Remember to be human

workers1

We stood around at the end of Gate 16, the way business travellers always do before a flight. Sadly I have a face that’s hard to disguise, so a steady stream of people came by.

Halifax is just small enough that when something happens – like four or five hundred people going to a financial lecture – a good chunk of the city hears about it. One conversation I struck up was with two guys in the HR office of a major international manufacturing conglomerate with 36,000 employees. A third of those fabricate auto parts, with plants across North America.

“Well, we got the letter just last week from the big guy,” one of them commented as he fingered his boarding pass. “Be respectful, it said, and remember to be human, because what’s coming will not be easy to do.”

The job terminations, he said, will probably be in the thousands. “And it will be a tragedy. I hardly want to go back.”

And we boarded.

Driving back from Toronto airport I was curious to learn of the deal the carmakers were coming back to Washington and Ottawa with. The radio turned into another font of bad news: GM needs billions and billions more to survive and even then will be shuttering five more plants and laying off another 47,000 people. Add in Chrysler, and more billions will be spent while thousands more will be sent home.

Back home I caught an interview with Bank of Canada boss Mark Carney, the man who just days ago said everything would be okay by this time next year. Today he was opining consumer debt in this country – and how could he not? Smashing the myth Canadians are so much smarter about money than Americans is a new Deloitte report showing household debt equals 130% of disposable income, a higher ratio than in the US. In fact credit card debt alone is $80 billion – a number that has been increasing about 10% a year.

About this time, Messiah Obama was signing his stimulus package in Denver. A couple of states away, legislators in California were about to pull another all-nighter as they try to pass a $14-billion tax increase. Yes, a tax increase – in a time of recession, deflation and job loss. Without the extra revenue that state, which has a bigger economy than Canada’s, will lay off 20,000 civil servants, slash government services and shelve 200 public works projects. It has a deficit now of about $40 billion – not far off ours.

And tomorrow Washington is due to release its mortgage rescue plan which, rumour has it, will see $50 billion go directly to people to pay off a portion of their home loans. Imagine that. Buy a house. Get over your head. Can’t make the payments. And the government bails you out of your own bad decision.

Is this the end game for America? And, by extension, us?

Not hard to reach that conclusion, as devastating as it is. We are snuffing hope and ambition with every job lost. We’re rewarding corporate failure. We’re destroying the free market and throwing into question personal responsibility.

Political leaders tell us there is no choice but this. Spending, debts and deficits will mushroom out of control, with no guarantee the plan will work. Badly run companies will be showered with money but without any realistic hope they will become better. All that’s certain is a few million more people will be going home to weep.

Lately there have been many comments on this forum that unfettered inflation will be our real challenge, the result of government overspending.

If we get it, fall on your knees with thanks.

108 comments ↓

#1 Irene on 02.17.09 at 9:10 pm

This is devastating. Why are the car companies even getting any monies at all from the stimules packageif they are really serious about saving jobs & yet they still keep laying off their employees while all along they are the inept people and begging for tax payers money. What a greedy bunch of useless people.It seems to me that the only jobs they are trying to save is their own. Something is very wrong here. Let them go bust because they have not had the brains to foresee making cars that buyers want and can afford to run. Maybe it’s the employees that should be in charge running the companies and boot all those blood sucking Cleo’s and director’s right out without a dime. You know we do feel sorry for all the employees but they need to stand up to those unqualified managers and CEO’s.

Enough is enough already. If these high paid managel people cannot manage , too bad they shouldn’t be there anyway. Do what all the other cash strapped business are doing. Work it themselves and earn their own pay check’s

#2 Bottoms_Up on 02.17.09 at 9:37 pm

Japan now shrinking at the rate of a depression:

http://www.theaustralian.news.com.au/story/0,24897,25064376-643,00.html

Latvia in the same boat and deflation is around the corner:

http://www.businessweek.com/ap/financialnews/D9682NJ80.htm

#3 bumbum on 02.17.09 at 9:40 pm

“Buy a house. Get over your head. Can’t make the payments. And the government bails you out of your own bad decision.”

that makes me want to cash out all my savings and put them in my backyard then borrow as much as i can and buy a beautifuly macmansion with 0% down. pay the minimum mortage for awhile then stop paying and govt will surely come to aid. life’s beautiful.

hope this doesn’t happen in canada. else, i’ll be the first to carry sandwich board sign “garth turner for PM”.

#4 Lance on 02.17.09 at 9:40 pm

“Lately there have been many comments on this forum that unfettered inflation will be our real challenge, the result of government overspending.”

The inflation that is coming is not the good kind. Instead of our asset values dropping with deflation, our asset values will drop with inflation: the cost of basic survival will increase while the price of everything else continues to depreciate. The deflation we’re experiencing now is the first wave in a tidal wave of asset devaluation. The next will be a bout of nasty inflation coupled with negative (real GDP) economic growth, serving to lower the purchasing power of the average worker’s wages (which will not be increasing with this inflation) and significantly lower the collective net worth of the middle class.

Our countries have been nearly bankrupt for years, shipping productivity overseas and living high on the hog with a growing mountain of debt. Now that the game has ended, we’re left penniless and without the manufacturing capacity to produce our way back to prosperity.

Deflation, inflation. It will be a long way down, my friends. Be prepared to quickly move from your cash positions when the winds change.

#5 Dee on 02.17.09 at 9:44 pm

Everyone is worried about inflation but deflation is much worse.

Carney may have to raise interest rates. Better than deflation.

Mr. Garth? If you haven’t typed in .com to your greaterfool you should give it a read. If more people read the stories of those losing their homes in the U.S. perhaps they would realize how we dodged a bullet up here. There by the Grace of G…..

The subprimes wasn’t all about buying ‘things’ unless you count the health of a loved one frivolous.

#6 Flip on 02.17.09 at 9:58 pm

I’ve been also following this website:
http://www.canadian-housing-price-charts.235.ca/charts.htm

it has great charts and also predicted this would happen… hand on tight folks… we’re going for a ride!

#7 average guy on 02.17.09 at 10:07 pm

Irene,” what a greedy bunch of useless people”. Much too harsh of an assessment but I do believe that the autoworkers will agree now that they were overpaid for the mindless assembly line work many of them participated in. They were happy to ride the wave, even if it meant the cars they were producing were becoming ever increasingly overpriced on the world market. The workers chose to believe the union hype, and the Gov’t chose to look the other way during the shotgun negotiations at contract time. Yes, many more auto workers will lose their jobs and pension benefits. That is the sad reality. The hierarchy of the unions?… well that’s a different story. I suspect their pensions will remain intact. Some of them might even become TV celebrities.

#8 Observer on 02.17.09 at 10:16 pm

Absolute insanity! They are bailing out the idiots that fell for these ridiculous mortgages? How insane is this becoming? Where’s Darwin when you need him?

#9 average guy on 02.17.09 at 10:30 pm

The Big 3 is not blameless here. They’ve had plenty of opportunities to do the right thing but it would have meant they would lose their fat cat salaries and pensions. It’s time to do the right thing now. Bankruptcy IS the right thing. Only then will they escape from the outrageous pay packages for both management and the workers that have haunted these companies for decades. Not to mention the bloated legacy costs attributed to the retirees. It’s time to start fresh. Survival is not guaranteed.

#10 Mike B on 02.17.09 at 10:35 pm

It would be a good thing if Garth ran for Mayor of Toronto . He could help sort out the financial mess we are currently in and perhaps set a standard for the rest of Canadian cities. Miller would be best left to deliver nebulous speeches on the viability of 500 sf condos as affordable family dwellings. Who needs sominex!

#11 Jonathan on 02.17.09 at 10:44 pm

Not if the US dollar collapses…

The US thinks it can just print money and send it abroad to pay for expenses. It doesn’t affect inflation because there is demand for the currency outside the country. But the foreign coffers are flooded, Asian reserves unnecessarily large and commodities such as oil are moving to the Euro. It is safe to say that demand for US dollars has peaked, after benefiting recently from an extraordinarily risk adverse world. From here on in, the US faces decreasing demand for its dollar.

At the same time the US is throwing trillions of dollars, money it doesn’t have, to fix the system. The question is, where will the demand for greenbacks come from? Savers lined up to buy 10 or 30 year government bonds at 3% interest is a bubble. The rate does not compensate for risks of inflation or volatile exchange rates. When demand softens, the US will have no choice but to raise interest rates significantly to keep investors interested in their dollar even if it means sending the economy into depression. Otherwise it will lead to hyperinflation – something much worse.

On the weekend I had the opportunity to sit down and have an interview with the Vice President of the largest investment bank in Canada. He agreed that government bond rates were “a bubble” and that the bank was forecasting intense inflation within the next five years.

#12 Sondra on 02.17.09 at 10:48 pm

Like an episode of “Weeds” people who were hard working citizens, without work, and no job in sight will need to find an alternative source of income.

The pot and other common street drugs are a public secret, used by the blue collar worker, white collar worker, politicians, big business executives, even retired baby boomers. It’s easy to get and it is tax free.

Big money is at stake. In BC the pot business is larger than forestry and mining combined.

Bribes are the “taxes”, and bullets and muscle are the enforcement.

Much to my horror I know two people involved in this business. One is a family man with a wife and two kids. The other is just 14 years old. The 14 year old looks at the parents who work and don’t have time for the family. He thinks they are “chumps”. He sees famous people who get away with drugs, dog fighting, and other crimes with impunity. First he was an drug runner, now a drug dealer, and he can have people seriously hurt with one phone call.

This is our future, this is the face of easy money, and layoffs, poor management, people who work too much, and pay too little attention to what matters,……… the spouse and the kids.

Come to BC, to the Olympics, never mind that 4 year old children watch their mothers get gunned down while driving to the grocery store.

#13 Jeff Riverdale on 02.17.09 at 10:49 pm

I thought I would add my 2 cents to the deflation / inflation argument. I agree that at the moment deflation is an issue. However, I think inflation will be a much bigger problem starting in the next couple of years. Below is a link to the St.Louis Federal Reserve’s Adjusted Monetary Base.

http://research.stlouisfed.org/publications/usfd/page3.pdf

Basically what this graph shows in the amount of money the US government has created. The Federal Reserve was created in 1913. From its creation to around September 2008 the Adjusted Monetary Base was about $850 Billion dollars. In about 4 months the US created as much money as it did in its previous 95 years.

The Adjusted Monetary Base is what gets ‘leveraged’ (or is the base for the velocity of money) So back in 2007 when everyone looked through the world in rose coloured glasses and individuals didn’t shy from taking on debt for mortgages and business expanded because of artificially low interest rates the multiplier on the base was say 15 times. So the US economy was $850 Billion Monetary Base X 15 multiplier or a ~ $13 Trillion dollar economy. Now that everyone is trying to pay down debt and save the multiplier is down to say 6 for example. However, now the Monetary Base is larger at ~$1.7 Trillion, so the economy is a ~$10 Trillion economy.($1.7 Trillion * 6=$10 Trillion) But as this base increases it takes smaller and smaller amounts of ‘confidence’ or leverage from individuals to bring prices up and create inflation. So for example if people start borrowing only at 60% of the previous high at the new monetary base ($1.7 Trillion x 9 = $15 Trillion economy = massive inflation)

I know the chart does show a slight drop recently (maybe those Wall Street Firms are paying some of that money back so they can lavish bonuses on themselves and not be restricted by the new CEO Comp laws) but Treasury Secretary Tim Geithner mentioned last week that the FED may buy another $1 Trillion in toxic assets from the Banks which would just add another Trillion to that Adjusted monetary base chart and you can see how sensitive that money velocity or leverage can slighly increase and start inflation.

Remember, the economy in Zimbabwe sucks but they still manage to have inflation over 1,000,000% per month. Not that we’re going to get that bad here just saying inflation can come in spades when you have unlimited currency at your disposal.

#14 North Vancouver Citizen Jr. on 02.17.09 at 10:56 pm

Nationalization Talk Heating Up (C, BAC)

http://www.businessinsider.com/nationalization-talk-heating-up-2009-2

…What the U.S. needs to do…

http://market-ticker.denninger.net/archives/791-To-The-Republicans.html

#15 POL-CAN on 02.17.09 at 11:10 pm

Ron Paul: What If

http://www.youtube.com/watch?v=2CmXz_QYvjs&eurl=http://sootandashes.blogspot.com/&feature=player_embedded

#16 kc on 02.17.09 at 11:35 pm

All the questions about inflation and hyper-inflation that get asked on here need to heed what garth is saying that it IS NOT coming to a town near you soon.

this is a simple explanation as to why it isn’t.

“While government and media commentators are still attempting to assure the public that there could be no repeat of the 1930’s, – a deflationary spiral leading to global depression, the commodity markets are telling a different story. Deflation is seen as a precursor to depression, because falling prices generate less cash flow to companies, reducing their ability to pay-off debts, which in turn, can lead to a vicious cycle of mass layoffs, production cutbacks, and weaker consumer spending.”

We are in a mass deflationary spiral.

All the talk in here about the new AMERO and can’t understand why this is also pure BUNK need to read this article. It will explain the reasons that it will not happen, (at least not in our life time). For all concerned countries to adhere to the “AMERO” the challenges are greater, and the risks are extremely costly.

All you need to do to understand why it won’t happen is to read this essay about the unravelling that is taking place in Europe with the “Euro”.

Euro Currency Fractures as European Bond Markets Diverge on Default Risks

http://www.marketoracle.co.uk/Article8942.html

cheers

#17 HJD on 02.17.09 at 11:37 pm

I’m no longer just worried. The continuing bad news about both the world economy and global warming scares me.

#18 jartann on 02.17.09 at 11:49 pm

Canada does not equal Japan, neither does the USA. Japan’s economy has not grown since the early 90’s (remember all those ‘experts” who told us that unless we did things the way they do them in Japan, we were in serious trouble?).

if demand for automobiles drops by 25% (by the way it fell by 90% in the depression), it doesn’t matter who is running the auto factory or the companies supplying it. No demand means no business. Or are people suggesting that the factory workers be kept on to build cars in a market where demand is so low.

This is not the “end game”. There is no such thing as an “end game”.

This is a bad, ugly recession. Governments are making it worse. Particulary the one being run by the big Zero, the Messiah, the One and his friends Nancy Pelosi (what a freak show she is) and that dweeb Harry Reid.

All things must pass. Recessions come and prosperity returns. People will adapt and already will. No “grand plan” will do the job-rely on the intelligence, energy and creativity of people and things will get better.

#19 Davinci on 02.18.09 at 12:28 am

If we just get inflation I will fall on my knees with thanks, if we get hyperinflation, I will fall on my knees praying for those on fixed incomes.

The only way I see hyperinflation is avoided is if Central Banks start raising interest rates so I can dump my gold and buy bonds. So what are the chances that they will raise rates and blow up the consumer and the government, both of whom can’t afford their debt never mind high interest payments.

The path is clear, the only way out that is palatable for politicians is to inflate the money supply.

Got Gold or Silver?

#20 rick in Surrey on 02.18.09 at 1:15 am

Hi Garth,
In light of our growing financial woes, I thought it to be only fitting to compose a new National Anthem for us here in the Great White North. We have always been so smug about how we are smarter and wiser than our neighbors to the south, yet it seems we have screwed up our own finances worse than they did their own. So here you go Canada (and a big pat on the back To Mr. Carney for doing such a bang up job!).

Oh Canada,
our homes and overpaid for land,
to pay the lot,
will all thy sons demand,
with glowing cards,
we see thee rise,
the true interest rates and fees,

From far and wide,
Oh Canada,
We stand on curbs for feed,
Governments keep my land,
It’s too expensive for me,
Oh Canada,
Watch as our finances bleed,
Oh Canada,
We drown in debt from greed!

PS-before anyone says I am not a proud Canadian, I have been with the Canadian Forces and with the RCMP. I am just tired of watching all the foolishness from people these days.
Rick P

#21 gold bug on 02.18.09 at 3:10 am

Be thankful for inflation?

Milton Friedman called and he wants his crazy theory back.

#22 Mike (authentic) on 02.18.09 at 3:17 am

I heard on CNBC last night that even IF GM goes into bankruptcy, the government will become debtor in possesser, meaning the gov’t will be responsible for paying for GM’s bankruptcy, to the tone of $35-40 BILLION dollars!

How the heck does that happen? A company run so poorly for the past 35 years deserves billion dollar taxpayer bailouts, tells tax payers they will only receive 30 cents on the dollar for their efforts, places the gov’t LAST in line for repayment and then doesn’t have to pay for it’s own bankruptcy.

About the Housing mortgage bailout plan, that’s just insane, rewarding the financial incompetant and punishing those who bought responsibly and then having those who bought responsibly pay for those who didn’t…

Who is the greatest fool now? The Gov’t or the Tax Payer?

THE INDUSTRY that should never fail:

Forget cars, FOOD!

– Also heard on CNBC that farm equipment sales are very down as farmers could not get loans to purchase equipment. Fertilizer sales and production was down (64%) as fertilizer bubble inflated last year. Expect LOW food yields this summer.

Growing food is the one industry that really shouldn’t fail, everyone can live without a car, try without food. Remember the food shortages last year?

Mike

#23 ralph on 02.18.09 at 3:24 am

If you suffer from depression do not go to this site. Garth you should put up a warning for people who suffer from this condition…..lol.

Your generator idea is a good one. However, I have one question. What are going to do when you are the only one on your street running a generator while the others are shivering in the cold? It could get a little crowded over at your place.

cheers

#24 new homes for sale in toronto on 02.18.09 at 4:29 am

humans tend to forget that they are humans coz others doesnt have any considerations at all now that the world is experiecing economic crisis what sould this people do to ease this burdens ?

#25 North Vancouver Citizen Jr. on 02.18.09 at 4:40 am

“”The Nationalization Train Has Left The Station

…The Financial Times is reporting Alan Greenspan Hops On Board The Nationalization Express and is sitting in the bar car next to Nouriel Roubini. The next stop is D.C.””

http://globaleconomicanalysis.blogspot.com/

#26 HalifaxFamily on 02.18.09 at 5:12 am

Just wait til the eastern bloc countries and russia default on their debt.

#27 HalifaxFamily on 02.18.09 at 5:15 am

http://www.marketwatch.com/news/story/russian-stocks-tumble-trading-suspended/story.aspx?guid={8FB99F30-712D-4980-A861-8C070365C221}&dist=TNMostRead

Russian stocks tumble, trading suspended
By Polya Lesova
Last update: 10:24 a.m. EST Feb. 17, 2009
Comments: 32
NEW YORK (MarketWatch) – Russian stocks tumbled Tuesday, prompting the RTS and the Micex stock exchanges to suspend trading for one hour at 4:05 p.m. Moscow time. The dollar-denominated RTS stock index plunged 9.4%, while the ruble-denominated Micex stock index fell 9.6%. The decline in Russia followed a tumble in oil prices and declines on global stock markets.

#28 Murray on 02.18.09 at 6:24 am

Fellow prisoners of debt. While we private enterprise guys try to get by the Gey Bruce Conservation Authority in teh Owen Sound area, where I live, hit the tax payer with an 8% tax increase. That is 28% increase in Conservation Authority levy in the last 3 years. Like Provincal Police Commissions, Conservation Authorities, have the power to levy, without recourse form elected Councils. How much can propery owners afford to protect swamps and beavers? Government employees don’t get it. Except for Health Care and Education, government is a luxury, not a necessity. They used to make coats out of beavers didn’t they. Save the oil sands, skin a beaver.

#29 Rhino on 02.18.09 at 7:49 am

It is easy to forget the human costs to those who are no longer in the corporate world. People like me, independent workers – the “self-employed” – who were prqaised last year for creating well over 70,000 jobs per year over the past couple of years. The myth that most are the “new entrepreneurs creating jobs” is misleading, when many that I know were forced into contract and part time work just to survive.

Yesterday, i lost 3 clients. All small business owners who are totally freaked out by the recession talk. All of whom have decided to stop spending on anything other than necessities. That means hunkering down to try and protect their business. To me, that means getting “fired” three times in one day. It also means their part time staff getting dropped, and more people without income. Folks like me have no access to EI, and are not likely to be reported in unenployment stats.

I believe the collapse of manufacturing, the over leverage of financial institutions, and games by our alleged political leaders, have resulted in a REAL recession that started in the late ’90’s. As good jobs dried up, people were forced into working harder to make less. The service industry still had enough business to hire and expand, but now that is collapsing as well.

The really sad thing? Folks like me, and many I have met due to moving in different circles, will not even be counted – until the welfare rolls skyrocket. Cities and provinces are already seeing their budgets affected by folks who have simply run out of options.

Sure… 20,000 from one company spread over the world makes headlines. The true human costs are significantly greater, and it is this “hidden economy” that is going to pop us and bite all these well laid plans in the butt.

Personally, I am not YET knocking on the door for a handout, but that possibility is definitely a consideration.

Meanwhile, we have a government cutting consumption taxes, making plans to help people make luxury purchases, and using government revenues to buy votes.

#30 Rhino on 02.18.09 at 7:59 am

#17 ralph on 02.18.09 at 3:24 am

(smile)

I have been thinking about a similar solution. Get a bicycle, build a frame, rip the alternator out of your car (can’t afford the gas anyway) make a frame, and pedal your way to energy self sufficiency and better health!

Think of all the bellies we could reduce! Think of the lower health care costs as our hearts and lungs become healthier!

The only aspect I am not certain about… any reduction in green house gasses, as we burp and fart our way to fitness and consume more calories??!!

And… my beagle is getting better at finding squirrels…

#31 Sail1 on 02.18.09 at 8:09 am

Its easy to see the direction that Canadian banks are taking.

“While the Bank of Canada does influence the pricing of very short-term commercial credit, the Bank of Canada does not set the interest rates that consumers receive on their deposits or pay on their loans,” the CBA says.

There’s a strong link between the Bank of Canada rate and the cost of raising short-term funds – hence the rates charged for short-term and variable-rate financing – when financial markets are stable.

But the link is less strong when financial markets are stressed.

“Banks look to us to communicate this complicated topic,” said Terry Campbell, vice-president of policy.

This is communication? Come on, guys. If the Bank of Canada rate doesn’t influence other lending rates right now, please explain how rates are determined.

Start telling customers what’s going on – in more than a sentence or two – and provide real insight, not a mere recitation of facts. Give us charts, statistics and graphs. We can handle it.

You need to try harder. Because if you don’t, you can expect the customer outcry to co

http://www.thestar.com/Business/article/589052

#32 timbo on 02.18.09 at 8:11 am

funny, and to the point North America

http://dailybail.com/home/2009/2/8/must-see-bailout-comedy-wanda-sykes-is-hilarious-explaining.html

#33 Rhino on 02.18.09 at 8:13 am

Garth said:

“A couple of states away, legislators in California were about to pull another all-nighter as they try to pass a $14-billion tax increase. Yes, a tax increase – in a time of recession, deflation and job loss.”

Huh? Seriously? Like, uh, SOCIALISM in the heart of free enterprise? Even if it is almost self centered in keeping their government running.

Gee… what a novel idea. Make those who are making steady healthy income help others in society who are hurting. Almost the direct opposite of what the neo-cons have been implementing over the past few years.

Why the hell we cut consumption taxes is beyond me. A bad idea then, and a worse idea now. VAT is the way to go.

Tax what we burn – not what we earn!

#34 molson cdn on 02.18.09 at 8:28 am

40 years ago,we were immigrants, our family grew up poor in northern ontario. it was a valuable lesson (that was beneficial) about economics — money management. you cant learn this in a book; you have to experience it–its the only way.

today,i don’t see any problems with the economy.
all i see are opportunities. Huge opportunities.
Hurray for 4-5% mortgages. Hurray for leveraging.
Canada is still the land of advantages.
Things can only get better.
The squirrels aren’t just looking for investment properities but for boats, vechicles, rv’s, etc……

In a few years, there wont be as many windows of opportunities as there is now.
This is an exciting time!

#35 Torquemada on 02.18.09 at 8:34 am

I decided a long time ago I would not buy a new car until I could go to a manufacturer’s website and order one–like I can do for almost any manufactured good. Car salesmen are just like realtors, useless middlemen who’ll never receive a penny of business from me.

I hope that an auto bankruptcy will force a rethink of the auto distribution model. However, seeing as how many dealerships prop up small towns, I don’t know have much hope of wholesale change.

Oh well, I’ve made peace with the fact I’ll never purchase a new car.

#36 john on 02.18.09 at 8:48 am

Obama’s 50 billion mortgage pay down rescue plan is a joke…very good for the banks and puts another 50 billion in their coffers–more money going to the corporate greed that caused the problems.Considering there are about 320 million people in the US…just consider what 50 billion would mean to 50 million mortgages ===$1000 pay down each which will not mean squat and not do a damn thing for the unemployed overextended homeowner……and thats going to make unfortunate peoples lives so much better?…i think not…but it will sure keep those bankers smiling. All these billions are not going to put a meal on anyones table but the corporate elite nor will they convince anyone to try to meet payments for a 200,000 mortgage on a 50,000 house. Oh yes and then there’s the auto plants billions and billions to save jobs to build cars no one wants or can afford while the auto plants lay off thousands more and are back at the table for more handouts. Anyone other than the Corporate elite that sees a future in this should lay off the “pot”

#37 Bill-Muskoka (NAM) on 02.18.09 at 8:58 am

Garth,

Why shouldn’t the people’s government bail them out as individuals? After all it is not the government’s money, it is the People’s. A lesson Canadians really need to learn about the relationship between the government and the governed.

Had Bush not blown billions over the past eight long years, an error that is over thankfully, the money would have gone towards the people’s needs instead of the U.S. War Machine. Granted those are jobs too, but their obsession with ‘defense’ is nothing more than a pig trough for the military/industrial complex. Something Government Motors has been feeding on for decades, i.e., the Hummer, Hughes Aerospace (another GM asset), etc.

Look at the corruption we have right in Ottawa with bid fraud. The Harper government is clueless who they work for. All the hyperbole over President Obama’s visit in the MSM seems to me to be a desperate hope that he will be able to wakeup Canada and we can get some functional government here as well?

Maybe he entourage of functional advisers will ‘enlighten’ the incompetent morons we have playing at their role in Oddawahaha? I doubt it, they are too stupid to grasp they are out of their depth.

Interesting, when one thinks about it, that California has a bigger economy than Canada. That says a lot about the real difference between Americans and Canadians. Americans believe ‘Yes, WE CAN!’ Canadians believe ‘Well, maybe someday we will, but do we have to?’

#38 North Vancouver Citizen Jr. on 02.18.09 at 9:05 am

It’s time for a Simple, “Fair Tax” in the U.S.
(Canada will follow)

http://market-ticker.denninger.net/archives/791-To-The-Republicans.html

No more IRS. No more BS. No more lobbyists gaming the system. Nobody has to file a tax return ever again, save businesses who already do monthly for their sales tax returns. Taxation becomes completely transparent and voluntary based on your desired level of consumption. It is a radical step, it will create a huge boost to GDP as every firm that has fled the US for Bermuda and similar will repatriate and in addition it will cut the compliance costs out of every American’s budget. Finally, it will tie government income inexorably to GDP, prohibit raising taxes without it being instantly visible to the public and provide incentives for capital formation – exactly what we need to create millions of new jobs.

#39 Jon C. Coates on 02.18.09 at 9:19 am

If GM goes bankrupt, there will be fire sale prices on their inventory of automobiles. This will force the other car manufacturers to match prices. This price matching exercise will lead almost inevitably to bankruptcy for Ford and Chrysler. That’s a prediction.

But, if they go bust, the stockholders will revolt against the dumb ass management that got them into this fix. New managers will emerge who will lead these companies out of their financial disaster state. Union wages will have to come into line and the industry will emerge stronger, leaner and fitter. The North American market will have resized from 22 million units per year down to a more permanent level of 14 million units, up from this year’s present level of around 12 million units.

The problem with bailouts is that we reward the incompetence of the management that got the industry into its present mess. Better to start over.

#40 613 Happy where I am on 02.18.09 at 9:24 am

Why are they paying the Big 3 to essentially keep the lights on??? And why do they want to bail out homeowners who can’t pay their mortgages or who can pay but their mortgages are worth more than the house is worth???
What has happened to personal responsibility and living within your means???

I think everyone who thought this big party we have been having was going to last forever deserves a big swift kick in the pants…

The sooner we lick our wounds and move on, the better… Stop expecting the government to bail you out… remember Katrina and those folks in New Orleans who didn’t have the brains enough to evacuate when a hurricane was bearing down on them…

Jeez! Enough already!!!!

#41 Sai1 on 02.18.09 at 9:27 am

#10 Mike B

It would be a good thing if Garth ran for Mayor of Toronto.

Give it a shot Garth, besides your sanity what else have you got to loose.

#42 David Bakody on 02.18.09 at 9:36 am

For all who have an open mind ….. I am thinking about opening up on some inner thoughts about this world wide mess (?) that would challenge your minds. Not quite sure yet as it may be best left to private conversation. On another note I was speaking with a very nice young Tim Horton’s pal and she mentioned she was disappointed that she missed Garth’s Halifax lecture, I was however able to pass on some important points for her to think about … wrt “After the Crash” …. to which we both agreed this is not all bad news …. and that is what is important!

#43 Steve (flyzipper) on 02.18.09 at 9:42 am

This seems relevant and quite timely …

http://www.ted.com/index.php/talks/barry_schwartz_on_our_loss_of_wisdom.html

#44 Jake on 02.18.09 at 9:53 am

Bill Muskoka Said:
“Had Bush not blown billions over the past eight long years, an error that is over thankfully, the money would have gone towards the people’s needs instead of the U.S. War Machine. Granted those are jobs too, but their obsession with ‘defense’ is nothing more than a pig trough for the military/industrial complex.”

Bill, open your eyes. They are just as concerned with defense and fueling the military/industrial complex. The error is not thankfully over. Stop drinking the Obama koolaid. More troops going to Afghanistan, and a continued presence in Iraq. Maybe our government will learn from him and increase our presence as well. Welcome to politics man. Say one thing and do the opposite. You are old enough to know better.

#45 Bill-Muskoka (NAM) on 02.18.09 at 9:55 am

And now for something completly different, but still very relevant. Our medicinal supply.

Yes, we have evolved in our knowledge of medicinal solutions, so here is how it has evolved.

Health Food
2000 B.C. – Here, eat this root

1000 A.D. – That root is heathen. Here, say this prayer.

1850 A.D. – That prayer is superstition. Here, drink this potion.

1940 A.D. – That potion is snake oil. Here, swallow this pill.

1985 A.D. – That pill is ineffective. Here, take this antibiotic.

2009 A.D. – That antibiotic doesn’t work anymore. Here, eat this root

Another lesson on learning from history!

#46 PTDBD on 02.18.09 at 9:58 am

The Travelling Salvation Show

Another day, another plan, another Ponzi, yes we can,can,.. can kick that debt can further down the road.

Do you notice how 75 Bbbbbbbillion just sounds like chump change now? Change you can believe in.

#47 Mike (authentic) on 02.18.09 at 10:02 am

General world PANIC! This is the sign I have been waiting for.

After reading 43 posts today and the markets yesterday even I’m getting panicky!

But, then it came to me, this is just the very start of the 3rd phase of the Kondratieff Winter Cycle we ented. I was wondering when we were going to enter this phase (talking about it a few days ago with my landlord)

Concern turns to -> fear turns to -> Panic turns to -> despair

Panic is normal is this Cycle, next is Despair.

Which means, we haven’t hit bottom yet, the markets are still going to go down, credit will freeze up further and interest rates will fall even lower.

Sadly, the light at the end of the tunnel will come when:

1. People show despair on a mass basis
2. The market bottoms
3. There is virtually no credit
4. We have outright deflation
5. Interest rates cannot go any lower.

When these generally happen we will come out of the Winter cycle and into Spring. But I don’t expect it till 2012 myself, although depending on how fast things get bad it may be sooner.

What a mess. Please take all precations necessary to help your family out in a depression.

Mike

#48 Pete on 02.18.09 at 10:20 am

#4 Lance – “move from your cash positions when the winds change”

Lance or anyone else, what’s the best thing to do with your cash if high inflation looks likely? I’m financially illiterate and have reasonable cash savings that I had intended for a home downpayment but now have no idea what to do with. I am very risk averse and I’m guessing the best thing to do for the long-term would be to buy a property in a couple of years when prices are normal again.

#49 donny on 02.18.09 at 10:24 am

“The Adjusted Monetary Base is what gets ‘leveraged’ (or is the base for the velocity of money)”

Increasing the monetary base while at the same time increasing capitalization standards (increasing reserves, savings, etc.) is not inflationary. You want inflation? Get the banks to start giving out no-doc loans, based on inflated house prices, to people who just lost their clerking jobs at Circuit City. The banks were giving out such ridiculous mortgages for one reason and one reason only; it was the only way to grow the market. And it’s the only way to get the market back where it was. And it isn’t going to happen anytime soon. The banks are in no position to do it, it wouldn’t be wise, and a lot of the types of lending involved aren’t even legal anymore.
As to California having a bigger economy than Canada, I’m not sure I’d want to trade places with them right now. Although maybe our crap will catch up with theirs. We’ll see.

#50 Dave on 02.18.09 at 10:26 am

“While government and media commentators are still attempting to assure the public that there could be no repeat of the 1930’s, – a deflationary spiral leading to global depression, the commodity markets are telling a different story. Deflation is seen as a precursor to depression, because falling prices generate less cash flow to companies, reducing their ability to pay-off debts, which in turn, can lead to a vicious cycle of mass layoffs, production cutbacks, and weaker consumer spending.”

We are in a mass deflationary spiral.

—————————————————-

everyone understands this it seems. There’s a few that are missing the point. We all know we’re experiencing a deflation. People are concerned what happens afterwards. A hyperinflation would effect the people sitting in cash and would basically wipe out any savings they had

This is fiction perpetrated by the bullion bunnies. While I advocate a gold position of no more than 15% of net worth, it is for insurance reasons and to participate in futire commodity price growth. There will be no hyper-inflation in this generation on this continent. — Garth

#51 dodgedabullit in Alberta on 02.18.09 at 10:41 am

Greetings: If someone were to call me up and offer to pay half the cost of a new pick-up truck for me, it wouldn’t happen . I agree with Garth, why should we reward corporate mis-management, and why should I take on furthur debt. My wife has re-located to Calgary, for work reasons, and we have furnished a rented apartment minutes from her job with articles from home and thrift shops. I discovered a dresser originally sold by Eatons, and made in Canada. The only new item we purchased was a matteress and box spring which were made here. I fully understand that our manufacturing industry has been collasping for a long time, but if I cannot purchase articles other than that made in China, why bother, it won’t help save Canadian jobs. I am a regular visitor to our local land-fill and I cringe as I see good things being buried by a bulldozer. The “Greater Tragedy” is that my local government will not let me remove stuff from the landfill, yet city hall touts us as a green community. What a bunch of bs. I am presently re-reading Pierre Berton’s book, “The Great Depression” and the quotes from the bankers and the politicans made back then are the same ones being flogged in the media today. Here is one ya just gotta love: “While no doubt a number of people have suffered owing to the sharp decline in stocks, the soundness of Canadian securities is not affected, Business was never better, nor faith in Canada’s future more justifies.” Prime Minister Mackenzie King, October 30, 1929. The book goes on to say that King had his investments in gilt -edged bonds, and lost nothing. Here is one that could have been published as we countdown to the 2010 Winter Olympics: “Vancouver people can create in 1930 the greatest era of activity and prosperity…that this continent has ever known.” Vancouver Sun. Try this for drinking kool aid:
http://www.calgaryherald.com/Business/Gloomy+economic+talk+self+fulfilling+prophecy/1292106/story.html

#52 Alberta Ed on 02.18.09 at 11:08 am

The local rag here in Calgary included a real estate supplement yesterday aimed at whatever Greater Fools may still be around. I suspect it was money wasted, considering the melt-down of the Alberta economy, which the provincial government has yet to acknowledge, not to mention, the folks at Calgary Silly Council. The deluge of bad news continues, but Mattamy Homes is planning a big development near Airdrie (they say…). It will be interesting to see whether real estate ads reflect the dismal economy once people start listing their houses again.

#53 Jeff Smith on 02.18.09 at 11:18 am

Stop it! You are ruining it for North Vancouver Citizen; ala “the future financial capital of the world….” ;-)

#12 Sondra on 02.17.09 at 10:48 pm

Like an episode of “Weeds” people who were hard working citizens, without work, and no job in sight will need to find an alternative source of income.

The pot and other common street drugs are a public secret, used by the blue collar worker, white collar worker, politicians, big business executives, even retired baby boomers. It’s easy to get and it is tax free.

Big money is at stake. In BC the pot business is larger than forestry and mining combined.

Bribes are the “taxes”, and bullets and muscle are the enforcement.

Much to my horror I know two people involved in this business. One is a family man with a wife and two kids. The other is just 14 years old. The 14 year old looks at the parents who work and don’t have time for the family. He thinks they are “chumps”. He sees famous people who get away with drugs, dog fighting, and other crimes with impunity. First he was an drug runner, now a drug dealer, and he can have people seriously hurt with one phone call.

This is our future, this is the face of easy money, and layoffs, poor management, people who work too much, and pay too little attention to what matters,……… the spouse and the kids.

Come to BC, to the Olympics, never mind that 4 year old children watch their mothers get gunned down while driving to the grocery store.

#54 Irene on 02.18.09 at 11:27 am

#39 John Coates: The problem with bailouts is that we reward the incompetence of the management that got the industry into its present mess. Better to start over.

That is precisely what I was trying to say in post # . Those people in the car manufacture industry were no better qualified to run the companies than you and I and should have been fired years ago. Greed is a dirty word and the root of all evil and as for the high wages the employees were making, that is peanuts compared to the CEO’s. Someone has to make a decent wage to pay the taxes the unemployed or the working poor can’t. Heck, we all may need a handout from the government soon and we need to know it is available and we in Canada as a government are dead broke. I say fire the government as well and get some competence there for a start. That might be the first step in solving a lot of problems we are facing today.

Cheer,

#55 smwhite on 02.18.09 at 11:41 am

#4 Lance

While sitting in traffic yesterday I was listening to the local AM news channel, which usually around 5pm EST has a 5 minute business segment with a gentleman by the name of John Budden.

For the past I don’t know how many years I’ve been listening to his blurbs, which usually fell in line with my thoughts on the economy.

He mentioned yesterday that he was recently invited and joined to a seminar from a local Ottawa that in a nutshell, focusing on “doom and gloom” type scenarios.

Mr. Budden had stated that there were approximately 25 persons at this meeting, when he asked how many of them were invested in gold, three people put up their hand…

1 out of 8 (about the same amount of people that actually do fact checking) doom and gloomers are only invested in gold???

Very telling! The herd hasn’t even made the move to precious metals, yet.

While many are claiming that gold has hit its peak(as in 1980, and it seems to be the same people that would have had you invest in financials a year ago) I believe that gold is simply at the same point it was in 1975, before the major breakout a couple years later…

http://www.zealllc.com/2005/gorex3.htm

So to add to Lance’s post, I agree, we haven’t seen anything yet, and one thing is certain, it isn’t deflation you should be worried about. All the signs are pointing to inflation. If you start handing over 100K cheques to struggling US home owners. Look out!

In relation to gold all stock markets are heading south…

DOW to GOLD is at 8.5, will we hit 1? If we do where will the DOW be at? 5000?

I think you bullion cheerleaders should be buying food and farms, n’est-ce pas? — Garth

#56 kc on 02.18.09 at 11:42 am

In a race to the bottom, I wonder who will win?

at present:

GM $2.10
CITI $3.00

#57 g s on 02.18.09 at 11:45 am

those responsible should suffer and should be liquidated to pay those suffering with no fault of their own. goverment should not intervene. and in rare cases it has to it should take (part) ownership and control and make sure it is made whole at the end before divesting. it is unfair to shift the burden/risk on taxpayers/residents who are prudent.

#58 smwhite on 02.18.09 at 11:51 am

#50 Dave

I love the precious metals play but I agree with Garth on HYPER inflation. It ain’t happening…

At the first signs of mass-inflation, interest rates will go up Volker style.

In the end, too much cheap money for too long is how we got here, and all government knows higher rates are the way out. Its just that the consumer is too vulnerable at this point to play that card, but it will get played sooner then later.

That will be about the time you want to lower your exposure the to pretty yellow metallic stuff…

Never put all your eggs in one basket, whether it be gold or real estate, stocks, bonds… Kinda the point of this blog isn’t it?

#59 Greg W., Oakville on 02.18.09 at 11:51 am

Hi #43 Steve (flyzipper),
Thanks for the link!

#60 Rhino on 02.18.09 at 11:51 am

#54 Jeff Smith on 02.18.09 at 11:18 am

Very well said.

#61 smwhite on 02.18.09 at 11:58 am

http://money.cnn.com/2009/02/18/news/economy/obama_foreclosure/index.htm?postversion=2009021809

Obama’s plan:

$ Helping borrowers who owe more than 80% of their home’s value to refinance and reduce their monthly payments.
$ Creating a $75 billion homeowner stability initiative to reduce monthly payments for at-risk borrowers by subsidizing interest rates. The goal would be to bring payments to no more than 31% of a borrower’s income.
$ Providing multiple incentives to servicers to modify loans and to proactively help at-risk borrowers while they are still current in their payments.
$ Creating a $10 billion fund to protect investors and servicers against further home price declines.
$ Requiring all financial institutions receiving government funds to participate in a standardized loan modification program, while seeking to have all federal agencies that own or guarantee loans also apply the guidelines.
$ Allowing judges to modify mortgages during bankruptcy, a measure the financial industry has strongly opposed.
$ Providing more Treasury Department backing of Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and expanding the number of mortgages the agencies back.

#62 Contractor on 02.18.09 at 12:01 pm

“Yesterday, i lost 3 clients. All small business owners who are totally freaked out by the recession talk. All of whom have decided to stop spending on anything other than necessities. That means hunkering down to try and protect their business. To me, that means getting “fired” three times in one day. It also means their part time staff getting dropped, and more people without income. Folks like me have no access to EI, and are not likely to be reported in unenployment stats.”

That thought is worth repeating, Rhino. I’m in the same boat. Became a ‘contractor’ out of necessity. Didn’t seem like a bad deal…was pulling a 6 figure income a year ago. However, I’ll be lucky to crack $40k this year. And I’ve got no future work booked at all at this point and am scrambling to figure out what to do next. Kind of sucks.

#63 dodgedabullit in Alberta on 02.18.09 at 12:08 pm

Greetings: Being human can mean getting scewed:
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20090218&id=9620951

#64 VooDoo on 02.18.09 at 12:44 pm

You heard it here first–Citigroup to ‘consolidate’ it’s operations (Burlington office to close, with the layoff of many employees, the rest shipped to Mississauga). Likely not yet in the newspapers.

#65 Marie on 02.18.09 at 1:06 pm

“I think you bullion cheerleaders should be buying food and farms, n’est-ce pas? — Garth”

Is it a real advice, or just an ironic comment?

#66 Future Expatriate on 02.18.09 at 1:08 pm

Just don’t know about that take on gold and hyperinflation… seems the richest investors feel otherwise.

Gold Hits Record Against Euro On Fear Of Zimbabwean Style Response To Bank Crisis

Funds Amassing Bullion

Call me a bullion bunny, but I’m in some very wealthy company.

#67 Mark on 02.18.09 at 1:13 pm

I remember when the governments used to try to help people who saved money rather than got themselves into debt…

Nowadays it seems that saving money is something the governments dont want you to do!

#68 ralph on 02.18.09 at 1:17 pm

President Obama today said:

“All of us are paying a price for this home mortgage crisis,” Obama says in a prepared text of remarks scheduled shortly after 12 noon ET Wednesday at a Phoenix area high school.

Actually the ones who are paying for this fiasco are going to be men and women just trying to make a decent living raising a family in affordable homes.

The rich don’t give a damn and will still be able to live in luxury.

#69 Got A Watch on 02.18.09 at 1:20 pm

I really get a good laugh from North Vancouver Citizen Jr.’s comments.

On the one hand, he links to Blog entries from Karl Denninger at Market Ticker, a deflationist uber-bear, or the UK’s Ambrose Evans Pritchard, who predicts the global economy will collapse soon.

Then he proceeds to tell us how Vancouver is immune to all this.

Bi-polar and delusional, to the extreme.

Why don’t you e-mail Karl and ask him what he thinks of Vancouver, the B.C. economy and the real estate markets there.

I have been a regular reader over at Market Ticker Blog and Forums since their inception in the early summer of ’07, and I am fairly certain what he would tell you, having had numerous e-mail exchanges with him, and participated in numerous debates on the Forum there.

He would say, with his usual bluntness,something along the lines of that “You are a delusional bubble-head. Vancouver is going to crater into a smoking hole, and real estate there will probably bottom at -70% from the peak, just like your muse, California. About 3X average income = average house, so if average income is $60K, average house = $180K”

Or he might just shorten it to “The kool-aid is strong with that one”.

The idea that somehow Vancouver will escape a global depression is laughable. In fact, Vancouver is in for more hurting than many other areas, due to the “irrational exuberance” and the fact that it is now 2 years behind the leading edge of this contraction. The higher you get, the farther you fall.

Almost every argument you have attempted to make on this issue could be summarised as “Vancouver is Different!”

Oh well, at least I can get a good laugh now and then here.

#70 David Bakody on 02.18.09 at 1:42 pm

#44 Jake on 02.18.09 at 9:53 am

Sorry Jake ….. Muskoka Bill is 100% correct ….. think? Saddam stated ….. “If America wants our oil I will sell it to them” … to-day as I speak more and more evidence is coming out how billions were spent on work never completed and even not started …. check the www and you will see where they printed money loaded on pallets (billions) to be given out for Iraqi’s to spend. … back to oil ….. what happened to the price of oil after the Yanks came to town in Iraq and what do you think would have happened if Saddam flooded the market with cheap oil ….. silly you ….. there were no WMD’s and even if there were ” ONE well placed missile fired from a Destroyer or Submarine could have level any hiding spot ….. saving a cool million lives or so O/K it took two or even a dozen …. Note: Remember those cruise missiles ? well they proved useless and the stock was fired off into what ever at near $750,000 a pop!

While all this has been going on (no end in sight) America’s true concern ( the health and welfare of people and states) had been put on the back burner.

I wrote several lines on US blogs and perhaps help stop that phony baloney crap of ” Fighting them over there instead of over here” with a simple line …

The Taliban/Al Qeada has, No Army, No Navy, No Marines, No Air Force, No Merchant Navy so how in heavens name are they going to get America, “Flying Carpet”? Some smart Republican Senator challenged me and said they would sneak here on a “Freighter” boys was I waiting for this one …. Where would it tie up, who would unload their ammo for the AK 47’s ( Bush spent billions for security) who would give them directions where to go, who would feed and cloth them, who would drive them around town …. and would the police, national guard and every American who has a couple of weapons in their home just stand by? …. never heard another word…

Terrorist …. Jake they did not come from Canada and they did not pay for one way flying lessons from a Canadian flying school … they were trained in Florida and never were asked to fill out any paper work that was checked out ….. just pass the cash over CASH! Jake lots of cash …. no questions asked ….. and Jake the most deadly attack was by Timothy Mc Veigh prior to 9/11 a Christian and ex marine ….. Now we have over one million people who have lost their lives in Iraq and Afghanistan who’s families hate us …. and why not because 500/1000 pound bombs when dropped make on hell of hole …… Why Jake and why are we now paying for the security of Drug Lords and government officials who continue to demand more & more money to rebuild their countries …. and Karzai said ” Hands off our opium crops” and we do want to go there do we Jake.

#71 wjp on 02.18.09 at 1:44 pm

Bailouts will only pospone and heighten the pain…they will only serve to reward the irresponsible and incompentent management and preserve their jobs. Even with bailouts, the average line worker will see his/her job disappear. Bailouts will leave a legacy of unparalleled debt to our grandchildren, and will lengthen the period of recovery from 2 years to 10.

#72 Bill-Muskoka (NAM) on 02.18.09 at 1:50 pm

#63 Contractor on 02.18.09 at 12:01 pm

I know it is no comfort, but anyone who is self-employed is without government benefits. We do have one BIG thing going for us the corporate workers do not. We have the skills, tools, and freedom to go into any market we deem viable. they have to wait for their severence packages, EI, and another job working for someone.

Back in 1981-82 I went through this and watched my clientel close their doors. Some very large companies in business for over 30 years. It was a Bitch then, and it will be again for many who rely on ‘having a job’. I had to close my doors too, right along with Chrysler. I re-grouped and started again in a different market.

Remember the old IBM vs PC argument ‘You can sell a few units at a very high price, or a lot of units at a low price.’

Having been a contractor I can relate to what you are fearing, and rightfully so. My advice is ‘Be darn slective who you do work for and insitst on a letter of credit from their bank.’ In other words, do not extend credit yourself without collateral od some sort.

There are too many still living in denial and when it finally penetrates their widdle brains they will NOT be paying you otherwise. Especially true in Cottage Country where egos far exceed brains.

Hang in there. This is a much needed adjustment akin to having some surgery to save your life. Do not panic, and do not allow desperation to take over your thinking. Communicate with your suppliers honestly and they will know you are one they can trust. Oh, and watch out on the proposed Harmonized Sales Tax Ontario wants. We both know how screwed up PST is on materials for contractors. I doubt things will get better if they revise the GST/PST laws.

#73 David Bakody on 02.18.09 at 2:01 pm

When President Obama spends money (World Money) because the National Debt must be financed to try and save jobs, create jobs, stabilize the financial markets and housing in America it really is small potatoes. Will it work, who knows but it will buy some time and if the money spent is accountable and transparent it will be worth it. I do know that doing nothing will get exactly that nothing. For those who do as Garth suggested ( others have also) pay down debt and save wisely will also have a large collective effect on the financial system …. this I know … a couple of years ago when I put extra money on my loan …. it took a couple of days to show up …. to day it is done overnight ….. so if the banks can balance their books sooner rather than later …. they may make more loans based on good banking policies …. and that is where our hope lies. Time will correct the markets as items wear out and people must make purchases. Now is food, shelter and clothing time …. good luck to all.

PS…. decided to keep other issues close …. all this Winds of War and world money stuff is open book to multi millions

#74 Soylent Green is People on 02.18.09 at 2:12 pm

re #21 gold bug on 02.18.09 at 3:10 am Be thankful for inflation?

Milton Friedman called and he wants his crazy theory back.

**********

LOLOLOLO

I just read Naomi Klein say:

“The crash on Wall Street should be for Friedmanism what the fall of the Berlin Wall was for authoritarian Communism, an indictment of an ideology.”

Let me repeat it, it’s so good:

AN INDICTMENT OF AN IDEOLOGY!

http://www.newyorker.com/reporting/2008/12/08/081208fa_fact_macfarquhar?currentPage=all

#75 Mike (authentic) on 02.18.09 at 2:12 pm

Future Expatriate “Call me a bullion bunny, but I’m in some very wealthy company.”

All that glitters is not gold! –

Gold is a bubble, inflated by fear. Reasoning? The US Dollar is actually UP (getting stronger), this should = gold down in value, but it’s up. This creates a bigger gold bubble as the REAL price is falling as US$ rises.

Want more proof gold is a bubble?

Check the Precious Metals Market. Out of ALL precious metals, ONLY Gold and Silver are up and it’s NOT from manufacturing needs!

I believe gold will remain strong due to the fear in the market, but you have to remember it’s temporary (till the fear goes away or the markets start to recover).

Also Non-USD countries have to content with currency exhanges. What if the CDN goes up to $.90 as the USD falls?

Then again, you do know about the housing bubble right? The stock market .com bubble, the oil $148brl bubble… so your saying gold increasing by 50% isn’t a bubble now?

Mike

#76 Real estate on 02.18.09 at 2:27 pm

remember the line from the re make movie with keanu reeves “the day the earth stood still. In it his character says, “if you live, the earth dies. If you die, the earth lives”. I think the best answer to global warming, at least short term, is the slowdown of the global economy. The less we consume, the more the earth can take a breather and recover. Just a thought…

#77 Bill-Muskoka (NAM) on 02.18.09 at 2:28 pm

#74 David Bakody on 02.18.09 at 2:01 pm

Let us not forget that President Obama has no authority to spend money unlike our own Caesar Disgustus who refuses to even consult the MP’s.

President Obama went, as the Constiution requires, to the Congress and only the Congress can appropriate funds. They, get this, represent the PEOPLE! What a concept, eh? LOL He is a LEADER who also understands his responsibilities and limitations granted by the People in the Constitution. Too bad Canada can’t find a similar person of integrity and comprehension.

BTW, thanks for the support!

#78 ralph on 02.18.09 at 2:30 pm

Just what is/was Alan Greenspan’s role in life? All I know about him is that he would come out of his coma every few months to show his face and mumble something about the economy.

#79 Harold #3 on 02.18.09 at 2:50 pm

“There will be no hyper-inflation in this generation on this continent. — Garth”

Who exactly are you referring to as ‘this Generation’. Next how about giving the reasoning behind that statement, unless of course ‘this generation’ refers to my ‘D’ for duffer generation.

#80 Skeptic on 02.18.09 at 2:55 pm

Gath wrote:
This is fiction perpetrated by the bullion bunnies. While I advocate a gold position of no more than 15% of net worth, it is for insurance reasons and to participate in futire commodity price growth. There will be no hyper-inflation in this generation on this continent. — Garth

I can understand that an intelligent and economics-savvy person can reasonably predict the general trend for the next 3-5 years. Unless you believe that “this generation” will last only 5-10 years, I fail to see how can you predict with such certainty no hyper-inflation for a generation-long period.

There will also be no plague. — Garth

#81 Contractor on 02.18.09 at 2:56 pm

To Bill-Muskoka (NAM),

Thanks for the advice and insight. It’s nice to hear from someone who has been there before and has lived to tell the tale.

The one thing that I have going for me right now is this: my business carries no debt. It is a service business that requires expensive equipment. And many people go into huge debt to get into the business.

Unlike many in my industry, I started small and always financed all of my business purchases in cash. Consequently, my financial obligations are negligible. I can coast for quite a while without much income – a situation which was intentionally created by me (for which I am thankful for today).

The other thing I am very thankful for is that though my family income has more than doubled over the past few years, my wife and I stayed in our affordable ‘starter’ home that we bought 7 years ago, made do with our old high-mileage reliable car, made many prepayments on our mortgage, killed all other debts, and built up about a year’s worth of cash reserves.

Believe me, it was tempting last year to buy one of those overpriced knob-and-tube wired dumps in Toronto last year. We almost did. It would’ve almost doubled our mortgage payment (along with pulling us out to the maximum amortization). But, when we looked around and had to deal with with multiple offers, blind bidding, and on-the-spot take-it-or-leave-it decision-making, both my wife and I recoiled in horror and listened to our intuition. We both felt that a rational market didn’t behave this way. And we made the decision to not participate in that irrational market.

So we waited and watched over the past year as all houses, including ours, started to lose value. But at least we’re not losing as much as we would have and aren’t under water on our mortgage vs. the house value (yet, anyways). With the downturn in my contracts this year, we’d be out of home already if we had upgraded last year.

I hear what you’re saying about not panicking, though. It’s important for everyone to remember that someday, somehow, this horrible economic contraction will all be over and jobs and contracts will start popping up again like spring flowers after the winter.

It’s just going to be a long, cold, miserable season until we get there!

#82 Drew on 02.18.09 at 3:19 pm

#78 said – Too bad Canada can’t find a similar person of integrity and comprehension.

Actually Bill, we have. He’s just not the PM yet.

#83 Bill-Muskoka (NAM) on 02.18.09 at 3:40 pm

#82 Contractor on 02.18.09 at 2:56 pm

That is how I built all my businesses too. I put the money into the best and safest investment I could find…ME! I bought any tool that would make me money and paid cash for them all. Some I even made myself.

Yes, we, too, looked at a couple of Century homes and they were way overpriced. I also went to the Land Registry Office and researched their original value a few owners back.

I was not surprised to see that the ‘asking (aka Sucker) price included second and third mortgages the sellers had added to pay their credit card debts. Those debts are NOT actual value in the home, they are merely the way things have worked for too long.

All the adjustments now occurring are going to include all that non-tangible debt added to the actual home mortgage.

I also estimated it would take about $50-70K in renos to make those old places economical to live in. They all needed major work, and the cost estimate was merely for materials, not labour. That I could pretty much do myself with the help of a couple of friends at times.

The old knob and tube wiring is way out of date. Compliance with the Building and Fire Codes are the only way to go, and that takes permits and lots of money. Watch for the insurance companies to tighten up their requirements on compliance.

Yes, many look great and cozy on the outside, but just like a used car, the devil is in the details.

After much discussion and research into total costs we decided all we needed was about a 1,000 square feet of space with additional outside storage. We bought a manufactured, i.e., modular home for $80K. It has all new windows, doors, flooring, appliances included, and is rock solid structurally, electrically, and HVAC wise.

It is all the home we need and we simply do not look at our HOME as an investment, although when I get done with a few projects the value will go up because it will be far better than most of the competition. We also have a huge lot (70′ x100’) to plant gardens and for the grandkids to run off their endless energy.

I have owned some large homes and like the movie ‘The Money Pit’ I learned decades ago they may impress the family and neighbors, but they are not worth the overhead.

Prudence still works as you and I know from experience.

In fact, I think modular homes are going to be a making a major comeback with the retiring Boomer generation. We Boomers simply do not need huge homes and like to travel a lot so why pay for something you simply have neither a need for or will use? Darn, guess I am getting old. I think with my brain, not my ego! LOL

Anyway, sounds like you did all the right things. Just remember that at the turn of the 20th Century (1900) 90% of the people were self-employed. That is happening again because corporations no longer are reliable employers because they are run by greedy nincompoops who are only interested in the profits, not the product or their own people.

The one draw back of being self-employed is there is no one else to blame! LOL My boss is a real SOB at times. Keeps me up late at night working out the solution instead of relying on someone else to solve a problem they do not even understand. What a concept, eh? ;-)

#84 Bill-Muskoka (NAM) on 02.18.09 at 3:45 pm

#83 Drew on 02.18.09 at 3:19 pm

Ah, you must mean The Count? Well, he is a far better choice than the current Bozo, but still no cigar. When I see a wannabe that speaks about the people’s needs first and not his political future, then I will be impressed.

Personally, I still think Bob Rae is the better choice, but like the Quebecers and the battle re-enactment, Ontarians can’t get over Rae Days, even though his idea is exactly what is being proposed now to save jobs.

Funny how vindication happens that way, eh?

#85 Bill-Muskoka (NAM) on 02.18.09 at 3:50 pm

There will also be no plague. — Garth

Oh DARN! We haven’t had a good old fashioned plague in a long, long time. Boy, there are going to be a lot of very disappointed Bible Thumpers running amok.

Also glad I noted the ‘g’ instead of reading it as a ‘q’ because I thought my stockpile of Listerine had just dropped in value? LOL Good to know I have a needed commodity because there are going to be a lot of people wanting to get rid of the putrid taste in their mouth before things have stabilized.

#86 Bill-Muskoka (NAM) on 02.18.09 at 4:10 pm

#82 Contractor on 02.18.09 at 2:56 pm

Speaking of winter. This is what I, and I think most Canadians really think about it?

It does have one good use though!

#87 Bill-Muskoka (NAM) on 02.18.09 at 4:18 pm

OH! Some POSITIVE news for once.

Church found Gucci divine, watchdog finds

An evangelical church that used donor money to pay for gym memberships, Gucci fashion accessories and trips to Hawaii and elsewhere for its directors has been stripped of its charitable licence by the federal government.

#88 Bill-Muskoka (NAM) on 02.18.09 at 4:22 pm

an addendum to the last comment.

The Canada Revenue Agency, which regulates Canada’s 84,000 charities, has publicly revoked dozens of charitable licences for cause over the past year. Losing charitable status for the Dominion church does not close it down, but it makes it more difficult to raise money and means it will have to start paying property and other taxes.

Now, let’s see if they can nail all the fraudsters on Bay Street?

#89 Jake on 02.18.09 at 4:31 pm

David Bakody,
I should not have used sarcasm in my post #44 as it clearly went over your head. I question the war on terror down to its very core. It has been propagated by fear mongering and has made certain people and institutions filthy rich. I don’t see countries like Iraq and Afghanistan, that can’t even get their plumbing to work properly, as great threats to western freedoms. Like you I see them as the victims of this all. What I don’t see is Obama doing anything different than Bush. He wants more troops in Afghanistan and he has changed his timeline regarding withdrawl from Iraq a few times now. Bill praises the change Obama represents and I just don’t see it. I see more death for the middle east and more wasted resources for the Americans. Obama uses the war on Terror as an excuse to fund the military industrial complex just as much as bush did. He is also using the war on our economy (by terrorist bankers) as an excuse to give more money to said terrorist bankers. Fear, fear, fear….and all most people feel is hope, hope, hope.

#90 Jake on 02.18.09 at 4:41 pm

And don’t get me started on Ignatieff. I remember reading some articles he wrote defending the Iraq War in an international relations class. Classic, now we have got two war mongering alternatives to choose from just like the Americans had. It’s not a coincidence people.

#91 john on 02.18.09 at 4:57 pm

Obama’s Plan…The plan has three parts:

– Refinancing made available for four to five million “responsible homeowners” to make their mortgages more affordable.

– A 75 billion dollar initiative for those who can’t afford to pay their mortgages but have seen the price of their properties plunge will aid three to four million people, the White House said.

– Finally the Treasury Department announced it was doubling its financial support to troubled mortgage finance giants Fannie Mae and Freddie Mac, to 200 billion dollars each, in an effort to stabilize the real estate sector.

—okay so this plan is going to change 7 million peoples lives and make their mortgages more affordable……..well that works out to $10,714 each ?? who the hells life is going to change with that..golly they might save $50 a month on their payments cmon now? But now Fanny Mae and Freddie Mac will be smiling all over with their combined 400 billion…oh yes and need i add the other 75 billion which is headed for their pockets also.

#92 Contractor on 02.18.09 at 5:00 pm

“Prudence still works as you and I know from experience.”

Bill – Muskoka (NAM), I agree 100%. I think lots of people will be learning this lesson the hard way in the years to come. It’ll probably be better in the long run as far as society’s concerned. But there’s going to be a whole lot of pain for a whole lot of people until things stabilize.

I do feel badly for everyone who is affected by this mess, regardless of their personal culpability in the matter. It’s sad, really.

But at least in Canada we can use our natural beer fridges half the year like you pointed out!

#93 timbo on 02.18.09 at 5:16 pm

In a recession does beer consumption go up? I am trying to think outside of the box as this might be a safe investment. Does anyone have access to Molson’s stock price history during the last 2 downturns?

Just a thought
http://www.glasbergen.com/real_estate_cartoons.html

#94 Dave on 02.18.09 at 5:32 pm

if some of you actually reduced the size of your posts, people might actually be inclined to read them. Sometimes mine are long, sorry, but not consistently like some

The shorter your post, the better chance your sentiments will be read.

#95 Dave on 02.18.09 at 5:39 pm

Gold is a bubble, inflated by fear. Reasoning? The US Dollar is actually UP (getting stronger), this should = gold down in value, but it’s up. This creates a bigger gold bubble as the REAL price is falling as US$ rises.

—————————————-

The USD is in a bubble inflated by fear. Still regarded as world’s reserve currency until the bond market bubble pops or the trillions in USD that China and Japan are holding is finally released into the market.

have fun holding the greenback!

#96 Bill-Muskoka (NAM) on 02.18.09 at 5:48 pm

#90 Jake on 02.18.09 at 4:31 pm

Thanks for clarifying your real meaning. Sorry for the attack parts of my response. BUT, Obama has not even been in office one month and you expect him to wave a Harry Potter Wand and make everything good already?

As a former American, and now Canadian, which makes me a Can-Yank (LOL) Obama is to Bush what gold is to dog crap! He is NOT a Bush Baby in anyway, shape or form.

If you wabnt to find the last remaining Bushite in power look at Oddawahaha and his name is Steve!

Also remember that President (not ‘Honourable’ as the morons in the PMO called him in gross protocol error) Obama only can clean up the Bush mess because the Bush Rethuglican Congress was voted OUT by the American people. It was the Rethuglican Congress that truly empowered Dubya’s fiascos. Thank God and Boeing they are GONE!

#97 Ultraman on 02.18.09 at 6:22 pm

Jake said “I don’t see countries like Iraq and Afghanistan, that can’t even get their plumbing to work properly, as great threats to western freedoms.”

Jake, I totally agree with you but on an economic perspective you bring an interesting point in that comment. I think the fact that these people can live with so litlle luxuries made them that much stronger. It wouldn’t take much to bring america to it’s knees, just cut off hot water for a few days and all of a sudden you’re dealing with a very disfunctional society…and stinky.

#98 Bob Bagina on 02.18.09 at 6:26 pm

I’m young (ish), and I like it when the old-timers start telling their stories. No sarcasm here, cause if there’s anything useful I’ve been taught or learnt in life it’s either been through experience or from listening to my grandma. I still slightly distrust my parents generation though who had free love then sold it for a subscription to the UTNE reader.

We too, like NAM almost leapt into buying something last year thinking if we didn’t do it now, we never would…….some Orwellian spin-doctor had obviously infiltrated our outlook.

My only question is if things do go to pot, how much cash under my mattress is enough. And if money dries up, and inflation hits does it even matter if I have cash (won’t it be devalued). Wouldn’t I be better off with a remote garden plot and an industrial strength canner?

#99 Bottoms_Up on 02.18.09 at 7:40 pm

Sorry Garth, we still have the plague:

http://www.geotimes.org/may07/article.html?id=feature_plague.html

“Today, plague still exists in many African countries, East and Central Asia and the Americas. The overwhelming majority of outbreaks occur in Africa, especially in Madagascar, according to WHO: In 2003, nine countries reported 2,118 cases of plague and 182 deaths from the disease. Of those, 98.7 percent of the cases were in Africa, and 98.9 percent of the deaths occurred in Africa. Still, the disease could spread with climate change both geographically and in prevalence, according to new research.”

#100 1 Bore E. parking lot on 02.18.09 at 7:47 pm

On the one hand you attack bailed auto workers as overpaid morons unworthy of their jobs and union pay, while on the other you lament the shrinking of the middle class of which they are a part.

#101 smwhite on 02.18.09 at 7:56 pm

#76 Mike (authentic)

I don’t disagree that some have been investing in gold, silver and certain PGMs; desirable to investors as “safe havens” in times of uncertainty.

But gold and silver are in bubbles and the USD isn’t? People buying up treasuries that pay less then 3% over 30 years? Who is going to want these “pieces of paper” when interest rates rise?

And from what I’m seeing about Obama’s new “housing plan”, pure genius, buy out any home that is upside down so that it won’t go to foreclosure and lower neighborhood property values.

Now they just need to fill 20 million empty US homes.

This party is only getting started.

http://www.howestreet.com/articles/index.php?article_id=8679

#102 MarcFromOttawa on 02.18.09 at 9:34 pm

#78 Bill Muskoka

Where in the constitution does it say the government can steal money from the people and give it to failed companies? That’s exactly what’s happening and Obama voted for every single bailout bill. Over 9 trillion dollars guaranteed by the government and counting.

#103 Bill-Muskoka (NAM) on 02.18.09 at 11:04 pm

#94 MarcFromOttawa on 02.18.09 at 9:34 pm

Simple. The U.S. is a Republic which means that it is a representative democracy. Therefore, the Congress has the authority to spend money as they see fit subject to a Presidential Veto.

#104 Lance on 02.18.09 at 11:41 pm

#48 Pete

For my part, I am in heavily in to gold and silver, but I’d be a lot more hesitant to get in at this point at the prices have risen considerably in recent weeks. I was fortunate enough to get in a few years ago when I started to get a sniff of the real estate bubble bursting.

Real estate may prove to be a good place to park some investment money once the market finds a bottom (though don’t expect a meteoric rise in value like we experienced in the past 5 years). As to when this bottom occurs is anyone’s guess, however… 12 months or 12 years?

It is going to be tough to pick winning investments for the next few years when almost everything will be losing value. Commodities may prove to be a wise investment once the current bout of deflation runs its course. Oil may be a good investment, but we may still see further downward movement before we reach bottom and this may have disasterous consequences for some of the more highly leveraged oil companies.

#105 Jonathan on 02.19.09 at 8:45 am

Mike (authentic):

“Gold is a bubble, inflated by fear. Reasoning? The US Dollar is actually UP (getting stronger), this should = gold down in value, but it’s up. This creates a bigger gold bubble as the REAL price is falling as US$ rises.”

You have pointed to a correlation but I would like to disagree with your assumptions.

The US dollar is in a bubble when compared to other currencies. This has been driven by fear. People are hoarding cash right now. Gold is popular, but as others have mentioned, most haven’t taken the time to find out how to go and acquire it – 95% of us don’t have any.

Gold has been pressured downwards by the fall in commodity prices. Oil and gold are usually linked. The fact that gold has held its value for so long points to an underlying speculative force.

I’m not a fan of the stimulus packages. I think they are just going to be a debt burden on society. But let’s say that I’m wrong and they jump start the world economy, even for just 4-6 months. In that time, the US dollar will fall as people move to riskier assets. Commodities prices will soar (denominated in US dollars). The rebound will be a disaster to the American and world economy.

Canada and Europe may on the other hand actually experience a heavy deflationary cycle if the US dollar falls. Having said that China is talking of turning itself into a consumer driven economy. That may mean a much stronger Yuan and huge upward pressure on commodity prices. As such, we might experience just normal inflation as China offsets America’s purchasing power.

Someone else in this group touched on the Amero. I think talks of the Amero are ridiculous unless people can back this up with some cold hard facts. Sure it sounds like a great contingency plan for America, but for Canada not so much, and like Obama said it was probably “ginned up on the internet”.

#106 ralph on 02.19.09 at 11:14 am

Recently, I was listening to the BBC News interview Clint Eastwood. One of the comments he made was this:

“Whenever you spend like drunken sailors….eventually you got to sober up….and we are in the sobering up phase. I guess that will last for a few years then we will be back drunk again.”

How true!

#107 Soylent Green is People on 02.19.09 at 11:32 am

re There will also be no plague. — Garth

**

I read in The Long Emergency the government could potentially release the flu virus into the populations on purpose once the revolts and rioting for food started.

Let the bug take care of over-population in a peaked oil world =:0

Buy some surgical face masks.

#108 Harold #3 on 02.19.09 at 12:05 pm

There will also be no plague. — Garth

Just jerk-off answers to reasonable questions. Maybe you should refer inflation/deflation to Stoneleigh at Automatic Earth or Mike Shedlock at MISH’S Global Economic
Trend Analysis.