

this sentence alone is very telling of you bias. you judge books buy its covers.
and that not so scary winchester

https://en.wikipedia.org/wiki/2014_shootings_at_Parliament_Hill,_Ottawa

you comment

The Winchester 94 okay, but for hunting that comes with experience and target practice, know what your rifle can and cannot do plus how to handle, carry it with no bullets in.

do you honestly think that someone who means you harm will follow a rules?
when you have time google
MURDER AND HOMICIDE RATES BEFORE AND AFTER GUN BANS

#152 Janice Jaylene on 07.02.16 at 9:32 am

The TSX will probably reach 15,000 to 16,000 over the next 8 to 14 months but I can easily see going to 9,500 to 10,300 by 2017-2018.

The same goes for over 8 to 14 months to Dow Jones, S&P 500, Nasdaq will all be 19,500 to 20,000, 2,250 to 2,350, 5,100 to 5,300 but they retreating to 12,000 to 13,000, 1,600 to 1,650, 4,100 to 4,300 by 2017-2018.

Many are already trapped in many equity markets like Japan Nikkei 225 Index,Hang Seng Index Hong Hong, TSX 300, Singapore Strait Times, Brazil Bovespa Index, China Shanghai Index, Taiwan TAIEX Index, FTSE 100 Index England etc. down anywhere from down 10% to 20% to 30% since 2007.

#153 MF on 07.02.16 at 11:02 am

Yes too big to fail which is exactly why it will fail. Look at 2008. Nothing was fixed. Just the inevitable collapse was postponed by printing trillions of dollars of bailout money which was useless since the “recovery” looks weak. The next time, which is inevitable, it will be different because these idiots/financial experts/central bankers are all out of ammo. Most here, me included, now believe rates cannot rise because of the massive debt. This means there will be no bail out as well.

MF

#154 For those about to flop... on 07.02.16 at 11:05 am

Today’s Euro 2016 quarter final features Common Sence’s Germany against WalMark’s Italy.

Also known as the ” U.S is booming / U.S is sucking wind” battle.

As if there isn’t enough going on this weekend I now declare this fine day National Unused Chart Day…

M42BC

https://imgur.com/a/D7lzO

#155 MF on 07.02.16 at 11:07 am

#149 Stock Shock on 07.02.16 at 12:50 am

You see much more upside for tck.b? Last cycle (post 2008) there was the China story. Remember they were the ones “saving” the rest of the world building cities no one needs? This time we all know that those cities sit unused and their economy is slowing, along with everyone else’s.

MF

#156 Henry Olivere on 07.02.16 at 11:08 am

Looking at some numbers here and saw that 30 year Canada benchmark yields were 2.46% on June-26-2015 and Thursday’s close, June-30-2016 they are 1.71%.

This 75 basis points drop or around 30.5% less interest yield per year.

This must be one of the biggest drops in interest rates over a 1 year period.

It looks like the bond market is calling for slow to flat growth and possibly the start to a recession in the following months or maybe in 2017.

#157 MF on 07.02.16 at 11:13 am

Look at these idiots in the UK “protesting” the democratic referendum process that gave them the chance to rule their own country and be sovereign.

Pathetic beyond belief.

Of course we will hear all about how the leave vote was ONLY about xenophobia, racism and any other insult these morons, whose ancestors fought and died for said freedom, can come up with.

Truly pathetic political movement and another embarrassment to my generation (millenials).

MF

#158 For those about to flop... on 07.02.16 at 11:15 am

Joking Man talks about trading FX and being an entrepreneur, but I found out he really is just a guy that sits beside the road selling vegetables.

Here’s the proof…

M42BC

https://imgur.com/a/xYbWa

#159 MF on 07.02.16 at 11:18 am

#147 Smoking Man on 07.01.16 at 11:44 pm

“What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth”

Pics requested of this historic meeting of the minds.

MF

#160 TRT on 07.02.16 at 11:26 am

DELETED

#161 crossbordershopper on 07.02.16 at 11:53 am

i wish i could go to the bank and borrow a lot of money to live in a nice house. who cares about debt. like what is that anyway, secured against a house, etc. the immigrants only know that they have to go to work everyday, and if they can come home to nice house, great.
remember, most people come from nothing, so it really doesnt matter there used to nothing, including me.
how nice it must be to live in a nice house. many do not, own in, rent it who cares.
what is the purpose of having a diversified balanced portfolio, what do you do with this, you get a monthly cheque, ok , and what do you do with this money, reinvest it, that sounds so exciting. and you grow old, and you have more money, ok. and then what.
well, you die, pay tax, give some to your kids.
how about, do nothing all your life, dont work, dont get stressed out, the goverment gives you the 1600 per month, in july 2016 now, with provincial and gst, you can get 1800 per month, all in, then of course you can work for cash or declare 4500 per year net income and still get cheque. the bottom line question is, in Canada, working is for suckers, and the stock market is a rigged game played by white old men.
nothing has ever changed. i love being poor, no stress, dont care about brexit vote, dont care about yellin, we all know justin will write us chequess till we die. so when the winter comes and your still working i will be in cuba, relaxing,

#162 crowdedelevatorfartz on 07.02.16 at 11:57 am

Greetings hung over Canadians.
Happy belated 149th Birthday and all that.
Next year promises to be an even bigger swillfest.

Apocalypto 2016 has been strangely silent since the predicted financial/social/humanity “meltdown” failed to appear as predicted…..
Stock markets have come roaring back in less than a week. Brexits’ referendum results will result in a slow, drawn out death by a thousand cuts.
Perhaps the “thing to watch” will be Austrias’ runoff election results.
A new election forced after voting irregularities didnt allow an ultra nationalist, xenophobic party to power by mere tenths of a point…. They will be elected.

Let us not forget looming national elections in Europe in 2017 that may drive a massive wedgie into the Euro butt. France ( where 63% favour leaving and Frexit WILL be an election issue) and Italy( which has similar leanings and a shakey economy). 12 months being a blip on the grand economic scheme of things when one has 30-40 years left to live on a pension.
A newly reunified Germany(Winston Churchill is spinning) will become the only economic powerhouse on that continent….where German work ethic and their “savers” mentality will crush all lazy, aging ,deficit spending, early retired mediterranen sunworshippers before them.
The war torn refugees from the middle east and economic refugees from Africa will just keep on coming….. further destabilizing economies and causing even harsher xenophobic political parties to the fore……

Apocalypto must be apoplectic.
Not to worry “Pockey” the end is nigh, just not today.

#163 Shawn on 07.02.16 at 12:35 pm

Blacksheep and How Banks Work

Blacksheep at 136 accused Mark of lying when Mark said:

“Remember that every dollar lent by Canadian banks must have first been borrowed”.

To review it works this way:

A Canadian bank must by regulation have equity and debt capital of at least around 5% of its assets (assets being loans receivable, bonds owned by the bank, physical cash and the bank’s deposits at the central bank). The assets are risk weighted such that cash and government bonds and deposits at the central bank are considered zero risk. CMHC mortgages are also as low as zero risk. Car loans and commercial loans and credit card loans get a higher risk. On a risk weighted basis the equity has to be around 7% minimum and total debt and equity around 10%, this is the capital ratio. If these ratios get too low, no new loans are allowed.

The bank would face a problem if its physical cash got too low or deposits at the central bank were too low. There is no specific cash reserve required in Canada but a bank will not allow its cash to get too low. If the cash was too low the bank would not make a new loan.

A bank’s capacity to make loans is set by the debt and equity investments that it can attract from investors.

Based on the above banks do have constraints on the ability to lend. But most of the time none of these constraints are active and you are not likely to be told upon applying for a loan: “sorry, you do qualify but we can’t lend anything right now due to shortage of cash or low capital ratios”. But a huge corporation would likely be told just that if it tried to borrow $50 million from a tiny credit union, for example.

When a bank gives you a loan they create a loan asset due from you and they create a deposit in your account. Voila, you have “money”. At this moment your own deposit is matching and funding the loan from the Bank’s perspective. Money was indeed created from thin air (don’t worry, this is good thing). You own a deposit and you owe a loan. Your net worth in unchanged. The Bank’s net worth is unchanged. While money was created, no wealth was created on day one here.

You then spend the loan to buy a house or a car or whatever. In most cases your deposit gets transferred to the seller’s account at a different bank.

Your bank now has to transfer some of its deposits at the central bank to the other bank.

Your bank wants loans matched by deposits so it will attempt to attract deposits and keep them to match loans.

The deposits that are indeed initially created by banks are not owned by the banks. They are OWED by the banks to customers.

Therefore Mark is quite correct that banks must borrow their deposits from savers. We can quibble with the “first” aspect since in the first instance the bank’s create the deposit matching it with a loan. But deposits move around and each bank must attract (call it borrow) new deposits to offset deposits flowing away.

Banks are often accused of being uncompetitive oligopolies. But just look how mortgage rates have been competed down. And look at how smaller banks have to offer higher GIC rates to attract deposits. There is clearly some competition there. It is true that once they nab you as a customer it tends to be inconvenient for you to switch banks so you usually don’t and in that regard banks don’t have to compete hard to keep a customer once they secure you.

Paper cash is becoming obsolete. The vast majority of all “money” consists of bank deposits owned by customers of banks being electronically transferred back and forth between customers.

Any notion that banking is evil by nature or harms the economy (other than in a banking crisis) is silly and often based on 2000 year old prejudices. Of course borrowers resent paying interest. But they sure don’t resent getting the loan in the first place.

Without banks and lending we could barely transact with one another. I doubt the economy would be 10% as large as it is without banking. It might be as low as 1%.

It’s not a coincidence that EVERY prosperous country in the world has an extensive banking system. Nor is it a coincidence that the richer the country (and its citizens) the higher the percentage of the economy linked to banking.

Blacksheep, I believe, thinks that money creation by the fractional reserve banking system is somehow a bad thing. He is simply wrong. Not lying, mind you, but very wrong.

#164 NoName on 07.02.16 at 12:38 pm

#158 For those about to flop… on 07.02.16 at 11:15 am

your link is not working ?!

http://i.imgur.com/yF6rzSt.jpg

https://www.reddit.com/r/funny/comments/4kbhw0/this_guy_runs_a_roadside_produce_stand_near_me_in/

—————–

#159 MF on 07.02.16 at 11:18 am
#147 Smoking Man on 07.01.16 at 11:44 pm

“What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth”

Pics requested of this historic meeting of the minds.

MF

https://www.youtube.com/watch?v=0ypt3X_6xS4

#165 Need any more proof Garth? on 07.02.16 at 1:09 pm

DELETED

#166 Oy vey on 07.02.16 at 2:00 pm

Have you seen this, Garth? Wow.

https://www.thestar.com/business/2016/07/02/two-couples-pool-money-to-live-under-one-roof.html

How much foreign investment does it take to affect house prices? I think the figure is ~5-10% which seems to me like it would do almost nothing, but my boyfriend thinks it should make a huge impact. Who is right (please say me)?

#167 For those about to flop... on 07.02.16 at 2:07 pm

NoName, the link is good.Check again.

Check in with the Croatian Cultural Centre to see what you are doing wrong.

Maybe it is because you are all out of bullets after emptying them on Entrepreneur.

Nice shootin’ Tex…

M42BC

#168 Blacksheep on 07.02.16 at 2:21 pm

Shawn/Mark # 163,

If your gonna try this crap, you should really keep better track as to what you’ve already said, so you don’t look like a total ass.

Here was some of our interactions from April/2015:
———————————————
Blacksheep # 208, on 04.11.15 at 3:28 pm

“For what it’s worth, commercial banking is not nefarious, it’s an awesome system once you recognize it as merely government sanctioned, privately guaranteed, IOU’s. But for some reason certain parties, are hell bent keeping the truth about banking from public knowledge.

They assume the Cattle to be to immature to cope with realities of what modern money, really is. As a reformed gold bug and an MMT advocate, I understand the power of the sovereign in control. I understand why Garth is saying good luck to the credit union people if ever TSHF.

I understand why you can’t compare debts in Greece, to debts’ in canada.

I’m just working out some finite details, and deception from suddenly silent Mark and even your self in the past Shawn, until you were both painted into a corner (you then, Mark now) by the BOE pdf and it’s details, doesn’t help.”
———————————————-
Blacksheep # 230, on 04.11.15 at 6:16 pm

I’ll let Shawn straighten this out, here are some highlights from his posts today:

“Shawn # 194, I did not disagree with anything in your quoted phrase and specifically agreed that banks create deposits (albeit they need a borrower to do it).”

“Shawn # 200, Bank deposits are counted as money. Banks together with their customers create deposits all day long. Blacksheep has provided links to the bank of England demonstrating this. Close the commercial banks and see how much money survives. The economy would grind to a standstill.”

“Shawn # 204, “Correct, there is basically no incremental cost to set up the loan and create the deposit.”
—————————————–
Shawn Allen # 233, on 04.11.15 at 6:32 pm

“My respect for Blacksheep’s intellect is definitely growing. He has debated these banking matters on this site for at least a year and he has demonstrated the ability to think and learn and to recognize truth when he sees it.”
——————————–
Google can be a bitch.

#169 Dan Duran on 07.02.16 at 2:28 pm

I should probably post this everyday, since there’s so much misinformation about the Toronto ‘bubble’:
– The price of condos built in the 70’s and 80’s is just 50% higher than they were in ’89. Good locations too. 4-5 storey buildings, the kind that will never be built again.
– Do you just look at the detached bungalows in the most desirable areas? Sure, those quadrupled since ’89. But get this, between ’65 and ’89 they went up 10-12 times (take Leaside for example)! GTA population in the last 25 years has doubled and the demand exceeded supply by 10000 units each year of the last decade. But you still can find detached homes in 2nd tier neighborhoods for 600k (a little more than double compared to ’89). Case closed.

#170 Smoking Man on 07.02.16 at 2:49 pm

#164 NoName on 07.02.16 at 12:38 pm
#158 For those about to flop… on 07.02.16 at 11:15 am

your link is not working ?!

http://i.imgur.com/yF6rzSt.jpg

https://www.reddit.com/r/funny/comments/4kbhw0/this_guy_runs_a_roadside_produce_stand_near_me_in/

—————–

#159 MF on 07.02.16 at 11:18 am
#147 Smoking Man on 07.01.16 at 11:44 pm

“What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth”

Pics requested of this historic meeting of the minds.

MF

https://www.youtube.com/watch?v=0ypt3X_6xS4
……

Sleeped in. Alcoholism. Now rushing to selemenca NY. Going to see a red neck comic.

The pic will have to wait.

#171 hope & ruin on 07.02.16 at 3:15 pm

thinking the property’s appreciated considerably since he did the deal a few months ago.
_____________________________________

It’s odd that people care whether their house has appreciated year-to-year, especially month-to-month. It’s not like they will sell it and make money. How much appreciation do you need to recoup closing costs?

That picture was used a little while ago. I remember because felix said something about mutts collecting sticks for their masters with low pet standards.

#172 Freedom seeker on 07.02.16 at 3:50 pm

#50

Not that Garth isn’t fully capable of defending himself, for the record some of us have been flowing him in various ways (books, interviews, blog etc) for over 20 yrs (yikes that dates me). Do I always agree? No, of course not. I do respect and trust his views and more importantly sincerity in wanting to help others. Does his blog help support his other ventures? Well, of course. So? You and others who are offended by his political views and style at times can simply turn the channel. Your choice, your right. Kudos for taking a stand but its too bad, you’ll probably miss some good (valuable) advice. Some of us crazies will stay, take what works (for free…now that’s crazy) and move on. Good luck.

#173 Freedom seeker on 07.02.16 at 3:52 pm

Let’s ignore the typo. I’m following Garth not ‘flowing’ (as in yoga.) Love autocorrect.

#174 Herb on 07.02.16 at 3:55 pm

A “continental” Brexit view to ponder –

https://www.theguardian.com/commentisfree/2016/jun/28/brexit-great-news-eu-britain-sovereignty

#175 For those about to flop... on 07.02.16 at 4:03 pm

NoName ,imgur is having trouble today…

M42BC

http://imgur.com/5z8Rt0Y

http://imgur.com/n92nCYP

http://imgur.com/SjbAmB9

#176 annek on 07.02.16 at 4:30 pm

Catch Saturday Star’s front page. There is a story of two families that are sharing a home that they were “successful bidders” . The Leslieville home was listed at $679,000 and they were the lucky winners at $40,000 more. Looking at the photo of the home, it is a semi detached. Looks really small. One family gets the main level, and the other the upstairs. In the picture they are all smiles. I don’t believe they have worked out a legal contact of what happens when on family opt out. They claim this is cheaper than rent! My question is, when prices of homes drop, and they owe more than the house is worth, and one family wants out, I can see some issues. Especially if homes are on a downward trend. The Star should take a picture on their smiling faces then!

#177 praiire person on 07.02.16 at 4:38 pm

Went for a walk yesterday. Saw the unimaginable. A house with a price reduced sign. Admittedly, this place is a dump. Stucco box that has been let go since it was bought last year. There are about six houses in a row that are in the same condition. Weed filled yards, litter. I don’t know if anyone is actually living in them.This is Victoria, the city of garden proud owners. Incredibly mixed messages re property prices. Supposedly lots of buying in the classy neighbourhoods: Uplands, Oak Bay, Bernwood. Driving average prices up but a nearby house went for under ask. The house with the price lowered sign obviously isn’t going for ask. It may be RE hype, it may just be select neighbourhoods where prices are up. At the bottom of the street, a rental has just gone up for sale. The sellers must be anticipating a quick sale because the moving truck was there yesterday. We’ll see.

#178 Shawn on 07.02.16 at 4:41 pm

Blacksheep on Banking

#168 Blacksheep on 07.02.16 at 2:21 pm
Shawn/Mark # 163,

If your gonna try this crap, you should really keep better track as to what you’ve already said, so you don’t look like a total ass.

******************************
Nothing in what you posted above from periods “correspondence” disagrees with my description of banking above, does it?

You say that “for some reason certain parties, are hell bent keeping the truth about banking from public knowledge.”

(Does the above not imply you think that there is some nefarious truth being withheld?, or do you speak of the wonderful truth about banking?)

I posted how loans work and instead of refuting any sentence that I wrote you resort to insults and imply that what I wrote disagrees with something I said previously but you do not demonstrate this.

Okay, so you DO agree banking is not nefarious. My apologies for forgetting that.

So, just WHAT if anything is your issue with my explanation today of how banking works? I have extensive education and knowledge in this field and I worked hard to describe banking as I understand it.

Presumably some visitors here will appreciate my explanation.

#179 TRT on 07.02.16 at 4:51 pm

Let’s try not to post using other other peoples names. I was asleep during my last post.

#180 For those about to flop... on 07.02.16 at 4:52 pm

#170 Smoking Man on 07.02.16 at 2:49 pm
#164 NoName on 07.02.16 at 12:38 pm
#158 For those about to flop… on 07.02.16 at 11:15 am

your link is not working ?!

http://i.imgur.com/yF6rzSt.jpg

https://www.reddit.com/r/funny/comments/4kbhw0/this_guy_runs_a_roadside_produce_stand_near_me_in/

—————–

#159 MF on 07.02.16 at 11:18 am
#147 Smoking Man on 07.01.16 at 11:44 pm

“What time shall I have the gay rights protesters ready? Dress nice. The premier’s coming. — Garth”

Pics requested of this historic meeting of the minds.

MF

https://www.youtube.com/watch?v=0ypt3X_6xS4
……

Sleeped in. Alcoholism. Now rushing to selemenca NY. Going to see a red neck comic.

The pic will have to wait.

//////////////////////////////

Damn it.

I was looking forward to seeing Kathleen Wynne waving a” zookeenee” at a guy with only a jockstrap and flip flops on…

M42BC

#181 NoName on 07.02.16 at 5:51 pm

Deutschland Über alles.

#182 TurnerNation on 07.02.16 at 5:52 pm

How the leftie love-in at the general store?

Does it have posted policies against Body Shaming and Gender Shaming?) ;-)

SM was a no-show. And I wore my pink shirt. Coward. — Garth

#183 WUL on 07.02.16 at 6:30 pm

Nothing like a birthday party to make Calgarians giddy (and Canada does not look a day over 139 years).

July 16 over July 15 (1 day) for detached homes:

Sales – + 37.50 %

Average Price – + 38.20 %

The contracts must have been signed before the news item about the court decision on Enbridge’s Northern Gateway Pipeline.

#184 Mel in Victoria on 07.02.16 at 6:47 pm

Garth, what is the penalty for intentionally over-contributing the allowable amount to one’s TFSA? I contributed the maximum allowable amount every year and it’s present value is almost double what I put in to that account.. Would appreciate your comments. Thanks..

No penalty on growth, no matter how much. — Garth

#185 WUL on 07.02.16 at 6:53 pm

We may be witnessing the addition of another to the list of Canadian golf greats. By birth year:

George Knudson
Sandra Post
Lorie Kane
Mike Weir

Brooke Henderson!

“It don’t mean a thing, if it ain’t got that swing…”

I may have to peel my eyes off my beloved Iceland football team tomorrow to watch and see if she clinches the deal tomorrow.

#186 Dan Duran on 07.02.16 at 7:02 pm

@Oy vey IMHO you’re both right in a way, but because of the big variance in your premise. 5% extra demand from foreign buyers will have small impact (but measurable), 10% would be a lot more significant (I wouldn’t say huge though). The problem I have with these kinds of questions is: why is it important? What difference does it make in a country that traditionally has been open to foreign investment and immigration? If we were living in Germany circa 1933, then yes, I would say some people might find the answer to that question rather important.

#187 WUL on 07.02.16 at 7:04 pm

Now I am feeling stupid. How could I have overlooked the incomparable ball striking Moe Norman??

#188 jay on 07.02.16 at 7:58 pm

http://www.independent.co.uk/news/uk/home-news/homelessness-housing-households-shelter-london-england-a7111501.html Vancouver is going down the same rabbit hole.

#189 Sorry...VREU on 07.02.16 at 8:12 pm

DELETED

#190 Mel in Victoria on 07.02.16 at 8:13 pm

“Garth, what is the penalty for intentionally over-contributing the allowable amount to one’s TFSA? I contributed the maximum allowable amount every year and it’s present value is almost double what I put in to that account.. Would appreciate your comments. Thanks..

No penalty on growth, no matter how much. — Garth”

Ok. no penalty for growth but is there a penalty on the over-contribution amount? And if so, how much? Thanks..

#191 AB Boxster on 07.02.16 at 8:25 pm

Steven Ames as well!

And my mom.
That lady could hit a straight ball.

#192 TurnerNation on 07.02.16 at 8:29 pm

I saw Wynn & partner on the subway less than one year ago. Hardly seemed approachable.
Oh well I’m old enough to remember when we all were equal. (No Barter of Rights and Freedoms needed).

50 more years of this to go.

M40ON

#193 Andrew Woburn on 07.02.16 at 8:36 pm

The battle for Europe begins.

“On Tuesday evening, EU heads of state and government come together for what could be their last supper together with Cameron. On the following morning, they make clear to Juncker that they will be taking the lead in the exit negotiations with Britain. “But that is the Commission’s responsibility,” Juncker protests. “Jean-Claude, we have been elected, you haven’t been,” is the rejoinder from several prime ministers and heads of state.”

http://www.spiegel.de/international/europe/brexit-triggers-eu-power-struggle-between-merkel-and-juncker-a-1100852.html

#194 Stevladimir Harputin on 07.02.16 at 8:39 pm

Well, Turner, happy Canada Day….NOT!!…you little maggot!!

Instead of respecting and genuflecting before me on my holiday, you persist in keeping your pathetic blog up and running, in complete disrespect, now for a second day.

And you wonder why you weren’t cabinet material!?

Friends, and I have many here, please rest assured that despite the selfie-PM delusions of the Liberals, I am still in charge of all that matters. And the barbaric cultural practices tiplne remains open for your submissions. Submission is always good for you. (Too bad the bearded loser here never learned that,LOL)

As you all sing the anthem this weekend, feel free to change “in all thy sons command” to (in all Stephen’s command”. Very true, and has a nice ring to it.

And remember.

Obey.

#195 Smoking Man on 07.02.16 at 8:52 pm

182 TurnerNation on 07.02.16 at 5:52 pm
How the leftie love-in at the general store?

Does it have posted policies against Body Shaming and Gender Shaming?) ;-)

SM was a no-show. And I wore my pink shirt. Coward. — Garth
……

Ha no coward here. I got up at 9am I was still drunk from the long branch pub crawl last night.

Sobered up enough by noon and had to head to Salemenca for a 7pm show.

Bill Envgall. Absolutely worth the four hour drive. Hallarious. Never heard of him. Apparently my wife is a huge fan.

Who knew.

#196 SoggyShorts on 07.02.16 at 9:01 pm

#184
Garth, what is the penalty for intentionally over-contributing the allowable amount to one’s TFSA? I contributed the maximum allowable amount every year and it’s present value is almost double what I put in to that account.. Would appreciate your comments. Thanks..

No penalty on growth, no matter how much. — Garth

Growth never gets penalized, but over contributing gets whacked for 1% per month.
So if this was year 1 and your limit was 5k, putting 6k in would mean you pay 1% of the $1,000 too much you put in ($10) per month. You probably aren’t getting 12% returns, so…..don’t do that.

#197 Smoking Man on 07.02.16 at 9:31 pm

Another night of over indulgence and self destruction.

Why we do what we do? There are no simple answers. The trick is to always find away too and including lying to yourself to justify your actions.

My excuse is having a crippling low boardom tolarance, always got to move. Make bets. Never stop. We’re all going to die 100% within the next 100 years. You live a day or 100 years when it’s done you won’t remeber a thing.

Sort of like a savage pub crawl. You wake up with a throbbing headache you smile and thing.

Yeah baby I got one more day of fun in.

People worry to much..

#198 WUL on 07.02.16 at 9:36 pm

My apologies Garth, but I neglected to mention what may be a salient fact potentially related to the eye popping real estate sales numbers and average prices in Calgary yesterday.

Thursday, the day prior to Canada Day, the inaugural direct flight (thrice weekly) of Hainan Airlines Calgary/Beijing occurred.

Hmm. Coincidence? We need Clouseau of the Surete on the case. I will monitor the situation and my first task will be to look at helicopter rental numbers in YYC over the last couple of days.

#199 family beagle on 07.02.16 at 9:45 pm

#163 Shawn on 07.02.16 at 12:35 pm
“Blacksheep and How Banks Work”

“Without banks and lending we could barely transact with one another. I doubt the economy would be 10% as large as it is without banking. It might be as low as 1%.”

Wrong. A simple online search for ‘raising capital’ will reveal what funds the economy and creates jobs.

“Any notion that banking is evil by nature or harms the economy (other than in a banking crisis) is silly and often based on 2000 year old prejudices. Of course borrowers resent paying interest. But they sure don’t resent getting the loan in the first place.”

Try as recent as 1913. Or 2008. By borrowers, you mean consumers?

And again, because it’s too rich…”Without banks and lending we could barely transact with one another. I doubt the economy would be 10% as large as it is without banking. It might be as low as 1%.”

Wrong. You can’t throw credit at scorched earth and call it an economy. A healthy economy has to be almost self sustaining. Our economy is commodity driven with some interesting services and light manufacturing. But if you’re talking about the house of cards the banks built, that ‘economy’ is overdue to wilt with debt burden, not productivity. Read a graph.

Btw, ‘barely transact’? There are mints and treasuries for money, as well as paypal, interact, amex to ensure convenience and velocity. You speak of some formula out of a Jekyll Island trust.

“It’s not a coincidence that EVERY prosperous country in the world has an extensive banking system. Nor is it a coincidence that the richer the country (and its citizens) the higher the percentage of the economy linked to banking.”

Prosperous? Don’t you mean ‘voluntary servitude’ for a debt based illusion of wealth? Things and stuff don’t mean wealth. Freedom and self determination demonstrate wealth. Banking economies are baked. In your theoretical paradigm, how doth the next generation pay for society’s wealth today? Borrowing to finance growth is unsustainable. As evidence, I submit the very national debts of your ‘prosperous’ countries. You even allude to crisis when some bankers justly get tarred and feathered… “Any notion that banking is evil by nature or harms the economy (other than in a banking crisis) is silly.” Silly is all the rage.

Shawn, ad hominem ommitted, don’t you inspect the charts Garth posts on household debt? We are screwed because of the schemes of bankers creeping into our lives. First you get a credit card, then a student loan, then a mortgage, then you lose your sovereignty. They are parasites in an artificial construct and the veil rises. Want an education? Attend a banking conference in the Caribbean. If the economy was truly humming, we’d have bullet trains across the prairies and 24 hour MRIs not strip malls of low margin dollar stores.

To banks, a life is just a place to park cash. $800 for a square foot of drywall, granite and vinyl siding. Ha. You’ve been duped. It’s your undying patronage they want. Think about it. If everyone takes August as a mortgage holiday, September will be a happy month. I’m done reading your obsequious sonnets to banks. Your therories are riddled with false premise. Cue your tizzy now…

#200 Smoking Man on 07.02.16 at 9:48 pm

Years ago I was trying to figure out why I could spell Select perfectly while coding and got red lined in MS Word.

I deduced a different part of the brain at work. The math and analyticall part of the brain than the writing side.

As my writing skills improve my coding goes down the shitter.

Soon I’ll be unemployable as a coder, now that the writing side of the brain is taking over the sensible side. But Man do I got soon kick ass fiction coming up.

#201 For those about to flop... on 07.02.16 at 9:49 pm

#191 AB Boxster on 07.02.16 at 8:25 pm
Steven Ames as well!

And my mom.
That lady could hit a straight ball.

//////////////////////////

I never saw my mum hit any balls ,for that I am grateful…

M42BC

#202 Ronaldo on 07.02.16 at 9:52 pm

#190 Mel in Victoria

This should answer your questions.

http://youngandthrifty.ca/contributed-tfsa/

#203 common sense on 07.02.16 at 9:56 pm

Flopola

Go Germany….no rate hikes, USA economy slowing.

Onward to the semi’s!

#204 Smoking Man on 07.02.16 at 9:58 pm

As a good buz slowly kicks in I suggest this tune.

https://youtu.be/sMqNFAU0tOw

The road could be anything in your life.

I would rather lose my eyes than my ears. I don’t need eyes to see. But I love tunes.

#205 Andrew Woburn on 07.02.16 at 10:05 pm

“This location will feature the world-premiere of our proprietary and remarkable new advances in technology that enable the automatic creation of impossibly delicious burgers at prices everyone can afford,” the ad explains.

Everyone, that is, except the people who used to make burgers.

“This robot-powered burger joint could put fast food workers out of a job”

http://www.techinsider.io/momentum-machines-is-hiring-2016-6

#206 Smoking Man on 07.02.16 at 10:14 pm

I would still be a homophobic if it wasn’t for this bueyiful Man… Milo too.

https://youtu.be/fJ9rUzIMcZQ

Happy Pride Day……..

But I’m not ever wareing a pink shirt.

You go do draw the line somewhere.

#207 WalMark of Sadkatoon on 07.02.16 at 10:22 pm

happy canada day

happy Fourth of July

or as I like to call it

happy rent-is-due day

!!

#208 For those about to flop... on 07.02.16 at 10:23 pm

on 07.02.16 at 9:56 pm
Flopola

Go Germany….no rate hikes, USA economy slowing.

Onward to the semi’s!

////////////////////////////////

Yeah Common, congratulations and now you get to see who Germany plays after tomorrow’s game between Garth’s team France and the Cinderella story that is WULLYs Iceland.

Hopefully Cinderella turns up with both shoes.

I’m sure some people are paying no attention to my ramblings but the ones that are, are probably shocked that Wales and Iceland could playoff in the final.

France will find a way tomorrow to win and then we will get to see Merkel and Holland sitting with each other stabbing David Cameron in the back.

Speaking of Cameron ,he congratulated Wales on reaching the semis and people told him to buzz off as he only backs losers and they don’t won’t him to jinx it.

Semi finals ,Wednesday and Thursday.

This thing finishes next Sunday…hang in there Garth.

The winner gets a free one year subscription to Greaterfool.

If the host France / Garth wins , I will be his stunt double for a year…

M42BC

#209 dr talc on 07.02.16 at 10:37 pm

#188 jay on 07.02.16 at 7:58 pm
http://www.independent.co.uk/news/uk/home-news/homelessness-housing-households-shelter-london-england-a7111501.html Vancouver is going down the same rabbit hole.
—-

government facilitates bubble
bubble creates homeless people
homeless people creates need for
more government

rinse, repeat

#210 Smoking Man on 07.02.16 at 10:42 pm

Two hot chics on stage singing country music. Showing off their flat stomachs.

You won’t see then at a liberal white man hating protest unless they go on a years worth of donut eating.

#211 Ponzius Pilatus on 07.02.16 at 11:03 pm

Shawn,
By bundling and selling mortgages as Mortgage Backed Securities, the Banks are not constrained by Capital ratios.
Remember 2008.

#212 Blacksheep on 07.02.16 at 11:37 pm

Mark #120,

“Remember that every dollar lent by Canadian banks must have first been borrowed from”

Mark# 121,

“slight correction. “must have first been borrowed by the banks from savers”.

Shawn # 163

“Therefore Mark is quite correct that banks must borrow their deposits from savers”
————————————
Mark was lying. Now your lying too Shawn. Again.

Here is a direct quote from the highest banking authority on the planet:

The Bank of England pdf:

“Rather than banks receiving deposits when households
save and then lending them out, bank lending creates
deposits”

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

The bank DOES NOT lend out $’s received from customers. Period.

You and Mark are a wealth of knowledge on a multitude of other economic topics, but for some reason, this singular issue dumfounds the shit out of you to the point of your both looking like lying assholes.

You cannot claim ignorance as we’ve discussed this multiple times.

What the hell gives?

#213 ww1 on 07.02.16 at 11:40 pm

#190 Mel in Victoria on 07.02.16 at 8:13 pm
Ok. no penalty for growth but is there a penalty on the over-contribution amount? And if so, how much?
==================================

This might help : http://bfy.tw/6ZJ3 (“let me google that for you” link)

#214 Smoking Man on 07.03.16 at 12:04 am

Getting fired soon. Tunes make my day. Bullshit has an end.

https://youtu.be/Bk3sLHZzZRI

#215 Stock Shock on 07.03.16 at 12:52 am

#149 Stock Shock on 07.02.16 at 12:50 am

You see much more upside for tck.b? Last cycle (post 2008) there was the China story. Remember they were the ones “saving” the rest of the world building cities no one needs? This time we all know that those cities sit unused and their economy is slowing, along with everyone else’s.

MF

Sure thing….TCK.B is a diversified resources ETF as it stands….reliable cost minded mgmt and economies of scale few companies even dream about.

I also like SNC and BIP.un as macro longs in the industrial space…again for the same fundamentals.

#216 AfterTheHouseSold on 07.03.16 at 8:03 am

This Bowmanville Ontario company which made conveyor belts for the mining, coal and oil sands, was the subject of one of Garth’s blogs earlier this year.

“Workers were notified of the decision to close the plant in November 2015.”

“Mr. Hastings along with dozens of other workers have been looking for employment but have so far been unsuccessful.”

http://www.durhamregion.com/news-story/6746055-former-goodyear-plant-closes/

#217 Doug Saunders on 07.03.16 at 10:15 am

El-Erian said on Bloomberg this week that the 10 year U.S. bond yield could be 1.0% to 1.25%. As uncertainties keep piling up and they keep getting lower.

I remember the last major low was 1.1% for the U.S. 10 year bond years back.

#218 A belieber on 07.03.16 at 11:02 am

@ Flop

I see you’re getting the hang of imgur now.

#219 Former Hedge Fund Shorts YVR on 07.03.16 at 11:12 am

DELETED

#220 Arfmooocat on 07.03.16 at 11:28 am

Don’t be this guy this weekend

https://www.facebook.com/THUG-LIFE-Videos-1301138296582120/?fref=nf

#221 Shawn on 07.03.16 at 11:43 am

A few responses on Banking

#199 family beagle on 07.02.16 at 9:45 pm…

Beagle, does the family know you have been on the internet? Also you may wish to consider running away from the home and gaining your freedom and responsibility in the wild free of any influence of the evil bankers.

#211 Ponzius Pilatus on 07.02.16 at 11:03 pm said:
Shawn,
By bundling and selling mortgages as Mortgage Backed Securities, the Banks are not constrained by Capital ratios. Remember 2008.

Good point. That is certainly true to a large extent in the U.S. From the Bank’s perspective when a mortgage is sold (securitised) it is like it has been paid off so that frees up the lending capacity.

Blacksheep at 212 said:

Shawn # 163

“Therefore Mark is quite correct that banks must borrow their deposits from savers”
————————————
Mark was lying. Now your lying too Shawn. Again.

Here is a direct quote from the highest banking authority on the planet:

The Bank of England pdf:

“Rather than banks receiving deposits when households
save and then lending them out, bank lending creates
deposits”

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

The bank DOES NOT lend out $’s received from customers. Period.

*********************************
Yes as I explained in post 163, at step ONE the bank creates a loan and a deposit for the borrower.

But it is NOT Period. At step TWO the borrower spends the deposit to buy the house or car and the deposit is sent to the sellers bank. NOW the lending bank must attract a deposit from some saver to offset the loan on its balance sheet. Temporarily it can offset the loan with its own equity and debt capital but to operate properly the bank needs to attract deposits (savings) from customers.

In SUBSTANCE banks borrow from savers like the seller of the house.

You are stuck at step one.

Look at any bank balance sheet and the loans are assets of the bank as they are receivable from customers. The deposits are owed to customers and fund the loans.

Blacksheep, you never address my points directly but just bring up the quote from Bank of England which is true but is only step one.

Every bank uses language that it funds its loans with deposits.

You are stuck on this weird which came first the chicken or the egg question.

It is not lying to say that banks borrow deposits from savers. It is at the very least a useful mental model of how banks work.

You may also want to consider that there is a difference between how things work for an individual bank versus all banks collectively (since a deposit can leave one bank but almost always ends up remaining within the banking system collectively).

You may also want to ponder why banks often advertise a special rate on GICs to attract deposits (you know, savings) from customers.

Ponder too, when a bank creates a loan and a deposit electronically, the customer is also involved in the transaction. Would it not be equally correct to state that the customer created the loan and the deposit by signing the documents? In fact it takes both parties to do this transaction. In this case the chicken (loan) and deposit (egg) are created simultaneously.

Banks together with customers can CREATE deposits but the bank owns the loan due and the customer owns the deposit which is then in effect lent to the bank to balance the transaction and the customer can transfer that deposit to another customer (i.e. buy something) and that other customer considers that deposit to be his savings and that deposit continues to fund a loan at the bank that holds the deposit.

Let me try to correct the offensive sentence then.

Remember that every dollar (except about 10% that is bank capital) lent by Canadian banks is funded by the deposits of savers. (Is that more palatable?)

I suppose I am wasting my time. People believe what they want to believe. But maybe one or two readers are actually interested in how banks work.

For more, watch “It’s a Wonderful Life” with Jimmy Stewart as he explains that his customer’s deposits are funding other customers farms.

You and the Beagle are behaving like animals here.

#222 Ronaldo on 07.03.16 at 11:48 am

#213 ww1 on 07.02.16 at 11:40 pm

This might help : http://bfy.tw/6ZJ3 (“let me google that for you” link)
——————————————————————
or this, lol

http://www.justfuckinggoogleit.com

#223 For those about to flop... on 07.03.16 at 12:12 pm

#218 A belieber on 07.03.16 at 11:02 am
@ Flop

I see you’re getting the hang of imgur now.

//////////////////////////

Yep,been using it only for good.
Yesterday it had problems with being overwhelmed.

It’s funny you were trying to help sockeye Sam and ever since then he disappeared…too hard to take a photo an upload it.

Where you been Beebs,just lurking or taking a break?

M42BC

#224 maxx on 07.03.16 at 12:31 pm

#36 NEVER GIVE UP on 06.30.16 at 8:17 pm

“FINALLY SOME ACTION!
The scumbags in the real estate industry just lost their self governance!
MORE ACTION NEEDED!”

You mean, all of those government “guidelines” and voluntary compliance that come under the banner of “protection of the public”?

I completely agree that much more action is needed. You wouldn’t believe what I’m currently seeing with these scumbags.

Mugs are all pretentious, plastic toothed, Cheshire cat grins with an excess of regulation professional photographer panache. Yuck mommy, it’s scaring me!

Shame on our provincial and federal governments.

#225 Blacksheep on 07.03.16 at 12:54 pm

Shawn,

“Remember that every dollar (except about 10% that is bank capital) lent by Canadian banks is funded by the deposits of savers. (Is that more palatable?)”
———————————————–
Where do said “deposits of savers” come from?

1) Newly created funds (deposits), when a new loan is initiated, via the promissory customer signature and the lending banks charter?

OR

2) Deposits (funds) placed in a bank by a depositor, for security, return or operational purposes?

Don’t try to muddy the bloody water like you normally do, just pick one Shawn.

#226 maxx on 07.03.16 at 1:01 pm

#46 mouldy in YVR on 06.30.16 at 8:43 pm

“Garth …hope you are planning to have a good summer break …..away from the blogs, the dawgs and the craziness of current times …….
“Sirius rises late in the dark, liquid sky
On summer nights, star of stars,
Orion’s Dog they call it, brightest
Of all, but an evil portent, bringing heat
And fevers to suffering humanity”..Homer”

Guessing that Homer wasn’t much of a cottager.

#227 rainclouds on 07.03.16 at 1:22 pm

#219

Garths article above highlights the level of indebtedness overextended consumers have taken on.

These and other factors are all components of the current Van RE situation.

#228 Keith in Calgary on 07.03.16 at 1:53 pm

The three times a week flight from Beijing to Calgary means nothing to the Calgary economy despite the protestations of the usual “presstitutes”.

Any one coming go Calgary no longer has to connect thru YVR……..that is all.

#229 Ponzius Pilatus on 07.03.16 at 2:09 pm

#211 Ponzius Pilatus on 07.02.16 at 11:03 pm said:
Shawn,
By bundling and selling mortgages as Mortgage Backed Securities, the Banks are not constrained by Capital ratios. Remember 2008.

Good point. That is certainly true to a large extent in the U.S. From the Bank’s perspective when a mortgage is sold (securitised) it is like it has been paid off so that frees up the lending capacity.
——————–
Even small banks like VanCity and its former (now defunct) subsidiary Citizens Bank securitized their mortgages.
VanCity was actualy on the forefront starting in the early 90s.
What saved the Candian banks is CMHC, so far.

#230 TurnerNation on 07.03.16 at 2:13 pm

But upon reflection I don’t really do politics. Few weeks ago went up to (mayor) David Miller and asked him a head-scratcher. He still had that glint in his eye, seems to be enjoying his new life as spokes for WWF. Finally, having some fun after all these years on the left. Welcome Sir.

Also few weeks ago went with my Sikhi friend to PC Patrick Brown’s event for that local community. Great food they have. (His press secretary Jim proudly pointed out he is first Asian guy in that role.)
They are trying at what Tim “Who-Dat?” failed, getting out there and currying favor with a broader range of our community.

#231 expanding money suply on 07.03.16 at 2:14 pm

#221 Shawn

“Remember that every dollar (except about 10% that is bank capital) lent by Canadian banks is funded by the deposits of savers.”

How do central banks expand the money supply?

#232 Ponzius Pilatus on 07.03.16 at 2:15 pm

#228 Keith in Calgary on 07.03.16 at 1:53 pm
The three times a week flight from Beijing to Calgary means nothing to the Calgary economy despite the protestations of the usual “presstitutes”.

Any one coming go Calgary no longer has to connect thru YVR……..that is all.
———————-
Well, Calgary finally get’s a decent ChinaTown.
Gotta roll with the times.

#233 Shawn on 07.03.16 at 2:31 pm

Banking… Close to Agreement?

#225 Blacksheep on 07.03.16 at 12:54 pm demanded of me:

Shawn,

“Remember that every dollar (except about 10% that is bank capital) lent by Canadian banks is funded by the deposits of savers. (Is that more palatable?)”
———————————————–
Where do said “deposits of savers” come from?

1) Newly created funds (deposits), when a new loan is initiated, via the promissory customer signature and the lending banks charter?

OR

2) Deposits (funds) placed in a bank by a depositor, for security, return or operational purposes?

Don’t try to muddy the bloody water like you normally do, just pick one Shawn.

****************************************
As stated, deposits are initially created as described in your alternative 1.

Thereafter they move around from bank to bank many many times until they get destroyed by paying off the loan. And remember loans are almost always growing so in the net deposits get created and then move around thousands of times and basically exist forever in the net since net loans paid off are almost always lower than new loans created.

The deposits moving around are your alternative 2.

If I move $50,000 from the Green Bank to the Blue Bank by buying a GIC at Blue bank and transferring my deposit from Green or if I buy a $50,000 car and the seller puts the funds received from my green bank in the Blue bank that is your Alternative 2 at work.

Perhaps you can agree that alternative 2 happens all the time and that each dollar of deposits created in alternative 1 (what I called step one) moves around as described in your alternative 2 (my step two) many many times.

From any given bank’s perspective that bank has to continually attract deposits as described in your alternative two. For every dollar of deposits that a bank together with its customer creates in alternative one (step one) it must effectively attract that dollar back many times as deposits are constantly on the move.

When a bank attracts a deposit, it owes that deposit to the customer. When you attract something from someone but you owe it back to them that can be called “borrowing”. Hence we can say banks must borrow deposits (savings) from customers in order to continue to fund their loans.

I do not need to pick just one of your alternatives since both happen all the time. But the second happens far more often then the first.

The very purpose of taking out a loan whereby a deposit is initially created is to spend that deposit which usually sends it on its merry way to a different bank where the recipient will usually spend it which usually sends it to another bank and on the cycle goes.

A bank which can’t attract (borrow from savers) enough deposits is soon unable to fund its loans.

Have you pondered why banks normally pay interest on deposits if all deposits are garnered by the bank via the creation process in alternative one?

As I stated before you did learn step one well and I did and do congratulate you on that. Your analogy to the old time process of writing a promissory note is good and useful. But it is time to graduate to step two.

#234 Shawn on 07.03.16 at 3:34 pm

Expanding the Money Supply

#231 expanding money suply on 07.03.16 at 2:14 pm asked me:

#221 Shawn

“Remember that every dollar (except about 10% that is bank capital) lent by Canadian banks is funded by the deposits of savers.”

How do central banks expand the money supply?

******************************************
Here is my understanding of the process:

For the most part it is the commercial banks together with their customers that expand the money supply by virtue of customers taking out loans which creates a deposit. Deposits are considered money since they can be used to buy things by transferring them to another person or company’s bank account (what a debit card does or a cheque does).

The economy pretty much self regulates the money supply in the same mysterious manner in which the economy manages to put just enough oranges into all the grocery stores in the land without any central planning.

If the people and businesses get too liberal at wanting loans and if the banks are too eager to lend this can cause what the central bank considers as an over supply of money causing inflation. The central bank will then raise the interest it pays on the deposits that the commercial banks keep on hand at the central bank. The commercial banks will the curtail some lending in favor of putting money into the central bank or by buying government bonds rather than lending out money. With less new lending, less new deposits are created and the growth in money supply slows. Or if more loans are paid off than created then the money supply declines.

Recently the opposite has been in effect. The central banks have lowered the rate they pay the commercial banks in order to encourage lending (which involves a higher interest rate for the bank) which creates new deposits which is new money supply.

Money (including mostly bank deposits) is a non-tangible construct that has evolved in order to facilitate trade and economic activity between people.

Since money represents the ability to buy goods and services it is considered wealth. But the real wealth is the goods and services themselves. Money facilitates people to work and create goods and services. Without money (the medium of exchange) the economy stops. Most money (almost all really) consists of bank deposits.

Therefore most of us can see that without banks together with their customers creating deposits then the economy would stop. Think GDP declining by 99%.

#235 Fractional reserve banking on 07.03.16 at 3:44 pm

#Shawn

Banks can issue loans that are far in excess of their deposits (fractional reserve banking), they can create money. If they only made loans from their money already on deposit, no new money would be created.

#236 Blacksheep on 07.03.16 at 4:23 pm

Shawn,

“When a bank attracts a deposit, it owes that deposit to the customer. When you attract something from someone but you owe it back to them that can be called “borrowing”.”

“Hence we can say banks must borrow deposits (savings) from customers in order to continue to fund their loans.”
—————————————–
“Rather than banks receiving deposits when households
save and then lending them out, bank lending creates
deposits” – BoE.

The Bank of England language, 100% degrees with what your claiming Shawn.

Maybe you could e-mail them and straighten them out….

#237 Smoking Man on 07.03.16 at 9:34 pm

For the chics that grew some and the pathetic men that lost them..

I give you

https://youtu.be/X6DVwql1E-g

#238 Blacksheep on 07.03.16 at 11:25 pm

Garth, excellent post today, nice well rounded perspective, thanks.

Shawn # 41,

Supplies the following irrelevant, long winded info from BoE pdf:

“Banks therefore try to attract or retain additional liabilities to accompany their new loans. In practice other banks would also be making new loans and creating new deposits, so one way they can do this is to try and attract some of those newly created deposits. In a competitive banking sector, that may involve increasing the rate they offer to households on their savings accounts. By attracting new deposits, the bank can increase its lending without running down its reserves, as shown in the third row of Figure 2. Alternatively, a bank can borrow from other banks or attract other forms of liabilities, at least temporarily. But whether through deposits or other liabilities, the bank would need to make sure it was attracting and retaining some kind of funds in order to keep
expanding lending. And the cost of that needs to be
measured against the interest the bank expects to earn on the loans it is making, which in turn depends on the level of Bank Rate set by the Bank of England. For example, if a bank continued to attract new borrowers and increase lending by reducing mortgage rates, and sought to attract new deposits by increasing the rates it was paying on its customers’ deposits, it might soon find it unprofitable to keep expanding its lending. Competition for loans and deposits, and the desire
to make a profit, therefore limit money creation by banks.”
————————————–
No one is claiming, banks do not need customer deposits to facilitate cash flow or to make a profit, or even to allow banks to continue creating new $’s via the customers, John Henry.

But your attempt to distract by sighting operational issues banks face is disingenuous.

Unfortunately for you, the above BoE details are 100% irrelevant to the fact that:

$’s deposited by one customer, are NOT lent out to other customers. Period.

So…..

Mark said: “Remember that every dollar lent by Canadian banks must have first been borrowed from the banks from savers.”

I then called him a liar.

Shawn, you said: “Therefore Mark is quite correct”

I then called you a liar, also.

Until you show me a legitimate source that contradicts what the BoE actually said relevant to new money creation, I stand by my comments.