Mayday

desperate1

This Brit threw in a yellow Lamborghini after failing to sell his house. Deflation, anyone?

“…And at the pointy end of the plane are Ernie, he’s the captain, and Jason, who is important because he’s got the map to Toronto and the compass…”

As the Westjet flight pushed back from the gate Friday morning, Edmonton’s airport was getting nicely coated with a driving snowfall. It’s still winter in northern Alberta, and the city’s looking like a cross between Mississauga and a fudgesicle. Miles of ugly industrial units, car dealerships, mattress stores and big box stores are mounded with banks of brown ice. I’d say there are better places to be in late March.

Vancouver, by comparison, was its usual luke drizzle, and back in Toronto, the 737 descended into sunshine and fifteen degrees. The country is incredibly diverse, and yet strangely the same. Not just that every town has a Staples and an Earl’s, but that we’re all headed for a common economic future. This is a fact that is lost on most of us.

In virtually every city, I hear the same thing when it comes to the one thing people want to throw money at, real estate. “It’s different here.”

It’s different in Toronto because that’s where all the immigrants go, so growth will be endless. It’s different in Halifax because of the huge stabilizing influence of the military. It’s different in Edmonton because of oil. It’s different in Ottawa because of the federal government. It’s different in Vancouver because of the sandwiching of mountains and sea.

Of course, none of this matters. All markets will continue to decline, even after a minor feeding frenzy by unwary first-time buyers. This will happen even as equity markets lurch higher and lower, and then recover some time in the months ahead. It will happen despite billions of dollars in new government spending and tax cuts. It will even happen as mortgage rates dribble down to the lowest point ever. And here are six (of many) reasons why:

(1) The jobs famine. House values will never rebound so long as people fear for their incomes. Jobs are now being lost at an annual rate of more than 6 million in the US and, on a per capita basis, the situation here is even more grave. Jobs which are being shed over the course of a year will take seven or eight years to return. If we’re lucky.
(2) Deflation. It’s the thing that keeps central bankers up at night. Rightly so. This monster, once unleashed, knows no master. All the government spending right now, all the cheap loans, all the bailouts, all the debts and deficits are aimed at one simple goal – to prevent a deflationary spiral. Japan is heading into one. So is Europe. Pray we don’t because if it slips loose, anyone who bought a house in the last five years is, well, prey.
(3) Car crash. The collapse of the auto sector is somewhat inevitable. Looks like Chrysler Canada is toast. GM is buying off workers with $20,000 cheques and new cars. Mercedes is selling itself. Saab sank. And meanwhile in India the $2,500 Nano is about to put millions now on bicycles into cars. North America is not far away from losing its industrial heartland. And you wonder why there are 2,171 houses in Detroit right now selling for less than $10,000?
(4) Hollowing out. Endangered is the Canadian manufacturing sector. The steel works in Hamilton are closing. Mills from Newfoundland to northern BC are idle. Small factories employing a dozen or 200 in southern Ontario are shuttering daily. This is the inevitable consequence of no longer being a competitive country. But how can a guy work on the line and feed a family on less than $30 an hour – when houses in Oshawa or Brampton cost $400,000? Answer: he can’t. And neither can the company pay him. They fall together.
(5) Dirty oil. Does anyone seriously believe the Obama administration will not, inevitably, support the move against oil squeezed out of the Albertan mud? After all, it takes eight barrels of water, clouds of natural gas and a devastated environment to produce one barrel of oilsands crude. The dirty oil lobby will find a lot of traction once the Obama billions start building all those new windmills.
(6) Sanity. In Toronto, Vancouver, Calgary, Edmonton, Kelowna, Muskoka, Milton and scores of other places where millions of us live, house prices are still insane. The average family cannot afford the average home, even with the collapse in mortgage rates. So, it is a certainty that prices will continue to decline until the historic norm is restored. This will mean a serious loss of wealth for recent buyers, along with negative equity and heartache. Many people will wonder how they ever could have bought so much with so little thought at precisely the wrong time.

Sadly, even Ernie can’t pull us out of this dive.

132 comments ↓

#1 Ghost of Tom Joad on 03.27.09 at 10:30 pm

Powerful writing Garth. Paints a dismal picture of what the future holds. The Obama years are going to hurt.

#2 POL-CAN on 03.27.09 at 10:41 pm

Nice one Garth…

The fundamentals suck and until they improve defaltion is what it is… What I do not understand is why everyone is so afraid of deflation? Yes it will hurt on the way down, but in the end we will have a stronger economy for that pain.

When I entered the corporate workforce in September of 1998 at 40 K per year as a 25 year old, the average home in the GTA was 213 K and the median was 185 K. In September 2008 the average was 368 K. Yes my income more the doubled but did every ones? No it did not….. If the average family income in T.O. is say 75 K the housing must return to the historical norms i.e. 180 K to 225K. We have a ways to go yet….

Let us not forget that it is better to have a higher interest rate on a lower principal then the other way around and that is where we are heading…

Cheers

#3 Ralph Cramdown on 03.27.09 at 10:55 pm

I agree with most of your points, but have to disagree about dirty oil. My whole life, US administrations have talked about how they’d rather not buy oil from various places, and it hasn’t mattered one bit. Oil is nearly fungible (you have to convert your refinery for the type of oil it’s processing), and if the US doesn’t buy Alberta’s oil, I’m sure China will.

#4 Stu on 03.27.09 at 10:58 pm

Bankruptcies are up, mortgage arrears are rapidly rising… yeah, it’s different in Alberta alright

#5 Bottoms_Up on 03.27.09 at 11:10 pm

http://www.cmhc-schl.gc.ca/odpub/esub/61500/61500_2009_Q01.pdf

Take a look at the data (CMHC–Canada). The housing market has fallen off a cliff. Don’t touch it with a ten foot pole. Pay off debt, save for a rainy day.

#6 Rural Rick on 03.27.09 at 11:26 pm

So sad to hear of first time buyers excited about their new homes unaware of their impending doom.
Renovating with a mortgage, 40 year mortgages, Low down payments, Line of credit secured by your house!
I have to thank you Garth for putting me on the road to freedom must be 25 years ago when you had a column in the Toronto Sun.
I remember you saying “forget new drapes, get used furniture, Pay off the mortgage first”.
We payed our first house off in 5 years. Every brick was a peanut butter sandwich. Mortgage free ever since and 3 houses later.
True then and true now debt enslaves you and house is just a place to live.
Thanks my friend for your guidance over the years.

#7 skullee yyc on 03.27.09 at 11:36 pm

Hi Garth
I am interested in your thoughts on a certain niche in the Canadian real estate market – the B.C. ski town. Ranging from the U.S border to the Trans Canada highway from the Alberta border and west to Kelowna, there are about a dozen or so ski and summer recreation towns that have insane prices for housing based on what a person can earn working there. While local prices are nuts, some of these spots have a recreation allure that will endure beyond any bubble and a mystique about them as the ‘place to be’, and attract a lot of wealthy people from Canada and beyond. After all you can only truly enjoy these places as a resident or perhaps a renter, they are not some stock you can hold and receive a dividend. So what are your thoughts on the sustainability of a 400k 1 bedroom condo in a B.C. ski town where people are lucky to make $15/hr?
thanks

#8 Grumpydawgs on 03.27.09 at 11:50 pm

Garth , maybe it’s the way you’ve worded your comment about the Alberta Oilsands I don’t quite understand. Are you saying that the American s WILL eventually have to back tarsands oil extraction due to thier insatiable need for secure oil or that they definatley won’t because of windmills being built in such large numbers that they could power cities , industries and automobiles without conventional power ?

Having pointed out the obvious enviornmental concrens with extraction what do you think of nuclear plants on site which would negate all water and gas concerns?

#9 Vanman on 03.27.09 at 11:55 pm

Garth,I’m starting to see housing prices come more in line with rents in Vancouver (both of which are extremely unaffordable in the first place). But with cheap credit and a vacancy rate at 0.5% isn’t it natural to see first time buyers getting in regardless of the marketing machine at work? When are we going to see rent prices come down? Starting to see some attractive options…. those that are priced right anyway.

#10 EST Rx on 03.28.09 at 12:00 am

Great post as usual.

“So, it is a certainty that prices will continue to decline until the historic norm is restored.”

Crazy times. I’m looking forward to the return to the historic norm.

I graduated with a Bachelors degree in 2007 and if I would have started a career right away I probably would have bought a condo. Thankfully, I went on to do post grad and now I’m watching all of this unfold. All I can do now is wait…

#11 Basil Fawlty on 03.28.09 at 12:06 am

Your analysis is sound and the quicker Joe 2-4 wakes up to these facts the better for him. It is becoming nothing short of hilarious watching the mainstream financial shows (including Canada’s), as they deliberate ad nauseum on how the latest bailout scheme is going to rescue the fading consumption binge. They are really sounding like “Johnny Come Lately’s”. Stick a fork in it, it’s done!
The question I have is will we get one last economic surge as the trillions in new money eventually finds it’s way into the economy, or do we go directly to a Japan style deflation?

#12 Apocalypse Now on 03.28.09 at 12:21 am

Mayday indeed it is and we will all be celebrating May day as we transition in N. America from Socialism to all out Communism with the State owning everything and everbody. If you think for a minute that life will ever go back to ‘normal’ as it was even until the end of last year you are in for a rude awakening; kinda on a Red Dawn level. Before this is all said and done there will be no equities markets left standing worldwide neither will there be any banks left standing, at least not in any form that would even remotely resemble what they are today. If you survive, the goal of your existence will be survival not building wealth. And all this will happen because you were asleep at the wheel all your life believing the horse manure that was force fed you from birth that the purpose of your life was to build equity, be it in real estate or the markets. Instead of keeping an eye on your portfolio you ought to have been keeping an eye on your governments that have slowly converted you, with your consent, from being a free individual to a slave, working like a beast of burden just to have few things that you never really own and having the fruit of the majority of your labor sucked out of you by your shylock bloodthirsty government. People deserve the government that they get and the facade of democracy that has fooled people since Trudeau is about to be ripped off and the shock will be deadly for many a Canadian. Wait and see! Thy maker beckoneth thee, answer him before the grim reaper comes a knocking!

#13 Dave in Calgary on 03.28.09 at 12:48 am

Garth, about point #5

You often poke fun that Obama would have to be Jesus in order to save the economy, but now you’re saying he can bring down the oil sands?

Simple Google Search will tell you that the USA consumed 3.35 Trillion Watts of Energy in 2004:

– 1.34 Trillion Watts Oil
– 0.77 Trillion Watts Natural Gas
– 0.09 Trillion Watts Hydro
– 0.27 Trillion Watts Nuclear
– 0.11 Trillion Watts Combined Alternative (Geothermal, Wind, Solar, Wood)

So let’s just say Obama is Jesus and he’s able to wave his presidential jesus wand (the same one he’s using to magically fix the economy) and he replaces 10% of American’s oil consumption with wind generated power (even though furnaces and cars and jets etc… use fossil fuel and not electricity… but just for fun).

This would mean America would now need to generate 130 Billion Watts of new wind power.

The Canadian Wind Energy Association Estimates it cost about 2 million dollars per MegaWatt to build wind farms.

So, to replace just 10% of US oil consumption with wind, will cost, a $260 Trillion dollars.

Sure, I’m using monkey math, but I think even Jesus would have trouble pulling this one off. Just like he can’t magically fix the economy, he CANNOT magically cure the US of its oil dependancy.

Sorry Garth, the tar sands are going to be developed…

#14 Jackie_Tranvestite on 03.28.09 at 1:18 am

Maybe, sorta, kinda; … but not quite.

There has been regional disparity forever, dude. Although the world needs the imminent deflation from insane levels of debt, medium-term draw down in manufacturing capacity and short-term consumption of excess inventory of many kinds, there’s eight Billion hungry fuckers running around this planet now.

Sooner than later, energy and manufactured items will be in high demand again everywhere. But guess what? -Those items will not be from Detroit North anymore. The Maersk containers will be again be full coming from China and Vietnam, and this time will contain a lot more cars and computers and less rubber dogshit. But don’t despair. Minerals from Sudbury will be in big demand then and all the Grade 11 dropouts working in the Mississauga car plants or wherever, as well in those financial companies in hogtown, can now work there in the mines.

Nationally, we have all the resources we really need now, for a self-sustainable society (as long as the center of power remains in Alberta and the peons between Detroit and Montreal serve our best interests, which of course is in everyone’s best interest).

National Protectionism? Hell, yeah, bring it on! Then the Ontario factories can continue making cars for the rest of the country – and even get back into making fighter jets again. We could even set up a National Manufacturing Policy (NMP) to ensure everyone and every industry in western and northern canada is provided with manufactured goods made in Ontario at half market price, to ensure national security.

We have all the technologies and knowledge needed now to make just about anything necessary to live. There is no advantage to globalization anymore when you have the resources and manufacturing and critical R&D ability to run a society. Only a few sick twist self-interested groups here really want globalization, like bleeding-heart Lie-berals intent on excess immigration, and really greedy corrupt bastards taking advantage of offshore cheap labour that polarizes and rots society to no end. (It’s funny that the Chinese of all creatures have had to finally come forward to tell north america what a lousy job they’re doing on capital governance).

It’s too bad that Ontario has limited itself to just being part of
a globally corrupt system of exploitive financiers on the one hand, and a bunch of blue-collar dropout bums on the other hand.

In fact, those regional areas providing raw materials to the rest of the world, starting with energy, will be able to get back up to a 3-times-income housing price level, or more, after the crash. The rest are SOL, like fishing villages when the fish run out. Without protectionism and a balanced well-planned society that is NOT hell-bent on family crap and its rampant consumerism, mcmansion squalor, and whiny myopic tree huggers, we will only see further permanent deterioration in non-resource industry and economies.

However, Western Canada hydrocarbon energy and other natural resources will come back in a big way, well-planned or not, whether we sell to the Chinese, the Yanks, or to Toronto down in eastern Canada. And so housing prices will be distributed accordingly. After the crash, of course.

#15 observer on 03.28.09 at 1:27 am

Dear Garth:

Thank you for what is generally a good analysis of the situation.

However, I disagree about the recovery of the equity markets.

I don’t see how they can get back up any time soon when corporate earnings can only stay anemic at best under the circumstances you have described above.

I also fear that the general public might be loosing its appetite for mutual funds for a long time, enough for a sustainable market recovery to abort.

#16 Jackie_Tranvestite on 03.28.09 at 1:44 am

One more thing – ‘dirty oil’ is only that way because less-than-well-planned system holistics, financial greed, and transitional history of technology, makes it so.

Much of that 8 barrels of water can be reclaimed and reused, heat can be sourced from nuclear plants (they have lots of those out in Ontario too, I hear), and the majority of bitumen is actually reachable only through sub-surface SAGD or similar. Additionally, if the stuff was upgraded to synthetic crude on site and then completely refined to petrochemical product in Alberta, the huge energy and materials waste of pumping stuff all over the continent, and revenue lost through export of low-refined product, would be avoided.

Alberta industry could get by quite well, thank you, by exporting only a tenth as much by volume to foreign markets, with ten times the value added. There’s no fundamental reason for shipping stuff thousands of miles down to Sarnia, for example, for them just to make kerosene and diesel out of it.

The stupidity and short-sightedness of the greenies whining over a bunch of ducks is incredible. Why not learn how to convince the morons in Ontario suburbs to move close together, use electric trams and bicycles, and give up their outrageously wasteful private hydrocarbon-based transportation instead? When the demand for your addictive drugs goes away, so will the demand for the supply.

#17 Future Expatriate on 03.28.09 at 1:46 am

Garth, anyone who bought a house in the last five years SHOULD be, well, prey.

There were more than enough warning signs.

#18 Shawn on 03.28.09 at 1:59 am

Can’t argue much with Garth’s essay tonight.

Don Coxe a famous commodity investor says house prices are also hurt by demograhics, not enough new kids, the aging population may have reached a tipping point.

On another point Don Coxe also says sun spots are AWOL and could mean global warming is AWOL as well.

On cars, when will Canadian Tire start selling a cheap import for perhaps way under $10,000? They are well set up to do it. Good bye many car dealers.

Dang, I was hoping though that it was different here in Edmonton, maybe the Asians can buy our oil.

I’m not so sure America will have a choice but to buy the oil, dirty or not. We shall see.

Ironically enough we could solve a lot of problems if we subsidised domestic SUVs. Oil would rise in price (and from the ground) and auto companies while not thriving would limp along.

#19 Informer on 03.28.09 at 2:03 am


Pick your Canadian house price bottom.

#20 Steve on 03.28.09 at 2:03 am

I hope Obama will support the move against “dirty” oil. But will he last that long?

#21 dd on 03.28.09 at 2:41 am

(5) Dirty oil … oh really. Are people will to pay 2x energy prices for cardon capture? That is what the current price tag is. Amercian sucks 20M barrels of oil a day … it will only increase in time. Dirty oil or not … they take all we can produce.

#22 Blacksheep on 03.28.09 at 4:49 am

The system is broken.

Have a look @ the ‘Europe2020’ sites latest forecasts.

From Zeppelin,

If it keeps on rainin, levees goin to break,
If it keeps on rainin, levees goin to break,
When the levee breaks Ill have no place to stay.

take care
BS

#23 Murray on 03.28.09 at 6:35 am

And yet there is price inflation in the grocery store. At the local Zehrs, bread is up 10% in one week. Mean while the price of wheat is less than one-half its price of last June. $5 a bushel down from $12 a bushel. Milk hs gone from $2.99 for four litres in 2005 to over $5. We are being shafted by a concentration of ownership in the food sector.

#24 anne on 03.28.09 at 8:13 am

Love the Westjet humour, glad to hear they’re still at it, last Westjet flight I was on had those little TV screens in the seatbacks and no jokes. Reading all the comments here, sounds like everyone is affirming what you said Garth, It’s different here (equity markets, Vancouver real estate, Alberta oil). I’m no expert and the experts I hear are all saying different things. All us folks in de Nile are just trying to get by, grab a little life enjoyment as we can. Having had a full cuppa prognostication, think I’ll go downstairs for pancakes with the grands…

#25 David Bakody on 03.28.09 at 8:45 am

The oil sand are finished …. think? If clean safe Eco-friendly energy can be generated for “Profit” from a nation that has historically done it time and time again, then why not. ( and the Canadian voters threw out a man who had the ability to look to the future for what? a man who spent his time Harping about yesterday and still is) oh well the horse and buggy and hula hoops might make a come back!

That home I posted here now has a sold sign it and I suspect it sold far lower than it was last year. Couple this with dozens on new signs and building lots row upon row unsold to contractors.

Stimulus ….. This morning paper has an $36M (PGP) rec centre in Peter MacKay’s district to be complete by 2011, fine … but then who will pay the wages and upkeep from then on? …. long term jobs for the future … dah!

This is start of the Real Estate Season so signs will pop up like those yellow flowers on lawns and we see? I suspect that many companies/government will be less likely to transfer people and all those oil and gas migrants will be holding on their cash as oil just dipped again.

I also noticed Toyota used cars (all makes & the lot is full) have higher sticker prices than their competition which leave me to believe they were forced to move inventory at all costs …. the problem is trades are still cash inventory and the new cars keep coming. (must be stored in secure places, more expense)

Sunny here in Dartmouth and most of the snow is gone.

#26 rory on 03.28.09 at 9:45 am

Hi all …just was looking at http://www.irvinehousingblog.com.

Got the this from the http://theautomaticearth.blogspot.com/

“Irvine Housing Blog: Larry Roberts
Many bloggers are writing about the housing bust but perhaps Larry Roberts, a.k.a. IrvineRenter, has found the best way to demonstrate how everyone from the lowliest buyer to the highest paid financier was implicated in the bubble. Almost daily, he posts a house for sale in Irvine, California, taking readers on a journey through the home’s recent financial history. He reveals the price the home was originally purchased for, how much money was taken out of the home during various re-financings, and what the potential loss to the bank is if the house sale goes thru. Needless to say, sardonic comments abound.
Prediction: Roberts is the cockeyed optimist of our bunch. He plans to change his handle to IrvineHomeowner in 2011, when he believes the housing market will bottom out.”

One example is this condo….
“This property was purchased on 4/25/2006 for $500,000. In a rather unusual transaction, this property was financed with a $500,000 Option ARM first mortgage. There was no second mortgage, and no downpayment.
It isn’t surprising that the borrower walked from the debt. The lender paid $471,115 at auction. I imagine the professional flippers in the crowd must have chuckled when they heard that bid.
If it sells for its current asking price—it probably won’t—the total loss to the lender will be $193,654 plus negative amortization and missed payments. The carnage continues…”

This is scary stuff …it made me say yikes + lots more examples on this site… If this is our future in Canada look out below.

#27 Ally Ally Oxycontin Free on 03.28.09 at 9:51 am

#1 Ghost of Tom Joad on 03.27.09 at 10:30 pm

Perhaps you would prefer an alternate administration [ ?]

Mebbe a regime run by Rush Limbaugh, the compassionate and modest perveyor of GOP ‘truthiness’.

Review the reception of his message in Canada. Mebbe draw on Faux News as a supportive force for how bad the media has become.

#28 Ally Ally Oxycontin Free on 03.28.09 at 10:08 am

#15 Jackie_Tranvestite on 03.28.09 at 1:44 am

“The stupidity and short-sightedness of the greenies whining over a bunch of ducks is incredible. Why not learn how to convince the morons in Ontario suburbs to move close together, use electric trams and bicycles, and give up their outrageously wasteful private hydrocarbon-based transportation instead? When the demand for your addictive drugs goes away, so will the demand for the supply.”

WOW, man … and I mean WOW ! That ought to move the concerted effort OUTWARD by approximately a century. Do you know any more BIRDIE NUMB NUMBS who share your faith ? Cite and list supporters !
Are you Ezra Levant, Rona Ambrose, Birdie [ BOO! ] Baird or Promise Keeper David Sweet ?

The ELECTORATE caught up with you last October when HarperOONY faced the nation on national teevee to acknowledge, ‘If we were going to have a recession, we’d have had it by now, but I see great opportunities to buy shares for mommy, who’s staying with us right now’ … Great Quote that … I don’t notice it as part of any expensive mailers yet !

#29 Alberta Ed on 03.28.09 at 10:12 am

Read Gusher of Lies, an excellent book about the energy equation. The US is dependent on foreign sources for oil, as well as many other commodities essential to our current way of life, and that is unlikely to change no matter how many wind generators and solar power arrays are built.

#30 pbrasseur on 03.28.09 at 10:14 am

Don’t forget this crisis originates from the influx of savings from emerging markets which allowed interest rates to descend to extremes lows (saving amounts to loaning).

This in conjunction to our governments stupid tendency to mingle with the markets to prop up real estate caused this huge credit and asset bubble.

Don’t forget, this is actually a growth crisis.

World economic growth is just beginning.

#31 dd on 03.28.09 at 10:15 am

#22 Murray

… And yet there is price inflation in the grocery store. …

Supply issues. Investment has not been great in this sector and it starting to show. With the liquidity crisis, farmer now can’t get loans for seeds etc. Prices will go up more.

#32 taxpayer like you on 03.28.09 at 10:18 am

2 Pol-Can asked:

“What I do not understand is why everyone is so afraid of deflation?”

Dont confuse price corrections with monetary deflation, which is a contraction in the money supply. With true deflation, psyche sets in that says not to buy because it
will be cheaper tomorrow/next week/year etc. Economy grinds to a halt. Debtors wiped out as they cant repay. Creditors same. Savers are rewarded.

Almost impossible for govt intervention to “reflate”. Can drag on for years – see Japan. This is why it is feared. “Inflation we can handle” they say.

Pol-Can also said:

“Let us not forget that it is better to have a higher
interest rate on a lower principal then the other way
around”

The key word there is “forget”. Your young enough to
not even remeber! Ha! Reminiscing about 8% in ’98? Try
21% in ’81!! But you are absolutely correct in your
thinking.

#33 LS on 03.28.09 at 10:18 am

Yep, here in Victoria the story is that it’s different here because of the climate and steady government jobs.
And I think they’re right, to a certain extent. There haven’t been many job losses here, and the chance of many happening are less than when those jobs depend on industry.

Sucks when you’re trying to buy a house but the values arent dropping as fast as one would like. But at least my job is safe..

#34 Ally Ally Oxycontin Free on 03.28.09 at 10:21 am

#12 Dave in Calgary on 03.28.09 at 12:48 am

You sound like an ‘unselfish’ kind of chap ! Do you really think TROC is going to pay bail for you soiling your own environment ? I seem to remember a Dave … and a rhyme dealing with caves ! You’re back ? Then I recall the last great emperor, byron of muldoon, ka-ching ka-ching dynasty [ Envelopes Please ! ] who spoke of ho-ers and old ho-ers, which I took to mean his most earnest appeal to the agricultural community.

#35 Where to live? on 03.28.09 at 10:25 am

Would love to not buy a house, but there are no good options where we are (Leamington-Kingsville). Whereas there are plenty of cheap houses (all ugly, btw).

We have the cash to buy a house outright, is it still a bad idea? How does one find a house to rent other than checking newspaper listings, Kijiji or Craigslist? And what do we do with all the cash if we don’t buy (my wife’s favorite question).

#36 dd on 03.28.09 at 10:26 am

#12 Dave in Calgary

“- 1.34 Trillion Watts Oil
– 0.77 Trillion Watts Natural Gas
– 0.09 Trillion Watts Hydro
– 0.27 Trillion Watts Nuclear
– 0.11 Trillion Watts Combined Alternative (Geothermal, Wind, Solar, Wood)”

Dave, 50% of USA energy is from coal. The world uses 39% coal for energy needs.

#37 Ally Ally Oxycontin Free on 03.28.09 at 10:33 am

#28 Alberta Ed on 03.28.09 at 10:12 am

If that’s your bible, Ed, so be it ! I’ve got a copy of the agenda for the first RNC where it is claimed that ‘Laura Bush served cookies, just before Jesus appeared to bless the proceedings.’

As a self-proclaimed AGNOSTIC, I know what I believe and I’m here to tell you, you’re NOT THE ONE !

#38 lgre on 03.28.09 at 10:43 am

Went to the bank yesterday and ended up talking to a banker I know, she was telling me that big problems are coming down the pipe regarding mortgage renewals..too many people over their head with the 0/40 bs and banks are not renewing.

#39 Dodged-a-Bullit in Alberta on 03.28.09 at 10:44 am

Greetings: Re: Post #7 (Grumpydawgs)–Don”t lose site of the fact that Nuclear Plants require vast amounts of water for cooling. Still require water for steam injection also. The cooling water is returned at a higher temp than withdrawn. This will take much pressure off the Athabasca River,though, and move it elsewhere.

#40 Darryl on 03.28.09 at 10:47 am

Just lookin though the RE section in the Mississauga News and it looks to me like the asking prices are higher than last year.

#41 Barb the proofreader on 03.28.09 at 10:47 am

#6 Rural RickI have to thank you Garth for putting me on the road to freedom must be 25 years ago when you had a column in the Toronto Sun..I remember you saying “forget new drapes, get used furniture, Pay off the mortgage first”.

I can’t imagine living with a mortgage now. It was instinct for us, put every penny into the mortgage to pay off as quickly as possible. We didn’t vacation for 12 years.
Our friends dine out and have the best of the best toys, but hubby and I never “went out for dinner” and still don’t, except for the rare occasion when it’s a friend’s get-together we should attend.
I’ve never bought drapes in my life. I threw out the ones that were old, left the living room window naked, and sewed my own curtains for small windows. I have mostly garage sale furniture. Our television is old, and our other two are cast-offs from friends. Our GMC P/U is 20 years old.
I filled our house with plants; most have swapped CO2 and oxygen with us for 30 years. Take care of your plants, they are a cheap and lasting decoration, and they keep your air healthy.

…….

I fly WestJet to see my Dad and family — I’m always disappointed when there isn’t a joke about the pointy end of the plane!

#42 Ally Ally Oxycontin Free on 03.28.09 at 10:57 am

#25 rory on 03.28.09 at 9:45 am

Great expose, Rory. Yes, it is scary … But you can always look to the alternative reality presented by the Harperoony government.

A few months ago, ‘not a problem,’ now … a lament for the FAKAWI bird … Where the FAKAWI ?

During a troubled period of my life, I was summarily dismissed from membership at an AA meeting during participant testimonials, when I APPLAUDED and said, “Hey, I can drink to that ! ” I thought it rather rough justice, because I was not nor have been since, a supporter of anything Harper does !

To my great comfort, that side of the house is looking fatigued … but they’re waiting for the major explosion which is to come.

Ya know, if you really look at the POSITIVE potential for Bernie Madoff’s 150-year sentence, he gets a 15% remission;

Provided … He has perfect attendance, and complies with the rules and is attentive to personal toilette.

For Harperoony and his ilk, it will only be total repudiation and banishment at the next election.

#43 60ish on 03.28.09 at 11:00 am

#16 Future Expatriate
“Garth, anyone who bought a house in the last five years SHOULD be, well, prey.”

Oh for Gawd’s sake, do we have to be quite so melodramatic…?

My considerably better half and I bought a house about five years ago in BC. It almost doubled in value since then, and has now dropped in value around $100K. It is paid for. We really don’t really care what it is worth — we hope to be in it for many more years, and leave in a box.

So please don’t include us and hundreds of thousands of more like us, in your foolish wide-sweeping, fear-mongering, statements.

#44 Sun Yat-sen suit on 03.28.09 at 11:21 am

Mayday – Is that the proper SOS?

How about Titanic’s -CQD?

Come Quick Depression per Gerald Celente.

#45 Stretch from over yonder on 03.28.09 at 11:31 am

Garth,

Please break it down for the champagne socialists in Winnipeg that their real estate investments are no different then the rest.

This supposed internalized self-sustained, diversified economy is immune from real estate deflation.

Never mind that 40 year mortgages were popular here, the provincial government can only balance the books with transfer payments and dipping into rainy day funds based on future crown corp revenues that don’t exist today and the impending implosion of Canwest, domestic car dealerships etc. etc. etc.

Its different here……………

#46 dd on 03.28.09 at 11:34 am

Nandu Narayanan

http://www.ci.com/web/portfolio_mgmt/trident/pdf/commentaries/trident_opps_feb09.pdf

#47 Keith in Calgary on 03.28.09 at 11:41 am

I love how CMHC, every bank out there, almost all the politicians, all those involved in the “REIC”, economists, Chamber iof Commerce heads all say that “they expect things will improve/return to normal/recover/stabilize…….insert appropriate catch phrase here……in the latter part of 2010”.

#48 Jacqueline on 03.28.09 at 11:43 am

I’ve been reading Shiller and he seems to say the market levels were not based on any fundamental earnings of companies but were a bubble. Also, It seems possible that people will lose their appetite for the market and mutual funds. It is also possible that people will want to get back in to make up for loses they’ve had. What do you think about all this stuff? Do you think that the market will go back up to bubble levels or do you think that the fundamentals are off right now and it is undervalued?

#49 Basil Fawlty on 03.28.09 at 11:46 am

Here are EIU’s (The Economist) probabilities on how the economic crisis will unfold:

Scenario 1: Stimulus stabilizes system — 60% chance
Scenario 2: Stimulus fails, leading to depression — 30% chance
Scenario 3: Dollar collapse, social unrest, violent protest — 10% chance

#50 go green on 03.28.09 at 11:49 am

#24 David Bakody on 03.28.09 at 8:45 am

We rec’d our latest assessment & interim tax bill from HRM. Our assessment went up $100k since 2001. Would hate to think what it would be if our renos were included. Doesn’t sound like much in comparison to other cities in Canada I know. Was checking on our NS site to see what other homes’ assessments on our street are. The site no longer breaks down the assessment on the land and the house separately. In previous years, where I live in Dartmouth, whether you own a double lot or a single lot, the assessment on the land was the exact same price. I feel this is unfair. Our lot is 12,179 sq. ft. but in previous years, and I suspect it hasn’t changed, all people on our street were assessed the same amount for their lot, regardless of the lot size. The new lots, at the extension of our street, were assessed at $52K in’05, regardless of size as well. Most are much smaller than the older part of our street, but the houses are bigger and assessed much higher.

On an other topic, our Fiddler MacDonald’s govt. has only sat in the Legislature for 12 or 13 days in the last year and they’ll be the last in Canada to bring out their budget. Guess they’re waiting to hear how much more money will spent in stimulus in con constituencies from MacKay. They’ve already plowed in $$$$ in new rinks, etc., for photo ops, but where are $$$$ going to come to maintain all these facilities. Apparently 75% of stimulis $ have been targeted for con strongholds across the country. And we hear Fiddler is planning attack ads, a la Stevie’s cons, against the opposition. Won’t work.

#51 Bob Bagina on 03.28.09 at 11:52 am

Nice writing Garth. It takes a lot to keep something like this blog up daily. Late Friday/early Saturday seems to bring out the chemically induced reader comments.

May we live in interesting times indeed.

#52 Dougo in OKO on 03.28.09 at 12:03 pm

Good points. Last Fall I went around to local RE offices looking Listing (paper adds) from previous years (back to 2000) It was amazingly hard to find archives! What I did find though was a incredulous response of ‘why on earth would you want to see those?’
To her credit, I found one local RE agent that was honest about the current situation….
She’ll get my business when the time comes.

#53 Nebbio on 03.28.09 at 12:03 pm

And yet again a cheery story in Friday’s Globe and Mail Real Estate section,about “first time buyers” leading the market. Things are not nearly as bad as everyone claims! Yadda, yadda, yadda.

Are these “first time buyer” out of their minds? Everytime I hear of a friend or aquaintence purchasing a new house I cringe. There is a still a long way to go folks and it is down. Hang on to your cash and bide your time. It will be the easiest money that ever came your way.

#54 Westcoaster on 03.28.09 at 12:16 pm

Good post Garth. Out here in Victoria, AKA La La Land, the local radio station is playing “feel good” commercials on how Victoria’s economy is “different” cause we have the solid footing of “government jobs” (wait til after the election in a couple months), “high tech jobs and tourism” ,both that are at the whim of big business globally and the US tourist. Is this solid to you ?

It is a shame to see my hometown resort to such pathetic cheerleading when ,as you say, house prices are clearly still “insane”. Seems this only misleads the sheep and the paper princes that markets only go one way. Sad,very very sad.

#55 Roial1 on 03.28.09 at 12:17 pm

#11 Apocalypse Now on 03.28.09 at 12:21 am

Instead of keeping an eye on your portfolio you ought to have been keeping an eye on your (governments) that have slowly converted you, with your consent, from being a free individual to a slave, working like a beast of burden just to have few things that you never really own and having the fruit of the majority of your labor sucked out of you by your shylock bloodthirsty (government).

You got one word wrong.

It is NOT government. It is greedy CORPORATE leaders that your freedom has been usurped by.

#56 Got A Watch on 03.28.09 at 12:18 pm

Garth – it’s time to exercise some discipline here. Some of the comments are getting extremely insulting and have no merit whatsoever.

I used to be Forum moderator a few years ago. If you don’t crack down hard on the serial offenders, they get bolder, and more appear. Some never learn from repeated warnings, they just keep posting offensive material, because they want to anger others and provoke responses. The place degenerates into idiots yelling insults.

Asking politely does not work. You have to ban them by user name, IP address and even MAC address, to get rid of the worst ones. Or they just keep coming back under new names.

Some will complain about “freedom”, but being free does not mean you can spout insulting BS all you want designed to offend others.

You have to think what a first time reader might think. They come here after reading the book, or from a link on another website, read the daily post, think it’s good. Then they get to the comments, and find it’s not so good, and probably won’t return. It takes away from the message you are trying to get across.

You will have many who try to add value by providing constructive and informative comments, and the few who have their own disruptive agenda. Don’t let the place be overrun by those who spew hateful and insulting themes.

#57 go green on 03.28.09 at 12:34 pm

Garth – Have you managed to get out on your bike yet? My DH & several of his buddies went out on a drive to the south shore today. His first ride this year on his spring/fall bike – a K100. He’ll be on guard for the pot holes that are everywhere & will drive under the speed limit, if necessary. Riders are rarring (sp?) to get out and enjoy. Be careful and have the proper gear – kevlar jackets, proper helmets, boots, pants, etc. They’re expensive but worth it.

A long one today, thank you! It sure felt goood, although my fingers were numb after a couple of hours. Took the bike in for spring servicing after the ride, and to get my hot grips wired! Chaps were on. — Garth

#58 Lance on 03.28.09 at 12:39 pm

Inflation. Same end result (lost manufacturing base, lost jobs, real value of homes deflating but not in our currency’s terms), different road we’re taking to get there. The central banks of the west have made it clear that inflation is the way they want to share the pain, not deflation. In the end our assets will still decline in real tearms but may even inflate in currency terms. There are many trillions of dollars yet to be printed this year and the Fed has done its first wave of “quantitative easing” this past week (aka monetization aka money printing).
Part of the recent increase in commodities and stocks is not due to a better outlook for earnings and consumption but figuring in an increase in inflation in to their valuations.

#59 ralph on 03.28.09 at 12:41 pm

#55-

You are right. Why can’t we just all get along and play nice. If not you will be sent to your room, OK kids.

#60 Bruce on 03.28.09 at 12:55 pm

http://www.youtube.com/watch?v=RxMNDpda9sk&feature=channel_page

#61 Future Expatriate on 03.28.09 at 12:56 pm

#3- And how exactly is China going to pay for Alberta’s oil, Ralph, when they own at least 90% of America’s debt and no one in America is buying their crap anymore?

Furthermore, are they going to need the fuel in the first place when all their crap-producing factories shut down and there’s no job to drive to?

Global Depression… the operative word is global.

#62 Future Expatriate on 03.28.09 at 1:03 pm

Oil (of all kinds) is the past; renewable (wind, solar, hydro, and tide power) is the future.

Even IF peak oil is a myth and the planet creates it.

Why?

Islamic extremism, fostered by the CIA but quickly growing out of hand, is NOT a myth, and eventually will kill any inherent business value of oil and any imperialistic interest in the Mideast whatsoever.

Leading one to believe there is a God after all.

#63 go green on 03.28.09 at 1:08 pm

#55 Got a Watch

With all the posters on Garth’s current blog, many of whom change their name, from one post to another, it is really difficult for regular readers, who also read many other blogs, to sift the wheat from the chaff.

Personally, I find many of the current posters offensive, ignorant and downright lacking in compassion for those who they consider were not as bright as they consider themselves.

We are in an Ok financial situation tho we lost on our investments. Some on this blog would consider us ignorant, naive, etc. for having invested and not getting out of the market years ago.

There are some on Garth’s current blog that, even though they have changed their ‘avatar’ on a regular basis, are still spewing their same old garbage. I’m sure Garth knows who they are by their IP addy. They’re just too cowardly to use their same name.

#64 Increasing that 1% on 03.28.09 at 1:30 pm

#15. Jacqueline_ Transvestite…1:44am
“…Why not learn how to convince the morons in Ontario suburbs to move close together…”
——————————————————

What’s with the insults?

These types of things have been said by others on this blog before, and having been born and raised in Ont., the sentiment here has never been to bash any other Canadians. Not that I’ve ever heard.

The only thing I heard was ‘Newfie jokes’ which people from Newfoundland would also tell, and occasionally some anger about the Quebec Separatists. But never intentionally insulting, derogatory names or sentiment.

The first time I heard an insult like this about Ont. I was lined up at a movie theatre in Vancouver, many years ago, -so happy to be there and visiting with my brother who was living there- and someone behind me said about someone, in a very negative way, that that person “must be from Ontario”. I almost shrank, and was shocked. Personally, I could not understand it, and it felt horrible.

Though there is a lot of stupidity to go around this country with individual’s actions, as evidenced by this economic mess, guess I still just don’t get it about the hatred or whatever it is.

#65 Jake on 03.28.09 at 1:34 pm

#54 Raiol1

No, you have it wrong.
Government = greedy CORPORATE leaders.
Keep chasing that rabbit though.

BTW, whoever posted this, thanks.

http://www.youtube.com/watch?v=eAaQNACwaLw

#66 Increasing that 1% on 03.28.09 at 1:41 pm

#58. ralph…12:41
“You are right. Why can’t we just all get along and play nice. If not you will be sent to your room, OK kids.”
——————————————————
I find it distracting when there are blatant, unnecessary insults in the comments. Takes away from the substance of the messages. Sometimes question why Garth allows them, given the “Helpful Reminders” ..

#67 go green on 03.28.09 at 1:47 pm

Garth – I’ve been reading your blogs for the last several years. I’ve got to give you the thumbs up. I don’t know how you manage travelling back & forth across the country from one month to another. I know it’s part of your bread and butter now, but it must be gruewelling. I detest flying now in comparison to what it was like 30+ years ago.

This year we decided to go with Econo Premium to Europe. Woopie D, 15cm of extra leg room and a few other perks – better meals, drinks with snacks, larger pillows, head phones, toothpaste & brushes, etc. (At least its a German airline and the food will be better). I’d hate to have to travel regularly on planes in econo class.

Garth, maybe you do Business class and can write it off. In econo class one can’t stretch ones legs, crammed in like sardines, food is disgusting, if even provided, etc. As much as I love Europe, if I did not have the obligation to go so often, I wouldn’t. Oil went down, but surcharges didn’t.

Got to hand it to you and your lovely wife. I’d rather spend 12+ hours in a car than 5 hours in a plane.

I fly economy. There’s a recession. Didn’t you get the memo? (And have a great trip!) — Garth

#68 Real Estate Deal or No Deal on 03.28.09 at 2:03 pm

Hey Garth,

Glad I bumped in to this site and that you launched Xurbia …

I have a request for you … blog at some time in the future what the historic norms will be for buying a home.

I am a first time home buyer, soon to be first time father, paid off staggering amounts of debt and will in the next two years want to buy a home.

Great interest rates, but I agree with your aforementioned comments regarding home prices.

I am not asking you for financial advice, just a guideline to consider.

Just finishing a 1,000 page whopper of a book and will read your recent book next.

Thanks.

#69 TUT on 03.28.09 at 2:29 pm

Energy, not money, is the primary input to determine the ability to keep a society running. Energy is REAL while money can be “created” at will at any rate. Not even gold can be used to replace energy.

Peak oil is not the end of oil, only the end of cheap oil.

Alberta’s oil reserves are estimated at 174.2 bb (billion barrels) and current production at 1.126 mb/day (million barrel/day). This is about 1.4% of the word consumption at approx. 80 mb/day.

This level of production has required so far $92 billion investment. A simple extrapolation shows that in order to produce 10% of current word consumption the required investment must grow to the tune of $700 billion. Even if money was readily available the gigantic work to do to multiply the production by a factor of ten is mind boggling and very difficult to manage. It will take time too, a lot of time…

This crisis seems to be the last attempt to reduce the global oil consumption and gain some time to increase production at a more sustainable rate and add some other alternative sources. Oil price increases did not work. Reduction of global activity may do the job. The risk of running out of control are high though.

For the data source see:
http://www.energy.gov.ab.ca/Oil/pdfs/AB_OilReserves.pdf

Any thoughts?

#70 Dave on 03.28.09 at 2:33 pm

Oil (of all kinds) is the past; renewable (wind, solar, hydro, and tide power) is the future.

——————————————

do people every stop to think if their suggestions are actually possible? If not, I have one, free food and homes for everyone in the world! (Pat me on the back someone).

what you’re suggesting is impossible. You people are looking at these renewables and seeing how beneficial they are, but never consider if it’s even possible. The renewables you mentioned as the “future” can only make up roughly 10% of the worlds energy needs. So how does the world abandon oil? Suggest some baseload energy sources if you want some credibility with that argument- there’s 3 to choose from and not mentioning none of them leaves a ridiculous hole in any type of energy solution argument

In the future, abandoning oil will be a choice. — Garth

#71 Ginner on 03.28.09 at 2:35 pm

Garth,

You miss three of the four obvious reasons for a strong adjustment downward in Canadian real estate prices(regardless of stock market recovery or stimulus). The first one, which you hit on the head in a number of your answers, is that the economic engine is being slowed which puts pressure on incomes and thus the price levels of all goods. But you miss the most important ones in my opinion that cannot be corrected with economic stimulus.

1.) Rental income on houses is historically low. The relationship between rental income and house prices has never been so out of whack. It is the only credible way to place value on real estate that is not based on hype. In the speculative side of the market the game has been predicated on ever increasing prices. Price stablization is not an option for the speculative investor. They cannot afford to carry the costs of mortgages and are certainly not going to get the rate of return on rental properties that they can get in other asset classes that are more liquid and less leveraged.

2.) Credit, regardless of stimulus, will still be difficult to access – certainly more difficult than it has been for the last decade. Lenders’ perception of risk has changed. Goverment cannot, and should not, increase the risk profile of lending institutions

3.) The perception of value has changed. This is the inescapable reality of bubble’s popping. There is doubt. What real value does property have? How can you put a price on it? Sure it’s driven by a few factors as you discuss in this blog: the current short term supply of actual units (not land), building costs, rental income, income levels….etc. But most importantly, it is driven by our (changing) perception of value. It’s time to admit that the same thing that drives us to value collectibles, is the same thing that drives the feedback loop in bubble markets. And that feedback loop has slowed.

This is what ultimately will drive the overshoot to a 50% + drop in prices in Vancouver.

#72 Ginner on 03.28.09 at 2:37 pm

..Oh, and foolish me….I forgot borrowing costs…

#73 POL-CAN on 03.28.09 at 2:51 pm

#31 taxpayer like you

I know what deflation is and what it does….

Contraction in the money supply/credit…. In this case it is the collapse of all bubbles world wide at the same time destroying a whole lot of fake paper wealth….

What the govs worldwide are doing with all the insane deficit spending is simply kicking the can further down the road…. Bank on this….

My point was that I do not understand why we are so afraid of recessions, deflations, or depressions. These corrective events are required in order for this BS fiat money system to function…. They clean out the waste created during the boom times (bubbles)…. Unproductive business fails and some one else takes over. People go BK and start over. There is nothing wrong with this if it is allowed to happen on its own.

The prices of everything are so high because the fiat currency is worth less then in years past. That is caused by inflation. Inflation is theft and that is why the PTB prefer it as it enriches them as they skim from each and every one of us.

As for deflation… I see nothing wrong with my/our wages going down provided that all assets and the cost of living fall to an affortable level based on said wages. In simple terms if this is allowed to happen it will be because the fiat currency regained some of its lost value. This is good IMHO.

P.S.

I posted here before about the unemployment numbers during the GD in Canada…. National was 25 %…. Here in Ontario it was 45 %…. We have a long way to go to reach those numbers but the possiblility of things getting that bad is REAL.

#74 60ish on 03.28.09 at 2:51 pm

#55 Got A Watch
“….it’s time to exercise some discipline here. Some of the comments are getting extremely insulting and have no merit whatsoever…”

#62 go green
“…I find many of the current posters offensive, ignorant and downright lacking in compassion…”

Good grief, you find the above offensive? You must have very meek dispositions! Compared to many other boards, and in particular this forum back when Mr. Turner was an MP, the above is really good. I think he is doing a great job of moderating these pages…

The deal with forums is, if you say something foolish, you be taken to task for it…

#75 Johnny Five on 03.28.09 at 3:07 pm

“Simple Google Search will tell you that the USA consumed 3.35 Trillion Watts of Energy in 2004:

– 1.34 Trillion Watts Oil
– 0.77 Trillion Watts Natural Gas
– 0.09 Trillion Watts Hydro
– 0.27 Trillion Watts Nuclear
– 0.11 Trillion Watts Combined Alternative (Geothermal, Wind, Solar, Wood)”

Dave, um, hate to break it to you, but there is no utility in the United States that generates electricity with oil. The last place in Canada is Tuft’s Cove in Halifax and they use bottom of the barrel Bunker C oil (literally 1 step above tar sand). Even then, they can burn NG there.

#76 Johnny Five on 03.28.09 at 3:12 pm

“Greetings: Re: Post #7 (Grumpydawgs)–Don”t lose site of the fact that Nuclear Plants require vast amounts of water for cooling. ”

Not at all. Ever hear of a cooling tower? Hell, even the nuke at McMaster U uses one. Plenty of nuclear plants use cooling towers. Now, check this out:

http://www.eurekalert.org/features/doe/2004-07/dlnl-net071204.php

Maybe they have something there.

#77 60ish on 03.28.09 at 3:37 pm

#61 Future Expatriate
“…Islamic extremism, fostered by the CIA but quickly growing out of hand…”

Legitimate proof, please.

I’ll bet you also believe that the events of 9/11 were an ‘inside job’

#78 Sondra on 03.28.09 at 3:39 pm

I have to agree that the insults and name calling is not necessary, interesting or entertaining.

If the people on this blog are intelligent, thoughtful they do not need to reduce themselves to a lower level of communication.

Disagreeing with an opinion, statement is engaging and thought provoking. The rest is just grand standing for their own ego.

I would like to thanks to those who take time to think, provide good information, and provide links to great sites. Much appreciated.

#79 taxpayer like you on 03.28.09 at 4:05 pm

72 Pol-Can:

Good response. I now understand it is peoples
perspective of deflation you are puzzling over.

My father was a teenager during the great depression. Comparatively, he had it good. Lived on a farm. He remembers young men coming by, no place to live, no
work. Would trade a days work for dinner, brekky and a warm, dry place to sleep. What you have to ask yourself, is do you want to see that, or would you rather see the
effort made to ease that?

So price corrections? Certainly. Real esate halved? Probably. Stocks halved? Already happened, may go down again. Incomes drop? Being self-employed, I feel it,
and it will probably drop some more. Inefficient industies
disappear? Yes, thats good.

But a Depression? You dont want it.

You also said:

“As for deflation… I see nothing wrong with my/our wages going down provided that all assets and the cost of living fall to an affortable level based on said wages.”

The key word you use is “affordable”. If you think about
it, the actual number placed on somethings value is irrelevent. If everything halved, housing would be just as
unaffordable as it is now. Conversely, if everything
doubled, nothing would change. Just the
debtors/creditors thing we talked about.

#80 Happy Renter in North Van on 03.28.09 at 4:24 pm

#45 dd – I had the pleasure of meeting Nandu Narayanan at his NYC office in November 2003… He’s the first person I met who laid out what this whole Real Estate mess was going to look like… He used the term NINJA loans at the time… None us knew what the heck they were at the time… Nandu’s one of the smartest guys I’ve ever met and have a lot of respect for him…

#81 wjp on 03.28.09 at 4:32 pm

As we used to say in the market, “he is just talking his book”, when you have somone making the same point over and over again, you can be sure his position will be enhanced if it goes his way. Deflation pushers, hyperinflation pushers, gold bugs generally have an axe to grind. Balanced thinking will generally produce balanced results. Take the emotion out of investing, it can be a killer. Have a great weekend!

#82 john m on 03.28.09 at 4:53 pm

48 Basil Fawlty on 03.28.09 at 11:46 am

Here are EIU’s (The Economist) probabilities on how the economic crisis will unfold:

Scenario 1: Stimulus stabilizes system — 60% chance
Scenario 2: Stimulus fails, leading to depression — 30% chance
Scenario 3: Dollar collapse, social unrest, violent protest — 10% chance
…….sounds good but we must be aware economists have not been remotely close yet…..my thoughts–scenario 1:stimulus stabilizes system—5% ,scenario 2 stimulus fails,leading to depression—40%,scenario 3 dollar collapse,social unrest,violent protest (this is already starting to happen around us)….55%….we are in the beginning stages,wait till the UI benefits run out,more jobs disappear,the full impact of the real estate crash hits our treasury…….its not a pleasant look at the future but its realistic and personally i don’t think any amount of bailouts is going to change it and never should have been started in the first place. It reminds me of a bunch of fools trying to buy time with no future reasoning (with our tax dollars).Our world is changing,our dependence on oil will be changed (its already started).People will have to cut back and seek alternatives (and we are). The greed of the oil companies,bankers and politicians has and is being exposed. Perhaps the world will be a better place,a good cleansing is desperately needed.

#83 alexei on 03.28.09 at 5:04 pm

Garth

1. would canada, china & india still be dependent on the US economically going forward

2. do u see the condo market in the gta mirror the 1992-96 situation

3. from a long-time renter & first-time buyer perspective, if there’s inflation in 2011 & beyond, would it make sense to be out of equities by then as inflation hurts equities and buy property regardless of whether the RE prices are still deflating

4. would the pst harmonization drive up RE prices

5. do u see the CAD narrowing gap/reaching parity/surpassing the USD in the next 3-5 yrs

(1) Yes (2) Probably (3) Ask me in a year (4) The opposite (5) Likely. — Garth

#84 Dave on 03.28.09 at 5:05 pm

In the future, abandoning oil will not be a choice. — Garth

———————————————-

yeah, but not because of some little experiment some random guy is doing in a lab right now. We’re seeing problems in regards to energy today. We needed an answer for these problems yesterday. It’s annoying reading comments suggesting that solar & wind are the answer for an energy crisis.

there has to be an a major alternative for oil for people to abandon it

It’s non-renewable. At some point, it’s done. — Garth

#85 dekethegeek on 03.28.09 at 5:13 pm

#75 Johnny Five
I agree with you that “Tufts Cove” in Dartmouth burns Bunker C for the electrical power grid in Nova Scotia.
I wonder if #7 Grumpydawgs was talking about “Home Heating Oil” in that 1.34 Trillion Watts Oil burned in the U.S.
Every time i go back east and visit people in homes that are heated by Home Heating oil I feel like I’m in a diesel spill from the fumes. ( kinda gross ) .
i wonder what the stats are for millions of U.S. homes using Home Heating Oil.
just curious.

#86 Where to live? on 03.28.09 at 5:16 pm

Okay, I guess I’m not getting any free advice. I saw the bubble back in 2004 and figured it was at the end of the run…I was wrong. Sold our place and sitting on cash trying to decide our next move. But faced with what I’ve already described above.

#87 taxpayer like you on 03.28.09 at 5:21 pm

In response to 74 J5

I dont think Dave was trying to equate oil to electricity, but rather just energy to energy.

The only true alternative source to oil Ive heard is solar. Apparently our planet is bombarded by 500 times as much solar energy as we currently use by all other sources.

But given current technology, they would have to completely cover california in solar panels. But real estate is dropping there right??

Personally I prefer tidal. Its 24/7 365……

#88 POL-CAN on 03.28.09 at 5:31 pm

#78 taxpayer like you

you give good blog :)

I do not wish to see anyone get hurt in this engineered financial collapse but I am afraid that the hurt is inevitable for a BIG percentage of the global population. It is NOT different here in Canada.

The telling event will be the G20 in London next week. If we see riots there, we will see them in the USA by summer/fall. The fundamentals are not improving, the economy will continue to get worse.

I have always been tin-foil. I get that from my father who is much smarter then I will ever be. My quest is to find knowlege so I can connect all of the pieces. That is why I am here, and on TAE, and on Mish’s blog, etc.
I read everything from GlobalResearch, Counterpunch, BBC, pravda, Russia Today, CNN, MSN, Bloomberg, and on and on….

I find that the most reliable source of news is Al Jazeera… How ironic is that? Our own MSM is a joke. Propaganda machines of the establishment and housing industry porn providers…. Sad….

#89 POL-CAN on 03.28.09 at 5:39 pm

#86 taxpayer like you

Don’t forget geo-thermal…. You can drill down anywhere in the world….

#90 Rural Rick on 03.28.09 at 5:50 pm

Where to live?
Real Estate Agents often know of house rentals that are not advertised. Whats wrong with renting till the dust settles on this? I would also be concerned that my new home could soon be in the middle of an Essex windfarm.
As to where to stash the cash I am sure you can get plenty of advice here.

#91 Barb the proofreader on 03.28.09 at 6:08 pm

Garth,

O/T but I love the juicy description written about
“Sheeple: Caucus Confidential in Stephen Harper’s Ottawa”
http://www.garth.ca/weblog/

(But, I had to look up the word dooced. You’ve said it yourself often, but I figured there was more to it:
“fired from one’s job for blogging”)

#92 . . . fried eggs and spam . . . on 03.28.09 at 6:20 pm

#1 Ghost of Tom Joad at 10:30 pm — “. . . The Obama years are going to hurt.”

It would not have made a blind bit of difference whether Bugs Bunny or Obama was in charge, as the flippant, ‘couldn’t care less’ boomers lifestyles (greed / consumption) most have lived, along with govts.’ wars and reckless spending have led us into this mess.
——
#12 Dave in Calgary at 12:48 am — “So, to replace just 10% of US oil consumption with wind, will cost, a $260 Trillion dollars.”

Add to that US$1.5 quadrillion — http://tinyurl.com/cwa8mq — in derivatives which are yet to be paid for / back, the US$700 trillion CDS’s and http://tinyurl.com/d2j5lz — what the hell!

The really neat thing about the experience of death, which everyone eventually has is that life does continue, so let’s all spend like there’s no tomorrow, ‘coz now there’s more debt than equity in the world. We’re all broke, so let’s boogie and have fun!
——
#29 pbrasseur on 03.28.09 at 10:14 am — “World economic growth is just beginning.”

Agreed, as the cycle must eventually go up again, but there’s an awful lotta pain to go through first.
——
#48 Basil Fawlty at 11:46 am — “Scenario 3: Dollar collapse, social unrest, violent protest — 10% chance”

I’m curious — did The Economist do it’s research in the UK, France, Latvia, Iceland, Ireland and numerous other countries where economies and / or govts. have collapsed?

Now that Hungary’s and the Czech Republic’s govts. have fallen down, with Rumania’s likely to follow, it is blatantly obvious that the world has become fully dependent on the US, instead of looking to themselves and immediate neighbors for self-sufficiency.

What if the worldwide financial deck of cards — derivatives / CDS’s / trillions of dollars in other debts — suddenly crashes down? Forecasts are only good for the weather, and most of those are wrong.

I understand why China and Russia proposed a new reserve one world currency system. Nothing else seems to be working at present.
——
#54 Roial1 at 12:17 pm — “It is NOT government. It is greedy CORPORATE leaders that your freedom has been usurped by.”

Well said. Greedy corporate leaders control govts., and they don’t care who gets elected.

As long as their fiscal needs are filled to the coffers, they (the ‘elite’) are more than content to let sheeple fight amongst themselves, thereby digging our own graves, and I will never be one of the sheeple.
——
“It’s non-renewable. At some point, it’s done.” — Garth — Nothing here is renewable, everything here runs its course so we’re all only here for a good time and a very short time!

#93 Grumpydawgs on 03.28.09 at 6:28 pm

I just heard a Political Science professor from Simon Fraser University refer to the Canadian press as ” most corrupt press in the world” he said ” to call them prostitutes is to give prostitutes a bad name.

Do go to your local newspaper of TV news spokespeople for help figuring this mess out, they are printing what they’re paid to, and it’s not biased in your favour.

#94 David Bakody on 03.28.09 at 7:03 pm

#87 POL-CAN on 03.28.09 at 5:31 pm

You are stating to get it ……start with this.

In 1913, prior to the passage of the Federal Reserve Act President Wilson’s The New Freedom was published, in which he revealed:

“Since I entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the U. S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.”

Think, with all the real smart money players on the face of this earth, the elite ( those who are beyond money) could not see this happening, hell they gave a shove and made bundles along the way and will continue to do so.

Governments around the world (G-20) were and are nor prepared for the Senior Boomers and millions of highly skilled people with years of experience retiring.

As far as American riots, they will never let it happen because Americans are so heavily & individually armed it would be Civil War II with both sides fighting Washington, so Stimulus package after another coupled with bank bailouts until the stock markets settle and when things settle down tax the hell out of future generations and so the cycle continues. The very rich get richer and the weak fall as did 355 billionaires last year.

#95 POL-CAN on 03.28.09 at 7:31 pm

David…..

I got it a long time ago :)

I keep things low key here on purpose as this is a real estate blog after all…..

Speaking of well armed americans…. I read some where that there are 270 million firearms in private hands down there…. Yet the fema camps are there to hold someone… Will they go quietly? Probably not…

The question is will the military comply with use of force orders agains the public?

#96 go green on 03.28.09 at 7:46 pm

Bit ticked off. CBC is supposed to be a national broadcaster. I’ve always suppprted them. Yet, I guess Nfld and the M’times don’t count. Well I’ll tell CBC.

#97 dd on 03.28.09 at 7:48 pm

#69 Dave
… So how does the world abandon oil? …

Oil will abandon us.

Oil fact – automobles use 1/2 of all oil in the states. So 10 Million barrels a day are for transporation. Don’t know what that is on a world wide basis. It will help turn autos electric and natural gas.

#98 dd on 03.28.09 at 7:55 pm

#69 Dave

“In the future, abandoning oil will be a choice. — Garth”

It is going to be very expensive to move from oil but we have no choice. No matter if it is solar, more coal, natural gas, or nuc, that infrastructure bill is going to be huge. This is the cheapest energy will be … well until we have to start burning wood again.

#99 Dave on 03.28.09 at 7:56 pm

It’s non-renewable. At some point, it’s done. — Garth

———————————————————-

umm, you’re missing my point. That individual was arguing that the world has to move away from oil- that’s fine. His argument was that wind/solar and some other obscure sources were the solution. Those can only account for roughly 10% of the world’s energy needs.

An argument concerning the world’s need to move completely away from oil but does not mention coal or nuclear to fill that gap, is a totally and completely useless argument.

for the record, if you guys want to argue about energy solutions on a global scale know that oil, coal, nuclear are the only baseload energies that can support global demand- the others aren’t even close. Don’t bother mentioning “solutions” without mentioning at least 1 of those 3…(although all 3 will obviously be factors going forward) You’re in a dream world if you think solar panels and wind turbines are the end all be all.

#100 dd on 03.28.09 at 8:05 pm

#60 Future Expatriate

“Furthermore, are they going to need the fuel in the first place when all their crap-producing factories shut down and there’s no job to drive to? Global Depression… the operative word is global.”

That is right. The world is pulling down all the help wanted signs because nobody is going to buy or need anything. Not even energy, shelter, clothing, or food.

#101 dd on 03.28.09 at 8:10 pm

#32 LS

“Yep, here in Victoria the story is that it’s different here because of the climate and steady government jobs.
But at least my job is safe.”

Natural gas prices (royalities) are hitting the goverment pockets hard. Government layoffs coming?

#102 dd on 03.28.09 at 8:20 pm

#68 TUT o

… This crisis seems to be the last attempt to reduce the global oil consumption and gain some time to increase production at a more sustainable rate and add some other alternative sources…

So true. The world is pissing away time not focusing on “THE” problem. However not all people or governments are no the same page. Maybe they though $150 oil was just a flash. Even on this web site some think oil will hit $25 buck and stay there for years.

#103 go green on 03.28.09 at 8:21 pm

Re Earth Hour – CBC just showed a pick of NYC – it was black. :-) Hope I got that right -typing beside a tee light. A simple thing to do

#104 taxpayer like you on 03.28.09 at 8:54 pm

98 Dave said:

“An argument concerning the world’s need to move
completely away from oil but does not mention coal or
nuclear to fill that gap, is a totally and completely useless
argument.”

Maybe Im missing the point too Dave. Coal will run out as well at some point. Nuclear? How many thousand plants needed to replace oil?

Just considering energy needs in total, solar seems to be
the only source that exceeds our needs, and is sustainable (as far as beings on this planet are
cncerned). Pol-Can added geo-thermal as well, but I have
no idea of what total energy could be drawn from that.
Tidal is as regular as, well, the tides, but same question.

Not sure how far nuclear can be taken but its history
gives us encouragement. Cant recall when the atom was
split, but by the late 50s we were powering subs and ships with it. Amazing advancements.

#105 dave in calgary on 03.28.09 at 9:30 pm

#35 dd

Misprint. Should have read:

– 1.34 Trillion Watts Oil
– 0.77 Trillion Watts Coal
– 0.77 Trillion Watts Natural Gas
– 0.09 Trillion Watts Hydro
– 0.27 Trillion Watts Nuclear
– 0.11 Trillion Watts Combined Alternative (Geothermal, Wind, Solar, Wood)”

And to Johnny Five, note this is total ENERGY consumption, not electrical consumption… so this includes coal used to generate electricity and oil products used in industry and transportation

#106 OttawaMike on 03.28.09 at 9:51 pm

Imagine what would happen to this financial crisis if the Americans came up with an all new low cost energy solution to replace the present status quo energy listed in the above posts?
The American empire’s position would be reaffirmed and the bankers wouldn’t have to sweat all the torches and pitchforks coming after them.

#107 bobs your uncle on 03.28.09 at 9:57 pm

Expecting China to take up the slack in the market if the US doesn’t recover is optimistic at best. It reminds me of the de-coupling theory of the Canadian/US economies.

Who are the Chinese going to sell to? Europe? Europe is worse off than the US or Canada. Canada? Canadas market for Chinese goods is peanuts.

Can China sell to themselves? Maybe but right now they are based on a slave wage system.

#108 prairie gal on 03.28.09 at 10:34 pm

Dave on 03.28.09 at 7:56 pm

It’s non-renewable. At some point, it’s done. — Garth

———————————————————-

umm, you’re missing my point. That individual was arguing that the world has to move away from oil- that’s fine. His argument was that wind/solar and some other obscure sources were the solution. Those can only account for roughly 10% of the world’s energy needs.

An argument concerning the world’s need to move completely away from oil but does not mention coal or nuclear to fill that gap, is a totally and completely useless argument.

for the record, if you guys want to argue about energy solutions on a global scale know that oil, coal, nuclear are the only baseload energies that can support global demand- the others aren’t even close. Don’t bother mentioning “solutions” without mentioning at least 1 of those 3…(although all 3 will obviously be factors going forward) You’re in a dream world if you think solar panels and wind turbines are the end all be all.
—————————————–

Why, Dave? Because you say so? And what qualifies you to make such a grand proclamation?

Solar power is by far the most abundant form of energy and the technology to harness and store it is advancing rapidly. It may not happen overnight, but I have confidence that with a combination of energy conservation, investment in renewables and lifestyle changes, the demand for oil will naturally fall.

Looking back, many large advances in technology were opposed by naysayers who opined, “It can’t be done.” Good thing those intrepid inventors didn’t listen to it. It takes a leap of faith to make the necessary investments in emerging technology, but I have no doubt there will be a handsome payoff in the future for those with the vision to see it happen.

#109 jess on 03.28.09 at 10:38 pm

Don Coxe a famous commodity investor ? is he a scientist as well?

#110 dd on 03.28.09 at 10:42 pm

#106 bobs your uncle

“Expecting China to take up the slack in the market if the US doesn’t recover is optimistic at best. ”

Agreed. China has to somehow get its own population to spend. I think that will be the only way for their long-term recovery.

Basically America is being forced into saving and investing and Asia into consumption … long-term.

#111 Future Expatriate on 03.28.09 at 10:56 pm

#76- Al Qaeda itself means “The Database”, referring to the CIA database of Taliban Afghan and Pakistani fighters armed and propped up by the US to fight the Soviets in Afghanistan during the Carter and Reagan Presidencies. Which soon became patsy cells for foreign but domestically controlled terrorism ops. Bin Laden himself was a high echelon CIA asset for many more years than he was “America’s Number One Wanted.”

The entire history is all over the web, but by all means, spend no time whatsoever looking for that which you’ve already made your mind up to disbelieve.

Oh. In the Arab world “Al Qaeda” colloquially means “the toilet”. Joke’s on you.

As far as 9-11, the day that men in rags in caves in Afghanistan can launch an op to fly supersonic jetliners into skyscrapers past all defenses of the mighty US, and furthermore, collapse said skycrapers into their own footprints, is the day pigs fly with feathered wings.

#112 Dave on 03.28.09 at 10:58 pm

Why, Dave? Because you say so? And what qualifies you to make such a grand proclamation?

—————————————-

the qualifications are in the numbers and the numbers say that the price of uranium metal is up 400% over the past 6 years. lol. There’s nothing else even close to those numbers. You guys keep living in that dream world because someday (nobody knows when of course) we’ll be able to harness enough energy from the sun to meet our energy needs. I guess some of you see it as a good risk to take- depending on some breakthrough to surface that will help us harness these energy sources you speak of.

The problem is now. China, India, & Japan recognize it. You guys go out and buy those generators and look up recipes for squirrels.

#113 Dave on 03.28.09 at 11:01 pm

Maybe Im missing the point too Dave. Coal will run out as well at some point. Nuclear? How many thousand plants needed to replace oil?

—————————————-

ah, okay, so uranium will run out in a couple of hundred years if it were to become the world’s biggest energy source in 10 years; we’ll sit in the dark and wait for a solar breakthrough rather than go that route. :)

#114 Rural Rick on 03.28.09 at 11:02 pm

Coal is the fuel of the future. Scrubber technology can catch most of the crap going up the pipe and it’s cheap and there is tons of it. Emerging economies will be using it big time.
Oil and gas will be too valuable to burn for electricity.
Nuclear will be used in richer countries. Geothermal has promise, wind is useless except locally. Only solar is potentially scalable to global need. But it is going to take time. So meanwhile it’s coal the fuel of the future.

#115 Dave on 03.28.09 at 11:10 pm

Solar power is by far the most abundant form of energy and the technology to harness and store it is advancing rapidly.

———————————-

awesome, I’d like to see the day. Not sure if you noticed, but we’re going through the worst financial crisis in 70 years. What’s the price of oil going to be like when we return to normalcy? If Matt Simmonds analysis of the oil fields in Saudi Arabia is correct, we’re screwed.

Do you think there’s going to be windmills and solar panels in those little impoverished villages in China & India too? If so, how many million of these are we going to need? how expensive will that get? How about at night or when there’s not enough wind? Seems like way too much risk to commit to these sources as the “answer” for energy independence.

#116 Dave on 03.28.09 at 11:19 pm

but I have confidence that with a combination of energy conservation, investment in renewables and lifestyle changes, the demand for oil will naturally fall.

—————————————————
LOL. Tell that to the people of China where 1 in 400 own a car (compared to 1 car for every person in the western world) and 80,000,000 join the middle class each year.

what was that song by Supertramp? “Dreamer, you’re nothing but a dreamer”

#117 Dave on 03.28.09 at 11:33 pm

I’m giving back, because through Garth’s statistics he provided on this blog I was able to confirm my belief with the stats that a real estate crash was looming.

http://arstechnica.com/science/news/2009/03/nuclear-power-yes-please.ars

http://www.time.com/time/nation/article/0,8599,1888119,00.html?iid=digg_share

#118 WakeUp on 03.29.09 at 1:36 am

Does anyone seriously believe the Obama administration will not, inevitably, support the move against oil squeezed out of the Albertan mud? — Garth

It’s non-renewable. At some point, it’s done. — Garth
——————————————————-
It sounds like you believe it. The Albertan mud will be used to delay the ‘done’ date and you can take that to the bank no matter what Obama or anybody else says!

#119 Just a Girl on 03.29.09 at 1:54 am

#98 Dave on global energy solutions.

Finally, a realist. Anyone interested in this topic should go back and read Dave’s post.

It’s not the demand for oil we need to control, by adapting to alternatives. It’s the end of cheap oil, and what impact that will have on global economies. The low hanging fruit is almost gone. Now we have to go after the harder, more expensive sources.

As long as there are beautiful ripe apples at arm’s reach, heck, we’ll pick those first. There’s a business case for it, no? Not so much at this point in time for the renewable alternatives. Still easier apples to pick, and dollars to be made.

It’s an imperfect analogy, but I’m with Dave. We’re going to need everything.

#120 JWK on 03.29.09 at 3:54 pm

#6 …25 years ago it was possible to pay off the average house with average salary.

Not true today.

I hope you enjoy all those capital gains and remember that can never happen to anyone starting out today.

#121 Too Old Bob$ on 03.29.09 at 5:12 pm

Welcome to the “CORRECTION”
One meaning of correction is: punishment intended to reform, improve, or rehabilitate; chastisement; reproof.

Well this could explain most of what’s happening now.

“Dirty Oil” hate to say it, but it’s here for awhile yet. Yep! get used to it. Dirty, clean, whatever, still a excess need for it. Eventually we will move on to some other energy source. Is it here yet or still needs to be invented. Not sure. It just needs to be cheap.

Maybe we are moving into a new era. Maybe it’s time to change our way of thinking, the way we do things, you know, greed, behaviour, selfishness. All these things that mankind has ignored for many years. Maybe things will never change and the strongest shall rule. You choose.

One last maybe. Is this the beginning of a new revolution. Is this the “Clean Technology revolution”
Here is a list of the others.

First – The Industrial Revolution. Year: 1771
Second – The age of steam and railways. Year: 1829
Third – The age of steel, electricity and heavy engineering. Year: 1875
Fourth – The age of oil, the automobile and mass production. Year: 1908
Fifth – The age of information and telecommunications.
Year: 1971

Google Clean Technology and see what you get.

#122 Eduardo on 03.29.09 at 5:58 pm

Garth,

I’m not sure where you got your 8 barrels of water… the number is actually 3.5 to 4… please cite a source or correct this because otherwise you are just another person from Ontario who has no clue about the oil sands and spews made up/extremely outdated stats.

The book, ‘Stupid to the last drop.’ Please cite your source, and drop the gratuitous insult. — Garth

#123 Eduardo on 03.29.09 at 6:12 pm

http://www.canadasoilsands.ca/en/issues/water.aspx

for real information…

One of these days I’d like to see an oil sands informative post instead of “dirty oil” nonsense.

#124 Eduardo on 03.29.09 at 7:26 pm

http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/lsnd/pprtntsndchllngs20152004/qapprtntsndchllngs20152004-eng.html

2.5-4 shown here.

The 7-8 to 1 number is about a decade old. I bet the guy who wrote that book has never even seen an oil sands facility

#125 Eduardo on 03.29.09 at 7:32 pm

http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/lsnd/pprtntsndchllngs20152006/pprtntsndchllngs20152006-eng.pdf

Pages 38-40 for more detail on water/co2

#126 Eduardo on 03.29.09 at 7:37 pm

I bet he does lots of good investigative reporting from his cubicle, listening to the local media in Ontario and Quebec, seeing as he works for the Gazette in Montreal.

#127 Eduardo on 03.29.09 at 10:34 pm

Garth,

For the record, the gratuitous insult was because I never cease to be amazed at the misinformation that gets published related to the oil sands as well as numbers taken out of context. At times, the oil sands industry is used to paint Alberta with a single stroke of the brush and part of the reason is what essentially amounts to complete lack of understanding of the current reality.

It seems like more top selling books get published by authors in the US and Ontario about the oil sands than the experts in Alberta. Seems a little bit like a lobby rather than information or enlightenment.

So, answer the question. I gave my reference. Let’s have yours. And that is no excuse for insulting your fellow Canadians. — Garth

#128 Eduardo on 03.29.09 at 11:16 pm

I just showed you my reference… the NEB paper … #124.

“Both mining and in situ operations use large volumes of water for extracting bitumen from the oil
sands. Between 2 to 4.5 barrels of water are withdrawn, primarily from the Athabasca River, to
produce each barrel of synthetic crude oil (SCO) in a mining operation.”

– Pembina Institute. Troubled Waters, Troubling Trends – Technology and Policy Options to Reduce
Water Use in Oil and Oil Sands Development in Alberta. May 2006. p 16.

I can also tell you based on first hand knowledge.
Regardless, your number is way off base and it was quoted as fact.

#129 Eduardo on 03.29.09 at 11:24 pm

Also see Page 35… The chart on the right. It shows that Suncor’s water use per barrel has decreased from 4.9 barrels in 2002 to 2.4 in 2006.

http://www.suncor.com/doc.aspx?id=114

#130 Gord In Vancouver on 03.30.09 at 8:54 am

The “Greatest Place On Earth” comes back to earth:

http://www.news1130.com/news/local/more.jsp?content=20090330_013331_6868

#131 Sandatola on 04.01.09 at 2:30 pm

Garth quotes the book “Stupid To The Last Drop” for his figure of eight barrels of water required to produce one barrel of oil. I’m looking at that book right now online, and the p. 122 quote reads “We need two to five barrels of water for every barrel of oil.”

Whether it’s two or five, it’s an exorbitant amount. CAPP, the industry association that represents the oil sands says on its website that 80% of the water cycled through can be reused in their process. That leaves 20% that is contaminated sitting in tailings ponds. If we use the high figure of five barrels of water for each barrel of oil, that would mean that for every barrel of oil produced, you could end up with as much as a barrel of polluted water. Not exactly a stellar record, even if it is improving.

In any case Garth, best to update the figure. Maybe Eduardo will stop bombarding you with posts. His seven straight must be some kind of record at greaterfool.ca!!

#132 Eduardo on 04.01.09 at 11:01 pm

Sandatola,

Whether you (or Garth) like it or not, the oil sands will be an integral part of Canada and the world’s energy future. All I was pointing out was that the industry is taking steps to improve on all fronts, water use, tailings, advancing CO2 solutions, reducing energy intensity, increasing water recycle, improving water quality.

I’ll tell you a little secret as well. CO2 capture for oil sands operations is relatively easy compared to coal plants because they have relatively clean CO2 sources. In a cap and trade environment, oil sands will be able to capture CO2 much easier than coal plants.

Regarding water the water use, I just quoted 2 different sources: one is the federal government, the other is regulated by the provincial government and financial regulators. They both show the number is less than 3 and no where near 5. This is also only for mining operations. Insitu is much reduced although they lose surface water to the ground, whereas mine operations keep all the water on the surface. I can tell you first hand this number is accurate, and the fact of the matter is people spew out numbers that aren’t even true when it comes to the oil sands.