‘World according to Garth’

The story below, by Canadian Press senior writer Julian Beltrame, moved on the wire today. — Garth

‘Hard times have just begun, look out below’

OTTAWA — Garth Turner is finding that the scarier things get, the more people pay attention to his doomsday alerts. One reason is that he’s out of politics, he says, so his economic forecasts are no longer seen as possibly tainted by partisanship.

But more important may be that the former MP’s alarmist book about collapsing housing prices in Canada – “Greater Fool,” which he began writing last December when the sky seemed to be the limit – has turned out scarily bang-on.

If he turns out to be as prescient with his soon to be released new book – After the Crash – Canadians would be well advised to heed his warning and on how to survive the economic collapse.

Turner, who has worn a number of hats in his career including entrepreneur, journalist, broadcaster, author and combative politician, is predicting hard times for Canada over the next two years and he hasn’t ruled out a good old fashioned depression.

“We’ve had a crash. America has crashed, stock markets crashed, Wall Street crash, real estate crashed and the global economy crashed,” he says of the events of the fall. “The world as we’ve known it is gone. You are not going to get credit cards in the mail, you are not going to get lines of credit easily. Those days are gone. The question now is are we going into a bad recession, are we going into a depression?”

‘His book on collapsing house prices has turned out to be scarily bang-on.’

Turner believes Canada’s gross domestic product will plunge five to eight per cent from the beginning of the recession, which he believes began after Labour Day, to the end, which he says won’t come until the spring of 2010.

As well, he expects housing prices will plunge another 30 per cent next year – on top of the 11 per cent drop so far this year.

For the first time since the Dirty Thirties, Turner expects many Canadians will wind up owing more on their homes than what their home is worth, particularly those who purchased in the last two years with little down payment.

That’s not a depression, as he sees it, but pretty darn close.

Most economists – but not all – would scoff at such doom and gloom, to which Turner replies: That’s what they said when he predicted Canada’s housing market was on the same disastrous path as America’s.

“It’s a relatively straight forward to weave some pretty ugly scenarios,” says Douglas Porter. “He’s probably not too far out of line to say things could be very ugly if policy makers make missteps or don’t step in to support the economy.”

Porter places greater faith in the massive economic stimulus packages being proposed around the world, and in Canada. Prime Minister Stephen Harper is pegging the deficit next year at up to $30 billion, mostly as a result of increased spending to help the economy.

The Bank of Canada and Ottawa have also injected over $110 billion in liquidity – cash -to grease the money markets, and interests rates have been chopped.

Turner agrees those bold actions could stave off the worse, but they also may not, he adds.

“We’ve never had this amount of money thrown at an economic problem, so we’re in uncharted territory,” he says.

“But by the same token, they are blowing their wad all at once, so this better work because we are out of bullets.”


#1 t. jaworski on 12.21.08 at 11:19 am

When is the new book gonna be on the shelves ? Garth–keep up the good work ! The ” TRUTH ” is out there.

In stores by January 19th. — Garth

#2 Ed Sager on 12.21.08 at 11:30 am

Let’s hope that After the Crash is required reading for Canadian politicians.

#3 Brittanny on 12.21.08 at 11:46 am

It is amazing how predictible the general public is. Same ‘ol, same ‘ol. We are somewhere between the “denial” and “fear” stages with “panic” coming soon to a theatre near you.

#4 Simon on 12.21.08 at 11:53 am

How much have housing prices plunged in the hinterland or, at very least, outside the markets we keep having emphasized? I’d wager the story is a little different.

#5 Keith in Calgary on 12.21.08 at 11:54 am

Govenments injecting money into the banking system when banks won’t lend……and individuals taking on debt is just plain foolish anyways……..as well as governments bailing out zombie corporations (auto makers, et al) will not bring us out of the recession/depression cycle……..”stimulus packages” do not work…….

They are too stupid to understand that, because they are cowtowing to the voters as only politicians can…….it is nothing more than at attempt at a made in Canada “dead cat bounce” that will leave us as a country saddled with unrepayable debt and a host of failed banks, and those same industries that they wanted to help, bankrupt anyways, when the money runs out as “Joe Consumer” is too smart to spend what litle money he has left on things he doen’t need.

We have had a fundamental shift in consumer attitudes occur…….and it is for the better.

To wit….yesterday the wife and I were out shopping at four liquor stores for our New Year’s Eve treats……we were not going to buy champagne, as it costs between $80-150 a bottle….we were going to buy a good Prosecco (it’s champagne too, but from a different region in France, therefore it canot be called as such) for $20 a bottle…….we finally found a liquor store that was not totally sold out of Prosseco……yet, each and every one of them still had completely full racks of champagne bottles going nowhere…..people were not buying at 5 times the price.

#6 dd on 12.21.08 at 11:59 am

Talkin to someone that lived throught the 82-84 recession in Calgary. 25% unemployment. People walking away for mortgaged houses. This town was a ghost town back then.

#7 roy on 12.21.08 at 12:01 pm

I watched the news the other night and saw good old Jim Flaherty stating that he was going to hire the top business people of Canada to lend advice on how to get us out of this mess. He was quoted as saying ” these people know business” I guess he is trying to tell us that He and Harper don’t and he now needs help because they never had a plan in the first place. Lets get rid of them! I hope the next time around that people re elect Garth. I think he would make a great finance minister .

#8 Makeorbreak on 12.21.08 at 12:06 pm


#9 dd on 12.21.08 at 12:11 pm

#5 Keith in Calgary,

Government stimulus can never take the place of consumer spending or a healthy economy. However, roads, bridges, transit lines, mantenance, and hospitals still have to be built because we are growing (slowly) as a nation and because upkeep still has to take place.

It is far better to have some people working, instead of just receiving the dole and sitting at home.

#10 JO on 12.21.08 at 12:21 pm

Bailouts and “stimulus” nonsense will simply delay the inevitable and make the pain last longer and deeper than flushing the system out right away. The $ 4B (with good chance for more) given to the auto makers is complete stupidity. Since when do we reward failure and mediocre businesses with money that comes from the working Canadians and successful companies ? Businesses of all sizes fail everyday in this country and do so as a result of many reasons, yet these dinosaurs and their greedy unions/executives will get what’s coming anyway. For now, janitors and maintenance people will keep making 6 figures (ones that squeeze in some OT)with insane benefits for working a job that high school grads can do. Make no mistake, the only reason this bailout happens is because no politician wants to be associated with a bankruptcy under their watch. Instead, they provide money that is not theirs to these failures (and help banks too) who often provide a lot of money toward campaigns, etc. These stimulus packages that have become a craze the world over are another farce – just as the housing bubble became. If stimulus worked, then Japan would have escaped the deflationary crisis. Again, the only reason we are seeing a strong push for these is due to the demand of the public that government “do something” and also due to the fact politicians now have a great excuse to spend large amounts of future taxpayers’ money on pet projects and other plans that tend to benefit a small number of special interests. We are in a deflationary environment for now and there has been excessive debt. This has been a global problem. Spending 40-50 B is small fry compared to the larger debt bubble. It may provide a temporary respite in Q1-Q3 2009 when things might improve a bit, but after the “stimulus” runs out, the economy will slip right back into stagnation or recession.

Anyone supporting these bailouts for specific industries and “stimulus” spending plans is mistaken if they think these actions are the “right” thing to do. The only thing that is right to do is to reform EI for all workers and focus on re-training. Then reform regulations to reduce leverage in the system at all levels (the market is doing it anyway) and strengthen underwriting. Tighten CMHC and make CDIC count for chequing accounts only (better yet, eliminate the CMHC/NHA). The bottom line is the only honest and prudent course of action tis to allow the debt to be defaulted on or paid back. It needs to be flushed out of the system before the economy can get back to sustainable growth. By far the most critical long term change is to eliminate the Fed and BofC with the disastrous fractional reserve lending practice that has allowed this farce to occur. Remove the “management” (read: ongoing attempts to devalue the currencies and punish the prudent savers) of our money from private hands who operate under a government umbrella.

Instead, these bailouts and stimulus nonsense will simply assure collapse at a later date (2010-2012) and ruin most citizens.

#11 yukon Don on 12.21.08 at 12:23 pm

I have been reading about the house of cards happening in the fake mortgage market and over value of housing stock and leverage by wallstreet for three years. Most peoples reaction was I was crazy when I tried to relate any information to them, now they seem to be listening. When MSM starts leaking bad news , you know that the sh-t will really hit the fan. My idea is to buy property , after it tanks and grow food with a group of like minded people. I am now liquid in cash , having sold two properties and moving to south vancouver island with a ladyfriend who lives there. The prices are super high now , but listings are not moving and a slow price decrease has already started on the Island. Thanks for your advice and holding true to your beliefs ,even when being scored by the everything always goes up crowd. My only concern is the government will just print tons of money , there by screwing those of us who have saved and not got sucked in to the borrowing game? Is hyper-inflation in the works in say 3 years or is the deflation to hugh to be stopped? thanks…

#12 Mike B on 12.21.08 at 12:29 pm

Porter and other supposed sages are banking totally on the stimulus pckg. Problem is that a) during the depression the US was not in second level of insolvency like it is today AND b) we did not have a derivative mess of 600 + trillion dollars … ie 10 bucks for every dollar of global GDP. There is only ONE fix… standard balance sheet economics. The US will go into a depression first followed by Japan and Europe. Parts of canada will also hit a depression. You cannot simply back out of this mess by spending. When the problem is debt… more debt is not the solution. Someone has got to pay for our excesses… probably the next TWO generations.

#13 dd on 12.21.08 at 12:31 pm

the Fed has cranked up the Great Bubble Machine for what policymakers hope will be one final time.

The Fed’s “unconventional” monetary strategy comes in four parts:

1) Cutting interest rates to near-zero to lower the cost of borrowing.

2) Injecting short-term liquidity into the financial system in the form of bank reserves (quantitative easing).

3) Trying to pull down yields on longer-dated Treasury bonds through a combination of the jawbone (promising to keep short rates low for an extended period) and the threat to intervene in the market directly by buying longer-dated paper.

4) Trying to reduce credit spreads above the Treasury yield for other borrowers, and increase the quantity of credit available, by buying mortgage-backed agency bonds for its own account, and financing other market participants to buy securities backed by other consumer credits, auto loans and student loans.


#14 real estate expert on 12.21.08 at 12:37 pm

“”The banks are intentionally holding back on lending, hoarding their reserves, at the direction of the Fed, so that the Fed could have some justification for bringing rates down. Lending out their reserves would have been inflationary and made rate reductions impossible, so they were told to wait.””

“”In one masterful stroke, the US has created an artificial demand for dollars thereby rescuing in the short term the plunging value of the dollar.””

“”Mr. Bernanke attacks the credit crisis with rapid-fire liquidity and free money after this week’s target rate cut to just 0.0%-0.25%, his bullets have caused some serious collateral damage. In the crossfire, the reserve currency of the world has received a nasty wound.””

“”China and Russia hold trillions of US dollar denominated debts and are at the mercy of the US.””

“”Subprime resets begin to drop sharply in the first half of 2009. But that is exactly when the Alt-A/option-ARM resets begin to climb each month, in a trend that will continue upward through 2011.

“”Will the system be ready?””

#15 Let them eat cake on 12.21.08 at 12:43 pm

Garth your too bold..
Porter is just towing the (BMO) line – Squiddley’s 2nd favoured domino. Watch out there may be more than falling glass @Bay/Adelaide.

#16 Charles on 12.21.08 at 12:48 pm

That seems unbelievable turn around for a book, writing it last week and having it published mid January. I thought book publishing was mired in red tape.

I started the book at the end of October and it went to press December 8th. It will be in the stores mid-January. In publishing terms, this is warp speed. — Garth

#17 Future Expatriate on 12.21.08 at 1:30 pm

Nice photo of a typical Victoria $650,000 “character house fixer-upper”, Garth.

Looks like the real estate tornado picked it up and dropped it and we’re not in Kansas anymore, Toto.

#18 colette on 12.21.08 at 2:11 pm

There is another part of this disaster that not too many people seem to talk about and that is with all the houses, condos, and other abodes out there we have people without any and those people are dying to have one.

Governments have sat back satisfied to promote housing as an economic stimulus mechanism which then stirred the pot to where we are now. Builders built the houses that made them money this means they didn’t build affordable housing they built subdivisions of look a like mass produced homes in the suburbs which then also contributed to urban sprawl and having a car tied to your butt…and probably a mortgage that you couldn’t afford.

Inner city apartments which were refuges for the poor got upscaled into fancy dancy condos, and as time went along housing became a financial investment that then meant that those who had money could have a roof over their head and those who didn’t lived on the streets.

Maybe now with this crash the true housing problem will be solved for with coming foreclosures there will be many more people who won’t have enough money to have a roof let alone any equity that could then be leveraged for car loans, vacations, or education.

What will governments do when our tent cities swell and the homeless become not only those mentally ill, the illiterate or suffering from a brain injury…rather the homeless are former ford workers, pulp mill workers, miners, and even tar sand workers?

#19 bingbiong on 12.21.08 at 2:12 pm

G M opened a brand new plant in china the other day. Where did this magic money come from? They also are setting them up in Brazil and Russia.
The big companies are running to Other places and North america will be left jobless and somehow we are paying for this crap.

#20 homeless and happy on 12.21.08 at 3:16 pm

collete #18

If this tar sand worker stays out of work I won’t be homeless, just take all my pennies and move to asia on the cheap.

Besides Canada’s more of a business than a country anyhow. I’m more of a taxpayer than a citizen. The older I get the less I want to work and contribute in taxes to this country. I’d apply for a nice government job with someone like Canada Post but I’d never be hired on. I’m white, male, heterosexual, and born here, there isn’t anyone lower than that :).

#21 dekethegeek on 12.21.08 at 3:44 pm

Garth I totally agree with your assessment of a 2010
(at the earliest) improvement in the economy.
I do remember the early 70’s ( Watergate, 12% interest rates, gas shortages and recession) and the early 80’s( 24% interest rates, recession and Ronald Regan)
The unfortunate part of todays financial equation is the danger of almost non existant interest rates. ie . The Fed and the Bank of Canada have almost no room to drop rates. On an interesting note ; If the Bank of England drops it’s rates below 1.5% it will be the lowest rates the bank has ever posted since it’s creation in 1695. Yup, 313 years ago. Stick that in yer pipe and smoke it.
How long did “deflation last in Japan? 10 years? And they were still able to sell their cars, electronics, etc. to the rest of the world. They still suffered a real estate meltdown of epic proportions.
The U.S. is having huge problems selling their goods(cars,software,etc.) except for Food( grains, corn,beef).
I can’t wait to see the sales numbers for the Christmas season. Bad news in January aint gonna improve “joe public’s” mood to buy ANY big ticket items if they think there is a chance of prices dropping further. Can you say “Deflation”? I knew you could.
I just hope it doesnt last 10 years.

#22 chris on 12.21.08 at 3:59 pm

Garth, do you have any specific comments/criticism on the Gov’t of Canada’s rescue package?

What rescue plan? — Garth

#23 $fromA$ia on 12.21.08 at 4:28 pm

Chris, The Government should cut taxes but in doing so will cut MP’s jobs.

#24 The First Rick on 12.21.08 at 4:43 pm

#7 roy on 12.21.08 at 12:01 pm I watched the news the other night and saw good old Jim Flaherty stating that he was going to hire the top business people of Canada to lend advice on how to get us out of this mess………………………………………………………………==========
That shocked me as well; Flaherty using the business model that took us were we are at. Sort of like ‘advice by proxy’. Similar to asking Mahatma Ghandi for advice on constructing a Molotov Cocktail. Regardless of how well the question is asked or how well the answer is intended, it just doesn’t instill me with a whole lot of confidence.

#25 Bob on 12.21.08 at 6:33 pm

#24 the First Rick

Are you kidding me? I would love it if politicians would seek the advice of business leaders. Are you trying to tell me that you trust the politicians business sense. There are 2 things that politicians are worried about.
1/ getting elected
2/ getting reelected

#26 Gonzo on 12.21.08 at 7:01 pm

#11 Yukon Don-
I think you are right…
Deflation will be the concern for the short-mid term. By the U.S. government printing so much money to try to avoid this, hyper-inflation will occur after. The question is, will Canada follow suit? I think it will not be as bad here… with hyper-inflation, commodities prices will rebound. Also, our debt, while large, is still much less than the U.S., and I think, less toxic to foreign investors. Our government, I’m sure, will try as hard as they can to keep up though with these bail-out schemes.
Regardless, though, hyper-inflation will still hurt those in debt much more than the savers. With hyper-inflation, interest rates will rise. Also, with cash on hand, you will have the ability to move into hard assets when the time comes: gold, food, other commodities.

#27 Ian on 12.21.08 at 7:36 pm

George Bush was the biggest pro bussiness president ever. All his top advisors are connected to big bussiness.

Its just more of Harper’s plan of copying George Bush’s moves from a year ago.

#28 Kash is King on 12.21.08 at 7:37 pm

From Karl Denninger:

“Being that this was deemed “unacceptable” Alan Greenspan along with Congress and the other regulatory bodies in Washington DC responsible for banking (and general credit system) safety and soundness undertook an intentional course of action to “paper over” the losses.

But wait! How can you do that?

You can’t – except through fraud.

That is, you cannot prevent a loss from appearing and being recognized unless you allow people to lie about the value of securities, place them off-balance-sheet in opaque containers where nobody can see what’s inside (and thus how they’re performing) and “lever up” to issue yet more debt (credit) to cover the cash flow that should be happening but isn’t.

As the embedded (and fraudulently-concealed) debt continued to mount banks and other institutions found themselves performing a Madoff – that is, issuing new credit (debt) to be able to “show earnings” that in fact were a phantom. Unlike Madoff they did not have to go find someone new to put money in to be able to issue the checks to existing investors, since a bank that can operate with no reserve requirements imposed on it is capable of issuing as much credit as it wants, effectively “printing money.”

Regulations and leverage limits are supposed to prevent this, but they were systematically and intentionally dismantled in the name of “financial innovation.”

In truth they were dismantled in the name of a massive financial fraud that permeated every corner of our credit system, from credit cards to student loans to automobiles to housing.

This ponzi scheme even extended to individual consumers – that is, you.

If you HELOC’d out money and paid down your credit cards with it, then charged anew or cash-out refinanced, you were a Madoff. If you bought a house with an Option ARM, knowing full well you could not make make a fully-amortized “recast” payment, you were a Madoff. If you played the balance transfer game with your credit cards, rolling balances from one zero-interest offer to another, you were a Madoff. Tens of millions of Americans did one or more of these things – and each and every one of them – if not you then someone you knew – was running a personal version of Madoff’s scheme.

Every organ of our government and regulatory system was involved in this knowing deceit and the complicity required for it to occur – Congress, The White House, Treasury, The Federal Reserve – and still is.”

Whole Article here:


#29 timbo on 12.21.08 at 8:57 pm

In depth interview with Kevin Phillips C-SPAN.


#30 squidly77 on 12.21.08 at 9:09 pm

how messed up are we ?

if you had 2 children..one that saved and one that didnt
would you punish the spender by taking the savers saved money and giving it to the out of control spending child ?

the government would/has
responsible companies that make cars that people actually want will now have there taxes raised to support the ones that cant control there spending and make cars no one wants

and they also give tax payers money to the out of control banks and eventually the out of control banks will begin foreclosure on the tax payers that bailed them out

when your told up is down and the sky is orange
you have to know that we are in some serious trouble here..if i had a conspiracist mind i might even think that something else much bigger..is going on here

#31 Waiting for a Deal on 12.21.08 at 9:17 pm

I have been reading “The Great Reckoning: How the World will Change in the Depression of the 1990’s” by Davidson and Rees-Mogg.

Well, they were wrong about the date … by about 10 years but an interesting point noted during the 16th, 17th, 18th and 19th centuries the number of inflationary years to deflationary years were pretty even. Some centuries might have had 57 inflationary year vs 43 Deflationary years. Others would have the opposite.

But during the 20th century, they say, has had an uninterrupted inflationary run since 1950 which was the result of Military Spending. In the past, after conflict stopped deflation would come but in this case Military Spending was 10% of GNP.

This book has shown me that while deflation isn’t exciting, societies continue and people will continue and people live their lives albeit differently.

#32 nonplused on 12.21.08 at 10:09 pm

I don’t think it matters whether it’s Harper or Dion or Layton or whatever dumb dumb clown gets elected, the orders come from the US. That’s why we hired Goldman Sacs boys to run our central bank just like they do. Our economy is a derivative of their economy, with 80% of our trade going south/north. So if they bail out auto, either we bail out auto or they shut down the Canadian plants. It doesn’t get any simpler folks! This is their industry and they were just nice enough to build a few plants here to keep things fair. They can take ‘em away again if they want too just like the Avro Arrow story. They let us build the CF100 because it wasn’t deemed to be a competitor with the market space the US intended to occupy, but when the Arrow started test flights Canada was told the US would not buy any and would introduce cheaper competitors shortly (ie. Was told to cancel it.) How else to explain why they cut up the 5 flying birds and the 6th with the new engine just weeks from test flights? Nobody cuts up a flying bird even when a program gets cancelled. They moth ball it. But it turns out the US planes were to be inferior for many years so the program needed to be destroyed. It was the end of the aviation industry in Canada for many years.


So, if the US bails, we bail. They will and can pull the plug otherwise.

#33 nonplused on 12.21.08 at 10:10 pm

I still like my proposed bailout plan better. Give me the money and I’ll go buy a new Ford!

#34 nonplused on 12.21.08 at 10:10 pm

Many people think the 0% interest rate is going to help. I say it will make matters worse. Artificially lowering the rate of return of capital makes the existing capital base uncompetitive with new capital. It’s why our industry got hollowed out. Let me explain: You build TV’s. Your employees get paid $15/hour making up 30% of the cost and you have capital plant investments that were made borrowing at 7%.

Next thing you know the Fed pushes the rate to 4%. It doesn’t impact you much but it means Sony can now borrow money for 3% less than you did to build a plant in China, where they can also pay $1/hour. You go broke and close down. Or, you also borrow at 4% and build a new plant in China and lay off all your American workers.

If rates were to go up, say to 10%, it actually makes your plant and high labour costs more competitive, because now Sony has to raise capital at say 10% and may not be able to recover the additional interest costs from the cheap labour.

Making excess capital available at bargin rates eventually causes over investment and the collapse of capital previously deployed at higher rates.

This new zero bound for interest rates means the final nail in the coffin for all remaining US and Canadian production of anything. Now, companies can borrow essentially for free to build brand new plants in low wage, low regulation countries.

#35 squidly77 on 12.21.08 at 10:21 pm

when a poor man steals a chicken to feed his hungry family we throw him in jail
when a CEO or banker steal billions we give them money and they give themselves a large monetary bonus

up is now down and the sky is orange

people will start to protest this theft
hopefully through civil disobedience and not through violence
the masses are not controllable..just saying

#36 JET on 12.21.08 at 10:24 pm

Added more charts for those interested:

#37 Landlords in TO on 12.21.08 at 11:28 pm

“Landlords will be screwed” and “there’s a coming renters’ market is what I read here”…

Elsewhere, I’m reading that Toronto’s coming due for a severe rental crunch (albeit I read that in the Toronto Star — not the most reliable newspaper) and that we have low vacancy rates.

With such low vacancy rates in TO, when we’re talking renters’ market here (parallel to the buyers’ market) — are we talking about commercial space or residential? Across Canada or just in specific centres?

#38 Derrin on 12.21.08 at 11:48 pm


“The sky is orange”……. when the sun is setting and the sun is setting on Real Estate in the four major markets in Canada. You won’t see much for awhile. But as the sun sets it also rises so you may want to cheer on the recovery so people in the world can feed their children. Hope is good, you should try a cup full.


By the way GM and Chrysler have been in the muck for awhile. It is not so much the product they are selling but the lack of competiveness due to the way the company has to operate in North America. They have seen success in other markets.
I agree with Squidly77 that we should not be bailing them out but we don’t need chaos. So, throw them a life line and if they can’t make it then at least it will be a slow sink. Unions and their members should start to think about their way out. Like going back to the books and finding other ways to be employed. Auto workers could see this coming a long time ago. When any other Canadian is looking down the pipe and sees that the company he/she is working for may sink, they start to look for a new job or hit the books to start their next new career. In Canada jobs are not for life…….we aren’t “Back in the U.S.S.R”. ooooooh ya.

#39 pjwlk on 12.22.08 at 12:12 am

Driving across Hwy#5 in the Flamborough area (Ontario) I noticed a builder’s sign with huge lettering saying “$30,000 cash back” when buying a new home! Imagine that?

Last week I noticed that the two town homes, one on either side of the one my daugther just moved into last month still aren’t occupied even though they now have occupancy permits. She explained to me that they were both owned by R/E agents who are trying to flip’em… without any luck I might add…

#40 Tober on 12.22.08 at 1:00 am

Been lurking a long time- first post. Sold my house in July; bought and read Greater Fool and it told me that I was seeing what I was seeing and I went ahead and now I’m renting wondering what’s next. Would love to own my place eventually, but I’m dug it for a wait.

I’ve read this wonderful blog and lots of other material and curiously I keep coming back to one short word: TRUST.

It’s gone. When it comes back, we can have what everybody’s been promised. It’s a pretty bad indicator when you sign a contract with a tradesman, as an example, to build you a deck or fix a roof and as you are signing you don’t actually expect him or her to fulfill the obligation set out. We are totally interdependent and yet not many of us believe that we can count on the other for what they offer. It’s pitiful and I don’t know what I’m supposed to tell my children. I’m troubled telling my pre-teen that this is the way things are supposed to work and this is how they actually do. Everything has at least two levels: official and unofficial. All of this wraps up into Ponzi Schemes, Lobbyists, and what we have to say and what we are leaving out.

How does this tie in to today’s message? Much as I want to, I don’t believe that most of the initiatives undertaken around the world are going to work. I don’t really think I’m alone in that belief. Seems to me that they haven’t got the lessons from this. It’s pretty clear who will survive and who won’t. This will give a whole new meaning to the phrase “Jobless recovery” in a few years.

And don’t get me wrong, there’s a hell of a lot of opportunity out there if you haven’t been thrown under the bus already. When the first glimmers of trust come back then all the capital sitting on the sidelines will stream back in and it will be business as usual. Except for the carnage. Don’t be in the carnage.

#41 Toronto Market Watcher on 12.22.08 at 2:21 am

#5 Keith in Calgary….

Not that I disagree re: your point on a “change in consumer attitudes”, or to paraphrase all of us prudent consumers are watching our pennies in these challenging times, but just to set the record straight, “Prosecco” is not champagne and not from France. It is indeed a wonderful sparkling wine from the Veneto in Italy. Much simpler, fruitier and much less complex in style and very unique but it is certainly not in the class of champagne, which is only produced in France. I’m not knocking Prosecco, I’m of Italian heritage, just to let you know, but you are comparing apples to bananas, hence the reason for the big price difference you refer to …. Given the economic storm clouds on the horizon, I’m not sure I’ll be sipping too much champagne for a while.

#42 David on 12.22.08 at 2:56 am

With respect to monetary policy, I get the distinct impression that the bankers and politicians are now acting like rookie doctors having their first sharp blade experience. Liquidity the bankers argue is the problem, not debt, not badly priced risks, not assets bubbles and not a negative savings rate. The zero risk free interest rate on T Bills might squeeze some funds out of risk free fixed income investments and into activities that pay a better rate of return. Fear of asset price deflation rather than any attempt to actually fix the problem seems to be the motivation for the central bank and the pols. Zero yields are unlikely to lead to a higher savings rate and are unlikely to fix matters like insolvency and default. There are no countries that have ever thoroughly debased the purchasing power of their currency on the path to prosperity.

#43 Bob on 12.22.08 at 5:09 am

#27 Ian,

damm you are one big idiot.

#44 Mike B on 12.22.08 at 8:12 am

27 Ian Are you referring to GW Bush… The guy who bankrupted every company he ever ran, save for the Texas Rangers. Perhaps “ran” is too strong a term. Plus his Daddy gave him all the companies. He never built one himself. Top aids being good business types… Like Hank Paulson who used to work for Goldman Saachs… Odd how Goldman managed to stay afloat in all of this mess… convert themselves to a standard bank on a weekend, little press on that. Ian…. Maybe you refer to Ben Bernanke, theoretical economist, bringing interest rates so close to zero that they might as well be zero. Japan tried that for a decade with little impact …Maybe you refer to Alan Greenspan, knighted for his efforts in ever increasing the money power of the Fed, private bankers primary amongst them the Rothchilds. If ever there was a ground zero for sub prime it was on Greenspans low interest rate policy… So really Ian unless you refer to Dick Cheney , I am really not sure what “business minds” you refer to.

#45 JO on 12.22.08 at 10:41 am

Gonzo – your comments on hyper inflation and deflation are not accurate. I suggest you get some info on both from credible sources since the decision to convert capital instead of saving it will be the one that decides who survives and who gets destroyed.

Is a net decrease/contraction in money supply and credit. Its symptom is falling prices. Right now, amount of printing is not enough to overcome the amount of debt being paid back or defaulted on, so deflation is winning out. Banks are hoarding the bailout money and also borrowing from the Fed to buy Treasuries. If and when banks start lending again (unemployment will have to stop increasing for a few months probably before this occurs) or the housing market and economy start to improve, all the printing will probably show up then as hyper inflation.

In deflation, people need to stay out of debt and in cash as well as some bullion. Assets are declining and cash as well as gold in some cases are the only assets that gain purchasing power. So deflation actually rewards savers and people that have done the right thing, while punishing anyone with large debts and speculators. That is why the Fed and all CB hate deflation. It is their kryptonite. Deflation threatens the debt, based, fiat money, fractional reserve Ponzi scheme that is the basis of the world economy. I should point out that risign interest rates are normally associated with high inflation, but can also actually occur in deflation. When large investors finally lose confidence in the Fed or Gov’t, they will likely sell gov’t bonds en masse and bond prices will collapse, raising interest rates. This may happen and if it does, my best guess is 2011-2012 or so.

Hyper Inflation
When hyper inflation hits, and no one knows when although signs will likely emerge beforehand, that is the time to get out of all cash. ask any Russian, Argentinian, Brazlilian, Icelander, or Serbian what happens to the “cost” of everything. You’d go to the restaurant for a coffee at 10AM and come back at 6PM and the coffee was triple the “cost”. Most items in Argentina doubled and tripled right after the devaluation and ensuing hyper inflation in 2001.

While the CAD should theoretically be relatively worth more as we are a commodity based economy, it may also hit the 50’s or low 60’s if the deflation persists until 2010-2011 which is entirely possible and likely before hyperinflation comes. We will likely have brief, weak recoveries as a result of this stimulus and bailout nonsense which may cause a temporary increase in inflation in Q1-Q3 09- but that is not certain either.After each weak recovery, deflation will remain the main event. Hyperinflation is really the government confiscating / stealing your savings. A massive temporary tax that takes your savings away, regardless if you have 1M in the bank or $ 1. As you can see, hyper inflation actually benefits people with large debts as you repay the debt in dollars that are cheaper.

So i would recommend anyone keep focussing on debt reduction and build up savings. Consider holding a reasonable amount in bullion, and keep an eye out on how things are progressing. Do not rely on the mainstream media. There are plenty of respectable analysts who run economic blogs that do not work for large FI / or government. (Mish’s Global / Calculated Risk / Naked Capitalism /Elliott Wave International).

Just food for thought.

#46 Diabolo on 12.22.08 at 11:23 am

squidly77 said
“people will start to protest this theft
hopefully through civil disobedience and not through violence
the masses are not controllable..just saying”

Re-incarnation of Gandhi ?? :)

#47 Bobby on 12.22.08 at 11:25 am

Good article about deflation

Imagine how many baby boomers have been
caught with large debt on plummeting assets
and have no cash reserves.
It’s an entire generation that is being slaughtered
A scary time in our history

#48 real estate expert on 12.22.08 at 11:37 am

“”OTTAWA — The manufacturing-based provinces of Ontario and Quebec will be hardest hit in the current recession, while Saskatchewan will outperform the rest of the country thanks to its well-diversified mix of natural resources, the Canadian Chamber of Commerce says.

blah blah blah

It said Ontario and Quebec in particular will be hard hit due to their export-oriented and manufacturing-intensive economies.

“The economies of both provinces are expected to contract in 2009. The weaker loonie will provide some solace but making up for the significant reduction in U.S. demand will be difficult, if not impossible,” the chamber says in its report.

British Columbia and Alberta are expected to see modest growth, followed by Manitoba.

The strongest growth is expected in Saskatchewan next year, due to its well-diversified mix of natural resources, from potash to oil and gas.””

What have I been repeating over and over?…Ontario is in real tough…overpopulated with a manufacturing base.

…and where does all that Saskatchewan/Alberta & BC potash, oil and gas, mineral, forestry and wheat travel thru???????

dohhh, Vancouver

Have I ever mentioned Vancouver will become the new financial/trading capital of North America…certainly Canada’s?

#49 David on 12.22.08 at 12:24 pm

JO, please explain how a zero interest rate policy will encourage savings.
Financial institutions would not be hoarding funds if there were willing depositors pure and simple. Credit would be easier if the risk of default for the banks was lower.
To do some simple arithmetic, $1 deposit equals about $10 of bank credit extended to consumers or business.
Would you or any other sane individual invest at the risk free rate for T Bills if it took you 5000 thousand years to double your money or that consumer price inflation would guarantee a negative return on your money?

#50 Kash is King on 12.22.08 at 12:25 pm

More opinions from Karl Denninger:


#51 Darryl on 12.22.08 at 12:36 pm

real estate expert #48

Obviously a Van RE agent.
Pump n dump eh?

#52 Marcus Aurelius on 12.22.08 at 12:56 pm

Porter exhibits all of the Darwinian characteristics of Genus Pecuniae BankWhoribus (to which B. Tal, D. Drummond, A. Shenfeld, S. Cooper and other bank employees belong). This genus is distinguished by the crenellated, puckered, anus-like shape to the mouth.

What happens if your reserve chute fails? That’s kind of where these ‘stimulus packages’ are taking us. Now imagine you are free-falling with a $600K free weight called an “I listened to my real estate agent, 2006-8, and got this mortgage” tied to your ankle, thanks to purchasing a grossly -overvalued detached central Toronto house. (Darwinian theory would indicate that these last types will not be given the opportunity to procreate).

#53 Keith in Calgary on 12.22.08 at 12:58 pm

#41 Toronto market watcher……

OK…….I didn’t know that……but it looks and tastes the same IMHO and that is a compliment to the Italians.

#54 The First Rick on 12.22.08 at 2:32 pm

#48 real estate expert on 12.22.08 at 11:37
Have I ever mentioned Vancouver will become the new financial/trading capital of North America…certainly Canada’s?
Yeah, you repeat it ad naseam and most of us continue to think you are an idiot. So what exactly is your point?

#55 TorontoBull on 12.22.08 at 3:16 pm

expect lower housing sales across Canada because of the snow storms… :)

#56 dekethegeek on 12.22.08 at 3:38 pm

Ahhhh yes #48 ” Real Turd Expert continues with his blathering predictions about vancouver being the center of the financial universe. Not in this century my myopic friend.
The next time you drive across the Second Narrows bridge from North Van. check out the empty docks on the right hand side. When times are booming they’re full of lumber. They have nothing but seagulls and snow drifts these days.
As you so correctly pointed out, Vancouver is a Port city ( much smaller than Los Angeles or San Francisco. Cities that have a far greater chance of inheriting the Financial Center Status only if a Rogue Comet strikes the Eastern seaboard of the US and the tsunami wipes out London 8 hours later. Perhaps we can name the comet ” Vancouver Realturd” in your honour! ). A port city that millions of tons of raw material pours through daily. Nothing more, nothing less.( please note that several major container companies have stopped shipping through Vancouver and moved to Seattle, San Fran. and L.A.because of the numerous strikes/thefts/non productivity that have occurred on an annoyingly regular basis. Gee Big Business doesnt like unions, who woulda thunk it?)
Financial center ? Not a chance. Smoke some more of that Hydroponic Bud and dream on !

#57 Diabolo on 12.22.08 at 3:39 pm

real estate expert #48

Easy Credit availibility jacked up prices in Vancouver along with hypes on being the Vancouver being a retirement community , hype on Olympics blah blah …
Now you are trying the financial capital garbage…

Give real numbers to prove your point…. don’t pull stuff from your ass.

squidly77 is right… Real estate agents are Predators (Hyenas if I may)

#58 Makeorbreak on 12.22.08 at 5:38 pm

JO: “Hyperinflation is really the government confiscating / stealing your savings. A massive temporary tax that takes your savings away, regardless if you have 1M in the bank or $ 1. As you can see, hyper inflation actually benefits people with large debts as you repay the debt in dollars that are cheaper.”
But don’t you think the interest rate on savings won’t go up too?

#59 islander on 12.22.08 at 5:56 pm

Squiggly is mentally ill, is what he/she/it is.
And so is anyone who thinks its a realtor’s fault that you bought a home you couldn’t afford.
Stop being such whiny babies.

#60 prairiegopher on 12.22.08 at 6:27 pm

In one of your previous posts you said to”forget Florida”. Do you see it as a bad investment due to crime, climate or???? Can you elaborate. Thanks.

#61 Makeorbreak on 12.22.08 at 6:29 pm


#62 The First Rick on 12.22.08 at 6:44 pm

#59 islander on 12.22.08 at 5:56 pm Squiggly is mentally ill, is what he/she/it is.
And so is anyone who thinks its a realtor’s fault that you bought a home you couldn’t afford.
Stop being such whiny babies.
Yeah, but at least he / she / it has a concious, a job, friends and doesn’t smell like a load of excrement. What do you have to say for yourself, Realturd? Just hoping to one day, have the same respect as lawyers? LOL!!!!!!!!!!!

#63 Derrin on 12.22.08 at 6:57 pm

Real Estate Expert

Oil and gas flow through pipelines to our southern neighbor. You should get a map and see the pipelines that go from the north and down to our American neighbors. That has nothing to do with Asia and Vancouver ports.
Financial centers have been created where it is easy to move money. Less red tape. For example Hong Kong.

I would like to know if that head office has opened up in Vancouver yet or are you converting your Yaletown 400sq foot apartment into a virtual office for HSBC…or some other large institution because that’s what exists in Vancouver.
Cheers, funny stuff.

#64 real estate expert on 12.22.08 at 7:29 pm

“”issuing promises to pay on demand in excess of the amount of the goods on hand is simply fraud, and should be so considered by the legal system. For this means that a bank issues “fake” warehouse receipts — warehouse receipts, for example, for ounces of gold that do not actually exist in the vaults. This is legalized counterfeiting; this is the creation of money without the necessity of production, to compete for resources against those who have produced. In short, I believe that fractional-reserve banking is disastrous both for the morality and for the fundamental bases and institutions of the market economy…. ””

Murray N. Rothbard


“”Vancouver will become the next financial/trade capital for North America, certainly for Canada.””

real estate expert

#65 re-aligned on 12.22.08 at 7:40 pm

Please don’t feed the troll (RE Expert). Facts and reason are not his thing but your reactions are.

#66 squidly77 on 12.22.08 at 7:46 pm

when you start calling me names i know i have gotten under your skin and you have already lost
honestly do you really think that you are a professional just by self proclaiming it
the name calling used by the real- tots here and other blogs should serve as an embarrassment to you

#67 dd on 12.22.08 at 8:09 pm

#48 real estate expert,

Great BC Bud Expert …

#68 Rob in Madrid on 12.26.08 at 5:20 pm

interesting take on the recession by msn money