Going coastal


In the space of a week I’ve been on both coasts, talking to people about money. You might think the citizens of Vancouver and Halifax would be see the world through different lenses, but I tell you that’s not the case.

Monday night in a few hundred people showed up as the lights of Dartmouth danced off the water outside the big hotel room windows. (Below were berthed three Canadian warships which head out on distant duty Tuesday morning.) The average house price here may be $400,000 less than in Van, but the concern is no less real. The Atlantic economy has been buffeted by falling oil prices, just like Calgary, by a devastated forestry sector, like BC, and an American chill, like Ontario.

The crowd was quiet and stoic while I detailed how we got into this mess, and what I think is likely to come next. House prices, gold, stocks, bonds – obviously this is a time of generational danger but also of significant opportunity. The winners will be those who can see both.

The questions were broad, covering the future of multi-unit rental properties (good), the prospect of hyper-inflation in a couple of years (non-existent), the stability of our banks (good enough) and whether the Boomers will finish off the stock market by sucking out their money (we don’t care, kid). And the business editor of the daily paper was there, asking me if I personally am prepared for a depression should it occur.

So I told him about my generator, my Bad Day Box and the cash. However, I may have neglected to mention the squirrel pens.

Only one thing matters this week, BTW. Obama’s mortgage plan on Wednesday. Watch market reaction carefully. This is the big one.


#1 dd on 02.16.09 at 10:03 pm

“Obama’s mortgage plan on Wednesday. Watch market reaction carefully. This is the big one.”

Unless there is consessions for the US homeower … there will no recovery for a decade.

#2 Da HK Kid on 02.16.09 at 10:30 pm

Yes, agree! But what concessions can stop the free fall and spiral of all other AFTER THE SUBPRIME such as Prime, CDO’s, Alt A Option A, and commercial from dumping.

As home values drop you get to a level that sucks in anyone with clean mortgages. 0% down toast, 5% down toast, 10% downs toast. When you hit 15% – 25% equity in it’s unstoppable.

Note USD index just jumped almost to the level in Nov 08 when the stuff hit the fan.

#3 squidly77 on 02.16.09 at 10:40 pm

two identical houses sold to two different buyers
buyer A house price $300,000 salary $50,000
buyer B house price $300,000 salary $125,000

buyer A is greedy and he wants more home than he can afford uses a 0 down sub-crime mortgage product and eventually falls behind on his mortgage payment

buyer B buys what he needs and puts 20% down and takes out a 25yr traditional mortgage and has no problem making his payments

obamas plan is to reduce the principle amount of buyer A mortgage while neglecting buyer B

a death nail to US banks and a political blunder of historic proportions in the makings

#4 nonplused on 02.16.09 at 10:41 pm

I don’t think the Obama mortgage rescue plan-orama can possibly work. The problem with any kind of bailout of this nature, directed at only a portion of the population, is that the question on everyone else’s minds immediately becomes “how do I qualify for a mortgage work out?” It’s a race to the bottom.

That and the obvious inequity in the system. Why does Joe Behind on His Payments get $100,000 loped off his mortgage and a 4.5% 30 year rate while his neighbor Sally Current gets nothing? It can’t be done without serious side effects of the socially disturbing kind.

The supposed “equity” side to it, where in return for the bailout you have to pay the government back out of equity in the future, does 2 things. First, it makes all the participants in the system renters from the government, and second, it assumes that prices must go back up. Way back up! If they don’t then look for mortgage rescue 2 – the sequel, followed by 3, 4 5, and 6. It’ll be like a Star Wars saga, and just as far fetched. So far they have the poor scripting and over reliance on special effects part down.

Anything the government tries to do to help the market will only make matters worse. That is the take away lesson of the last 50 years of interventionism. As I have said before, the economy is a very complex system. You can’t just start unplugging things and plugging them in somewhere else and hope it’s all going to be ok.

And as I said about the auto bailout, “Why don’t they give me $40,000, and I’ll go buy a new truck!” That’s the only kind of bailout that could be fair to everybody. So if they want to throw another $400,000 at me I’ll go buy a house or 2 too! Maybe one for each of the kids!

It just can’t work. That’s why they are having such a hard time figuring it out. It can’t be figured out.

#5 Investx on 02.16.09 at 11:22 pm

Real Estate Recovery not too far away?

From the Globe&Mail

“Late last week, National Bank noted that the U.S. housing market – the rotten heart of the global economic malaise – appears to be nearing a nadir. Median household income is coming in line with the median price of an existing home, a key factor for recovery, and the inventory of unsold homes and condos is falling, another good sign.

In recessions, home sales usually hit bottom well before unemployment stops rising. So while more job losses will occur, National Bank said home sales could bounce back by as much as 10 per cent.”


#6 First stone on 02.16.09 at 11:26 pm

Garth, are you Tom Vu in disguise?

#7 POL-CAN on 02.16.09 at 11:34 pm

Do not forget about the auto bailout hearing tomrrow.
This could get ugly fast….

#8 jartann on 02.16.09 at 11:39 pm

Predictions, predictions, and more predictions.

So how do we know that it will take ten years for a recovery? Why not 8.5 years? Or 250 years?

People who subscribe to doom and gloom theories make the same mistake every time-which is why the doom and gloom they forsee never quite happens (we are in year 10 of the widely predicted 12 years of chaos post Y2K). Here is how it works:

1. They see a problem

2. They see that the problem is getting worse.

3. They see that if the problem keeps getting worse, the consequences will be horrific, there will be an apocolypse, there will be some kind of doom (global warming, cooling, financial meltdown, floods, droughts, no food, no resources, etc).

4. They have no idea how the problem will get fixed.

5. No one they know has any idea how the problem will get fixed and they don’t believe any politician knows either (they are right about that).

6. The current trend cannot be stopped and can be extrapolated to produce the predicted doom.

Therefore: we are doomed.

What people miss is that human beings and institutions adapt. They change, they modify their behavior. In fact, the one thing that can prevent this adaptation is lunatic policies from politicians like Ozero in the USA. Time and again people have adapted, or technology has developed, or institutions have changed to change otherwise negative trends.

Recall last September. What were we told? That the $700 Billion financial rescue bill had to pass NOW or all was lost. Yet, half of it has not been spent, and much of what has been spent has been used for reasons other than those intended.

Predictions are just guesses-assumptions are made about future outcomes based on current trends uninterrupted. People need to be informed and adapt to the changed conditions. This recession, in terms of employment, is still nothing like even the early 1980’s. Plenty of mistakes have been made, and the biggest one is to believe we can spend our way to long term prosperity-which we cannot. This downturn is probably the first stage of an adaptation to a new reality and if so, this may be a good thing.

I have heard about the “no food, no electricity” scenario too many times before. Just not plausible.

#9 Apocalypse Now on 02.16.09 at 11:45 pm

First of all I doubt that Obama had anything to do with the crafting of this ‘mortgage’ plan but he will duly spout the platitudes that he will be required to spew forth about helping the American people etc. etc. blah blah blah.

The only thing big about this day will be how much more of the future and present taxpayers money will be siphoned off to the utterly corrupt and conscienceless cretans on Wall Street that Obama and the rest of the Washington gang really work for. Don’t hold your breath; if the previous administration could not help a few thousand victims of Katrina save their homes after years of ‘helping’ them neither will the present administration save any statistically significant number of home owners in trouble that number in the millions. The market is as far above the eventual bottom as Mount Everest is above sea level.

#10 Apocalypse Now on 02.16.09 at 11:48 pm

Garth, I’m sure you’ll be changing your tune as to the stability of our banks in the not too distant future, perhaps as soon as this fall.

#11 Jeremy on 02.16.09 at 11:50 pm

ah thats the town i grew up in. my parents left it in 2006 to be apart of the boom in calgary, my father always thought halifax was never forward thinking enough. they bought there 3br duplex in 2000 for 83000 and sold it for 146000 in 2005, i wonder what its worth now. i wish i could get a house at that price here in victoria or even 2x that price.

#12 colette on 02.17.09 at 12:08 am

well I just returned from my own trip to the lovely Bulkley valley for my son’s wedding. And the event really brought home what it was all about.

Friends gathered from near and far. (even Norway) Friends, neighbours and relatives pitched in with cooking, setting up, cleaning up. The local favourite band came and played and partied till the sun came up.

Everywhere was smiley happy people. They might not be millionaires but they are working, loving, and getting on with life.

There must have been something in the water for there was pregnant women and babies everywhere. And when we get right down to it…it is the sense of community and love that is going to pull us through this.

And I suggest that a good way to make the going through it all is to find out what is really important…and then get all your friends together and commune and have a little fun.

we might need the fortifying for later…

#13 Anton on 02.17.09 at 12:29 am

You don’t need a rifle or a squirrel pen to meet all your squirrel needs.

#14 john on 02.17.09 at 12:39 am

I think Obama’s gas plan is scheduled to be announced on Friday. No one’s going to have to worry about paying their mortgage or buying their gas in the US pretty soon. Change is here.

#15 Opportunity on 02.17.09 at 1:22 am

Who cares what happens in the US. That country is already in a free fall. The advantage we have is that those who panic with the US will lose. I’m looking for the opportunity to capitalize.

A house in Vancouver is $900,000. The same in Ontario is $300,000. What an opportunity.

#16 kc on 02.17.09 at 2:36 am

sorry for the length Garth (if you edit or don’t post no worries)

“Only one thing matters this week, BTW. Obama’s mortgage plan on Wednesday. Watch market reaction carefully. This is the big one.”

Garth you are only touching the tip of the pin point to state: “This is the big one”

If you are reading this and don’t like to read doom and gloom, my advice is skip my post, however, for those who are interested: read at your own will.

Summerizing 3 major forces at play here are: European concerns, Canadian Banks, and the rapid decay of global conditions. IE 50M unemployed world wide in job losses by the end of ’09 (est).

Eastern Europe is heading straight into Bankruptcy, along with UK banks from over exposures and imploding leverage losses. Risk of catastrophic civil unrest in eastern Europe sits at high levels from unemployed destitute people and countries sabre ratteling. (read following links) The IMF is warning that they will not be able to “bail out” any of these countries for the losses are at too grave conditions.

When examining the situation in US DEBT to GDP anyone just has to ask “how much more can they take”? Stimulating “dead banks” to increase and renew the credit party isn’t going to work and can the US taxpayer afford to take on the mass amounts of new capital that is going to be needed to shore up the banks again in 6-9 months if and when 1 of the 3 (too big to fail) fully implodes > ?? They are dealing with larger more troubling concerns about public money not being used to help the flat broke today and lets not forget the millions of forclosures. And remember the biggest problem is who will be buying all this debt paper?? Japan is tanking hard, as is the rest of Asia. If Asia or what ever country can’t buy, what is proposed is nuts, the treasury board is going to buy bonds using taxpayers money to turn around and give out stimulus. This is a nice read directed at Obama’s (will it work) idea. Read it and ask yourself is Canada any different??

Obama Economic Stimulus: Truth and Consquences

Our leaders want us to believe that Canadian banks are tougher than the rest of the world and all the world wishes they had our problems… are these statements really true? Or are we just 6 months behind the curve and joining the party late>? My guess is we are just late. Take into account our population on a scale compared to the rest of the world’s countries population. one example England: 60 Million to our 30 Million. Is it fair to say our banking system is actually on par with theirs if and when ours start to unravel? Compare our leverage ratios:

“Carney used a rather crude measure to illustrate his point. Major Canadian banks had an average assets-to-capital ratio, he said, of 18:1. The comparable figure for US investment banks was more than 25:1. European banks had a ratio of 30:1 and some major global banks had asset-to-capital ratios of more than 40:1.”


“Canadian banks have an asset-to-capital ratio, also known as the leverage ratio, of about 20-to-1. Some of the big American and European banks have ratios twice as high.”


(ratio means 20-to-1, for every dollar in the vault the bank has lent out 20)

We are half the population with 3/4 the leverage, how much capital has been withdrawn from spooked investors? not to mention cash injections (80B) How much of our banks invested off shore, or off shore investors in Canada? When our banking sector starts to be hit with the full gale of the bankrupted borrowers and Don’t forget Commercial property vacancies, (drive around your town, city. how many vacant lots, buildings, and half built condos do you see? how many for lease signs do you see?) remember someone is holding cash and equities on that lot. Many feel that what is happening overseas (UK) can’t happen here, however, some may feel different for we are in no different shape, we just started later.

Canadian banks, many question in here the truth of where our banking sector sits in the whole picture world wide. Stumbling around the net I was able to find this gem of a site that breaks down bank after bank and shows investors what/who is doing. 2 things stood out and needed to be shown here, and when you take into account what is going on world wide it makes for a good arguement that maybe there is good reason for alarm bells to ring. for those who care to follow through and read more, link provided. (scroll down to article)

2) Derivative Exposures-
“…However, the failure of a significant global financial institution posses significant risks, as was the case with Lehman”

3) Off-balance Sheet Exposures-
“To date the commercial paper market has continued to function reasonably well, although at materially wider spreads with less liquidity generally. However, if this industry were to seize up, banks could find their exposures increasing rapidly as the conduits drawn down on liquidity facilities that effectively transfer risk to the banks.”

Friday, January 30, 2009
Banks: Risks and Exposures

Bankrupt Britain: Europe Blames America While U.K Warned of Bankruptcy

Eastern European Economies About to Explode in a Chain Reaction of Debt Defaults

#17 North Vancouver Citizen Jr. on 02.17.09 at 6:56 am

“”Ontario, which accounts for about half the country’s manufacturing sales, the decline was 9.2 per cent. Sales of auto parts, the blood of the fading Ontario manufacturing economy, fell 17.6 per cent “as parts manufacturers struggled with a sharply reduced demand from the auto assembly plants,” Statistics Canada said.

Mr. Pinsonneault nevertheless believes that a recovery should emerge in the second half of the year, around the same time National Bank Financial expects the long U.S.
recession to end.

In recessions, home sales usually hit bottom well before unemployment stops rising. So while more job losses will occur, National Bank said home sales could bounce back by as much as 10 per cent.

Lower interest rates, meanwhile, could be in the offing. In December, the Bank of Canada slashed its benchmark rate to a 50-year low of 1 per cent from 4.5 per cent. On Monday, Scotia Capital economists said the central bank may axe the current figure in half to 0.5 per cent on March 3, when it next deliberates on interest rates.

© Copyright The Globe and Mail

Loonie down to 79.19

…The birth of the “Amero” currency and North American Protectionism is just around the corner.

The holy trinity of London (Banking), Vatican (Religion) and Washington DC (Military) is about to change to……

Vancouver Proper, BC Canada…the next Financial/Trade/Leisure Capital of North America.

…You heard it here first…

There will be no Amero. — Garth

#18 David Bakody on 02.17.09 at 7:14 am

As previously mentioned I attended the meeting and it evident all ears were wide open. Doom and gloom was not the message. What happened and What to do was. Canadians by their natural nature and heritage always did prepare for long cold winters ….. perhaps we should do so again. Not sure about y’all but I grew up on the handle of a grinder and cleaning bottles in my Mother’s kitchen. Here on our local CBC noon show it is not uncommon to here many stories of how to prepare preserves. Yes there are new ration packs and electric generators …. hello it’s called progress!

On another note nice to see a picture of HMC Dockyard and D-200 … what is not shown is sad state our once proud Navy is in ….. recruitment is down and releases are up and moral is in the tank ….. the Navy is at 67% of it’s required technical strength …. only 14 tech’s were hired last year as Harper & Co scramble to fill Afghanistan billets and try to fund the costly conflict. These ships sail with reduced crews and most stay tied alongside for months … several ships have been laid up and out West things are worst. Training is at standstill and many courses have been farmed out to community colleges …. and it goes down hill from there. It seems like yesterday Harper & Co were spouting off about the NWP, the Artic new tankers a larger military and 40 year mortgages! …… it’s all gone south …. and that is the doom and gloom .

#19 grandeprairiegirl on 02.17.09 at 7:18 am

There will be no Amero – Garth.

I’d really like to believe that. But how can you be so sure??
A lot of events seem to be pointing in that direction.
I believe the eventual goals are a one world currency, one world military, one world religion.

#20 Herb on 02.17.09 at 7:58 am

David Bakody (#18),

for old times sake, what are those boom-thingies around those naval vessels – Canada’s latest anti-submarine defences?

#21 Shawn on 02.17.09 at 7:59 am

Garth glad to hear you acknowledge the possibility of opportunity “obviously this is a time of generational danger but also of significant opportunity”.

No doubt the crowd in the east has similar views, however, the Maritimers and, Newfoundlanders are a little more hardened and used to hardship than in other regions of the country.

One of the bloggers here posted an article yesterday on the IMF and its role in the international bailout of Euro nations. I wa quite alarmed to see the IMF reserves are in the low billions ($200 billion) that was a surprise to me. It is barely worth a quarter of any USA bailout recently legislated.


It also concerns me to see the IMF may have to address new options to deal with a run on their account ..interesting times.

#22 pbrasseur on 02.17.09 at 8:11 am

@ jartann (#8)

You bring a good point, the world is not static and it is true that people do adapt, they scramble to do so. That’s especially true in a dynamic economy like the US, freer than most, based on innovation, where people change job every two years compared to every 12 years in Germany, a far more static and rigid environment (as is Japan). This makes a huge difference. For example it is mostly why a Japan like scenario is so unlikely in the US; Japan and the US are light years apart when it come to dynamism and adaptability, those two countries have also VERY different attitude and mentality in the face of hardship, it is not knowing Americans very well to think that there are just going to passively watch as their world crumbles into deflation.

In fact we can see the US economy adapting very quickly right now, right before our eyes. That’s what all those foreclosures are about, they’re about people (and the whole society) getting out of the jam of negative equity. Fast and furious, and of course this brings immense stress to the financial system, all over the world, but it too will survive.

As for Garth I believe he’s mostly right and I listen when he talks about real-estate, I appreciate that not many people have seen the problem (and its magnitude) as clearly he has. He loses me when he gets into things like macro-economic and/or climate change though, there I believe he reaches is own level of incompetence, as do most (I guess this summarizes my opinion about his latest book).

#23 ThumbsUp on 02.17.09 at 8:16 am

If you look at the US as an Enterprise, it is no different than GM, only x times bigger.

#24 Al on 02.17.09 at 8:40 am

#8 Jartann,

You made some good points, but you skipped the first half of the issue. You are correct about some doom and gloomers projecting trends too far into the future, but the perma bulls have the same failing. I’d dare say they’re even worse. And let’s face it, most of us want to believe things will continue to get better and better (maybe less so around here.) It’s this optimistic projection that encourages foolish behaviour and gets us into trouble.

Taking on excessive debt to bid up asset prices (housing/equities/commodities/whatever) is like drinking alcohol. It feels good for the first little while and seems like a great idea. You’re enjoying your profits or buzz. As you continue, you start to get the feeling something is wrong but it’s hard to stop because you’re drunk on greed or booze. Eventually you crash, as do the markets. Next up is the hangover. As you pointed out there doesn’t seem to be a way to fix it, and that’s because there isn’t. The perma bull will predict they won’t get a hangover just before passing out, while the doom and gloomer will swear the hangover will kill them. It’s unfortunate that in economics we all get a hangover whether we drink the kool aid or not.

#25 apocalypse now on 02.17.09 at 8:50 am

Well said #19 grandeprairiegirl

Garth: NEVER SAY NEVER, the probability of an Amero at this point is low but not zero, so unless your are God you cannot say with 100% certainty that there will be no Amero. The real question inquiring minds should ask is whether this financial crisis (too mild a word) is accidental or planned. If accidental then the likelihood of an Amero is small; if planned then it is very high. The reason I cannot bring myself to believe that it is accidental is because I have heard people shouting from the rooftops 10 years ago about the coming economic collapse; most of those predictions were not crystal ball gazing but rather based on reason, logic and sound economics. Sadly, none of these voices were on mainstream media or that of politicians. If non-mainstream intelligent people could see the collapse coming then I refuse to buy the idea that no one in banking, government or the myriad of think thanks that permeate the western world were unable to see the freight train coming. Greenspan could not have been so unwise as to not see the consequences of giving unemployed people 500K mortgages. The regulatory bodies including the SEC could not have been so ignorant to not foresee the abuses that accompany 40 to 1 leverage, and marketing as securities of worthless paper. The whole derivatives market would simply not exist unless all the higher ups were in collusion, that includes Wall Street, Bay Street, Washington, Ottawa, London and so on and so forth. Once again the real game of modern finance is to take from the middle class and give a little to the poor and the rest to the ultra wealthy. This is the real reason why the rich get richer, not accidental but by design. I have drawn it on paper and shown it to my friends the absurdity of the genesis of this crisis as explained by the mainstream media and powers that be, and they have no argument to refute my claims, yet they refuse to believe that the system is that corrupt. Corrupt it is, and that people will find out when our currencies are devalued and replaced by something like the Amero even if it is not called by that name.

Garth, although I can understand the difficulty you must face in addressing the conspiratorial nature of how things really work in our societies, yet I believe that the more things deteriorate the harder pressed you will be to maintain your intellectual honesty, and perhaps integrity without addressing this issue.

#26 Mike (authentic) on 02.17.09 at 8:59 am

There will be no Amero. — Garth

Hold that thought Garth…there seems to be some recent news stories on that.

Amero Could Result from Crisis
“The North American Currency — called the “Amero” in select circles — would effectively comingle the Canadian dollar, US dollar and Mexican peso.”

Opportunities and Dangers in Stimulus and Bailout Shockers!
“(the) key component of this multi-faceted Scheme is the replacement of the US Dollar with the “Amero” as the Council on Foreign Relations (CFR) consultant ”

Photos of the Amero coin

For me, I hope we don’t get an Amero. But Europe did get the Euro. If the US or Canadian dollar sinks too far in value vs the other, there might be a loud cry for it.

But in 2008, before the markets tanked, I thought the US dollar was going to be 70 cents to the CDN too…


#27 smwhite on 02.17.09 at 9:00 am

#17 North Vancouver Citizen Jr.

You forgot gang violence capital…

How much value added is there to the city from street violence? I mean, does that raise the value of the average home by what 5%, 10%?

Shhh… Don’t let the world know Vancouver’s dirty little secrets. At least a prairie or eastern winter will shoo the street urchins away for 3 months of the year.

#3 squidly77

I agree, to be fair to persons that lived within their means and used diligence, I think they will soon find out that all they can do is extend mortgages for troubled home owners, and give up the dream of propping them(homes) up tax dollars.

Like Mr. Peter Schiff has stated many a time, prices have to collapse so people can afford these home son their own, and not with exotic or creative financing.

Rewarding bad behavior seems to be the norm south of the border…

#28 Gord In Vancouver on 02.17.09 at 9:03 am

#3 squidly77

….buyer A is greedy and he wants more home than he can afford uses a 0 down sub-crime mortgage product and eventually falls behind on his mortgage payment

….obamas plan is to reduce the principle amount of buyer A mortgage while neglecting buyer B (responsible)

a death nail to US banks and a political blunder of historic proportions in the makings

Hopefully, Harper won’t bail out Canadians who can’t handle 40 year/ nothing down mortgages, which were issued between 2006 and 2008.

#29 PTDBD on 02.17.09 at 9:06 am

The Travelling Salvation Show

Another week, another plan.
Another Trillion.

#30 smwhite on 02.17.09 at 9:19 am

We’re already using the Amero for [email protected] sake… Its called the greenback, the worlds “reserve” currency.

And because of it, gold is up another $20.

Markets in Asia and Europe down 3% today, looks like it will be another winning day on Wall and Bay street…

#31 Samantha on 02.17.09 at 9:23 am

Yes, Wednesday should be interesting. Hmmm….wonder what rabbit will be pulled out of the hat this time?

That nasty little sub-prime debacle was only the appetizer for the main course, which are the adjustable rate mortgages.

For those who want to take a peek at the coming tsunami:


Bailouts have been a joke from the beginning. Everyone needs to take responsibility for this mess – consumers, corporate (banks included as they ARE a business), and government.

When greed (love of money) is replaced by self-sufficiency, realistic expectations and common sense, then maybe we’ll all find a better to way to live. But, the transition is going to hurt, so get prepared.

#32 David Bakody on 02.17.09 at 9:26 am

#20 Herb on 02.17.09 at 7:58 am

Glad you asked …… there are environmental oil-spill neck lasses …. should there be an accidental fuel oil or any other chemical that is used aboard ships (their are many) it can quickly be isolated and recovered. Canada was a leader in the oil recovery systems at one time. We here take these issues for granted and fail to understand in-landers are not up to speed on such important issues. Thank you for your interest.

#33 Bill-Muskoka (NAM) on 02.17.09 at 9:33 am

Here are the new definitions needed to comprehend today’s ‘investment markets.’

New Market Terms

CEO – Chief Embezzlement Officer

CFO – Corporate Fraud Officer.

BULL MARKET – A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET – A 6 to 18 month period when the kids get no allowance, the wife gets no jewellery, and the husband gets no sex.

VALUE INVESTING – The art of buying low and selling lower.

P/E RATIO – The percentage of investors wetting their pants as the market keeps crashing.

BROKER – What my broker has made me.

STANDARD & POOR – Your life in a nutshell.

STOCK ANALYST – Idiot who just downgraded your stock.

STOCK SPLIT – When your ex-wife and her lawyer split your assets equally between themselves.

FINANCIAL PLANNER – A guy whose phone has been disconnected.

MARKET CORRECTION – The day after you buy stocks.

CASH FLOW – The movement your money makes as it disappears down the toilet.

YAHOO – What you yell after selling it to some poor sucker for $240 per share.

WINDOWS – What you jump out of when you’re the sucker who bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR – Past year investor who’s now locked up in a nuthouse.

PROFIT – An archaic word, no longer used.

And to truly grasp how things got the way they are read this about Frank Lutz, the Design Guru of Government Motors (aka GM)

Lutz’s exit shuts door on car history

“It’s not a normal state of affairs for a country to spend, spend, spend and not produce, produce, produce,” Lutz told the auto press. “The argument was always, `Oh yes, but the financial sector. We have the world’s best, most sophisticated and most powerful financial sector, so stop worrying. This country is so well run now by the financial establishment that we really don’t have to produce things anymore.’ And we saw what just happened. So in that I feel vindicated, because I’ve been saying that for years.”

That is the argument that runs, “You claim we’ve screwed up our business six ways to Sunday, but you should see the mess the telecom business has made of itself!”

Still, Lutz is hardly in denial about Detroit’s grim prospects. Lutz was asked by those same auto show reporters last month about GM’s continued status as the largest U.S.-based automaker. Lutz had to acknowledge that, “It’s similar to being named valedictorian at the reform school.”

I think that sums it up quite well!

#34 squidly77 on 02.17.09 at 9:44 am

i wont say anymore that canadian banks are in trouble as to many people post to protect them
no..the canadian banks are probably the best investment one can make and at this point are only down 40-50% year over year

in fact i even like that the canadian government chooses to hide bad news from me..hell who cares

It is directly related to a 75 billion dollar bank bailout program for Canada’s chartered banks, announced, virtually unnoticed, four days before the October Federal election.

who care about anything anymore..to hell with it and just pass the kool-aid

thats the msms view anyways because they sure as hell wont let you know whats going on

mmmmmmmm kool-aid

#35 squidly77 on 02.17.09 at 9:47 am

comfortably numb..

#36 GB on 02.17.09 at 9:50 am

I bought your book. But you said this:

“…and whether the Boomers will finish off the stock market by sucking out their money (we don’t care, kid)….”

I did not recall reading anything about this in the book. Can you clarify what you mean by “we don’t care, kid”?

I have thought about this potential drain on the stock market for quite a while. Why should we not care?


#37 Jon C. Coates on 02.17.09 at 9:54 am

An ounce of gold is always an ounce of gold. When the price goes up, its an indication that the value of the currency has dropped – and that only works if there is a healthy demand for gold so the price cannot be manipulated by a few manipulators.

The trick with real estate is to own it. If you do, mortgage rates and market values mean nothing because you have a safe, warm place to live. Speculation on the price of your home, or worse still, to own a home and then to mortgage it so you can “invest” in a better life style has a strong potential for ruin. In the long run, because there are always going to be variations in the market value of homes, the variations are going to be downward some of the time. And, sometimes, down is so far down it becomes a disaster for overextended people.
A prudent person gets his home paid for ASAP. Then he gets rid of other debts. Then he builds a bank account to cover a few months of expenses with no income. Only then should this person play the stock market and only with money he can afford to lose.
These may be old fashioned values, but if you adopt them, you stay out of a lot of financial trouble. Being financially conservative may not let you become outrageously wealthy, but you eat well, sleep comfortably and the rain stays off of your head. Try that if you face foreclosure, your job’s gone and you have debts that won’t quit.

#38 pbrasseur on 02.17.09 at 9:54 am

@ ThumbsUp

“If you look at the US as an Enterprise, it is no different than GM, only x times bigger.”

Really? What about Intel, Cisco, Microsoft, Amazon, Ebay, Apple, IBM, Google, Adobe, Qualcom, Walmart, Johnson&Johnson, P&G, etc…?

#39 North Vancouver Citizen Jr. on 02.17.09 at 9:55 am

#27 smwhite

“”You forgot gang violence capita””

…that is occuring outside Vancouver Proper.

The stuff going down in the rest of the world right now will undoubtedly make Canada the single best world’s “safe haven”.

#40 Jordan on 02.17.09 at 10:05 am

What is your argument for no Amero?

Why won’t we enter hyper-inflation?

What can the government do to prevent these two scenarios?

I need an informed and logical argument!


#41 Jeannette on 02.17.09 at 10:07 am

Bailing out the deadbeat mortgage holders at the expence of the rest of the population is a good recipe for revolution. The Obamanation will be a one term disaster. It is impossible to “fix” the economy, the debt is simply too large.

I think the best course of action is to let the banks fail, the auto companies fail and the Ponzi scheme victims loose their homes.

#42 North Vancouver Citizen Jr. on 02.17.09 at 10:24 am

The dour Mr. Spengler’s surprising upbeat view of the US future:
Obama, an economic unilateralist
By Spengler
Asia Times Feb 18, 2009

“”The silliest thing that clever people are saying about the world economic crisis is that the United States will lose its position as the dominant world superpower in consequence. On the contrary: the crisis strengthens the relative position of the United States and exposes the far graver weaknesses of all prospective competitors. It makes the debt of the American government the world’s most desirable asset. America may deserve to decline, but as Clint Eastwood said in another context, “deserve’s got nothing to do with it”. President Barack Obama may turn out to be the most egregious unilateralist in American history.””


#43 Eduardo on 02.17.09 at 10:33 am

For all you talking abotu a global currency and european currency failures and asking who is going to buy bonds from IMF, US, etc… gold + hyperinflation…

#44 dodgedabullit in Alberta on 02.17.09 at 10:46 am

Greetings: A previous poster said that the problem with doom and gloomers is that they offer no solutions to solving problems. Well, I am one of those and I do have a solution to the problem of the auto industry in Canada at least. However, the new problem is who will listen and give my ideas serious consideration. Certainly not the shitheads in Ottawa, GM corporate offices, or the CAW, or bankers on Bay Street. Letters to the Editor of every newspaper in Canada are like pissing into the wind. We are so bankrupt of the ability to see more than a few inches ahead of us, let alone to the sides, it is pathetic. My vision would put the auto industry back to work, clean up the environment, severely reduce the consumption of new resources, rejuvinate the trucking and railway industry, and create work for many people in communities all across Canada. My proposal is to re cycle the hundreds of thousands of abandoned vechicles sitting in back alleys, storage yards, and garages and driveways not to mention farms scattered across Canada. I am talking about STOPPING NEW automobile production completely. Turn the existing plants with their skilled workers, engineers and office staff, and infrastructure, to the task of putting these vehicles back in the hands of motorists without the huge costs financial, material, environmental, and labour, of building new vehicles. Many thousand of vehicles abandoned, already meet modern pollution and safety standards. They are sitting unused because something happened with the engines, drivetrains, or the high tech electronics. The existing cost of labour and service shops is so high, that people just give up and throw perfectly good vehicles away. We have complicated the modern automobile so much that guys like myself who used to be able to assist our neighbors are beat. The difficulties of becoming a compenent service technician are overwhelming due to this complexity, and the fancy equipment needed to diagnois the modern auto. Many, many garages are now relegated to replacing parts, because their people are unable to fix stuff. Try to fix a siezed power window and you will find out, or replace a power steering pump, or AC unit on most vehicles. Existing pollution equip is a nightmare. My proposal is that Canada start a program, funded by some of this Harper budget money, to collect all abandoned or unwanted vehicles and ship them by truck to the nearest rail head for shipment to Ontario. ” Sorry, I forgot, we tore up a pis-pott full of rail lines, didn’t we”. Ah! but we do still have a transcontinental railway system yet,for how long is anyones’ guess though. Anyway the existing auto plants could re engineer, over haul, and modify vehicles deemed worthy of keeping in service, and re-introduce them back into the market with an appropriate warrenty and certified as meeting existing standards. Much of the present support structure for these autos can be used, ie: interior furnishings,accessories, body parts, wheels, brakes, suspension, drive train,paint shops, corrosion treatment. We already have all the engineering drawings, specs, for cars built in the last 10-15 years. Canada could embark on the largest productive recycling industry ever undertaken and create a huge stimulus to the economy. Instead of crushing automobiles, and trucks, put the suckers back on the highways and conserve our existing resources for the next generation and direct those resources toward alternate forms of transportation and energy. Help those communities who want to clean up the eyesores littering their neighborhoods, give these hulks some value and Canadians will flock in droves to clean up the mess. Put these Government Approved Re-conditioned Vehicles back into the hands of motorists at fair and reasonable prices. Give every Canadian who turns in an unwanted vehicle some form of credit, either a tax credit, or credit toward a replacement vehicle. Re-introduce the concept of RE-capped tires. Millions of tires have been buried or shredded for no good reason. We are consuming huge amounts of oil for new rubber why? The aviation industry and transportation industry have been recapping tires for years. If the sidewalls are good, they can be re-used. Existing Auto dealerships can be turned into depots to collect used vehicles and return re-conditioned ones to market. This will get rid of the shady used car market, and the chop shops. The consumer must be re-assured that these vehicles are good and the warranty will be honored. Private industry signing on to this program will realize that their success depends on good service and a quality product. We will be able to close the door on the import auto market, because we will be recycling these used cars also. If Toyta, Honda,etc.. refuse to cooperate with our efforts to keep their product on the highways, the hell with them. We will re-build the Big 3 to serve Canadians if necessary, and employ our own people while doing so. This re-cycling concept could also be expanded to the farm machinery industry, and the trucking industry, as well as the used construction industry. I bet everyone reading this post knows where there is an abanoned school bus eh!, probably a yard full of them. There is a huge quantity of abandoned equipment sitting going to waste. I recently saw a 30 year old dump truck in a field, there was still air in two of the tires, go figure. The 64,000,000 dollar question is: Are we going to keep throwing money into a bottomless pit, lining god knows whos’ pockets, or do something productive with it?? What will it be, Bay Street or My Street, why can’t both benefit??

#45 dekethegeek on 02.17.09 at 11:20 am

#18 David Bakody
Your observations on the Canadian navy are bang on! I used to live in Hfx. many moons ago and the former Trudeau Liberal 1970’s -1980’s mandate to “downsize, consolidate, modernize” the (army,navy airforce) military into one cohesive (armed forces)unit was the worst , most demoralizing, uninformed policy mistake that any government has made. To bring the armed forces up to a safe level of preparedness ( more men, new equipment, spare parts, training = Billions $)would be political suicide in this day and age.
What a shame, because if things spiral down as this blog suggests. A well trained, well equipped military is just what we will need for social security and safety.
If Vancouvers’ running daily gun battles these days are any indication. The police can’t handle it.

#46 inflation period? on 02.17.09 at 11:32 am

“The prospect of hyper-inflation in a couple of years (non-existent)”

Garth can you can you give more details? cause everything is pointing to this in the long term , dont we use a fait money system?

#47 betamax on 02.17.09 at 11:51 am

“Vancouver Proper, BC Canada…the next Financial/Trade/Leisure Capital of North America.”

LOL. Of course Vancouver, not NY, LA, or a dozen other larger US cities. These delusions of grandeur are just that.

There’s no political will for the Amero and quite the opposite against it. Ever heard of Esperanto?

#48 kitchener1 on 02.17.09 at 12:21 pm

RE: The Amero
It will not happen!! Ever. Yes there were plans in regards to the SPP- Special Prosperity Partnership but its dead in the water. There is too much political change happening in Canada-America-Mexico to implement a unilateral currency.
Garth was a politican so I am sure he was more privy to inside info then any of us will be.

#49 whiterock on 02.17.09 at 12:28 pm

#22 quote about Garth ” He loses me when he gets into things like macro-economic and/or climate change though, there I believe he reaches is own level of incompetence, as do most (I guess this summarizes my opinion about his latest book).”

Enlighten us, #22, when you reached yours(level of incompetence, that is) and quantify it if you can.

#50 GOD on 02.17.09 at 1:02 pm

There will be no Amero.
Trust me.

Garth, keep up the enlightenment.

Signed, your friend,
The Real Fed.

#51 jess on 02.17.09 at 1:03 pm

LONDON, Feb 11 (Reuters) – The International Monetary Fund said it does not intend to alter plans to sell just over 400 tonnes of gold to fund changes to its financing base, an IMF spokeswoman said on Wednesday.

A recent surge in IMF lending to countries facing balance of payments crises related to the global economic slowdown and financial turmoil has led analysts to question whether the Washington-based institution will proceed with the plan. [ID:nN19466275]

But a spokeswoman for the IMF — the third largest official holder of gold — said the sale would still go ahead.

#52 The Tallyman on 02.17.09 at 1:16 pm

Harper is boasting again about how different Canada is and that we are going to come out of this in a better position.

Ya Steve… The Fetal Position!

it’s time Harper had his sweater retired.

#53 Jelly on 02.17.09 at 1:23 pm

apocalypse now,

Yes, this is very frustrating when most people are so oblivious and/or apathic regarding swindles that are so blatantly obvious and no accident. All you hear are such ignorant comments like, “Obama will fix it by ___”
It is as if the general public rarely think critically and believe what the news is saying and never open up books to save their lives. Really frustrating, I am more of a realist and sceptic regarding supposed solutions that are just based on more filthy theft and corruption.
As doom and gloom as some people may view your posts, they usually make a lot of sense and have reasons behind them…
I am curious how badly you think things will get in Canada.

#54 MikeB on 02.17.09 at 1:28 pm

Another Doomer and Gloomer… Permanent Change and Worst is Yet to Come.. Canadians of course are of the mindset that they are immune.

#55 Sail1 on 02.17.09 at 1:58 pm

The hawk or the squirrel?

This doctor may take offense to this blog.

Squirrels are getting some non culinary notoriety elsewhere.


#56 Herb on 02.17.09 at 2:01 pm

David Bakody (#32),

David, I was pulling your leg!

#57 jess on 02.17.09 at 2:27 pm

fraud is a lagging (octopus)indicator

SIB, based in Antigua, allegedly acted through a network of Stanford Group Company financial advisers to sell approximately $8 billion of “certificates of deposit” to investors.

The bank boasted a unique investment strategy that it said allowed it to receive double-digit returns on its investments for the past 15 years, the SEC said.

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” Rose Romero, director of the SEC’s Fort Worth regional office, said in the statement.

The SEC also charged SIB chief financial officer James Davis and Laura Pendergest-Holt, chief investment officer of Stanford Financial Group. The third company named in the complaint is investment adviser Stanford Capital Management.

#58 barb the proofreader on 02.17.09 at 2:33 pm

#25 apocalypse now

Dear Appy,

The one thing you didn’t consider is that all your arguments can go either way. You surmise that this all MUST be conspiratorial – er, planned. The one factor you did not add into your greed scenario is the Elite’s ignorance. After all, they are just people.

Ignorance is a more historically proven factor in causing folly, and so, I think you should weight ‘stupidity’ more heavily into your inquiry.

Humans are painfully Stupid. I’ve spent more time calculating that into explanations and it is the one true thing.. besides Greed.

NOTE: Stupidity and Greed have a common denominator. Fear. And Fear grows from our basic need, Safety.

There is nothing more that a human needs than the Umbrella of Safety (air, water, food, shelter, protection from danger.)

In the absence of Safety — we have Fear.

In Our Fear, as we try to build ever-more secure walls of comfort, we stupidly (and Compulsively) become Greedy. Why? Because we don’t know WHEN to stop building our Safety Net. How much is too much? Our Fear triggers a “compulisive pursuit” of “more & more Safety” through “Control by Money”.

Greed is Fear on Steroids.

And that last part is important.. because it’s needless, at least in a co-operative society, to overbuild a safety net. How much money and power do the Elites Need? I’m talking about the Elites’ Greed here. There’s nothing in place to stop their accumulation of wealth. Is that good or bad? Let’s examine it.

Our monetary society is just like the game of Monopoly. Whoever landed on Park Place first, wins in the end. Because money makes it very easy to make MORE money. And THAT one truth is why the rich get richer. NOT CONSPIRACY.

However, conspiracy is a partial component.

Do not ever forget that the odds are with whoever gets to the money FIRST — they win. That’s why there are so few Elites at the top. They are sucking their money from the middle class (you recognized that in your post) but that is just the natural course in a “fewer rules” game. (Important: That’s why they have fought for de-regulation, less protectionism, free trade, free markets, and the rest of that crap).

You don’t need grande scale organized conspiracy of the elites to have grande scale, wink, wink, nudge, nudge-type greed and corruption of the elites.. and cronyism. Their wealth accumulation is a natural outcome of logical Capitalism, just like the game illustrates. But when a few of them poke around, tipping the odds, tipping the sentiment, tipping the rules, that’s when it FURTHER tumbles in their favour. (And THAT’S when the Middle Class’s Stupidity kicks in. We fall for their games and dumbly believe what they say…. in other words, we act like sheep, as they say.)

Do you see the difference?

Ask yourself – what was in Friedman or Greenspan’s minds, what made them was so unwise? Were they pawns, co-conspirators, patsy or stupid? Who will ever know?

I’ll give you one thing, Appy, it is semi-conspiratorial…. in so much as fringe Elites DO push to make things unfairly tip in their favour — when their groups succeed in taking away the protection of the masses, with de-regulation, and Vilification of social Safety Nets. Some Groups or Individuals within the Elite community “Push” their own agendas. As you state, Military, Financial & Religious, Elites. Again though, it’s out of their own Stupidity and Greed… and in some cases, their Bigotry and Hate. (ie Don’t think for one second that the collapse of African countries hasn’t had some dirty white hands in the pot, with gun hand-outs and false ideologies. They didn’t fall apart on their own.. their lame dictators were made stronger by outside meddling money.)

Accidental or planned. Accidental or planned…. I’ve researched that for a long time. It’s “Nudged” bit by bit, almost unnoticed, except for the people running around with their pants on fire trying to tell everyone what’s going on. So we’ve reached the Tipping Point. The people at the Elite fringe edges who purposely put themselves in positions of influence have their little Apocalypse. So, What will they do with it is the more important question. Fearful people are easy to manipulate. In some ways we agree. But Amero – – unlikely, because it’s genesis in 1999 was from one of these manipulative Elite corporate group gang members (pawns and idiots). Hopefully we have all learned to ignore their hidden-agenda “advice” meant only to tip us in a direction that helps them — not us. And hopefully we’ll avoid their Amero agenda, because we have bigger things to worry about than what colour the money is. We have to worry about human rights and the Earth’s rights.. protecting our own safety and comfort — from greedy corporate Elites who get richer and richer on our dime, using their dirty little tipping tricks and phony extremist-right politicos. We need to get smart, hopefully crisis helps us get smarter.

At least someone’s pants were on fire years back:

#59 PTDBD on 02.17.09 at 2:36 pm

Momma don’t let your babies grow up to be Ponzies.

#60 CM on 02.17.09 at 2:37 pm

Not strictly all about the economy, but these things are all connected.
Dr. Michael Hudson on the bank bailout:

The Oligarchs’ Escape Plan

The whole thing is fascinating, including the imminent collapse of eastern Europe. The part entitled “The U.S. giveaway to banks, masquerading as “help for troubled homeowners”” may give a perspective on Obama’s plans.

I’m not exactly optimistic.
More of Nasty Stevie’s sock-it-to-’em budget plans – a few provisions I hadn’t heard about.

“The union representing Canada’s 6,000 prison guards will take the federal government to court over a section of the budget that rolls back wages from what’s in their signed contract.

…”It means the next time we sit down with Treasury Board to have a new contract, everyone is going to agree on it, then the government is going to come back and change the rules.

…Other groups affected include more than 29,000 employees of the Canada Revenue Agency, who were due a 2.5% increase in November 2009 as part of a contract signed in 2007. Increases for the RCMP that came into effect Jan. 1, 2009, have been adjusted to 1.5% and Armed Forces increases due in April will be set at 1.5%.”

Nice. Prison guards (a lot of them around Kingston) won’t get the raise they bargained for. They’re threatening a strike. Can we send such wholesome Canadians as Paul Bernado to stay with Stevie at 24 Sussex while the penitentiary is unguarded?

Canada Revenue – good one. You need the taxes but you cheese off the tax collectors. Can’t see anything going wrong with that one.

But the Armed Forces has got the be the final kick in the teeth. David Bakody has mentioned how the Navy is being whittled down to nothing but still expected to function. So – you mire the forces down in Afghanistan, and then you cut their SALARY? What’s the matter with you, Stevie? Are you nuts or something?

And finally, the Pakistan born author and peace activist Tariq Ali on Obama and Michael Ignatieff. (Thank you, Tariq.)

He calls Obama’s ideas “imperialism with a human face”.

Here, however, is the bit I love. He watched Ignatieff for twenty years in the UK.

DO [Derrick O’Keefe]: Obama-mania is a political phenomenon every political operative in the world is trying to tap into. Here in Canada, some have even touted Michael Ignatieff as Canada’s Obama, or as the ‘new Trudeau.’ What were your impressions of Ignatieff during his twenty-plus year stint in the UK?

TA: Trudeau was an independent-minded leader, not a stooge of the neighbouring country. The Count (as we called Ignatieff) supported the war in Iraq, defended torture and aligned himself in a dog-like coital lock with the Bush-Cheney gang. If Canadians elect him as Prime Minister they might as well join the United States after demanding exceptional status on health, education and the CBC. Why not? It will be that in everything but name.


Ooooh, that was absolutely bang on.

Going off to bang my head against the wall now.

#61 Rasputin on 02.17.09 at 2:38 pm

Squidley #3
Never fear. Buyer B won’t be neglected. Buyer B is “rich” therefore his taxes will go up to support buyer A.

#62 Bill-Muskoka (NAM) on 02.17.09 at 2:39 pm

Coast to coast and in the Desert too.

Obama expected to announce foreclosure plan

(CNN) — President Obama on Wednesday will visit Phoenix, Arizona, one of the cities hardest hit with foreclosures, where he’s expected to outline a $50 billion to $100 billion plan to help homeowners.

Sheila Bair, the U.S. FDIC chairwoman, has advocated reducing payments to between 31 and 38 percent of a family’s gross income.

Bernstein said it will be a “very aggressive plan to help responsible homeowners stay in their homes.”

In Phoenix, the median home price is $150,000 — a significant dip from its peak of $262,000 in recent years. The national rate of foreclosure increased by 79 percent between December 2006 and December 2007, according to RealtyTrac, a company that compiles data on home foreclosures.

Today is a game of payback for yesterday, said Phillip Robinson, a foreclosure attorney who has been quite busy lately.

“We lived in a culture the last 10 years where mortgage originators said you could use your house as a credit card to pay off your cars, to pay off your credit card bills,” he said. “Well, that doesn’t exist anymore.”

#63 barb the proofreader on 02.17.09 at 2:59 pm

Who’s Keeping Burger King Workers Below the Poverty Line?


Better rules, better worker protection, public awareness, and smarter handling of solutions, is the key. Obama knows this.

#64 JO on 02.17.09 at 3:09 pm

Nonplused, good comment on the mtg “plan” about to be announced by Obama. Once you look at the details, and if the leaked details are anything like the actual plan, it is clear these “moditifcation” or, my favourite, “foreclosure prevention” plans are disasters in a variety of ways. In effect, these plans make mortgage/debt slaves out of the people who get into them. Ask anyone who has been modified in the last 12 mts..house and networth down another 15-20 %, payments that in many areas are still too high and more expensive than rent. Not only that, these plans destroy labour mobility as someone may get a job in one state next to where they live, and cannot sell their home to move the family.

These plans are clearly, first and foremost, a way to help the banks reduce/avoid/delay defaulted and charged off mortgages. Make no mistake. They never do anything to help those in trouble.

On a different matter, these plans will effectively subsidize those who are not paying. What the hell is going on? The true victims, beyone those who actually get modified into bank debt slaves, are the ones who put down 20 or more downpayment, those who pay on time, all working taxpayers and anyone smart enough to rent because they refused to become trapped in the massive credit bubble created by our central banks, the large commercial banks who run them, and your friendly gov’t.

These plans are a total disaster and will only delay the inevtiable and cause even more damage. Pathetic.

#65 JO on 02.17.09 at 3:17 pm

I liked your Blame post Garth. I agree. While a lot of the blame rests with the central banks, large banks, and gov’t, anyone who fell for the easy credit and spent it on things they didn’t need, and who did not save a reasonable amount and otherwise keep their finances in order need to be held accountable. Deflation does that, at least for now and probably another 18-24 mts..i did credit for years until end of 2005 and i was in awe..a large number of people (over half of applications) simply showed reckless financial behaviour. Time to pay the piper folks and right the ship as quickly as possible. Someone can hand you a gun, but it’s up to you to put it back down or use it.

#66 nonplused on 02.17.09 at 3:52 pm

The end of the world as we know it nicely summarized in an 11 minute video. It is a must watch.


#62 Bill-Muskoka (NAM)

Reminds me of Bush’s generator powered speech in front of the Louisiana legislature after Hurricane Katrina. Dog help us all.

#67 squidly77 on 02.17.09 at 4:04 pm

#40 jordan
What is your argument for no Amero?
checked the euro lately ?

#68 JO on 02.17.09 at 4:13 pm

To the hyper inflationists / deflationists:

Anything is possible but for now and probably the next 2 yrs or so, we should have deflation. Why:

1) Money system is a debt based, fractional reserve, fiat money system. By far and away, the debt part, mostly accumulated over the last 29 years or so with a blow off top in the last 6-7 yrs, was used to buy over inflated homes. So total debt in US is about 54 T, of which 43-44 is private. This is the mountain of debt upon which you add the fiat money or base money, the amount the Fed prints. They also have a host of other facilties and the like which has increased their balance sheet.

So we have about 54 T in debt (rapidly escalating but yet a lot of it going bad, being paid off, or otherwise destroyed which shrinks the debt outstanding) against a fed balance sheet which has grown by roughly 1-1.5 T last I checked. Base money increased. The amount of debt simply dwarfs the printing done so far. It is the destruction of this debt that is completely overtaking the fiat money printing for now. Think of the Fed trying to fill a large pool one teaspoon at a time. Deflation is the shrinkage of money and debt. You have to look at both, not just money as the hyperinflationists are doing.

2) Psychologically (just as important), there is a rapidly rising negative mood which helps explain sharply rising savings rates, and more people paying off existing debt and not buying as much on credit. There have been reports more and more people are using cash to buy things. This is critical. Hyper inflation will happen once/if a large enough number of people become willing and/or able to borrow large amounts of money (assuming the banks are able and willing to hand it out, a whole other issue) and spend it. Most of the credit creation happens due to the actions of the large banks, not the Fed or gov’t. So even if the Fed were to take away all the bad debts (and hand them to the taxpayer) and ask the banks to lend, they would only do so if unemployment and asset values showed favourable trends. Both of these areas are looking ugly. It is very difficult to get hyper inflation when unemployment is exploding and houses/cars falling in price. Even if the Fed put a gun to the head of the banks and said lend it (there is a massive amount of unlent reserves sitting mostly in US TBills), any ability to hyper inflate would rest solely on whether the banks could find enough people and companies able and willing to borrow a large enough amount and then spend it. So for now and probably a couple of years, deflation is much more likely to continue.

3) Some say the Fed could print 20 or 30 T and give it to consumers. Yes, they could. Maybe in the form of a consumer voucher that would have to be spent within a year and if not spent, people would need to add it to income for the year in tax returns. This would very likely cause hyper inflation. Yet, in practice, the Fed and US gov’t would wipe out the huge reserves of the US banks in TBills, and the foreign TBIll holders (China and Japan) whom the US needs to rely on to finance the massive deficits (Fed could step in as a buyer too-would be inflationary too). WWW 3 would be upon us within a year if the USD were to collapse as a result of this despotic action. So even though Benny Helicopter Bernanke could order 20-30 T to be printed, it would in practice be extremely unlikely due to the situation.

More likely, high inflation will happen (2011-2013?) once houses stop falling, unemployment stabilizes, and the amount of debt being destroyed (defaulted or paid off) becomes equal to or less than the amount of printing being done. We will need to see a large number of people spending to buy homes and cars in huge quantities.

Lastly, whether we have deflation or hyper inflation, it is very likely we will see a collapse in long term bonds and a resulting massive spike in long term interest rates at some point in the next 3-5 years.

Sorry for the length but just though I’d share my thoughts on this.

#69 JamesR in Victoria on 02.17.09 at 5:00 pm

@ #26 Mike (Authentic)

Regarding the images of the Amero coin you linked for us. They are part of a fantasy coin collection designed by Daniel Carr of Designs Computed and minted by Moonlight Mint.

In Daniel’s words.
” My goal with these coins is not to endorse a Union of North America or a common “Amero” currency. I fully support the United States Constitution, and I would not welcome (in any form) a diminishment of its provisions. I expect that these coins will help make more people aware of the issue and the possible ramifications. I leave it up to others to decide if they are in favor of, or against a North American Union. And I encourage citizens to voice their approval or disapproval of government plans that impact them. ”

Rather than being a harbinger of a North American Economic & Monetary Union, they are part of a NAU awareness campaign. Or perhaps, in my opinion, an attempt to profit from hype around this over the last couple of years.

Just a friendly recommendation to follow your own links a little deeper. I discovered this from following a link on the second page of the images.google.ca link you provided, which happened to be Daniel’s website.

Also, I’m not saying that there isn’t a chance of the Amero and by extension the NAU happening though I personally feel it is unlikely. In the Amero coin case specifically though, you may have jumped to a conclusion before researching the topic diligently enough.

Some recommended reading:

Daniel Carr’s Website:

Moonlight Mint Amero Page:

Wikipedia Info on the Amero:
Amero Coins: http://en.wikipedia.org/wiki/Amero#Amero_coins
Amero Bills: http://en.wikipedia.org/wiki/Amero#Amero_bills

James R

#70 ThumbsUp on 02.17.09 at 5:10 pm

#38 pbrasseur on 02.17.09 at 9:54 am

“Really? What about Intel, Cisco, Microsoft, Amazon, Ebay, Apple, IBM, Google, Adobe, Qualcom, Walmart, Johnson&Johnson, P&G, etc…?”

All those companies you listed are making money, the US is losing money every minute, if the US is listed on DOW as a corporation, it’s probably near being delisted.

#71 Ally Ally Oxycontin Free on 02.17.09 at 5:18 pm

Wind and solar power companies lobbied to win a tax break to encourage investment in renewable fuel. But the nuclear-energy industry lost a $50 billion loan-guarantee program that had been included in the legislation until late in the negotiations.


Under the search umbrella describing stimulus package:


Photovoltaic Solar Panel Technology virtually next door in Michigan … Still no mention of any program in Canada.


#72 TomOfMilton on 02.17.09 at 5:18 pm

#19 grandeprairiegirl “I believe the eventual goals are a one world currency, one world military, one world religion.”

Well…it sounds nice at first. Kinda like wishing for “peace on earth” and such. However, an organization looking for “one way” of doing anything is historically unleashing some of the most evil actions committed thus far. Freedom to choose between right and wrong is what our gift as humans is.
We’ve forgotten about horrors such as “Khmer Rouge” and the Gulags and the Auswitcz. Folks who know even more about History than I can recite more.

I know that people yearn for fairness, honesty, opportunity and love…but I think we are mistaken when we think that
“If science (social or other) advances enough…”
“If we find the perfect government system…”.
Its you and me folks. It’s what we decide to do in our own back and front yards that will get us the dream. Taking away people’s choices and forcing “one way” on them…is death. That is the end of times.

#73 MikeB on 02.17.09 at 5:18 pm

The latest BS from the states is that rather than buying up all the toxic assets there will an offer to private companies to buy those up and take them off the banks balance sheets. The catch..these private investors will be given the sweetest of deals… junk bond level returns and a treasury bill backstop in case the assets prove problematic. Wonder who will be the ones buying those ..?? Gotta be everyday Joe right?
Guess again. Same A-holes who got us in this mess will now back door this and get the benefits from the mess they created. Hedge fund A-holes that is..
Rumour has it that George W had to put his cash into a blind trust before he became (kinda became) president. Now he finds he has lost almost all of it. Anyone can corroborate this stuff??

POL Can- dying to hear your insights into the Toronto RE market. Much more active from what I can see and prices are still quite high.. Really alot of junk and super expensive houses out there right now, even in the very good areas.

#74 Bill-Muskoka (NAM) on 02.17.09 at 5:19 pm

#44 dodgedabullit in Alberta on 02.17.09 at 10:46 am

I agree with you in part, especially on revitalizing our railroads.

Regarding recycling older vehicles, here is something you did not mention. In Ontario, as well as everywhere else I am sure, the insurance industry is the main reason vehicles are scrapped. Why?

Well, because of the idiotic inflation based growth ( a complete lie) economic policies we have been working under for the past few decades, the labour costs have sky-rocketed so mechanics and dealerships can also remain profitable.

This was all the result of everyone wanting more, which begat the next in line demanding more, and so on, and so on.

We have thousands of hectares of repairable vehicles sitting around just the Toronto area simply because the insurance companies deemed them total losses due to repair costs. Many have relatively minor damage, but were written off due to age. Let us not forget Ford’s Wonder Car, the Three Year Fall Apart that literally was Found On Road Dead, all to increase profits by some moronic, non-enegineer bean counters with MBa’s..

The auto manufacturers, and Magna International in particular, have been raping both the general public and the repair shops with 300-400% markups on parts. This is really not new because I recall a little research way back in the late ’60’s that proved a Chevrolet Impala, which cost about $3,000 brand new, cost $30,000 to buy the same parts. That is a 1,000% markeup by the auto makers. I can order new parts from places like 1-A Auto Parts in Massachusetts at a third to half the price charged in Canada. Same parts, just not distributed by Magna and the other Canadian parts distributors.

If one goes to Cuba, especially Havana, they will find 1950-60 vehicles still running fine because that is all the people have due to the assinine U.S. Embargoes. Granted the air pollution if terible from them because of worn out cyclinders, rings, valve stems, etc.

What really needs to be done for both economics and the environment, is to recycle the usuable parts from modern vehicles, adn to also mandate, by law, that the auto makers cannot continue to produce the same old version of gas hogs they have. We need tyo mandate new technology be the desibng. we have come a long way in materiaols and engineering research, but the Good Old Boys still rule the design over the engineers.

We have the technology, but companies like GM have prevented the patents from being used to protect both themselves and the oil industry.

Look at movies like ‘Tucker’, and ‘The Water engine’ to see how long this has been allowed to go on. As to GM I do feel sorry for the workers, albeit they are paid way too much, but got those concessions to justifiy the total criminally assinine salaries of the CEO and CFO. No one, union or not, will sit back and be paid a pitance when the CEO is being paid millions of undeserved income and bonuses. Did I mention their private jet?

So, there are a few points to consider in what you are presenting. ;-)

#75 Eduardo on 02.17.09 at 5:21 pm

JO RE 68,

I agree that PRICE deflation MAY be a problem for the next little while, but inflation IS MONETARY. Once credit frees up, then the velocity of money starts to accelerate that money (causes inflation which, again, is monetary) because there is so much money to go around.

The debt you are talking about is capitalization, not money.


I do agree with lots from your post though.

There will be little inflation for several years to come, and no hyper-inflation in our lifetimes. Get over this nonsense. — Garth

#76 Keith in Calgary on 02.17.09 at 5:27 pm

Mike B……

All Presidents and Prime Ministers have to do that……IIRC even lower level cabinet ministers as well.

#77 Bill-Muskoka (NAM) on 02.17.09 at 5:27 pm

#66 nonplused on 02.17.09 at 3:52 pm

I am going to order one of the T-Shirts that says:

Bush’s Last Day
The End of An Error

#78 Rasputin on 02.17.09 at 5:31 pm

My thoughts on the North American Union, Amero etc. It’s coming. I hope I’m wrong, but I doubt it. The PTB know that North Americans are proud people who will not quietly accept a loss of sovereignty.
The game plan all along was an economic collapse so that we all beg for our leaders to save us. The NA Union and Amero will then be trial ballooned as the solution. Things just go so much easier when Joe 6 Pack thinks it’s his own idea. Has anyone spotted any sign of an economic collapse here abouts?

#79 Bill-Muskoka (NAM) on 02.17.09 at 5:35 pm

#58 barb the proofreader on 02.17.09 at 2:33 pm

There is no conscious conspiracy, it is the result of decades of universites teaching a false economic theory to business majors and MBa’s (Master Bullshit Artists).

There is no more of a conspiracy on this mess than there is in a main stream religion. It is merely a lot of people in business who swallowed the belief system they were taught.

Kind of like a fish taking a lure, unfortunately, this is one BIG fish, and it stinks to high heaven.

#80 ThumbsUp on 02.17.09 at 5:37 pm

#68 JO on 02.17.09 at 4:13 pm
“To the hyper inflationists / deflationists:”

Very good analysis. I think that(inflation) is what the US is dreaming of.

Janpan had tried two decade to inflate their economy without success.

What can the US do differently to avoid deflation?

#81 Eduardo on 02.17.09 at 5:38 pm


If “There will be little inflation for several years to come, and no hyper-inflation in our lifetimes”:

What is going to happen when there is nobody left willing to buy US bonds (and other countries for that matter)?

Then turn the lights off. The economy is over. — Garth

#82 Dave on 02.17.09 at 5:57 pm

There will be little inflation for several years to come, and no hyper-inflation in our lifetimes. Get over this nonsense. — Garth

okay, there are some high profile people that totally disagree with you. Some guys that have been completely bang on about the banking crisis, real-estate crash, commodity bull run since 2000, dot.com crash in 2000, uranium bull market in 01 etc. they provide information as to why they think we’ll be subjected to a hyperinflation in a few years time. To be honest, I’m not sure why you’re an advocate of owning gold if our currency isn’t subjected to rampant inflation.

Sorry Garth, your real estate information is top-notch but there are far too many high profile people that called whats going on in our economy a few years ago. I’m not sure why you dismiss a hyperinflation as nonsense without providing a reason for your stance. They’ve all provided info as to why they think it will happen. I hope you’re correct, but I don’t think so

There is not a shred of evidence to support this and I don’t care how “high-profile” your experts are, they’re wrong. Hyper-inflation does not just happen – it is caused by a conscious political decision to devalue a money supply and print currency when debt obligations no longer find a market. It is as absurd to believe the Americans would chose this route as it is to suggest they’d merge their currency with ours. One thing is a sure bet, however. Tinfoil sales. — Garth

#83 POL-CAN on 02.17.09 at 6:09 pm

#73 MikeB re T.O. market update

From where I sit the T.O. market is dead :)

We thought we found the right house for our situation
(multi-family) and tried 3 times to get it on our terms (25 % below asking, then 12 % below asking, and finally 95 % of asking). Ran into 2 phantom offers and finally said enough of that BS…. The house is still on the market lol

We deceided to upgrade our rental for the next year or so and will be moving May 1st to Riverdale (Greek town) as there seems to be a lot of nice full reno detached homes for rent there under $2500.00 per month….

We are going to ride this puppy almost all the way down… And while we wait we will continue to travel and enjoy life…. Took me a while but I finally convinced my gf and her sister that this is a once or twice in a lifetime event and that we should be patient… Why overpay?

I figure a fully detached 3 story in Little Italy will be under 500 K within a couple of years max…. Right now nice semis (that interest us) are asking 700K and up….

This will get back to historical norms… i.e. 3 x income or 120 x rent. Given the state of the world today I have a feeling that we will get there fast.


#84 Sail1 on 02.17.09 at 6:14 pm

#22 pbrasseur

He loses me when he gets into things like macro-economic and/or climate change though, there I believe he reaches is own level of incompetence, as do most (I guess this summarizes my opinion about his latest book)

Your entitled to criticize , as long as you sprung the $20.00 and bought the book. Borrowing the book or signing out from a library does not give you that privilege.

#85 Dave on 02.17.09 at 6:20 pm

it is caused by a conscious political decision to devalue a money supply and print currency when debt obligations no longer find a market.


how does a conscious decision differ from an unconscious decision? If there’s an oversupply created, who cares what the intention was of the political leader. The only reason Zimbabwe is going through hyperinflation is because Mugabe wanted it that way?

I think money is subjected to the same supply/demand rules as any othe market. Money created out of thin air and interest on top of that money created out of thin air should have inflationary effects. Dollars are deeply imbedded into people’s psyche as currency. If this frame of mind unravels, then the laws of supply & demand will be at the forefront.

if your concern is deflation only, i’m not sure why you have a gold position…unless I understood incorrectly

You’re really standing alone by completely ruling out inflationary problems

We have far, far bigger things to worry about right now than the nebulous spectre of inflation years away. — Garth

#86 Vancouver_Renter on 02.17.09 at 6:25 pm

#68… Excellent post! To help understand your first point, it really helps to watch the documentary “Money as Debt” which was created by a Canadian and does a great job of explaining how our dysfunctional banking system evolved. About 2/3 of the way through the video, you start to understand that, quite literally, “money is debt”. And without never-ending growth and borrowing, we are at risk of a systemic failure. Watch it here:


The global banking system is completely flawed. We use it only because it evolved to this point over centuries. If we could start from scratch and set up an entirely different system, we could create a much better one that doesn’t rely on debt, growth, and control by bankers. It’s all explained in the video.

Over the last few years, I’d occasionally leave messages on Jim Puplava’s Financial Sense Newshour caller line arguing your first point. I’d suggest that no amount of stimulus could possibly offset decades-worth of a massive debt bubble that contracts. But Jim Puplava would always respond by saying that, no, the fed would just hyperinflate our way out of the problem. I assumed that he must know what he’s talking about and that I was missing something.

But I’ve learned a lot since those calls into the show. And I appreciate now that my concerns really were valid and I should have listened to my instincts more. The massive debt bubble implosion is happening all around us, in spite of insignificant government stimulus. Like you say, it’s because the debt bubble is WAY bigger than any stimulus the governments or central banks could inject into the system.

#87 Dave on 02.17.09 at 6:28 pm

I don’t know about the merging currency comment you made. I’ve heard about that but I haven’t suggested that thats the intention. I can see Canadian political leaders trying to devalue the Canadian dollar in-line with the U.S because of trade purposes, but haven’t thought about why the one currency would be beneficial to either country as some have suggested

#88 go green on 02.17.09 at 6:30 pm

#33 Bill-Muskoka (NAM) on 02.17.09 at 9:33 am

Thx. Just sent it off to our financial guy. I look at the statements and file them. No use crying. Thank goodness hubby has as secure a job as possible & has another 7 yrs before he’s eligible to retire. I’ve an indexed pension & we’ve NO debts & have cash. We were prudent. Didn’t charge anything we couldn’t pay off at the end of the month.

#89 Skye on 02.17.09 at 6:35 pm

Hahaha tinfoil sales… thanks for the reality check.

#90 Vancouver_Renter on 02.17.09 at 6:39 pm

#82 wrote “To be honest, I’m not sure why you’re an advocate of owning gold if our currency isn’t subjected to rampant inflation.”

You should do your homework! In all five big deflationary contractions in the past 300 years, which occurred in 1720, 1772, 1825, 1873, and 1929, gold and gold stocks were the best performing asset class throughout the hard times. In all five of those contractions, governments and central banks of the day also embarked on massive stimulation programs that had no beneficial effect.

Gold producers PRINTED MONEY for their shareholders throughout these five depressions because their product (gold) had a strong liquid market while their costs (energy, labor, materials, equipment) all fell, resulting in ever-increasing margins. Does that mean that gold stocks will outperform again this time around? No, there are no guarantees. But certainly history is on the side of gold miners.

WAY too many analysts are basing their predictions on what logically SHOULD happen rather than what DID historically happen, over and over, in similar past circumstances. Ignore history at your own peril.

#91 squidly77 on 02.17.09 at 6:41 pm

wall street hasnt seen a bear as vicious as this beast in 70 years
and its about to go ballistic
this is the real deal..bye bye markets

#92 JamesR in Victoria on 02.17.09 at 6:58 pm

With all the discussion about inflation/deflation… I’m hoping someone here might be able to enlighten me on one particular point. Right now we’re seeing huge asset deflation occurring. Will deflation finally come around to affecting food prices?

I’m firmly in the deflation camp, Mish has some really strong arguments supporting deflation that I find logical and well supported. I just can’t quantify why food has not been affected at all yet and have been unable to find a discussion talking specifically about it either… Any ideas?

#93 Toronto C9 Renter on 02.17.09 at 7:02 pm

For Toronto market watchers, here’s an interpretation of the Jan 09 market data from Chestnut Park (Toronto’s main high-end brokerage). It’s actually quite hilarious…


Among other things it even quotes MIT’s “Laboratory for Financial Engineering” (who knew there was such a place??) to explain why high-end sales dropped 75%. Says there are some “amazing buying opportunities”

#94 timbo on 02.17.09 at 7:05 pm

It sure seems that there is a major effort under foot to prop up the US dollar no matter what the cost to keep the US economy’s from not imploding. It seems to me a way to keep prices low and create breathing room

I still think it has passed the point of no return with regard to debt to GDP ratio. This is going to unwind and probably will start in Europe and happen fast.



Layoffs holy Sh*t!!! 1/2 our company is off.All I hear from people is they are working on skeleton crews and praying. If anyone says that Calgary is in for a huge market rally this spring I say your insane!! Get out now while the herd is touching the snooze alarm because its really going to get ugly. I’ll bet 30,000 jobs have been lost or reverted to part-time to hide the numbers just in residential construction and related trades. Take that cash out of the economy and ouch…….

look how much your losing per month if you bought a house or condo.

getting really upset now Garth…….

“Your intelligence is measured by those around you; if you spend your days with idiots you seal your own fate.”


#95 North Vancouver Citizen Jr. on 02.17.09 at 7:15 pm

Mr. Turner,

…Your fellow Ontarian’s need your leadership…really.
It looks awful for your Province.

No worries out here…British Columbians are covered…they have me…your future Federal Finance Minister.

#96 Apocalypse Now on 02.17.09 at 7:18 pm

#53 Jelly

How bad will things get in Canada?
Only God knows for sure but personally I am preparing for the worst possible scenario. These are unprecedented times so it is difficult to accurately prepare but some common sense preparations are called for:
Moving away from heavily populated areas is a must.
Have an adequate supply of food and water as well as
Gold and silver coins will never lose their worth and may one day buy the proverbial family farm.

#97 timbo on 02.17.09 at 7:44 pm

to those who advocate inflation right now or in the near future I ask you to ponder this…

how can you inflate your economy when it is shrinking because of the inability to extend credit for growth?

How can Canada grow when with deflation when most Canadians are in debt and this deflation will just burden families more? income lowers-debt remains the same. this is not the 70’s where a lot of Canadians saved and we had manufacturing back then which kept dollars in the country.

this is a house of cards that is linked world wide and not tied to one area. As the burden of more and more US debt obligations increase it will put more and more pressure on us to lower our dollar to keep our exports viable to the ever shrinking purchasing power of our neighbors in the south who are insolvent. The only outcome I see is default. How else can you balance the books? And what is going to happen in default? I don’t know about guns and squirrels but I think the middle class will be broke and that is everywhere.

Again, deflation makes your purchasing power go down goes down but your debt burden stay’s the same. As more and more jobs are lost prices have to fall because more and more people cannot buy. with more and more people not buying the cycle repeats downward not upward. we have little control as we are an exporter and our economy is dependent on our neighbor. this east west bashing also showes when times get tough people finger point into stupidity. Its not Ontario ,Alberta, BC or the maritimes that started this so stop gloating over another Canadian loosing his job, he has a family and his income keeps the economy going. In my opinion it was very bad stupid planning by central banks that wanted to keep the party going by depressing interest rates and letting credit run free. People should demand arrests but that will not happen. A Couple of token madoffs will make it look like the government is doing something but the true criminals got out long ago and are laughing their asses off.

just a rant , could be wrong and probably typo’s everywhere but I just had to get this off my chest.

#98 dodgedabullit in Alberta on 02.17.09 at 7:52 pm

Greetings: Main Street America is beginning to fight back:

#99 timbo on 02.17.09 at 7:56 pm

#92 james R

I’m firmly in the deflation camp, Mish has some really strong arguments supporting deflation that I find logical and well supported. I just can’t quantify why food has not been affected

just a guess but we have to have food. growing,shipping,processing and markets that sell to the consumer will not go away unless the population moves. Everyone grow a garden,get a cow and chicken and prices will drop. that will not happen so your trapped.

#100 john on 02.17.09 at 7:57 pm

Please bloggers keep your comments short and sweet.

#101 Vik on 02.17.09 at 7:58 pm

#33 Bill-Muskoka (NAM) Here’s another one :
GM – Government Motors

#102 Darlene on 02.17.09 at 8:15 pm

# 24 Al on 02.17.09 at 8:40 am

I loved this part of your post:

Taking on excessive debt to bid up asset prices (housing/equities/commodities/whatever) is like drinking alcohol. It feels good for the first little while and seems like a great idea. You’re enjoying your profits or buzz. As you continue, you start to get the feeling something is wrong but it’s hard to stop because you’re drunk on greed or booze. Eventually you crash, as do the markets. Next up is the hangover. As you pointed out there doesn’t seem to be a way to fix it, and that’s because there isn’t. The perma bull will predict they won’t get a hangover just before passing out, while the doom and gloomer will swear the hangover will kill them. It’s unfortunate that in economics we all get a hangover whether we drink the kool aid or not.

It’s one of the best analagies that I’ve read so far. Well done.

#103 Eduardo on 02.17.09 at 8:19 pm

The reason why food prices are increasing is because food and nessecities are the first things to increase in inflationary environments. Also, worldwide demand is increasing constantly.

Inflation is the product of a loss of confidence from both the buyers of debt and consumers. Garth said above that we all have to turn off the lights because the economy is over if nobody will buy the debt, but this is wrong…

QUANTITATIVE EASING (Bernanke wrote papers about it)

The US will be and is being forced to make a conscious decision to inflate their currency. Benefits are:
-debt becomes smaller
-favorable conditions for exporters. Increase manufacturing industry

#104 Jeff Smith on 02.17.09 at 8:21 pm

Holy Smokes!!! GM/Chrysler death reflex is gonna be around 50,000 job losses! We are gonna be in for a ride folks!

#105 Dan in Victoria on 02.17.09 at 8:23 pm

Just finished listening to this,have to pass it on good explanation about real estate, money supply, debt,etc took two days it filled in a lot of blanks for me.wwwchrismartenson.com The crash course.Got the link from one of the tinfoil forums.I saw your picture of the bike going down yesterday then looked across at the book picture”after the crash”made me chuckle.Dan

#106 Jeff Smith on 02.17.09 at 8:24 pm

#6 First stone on 02.16.09 at 11:26 pm

Garth, are you Tom Vu in disguise?

By the way whatever happened to Tom Vu ?? I remember that guy, he was some-one we admired back in high school. My buddy wrote in my year book: “If you ever become famous and rich like Tom Vu, please don’t forget us”. Somehow a guy with lots of nice babes and fancy roll-royces really enthralled us.

#107 David Bakody on 02.17.09 at 8:28 pm

NEW YORK (CNNMoney.com) — General Motors and Chrysler LLC said Tuesday they could need an additional $21.6 billion in federal loans between them because of worsening demand for their cars and trucks.

Wow ….. if they do not get this money ….. more housing loses and the spin off loses could mount to numbers never heard off in many years if ever ….. for what it is worth Toyota is not doing well either ….. Dubai is not selling high priced cars and has stopped construction on Condos and laying off thousands …. all big money not flowing back home. Not good. Pay down debt and save wisely ……

#108 ThumbsUp on 02.17.09 at 8:48 pm

#85 Dave
“I think money is subjected to the same supply/demand rules as any othe market. Money created out of thin air and interest on top of that money created out of thin air should have inflationary effects.”

Price of money = interest rate, quantitive easing brings down the interest rate, made credit cheap, however it doesn’t mean demand for credit will go up, Japan has kept their interest rate near 0 for decades. Japanese don’t invest in Japan, everything from labour to RE is still too expensive.

Debt = money, speaking of money created out of thin air, look back at 2000-2008, all those subprimes mortgages & LOC are the real money from thin air.

Today’s billions of bailout money will only create bunch of zombie jobs that will only make the pain look less obvious but last longer and go deeper, make political sense, does not necessarily make business/economic sense.

#109 Rural Rick on 02.17.09 at 8:57 pm

We will see what tomorrow brings to those underwater in the States. May be it will be a practical plan that the markets like. We can only hope.
On the off topic of global warming. I was at a meeting six months ago when the Ontario government specialist on global warming said “The time for mitigation is passed. We can only work on adaptation.”
Guess it really is a scam.

#110 Davinci on 02.17.09 at 10:27 pm

Hyperinflation is not just caused by the printing of money it’s also cause by the lose of confidence in the printed money.

With that said large dollar holders and US debt holders may lose confidence in the purchasing power of USD.

So what the a Canadian says.

Well I’m not sure if you heard of the agreement called Bretton Woods. Well it was agreed that all countries back their currency with the US Dollar and the US Dollar was backed up with gold. Are the dots connecting yet or do I have continue drawing you a picture?

Finally history has a 100% track record for fiat currencies. They all end in hyperinflation. The only question for us worry about is when? Now or later.

#111 kitchener1 on 02.17.09 at 10:31 pm

All you people crying inflation please pass me some of that BC bud that your smoking.

For inflatation to happen a country has to devalue by printing $, even though the US is in bad times money managers the world over are all making bets that its is to big to fail. The US economy might stagnate but its not going to go Zimbabe anytime soon.

We have a major OVERCAPCITY problem in North America–too much of everything, too many houses,cars,pizza stores,barber shops, electronics etc… Well times get tough people sell their assets to much assets = deflation. That is were we are headed in the long term.

#112 Dave on 02.17.09 at 10:49 pm

You should do your homework! In all five big deflationary contractions in the past 300 years, which occurred in 1720, 1772, 1825, 1873, and 1929, gold and gold stocks were the best performing asset class throughout the hard times. In all five of those contractions, governments and central banks of the day also embarked on massive stimulation programs that had no beneficial effect.
how can you inflate your economy when it is shrinking because of the inability to extend credit for growth?

look, as I mentioned, I know of people that were concerned with all of this before it was an issue. I was prepared for a period of deflation, however, these same people warned that anytime there was a period of deflation going back to biblical times, the end result was rampant inflation! The reason: government intervention. So I was preparing for all of this accordingly. So when words like “stimulus” surfaced, I get a bit weary because everything is playing out the way some high-profile economists have predicted. It is argued that stimulus during periods of deflation only prolong the inevitable inflation, as governments throw more and more money at the problem rather than let the market sort itself out.

I do admit I haven’t paid enough attention to how gold responds in periods of deflation. I know that the mining companies would benefit during deflation and would suffer during hyper-inflation. I’m not sure why the physical metal would be so valuable in a deflationary economy considering the purchasing power of the dollar is strong because of price reductions from cost cutting measures from companies etc.

I think society expects these stimulus’ or injections to change the market instantly and they don’t so governments continue with the injections. Someone mentioned that stimulus packages had no benefit in the past, which I agree with. The argument is that they did eventually have a negative effect on the economy by means of inflation.

#113 daystar on 02.17.09 at 11:35 pm

#58 barb the proofreader

Almost always agree with you on everything you say Barb and just so you know that I’m not picking on you, I’ve felt over the last while that you are of a genuine loving spirit, one real sharp cookie, highly passionate with your endevours and to put it bluntly, one of the good ones ;-)


Greed is not fear on steroids. If you had said it was the cause of fear on steroids, I wouldn’t split hairs, but you didn’t. ;-) (that, plus I’m indirectly up to something) Greed isn’t desperate. Greed doesn’t look over its shoulder and follow the path of the rabbit.

Is Greed blind? Selfish? Not caring for tommarrow? Criminal? Evil? Destructive? Ego centric? Self centred? Disconnected? Heartless? Hoarding? Dark? A lust for power, unaccountably pchycopathic? Greeds effect is fear on steroids from the irreversible destruction caused but in the final analysis, Greed is born out of a lust for power, the action to the reaction fear on steroids being a mere effect, and it can only be defeated with its opposite. Charity. Generosity. Caring for the future. Lawfulness. Good. Creation. Connection to the needs of all other life and their supporting environments. Compassion. Sharing. Light. Vision… Love, holy and accountable.

You are right in pointing out that humans are pathetically weak when they are immoral and insensitive beyond their own individual needs. And these weaknesses are exploited by predators motivated (and pathetically weak) by their own lust for power, blinded to the truth that this power they covet, however proudly powerful, is temporary… fleeting… so temporary that the cost to such power, the damage to the environments that support life for generations upon generations, when one dies and finally steps outside of the box, realizes that they were temporarily insane far too late.

Was it planned? Or simply predictable. Its about as obvious an answer as consumption and development racing at hopelessly unsustainable levels for life on any planet to survive and the damage if left unchecked and it was and still is in cases… we’ve yet to realize or let sink in the damage done not so much so with the reckless destruction the lust for power that gave birth to greed on our forests, waters, air and earth, but in the reality that we’ve overbuilt, overdeveloped and now what are builders to do?

(Jesus was a carpenter, sure but… 24/7?)



Planned? One look at Exxon’s directors tells a tale all in itself without the need to source the directors of the supersix. Is it any small wonder readers why Condelleza Rice stepped down as director of Chevron to fill the position of National Security Advisor? What was Cheney’s old job again? That they control the whitehouse’s energy policies under GWB was a given. Did the supersix orchestrate $140 barrel of oil valuations with Saudi blessings, encouraging consumption, consumer debtloads, bank overextentions, overdevelopment, anything they could to consume more energy, consume, consume, consume?

And how far back does it go… Clinton and his food for oil scam, GWB senior and his oil wars, Reagan, how far back does it go? And did the Saudi’s help through and through? You know the answers. Through the feds, fuel MPG regs that are sadly breaking the backs of our automakers who in many ways have been forced to make guzzlers… to consume, for consumption is what drives prosperity, drives wealth, but overdevelopment, overconsumption, greed… is what drives environmental degradation, ecological collapse, recessions, depressions, desperation and death. They didn’t think it through. Thought only for more power.

What has JP Morgan bought recently, the ones who were formerly Manhattan Chase, with a hand out for every barrel of oil sold with U.S. currency… and where does the former chair again sit now? And did they know the results of boom and bust? Did they orchestrate it? Plan it? Plan to make money off of boom AND bust?

JP Morgan Chase history is another tell in itself.


Again, Exxon is the mother of all boards, with most of their directors being ex chairmen (the biggest shareholders) themselves. They could inarguably be the most powerful board in the world, And all throughout history, whoever controls energy, controls the world. Its about power, Barb, Greed the ugly dark byproduct of their lust for power and the big players haven’t thought it through and here’s why.

They can’t buy environments. Micro, maybe but macro? To damage macro is to damage their ability to freely move throughout the planet and the time is coming where even the fattest of cats will no longer be able to go where they want because of environmental damage from their choices to encourage high rates of consumption for power at the expense of all other life. And they won’t be alone. And in the end, they too, will realize that nothing in hidden under the stars.

Again, the answers are there. Charity. Generosity. Caring for the future. Lawfulness. Good. Creation. Connection to the needs of all other life and their supporting environments. Compassion. Sharing. Light. Vision… Love, holy and accountable, freedom can only come from self control. It all starts from within and in time, we learn through practice that in order to lead, one must follow these truths and in order to follow, one must lead… by example.

And… if we don’t know this… follow and believe the examples set by such men discussed to be fit for leadership over the answers given, we will follow such men to our own doom. I’d much rather follow and believe the examples set by a carpenter who took the time to build a kingdom with power that was far from temporary and what comforts me is that I know I’m not alone but what of the example of my own? For it all starts from within…

#114 Bill-Muskoka (NAM) on 02.18.09 at 9:36 am

#113 daystar on 02.17.09 at 11:35 pm

That was one fantastic comment. Thank you.

#115 ted on 02.18.09 at 10:04 am

daystar #113

I am so tired of hearing about war for oil. America has been in undeclared wars for decades. There is a common theme to most of them and its not oil. Tired of people trying to look intelligent and independent but keep on rehashing theories made popular by the MSM.

#116 barb the proofreader on 02.18.09 at 4:51 pm

#113 daystar on 02.17.09 at 11:35 pm..”that, plus I’m indirectly up to something”
Most of what you say I’ve said before too, well, except the holy part, I think that’s a diversion that distracts from universal true understanding and therefore hinders the progress. Truth and education are the keys. For humans to progress, we need education. So-called Elite groups, and you and Bill-M have covered this too, have become so good at nudging everything their way, it’s so obvious, that we all have to roll up our sleeves and get the world talking about them.
Hey, don’t forget the Iran-Contra affair, too, Bill-M. And that’s a good example where you can see through the facade. There you have Oliver North.. and from him it’s easy to connect the dots to his associates. Where do the dots connect to? Do a historical fact check on the Who’s Who of CNP. Some pretty bad bigots with money, and who falsely cling to being the so-called moral majority. As Bill M has pointed out in the past, “The Moral Majority was neither moral nor a majority”.
A true morality comes from doing good just for the sake of doing good. No strings. No interference. And that’s what I find most human beings are about, just naturally good, no strings attached. So who are the devils tipping things rottenly for our world? Our world troubles are clearly coming from the holier-than-thou Rich Elites who want to control others – they finance and nudge and tip-over democracies in places they don’t like – they are a big, big problem, and we have to talk about that more openly, or it will get a lot worse.
BTW, I’ve had the good fortune of knowing that Exxon is Evil – as evil as evil gets – known that since I was a teen.. We lost our family home because of an error the former company made. My dad managed a discount gas station of theirs, and for quite awhile they overpaid him 3 cents a gallon too much. When they told dad this, they demanded all the money at once. We had no money.. we lived in poverty, but they would not allow any arrangement over time to reimburse their error. And it was their error. Dad and Mom were forced to sell our home, when housing prices were rock bottom, and they never owned a home again and they remained poor – couldn’t even afford a funeral for my mom. For over 20 years my parents had paid a monthly mortgage of $85 and it was nearly paid off by the 70’s, but they were forced to sell our family home for $17,000 .. so needlessly, because of the Greed of an Oil and Gas giant.
Maybe that’s why I’ve always been ahead of curve in understanding these corporate monsters, and never trusting anyone.

And BTW, Greed IS Fear on steroids. I guess you have to think it over.

Think cave man.
He gathers and hunts and builds his protection. That’s all he Needs. If he loses those, fear kicks in. To calm fear, he rebuilds and re-secures his food source.
To want more food and shelter than is reasonable, is Greed.
Greed is therefore Fear on steroids.

#79 Bill-Muskoka (NAM) “it is the result of decades of universites teaching a false economic theory”

As you know Bill, we agree,
And Harper is a PRIME example of one of those MBA’s (Master Bullshit Artists) who learned an INCORRECT economic theory in the late 70’s — so here we are up to our necks in it – as predicted for the past 2 1/2 years. To boot, Harper’s parent worked for the Evil Imperial Esso, and he worked in the oil trough too. Our own Prime Minister is MADE of the very cloth that strangles us. No wonder he’s incapable of telling the truth.