The devil & the cockroach

Chart Source.     Click on chart for larger version

Update:

Gulp. Toronto stocks crash 600 700 765 points

GM shares sink to lowest value since Depression (the last one)

Canadian banks set for big job cuts?

What the economists now fear the most: deflation.

Toronto house sales crashing as head realtor blames CNN

US jobless claims jump to a 16-year high

Oil heads for $50 a barrel as stocks nailed again

TD Bank takes credit hit on investment losses

Financial crisis has Canadians rethinking retirement

Click on headlines above for links

In the first two weeks of November, only 800-odd houses sold in Toronto, which was about 50% less than the same time last year. Prices were down and listings were up. At this rate there’s about a 2-year supply of homes for sale, so good luck if you’re trying to flog one.

But that’s just one punch in the gut. The Dow is now at the lowest point in over five years and the TSE’s lost damn near half its value in a few months. Small business people are being told their prime-plus-one lines of credit are now prime-plus-five and Visa card rates have been adjusted upwards to punish those who have trouble paying. That’s a genius move.

The Bank of Canada boss is saying out loud that the economy’s slipping, and interest rates will be coming down again soon – not that anyone will see it. The finance minister said today, “there will be a deficit if there is a deficit” which is not exactly what he said when trying to stay finance minister which was, “there will be no deficit.”

So far Ottawa has given a more massive bailout per capita to the Big Banks than Washington did. And while American politicians debated, agonized over and struggled with their rescue plan, ours never went for a vote in Parliament, was never discussed by a committee and was never even explained to the people, who are now on the hook for $75 billion in high-ratio mortgages. It was a personal disappointment that my former opposition colleagues were mute.

Layoffs are turning into an epidemic, and it’s this fact, not $40 oil (soon to arrive) which will do the most economic harm. Consumer spending is drying up by the hour, a fact you can see in car dealerships, furniture stores or any one of the deserted department stores coast-to-coast. Except Wal-Mart. That place is packed.

A long time ago I said real estate excess would lead us into this swamp, and it has. But the real killer is turning out to be debt. Corporations and families have learned very quickly that deflation knocks down incomes and asset values in just weeks, but that debt is the cockroach which survives every disaster. This means hundreds of thousands of Canadians by the Spring will have negative equity in their homes, with mortgages that exceed their falling property values. It means companies like Canwest can’t service billions in debt once ad revenues disappear. It sure has the entire car business on the edge of oblivion. Toyota, for example, which opens a $1.1 billion car plant in Ontario in a few days, and will then shut it down to decrease inventory.

Some people think a major Canadian bank will fail (not hard to guess which one) before this is over; that real estate in Toronto and Vancouver will decline by about half; and stock markets in T.O. and New York have at least three thousand more points to give up. Without a doubt, the federal government will be in deficit, unemployment will soar and the devil of deflation will be licking our ankles. On Thursday came news the core inflation rate in the US dropped the most in 61 years. Maybe ever. That’s just when the record-keeping started.

As tough as things feel now, the months to come will be far more intense. If you have not yet started a list of personal and family actions, I urge it. Suggestions will come here in the days ahead. Feel free to ignore them. Most will.

146 comments ↓

#1 tonguestump on 11.19.08 at 11:24 pm

First!
Bring on the suggestions Garth. Can’t see how we can’t get a bond default down here in the states. I think Obama’s handlers don’t want the dollar to die on his watch because that would emsculate the Messiah. If he can walk not only on water but turn it into vino too, a dollar default won’t look too good. We’re also seeing talk of a COMEX default because the paperboys all of sudden want metal delivery. Go figure.

#2 random guy on 11.19.08 at 11:30 pm

my large family ran clothing store in north central ontario is still up 25 percent for the week with sales of over sixty one thousand since sunday. oh no, here comes the sky again!!

#3 synthetic on 11.19.08 at 11:35 pm

“Some people think a major Canadian bank will fail (not hard to guess which one) before this is over”

Which bank would that be?

#4 wealthy renter on 11.19.08 at 11:39 pm

Hello Garth,

These are the kind of posts that scare the shit out of a typical reader of this forum – especially the rumours concerning bank failures. Most of us here are probably sensible with money, and live well within (or below) our means, and that means lots of money in the bank. Given the quality of the discourse at this site, it also appears that Socioeconomic status of the readers skews very high, but few of us are truly financial gurus with insight into machinations of Bay Street.

My wife and I have a hundred thousand each tucked into individual accounts at the bank I believe you are talking about (and its huge grocery store partner.) I am well aware that the CDIC insures money, but more than a few commentators argue that the process of recovering money after a major bank failure in Canada would be gut-wrenching, and time consuming.

Is there a truly safe bank in Canada? Jeebus, I can’t believe I am worried diversifying my bank accounts. What the hell has happened? (rhetorical of course.)

#5 The Tallyman on 11.19.08 at 11:42 pm

Very descriptive wording Garth,
“devil of deflation will be licking our ankles”

Gonna be putting on knee highs
and be looking forward to your upcoming suggestions.

#6 john on 11.19.08 at 11:49 pm

Thanks Garth your predictions and advice have been priceless.I have listened and adjusted my life accordingly.It makes me very angry the powers that be never for over 2 years tried to discredit you and never took any heed to your predictions. All that huge surplus squandered for personal gain and votes. Our rock solid banking system doesn’t sound very solid now.Today i read that the Harper government is going to bail out the auto industry. Never in my entire life as a citizen of Canada have i felt so defenseless and at the mercy of such incompetence.We have been lead down the garden path,we will all pay for their dishonesty and arrogance. Thanks for giving us the straight goods from day one Garth.

#7 Larry on 11.20.08 at 12:12 am

I moved half my savings to a credit union just in case the bank fails and i have to go to CDIC and wait a few months or maybe years to get it. As the saying goes don’t leave all your eggs in one basket.
I can’t believe it that the the US and Canada govt’s are going to throw money away at the big 3. Let these poorly run companies go bankrupt and reorganise like any other company would have to do. I have a hard time to think that my tax dollars are going to fund the pension and health benefits of some snowbird from Ontario sipping a beer in sunny Florida. My word we really are the greatest fools.

#8 patriotz on 11.20.08 at 12:24 am

more than a few commentators argue that the process of recovering money after a major bank failure in Canada would be gut-wrenching, and time consuming.

No it wouldn’t, because that would provoke a run on other banks. CDIC and BoC aren’t that stupid. The latter can create money out of nothing and there will be plenty of it to pay off depositors should a bank fail.

#9 Kilt on 11.20.08 at 12:34 am

How do you know they are High Ratio Mortgages they purchased?

What else does CMHC insure? — Garth

#10 Rasputin on 11.20.08 at 12:46 am

Question for Garth… Do you have a target date for your book to hit the stores? Thanks! I’m looking forward to reading it.

#11 JET on 11.20.08 at 12:49 am

You’re scaring the beep out of me on that bank failure bit…

#12 The Tallyman on 11.20.08 at 1:16 am

#2 random guy said:
“my large family ran clothing store in north central ontario is still up 25 percent for the week with sales of over sixty one thousand since sunday.”

Are you selling army fatigues & hunter clothing (lol)

#13 Rich Grover in Vancouver on 11.20.08 at 1:31 am

bring it. a good dose of reality will do the world long-term good.

#14 charliegosurf on 11.20.08 at 1:31 am

it’s gettin better by the day!

or worst, depends how you see the glass of water….

threres a place i know called spanky, where all this shit doesnt matter much…

i will try to attend one of your session garthman in b.c., bettween runs… since your kind enough to make it free, ill bring you a present and maybe a squirrel jerky, i cant seem to get my eyes off them latelly…

so long, and cockroaches could probably make for a great salad, easy to grow.~~~!!!!

#15 Doug in Calgary on 11.20.08 at 1:39 am

#4 – Alberta Treasury Branch is fully guaranteed by the Government of Alberta with no deposit limit, last time I checked (but it could have changed). Hard to find this info on the internet, but if still true could be relatively safe, I think? Not sure about out-of-province depositors. It’s where my money is.

#16 Barbara Samson on 11.20.08 at 1:49 am

“My wife and I have a hundred thousand each tucked into individual accounts at the bank I believe you are talking about (and its huge grocery store partner.)”

Wait a minute, I thought the only major banks in Canada were CIBC/BOM/TD/SB/RBC. Are the internet banks, like PC Financial / NG Direct / HSBC considered major for the purposes of this discussion?

#17 Jeff Smith on 11.20.08 at 2:56 am

Oh even Bloomberg thinks real estate in Canada is dropping.

http://www.bloomberg.com/apps/news?pid=20601213&sid=aUaxzBW8q_OU&refer=patrick.net

#18 David on 11.20.08 at 2:57 am

Looks like the Finance Minister has taken up tautological forms of argument, “there will be a deficit, if there is a deficit”. Rigourous thinking on his part no doubt.
Funny how there was never any money for a national day care programme for Canadian children, but now there is $75 billion to unburden the banks of potentially high risk mortgages. It was all just a minor technical issue and from the manner in which it was handled, not really worthy of any serious democratic debate.
Oil at $40 US a barrel will hammer both the Loonie and Alberta government revenues. Those herring eating socialists in Norway had it all wrong didn’t they?

#19 Chris L on 11.20.08 at 3:00 am

Which bank is that, anyone? Also a question that has been bothering me about banks. If you have a line of credit or a mortgage with a bank and it goes under, does that wipe the debt clean as far as you are concerned?

#20 Sam on 11.20.08 at 3:09 am

These MLS guys are very cunning.. this is the only news they are giving to consumers under NEWS section:

http://www.realtor.ca/StaticPage.aspx?f=News

#21 JoJo on 11.20.08 at 3:52 am

Hi Garth,
So what about your prediction that RE will FALL even 40% from last year?
I can’t see it in Oakville,Burlington,South Mississauga.

Second problem about Defflation!
Did you see any cheaper food product,or any cheaper product in Wallmart from last year?
Do we have cheaper services cable,TV,Hidro,Water,Transit,Education or Maintenance
costs for cars,houses,landscaping and etc.
Do we have cheaper Property taxes?
Do we have cheaper health,car,live,house insurances?
Did you see any cheaper new build house from builders in Oakville,Burllington,Mississauga (at least prices from 2006). Yes currently only Fuel is cheaper 50 cents from July and so what?
When I see all those prices at least 35% down,than we can talk about Defflation.
Next problem about Defflation situation in USA is clear that is FAKE and CRIME.
Have you ever seen defflation with 1% interest rates?
When was 1% interest rate in Great Depression,or 70’s, 80’s Defflatory-Recessions?
Do you know how much was interest rate in that time?
Yes, between 12% to 22%.
Currently on the stock market is panic and I don’t care
even if DOW or TSX have loss more than 70%.
Again it’s Fake and Fraud. Last week I saw gold price was up $42, and gold stocks falled.
I agree with you that will be Depression, but in opposite way Hyper-Inflatory Depression.
Mr.Bernake is a proffesor about Great Depression and
even if he likes the same scenario he can’t do it.
Why, because of completely different situation from 1929-1933. That time $ US was valuated in Golden Standards and today is NOT. No Gold – No printing money.
Well still is a top secret that USA printing money like crazy but will see next December/2009.
Derivatives now up to $684 Trillion.
So Many Things to Correct… So Little Time.
In our mind’s eye we saw images of recession… depression… despair… desperation… and finally upheaval… in which the whole system… the world’s dollar-based money system… came crashing down.
“The only cure for a bubble is to prevent it from developing.”
In other words, you can’t cure a bubble by cutting interest rates, easing bank lending requirements, running bigger government deficits, sending out ‘rebate’ checks, buying up Wall Street’s stupid mistakes, or bailing out sinking businesses. You can’t cure a bubble by reflating it. You can’t cure a bubble at all. You have to let it pop… and then go about your business. Get it over with quickly; that’s the best you can do.
Think that will happen?
No, the feds are at work – with their patches, their rescues, their bamboozles and their swindles.
Saving America from free-market capitalism will become the Great National Project of the Obama years. Deficits will top $1 trillion… maybe $2 trillion. Brain dead businesses will be kept alive. Whole industries that should be allowed to go broke will be protected. Towns, states, and colleges that should go bust will be propped up. There will also be a huge building boom – in infrastructure. Bridges, trains, highways…
New free Healthcare system in USA and more education
grand’s and loans.
What about wars in Iraq and Afganistan?
*** If Olympic medals were given for consumer spending, Americans would have won the gold, silver and bronze every year for the last 20.
So do you see, dear Garth, how the new financial system will work? Is it Defflatory process.
The Gold Anti-Trust Action Committee was organized in January 1999 to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities.But it’s over.
The financial system the world’s economies run on has failed. It has broken down, and will continue breaking down, until citizens of the G8 nations identify the real, root causes of the catastrophe.
Dear Garth,game is over about power of $ US.
Soon,will see the biggest Crime and Fraud of the Century in the World.
Soon,New World Order from IMF and New Breton Woods
agreement or III-WW.

http://www.atimes.com/atimes/Global_Economy/JK19Dj02.html

http://www.321gold.com/editorials/west/west111408.html

http://www.crimeofthecenturymovie.com/about_the_film.php

http://www.crimeofthecenturymovie.com/

#22 Mark on 11.20.08 at 4:18 am

Put your money where your mouth is Garth…. Go buy HFD and HOD on the tse if you are confidant…. I suggest the readers do the same.

Mark

#23 JoJo on 11.20.08 at 5:11 am

The real problem is not RE Crash,will be crash of all assets and cash money as well…
Less production of Gold about 20% from 2001 and higher demand but Gold price still falling?

http://www.hardassetsinvestor.com/features-and-interviews/1/1295-peter-schiff-gold-will-rise-dollar-will-collapse.html

http://www.contrarianprofits.com/articles/how-feds-reflate-at-all-costs-will-destroy-the-dollar/8756

http://www.lewrockwell.com/podcast/?p=episode&name=2008-10-05_041_thanks_for_the_inflationary_depression.mp3

http://csinvestor.com/peter-schiff-videos-the-economy-gold-and-the-coming-collapse-of-the-dollar/

http://www.foxbusiness.com/story/markets/commodities/gold-hands/

http://www.24hgold.com/news-gold-silver-The-Party-is-Over.aspx?langue=en&articleid=328079&contributor=Peter+Schiff&lastpublishingyear=2008

#24 BOB on 11.20.08 at 7:23 am

John #6 what are you talking about? Are you blaming this mess on the Harper government? Give your head a shake buddy you are way out of touch.

#25 BOB on 11.20.08 at 7:25 am

Garth what is the big deal about running a defecit? Canada’s national debt is in the billions anyway and there is no way we are ever paying that back anyway unless it’s in inflated dollars.

#26 Helmut on 11.20.08 at 7:36 am

Garth… I agree that a major cause of this crisis is too much debt on all levels. The house of cards had to unravel one day. We are watching it now unfolding. Things will get worse, much worse I’m afraid.
On a lighter note…my 16 ish little girl informed me last week that her dog was ready for pick up. We picked up the 6 week old bundle last Friday. She named him “Munchie”. So between Munchie the Rotti and large cans of Chef Boyardee for a buck ninety seven things are looking up.

#27 Dr Phil, you can call me Uncle on 11.20.08 at 9:11 am

It’s the 20th of November the DOW just went below 8000. May retails stores are closing south of the boarder, along with a few of their Canadian counter parts. Most businesses are felling a serious down turn in revenues. Global production/output is projected to contract over the next few quarters. Japan is in a formally acknowledged (aka technical) recession. The US big 3 autos are begging for money. Unemployment is rising…..

Yet Toronto Real Estate Board president Maureen O’Neill continues to claim “All the economic fundamentals are sound…..”

http://www.thestar.com/Business/article/540073

Can someone please explain to me which sound fundamentals she is referring to? What am I missing here or is it that I watch a bit of CNN occasionally or worse CNBC?

Perhaps I should ask for a refund from the higher education institutions I attended in the past.

#28 Kash is King on 11.20.08 at 9:17 am

Not to be alarmist, but is the world’s biggest swindle about to occur?

“A tsunami of hope or terror?” by Alan Kohler

http://www.businessspectator.com.au/bs.nsf/Article/A-tsunami-of-hope-or-terror-LHRJP?OpenDocument&src=ei

Some “lite” background reading for reference to some of those terms:

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

Hope you’ve done complete DD (read the fine print) on whatever financial instruments you may hold, that your mutual funds may hold, that your insurance company may hold, your pension plan may hold, or that your bank may hold.
Erm wait, scratch the banks…they’ve been presumably allowed to put this stuff “off books”…

#29 john on 11.20.08 at 10:04 am

BOB on 11.20.08 at 7:23 am John #6 what are you talking about? Are you blaming this mess on the Harper government? Give your head a shake buddy you are way out of touch.
>>>>> lol im glad you feel that way and hope you continue to follow their guidance :-)

#30 Al on 11.20.08 at 10:05 am

#19 Chris L,

The money you owe to the bank is considered an asset of the bank. If they go bankrupt, the debt holders of the bank will get the assets. Therefore, you’ll be in debt to whoever the bank was in debt. LOCs will most likely have to be payed in full while mortgages will stay the same except the payment goes somewhere else.

#31 Jim on 11.20.08 at 10:08 am

Dont tease us about that bank failure. Give us the goods as to which one you are talking about.

There’s a big gulf between rumour and fact. — Garth

#32 nota bene on 11.20.08 at 10:38 am

This latest Scotia report appears to be using 2008 YTD data as of several months ago, not end of Oct:

http://www.scotiacapital.com/English/bns_econ/retrends.pdf

Anyone have other observations/perspectives on this, good or bad?

#33 OntarioHouse on 11.20.08 at 10:54 am

#21 “JoJo”
Garth NEVER predicted a 40% fall this year. Stop lying or get your facts straight. The number decrease that he did predict has already come to pass. Resale prices have fallen in Oakville and Burlington (especially Oakville). Do you ever check the numbers on the real estate board website?? You seem to have limited knowledge of how a housing crash progresses and the general time line that it follows.

#34 Calgary Rip off on 11.20.08 at 11:04 am

Garth should write for the Herald. Get rid of Mario T. and the Hope guy. These posts are highly accurate.

New post in Herald today(Calgary):”Oil dives below $50 as investor confidence sinks”

That’s great news at the pump for the time being, until the speculators get hold of this and again drive the prices to $215 a barrel, which WILL happen soon. It’s even better news for Alberta, in that the high priced shacks will soon be HALF of their current value and the economy will be stimulated in a good way.

Costco prices and gas: I was at the NE Calgary Costco yesterday with wife while daughter was in gymnastics. ALL their prices on each item was roughly increased $2 per item(avg). WTF? I thought oil went down? So why are food prices going up? Or is this just a local price gouge by Costco?

Anyone have any idea what foods will cost in 10 years, or 20? I believe a loaf of bread will cost $15 in 10 years from now, the caramel coloured “wheat” no name brand you get at Superstore. I imagine costs of things will make things more and more of a luxury, sort of like the 1700’s, I think when if the traders had a bad day, then there was no spices, produce, cattle or goods to be had.

#35 Bottoms_Up on 11.20.08 at 11:07 am

to paraphrase Bob Rae this morning, “this deep recession that we’re in..”

deep recession=possibility of depression….

#36 Another Albertan on 11.20.08 at 11:28 am

@9:

To follow up on Garth’s comment:

Why would the banks sell less-risky assets? If someone comes to you with an offer like the government did, you clear out your toxic waste if only because you can. The opportunity might not arise again for quite a while.

#37 al on 11.20.08 at 11:33 am

Jeebus people, it’s really not that hard to figure out the shittiest run bank in Canada that invested heavily in MBS down south……………..it’s not like it wasn’t plastered over the headlines.

#38 Another Albertan on 11.20.08 at 11:43 am

And for everyone who is wondering about which bank could potentially be on the ropes:

Go look at quarterly results and news releases and market-related writedowns in the last 15-18 months. Gather some data and infer from there.

This information isn’t invisible. This blog’s archives will show my comments about Lehman Brothers months before their melon hit the canvas… and my comments were essentially paraphrased from the blog-o-sphere anyways.

As a couple of my colleagues in New York contend, there is a massive information asymmetry in Canada in regards to the banks and the insurance companies. They believe that Canadian banks aren’t nearly as strong and as transparent as we are led to believe.

#39 Denver-Calgary on 11.20.08 at 11:50 am

The news of banks failing in the states occurred quickly – it was like there was a denial to the public until the very last moment. Yes, there were signs all across the board that the capital markets were weakening, but to know exactly who was going down was tricky to decipher.

It would be great for us to predict which will go under, but we can only be sure within the scant days or weeks (if we’re lucky) leading up to a bank failure.

So all we can do for now is sit like spectators at a hockey game without knowing all of the facts about the players…

Thus, all we can do is read between the lines in the news and try to predict in our own minds how the next few minutes in the game are going to be played out until a player gets a penalty…

So here’s another article with some clues that will lead to another article with more clues…
http://www.bloomberg.com/apps/news?pid=20601082&sid=amqN5bHOBW7E&refer=canada

#40 BOB on 11.20.08 at 12:00 pm

John #29, who in their right mind would follow the government’s guidance? What is occuring is a world wide event and you are trying to blame Harper. Also weren’t you saying a few weeks ago that things had stabilized because the stockmarket leveled off for a few days. If so no wonder you look for guidance because you are clueless.

#41 anonymous on 11.20.08 at 12:00 pm

Homes in Edmonton are selling like crazy. It’s really nuts. I think it’s just the last of the 0/40 crowd.

The last shin-ding before it starts pouring blood thoughout Alberta.

dd,

I’m all in as of today. 100X with 2X leverage. banks, energy and technology. May god have mercy on me.

#42 ambrother on 11.20.08 at 12:18 pm

BMO/CIBC/TD?? Which one? the sure thing is any one these banks down will bring this country into a big mess.

#43 Downsized and Delighted on 11.20.08 at 12:22 pm

The banks aren’t going to fail because the government will step in and bail them out. Period. That’s what the bail out is about in the U.S. It’s about the domino effect of letting a major financial institution fail and the loss of confidence that would follow. The government will not let this happen. They learned what happens when you do nothing during the great depression, and they will not hesitate to run huge deficits to accomplish prevent that from happening again.

Now all this doom and gloom talk has been “fun”, but don’t get carried away people. It is fun to think of all those people you envy with their big houses and cars getting theirs, but no, the world is not going to turn upside down (bizarro world) overnight so that you’ll get the big house for nothing (sorry Calgary Rip-Off) and your greedy friends will be living with their parents.

I’m still waiting for the last checklist Garth (unless the squirrel menu was it?), so I’m not holding my breath for this one.

#44 squidly77 on 11.20.08 at 12:26 pm

Which bank is that, anyone? Also a question that has been bothering me about banks. If you have a line of credit or a mortgage with a bank and it goes under, does that wipe the debt clean as far as you are concerned?
the bank begins with c and ends with c..figure it out
as to your question the answer begins with n and ends with o

#45 Wealthy Renter on 11.20.08 at 12:45 pm

Hi Patriotz,

I understand the gist of your post, but are you saying that if Bank X fails in Canada. I can immediately have my money transferred to my Ing or HSBC aacounts?

I realize that the printing presses can be fired up or incentives could be provided for another bank to assume control over a failed bank, but I have heard commentators say it could possibly take up to one year to recover your money as the result of a failed major bank.

I don’t know if this is true, but it is the unknowns which cause worry.

#46 john on 11.20.08 at 12:52 pm

BOB on 11.20.08 at 12:00 pm John #29, who in their right mind would follow the government’s guidance? What is occuring is a world wide event and you are trying to blame Harper. Also weren’t you saying a few weeks ago that things had stabilized because the stockmarket leveled off for a few days. If so no wonder you look for guidance because you are clueless.
——-lol you get funnier by the minute–you know very well i never made any such post about the market stabalizing so quit making things up ok “buddy” :-).As far as looking for guidance–im not looking i have listened to Garth he has been right on the money! This has been predicted by Garth for over 2 years while Harper denied it was going to happen.Two years is a long time to prepare–Harper didn’t in fact he brought us the highest spending Government in Canadian history.I have over 13 billion reasons for my opinion do you have at least one? “buddy” :-)

#47 Westside on 11.20.08 at 1:23 pm

Calgary Rip off is right. The price of oil will skyrocket due to supply and speculators. It’s a good time to invest in energy companies people.

Garth, this page is a good read but you’re way too doom and gloom. We’re in a bad recession and heading toward a depression but being over-the-top negative isn’t going to help out.

#48 Michael in Edmonton on 11.20.08 at 1:41 pm

Hi everyone,

Long time reader… I’ve become really concerned with the current financial situation of the country, and am considering putting together a nonprofit financial advocacy / financial counselling organization. I think it’s the duty of citizens who are well informed and concerned about the well-being of ordinary people to help form debate and policy in this country.

I think it’s clear that we need some enhanced regulation in this country. We need to make housing affordable, sustainable, and accessible — let’s take it from being an ‘investment’ to an important personal asset.

I have some initial ideas about policy, and wanted your thoughts on them:

– create a publicly-accessible listing service for home sales (no proprietary sales information syndicates)
– cap realtor fees at 5% of closing price
– ban mortgage amortization periods of longer than 30 years
– ban mortgage amortization periods of longer than 10 years for second-plus personally-owned properties (except when co-signing as a guarantor)
– require 10% down payment of equity cost
– close loopholes around debt financing of down payment
– in case of sudden joblessness, ability to suspend mortgage payments while unemployed, and add payments to end of term (up to 6 months)
– ban building of houses on speculation — must have deposit of 5% before building
– ban financial penalties for bulk mortgage repayments — unlimited ability to pay off principal as desired
– creation of full-term mortgages for entire amortization period

These are just some initial ideas, and I’m working on creating a website to help people weather this financial downturn and make housing sane again…

#49 SSS on 11.20.08 at 1:50 pm

@#34 Calgary Rip off
I heard it on BNN last night, and they say that costco prices increased due to the suppliers, demanding quick payback for the goods. The suppliers used to depend on short term credit and in the past gave costco more time to payback.

#50 confused and a little crazed on 11.20.08 at 1:51 pm

hi Guys,

I still remember Garth predicting a 15 % decrease in Van housing when I told him I sold my house in March 2006. Though I the news and blogs say it has dropped 10 % since its peak Feb 2008. I caculate around 6-7 % drop instead. So we have al least aanother 80 K drop in prices in Van east housng to match 06 pricing…scarey isn’t it.

whether it makes it or not who knows. I bought GE @ $15 aand it dropped to 13.25 in 2 days 65% lower than high, scarey….longterm sure it be ok but It won’t be soon. Well hey Buffett bought @ $22.

But I can’t see the govt doing nothing . At this rate the Dow will be 4000 before Christmas

#51 brazer on 11.20.08 at 1:54 pm

#27 dr phil

re: Maureen O’Neill…if i can borrow from and paraphrase Al Gore…

It is difficult to get a woman to understand something when her salary depends on her not understanding it…

that quote will tell you everything you’ll ever need to know about real estate peddlers…

#52 confused and a little crazed on 11.20.08 at 1:56 pm

oh yeah…Garth won’t say which bank will fail because It quite probable he will get sued by that bank for defamation so stop asking

#53 brazer on 11.20.08 at 2:02 pm

http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/11/19/the-year-of-the-bank-writedown.aspx

The year of the bank writedown
Posted: November 19, 2008

Shares in the Bank of Nova Scotia were down more than 2% Wednesday as investors react poorly to the news that Scotia will take another writedown, this one worth $595-million after tax.

The remaining five big banks, including Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Montreal and National Bank of Canada, were also trading lower, on anticipation that more writedowns are in the cards. The latest rumour forecasts CIBC writing down another $1-billion or more in the very near future.

For those keeping count, here are the total after tax charges suffered by the banks since the third quarter of 2007:

* CIBC has written down $4.969-billion representing 46% of its common equity.
* Royal Bank has written down $1.086-billion representing 4% of its common equity.
* Scotia Bank has written down $899-million representing 4.8% of its common equity.
* Bank of Montreal has written down $638-million representing 4.2% of its common equity.
* National Bank has written down $484-million representing 10.3% of its common equity.
* TD Bank has written down $65-million representing 0.2% of its common equity.

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

does it take a rocket scientist to figure out which bank appears to be in trouble?

#54 brazer on 11.20.08 at 2:07 pm

http://financialpost.stockgroup.com/sn_overview_fp.asp?symbol=IT.TSXCI

for those who follow my posts, you may recall my repeated prediction of 8000 for the tsx…we’re just about there.

also of note, where are the shills that were screaming “buy” when we hit 9000? you’ll note those particular voices have conveniently left the blog.

#55 GenXer on 11.20.08 at 2:18 pm

Wow – TSX falls under 8000 today. I’m shocked. Next bottom is projected at 6400.

Garth – you win. I’m stocking up on emergency supplies and getting ready for the worst. Even I can’t make positive news out of all this.

FYI – I read your book when it first came out, have been following this site and Illargi’s for months and I’m still shocked at the speed at which this is all unfolding. What is the average person making of all this?

#56 Keith in Calgary on 11.20.08 at 2:31 pm

The only thing that lowering interest rates does, is put more money in the pockets of our banks……it does not help consumers with their monthly carrying costs, as banks do not cut their rates accordingly in most cases, bnks will not lend, and quite frankly……nor should you borrow.

It does not help businesses…….for example, let’s say that I am a business with an outstanding $500K line of credit…… a .5% cut in my rate, is a mere reduction of $205 a month in carrying costs……if I need it really that bad, I shouldn’t be in business. Even a 2.0% cut is only $821 a month…….big deal.

#57 Mike on 11.20.08 at 2:32 pm

Wasn’t this blog called something else before??

Not surprised the Conservatives pull a 180 on their promises. They did exactly what the Bushes have been doing for years. Smear campaign, tell whatever they want to tell and hope the dumb public just meander along without noticing.

Maureen O’Neil is just beyond ridiculous. The market is going down Maureen, face facts, not a dip, not a small correction, a true realistic correction based upon the simple reality of basic economics. People buy within their means and must have money to put down. Simple. Debt is indeed the evil that will bring the house of cards down for the WORLD, including the all mighty Canada.

David’s post 18 is priceless. No money for daycare but gobbs for the auto industry and banks. Flaherty must be reading ” National Economy for dummies” book only available to high levels of government.
January will be a difficult month as December will be smoothed over by the holidays. NEXT Year… a blood bath and for everyone so I do not write it without fear and trepidation.

#58 BOB on 11.20.08 at 2:32 pm

hey John you do realise that Harper was in the middle of an election campaign right? Wow a politician lied and you are so shocked. Cretian was supposed to get rid of the GST and scrap free trade. Do you get it now? Also I didn’t make anything up. There was another John that was posting. My mistake.

#59 Keith in Calgary on 11.20.08 at 2:36 pm

Forgot to say that Mark Carney is a moron. As useless as Bernanke and Greenspan.

Calgary Rip off…..

The monthly grocery cart for my wife and I has doubled since 2004…..we now pay $800 a month for 2 people……after shopping carefully, comparing prices, and buying no more than we really need.

#60 iofthebeholder on 11.20.08 at 2:45 pm

Nice to see a lower level of denial on this forum compared to American forums when the crises began in the US. Garth has it right, get your ark in order,,,soon. The people who publish the following article were exactly right in terms of timing the plunge this fall. Things will go terminal next summer; ushering in the need for a new (monetary)system. Enjoy and good luck to all.

http://www.leap2020.eu/GEAB-N-29-is-available!-Phase-IV-of-the-Global-Systemic-crisis-Breakdown-of-the-Global-Monetary-System-by-summer-2009_a2435.html

#61 dd on 11.20.08 at 2:52 pm

#31 Jim,

It is CIBC. 2nd running would be BOM.

#62 dd on 11.20.08 at 2:56 pm

#41 anonymous,

Still 70% cash. Waiting for a while. We will be in this recession for a while so for me there is not rush. Looking at:

Oil,
Engineering
Agriculture
Gold
Shippers

#63 Al on 11.20.08 at 3:04 pm

Downsized and Delighted,

“The banks aren’t going to fail because the government will step in and bail them out. Period. That’s what the bail out is about in the U.S. ”

The US didn’t bail out Lehman Brothers, Bear Stearns, Indy Mac or WaMu. Indy Mac and WaMu were commercial banks and would be equivalent of, for instance, CIBC failing in Canada. There are lots of smaller failures as well (link below).

http://www.fdic.gov/bank/individual/failed/banklist.html

I mention this not because I want to get a house for next to nothing, but because it’s probably a good idea to have bank accounts at more than one bank. If a bank, such as CIBC, were to fail and I had all my money there it could be uncomfortable for awhile until CDIC sorted it out.

#64 Calgary_rip_off on 11.20.08 at 3:40 pm

All this news of things crashing and the stock market plunging and oil prices dropping are the best news yet.

I cant wait for conservative to Alberta to get tanked when oil goes to $10 per barrel. Ha ha ha. Most of the conservative idiots who voted Harper in will have problems, should have voted NDP, as at least with NDP you have SOCIALIST programs to help out your neighbour. The conservative party might as well be American.

Coincidentally as all this is happening SOCIALIST NORWAY is buying up stocks like crazy. Perhaps socialism isnt a bad thing founded on those ideals?

#65 Calgary_rip_off on 11.20.08 at 3:42 pm

keith in calgary:

You spend $800 per month on groceries? WTF!!!!???

Do you eat Filet Mignon and caviar with aged red vino at every meal???

Ever heard of cornmeal, egg whites, oatmeal, powdered milk?

What is your salary anyway? $2Million per year??

WTF????

#66 tounguestump on 11.20.08 at 3:46 pm

#59
Mark Carney is not a moron, he is Goldman Sach’s alumni and is clever enough to place his butt well above the financial [email protected]$t Storm that we will encounter. As for Bernanke and Greenspan, if you play the “Cui Bono” game you will begin to realize that these may perhaps be soulless men but they are certainly not useless when you take into consideration the tremendous amount of bank power consolidation that these men have accomplished under their respective tenures. Ask Garth if there’s a little toy called the political process that you can take to the check out register if your credit card has enough left on it. These guys have some amazing accomplishments under their belts just not in your particular favor. That’s all.

#67 smwhite on 11.20.08 at 3:59 pm

#40 BOB

If I listened to the government or the banks I’d be up to my eyeballs in sh#t. Harper knew this was coming because his finance minister, told him last year Ontario was going to be a “have not” province. I think that its pretty obvious what happens when 1/3 of the countries population is sailing away on a sinking ship. Not to mention the fact our biggest trading partner was already in massive deficit. Stop making partisan excuses.

No credit = no spending!

Many of us seen the writing on the wall years ago through the “hyper-inflationary” policies of the Federal Reserve and the American trade deficit. Now out comes the “Pollyannas”(I borrowed that from Islander) with the “nobody could have prevented this” verbal diarrhea.

So Bob, is it incompetence or just a few “little white lies” that were told to keep the herd content and to get Harps elected again. I don’t think there is any conspiracy, just plain and simple politics.

By the end of his term, Harper will be loved as much as Mulroney was when he “left” office. Has anyone taken up the prime minister’s on his “buying opportunity” advice?

I love that deflation is the new media buzz word, government and the herd will react to deflation while at the same time the bank of Canada governor is going to continue to print money via lower interest rates, again. Remember, the disease is the cure!

You can’t use the dollar itself anymore to gage where the hell the economy is, you have to use commodities such as oil and gold to get some sort of understanding.

Oil in 2002 was @ $20

Oil 2008(Spring) = $140 up 30% over seven years
Oil 2008(Fall) = $50 up 15% over seven years.

Oil @ $40 over seven/eight years is still up about 10%/9% a year. Pretty high when the “MAN” factors sustainable growth @ 3%. We’ve gone through a period of mass inflation without even knowing it, now the system is rejecting the drugs we used to prop it up.

How about that TSX?

#68 Bulls eye on 11.20.08 at 4:02 pm

RE: #48 Micheal –

I think that it’s great that you want to set regulations, however it won’t fix this mess, I think that everyone will get bad karma returned based on there level of greed. Those who were tall and proud to buy vacation property and second homes etc… will feel the effects sooner. Good. These are the same people who refused housing solutions and rent reduction for those in need.

buy an Airstream – Survive the depression.

#69 TorontoBull on 11.20.08 at 4:04 pm

great read
http://www.economist.com/opinion/displaystory.cfm?story_id=12637043

#70 Ms O'Neill on 11.20.08 at 4:08 pm

Does she really thinks that the people in TOronto are so naiive, so uneducated and so uninformed to believe in that obviously motivated crap

#71 smwhite on 11.20.08 at 4:27 pm

#66 tounguestump

I concur, and I have called Mr. Carney less desirable names then moron. These are all highly educated men, which makes it very frustrating for those that can comprehend the “majority” of whats going on such as the danger of using way to low off interest rates to stimulate economic growth and the overpaying of assests. Rates went to low too quick.

Unless the Bank of Canada wants to totally destroy manufacturing in Canada, you have to hold hands with the USA.

That’s what happens when you make a fiat currency the worlds reserve currency. Even worse when you put it in the hands of some men who’s intentions are self-serving. I’d have liked rates up at least a point higher then the low they were dropped at in 2003. It would give more wiggle room in the current environment where its more then just one industry in the sh#tter.

What is really special is right now American’s are up twenty percent on our dollar because of the rush of investors to protect their profits in that reserve currency. In the grand scheme of things its very smart, because the US government has been spending like a Orange County wife and have just automatically paid off a good chunk of their debt by creating this fiscal crisis and having people run to the dollar….

See they’re not morons, just corrupt…

#72 The Tallyman on 11.20.08 at 4:30 pm

Toronto house sales crashing as head realtor blames CNN

So I guess Calgary’s excuse is that SHAW moved
HGTV from channel 50 up to channel 107… lol

#73 Jeannie on 11.20.08 at 4:37 pm

I’m assured by the Alberta Treasury Branch in Alberta that my accounts in their banks are 100% insured, safe and secure.
My bank manager tells me that no other bank can make this promise. I hope to Gawd he’s giving me the straight goods.
Never thought I’d see the day when I’d have to worry, not about return ON investment, but return OF investment.

#74 The Tallyman on 11.20.08 at 4:40 pm

#68 Bulls eye said:

“buy an Airstream – Survive the depression.”

Better yet buy a cargo van and perform a do it yourself conversion on it for “stealth camping”
You won’t stick out like a sore thumb and you get to park free almost anywhere disguised as a tradesman van.

#75 john on 11.20.08 at 4:42 pm

Garth>>So far Ottawa has given a more massive bailout per capita to the Big Banks than Washington did. And while American politicians debated, agonized over and struggled with their rescue plan, ours never went for a vote in Parliament, was never discussed by a committee and was never even explained to the people, who are now on the hook for $75 billion in high-ratio mortgages. It was a personal disappointment that my former opposition colleagues were mute.”——-

Makes one wonder what is next,in the US they are treating this as serious and trying to look after the taxpayers that is democracy at work! Here in Canada we have a minority government with all the answers -no public debate,no research (in my opinion),not all representatives of the people debating the issues,all decided behind closed doors and with the stroke of a pen . 75 billion of our tax dollars commited to solving a problem we were told didn’t exist by the same people less than 2 months ago? And now the auto sector is at the table if the bank won’t loan them money (our money) then who in their right mind would? False hopes bring temporary satisfaction but without reality nothing is solved. Thanks Garth.

#76 Brittanny on 11.20.08 at 4:43 pm

Mr. Harper: “Who gave you the right to spend $75,000,000,000.00 of my kids/grandkids future income to bail out greedy and incompetent bankers, who in the past years were making billions in profits in every quarter?”

“Who told you that you could do that?”

“It was not me or any citizen of Canada”

“You have no right to do this in a democracy”

“You must now answer to over 30 million angry Canadians”

#77 Jelly on 11.20.08 at 4:53 pm

You would not believe the house going for 2 AND A HALF
MIL in Lake Bonavista in Calgary. You could get a freaking mansion in a beautiful climate in the US for this amount.
They would be lucky to get half of that amount, and
truthfully the house is probably only worth a QUARTER
of that price!
Do you guys think lake views are worth it?
MLS #C3351743
These sellers are totally delirious!!
In any market this is insanity, not to mention
a CRASHING one!
I won’t hold my breath!

#78 Calgary Rip Off on 11.20.08 at 5:01 pm

Yes Jelly,

Only in Alberta. SNAFU. Totally delirious is an understatement. Satanic is a better one.

#79 smwhite on 11.20.08 at 5:41 pm

Some pretty yummy charts…

http://dshort.com/inflation/inflation-1915-2008-notes.gif

http://dshort.com/inflation/inflation-sp500-chart.html#top

http://dshort.com/charts/bears/four-bears-large.gif

#80 Rasputin on 11.20.08 at 5:41 pm

Citigroup will be gone by Monday. This is huge.
If credit keeps unwinding, and the PTB keep showing they are powerless to stop it, my target for oil is under $20 by this time next year. Heck we could see that by April. Alberta and specifically “world class” Calgary, is heading for a disaster. I am going on record right now and called for a 50% collapse in housing prices in Calgary by November 09. And you thought Garth was a doomer!

#81 Expat in NC on 11.20.08 at 5:48 pm

Jelly,

I’d love to see the selling history of that house, what it was sold for in the past. Just from looking at the pictures I don’t see it being worth more than 350k. You are right though, for $2.5 mil you could buy a beautiful house in a beautiful climate in the US (or any number of nice destinations).

#82 john on 11.20.08 at 5:53 pm

For You Bob :-)—-Tories blamed for coming deficits

OTTAWA – Parliamentary budget officer Kevin Page told MPs Thursday that Canada’s deficit next year could be as high as $13 billion and that Conservative government decisions to cut the GST and raise government spending are to blame, not global economic events.

“The weak fiscal performance to date is largely attributable to previous policy decisions as opposed to weakened economic conditions,” Page wrote in his first report to parliamentarians on the government’s economic and fiscal position.

more…

#83 Harper Lover on 11.20.08 at 5:55 pm

Britanny,

75 Billion, Shut up and take it.

#84 anonymous on 11.20.08 at 6:02 pm

All of you sitting in cash (which sounds pretty good to me right now) should realize that in the past week, your currency just lost 17% of it’s value to the US dollar.

See. Nobody gets out alive!

#85 anonymous on 11.20.08 at 6:04 pm

dd,

I got my face ripped off today in the market. At least my losses are in US dollars. As if it really matters…

It’s a bloodbath. Nice to hear you still have plenty of ammunition.

#86 squidly77 on 11.20.08 at 6:15 pm

http://dshort.com/charts/bears/four-bears-large.gif
denial will get you no where

#87 The Tallyman on 11.20.08 at 6:18 pm

#76 Brittanny

Citizen: Mr. Harpo I believe I’m really getting screwed!

Mr. Harpo: There there… come sit on my lap and tell me all about it.

#88 squidly77 on 11.20.08 at 6:20 pm

the above graph is linked from here
http://calculatedrisk.blogspot.com/2008/11/graph-worst-crash-since-great.html

#89 Finanzkrise on 11.20.08 at 6:23 pm

What a joke – TD unveils its own housing price index, the basis for which coincidentally affirms that Canadian housing prices have fallen 4.6% since last October, less than half of the numbers stated by CREA.

Meanwhile, TD’s balance sheet is at least twice as bad as the market had accounted for, and their stock was punished today (almost 13%). And TD is considered the least exposed of our major banks to toxic debt…

http://www.reportonbusiness.com/servlet/story/RTGAM.20081120.whousing1120/BNStory/Business/home?cid=al_gam_mostview

#90 The Tallyman on 11.20.08 at 6:26 pm

By Xmas we might have to get all the readers on this blog to pool all their money together just to have enough to make a down payment on a turkey.

fractional ownership hits the food store!

#91 squidly77 on 11.20.08 at 6:26 pm

Garth i like you saw this coming from a long way away
and i like you was mocked and called a fool and a doom and gloomer
its real and its here

#92 john on 11.20.08 at 6:27 pm

Dion rips Harper economic record as Parliament resumes
Module body

2 hours, 49 minutes ago

By Bruce Cheadle, The Canadian Press

OTTAWA – The new era of collegiality in the House of Commons opened Thursday with a scathing Liberal critique of the Conservative economic record.

Liberal Leader Stephane Dion began the first full day of parliamentary debate following last month’s federal election by stating that it would be “totally irresponsible” to bring down Prime Minister Stephen Harper’s minority so soon.

But in his response to the Conservative throne speech delivered a day earlier, Dion then launched a detailed attack on the Harper government’s apparent willingness to send Canada back into deficit.

He noted federal spending will be up 25 per cent, or $40 billion, after three years of Conservative government since Harper took power.

Revenue-gobbling cuts to the GST did nothing to improve productivity, Dion argued, echoing the thinking of many economists.

And Conservative budgets eliminated the $3-billion contingency reserve, designed as a fiscal safety buffer, that had been built in by successive Liberal governments.

“The bottom line is this: In less than three years the government has destroyed the $13-billion surplus that it inherited from the previous Liberal government,” said Dion.

He got some ammunition Thursday morning when Kevin Page, Canada’s parliamentary budget officer, delivered his first independent report on the state of Ottawa’s fiscal position.

“The weak fiscal performance to date is largely attributable to previous policy decisions as opposed to weakened economic conditions,” said Page’s report.—
My Thoughts>>> Mr Dion says it would be totally irresponsible to bring down the government at this time–perhaps–but i really think its time to see where we are headed–300 million for an election is small change compared to the billions Harper is doleing out behind closed doors,the vote buying schemes and dishonesty are a pretty clear indication of where we are headed ,in the future we will all pay perhaps for missing an opportunity to correct our misjudgements.We are all headed for bad times no one will be excluded,how bad will be determined but the powers that be.

#93 Rasputin on 11.20.08 at 6:36 pm

Tomorrow and Monday could be true crash days in the stock markets. The last 2 days have seen real GMTFO drops in the last hour. Tomorrow is a critical day and the PPT knows it. The hot money is scared and if they can’t stampede the shorts…look out below. I sure as heck would not want to own any shares over this weekend.

#94 Larry on 11.20.08 at 6:38 pm

Squirrel jerky anyone ?

#95 Shifty on 11.20.08 at 6:49 pm

I’m going shopping for a good safe and a squirrel gun.

#96 Rasputin on 11.20.08 at 7:17 pm

Forgot to mention before but I went to a car dealership the other day (Calgary) and the sales people were playing cards! They nearly trampled each other while coming to talk to me. I am not really in the market, just checking the lay of the land.

#97 Canned Goods and Buckshot on 11.20.08 at 7:22 pm

I’m sure squirrel and firearms comments are made tongue in cheek. Certainly my moniker is. Many people may view the uncertainty and turmoil of the next few months to years with dread. Hopefully, the fiscal situation as it unfolds will cause people to take stock of their circumstances with a holistic view. Not having credit or cash to buy needless Chinese consumer goods is not the end of the world. Hopefully people will turn away from consumerism and materialism and embrace community and sustainability. No SUV? Gee, I might have to walk the kids to school and actually talk to their friends’ parents. Have to put in a garden? Gee, I might have to get some excercise and learn something new. If the SHTF, squirrels, deer and firearms are not going to help you. Having some community and a preparedness plan is a better alternative. Ok Garth, still waiting for your list of actions to see if I’ve missed anything.

#98 The Tallyman on 11.20.08 at 7:30 pm

Victory gardens,

also called war gardens or food gardens for defense, were vegetable, fruit and herb gardens planted at private residences in the United States, Canada, United Kingdom and Australia during World War I and World War II to reduce the pressure on the public food supply brought on by the war effort. In addition to indirectly aiding the war effort these gardens were also considered a civil “morale booster” — in that gardeners could feel empowered by their contribution of labor and rewarded by the produce grown. Making victory gardens became a part of daily life in the middle of the earth, the home front.

#99 Mark on 11.20.08 at 7:32 pm

The housing market according to:
Eric Beauchesne, Canwest News Service
Published: Thursday, November 20, 2008

http://www.canada.com/calgaryherald/story.html?id=b2518421-fafd-4de9-b16c-215e298e8dfc

#100 The First Rick on 11.20.08 at 7:33 pm

#84 anonymous on 11.20.08 at 6:02 pm All of you sitting in cash (which sounds pretty good to me right now) should realize that in the past week, your currency just lost 17% of it’s value to the US dollar.

See. Nobody gets out alive!
============
STFU!!! :)

#101 The Tallyman on 11.20.08 at 7:35 pm

oops… Victory gardens reference taken from Wickepedia

#102 Steve in Kitchener on 11.20.08 at 7:41 pm

Re: 74 The Tallyman, I think what you referring to is called Boondocking; a lot of people are doing this in the states right now. I even noticed two people in my general area in the summer living in there panel vans while I was out walking the dog.

Garth these are great posts, I used to work at one of the major banks and I remember telling my friends that worked there that I was going to sell my condo in Toronto (man am I happy I got out when I did) and move to Kitchener and rent. They thought I was crazy), well I guess it was not that crazy after all. I don’t think people in general have an idea how fast things can come apart. Prices take a while to go up but when they come down they come down hard and fast. Why would anybody buy anything ( real estate, auto’s, home electronics) when it may cost less in a month?

#103 The Tallyman on 11.20.08 at 7:42 pm

Real world use for those McMansions and a return to getting to know your neighbor.

more on victory gardens

#104 brazer on 11.20.08 at 8:01 pm

http://www.thestar.com/article/540073

But O’Neill said homeowners need not worry about the falling value of their homes.

“I don’t think people will see huge declines from here in their house prices, but the market’s not going up yet. I think the confidence will come back, but right now it’s not there,” she said.

—————–

spin maureen spin…..

#105 brazer on 11.20.08 at 8:03 pm

JPMorgan cuts investment banking jobs: sources
http://finance.yahoo.com/news/JPMorgan-cuts-investment-rb-13635809.html

NEW YORK (Reuters) – JPMorgan Chase & Co (NYSE:JPM – News) is cutting 10 percent of its investment banking staff — about 3,000 jobs — as the economic slowdown starts to bite into its earnings, people familiar with the situation said on Thursday.

#106 dekethegeek on 11.20.08 at 8:04 pm

Harper Lover
Whilst i like your reply to Brit ,
Why did we buy back dem Mortgages anywho?
Thought our economy was “rock solid” up until 1 day after the election.
But i’d rather have “sound banks” than watching them do a death spiral down and have someone like Brittany wail that Harper didnt bail them out!!!!!!!!!

#107 brazer on 11.20.08 at 8:05 pm

http://biz.yahoo.com/ap/081120/goldman_sachs_energy_report.html

Goldman to discontinue oil recommendations
Thursday November 20, 6:10 pm ET
Goldman Sachs to end oil recommendations; doesn’t expect ‘significant upside potential’

COLUMBUS, Ohio (AP) — Goldman Sachs, which earlier this year said it expected oil to reach $200 a barrel, said it is discontinuing its crude-oil trading recommendations as it does not see “significant upside potential” to oil.

Goldman said Wednesday in its weekly energy report said that while continued weak demand and constrained credit would keep prices under pressure, it hoped that high volatility would provide a better exit point for trading.

“The volatility in the past few weeks has mostly been to the downside and the pressure on the oil complex has increased,” the report said. “In the near term, we do not expect significant upside potential and as a consequence we are closing all of our trading recommendations.”

Oil has fallen 66 percent since hitting $147 a barrel in July. It fell $4 Thursday to settle at $49.62 a barrel.

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

alberta is finished….rip.

#108 brazer on 11.20.08 at 8:07 pm

How the Mighty Have Fallen: Buffett, Other Legends Feel Bear Market Bite
http://finance.yahoo.com/tech-ticker/article/132132/How-the-Mighty-Have-Fallen-Buffett-Other-Legends-Feel-Bear-Market-Bite

Feeling mauled by the seemingly undying bear market? Take a look at the year-to-date performance for some biggest of the big-name investors and consider yourself in good company:

* Warren Buffett (Berkshire Hathaway): -43%
* Ken Hebner (CMG Focus Fund) -56%
* Harry Lange (Fidelity Magellan): -59%
* Bill Miller (Legg Mason Value Trust) -50%
* Ken Griffin (Citadel): -44%
* Carl Icahn (Icahn Enterprises): -81%
* T. Boone Pickens: Down $2 billion since July
* Kirk Kerkorian: Down $693 million on his Ford shares alone

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

all the big boys have lost their shirts…including the legendary oracle of ohama …

#109 johm on 11.20.08 at 8:17 pm

The average monthly wage of workers in China’s cities and towns in the first three quarters this year came out to 1,853 yuan(250$) .

#110 brazer on 11.20.08 at 8:26 pm

Teck Cominco halts dividends, cuts capital spending by $730M; stock plunges
http://ca.news.finance.yahoo.com/s/20112008/2/biz-finance-teck-cominco-halts-dividends-cuts-capital-spending-730m.html

Teck’s already ravaged stock lost as much as 36 per cent on the news early Thursday, hitting $3.35 on the Toronto Stock Exchange – its lowest level since the late 1980s. The stock closed down 21 per cent at $4.10, with more than 23 million shares traded. That is down from a record $52.90 last spring.

======

not good.

#111 pbrasseur on 11.20.08 at 8:33 pm

Wow that’s a really nice graph!

I find it rather reassuring since it shows we are likely getting close to a bottom.

Of course many here will see the great depression curve and argue we are going there.

No way, the only way to get there would be if governments would react to this crisis as they did then, that is by implementing a bunch of absurd socialist policies and by starting a protectionnist war that would cripple the world economies.

Even our dump politicians know better than that by now.

But of course many of you won’t believe that.

I prefer the Warren Buffet way, I’ll be buying stocks.

#112 T.O. Girl on 11.20.08 at 8:41 pm

Spoke to a real estate friend and informed me that some homes have been sold in central toronto and basically got 30-40 000 below asking price!! Homes were listed above 07 prices!! I am shocked what greater fool bought these houses overpriced and only a small amount of discount are they crazy??? What do they do for a living that current economic turmoil doesn’t seem to effect them! I am wondering could Garth be wrong??? Are houses coming down or just selling at close to asking?? For all those buying now Wow what a bunch of idiots so what ever happens to them later on in coming months of DEPRESSION due to job loss or salary frozen they deserve it!!

#113 johm on 11.20.08 at 8:48 pm

BEIJING – The average monthly wage of workers in China’s cities and towns in the first three quarters of 2007 was 1,853 yuan(250$) . Most factory work will move
to countries like China or India . So manufacturing
jobs in North American are drying up and leaving
financial hardship . Deflation that has never been
seen in the worlds history will happen to most G7
Nations . World Governments should stay focused
on feeding the people and avoid mistakes from the past
like wars . my to cents ……

#114 The Coming Depression on 11.20.08 at 9:03 pm

Garth check this out a dealer in Miami is offering a 2 for 1 Dodge Ram special! Dealer name and # available on my site..please call to register..LOL

#115 dekethegeek on 11.20.08 at 9:20 pm

Johm – Most factory work will move to China or India…
Great, I get to look forward to “quality” manufactured goods such as the Chinese manufactured “Chery” car,
Melimine laced milk by-products, powdered Rhino horn for my “enhancement”, dried squid and shark fin soup. Yummy.
Let’s see how China and India handle the World wide economic slowdown when their own unemployed are rioting in the streets because they have no jobs, food or hope.
You’ll be glad your living in a first world country.
A famine, yup , thats what this world needs, get rid of 2 or 3 billion hungry mouths and there will be plenty -o – jobs fer the rest.
Why didnt i think of this sooner.

#116 BOB on 11.20.08 at 9:24 pm

#75 John, the whole world is bailing out their banks but you expect little bitty Canada to stand alone?

#117 dd on 11.20.08 at 9:39 pm

Great graph. Need to layer over the 80-82 bust.

#118 islander on 11.20.08 at 10:06 pm

Michael (#48) you sound like a well-meaning person so I’ll be kind.

But if you’re going to propose Soviet-style economic policies, someobody has to counter those notions.

1. You want to create a publicly accessible listing service for home sales (no proprietary sales information syndicates).

There is nothing stopping you from doing so. The information is available at Land Titles and provincial assessment offices. Pool your resources with like-minded individuals and create your own MLS.

2. You want to cap realtor fees at 5% of closing price.

OK, as long as I get to decide what to cap your salary at. Fair is fair.

3. You want to ban mortgage amortization periods of longer than 30 years, ban mortgage amortization periods of longer than 10 years for non-primary residences.

What other contract terms would you like the state to dictate. Why do you not trust principals to a contract to determine the terms of said contract?

4. You want to require 10% down payment of equity cost

Why 10%? Why not @25%. Why not 100%. How about the lender and borrower agree on mutually satisfactory down payment?

5. In case of sudden joblessness, ability to suspend mortgage payments while unemployed, and add payments to end of term (up to 6 months)

Who is going to pay for this massive welfare scheme? What if I lose my job? Can I stop paying Visa? My utility? GMAC? Safeway?

6. You want to ban building of houses on speculation.

What other features of an entrepreneurial society would you like to squelch? Inventing things in garages? Paper routes? Door-to-door encyclopedia sales?

7. You want to ban financial penalties for bulk mortgage repayments.

Again, you want to put yourself between the principals of a contract. Why do you hate free will?

#119 timbo on 11.20.08 at 10:56 pm

this is due to North America exporting the manufacturing offshore. If we could we should try to bring back industrial production to our own shores to keep the dollars at home. The only problem is that offshore owns all of our debt and would probably call it back when that happens.

Somehow if we could revitalize home grown production of goods that I believe would be the answer otherwise what we are seeing will continue to the bottom.

The guess at the bottom would be when California housing prices stabilize for at least 2 quarters. Then you know this craziness is over but by that time all the offshore money will have bought up the rest of the good assets North America has. complete foreign ownership. first swipe auto’s, next insurance.

Rip up free trade and get Canada working again.

#120 timbo on 11.20.08 at 11:04 pm

#117 islander

I partially agree with what you are saying but an economy without strong regulation promotes rampant speculation and fraud.

If you don’t agree with that statement the go live in a country for a week with no police force. Human nature must be kept in check otherwise it’s mad max time. But too much regulation and it swings the other way and quashes risk taking.

#121 Brian on 11.20.08 at 11:07 pm

The interesting thing is that the weakness in the TSX these last two days has been led by bank stocks — which until now were seen as a safe haven.

There is a great article on the risks in bank stocks, written by an ex fund manager here, Garth.

http://truthortalk.wordpress.com/2008/11/20/bank-stocks-underperformed-today-only-the-beginning/

#122 wealthy renter on 11.20.08 at 11:33 pm

DeketheGeek

You can talk about melamine or sharks fin soup all you like, but GM and the many of the European manufacturers have been transferring automotive technology over to China for fifteen years, they can build any car that we produce here for a fraction of the cost.

Aside from a few spoiled and pampered city people, the Chinese will weather this economic storm quite well. They are more competitive and resilient than we are. Many Chinese over age 30 remember supplementing their diets with grass and leaves when cities experienced near starving rations at the end of the Cultural Revolution. The can do near-starvation just fine.

They can deal us a can of whoop ass in toughness.

#123 dontcallmeshirley on 11.21.08 at 12:05 am

Hey Islander,

I hear what you’re saying about stepping between the principals of a contract.

There’s one huge distortion you’re forgetting: a friendly government is insuring the mortgage.

That guarantees non-commercial terms doesn’t it?

How much money would a bank loan out without this safety net?

Should we not have a check against potentially reckless lenders – minimum down payments, max amorts etc?

#124 squidly77 on 11.21.08 at 12:09 am

mad max..now your talking
http://www.youtube.com/watch?v=c4TdPxOXuYw
i would thrive in that environment
my wife..not so sure..she needs her nails done tomorrow

no squirrels here any more

#125 squidly77 on 11.21.08 at 12:20 am

better run bull..the grizzly just killed the black bear
and its tasting blood
http://www.scottgoto.com/Site/HOME_files/BullVsBear-filtered.jpg

#126 Coach on 11.21.08 at 2:19 am

What is the bank that speculation says may fail in Canada?

#127 patriotz on 11.21.08 at 3:06 am

I understand the gist of your post, but are you saying that if Bank X fails in Canada. I can immediately have my money transferred to my Ing or HSBC aacounts?

During past bank failures, they have either been taken over by other banks (like Bank of BC by HSBC in the 80’s) or have been kept open under CDIC supervision while they were would down. They don’t just close their doors.

This is also what is happening currently in the US, and I see no reason why anything should be different should a bank fail in Canada this time around.

Remember that endless pipeline of fiat money.

#128 Kelowna Gal on 11.21.08 at 4:44 am

From # 34 above;
Costco prices and gas: I was at the NE Calgary Costco yesterday with wife while daughter was in gymnastics. ALL their prices on each item was roughly increased $2 per item(avg). WTF? I thought oil went down? So why are food prices going up? Or is this just a local price gouge by Costco?

Anyone have any idea what foods will cost in 10 years, or 20? I believe a loaf of bread will cost $15 in 10 years from now, the caramel coloured “wheat” no name brand you get at Superstore. I imagine costs of things will make things more and more of a luxury, sort of like the 1700’s, I think when if the traders had a bad day, then there was no spices, produce, cattle or goods to be had.
_____________________________________________

I totally agree with # 34.

My husband and I were in Costco the other night. We had to buy some basic food items eggs, milk, cheese, bread, etc., and our bill came to $ 115.00. We could not believe it. A bag of sugar was $10.69. The cheese that we always buy went from $ 10.00 to $ 13.49…but it had a coupon for $2.00 and, it still cost us more. This is not just happening in Costco, I’ve noticed that all food prices have gone up. My point is is that whatever is going on is happening at an accelerated pace. I DO NOT feel like I am prepared for this. Where is it going to stop? We have children and want to provide for them, love them and see the best for them. What kind of life are they going to have in 10 years? Most of this is out of our hands and that is what makes it so difficult. It’s something that we cannot control.

Garth, PLEASE can you come and speak in Kelowna when you are out west??? Kelowna is not too far from Victoria. They say that “Knowledge is power” and we are trying to learn as much as we can, as fast as we can.

#129 Octagonian on 11.21.08 at 5:24 am

For GAWDsakes, Garth, get a grip.

Deflation — which is defined as a DECLINE in the money supply, and which is decidedly NOT the case — is a GOOD thing.

We are in a correction. This is good news. We are experiencing PRICE deflation, Garth, not monetary deflation. People are not hiding cash in their mattresses; money is digital now, and in ample supply.

No Canadian bank will be PERMITTED to fail — it will be bailed out or chaperoned into a merger with a subsidized larger bank.

Temporary asset depreciation does not equal deflation. Wealth is being lost; the money supply has been INCREASED.

Your own poor understanding of economics is merging with your apparently natural gloominess and you are scaring people.

Unemployment MIGHT hit 10%, and linger there a year or so; most non-pollyanna economists don’t even believe a full fledged recession will hit next year…parts of western Canada may escape entirely.

You seem to have morphed from a housing prognosticaotor into a general economic crank. This is unfortunate; you have been very good on housing. You are hurting your own credibility now, by preaching fear and loathing to the already fearful.

Yes housing will likely bottom down 50% from peak; Boomers will not be retiring in comfort, but that always was a fantasy… they will either stay in the workforce or subsist on a government cheque. They hold the democratic demographic electoral hammer, after all.

But for the love of Ba’al, PUH-leeze stop with the panicky shat bit crisis mongering.

#130 Kash is King on 11.21.08 at 6:24 am

#117 Islander… ” Again, you want to put yourself between the principals of a contract. Why do you hate free will?”
I agree with your points, but the gov’t already comes between the principles in the form of the CMHC, whereby the lender can pawn-off the risk on to the gov’t.
What we need is true free enterprise, and abolish the CMHC, and let market forces price the risk, and let the principles determine and agree to those costs, and terms.
On the flip side, there should be no bailouts for lenders. In other words, if they make bad loans…it could cause them to go under.
If they know this fact ahead of time, they would be less reckless in lending, and that would put a damper on speculation, just by market forces.

#131 johm on 11.21.08 at 11:40 am

Banks are not lending like they did in the past .

deflation is happening ……. Octagonian

#132 Keith in Calgary on 11.21.08 at 1:29 pm

#65 Calgary Rip off…….

Nothing special really, we shop at either Safeway or Superstore……….just lots of fresh veggies, fresh fruit, good cuts of red meat, chicken, fish, milk, eggs, etc……..the biggest killer is things like laundry soap, cleaning supplies, etc. We’ve already spent roughly $550 MTD……..we used to spend $400-450 a month on the same things 4 years ago. Now it is $700-800 a month.

You can each much cheaper obviously, but then I’d be 75 pounds overweight and sick, probably diabetic and with heart disease, from all that corn meal, starch, glucose-frustose, and pure sugar, that is in the boxed prepackaged foods like cereals, KD, pastas, sauces, bread, etc…..etc….etc….they are nothing more than sugar delivery systems. And sugar is a poison.

Bad and unhealthy food is cheap, which is why poor peope are fat.

As far as recession talk goes…..we are already in one. Our economy is in decline, it just has not declined two consecutive quarters in a row, but one quarter here, and one quarter there, etc…..the total loss being negative. And I fully expect the gubmint to fudge the numbers as much as possible going forward……..

#133 Bottoms_Up on 11.21.08 at 1:34 pm

#127: your costco is definitely gouging you. Cheese at Costco here in Ottawa is 9.99.

#134 pjwlk on 11.21.08 at 2:32 pm

#8 patriotz “No it wouldn’t, because that would provoke a run on other banks. CDIC and BoC aren’t that stupid. The latter can create money out of nothing and there will be plenty of it to pay off depositors should a bank fail.

From: http://forums.canadianbusiness.com/thread.jspa?messageID=287568

“CDIC coverage should be the last resort of safety. It’s hardly something you want to go through. In other words, if you think your bank is risky then the proper thing to do is move your assets elsewhere, not wait for bank failure and CDIC action.

If the FDIC in the United States is any indication, going through the CDIC process will be a pain. There are time delays, paperwork, and stress. Who knows how long it will take to get your money back… weeks? Maybe months or years? There is no precedent for bank failures of the magnitude we have seen this year.

The reality is that the CDIC does not have sufficient insurance funds, or total assets, to repay depositors in case of a large bank failure in Canada. That is by their own numbers, I don’t make up claims like this. This means that the CDIC will need its own government bailout. I guarantee you will be waiting to get your money back.”

#135 pjwlk on 11.21.08 at 2:36 pm

#73 Jeannie:

“My bank manager tells me that no other bank can make this promise. I hope to Gawd he’s giving me the straight goods.”

What would you do if the manager is wrong and he can’t recall speaking with you on the subject, or was sure he told you something different? When it comes to money, the only thing that matters (and holds up in court) is what you have in writing. Believe me…I’ve been there.

#136 FP on 11.21.08 at 3:33 pm

I agree with #127 Kelowna Gal and #131 Keith in Calgary. Food/grocery items are definitely priced a lot higher than they used to be. My husband is a Type 1-insulin dependent diabetic and we therefore have to be careful about what we put on the table as a result. We check labels and avoid pre-packaged and prepared foods out of necessity as these mormally have very high sugar/sodium content. We hardly ever eat out…maybe a couple of times a year…and I prepare all our meals from scratch – nothing fancy, just lots of fresh fruit, veggies, lean(er) cuts of meat/poultry/fish, eggs, etc. We’ve noticed that whole wheat bread has gone up from about $1.59 to $2.49 in the last six months (sometimes more depending on the grocery store) and are planning to start making our own bread…the thing is, whole wheat flour has also gone up in price. A bunch of celery (one of the most basic vegetables you can imagine) has gone up from around $1.99 a year ago to between $2.99-$3.99 and milk has gone up from around $3.59 for a 3-litre bag to about $5.99 (again, depending on where you shop — Canadian Superstore does tend to have cheaper alternatives). Don’t even get me started on what diapers cost — we mix cloth diapers with disposables to save money but cloth diapers also mean higher laundry/energy costs.

We are pretty frugal and have generally managed to save 50% of our net household income — we have no debt and our only fixed expenses every month are the rent, car insurance and phone bill and yet we have noticed that the amount we can save is slowly shrinking month after month due to higher cost of living.

I don’t pretend to have a sophisticated grasp of economics — just a laywoman’s understanding — but I can’t understand why so many economic experts keep predicting deflation when prices of groceries and utilities keep going up almost every month. I realize that many discretionary items such as electronics, cars, furniture are going down but the prices of many consumer staples are increasing rapidly. Is this dichotomy normal in a deflationary environment? I have to admit that it just seems confusing to me!

#137 Octagonian on 11.21.08 at 4:32 pm

#130 johm:

Banks ARE lending. They just are not spraying cash around with a fire hose like they were until August 2007. Credit worthy people and credit worthy projects get money, as they should. Credit was never supposed to be free and easy — it was once, before being printed out of thin air by pandering, corrupt governments, derived from peoples SAVINGS and was expected to be guarded against unnecessary risk.
But credit is there. A close friend just financed a new car — one of the categories where banks are tightening up; I just got a mortgage for a rental property I purchased well under market; another friend is opening a restaurant, with a mix of bank credit and private investment.
And, finally, while the banks are not throwing it around as much any more, they HAVE megatonnes of credit. Go to the Bank of Canada website and search “M3” the most reliable measure of the money supply. You will be astounded.

#138 Octagonian on 11.21.08 at 4:39 pm

Post script to my previous post imploring Garth to lighten up…

IF Garth believes he is right, and others also do, they should be doing the following:

– Getting a good supply of guns and ammo — crime will sky rocket under conditions Garth describes; hunting will also be a very necessary endeavour, for which a gun will be needed;

– Maintaining a large amount of gold, silver, and cash ON HAND;

– Forming local mutual aid militias;

– Overthrowing local governments whose tax policies not only impoverish the population and permit a precious few to live in privilege, but whoes spending also serves to distort and render dysfunctional said local economies;

– SECEDING from Ontario/Canada…it is the Canadian dollar and the Bank of Canada, along with various inflationary, equalization, socialist and protectionist policies benefitting certain areas of the country that afflict other areas; Mega-sized “federations” that are hyper-centralized and controlled from afar, historically suffer the most in recessions, depressions and economic upheavals. If what Garth forecasts comes to pass, Canada will be no more.

Where the hell did you get your hands on my plan? — Garth

#139 Jeff Smith on 11.21.08 at 7:28 pm

Geez, the banks aren’t lending money to the car dealers. How is this supppose to help the Big 3 ? I suppose they rather lend money to home buyers instead. sheesh!

http://www.wheels.ca/reviews/article/473711

#140 Bottoms_Up on 11.21.08 at 8:47 pm

RE: #132 “And sugar is a poison.

Bad and unhealthy food is cheap, which is why poor peope are fat.”
———————————————-
1: TOO MUCH sugar is a poison. Sugar (glucose) is required for proper muscle and brain function.

2: Oranges are not unhealthy. I saw a man who was 200lbs overweight because he ate 30 oranges/day, thinking it would be healthy for him. I also know lots of rich overweight people. Extra weight comes from eating too much food, and not enough exercise. Weight is independent of socioeconomical status (it’s probably more related to education and self restraint).

#141 novagardener on 11.21.08 at 10:12 pm

#140 Bottoms Up

Weight is independent of socioeconomical status (it’s probably more related to education and self restraint).

That’s garbage theory. Its a known fact that those in the lowest echelons of our society derive most of their calories on pasta & high, cheap carbohydrates. They cannot afford high cost fresh fruits & vegetables & lower fat meats.

#142 The Coming Depression on 11.22.08 at 1:23 am

Check out Peter Schiff and what is coming for GOLD and the economy…6 min video and quite scary..he is the guy on Glen Beck..a must see!
http://www.thecomingdepression.blogspot.com

#143 Bottoms_Up on 11.22.08 at 7:40 pm

Well Novagardener, here is a link to a scientific study that concluded education is an important factor in obesity:
http://www.ncbi.nlm.nih.gov/pubmed/15533527?ordinalpos=2&itool=EntrezSystem2.PEntrez.Pubmed.Pubmed_ResultsPanel.Pubmed_DefaultReportPanel.Pubmed_RVDocSum
The study also points out that socioeconomical status is not necessarily independent of education, and is obviously multivariable.

#144 Just a Girl on 11.25.08 at 7:29 pm

#136 FP wrote: “I don’t pretend to have a sophisticated grasp of economics — just a laywoman’s understanding — but I can’t understand why so many economic experts keep predicting deflation when prices of groceries and utilities keep going up almost every month.”

Food prices are affected by many factors: cost of energy, weather, consumption/demand, population, etc.

The soaring cost of oil and inflationary pressures have increased the cost of food worldwide. If we are moving to a deflationary period, there theoretically there should be some easing off on prices in the future.

In the meantime, I think it’s safe to say, the food banks could probably use our support this Christmas, for those that are in a position to share :)

#145 Jonathan on 11.25.08 at 11:17 pm

Someone questioned… “Some people think a major Canadian bank will fail (not hard to guess which one) before this is over”

and asked…. Which bank would that be?

My guess would be CIBC, they have the riskiest mortgage business out there..

Failure of any Canadian bank is a remote possibility. Merger is more probable. — Garth

#146 Jonathan on 11.25.08 at 11:59 pm

Dominant world economies start with a population that produces more than any other country. Rome, France, Britain, United States and now China grew through unparrallelled production abilities. The production gives the government the ability to tax. As time passes the country gets involved in many foreign affairs in order to secure production outside its borders. These affairs quickly become obligations as the superpower becomes entirely dependent upon them.

Over decades this superiority gives citizens within the superpower the idea that they can get away with not producing. That somehow there country and citizens are innately priveleged to a higher purpose. They feel as though they can feed off other countries.

Internal production shrinks and is replaced with speculative markets, which are merely just a back and forth movements of money that can no longer find a productive owner. It is important to note that speculation is completely pointless and has no productive qualities. The country becomes one big bubble.

At the same time its foreign obligations continue to grow. In order to meet the obligations the country takes on debt. The debt keeps rising until one day, it can no longer fund that debt with shrinking production. At that moment in time, the country without knowing it hands over the power to the next superpower.

Today and over the next twenty years we will watch America fall and China rise. It won’t be pretty and it won’t be fast. These transitions never are. Britain’s wasn’t fun, nor was Rome’s. The fact that the US has a massive trade and government debt entering into this transitionary period promises harsh times ahead. Current trade and federal deficits are growing exponentially by the month and are ballooning into trillions of dollars, each. The US transition from superpower status will be long and punishing.

In this time watch China rise in the exact same manner as the US or Britain or Rome once did. Production.

China’s currency will soon become a standard. It’s importance in foreign affairs will be unmatched. One day far in the future, its people too will stop trying, stop producing, feeling special and within their own bubble, they will merely speculate. Their debt will grow. Then reality hits and the bubble pops.

It’s like watching history happen well into the future. I guess that is how Garth felt when writing the Greater Fool. Moral of the story? Don’t lock in to real estate and debt in a time of great uncertainty. For a country that is entirely dependent on the US, we are most at risk as they fall off of their own pedestal.