Deflation, inflation. Oh, what a dilemma.

If prices keep falling, depression beckons. Houses, wages, cars, computers, profits and jobs all devalue. If prices rise, it signals economic expansion. But the toll on struggling families and the unemployed will be extreme – higher food and energy costs, rising interest rates and falling disposable incomes.

Gold and oil raced higher Thursday as investors speculated the inflation guys are winning. Their evidence: that $1 trillion move by the US Fed to buy up a slew of bonds. The money was not actually printed or circulated, just created digitally and sent by email (albeit a fancy one).

The betting now is that other central banks, like the Bank of Canada and the European Central Bank, will follow suit, doubling their reserves to buy up government securities and create a honking big pot of money to scare off the deflation demons. Many of this blog’s manic friends have been beating the inflation drum, convinced we are just months away from the collapse of paper money as crazed central banks toke out on creating cash.

Under their scenario, hard assets inflate wildly as paper money deflates. The US dollar collapses, causing the likely demise of major banks. In this world, smart wealth rushes into the only global currency alternative – bullion – sending it skyward, as the rest of us use hundred-dollar bills to buy bread and watch as our life savings are destroyed in a matter of months. Others see real estate, oil, two-by-fours and chickens soaring in value. As that happens, debt fixed in dollars fades as fast as your RRSP, which means mortgages slip away into nothingness, at the same time as interest rates hit 20% or 40% or higher.

And this is exactly why it ain’t gonna happen. No depression. No hyper-inflation. Both are toxic to human society and would inflict irreparable damage. There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place. If we tip either way, it will be totally by accident.

In any case, you may feel it wise to make your bet.

Fear debt, or embrace it. Sell hard assets, or buy them. Invest and scrimp, or spend and acquire.  Flee into gold, or save your cash.

And if you get it wrong, come here. I have a mobile soup kitchen on order. No Krugerrands accepted.


#1 Da HK Kid on 03.19.09 at 10:00 pm

Good call Garth. I’ll stick with cash and deflation scenario even though I have a little gold in my portfolio, 10% to hedge.

Any type of inflation is not to be upon us for years until we can write down all bubbles still coming.

Has everyone forgot about long term thinking and planning for it. We have lost our ability given those who are pushing gold and hyperinflation claims.

This is YES, the Biggest Global Realignment in History!

Look out for China as they buy all the companies and raw materials to stimulate their domestic economy instead of foreign debt and maybe sell them back at an inflated cost to the rest of world.

#2 Too Old Bob$ on 03.19.09 at 10:09 pm

“The US dollar collapses, causing the likely demise of major banks.”
Possibly! but how do you get people to invest in the American Dollar, thus making it a valuable asset…..RAISE INTEREST RATES.

Then again, maybe the dollar ain’t worth the ink printed on it.

#3 jo lo on 03.19.09 at 10:18 pm

I found an interest link below on why we will not go into depression. Any comments?

#4 Anon on 03.19.09 at 10:23 pm

This comment is in response to #120 @Garth2 from last post. I posted in the latest entry as I wasnt sure where it would show up.

@Garth2 said:

“Wealthy Renter, watch your negative spin factor buddy.

Y-on-Y numbers are:

2009 2008 Y-on-Y-pct
January 2670 5075 -47.4%
February 4120 6015 -31.5%
mid-March 2565 3183 -19.4%

Toronto prices are also rising month-to-month. They are not back to 2008 levels yet, but they are gaining and fast..

In recent times, March average prices are lower than February, higher than January. As it goes, March 2009 prices are tracing higher than January AND February.
Whatever the realtors are doing, it’s working. Again…”
Are you serious? What are you talking about? Sales are still down/falling from previous levels, and you state that they are rising fast? Are you suggesting that because the ship is sinking at a slightly lower rate, people should jump on board? Really?!?!?! And if prices arent “back to 2008 levels” then they are FALLING!

You talk about spin? It is just like the latest news out of TREB that states the rate of decline is the smallest in months. In plain english, that should read that sales were falling and continue to still fall. The ship is still sinking.

I also suspect that the general trend would be to have price increases for the first half of the year if compared month over month. I think that prices will be lower for March 2009 then in March 2008.

Truth hurts.

#5 Brown Eyed Squirrel on 03.19.09 at 10:25 pm

This is a depression.

That means only one thing – DEFLATION.

Inflation is a pipe dream.

#6 Jim (manic?) Genac on 03.19.09 at 10:38 pm

“There is not a sane government in the world which will allow either to take place. If we tip either way, it will be totally by accident.”

Would that be the same goverment who stated (nay insisted) there wouldn’t be a deficit?

Opps… my mistake… you said ‘sane’ government.

#7 Jonathan on 03.19.09 at 10:42 pm

Ok I’m for rising interest rates that will counteract inflation. But not yet. 6 months to 2 years from now the scales will tip.

1. China currently fears the safety of US treasuries. If Asian countries start dumping their bonds, it will create the exact problem that they all feared. Effective interest rates on US bonds will increase to compensate.

2. China wants to invest its money internally. It has to choose between lending and spending. Less lending, means less savings being forced to the west. It was this steady stream of savings that caused the bubbles of the past twelve years. The result is less money to go around, which will increase rates and reduce inflation.

3. US dollar is overvalued. It rose about 20% in the flight to safety between September and November. Plus all the hedge funds were forced to sell, swapping stocks for US cash. Investors across the board have ditched investments and placed their money temporarily in US cash. When risk aversion leaves, the race will be on to get out of the US dollar. Foreign exchange risks add to overall risk for foreign investors, increasing the interest rate that they demand.

4. US money supply has over doubled since September. This is the largest change to the money supply ever – by far. The short term risks are unknown, but in the long term the dollar will devalue in half unless the US treasury is capable of pulling the money supply back on a timely basis. Unlikely to happen, at least in full, and the result will increase the devaluation of the US dollar.

5. Asian exports and current accounts are shrinking. Japan has run a current account deficit for the first time in 32 years. This means less money to spend.

6. The US government plans to increase quantitative easing if Asia does not have an apetite for its deficits. 300 billion dropped the US dollar by 2%. What will 2 trillion do?

7. Quantitative easing means buying bonds with printed cash (or digitized). This increases the demand for debt, thus lowering interest rates. When markets return to normal, the treasury will be forced to sell those bonds in order to avoid inflation. The result will be increased supply of low interest, long-term debt that investors will be avoiding. No matter how much quantitative easing lowers rates today, it will raise them twice as much when the treasury dumps them back on the market.

Ok I could go on, but frankly noone would read more than this. Cheers!

#8 Cendrine on 03.19.09 at 10:42 pm

Carole….Carole AB….are you there?

What does LEAP 2020 say?

Is that august body wrong? They are predicting USD collapse this summer after the US defaults on its debt.

#9 bobs your uncle on 03.19.09 at 10:57 pm

I don’t know if the latest trillion dollars the Fed is cranking out will stop the deflation. Most US money is held outside the US as reserve currency.

Once it does take off, inflation that is, the trick will be to stop it from accelerating too fast. It will take a lot of coordination between the central banks of the G20.

If somebody like China started unloading US currency too fast the dollar could really take a beating. It will be interesting to see how it plays out.

#10 Wondering in BC on 03.19.09 at 11:02 pm


You need a collection of Canadian Depression photos for your blog to use instead of American ones. Click my name and look at theCanadian Depression Gallery. Maybe some of the younger readers can see what their parents & grandparents went through.

#11 ts harpoon on 03.19.09 at 11:18 pm

Marc Faber: The Doom, Boom and Gloom Report – Go buy a Farm and a shotgun…

Wall Street Journal: Gold futures rallied more than 8% Thursday to end near $960 an ounce…{D83BE452-2CFE-4150-AB39-44E1412C3B0E}&siteid=yhoof

Charles Hugh Smith:
Could Cities Be Safer Than Suburbs?

Los Angeles Times: The belief that the wealthy are worthy is waning. Seething, angry Americans begin eyeing the rich…,0,351773.column

The Boston Globe: Here, a few recent glimpses into some of the places and lives affected by what some are calling the “Great Recession”

President Barak Obama is just about to make an appearance on Jay Leno – It’s all good right?

#12 Lance on 03.19.09 at 11:36 pm

Inflation without economic growth is just a deflation wolf dressed up in sheep’s clothing… but central banks can control that scenario far easier than they can control an inward spiralling deflation/depression, so that is the path they choose. They will devalue everything we own even while the prices remain flat or even increase. We’ll wake up in a couple of years and wonder why $30 an hour only buys what $20/hr bought in 2008. Every dollar bill will receive this incidious flat tax and only a precious few will even notice the hand reaching in to our wallets to devalue it. Bullion, basic metals, oil, whatever (beware real estate, it is still overvalued). Put your money in to something tangible to help preserve your wealth. Cash is safe for a while longer, but watch for the tsunami coming over the horizon.

#13 john on 03.19.09 at 11:38 pm

is the digital money kept on the books? if so, how will it be mopped up later? wont it affect other things and create a chain reaction again.

with real money they have many mechanism to mop up.

its clear that an old boys club is active south of us. if u belong to goldman, citi or jpm then u are creme-de-creme, supposedly. the last few top level guys in govt have been from these.

so in order not to lose their holdings in aig or their speculative contracts, they are trying level best to shore up the existing structure despite their shenanigans. explains why lehman was played by regular rules.

if they let these rotten ones die & let other stronger but smaller ones to the front then we all can get going, else we are in quagmire for another 2 yrs at least.

#14 TheComingDepression on 03.19.09 at 11:46 pm

I have come to the conclusion: You don’t have a clue as to what you are talking about. As a matter of fact your so far out in left field the above statements will come back to haunt you..
There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place.
Like we have a sane government in place to prevent this? They couldn’t prevent a real estate crash, stock market crash, bank crashes, pension devaluations, company closures, bankruptcies all over the place…and your saying they will prevent INFLATION? THATS HILARIOUS!

No depression. Live with it. — Garth

#15 Just a Carpenter on 03.19.09 at 11:46 pm

I’ve been to Zimbabwe so I saw first hand the results you speak of, we paid $250,000.00 for two eggs over easy a slice of ham and a piece of toast. I sincerely hope that those in power have the sanity to assist us in steering away from those circumstances. In the meanwhile I am enjoying a return to the simple pleasures. Scrabble by candle light has it’s benefits…..

#16 Foreign Investor on 03.19.09 at 11:52 pm

I like the continuity from one post to the next – US Empire – “Next” – “There is no way like the American Way.”

#17 Kurt on 03.19.09 at 11:58 pm

No hyperinflation. Banks write money into existence out of thin air too, and when the loan they made with that money goes into default, a good chunk of the money evaporates into thin air. The fed’s quantitative easing is just another method of replacing the missing money – they don’t *have* to create too much. What about when the banks start lending again, you ask? Lending like how? Like they did two years ago? Impossible, governments won’t allow it. So we end up with a mild inflation that is easily controlled with monetary policy. Eventually the bonds will mature, and the money will return wence it came – back into thin air. This happens *if and only if* we elect responsible governments, so remember to vote and make sure your neighbors do too. (This is why Zimbabwe is irrelevant to discussions of our situation: Bob Mugabe is the model of political irresponsibility.)

#18 whateva on 03.20.09 at 12:02 am


#19 Basil Fawlty on 03.20.09 at 12:19 am

Diversification reduces risk. In these times, think return of capital, before a return on capital.

#20 TrueGritCalgary on 03.20.09 at 12:22 am

On the inflation thing, I think Garth may be right. What would be the point of lending people cheap money now to buy still overvalued assets and then 3,4,5,6,7 years from now saddle them with very high interest rates when they go to renew? This would only serve to start a new foreclosure crisis at such time in the future. There is still a lot of deflation and economic statbility that needs to be happen before much higher interest rates can even be contemplated.

#21 Shawn on 03.20.09 at 12:46 am

The buy “hard assets only” fanactics expect stocks to be worthless in hyper inflation. But why would “paper” stocks that in turn own companies that produce tangible products be worthless. Why would owning a hard asset like your own land (attested to by the way with a “paper” deed) hold value while your stocks in Real Estate companies went bust?

In doomsday scenarios, buy generators, fuel, canned food, seeds, gund and ammo.

I’m with Garth no reason to think the end of the world is nigh. (But it does not hurt as he says to prepare for some bad scenarios just in case…)

#22 JoJo on 03.20.09 at 1:14 am

Deflation, inflation. Oh,it’s not a dilemma.

Prices not falling. Houses,cars, computers are not devalued in Canada even are too,too expencive.
Second problem about profits,wages, and jobs are devalued because of shiping our production to Asia and we still have high level of immigration.
If you have money supply more than 4 times than 2 years ago than gold price will rise, it signals economic Hyper-inflation.Because 4 times more money somebody had put in his pocket,alredy. Goverments will keep going will hiring in public services over 22% in Canada and USA as well, and no production.
So they will increase property taxes,goverment services fees,transit fares,education costs,higer cost of living will be extreme – higher food and energy costs,higher services costs, and low interest rates and falling disposable incomes (because we don’t have production and still we have high immigration costs).

Gold and oil raced higher Thursday as investors speculated the inflation guys are winning. Their evidence: that $1 trillion move by the US Fed to buy up a slew of bonds. The money was not actually printed??? Oh yes man, money has to be printed because if you sent me transfer of money on my account tomorow I will go into the bank and I can request cash,any time .
I’m beating the hyper-inflation drum, convinced that we are just one year away from the collapse of paper money. The US dollar will collapses, causing the likely demise of major banks and Revolution in USA.
OR will be WW III and the USA has to protect $ US like world trade currency of all commodity goods (Oil,Gold,Food etc) with printing every month 1 US Trillion, and still has to borrowing at least 3 billions $ US every day from Asia,Canada and Europe to survive their economy.
USA doesn’t care about their value of currency, because they can printing how much they want.
But if somebody wants to change the trade world game with other currencies than it’s enemy number one.
And this is exactly what will gonna happen. Hyper-inflation depression or WW III.
Both are toxic to human society and would inflict irreparable damage.

#23 No logic on 03.20.09 at 2:11 am

Economy is hard to predict, Garth, even having a big knowledge of it. You already had some wrong predictions here, did ya? In many cases, economy is driven not by logic (wich you try to apply) but by people’s emotions. All analitics with their forecasts do no better job than monkey banging on the keyboard. I can roll a dice with the same likelyhood.

#24 Tony on 03.20.09 at 2:34 am

Garth i give you credit, back in the days when you wrote for the Toronto Sun i always figured this guy knows a bit. Now all these years later i see you know quite a lot. You can email me for advice or i can give you my real email address. I’m also a prominent contributor to the usenet newsgroup misc.invest.stocks. Look for the name Tony. I don’t give a lot of advice but when i do i make the people who read the newsgroup a lot of money. You can use my advice on your blog it’s ok.

#25 Jay Currie on 03.20.09 at 2:37 am

“Last September I wrote several posts on this blog titled ‘Desperate People Do Desperate Things’. To me, this is more of the same. Where does the Fed get the money to buy long-term Treasury Bills? – it prints it. Why does the Fed need to buy these Treasury Bills in the first place? – presumably because the foreign investors who previously bought them have lost their appetite (or at least some of it) for U.S. paper. It is no surprise the price of gold went up. I think we are all being pushed from behind and forced onto a roller-coaster where the last thing one hears before being crammed into a seat is the ticket-taker saying ‘belt yourself in and hang on to your hats’. ian campbell

The problem is, Garth, that there is very little reason to believe that the Fed has this right. Do we know what the right amount of printing is to counter the “wealth evaporation”? Can we know and, more importantly, can the Fed know?

I very much hope that the Bank of Canada does not follow the Fed down this path.

At some point the BOC has to be willing to part company with the Fed and recognize that Canada – with a rising oil price and solvent banks – is not in the same place as our American friends. And, instead of inflating away the savings of ordinary Canadians our BOC needs to protect those savings.

It is going to be very rough for the next few months, but I agree with you that there is no reason to expect either a Depression or hyperinflation in Canada. Simply having Canadian dollar denominated assets may very well be as good protection as owning gold. So long as the Canadian government and the Canadian Central Bank are not stampeded into policy which addresses problems which we do not currently have and, with good management need never have.

#26 Glenn on 03.20.09 at 3:26 am

“We regard the agreement signed last night and the Anglo-German Naval Agreement, as symbolic of the desire of our two peoples never to go to war with one another again.” — Neville Chamberlain, British Prime Minister, 30 September 1938

“And this is exactly why it ain’t gonna happen. No depression. No hyper-inflation. Both are toxic to human society and would inflict irreparable damage.” — Garth Turner, 19 March 2009

[add symbolic waving of paper here]

Peace in our time, indeed.

#27 Future Expatriate on 03.20.09 at 3:54 am

Wow, Garth… ascribing sanity to North American government. After eight long years of George “Adolf” Bush, and a clueless empty suit as “the best there was” to replace him to boot. Not to mention you being sacked. No greater proof of complete insanity need be offered.

That’s a suckers’ bet if I ever saw one. I wouldn’t bet a wooden penny on any government on this planet for a single second.

There might well not be a secret global conspiracy to bring down the planet into one-world fascist poverty, but with the idiots we have in charge, who needs one?

#28 Vancouver_Renter on 03.20.09 at 5:12 am

“And this is exactly why it ain’t gonna happen. No depression. No hyper-inflation. Both are toxic to human society and would inflict irreparable damage. There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place.” – Garth

So if governments are on top of things, all powerful, and capable of controlling economies and financial markets in order to prevent disaster, why did they allow this economic crash to happen in the first place?

(One possible answer… They’re not as influential as they think they are.)

#29 Jimster on 03.20.09 at 5:23 am

Since rich , powerful elite are in charge, and they wont want to see their assest depreciate, my bet is we will see inflation, or hyperinflation.

Also, becuase things happen much faster then they used to, we will start to see it by the 3rd quarter.

But, because there are too many house in inventory, and us poor surfs wont be able to afford them because of low employment, plus the boomers retiring, real estate will not participate as strongly as other asset classes.

Just my 2 cents.

#30 Mike (authentic) on 03.20.09 at 6:38 am

Does the trillions lost in the stock market in some way “equal” the trillions in bailout and new digital money?

If so, are we not “balanced” then? $1 lost = $1 printed?


#31 Herb on 03.20.09 at 7:06 am

Killing time in a waiting room yesterday, I picked up a paper from the next chair, and it was the financial insert of the National Post. And what caught my eye? An article leading off with the “95% Rule”: 95% of all economic and financial writing is either wrong or irrelevant.

That strikes me as a prediction to trust.

#32 lotusland on 03.20.09 at 7:41 am

Jo Lo
“A Depression is impossible in the old sense of the word. If one describes a depression as the loss of purchasing power of the wage earner (a correct definition), then we have been in one for the past 50 years since wages have not kept up with the cost of living. But since everyone is thinking breadlines and the 1930’s, I will stay with that picture for our definition. It is not going to happen”

Above is a final comment from the site you had the link for. Too much to counter point here from that site.

The premise that the Government can reinflate the economy with a printing press is flawed I believe. I think they can slow the bleeding, maybe ultimitely stop it, but I do not think they can stop the asset price correction from running it’s course. I wish there was a definitive number out there (total lost $$ in the last 6 months in the U.S. & total available credit shrinkage), because my guess is, the two combined are in the $25-$50 Trillion range (credit being the big one). The government will print a lot of money, but I think were talking $10 Trilllion at most, and that, as mentioned, will cushion the fall, but not stop it. There is still more pain to come. Not a depression perhaps, but a recession of the 82′ magnitude at least. In my opinion, what we are seeing in the market right now is a dead cat bounce. It will drop again, further than before. After that next drop, I think we will be at bottom. The market should hit that point by late fall I think. The economy will take a year after that to really start to get some legs.

#33 Madame Guillotine on 03.20.09 at 7:48 am

Did you ever think that making a
speech on economics is a lot like
pissing down your leg? It seems
hot to you, but it never does
to anyone else.
Lyndon B. Johnson

#34 Some Guy. on 03.20.09 at 8:17 am

What kind of nonsense is this? I dont come here to use my own mind, I come here to be told what to do….

So….what do I do?

Think. — Garth

#35 ted on 03.20.09 at 8:19 am

This is with regard to your previous post. “a far less competitive North America and the end of the US empire.” So lets get this straight. You are predicting the end of the US empire in a short period but no depression. I burst out laughing reading this. Yes we are going to see the fall of the largest empire in history a truly momentous historical event and yet you don’t think this will result in a depression. The transisition to global instability or to another empire will just be seamless.

What we are going through is hardly seamless. — Garth

#36 David Bakody on 03.20.09 at 8:22 am

As like millions/billions of other people I know that the only thing I have control of is my little ode home and savings ….. what little debt I have I will pay down and save wisely …. but I will also treat myself and family to fine meal now and then, take a drive to country, keep my little ode sailboat. That does mean I will not continue to read and voice my daily thoughts. I shall also keep and open mind and be open to change.

Of course deflation and the devalue of many goods and services will happen but I suspect that those goods and services that remain in high demand will continue to rise. What is important or should be they will now attract more dedicated talented people. When Garth mentioned yesterday that one generation will hard hit …. it only reassured me of the new 40-20-20-20 plan which is all business is well under way. Think? as companies downsize and restructure they will keep the best and brightest to fill the 40% and keep the next 20% on tight leash …. others will make their own move (s) 20% and last 20% will be left on their own. But fear not, the best and the brightest will do just fine. Do not look for any governments to help they will too busy trying to find ways to pay off this accumulated debt off all coupled with high costs of trying to run a country. Just a few thoughts eh?

So pay down debt and save/invest wisely because more and more people are going/about to learn their best investment is knowledge! Being smart is not enough because smart might make you money but sure will not keep it.

#37 Munch on 03.20.09 at 8:24 am

No Krugerrands accepted?????


ONLY joking! Nice article, Garth!

Good news! All charges against President Zuma will be dropped! Yeah! How’s that for excellent management? I betcha your president couldn’t pull that one off, so ENOUGH with the third world jokes already, and show us a bit more respect!



Munch from Johannesburg

#38 Bill-Muskoka (NAM) on 03.20.09 at 8:25 am


Too bad you couldn’t use the animated gif version from CNN cartoons by Bill Mitchell

Now, with the plethora of financial Wizards here I am wondering when all are going to appear on on ‘Mad Money’ on CNBC, or could it be possible CBC will start a new show titled ‘Looney Over Loonies’?

Perhaps some will even get the Colbert Bump, or invited to appear on ‘The Daily Show’?

#39 Munch on 03.20.09 at 8:26 am


I can’t decide if ZUMA’s sheenanigans is more or less deviant than the tricks YOUR lot are getting up to!

A trillion dollars here, a trillion dollars there! WTF are you people THINKING, man???

#40 Grantmi on 03.20.09 at 8:31 am

This is next to pile onto home owners….

Here comes the Tax Man!!

(Cue Beatles music here)

Let me tell you
How it will be.
There’s one for you,
Nineteen for me,

‘Cause I’m the taxman.
Yeah, I’m the taxman.

Should five percent
Appear too small,
Be thankful I don’t
Take it all.

‘Cause I’m the taxman.
Yeah, I’m the taxman.

If you drive a car,
I’ll tax the street.
If you drive to city,
I’ll tax your seat.
If you get too cold,
I’ll tax the heat.
If you take a walk,
I’ll tax your feet.


#41 dd on 03.20.09 at 8:45 am

#14 TheComingDepression … No depression. Live with it. — Garth

No depression but one hell of a recession.

#42 dd on 03.20.09 at 8:48 am

The US government is using more and more tools because the latest thing didn’t work. Buying up long government bonds. So basically the Fed is printing money.

We will get out of this situation sooner or later but it will never be like it was in 2005 …

#43 dd on 03.20.09 at 8:52 am

#32 lotusland

… but I do not think they can stop the asset price correction from running it’s course.”

Totally correct. The banks and famalies are still leverage out the ying yang. Debt has a long was to come down.

#44 Bill-Muskoka (NAM) on 03.20.09 at 8:54 am

#37 Munch on 03.20.09 at 8:24 am

Can we send our PM there? Maybe take him out to remote area and let him get a taste of real life?

BTW, I have a great deal on a Coke bottle? (The Gods Must Be Crazy) #37 Munch on 03.20.09 at 8:24 am

#45 linda on 03.20.09 at 8:54 am

“…Real-estate, oil, two by-fours and chickens…” Now, those are four words I never thought I’d hear in a sentence today, Garth. You can write anything!

#46 MM on 03.20.09 at 9:02 am

Hello Everyone

I just wanted some people’s opinion on this blog in regards to investing some extra cash. Do you think investing in companies like Imperial Oil, CP Rail or Sony are good long term investments. They say to buy when everyone else is not. Just like to hear your thoughts.

#47 Makeorbreak on 03.20.09 at 9:04 am

No depression? Think again!

#48 PTDBD on 03.20.09 at 9:06 am

– $7,500 tax credits offered by Obama to hybrid buyers
PM Harper ???????????????

Geithner endorsed the IMF’s call for countries to enact stimulus packages of 2% of their GDP.
Mark Carney ????????????? Was there ever any doubt? Synchronized global economic cliff diving.

– Spitzer says “watch AIG’s payouts, not the bonuses.”
Follow the money.

#49 Rhino on 03.20.09 at 9:06 am


If “There’s no way like the American Way”…

Why does the family seem to be crammed into an old Volkswagen??!!


#50 Makeorbreak on 03.20.09 at 9:31 am

#51 Ally Ally Oxycontin Free on 03.20.09 at 9:32 am

If YORE FAMILY has a gross income in excess of $250K, and y’all are workin’ for AIG, y’all kin ‘spect to have YORE BONUS taxed at the 90% rate.

#52 Jerome on 03.20.09 at 9:39 am

We have had our home on the market for almost a year.. were down to 3 showings a month in the later part of 2008/early 2009. This week we had 9 showings in five days and conditionally sold last night while people were calling to book more showings.

Have yet to decide if I will buy right away again or rent until later in 2009. I cant see this sudden momentum lasting long term.

#53 Ally Ally Oxycontin Free on 03.20.09 at 9:46 am

When that smiling, cherubic, well-dressed man steps forward, offers his hand and business advice … well, you ought to know by now.

Anatomy of a Crack-Up: The Marc Dreier Case

#54 Ally Ally Oxycontin Free on 03.20.09 at 10:00 am

Some of the U.S. legal inner workings — WSJ law blog

See bottom right corner to make your selection

#55 Ben's a Clown on 03.20.09 at 10:06 am

Who has the better track record, Garth Tuner or Peter Schiff and Jim Rogers?

#56 Jimster on 03.20.09 at 10:13 am

Seems Obama’s hopenosis is wearing off.

#57 smwhite on 03.20.09 at 10:17 am

Looks like your not appeasing the manic depressants enough Garth, the knifes are out.

Think some are getting their geography a little off kilter, Canada will endure some pain but nothing like the USA; and this whole decoupling from them will happen, over time.

Hyper inflation COULD be a problem in the USA, but very unlikely. The Fed will raise aggressively raise rates before the prices of items start rising on a daily basis, which is the definition of hyper inflation. This will trigger a sell off in all precious metals as people will move into treasuries that are paying double digit interest, as per 1980. Gold won’t sell off at the $900USD level, thats your new base, it when it falls more in line with the ratio at between 1 – 3 of the DOW.

All its moving the last couple of days isn’t because signaling a bubble, its signally financial instability. This is what happens when you admit in a public forum that you are robbing Paul to pay Peter.

No hyper inflation for Canada(but inflation in the necessities is here today), as its very obvious that we’re in for a bear market/commodities run. So, in a twist, that could help ease some of the pain in the Canadian housing market, especially in Alberta as the price of oil rises and helps once again fill the government coffers.

Real estate is a decent inflation hedge. I will bet that we’ve got at least another couple of years down before prices stabilize and it makes sense to buy to protect your dollar. It’ll be around the time the USA has no choice but to raise their rates to Volcker levels.

I will stand by my asset deflation theory for now, as most equities are still overpriced and the average price of a home is still unaffordable without historically low interest rates.


#58 PTDBD on 03.20.09 at 10:18 am

Next? – the NEW, improved Geithner Plan to buy….
wait for it….. =-o Toxic Assets =-o
to bail out….c’mon on, you’re never gonna guess this one…..
=-o The Banks =-o again

How? …more of that gentle, soothing, behind the back move, namely “quantitive easing” estimated to be another 2 Trillion :-P

Receivers of this stuff? The usual suspects. Follow the money. Do a study of Buzzards, Hedge Funds, political contributions, etc. Backstops for the risk? Here is where this “quantitative easing” or paper printing gets interesting and universal. It’s not just the American taxpayer anymore…It is now Universal. Every living, consuming being in the world will pay to support this crapola.

Do you remember ABCP and how Canadian taxpayers got stuck with that, in the end? Well, baby, that was 30 Billion. Now take that and multiply it by ???? to get 3 Trillion of “monetary easing”. Give me a bit of help on the math here. Anybody from Zimbabwe?

#59 smwhite on 03.20.09 at 10:29 am

#32 lotusland

What you said… :)

Couldn’t agree more on assets corrections and the bottom, once those lovely employment numbers for the spring start pumping out, that should put a damper on the rally.

#60 canuck on 03.20.09 at 10:45 am

Optimism is the best defence against the recession
As dentists report that more people are grinding their teeth in their sleep from worry, the downturn is no time for negative thinking, says Peter Collett

I agree with that article, economic conditions will turn around, we just have to adapt. It doesn’t mean we have to move, lash out at others, feel defeated and give up, but what we can do is harness whatever skills we have and increase them.

Yes banks are in the process of printing money, in order to try and introduce inflation because governments are accustomed to central banks fighting inflation. But deflationary times defy their ability to correct markets and that’s why they’re trying every trick in the book to get money to decrease in value in relation to rising costs of assets.

Cash is King in deflationary times, ensure you have enough to buy necessities. Other than that, don’t sell a house that doesn’t have a mortgage–everyone has to live somewhere. Rent, do not buy.

Learn to grow your own and make things that you won’t have the cash to purchase. Use whatever funds you have wisely. Be a saver and not a spender in deflationary times. Measure your money carefully and don’t buy unnecessary things. Don’t carry any balances on credit cards–the interest on credit cards ranges from a low of 15% to a high of 33%.

Be inventive, don’t insulate yourself from others–in groups, there is safety and comfort. Use your talents to further societal aims. Share your misery by growing a communal garden and betcha you’ll soon find your troubles are much smaller compared to others. If nothing else, knowing others are more miserable than you, will tend to make you feel better about your condition. :-)

Get up every day and put one foot in front of the other, and soon miseries disappear. People really are social animals that need others. “No one is an island.”

Blogs like this are an opportunity to learn what others do in dire times.

#61 Diabolo on 03.20.09 at 10:51 am

BREAKING NEWS: Harper kidnapped Garth around 2 weeks back and has taken over his blog…awaiting details.

#62 jose on 03.20.09 at 11:05 am

it’s mind numbing how irresponsible these “powers that be” are proving to be!
Pushing to the future higher taxes for our children, trying to keep housing out of reach for a lot of people and trying to slave them to the banks for 30-35 years!
the move to monetaze their debt will have extreme consequences in the future, probably inflation

#63 Plainly stated on 03.20.09 at 11:07 am

Wonder why no one has said this before. Its financial warfare by the financial elites of the US with europe cheerleading, thats whats going on!

The US finds itself in hock to the far east. but its got one thing going for it now: the usd. its the reserve currency of the world. oil & gold are priced in it worldwide.

if it tries to be responsible now and own up to its debt, the std of living of its populace will suffer and the elites will have a tough time controlling. 43rd & 44th prez have said “our way of life is non-negotiable”.

so, this crisis is being engineered in such a way that beggars the far east and east europe. sure there’s some pain over here as well for now but its not like what the east europe or east asia are facing.

US has shown that if the middle east tries ditching the usd, life will be hell a la iraq.

this is hoped to preserve the “natural” order of things to a large extent which has been with us for the last 50 yrs. cheap labour & goods from the east and the usd, king of the fiats.

there’s some deflation or inflation short-term say 2-3 yrs, but not in decade terms.

the alternative is the US defaults on its debt which crumbles this edifice.

do u think they can achieve this. Place your bets now!!

#64 Shawn on 03.20.09 at 11:15 am

Re 13 John and Garth on digital money.

I believe almost all money is digital these days. So that is not the worry, Whetherphysically printed or digitally created its the same thing.

I won’t pretend to fully understand money supply , but I know a bit about it.

#17 Kurt is correct Banks creat money from this air, stocks create wealth from thin air when they go it price. Houses created trillions from thin air by rising in price.

People thought hey could grow ever richer simply by trading houses with each other at ever higher prices!!!

No one complained then. Now that the money and wealth returns to thin air whence it came we all cry foul.

It’s just the way the very strange world of money works.

#65 PTDBD on 03.20.09 at 11:22 am

Global Holisitc Quantitative Easing


Germany’s Bernhardt…”The ECB can make an unlimited amount of money available.” in response to speculation that a euro Zone state should go into bankruptcy.

fiat – “a command or act of will that creates something without or as if without further effort”

fiat money – “money (as paper currency) not convertible into coin or specie of equivalent value”
fiat money. (2009). In Merriam-Webster Online Dictionary.

from money

As was stated on Garth’s original blog, it’s all about Trust. The value of Fiat money depends on the trust of the populace that it will hold it’s purchasing power, and on the statesmen that manage it.

North America, Eurozone, Russia/Asia/Mid-East/South America crank up your paper/digital prestidigitizers!

#66 rory on 03.20.09 at 11:22 am

#37 Munch said:

Good news! All charges against President Zuma will be dropped! Yeah! How’s that for excellent management? I betcha your president couldn’t pull that one off, so ENOUGH with the third world jokes already, and show us a bit more respect!

Oh Munch, Munch …Garth lives in Canada and ummm … Canadians have a Prime Minister …Presidents are for those Murrikans of yours.

P.S. – as to No Krugerrands accepted????? – Garth is just trying to pump the sale of locally produced Maple Leaf coins instead …how’s that for a spin.

#67 @Garth 2 on 03.20.09 at 11:44 am

Anon said, in a hysteric, almost manic tone:
“Are you serious? What are you talking about? Sales are still down/falling from previous levels, ”

You’re half right, sales are still down. But they are not falling on a month-to-month basis. In fact, on a month-to-month basis they are in fact rising… even against recent seasonal patterns. The only question is what the inventory picture looks like. I admit that I neglected the supply side … but so do you here.

Anon rails on:
“Are you suggesting that because the ship is sinking at a slightly lower rate, people should jump on board? Really?!?!?! ”

I am suggesting no such thing. I don’t have a lot of faith in this rally, but the market has proven me wrong. And I admit it. A long protracted slide now seems more likely than an acute episode, and the near-term result suggest a rally.

Anon, most indignantly spews:
“You talk about spin? It is just like the latest news out of TREB that states the rate of decline is the smallest in months. ”

What TREB said here is true. But TREB’s underlying message is that buying and selling homes is good at all times. I disagree with that.

Again, more from Anon:
“In plain english, that should read that sales were falling and continue to still fall. The ship is still sinking.”

The ship is sunk for flippers. This much is true. But for regular-joe homeowners, it seems less dire.

Anon retorts with a prediction:
“I also suspect that the general trend would be to have price increases for the first half of the year if compared month over month. I think that prices will be lower for March 2009 then in March 2008.”

I agree, March 2009 will be lower than March 2008. What would be surprising is if March 2009 prices are higher than February 2009 prices. That will definitely signal a rally, since that hasn’t happened in years.

Anon and I make nice:
“Truth hurts.”

Agreed. Let’s both relax.

#68 Got A Watch on 03.20.09 at 11:45 am

“No depression. No hyper-inflation. Both are toxic to human society and would inflict irreparable damage. There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place”

Garth, maybe because you were in Government, you seem to have a touching but misplaced faith that Government is competent and can control the economic direction.

I would say you are wildly wrong on both counts.

Our Governments are fundamentally incompetent, bloated and stupid, and their policies will not help to resolve this crisis in any way.

The Government cannot control the economy very well at all. They try to do so in Command Economies like the Communist or Socialist nations, and it does not seem to have worked out very well for them over the long run. A lot of Government employees doing make-work projects, resources mis-allocated to unproductive or otherwise non-desired sectors, budget deficits etc. I could run to several pages on that alone.

I have full faith that over-lobbied by monied interests Governments will almost always choose to do the wrong, inefficient and un-productive thing.

Just because they wish to have no deflation, does not mean it has not already happened. We are in it right now, and even you optimistically say it will last 2 more years.

The only thing to argue now is how long this Depression will last, and if inflation will eventually happen at the end of it. I would answer those – many years, and maybe, at this point.

The amount of credit losses to come is even larger than the losses taken so far, which was already enough to sink the global banking system. I estimate we are only 20% of the way through this crisis. Governmental incompetence will ensure it lasts many years yet. I give you Jim Flaherty and Tim Geithner as Exhibit A there, to mention 2 of a cast of thousands.

We have a Bull market in bad Government and institutional stupidity, all across the globe. If you are counting on these clowns to lead us out of the wilderness, I have a bridge to sell you. They may do the right thing, eventually, but only after all other alternatives have been fully exhausted.

#69 Barb the proofreader on 03.20.09 at 11:48 am

Speaking of digital money. We have lots to worry about, meanwhile our prime minister is conspiring to help his best friend, (best friend!) the corporate lobbyist Ken Boessenkool, to change the rules and get taxpayer money for THE big conglomerate Canwest… MEANWHILE with his other hand he is gutting our beloved CBC.
Are these guys just plain insane or 100% crooks?

“the Aspers helped ensure that Harper would remain prime minister when Canwest newspapers provided supportive editorials before the 2008 election and then hammered the idea of a Liberal-NDP coalition”

At least Harper “pays back” his “friends”. Yes, it is like the 30’s all over again… Al Capone style.

“Word will filter out that Harper has put the media giants at the front of the soup line.”

#70 mattbg on 03.20.09 at 11:49 am

It looks like Garth has attracted a Kunstler-like following. Like Kunstler, too, I’m sure he knows that half of them are crazy.

#71 Comrade Okie on 03.20.09 at 11:49 am

Hmmm. That reads like a Maritime weather report.

We will have sunny periods today, with some cloud activity and a 40% to 60% chance of precipitation. Winds will be light from the southeast in the morning, possibly strengthening throughout the day. The temperature will be between 6 and 9 degrees unless there is a shift in currents from the gulf stream.

Personally, I like the Farm and Shotgun option. But I’ve always been partial to both, so that’s not very reliable either.

#72 Barb the proofreader on 03.20.09 at 11:59 am

# 63 by Plainly stated


Interesting post… although, it HAS been said before.. many, many times.
Stated in it’s simplest form, the U.S. is an egocentric spoiled brat, who, from time to time, has, and will, do ANYTHING..

#73 Jake on 03.20.09 at 12:02 pm

#44 Bill Muskoka.
I disagree with you now and then, but your comments to Munch were hilarious….
“BTW, I have a great deal on a Coke bottle? (The Gods Must Be Crazy)” Thanks for the Friday morning laugh. That was priceless.

#74 Jake on 03.20.09 at 12:06 pm

Oh yeah, did anyone catch Rex Murphy’s Point of View yesterday on the national. The link to the segment from March 19th has not been posted yet at But you can link up to it through CBC’s The National for March 19th and scroll to Rex’s segment near the end of the broadcast. He discussed the ethical considerations of the bailouts. It was very interesting and well worth your time. I will post the specific link when it is available.

#75 Barb the proofreader on 03.20.09 at 12:16 pm

Will Vulcan, Alberta be on your book tour?

#76 Puzzled on 03.20.09 at 12:27 pm


No, this madness is nowhere close to causing hyperinflation. You do not get hyperinflation with this much consumer and corporate debt when unemployment is soaring globally, overcapacity is rampant, and wages are falling. Please see Fiat World Mathematical Model for more details.

Global Debt Destruction Continues

Yesterday, Kevin Depew on Minyanville offered his thoughts on yet another Options Expiration Bernanke Bombshell. Let’s tune in.

Just wanted to drop in a quick note about the Fed decision to purchase Treasuries. It is hoped by the Fed and the market, as evidenced by the jump in stocks, that the decision to purchase Treasuries “help improve conditions in private credit markets.” But it won’t. What it has done is punished government bond bears and injected some additional volatility into equities ahead of expiration. At the end of the day, all that is really taking place is the issuance of more debt to make up for the debt that is being transferred away from people who don’t want it anymore.

This will not solve the key issues driving the deflationary debt unwind; a global reduction in time preferences and the global destruction of debt.
Bingo. Time preferences have changed (people are saving not spending). Furthermore, rising unemployment everywhere suggests that borrowed debts cannot and will not be paid back. This debt destruction still exceeds printing, and printing still exceeds lending.

All that Bernanke specifically (and central bankers in general) are likely to accomplish is to delay the destruction of debt at taxpayer expense, and thus delay the recovery. There is no Keynesian free lunch, and no hyperinflation on the horizon either.

Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List

#77 Steve on 03.20.09 at 12:32 pm

Hold on to your hats people….this slide is steep and there is no bottom in sight.

#78 Jonnay on 03.20.09 at 12:48 pm


Mark Carney said a few days ago that the BoC would consider “quantitative easing” aka printing money. That in itself worried me straight away. Now I know things aren’t great up here in the economy but they’re not nearly as bad as other places. Why would we have to start the printing press? And if we did, wouldn’t that eventually become an inflationary issue?

#79 Bill-Muskoka (NAM) on 03.20.09 at 12:54 pm

Gold, Cash,whatever…I’m putting my Canadian Tire Money in a safe place! LOL

Now, where is my trusty old Magick 8 Ball? That’s what I trust!

BTW, banks do NOT print money, the National Mint (aka Treasury) prints money! Like the bumper sticker in the U.S. states:

Counterfeiting is Illegal! The Government doesn’t like coompetition!’

AIG stands for ‘Arrogance, Ignorance and GREED’

Today is the Spring (Vernal) Equinox. Al Sleet, the WINO Hippy Dippy Weather Man would forecast very accurately a ‘50% chance of light and darkness!’

#80 RS on 03.20.09 at 12:56 pm

Can we please get back to talking about real estate – like old times?

#81 Bill-Muskoka (NAM) on 03.20.09 at 1:14 pm

#64 Shawn on 03.20.09 at 11:15 am

You’ve got that right. Inflation is properly named because all it is is hot air pumped up to look like real wealth.

Personally, I plan on using the Richard Pryor ‘Brewster’s Millions’ approach in sequestering all those 1/2 cent rounding errors and then running a campaign for ‘None of The Above!’ You just know some programmer has done that very thing somewhere!

BTW, anyone see the $7 million dollars collected in the U.S. by asking people to send in their unwanted pennies? That would take 700 million pennies and it covers a long city block. Sorry no link at this time.

Meanwhile, the adherents to inflation are gasping their last breaths like some worn out religious movement based on unfullfilled promises. They are the ones criticizing Obama the most because they are truly experiencing ‘Hopeiness’, and it is not going to rise again!

Like a defective condom, they burst their own protection. Proof? Look how many have been SCREWED!!! What else should we expect from those addicted to gambling?

#82 Dave on 03.20.09 at 1:25 pm

for those that insist hyperinflation is not a concern, please tell me what happens when people don’t want U.S government bonds anymore? Is the fed going to buy up all that debt too??? I’m sure this is a few years away, but will obviously occur soon.

uncertainty won’t last forever. The bond bubble will burst, and then what? still deflation?

#83 K on 03.20.09 at 1:31 pm

# 47…..Makeorbreak…..Good article!…It really does cut to the chase.. Everyone on this blog should read it…..Garth do you have any comments?

#84 rationalnational on 03.20.09 at 1:36 pm

What I find interesting is the statements made about previous crisis and the potential for a repeat or rhyme of those in the current and future environment. There are dramatic differences today.

1) Fiat currencies are the norm, and the world reserve currency is controlled by one country
2) The world reserve currency belongs to a country whose debt load is 3x their GDP (conservative) and rising rapidly
3) The rest of the world is VERY unhappy with the actions of the financial system, specifically with those who reside in the country that owns the world reserve currency. They have begun to veto treasury purchases. Begun being the operative word, better hope they don’t start selling in earnest.
4) This is the first time that the developed world owes the developing world for its existence. Power must shift.

Look around, this is not a cyclical trend, it is secular. The worlds debtor nations are the ones who live in the myth of power – the creditor nations are the ones who are really calling the shots. That said, when one speaks of governments not “allowing” these events to unfold, you actually assume that they have the power to exert change and influence on those that they depend on. Good luck with that, it’s akin to a 4 year old rebelling against their parents. Who’s going to win?

As Garth says, you must make a choice. However, consider:
a) how big the deflation potential is
b) compare that to how untenable it would be for a politician to have this occur on his/her watch
c) then consider the lengths they will go to in order to avoid that outcome
d) consider how truthful, accurate, and effective they have been in managing the crisis to date.

With desperation comes risky moves like those of late. Politics will rule the decisions made from here on out. Garth should know this better than anyone.

And as for “inflation won’t happen until employment picks up”. Well, we have inflation in Canada as per the reports this week. How’s our unemployment doing? Something wrong with this argument? Riddle me this, what happens to inflation when currency is purposefully devalued? How widespread is it – i.e. what assets are affected by this? Now compare the total value of assets impacted by a currency devaluation agains the deflationary effects of the losses to date and tell me what is more powerful.

Lastly, “we’ll have interest rates at 20% if inflation comes”. Well, remind me what quantitative easing is again? Hrm, buy bonds – price goes up, yield goes down. Creditor countries stop buying bonds, price goes down, yields go up. Wait! That means deflation wins! Let’s fix this – print money – buy bonds, bring rates down. So, what loses? the currency. What do you do if your largest trading partner does this? Learn the two step and get on the dance floor.

Good luck to all.

#85 Dad was wrong on 03.20.09 at 2:10 pm

Well the “vacant stores in soon-to-be ghost towns” scenario has already started in the UK:

> Makeorbreak on 03.20.09 at 9:04 am wrote:
> No depression? Think again!

#86 go green on 03.20.09 at 2:18 pm

#49 Rhino on 03.20.09 at 9:06 amo

Re your post yesterday. You lived about a 5 minute walk from where my sister lives. She used to live on Orchard, but now lives on Desroches.

#87 Gonzo on 03.20.09 at 2:29 pm

#57 smwhite
Liked your post. It’s nice to hear people contrast the situation in Canada with that in the U.S. I agree that we are in a much different position than them. It’s seems like the hyperinflationary folks here use U.S. economic information to guide their reasoning. When inflation comes, oil/commodity prices will rise, and so will the Canadian dollar. If the U.S. is not buying our resources, Asia will, and thus we should be able to uncouple our dollar from them. If the U.S. dollar collapses, people will be looking for better places to put their money and I think the Canadian dollar will look fairly attractive. For those who look to Schiff – even he is buying Canadian energy stocks.

#88 rory on 03.20.09 at 2:33 pm

Hi all …

form Mike Shedlock at talking about more money to the auto guys.

“Misguided energy is far worse than no energy at all. Unfortunately, there is misguided energy everywhere you look including Congress, the Fed, the Treasury, the FDIC, and the Whitehouse.”

I don’t know about conspiracy theory or absolute power, etc but how can so many people at the top, including CEO’s, bankers, and Wall St. not listen to anyone or anybody.

There has got to be an agenda somewhere but can any one tell me what that might be besides ‘no one has a clue or the guts’

#89 POL-CAN on 03.20.09 at 2:38 pm


Please have a look at the following chart of Canadian unemployment trend…

This is not going to slow down anytime soon…. And people are buying houses? Not cars or TVs, or furniture but HOUSES?


Dead people walking…

#90 Grumpydawgs on 03.20.09 at 2:38 pm

The CBC signaled yesterday the ‘alls clear’. Apparently the CBC economists figure that rising food prices balance out a falling house price and so everythings ‘A-OK’, you gotta love the CBC cheerleading us out of this thing.

#91 Grumpydawgs on 03.20.09 at 2:41 pm

The retail sales figures being ‘up’ this morning forgot to factor in inflation. In fact sales are not up , just the price of goods is. Don’t be fooled.

#92 Got A Watch on 03.20.09 at 3:02 pm

Every recession features those who rush to call the bottom too early. And get hurt for doing so.

Many people just don’t want to hear bad news, as if hearing about it will just make it worse. The ones who blame the media, or anybody who says something negative, as if the economy can be talked down and fundamental factors don’t matter.

When the real estate market, or the stock market, does find the actual bottom, it will be easy to spot.

Magazines will have front page stories, newspaper headlines will read:

“Real Estate: Worst Investment Ever?”
“How I Lost All My Money On My House”
“Never Buy Real Estate”

“Stocks: How they Took All Your Money”
“I Am on Welfare Because I Bought Investments”
“I’ll Never Buy A Stock Again”

At that point, when you tell someone you’re buying:

-they’ll look at you as if you have 3 heads
-people will get upset at the very mention
-concerned friends tell you you’re plumb crazy
-they’ll say “it will never come back”

We are a long way from that yet, it’s called “capitulation”, when the masses give up on the idea.

Don’t be ‘The Greater Fool’. Cash is king. Whatever you want to buy now, wait a year or two then look at it again.

You are utterly distorting what I said and believe. The economy will in fact begin to grow by this time next year, but deflation will persist and the housing recession will last at least five years. Those in equities will make money. Those in real estate will lose it. — Garth

#93 . . . fried eggs and spam . . . on 03.20.09 at 3:12 pm

#8 Cendrine 10:42 pm — “. . . are predicting USD collapse this summer after the US defaults on its debt.” (I also read that a few months ago.)
— / —
#13 john at 11:38 pm “. . . is the digital money kept on the books? if so, how will it be mopped up later? wont it affect other things and create a chain reaction again. . . . with real money they have many mechanism to mop up.”
#63 Plainly stated at 11:07 am — “. . . financial warfare by the financial elites of the US with europe cheerleading, . . . its got one thing going for it now: the usd. . . . US has shown that if the middle east tries ditching the usd, life will be hell a la iraq.”
When the US defaults — the cupboards are bare now — the powers that be will press the ‘delete’ button on all necessary computers, the electronic, or digital money is gone and the books will be burned, so no debts can be repaid, as there is nothing to pay them back with.

Same as Bre-X, Nortel, Enron, Dome Petroleum, Worldcom, etc., and plenty of others besides. What could hurt the ‘elite’ are the derivatives and credit default swaps, because one sees that the whole house of cards is already tumbling over itself.

There will always be a whole range of opinions on in-, de-, stag- and hyperinflation, lower / higher taxes (which is OUR money anyway), recession / depression yet to a large extent, none of this stuff matters anymore. That is drivel printed / said by the msm to place attention spans elsewhere.

All that does matter is for individuals to take steps in looking after their families. Life always carries on, no matter the outer circumstances.

#94 POL-CAN on 03.20.09 at 3:13 pm

# 90 Grumpydawgs

Food prices going up will never equal the loss of equity of 20 % on a 400 K house plus a 40 to 50 % stock market decline.

If the CPI was measured properly this would be self evident….

This economy is in the crapper… All you have to do is look at traffic which is way way down…. Rush hour is what it used to be years ago… 2 hours in the morning and 2 hours in the evening :)


#95 Cave Spot on 03.20.09 at 3:16 pm

Feb was a horrible month for new home and condo sales in the GTA (see link for stats). New Hi-Rise (Condo) sales were down 73.9% in Feb. Good luck to anyone who has recently purchased a condo in Toronto. It may turn out as bad as Miami but it will not be pretty.

#96 on 03.20.09 at 3:18 pm

“If prices rise, it signals economic expansion.” Garth, this notion is incorrect. Prices can rise without economic expansion – Zimbabwe is a good example. Stagflation is another good example of no economic expansion and prices rising.

Neither of which will occur here in the next two years. — Garth

#97 CalgaryRocks on 03.20.09 at 3:27 pm

#89 parabolic moves are often unfounded and reverse just as quickly. See Nasdaq, nat gas, oil, tulips etc.

#98 PTDBD on 03.20.09 at 3:28 pm

Post #84 by rationalnational was well expressed.

The magnitude of what is happening has not been yet appreciated. There is a point of time convergence of the reserve currency problem, the debt and deficit crisis with those of Peak Oil, Climate Change, boomer retirement and above all the rise of India and China.

The lid is being kept on the markets by the professional manipulaters of gigantic pools of money and those crafting money out of thin air to keep the machinery turning.

#99 char on 03.20.09 at 3:53 pm

There is a serious lack of a lively, vital, Canada-centered alternative economic commentary (except for Garth’s blog ). Where are the big personalities? Where are our wierdos and doomsayers? Where’s our Alex Young? How come no Canadian Peter Schiff, Jim Rogers, Robert Prechter ? What, we don’t have billionaire investors ?

Why is there no whistle blowing crusader journalist like NY Post’s John Crudelle (whom I admire)? Where’s our Max Keiser? Even a lunatic would be welcome, but here we have no one !

No wonder we think it can’t happen here, my guess is no one sounded any warning in Iceland either.

For instance, who owns most of Canada’s dept ? Anybody out there have a clue ? It’s never talked about.
My bank manager at TD told me last year “Canada has no dept”…this is a guy with a degree who just got promoted !

The closest thing I know of is Ian Gordon, he’s never written a bestseller, and I bet hardly anyone’s heard of him.

So gold or cash, inflation or deflation and when ? My point is, in Canada how are we supposed to even guess?

#100 Ally Ally Oxycontin Free on 03.20.09 at 4:02 pm

U.S. Federal Deficit Soars Past Previous Estimates

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated, congressional budget analysts said today.

#101 Ally Ally Oxycontin Free on 03.20.09 at 4:12 pm

Watchdog fears market ‘Ponzimonium’

“US federal regulators have warned of a “rampant Ponzimonium” as they disclosed they are investigating “hundreds” of possible scams in the aftermath of the $50bn fraud allegedly perpetrated by Bernard Madoff.

Bart Chilton, a commissioner at the Commodities Futures Trading Commission, the US regulator, said the watchdog was “seeing more of these scams than ever before” in commodities and other futures markets.”

#102 Carole AB on 03.20.09 at 4:30 pm


Leap 2020 says Very
Great Depression for US – 10 years, deep recession for Canada 3-5 years. Everything hinges on new basket of global currency and G20 meeting. You can get free press clippings and a new excerpt on what the US will look like in 2010 from the latest Bulletin GEAB 33 emailed to you.
Sign up at bottom left of page. They sent me clippings today. Looks like Russia and China as well as the UN are asking for a new currency.

Did you know that stuff will make you blind? — Garth

#103 gold bug on 03.20.09 at 4:45 pm

Garth wrote: “No depression. No hyper-inflation. Both are toxic to human society and would inflict irreparable damage. There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place. If we tip either way, it will be totally by accident.”

Can’t decide whether that’s more “deluded determinist” or “closeted Marxist.”
Government is the root of all evil. It is not the cure. Its best intentions usually bring the worst results.
You haven’t been out of Parliament long enough for the disease to have been cured, obviously.

And the better way to run a democracy is what? — Garth

#104 Got A Watch on 03.20.09 at 5:19 pm

“You are utterly distorting what I said and believe.”

Geez, Garth, I was just giving my opinion. I had no idea that was “distortion”. I was talking about the classic ‘madness of crowds’ type thing, which applies to almost any market at extremes. Not replying to anything you said specifically, in today’s post or any other. Huh?

If that is “distorting what I said and believe”, I plead guilty to not having read your book, no idea what you said or did not say in there, or anywhere else, except what I have read from you here.

I agree with the rest of your comment below mine there, mostly, but you should qualify that is just your opinion as well. Unless you have a hotline to the future. Everything we talk about the future is, by nature, speculation. Some may have a more informed opinion than others, but it is still just an opinion.

Not attacking you in that comment, it was not directed at you. You seem a little touchy there. We can compare notes in 2 years and see who was right and who was not. I will have no problem with saying you were correct, if in fact, you were, and I was wrong. I would hope you would extend me the same courtesy.

I hope the economy begins to recover by next year. The way the Governments are going about it so far, I am not very confident it will.

Are you sure you replied to the right comment.

#105 jess on 03.20.09 at 5:54 pm

the use of price controls in the tool kit hence no hyper inflation

#106 Makeorbreak on 03.20.09 at 5:58 pm

Garth, you accused me last week of almost wanting a great depression to happen. No, I do not want a GD to happen again, but regardless of what I want, this is likely to happen and I want to make sure I and my family prepare for it. There has been too much warnings in the past couple of years just to dismiss it (and I still want to know why you changed your mind so abruptly.)

I never said the odds of the current recession falling into a deflationary spiral were greater that 20%. Nor do I believe otherwise now. However, a 20% risk of something happening means I prepare for it aggressively – which I have done in my own life, and am attempting to assist other people to do, through This is a time for insurance against the possible, if not the probable. — Garth

#107 bobs your uncle on 03.20.09 at 6:17 pm

#99 Char,

There isn’t much comment about Canadian economic policy as what Canada does makes little difference. The US dollar is the reserve currency, every country uses it to do business. That is what all the nations agreed to. To give an example….there are more US T bills in the Caymen Islands , $92 billion, than Canada holds, $52 billion.

There are $62 trillion dollars of outstanding credit default swaps left over from 2008. These CDS’s are in US dollars.

#108 JO on 03.20.09 at 6:19 pm

Deflation remains the primary threat going forward. High inflation will then be the major risk whenever the deflation ends. Of course, no one knows when, but the risk of deflation ending rises astronimically once unemployment stabilizes and home prices stop falling. Both of these should continue to favour deflation for at least 2 – 3 more years.

There is a monentary noose on the economy. No matter which way we go, it will end very badly. For now, a collapse in the long bond market remains a likely result at some point in the next 2 yrs..due to deflation, as collapsing tax revenues and wary investors reach the point of refusal in financing huge gov’t deficits. And then the fun comes. 40-50 % cut in gov’t services in a matter of days and shocking interest rates on long term loans – even if the short term rates remain near zero.

Eventually, when unemployment stabilizes/home prices stop dropping / large numbers of consumers and business decide to start borrowing and spending, we enter high inflation with a low risk of hyper inflation. This might happen before the end of the de-leveraging process, but you have a better chance of winning the pay day lottery. The Fed could induce a hyper inflation by printing 20-30 T and issuing spending cards to all citizens with the simple rule of spending everything with 1 year or whatever you don’t spend, you pay tax on it. Or the Fed could charge all banks a penalty of 15-20 % on all reserves held on deposit. This would force banks to get rid of that excess cash – even in an environment where unemployment is exploding and houses (collateral for loans) and cars are dropping.

These actions are extremely unlikely. As Garth alludes to, as bad as deflation gets, a hyperinflation would be far more painful because it would impact almost everyone – rich included. Not only that, your foreign debt holders would want to start WW3 and never invest $ that the nation would desperately need to survive. And finally, no gov’t would survive in any depression – let alone a hyper inflation.

Cash is king for now – gold is a distant second in small doses. Gold is far more likely to hit under $ 700/ounce at some point before the end of 2010, then to go to 1400 or least for now.


#109 Carole AB on 03.20.09 at 6:27 pm

Garth “Did you know that stuff will make you blind?

Are you saying there is no chance the US will default, or of a new international reserve currency? I admit their last bulletin was a little crazy, then again they are on the front line in France with protests etc.

By the way what do you recommend for a small business in oil and gas manufacturing with very good possibility of no further contracts,or income very soon. No debt, no mortgage, no vehicle payments….enough in company to pay ourselves (2) for around 10 – 12 months? And of course no possibility of EI. Do you see Alberta coming back by then?

No default. No international currency. This is rubbish. As for Alberta, there is no real recovery (higher home values, more jobs, oilpatch investing) on the horizon for at least a few years. You are best to work on diversifying. — Garth

#110 on 03.20.09 at 6:43 pm

there won’t be inflation. higher unemployment means ordinary people will be more selective in spending what they have. this means buying cheaper food, substituting no name brand goods.

at the same time previously heavy spenders will be saver to pay down their heavy debt loads.

the run up in the market the last few days was over-reaction to the “inflation” scare. the market will drop and hit lower lows. capitulation will set in; and then it’s time to buy-in when you can cut the fear with a dull knife.

#111 No Fool.... on 03.20.09 at 6:44 pm

Though I’m not crazy about Xurbia, I will say that there is absolutely no real down side to the ideolgies pumped out.
If thing go really bad, you win.
If things go good, you still win.
What’s the diff?

#112 . . . fried eggs and spam . . . on 03.20.09 at 6:55 pm

China now backs Russia on having an alternative currency to the US$. Do they know something the rest of us don’t?

#113 bobs your uncle on 03.20.09 at 7:25 pm

112 Fried Eggs,

Everyone is pestering China to stop holding down the value of their currency. China is trying to keep their money cheap in relation to the rest of the world. If Chinese labour is too expensive the rest of the Pacific Rim will be eating their lunch.

#114 Carole AB on 03.20.09 at 7:25 pm

Garth “You are best to work on diversifying”

Thank you very much for the advice. Any recommended reading on this topic? (I have After the Crash)

#115 North Vancouver Citizen Jr. on 03.20.09 at 7:37 pm

So New York City, Toronto, Boston are dying cities, and Miami, LA, Phoenix, Las Vegas, Montreal are dead ones.

…Did I ever mention Vancouver will become the next Financial/Trade/Leisure Capital of North America?

#116 Dawn in Calgary on 03.20.09 at 8:08 pm

#81 Bill — “Personally, I plan on using the Richard Pryor ‘Brewster’s Millions’ approach in sequestering all those 1/2 cent rounding errors and then running a campaign for ‘None of The Above!’”

Sorry Bill, but I’ve watched WAAY too many movies.

You’re talking about two different films – – the Richard Pryor movie Brewster’s Millions was where he has to spend 30 million in 30 days to inherit 300 million. To spend some of it he runs the “none of the above” campaign.

The 1/2 cent rounding error was the scheme from Office Space.

Back to real estate? We’re looking at a 17 acre place on PEI for less money than they require here in Alberta for a down payment. What’s ridiculous is here in Alberta we’re surrounded by thousands of hectares of land, and on PEI they really AREN’T making any more land, and because of erosion, the island’s slowly getting smaller. But yet where is the more expensive property?

This market is ass-backwards.

#117 Gonzo on 03.20.09 at 8:10 pm

On CBC Calgary news tonight: 1/10 homes for sale in Calgary currently is a foreclosure property.

#118 Basil Fawlty on 03.20.09 at 8:32 pm

“There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place. If we tip either way, it will be totally by accident.”
The current financial crisis was caused by too much easy debt, which created a credit bubble. The current cure for this disaster is too restart the credit markets and get people borrowing again, which is what created the original problem. So, are we to expect that government can somehow control whether we experience hyperinflation or a depression? I would say they created the mess and they have no idea how to cure the problem. All they have offered so far are lower interest rates, plus money creation and borrowing to bailout the financial wizards who helped create the toxic debt products.
Oh yeah, let’s put our faith in the government and there will be no economic extremes. God help us all.

#119 Juan on 03.20.09 at 9:03 pm

“There is not a sane government in the world (sorry. Zimbabwe) which will allow either to take place. If we tip either way, it will be totally by accident.”

Uh Huh with the US congress and Bernanke at the helm of the FED I would say that isn’t at all out of the realm of possibilities.

#120 Jonathan on 03.20.09 at 9:12 pm

MM writes: “I just wanted some people’s opinion on this blog in regards to investing some extra cash. Do you think investing in companies like Imperial Oil, CP Rail or Sony are good long term investments. They say to buy when everyone else is not. Just like to hear your thoughts.”

I’d go with CN Rail over CP Rail. It is a leader in North American rail, well managed company and its stock holds up well in recession. CNR’s EJ&E lines in Chicago were just approved, and they have made some interesting partnerships. Railways average 38% return in the year after the last 8 recessions. Good return for such a safe play.

Keep away from Sony unless you want to take on alot of risk. I’d think you would be better going with RIM or Apple as their potential returns are higher. Sony has alot of issues with its product lines and almost all of them are losing money. On the other hand, Sony’s new ‘western’ management is in the process of shaking the company up. If you really like Sony, I would check out what senior managements plans are going forward. If you are excited by them then perhaps invest a smaller portion of your investment funds with Sony stock. If you think management is full of hot air, then stay clear.

Oil is a good long term investment. If your interested in a slightly higher risk with much larger rewards and a shorter investment horizon, consider the medium sized oil companies such as Talisman. Talisman stands an excellent chance of being bought up by larger oil companies if the oil markets rebound. The return could be 300-400%.


#121 Jonathan on 03.20.09 at 9:24 pm

MILTON & Surrounding Area, ONTARIO
Real Estate Update


February 26, 2009
1565 Listings (

March 10, 2009
1651 Listings (

March 16, 2009
1709 Listings (

This is an increase of 9.2% or 144 units in 12 business days (2.5 weeks). Even as sales strengthen as buyers head into the spring market, inventory levels keep rising.

If inventory increases linearly then it will double in less than 24 weeks (5.5 months). If inventory continues to accelerate at its current pace, inventory will double in 6.5 weeks (38% weekly growth rate).

#122 Jonathan on 03.20.09 at 9:27 pm

MILTON & Surrounding Area, ONTARIO
Real Estate Update


February 26, 2009
1565 Listings (

March 10, 2009
1651 Listings (

March 16, 2009
1709 Listings (

March 20, 2009
1740 Listings (

4 days and only 31 additional listings added to inventory. Inventory is growing at a slower pace than in previous weeks.

According the real estate board, home sales were down 12% YOY in February, average prices were down 12.7% and median prices were down 8.1%.

#123 ThumbsUp on 03.20.09 at 9:44 pm

Not RE, environment & economy
China seeks export carbon relief
“These (exported) products are consumed by other countries… This share of emissions should be taken by the consumers but not the producers”

Li Gao, China’s climate change negotiator
valid statement, interesting to watch.

#124 Pat G on 03.20.09 at 10:11 pm

DaHKKid #117

Yes, China and other countries have been invited by the Harper government to invest in Canada with fewer regulations and with the level of investment raised from $295,000. to one billion dollars before any review is required to determine if the investment is in Canada’s interest. this is how he plans to stimulate the economy.
— And not just that, the threshold would rise over four years.

He also said they’d remove the present cap of 49% ownership in the uranium sector to allow majority ownership but only for countries that give Canada commensurate rights and benefits and that would pass a new national security test.

Read all about it here

and here:

the Compete to Win panel, set up by Harper, also urged allowing bank mergers and the opening up of the communications sector to more foreign investments but Harper said they’re not considered at the this time and that he doesn’t think Canada is ready for that. Of course Harper believes in incremental change so the general public won’t notice what’s being slipped into major bills that are turned into omnibus bills such as the Budget Bill.

Media convergence and foreign ownerships is another serious concern.

A CBC’s online report states, “the panels report urged a two-phased easing of telecommunication limits designed to “increase the number of competitors in Canada, rather than simply open the door for foreign buyouts of Canadian companies “. Foreign takeovers of larger companies would then be allowed after five years at which time, a “broader review of broadcasting and cultural policies would take place”.

So far as I can see this, it’s stealing our wealth by stealth and diluting Canadian independent news gathering and reporting to the detriment of our democracy.

This must be turned around before it’s too late.

#125 char on 03.20.09 at 10:46 pm

Hey #107 bobs your uncle

Let me be more clear. I was bemoaning the lack of contrarian Canadian enconomic journalism. Especially PREDICTIVE Canadian journalism, which every guy I mentioned does. Each one predicted years in advance the US real estate crash.

Notice every single link on Garth’s blog is to a US centered publication, or to the Uk (is business conducted in British currency?) Unless it’s current news of our housing crash.

Everyone who posts here is stuggling with PERSONAL financial decisions. If the US dollar really tanks, will the looney skyrocket ? If the US puts interest rates up to save it , will we follow ? Will Canada run the printing presses like Bernake? There are many possible scenarios, and all the mainstream press tells us is our banks are safe and everything will be fine. Like it was in real estate.

What Canadian pundit predicted well in advance a crash in equities and commodities, aside from Ian Gordon (who practically nobody’s heard of)? All we heard about was decoupling and peak oil.

Marc Faber says commodities based economies like Canada will suffer the worst. Why am hearing this from a European? Where’s the Canadian Nouriel Roubini ? We don’t have academics ?

And I was talking about Canadian govt. debt, not bank debt. My bank manager thought there wasn’t any, therefore Canada’s in great shape, so buy mutual funds. Oy vey.

#126 Tony on 03.21.09 at 1:42 am

Looks to me more like a one days sucker’s bounce in the price of gold and a two days sucker’s bounce in the price of silver. Without wage inflation there can never be inflation. Watch for the US dollar to gain strength next week a pullback to the 6950 level on the Dow and the TSX will take a pasting as commodity prices fall.

#127 MM on 03.21.09 at 10:51 am

Jonathon.. Thank you for you’d advice. Appreciate it.

#128 Got A Watch on 03.21.09 at 11:38 am

Thanks Garth for posting my rebuttal to your comment.

I don’t think we disagree on that much.

I believe you mistook my general comment on markets finding a real bottom, as a personal attack, which was not my intention.

The comment was aimed towards those who want to go out now and buy real estate, or buy more stocks or mutual Funds etc. Based on my feeling that we are not near the real bottom yet.

That was all I was trying to get across.

When I use the words here ‘The Greater Fool’ (I should be more careful), I mean those who are rushing to call the bottom and buying too early, it was not referring to the title or content of your book.

I suppose I will have to buy your book. I have a stack of unread books here already, tho, I seem to find little time for books after being on the internet all day.

Keep up the good work. Thanks for your efforts.

#129 Bill-Muskoka (NAM) on 03.21.09 at 1:59 pm

#116 Dawn in Calgary on 03.20.09 at 8:08 pm

You are right, it has been decades since I watched that flic. So, I did a Google and it was actually Superman III that Pryor did that bit in.

Pryor did, however, use the ‘None of The Above’ bit in ‘Brewster’s Millions’!

Now, the ULTIMATE Richard Pryor film was ‘Moving’ will you agree to that? It sure is a lesson for people playing in RE about ‘conditional contracts!’ LMAO!

#130 Davinci on 03.23.09 at 6:54 am

If you do not advise your readers to buy at least 10% of their net worth in gold, then hyperinflation happens can I come and punch you in the nose for destroying so many lives with your bull shit stance that governments are smart.

Well, then again I think someone in the Canadian government knows what time it is…