Feeling safe

Have you heard about the booming business in home safes? Home Depot may not be selling too much drywall these days, but safe sales are up by a third aross the United States. I did some investigating in my neck of the woods today. Sold out here, too.

Why would people want safes? For cash. There is a growing sense the banks are over-leveraged financial death traps and that no government is currently speaking the truth with citizens. Cash might be one of the three things you really, really, really will want to have if the lights go out, you wake up one more and there’s a ‘bank holiday’ or if deflation turns more serious. The odds of one of those things happening, I’d say, are growing longer as the days shorten.

Deflation is the opposite of inflation. When prices continuously rise – something most of us have been used to our entire lives – then it takes continuously more money to buy stuff. The value of assets rises which makes the value of money fall. That’s inflation. If your income does not also rise, you are a loser. But if you owe money in the form of a mortgage on a house which is gaining in value, you win. The asset value goes up, the debt stays the same, so your equity increases, and your ability to repay that loan is enhanced.

It was inflation on crack which hit the real estate market since Nine Eleven. This hyper—inflation caused a bubble which drove the price of houses far beyond the ability of people to afford them, so it ultimately popped as demand dropped. This is the worst aspect of inflation – its ability to make the essentials of life unaffordable (though I’m not sure a media room and a hot tub qualify). In an inflationary world, savers lose and investors win. It makes no sense having suitcases full of cash sitting around, because its purchasing power is constantly eroded. You’re far better off to convert cash into those things which are rising in value. And, finally, it makes great sense to borrow more money to do the same thing, since inflation pushes down the burden of debt as it increases commodity prices,

Take a mirror to all of this, and you have a deflationary world – the one we are entering now at a hell of a clip. In this environment, all the rules change.

Prices start dropping for commodities, then services, followed by business profits and wages. Lack of consumer demand forces prices below the cost of production, which leads to mounting unemployment, even less demand and even lower prices.

In deflationary times like these, the value of cash rises and the cost of houses, cars, iPods, bank shares, pet food and most everything else declines. That means purchasing power goes up for those people with money. At the same time, it makes debt intensely harder to pay since loans and lines of credit don’t go down. With real estate, deflation is a double killer. (a) House values drop below the price many people paid to get it. (b) Because the mortgage debt remains constant its burden rises as equity is wiped out. This is exactly what’s happened with scores of American families – more than seven million of them – who are in negative equity. There’s no doubt the same is going to happen in Canada, as real estate continues to drop, turning homeownership into a nightmare for those who purchased a home since 2006. This is a disaster, of course, for people – like tens of thousands of autoworkers in southern Ontario – who have lost their jobs in this deflationary cycle, and yet live in areas where the cost of housing was high.

For economists, deflation is far scarier than inflation. It should be for you, too. This is what caused the Great Depression.

99 comments ↓

#1 Canada Real Estate Gateway on 11.08.08 at 12:03 am

The number of Americans who have negative equity in their homes is truly disturbing. It makes refinancing on a mortgage nearly impossible.

#2 POL-CAN on 11.08.08 at 12:28 am

Garth…

I hate saying this I really do, but…..

We need this period of clensing in all areas of the economy. There is too much waste in the public and private sectors not to mention in our personal lives as consumers.

There are too many people employed in all levels of governments and corporations that produce little to no value while collecting serious $$. We are already seeing the corps cut 10 %. That is just the start. Gov will cut too but this usually comes much too late (recovery is usually in progress by the time they trim).

When will the politicos realize that taxing everyone to death in order to sustain a bloated system is not the way to prosperity? How much more will they bleed us through this crisis?

Currency has to be backed by gold. Fractional reserve lending has to be limited. Compound interest should be banned along with all of the central banks. CEO compensation should be capped. Corruption should be persecuted. Politicos should not have any earnings that are tax excempt (they should feel the pain like the rest of us). People should be held accountable for their deeds/actions. Laws should be enforced…

#3 john on 11.08.08 at 12:29 am

Hi Garth,

If you had to throw out the likelyhood (%) we could have a bank holiday in the next 3 years what would be your guess.

#4 pete on 11.08.08 at 1:21 am

I think deflation is 100 times better then inflation for those who lived within their means and saved while those who were follish and lived beyound their means suffer for their financial stupidity. We have to get back to a financial system which rewards those who work and save and not the financial systme which we see today which is crashing down like the house of CREDIT cards which is was built on. If the financial system doesn’t reward hard work and savings then I will become a worthless spender like the bums in the US and all over the world who live above their means without earning it through WORK.

#5 charles on 11.08.08 at 1:28 am

It looks like the debt fueled party we have all been experiencing over the last few decades is finally over, and the hangover (the deleveraging process) has started. It is not going to be very pretty.

As the renowned Mises warned us decades ago, “There is no means of avoiding the final collapse of a boom brought about by credit expansion”.

We are currently experiencing a titanic struggle between two powerful forces. One of these is the natural process of debt default which occurs when a society becomes saturated with debt, and the other process is a desperate attempt by the world’s central banks and governments to keep the present system going a little bit longer (and pushing off the “inevitable day of reckoning” onto the next generation) by pumping even more debt into a economy that is already hopelessly clogged with debt.

It looks to me like the debt default crowd is presently winning this struggle, but I definitely would not count out the efforts of the world’s central banks and governments in their resolve to keep the present system going a little bit longer.

What is going on now in this crisis will be discussed in the financial history books many hundred of years from now.

#6 Kitchener1 on 11.08.08 at 2:06 am

Quick note regarding safes and insurance. Safes are not a great way to protect valuables, much better getting a saftey deposit box at a bank.

The reason is that most home insurance polices will only cover a maximum of $500 to $1000 of cash if it is stolen or damaged in a house fire/flood/theft etc..

Better check your policy

#7 de Gaulle shadow on 11.08.08 at 2:42 am

Charest needs to spruce himself up a bit for the local election. Suggestion: fly to Paris and get appointment avec Sarkozy hair perm stylist. A glint of Nic might do the trick. Too bad for the party the Trudeau boy doesn’t have more ball.

What’s safe about a safe in a private home? Have they not heard about armed home invasions? Heck car thief’s break in now to get the keys.

#8 Ian on 11.08.08 at 3:13 am

Deflation is a good thing. It rewards saving money. Deflation didn’t cause the Depression. The Depression was caused by the bursting of a stock market bubble. Deflation occured after the bursting of the bubble, but the problem was the bubble. When deflation occurs and there was no preceeding bubble the result is good for ordinary people.

#9 JoJo on 11.08.08 at 3:46 am

Ha,Ha
Garth What you mean Deflation?
Americans need change in order to stave off what could be an economic depression?
Deflation can’t ever exist with 1% interest rate from FED, and printing money like crazy ( 3-trillions $) within 3 months.
What caused the Great Depression?
Interest over 20%, no lenders, and no printing any money for four years.

It’s Hiper Inflation,Garth. But $ US is stronger more than 30%? Why? Because US economy is in good shape or high interest rate? No,because of morons that invested in US and now lost over 40% money.
Somebody took all money in their pockets from over 20 millions new builded houses in USA and Canada in last 8 years.So builders and Resalers alredy got money.
Money supply is more than 10 times from 2001.
But now couple thousands millioners put the money in safe and you can see over 20 millions morons on the Real Estate Market and Stock Market as well.
Every single day USA has to borrow over 3 billion USD
to keep their economy going.
USA current account deficit is 3 times more in debt than 7 years ago.
What about Obama’s promises for free and Universal Health Care and free student loans?
Canada has expences about 200 billions for Health Care and Student loans and social support,every year.
Than USA should printing more than $ 2 trillions to achieving the Canadian Standards in Health Care.
In USA you have over thousand bridges which must be rebuilded as soon as possible, or every day will colapse at least one. So they need over 5 trillions for infrastructure. What about US trade deficit which is
Every month about 70 billions. Please you should open FOREX currency trade market and see what is the real value and how you can make valuation of any world currency.
If any country has debt,currency going down.
If any country has trade deficit,currency going down.
If any country has job losses,currency going down.
If any country has less production,currency going down.
If any country has war expences,currency going down.
If any country has printig money,currency going down.
But $ US is going up.Hmmm
BTW about Gold.
Gold was real money over 3 thousand years and $ US is
world pegging currency about 60 years.
And when $ US going down than Gold price will going to the roof. OK.

http://money.cnn.com/2008/11/05/news/economy/three_trillion_dollar_bailout/index.htm

http://mrmortgage.ml-implode.com/2008/11/04/no-more-mortgage-payments-soon-get-ready-to-default/

http://www.safehaven.com/article-11778.htm

In 2009 will see collapse of $ US, and Gold and Silver will going 100% up.

#10 David on 11.08.08 at 4:10 am

The negative equity trap door continues to fall and is part and parcel of the deflationary cycle in housing. Homes supported by zero equity and maximum leverage are naturally enough the first to reveal the flawed fundamentals of the housing bubble.
All those lovely elegant weighted moving index charts on home prices remind me of that apochcryphal story about the man who kept pulling the socks off his feet every 15 minutes to see how far the gangrene was progressing.

#11 GenXinSask on 11.08.08 at 5:51 am

Okay, so if we own the house outright, have cash in the bank and zero debt, isn’t deflation preferable to inflation? I vote deflation.

#12 charliegosurf on 11.08.08 at 6:15 am

youhou, great poster master,

equity is a fundamental of poker too, funny how real-estate relates to the game. we live in TURN card time.

gotta hate to commit all that cash in one hand, when yu well know your opponent will take that cash away….

even with a pair of as, or a great full house, you are flushed by the flush…, yu can loose equity real fast as the card of life unFold, the river can always save you…but the river is runnin dry in america.

sometimes better to bet low, and watch the show, you just let the other players reveal to you the truth by their foolish equity lust, than jump on them and run with their pot. lol

keep on playin, that rare royal straigth flush of luck, might come in a odd future to replinish that pot of equity….still, yud always loose cause the bank, or that SAfe deposit box would get you with four aces…

#13 Stuff on 11.08.08 at 8:23 am

Garth,

In your opinion is our money safe in a savings account of a bank in large amounts? We are saving and waiting for the right time to buy and would hate the bank we have our money in to go kaput..

I was thinking of splitting our money and putting it into to different banks.

Is that just being too paranoid?

#14 booboo on 11.08.08 at 9:05 am

#13 Stuff
I live over in England and we’ve had a bunch of banks go belly up over the last year and a half. Fortunately for the hard savers like me the gov’t has bailed them out. I’m sure the same would happen in Canada but I’d split my money if I were you, just the same.

#15 midas on 11.08.08 at 9:44 am

#13 Stuff
The purpose of a safe is not to keep cash as in paper money in it but rather GOLD and SILVER which are real money and have been for 5000 years. In the event of a bank holiday which is an almost foregone conclusion all PAPER MONEY will be worthless or at least worth a lot less than it was before the bank holiday. With globalization this contagion of the collapse of paper currencies will be worldwide and there is no fiat paper currency that you can store your savings in and guarantee that they will retain their value or even have any value left at all when this whole house of card collapses even as the collapse accelerates right before our eyes. Canadian $, Swiss Francs or Japanese Yen will fare no better than the US dollar since all currencies have a very incestuous relationship as do all banks worldwide and as dominoes they will all fall together. Post war Germany would be a good model as to things that you can invest in that will be of value when the ships stop sailing (happening right now) and the trucks stop rolling and there is no food in our grocery stores and no gas at the pumps. 1. Gold and Silver. 2. Non perishable foods 3. Cigarettes and Booze. These things will be the currency of the future at least for a period of time when the world will be more Mad Max than Green Acres or Happy Days.
But it can’t happen here! Famous last words!!!

#16 dd on 11.08.08 at 9:57 am

It is funny. Deflation is happening and the world is going to the US dollar. All $ are devalued against the US$ except for the Yen.

What happens when this huge money spending really starts in the US? What happens when the Fed issues $1 trillion in debt this year, $1 trillion next year, … . There will be more US$ floating around the the next 5 years. Too much supply.

When this happens does the $US decrease and all other currencies increase? What will hold its value in the future?

#17 dd on 11.08.08 at 10:08 am

#9 JoJo,

The US and the world will work all its power to be inflationary. The US has over $10 trillion alone. They have to have higher inflation to pay off this massive debt.

But will all these measures work? The US government wants the US$ to be the safe haven and be inflationary. Safe haven because they have to convince investors to buy their T-bill and bonds for years to come and inflationary to pay off debt.

#18 GrandePrairiegirl on 11.08.08 at 10:41 am

#13 Stuff,
I’m not sure what you mean by ‘large amounts’. However your funds are insured up to $100,000 per account per accountholder. Your spouse could hold one account as well as yourself and you’d be covered for $200,000 and that is per bank I believe. This gives you 8 accounts between 4 banks. I’m not counting CIBC, as they are most affected by the ABCP mess so far.
Credit Unions are not covered by CDIC although they may have provincial coverage, you should check this for yourself. Also products that are not covered by CDIC insurance are, mutual funds,stocks,bonds,treasury bills and GIC’s and term deposits that have a maturity date of more than 5 years and U.S. dollar accounts.
The 100k is principal and interest combined.
CDIC is a federal crown corp. created in 1967, they show a list of 40+ bank failures since their inception.
I also think if one of the big 5 were to fail then CDIC does not have sufficient funding to cover all eligible deposits and they would need a government bailout. If bankruptcies start skyrocketing and impaired loans start escalating in Canada, the banks here could have the same problems as those in other countries regardless of what Flaherty and Harper say.

#19 GrandePrairiegirl on 11.08.08 at 10:56 am

Then again if the U.S. really does collapse in 2009 sometime my previous comment will be irrelevant. Stock up on food and survival gear. If the SHTF scenario doesn’t happen you can always consume the food(no loss) and ebay your survival stuff or keep it for camping or what have you.
Hope for the best and plan for the worst.

#20 newbie on 11.08.08 at 11:01 am

What is a bank holiday? Thanks….

#21 brazer on 11.08.08 at 11:14 am

Economy not quite in freefall, but close, Greenspan says
http://www.financialpost.com/news/story.html?id=940875

“Indeed, the early data for October suggests it’s even more severe,” Mr. Greenspan said. He will look for a stabilization in house and stock market prices for a signal the financial crisis is nearing an end.

House prices may have another 5% to 10% to fall but Mr. Greenspan would say only this about the stock market:

“All bottoms look like the bottom we’re looking at now” but it does not follow that this bottom will soon lead to a recovery.

#22 wealthy renter on 11.08.08 at 11:18 am

Pete, deflation in the consumer price index is BAD for everyone, especially if it spirals out of control. Economists from both the left and right of political spectrum cite debt and deflation as the primary causes of the great depression. (simplistic I know.)

I live under my means and want to buy my little dream house at a cheap price, but I would prefer rent than see a deflationary scenario world- wide.

#23 brazer on 11.08.08 at 11:27 am

OIL PARTY HITS THE SKIDS
Published: Saturday, November 08, 2008
http://www.nationalpost.com/todays_paper/story.html?id=942462

Sure, the whole world is taking it on the chin from the financial meltdown. But Calgary thought it was invincible, its latest boom being so big and lasting so long. Downturns have been wiped from the city’s collective memory.

Fancy stores were rushing in. High-end car dealerships such as Aston Martin opened their doors. Second and third homes were snapped up on ski hills, the West Coast and Arizona. Houses were bulldozed to make room for mansions, while new country estates devoured the ranchland surrounding the city. And Calgarians happily regarded paying high gasoline prices as part of their civic duty.

That was then.

Mr. Davis can pinpoint the precise day Calgary’s cockiness faded: Oct. 10.

The stock market’s energy group, where Calgarians hoard their wealth, had just wrapped up a 25% nose-dive, deepening losses to 60% from the June 18 high.

#24 GrandePrairiegirl on 11.08.08 at 11:30 am

Shopping List : 100 items that will disappear first.

http://www.thepowerhour.com/news/items_disappearfirst.htm

#25 squidly77 on 11.08.08 at 11:38 am

7 first..because if you got it..someone will take it
spams on sale at safeways 4 for 10 bucks

#26 squidly77 on 11.08.08 at 11:42 am

the last time we had deflation in calgary was 1982-85 and the monster did this..
http://photos1.blogger.com/blogger/4027/164/1600/History%20of%20Calgary%20RE%20prices%20-%201973%20to%20today.jpg

#27 GrandePrairiegirl on 11.08.08 at 11:56 am

#20 newbie

They will simply close their doors for several days,possibly longer, to prevent runs. When they reopen they may also impose new (and of course lower)
withdrawal limits.

#28 Noz on 11.08.08 at 12:36 pm

Here’s to the 2009 CORRECTION! Let the mayhem and correction begin.

Let all the bastards and crooks and stupid people pay the price for being indulgent, greedy, and fraudulent.

Let the hard working, honest people who saved, lived within their means, and admitted to seeing what was coming prosper.

Let the losers who now want to be bailed out because they couldn’t sit down for 20 minutes and read a 10 page contract lose their homes, their yachts, their 8 passenger SUVs…and NEVER be able to buy another home again. EVER.

Let the CEOs with huge bailouts get put in jail or burn through that magic cash of theirs so they can end up working at a Starbucks.

Let the fraudulent mortgage brokers, slimy real estate agents, and scam artist appraisers hit the ground so hard they’ll taste the dirt they are selling.

Let the Wall Street crooks lose everything they’ve got and enjoy looking at their $20K a month condos from the street corner in their new cardboard boxes.

Let the Big 3 who’ve screwed us for decades making absolute garbage SUVs and gas guzzlers completely implode due to their irresponsible, crooked, and pathetically run business models….perhaps then the workers will end up in something more useful like wind, solar, or geothermal (please….no one should, even for a minute, buy this crap that the world will end because GM and Ford aren’t around…what a joke).

Let all the idiots and morons who CLAIM they didn’t see this coming and now want handouts, be able to develop such clarity of vision that they’ll be able to see the massive economic freight train they built, come barreling down over them from a mile away….then they won’t complain about not seeing what’s coming.

MOST OF ALL:

Let the environment and this beautiful, precious planet regain her composure and have a breather thanks to the inadvertent fact that we pathetic, stupid humans are consuming less, polluting less, and wasting less….for now.

Perhaps this global “crisis” is what we’ll look back on in 50 years and say that we accidentally saved our own asses….because I know we can’t do it when we try.

Have a good day.

#29 Mike B on 11.08.08 at 1:07 pm

NOZ 28 nice thoughts indeed… Sadly the thing about sheisters getting theirs is THEY DON’T . Most believe the “crisis” is just beginning and that it was essentially engineered. These guys are so safe and secure that nadda will effect them. Banks get it both ways… Make record profits… Give little or no interest in savings/GIC get discounts from gov. but keep some for themselves first ..raise mortgage rates .. write off any losses … pay crappy dividends… officers make huge bonuses but have no legal responsibilities…Banking must be reformed world wide. The tail should not wag the dog.

POL-CAN …. Talk about hitting the nail on the head
everything you wrote is so true. Do you think we should all go and buy gold/silver coins. Money is not safe but who has all the gold…. BANKS

#30 mountainbiker on 11.08.08 at 1:56 pm

Does anyone know how long it takes to have mutual funds transferred into the bank and once there is it easy to split the funds up between a few banks?
I was hoping there would be a slight rally, and have some time, but it looks like it’s a crash course on a bungee cord.
Thanks

#31 GrandePrairiegirl on 11.08.08 at 2:08 pm

#29 Mike B
Top 3 gold holders.
#1 – The Federal Reserve
#2 – Bundesbank Germany
#3 – IMF

And keep in mind the Federal Reserve is not U.S. owned but a group of private bankers and the majority of those are foreign.

#32 Calgary rip off on 11.08.08 at 2:21 pm

A big THUMBS UP to Noz posts of Truth or Consequences.

Right on dude!!!!!!!!!!!!!!!!

#33 kc on 11.08.08 at 2:33 pm

#15 midas…..

you forgot one other number to invest in….

4. Shot Gun Shells……..

About safes and the such, here is an easy way to hide them. First, do a little remodleing to your basement. Dig out a small corner and cement in your water tight-fire proof safe, cover the spot up with new flooring. (after you stuff in your hidden treasures. now comes the fun part, in that corner you invest in a 75-100 gallon fish tank and place it directly over the corner that will cover the safe…

Presto, super hidden and fully safe safe.

cheers

#34 Jelly on 11.08.08 at 2:42 pm

Noz,
Here,here…
I only wish-
unfortunately Mike B is right,
the powerfully corrupt rarely
get their comeuppance.
May they get what’s coming to them when they die…
I don’t believe you can shit on people and the earth
and get a free ride…

#35 dd on 11.08.08 at 3:59 pm

#26 squidly77,

I noticed in the graph the 1998 housing prices and oil pull back to $10 -11/barrel. Housing prices didn’t come down much.

Just an observation.

#36 timbo on 11.08.08 at 4:00 pm

some interesting reading if you have time

1.basics to what financial markets are doing right now

http://www.generationaldynamics.com/cgi-bin/D.PL?s=wGIMw5&d=ww2010.i.cdo080123

2.site to see financial and economic minds blog with news on markets overseas

http://calculatedrisk.blogspot.com/

3.watch robert shiller video if you have time (shiller price index)

http://econvideo.blogspot.com/

4.a very good book on history of the depression and the credit cycle . some pages are long but 1/2 way you will see a stark contrast to now as all you have to do is make germany the usa and the usa japan and china.

http://www.mises.org/books/bubbleworld.pdf

5.basic to housing california univ lecture which can easily apply to canada now

http://www.youtube.com/watch?v=ILW8OolM0Lo

6. good essay

http://www.financialsense.com/editorials/hultberg/2008/0129.html

thanks again garth for the book and the blog , forced me to dig deeper and try and figure out why this is happening and how to hedge.

#37 JO on 11.08.08 at 4:17 pm

JoJo, your posts continue to say we are in hyper inflation yet there is no such thing going on. All market action in the last few months is clearly signs of the deflationary hurricane now hitting shore in the real economy. The public is becoming more frugal, savings rates have started to shoot up recently, and there has been a rising aversion to debt. The sale of generic brands is rising faster than name brands and all these actions confirm the onset of a DEFLATIONARY mindset among the public. Fewer homes and cars being bought and sold and velocity is dropping, so yet again this is deflationary. Yes, the Fed has started “printing” as adjusted base money has gone up a lot in the last 5-6 weeks but it is simply dwarfed by the sheer amount of debt going bad and being paid off. When this deflation ends is the question and it is one nearly impossible to answer accurately. Look at gold prices and velocity, if they are both rising faster than the decline the US dollar, and you start to see signs of panic among people for access to the basics (groceries, etc), that will be the start of inflation. My bet is that we will see hyper inflation in the final stages of this thing, but we’ll likely have to see house prices stop dropping in the US and the total amount of debt being destroyed down to the pre 2001 bubble area. By making a bet on hyper inflation now, you are exposing yourself to a potential wipeout as deflation has an ugly impact on asset values. That said, I am planning to build a 20 % position in gold bullion on sharp declines. I am betting it will go into mid 600 before i start adding more. But hey, I don’t have a crystal ball !
JO

#38 squidly77 on 11.08.08 at 4:34 pm

as you can see clearly here..it was not the price of oil that caused housing prices to bubble in calgary
it was easy money..low interest rates and reckless abandon that caused the bubble prices
our mega-project building boom actually began in 1999
it was not until late 2005 and on that house prices got silly
the mega-boom actually peaked in 2002 but we continued low employment rates by building thousands and thousands of houses
and as more people came to build those houses the builders decided to build thousands and thousands more
http://photos1.blogger.com/blogger/4027/164/1600/long%20run%20trend%20-%20real%20prices.jpg

and for your interest heres the latest story on oil
http://quotes.ino.com/chart/?s=NYMEX_CL.Z08.E&v=dmax

unfortunatly this guy made good on his threat
http://i34.photobucket.com/albums/d132/Capresesalad/housingbubble.gif

#39 qwerty on 11.08.08 at 4:50 pm

# 35 dd

Look at the house prices in 1990s. They were well within affordable means. Therefore there wasn’t a huge drop off in prices.

#40 midas on 11.08.08 at 4:53 pm

Don’t count on all bank deposits being insured by CDIC etc. When the system goes down worldwide all those insurance guarantees will worth as much as the stock of Bear Stearns or Lehman Bros. This deflationary scenario is only temporary; we have some serious inflation coming down the pike in things that are necessities such as food and fuel. Deflation in housing prices or prices of flat screen TVs is of little value since you can’t eat them. Our clueless children are about to learn a history lesson or two and words like Weimar Republic and dirty thirties will soon resound through the world. Watch for the powers that be to launch another major war or two or three to cover their nefarious activities in plundering the public treasuries to enrich themselves and their bankster buddies at the expense of the average folk.
There is no new thing under the sun…to learn what is coming just look at that which has been. The first decade of the 21st century is much like the roaring 20’s, average people fooled into thinking they could live like royalty in their Mcmansions bought on borrowed money. The second decade that is just around the corner will actually make the 30’s look like utopia. And no one act surprised and ask how can this be? There is no other way for it to be! The time has come to pay the piper and his tab has been compounding daily for a long time. God help us all!

#41 squidly77 on 11.08.08 at 5:00 pm

to me there is nothing more convincing then graphs
dosnt matter what the shills snort or what the msm spews
one look is all you need
so lets have some fun with graphs..

tsx
http://quotes.ino.com/chart/?s=TSE_0000&v=dmax

nasdaq
http://quotes.ino.com/chart/?s=NASDAQ_COMP&v=dmax

big brother dow jones ind
http://quotes.ino.com/chart/?s=INDEX_DJI&v=dmax

s&p 500
http://quotes.ino.com/chart/?s=CME_INX&v=dmax

all bubbles markets eventually return to there historical values
http://www.greaterfool.ca/wp-content/uploads/2008/10/case-shiller-index-oct-30-081.jpg

so all you reators brokers and specuvestors argue away
but your cause is futile

#42 brazer on 11.08.08 at 5:46 pm

October data skewed by hiring for election
http://www.thestar.com/Business/article/533162

“This wasn’t a great month, after you strip out the jobs associated with the election,” said Avery Shenfeld, senior economist at CIBC World Markets. “But Canada really hasn’t had the steady downtrend in employment that the American economy has suffered. We may be entering a period like that in the coming months, but we have the advantage of having gotten off to a better start to 2008.”

Despite that glimmer of optimism, yesterday’s dismal U.S. job report had some economists predicting tougher times ahead for Canadians.

“We have to more fully reflect the weakness in the United States, and I would think fairly soon,” said TD Bank chief economist Don Drummond, who called the U.S. numbers “bleak beyond belief.”

#43 brazer on 11.08.08 at 5:48 pm

Battered GM on the brink
http://www.thestar.com/Business/article/533169

Nov 08, 2008

General Motors Corp., once the world’s mightiest company, is on its knees today after reporting another huge quarterly loss that will prompt more cuts, including 500 extra layoffs in Oshawa.

#44 squidly77 on 11.08.08 at 6:12 pm

a blogger on the vancouvercondo.info blog wrote

Pandora, like you, I don’t understand the anger of many here and the glee of seeing others go through difficult times.”

When prices were going up, up I was told by many of the house-rich that I must be a loser because I couldn’t own a home. I’m a leftie. They flaunted the capitalist principles that if I couldn’t afford to live in the city maybe I should get out of it (no matter that then they wouldn’t someone to serve them their lattes). I said everyone had a right to safe, appropriate housing and they said it was a privilege. And no one worried that I was going through “difficult times.” They were busy getting rich and if I couldn’t join the party, scew me. If I said prices were to high and soon regular people would no longer would afford to live here then I must be a sore loser. Yes, they said I had missed the boat and that Vancouver was for the wealthy. The un-wealthy pawns of society feel free to vacate the premises.

Well, now that prices are falling suddenly I have to feel sorry for house owners? I don’t agree with reckless capitalism but this is the society I live in and it’s not a very nice, polite or compassionate one. If it was, we’d have more social housing and less people living on the streets. Instead, we have happy condo owners living in Yaletown, sipping lattes, happy to ignore the woes of others. But now they are afraid they’ll be joining the guy who picks the bottles out of the dumpster.

So I should fell sorry for them.

Excuse me while I’m experiencing some Schadenfreude.

said perfectly

#45 charles on 11.08.08 at 6:12 pm

The following is from an article titled “We Should Get Quebec Off Welfare”. It was posted on the Ottawa
Citizen web site on Nov. 7, 2008. The article was written by Doug McGoldrick,

Re: Ontario officially a ‘have-not,’ to get $337M in equalization, Nov. 4.

What a joke the equalization payments are. In its new have-not status, Ontario will get around $26 per person while Quebec gets $1,038 per person. This wouldn’t be so bad, if Quebec wasn’t the author of its own misfortunes.

Before Bill 101, Quebec was a thriving province and Montreal was a world-class city. Since the introduction of Bill 101, companies have deserted the province like rats from a sinking ship, and few businesses want to open up in the province.

Finance Minister Jim Flaherty has told Ontario to lower corporate taxes in order to attract business. Why hasn’t he told Quebec to ditch their language law in order to attract business?

If any province is the recipient of equalization payments for any period of time, the federal government should insist that they take steps to address the problem. If they fail to do so, they should be disqualified from any future equalization payments.

Premier Dalton McGuinty shouldn’t be complaining to the federal government about transfer payments, Mr. McGuinty should be ragging on Premier Jean Charest to get off this welfare. After all, that is where most of the fiscal imbalance that Ontario suffers goes.”

The following is the link to the article:

We Should Get Quebec Off Welfare

“Under the equalization program alone, equalization revenues for Quebec jumped to $8-billion this year from $4.8-billion in 2005-2006.”

The following is the link to where I got the preceding quote from:

Ontario’s new have-not status could bring toxic consequences

With an unprecedented financial storm about to hit us money is going to be a very precious commodity. I think it is time to make some common sense changes when it comes to spending taxpayers’ money in this country.

#46 dd on 11.08.08 at 7:09 pm

#38 qwerty,

True. I was relating to the price of oil and the 80-82 recession.

#47 dd on 11.08.08 at 7:15 pm

OK,

So the price of oil is down, housing is down and still going down, price of everything is coming down.

What next? Most are renting (on this site). Most have cash. What is the next opporunity. Waiting?

So …

#48 islander on 11.08.08 at 7:20 pm

Met a guy working the recent federal election. He told me that he – an Anglo – worked for a thriving business in Quebec, back in the day. After Bill 101, the French Gestapo paid a visit and started demanding that his boss hire more Francos. According to this guy’s story, the boss closed the business and moved the entire operation to Ontario before the end of that month.
I have no idea whether it’s a true story. But that’s what the guy told me.

#49 T.O. Girl on 11.08.08 at 8:19 pm

Spoke to my RE friend yesterday told me things are getting really bad NO SALES sellers are being urged to reduce prices! Well I say they have alot to go at least 30% or more before any smart buyers come in thats if they still have a job. people dont rush to buy we are at the tip of the cliff as in 1991 prices declines have just started there will be many more to climb. North Toronto, Leaside are still priced way to high for some of the crap you get! I wouldn’t buy a house in Leaside for 50% down no lot and homes are just crappy if the newly renovated seem like they were done by speculators trying to flip fast -choppy work-, Save your money don’t be a greater fool.

#50 confused and a little crazed on 11.08.08 at 8:20 pm

guys,

I think u guys pretty much said it all. we have to bet back to the basicsSo many if us are brainwashed by the corp ” BUY now” lifestyle. All those commercials indication your life will be so much better with ” input product”

Even some singing groups Nsync…girlicious…manfactured product. Forget learning instruments, creating songs meaniful to u . Just hire the right marketing people. Make the right sound …package it in a nice cute ass and sell.

Though I was too young to know the songs from Billy Joel and Rod stewart when they first came out. ButI like them now as an adult. I can relate to the songs. Of course there are new good ones too. Sorry guys just rabbling.

But this severe correction is needed Deflation/ Depression. We really don’t need another mall or newer ways to buy giant LCD/ Plasmas Tv. We jshould just take 5 and learn how to plant some food. It’s skill worth learning.

#51 JET on 11.09.08 at 12:36 am

Unreal:

“Even if we didn’t sell another condo, we’d still be building heavily into 2009 and 2010,”

(I guess they have to – too much at stake)

http://www.dailycommercialnews.com/article/id31266

#52 anonymous on 11.09.08 at 12:59 am

If you think we are headed towards a great depression, cash is king. Maybe even gold.

If it’s a deep recession, things are going to get a lot worse, but the US stock market is only 1000-1500 points away from the bottom. In Canada it’s going to be worse (I think the TSX has at least 3000-4000 points to go before a bottom is hit).

Just remember, in depreciating economies we all lose. You can’t hide anywhere.

Stock market sucks. Bond markets suck. Housing sucks. Gold sucks. Oil sucks. The job market sucks. Everthing sucks.

Even cash can suck. Canadian dollar has lost a lot of value against the US dollar. So, unless you were long the US dollar for the past two or three months, your Canadian dollar sucks.

Remember, you need to take pain in order to make it though. Avoiding pain might not be an option. The idea is to try to minimize how much money you lose. If you have a job, that’s great. Keep it.

dd, I sold out of my DIG (double oil/gas) position. I’m staying clear of oil/gas for a while until things settle down.

I’ve been buying the dips, and selling the rips in US banks and the nasdaq.

#53 POL-CAN on 11.09.08 at 1:03 am

Garth….

This link is for that blow hard poster that thinks the west is immune to the global slowdown…. His post make such an impression on me that I can’t even remember his nickname :)

http://www.theglobeandmail.com/servlet/story/RTGAM.20081107.wbaltic07/BNStory/National/home

Do to the above I suspect that we will see shortages in some stores just in time for x-mas…. This is getting ugly

#54 squidly77 on 11.09.08 at 1:08 am

consider the blog title
greater fool
well now the fools are all in
they are now waiting and expecting the smart people to bail them out

HAHAHAHA..thats why they are fools

realtor final exam
http://www.digitalrendezvous.net/wp-content/uploads/2008/02/games-idiot-test.png

#55 Charles on 11.09.08 at 1:46 am

The following quotes are from an article posted on the Daily Mail web site (U.K.). The article is titled ‘It’s awful – Why did nobody see it coming?’: The Queen gives her verdict on global credit crunch. The article was posted on Nov. 6, 2008, and was written by Sam Greenhill.

“The Queen spoke for the nation yesterday when she asked how the credit crunch could have taken so many economics experts by surprise.

She described the financial crisis as ‘awful’ and inquired that, since the meltdown was so massive, ‘Why did nobody notice it?’

The royal concern was revealed at the London School of Economics, where she opened its £71 million New Academic Building.

Professor Luis Garicano, director of research at the LSE’s management department, said: ‘The Queen asked me, “If these things were so large, how come everyone missed them?”.’

It is a question which will resonate with ordinary families baffled at why politicians, bankers and City experts all failed to spot the financial storm on the horizon.

Explaining the origins and effects of the credit crisis, Professor Garicano said he told the Queen: ‘At every stage, someone was relying on somebody else and everyone thought they were doing the right thing.’

The Queen then described the situation as ‘awful’.”

The following is the link to the article:

‘It’s awful – Why did nobody see it coming?’: The Queen gives her verdict on global credit crunch.

#56 patriotz on 11.09.08 at 2:51 am

Don’t count on all bank deposits being insured by CDIC etc.

Yes you can. The reason is that the Crown has the power to print money without limit. You will get your money back. Whether the purchasing power of that money will be reduced (inflation) is another issue.

There will also be no bank holidays for the same reason – the BoC can just replace lost deposits with money created out of nothing.

#57 JoJo on 11.09.08 at 3:21 am

Hi Jo
I guess you still can’t understend currency valuation.
When you have country as US in overdebt position,plus
printing trilions every year for government bailouts than $ US will collapse,soon.
If any country has defficit and goverment will printing money like crazy than
you have higher money supply and it’s inflation.
I know that world wide production in 2007 was $60 Trillions, but the Stock Market “Assets” and debt over $600 Trilions.In USA you can see production of $ 13 Trillions and Stock Market “Assets” and debt over $60
Trillions.
I know that in golden standards today 1/oz of Gold =
$ 59,000 US. Because Fed has so much money supply
and about 800 tons of gold,only.

#58 Dr Phil, you can call me Uncle on 11.09.08 at 10:29 am

Now for some light entertainment….
I nice example of a realtor fiercely trying to defend positive housing market fundamentals blaming the media for negative hype despite the overwhelming negative economic fundamental in our great nation. See Comment section…. A poster has even recommended this realtor refer to Garth’s greater fool blog for some education.
http://www.theglobeandmail.com/servlet/story/RTGAM.20081105.WBmarkets20081105132502/WBStory/WBmarkets

#59 Dawn in Calgary on 11.09.08 at 12:00 pm

wouldn’t buy a house in Leaside for 50% down no lot and homes are just crappy if the newly renovated seem like they were done by speculators trying to flip fast…

++++

That’s still what they’re doing in Calgary. Or at least trying to. I can’t imagine this place will sell. I wouldn’t buy it for a quarter of the price. A two bedroom, obviously spec/flip home is listed for $640k.
http://calgary.en.craigslist.ca/reb/908062292.html

#60 CalgaryRocks on 11.09.08 at 1:17 pm

One thing that will never deflate is the power of dirt bags politicians to find new ways to raise our taxes.

Look at your ass mayor in TO and our other crackpot in Calgary.

Why don’t you ever complain about constantly rising taxes instead of your constant, the sky is falling, rethoric which only helps scaring idiots into buying your books?

#61 Bottoms_Up on 11.09.08 at 1:41 pm

If post #56 is correct, then:

32,000 ounces to a ton

therefore US has 25.6 million ounces of gold

therefore 1.51 trillion US dollars in gold

#62 vicguy on 11.09.08 at 2:51 pm

Sorry, “bottoms up”, my calculation is: 800 tonnes X 32,150 x $734= $18.88 billion.

#63 squidly77 on 11.09.08 at 2:55 pm

CalgaryRocks said
Why don’t you ever complain about constantly rising taxes instead of your constant, the sky is falling, rethoric which only helps scaring idiots into buying your books? it makes me smile to know that we have ruined your morning

#64 kc on 11.09.08 at 3:22 pm

Here is a nice summary of what is happening in the states, the article is written by John Mauldin who writes a news letter every week and he is pretty bang on in most points.

This letter actualy points to the bleak news that is engulfing the US, in all aspects of thier economy. I take this as a sign of what is heading to us here in Canada.

cheers

The Impact of Deleveraging on Economic Growth

http://www.marketoracle.co.uk/Article7197.html

#65 CalgaryRocks on 11.09.08 at 4:14 pm

it makes me smile to know that we have ruined your morning
===================================

Even if that were true, it turns out that with my life, a ruined morning is still a lot better than the brightest morning in yours! Thinking of that makes ME smile!

#66 squidly77 on 11.09.08 at 5:02 pm

popping soon..
http://www.nicholsoncartoons.com.au/cartoons/new/2002-10-08%20Housing%20bubble%20markets%20flatten%20a%20bit%20530.JPG

and that makes me smile

#67 squidly77 on 11.09.08 at 5:12 pm

realtors are crying here
http://albertabubble.blogspot.com/
is that you calgaryrocks..

#68 Rick on 11.09.08 at 5:28 pm

Realturd shot in North Vancouver on Friday. What is this, the 3rd Realturd shooting in the Vancouver area, in the last 6months?

http://www.canada.com/theprovince/news/story.html?id=fb000092-1d91-47f5-9078-a48eaa7a5231

A despicable vocation in need of a serious overhaul.

#69 dboy on 11.09.08 at 6:10 pm

It’s interesting to look back and reflect – some were trying to warn us about where we were headed; however, we didn’t listen:

http://www.snapuprealestate.com/news/u_s_housing_crash_affects_global_economy.htm

#70 dave on 11.09.08 at 6:12 pm

#56, I don’t understand what you are referring to with your figures of $60 trillion and $600 trillion.

However the following article references global invested wealth as $109.5 trillion in 2007.

http://www.financialpost.com/money/story.html?id=769842

#71 VanIslander on 11.09.08 at 6:20 pm

Garth ,
could you please make a new thread for this article in the Victoria Times Colonist today ?

Seems this ReMax real estate agent is claiming Victoria is insulated from all world disasters. Can you imagine the influx of people moving here we will have when the word gets out ?

I think this newspaper has stooped to an all time low in real estate pumping.

“We are, to a large degree, insulated against the vagaries of the world market here.”

http://www.canada.com/victoriatimescolonist/news/story.html?id=1f0645f1-49b1-4ac7-87f0-29973935c6bc

#72 POL-CAN on 11.09.08 at 8:32 pm

I thought I would post something funny yet at the same time true and educational….

Ron Paul: Who Owns YOU? (Narrated by George Carlin)

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

I miss George Carlin…. :(

#73 Rick on 11.09.08 at 8:34 pm

#28 Noz
++++++++++++++++
Absolutely impeccible post!!! Bless you!!

#74 Bottoms_Up on 11.09.08 at 11:04 pm

RE #61: I was using 1 oz of gold as $59,000, as i said, if the numbers in the #56 posting were correct

RE 59: “..only helps scaring idiots into buying your books?”

1st rebuttal: read his 2002 book regarding the (hot) real estate market of the time (so clearly he’s trying to educate of current conditions and not trying to just profit from scare tactics)

2nd rebuttal: you can get his books at the local library

#75 john on 11.09.08 at 11:17 pm

Garth,

Unable to open your “squirrel alert” entry. Pls look into this…

#76 john on 11.09.08 at 11:53 pm

Garth,

Still unable to open your “squirrel alert”entry.

Pls advise…

#77 dotava on 11.10.08 at 12:54 am

#73 Bottoms_Up on 11.09.08 at 11:04 pm

Don’t wait in library – investment in “Greater Fool” was priceless.
Waiting for another book to invest. :-)

#78 charliegosurf on 11.10.08 at 6:57 am

the squirrel is busy eatin calgary rocks salary, lol

#79 CalgaryRocks on 11.10.08 at 9:20 am

charliegosurf on 11.10.08 at 6:57 am
the squirrel is busy eatin calgary rocks salary, lol
==================================

I bet squirrels are already endangered in your ‘hood. haha, bon apetit!

#80 tom on 11.10.08 at 9:53 am

this have definitely changed here in Toronto. Only last week a friend of mine, who has his property for sale in Richmond Hill for $900K, told me that he was offered a ‘take it or leave it’ offer of $680K. that’s $105K less than what he paid for it 2 years ago. i’m interested to see the latest figures for avg downtown condo prices, i reckon these will be even more foobar’d.

#81 Jelly on 11.10.08 at 10:22 am

Garth,
Can’t read new posting…

Reboot. — Garth

#82 Andrew Toronto on 11.10.08 at 11:25 am

Per article in finacial post this am..

“They should be in the 7% to 10% range [for price decline] in Ontario for the next 12 months”

So if we’ve already had 15percent haircut already another 10percent will bring house prices down to approximately 25percent roughly what Garth was perdicting.. meanwhile the rest of the world is having a major meltdown .. what gives Garth shouldn’r we be seeing bigger price declines here as well , Nortel just annouced another batch of job cuts over 1000 gone. countries talking about infrastucture programs to revive the ecomony now .. even heard harper looking at that ..But if not real jobs are created and investment in research and deveopment occur .. what can these bandaid solution produce ..

I think some of these folks don’t get it building and fixing roads is fine , but once that’s done then what .. obviously building cars and manufacturing is a thing of the past here .. see stamp made in china .. and services mostly going to India..

where those that leaving teh canadian workforce to do.. and lets not forget the aging baby boomers and the cost of medicare in the not to distant future something gonna give and when it does I think garth has this much right that where really at the early stages of this mess. I suspect the end won’t be for some time and when it does the result probably will not come till a world war breaks out ..My 2 cents ..

http://www.financialpost.com/news/story.html?id=936664

#83 T.O. Girl on 11.10.08 at 11:33 am

Post #79 tom
Your friend should of taken the 680 000 and ran, it is probably too much anyway!!! Home prices are ridiculously overpriced. How many people now days can afford common house prices of 700 -800 000 very few everyone I know is afraid of their job loss!! (many of my friends have good jobs) no one is immune!!
If I were a seller I would get out as soon as possible and remember
THE BEST OFFER IS THE FIRST OFFER !!!! ALWAYS

#84 kc on 11.10.08 at 11:48 am

81 andrew

you are hitting the nail on the head.

There are so many “China Bulls” out there that presume that Asia will be North America’s life line, however, research that very topic and you will soon see that China is melting faster than us.

here are 2 very important articles that give reason to feel we are not immune to the crises.

Keep in mind that China is now talking about bailout stimulis packages …. doesn’t this alone say volumes to the well being of “our saviour” over seas?

The Chinese are talking the same path… infrastucture programs – trying to stop any unrest that will escalate. top this off with falling house prices there too.

“”The property bubble is already starting to burst,” says Yan Yu, a business management scholar at Peking University, researching the export center of Dongguan in southern Guangdong province. “House prices here in Dongguan have fallen by up to 50% this year,” leaving many homeowners owing more on their mortgages than their homes are worth.”

and HUGE factory shut downs….. Asia is NOT saving anyone… they can’t save their selves.

cheers

full article – Peter Schiff and China’s Economy Hard Landing

http://www.marketoracle.co.uk/Article7223.html

Why Washington Cannot Prevent Economic Depression

http://www.marketoracle.co.uk/Article7224.html

#85 Bottoms_Up on 11.10.08 at 11:50 am

Housing starts in Ottawa up nearly 31% yoy (CMHC). Yikes.

#86 Bottoms_Up on 11.10.08 at 11:53 am

i can’t access Squirrel alert either…tried rebooting, refreshing, deleting cookies and temp. files

#87 Bottoms_Up on 11.10.08 at 12:18 pm

city of ottawa in financial trouble:

http://www.canada.com/ottawacitizen/news/story.html?id=90dff0dc-964b-4d46-8065-b75f9da9e4cc

excerpt:
Somerset Councillor Diane Holmes says Ottawa must follow Toronto’s lead by finding new revenue sources, such as a land-transfer tax when property is sold….

#88 POL-CAN on 11.10.08 at 12:22 pm

same here…. can not access the new thread….

#89 POL-CAN on 11.10.08 at 12:28 pm

# 79 Tom

Do you have an mls number for that listing?

I am curious to see what that 900 k house looks like :)

#90 Bottoms_Up on 11.10.08 at 1:49 pm

Can someone with access to Squirrel Alert please cut and paste it as a comment here?
thanks

#91 Lawrence on 11.10.08 at 2:02 pm

New Housing Price Index – Statistics Canada

Garth seems to believe his opinions are as good as facts. But it is always nice to check an objective source once in a while. For all his wailing, Garth is best characterized as a scare monger who lacks the data to support his predictions which arer based more on his ego than anything else. Too bad about the election Garth. I suppose they got tired of listening to your opinions too.

September 2008

The New Housing Price Index increased 2.1% in September on a year-over-year basis, a slower pace than the 2.3% advance in August.

On a monthly basis, prices rose 0.1% between August and September, resulting in a New Housing Price Index of 158.7 (1997=100).

The largest year-over-year increases were in St. John’s and Regina, both with increases of 22.7%. However, both of these cities registered no monthly change in September. Also, both cities were down from record highs in 2008, with Regina down from its peak of 34.0% in April and St. John’s down from 24.3% in July.

In Saskatoon, the year-over-year increase was 5.5%, once again confirming a trend of deceleration in this city. On a month-over-month basis, new housing prices decreased 2.1% as Saskatoon builders continued to report difficult market conditions.

Edmonton recorded a 12-month drop of 5.8%, which was the largest annual decline since July 1985, while prices in Calgary declined 1.2%.

On the West Coast, the 12-month increase for Vancouver was 1.4%. In Victoria, contractors’ selling prices increased 0.2% year-over-year, up from a 0.3% decline in August.

Compared with September 2007, contractors’ selling prices were 4.3% higher in Ottawa-Gatineau and 3.0% higher in Toronto and Oshawa.

In Québec, the 12-month growth rate was 6.1%, while in Montreal, prices increased 4.8%.

#92 THC on 11.10.08 at 2:12 pm

gARTHS! FIX YOUR NEXT POST IT DOESNT WORK! YES I DID REBOOT!

#93 POL-CAN on 11.10.08 at 2:42 pm

# 90 Lawrence….

For crying out lound man… Please read some worlwide news…. Even China is crashing… In the UK house prices are falling $ 3 k per day…..

If the big 3 fail (more then likely before January 20th) then Ontario is dead, finished, caput….

If oil falls below $55 per barrel, then the oil sands in Alberta are done too…

Nortel just announced more layoffs… Cuircuit city just filed for bk protection….

It is NOT different here in Canada. History has shown that our recessions start later AND last longer then in the USA. This one will be nasty….

#94 POL-CAN on 11.10.08 at 2:58 pm

Garth…. I hope you do not mind :)

Some of us can not wait for you to fix the new post so I yanked the text out of the source and cleaned it up a bit….

Squirrel Alert

Most mainstream economists seem to agree this recession will be brutish and deep, and may last two to three years. But it will not evolve into a deflationary spiral leading to a depression. Let’s hope they’re right, although China’s move this week to bring in a $586 billion stimulus plan did not fill me with hope. I mean, this is China – 1.3 billion people, with a growth rate of 11% last year and a 20% increase in exports, with 15 million people a year being added to the workforce. If Beijing is worried about economic slowdown, is there any hope for us?
And Spain. Sheesh. With forty million people, about the same size as Canada, and yet with almost 3 million unemployed, it’s steaming towards Depression-style unemployment of 20%. And Iceland? Wow, No. 1 on the UN best-places list in 2007 and a basket case now, where 30% of the population wants to leave. All this, of course, in mere weeks.
Meanwhile jobless numbers in the US last month were staggering. The real estate market there has yet to feel bottom. And some smart people are saying the Dow at just under 9,000 will be heading to 400. And I haven’t even touched yet on the sucker’s rally of 1930.
As I write my new book. I have been asked for some pointers on surviving a depression. Here are a few
1. Get out of your mortgage. A true depression will sink residential real estate values by at least half and possible by three-quarters. If you bought a home in the last five years with financing on it, the chances of it falling below not only your purchase price but your mortgage amount are excellent. If that happens, you have no options. Walk away, and you’ll get sued for the difference between the amount you owe and what the bank dumps your house for – and their lawyers never give up. If there’s any chance you might lose your job in a depression and you don’t own your home mortgage-free, you’re rolling the dice by not selling now and getting out of this soon-to-be-crushing obligation.
2. Get out of town, or at least the big city. Take some of the real estate proceeds and buy a piece of land and maybe a used RV (lots of those for sale these days), and park it. Or move to a smaller, more remote community, where housing costs are far less and community support is far greater. If so
3. Get a home with its own services, namely a well and a septic bed. If there is an economic collapse, don’t count on governments to be there providing you with endless free, clean water, and the capacity to treat your sewage. All it will take is a sustained power disruption to end those niceties. Then what would you do? What will the millions who live in Toronto do?
4. Buy a generator. You can almost count on the grid going down as utilities struggle with a declining revenue base and the cost of fuel to create electricity. If there’s an ice or wind storm, it could be months, not hours or days, before service is restored as power companies struggle with their own financial problems and try to operate with reduced staffs.
5. Of course, for a generator, you will need fuel. A natural gas-powered residential unit will operate so long as the gas company keeps the pipes full (definitely longer than the wires overhead will stay up), and a propane generator can run for as long as your storage tank allows (the company supplying you with gas will not be able to pump any into their vehicles without electricity). So a good bet is a large, well-installed gas generator and a few hundred litres of gasoline. Store it in 50-litre cans so it can be moved quickly if necessary and don’t forget to keep a pump close by. You will not want to spill a drop.
6. Live somewhere you can plant a garden. Growing food in a depression is a no-brainer, giving you excellent nutrition at the right price. Get seeds now. Horde them.
7. Get cash and store it safely in a safe.
8. Get a weapon and learn to hunt. In the last Depression, deer and squirrels almost became extinct. Think about it.
9. If dining on rodents is not appealing, then this is another reason to move into a rural area. Chickens are easy to raise, and are one of the most efficient machines on earth for converting feed into protein.
10. Change at least a portion of your savings into gold or silver, since these commodities are historic guardians of wealth. If things get really bad, Canadian dollars could become seriously devalued – a nasty lesson Icelanders learned in their recent brush with disaster. Precious metals are portable and universal, which is another reason you need that safe. Obviously, don’t buy bars of the stuff, but rather gold coins and single wafers of one ounce to five ounces. Easier to pay for gasoline and squirrel meat that way.
11. Make sure you have meds and first aid handy. If you or someone else in your home requires prescription medication, see your doctor and get what you need to fulfill a year’s worth of it.
12. Buy and store food and water. Collect plastic bottles. Have a bad day box full of supplies – matches, wind-up or solar radio, lanterns and kerosene, camp stove and fuel, thermal blankets, tools including axe and hatchet, tape, pliers, the usual.
13. Get bicycles for your family. Sturdy ones with large tires. No need to pay more than a couple of hundred bucks a piece at Canadian Tire or, better still, Wal-Mart.
14. Get a dog. A real dog, like a German Shepherd or a Rottie. Although you now have to worry about dog food and caring for your pet’s health, you have just secured the single best security device possible in a world which, I guarantee you, will be far less secure than this one. Besides, you get an extra friend.
15. Build community support. A protracted depression will tax everyone’s ability to cope and there’s no doubt you and everyone around you will need help. So find ways of helping each other. A communal garden could be far more productive than several individual ones, for example, with the constant care and security which will be required. Time can be spent in the evenings rotating between various homes, so precious generator fuel is not wasted lighting many houses separately. Find those on your street or in your building who have time on their hands, and can do the necessary maintenance and repair work that a condominium corporation or the city will surely abandon. Most importantly, find others to share your burdens with and to talk about sweeter times to come.
But of course, we’ll all be okay.
Note: Early reaction of some readers indicates a belief I am predicting a depression. Not so fast. What I am doing above is giving some guidance in case a deflationary cycle occurs. In my coming book, After the Crash, I also offer extensive additional advice on how to prepare for the possibility of such an event, and the odds of it happening.

#95 Lawrence on 11.10.08 at 5:32 pm

POL CAN

The reality of a global recession is not at issue. What is at issue is the impact these factors will have on Canadian Real Estate. Statistics Canada releases a report today that suggests a healthy market exists in Canada for new homes – Garth’s opinions notwithstanding.

Compared to Spain, Britain and our friends to the south, We are doing something right. Our prices are correcting in specific markets as they have always done. Overall, however, the real estate market is a better place to put your money than the stock market or virtually any other place. My professionally managed RRSP’s and my personal portofolio remind me every day of the huge gamble people make when they rely on the stock market to accrue wealth.

The undisputable fact is that people who have owned real estate for more than five years, in virtually any market in Canada, have done better than renters who have invested in the stock market during the same duration.

We should be proud that Canada has persistently and consistently outperformed every G8 economy despite the “headwinds”. Canadian financial institutions and Insurance Companies have avoided the pitfalls that have decimated others. We are well positioned to take advantage of the weakness to the south to make a substantial gain in the next three to five years.

The Canadian economy will bump along for a while but we will emerge even more confident of our economic priniciples and policies and we will have even more to bring to the world in terms of solutions.

Garth has books to sell- but not to me. He is deluded by visions of his own grandeur.

#96 PP on 11.10.08 at 5:33 pm

Midas

Excellent Post.

#97 POL-CAN on 11.10.08 at 11:48 pm

# 94 Lawrence

I agree that Canada has done well (for now anyway)…

My point is that our RE market will crash just like everywhere else on this planet due to outside factors. We are an export based economy and when no one is buying our products and commodities we crash hard.

Our RE market got goosed in 2006 with the 0/40. If it was not for that then we would be in the excact same situation as our US friends.

My RRSPs are taking a beating too…. It is like the last 2 plus years are gone…. 60/40 GIC/TD Bank stock…..

For now our Banks are doing better then in the south…. But the derivative storm is coming….

Time will tell

#98 Lawrence on 11.12.08 at 3:48 pm

POL-CAN

No county can be shielded from global economic forces. The fact that our housing market, our economy, and our financial system has weathered the storm so well, after a full 15 months of chaos in the US, is remarkable. It is more than remarkable. It is tangible proof that Canada does not walk in lock-step with the US. This is irrefutable fact, Garth’s opinions notwithstanding.

Canadians, especially those who are elected to represent them, can be very proud of Canada’s performance under these trying circumstances.

Garth’s promotion of his views and his blurring of distinctions between Canada and the US data is akin to misleading propaganda (to sell books) than a fair appraisal of our economic and financial situation. It lacks integrity and smacks of self-service.

Free speech is one thing, the more the merrier, but cheering for Canada’s housing collapse, distorting information to favor his point of view, and ignoring objective data is the pre-occupation of the propogandist.

#99 POL-CAN on 11.12.08 at 11:12 pm

Lawrence

I agree. But….

However you want to look at it our little boom is coming to an end and much quicker then down south. The bad news just keeps on coming and by spring the situation will be dire indeed.

Most of the readers on this blog are interested in housing prices correcting. What we will get instead in a severe recession/depression that will last for years.

Yes, housing will correct. The question is who will be able to buy with massive unemployment and lack of credit?

My personal view of this is tin-foil. I belive that during the last 30 years the greatest theft in the history of the world was being prepared by the PTB. A complete destruction of the middle class is at hand and I do not see a way out. Interesting times indeed…..