Head fake

amex1

Confused yet?

Japan emerges from recession, and Asian markets tank.

Reader’s Digest declares itself bankrupt. Winnipeg’s New Flyer bus-building plant goes bust.

A quarter of Canadians skip the dentist and 14% leave their prescriptions unfilled – for lack of money.

The three houses listed near my bunker ($600K range, commutable to Bay Street), have sat unsold since there was snow on the driveway.

And not a day flies by (this one included), when mainstream economists – most bank-employed – repeat the mantra. “The important thing for Canadians to remember,” RBC’s Patricia Croft told a TV reporter as world markets crumbled on Monday, “is that the recession is over.”

Huh? (And I even like Patty.)

I noticed Seeking Alpha referenced one of my books this week (Greater Fool), then reached a few key conclusions, consistent with what I wrote 18 months ago, to wit: House price advances outstripped incomes for the past few years. House valuations are not supported by economic fundamentals. Canada has a bubble.

Despite that obvious fact, the Canadian economic and political establishment (like the Obama pump gang) is doing everything it can to convince consumers to borrow and spend. As this blog has referenced over past weeks, a goodly number of suckers have swallowed it, hl&s. Enough, in fact, to get the financially-stressed MSM on the bandwagon.

As we all know, when something’s on the front page of a newspaper, well, it’s suddenly true.

But everyday there’s anecdotal evidence in my life (and I suspect yours) that this recovery may already have passed its best-before date. For example, there’s American Express – purveyor of the fine life, employer of Beyonce.

A neighbour came over with a letter from Amex, and a question. He owes about $13,000 on his card, and can’t pay it after losing a job (and his restaurant)  in downtown Toronto. The form letter said American Express would make a “one-time and final” offer to settle his account for a payment of just over six thousand dollars – half off.

Should he try to borrow money, he asked? And where’s the logic in that, I asked?

This week he brought another letter. “We recently sent you a settlement offer which represents 50% of your outstanding balance,” it said. “That offer has expired but we would still like to work with you to resolve the outstanding balance on this account. At this time, we are extending our previous settlement offer and allowing you to take advantage of this savings opportunity to resolve your balance,”

Credit card debt, half off. Can you imagine getting a letter like that a year ago?

So I’d say there are two economies right now. Patty’s and the real one.

In Croft’s Canada, GDP has started to expand, the retail sales numbers are trending upward , commodity price levels have moderated, the exchange rate has improved, manufacturing shipment orders are showing some positive momentum and the pace of decline in the composite leading indicators has stabilized.

In the real economy, guys I know who lost their jobs five months ago are not a millimetre closing to finding a new one. Severance packages have run out, EI is depleting and self-worth is at zero. Worse, whole industries have moved to Guangzhou. There’s a sinking feeling among 40-year-old unemployed professionals that it might be a year or more before they see another paycheque. For fiftysomething Boomers it’s just friggin’ over.

So, were it not for the Home Renovation Tax credit, the lowest-ever mortgage rates, the car rebates and incentives, a $50 billion annual deficit in Canada and a trillion dollar shortfall in the States, the bailout billions for the car companies and the hundreds of millions for Air Canada, the mortgage giveaway to the banks, pension top-ups and premium holidays and more government spending than it took to win a world war, well, God help us.

It may work, stretching this bubble for another few months, a year, even two. But, it ain’t over.

And I don’t take Amex.

HOWE STREET BANNER

Garth's latest podcast is here.

137 comments ↓

#1 Grace on 08.17.09 at 10:38 pm

We are sinking into a nation where the poor (if lucky enough to find work) will keep the rich in their “toys”. The introduction of the HST (Ont. & B.C.) and spreading across the nation, proves once again that this nation’s tax regime is skewed against the middle class.

#2 catamaran guy on 08.17.09 at 10:44 pm

tick tick tick…..yes the countdown is starting….
Sitting on my boat, fully paid off, no debts,with 400,000 in cash
yeah ok I just inherited.
Plan on sitting on it safely for the next year or two.
then see what BC waterfront I can buy from the hapless Americans and Albertans that will have to bail.
good time not to be in debt ,eh?

#3 Einsam Solo on 08.17.09 at 10:45 pm

Tomorrow’s headline: “Stop worrying! It’s time to panic!”

#4 squidly77 on 08.17.09 at 10:55 pm

yeah..we are in a world of trouble now
i dont know what to say as i dont wish to beat on the already beaten up

how can people be warned ?..you post warnings all the time as i have since 2006..no one listens

what to do…..

heres another warning..take care or financially perish
http://albertabubbleblog.blogspot.com/2009/08/double-bubble.html

#5 Kate on 08.17.09 at 10:55 pm

I wish I had Amex with 13K and refused to pay them. That’s an easy way of making $6,500… Doesn’t it feel unfair for those who do pay off their cc bills? And wouldn’t it feel unfair when the government starts doing the same thing for people with unpayable mortgages?

#6 squidly77 on 08.17.09 at 10:59 pm

the s&p is going to 200 before settling back at 500 in 6-7 years

#7 Gregor Samsa on 08.17.09 at 11:09 pm

Canada and our own Bush Jr, aka Harper, are following the exact same play book as the U.S. – we are just a couple years behind in the game. I beleive that the Canadian housing bubble has been intentionally created, just as it was in the U.S., to hide the current economic problems until they are some other guy’s problem. Stimulus money will soon evaporate, leaving only high deficits and higher taxes behind. Good luck in politics Garth – the next government is going to have some tough decisions to make… in my cyncial moments, I think Harper is intentionally creating a ticking time bomb that will go off under a Liberal watch.

#8 GG on 08.17.09 at 11:53 pm

Garth, how’s this as title for your new book:

“How Obama Cheated Me of My Predictions”

The man knows too well that by raising interest rates the economy is doomed, so he wont. I think you’re underestimating the power of governments. They can make or break an economy at will. So what if it’s all artificial, the whole market system is artificial anyways invented by us greedy merchants.

Even Obama does not control rates. — Garth

#9 Nostradamus Le Mad Vlad on 08.17.09 at 11:58 pm

The times they sure are rapidly changing. In a few posts, I have mentioned the Asian race being handed the reins to be Captain of the Good Ship Earth, taking over from the Caucasian race.

In line with #95 Albertaboy on 08.17.09 at 5:00 pm’s fine post — “. . . the end of the US as a global superpower both financially and militarily and seeing the dawn of China & India as emerging wealth producing nations. . . ” and one of Garth’s sentences — “Worse, whole industries have moved to Guangzhou.” — In essence, there it is. The dynamics are shifting from west to east.

It won’t happen in our current lifecycles, but the fiscal downturn in the west is a direct result of what else is happening. In a time of intense volatility (such as now), there will always be major unexplained ups and downs all over.

One pointer from Weiss Research Inc.: “. . . on the most critical economic sea change in a hundred years:

“The decline of the U.S. and Western Europe as the world’s dominant economic forces … The emergence of China and most of Asia as the world’s most powerful engine of investment profits, plus … The massive flow of capital from West to East, and how sophisticated investors are profiting from it directly.”

There are plenty of good ways to invest, i.e.:

http://www.uncommonwisdomdaily.com/profit-maps-for-dow-dollar-asia/
http://dailyreckoning.com/what-goes-up/
http://www.moneymorning.com/2009/08/17/us-economy-earnings-report/
http://dailyreckoning.com/more-bad-banking-news/
http://www.moneymorning.com/2009/08/17/high-speed-rail-china/
http://dailyreckoning.com/let-them-inflate/

A quote from the last one: “. . . Krugman is on record has having advised the Bank of Japan to purposely cause inflation, as, “The way to make monetary policy effective is for the central bank to credibly promise to be irresponsible – to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs”, . . .”

Pretty easy to understand why folk are so confused — Krugman blabbering on about nothing and then expecting us to believe him. Hell, most haven’t got the foggiest what he’s talking about to begin with!

BTW, next spring this — http://www2.canada.com/topics/news/story.html?id=1858660 — is happening, so with the possibility of a “Bank Holiday” in the US first, flu shots having the wrong effect, an “October Surprise” event somewhere, etc. it looks like an exhilarating end of ’09 — then the SHTF!
——
Climate and Change. Put them together and cartoons magically appear! —
http://ifglobalwarmingisrealthenwhyisitcold.blogspot.com/
——
Straight to the point, and probably will happen. Excerpt below. —
http://www.prisonplanet.com/government-will-hype-fall-swine-flu-outbreak-to-save-obamacare-warns-armey.html
“Former Congressman and House Majority Leader Dick Armey warns that the government is planning to exploit a hyped swine flu outbreak this fall in order to reinvigorate support behind its failing Obamacare agenda.”
——
Big Brother is censoring the ‘net, and its blanket is smothering us. Excerpt follows. —
http://www.campaignforliberty.com/blog.php?view=23799
“. . . make it possible to monitor the internet combined with legislation that gives the authorities the ability to go after users who can then be charged with illegal behavior, such as is happening in Germany.”
——
“Canada has a bubble” + Quantitative Easing = Sex In A Pan.

Soon to be revealed to the hordes waiting for a saviour as another tepid, dull, drab Unproven Conspiracy Theory, it consists of three elements vital to the evolutionary progress of humanity:

(1) a hole in my sock; (2) levitation gone tragically wrong (Crash And Burn); (3) Krispy Kreme-laden Viagara-filled donuts (a weird link — http://www.alternet.org/sex/142004/how_viagra_promised_a_sexual_revolution_but_delivered_a_bad_joke/ )

Rising to prominence in the 80s — the Reagan – Greed – Gorbachev – Greed – Funny-Nomonics – Greed era, my better half made it out of curiosity — http://flame.cs.dal.ca/~gates/recipes/SexInAPan.html — and I have never been the same since.

Gloriously tasty, once will suffice as any more would be a major overdose, leading to a sense of contentment and normalcy.
——
What lurks in the supermarkets? — http://www.alternet.org/healthwellness/141971/11_dirty_little_secrets_your_grocery_store_is_hiding/

#10 Munch on 08.18.09 at 1:28 am

Brings to mind the Iraqi foreign affairs minister who was in complete denial even while Murrikan tanks rolled into Baghdad in the scenes behind him.

Strange, but it’s actually all normal. I have a psychology background – people look for information that supports the view that supports their beliefs or agenda – the trick now is to find out what that agenda is – I suspect it is that people just can’t believe that the Good Life is over ka-dover!

#11 Sherry on 08.18.09 at 2:13 am

“In the real economy, guys I know who lost their jobs five months ago are not a millimetre closing to finding a new one. Severance packages have run out, EI is depleting and self-worth is at zero.”

You must be thrilled. More people to take advantage of.

You should explain that. — Garth

#12 Vexed in Victoria on 08.18.09 at 2:45 am

It is the month of August, on the shores of the Black Sea . It is
raining, and the little town looks totally deserted. It is tough
times, everybody is in debt, and everybody lives on credit.
Suddenly, a rich tourist comes to town. He enters the only hotel,
lays a 100 Euro note on the reception counter, and goes to inspect
the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his
debt to the butcher.

The Butcher takes the 100 Euro note, and runs to pay his debt to
the pig farmer.

The pig farmer takes the 100 Euro note, and runs to pay his debt to
the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to
pay his debt to the town prostitute who, in these hard times, gave
her service on credit.

The hooker runs to the hotel and, pays off her debt with the 100
Euro note to the hotel proprietor to pay for the rooms that she
rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the
counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the
rooms, and takes his 100 Euro note after saying that he did not
like any of the rooms, and leaves town.

No one earned anything.

However, the whole town is now without debt, and looks to the
future with a lot of optimism.

And that, ladies and gentlemen, is how the Western world is doing
business today.

#13 Onemorething on 08.18.09 at 3:07 am

It’s like anything Garth, you gotta hit the bottom before you understand you were dreaming!

As for many posts I have submitted the staging of denial for our poor house owner friends and that misery loves company.

I would have hoped that Canadians (which again is the ONLY country in the world to not suffer a proper initial correction in RE) would have the common sense to take this 2nd chance opportunity to dump RE at good highs and understand the reaper is still coming but wants both what was missed and the next stage down.

Again, I believe there will be three ie. W-Shaped “recovery” and I use the term recovery as something so slow it will not feel like one.

MISH’s numbers say it best but no we MUST BE DIFFERENT THEN THE YANKS, oh yes we are, we got the same mortgage offering, drank the coolaid etc. BUT the Americans have a whole different set of laws for just walking away. In Canuckland, we are stuck with you debt.

DEBT IS CONSTANT, VALUATIONS ARE VARIABLE!!!!

• More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 30, 2009 according to newly released data from First American CoreLogic. As of June 2009, there were an additional 2.5 million mortgaged properties that were approaching negative equity. Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.

#14 Peter on 08.18.09 at 3:18 am

First to comment here…Yes, Garth, its true, jobs are diminishing every single day hideously and untold from the media..media are brainwashing us with good news and great time to buy homes or stocks..However, the economy is weaker and weaker day by day..If those bankers telling you, our economy has no problem…probably its just their 57th floor economy where they can eat a $ 100 steak every lunch and dinner by flipping stocks or loading up some options on a commodity..If you walk into a mall (now its back to school), mall are busy but no one seems to be buying stuff except they would like to go in and get some free air-conditioning..The busiest section would be the food court where you always see the line up on the lowest price items ($ 1 any size drinks on Mac or some $ 1.39 menu or a $ 1.40 coffee)…If you drive thru the streets of your neighborhood, many people are doing garden work and house cleanup instead of going to do some work in rewards of money…So, if Patricia or Ms.Croft are telling you we are okay, think again !! Bankers, Talkingheads on TV and Politicians from the majority are always Brainwashers and BS’ers…!!!

#15 Peter on 08.18.09 at 3:24 am

Few forums has been discussed that a well-known bank with World Reputation is closing off their call centre in around 6-9 months here in the YYZ and YVR, cost cutting measures of course !!! and will be shipping these white collar JOBS to HKG, India (English line) and China (Guangzhou) (Cantonese and Mandarin line) …So, if you think everything is alright in Canada…You never know that one day, those labour force over there will be taken away your job here and you will be left with nothing but YOUR HIGHLY INFLATED HOME & TONS OF DEBT THAT YOU WILL NEVER BEING ABLE TO REPAY !!!

#16 Steve on 08.18.09 at 3:25 am

From what I’ve heard Amex used to require that all debt on the credit card be paid IN FULL at the end of the month. I think we’re going back to those times again as credit is being withdrawn from the market. Greater fools indeed!

#17 Mike (Authentic) on 08.18.09 at 3:36 am

What a good post Garth, you nailed it!

The economic patient is sick, but we not only ignore it but keep injecting the patient with drugs that will only make the problem worse rather than going with the cure.

If you or your neighbour was in debt would you advise them to borrow more money? No. But yet gov’ts around the world are doing this and telling you that you should do the same.

A hurricane just missed Florida yesterday and the FOX news reporter said “It’s lucky that the hurricane missed it’s mark because the USA couldn’t afford to pay for the cleanup right now”. Well, that brings a whole new light to things, bail out the banks, the automakers and the “too big to fail” companies but leave the people in a disaster zone.

So we have QE’d and indebted ourselves, our childern and now our childern’s childern to pay off this enormous debt and in the end the patient has to walk out of that hospital and get better themselves without the help of the gov’t.

To make things better we have to look at fixing the issues ourselves and not look for outside (gov’t, bank, corp) help. You need to pay off your debts, protect your savings, buy only what you need and spread the word of what you are doing to help you and the economy and why.

If enough of us take personal financial responcibilty then we can show the Gov’t what to do in a finacial crisis with our tax money.

Mike

#18 Anon - GTA on 08.18.09 at 7:00 am

So what happens to these 40 year olds and 50 year olds?

How are they(+ their families) going to survive in the years to come?

Is there a possibility that there is reverse migration of some of these folks back to the countries from where they came?
Perhaps by the younger ones that are new to this
country and haven’t or have recently dived over the Mortgage waterfall?

You just won the Idiot Posting of the Day. And it’s only 9 am EDT. — Garth

#19 miketheengineer on 08.18.09 at 7:53 am

The real story:

I have been outa work since May. Had a few job interviews, but struck out due to the quantity of qualified candidates. I use Workopolis for my searches from time to time. About 2 years ago, on any day their averaged about 1800 new jobs posted, during a week day, and about 500 on a Sat or Sun. During the month of Aug, the postings were about 800 on a week day and down as low as 10 on a Sat or Sun.

Anyone who tells you the recession is over is not exactly telling the whole story. They should be saying, the recession is over, the greatest depression since the 1930’s has started.

My friend John called me last night. The most hard working, honest, god fearing, family man that I have ever met. He lost his job at an automotive manufacturing parts plant last year. EI ran out. He was desparate. He found a full time work at the retail level for about 12 an hour. Right now is in survival mode. He is draining his little savings every day. How long will this last him?

Then there is a lady I will call “Sara” (I will not use her real name). She was a senior buyer at an autmotive parts production facility in GTA. She lost her job in Jan. Then her spouse passed on “suddenly”. Now with house and 2 kids, what is she going to do?

This is just 2 stories.

I have at least 20 more people I know in the same boat.

Let the greatest depression begin. The sooner we realize it is here, the soon we can get through it.

Got to go now and sort through the “cold cellar” and sort out a big box a food for the food bank in Hamilton. They ran out last week of food for the poor.

#20 D from London, ON on 08.18.09 at 7:54 am

Garth, do you know how much of the $13k is accumulated interest? Amex (like all credit card companies) charges interest at an alarmingly high interest rate.

I imagine your friend must have had an outstanding balance for some time for Amex to make such an offer. If so, that would likely mean a good portion of the $13k balance is accumulated interest. Is Amex just giving up on collecting phantom interest with this proposal (i.e. cut their losses and take payment for the actual goods and services purchased on the card, and forego the interest and service charges revenue)?

Tell me about the interest on your mortgage. Try to get a 50% discount on that. — Garth

#21 john m. on 08.18.09 at 7:56 am

Great post Garth. When the sun is shining and people are happy we don’t worry but enjoy the moment and treasure life .After all our government and the experts on the economy aren’t worried in fact they have told us they have everything under control and “the recession is over” .Well when the cold weather starts to arrive and people start to face reality and realize they have been “had” as our economy heads deeper in the toilet i think resentment and anger will surface like never before. The politicians that have been selling us this crap and have been throwing our tax dollars around like drunken sailors are headed for a dismal future IMO.

#22 just a guy on 08.18.09 at 8:21 am

Sweet. I recommend getting an Amex, taking a cash advance to invest in high dividend stocks in your TFSA and then paying back only half months later. That’s free (and tax-free) money. It’s a gold mine, expect without all of that useless gold.

#23 Madame Guillotine on 08.18.09 at 8:30 am

Had occasion to be in Milton for the first time in a while yesterday.
When I worked there some years back locals used to call it ‘ Gods country” and it was easy to see why.
Bet you would go a good few whiles afore hearin’ someone say that now.

#24 David Bakody on 08.18.09 at 8:31 am

Easy on the low interest rates …… this you can take to bank …. both Big Business & Government ( one in the same) already have ways and means of collecting money be they taxes or service charges. Point: there is now a charge for transferring money within a TFSA at one major bank, city services continue to rise and more user pay is now in effect……. the list goes on. AND in the end it will all be added to higher interest rate and fuel prices. Are you listing Patrica?

#25 Evangeline on 08.18.09 at 8:37 am

((wish I had Amex with 13K and refused to pay them. That’s an easy way of making $6,500… Doesn’t it feel unfair for those who do pay off their cc bills? And wouldn’t it feel unfair when the government starts doing the same thing for people with unpayable mortgages?
#6 squidly77 on 08.17.09 at 10:59 pm ))

It is fundamentally dishonest, a cheat to all their clients who pay their debts faithfully.

Every economic problem we have today is grounded in the dishonesty of our financial institutions; not one of them will come clean about their bottom lines, so how can we expect them to be honest about anything else, like their declarations the state of the economy? The fact is they are so desperate for cash they will take anything, even half or less of what they are owed. How many of our financial institutes are bankrupt? which ones? that is the big unknown that is preventing a true recovery.

#26 greaterfool on 08.18.09 at 8:41 am

Garth, in your opinion when do you think things in RE will change? DO you think it will be closer to 2 year range or maybe this winter?

Thanks

#27 Chris L. on 08.18.09 at 8:44 am

Is the G&M taking a more cautious approach? Interesting.

http://www.theglobeandmail.com/globe-investor/investment-ideas/features/lets-talk-investing/how-fast-is-your-home-appreciating/article1254567/

The notion that houses increase in value just because some time has past is absurd. Houses increase in value due to demand, demand is sometimes emotional sometimes demographic and always tied to affordability. Don’t ever forget replacement value…most people do. I can build some of the shit-shacks out there for a fraction of what they re-sell for. Crazy suckers!

#28 dave99 on 08.18.09 at 8:56 am

#11 Vexed in Victoria,

This story (which of course I’ve seen before) is misleading and fundamentally wrong.

The premise is that there has been some slight of hand by virtue of illegally taking the tourists money, circulating it through the economy, and then returning it to him with having paid him for the loan.

However the story is predicated upon blurring the line between a “cash” and an “accounting” basis.

What takes place is simply a series of cash transactions, and the story is correct in this regard when it says that when one pays ones debts, one does not “earn” anything. The “earning” happened earlier when all of the citizens performed their services (the aforementioned accounting basis).

In this story, it so happens that for each person their one asset (the unpaid receiveable) is offset by an equal debt. Thus, before the tourist arrives, every person has a net worth of zero. And this is similarly the case after the tourist arrives. Even without the tourist the various people could have simply met in a town hall and assigned their debts to each other.

Really, all that this story explains is that we use currency with an agreed value to pay debts accrued from services performed with an agreed value. (otherwise known as our economy)

#29 robert on 08.18.09 at 8:58 am

The number of Charlie Brown’s ready to kick the football yet again on upbeat (read fabricated, obfuscated, cherry-picked) economic news is quite remarkable yet not dissimilar with other historical periods of mass delusion. We (those of us who have stepped aside and protected ourselves) have the privilege of watching, before our eyes, what Charles McKay so astutely observed one hundred and sixty years ago. Civilizations rise and fall, technologies advance but human nature remains fallible (and constant). The entertainment value of this spectacle easily outweighs anything television or the movies have to offer.

#30 karim kanji on 08.18.09 at 8:58 am

http://www.youtube.com/watch?v=hooPU2mdsH4

A great video and amazing song with a commentary on real estate focusing on the Condo Market.

Hope your readers enjoy!

#31 The 'VULTURE' on 08.18.09 at 9:06 am

Who’s Fooling Who

Hey Patricia Croft…I am confused…..I went to dump part of my real estate investment cash (a large sum BTW)in your bank (RBC) and was only offered at best 5 basis points on 30 days (term deposit no roll-over) and the advisor would not move one bit not even after speaking with the branch manager. The advisor said that there was no demand for the money and that the Canadian economy is currently in a serious depression….I should expect rates to stay ultra low for the next couple of years at least…maybe even longer….

“The thing for Canadians to remember is that the recession is over.”

Who’s fooling who, you?????

#32 Helpful Joe on 08.18.09 at 9:13 am

Unless the letter from the credit card company says that the offer is “in full and final satisfaction” of the obligation owed, then after payment they will sue for the remaining balance after receiving the voluntary 50% payment.

Review the letter properly and seek legal advice as to the legal effect of the words choosen for your specific letter prior to relying on the words of a creditor that is only trying to reduce its exposure to the full amount of the obligation

#33 Gord In Vancouver on 08.18.09 at 9:14 am

A quarter of Canadians skip the dentist and 14% leave their prescriptions unfilled – for lack of money.
____________________________________________

This figure had better NOT include recent home buyers. We now have a surefire way of identifying real estate pumpers without asking for their opinions – smell their breath.

#34 seanmhair on 08.18.09 at 9:16 am

Thank you Garth.

The talking heads make me crazy. How dare they ignore the very real pain of thousands of people, suffering through this mess? Not to mention, leading those ‘hanging in there’ into mountains if unsustainable debt.

Any chance of you getting in front of every TV camera in the country to share some much needed, long over due, truth?

#35 Samantha on 08.18.09 at 9:16 am

Here is are a few exerpts from “On Equilibrium” by John Ralston Saul, page 31, 32, 33:

“And yet Solon found his way very neatly. A century and a half before Socrates, he was brought to power because the Athenian city-state was crippled by the unmanageable debt levels of the farming class. The beneficiaries were a small, aristocratic business class. The farmers represented an important part of the citizenry and their status as debtors removed them from their role as citizens. So the Athenian citizen-based society was crippled.

Solon’s solution was pure common sense. He cancelled the debts, thus reactivating the citizenry. It was a revolution because it clearly demonstrated the precedence of citizen rights over contractual rights. At the same time it was a prudent revolution. Solon broke the chains – those were his words and he was Athens’s leading poet – but he did so in a way which did not bankrupt the business class.”

further along:

“To understand our situation today, think of a Solon of the twenty–first century. She would find herself advised in such a debt-ridden situation by a flurry of experts who ‘understand’ the precise effects of such an action. They would tell her that it was impossible to cancel the debts. Through analysis and calculation they would demonstrate conclusively why. Any clear, strategic action today could be factually demonstrated to be catastrophic. In general, expert analysis tends to reduce political initiative – that is, public strategy – to introverted and narrow tactics. In other words, our determination to place contractual rights first forces us to try to see citizens’ rights primarily through that small, utilitarian keyhole. The result is false sophistication: the complexity of our methodology obscures the naiveté of our assumptions. They are far more naive than those of a poet-statesman and his fellow citizens tow and a half millennia ago.

Finally:

“In the case of Athens, the power of the incalculable was double. First, Solon released the energy ad creativity of a large part of the citizenry. This impetus gave a kick-start to their society, including its economy. Second he imposed a salutary slimming upon a rather lazy business class which was living off interest and other people’s labour. He got them back out into the real market – manufacturing, selling and trading.”

Excellent book and relevant to our times.

#36 jess on 08.18.09 at 9:23 am

the carry trade? geezzzzzzzzz

Video from the protest in Phoenix, Arizona, shows the man standing with other protesters, with the rifle slung over his right shoulder.

Phoenix police said authorities monitored about a dozen people carrying weapons while peacefully demonstrating.

“It was a group interested in exercising the right to bear arms,” police spokesman Sgt. Andy Hill said.

Arizona law has nothing in the books regulating assault rifles, and only requires permits for carrying concealed weapons. So despite the man’s proximity to the president, there were no charges or arrests to be made. Hill said officers explained the law to some people who were upset about the presence of weapons at the protest. Watch the rifle being legally carried at rally »

“I come from another state where ‘open carry’ is legal, but no one does it, so the police don’t really know about it and they harass people, arrest people falsely,” the man, who wasn’t identified, said in an interview aired by CNN affiliate KNVX. “I think that people need to get out and do it more so that they get kind of conditioned to it.”

#37 moneymen on 08.18.09 at 9:28 am

Master card/GE Money has sent me an unsolicited credit card. The interest rate on purchases is 29%.

The “account protector” that “could” pay my entire credit card balance in case of death/disability/job loss! to cost 18% a year more. Grand total of 47% +/year!

I need not qualify for the privilege of $11000 credit and could not; being chronically jobless. But the credit is there for me to take, hey, why not do the “clunker for cash”!

Now remember, GE financial was bailed out in ’08. So what’s an another bailout sooner or later?

When I pick up the phone & activate the card, you might be also become the suckers. Oh the joys of the credit bubble economy for the pennyless!

#38 Live Within Your Means on 08.18.09 at 9:35 am

Amex, CIBC & others have greatly contributed to our municipality’s recycling program.

We were lucky enough to be invited to a neighbour’s cottage by the sea last weekend (38c in town) :-). Six of us were discussing local RE & the number of $500K new homes being constructed in new phases of subdivisions and the number of Greater Fools out there. A close friend of one couple recounted how his friend’s wife had just bought a used car (Mustang or similar) with a 5 yr loan and they remortgaged and extended the amortization period on their house because of the low interest rates. This couple is living way beyond their means. Yes, we at the cottage are all boomers with paid off mortgages because we paid them off ASAP.

Last eve. my husband was talking with his bro. who had just purchased a wide screen TV with surround sound. Good deal, 0% down, no interest for 2 years. Last week his bro had car & bike problems and didn’t know where he’d find the money to pay for repairs. We’ve loaned him money before and hubby did not offer to loan him money last week. Apparently, hubby finally told him what he thought last eve. Of course, his bro came up with all kinds of excuses & said his wife would find work. She’s been looking for 2 years now. They used to earn $130K and now down to about half tho they have no mtg. They’ve got a 17 YO & 6 YO to put through college and haven’t planned for their children’s education, etc. They’ve both inherited money but have spent it as fast as it comes in. They’re your typical consumers. I’ve family on my side who are similar but realized years ago I was wasting my breath.

#39 jess on 08.18.09 at 9:40 am

The problem is being exacerbated by a growing gap between household incomes and house prices, the IMF said.

The Reserve Bank of Australia recently flagged its concerns that a combination of easy credit, low interest rates and lack of supply could create a property bubble which could burst in the longer term, causing a collapse in house prices.

The average value of a new mortgage in Australia has risen to its highest ever level as property investors return to the market, according to the country’s biggest mortgage broker.

The average new mortgage lodged in Australia rose to $354,137 in July, eclipsing the previous record of $353,223 in October 2008, according to data from mortgage broker AFG released yesterday.

So far this year, new mortgages for owner-occupiers have risen by 41 percent, while housing finance for first home buyers has risen by 35 per cent in the same period…
However, the Reserve Bank has signaled that it is ready to raise interest rates should the conditions arise and many economists are now predicting that rates could rise as early as February 2010…
price growth is one of the main drivers behind the Australian economy’s stellar performance compared to the rest of the industrialised worth.”

#40 martha on 08.18.09 at 9:43 am

I know a man who is early 60’s, in the private sector, educated, and top skills; never been out of work.

He and the others currently work 50-70 hours/week. Overtime? you’r kidding. Peanuts, then? No.

#41 maridion on 08.18.09 at 9:49 am

Citizens Bank in Alberta, closed?

The TD just took over its mortgage backed securities , its other real estate loans…… But it was left with currency exchange operation.

I could not get a quote on their GIC’s either. What does it mean?

#42 Larry on 08.18.09 at 10:05 am

I played a fund raising golf tournament in Calgary yesterday and the auction afterwards was very quiet. The recession is here folks alright it’s just msm that fails to report it as is. Shame on the govt, banks and msm for continuing this fraud. Housing in Canada needs to depreciate at least 30 %.

#43 kenken on 08.18.09 at 10:13 am

Some economists talking of W-shaped recession -replunge starting in coming months (both stockmarkets and economic)
everyone here talks about the bursting of the canadian RE bubble…i so want to believe but that did not happen in the first dip due to lowered interest rates …what makes you ppl think it will happen SOON … the govt will trick it with leaving int rates low!!
Am sceptical about this since I have waited for more than 1 year now to see this fall and have no choice but to wait more…
QUESTION: each time I read posts on this, i see COMING SOON..but how soon is soon? I have extended my rental and hoping to see the start of the dip in the coming months/1-year…but what if that does not happen in 1 year?

#44 $fromA$ia "Garths Nugget Boy" on 08.18.09 at 10:23 am

Guess what the banks are too big to FAIL!!!

Guess what, the amount of people in over their heads is too big to FAIL!!!

Inflation is comming.

Punish the savers! Love your Conservative Party!

We are sucked in to this trap. As we get the economic ball moving again, it’s momentum will be too hard to stop and we are gonna be screwed!

#45 Mel Eager on 08.18.09 at 10:24 am

To all who pay their credit cards, and other debts on time:

Feel good about yourself!

You have something quite valuable, a good Credit Score!

The “lucky” guy who is has the opportunity for half his Amex bill forgiven, will see higher rates for future loans, or perhaps not have future loans approved at all.

Mel.

#46 Nathan in Edmonton on 08.18.09 at 10:35 am

Tell me about the interest on your mortgage. Try to get a 50% discount on that. — Garth

I hate to think it but that may happen. A friend told me this weekend that he stopped paying his mortgage on his McMansion in Vegas, even though he could still afford it. He negotiated the principle down with his lender. Foolish consumers keep getting rewarded.

#47 tim sople on 08.18.09 at 10:39 am

US wholesale prices fall greatest in 60 years.

http://ca.news.finance.yahoo.com/s/18082009/2/biz-finance-u-s-wholesale-prices-fall-expected-july.html

#48 Wayne Lewis on 08.18.09 at 10:45 am

Money has never been so cheap. Get out there, saddle yourself with debt and leave this planet a million in the hole.

Peoples minds and market fundamentals are so out of whack… it’s not going to last.

#49 Davinci on 08.18.09 at 10:54 am

What is amazing to me is how you people can not figure out how this one guy who can’t pay 13k affects you.

So let me help you connect the dots…

1. Dollars come into existence when someone goes into debt. The same applies to credit card debt, deny it all you want or point to the shell and word games the banks play to hide the facts, it remains true forever.

2. You people who are prudent hold that money thinking you are so smart for avoiding debt and save those dollars.

3. The millions people in debt that can’t pay should bankrupt the banks that lent the money as they must pay the principle created in the first place. This should cause deflation as the banks sell assets to cover unpaid debts, benefiting the prudent savers.

4. Governments are here to help the too big to fail and prevent nasty deflation! So they will “loan” wink, wink nudge nudge the bank the money.

5. The super hero government borrows the money to give to the bankrupt banks. So how does money get created again?

This in effect doubles the money supply for each person that does not pay. Smart people may say “Wait a minute, the banks will use it to extinguish debt thus there is no net gain to the money supply.”

Really?

Lets have a look at what the banks did in the USA when they got 700 billion TARP money. (isn’t a tarp used to cover things up?) lol

That’s right they gave themselves bonuses purchased other banks, issued more stocks, did some trading.

Did they get rid of the toxic assets by paying them down?

http://www.youtube.com/watch?v=h75TNIkZ9PI

HELL NO!

Yes, Yes toxic assets make up bad loans as well as loans that will most likely default in the future. The end result is still the same.

PAPER MONEY WILL BE CREATED TO SAVE THE TO BIG TO FAIL THUS DEVALUING YOUR PAPER MONEY!

Got gold?

#50 David Bakody on 08.18.09 at 10:59 am

Last month was rain and rain before that for the most part ….tourism numbers in the tank with many outlets cutting back on staff and changing hours and menus to boot. Yesterday as well as few days before the sun was out and people were happy, I counted three (3) travel trailers/campers in the parking lot than in past years had many more on any given day, and to boot very few people in the street/shops ….. Yes Patricia the Recession is over well at least in your bank account. Please be sure to tell family and friends just how easy it is making money just by stretching the truth for government next time y’all sit down for some fancy meal.

Garth: I drove by some of those new construction sites you may have visited on your last tour here …. for the very most part still no activity since the bang last autumn …. yes existing homes are selling but this is due to senior boomers moving to rental/new low end Condos …. and that was due no matter what.

Others: When the stimulus gravy train runs into the next tunnel it may not come out ….. and only fools will venture in to find out if it is stuck, derailed or has disappeared as there is a late headed for the same tunnel on the same track from the other direction. All we can hope for is that Garth is wrong …. but in the interim those who have listened to warning will be fine either way ….. and that we can than GT for …thank you.

#51 FY on 08.18.09 at 11:00 am

Samantha

Excellent post about the book. Thanks for sharing.

#52 Men With Hats on 08.18.09 at 11:00 am

As the crump of this financial crusade grows louder the first casualty,as in all wars, has been the truth .
This is no mere spinning it is out right lies,deceit and deception. Herr Goebells would be proud of these fictions .
Ms.Cooper et al do their lords and masters bidding in attempts to fog the minds of Canadians .
They must think the entire nation is in a psychic trance and incapable of rational thought .
All signs point to more desparate times .
Batten down the hatches we are in stormy,turbulent seas .

#53 Larry on 08.18.09 at 11:12 am

#42 kenken. You know the crash is coming deep down otherwise you would not rent or read blogs like this one. For now enjoy your financial freedom and do all your homework on potential properties, location etc so that your ready to feed when the main course arrives. The govt are powerless to prevent interest rates from rising.

#54 PTDBD on 08.18.09 at 11:17 am

@Maridion & Citizens Bank
http://www.globeinvestor.com/servlet/story/CNW.20090805.C2873/GIStory

give them a call..check FAQ on home page

#55 kc on 08.18.09 at 11:20 am

42 kenken

“Am sceptical about this since I have waited for more than 1 year now to see this fall and have no choice but to wait more…
QUESTION: each time I read posts on this, i see COMING SOON..but how soon is soon? I have extended my rental and hoping to see the start of the dip in the coming months/1-year…but what if that does not happen in 1 year?”

You and the others who ask this same Question must be of the younger “instant gratification” group. You people come into here and ask the same questions over and over… when… when …. when. To answer those questions is pretty elementary; just toss your eyes south their bubble peaked 06-07 and 2-3 years later they are down (on average) 30-40% , greater in the hardest areas. Now you people who ask must think that the Canadian economy is going to take this HUGE pill one morning and the prices are going to magically DROP by 40% the next week. the end of last year and start of this one there were signs that this bubble’s top was in “prices have peaked” and in some places they are still below the top. What type of magic wand are you looking for?? you have 2 options A- rent and watch or B – Buy at the top and become house rich (debt slave) cash/credit poor. the choice is yours.

Pink kool-aid tastes the same as blue kool-aid, pass the straw please.

#56 malbadon on 08.18.09 at 11:21 am

Wait, why am I paying off my Amex every month then?

#57 Calgary_rip_off on 08.18.09 at 11:23 am

Garth,

your statements are a bit far reaching. They simply do not extend from province to province. It is a bit of a stretch to assume that in each province people are unemployed. If what you say is true, and everything is crashing, why are people in Calgary still able to afford homes that are priced at DOUBLE what they are worth? If you see an mls listing below price chances are the sale will be pending within hours. So where are the unemployed that you mention? It certainly isnt applicable to Alberta. There are still years and years of bitumen and natural gas resources. The oil and natural gas prices may be down currently, but the resources are still there.

It would be preferable to report on interest rates. Interest rates are the only true thing that would bring Alberta to its knees. Some of your readers say that home owners in Calgary are maxed out financially. It doesnt appear that way. Look at the vehicles being driven, the activities chosen, and foods and restaurants visited. It is true that there are wage earners here who are homeless. My guess is that individuals in that predicament are likely to save and move to someplace like Manitoba and get a meaningless job there that pays the bills.

I would move to Manitoba, but there arent any jobs that pay as much as mine does. Im in the same situation as many people here in Calgary.

In the future you may want to report on actual percentages and facts-median house prices, coming mortgage interest rates, unemployment percentages province by province. Certainly a lot of work, but more accurate than blanket statements of hopefulness for doom. Or perhaps you could post links to up and coming death metal bands like Slayer who are soon to visit Calgary, again.

You also mistake self worth for being equated with some dollar figure. Screw that idea. Thats dumb. I dont equate my value or my identity by how much I make or what I do. There will always be someone better or worse than yourself. I like me, so how much I make or my job title is absolutely irrelevant. Jobs and job title bs are just a way to pay bills-nothing more nothing less, because all the workplace relationships and “camaderie” in the end are only related to the ability to buy and sell(b.s game playing)-so those relationships are meaningless other than the dollar paying the bills-hence the statement of self worth related to money is stupid.

#58 Jody on 08.18.09 at 11:29 am

Oh it’ll come, I am very interested to hear the traffic count to Cross Iron Mills on Wed, a new giant shopping hole north of Calgary set for a grand opening. I would love to find out how many people shopping there buy on credit with money they don’t have. I have 3 close friends that have lost their jobs this summer, manager, engineer and landman, all made 6 figures a year and are educated, one with an MBA. A big manufacturing company laying off 600 people in Calgary as they are moving to Michigan

http://www.calgaryherald.com/business/Haworth+eliminate+manufacturing+jobs+Calgary/1904985/story.html

But the above story was on a sidebar on the heralds website while the main story was the sale of Mike Vernons home for just over $10 million, the build up of real estate continues.

#59 Got A Watch on 08.18.09 at 11:44 am

Garth, congratulations on your instinct to serve the country. This nation needs more great Canadians like you, and much less of the current crowd in Ottawa.

But I have to question your sanity in running in Dufferin-Wellington. That is the riding I live in, and I can tell you factually, it is jammed with cliche sheeple who have never voted other than Conservative in their lives, or their parents, or grand-parents…

In fact, some locals have been proud to inform me several times of the fact that “this riding has voted Conservative(or Reform once, or right-wing equivalent before we had Conservatives) every election since before Confederation, without fail.” They say this with great approval.

Just look at the margin of victory. The CONservatives could run an embalmed dead dog mounted on a plaque here, and it would very likely win hands down. Tilson is a nice guy, personally, but a total loser and ineffective in getting anything out of Ottawa that benefits this riding, he deserves to be sent packing. Everyone takes our vote for granted, I can’t think of one thing the Federal Government has ever done in this riding, at all. Drawing a big blank on that one.

Now, if we had a real Conservative Party in this country (not the present Harpoon cult of stupidity), you would be welcomed here. But as a Liberal candidate, I hate to say it, unless Harper plunges in the polls to the sub-basement before the next election, the odds are against you, heavily.

I will gladly vote Liberal for you, first time in my life, but I doubt most of my neighbors will. They are in general well-off MSM-kool-aid drinkers, if I have to describe them in one sentence (my postal code used to be one of the highest income ones in Canada), and your message of realism will not be well received I think.

I am not much for politics anymore, a pox on all their houses, but surely you would stand a much better chance in Halton where you have the name recognition and an incompetent Conservative incumbent who should be much easier to defeat.

Good luck anyway.

#60 Republic_of_Western_Canada on 08.18.09 at 11:50 am

#17 Anon – GTA –

Good point; a remarkably astute observation for a hogtowner.

Labour mobility has always been a means to survive and prosper, especially for younger people. Applying one’s particular brand of expertise to a new geographic location (or to a place to where you came from long ago – which has probably changed since then) is a time-honoured strategy.

But you better not try it if you’re over 40, unless you have mad skillz, are single, healthy, and will save a big chunk of your earnings. That’s because no matter where you go (or stay), you will be competing for a job against younger, quicker, more naive/malleable, and cheaper (but sometimes less experienced and capable) people.

That’s another reason why squeezing out kids, getting stuck in mortgage debt, having wives and pets and garden tractors, etc and otherwise stuck in a domestic quagmire is SUCH a bad idea in this day and age.

As far as being compelled to ‘go back’ to an original point of origin, Japan is now implementing it big time for it’s ethnic Japanese but Brazilian nationals. Who is to say they’re wrong? Opportunities in Brazil were much better when their ancestors originally migrated there; the same situation may exist now.

#61 Republic_of_Western_Canada on 08.18.09 at 11:52 am

Good-lookin’ pair of engines in that picture, by the way.

#62 Don of the Basement on 08.18.09 at 11:55 am

The fundamental problem here is that the inherent characteristics of the free market system is to whipsaw. There is no way to be zen-like smooth for a free market. And so, we get ourselves into trouble in boom times by climbing up too many stairs where we can and do get really injured in the necessary fall back to the ground (or even into the ground!).

And of course once we see that we have climbed dangerously high (higher than we know we should have)…well, what’s the natural human response? Avoid the pain of a fall, or at least defer the pain. Problem is, we can’t seem to just hang out on some stairs for a while…and we sure as hell haven’t figured out a way to walk safely back down the stairs…which only leaves deferment to a future, larger pain by climbing up more stairs (which seems to be where we are at now.)

I’m afraid of these heights. perhaps we are at a fatal height? This cannot seriously be the rational calculated response of a responsible government to this situation. Is it because there just aren’t any other options for a government in this situation?

**Garth, what would your strategy have been from a policy standpoint (assuming you had sweeping china-like executive power) to deal with this situation and when would you have acted?

#63 Mike (Authentic) on 08.18.09 at 11:55 am

#42 kenken “W-shaped recession…bursting of the canadian RE bubble…but how soon is soon?”

Well, it would have fully busted by now, but we didn’t predict a couple things:

1. Massive bailouts of the banks and “Too big to fail” corporations or you would have higher interest rates now.

2. Lowering interest rates to 0.25% and thus creating historically cheap mortgages and loans to keep the bubble softly deflating.

3. Mage QE money being printed up. As gov’ts around the world see people are not spending money they will keep the bubble going by spending your kid’s kid’s tax money.

So, too much debt + more debt + cheap interest rates + gov’t QE money = a worse crash than before “coming soon”.

Think of it this way… You pump up a bicycle tire too much and BANG! Well, the air is the debt and the tire is the economy. It can only hold so much debt before things blow up.

Mike

#64 robert on 08.18.09 at 11:59 am

#42
Your have waited a whole year and you are anxious? Housing bubbles take ages to unwind. As we are probably two years or more behind the US expect ours to be still falling when theirs is showing a glimmer of recovery – oh say about five years from now. The previous California bubble in the early nineties is most instructive in this regard. As the scale of the current bubble is much vaster I would guess the time dynamic involved in its ultimate resolution will be likewise, ahem, considerably extended. There is absolutely no shame in renting in the meantime. Relax. Remember patience is a virtue and good things come to he who waits! A word of caution though if you conflate ownership with investment. Housing will probably lie dormant for years once it reaches its price nadir and has broken enough fools in the process. I am in my fifties and the only people in my parents generation who saw real estate as an investment were the ones with cash flow positive income properties. Think of this whole process as going back to a time when the utility of a house was all that mattered – good roof, sound heating and ventilation, nice yard/garden, comfortable neighborhood etc. When residential real estate is again generally seen in those terms as opposed to a get rich quick scheme or means of retirement, the valuation correction should have about run its course.

#65 Lawrence on 08.18.09 at 12:03 pm

I took a hiatus from this site for the past number of months after calling the real estate market in a “correction phase” as opposed to a market that is due for imminent and total collapse as Garth is won to predict (over and over and over again!).

The objective truth is that the real estate market in most major centres is in better shape now than it was 6-12 months ago. There has been a correction in some area that were over heated but there is nothing terribly new about this.

I tried to re-enter the Calgary market in March 09 only to find a return to bidding wars in the mid-priced segment of the market (500 – 600G’s). Today I read that a record was set in the Calgary market with a mansion owned by Mike Vernon, ex-Calgary Flame, selling for over 10 million dollars or three million dollars more than any other property in Calgary history.

Sales in July are up over what we saw here 12 months ago and prices are firming and moving higher. This follows much more activity and sales since March 09.

So, here are the facts. The Canadian real estate market has been resilient over the past 12 months during:

1. A crash in the world wide Stock Market of “depression era” proportions.
2. A catastrophic commodity crash – especially harmful to the Canadian commodity based economy.
3. A catastrophic crash in the US real estate market
4. Unprecendented bank failures around the world requiring massive public investment in stalwarts such as RBS, Lloyds, UBS, CITI group.
5. AIG, the largest insurance company in the world, also collapsed but was considered too important and was rescued.
6. Major auto makers have declared bankruptsy and have laid off hundreds of thousands of employees.

I could go on.

Here is my point. If your predictions, Garth, were ever to come true (or were of any value – other than to serve your own needs to promote book sales), all of these things describe the perfect storm. So, why are you so wrong and so persistently committed to ignoring the realities of the Canadian Real Estate market.

I submit it is because you ignore and even deride basic human psychology. People do not trust bankers, brokers, investment advisors, or the media. What they trust are things that are real. They value the security of knowing that they can work hard and pay off their house and satisfy one of the most basic needs – shelter – and this need or desire is more evident now than ever – why??? Because we all want the security of knowing that we control one small aspect of our lives – a home.

With all the chaos and uncertainty noted above, people have turned to real estate to add to their sense of personal Security. Security and home ownership. They go together and, from a psychological point of view, they are obviously powerful allies.

Eighteen months ago I forecast a correction, and it occured. Today’s market is a hiatus in the midst of that, for reasns even you should be capable of grasping. As for my prediction of an ‘imminent and total collapse’ in the real estate market, give me a link or any verification I said so, or buzz off. — Garth

#66 X on 08.18.09 at 12:07 pm

Anyone have a link for the quarter of Canadians who are skipping their dental appts? Just wondering how the survey was conducted. It is business at usual at my dental office.

Of course we have had patients not want to rebook as they are loosing their job and don’t want to commit to the future appt, if they may have no job and no insurance. But it is the kind of field that you can’t really avoid for too long or you run the risk of pain, infection, decay, which in turn brings you back to the dental office.

#67 Happy Renter in North Van on 08.18.09 at 12:16 pm

Patty Croft and other talking head economists all live in Toronto, all live in Rosedale, Kingsway, etc… They rarely venture outside of their gilded cages on Bay Street and don’t talk to real people with dirt under their nails… Their only connection with blue-collar people would be waiters and their nannies. Why would they see a recession?…

#68 Dawn in Calgary on 08.18.09 at 12:17 pm

I guess now’s my turn to ask the blogdogs for advice.

I’m at a point now where I am approved for an RRSP catch up loan (bankruptcy off my credit report). I have the means to repay it quickly but am not sure where to put it? I know Garth has recommended health care and energy for the long term. I have 26 years to retirement (give or take a year).

Opinions?

#69 Mark on 08.18.09 at 12:25 pm

I went into my branch of Citizens Bank here in Vancouver the other day. I was withdrawing the last of my RRSP to try and pay off more of my credit card debt that I accumulated when I lost my job last year. They told me they were closing, and I could open an account with VanCity if I chose to.

A bank closing? That can’t be good news as far as I’m concerned …

#70 POL-CAN on 08.18.09 at 12:40 pm

KD is on a rampage again this morning. He makes some very good points and questions the lack of outrage from the sheep:

Will It All Come Tumbling Down?

Let’s juxtapose two stories. First, from Bloomberg:

Aug. 14 (Bloomberg) — More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

Ok. Now how about this one?

WASHINGTON (MarketWatch) — Delinquency rates for loans and leases at U.S. banks increased to a record 6.49% in the second quarter from 5.58% in the first quarter, the Federal Reserve announced Monday.

So let me see if I get this right.

At 5% of non-performing loans a bank is at risk of being insolvent.

But the entire banking system in The United States had its non-performing loan ratio increase from 5.58% in the first quarter to 6.49% in the second, a record, and higher than the 5% level at which the survival of a bank(ing system) is threatened with collapse.

Hmmmm…. So should we take from this that the entire US Banking System is about to collapse?
.
.
.
http://market-ticker.org/archives/1344-Will-It-All-Come-Tumbling-Down.html

#71 jess on 08.18.09 at 12:41 pm

So Federal law isn’t? So break the law to change it. …hum
big banks intend to muscle their way into becoming a major force in the insurance business.

The Conservatives campaigned on a promise to maintain the restrictions, and an official in the Finance Department recently said the government intends to stick to that (globe and mail )

#72 POL-CAN on 08.18.09 at 12:46 pm

Not sure if this was posted already…

If anyone wants to know the true state of the US economy and by extension ours, then this is a must read.
Lots of charts to scare the crap out of everyone:

The Week in Charts – Buckle the Heck Up!

No, I’m not being over-dramatic. It is time to buckle the heck up. The resonant disconnect between reality and the pumping that is going on in the media and among supposed “experts” is at an all time historic, never been here before, Economic Mass Psychosis, HIGH.

To Quote John Kenneth Galbraith, “The majority is always wrong.” Right now the majority believe we are exiting the crisis. They are just plain old fashioned WRONG – again.

To prove my point, I’m going to show you the week in charts courtesy of the St. Louis Fed. This week, however, I’m issuing a WARNING. The evidence in these charts points to the beginning of a DEFLATIONARY SPIRAL. The PPI data comes out next week and will be a key piece of evidence in this regard. The results of a deflationary spiral will be UGLY if entered. You will see another round of deleveraging to go with locked credit markets. Equities will get hammered and the real cleansing of the economy will accelerate. This process will be PAINFUL but necessary to end the malinvestment. It will be the phase where more businesses who were hanging on HOPING for recovery will simply run out of cashflow to maintain operations. The same thing is necessary to cleanse a way over-bloated government and military.
.
.
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http://economicedge.blogspot.com/2009/08/week-in-charts-buckle-heck-up.html

#73 Chillax on 08.18.09 at 12:56 pm

I was housesitting during my brother’s house inspection, and the buyer’s realtor was talking about the recent coverage on “Rent2010,” which lists available rental properties during the 2010 Olympics.

Apparently, only 15% of the 1500 units have been rented. The realtor noted that two of her “friends” had bought a couple of condos in the last three months, with the sole purpose of renting them out during the Olympics.

She then promptly noted that prices “always” crap out after Olympic events, and I agreed, and provided a couple of examples (Bejing, Salt Lake, etc). I also noted that it was interesting that a realtor was commenting that prices were going to fall off a cliff. The conversation ended abruptly…

That being said, weekly sell to list ratios are still hovering around 95% in Metro Vancouver. Since April, the market has looked like 2006 all over again. We now have a median home price/median salary ratio above New York, which has seen its market crumble!

I attribute the buying to SBS – soggy brain syndrome, where our nine months of rain have eroded our collective intelligence.

#74 Duane on 08.18.09 at 1:14 pm

Why is it that when we look for opportunity in a down turn, we are looked at like vultures? When we look for opportunity in an upturn, we are looked at as wise – even buying when median house prices are 6-8:1 median income?
Why not look at the media, realtors, and lenders as the vultures. All my wife and I are doing is waiting for something in this perfect storm (interest rates, employment, lending practices) to change enough and get into something that makes sense to income, like 3-4:1 – true affordability. I will be saving my family many tens of thousands of dollars. And I will be looked at as a vulture. Meanwhile, bubble-blowers have taken away any such affordability from me. Yet they are looked at as wise. Go figure. Hypocrites.

#75 questioning on 08.18.09 at 1:18 pm

don’t worry about the jobs being moved to Guangzhou, they spend money here to buying house:), so the housing price will not go down.

#76 PTDBD on 08.18.09 at 1:21 pm

With natural gas prices falling to seven year lows, shouldn’t those lock-in contract rates be falling also? Not!

$75 per month penalty to get out of the contract? Yea, this deregulation sure works well, but not for the home owners.

‘ripoff’

#77 [email protected] on 08.18.09 at 1:34 pm

Every time I look at the news I see stories all the time about China. Now of course the stories are about how much China can help Canada and Canadian companies. And our politicians have now decided to embrace China with as much as three visits since May. Of course not to discuss humanitarian issues, Tibet, or child labor, blah blah blah but to try to sell Canada and all the we have to offer (basically resources) unless they are interested in timmies coffee or hockey sticks.

Harper and his party have done nothing but insult China for the last three years and really expect much interest in Canada from China? In 2006 Harper vowed that Canada would not “sell out” its beliefs in democracy, freedom and human rights to the “almighty dollar”. In 2007, he ignored warnings by China about meeting with the Dalai Lama seriously undermining Sino-Canadian relations. And of course his decision to miss the Beijing Olympics. The list goes on.

And now after a brutal recession they are crawling back to China to try to patch things up.

Well I’m not saying that all the tough talk is all that bad and to try to encourage some real changes but only if you have something that the Chinese need and can’t do without. Unfortunately, what Harper doesn’t realize is that China doesn’t need Canada as much as they think. There are so many other countries full of resources that are eager to do business with them like Australia which is much closer and has enormous amount of resources. A market of 30 million is not large on a global scale to sell their Chinese goods. China unlike what most people think do not sell all their goods to US and Canada alone. They are selling more and more domestically and to close neighbors.

Thanks to Harper and his gang Canada and Canadian businesses have lost an enormous opportunity in improving relations with China that may take years or even decades to recover from. Sure they’ll continue to have these meetings but with very little accomplished as far as announcement of any deals. We face lost a great deal of face in the eyes of the Chinese which will be hard to be undone.

After all we are a nation who harbors China’s most wanted man from persecution in China. He is of course very rich and happens to be living in Vancouver even after admission of guilt to smuggling in which China accuses him of smuggling as much of $10 billion US with the protection of corrupt government officials.

#78 tim sople on 08.18.09 at 1:35 pm

IMF vs Jim Flaherty(last line)
http://ca.news.finance.yahoo.com/s/18082009/2/biz-finance-recession-recovery-sluggish-usher-higher-taxes-imf.html

#79 Wealthy Renter on 08.18.09 at 1:39 pm

You just won the Idiot Posting of the Day. And it’s only 9 am EDT. — Garth

Garth,

Anon-GTAs post is not so bad. I can sit and type the names of ten Chinese Canadian families that have returned back to China for much better opportunities than they had in Canada. These are people who did doctorates and post-docs in Canada. Strangely, they would rather be tenured professors in China with home allowances and servants than be on welfare in Canada.

And these are Canadian citizens. The Chinese government often bends over backwards to give these kinds of skilled people work visas and monetary incentives to purchase a home.

Add the ridiculous cost of living in the GTA or Vancouver (esp. housing,) and a brain drain is not a radical idea.

#80 steven rowlandson on 08.18.09 at 1:41 pm

Let’s see. Canada’s governments are in debt and going deeper. There is little inclination by the public to support austerity and all governments with few exceptions are morally and fiscally irresponsible.

As a result a bad example has been set for the public to follow.

Since the gradual approach to debt redemption started by Paul Martin fell by the way side it is possible that more extreme measures are needed and could only be executed by myself and only if I had supreme authority to govern my way. Since that is not going to happen at this time I would say that Canada is doomed to financial failure and being absorbed into a diabolical one world order. God help us all!
On the other hand there are alternatives to such disasters.

The less disruptive one would be a policy of austerity and debt redemption lets say 20 billion plus a year for the next 25 years. That means nothing gets in the way of budget surplusses for any reason. Creditors get paid first. Government and dependants get whats left over.

The second possibility requires some money printing.
Lets suppose some one with 5000 oz of silver could get a billion bucks an ounce and pay 40% as capital gains tax and invest the rest in canadian banks to put a floor under the economy. The 2 trillion in tax revenues would be enough to wipe out every federal, provincial and territorial debt in the country and that would be deflationary to off set the monetisation of the silver.
The result would kick off a new credit cycle.
Such a scenario would involve some inflation but then again canadians love inflation. If in doubt about that then check out real estate prices, vehical prices, ice cream cone prices ect. ect.

Steven

#81 Barb .. a reader in Calgary on 08.18.09 at 1:48 pm

#18 miketheengineer

Mike,
To add to your list, my brother. He has worked every day of his life until he was laid off this year, senior mechanic, late 50’s. I asked him how long it might be before they’d ask him to return and he stared back sternly with that incredulous look of ‘never’ on his face.

#82 Nadzieja on 08.18.09 at 2:06 pm

I have just became smart… really… I came from a few years in US last August, and was about to buy a house. Like other excited dupes with some money I was looking around the areas good for commute to Downtown Toronto. And I almost made an offer… but the house was not 100% what I wanted, so I decided to look some more. If it wasn’t for a colleague of mine with a little larger brain and more letters behind his name, I might became one of the many fools. Thanks to your posts, I started to follow the market, and decided to rent, and save (I am so lucky, a family of three, expecting fourth, no dept, money saved and renting….). But even though what you are saying in your blog is totally true, there are other additional causes to the bubble. These are a bit sensitive issues, and I am not sure how Canadians can deal with this. It seems like Canada is so proud of being so very welcoming country to immigrants, to the point that will even pay you money to immigrate here. I am not against immigrants, I am myself one (as you can gather from my poor writing style), but I have problems with Immigrants cheating the system. I live in the area of Mississauga, where most of the new immigrants arrive, houses are brand new and sell faster that fashion. I just met a group of very nice people from the Gulf area, who are telling me, that it is so easy to come here on a refugee status, leaving one person working there. There is no tax law in the Gulf countries and the money is sweet. The family here can buy a house, don’t work, collect welfare (no income in Canada), receive our great free Health care, and not pay a penny in taxes. At the same time inflate out housing bubble- it is really something to check how many families like that have arrived here recently- on my street there are 6 of them….
How can Canada get out of recession, keep taxes low, have enough money for schools and doctors, when we have to spend on so many “unfortunate” people. And please do not take me wrong, I am not some racist, or religious maniac, I love all the people, but I think that there should be limits to some charities.

Not so fool any more

#83 Peter wiener on 08.18.09 at 2:15 pm

# 73

Have you been drinking?
That is THE MOST MORONIC posting I think I have ever read on this blog, and I’ve read a lot of them here.
You are truly a mental cripple.

#84 Barb .. a reader in Calgary on 08.18.09 at 2:18 pm

#34 Samantha “Here is are a few exerpts from “On Equilibrium” by John Ralston Saul: “… yet Solon found his way very neatly. A century and a half before Socrates .. brought to power because the Athenian city-state was crippled by the unmanageable debt levels ….”
“In general, expert analysis tends to reduce political initiative …”

“Excellent book and relevant to our times.”

Samantha,

I’m waiting for my uncle to finish Ralston’s book before he lends it to me.
But per your quote I see Obama seems to have that similar initiative to get things done. Interesting.

#85 Coho on 08.18.09 at 3:06 pm

#16 Mike (Authentic),

You raised a good point about priorities pointing to the Fox News commentary claiming “the USA cannot presently afford a cleanup after a hurricane”, yet trillions have been given in bank bailouts. Below is a couple snippets from an article on the Howe Street website about the role central banks have played in this debacle.

…Tracing the founding of the central bank in the United States, Griffin clearly demonstrates how and why it was formed, and how it is functioning EXACTLY as planned. The Federal Reserve is not America’s first attempt at a central bank, but all others were eventually shut down because they were recognized for what they really are — an attempt to create a cartel of bankers who, with Congressional support (even though they are not a federal agency), constantly overextend themselves in the pursuit of higher and higher profits. And when the game is up, it uses its Congressional “connection” to foist the losses onto the American taxpayer…

…But one of the Fed’s other foundational reasons for existence was to reduce competition from outside banks, as previously mentioned. It also planned to foster an attitude of easy lending, perpetual indebtedness and constant loan rollovers and interest charges. Then when the jig is finally up, and the indebted families, corporations or nations can no longer even afford the interest payments, the debt burden will be passed to the unsuspecting taxpayer by way of inflation.

Since the inception of the Fed, the game has been managed very well. Smaller banks were allowed to fail, just as they are now. This gives the appearance of “letting the market work.”

Let’s look at some of the worst of the big bailouts, just so you can see get a grasp of what has happened, what will happen and how that affects your money…

link to entire article: http://www.howestreet.com/articles/index.php?article_id=10489

#86 Larry on 08.18.09 at 3:19 pm

#55 Calgary rip off.
You sound like a whining jealous neighbor looking across the street and seeing everyone living in huge houses and owning fancy stuff. You question how is it done? when you know damn well it’s all because of easy credit and low intertest rates. You then come here and ask Garth to gratify your jealousy by providing you with even more justification as to why this bubble will burst.
Open your eyes and look at the facts, Calgary is not the same city it was 12 months ago. Unemployment is becoming more and more a reality for many Calgarians and the once famous statement “if you have a heartbeat you got a job” is not heard here anymore. Garth is not going to provide you with the gratification of telling you that your spot on and the crash will happen at 8am next monday. Nobody can be sure exactly when the crash is coming but coming it is.
I’m surprised that you ask why people in Calgary are still able to afford homes that are priced at DOUBLE what they are worth, drive fancy cars and eat in fancy restaurants? It’s all fake my friend. I attended an auction yesterday and the bids were very disappointing for the fund raising organizers, a true sign that when people have to step up to plate and show the money they can’t.
Alberta’s years of bitumen and natural gas resources has nothing to do with the credit and RE bubble we are witnessing. Calgary rip off stop looking at the fake lifestyles that i honestly believe you crave and focus on the important things in life such as your health, family and friends.

#87 Duane on 08.18.09 at 3:20 pm

Totally off topic, but there is the start of something in the US that could have mind-boggling repercussions in virtually every country in the world. American senator Ron Paul is wanting to put the Reserve’s head on a chopping block and see what’s inside. There is growing concern that the Fed and all central banks are deliberately creating these ‘business cycles’ to the advantage of a very few at the top.

How? Get the country drunk on credit, have the fools pledge their assets (homes, etc) as security, then ratchet up the rates so you can’t refinance. Foreclosures ensue, prices plummet, and the central bank lowers rates again. The Bank then ‘prints’ money, gives it to the banks (i.e. friends & shareholders of the central banks), who ‘create’ many times that amount, then buy up the assets at fire-sale prices, and the process starts all over again. The result: the rich have more real assets, the middle class shrinks more into the increasing lower class (relatively speaking), and our savings and purchasing power have eroded even more as the gobs of new money makes its way through society. (Something along those lines anyway.)

Garth, we would love to know about the transparency of the Bank of Canada. Was this issue ever brought up in your political years? This bubble wouldn’t have had fuel if it weren’t for the BoC.

Careful digging too much though. Nearly everyone that credibly threatened the Reserve’s existence (or one of it’s predecessors) has paid for it:
Andrew Jackson
Abraham Lincoln
James Garfield
William McKinley
John F Kennedy

#88 Duane on 08.18.09 at 3:29 pm

@ #82 Peter wiener on 08.18.09 at 2:15 pm

“That is THE MOST MORONIC posting I think I have ever read on this blog”

If you are going to call me out, put some effort behind it. Are you a realtor, lender, or bubble-friendly media and I’ve hurt your feelings? Break it down for me. Why, in detail, is in moronic? Let’s see who looks like the moron after that…

#89 rick on 08.18.09 at 3:32 pm

“Anon – GTA on 08.18.09 at 7:00 am So what happens to these 40 year olds and 50 year olds?

How are they(+ their families) going to survive in the years to come?

Is there a possibility that there is reverse migration of some of these folks back to the countries from where they came?
Perhaps by the younger ones that are new to this
country and haven’t or have recently dived over the Mortgage waterfall?

You just won the Idiot Posting of the Day. And it’s only 9 am EDT. — Garth”

Why is it an idiot post? Many many immigrants have come here and taken HUGE mortgages and huge debt. How else can new immigrants own a $400-500G house working at TIM/s and other low paying jobs. If they go bust you will see many (I’ve heard some stories of this already happening) will leave Canada and their debt.

#90 miketheengineer on 08.18.09 at 3:33 pm

#81

My mother has a saying, “what goes around comes around”. I have seen it happen over and over again. People who steal, get away with it today, tomorrow, and they laugh at all the hard working honest people, and they call us stupid, cause we don’t steal and abuse the system. They just keep laughing at us, over and over. They have found a “loop hole” in the system. They take advantage. Good for them I say. Jolly good for them.

Till the day the police show up.

All of a sudden, they don’t laugh no more.

#91 Calgary_rip_off on 08.18.09 at 3:49 pm

Larry,

Garth is a politician who served in Parliament. In his website I expect opinions, insight, and statistics, not blanket statements.

I disagree strongly that a huge crash will revert prices to preboom levels in Calgary. That would imply crashes on multiple levels. It cannot happen or the whole city would implode.

You assume that I require a lavish lifestyle for my family. What I require is not paying another person’s mortgage. My rent and many others is in excess of many people’s mortgages, not because of the house rented but due to timing. Others have said not to want a mortgage in this city.

I crave(your words) using my hard earned money serving local Calgarians to be put into a house of decent standards that is all. I dont require a Ferrari, a 2000 sq ft. house, an acreage, which many that I work with possess. I also dont require all the phony bs. I want tools such as a house to enable me to produce and work. Period.

If this is whining, I will continue to whine. :)

In the meantime Ill continue to listen to Megadeth and heavy metal…….:)

#92 Keith in Calgary on 08.18.09 at 4:03 pm

I’ve been laughing like crazy today because of the 10.3MM house sale in Calgary.

The entire MSM is spinning like a dradel as a result and all the realtor blogs are trumpeting the “confidence” people have in the market. LOL !!

Sales are tracking to be way down again from last month……and the lowest sale price of the day is now always in the 200K level……and pretty regularily in the 100K range.

#93 ally ally oxycontin free on 08.18.09 at 4:07 pm

…Final major household purchase;

Mansfield pressure-assist toilet … expensive but the bowl is cleared every time. Plumbing Mart assured me this top-level device is pretty much guaranteed to sink a sailboat on any one of the five great lakes, when the push-button is activated.

SSSSWWWWWOOOOOSSSHHH

#94 Peter Wiener on 08.18.09 at 4:27 pm

# 73 sincere apologies, my comments in #82 were directed at the posting #74 ,not yours.
again, sorry

#95 Peter Wiener on 08.18.09 at 4:35 pm

re #90 Calgary Rip off

I don’t know how old you are or how long you have lived in Calgary, but checking into a little history of your city will show MAJOR housing prices collapses as recently as 1981 /82. I lived there at the time and remember prices being cut in half or more in some cases and friends walking away from their homes, returning the keys to the bank. THEY HAD PUT 25% DOWN (in a heated up market) and still walked as they were; 1) still underwater (owed more than the house would fetch if sold to settle said mortgage) and; 2)unemployed and unable to replace their high income.

Just ask anybody over the age of 50 or so – it was an effin’ BLOODBATH!

#96 TJ on 08.18.09 at 4:39 pm

Before I get too worked up over the role of Goldman Sachs in this horror show – I just want to get another opinion on ‘the recovery’.

Here is Nouriel Roubini – and he is not buying any of it:

Today, 20 months into the US recession—a recession that became global in the summer of 2008 with a massive recoupling—the V-shaped decoupling view is out the window. This is the worst US and global recession in 60 years.

If the US recession were—as is most likely—to be over at the end of the year, it will have been three times as long and about fives times as deep—in terms of the cumulative decline in output—as the previous two.

Today’s consensus among economists is that the recession is already over, that the US and global economy will rapidly return to growth and that there is no risk of a relapse.

Unfortunately, this new consensus could be as wrong now as the defenders of the V-shaped scenario were for the past three years.
Data from the US—rising unemployment, falling household consumption, still declining industrial production and a weak housing market—suggests that the US recession is not over yet.

A similar analysis of many other advanced economies suggests that, as in the US, the bottom is quite close, but it has not yet been reached. Most emerging economies may be returning to growth, but they are performing well below their potential.

Moreover, for a number of reasons, growth in the advanced economies is likely to remain anaemic and well below trend for at least a couple of years.

Worse, Roubini goes on reiterate his fears of a “double-dip” recession. Why? Either a potentially botched government exit from economic intervention — meaning either too little support or too much debt — or because oil, energy and food prices potentially rising faster than economic fundamentals warrant.

So, the end of this severe global recession will be closer at the end of this year than it is now, the recovery will be anaemic rather than robust in advanced economies, and there is a rising risk of a double-dip recession.

The recent market rallies in stocks, commodities and credit may have gotten ahead of the improvement in the real economy. If so, a correction cannot be too far behind.

http://tinyurl.com/nbht2h

#97 DW on 08.18.09 at 4:53 pm

#73 Duane

Actually your post resonated with me.

You can tell a tree by the fruit it produces ………as in the case of peter wiener.

Chill out guy and smell the roses; bargains are just around the corner and we will be swooping and I’ll drink to that too.

#98 Two-thirds on 08.18.09 at 4:55 pm

I had heard similar stories as the AMEX story in today’s post before, but only for the States.

If they are indeed slashing/forgiving delinquent accounts, it amounts to rewarding reckless behaviour while those who are financially responsible get no break. This is the new normal and it is revolting.

Do these signs point to deflation? (thanks to those who posted links to KD’s TMT and NEE, great reads). Not sure that deflation is a comforting thought though, even being debt-free, it will get ugly for society in general.

Garth, would you consider devoting a future post to outlining strategies for protecting against deflation? I know you had one like that a while ago, but I cannot seem to locate it… :(

#99 Farnsworth, Hubert J. on 08.18.09 at 4:57 pm

#78 Wealthy Renter

“Add the ridiculous cost of living in the GTA or Vancouver (esp. housing,) and a brain drain is not a radical idea.”

I agree. As it happens I returned to the GTA myself 2 years ago from a 3 year period living/working in Beijing (I’m not of Chinese ancestry, BTW) and got to know personally of many families and individuals in exactly the situation you describe.

Smart, accomplished, highly motivated immigrants to Canada having to choose between little to no opportunity in Canada, or a return to China and having enjoying a higher standard of living than 95% of Canadians.

This scenario is being played out in many many jurisdictions around the world that received an influx of Chinese immigrants. These “returnees” are prized by their Chinese employers for the knowledge and skills that the bring back, as well as those that they originally left with years ago.

#100 Jmack on 08.18.09 at 5:00 pm

Anyone who locked in Natural gas rates deserves exactly what they got…Door to door salesman were popular in the 30’s and 40’s…now it’s a scam….get off my porch.

#101 Bill on 08.18.09 at 5:03 pm

# 90 Calgary Ripoff:

“You take a mortal man and give him control. Watch him become a God…It’s the Symphony of Destruction”

-Megadeth

#102 Bill on 08.18.09 at 5:37 pm

#88 Rick

FYI – immigrants are not coming to Canada with tattered clothing and $10 in their pockets. They are ambitious, educated and bringing lots of money $$$ with them. More money than you can ever dream of.

And many of those you see working in Tim Horton’s…chances are that they own that franchise.

#103 lgre on 08.18.09 at 5:40 pm

#95 TJ on 08.18.09 at 4:39 pm

Roubinis’s predictions and opinions change faster then the weather. I don’t even bother reading anything he has to say anymore..just last week I saw a video of him saying that he is now a ‘bull’ and that he sees the US on the right track for growth..I would be ashamed to get on national TV and flip flop on a weekly basis..he has lost all credibility IMO. Beware of the Roub.

#104 dd on 08.18.09 at 5:50 pm

#102 lgre

…Roubinis’s predictions and opinions change faster then the weather…

He is economist and changes when new information is presented. However he certainly is not a bull. He has been predicting that growth in the US will be so slow that it will seem like a recession for years to come. He doesn’t see the end of the world coming soon (maybe that is the bull story).

#105 lili on 08.18.09 at 6:03 pm

Kudos to #63 Lawrence above…

Garth, you have no idea how flimsy your defensive rhetoric appears to even a mildly informed reader. You wrote an entire book about real estate, heavy on hyperbole, yet mixed with otherwise sound analysis on the assumption that something very significant would happen to Canadian real estate.

However, you can’t possibly believe that a single person would have bothered to read it if they knew you’d be patting yourself on the back for predicting a 3-month 10% temporary drop in home prices that in less than 6 months was completely erased and was followed by all time price highs.

You do yourself no end of disservice by taking credit for such a tiny blip as some kind of success. You weren’t recommending that anyone should have bought in January by the way…

Stop saying you were correct; such pronouncements of victory in a strictly technical sense only suggest that your current predictions will turn out to be just as fleeting and impractical to the average Canadian.

And the just a guy with an opinion thing is a cop out… you have a megaphone too!

Hey, I make mistakes. This just isn’t one of them. — Garth

#106 TJ on 08.18.09 at 6:13 pm

#98 – Beijing presenting a better standard of living than 95% of Canadians is about the most absurd comments I have read since Mao wore shorts and Wayfarers.

Who do you work for – the Red Army Junior Spy Corps?

If it’s so good – go back….and say hi to all those highly treasured, Canadian educated and wonderful friends.

We’ll miss you.

#107 ally ally oxycontin free on 08.18.09 at 6:40 pm

IMF says [paraphrased] although we might be at the end of the beginning, they predict a long hard slog … with many being kicked to the curb. Give thanks to the banker’s watchful eye ‘of what constitutes a sound investment … and don’t believe ANYTHING that Goldman Sachs / or Mark Carney / or Jim Flaherty tell you!

#108 Devil's Advocate on 08.18.09 at 6:50 pm

#104 lili on 08.18.09 at 6:03 pm

you might prove yourself vastly more suseptible to much the same criticism as you dool out when you say such things as “a 3-month 10% temporary drop in home prices that in less than 6 months was completely erased and was followed by all time price highs.”

It ain’t over yet babe…

#109 WillsDad on 08.18.09 at 7:08 pm

Tip: If you’re ashamed of telling people you rent, lie. After all, they lie too. All the are doing is renting $ from the bank.

Reality: House prices are too high for incomes in Canada, so it will correct, when the cheap $ runs out. Simple.

#110 Barb .. a reader in Calgary on 08.18.09 at 7:18 pm

re: @ #63

” …. buzz off … “

Garth, is this the same “Lawrence” whose only purpose on your political site was to snap at your heals like an obedient Harper troll?

Perhaps back from hiatus only because he was informed of your recent announcement. Same old, same old, eh. Harper just can’t quit you, cowboy.

#111 John m. on 08.18.09 at 7:24 pm

Baird was sworn in as Minister of Transport, Infrastructure and Communitites, replacing Lawrence Cannon, on October 30, 2008——-Yes we are headed for disaster..think not?? ..check some of the backgrounds of some of Harper’s appointees..responsible for billions of our tax dollars.check them out “wilkipedia”…Baird is just one example…i could not find anything about any job he had ever had in his lifetime other than provincial and federal politics…not a pretty story IMO…….the list goes on and i will post more (if Garth posts them) .”Baglicking Sheeple with a lifetime at the trough are deciding our future IMO .So when the politicians tell you the recession is over..take a few minutes and check out their respective backgrounds…in the private sector without their government portfolios they would attract as many listeners as “a fart in a windstorm”.Thanks Garth for giving us the straight goods..your accomplishments speak for themselves.

#112 TaxHaven on 08.18.09 at 7:32 pm

You in Canada really ARE in la-la-land:

http://www.kelownadailycourier.ca/top_story.php?id=205795&type=Local

2,200 units of housing? In a semi-desert, arid climate? A GOLF COURSE? A winery? In 2009?

OH…! “We look(ed) where the Growth Corridor is going…it’s a very fast-growing part of Canada.”

Hope springs eternal in developers’ minds.

Hope they have deep pockets and a thirty-year time horizon to see their nominal investment back…

#113 ally ally oxycontin free on 08.18.09 at 7:46 pm

…IMF says … “Be prepared to wait for it!”

“OTTAWA — There is, indeed, a recovery underway, but it will be long and difficult, and require a massive rebalancing in the global economic landscape — otherwise, growth is likely be “anemic” for years to come, warns the chief economist for the International Monetary Fund.”

#114 OttawaMike on 08.18.09 at 8:57 pm

I have a couple of anecdotes about credit card companies acting skittishly:
A couple I know, civil servants, family income 140k$, live modestly, forgot to pay their 169$ balance for July. Visa calls at 8 pm last night and wants to know when exactly (as in what hour of the day)the payment will be made. Same thing with me, in June I was 2 weeks late on a Home Depot card. Get a night time call asking why I’m late. In both case we have good credit history and scores but something is happening out there to warrant the phone call shakedowns.

#115 ralph on 08.18.09 at 9:02 pm

#104 lili

Did you read today’s headline? Well here it is.

“Economic recovery will usher in higher taxes: IMF”

http://www.edmontonsun.com/money/2009/08/18/10501076.html

#116 ralph on 08.18.09 at 9:07 pm

Canada’s finance minister Jim Flaherty has rejected the notion he will have to raise taxes to pay off for the about $47 billion in stimulus the Conservatives have committed over two years.

Just where does dim Jim think the money is going to come from? Fall from the heavens like manna?

#117 miketheengineer on 08.18.09 at 9:20 pm

Swine Flu Shots – Important Information.

http://www.youtube.com/watch?v=dl6yKPicCYg&feature=channel_page

Dr. Blaylock give the “whole” story. They are testing one vaccine and then they are going to give one loaded with Squaline….and this is somewhat toxic to the brain.

I don’t think I will allow anyone to give this to my family members.

#118 dd on 08.18.09 at 9:28 pm

#63 Lawrence

“I tried to re-enter the Calgary market in March 09 only to find a return to bidding wars in the mid-priced segment of the market (500 – 600G’s)”

Calgary is still an overpriced market compared to wages. Sure prices are moving but only because of cheap money. With the layoffs, voluntary decrease in hours worked, and cuts in bonuses the fundamentals of the Calgary housing market is deteriorating.
Just because house sellers are entertaining mul
tiple offers doesn’t mean the property is actually worth it. Did you just happen to sell on a whim or did you do some actual research on why you should buy or sell?

#119 Nostradamus Le Mad Vlad on 08.18.09 at 9:31 pm

Hark! I hear the sound of Lemon Meringue and Banana Cream Pies waiting to be guzzled!

The times they sure are rapidly changing, and to a large extent, politics don’t count for anything now, except bobblehead dolls.

In a few posts, I have mentioned the Asian race being handed the reins to be Captain of the Good Ship Earth, taking over from the Caucasian race.

In line with #95 Albertaboy on 08.17.09 at 5:00 pm’s fine post — “. . . the end of the US as a global superpower both financially and militarily and seeing the dawn of China & India as emerging wealth producing nations. . . ” and one of Garth’s sentences — “Worse, whole industries have moved to Guangzhou.” — In essence, there it is. The dynamics are shifting from west to east.

It won’t happen in our current lifecycles, but the fiscal downturn in the west is a direct result of what else is happening. In a time of intense volatility (such as now), there will always be major unexplained ups and downs all over.

One pointer from Weiss Research Inc.: “. . . on the most critical economic sea change in a hundred years:

“The decline of the U.S. and Western Europe as the world’s dominant economic forces … The emergence of China and most of Asia as the world’s most powerful engine of investment profits, plus … The massive flow of capital from West to East, and how sophisticated investors are profiting from it directly.”

Further, why are the banks in the west in trouble, but not China? —
http://www.webofdebt.com/articles/secret_of_china.php

Joblessness leads to foreclosures — straightforward. Comments from wrh.com —
http://www.msnbc.msn.com/id/32455445/ns/business-washington_post/

“The country’s growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.”

Webmaster’s Commentary: “There is no such thing as a ‘jobless recovery’. There just isn’t. When the financial giants grow rich while the people starve, that is called “looting.”
——
A new false flag? ObLaden is mentioned here, and he has been just a teensy bit dead for a few years now. This is why Benazir Bhutto was murdered — she was on record as saying ObL had died a few years previous. —
http://www.wnd.com/index.php?fa=PAGE.view&pageId=107174
“Given that Bin Laden is dead, mention of him is a red warning flag of a deception operation.” (wrh.com)

#120 Jonathan on 08.18.09 at 9:32 pm

#29 karim kanji

Did you seriously link us all to that video? Quality control please.

#121 lgre on 08.18.09 at 9:36 pm

“He is economist and changes when new information is presented. However he certainly is not a bull. He has been predicting that growth in the US will be so slow that it will seem like a recession for years to come. He doesn’t see the end of the world coming soon (maybe that is the bull story).”

I’m sorry, but changing his views on a week to week basis in this environment discredits anything coming out of his mouth. It would be like Garth saying that he is now a Bull regarding the CA RE market because July numbers are at an all time high. There has to be a fundemental reason of why someone is predicting something and not because of daily manipulated numbers. He is trying so hard to be right that he is actually missing the real problem.

I give him credit for calling the crisis early but other then that I cant recall anything else.

#122 lgre on 08.18.09 at 10:00 pm

#116 miketheengineer on 08.18.09 at 9:20 pm

The swine flu is a fraud, I have never seen an illness pushed towards vaccination as much as the swine flu..and it killed a small fraction of people, infact more people die from the average flu then the swine flu has killed..but its a pandemic in their eyes…run from this vaccine, created for nothing more then profit.

#123 dd on 08.18.09 at 10:09 pm

#112 ally ally oxycontin free

…require a massive rebalancing in the global economic landscape…

And what does this mean? China will have to spend more and US/Canada will have to save more.

#124 NKVD Black Raven on 08.18.09 at 10:09 pm

China is a one party animal. Any collapse, fracture or serious civil unrest could lead to hardliners gaining power. This could prelude a reversion or long-term suspension in the present free market system.

#125 Jonathan on 08.18.09 at 10:10 pm

I love how some bulls are pointing to inflation as the saving grace of overpriced real estate. It won’t work that way.

Inflation will encourage higher interest rates. It will also prop up the price of food, energy and other commodities. This will put strain on business, causing them to lay people off and lower salaries to make ends meet. It will also cause financial stress on households, deterring them from embracing this house lust.

In June 2008 the United States had 5.8% price inflation. That inflation as we all know, did exactly what I explained in the paragraph above.

#126 dd on 08.18.09 at 10:17 pm

#114 ralph

To: “#104 lili & #63 Lawrence … higher taxes – IMF”

Yup … that house of yours is going to be worth alot more in the future. Of course first the homeower will have to pay for higher energy and food prices, interest rates, and higher taxes. And lets not forget the back breaking debt load that the average family has in Canada. Oh, and to top it all off … low growth in wages for years to come.

If interest rates do not low (cheap) this housing bubble is dead.

#127 conan on 08.18.09 at 10:24 pm

Re 66

You do not have to rush into any investment. Your window to contribute for 2009 is still open for many more months.

Unless you earned a kabillion last year I doubt you will want to use all of your catch up rsp room in one shot.

Just use enough rsp contributions each year to reduce your tax rate bracket. There is no point in reducing your income to min tax bracket rates unless you have an outstanding investment opportunity.

Try not to buy into the market unless you sense a buying opportunity. There is a rhythm to this recession market and right now its profit taking time.

You need to find out what tolerance level you have for risk. Once you know that you will have a better idea what you want to be invested in.

#128 Farnsworth, Hubert J. on 08.18.09 at 10:31 pm

#105 TJ

Wow. You are so right. What was I thinking? Why didn’t I see through the charade? Damn those Red Army acting-spying coaches! I mean, who would have thought they could create such a subtle tapestry of lies? Alas, I was such a dupe.

You’re a moron. China is capitalism on steroids. Talented professionals in architecture, medical arts, engineering, and a host of other disciplines with international experience do in fact commonly enjoy a standard of living in many parts of 21st century China equal to or better than the relatively few Canadian’s earning six-figure salaries.

And guess what, kid, there are actually people whose work demands they travel and relocate multiple times. Imagine that! They go places – and they come back. They go places again – and they come back again! Amazing! Who would’ve thunk it?

Why don’t you get on a plane go see some other part of the planet that isn’t the dark ignorant place that you current pollute?

Did I mention that you’re a moron?

#129 Dean-oh on 08.18.09 at 10:50 pm

Mike #116. Good video. I would never take a vaccine either, not because of what is on this video, but from info I’ve picked up over the years. The doctor in this video relates a story where three seniors died in one day at a vaccination center after receiving a vaccination. Scary.

#130 Peter Wiener on 08.18.09 at 11:02 pm

#115

Perhaps he’s telling us that he is going to print the money so he doesn’t have to take the politically unpalatable route of raising taxes. Or perhaps he means the Conservatives won’t have to raise taxes as they won’t be in power, but the Liberals will be and it will be their problem. Don’t put anything past these “Inglorius Basterds”.

#131 CTM on 08.18.09 at 11:20 pm

First the “Good news:”

http://www.theglobeandmail.com/news/national/calgary-home-sells-for-record-103-million/article1256453/

Then this!

http://www.nationalpost.com/news/story.html?id=1904537

#132 Peter on 08.19.09 at 12:48 am

From the feedbacks I saw on this post, I can easily think that our country and our society has evolved dramatically..In the old days, your grandparents or parents will tell you that “a dollar saved is a dollar earned”, However, except miketheengineer is providing in depth and insights of what is happening to our economy right now and how do people suffered when they are out of work and EI ran out, they all freak out on survival mode. Many people are plain self-ignorant on the economy but rather were asking naive questions and answers on asking Garth “How do I not pay my Amex and get a 50 % cut on that ?” or “Hmm..perhaps I should maxed out my Amex and take out cash advances to buy some stocks…!!!” Honestly, what I seeing is you all are cutting corners by maxing out everything, try override some bills and forget about it, starts out new and maxed out again !! If our country has tens and thousands of you who are think you can snitch out of a credit card or LOC…We are all going to suffer badly because banks or credit card company wont be able to grant us credit and we all get screw into this scrutiny !!!

#133 Mike (Authentic) on 08.19.09 at 2:17 am

#130 CTM First the “Good news:”

$10.3 million for a house that is to be worth $7 million next year and $5 million the following year has to be the “Last Greatest Fool of Them All!”

Someone should orgainise a protest infront of that house to protest financial stupidy.

Mike

#134 Herb on 08.19.09 at 8:31 am

Peter wiener [sic] @81,

actually the most moronic posting was your #135 of 13 Aug 2:02 pm (“Subprimal” thread), in which you grandiloquently announced that

After months of reading this blog and in good faith trying to add something to the susbstance [sic] of it from time to time, I realize that all I’m doing is inadvertantly [sic] antagonizing people who can’t comprehend or read what I’m writing and thereby wasting my time. Accordingly, I doubt I’ll bother posting again.

And then your follow-up #137 lauded an “endorsement for my decision not to post here anymore.”

What made this moronic was not your advertised silence, but the frequency and ferocity of your subsequent postings.

Do grace us with your enlightenment, but stop accusing readers you find disagreeable of drunkenness or imbecility. After all, you are a serious finance type and don’t need insults and personal attacks to make your points.

#135 Peter Wiener on 08.20.09 at 12:33 pm

re#134 Herb

At least I make valid points in addition to stirring the pot with jibes at posters who don’t or can’t substantiate their opinions.

You post only to criticize, where is your contribution?

Again, read the factual content of what I post and disregard anything else that is a little too rough for your sensitive soul.

#136 Vancouver_bear on 08.20.09 at 4:26 pm

#65 Lawrence on 08.18.09 at 12:03 pm

You forgot to add that “it’s different here” or “different this time” … choose one statement for your liking.

To all others: Beware of troll realturd!

#137 Post Recession: Real Estate Investing Strategies | Financinlandapt.Com on 08.27.09 at 3:55 pm

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