How we failed

At least four times last week I was contacted by a young reporter from the Globe and Mail who told me he was writing a story about the coming of 40-year mortgages to Canada. He had heard I’d been the only MP to object to changes in the regulation of mortgages when they were proposed, then passed, by the Harper government in 2006. Why, he wondered?

You can read his story here. It is compelling evidence Jim Flaherty was instrumental in destroying the Canadian residential real estate market, allowing a sudden drop in lending standards to turn a healthy and strong housing market into an unsustainable bubble.

This will not be news to regular readers. Two years ago I went public about the potential chaos that would ensue from allowing borrowers to extend repayment periods from 25 years to 40 years, and also sanctioning zero-down real estate transactions. After all, it was very clear that allowing people who had no money to buy houses would end badly. In addition, 40-year amortizations did nothing but drop monthly payments and let people borrow more on the same income. That fuelled higher real estate prices, and quickened the death spiral of debt.

One year ago, in December 2007, I sat and wrote the book, “Greater Fool” which spelled out in detail my problem with these Canadian subprime mortgages, and predicted the outcome – a US-style real estate contagion which would sweep Canada.  Unfortunately, I was right. It is now infecting every city. It will grow more virulent as the economy weakens and unemployment spreads. By the time the real estate market bottom in perhaps a year, maybe longer, values will have dropped by up to a third more.

As you can tell from the Globe story, the advent of Canadian subprimes started almost immediately with the election of Stephen Harper. Conservative lobbyists representing US financial companies found fertile ground with an inexperienced, naive and uncaring finance minister. In Flaherty’s first budget, the way was paved for a relaxation of lending standards which would contain the seeds of disaster. At the time I raised the reality of the rapidly-devolving US housing market and the apparent destruction of the American middle class as a result.

And while I was correct to do so, I did not foresee the massive implications which would ensue for Wall Street, the entire global financial system or the industrial base of North America. Today we stand within the valley of a massive downturn, and perhaps on the edge of a deflationary spiral which will make recession seem quaint.

The immediate disease was greed leading to debt. But the defence against excessive debt should have been government vigilance. In Canada, as in the US, the elected failed us.

As the Globe story also points out, I was among the elected. And while I raised concerns about the mortgage changes, and caused the House of Commons finance committee to hold a hearing into them, at the end of the day I (and every other MP) allowed them to pass.

Why did I cave?

Good question. I regret it. But in this we have a concrete example of how our system fails us.

In May of 2006 I was already in deep shit with Stephen Harper, having objected to his hypocritical appointment of David Emerson and his weak environmental stance. I had also defied him by continuing to write this blog. When, as a Harper MP and finance committee member, I objected to the mortgage changes, I thought it would be the last straw, and lead to my being thrown out (that was not to happen for five more months).

And while I caused the hearing to take place, and continued to raise concerns about the lending letdown, I did not vote against the budget provision. Apart from being warned of the consequences of holding out by two senior government members, I knew a negative vote would finish my time in caucus, remove me from the committee and still not prevent the budget from passing. So I acquiesced and decided to continue to lobby against the new mortgages through my online writing, the media, speaking out and in a book.

The blame is mine for not having done more. But so long as political parties tell MPs what to do, say, think and how to vote, the outcome will be the same.

This underscores the need for independent members of Parliament who are able to support their colleagues, but also have the right and duty to speak out on behalf of their constituents and the greater good of Canada at all times.

When will we have a leader who understands this?


#1 Ed Sager on 12.13.08 at 10:49 am

Amen! The herd mentality is all-too-evident in Alberta, too.

#2 john on 12.13.08 at 11:04 am

Interesting how Harper and Flaherty are twisting the facts but that is without a doubt something we have gotten used to! You did your part Garth,the fault rests on the backs of Harper and Flaherty and all his puppets.Your books,and your advice have helped many Canadians. I seriously wonder if the Harper government is purposely destroying our country? Its hard to fathom how anyone could be so stupid and dishonest with so little effort :-)

#3 Renta on 12.13.08 at 11:32 am

I got a glossy flyer in the mail the other day from the BC Gov’t called “New Support for You and Your Family”? They seem to be offering “New Help for Homeowners” with a temporary tax deferment. “New legislation will allow homeowners who are experiencing financial difficulties as a result of the current economic conditions and have at least 15% equity in their home to defer their property tax payments for each of the next 2 years, with simple interest applied at the the prime rate. The deferred taxes do not have to be repaid until the home is sold, but can be paid back earlier if desired”

Ok…So lets just add even more debt to your mortgage, since you can’t afford both your house AND taxes anyways, and now that your net worth is even less thanks to this stupid bone-headed gov’t sponsered equity loan. But it’s ok! Its wasn’t like the banks to deny the huge uncontrollable mortgage in the first place. So how can this sort of loan can be a good thing? Well It’s the Gordo HELOC!

It’s good for the government because instead of people paying their property taxes they can spend more money and make the economy look better. Until they can’t.

Only one phrase comes to mind….”Come into my web said the spider to the fly…..”

#4 poorguy on 12.13.08 at 11:57 am

nah,Toronto is different.

#5 kc on 12.13.08 at 11:58 am

There were people asking about how to hide money in posts before. Here is another pretty safe way…

Buy a whole roasting chicken, or 2 or 3… Think about this… there is a hollow cavity inside the bird, You figure out a water tight container, place your bill roll into the container, place that into the hollow cavity, check for (concealment in the bird) place it (them) into deep freeze. Presto…. Cold hard birdcash… I will venture to say a thief will not be looking into cavities of frozen birds…..

Very intersting G&M article garth.

For those who would like to listen to garth on CKNW radio here is a link to the Audio Vault

Sunday Dec 7 – 8 PM

cheers, and looking forward to your interview next month

#6 GarthFan on 12.13.08 at 12:12 pm

People who ignore history do so at their own peril!

#7 bill on 12.13.08 at 12:15 pm

you have nothing to regret…you made your stand and ultimately got tossed from the party you loved for so many years.

the fact that you’ve communicated your valuable insights to the public on real estate via this blog, tv interviews and your book is service enough.

you can’t save everyone, but i’d venture to guess that thousands have benefited from your knowledge and predictions.

keep it up.

#8 OntarioHouse on 12.13.08 at 12:17 pm

Excellent Globe and Mail article. Its great seeing the truth finally being told.

#9 Midas on 12.13.08 at 12:24 pm

Garth, this fairy tale that this problem in Canada began only with 40 year mortgages is just that, a fairy tale. From personal experience I know that lending standards in Canada were lowered dramatically in the late 90’s as early as 1997. I bought a rather expensive house for the time, around 350K when there was no way on God’s earth that I should have qualified for a mortgage of 100K let alone the nearly 300K mortgage that one of the big 6 banks qualified me for. Then again in 2004 when I moved to BC I bought a 600K house with over a 450K mortgage that any bank should not even have looked at let alone offer someone whose income did not justify it. I did well selling both those properties but all lending sanity had pretty much gone out the window by 2000 when this housing boom began. In BC I could have bought a 900K that I seriously looked at and the bank would have loaned me the 700K or so that I would have required to close the deal. It was my own sanity that kept me from getting that property, (in retrospect I could have made a quick 300-400K but that’s another story.) How else can people in Vancouver have 70% of their household income going towards a mortgage? These were not all 40 year mortgages signed after 2006. Even in TO the official ratio is 51% although the unofficial and real ratio is probably higher.
All banks were all too happy to qualify just about anyone that had a little bit of money (10%) and could show an income on paper, even self-employed as I was and this goes back to 1998. The problem began with the lowering of the down payment requirements, from 25% to 20% to 15% to 10%, 5% and all the way down to %. This was a gradual process that occurred over the last 10-12 years. The 0 down, 40 year mortgages have exacerbated the problem not created it. They fuelled a boom that was based on an already shaky foundation; the 40 year mortgage is simply the edifice that has been built on top of the foundation that is now crumbling and bringing the whole house down with it. This fire was started by the Liberals, Mr. Paul Martin and Mr. David Dodge are more to blame for this carnage than Mr. Harper and Mr. Carney. David Dodge like his counterpart Alan Greenspan sowed the wind; Stephen Harper and Mark Carney are going to reap the whirlwind. Let me correct that, the Canadian people are going to reap the whirlwind. Stephen, I’m sure has a cushy Bay Street appointment lined up after politics, and no doubt Queen’s or another University will have a chancellorship ready for Mark.
Garth, why did you not lambast the media? It’s OK for the Globe to come out and start spilling the beans now, where were they in 2004, 2005, 2006… when I first started hearing about the coming housing crisis? Are they that brain dead that they never see the storm coming till after it had already made landfall? Or are they that deceitful that their real job is to keep us all in the dark? In either case why do you or I or anyone else for that matter give any credence to people that are morons at best and liars at worst?

#10 bob on 12.13.08 at 12:46 pm

What I would like to know is how much are the taxpayers on the hook for.Is there info available for this?So being smart with money,people will still get burned.Gee I should have run up a bunch of debt and get a bailout.My mission is to keep money in cash.None of the government options can control this mess,pretty much losing faith in the leadership hopefuls of any of the parties.There must be a lot of worried people on the hill.I can’t remember the last time Canadians were so tuned in to politics in the country,this could be a good thing in the long run.

#11 Bottoms_Up on 12.13.08 at 12:50 pm

from the link in #4:
“This means there will be a three-year inventory of unsold new condos on the market by 2009 (in toronto).”

kc, you’re forgetting the bird could be stolen. Or cooked accidentally. I wonder what basted gold bullion tastes like?

#12 Bottoms_Up on 12.13.08 at 1:11 pm

From the link provided by Garth:

“..New mortgage borrowers signed up for an estimated $56-billion of risky 40-year mortgages, more than half of the total new mortgages approved by banks, trust companies and other lenders..”
with the elimination of 40 year amortization, this statement shows that over 1/2 of potential buyers are no longer in the market. Couple that with a slowing economy and you can start to see the pain realtors must be going through….

Glad to see they plugged your book Garth, you shoulda got them to plug the new one too!

#13 Midas on 12.13.08 at 1:22 pm

GARTH WROTE: “This underscores the need for independent members of Parliament who are able to support their colleagues, but also have the right and duty to speak out on behalf of their constituents and the greater good of Canada at all times. When will we have a leader who understands this?

The answer to your (rhetorical) question is NEVER! Garth, you of all people should know that any political leader is beholden to many things and many people none of which include the general populace. You do not get to be a political leader without striking bargains with the devil in the shape of bankers, corporate leaders, mainstream media, and even religious leaders. Therefore your allegiance lies not with the people of the country but with the people who bankroll your perceived yet carefully crafted success, as for instance in the case of Mr. Obama. Therefore the leader is in fact a follower of unseen interests and since these interests are not in the least bit interested in the welfare of the common man, neither in reality is the political leader no matters how many soothing phrases he spouts. So what can the common person do? Bend over or pray, take your pick!

#14 squidly77 on 12.13.08 at 1:26 pm

vcr sfh prices down by $179,650
cgy sfh prices down by $70,449
edm sfh prices down by $63,271

the centre could not hold and has now blown apart
plunge o metre

oh my..

#15 Roger, British Leyland & Me on 12.13.08 at 1:45 pm

I think Harper/Flaherty and the PC’s are starting to whiff there’s a problem.. Toronto Mayor David Miller doesn’t. In todays Saturday Star he’s quoted as seeing lots of parking garages in the city that can be converted into residential to kick-start the economy… dumb ass.

#16 JosephK on 12.13.08 at 1:51 pm

KC: Good idea, unless the thief is also hungry.

#17 JosephK on 12.13.08 at 1:57 pm

Garth outlines the one thing that has always bothered me about the Canadian Parliament. The MPs don’t represent their constituents; they represent their party and the ideology of the party leader. This is why election campaigns always degenerate into a “cult of personality”. You basically vote for the least worst “dictator” to rule for the next term and hope for a strong opposition. We don’t vote people into office, we vote them out.

#18 Makeorbreak on 12.13.08 at 2:12 pm

kc: excellent idea, the bird in the freezer. Thank you.

I will also have my locks change for something that needs a key for both the inside and the outside. So even if my window is broken, the thief won’t be able to open the door. Then I’ll have metal bars installed for all windows. Not very nice for the curb appeal but hey, I’d rater have that than an alarm system.

#19 George Popovic on 12.13.08 at 2:21 pm

With all the bad news about real estate and the economy in general the Star has done it again. On page B5 of today’s Saturday Star, there is the usual “What they got” entry that shows a picture of a house along with the listing and the selling price. This entry, once again, lists the asking price of $299,000 and the sellng price of $310,000.
Bravo!!! to the folks at the Star and the real estate bunch who created this masterpiece. Clearly, the message is that the bidding wars continue out there on the streets of Toronto…better get out there before the prices go up.

Please stop and show a little dignity.

#20 squidly77 on 12.13.08 at 2:40 pm

woops..vcr is only down $104,000

#21 Shifty on 12.13.08 at 2:56 pm

#3 Renta
The flyer makes a great liner for the cat box, great quality absorbent paper . The flyer contains nothing but BS, guts and feathers.

#22 StillWaiting! on 12.13.08 at 3:05 pm

After reading this posting and the article it reminds me of a conversation I had with a friend of mine just recently before the elections this year. I was trying to explain to my friend that allowing the Harper government to stay in power would be a big mistake. His argument was that because the cons brought down the GST tax and that he saved money on the purchase of his brand new home in Markham that he would vote cons again because they have done so much good things for him.

I would love to ask my friend how he feels now about the Harper government now. Because of the cons and their 40year, 0% down policy that house of his would have been a whole lot cheaper than the rebate he got plus he bought at the height of the bubble in 2007. Just got his house this year from the builder I’m glad I’m not the greater fool. You’ve got to admit Harper has put up a great show of smoke and mirrors for the Canadian public since he’s been in power.

#23 Gord In Vancouver on 12.13.08 at 3:25 pm

#14/#20 squidly77

vcr sfh prices down by $179,650

woops..vcr is only down $104,000

Don’t worry about it. Pretty soon, Vancouver real estate pumpers and speculators will be begging for a $179,650 loss.

#24 AJW on 12.13.08 at 4:49 pm

Garth- Thank you.
I am a young Canadian who did what I thought was best and went to university. I incurred personal debt to pay for my fees, worked part time to minimize it, but all the while watched the affordability of housing climb out of reach. My peers were dispondent. What happened to the Canada that we thought we were going to be part of? It seemed as though the people who had bought before us were the lucky ones- and us the fools who thought we were making the right choices.
Now the bubble is bursting and I do feel for those people that listened to the media and bought up what was unaffordable. However, having housing prices retreat and come back to being coupled with affordability will be better for us all.
Thank you for your brilliant book, your blog, and for sticking your neck out!

#25 Charles on 12.13.08 at 4:58 pm

The following link will take you to a short video (2 minutes and 36 seconds long) of a speech Congressman Ron Paul (Texas) gave in the United States Congress (on Dec. 10, 2008) during the debate on the motion to grant a bailout to the U.S automakers.

Ron Paul on What Causes Financial Bubbles 12/10/08

#26 Makeorbreak on 12.13.08 at 5:46 pm

Even Queen Liz is tightening her belt (for those who can read French)

#27 islander on 12.13.08 at 5:55 pm

The sad thing is that America had a chance to elect Ron Paul, and he couldn’t even poll 5% in his own state during the primaries. I have to conclude that A: People don’t want to hear the truth, and B: People are stupid.

Garth may be the Great White North’s version of Ron Paul, but outside the true believers, he will not gain traction. Like Paul, he has been rejected by his own party.

Taxpayers are held hostage by politicians whose short-term interests dictate handouts to failing automakers, rapacious bankers, and whoever else lines up at the trough.

The only solution is to neglect to visit the Post Office on April 30. Starve the government of the money it needs to operate.

#28 George on 12.13.08 at 6:01 pm

I’m trying to purchase a farm property. I’d rather have money in topsoil than a bank. Especially in the US. Unfortunately, the sellers agent is an arrogant non-nice – he’s a prick. With these competitive devaluations about to eat at our dollars on each side of the border, do you let them win because I think dollars are very dangerous things to be in with all these rescues and bailouts. So rather than wait to get a hundred thousand break on carving out the bottom should I watch the purchasing power go poof in the meantime. In trying to get a pulse on Canadian culture, I’m always surprised at how heated up the debates become on Canadian discussion boards. That might be a good thing. It definitely seems to be a much more informed society than the one I presently live in.

#29 The Tallyman on 12.13.08 at 6:09 pm

Garth, you nailed it when you referred to the need for independent members of Parliament who are able to support their colleagues, but also have the right and duty to speak out on behalf of their constituents and the greater good of Canada at all times.

This should be commandment #1
What a great country/world we would be in if leaders just believed in and followed that motto.

Also your 20/20 reflection on “your cave” is so completely honest and admirable.
Wish I had the guts to own a few of my past moves.

While I don’t believe any leader from any party can fix things, I’m hoping that all politicians can adopt a community in crisis attitude and put the country first.

At the very least the rise of a coalition threat should keep all the foxes in check… especially if the conservatives survive.

#30 The Tallyman on 12.13.08 at 6:23 pm

#5 KC

I think stealing frozen chickens are going to be higher on a thief’s initial wish list than $ if things go similar the Great Depression.

And when he finds all that loot…
Man that chicken’s going to be finger lickin good!

#31 Bottoms_Up on 12.13.08 at 6:25 pm

Garth, keep your eye on this site, it appears they’re going to comment on (i.e. rebute) the Global and Mail article that you mention above.

What else would you expect from the mortgage industry? — Garth

#32 Kilt on 12.13.08 at 7:22 pm

Sad that you try to throw the blame on the current government. What happened to buyer beware. If I buy a crappy condo for $400,000 with nothing down and a 40 year mortgage and the market tanks 20%, whose fault is it but mine. This is probably the largest purchase of you life. You think one would take the time to research it. Anyone looking at a 40 year chart of real estate prices will see multiple bubbles. Things will drop 10% from here, then plateau for 5+ years before the next big bubble. This had little to do with the government, it is more part of the economic cycle. Sure, 40 year mortgages probably made things a little worse. But I won’t be shedding any tear for those fools who bought a home that they really can’t afford.

PS. Garth, isn’t your political career basically over?


Try some research. You’re embarrassing yourself. — Garth

#33 RimmyJ on 12.13.08 at 7:44 pm

In response to Jeannie’s question from yesterday’s blog on how Robert Prechter feels about the present global downturn, the U.S. dollar and gold, I have some very general comments.

First of all, he sees this downturn very much as he had predicted. He is one of a very few people who has not wavered on his prediction that we were headed for deflation and not inflation, even when everything seemed to indicate just the opposite. When Ben Bernanke recently stated that this would not be like 1929-1932, Prechter agreed. IT WILL BE WORSE, he stated.

Concerning the U.S. dollar, he feels it will move higher during the deflation but it will eventually be hurt because of the huge expansion of U.S. Treasury Notes and Federal Reserve IOU’s. Historically, the senior currency(U.S.) moves higher in a deflation.

Prechter also sees gold deflating, although he has conceded, at least in his book, that he could be wrong on gold. In any event, he still feels it is important to hold a healthy amount of gold in ones portfolio because it is “real money” and if it deflates it will not deflate like other investments. On a relative basis it will perform well during this time.

I would suggest you go to his website and sign up to receive regular e-mails. If you want more specific and time sensitive information on the markets, commodities etc. you can subscribe to several specialty services for a fee. I do not subscribe at present but I have on occasion purchased single monthly copies and they are usually very informative.

I also highly recommend his book CONQUER THE CRASH. You will likely find Part I (Chapters 1-8) a little dry so I would recommend starting in Part II ( Chapters 9- 34). You can always go back to the dry parts later. I hope this answers your questions.

#34 JO on 12.13.08 at 8:27 pm

Hi Garth, I agree the Conservatives made wrong moves to extend the amortization and allow 0 down. It did help extend the false boom. And it also concerns anyone that MP s are punished for expressing opposing views. That is a shame. I have to say though, the issue of poor underwriting goes back further. The NHA needs to be amended and better yet, CMHC needs a complete overhaul or closure. I question some critical elements of the underwriting, including the GDSR/TDSR, and appraisal system. As usual, these issues will be looked at maybe in 18-24 months through some sort of inquiry but only after the damage is done. Our RE/economic cycle is probably 18 months or so behind the US, so anytime someone hears some person on TV say our default rates are very low compared to the US, that is true only now, but the more important test is, where will they be 18 months from now? The issue of poor underwriting goes back long before the PC’s entered power. I am curious to see how this mortage market situation plays out over the next 2 years. My best guess is that CAD RE will not bottom for at least 4-5 years or so. The extreme credit creation and various other measures (including public sentiment) support a much longer than average fall in values.

#35 My_view on 12.13.08 at 8:35 pm


Thanks for that post.


Do not change the inside locks to double key sets, in case of fire you have no time to look for keys…….

#36 squidly77 on 12.13.08 at 9:02 pm

the General Motor companies $300,000 christmas tree

good grief is that where my tax dollars are going

something to think about

many Canadian families run short of food at christmas time..

#37 Harold Tichenor on 12.13.08 at 11:08 pm

It is interesting to note in the context of this article the recent Ipsos Reid survey that says something like 60% of Canadians feel that the Conservatives are the best party to have in power to deal with this financial emergency. Yet another stunning example of the power of disinformation and propaganda. If all members were independents voting by their conscience and not being whipped to toe some party line we could finally have a working Parliament. The answer to your last question “When will we have a leader who understand this?” is: when we have enough independent (non partisan) members of Parliament and they elect an independent Prime Minister (leader). That PM in consultation with the members could then appoint a cabinet on the basis of merit and skill regardless of party affiliations. This is a workable proposition that more Canadians should be discussing.

#38 Enki on 12.13.08 at 11:33 pm

Makeorbreak: Using dual locking doors is a VERY bad idea. I briefly rented a home that was configured that way, and it got broken into anyways while I was away. After I moved out, the family that moved in after us had a house fire (spotty wiring it turns out). They barely made it out with their lives, and only because one of them made it back to the bedroom to find their keys. Everything they owned burned. Thirty seconds can be the difference between living and barbecue, and those locks can slow you down that much.

#39 timbo on 12.13.08 at 11:52 pm

from calculated risk..

Fairfield Sentry Ltd., a fund overseen by Mr. Madoff and sold through Fairfield Greenwich. The shares offered by Neue Privat and Nomura were leveraged three times — meaning $3 of borrowed money was added to every $1 of capital invested in order to magnify returns, greatly increasing the potential losses for those investors.

July 21, 2008 – Sceptre Investment Counsel Limited (“Sceptre”), one of Canada’s leading
independent money management firms, and New York-based Fairfield Greenwich Group
(“FGG”), a $16.6 billion global hedge fund and fund of hedge funds management firm, have
today announced a cooperative venture to provide alternative investment solutions to Canadian
institutional and high net worth investors. Sceptre will advise Canadian investors on their
alternative investments and distribute FGG’s fund of hedge funds products. The venture sees two
of the oldest, most established, and most accomplished management firms in their respective
markets forming a mutually supportive relationship to provide Sceptre’s clients access to the bestof-
breed alternative asset products on FGG’s global platform.

Sceptre’s linked to this man ….hmmmm

How exposed are we to this new ponzi scheme in the US
A and how many more ponzi schemes are out there?

check your investments and maybe realize that the statement you are reading is just a statement until you cash the balance. Sort of like a house price…only valid at the sale, not at assessed value.

Again I do believe when house prices in California level for 3 months or so we are at bottom and I hope that comes soon. If the USA stabilizes then we might avert a heavy recession. The reason again I quote the US is that is our major trading partner, when they stabilize they will increase trade and we can stabilize.

#40 timbo on 12.14.08 at 12:07 am

a history of the scheme

A really good web-blog should be about the history of fraud ,if not already done. You ,Garth, have the housing down pat and that is the big one. It is clear that most of the developed world has that holding the banking sector and government policy hostage right now.

#41 ThumbsUp on 12.14.08 at 12:16 am

Hi Garth,
Read your book, excellent work, well worth the money, it may have saved me substantial amount of money buying into this over-valued and over-priced RE market and forclosure my future earnings to the banks and RE industry for a piece of over-priced shelter, can’t wait for your ‘After the Crash’ January.

You did the right thing in Ottawa and I’m proud that we still have people that speaks up. Keep up!

In reviewing my TD portfolio today, I was a bit shocked that one of my holdings – TD Canadian Bond Index e-series, hasn’t performed as I had thought the last few days, so I checked its holdings, it’s got whole bunch of ‘Canada Housing Trust’ in its top 10, I remember it used hold alot of ‘Canada (Goverment) bond’ in its portfolios not too long ago. What’s going on here, my guts tells me sell it next week,is it worth holding such a fund?

Thanks again, Garth!

#42 timbo on 12.14.08 at 1:06 am

lastly speaking of fraud

how can it be that if a single individual commits its fraud but if a large corporation acts its ignorance? We sure have double standards in justice and fall-guys to give ourselves hope in a fair system.

What is the difference between a hedge fund, investment bank and ponzi scheme…nothing except for the fact that if your big enough you have no paper trail to what you are aware of and spread the fraud around to hide the big picture. When the game is finally up you say you were not aware of the situation or were forced to take on more and more risk to remain competitive.

Things are sure going to be interesting early next year as all the companies in Canada that chased profit on heavy leverage show their losses. The net worth of Canadians will put to the test when deflating housing values really begin to impact spending.I truly hope we have a more stringent, heavily regulated system that can cushion the losses that the US is going through. Again I am not cheer leading the downturn only hoping that we were more frugal. Calgary’s RE price in the 3 years has made me second guess my trust in regulation and forces me to question how government regulation is non-existent when bubble dollars are involved.

OOpps forgot , no one likes the police when they come to a party. We only want them around when there is danger. Human nature, what do you do?

#43 David on 12.14.08 at 1:14 am

The Globe article is quite good actually. For those among us who been railing to no avail against the FIRE sector for several years, there might be a tendency to dismiss this piece as yet another example of journalistic necrophilia.
Sub prime has become a catch all phrase for what went horribly wrong. These exotic mortgages accounted for about 5% of the total housing market. I like to think of sub prime mortgages as the fateful pebble that started the avalanche that is now playing itself out as a global financial crisis.
Sub prime mortgages in some form or another have been around for a while prior to the bubble for families with blemished credit or limited incomes. Those mortgages, in a sense, did function in a stable housing market and not so well when the mortgage industry became securitised by likes mentioned in the article.
I can certainly understand Garth’s frustration over this issue. I was called all kinds of names like coffee shop crank for speaking out against the potential damage the bubble would do to the real economy. Certainly any family that saw the value of their existing home rise in the high double digits every year was not about to complain, nor question the causes. The annual increases in home prices often exceeded the family annual income, all for just occupying a property.
The previous tech bubble was relatively benign by comparison, since tech was a small part of the overall economy and most of those hurt by the collapse were venture capital funds who discovered much to their chagrin that people were not going to buy dog food over the Internet. In the end people who invested in tech lost 100% of a small fraction of their net worth.
Housing is in most instances the principal or only asset many families own and a large scale secular decline in the market will have an impact that will last a generation.
That there was a distinct lack of even minor public debate on these changes is not surprising and industry lobbyists are unlikely to invite any possibility of discussion unless they themselves are framing the terms of debate. Harper and Flaherty were not acting out of character.

#44 $fromA$ia on 12.14.08 at 1:59 am

#32 Kilt, your an idiot. RE will drop allot further than what you propose with no plateau.

Would you like another try at your crystal ball?

Your not Flaherties right hand economic adviser are you?

#45 APCM on 12.14.08 at 2:28 am

Anyone who says buyer beware should know it’s not that simple.

My husband and I are very very cautious buyers when it comes to our major purchases. And it is only because we lost out in multiple bidding wars in TO (before I found this site) that we aren’t Greater Fools.

#46 APCM on 12.14.08 at 2:39 am

I wanted to add that when I first started condo hunting, I didn’t realize I was competing for properties with 1) people who earn less than I do 2) people who have a lower downpayment than me 3) people who are willing to take more risks than me

No idea. The bank didn’t tell me about the high-risk lending. I didn’t see it in the media.

The problem is that this type of lending just leads to high prices. Many average folks & families got suckered into thinking these bubble prices were reasonable. Even if they had a significant downpayment, they got taken for more by the bank. The banks want to ensure most people don’t buy their homes in cash because guess what? Mortgages (especially big ones) make the banks money.

#47 Big Gnarly Grippers on 12.14.08 at 3:25 am


Harper had to be a prick so that the Conservatives (and far-right interests) could carefully wrest the country back from the hands of the corrupt, entrenched, self-serving, Ontario Lie-beral criminal gang. All sorts of atrocities by the Allan Rock/ Chretien lineage, from C-68 gun-grabbing to financial scandals down to the present reprehensible attempt to overthrow a legally elected government, could only be corrected by a strong Conservative replacement. It needed to be pulled out by the roots. As Konrad Adenauer once decreed, “No Experiments!” could be considered until the country had gotten back on its feet.

What started as populist left-wing Trudeau-mania has decayed down into a mafia-infiltrated nanny-state which discourages personal discipline, responsibility and honest accomplishment. It’s mostly interested in it’s own self-preservation, the implementation of social pussification on a national scale, and the maintenance of a hugely bloated government-centric employment and money-distribution machine. Every government town has that disease of course to some degree, from Victoria to Edmonton to Halifax. In Ottawa however it’s a whole different order of magnitude.

For example, a Lie-beral knee-jerk reaction to the present car-factory problems down in Ontario would to simply bail out any and all auto manufacturers and suppliers regardless of expense, especially those with lobbying connections to the Feds. That’s regardless of the fact that those dinosaurs have long since lost financial ability or relevance to exist on their own in the global marketplace. Auto-workers who are now squealing like stuck pigs about job losses have not attempted to seriously upgrade themselves to compete in the global theater as something else. It’s too easy to work in the factory 30 years with a Grade 12 education and bitch to ‘the government’ from time to time, than to get an engineering degree or whatever, sweat to pay off the student loan, then walk away from an obsolete industry for good.

From the folks over at TAE, it appears the 0/40 debacle was mostly the result of a pissing-match between CMHC and equivalent private companies. All thought a lot of money could be made out the the Canadian mortgage insurance ‘industry’ back in 2006. Given the rabid acceptance and immediate political benefits of cheap loans in 2006 however, it’s irrelevant which government would have been in power then.

But, there’s more than enough blame to go around.

First, most consumers of cheap loans were needlessly buying houses, buying oversized houses, or willingly paying way too much for any house. That boils down to lack of personal responsibility, lack of financial cognition, and the current pathological, excessive social preoccupation with married/domestic stuff of all kinds including squeezing out kids as fast as possible. That’s nothing more than politically-correct forms of crack addiction.

Secondly, a shameful lack of restraint and responsibility by financial institutions in the pursuit of profit was evident.

Thirdly, a glaring lack of government oversight existed, a la Greenspan & co., to provide some moderation and negative feedback before the whole situation went critical.

Sounds like you caught your Big Gnarlies in the car door. — Garth

#48 The First Rick on 12.14.08 at 3:28 am

#24 AJW on 12.13.08 at 4:49 pm Garth- Thank you.
I am a young Canadian who did what I thought was best and went to university. I incurred personal debt to pay for my fees, worked part time to minimize it, but all the while watched the affordability of housing climb out of reach. My peers were dispondent. What happened to the Canada that we thought we were going to be part of? It seemed as though the people who had bought before us were the lucky ones- and us the fools who thought we were making the right choices.
Now the bubble is bursting and I do feel for those people that listened to the media and bought up what was unaffordable. However, having housing prices retreat and come back to being coupled with affordability will be better for us all.
Thank you for your brilliant book, your blog, and for sticking your neck out!
Thank you for being the generation who has given the most, worked the hardest and obtained the least. Amazingly, most of you manage to keep your chins up.

#49 The First Rick on 12.14.08 at 3:42 am

#27 islander on 12.13.08 at 5:55 pm
The only solution is to neglect to visit the Post Office on April 30. Starve the government of the money it needs to operate.
Really? This advice from a Realturd? Sorry buddy, most of us have our taxes deducted at the source, we don’t have that luxury. Secondly, most of us add an intrinsic value to what we are taxed on, i.e. we work for a living. As a Realturd you add absolutely no value to what you contribute to society. You simply stand in the middle of a transfer of assets and grab a peice of the pie. Now YOU suggest holding back taxes!!!! Incredible!!!! NONE of the money you suggest to hold back is yours to begin with. You ‘earned’ it because people are forced to give it to you. Islander, do two things, get a job and STFU. You are a Realturd who comes to this site, pretending you are part of the solution when you were never more than the problem. Buzz off. It’s too late for you to decide to change teams.

#50 Future Expatriate on 12.14.08 at 4:03 am

“When will we have a leader that understands this?”

When you’re Prime Minister, Garth.

#51 Future Expatriate on 12.14.08 at 4:09 am

#19: And how much of the difference between asking price and selling price can be attributed to the crash of the Loonie in the interim?

Here’s an idea: Why don’t realtors just factor in the devaluation into each reported sale so that they can fraudulently claim that the property sold for more than it was listed for?


#52 Midas on 12.14.08 at 7:29 am

#28 George /

Put your money in gold and wait. You will be able to get that farm for quarters on the dollar; maybe even pennies on the dollar and probably within 6 months, or a year tops.

#53 JO on 12.14.08 at 10:27 am

APCM – Seems like you were about to buy a condo – I would suggest you scrutinize any project in great detail. The majority of these places are long term disasters in the making – poor build quality in many cases, understated maintenance fees in the first year or two with explosive rises common in most cases over the next 5- 10 years, there is no land below the floor to provide some sort of intrinsic value, larger than average numbers of buyers are/were speculators, so the end game I think in 5 years or so will be average prices down 40-60 % with average condo fees over $ 500/M in TO area and little chance to sell a condo unless it is for pennies on the dollar and after an enormous listing time. I would suggest you think about buying (in 18-24 months or so) a bungalow or freehold townhome with a veggie patch and few stairs. Just food for thought. I would stay away from condos unless you are not concerned about cost and value.

#54 Bottoms_Up on 12.14.08 at 10:37 am

#28 George /

Put your money in gold and wait. You will be able to get that farm for quarters on the dollar; maybe even pennies on the dollar and probably within 6 months, or a year tops.
Gold is going to bottom out in the 600’s, wait for this price then buy it.

#55 Miketheengineer on 12.14.08 at 10:50 am

What to do with mutual funds. I have my mutals in bond funds and monthly income funds. I have a drop of 20%. I have a very real concern of being out of work next month (new job?? not likely). What to do? Do I cash in the funds, pay off the mortgage, refinance what’s left? Or do I slowly with draw the funds, using that to pay the mortage, while hoping to land another position with lower pay. I bought my house in 1998, and I have about 50K in it. What would you do in my shoes? My spouse is in worse shape, her funds are down over 45%, since she was much higher in equities.

#56 danny on 12.14.08 at 10:54 am

“At least four times last week I was contacted by a young reporter from the Globe and Mail who told me he was writing a story about the coming of 40-year mortgages to Canada. He had heard I’d been the only MP to object to changes in the regulation of mortgages when they were proposed, then passed, by the Harper government in 2006. Why, he wondered?’

Garth I remember a year and a half later I was watching tv and I hit one of those govenment/parliament/legislative session and I saw you(Garth) put forth a motion to investigate the 40 year mortgages. It seemed that one or two MP’s were arguing with you about the language or word “investigate” and what it implies. Anyhow in the end everyone agreed with the wording and a review was set. You were the only one to vote against it and the only one who continued to look out for Canadians. You are a man of your word.

#57 Kash is King on 12.14.08 at 10:57 am

APCM: ====> “The banks want to ensure most people don’t buy their homes in cash because guess what? Mortgages (especially big ones) make the banks money.”


Maybe we should entertain the idea of outlawing all forms of usury?
Or perhaps each dollar loaned must be matched by an equal dollar on deposit.
Might be painful short term while adjusting, but we would emerge as a very strong country.
Just sayin’

#58 whiterock on 12.14.08 at 11:46 am

Hear what this great Canadian economist prophetically had to say about our current dilema

#59 Sam on 12.14.08 at 12:04 pm

Is this true about rental market .. ?!?!? pls see below:

#60 Gonzo on 12.14.08 at 12:18 pm

A question…
How will gold perform relative to the Canadian dollar? I think it is clear that the American dollar is heading for a serious crash after this artificially strong dollar run is over. This will inevitably inflate gold relative to the U.S. dollar. The question is, how will the Canadian dollar respond? I have heard 2 camps: 1) The Canadian economy is a commodity-based economy, and will benefit as people move away from U.S. dollars into commodities and foreign currencies. 2) The collapse of the economy of our closest neighbour and strongest trading partner with inevitably affect our dollar negatively as well
I guess it is a question of which is better to store your wealth in… The Canadian dollar or gold?
Any comments?

#61 Rasputin on 12.14.08 at 12:39 pm

Hey Big Gnarly Grippers…great post! Keep getting those big gnarlys caught in the car door. My nomination for well thought out post of the year.

#62 Makeorbreak on 12.14.08 at 1:30 pm

Miketheengeneer: Sorry to hear about your situation. My 2 cents is get out of your mutual funds right now. Take whatever is left and put it in a GIC. Better having something now than nothing later. Your wife should do the same. Put your home for sale immediately. Do not refinance. The more you wait, the less your house is going to be worth. Provided you are not under water since you bought it before the boom, you should be happy if you recoup your $50,000. Buy some gold with the proceeds or put it in a GIC and rent. It will be easier to relocate if you find some work in another city or province. Good luck.

#63 dekethegeek on 12.14.08 at 1:37 pm

#9 Midas : your statements about banks etc. are BANG ON
#18 MakeorBreak: your query about putting “double sided deadbolts” in your house to lock your door from the inside.
Bare in mind it is against the fire code but I have done it as well because the RCMP in Burnaby have an annoying tendancy to show up to the wrong address 30 minutes after my neighbors called them about a “break in in progress”, for the 3rd time!!!! ( Crack house just down the street that no one seems to know what to do about) Anywho, if you go that route. LEAVE YOUR KEY IN THE DEADBOLT when your home. That way if there is a fire you know exactly where your key is. Works for me.
Garth, excellent post as always.
I dont think anyone will blame you on the way you voted, your reservations about 40 year mortgages are noted on the public record. Unfortunately i think “free votes” on all issues creates a US style of govt where there is so much “back room” bartering that the public recieve the same uninformed ,media appeasing results. ie. Pablum for the ignorant masses. When every i talk about the economy or the coming meltdown( as I have for the past 1.5 years) my friends and co-workers eyes glaze over and they start talking about “last nights hockey game” or the UFC Fighting matches.
Is this how Rome fell ? With the masses oblivious to the encroaching calamity and the leaders “fiddling” with our tax money?

#64 dekethegeek on 12.14.08 at 1:42 pm

Garth, I’m just a bit curious that I haven’t seen much in your website about the 600 Pound Gorrilla sitting in the corner called. The Derivatives Market.
I have noticed that the Media hacks also barely talk about this potential Doomsday catastrophe…unless an economist brings it up ( which is rare )
600 Trillion ( yes Trillion) Dollars in derivatives.
Any thoughts abouts this?

#65 Makeorbreak on 12.14.08 at 1:44 pm

Thank you for your advice on double locks. I won’t have those installed.

#66 Keith in Calgary on 12.14.08 at 2:29 pm

The ABCP market is still frozen and looks like it may collapse

Watch for more “mystery assets” to suddenly appear on the B of C balance sheet.

If not….$300 billion held by banks and investors gets burned.

#67 dekethegeek on 12.14.08 at 2:46 pm

#55 Mike the Engineer, check out SNCLavalinProfac website. They are still hiring, world wide or canada wide.
They have multiple jobs either in Civil, structural or Maintenance engineering ( building operations ) positions.
Stupid company, loves to push paper buy hey. jobs a job right?

#68 nonplused on 12.14.08 at 2:57 pm

Ha, ha hiding cash in frozen poultry.

How much cash are you people trying to hide, anyway? Why not just take it down to the Costco and stock up on non-perishables? Or whisky?

Anyway, the deflation is going to be fairly short lived. The devastation being wrung in the real economy by the inability to transact is going to create real shortages of goods & services in the not too distant future. You just can’t go and shut down all the mines and factories and turn off all the oil wells and expect nice fully stocked store shelves down the road. And the amount of cash buried in all the backyards already available to compete for basic necessities could create a lot of fireworks if a general perception of shortage creeps into the public mindset.

If that happens the next move by the governments will be to print even more money to pay civic employees who are demanding higher wages so they can feed their families. From there we go straight to the same inflationary collapse that has been the end of every single paper currency mankind has ever tried except the current US dollar based system. But it’s only the exception because it hasn’t collapsed yet.

Assets will still deflate for a while, some dramatically, but eventually the massive inflation in wages and necessities will put a floor under them too. But we are probably several years away from that point.

All the talk about deflation is just that: talk. The money supply is exploding! There is no deflation, overall. Sure, the money is all going exclusively to banks and companies closely tied to the government and not to the people, but the money is there and it will go somewhere eventually. Just not the price of your house.

Also, now that the effective interest rate for the US government to borrow is negative (less than inflation), in theory the amount of money available to fund any purpose the gov comes up with is effectively infinite. So you better get a turkey rather than a frozen chicken.

#69 nonplused on 12.14.08 at 3:34 pm

I think if you need to lock the doors at all you aren’t hiding your stuff very well. Oh well I guess that’s what “conspicuous consumption” is all about. You need a BMW in the driveway to attract babes and it attracts thieves too. You get what you deserve.

Ever notice the same things that attract babes inevitably attract thieves? Me neither, it just struck me now.

My uncle years ago broke the key off in the ignition of his van accidentally. He drove it around for several years using a screwdriver to start and stop it. No one ever stole it because it didn’t look like the sort of van you’d want to steal.

He was also known to leave his house unlocked when he wasn’t home. The theory was that if a thief really wanted in he was going to get in but this way saves the door jam from damage. If he ever did get burglarized I bet he didn’t even know! He was kind of forgetful anyway and probably just thought he’d misplaced whatever was missing.

#70 nonplused on 12.14.08 at 4:07 pm

Hey this a bit beside the topic,

Ever wondered how Gen X and Gen Y is ever going to come up with the money necessary to fund the baby boomer’s retirement and health care and all that?

I’ve heard/read the question many times of course, everyone pointing out that it is mathematically impossible and bla bla bla and then we go right back to borrow and spend and forget about it.

Well, I guess the answer is simplicity itself: They’re not.

#71 nonplused on 12.14.08 at 4:21 pm

From Hyperinflation starts and ends in essentials not assets.

Peter Shann

The most widely accepted view is that hyperinflation and monetary collapse results from governments introducing large amounts of fiat money into the economy, Wikipedia comments;

“The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. This results in an imbalance between the supply and demand for the money (including currency and bank deposits), accompanied by a complete loss of confidence in the money, similar to a bank run”

This explanation is superficial and doesn’t provide answers as to why governments would in the first instance “massively and rapidly increase the amount of money” nor why they would.

feel compelled to continue with this as inflation increases by factors of thousands of percent and in some extreme instances print banknote in denominations of 100,000,000,000,000 currency units, it also fails to explain why newly issued money is not primarily invested in asset class goods or why goods that can easily be replicated, as can most essential consumables, be often subject to the greatest price inflation.

A prerequisite of hyperinflation and monetary collapse is that a disruption in the availability of essential goods occurs, today this could happen as a result of past reliance on expanding credit and fiat money temporally facilitating dependency on low cost imported goods many of which now feed primary needs leading to a commensurate loss of home production capacity with an inherent delay to the medium-term should such reengagement with manufacture become necessary as it would in the event of off shore suppliers losing confidence in reciprocal worth of monetary instruments offered in exchange for goods, and or shortage of essential goods may arise as a result of natural correction occurring, by way of example from the collapse of speculation driven credit markets and or as a result of collateral damage to the production cycle caused by inappropriate governmental action in further increasing money and credit supplies in attempt to drive a spontaneously occurring and necessary correction back in the direction of instability and in so doing distorting essential work ethics and disincentivising investment in the production cycle,

In my view the most probable sequence of events resulting in hyperinflation and monetary collapse is as follows:

1. A broad based shortage of goods that are thought essential develops and this is not relieved in time to satisfy demand.

2. Consumers trying to acquire essential goods that they believe are in short supply become fearful and are prepared to pay increasingly higher prices and stockpile these goods further increasing shortages and accelerating prices as a sellers market develops.

3. Prices rise for essential goods in short supply as an increasing proportion of the money supply circulates in these goods, also with increasing velocity and as most of these goods are consumables with high turnover upward re pricing quickly occurs.

4. The proportion of available money circulating in goods that are perceived as essential increases and the demand for less essential goods diminishes I.e essentials become disproportionately more expensive than the norm against non essential goods displacing money towards the goods most in demand further fuelling inflation,

5. The shortage of essential goods accelerates as manufactures increasingly focus on short term survival, longer term risk is avoided and investment in the production cycle is reduced accelerating 1.

6. The normal balance of demand for all goods increasingly prefers those goods required to satisfy primary needs and people engaged in making and supplying less immediately essential or non essential goods become unemployed who then pressures governments accelerating condition 9.

7. Eventually goods not immediately required but non the less essential are needed and rapidly increase in price as they also become in short supply.

8. Consumers with least money first find it increasingly difficult to secure essential goods, become frightened and are forced to allocate greater proportions of their money on essential goods and demand greater income,

9. The demand for money forced by need and fear becomes irresistible so governments feel insecure and provide increasing amounts of fiat new money,

10. Consumers first to spend the new money see some value but soon as this new money is distributed and its value is lost, the velocity of money also accelerates as people rapidly exchange money for goods, wealth is seen as best protected when stored as goods rather than cash further increasing price and reinforcing condition 9,

#72 David on 12.14.08 at 5:15 pm

Harper and Flaherty maybe just maybe never grasped the greater fool concept.
AIG was the world’s biggest reinsurer until a few years ago. The sub prime fiasco managed to vaporise 97% of AIG share holder value this year. AIG was also the biggest recipient of the $700 billion US bailout package.
Instead of rolling out the welcome mat, the incompetent dishonest bumblers from AIG should have been thrown underneath the bus in Canada. Harper messed up bad.

#73 Meo on 12.14.08 at 7:50 pm

There was a time when you needed CASH to pay for a car, a house, a toy, etc.

Nowadays, folks get a car, a house, FOOD on credit…

What happened?

Why should I make my own coffee at home when I can burn 2 litres of gas while idling in a Timmy’s line-up for 20 minutes and pay $5 for a coffee and 2 donuts?

Who’s responsible?

Peer pressure?

Artificial lifestyles after a few generations?

Immediate, instant gratification?

Pay later, have fun now?

I’m entitled to something better but I can’t afford it. Too bad!

ALL of the above practices and beliefs only stimulated the LAZY, the DUPED and the UNMOTIVATED.

Wanted to spend like a zillionaire while you earned $10/hour?

The tab is in.

Enjoy your bankruptcies, you selfish, brainless, careless imbeciles.

P.S. Cash is now king… Too bad you all ain’t have any. Time to suffer… Merry xmas!!!

#74 Calgary_rip_off on 12.14.08 at 9:29 pm

Squiggly, are you at the top of the sea? There isnt any depth in those comments. You may want to use your squid abilities and go many leagues deeper.

$70,000 is a lot off of a price for SFH in Calgary that is $200,000 overpriced? I dont think so. House prices in Calgary are so far out of whack you’d wonder if marijuana, not oil is the commodity of Calgary. More likely its alcohol, the most useless and dangerous drug on the planet.

You own your home in Renfrew(part of Calgary) right? So what gives? Why in the hell do you care if prices go down? I believe you are old(mid 50’s) and have owned a home for a while, so what do you have to worry about? Your kids? That would be understandable.

Unfortunately, unless oil prices plunge and lots of people are out of work, prices in Calgary probably wont come back to a reasonable level. It has been the last 4 years and probably will always continue to be unreasonable sh*t shacks. Hell, they arent even constructed to codes currently available in Europe that would axe all heating and cooling costs completely. It is possible now to build a SFH with no heater. What a concept. Maybe some folks will lighten up to the idea of a generator in their basement that produces electricity and heats their home at the same time.

I along with many potential buyers are growing disallusioned with pompous @ss sellers in Calgary and the Herald and all its propaganda. All many buyers really want is something reasonable without the time machine required currently to go back to 2002.

If you have posts that actually how earth shaking statistics in the future, please post. But $70,000 off of a half million median is barely worth breathing about. Do you call this crashing? Give me a break. It’s all so FOS.

Perhaps Garth will get back in and shovel the rampant conservativism present through Harper. Do to Harper what he did to you Garth. It’s payback time.

#75 Jeannie on 12.14.08 at 10:27 pm

RimmyJ. Thanks for that useful information.
Following your advice, I looked in on the Elliot Wave website.
They’re presently offering several free chapters of Prechters book on their website.
I’ve bookmarked the site and will read it this evening. Lots to think about,eh? Appreciate your response.

#76 Blacksheep on 12.14.08 at 11:02 pm

Just watched a 60 minutes video on the coming second larger wave of US mortage resets.

Alt-A and Arms, resets represent 1.6 trillion combined.

The analyst said he expects 50-70% forclosers on these low to start, then reset higher interest %mortgages.

The value of the sub prime collapse was about 1 trillion.

The housing bottom is years away in the US.

This is going to get ugggly!

take care,


PS, sorry no link

#77 Adi on 12.14.08 at 11:06 pm

To Meo: A bit harsh… but true. Anybody can get anything, anytime. Until they go bankrupt. I know people that went bankrupt after spending 50K on credit for high-tech stuff and cars. Some of them even got a mortgage two years after going bankrupt. The System is greedy, and the politicians are failures. No matter the party they come from.

#78 nonplused on 12.14.08 at 11:19 pm

#60 Gonzo,

gold right now is still near it’s highs in Can$. the Can$ is a derivative of the US$ just like the Can economy is a sub of the US economy.

if the US$ goes, almost all paper goes with it as other currencies are largely backed by US reserves. But little currencies like the Can$ have the potential to blow up early ala Iceland. That equals more risk, not less.

Time to stockpile essential non perishables! Your cash in the bank pays the same as cash in a can which is the same as a t-bill now: 0. it’s a nice round number. And it coud get trashed. But a 3 year supply of AA batteries will power the kids toys for 3 years whether the dollar collapses or not, so you loose nothing. There is no penalty to buy now anymore.

#79 nonplused on 12.14.08 at 11:25 pm

Oh ya,

Gold is non perishable, but is not essential, at least in a paper currency system. Buy batteries, garbage bags, and toliet paper first. If you still have extra money you don’t want to stick in a frozen chicken, then buy gold. But remember you probably won’t be able to barter gold until things get back to normal, whereas most people will take a bottle of whisky for a snow shovel any day. You won’t be able to bring the gold to the bank either as the bank will be closed or subject to capital controls.

Whew, the cold here must be getting to me. Can’t go outside.

#80 Tom on 12.15.08 at 3:26 am

#70 “Ever wondered how Gen X and Gen Y is ever going to come up with the money necessary to fund the baby boomer’s retirement and health care and all that?”

I suspect we are going to go back to the days of multi-generations living in the same house (although, to be fair some cultures have always done that through necessity and because the family unit is valued). The boomers have their big houses and if they want looked after they’ll just have to let their kids and grandkids move in. One thing’s for sure, many, many boomers are not going to have that quiet lazy retirement they dreamed off but never really worked for. A higher retirement age is very likely in future.

#81 Zoronqueen on 12.15.08 at 3:42 am

nonplused–thanks for the article. I too worry about the state of people’s health.

Meo–Usually the old, young and poor have the greatest to lose. There are already a lot of poor people who are homeless that cannot afford the inflated rents/mortgage.

The ones who end up bankrupt are the small business, middle class who are up to their eyeballs in debt. Everyone is responsible for this mess. The way to get out of it is to have friends and family who care and will support you through the difficulty times…

My grandpa from the 30s is living in a rat infested house with my grandma and aunt. Many of us have asked Grandpa to move. But I now understand that having a basement storage full of food and a garden outside. May not be so bad after all….

#82 Future Expatriate on 12.15.08 at 6:02 am

#73: Cash ain’t gonna be king for long, O great Empathetic One. And those of you who put their faith in it will soon be worse off than those you decry.

Word to the unwise…

#83 READTHIS on 12.15.08 at 6:20 am

THE TRUE GREATER FOOL> anyone that thinks money is anything other then being slaves to bankers.

Do you not understand this is the problem.
If they don’t lend more and more and more and more, the game is over.
Lets say we have 100 dollars(with asset backing)
I am in charge so I borrow 200 more. (no assests backing.hmmmm? its true)
With the interest payments the loan is paid off.
We now have 96 dollars left to share.
borrow 200 more. Pay it back with interest and we now have 94. Do you see in the end we have nothing.
Keep going and we will have 0 dollars.
take away the credit and noone has anything.
and then the poor poor banks take everyones houses.
Fake made up money from heaven gets to take everything from everyone.

Open your eyes or we will all be poor.

#84 patriotz on 12.15.08 at 6:25 am

TD Canadian Bond Index e-series, hasn’t performed as I had thought the last few days, so I checked its holdings, it’s got whole bunch of ‘Canada Housing Trust’ in its top 10

Canada Housing Trust bonds are issued by CMHC and are 100% Government of Canada guaranteed. Their repayment is not contingent on repayment of any mortgage.

The TD Canadian Bond Index contains about 1/3 corporates and they’ve been going up and down lately.

Fund profile

#85 Kash is King on 12.15.08 at 7:46 am

Some folks believe we are in the middle of a deflationary “event” right now that requires urgent attention. From Martin Weiss Ph.D. :

Gonzo #60 your questions about gold vs $ protection? You may not want to rule out how well the $US may weather this storm vs gold.

Yes there is a lot of “printing” going on there, but there is everywhere else also. Kinda can be likened to the $US being “the tightest whore in the brothel”.

The amount of printing is miniscule compared to the amount of deleveredging (deflationary) going on ; like pissing into the ocean.

Typically the reserve currency does the best in deflationary times…. it’s the world benchmark.

Those of you freezing money inside chickens may have the right idea, so long as they are stuffed with greenbacks, and not canuckbucks? jmho.

Some excellent research on the $US by Jack Crooks:

GL all.

#86 vtj on 12.15.08 at 9:31 am

#73: Kind of harsh there, don’t you think? I’d chill out a bit if I were you – you’ll live a longer, more enjoyable life in my humble opinion.

For anyone interested in understanding what may have caused this “spend what you don’t have” attitude, a very interesting read is “Influence” by Robert Cialdini. It scientifically demonstrates how we can be so easily manipulated by external forces (ie., multi-billion dollar marketing campaigns). I first read it about 7 years ago – a real eye-opener for me.


#87 squidly77 on 12.15.08 at 9:42 am

has now responded to the globe and mail article on subcrime mortgages..of course they are defending them
leave a comment and let them know how you feel aboutthe 0/40

#88 squidy77 on 12.15.08 at 9:55 am

calgary rip-off why the hell do you care about me..yes i own my home out i am definitely not in my mid i do not live in renfrew..and yes i want cheaper house prices for my kids
for over two years i have said that i believe house prices will fall from the highs of $505,000 back to the historical norms of $180,000 in calgary

damn it how old are you,..10 are embarrassing calgarians with your constant whining and complaining
where ever you came from please go sound intimidated and scared by the over there head in debt realtors and spec buyers
open your eyes chicken little and realize that you are now in the drivers seat

#89 buy gold on 12.15.08 at 11:40 am

“Within the next decade, for every two people who are retiring, there will be less than one person to take their place” (Dr. Linda Duxbury, Carlton University)

#90 squidly77 on 12.15.08 at 11:42 am

On a year-over-year basis, “sales are down a more dramatic 42.2 per cent.

CREA reported that the national average price of homes sold was down 9.8 per cent from November last year. Declines in average prices “were limited to a handful of higher-priced major markets” – Greater Vancouver, Victoria, Calgary, Edmonton, Oshawa and Toronto, CREA said.
the canadian housing bust has begun

#91 Jonathan on 12.15.08 at 12:04 pm

Harper said in a statement to the media in late 2007/early 2008 that as global economy is about to enter turbulent times, a country must pay down their debt.

The statement surprised me at the time. I wondered how serious he felt it was going to get for Canada. Obviously pretty serious!

If you were on the ‘inside’ like Harper, then you knew how the banks’ assets were overvalued all the way back in 2006. So when banks were forced to sell assets in 2008 to make ends meet, it opened everyone’s eyes to the rest of their assets which were way overvalued (worth 5 cents on their book value). The result: these companies had been secretly bankrupt for nearly two years now.

So why is Flaherty offering the banks 75 billion? Easy. It’s so they are not forced into asset sales 6 months down the road from now like their US counterparts had been. These asset sales would force them to open up their books so that the international community can evaluate their worth. This transparency would reveal their massive weaknesses. The result, some Canadian banks may be the walking dead like their US counterparts.

The 75 billion is more cause for concern than comfort.

#92 Bottoms_Up on 12.15.08 at 12:07 pm

from BNN:

The number of existing homes sold in November was down 12.3 percent from October, marking the second consecutive steep decline, the Canadian Real Estate Association reported Monday.

Seasonally adjusted, 27,743 units were sold in November, “the lowest level for monthly activity since January 2001,” CREA said.

The national average price of homes sold in November was down 9.8 percent year over year.

#93 squidly77 on 12.15.08 at 12:08 pm

60 minutes on alt a and option arm mortgage nightmare ahead

#94 Finanzkrise on 12.15.08 at 12:10 pm

The ‘shocking’ turn in the Canadian housing market over the past 6 months is being reported almost daily in some form or another by the mainstream media these days…

#95 squidly77 on 12.15.08 at 12:18 pm

Well it looks like Garth Turner’s lackeys have finally found this site. Their viewpoint that the sky is falling and Canada is mired in subprime debt is just as biased as any Realtor-speak.

even the mortgage brokers are feeling the heat

#96 Mike B formerly just Mike on 12.15.08 at 12:50 pm

Not having read everything on this particular blog I will make a couple of generic observations regarding real estate in Toronto. Having sold our house over a year ago we are sitting on cash. We have seen some marked improvement in asking prices in general. Some agents I have spoken too in superb areas are indicating that it is basically impossible to sell a house these days. Seasoned pros not novices .
From my own perspective… stuff has dropped alot in price but still things are being put up at monstrously high prices .. in the rarest of cases… entry level stuff on busy streets, semis on less liked streets, are actually selling for decent cash. Some move up buyers are taking the plunge . In all “asking prices” are still very very high and not dropping dramatically enough for my tastes.
Any other Toronto insights would be great

#97 timbo on 12.15.08 at 1:04 pm

fascinating look at the banking time line in the USA from the great depression to present with some good music to boot.

#98 Calgary Rip off on 12.15.08 at 3:22 pm

Hi Squidly:

You surfaced!!! I dont care if I embarass Calgarians. Their embarassment should be of the ridiculousness of the current situation. Has nothing to do with me.

Fear and being scared is a normal reaction and should be supported. Denying your fear leads to doing nothing, and in extreme conditions, death. Very very stupid to deny your feelings. Maybe I should just go buy some alcohol and then deny my feelings? Nah.

I like your views Squid. You should write for the Herald instead of Mario or Marty. They are the embarassment to the Herald. $180,000 as a median here’s a big thumbs up!!!

Chicken little is now in the driver’s seat with Mobil 1 0w40 for dangerous arctic conditions under the hood in Calgary.

If all the stupid 0 40 year stuff had never been introduced this “bubble” would never had occurred. Hopefully Calgary can recover from the last 5 years of this current mess.

Let my complaining and whining continue. Innocent buyers need to be aware of bubble prices.

#99 vtj on 12.15.08 at 4:21 pm

#98: “If all the stupid 0 40 year stuff had never been introduced this “bubble” would never had occurred.”

That statement is misguided: many factors contributed to this bubble and to think otherwise is naive.

#100 POL-CAN on 12.15.08 at 5:09 pm

#96 Mike B

I second your observations.

We are sitting in cash as well and are giving up on the search for a month or so. We are concentrating on High Park, Little Italy, Riverdale, Greek town, and the beaches. Yes there are still some sellers trying to get last year $$, but overall it has been treanding down.

By spring we should see an epidemic as more sellers clue in to the mess that the economy is in. Look for the prices to start going down at an ever increasing pace if the market does not pick up March/April. I do not see how it could.

Had 2 low ball offers refused in the last month but it is all good :) Just means that we can get more for the same $$ later….

#101 Meo on 12.15.08 at 6:35 pm

Beware of SQUIDDLY77.
He was commited to the Alberta Hospital for 7 years.
Part of his therapy was to get over his obsession with BRE-X, in which he lost his fortune and his family.
Squiddly77 is well documented. He can be googled.
Squiddly77 wishes a bust for Alberta and Canada.
Squiddly77 hates realtors, businessmen amd free entreprise – not to mention Liberals.
Squiddly77 is a typical Albertan separatist: anti-Canada and anti-Liberal.

#102 Wealthy Renter on 12.15.08 at 8:16 pm

“Any other Toronto insights would be great”

The prices in Central Etobocoke are still sky high, with a decent home running $600 to $800K. Homes in more exclusive areas run $1 to $3 million

Prices are easily up 15% from last year. This area appears to be its own island. I don’t quite get it since this area is not as exclusive (and much more middle class in sensibilities) when compared some areas in the core. I suppose buyers are attracted to the quiet living. With the exception of the East and West Mall areas, central Etobicoke has a very small population density, almost small “townish” for lack of a better word. It is very expensive.