Harmonize this

Frankenstein1

A consequence of today’s actions are tomorrow’s taxes.

As night follows day, troubles trail deficits. There’s simply no escape, and this time the consequences will be as profound as they were in 1991. As that year dawned, the country got a new sales tax – a value-added thing called the GST, which would go on to raise more than $40 billion a year.

Canadians hated it, and in the next election destroyed the government responsible.

But the GST was inevitable, following years of record budget deficits which wildly inflated the national debt, crashed the dollar and gave us crushing interest rates. It took years of the money-sucking tax to balance the books and actually reverse the tide of debt.

Until now.

Since 2005 Ottawa has increased program spending at twice the rate of inflation. Even before the wheels came off the economy last fall, federal spending had hit the highest point ever, under Stephen Harper. Despite pledging in the last election he would not allow an annual deficit, it’s now going to be at least $50 billion (a record), and will take years to reduce.

The Parliamentary budget officer estimates at least $200 billion will be added to the national debt. That debt is financed mostly by bonds. When the government is forced to flood the marketplace with new bond issues, it competes for capital, and forces mortgage rates up. That interest on $600 billion debt is tax money, transferred from your income to the pocket of investors. It doesn’t buy a single new MRI machine, fund a school or fill a senior’s prescription.

But so much for economics.

I have a small taste for you of what’s coming, since governments are now incapable of living within their means. It’s the son of GST.

Starting in just over 10 months, seventeen million Canadians will wake up to a new tax on everything. Called the HST (for Harmonized Sales Tax), it will force everyone in Ontario and BC to double the sales tax paid on a range of things to which GST only now applies.

The two provincial governments are doing this because (a) they are being bought off by the feds, (b) it will raise a honking new mess of money, (c) it’s the kind of tax politicians love, since it’s automatic and universal and (d) business groups have been lobbying for it, since they get to write off all the tax that consumers are stuck with.

Here’s what the HST will do for housing in Ontario.

  • It will add a tax of 8% on to the existing 5% GST on every service required to buy or sell a home. Like the commission, for example. On a $450,000 house, that amounts on average to $22,500. The HST will add $1,800. By the time HST is added to the legal fees, the appraisal and moving charges, the average house will be about $2,000 more costly.

But that’s nothing compared to the impact on new homes.

  • The HST will apply to all new homes in every price range, with a maximum rebate of $24,000. That means a $400,000 house (Toronto average) will have 8% more stuck on it, or $8,000 after the rebate. A $750,000 house will have $36,000 in addition tax – plus the HST on commissions, closing costs and moving.

But it gets worse.

  • The rebate is only for principal residences, which means every new cottage, chalet, recreational property, cabin or hobby farm will attract the entire withering 8% tax. That means to buy a $300,000 cottage in the Kawarthas (modest digs) could cost the purchaser $24,000 more.

And the worst: this tax will come into effect just about the time the Bank of Canada says it will lift its current freeze on interest rates. That should be an interesting one-two punch – rising mortgage rates and romping taxes.

In case you were in the john, here’s the main point: Spending, deficits and debts have consequences. Taxes and interest rates are going up, not down.

Look into the eyes of the HST. It’s the future winking back.

HOWE STREET BANNER

For Garth's latest podcast, go here.

119 comments ↓

#1 piccaso on 08.10.09 at 10:19 pm

Maybe that will fuel the resale market, not that I’m interested.

#2 RM in Oakville on 08.10.09 at 10:22 pm

And the first shoe drops on so-called “cheap money”. There will be more, count on it. Debt must be serviced, whether you’re a homeowner or a government.

#3 My_view on 08.10.09 at 10:25 pm

Will this HST cause the correction, sorry crash, finally? Thats what I thought of the 0/40 being gone, then the double dip LTT (T.O.). Whats a few more thou on a half million. Chump change today. Resales will remain competive and strong. New builds will slow, the glut will be absorbed and demand will return. Lucrative products/incentives/rebates introduced yet again. The wheels on the bus go round and round…..

#4 Dean-oh on 08.10.09 at 10:32 pm

Are we shooting for # 1???

http://www.sirened.com/the-10-highest-taxed-countries

#5 dd on 08.10.09 at 10:34 pm

A fundamental shift must take place in the developd countries:
1) increased immigation
2) Higher consumption taxes
3) lower investment taxes

This is offset with polices in developing such as:
1) Higher consumption for goods
2) Higher taxes for investments
3) Better health care and pensions for the general population

#6 duder on 08.10.09 at 10:39 pm

The HST has been a major focal point of the Winnipeg Free Press during the past week…the NDP Government previously opposed it but now seems to be somewhat embracing it…I’m certain it will be coming to Manitoba.

#7 Homeless on 08.10.09 at 10:41 pm

Don’t you think 10 months before this tax would be house frenzy setting new record prices.

#8 Nostradamus Le Mad Vlad on 08.10.09 at 10:44 pm

“The HST.” More accurately referred to as the Happy Sex Tax!

“Until now. . . . But so much for economics.” — I ‘spose Snow White and the Thirteen Leprechauns are working elsewhere now, as Zombiewoofs are MPs real names!
——
Further Adventures Of The Great Garthsby . . .

“. . . sitting on a cornflake, waiting for the crash to come . . .”

http://www.youtube.com/watch?v=6B9gAdKGDsI&feature=related — or —
http://www.youtube.com/watch?v=Lkm2WGTX220

But I digress. :-P Welcome all, to the Krazy Kornucopia Konspiracy of Kelowna, where the motto is: Our Bubbles Are Bigger Than Yours!

Perusing through prior well-written posts, I was struck by images on the horizon of my nose, turning me cross-eyed, inside-out and upside-down. Bre-X rising? I think not.

Looking beyond the current abyss, I briefly scanned the e-mails from this morning. First, Mish’s “On The Brink Of Recovery”:
http://globaleconomicanalysis.blogspot.com/2009/08/on-brink-of-recovery.html

Mish quotes: “Economist Paul Krugman and Obama’s economic adviser Laura Tyson claim U.S. Economy May Be on Brink of Recovery.”

(Brief interlude — cartoon time!) — http://angrybear.blogspot.com/2009/08/great-recession-for-whom.html

Followed by Bill Bonner of The Daily Reckoning:

http://dailyreckoning.com/the-bounce-phase-of-the-economic-depression/

Bonner says: “Paul Krugman says the world ‘avoided a second Great Depression.’ He’s wrong too. The stock market crashed in ’29. The market then bounced. After a few months almost everyone was persuaded that the “worst was over.” But the worst was just beginning. It wasn’t until 1932 that the stock market finally hit bottom. . . .”

Then, these two:

http://www.moneymorning.com/2009/08/10/recession-over/

http://exiledonline.com/fusterclucked-again-the-commercial-real-estate-crash-is-on/

“Compared with a year earlier, initial claims were up 22%, while continuing claims were up 89%. Compared with six months ago, initial claims have fallen 12% while continuing claims are up 33%.”

These are govt. figures; how accurate are they? As far as I know, they don’t include people who have given up looking for work altogether. Cooking the books?

With all the economic fuddle-duddle happening so quickly now (one part of the overall mess), the mass confusion leads to part of one of the links from last night:

“. . . International Swine Flu Conference that will be occurring in Washington, D.C. Aug 19 – Aug 21, 2009 . . .” — After this is over, things will be taking pace at a faster rate of speed. Put everything together and what to make of it?

Well, the Aug. 19-21 Conference; then, the nine day “Bank Holiday” (Sat. – Sun. – Mon. – Fri. – Sat. – Sun.); during this panic, Martial Law is brought in by govts. to give them sweeping powers and full control over everyone and everything (see link below); Fall ’09 or Spring 2010 “Surprise”. An outstanding reason to have $15K cash on hand, $10K in silver 1-oz. and $5K in gold 1-oz. coins.

Take into account Sunday, Dec. 23, 2012 when the Mayan Calendar ends. So, a polar – equator shift so no one knows what the hell is going on anymore, toss in WW3 for good measure and then pull ourselves up by our bootstraps to start all over again!

As the WH has given its’ so-called “approval” (who needed someone else approval anyway?) to the present Iran govt., Israel has to look for someone else to provoke / attack, ‘coz they’re in the middle of a cash crunch too..

Life’s a gas!

Further down, see what the US (and probably our) govts. are allowed to do.
http://www.freedomfiles.org/war/fema.htm

http://thehill.com/leading-the-news/governors-oppose-dod-emergency-powers-2009-08-10.html

http://www.roguegovernment.com/Army_National_Guard_Recruiting_FEMA_Camp_Or_%22Internment_Resettlement%22_Specialists/16714/0/13/13/Y/M.html

#9 VANMANFROMPAKISTAN on 08.10.09 at 10:56 pm

I’m not so sure this is a clear cut tax increase on new properties (at least in B.C.)

Currently, PST is paid on all sorts of things that are used in building houses and buildings (equipment, lumber, etc.) The builders who pay the PST on these items don’t get refunds so they are forced to pass on the cost to the end consumer.

With HST, the builders will get input tax credits for HST paid meaning the HST is refunded to them (more or less).

So in theory the pre-HST cost of the the house/building should go down.

Meaning, it’s at least possible that the total cost of a no PST but GST unit will be the same as a HST unit.

That said, the HST will almost certainly have a “chill” effect on the housing market.

#10 Nostradamus jr. on 08.10.09 at 11:06 pm

Greetings from Vancouver on the Left Coast of Canada.

1/
…We are watching with interest at the escalating home prices in the GTA…where today you can sell a Toronto home and purchase two Vancouver ones.

2/
Smart money have sold all their stocks, waiting for the next stock market crash forcing citizens to buy U.S. and Canadian Bonds…then these govts lend all this cash to banks who then restart the cycle and reinvest this money back into the stock markets so that the plebes and their mutual funds can reinvest at the market tops and the cycle simply repeats itself over and over.

3/
Pay off all your debts first.

Namaste

#11 Einsam Solo on 08.10.09 at 11:08 pm

Call me cynical, but BC’s HST is coming in about the time we will find out about the billions in miscellaneous costs for the Olympics.

#12 ESL on 08.10.09 at 11:09 pm

Higher taxes will put the kibosh on this sputtering economy and keep it in the gutter for years to come. In fact I’m convinced the HST will kick in full force after the Canadian housing market has resumed it’s inevitable downturn and hammer prices that much harder, further accelerating the decline and making a bad situation even worse. I say get ready for the next bubble – tent cities sprouting up over the whole of this indebted continent. Providing shelter for these poor displaced folks will be a challenge come Winter 2010/2011.

NASHVILLE, Tenn. — Last summer, police responding to complaints about campfires under a highway overpass found dozens of homeless people living on public land along the Cumberland River.

Eviction notices went up — and then were suspended by Nashville Mayor Karl Dean, a Democrat, who said housing for the homeless should be found first.

A year later, little has been found — and Nashville, with help from local nonprofits, is now servicing a tent city, arranging for portable toilets, trash pickup, a mobile medical van and visits from social workers. Volunteers bring in firewood for the camp’s 60 or so dwellers.

http://online.wsj.com/article/SB124994409537920819.html

#13 Real Estate Deal or No Deal on 08.10.09 at 11:10 pm

Why do Canadians continue to take getting $crewed with higher taxe$?

It is revolting and appalling.

#14 kc on 08.10.09 at 11:20 pm

Anidotal evidence that some people are swimming naked and the tide is starting to go out….

was in a grocery store today, the couple ahead of me (in their mid 30’s) had the bill come to 70.00, he gives the cashier a visa card, declined… tries a second card, declined… then tries a 3rd card, it also was declined. finally the wife gives a debit card, and it passes. out in the parking lot they were a row over from me and I happened to notice the wheels they were placing the bags into… looked like 07-08 Audi … over extended are they???

#15 Dawn in Calgary on 08.10.09 at 11:24 pm

Alberta women lead $75-million lawsuit over real estate deals

Two Alberta women are leading a $75-million class action lawsuit on behalf of as many as 3,000 investors seeking to recover tens of millions of dollars put into property deals.

Jennifer Lofgren of Calgary, and Lucia de Wet of Pincher Creek, are spearheading the suit, which seeks to recover funds put into projects in Alberta, British Columbia, Ontario and Hawaii during the past four years.

The lawsuit names Jeanette Cleone Couch, the named officer and director of Shire International Real Estate, plus several other project companies as defendants.

http://www.calgaryherald.com/business/Alberta+women+lead+million+lawsuit+over+real+estate+deals/1879036/story.html

#16 Bottoms_Up on 08.10.09 at 11:28 pm

If the average family spends $20,000/yr on non-PST items, they will now have to spend an additional $1600/yr of after-tax dollars.

That’s like a paycheque vanishing into thin air.

Don’t we live in a democracy? Did the people vote for this?

#17 Devil's Advocate on 08.10.09 at 11:30 pm

I asked a long time client today what they thought of the proposed HST. They answered; “one way or another the government is going to increase taxes.”

At least this is a consumption tax rather than an income tax… although I am sure there will be increases in income taxes to follow. Ironically, this consumption tax will curtail spending and only further exasperate the situation. Just another example of how we are placing yet further faith to fix the problem who never saw it coming in the first place… or worse yet faith in those who were the cause of it to fix it.

Dumb and dumber…

#18 Nostradamus Le Mad Vlad on 08.10.09 at 11:31 pm

Frank N. Burger, a.k.a. The Thing Who Eats Sheeples For Lunch.

“The HST.” More accurately referred to as the Happy Sex Tax!

“Until now. . . . But so much for economics.” — I ‘spose Snow White and the Thirteen Leprechauns are working elsewhere now, as Zombiewoofs are MPs real names!
——
Further Adventures Of The Great Garthsby . . .

“. . . sitting on a cornflake, waiting for the crash to come . . .”

http://www.youtube.com/watch?v=6B9gAdKGDsI&feature=related — or —

http://www.youtube.com/watch?v=Lkm2WGTX220

But I digress. :-P Welcome all, to the Krazy Kornucopia Konspiracy of Kelowna, where the motto is: Our Bubbles Are Bigger Than Yours!

Perusing through prior well-written posts, I was struck by images on the horizon of my nose, turning me cross-eyed, inside-out and upside-down. Bre-X rising? I think not.

Looking beyond the current abyss, I briefly scanned the e-mails from this morning. First, Mish’s “On The Brink Of Recovery”:
http://globaleconomicanalysis.blogspot.com/2009/08/on-brink-of-recovery.html

Mish quotes: “Economist Paul Krugman and Obama’s economic adviser Laura Tyson claim U.S. Economy May Be on Brink of Recovery.”

(Brief interlude — cartoon time!) — http://angrybear.blogspot.com/2009/08/great-recession-for-whom.html

Followed by Bill Bonner of The Daily Reckoning:

http://dailyreckoning.com/the-bounce-phase-of-the-economic-depression/

Bonner says: “Paul Krugman says the world ‘avoided a second Great Depression.’ He’s wrong too. The stock market crashed in ’29. The market then bounced. After a few months almost everyone was persuaded that the “worst was over.” But the worst was just beginning. It wasn’t until 1932 that the stock market finally hit bottom. . . .”

Then, these two:

http://www.moneymorning.com/2009/08/10/recession-over/

http://exiledonline.com/fusterclucked-again-the-commercial-real-estate-crash-is-on/

“Compared with a year earlier, initial claims were up 22%, while continuing claims were up 89%. Compared with six months ago, initial claims have fallen 12% while continuing claims are up 33%.”

These are govt. figures; how accurate are they? As far as I know, they don’t include people who have given up looking for work altogether. Cooking the books?

#19 Alberta Ed on 08.10.09 at 11:35 pm

Suggested BC/Ont. bumper sticker:

HARMONIZE THIS: (image)

#20 asp on 08.10.09 at 11:42 pm

Whatever. My total tax bill will still be smaller then it was a couple of years ago before all the recent tax cuts.

Governments provide valuable services at better prices and quality then the private sector. In order to continue to do that, they need broad sources of revenues.

It’s a good thing to divert a few grande from the housing bubble into social services.

Which tax cuts were those? — Garth

#21 Steve on 08.10.09 at 11:43 pm

dd, how about some intelligible English?

#22 Basil Fawlty on 08.10.09 at 11:47 pm

The corporate spinmeisters are telling us that the HST is the best way to go “economically”. While here in the real world this tax is a massive shift from corporations to individuals. The HST, and GST before it, arrive after massive tax cuts to business over the last 15-20 years.
Our Federal and Provincial governments, with high priced coaching from all the corporate think tanks, tell us that taxes must be decreased so we can be competitive and business will then be able to create more jobs. Then they turn around and increase taxes and tell us it is the best thing to do “economically”.
What a load of horse manure. Who believes their nonsense? If we had a free press they would be muckraking and laughing at the sheer audacity of these buffoon’s

#23 Mike B on 08.10.09 at 11:52 pm

I am never at a wonder why people think Canadians are such marks, rubes, dupes, complacent sots. Cause we are… We let the feds do whatever they see fit by bolstering balance sheets for our poor impverished banks who knowingly got burned by sub prime. We follow in line like good little sheep and buy that house and car on credit, huge credit. Look at toronto with the garbage strike… A 6 % increase in the middle of a recession. Does the tail wag the dog in this country? Seems like.
Question is will HST kill resale or add fuel to the flame.
If we see no reasonable correction soon then when it does hit it will be hard and painful. Thosr extended beyond their means will have their asses handed to them.

#24 Kelly McMae on 08.10.09 at 11:52 pm

Definitely won’t be buying much, unless I can maximize the back alley under the table deals that are already commonplace.

See you in the market painted black.

#25 Bilbo Bloggins on 08.10.09 at 11:57 pm

Sometimes an announcement has an opposite effect on the market than would dictate.

Most people realize interest rates will be rising in the next year or so.
This spurs those with pre-approvals locked in for 180 days to start binge buying. The spring RE market is proof of this.

Now that the HST is coming in, you can bet that more FTBs will be jumping in before July 2010.

#26 Elle on 08.11.09 at 1:09 am

Well, what a fine kettle of fish this is!!!!

As if things weren’t bad enough in the construction industry with the economy weaving all over the place, like a drunken sailor (sorry sailors) “since October, 120,000 construction jobs have vanished.” Drywallers are already scrambling to scoop up dwindling jobs in the construction projects….many here haven’t worked for months and are in bankruptcy. and now……..a brainchild of an additional tax -HST- on new housing will pretty much cut these hardworking guys off at the knees.

Isn’t it ironic that only a few short months ago gov and Shell Bussy and his ilke were crying for more immigrants to be brought in and trained for the building trades because of the building boom…….my how quickly things change!

#27 Mike M on 08.11.09 at 1:19 am

How do we propose to pay for all the social services that Canadians seem to assume are our birthright?

As Canadians age and have fewer babies how do we pay for “public” health and OAP?

I would much rather see a tax on consumption than one on income.

Let’s get rid of taxes on capital gains and reduce personal income taxes but double the HST.

#28 don bool on 08.11.09 at 2:16 am

The root of this idea is firmly planted in Ottawa where resides a gov’t which has repeatedly told us they would not raise taxes.

I don’t have a problem with the implementation of a HST to replace both the GST and PST. The problem is that they,re playing this down as a “non event” and not admitting that the real reason is the additional revenue they will get out of this. If they were honest and say that it,s a tax increase, they would have more credibility. Taxes will need to be raised.We are in a deep recession, more then ever before people are counting on social programs. A tax increase is nessecary and there,s no way around this. So how does Harper raise tax revenue and not look responsible for this tax grab.He does it by bribing the provinces with tax payers money. So let’s call this tax what it is, not a Harmonized Sales Tax, but a HARPER SALES TAX.(HST) .

*The HST is simply a back-door way of Harper getting even more money from the citizens without appearing to levy a new tax.

In theory Conservatives are supposed to believe in:
-Fiscal Responsiblity
-The free market principle
-Lower taxes
-Smaller and less intrusive goverment.

What has Harper done:
-Run up a huge deficit.
-Given bailouts to failed and mismanaged companies left and right.
-Using the HST to make a huge tax grab.
-Trying to bribe provinces with money in an attempt to turn the electorate against the premiers for increasing taxes.

Harper doesn’t believe in Conservative policies and neither do the zealots who follow him, he has his own ideology which he tries every trick to enforce on the public. Much like him, all his followers care about is his retaining power.

If your true to your beliefs you should stand up for them, even if it means denoucing the leader of your party if he betrays them.

Recent Quotes from Stephen Harper
*You know, there’s two schools in economics on this. One is that there are some good taxes and the other is that no taxes are good taxes. I’m in the latter category. I don’t believe that any taxes are good taxes.

* “We will not start raising taxes and cutting programs. That’s a very dumb policy and to the extent that (Page) suggested it, it’s a dumb position.”

…this HST should cover those auto bailouts… You know! That other tax called the GMT. (General Motors Tax)

#29 JOJO on 08.11.09 at 2:20 am

Ouch Garth,

“But it will gets worse”.
“And the worst: this tax will come into effect just about the time the Bank of Canada says it will lift its current freeze on interest rates. That should be an interesting one-two punch – rising mortgage rates and romping taxes”.

“Spending, deficits and debts have consequences. Taxes and interest rates are going up, not down.”
SO FROM YOURS PREVIOUS PREDICTION THAT OIL PRICE WILL GOING OVER $ 100 and Food,services and living expences will going up next year we have completed picture of DEFLATION?

Garth finaly you have to go in elementary school and learn what is INFLATION and DEFLATION.
OH,my god ….DEFLATION?
Taxes and interest rates are going up,oil,food and living expences will going up next year and you still talking about Deflation?

I said consistently deflation in the eocnomy in the short term, followed by ramping inflation, risng rates and higher taxes. This, indeed, is what will happen. — Garth

#30 D on 08.11.09 at 5:38 am

The GST in 1991 replaced the manufacturer’s tax, which was a hidden tax and I believe was 11%, with the GST which while more universal was visible and therefore it wasn’t the sudden apocalypse of taxation that it became known as, right?

Next up is the HST, I live in Quebec which has had this approach forever it seems. One thing this country needs is to be harmonized business wise like a country. Different rules and amounts province to province also means that it can vary provincial government by government, and that’s not a good thing for planning.

If we could get free trade working between the provinces we might actually start down the path of efficiency. Perish the thought.

#31 David Bakody on 08.11.09 at 6:11 am

The numbers of Senior Boomers who are about to flood the government with demands in Health Care is staggering …… AND costly …. and they vote …. yes vote in high defining numbers while spending little! Soooh all you young whipper snipers be prepared to pay big time!

#32 John on 08.11.09 at 6:11 am

As we bought in late 2001 we were a little put off by builder gets the GST rebate clause in our contract but we were ready to buy for and live in for the next 20 yrs…good school 3 bedrooms and right beside the 2 subway lines. Wow we did really well in hindsight. Thanks for all the right advice Garth! As we watch the greed around us not selling (mcmansions galore), we have our RRSP’s, and our mortgage down at nearly half of our resale value. We will enjoy not paying those new taxes that have come about and look forward to the years of no commute..

#33 MrC on 08.11.09 at 6:25 am

Next year… That is so far away. People don’t want to think that far ahead Garth. I mean after all, you could win the lottery, find a job with double the salary, get a long lost relatives inheritance….

Talk to us again about this in 9 months. Thats about the time the mainstream media will start jumping on this story. LOL

#34 POL-CAN on 08.11.09 at 7:04 am

KD is on a tear these days:

.
.
.
Do those of you in Washington understand that robbery at this grand scale cannot work and must not be allowed to continue? Do you understand that “Pax Romana” was brought down by this very same sort of corruption? Do you understand that we are absolutely dependent on CHINA and JAPAN to fund our operating credit requirements in The Federal Government, and that should they give us the finger The Federal Budget would implode by 50% overnight?

IF THAT HAPPENS HOW WILL YOU FEED THE PEOPLE?

Do you understand that these frauds and thieves are not the Chinese and Japanese, nor the Saudis? That they have the money, and we need to borrow it? That they have oil, and we need to buy it? That they are not stupid and that eventually they will tire of the lying, thieving and political misdirection, and if they do before you clean up this crap our nation is absolutely, irretrievably and without question SCREWED?

I love my country, but today, I fear for her future.

WAKE UP AMERICA.

STOP THE LOOTING AND START PROSECUTING.

http://market-ticker.org/archives/1317-DAMNIT,-STOP-THE-LOOTING-NOW!.html

#35 B in NB on 08.11.09 at 7:33 am

We’ve lived with the HST in NB for years now. There is no fun in looking at a 13 percent tax added to almost everything you buy, however it taxes the spending so you can minimize it’s impact a little in spending less.

The fun part of it was when it came into effect, at first the politicians and journalists called it Blended Sales Tax and it didn’t take long for the short version to show up everywhere: the BS tax.

#36 pbrasseur on 08.11.09 at 7:51 am

Garth,

I doubt the B-o-C will raise interest rates anytime soon, even after the “freeze” they will do everything they can to maintain low rates for the longest time possible, also they certainly don’t need to boost the $CAN. If interest rates do go up it will be by pressure from the bond market.

It’s a global marketplace with floating currencies. The BoC hardly has free will. — Garth

#37 Munch on 08.11.09 at 7:57 am

Brilliant, !

Brilliant!

The facts are overwhelming, aren’t they?

Perhaps too much so, thinking about it!

Is there any danger of “us” being wrong? I really don’t think so, but I do get worried when everything “lines up” so perfectly like this!

It makes Munch nervous!

#38 Quebec-man on 08.11.09 at 8:09 am

A couple observation: the national scene is one thing but it is ugly in provinces too. The Quebec gov’t will be looking for some 6 billions a yr in a couple yrs time. On the table, two increases of 1 % to the TVQ to “occupy the fiscal field left by the feds. Even that leaves a gap of 2.3 billions…
At local level, things are ugly in the USA, was on the East coast last week. New Hampshire tried to raid some health practionner compensation fund by 100M$ to balabce the books. Courts stepped in to block the manoeuvre. Newspapers were all about state, town and school boardstrying to find $$$

I take comfort in a farmer’s pt of view: things are never as bad or as good as you think they will be. So thruth should end up between the sheeples’ and the doomers’ pt of view .

#39 Bill-Muskoka (NAM) on 08.11.09 at 8:16 am

Garth,

Thanks for dealing with this very critical issue.

The impetus for it seems to be Harper telling McGuilty ‘If you don’t send Ontario’s tax dollars to us in Oddawahaha, so we can use the cash flow to make ourselves look good after blowing every sound economic policy known, then we will not give you federal money.’

That is $4.3 BILLION in OUR money Harper and Dim Jim want to control and withhold like some low life gangster demanding protection money.

All the rest pure political BS!

#40 Gord In Vancouver on 08.11.09 at 8:29 am

Not What Mark Carney Expected

http://www.vancouversun.com/Canada+housing+starts+fall+unexpectedly/1881140/story.html

#41 dd on 08.11.09 at 8:32 am

#9 Nostradamus jr.

“2/Smart money have sold all their stocks, waiting for the next stock market crash” … and then will buy at the bottom of the market.

#42 lgre on 08.11.09 at 8:45 am

The End of Suburbia (xurbia as Garth calls it)

a great documentary that everyone should watch

http://www.youtube.com/watch?v=Q3uvzcY2Xug

#43 JET on 08.11.09 at 8:52 am

I hope someone can confirm this but there is a general misunderstanding in Toronto that the HST will apply to ALL homes. This could be one of the factors pushing people to buy.

It applies to the purchase price of new homes only, and the commission, legals, moving, renovation and utilities of existing houses. — Garth

#44 Herb on 08.11.09 at 8:52 am

Don Bool @ #26,

“HARPER SALES TAX” – nice one, Don. Now, everyone, spread the word:

HARPER SALES TAX.

#45 PTDBD on 08.11.09 at 8:54 am

Obama’s decline of Harper’s handshake during yesterday’s closing ceremonies of the SPP in Mexico was astonishing. What’s going on?

#46 KenKen on 08.11.09 at 8:56 am

Masterstroke by lowering int rates in past year

Lower int rates at the right time has prevented a drop in prices in RE…that’s nothing new, you would say…but check the workings

Oct07 (peak of housing in CA)-prime was 6.25% and best variable mortgage rate was around 5.25%.
Assuming downpayment of 5% and 25 year tenor, a house of $300K resulted into monthly payments of $1708.

Jun09 (NOW) – at VRM of 2.75%, down 5% and tenor 25 years, the same monthly payment of $1708 makes a house of $390K affordable
Those who could not buy in the peak Oct07 and renting at $1200/1300 per month then can NOW afford a house of $275K-300K (5% down and tenor 25 years)…due to lower VRM

FUTURE: with normal interest rates: prime returning to ‘normal’ levels of 5% (best deal), those $375K-400K houses will not be so affordable and buyers will only be able to get them if they are at $300-320K range…unless by that time, income have increased by at least 20%

lower rates now has prevented a reduction in prices of 20-30%. With normal rates reinstated (inevitable), the housing market will see a long overdue price correction.

#47 Devil's Advocate on 08.11.09 at 9:00 am

In over eighteen years of selling real estate I can’t recall any time in the last ten that a foreclosed property before the courts sold at or below list price. In almost every case the final sale price was over the list price. Why? Because a foreclosure sale before the courts becomes an auction. The first bid initiates a court date at which time anyone can show up and place a bid. Invariably it seems the judge returns all bids and requests that bidders put forward their best offer, free and clear of any due diligence conditions of course. This is a clear indication of the mindset of much of the home buyers… vultures who “think” they have found a great deal. Fact is always a property sells for its true market value. Put a price of $1.00 on a property and what will it sell for? At least fair market value as frantic bidders try outbid one another pushing the price to and often beyond the real market value of the home.

Vultures who lie in wait of those good deals they expect coming down the line will not get such a bargain but rather simply pick up properties at the then market value a market value driven down by a failing economy, increased interest rates, unemployment, higher taxes and such.

Trust me… there are no screamingly good deals in real estate. Properties always sell for what they are worth and often beyond such as there is always a greater fool willing to pay more than they should.

#48 Paul Singh on 08.11.09 at 9:09 am

Cant believe it no houses left in delta/surrey ,bc in the 3/4 bed 2+w/r 400k range. It was full just a month ago. Looks like are definently been pushed out of buyers market now…Damm

Garth whats happened here….

#49 VOODOO on 08.11.09 at 9:10 am

http://www.ottawacitizen.com/business/Ottawa+real+estate+stays+July/1879877/story.html
————————————————-
The Ottawa market has officially gone mental.

#50 JET on 08.11.09 at 9:53 am

It applies to the purchase price of new homes only, and the commission, legals, moving, renovation and utilities of existing houses. — Garth

I understand this but my point is that a lot of people don’t realize this, and think that the HST will apply to the purchase price of all homes (like the Toronto land transfer tax). I have heard at least a couple of people say that they thought (incorrectly) this was the case, and one of them is a realtor. This misunderstanding could have pushed some to buy.

#51 infernalmachine on 08.11.09 at 9:55 am

Any thoughts on how the HST will affect rents? Will the mandated annual max rent increase go up in 2010 so landlords can recoup the difference?

Seriously, we should just Logan’s Run the boomers.

#52 infernalmachine on 08.11.09 at 10:05 am

Ok, maybe not logans run them but as a gen … Whatever-er being born in the 1980s makes me, I feel just a bit stressed at the impending healthcare bomb I will shortly be expected to finance. :(

#53 robert on 08.11.09 at 10:13 am

Reality is about to hit the “realty” industry in Canada. I have a buddy in the biz who is heading out as a part of an industry lobby to convince Mark to rescind or revise the HST as it applies to house sales. The double whammy of interest rate creep and taxes has them absolutely s—ting bricks. This may well be the straw that breaks the camel’s back.

#54 smw on 08.11.09 at 10:14 am

#47 VOODOO

Just for homes under 400K. The “big uns” are sitting, in fact, I’m looking at a price reduced sign on my neighbors lawn as we speak.

Reduced?

Yeah, from $520K to $490K.

Still over priced by $100K.

But the best, I mean the best, is the beautiful home that was bought in the fall(Asking $600K MLX says sold for $550K) and had the hardwood floors resurfaced, stainless steel, granite and fresh coat of paint…

Are you ready, asking, $800K 9 months later.

http://orebweb3.oreb.ca/mlssearch/frm_SearchMlsDetails.asp?x_mls_num=730922

As stated a couple days ago, in Ottawa, the only people drunk on real estate are the “teens” running around with their new found “wealth”…

I would say that a $130K price drop is substaintial, somebody made a miscalculation. The home asking price is still over $100K what the investor paid, but lots of work has been put in and your looking at $4,000 a month to cover the mortgage…

Sitting for a year is quite a beating to the wallet…

How long till taxes, interest rates and a lack of qualified buyers pushes the market the other way, especially for the middle to high-middle priced homes.

This is a perfect example of what is being warned about…

Perfect storm, and we’re in the eye of it and 3/4s of the population is too busy thinking they’re rich on pressboard and plywood.

#55 Brian Donaldson on 08.11.09 at 10:28 am

Now I understand the deflationary spiral that is going to happening in next few years. Inflation can only happening during a credit expansion like the past 8 years. Credit is now contracting. Go to http://www.elliottwave.com/ and read their forecast. Gold and Silver bugs listening up.

#56 Mr. D - Ottawa on 08.11.09 at 10:30 am

When I first heard of the HST, I didn’t like it because a number of services including utilities would have HST (at 13%) instead of just GST (at 5%) being charged.

Then I remembered that my household is super efficient and one of the very few using solar-air heating (plus natural gas). All of our utilities are much less than half of the average household so the impact of the HST will be minimal. Those households using more resources will pay more which makes the HST a good idea.

I’m okay with paying more for the other services such as hair cuts, etc.

#57 Future Expatriate on 08.11.09 at 10:38 am

#43- Obama, the CIA-born atheist, has a real problem with Christianists. Not over warmongering, oh no, they’re definitely on the same page when it comes to warmongering and offense profiteering; it just has to do with differences over the differing sanctimonious rationalizations in favor of profiting off the deaths of innocents.

That, and Harper asked Obama to sign his copy of Larry Sinclair’s new Obama book off camera. Lord O was not amused.

Cheeky fellow!

#58 BC Guy on 08.11.09 at 10:40 am

I thought I would ask the group…What has been the total lost of manufacturing jobs over the past decade in Canada.

Best regards to all…

#59 Nathan in Edmonton on 08.11.09 at 10:50 am

Higher taxes are for sure in the cards, but so is a much poorer private sector and population… somthing will have to give. Downsizing a bloated government seems obvious.

#60 Denis on 08.11.09 at 10:51 am

Canadian bankruptcies rose in June from the same month a year ago as more consumers gave up paying their bills amid the country’s first recession since 1992.

The number of bankruptcies filed by consumers and businesses in Canada climbed 52% to 11,338 in June, the country’s bankruptcy superintendent reported on its Web site.

http://www.financialpost.com/story.html?id=1881448

#61 Denis on 08.11.09 at 10:52 am

Highlights and Full Statistics available here: http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02258.html

#62 PTDBD on 08.11.09 at 11:00 am

“All of our utilities are much less than half of the average household” says Mr D surmsising that he would then not be seriously impacted by the HST.

When I look at my utilities bill, one thing really stands out. It doesn’t really matter too much even when we cut our use to almost nothing. 60% of the bill consists of add-ons that stay constant no matter how little water, gas, or electricity we use. Delivery charges, distribution charges transmission charges, service charges, administration charges, etc. We could go down to using nothing at all and still pay that hefty overhead and the associated tax.

#63 LS on 08.11.09 at 11:05 am

I don’t even mind the idea of the HST so much. However what I do mind is that in BC we had for 30 years a relief of the PST for purchases of various “green” products, like bicycles, pollution control devices, and energy efficient lightbulbs, etc. It was a fantastic way to provide some incentive for consumers to change their behaviours.

Now with the HST, not only are these tax incentives towards greener products gone, they are reversed by granting an exception to gasoline and diesel!
That is just an outrage. I don’t mind paying taxes for services, but to destroy all our progressive taxation policies in one fell swoop is inexcusable.

#64 Blobby on 08.11.09 at 11:08 am

@#48: Quote : “I have heard at least a couple of people say that they thought (incorrectly) this was the case, and one of them is a realtor. ”

Something tells me there’s a HIGH chance the realtor actually knew the reality here, and was just pushing for a sale. i.e. the good ol’ spin on the truth : “Buy now as next year prices will be going up with the new hst tax and interest rates and you’ll be forced out FOREVER!”

#65 Industrial Guy on 08.11.09 at 11:34 am

Taxes on the rise, unemployment growing, Inflation ready to take off right after a major recession?

Deja vu! It’s the late 70’s and early 80’s all over again. Maybe we’ll soon have a Trudeau as Prime Minister too.

For those to young to remember this period in our recent history, look up. “Stagflation ” … “Wage and Price controls” ….. COLA (cost of living allowance, not the drink) and oh yes .. “21% mortgages”.

Scared yet? You should be.

#66 North Van Dude on 08.11.09 at 11:37 am

Garth, I think it might be worthwhile to have a post dealing with why the BoC does not have the power to keep interest rates low at their whim.

I keep reading comments from readers that the govt and BoC will do whatever they can to keep rates low, which reflects the sentiments of most of the sheeple. It might be a good idea to spell it out for people exactly why the govt of Canada is not the one who decides what rates need to be.

#67 Marc on 08.11.09 at 11:39 am

With the exemptions eliminated, I really hope that governments can legislate for honest pricing. That is, the price on the sticker, is the payment given for the product. Europe has it, Breat Britian has it, Australia has it, as well as many parts of the world. When I buy a product for $99.99, I know it has 12% added, so we can just put a sticker on the broduct that reads $112, they can keep the penny for all I care.

But retailers don’t want honest pricing. Why, because they think we are all stupid, and will view products in Washington state, Alberta as less expensive as their stickers may not have taxes included on them.

Now excuse me, I saw a good air fare for a flight to T.O. that is for $199 each way. Won’t be surprised when the total comes in around $1K. WTF is that anyway?

#68 mike from oakville on 08.11.09 at 11:41 am

Suck it up whiners. The GST is an efficient tax and so is the HST. In the long run, i’d much rather a tax on consumption than a tax on income or wealth. Smart economists all agree. Ontario Tories don’t – petty politics over good ideas. Shame on you Hudak. Way to alienate what used to be the base of the PC party – small business owners.

#69 Bill-Muskoka (NAM) on 08.11.09 at 12:01 pm

#43 PTDBD

Cooties!!! LOL

Seriously, do you shake the hands of a person you cannot stand? Would you want to shake Harper’s hand? I would not!

#53 Future Expatriate

Where do you get such tripe? If you were held accountable under the libel and slander laws would you be promoting such lies? Maybe you work for Fox News, eh? Such comments belong on the front of the National Enquirer, or Fox News (Unfair and unbalanced).

As to the Mexican refugee claimants. Where has Harper been all these years? Oh, yes, creating and reviewing Attack Ads, mailin out 10%er’s to other ridings, and acting like a school yard Bully instead of a Canadian PM. I wouldn;t doubt it at all that Bush called Harper and said ‘Hey Bud, listen up, them Mexicans are going to try taking over Canada now that we have them stopped along our border (Which they don’t of course). Of course ya’ll need more Nannies and dishwasher don’t ya?’

Harper knowing he cannot garner votes from Mexicans refugees, wants to keep all the under the table low paying jobs for immigrants who will vote for him (So he likes to think!) Gotta keep those quotas under control, ya know!

#70 Bill-Muskoka (NAM) on 08.11.09 at 12:08 pm

#56 BC Guy

No one actually knows, but it is very high. My wife lost her job of 20 loyal years (so the morons that run the big company she worked for could get their bonuses and pay the stockholders after they spent millions buying up competitors), applied for EI, and was denied because she got too big of severence payout, even though it had expired. She is working again at half her former pay without the former benefits, and did not have to report it to EI because the simply don’t give a damn if applicants found work unless they are paying out money.

So much for EI as dependable backup for all our hard work and paying into the damn corrupt system. Another hot potato Chef Steve can’t and won’t handle.

#71 rory on 08.11.09 at 12:44 pm

#49& 50 infernalmachine you crassly said:

“Seriously, we should just Logan’s Run the boomers.”

“Ok, maybe not logans run them but as a gen … Whatever-er being born in the 1980s makes me, I feel just a bit stressed at the impending healthcare bomb I will shortly be expected to finance.”

Simple solution and much easier to implement …just kill yourself …your problem is solved…just hurry it up so we do not need to listen to such drivel …maybe your boomer parents will cry for you or not…what an over the top reaction so for your reward you get to be the blog’s ‘tool’ of the month…enjoy.

#72 MenWithHats on 08.11.09 at 12:59 pm

Nothing to harmonize in Alberta .

#73 PTDBD on 08.11.09 at 1:06 pm

“The number of bankruptcies filed by consumers and businesses in Canada climbed 52%…….”
– please notice the shift in language – we are no longer the public or individuals, we are “consumers”

#74 Vancouver_bear on 08.11.09 at 1:18 pm

#15 Bottoms_Up on 08.10.09 at 11:28 pm

I guess we will be forced just to spend less and watch closely how much we spend. This way businesses who was exempt from PST before will be just screwed, I don’t see how this will benefit anyone. I intend to cut all my the services I buy in order to make sure that my bills stay the same, not that I can’t afford to pay more, I just don’t want to.
I will not suffer much if I don’t get some cable channels, the programming can be easily found on the internet these days, just little time needs to be spent.
The reastaurants….I guess I will cut there as well, will be going to restaurants not on weekly but rather on monthly bassis and on some holidays… also will be leaving less tips, making a note on every restaurant bill that additional 7% of the tip can be claimed from BC government if it can be. My paycheque was cut this year as for many other of my friends either hours or the pay was cut.
Thank you Mr Crampbell for screwing us over, I am one more step closer to the decision to move out from this best place on meth.

#75 David on 08.11.09 at 1:55 pm

Lovely simplistic answer from Mike from Oakville. Governments actually have to look at issues broader than “tax efficiency”. For example there are compliance issues, incidence of tax, regressivity and progressivity of those taxes paid based on incomes, collection and enforcement of tax laws and excess tax burdens applied to some, but not all citizens. Taxes on personal consumption are treated differently than capital gains which are treated differently than dividend income and so on. Who exactly are those “smart economists” and do you care to name names? The Canadian tax system does not treat every dollar of income the same way, so maybe it is time to wise up and read a few books on the subject before labelling people “whiners”.
Here a couple of really great articles on the negative equity trap and falling incomes crisis that are worth a reading.

http://www.steamboatpilot.com/news/2009/aug/07/house_cards_mortgage_market_folds/

http://www.counterpunch.org/auerback08112009.html

#76 Future Expatriate on 08.11.09 at 1:56 pm

#67- Bill, Bill, c’mon now… next time someone uses the word “cheeky”, have just an inkling they’re joking?

Fox news? Won’t even have it in the house.

#77 Evangeline on 08.11.09 at 2:00 pm

((Governments provide valuable services at better prices and quality then the private sector.))

oh sure, that’s why Fedex and UPS are such huge failures

#78 Bill-Muskoka (NAM) on 08.11.09 at 2:02 pm

Eh? What is this?

Canadian bankruptcies skyrocket in June: Toronto has highest credit card delinquency rate at 2.03 per cent

Well, Golly Gee Mr. Turner, those Toronto Star promoters of the RE BOOM semm to be catching a little well deserved FLAK!

#79 Bill-Muskoka (NAM) on 08.11.09 at 2:06 pm

Nothing to harmonize in Alberta .

#70 MenWithHats

What ya talking about their Pardner? Do you mean to tell us they can no longer get in tune with the beer farts aroud the campfire? Well, there goes Alberta’s chance for being the setting for the sequel to ‘Blazing Saddles’!

#80 Daystar on 08.11.09 at 2:26 pm

Ah, the future.

What does it hold?

Well, we’ve overdeveloped. Canadians truly must admit that, if not in our own nation, certainly world wide. We built to many homes, condo’s, oil and gas wells, mines, cars, too much of everything including debt and until this world depletes and expands its population and dilutes debt values, it will be years before this turns around. Thats where we are at now.

And we are at rock bottom interest rates with nowhere to go but up. And with all this mushrooming record fed deficit caused by tax cuts over 13 years to corps and personal taxes alike in the face of tax revenue declines, where are taxes supposed to go?

And where is the U.S. dollar, crossing a critical combined intergovernmental net debt to real GDP ratio of 100%, to go? And what can Obama do about it?

What if he introduced a GST in the U.S.?

And what would that do to the U.S. dollar? (and the length of his lifespan) And ours? And U.S. interest rates, what would that do? And what would U.S. interest rates, if falling 3 or 4 points in the bottom of a housing market due to world confidence restored in the U.S. dollar, what would that do for america, personal equity doubling once again? What would that do for their economy, their markets, their future?

Think about the bigger picture, folks. Its not just about interest rates and currencies and bond markets, it is about taxes as well and not just here, but abroad. And think about the timing.

Speculate for a moment of what the fallout would be if the U.S. did a daring move to put a flat consumption tax on everything. They would attract nations supporting their dollar in droves. And with that, my friends, they could easily drop interest rates with a rush to a U.S. dollar safety haven timed with a nasty real estate bottom… they could flood their own markets with cheap credit once again and the end of the recession would come (and if they had any sense, they wouldn’t let the greeders take it too far creating a bubble that would likely collapse their economy for real).

But what of Canada if the U.S. did this? What would happen to us? If this U.S. scenario played itself out, Canada would no longer be as attractive to invest in the dollar, even with cheap rates and especially with Harpers drunken spending spree’s and tax slashes to the rich and corps and balooning deficits in the face of dramatically reduced tax revenues, shrinking GST and personal declines in equity due to real estate delines. What would the feds be able to do, to support their dollar so big oil can cash in at high prices… let the dollar fall? Would they have a choice? And what if it hits .60 cents… and what would that do to oil and gas revenues even at high commodity valuations… is a big hike in interest rates inevitable? Can Harper borrow endlessly for peanuts? Is this Japan? If the U.S. dollar is a hit with the bond markets once again, what will happen to us?

And with that, with what I just described, we have ourselves a double whammy scenario. Tax increases, higher governmental debt, and higher interest rates that would likely be double or possibly even double digits 4 years from now, what do you all think that would do to our real estate industry and personal equity in general and our economy as a whole?

And what of cycles?

And in the meantime, outside of a surge in commodities, what else would Canada have going for it? Gold would tank… We are truly a nation of sellouts and our manufacturing has been decimated. Energy revenues would drop like a stone with a weak dollar…

I hate to break the news, but Canada is the laggard on this one, whether things improve world wide, especially in states, or not and why? Because we aren’t as competitive as we once were. Our manufacturing base is too weak now to capitalize on a weak Canadian dollar. Because our interest rates have nowhere to go but up unlike the U.S. and because, in case the U.S. dollar shows strength again, our dollar will dive and our interest rates balloon as a result. And a weak dollar is good and bad, good for a weak manufacturing base (but how long will it take to retool and recover)… bad for gold and energy and their tax revenues… and rising rates? Thats will bleed our personal equity and economy dry.

Either way, U.S. boom or bust, taxes go up, interest rates go up and cash is king for 3 to 5 years and commodities and markets save our Canadian bacon, only after ugly real estate and markets bottoms in both nations.

I predict the U.S. to be in a recession at least until 2011, with a housing bottom nearing this year or next but valuations but flatlining until they can get their currency under control giving them room to drop interest rates that will likely come with health care reform and and a consumption tax, with a real recovery coming around 2012 and yes, Obama’s spending spree will help if these things come to pass and he lives long enough to get it done.

And I predict an ugly rocky Canadian market overall for at least 4 more years and can someone get rid of that moron leading our feds? He’s a bully and nothing more. 50 billion dollar deficits, dumb assed 40/0 policies for over 2.5 years with more than 250 billion on the hook from home owners facing future negative equity with rock bottom interest rates having nowhere to go but up now… if the U.S. dollar becomes attractive… if the U.S. economy improves, it won’t be good for our Canadian dollar. We will have to jack rates just to keep it at .70 cents and that, I assure you, with Harpers crazy deficits, will kill our economy as energy and gold revnues decline until the rest of the worlds commodities improve for real. And what will that take in an overdeveloped world climate? Time. Time and a major change in our federal government.

My guess is a true Canadian recovery in employment and personal equity won’t come for 4 years and by that time, we will have experienced a housing bottom that decimates valuations, record deficts beyond anyone’s imagination spawned by a Canadian subprime from 40/0’s and BoC 0% rate policy forced to skyrocket… tax increases… the only thing that will save us is commodities just like it did in 97′ and beyond and that will take depletion and developing nations becoming 1st and 2nd world.

And the only thing that Canadians can do to prevent an ugly 4 years to come? A change in government. Leadership that knows whats coming, and what to do with the changing winds. Much of Canada’s ugly future is still preventable, with a good federal government. What I do know is this. Canada is in a terrible place right now because of real estate valuations, high debt loads and low interest rate policies brought in by Harper. He’s lied to us all on so many levels, including his claim that Canada will be first out of the gate. These variables I’ve mentioned won’t correct without some pain. housing valuations will drop, loans will default, interest rates will go up and taxes will increase, revenue will drop and all of this because of ugly Harper policies.

Will they correct at all with this current Harper government? It can’t happen. They have led us here and the sooner they are removed from power, the better off all Canadians will be of they are the problem to the solutions and regardless of who takes over, there will be a Harper hangover for years to come. I predict… at least 3 to 4 ugly years in Canada, beginning next year, but thats my long winded two cents.

Keep it rockin’, Garth!

#81 Dan in Victoria on 08.11.09 at 2:43 pm

This harmonized tax is just the start.Wait till there are fees for this that and everything,and I mean everything these guys(governments) are broke,the buisness cycle has turned,all this talk about how fininacially smart our leaders were in the past few years is an absoulute lie.They are going to be looking at every possible source of income,or “cost cutting”….look out public servants.Look out “services”All this mess is just being pushed off down the road but its going to come to an ugly end sooner than later.These cycles in the past were fairly predictable in their timing,but these guys had to tamper with the checks and balances,now there is one hell of a correction coming.Myself, I am just so fed up with the lack of accontability of our leaders and yes, us as citizens.Its been a giant orgy of greed by all of us.The smart ones know that the jig is pretty much up,and are exiting the stage.The stupid ones are going to wait till the last moment then expect to be taken care of.Lying to yourself(denial)will not change anything.Think about it.

#82 eddy on 08.11.09 at 2:46 pm

only a very sick mind could ram this HST garbage down the throats of Canadians. it will expand the underground economy beyond belief! on a new home – 2 taxes (HST) bended into the price, in Toronto- 2 land transfer taxes on top of that. added together, the various governments and banks make more money than the builder. problem is they’re just inflationary parasites. they don’t actually create anything. maybe a photo of Dracula would be more apt

#83 Shifty on 08.11.09 at 3:01 pm

Don’t get sick in BC. /www.timescolonist.com/health/Major+cuts+revealed+leaked+health+care+documents/1879484/story.html

Geez, and we can still pay for the 2010 winter games, talk about mismanagement on a colossal scale.

#84 Alan Pater on 08.11.09 at 3:12 pm

What tax cuts?

Federal:

July 1, 2006: GST cut from 7% to 6%
January 1, 2008: GST cut from 6% to 5%
retroactive to 2007: basic personal income-tax exemption increased to $9,600
January 1, 2009: basic personal income-tax exemption increased to $10,100

BC Income tax cuts:

2001 – B.C. income tax reduced by 25%.
2005 – BC Tax Reduction credit reduced or eliminated taxes for 730,000 people.
2007 – 10% cut on income up to $100,000.
2008 – 2% cut on income up to $70,000.
2009 – 3% cut on income up to $70,000.

#85 Coho on 08.11.09 at 3:32 pm

#64 North Van Dude,

You may already be aware of this, but the Bank of Canada might as well be called the Bank of Mars because it is not Canada’s bank as the name implies.

Nor is the United States Federal Reserve in the US the bank of the people. They are named that way in order to deliberately mislead the people to wrongly think these entities are part of the government. They are private and they control the money supply and cost of money for their respective nations. Gov’ts come to them to borrow fiat money and are charged the “going rate” of interest which the central bank sets. Central Banks are parasitic entities.

One-third of annual taxes taken in Canada goes toward the interest only, on the national debt of 600 billion dollars. We’ve got a monkey on our back…a very heavy one, much more exploitative than anything mafia dons have ever exercised in their “community business dealings”.

Central Banks aren’t created equal. I would guess that the “BoC” almost always follows the lead (sometimes under pressure) of the US FED.

It is worth researching the nature of these entities to get to the truth and make our own realizations and conclusions, as going into depth about this subject is a no no for most blog hosts.

#86 miketheengineer on 08.11.09 at 3:40 pm

What I am happy about.

This time last year I was paying over 1.20 per litre of gas, and spending in excess of 800 per month on fuel. More than my mortgage payments for the month. (and I was using a car with a 4 cylinder engine, new)

Now that I am outa work, guess who is NOT getting my money. Now I spent about 200 per month on gas. The oil companies and the gov is not getting tax money. That is about 500 litres of fuel per month. The gas companies must be swimming in fuel right now. Why are the prices still sooo high. I don’t understand. There must be oddles of gasoline, nat gas, and hydro floating about right now. How come the prices are still soooo high?

Yippie….consumption down, tax revenue down. Hope the government likes less consumption, and less people working.

Are we having fun yet….

Soon the real picture will reveal itself….

Are we having fun yet….

Soon, very soon we are all going to be in for a very big shock.

#87 TJ on 08.11.09 at 3:41 pm

If you think Canada escaped the downward trend in U.S. banking, think again. While the country may not have plunged headfirst into subprime mortgages, it did dip heavily into risky derivatives. The leverage it took on generated impressive returns on equity in good times, but that same leverage is set to wipe out equity today.

Shareholders in one “safe” Canadian bank will have to rethink their loyalty. Its looming solvency crisis practically guarantees a dividend cut.

Accounting secrets have not yet obliterated Canadian bank earnings — like those of U.S. banks — because the Canadians have not yet accounted for the coming tsunami of mortgage, consumer loan, and corporate loan losses.

http://tinyurl.com/ovznq3

#88 Bill-Muskoka (NAM) on 08.11.09 at 3:53 pm

#74 Future Expatriate

Sorry! I didn’t think that sounded like you. As to Fox News, i will not even watch it, read it online or otherwise partake of their crap. Jon Stewart does such a fine job of covering their insanity anyway. LOL

Speaking of Jon Stewart, I had to laugh at Global National last night. They picked up on Stewart’s coverage of the Favorite Carp story in England. Seems the old fish finally got to the end of the line. GN even used the Daily Show coverage for the segment. This proves Jon Stewart is more news than the NEWS! LOL

#89 Justin on 08.11.09 at 3:53 pm

Many Home purchases now are being sucked (borrowed) from the future . This by necessity will make the coming price collapse all the more incisive when: Interest rates begin to rise, HST kicks in, Jobless claims continue ro rise, etc. It all looks and feels good now and theres even a calm in the air not unlike being in the eye of a Hurricane……

#90 Halton Region on 08.11.09 at 4:06 pm

It’s getting Bad Garth
There has been widespread job loss in St Thomas.
Communities all across Ontario are reeling from the economic storm that has hit our province.
Take a Sunday drive to St.Thomas and have a look for yourself.
Factory CLOSED Signs Read
***FOR SALE-FOR LEASE- FOR ANYTHING***
Row after Row of Empty buildings.
Only in Canada you say!
“After my drive”
Enough is Enough Mr.Government.
I will pull the plug on my small Business Mr.Government.
You have Raped small business long enough.
Small business gives more than the Corporate giants for what?
The Government can support me for a few years.
Mad as hell to see my Canada going down in the dumps.
Building my bunker and hunting the land Garth.
You are 100 % right Canadian Bubble will be worst than the Great Depression.
Caused by -Greed -Bad Government-Banks.

#91 Nostradamus Le Mad Vlad on 08.11.09 at 4:14 pm

In my next physical lifecycle, the thought of using a combination of coconuts, numbnuts, peanuts and bamboo shoots — instead of The Old Grey Matter — is looking a distinct possibility.

Whaddy’all think? I certainly wouldn’t lose anything I don’t have now anyway, plus it means that I won’t have to think anymore!
——
“The HST.” More accurately referred to as the Happy Sex Tax!

“Until now. . . . But so much for economics.” — I ‘spose Snow White and the Thirteen Leprechauns are working elsewhere now, as Zombiewoofs are MPs of the day!
——
Apologies to The Beatles, as “. . . sitting on a cornflake, waiting for the crash to come . . .”

http://www.youtube.com/watch?v=6B9gAdKGDsI&feature=related — or —

http://www.youtube.com/watch?v=Lkm2WGTX220

But I digress. :-D Welcome all, to the Krazy Kornucopia Konspiracy of Kelowna, where the motto is: Our Bubbles Are Bigger Than Your Bubbles!

Perusing through prior well-written posts, I was struck by images on the horizon of my nose, turning me cross-eyed, inside-out and upside-down. Bre-X rising? I think not.

Looking beyond the current abyss, I briefly scanned yesterday’s e-mails. First, Mish’s “On The Brink Of Recovery”:

http://globaleconomicanalysis.blogspot.com/2009/08/on-brink-of-recovery.html

Mish quotes: “Economist Paul Krugman and Obama’s economic adviser Laura Tyson claim U.S. Economy May Be on Brink of Recovery.”

(Brief interlude — cartoon time!) — http://angrybear.blogspot.com/2009/08/great-recession-for-whom.html

Followed yesterday by Bill Bonner of The Daily Reckoning:

http://dailyreckoning.com/the-bounce-phase-of-the-economic-depression/

Bonner says: “Paul Krugman says the world ‘avoided a second Great Depression.’ He’s wrong too. The stock market crashed in ’29. The market then bounced. After a few months almost everyone was persuaded that the “worst was over.” But the worst was just beginning. It wasn’t until 1932 that the stock market finally hit bottom. . . .”

Then, these two:

http://www.moneymorning.com/2009/08/10/recession-over/

http://exiledonline.com/fusterclucked-again-the-commercial-real-estate-crash-is-on/

“Compared with a year earlier, initial claims were up 22%, while continuing claims were up 89%. Compared with six months ago, initial claims have fallen 12% while continuing claims are up 33%.”

These are govt. figures; how accurate are they? As far as I know, they don’t include people who have given up looking for work altogether. Cooking the books?

BTW, #9 Nostradamus Jr. — “3/ Pay off all your debts first. Namaste”

Ditto. Nice way to live.

#92 poorguy on 08.11.09 at 4:42 pm

Fasten your seatbelt L&G.Next wave gonna be bigger.

http://finance.yahoo.com/tech-ticker/article/299205/Bob-Prechter-%22Quite-Sure%22-Next-Wave-Down-Will-Be-Bigger-and-March-Lows-Will-Break?tickers=%5EDJI,%5EGSPC,SPY,DIA,QQQQ,%5ERUT,BGZ&sec=topStories&pos=9&asset=&ccode=

#93 jess on 08.11.09 at 5:23 pm

anybody read this one?

B. M. Anderson’s
Financial and Economic History of the United States, 1914-1946, posthumously published in
1949, see reference at the end).

#94 Jeff Smith on 08.11.09 at 5:23 pm

OK everybody, its time to buy a house now, since affordability is up.

http://www.theglobeandmail.com/globe-investor/investment-ideas/features/lets-talk-investing/time-to-buy-a-house/article1247669/

#95 bubbleboombust on 08.11.09 at 5:33 pm

Someone hold me, I’m scared!

#96 from victoria on 08.11.09 at 5:44 pm

Jeff you forgot…. It is time to buy a house when affordability is low – you need to get on the ladder. It is always a good time to buy a house.

#97 David Bakody on 08.11.09 at 5:50 pm

#79 Dan in Victoria on 08.11.09 at 2:43 pm

Hey Dan they been doing it here for years ….go to any government office and request a piece of paper with info on it and bingo (taxman) go to the grocery store bingo (taxman) to to a drug store bingo (taxman) matter of fact the moment you walk out of your house and reach into your wallet (bingo) taxman …. stay at home wash and shave ….. bingo bang boom y’all get three taxman … my basic water bill is $37 plus $30 for amount used and with Environment and Management fees it comes to $152+ every quarter …. plus now when you buy any electronics or tires they is a recycle fee and host of other things too numerous to mention …… Hello BC/Ontario welcome aboard ….. The West is in Dan.

#98 blobby on 08.11.09 at 6:11 pm

@#91 – i LOVE how she skimmed over the “what happens when interest rates go up” question

#99 TJ on 08.11.09 at 6:43 pm

How is your Provincial Pension?

This story from Bloomerg today, illustrates perfectly why we are in such a fiscal pickle. *The reference to Mezzanine debt is basically a tranche of an SIV that is so far beyond junk – it is outside on the lawn.
My question is: What is a Pension plan doing playing with garbage like Real estate SIV’s based on mezzanine level paper?
What happened to AAA only, thank you very much?

This begs the question, guys – how is YOUR Provincial Pension?

Caisse de Depot et Placement du Quebec, Canada’s biggest pension-fund manager, had an unrealized first-half loss of C$5.7 billion ($5.2 billion) on real estate, wiping out a 5 percent gain by other investments.

The Montreal-based fund manager will exit its mezzanine loans business and merge a residential-and-hotel property unit with one focused on office buildings, the Caisse said in a statement today.

http://tinyurl.com/qhuy9a

#100 Nostradamus Le Mad Vlad on 08.11.09 at 6:45 pm

Contemplating upon my next physical lifecycle, the thought of using a combination of botox-filled numbnuts, leafy green coconuts, peanuts and bamboo shoots galore, instead of The Old Grey Matter is looking a distinct possibility.

Whaddy’all think? I certainly wouldn’t lose anything I don’t have now anyway, plus it means that I won’t have to think anymore!
——
“The HST.” More accurately referred to as the Happy Sex Tax!

“Until now. . . . But so much for economics.” — I ‘spose Snow White and the Thirteen Leprechauns are working elsewhere now, as Zombiewoofs are MPs of the day!

5:13 clip of hyperinflation, but forget the hyper crap. See what the relation is between gold, money and the like. —
http://www.eclipptv.com/viewVideo.php?video_id=6800&title=Hyperinflation___Germany_1923
——
Apologies to The Beatles, as “. . . sitting on a cornflake, waiting for the crash to come . . .”

http://www.youtube.com/watch?v=6B9gAdKGDsI&feature=related — or —

http://www.youtube.com/watch?v=Lkm2WGTX220

But I digress. :-D Welcome all, to the Krazy Kornucopia Konspiracy of Kelowna, where the motto is: Our Bubbles Are Bigger Than Your Bubbles!

Perusing through prior well-written posts, I was struck by images on the horizon of my nose, turning me cross-eyed, inside-out and upside-down. Bre-X rising? I think not.

Looking beyond the current abyss, I briefly scanned yesterday’s e-mails. First, Mish’s “On The Brink Of Recovery”:

http://globaleconomicanalysis.blogspot.com/2009/08/on-brink-of-recovery.html

Mish quotes: “Economist Paul Krugman and Obama’s economic adviser Laura Tyson claim U.S. Economy May Be on Brink of Recovery.”

(Brief interlude — cartoon time!) — http://angrybear.blogspot.com/2009/08/great-recession-for-whom.html

Followed yesterday by Bill Bonner of The Daily Reckoning:

http://dailyreckoning.com/the-bounce-phase-of-the-economic-depression/

Bonner says: “Paul Krugman says the world ‘avoided a second Great Depression.’ He’s wrong too. The stock market crashed in ’29. The market then bounced. After a few months almost everyone was persuaded that the “worst was over.” But the worst was just beginning. It wasn’t until 1932 that the stock market finally hit bottom. . . .”

Then, these two:

http://www.moneymorning.com/2009/08/10/recession-over/

http://exiledonline.com/fusterclucked-again-the-commercial-real-estate-crash-is-on/

“Compared with a year earlier, initial claims were up 22%, while continuing claims were up 89%. Compared with six months ago, initial claims have fallen 12% while continuing claims are up 33%.”

These are govt. figures; how accurate are they? As far as I know, they don’t include people who have given up looking for work altogether. Cooking the books?

BTW, #9 Nostradamus Jr. — “3/ Pay off all your debts first. Namaste”

Ditto. Nice way to live.

#101 D from London, ON on 08.11.09 at 6:47 pm

#45 – Devil’s advocate

Very interesting post about foreclosure sales and eventual sale prices of same. I have long suspected what you say is right, but I wonder if Garth would care to comment on it, especially given his recent POS purchase and renovations.

Garth, is it generally true that foreclosed properties eventually sell for what they are worth?

#102 john m on 08.11.09 at 7:26 pm

Reality is very obviously slow for a whole lot of “sheeple” to comprehend…..but the facts are there—the economy is headed to the toilet and its picking up pace.Harper went on a vote buying spree from the first time he got elected and it has continued at pace like nothing ever seen before in the Government of Canada since the “technical recession” hit. We are deeply in debt and going deeper by the second……it has appeared to me that no matter what it costs he thinks he will buy popularity (with our tax dollars) and try to prevent the inevitable and most of all prove himself and Flaherty right.They have failed! Borrowed money is a temporary fix to a problem they refused to recognize did not have the smarts to accept and have destroyed the futures of a lot more gullible people (with the easy money schemes). Correction is coming and a whole lot more victims than there were when we started to feel the economy collapsing will be starting to sweat as fall approaches. To quote Garth “this will not end well”

#103 jess on 08.11.09 at 7:38 pm

tolerate the intolerable

…so do you think the bankster who now may rent your home back to you are seeing the reality of foresclosures on the real economy?

AUGUST 11, 2009.Cities Tolerate Homeless Camps

…”Nashville estimates that on any given day, the city has 4,000 homeless people and 765 shelter beds. About 25% of the homeless have jobs, Mr. Harris said, but can’t afford housing. A nonprofit coalition of 160 churches called Room in the Inn said it received 816 requests for financial assistance to ward off evictions or electricity shutoffs in July, up from 499 in July 2008.

More housing could be available soon. Tennessee will receive $53 million in federal stimulus money to help pay for the development of affordable rental housing across the state, the federal government announced last month.”
…Many haven’t been so lucky. David Olson, 47 years old, said last week he and his wife wound up under the Nashville overpass after he lost a job making cement pipes in Iowa four months ago. The couple came to Nashville for a remodeling job that turned out to be a scam. “I’ve got five years’ experience in carpentry and 10 years’ roofing and I can’t find a job,” he said

#104 Dan in Victoria on 08.11.09 at 7:38 pm

Post #94 David how about a 400 to 500 dollar provincial government “permit” fee and no inspection.Good buisness to be in huh?I get it about the fees,how about a television license,how about a septic tank license,what about well water license (maybe they already have that one) these guys are going to leave no stone unturned in their quest for money.Once they have burned through that they will be back for more,or they’ll jack the rates up.Home owners are a sitting target.Tighten the belts turbulance ahead.

#105 MenWithHats on 08.11.09 at 7:46 pm

Cowboy ripping his pants while passing gas “More beans Mr. Taggert ? ”
Taggert waving his cowboy hat over the assembled cowboys and their plates of beans.”I’d say you’ve had enough “

#106 Dan in Victoria on 08.11.09 at 7:53 pm

Post# 80 Eddy yep the underground econmy is alive and well and is just starting to gain speed.The last three months,almost every job I have done they have been offering cash.BUT,anyone who has any brains in their heads should refuse it.Let me give you an un scientific rule of thumb calculation.You do a job for $1000 .The client wants $250 off for cash.You accept,now you have done that job for $750.The tax man comes sniffifing around,the client is being investigated.They will sing like a canary to save thier butt.All of a sudden the men in black suits show up and want their money so now you pay the $250 (taxes)out of your pocket,plus fines etc.You have now done that job for $500 less fines.Why not just do it for a $1000 pay tax, and get to keep the $750.Its the cost of doing buisness,and you end up with exactly the same amount.To me its a no brainer.

#107 Vancouver_bear on 08.11.09 at 8:05 pm

News1130: Pipe bomb found in Metrotown parkade has been detonated

What is it?
Al-Qaeda has a trainig session before de ‘lympix?

http://news1130.com/more.jsp?content=20090811_190238_9620

Hey, Nostri, what do you see in your crystal ball?
Safest place on earth? Strongly doubt it….

#108 Repatriated Expat on 08.11.09 at 8:05 pm

I’ve been working to get my monthly household budget down and and it’s amazing how difficult it is and the level of discipline requried to make small advances.

I really don’t appreciate the broad strokes of tax increases, whether the 8% HST, 1.5% on cable services that Rogers announced, or the regular huge chunk of flesh off my paycheck. Although I don’t have an issue with taxes in principle.

#109 jess on 08.11.09 at 8:31 pm

go get em’ out of the tents

Maguire Properties Inc., one of the largest office-building owners in Southern California, is planning to hand over control of seven buildings with some $1.06 billion in debt to creditors, the latest sign that rising vacancies and falling rents are causing stress in the commercial real-estate sector.

#110 jess on 08.11.09 at 8:42 pm

well said by this investigator. and the future of iceland is indeed bleak

Eva Joly is a Norwegian-French investigating magistrate and judge. She was hired by the Icelandic government last spring to act as an advisor to the special investigator into the bank collapse. We ran an interview with her in this space a few weeks ago. This article is published by permission.
http://icelandweatherreport.com/2009/08/eva-joly-iceland-is-being-blackmailed.html

#111 lgre on 08.11.09 at 8:50 pm

#102 Dan in Victoria – when there is no paper trail anyone can say what they want..there is no case..try using a he said she said scenario in court..see how far out the door it gets you.

#112 TheFirstRick on 08.11.09 at 9:14 pm

#102 Dan in Victoria on 08.11.09 at 7:53 pm

I agree completely. For the small business / contractor, cash jobs make no sense. You get ’em with the expenses and the greater your sales, the more acceptable are the expenses. Sometimes sole proprietorship trumps incorporation.

#113 Industrial Guy on 08.11.09 at 10:02 pm

RE in Niagara ……

I was in St. Kits and Niagara Falls today buying some used equipment from a recently closed car parts plants. It’s unreal how quickly the economy has turned in this area.
One of the machine riggers was telling me …”the RE market is so bad down here, some people have just given up trying to sell their houses.” The owner of the big name moving company next door didn’t disagree. His business has basically evaporated.
This is St. Catharines, Ontario (130,000). As bad as St. Kitts is, Welland (pop 50,331) is worse.

John Deere is gone with a loss of over 500 jobs. About 70 people are left to pack up the inventory and ship it out. Canadian Tire Financial Services Ltd seems to be the largest employer in the city with 1184 employees.
The manufacturing sector dies and the service sector with its McJobs grows. The tourism industry in the region has also been hammered by the new passport requirements.

It’s basic economics. When all the good jobs are gone. No one has money to buy $200,000 houses.

The RE market in Toronto may be bigger, but that only means the crash will be much worse. It’s funny. You can actually see Toronto across the lake from here. One market booms while the other dries up.

#114 Dan in Victoria on 08.11.09 at 10:06 pm

#107 Igre,ask my uncle about that,your’re dealing with the government,common sense does not prevail.I speak from experience.I have seen these “collectors” in action with a family member.Anyhow,who needs the headache?My point was you end up at the same place…..Some of the herd is going to get culled.

#115 gold bugger on 08.11.09 at 10:15 pm

asp wrote: “Governments provide valuable services at better prices and quality then the private sector.”

Notwithstanding that you can’t tell the difference between “then” and “than,” your grasp of economics is laughable if not for the fact you presumably get to vote, which cancels out my ballot.

“I’ve said it before and I’ll say it again, democracy simply does not work.” – Kent Brockman.

#116 Tony on 08.12.09 at 12:18 am

Interest rates will likely fall not rise in the years to come. Deflation is the most likely outcome not inflation. The US stock markets appear to have put in a top last Friday and should fall for the next several years. Insider trading is on the sell side by a factor of about 27 to 1. This will strengthen the US dollar and bond prices will rise sharply both in America and here. Long term bonds should return a healthy profit over the next 6 months. The US recovery in the last 6 months of this year is a pipe dream and won’t happen until at least 2012. Negative growth will occur for the next several years.

#117 steven rowlandson on 08.12.09 at 9:02 am

Garth if I were King I would fix the problem quickly.
Then again Canada as you all know it would be over.
I believe in paying debts off and being tight with spending money and I like to keep things simple and straight forward. I stand where the profits are.
Since I like to save money I would do so untill revenues from savings could replace taxation. I envision a 20 to 30 year regime of frugality before an end to taxation.

Political correctness and the new world order in canada would be over with.

Steven

#118 Alan Pater on 08.12.09 at 7:39 pm

#111 gold bugger.

Oh yes, I do vote. And I do read economics. Hate grammar.

You know, there are plenty of countries in the world where taxes and social services are minimal. Why don’t you emigrate and help make my vote count?

#119 TJ on 08.13.09 at 4:30 pm

Karen Weaver, global head of Deutsche Bank’s securitization research division — responsible for analyzing credit default swaps, collateralized mortgage obligations, and other exotic Wall Street products — said last week that 48% of U.S. mortgage owners will end up owing more than their home is worth by 2011.

The figure may have left many Americans wondering how this could be possible. But consider that 27% of U.S. homeowners with a mortgage are already “underwater.” And according to Deutsche Bank, home prices may fall another 14% before hitting a bottom.

The obvious takeaway of falling home prices and being underwater is what it does for defaults. But there’s a bigger implication, which is that when we look at the economy over the past decade or two, it’s been very much a consumer economy.

What has been driving the consumer hasn’t been gains in incomes. What has been driving them is easy credit and rising home values. And the fact that their home price was rising and they could borrow against that through home equity lines or loans or refinancing, it augurs for a very different economy going forward if people don’t have that option.

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