For the price of an average home in Toronto, you can buy 65 of them in Detroit. That’s practically a village. You could be mayor.

The median house price is around $6,000, and not improving. There are just under 5,000 properties for sale in that city right now, 3,250 of them for $50,000 or less.

The reason: 28% unemployment, in a state where 15% are jobless. The city will be bankrupt by October and Michigan’s total revenues have crashed by a third.

This is of interest to the 11 million Canadians who live in the province next door. A quarter of all the trade between the two countries flows over a single bridge linking Detroit to the other side. In fact, the economies of Ontario and the Great Lakes State are inextricably entwined.

I mention this because it interests me. Instructive how a city of almost 2 million people in 1950 can become a derelict metropolis with half that number rattling around five decades later. It’s eye-opening what can happen to an industrial powerhouse when a country decides to export its industries, and concentrate on selling stuff, not making it.

Of course, Toronto is not Detroit, nor is Saskatoon or Burnaby. But are we on the same path of inevitability?

I remember chatting with Jim Flaherty one day (when he’d still talk to me), and he said proudly that nobody in Ontario – not a single worker in any company working in any factory – makes shoes anymore. But, he added, whipping the Blackberry off his belt, we make these! And so we do in Kitchener-Waterloo, where Electrohome used to churn out televisions. But those are gone, too.

Interestingly, everybody has shoes. Usually many pairs. Every home has at least one TV. But 94% of us don’t have a Blackberry.

Some chi-chi social provocateurs say the future is globalization and urbanization. Let the manufacturing, fabricating, assembling, engineering, materials handling and support jobs migrate to Chindia. Go ahead and shut those unsightly single-story plants with their hazardous wastes and send them packing. Hollow-out small town Canada. Hell, the locals can move to an apartment in Toronto, go to York University and learn something useful.

In reality a green, knowledge-based society filled with highly-educated workers making ever more money is a dream more distant now than ever. Over the next few years immense amounts of wealth will flow out of countries like Canada and the States as we send cash to Asian bondholders. At the same time, we’re helpless without that offshore manufacturing capacity, and now snared in sluggish economic growth and chronic unemployment.

This week the IMF reinforced a point I’ve been making for months: The only certain thing about the years to come are higher taxes and slower growth (and you can in add higher interest rates). The legacy of the 2008-9 meltdown is already known: Debt. Steamy piles of it. The inescapable consequence of the greatest government spending orgy in history.

Sales taxes will be first (the new HST and more GST), followed by capital taxes and income tax. This will be accompanied by stiffer energy bills and lots more interest.

If you don’t see this coming, you’re not looking.

The hell of it is, we’ll still need shoes.


#1 $fromA$ia "Garths Nugget Boy" on 08.19.09 at 12:18 am

Don’t worry Garth, the gov will just make more stimulous and beat down the deflation to a point that when inflation comes all debts will be paid off muh easier including home mortgages.

The Government in every way wants to punish the savers. What are you going to do with your debased dollars? Who cares about higher taxes, were looking at higher incomes as well. As I said my union just negotiated a wage increase in the worst reession since the depression.

#2 Crash on 08.19.09 at 12:24 am

Manufacturing is the cornerstone of any economy. It is what creates wealth. Detroit is what happens when we export our manufacturing jobs. I fear we will have many more Detroits in the next decade or so.

#3 Peter on 08.19.09 at 12:53 am

No one will ever think about it as we are all brainwashed from the media and they keep telling us we are all perfectly fitted into the “EVERYTHING WILL GO UP” or “ASSET INFLATION” MODE. Seriously, the central banks still does not know what they are doing as they are still thinking..hmm..people are out of jobs now and their homes, their family already screw for food and shelter..However, we think lending money to them is not enough as they are all in trouble and they all need help..So, what we can do is we should give them more “CREDIT” or “DEBT” behind their back and tie them to their knees so that they would be able to live along (but dont kill yourself) and should be repaying the banks or the CC company back slowly until you are on the death bed…!!! INSANE !!!

#4 debtless in yyc on 08.19.09 at 1:08 am

Hi Garth
Funny that your current mantra is future higher taxes to pay for government excess and debt service. All the while I plot to avoid these future taxes using the following strategies; a) work less thus pay less of my middle class burden b) wait until bond yields rise so I can benefit from our poor governance in some way (also contributes to objective (a) though surely I will also suffer from program cuts and higher taxes on the interest, and c) make sure I am well positioned for energy price rises via Canadian energy equities.

The three comments above seem practical if self serving and cynical. That is the reality of our poor governance (rate of transition of the nations youth from idealistic to cynical is rapid).

Great blog and writing Garth! I read all of your posts and ask my friends to as well. It provides comfort while I refrain from purchasing houses in rabid competition from people with no money.

#5 Joseph on 08.19.09 at 1:13 am

Great post. It somewhat cross-relates to the question from blogger #97 from yesterday’s “Head Fake” entry, who asked,

‘Where is the best place to put your money in a deflationary setting?’

With tens of trillions of dollars of capital having vanished worldwide in the past year, there should be correlating downward price pressure on goods. With this kind of wealth desturction going on all around us (Garth’s Detorit reference being a good example), deflation will likely be universal, with a shortage of money everywhere, so that prices for everything declines. With deflation, anything you buy declines in value every year, compared to if you’d simply kept the cash in the first place. Bert Dohmen, president of Dohmen Capital Research Institute and author of the award-winning Wellington Letter, stated yesterday that following strong, yet deceptive, 4th quarter US GDP growth this year, the economy will tank again. Dohmen states, “There’s too much debt out there which is still imploding, and all the central banks in the world cannot print enough money to compensate for that.” Dohmen notes the approximately $60 trillion in debt denominated in U.S. dollars, points up the fact that the few trillion the Federal Reserve has poured into the system won’t come close to making up for all the money being lost in defaults and bankruptcies.

According to the deflationary experts I have researched, during deflation the goal is to preserve one’s capital. Cash is the only asset that is a good investment for deflation. Secondly, the deflationary crowd really pushes the need to then keep your cash in a safe place. Given I don’t believe in stuffing cash under my mattress, I would place any cash I have in a CDIC-backed institution/investment. Besides this avenue, the deflationists insist on setting aside cash in a safety deposit box so that you have readily available cash on hand in case your bank does fail. Stocks were singled out as the worst possible investment in a deflationary setting.

#6 Nostradamus Le Mad Vlad on 08.19.09 at 1:14 am

“Shoeless In Seattle” or “Shoeless Joe Jackson”.

“. . . you can buy 65 of them in Detroit.” — Not too long ago (could be wrong), a European gazillionaire bought up a whole street of homes, all foreclosed and empty and all in first-class shape.

What for, I don’t know. People — especially greedy ones — sometimes leave me shaking my head at their blissful ignorance, but there are no laws preventing stupidity.

“. . . around five decades later.” Change is one of the many constants in the different cycles of life.

Although we don’t need to sell, I would very much like to be renting a condo next spring after having sold our present home. No doubt about it, it is expensive to maintain.
In this 24 second clip starring Bob Hope, zombies are defined quite nicely! —
For those that may be interested —
“The Vaccine Resistance Movement in Canada is pleased to announce a Nationwide Informational Demonstration and Political Protest in Canada, Friday August 28th, 29th and 30th, 2009 and we need EVERYBODY who shares our concerns to get involved, to inform others about H1N1 and vaccines, to speak out, and to protest the vaccine agenda. We need good people in every city and town to take part and begin to give our governments, various health agencies, the WHO, as well as Big Pharma, a loud and clear message: WE ARE NOT GOING TO TAKE IT!”

Straight to the point, and probably will happen. Excerpt below. —
“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.”
Climate and Change. Put them together and cartoons magically appear! —
Big Brother is censoring the ‘net, and its blanket is smothering us. Excerpt follows. —
“. . . 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.”
What lurks in the supermarkets? —
“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 four chemical elements vital to the evolutionary progress of humanity:

(1) a hole in my sock; (2) levitation gone hopelessly wrong (Crash And Burn); (3) You were marvelous darling; (4) Krispy Kreme-laden Viagara-filled donuts (a weird link — )

Rising to prominence in the 80s — the Reagan – Greed – Gorbachev – Greed – Funny-Nomonics – Greed era, my better half made it out of curiosity — — 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.

I’m not normal!

#7 Mike (Authentic) on 08.19.09 at 2:04 am

We live in a fragile economy where complex inter-linking of production, markets and wages intermix to create what we have today. Housing prices are just like this, it takes a lot of hard work to have them where they are and any slight economic problems occur and they cannot be sustained.

Just like an engine, you need spark, fuel and air; remove any of the 3 and the engine won’t turn.

This is what has happend to Detroit and slowly to the world economy. Our economic engine is sputtering and there are lots of economists trying to figure out what’s wrong with the engine and how to fix it. “Put sugar in the tank! That will sweeten up the economy!”, “No, we need to richen it up so we use even more” and so it goes until they admit defeat and then take it to the tax payers to get fixed.

Detroit really can be any city that it’s primary employment base is crushed. Calgary can be detoit if you remove 90% of our O&G jobs, Vancouver if you take away tourism and lumber, Ontario (auto, tech, steel), Maritimes (fishing, oil). Windsor is a “rich Detroit”, but Windsor is suffering bad. I’ve been to downtown Detoit and it is Shocking how much of a war zone it is. How dead the inner-city has become and how it will ever be fixed.


#8 Arthur Kurwa on 08.19.09 at 2:34 am

We need shoes, yes. But one thing you failed to mention Garth is that over the years the quality of manufacturing goods has slipped, bigtime. A really good pair of shoes, handmade, should last years. The runners I buy now are good for a couple of weeks and then rubbish.

I own a pair of hiking boots. They were the only ones at the store that were not made in China. Actually, they are made in Italy and they are the best hiking boots I’ve ever felt and owned.

If consumers started paying more for quality products, then maybe some of those manufacturing jobs would stay. If consumers insist on the lowest price, then the wal-mart / China tag-team will only grow.

The amount of manufacturing jobs flooding to China can be partially blamed on all the Canadians who wanted a pair of shoes for $4, and to hell with the external costs! Well, the chickens are coming home to roost.

#9 TaxHaven on 08.19.09 at 3:10 am

Garth, you were a politician. One of them, one of the system. Perhaps you felt frustrated as a powerless one out of 310-odd. But as Minister in charge of the Tax Farm and Herd, couldn’t you have undermined the Matrix somewhat?

We don’t have business growth – real, productive business producing tangible exportables – because of regulation. Because of laws, ever more of them: licenses, business permits, parking requirements, insurance requirements, minimum wages, GST-compatible cash registers, record-keeping requirements, mandatory benefit contributions, anti-discrimination laws, wheelchair ramps, anti-smoking laws, anti-money laundering paperwork, “compliance officer” installations & reporting, zoning requirements, fire inspections requirements and…high taxes to fund an insupportable standard of living.

Here in Taiwan a small business, even a small industrial company, can escape much of this, either by flying under the radar or by staying small enough to avoid much tax-collecting responsibility. Even a properly registered, licensed, inspected business becomes viable due to low taxes, lower salaries and lower costs. Indonesia, China and Vietnam are even better places to set up a company.

Where are Canada’s small vendors? They can’t just set up a stall beside a road and start selling. They can’t squat down on a sidewalk in Toronto’s Chinatown and sell potted plants on a mat. They can’t push a cooked food wagon down Granville Street selling congee or noodles to commuters (and likely making a killing!)…they can’t do woodwork in their garage and sell it in flea markets, on the internet or by word of mouth without taxation, registration, zoning changes…they can’t even sell a used car to their neighbour under-the-table for $600 as a favour.

It’s all about standards of living. Given that Canada features such an exceptionally poor level of productivity when COST is taken into account, Canadian standards of living are insupportable in the long run, except for an ever-shrinking minority. Structural unemployment and underemployment are HERE TO STAY.

You have two choices: reduce those standards of living, reduce the size of government, and reduce regulation so as to compete with the free world. OR, watch your beloved social programs head closer to bankruptcy, a permanent jobless ‘recovery’ take hold as more and more Canadians ‘work’ doing each others’ laundry or retailing stuff to one another… And as the decades to come pass, watch the dollar slide as more people pretend to work and their employers pretend to pay them.

#10 Elle on 08.19.09 at 3:21 am

My father was a shoemaker. His shop was in Kits on 4th avenue – we lived in the back. Sometimes I got to tag along to Denbys, a fragrant leathery smelling warehouse on the waterfront in Vancouver.
Large bends of leather for soles and heels and softer, more pliable pieces used for the ‘uppers’, were stuffed into our small car, along with black polishes, bottles of dye and metal heel plates….called blakies.
This was a time, when shoes were repaired when they wore out. Then synthetics and plastics came on the scene. Most shoes were now, just thrown away. So many imports – so little now MADE IN CANADA.
As it is at home – so it needs to be in our communities -we need to produce!
With what is coming down the pike……we have a lot to think about.


#11 Maurice on 08.19.09 at 4:57 am

Eventually, we will go back to making shoes. At home! I was a Charter Member of Burlington’s Sustainability Committee. The Volunteer Committee was made up of mostly Government employees from different segments of the three levels of Government (Canada Centre of Inland Waters etc). There were only two self employeed “stiffs” like me. All that they could talk about was getting rid of the “dirty” industries and replacing them with “clean jobs”. Well they got rid of the dirty industries all right. Only problem is there are few “clean jobs” to replace them.

#12 Danforth on 08.19.09 at 6:26 am

Great Detroit pic !

Q: Does anyone know which neighbourhoods in Detroit (Flint, etc) are seeing the highest rate of home abandonment and ghost-town factor?

I’d like to take a one-day field trip to witness this spectacle sometime in September/October before they bulldoze the place and before winter sets in. I heard the mayor of Flint on CBC radio a week or two ago talking about planned urban shrinkage.

Thanks for any tips on key streets/neighbourhoods.

#13 Samantha on 08.19.09 at 6:41 am

“Sales taxes will be first (the new HST and more GST), followed by capital taxes and income tax.

This will be accompanied by stiffer energy bills and lots more interest.

If you don’t see this coming, you’re not looking.
The hell of it is, we’ll still need shoes.”

There will be a tax fiesta and we will all be invited to attend and take our turn as the piñata. Once we have been thoroughly broken and gutted with the big tax stick, the powers that be will then aim their salad shooters or slap choppers at various benefits and programs and commence slicing, dicing and slashing.

Our future gig as piñatas won’t be sufficient to compensate for the national debt, fallout from personal debt and resurrection of our manufacturing sector.

Indeed, people still need shoes, especially when you have to pound the street looking for a job. Shoe repair might be a better choice for a new skill than assembling blueberries or blahberries or whatever they’re called.

My brother and I recently discussed shoes during a conversation about the kinds of manufacturing we need to resurrect in the Country. We need to return to control and manufacturing of the basic products necessary to our survival. We create what we consume.

Basics such as: food, clothing and shoes, shelter (refurbishing the cheaply built crap that flourished during the bubble, and perhaps turning McMansions into multiple family dwellings), pharmaceuticals, isotopes would be nice, and whatever else we need to function.

And to ensure that the gravy train is finished: an end to the big bonus packing corporatists who have gone viral and infiltrated every part of our lives. It’s easy: Quit shopping at their super-duper-big-box-blue-vest-warehouse-full-of-crap cavernous stores. New business incentives: Welcome back the era of Mom and Pop stores, local craftspeople, butchers, market gardeners and artisans and shoemakers.

If you want this insanity to end, it’s simple: stop playing the game. Stop playing the market and enriching the elite. Stop shopping at corporate stores. Bank with credit unions. Start co-ops to make purchases direct from manufacturers.

Try to think of yourself as something more than an investor, because baby, that gig is so last decade.

#14 David Bakody on 08.19.09 at 7:00 am

Once more another great post Garth, either the Rich Patricia’s and other Bankers are too busy counting their money or they are planning a move to Dubai ( the crunch is there also). So where is safe territory? God only knows and many people may have given up on him, we know our PM has or at least set himself as King spending more money on the Winds of War putting boots on the ground in Afghanistan ….. the question is ….will Wars build an economy taking a country out of depression/recession? I think not because the new greed and graft from the winds of war go to a selected few who have more now than they know what do with.

#15 miketheengineer on 08.19.09 at 7:01 am

This is way too important. Sorry if a digest from the real estate discussion a bit.

Swine Flu Shots – Important Information.

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, especially my children.

#16 John m. on 08.19.09 at 7:05 am

Great post and how true…It totally amazes me how many Canadian companies use call centers in India to service Canadian clients in fact i have been trying for some time to find an actual list.Bell Canada is one example of one i have had dealings with…two years and numerous calls due to overbilling which was never corrected until by sheer luck one day i got an office in New Brunswick and the problem was rectified immediately and a credit placed on my account. The service is terrible–rates are constantly rising,and Canadian jobs are being sacrificed for cheap labour. It would not surprise me in the least if in the future a call placed to your local MP would be taken by an answering service in Houkamonga :-)

#17 wjp on 08.19.09 at 7:06 am

In my opinion, the key to this is debt, when the stake holders (the lenders) come to the realization they have total control over the Governments of the U.S. and Canada, then you will see harder times. The financial and real estate folks will continue to pump their never ending good news and the media will gobble it up and spit it out as they all have a real stake in higher markets. The unemployment of many will never be reversed, most manufacturing jobs are gone for good. Corporate profits will resume but at much lower levels; and as a result of cost cutting not robust activity, which means more unemployment. Interest rates will rise as countries compete against one another for the lender’s dollars. For those employed and who might consider themselves immune to the downturn, taxes, utilities and food will continue to escalate. The Canadian dollar could see 62 cents again as the federal and provincial debt levels rise and place the country economically into third world status. The U.S. dollar will be in great danger of becoming irrelevant as a reserve currency as lenders look to protect their investments. Western Canada will have oil but with the U.S. facing much slower economic activity, will that be enough to finance the federal coffers? China may be the world’s backstop but are we positioned to take advantage or have others beaten us the the trough? Will the folks out west be willing to support much of the rest of Canada? Once Ontario takes more from the federal coffers than they pay in, will that be the final straw?
Hard to say but one thing is for sure, we will not be returning to the consumer driven economy any time soon. Even those of us without debt are scrambling to save enough to get us through the rough inflationary times yet to come. Maybe all of this a good thing, we just may find out what is really important…just one man’s opinion!

#18 View from the South on 08.19.09 at 7:17 am

This may be one of my favourite GF posts. I live next to Detroit. I have fond memories of going to Detroit, to Hudson’s to see Santa and Cobo Hall for the Christmas Expo. My older brother and I walked to the old Tiger Stadium from the tunnel but, more recently, I don’t think I’ve been across twice in the last three years.
As a kid we made a semi-annual pilgrimage to K-W and Cambridge. My Dad got an armload of Arrow shirts, Mom got some Tender Tootsie shoes and I got some Buster Brown’s – all from the factory stores. Real factory stores at the factory.
There are lots of manufacturing city’s like Detroit – Youngstown, OH and Flint, MI are two. It’s sad because at one time people took pride in making things and now we take pride in “having things”.
Toronto may not face Detroit’s fate, T.O. may end up in worse straits. Because Detroit is emptying out and the remaining people are taking advantage of open spaces and starting gardens and small farms. Cities like Hogtown may find themselves bursting at the seams with “refugees” from the rest of the country because they are the only places where the masses think they can find “wealth” and “growth” and “prosperity”.

#19 Cash is King on 08.19.09 at 7:19 am

The City across the river from the no longer great city of Detroit, Windsor, has Canada’s highest unemployment rate at 15%.
School Boards and Churches continue to close due to low enrollment and attendance as they are unable to maintain the buildings. Social Service requests and suicides are through the roof.

But hey, the empty POS houses are selling like hotcakes.

#20 RiffRandall on 08.19.09 at 7:24 am

Nice post – getting out of the business of making things is something we need to be very concerned about.

It also seems like a lot of people don’t realize that it doesn’t end with manufacturing – we are losing ‘knowledge’ jobs to China (and India, and Vietnam) as well. I work and the tech sector and have been seeing it for years – people are kidding themselves to think that these knowledge-based jobs can only be done in NA, and we need government to get a handle on this before it’s too late.

#21 RiffRandall on 08.19.09 at 7:25 am

work ‘in’ the tech sector

#22 buy gold on 08.19.09 at 7:30 am

Garth, Just listed my house for sale in Old town Markham last friday for 439900 its just sold late yesterday for 439 even with no house inspection and or financing approval it was a firm offer.


#23 OttawaMike on 08.19.09 at 7:56 am

#9 TaxHaven on 08.19.09 at 3:10 am
That post hit the bull’s eye, I can’t think of a better way to say it.
#13 Samantha on 08.19.09 at 6:41 am
That post has some of the answers to Tax Haven’s argument

#24 lgre on 08.19.09 at 7:59 am

I for one would rather pay more and get something made here then someting from Chindia. I bought a new pair of sunglasses a few months back, and was shocked to see that MADE IN USA was stamped on it and not some asian country.

#25 robert on 08.19.09 at 8:00 am

Slow growth, no growth going forward is a given. I am just wondering how the growing numbers of jobless (a direct consequence of that slow growth) will be paying those higher taxes and intererest rates? You cannot get blood from a turnip however you can try to squeeze the absolute bejeesus out of anyone with decent income, savings, assets. Maybe the rich will be the ones picking up the pitchforks and torches this time.

#26 dd on 08.19.09 at 8:11 am

#1 $fromA$ia “Garths Nugget Boy”

“The Government in every way wants to punish the savers.”

Saving and investing tax should decrease in Canada. Consumption taxes should increase. We need more investment in this country not less. You see governments could tax the investments of the investments at a lower rate. But governments are always slow on the uptake.

#27 Mike (Authentic) on 08.19.09 at 8:15 am

“Higher Taxes to boost Revenue Idea”.

The US Gov’t is learning that unemployed people can’t pay as much in taxes.

IRS tax revenue falls along with taxpayers’ income

“Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

“These are staggering numbers,” Lynch says.

The White House thinks that tax revenue will increase in 2011, thanks in part to the stimulus package, says the report from AIER. But it warns, “Even if that does happen, the administration also projects that government spending will be so much higher each year that large deficits will continue, and the national debt held by the public will double over the next 10 years.”


“The government may have a hard time trimming spending to reduce the deficit when the recession ends. The 77 million Baby Boomers— those born in 1946 through 1964 — will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare. ”


#28 dd on 08.19.09 at 8:15 am

“The hell of it is, we’ll still need shoes.”

And with higher oil prices that may be the case. When oil hits the $150 dollar mark again the transportation cost will erode the incentive to ship from overseas. Of course I will hate to see the other ramifications of peak oil.

#29 dd on 08.19.09 at 8:19 am

#4 debtless in yyc

“wait until bond yields rise so I can benefit from our poor governance in some way ”

If the government ties to keep government bond yields low for years to come, inflation will be the big worry… and there goes your money.

#30 dd on 08.19.09 at 8:27 am

#17 wjp on

“Interest rates will rise as countries compete against one another for the lender’s dollars. The Canadian dollar could see 62 cents again…The U.S. dollar will be in great danger of becoming irrelevant…”

Will the CDN buck really decrease if the main US currency decreases? The CDN buck is more tied to the price of oil and commodities. Over the long term the CDN buck will increase because we will be more tied to the Chinese markets.

#31 My_View on 08.19.09 at 8:35 am

You failed to mention the IMF has also called the recession is over.

Detroit, although you have mentioned 5 decades of decline, has always been a sh**hole for as long as I can remember. Since the late eighties to now, I would travel to Detroit for Redwing games and the auto show. I was always amazed when driving through and seeing homes like the picture above. It’s not only the declining manufacturing sector that caused this rat hole, many factors you fail to mention, like the racial division that city has suffered for decades.

But are we on the same path of inevitability?

Fat chance! Last time I checked, didn’t see any homes trying to cross the border. By the way, all the reports I’m hearing of lately, BOC rates will stay low all the way through 2010. Eventually the Bull will emerge from you GT, the Liberal party won’t have it any other way, no pessimism please. I guess by the time an election is called and parties start to debate, the life expectancy of this site will be numbered.

You just showed your hand. — Garth

#32 Jonathan on 08.19.09 at 8:38 am

Inflation won’t help home prices. It will do the opposite. It will push up interest rates making record debt levels impossible to afford in the short term. It will cause commodity prices including energy and food to increase damaging household and corporate balance sheets. It will cause businesses to lay off workers and reduce incomes to offset rising costs.

The US caused inflation, purposefully or not, in 2008. Perhaps it was a test; an attempt to escape this debt trap. Inflation hit 5.8% YOY by June. Oil and food skyrocketed. It did not bode well for home prices or the global economy. Inflation is not the answer to our problems my friends, it will just escalate the issues.

Given that, what, 75% of Canadian mortgages are 5 year terms, it is the bond market, not the BOC that dictates mortgage interest rates. Since the bond market reflects inflation expectations, again, inflation is not the answer.

If inflation was the answer, we would have already inflated this problem away. In fact triggering any inflation over 1% right now will actually cause deflation shortly thereafter. The economy can’t handle inflation and will shrink – which will kill the inflationary forces. Once the economy shrinks, the market fundamentals won’t support the price level of the inflated assets. They will then fall in price. Hence, inflation will cause deflation.

Please Garth and others, do you agree? Let’s put these inflation bulls out of their misery once and for all.


#33 Mike (Authentic) on 08.19.09 at 8:43 am

“Canada’s annual inflation hit a 56 year low in July at 0.9 pct from a year earlier on sharply lower energy prices, Statistics Canada said”

Garth is/was right about deflation.


#34 DG on 08.19.09 at 8:43 am

Isn’t it a good thing that only 6% of us have BlackBerrys? It means that there is much more growth still to come from RIM. Everybody needs shoes, sure, but it’s more significant that lots of people who don’t yet have one want a BlackBerry.

#35 Jed on 08.19.09 at 8:44 am

Detroit has been in a sad state for many many years. I worked there in the mid 80’s and it was already melting down. I recall seeing abandoned building boarded up and on a slant all over the place back then. The demise did not happen overnight and it cannot be attributed entirely to the current economic state. Our Canadian cities have a very long way to go before you can compare them to Detroit.

#36 mattbg on 08.19.09 at 8:44 am

Almost sounds like Detroit would be a good place to set up a truck piracy operation :)

#37 wayupnorth on 08.19.09 at 8:48 am

Great post and replies so far!

It is important to remember that all free trade agreements that fuel globilization are written by corperations for their own benefit. Governments only rubber stamp them. This is why there is no common wage to participate or common quality control, working standards or environmental standards. The way they are written now, there there is just one standard, the lowest one in every category.

People like Mish, KD, TAE, NEE and many others have recognized for a long time that the only way to fix anything is to take back control from the corperations first. Many people talk of WWIII between countries but I figure the next major war will be the worlds population throwing off the yolk of of corporate dominence.

Is it just me or do those houses in Detroit look like boarded up versions of those $700,000 “mansions” that Garth has been showing us the last few weeks sold here in this country?

#38 Bill-Muskoka (NAM) on 08.19.09 at 8:48 am

Detroit is a prime example of what Jared Diamond was speaking of in ‘Collapse: How Societies Choose To Fail or Succeed’.

I used to travel regularly to Detroit as Senior Sales Engineer and recall way back to the mid 1970’s how the city was a desperate ghetto of fear, crime, filth, and people trying to deal with the huge gap created between the haves, have-nots, and a struggling middle class of employed workers.

Businesses in the suburbs had their doors locked and one had to show some form of ID to gain entrance. That was how bad the crime level was way back then. What caused this?

First, the huge gap between the elite country club executives of the automotive industry, ‘Captains of Industry’ as many were called, and the racially discriminated Black community of blue collar workers who made the millions the elite enjoyed.

It was a different era than Canadians have ever really known, one still plagued by segregation, racial animousity, and outright hate and fear.

Today, we have those same elements alive and active right here in Canada, be it the Arctic, Toronto, Vancouver, Calgary, wherever people of different backgrounds, race, religion, etc. come together.

We have worshiped the dollar and materialism like a God, allowed ourselves luxuries at the expense of the future, and still will not grasp that unless everyone has equality of opportunity, we shall FAIL.

Yes, the RE industry is a major factor because when people cannot afford a decent place to live, then despair kicks in, the better side of humanity disappears, and the primal nature takes over. If that is the future YOU want then continue on as you are. You will NOT escape the consequences, just as the people of Detroit have not.

That is reality, proven over and over again by history. We are not merely observers, we are the participants.

#39 Tony Lewes on 08.19.09 at 8:52 am

Finally a column about something working people have known about for a long time. For some reason the elites only think in terms of hi-tech. Well guess wha,t even those jobs are going to Chindia or Mexico. Ask someone who works for Bombardier, where the workers have to train Mexicans to do their jobs. The super hi-tech semi-conducters are produced in Japan even those the U.S. military relies on! If nothing else this recession has opened a few eyes.

#40 squidly77 on 08.19.09 at 9:02 am

Where are all the bubble headed realtors and specs now ?
hiding under their own personal rock no doubt..or maybe just an old tree…whats their poison a rock or an old tree

#41 Network Admin on 08.19.09 at 9:15 am

…I remember chatting with Jim Flaherty one day (when he’d still talk to me), and he said proudly that nobody in Ontario – not a single worker in any company working in any factory – makes shoes anymore…

Not true – see

Don’t tell Jim. — Garth

#42 conan on 08.19.09 at 9:18 am

The fun is just beginning.

Knowledge brokers in North America will use the Internet to set up competing enterprises for writing, legal and accounting services.

I am just guessing but, in the next 25 to 50 years, North America should have wage parity with India and China.

Hint… Our wages go down.

How do house prices stay up? They don’t, but municipal zoning changes can do a lot to help keep prices up.

We are seeing the changes now. Garages can be converted into low cost housing. Basements can be turned into one-bedroom apartments.

There are solutions to our shared future but we do not look hard enough for them.

#43 MikeB on 08.19.09 at 9:22 am

Crash 2 is absolutely correct. Our politicians decades ago planted the seeds of manufacturing as a base on which we could build our economy. These are long term plans like infrastructure which pay off dividends for decades to come. An engineer friend of mine said it best, if there is no manufacturing based then who are the service sector servicing??
Our current politicians are more worried about being re-elected than the future of this country. Detroit has always been a disaster but it is much worse now. Will Toronto fair better.. presumably so. But with our record inflation rate in negative territory and at a 56 year low than I see no need for an increase in interest rates which will spur on the heady insanity of debt in the housing market. It may not happen tomorrow but the road we are on will take us to a place we will likely not enjoy for decades.

#44 Jonathan on 08.19.09 at 9:25 am

#8 Arthur,

I disagree. The quality of the products we buy today are light years ahead of a similarly priced product thirty years ago – even when measured in nominal terms. We have effectively been fighting deflation for thirty years now thanks to globalization. Productivity has increased, but not to a point where it offset the lower prices of goods. Incomes should have fallen as a result. Hence the debt bubble and the consumer economy has been created, increasing real total debt 400% in thirty years in the developed world. Debt, knowingly or not, has been used for thirty years to prop up the economies of the developed world.

Historically speaking, when the prices of goods drop, and productivity does not offset the increase, incomes also drop. Productivity in the industrialized world is the lowest on record.

I have an article on my blog written about this but Garth slapped my wrist last time I put my link in.

#45 Happyplace on 08.19.09 at 9:28 am

Detroit’s decline is more an example of urban decay than recessionary problems. I was born and raised in the Detroit suburb of Dearborn in 1955, and believe me Detroit was a city in decline even back then. While it is inconceivable for Canadians, the city was very segregated. The white population moved out to the burbs as the crime rate moved higher. Everyone had a gun in their house, that is the reason we moved to Canada.

#46 Makeorbreak on 08.19.09 at 9:37 am

John M : “It totally amazes me how many Canadian companies use call centers in India to service Canadian clients”

…except in Quebec. I found that for their french-speaking clients, these companies haven’t yet figured out how to outsource these services to Algeria or Gabon…Often, you interact with somebody with an Acadian accent. Which is perfectly fine for me.

#47 FY on 08.19.09 at 9:38 am

#9 TaxHaven

You are right on the issue. What globalization does is to allow the elite of the developed country (think Apple, RIM, Nike etc.) to form alliance with the elite of the developing countries (think manufacturers, suppliers in China). The two groups combined are even more productive in creating wealth, than being alone.

That left out the less gifted/connected in the developed world (think Detroit’s auto workers) and the developing world (think migrant workers in China) to get smaller pieces of economic pie.

Inequality of the developed world used to be mitigated by a progressive tax system and social ideals. That is no longer effective: the social safety net while keeping the min standard of living of the less well-off, it increases the unemployed ranks.

In other words, if you insist on your old/good pay with the rise of global competition, you have to accept much higher unemployment rate.

The economist euphemistically calls this specialization, moving up/down the food chain.

Overregulation (only in the face of more intense global competition) is one of the many reasons the less well-off has to choose a service job (retail/fast food) than trying to do sth more creative and value-adding.

It has been a great myth and condescending view that China’s rise is mainly due to its cheap labor, lax regulation. Far from it, there is economic clustering effects, well documented by financial media. For example, nearly 80% buttons world wide are manufactured in one street in China. In one article I remember, one shoe manufacturer tries to move up to food chain, so to speak, to produce higher end sports shoes in North America – but the problem they face was that the volume being so low that they could not find a North American supplier willing to make them for a price they can accept.

Financial Post has an article on this phenomenons.

Garth’s post is a description but no prescription. But I am not sure anyone has good prescription to this problem, short of a coordinated global progressive tax system, but that would be decades or more down the road.

The decaying of Detroit, is like decaying of many ancient cities including those in China, only shows the unstable nature of the economic system. I am not sure we know what we can do about it.

#48 Denis on 08.19.09 at 9:39 am

Buffett says U.S. debt poses fresh threat to economy

#49 Denis on 08.19.09 at 9:40 am

Buffett’s Full Commentary available here:

#50 moneystill on 08.19.09 at 10:15 am


Isn’t it time to acknowledge the elephant in the room nobody wants to talk about.

Namely, how shoddy the shoes are. Running shoes made of nothing but gaze & “fish net”. Good only for the tropics.

Nearly useless Ladies’ shoes; no heel support!

So throw money at the problem. I bought a $400./pair of walking shoes. The stiching came apart after a couple of months of wear. They used to be good for 4 years and to cost about half the price.

The lavish quality goods we used to buy in Canada are only within the range of Bay Street now; just as shoddy in the US TOO.

Call it hyperinflation in disguise, if you wish, when a wheelbarrel full of money can’t get you a real pair of shoes.

Are we going to say it? The goods are shoddy, they don’t the job and don’t last.

#51 Gregor Samsa on 08.19.09 at 10:16 am

I could not agree more with Garth today.

When you boil it right down, there are only two ways for a country to gain real wealth: (1) through extracting and selling natural resources and (2) innovation. I think early in the days of offshoring and outsourcing, it was thought that we would just export the “dumb” labour, while keeping the higher end design and engineering jobs (ie, the source of innovation) here. But the reality is that the two go hand in hand, and many / most of the design and engineering jobs have followed the manufacturing jobs to Asia.

So Asia has now has the ability to produce newer and better products and sell them on the global marketplace to pull themselves out of a recession. Here in North America, our options are to try and find more oil and minerals to dig out of the ground or head to the mall with our credit cards (to purchase goods mostly made in other countries). The very fact that Canada has that resource card to play is our only saving grace.

Services, retail, government, insurance, real estate, health care, law – for the most part these parts of the economy do not create wealth – they either consume or recycle wealth. I think these sectors will soon become a millstone around the neck of Canada.

#52 moneystill on 08.19.09 at 10:26 am

$fromA$ia “Garths Nugget Boy”

Subject: Wage increases for some in a recession. Where is it going?

A little history sheds light on “aberrations”. A good summer read, is the documentary fiction, by Upton Sinclair: The Jungle. In public libraries.

#53 Denis on 08.19.09 at 10:30 am

Hot off the press – Sprott’s take on stimulus:
Beyond the Stimulus:

“This is not good news for “Main Street”, especially considering the dramatic increase in unemployment that we’ve witnessed recently. If the effects of stimulus wear off as quickly as they were injected, we could be in for a very difficult Fall (no pun intended). To make matters worse, this scenario is not limited to the US alone – it could potentially impact any of the other large economic powers who have instituted their own massive stimulus packages, most notably China, resulting in a simultaneous global economic decline that would make 2008 look pleasant in comparison.”

“So if the money hasn’t generated GDP growth, where did it go? It’s gone everywhere. Their government-induced liquidity flood has “soaked” virtually every
speculative asset class in China. Copper, nickel, steel, Chinese equities, Chinese real estate – they’ve all appreciated in spite of the obvious and acknowledged weakness in the global economy. It’s been great in the short-term – but this money was LENT OUT remember, and must eventually be paid back.”

“It is our view that the world’s combined government stimuli have completely distorted the global economy in the short term, and have encouraged a false sense of hope in the stock market. While the market has rallied, the real economy continues to struggle, and is notably
worse in many areas. Rates of employment, corporate revenues, US housing prices and retail sales all continue to decline in the face of ‘shock and awe economics’. In our assessment of recent economic data, there are only two possible explanations for the recent market rally. Either investors are discounting an incredible economic recovery that is just around the corner (hard to believe), or the extra liquidity injected into the economy has found its way into the stock market. We’re leaning towards the latter alternative.”

“The Federal Reserve has embarked on its own monetary injections, called quantitative easing, by buying $1.745 trillion dollars worth of debt issued by Fannie Mae, Freddie Mac and treasury bills issued by US government.” => Same as the BoC buying debt issued by CMHC. “Other Assets” on our BoC’s Balance Sheet.

“In our view, the threat of a double dip recession remains real. When the stimulus effects wear off there will be nothing left to replace the artificial demand they have induced. Investors should be prepared for what awaits us beyond the stimulus.”

#54 Smith-Martin on 08.19.09 at 10:39 am

Each day I read your post looking for a ray of light ,in this dismal economic time. You do your best to try to educate those who will not learn from the past, perhaps once you are back on the hill you can help the poor fools who are currently running our country to see the light…good lick with that.
I am of an age where memories of the ‘great deppression’ still linger,my parents tried to teach us to be frugal and not waste what we had ,but to only purchase what we absolutly needed and to pay with actual cash. to day plastic is the most important possession most people carry in their pocket books.
I remember shopping at T. Eaton’s for beautiful ,well made clothing , made in Montreal, then they opened shops in Tiawan to produce shabby poorly made clothes that were still over priced, it was the start of the slippery slop to the end of quality, made by people who took pride in their trade, Eaton’s is gone along with many companies that built this great land. G overnments incouraged this, as a way to help “Third world Countries” Who will help us in our time of need? Will Asian companies, off shore to Canada?
Good luck with your re-entry into Politics.

#55 rory on 08.19.09 at 10:41 am

#49 Denis:

Sure, now that the US Gov’t has supplied enough cash to shore up Buffet’s financial businesses he is now speaking up for the common folk and common sense … time now for the Buffet PR tour/machine to show what a great American he is …a little late and a little hypocritical …IMO.

Second item, when something attains commodity status the only thing that rules is the price. If someone can do it cheaper it will become the new norm …so as other countries are able to commoditize (spelling?) technology then we need to compete also …how – by having lower prices in wages, taxes, etc which will equal a falling standard of living …no way out people…again IMO.

P.S. – good article GT, people need to know down is a very real possibility and not just in housing.

#56 miketheengineer on 08.19.09 at 11:03 am


I worked in Warren MI, just outside of Detroit for 6 months, living on Van Dyke Ave for most of it. At night I drove around MI, to see what was about. This was in 1999. I remember Help wanted signs, low unemployment. I did go to a Red Wings game in the city of Detroit one night. We left quite late, and I took a wrong turn, leaving the game. The guy I was with said to me as we stopped at a red light. “What are you doing?”, “Don’t stop, just yield and go through, there are no cops in this area. If you stop, we become a target to the bad guys.” I went through about 15 red lights that night, one after the other. I was a lot younger then, and life was still considered an adventure.

Regular folks are scared of the place. I understand completely what has happened there, after living there for 6 months.

I know what Garth is really thinking here. Opportunity. Lets wait and see how low it goes. Continue to save our cash, get a group together, buy a whole chunk of Detroit. I am talking a 4 or 5 complete city blocks, and build war time bungalows, on big lots.

Enclose in a compound, like they do in Vegas, put in a food store and a doctor, dentist etc. Make it nice, and affordable, and it would sell.

Opportunity knocks….God, I wish I had access to a whack of cash.

#57 Makeorbreak on 08.19.09 at 11:13 am

Garth: even blackberries aren’t immune to the ‘yellow peril’ – en français:

#58 Betamax on 08.19.09 at 11:14 am

lots of people who don’t yet have one want a BlackBerry.

Newsflash: Anyone who wants one already has one.

Lack of sales is not a magical indicator of potential growth. Give your head a shake, Mr. Contrary.

#59 conan on 08.19.09 at 11:19 am

Re: 51

“The very fact that Canada has that resource card to play is our only saving grace. ”

Actually I think people are our best resource.

A piece of particleboard is not going to solve the big problems … the people will.

Industry creates wealth for Canada. Creating income from employment is a good thing. I notice your list does not include banking or the stock market folks. Why is that?

#60 [email protected] on 08.19.09 at 11:42 am

The whole world is corrupt.

Why else would we be continuing to be locked into purchasing gasoline powered vehicles? Yeah sure we have some electric powered cars or bio fuel cars, usually still requiring gasoline.

Just think how much money we’d save and how much cleaner our air would be if we switched to 100% natural gas powered vehicles.


1. There is tons of nat gas in North America. We would immediately cut off our dependency to Middle East Oil.
2. It burns much much cleaner than gasoline so would greatly reduce green house gases.
3. Nat gas price to oil is now an insane 20-1 ratio. Normal ratio for comparable energy output is 7-1. So it is insanely cheap.
4. It would also create huge number additional local jobs in the nat gas sector and thus improve our economy.
With these great benefits why can’t we buy a nat gas powered vehicle in Canada?

If we were able to reduce our gas bill perhaps we would have more left over money to blow on big screen TV’s, family trips, etc which would greatly help other sectors.

If we continue to be stupid due to greed we are destined to be doomed.

#61 RJAG2034 on 08.19.09 at 11:44 am

Hmmm, I guess we never learn from history.

Think about Rome, its dominance in the world for many years and then the outsourcing of the grain harvest to Egypt and North Africa caused the decline of its local farm industry. They supplied it cheaper and in greater quantities than the local producer.

This caused many thousands that worked the farms to become destitute and move to Rome and were given the ‘dole’ free grain. As more and more moved there to get the free handouts it caused a ripple effect and over a generation chaos ensued as the ruling class could not keep up the ‘dole’ without seeking ways of paying for it. Greater taxation put more pressure on those that had some wealth and the end result was civil war and the beginning of the end of the greatest period of human development that wouldnt be seen again for nearly a thousand years…

Sounds very similar to whats happening in the Western World doesnt it?

#62 conan on 08.19.09 at 11:46 am

Re: 55

“Sure, now that the US Gov’t has supplied enough cash to shore up Buffet’s financial businesses he is now speaking up for the common folk and common sense ”

Did not Buffet get royally smoked on his multi billion dollar investment that the government pressured him into buying?

He took a bad positon and I am sure he is pissed off.

#63 D from London, ON on 08.19.09 at 11:53 am

#38 – Bill Muskoka (NAM)

Amen, brother. I agree 100%.

#64 Bruce on 08.19.09 at 12:11 pm

It’s amazing how often the sheeple can be fooled. I don’t see ANY signs of recovery. As a matter of fact, what I do see is an increasing amount of worry and despair on people’s faces. Folks that have worked their entire lives and wondering if they’ll be able to retire. Students and our youth wondering if they’ll have a future beyond a McJob, and couples wondering how much longer they can keep their marriage or relationship from dissolving. There is NO real recovery taking place. Much to Mr. Carney’s blarney of hot air. Let’s face it. The world has become a big rat race where everyone shits on everyone else, where our “economy” caters to the wealthy few over the working many. You can’t win today. The only ones who can save money are the people who already have it. Money flows to money and the “old boys club” takes care of its own. It’s always been that way all throughout history. Best of luck. Wait till 2010 leading up to 2012. If you think things are bad now…

#65 Keith in Calgary on 08.19.09 at 12:11 pm

Regarding the $10.3MM Calgary house sale which the national media is still spinning wildly……a

A one of a kind Faberge Egg will always sell to someone who has the means to buy it…..but that fact alone does not mean that People’s Jewellers and Ben Moss will have a record year.

#66 Republic_of_Western_Canada on 08.19.09 at 12:11 pm

#12 Danforth –

Here’s a good

DELETED. You have just attempted to link this blog to a white supremacist site. This is your last post, loser. — Garth

#67 Industrial Guy on 08.19.09 at 12:21 pm

Resources….. hewers of wood …drawers of water…. Boy! have we progressed.

It’s time for you young pups to start reading James Laxer. He warned us back in the 70’s that the loss of secondary (manufacturing) industries was fatal to the Canadian economy. Either we invest in research and development and create unique and innovative Canadian products or someday our “branch plant economy” would close and move back south. He was right.

As one of my suppliers says …..”decades of neglect have served us poorly … Our turkeys have come home to roost”. Canada’s poor record of supporting innovation has left us with a few bright lights like RIM and a whole lot of long term unemployed.

Why is Denmark, a country of 6 million people the world leader in the construction of wind turbines? Why did Canada miss the boat on this one?

It’s simple. Our business sector is driven by short term greed. No one cares about a national industrial or resource development strategies which benefit everyone. It’s all grab the bucks and run. Hire temps, lease equipment …. grab your profit and off you go.

Many U.S. based companies have discovered the benefits of bankrupting their Canadian operations as a way of avoiding costly termination charges under Ontario’s Employment Standards Act. They ship all the good equipment back home and let Government programs clean up the mess of wages owed, pensions, environmental contamination etc …..

Oh yes, our resource industries also compete with third world countries. Just talk with the striking miners at VALE INCO in Sudbury. Brazil based Companhia Vale do Rio Doce chief executive Roger Agnelli recently told media that Sudbury is the company’s highest-cost operation and is not sustainable.
Not good news if you’re placing all your hopes on resources.

#68 Gord In Vancouver on 08.19.09 at 12:27 pm

Great post, Garth.

A city doesn’t have to be a Baghdad-like ghetto such as Detroit to be a poster child for the negative aspects of outsourcing.

Vancouver, BC used to host a wide range of both manufacturing and service-based businesses but now relies heavily upon the latter. Consequently, residents who lose jobs that pay $40,000+ struggle like heck to find employment that offers similar compensation.

Premier Gordon Campbell may lose his seat after the next provincial election but he had no choice but to implement the HST – to SAVE, not necessarily expand, his province’s manufacturing sector.

#69 PTDBD on 08.19.09 at 12:56 pm

My, oh my, oh my! So many intelligent, rational posts here today but all so depressing. “You people”, (don’t you just love that expression), just haven’t caught up with the new paradigm. You are still on a solid moral footing. Tsk, tsk. That’s no way to prosper in today’s world. From observation I see that:

– Banksters and speculators are tichly rewarded even when their greed fails them into losing enterprises. The taxpayer is offered as the last bagholder to support them until they can continue in their ways. They can then lend again to the taxpayer.

– Failing capitalistic enterprises are bailed out in the same way instead of letting them perish to make room for their better competitors. Those that do declare bankruptcy are free to declare their debts banished and they re-enter the marketplace.

– Foreclosed mortgage holders who bought without sufficient foresight are allowed to stay in their homes.

– Those that bought gasoline guzzlers in the past are rewarded with cash incentives to purchase new cars while those who bought fuel efficient vehicles get no such rewards. Instead, they pay higher taxes for the clunker program.

– Savers get no interest for their cash. The Banks are supplied with plenty of almost free money from the Central Banks who create digital currency at will to further deplete the buying power of the existing money supply.

– Dropouts are payed to go back to school while the achievers suffer the consequent disruption and greater class size.

– Those that do not pay their huge Credit Card debts are rewarded with 50% off deals is they agree to pay the debt off. Those that pay regularly, are punished with outrageous interest rates should they accidently miss one payment.

– A company gets a reprieve on their debt and their stock doubles the next day. Companies don’t have to make a profit anymore for their stock to go up. They just have to beat analyst estimates.

It’s the world today and a product of the “we want it all, we want it now” mind-set. It’s working for them.

#70 rKr on 08.19.09 at 1:11 pm

This is certainly the best time to buy a condo especially in Toronto. the demand for Toronto condos will *explode* in 2010 (somewhere between June-Aug to be more precise). Current rates are low, prices are very reasonable now, in fact I would say real estate in Canada is at rock-bottom, job losses have halted and the economy is growing once again. Those of you who are astute enough to watch Brad Lamb (Big City Broker..) will remember a few months ago he travelled to NY to buy a condo. Once again, this proves that real estate is the best option for long term investment, therefore I would seriously recommend anyone who wants a rapid return on their investment to be brave & seriously consider a second condo in Manhattan (raising the funds for most people should not be such an issue) and you’ll thank me for the ROI within the next 18 months.

There’s been a mistake. The Yuk-Yuk’s site is the next blog on the left. — Garth

#71 Got A Watch on 08.19.09 at 1:11 pm

#67 – Superb post! I’ll toast it with a fine Canadian beer later. I recommend ‘Hockley Dark’, my local rural brewery.

A FIRE/consumer (FIRE = Finance Insurance Real Estate, for those who are wondering) is a garbage economy. Garbage in, garbage out. A nation of tanning salons selling gift certificates to each other.

I don’t think I recall hearing any of our alleged “elites” discuss this, never mind take steps to address it. Every place on the map trying to attract “green jobs” is a delusional “plan”, there aren’t that many to go around. The ‘Green Revolution’ won’t produce mass employment. We need leadership and it ain’t going to come from Ottawa.

If you want your neighborhood, your town, your province, your country to be a prosperous place where your children have a viable future – it’s time to take charge of matters.

An entrepreneurial spirit built this country, and that same spirit is the only thing that can sustain it going forward. We can do as good or better than the Danes or anyone else on technology if we just had our act together. And I don’t mean just BlackBerries, though they are a proof of concept.

Manufacturing of high-tech/high-quality goods and renewable resources (agriculture) is the only way to go in the long term. All mined resources get depleted sooner or later, I am thinking 50/100 years down the road. Canada won’t be a resource exporter forever, then what?

This means the old-fashioned heavy manufacturing done in new ways. Think Germany here, who still make the heavy machine tooling that less developed nations use to build and run their plants. The Danes machine their own turbines, they don’t order them from China.

Canadians are up to the challenge, I think, but we have a crippling leadership deficit. Perhaps Garth can give us his industrial policy views in another post, it is a vital issue for every citizen.

#72 Kate on 08.19.09 at 1:19 pm

#73 Calgary Rip off on 08.19.09 at 1:23 pm


Its interesting the opposing views on your blog presented by you and by some of the readers here unlike many people here in Calgary.

Where are these high interest rates as applicable to housing? Why would Ottawa enforce rates that would bring a city to its knees? Your blog really isnt making any sense.

Some would say that because the USA doesnt need oil or lumber from Canada that Canada is hooped. However, Canada makes many products in Ontario that can be shipped to the USA. Where the hell is the doomed recession?

Also, who would want to buy one of those houses in Detroit? The problem with too low valued real estate is that its likely to encounter sinister neighbours. I wouldnt buy one of those shacks with your money because I dont want hookers, drugs, dogs and guns as my neighbour. Although heavy metal music is good, I dont go with the genre of death/satanic black metal with all its evils. Slipknot sucks-id rather listen to Yngwie Malmsteen. A bit of class is required, so no thanks to that hellhole called Detroit.

Just because Calgary is a ridiculously priced prairie city and people want prices to go lower doesnt make it so. Again, if there is a house way below the market rip off currently presenting as status quo you will have vultures and realtors waiting to pounce. The house listed will be sold in hours. Look to your lovely mls guide or realtor pimp sites in Calgary for evidence. They’re all a bunch of ho’s.

Factual evidence of WHEN the housing mortgage rates will happen is needed not some bs about buying some shack in Detroit. Who would want to live there even if its affordable? It would be like something out of the Terminator Salvation movie. Or worse.

Keep ’em facts comin from Ottawa Garth.

#74 Makeorbreak on 08.19.09 at 1:28 pm

Bye bye recession, hello recovery!

Unemployed may find another job, but this article fails to mention what the wages and benefits are compared to the old job:

#75 My_view on 08.19.09 at 1:30 pm

China & India, hmm, thats all you hear about the last several years. What if asia is the next bubble? China, a 1 party communist government who controls just about everything. We all know how good that is for the free markets. Lately China has been hoarding metals, reminds me of tulips.

#76 wjp on 08.19.09 at 1:33 pm

#30 dd…we will have to wait in line after Australia and others, we may have what they want and need but so do others and they haven’t annoyed the hell of of China like our present government. High oil prices will only benefit the west, the rest of the country will die…

#77 Men With Hats on 08.19.09 at 1:47 pm

Shoeless and clueless . Perfect description of Flaherty .

#78 steven rowlandson on 08.19.09 at 1:48 pm

At last Garth afordable housing.
The draw backs.
No jobs.
High crime.
NWO government.
Super poor quality properties.
Properties are in another country.
I suppose one could buy one on spec and fix it up over time if one had a job and was a city person.

As for manufacturing jobs I am reminded of an idea Bob Chapman had and that is to impose tariffs on all imported goods. Therefore if businesses wanted a share of the market they would have to make the goods locally or get priced out of the market by taxes on their imported goods. Not exactly free trade but under the circumstances one can understand his motives. Look for a new wave of protectionism as the economy goes south. It will come from interested individuals first as most governments are more or less in the globalist camp.


#79 Mike (Authentic) on 08.19.09 at 2:05 pm

Hold the phone here.

If we lessen our global dependance on oil and the future of cars is to go electric, won’t this really hurt Canada a lot? We don’t have lithium for the car batteries and who would want our oil anymore?



#80 Industrial Guy on 08.19.09 at 2:14 pm

The Germans are now buying some of their tooling from Canada. I know one company in the Windsor area who recently completed a 10 million dollar tool and die contract with a well known German car company. The designs are German …… the tool steel was from U.S. owned mills … the labour? That’s where us Canucks come in.

To many companies in the EU, Canada kinda like Mexico with 24 hour electricity, drinkable water and Mounties

The high flying Euro and the high wages and benefits paid in the EU make us quite competitive. It’s too bad our industries focus on the U.S. market.

I could be …..because so many are owned by U.S. based firms. An economist in the 70’s claimed “Canada was the richest underdeveloped country on earth”.

Just imagine how Canadian companies would react if all their staff had 5 weeks of vacation annually as required by the labour laws in most EU countries.

The Toronto Star is reporting today …. “Inflation hits 56-year low”. odd, once “inflation” is below 0%, isn’t it deflation?

It should read “Deflation hits 56- year high”.

#81 Future Expatriate on 08.19.09 at 2:16 pm

I bought an electrohome monitor for my Amiga computer back in the 80’s. Even then, I was buying Canadian when I could.

#82 dd on 08.19.09 at 2:19 pm

#70 rKr

…job losses have halted…

Oh that is funny. What kind of drugs are you on?

#83 RJ on 08.19.09 at 2:26 pm

As a Yank, I had always found it somewhat comforting that resource rich Canada was our number one supplier of crude oil. Whatever OPEC had up it’s sleeve, would no doubt be mitigated by our benevolent friends with beavers on their nickels. Heck, the War of 1812 was just a big misunderstanding started by some foolish hillbillies.

Then I delved into EIA data, and found that Canada is a net exporter of just one million barrels a day. Further, 95% of her 178 billion barrel stated reserves are locked up in tar sands. Considering the problems with Venezuelan and Mexican production declines, I would expect to see plenty more Detroits in our (USA) future.

#84 POL-CAN on 08.19.09 at 2:45 pm

Lots of great post today but I have to stray off topic… But only sort of….

Another interesting post from KD:

Whistling Past The Graveyard?

Note that the PDs (that’s the big banks that deal directly with The Fed) took basically all of the auction, and they were willing to loan all that money to the Treasury at an annual interest rate of 0.145%.

That is essentially zero.

So what is it that these big primary dealers see happening (or more importantly, have been told and thus know will happen) in the next two months that leads them to think parking $22 billion of money with Treasury at zero interest will provide them with the best possible return on their investment? Oh, and they bid for nearly 5x as many bonds as were sold too…..

I know, I know, its “a new bull market”, and you should buy stocks, right? We’re going to the mooooooon!

Are the rats jumping ship? The 70 days will take us right out to the end of October. What happens between now and then?

Better go to the bank and have some cash on hand just in case.

#85 David Bakody on 08.19.09 at 3:05 pm

Very few people pay full price for items they know they can get on sale. America’s ” Cash for Clunkers” is a prime example and it will flow here sooner rather than latter. Why do people line up overnight sleeping in the snow and rain for electronics on boxing day. There are a thousand of examples and the final cost is coming home to roost. Not to praise Paul Martin but he understood finance and he paid our countries bills and put money in the Bank …. then along came Jones, smooth talking fast walking Jones and we, yes we are soon to be in a place that even our children working day and night may never be able to recover from.

Note: There is Dark Side to all that Garth has mentioned and it is crime …… not from your everyday crook, but from depressed hungry people.

#86 Mark on 08.19.09 at 3:14 pm

Interesting article on the history of renting and home ownership in the US:

#87 timbo on 08.19.09 at 3:20 pm

Fantastic, the word is out there. Bring back some of the jobs that kept the economy stable. We have been living on credit for 20 + years and it’s time to use production as a driver not the credit card. Wal-Mart’s and 7-11’s are not the answer. Good paying , economy driven, tax paying jobs cannot compete against off-shore.

hate me or not it’s true. Just think about it…

#88 Dawn in Calgary on 08.19.09 at 3:34 pm

#70 – rKr

Uh huh. Right. Go buy that condo in Manhattan. Let us know how that works out for you.

‘As the Manhattan real estate market sits at a standstill and once filled-to-capacity towers rapidly empty out, landlords and brokers struggle to fill apartments with a class of renters they would normally count on at this time of year — out-of-state college graduates.’

#89 Barb .. a reader in Calgary on 08.19.09 at 3:39 pm

The CONs called me from Oddawa this week wanting to know if I’m a Conservative and can they rely on my vote?

Obviously self-serving Stephen has been reading Garth again and wants to get the next election under his belt before the crash part deux occurs.

#90 VOODOO on 08.19.09 at 3:44 pm

‘Spin’ has occurred in Ottawa since at least 1861 (yes, 1861):

In an effort to refute the position that Ottawa was over priced and untenable for prospective landowners, the Citizen published an editorial on, and stated “land held at such high prices as to deter people from purchasing” is an assumption ‘almost’ wholly without cause – there may have been ‘one or two owners’ who held their property at high prices, but there are eligible city lots for sale on terms that were reasonable and easy. The Citizen continued on to note:

Mr. Chas. Sparrow jr.- a land agent in Ottawa- advertised building lots a 5 min walk of the Parliament buildings from ₤50 to 100 each, Size 1/5 to 1/6 of an acre

These prices are small compare to lots in Western towns and cities during speculative mania of 1855-56
Previous six months- Sparrow disposed of some $50,000 worth and they are still in demand

**Now it’s a good time to purchase**

The Price of Land in Ottawa, Ottawa Citizen August 2, 1861
Can you believe that!! They’ve been using “it’s a good time to buy” for over 148 years! HA!

#91 Azza on 08.19.09 at 3:52 pm

#25 robert

If I would you I would not count on rich to pay high taxes instead of middle class. If anything rich people pay LESS taxes than regular folks. I think Donald Trump said that, that he is paying fraction (12% I think) of that regular guy would pay (30-40%) because of tax optimization.

If you read this blog yesterday Mr. Turner himself said something about income allocation. Rich people are rich because they know how to avoid paying unnecessary fees/taxes. You start from tax deductible mortgage, investing account in trust registered in minor’s name, income allocation to personal business that otherwise losing money, good accountants and financial advisors who rich can hire to reduce their taxes.

Rich are paying the bill? You just made my day! :-)

#92 eddy on 08.19.09 at 4:03 pm

people have to revolt and take their country back from the money masters and big business. the Canadian government has made every citizen a debt slave and tax collector- for life. they’re even too lazy to collect their own tax!

the government of Canada then uses that tax to support and finance chindia’s black market economies

#93 POL-CAN on 08.19.09 at 4:05 pm

The USA is in a depression:

More Overwhelming Deflationary Evidence In Chart Form – Impact Imminent!

The verdict? The BLS announced the following, “From July 2008 to July 2009, prices for finished goods fell 6.8 percent, the index for intermediate goods decreased 15.1 percent, and crude goods prices dropped 44.8 percent, all of which are record 12-month declines.”

#94 Noname on 08.19.09 at 4:11 pm

I doubt the blackberries are really made in Canada. They are probably designed here but made in China, just like all the iphones.

#95 GG on 08.19.09 at 4:13 pm

Garth. If the scene in Detroit is the future shhht I’m jumping into refuge boat to Cuba or Mexico.

#96 Evangeline on 08.19.09 at 4:23 pm

I was checking out real estate in Florida yesterday. Unbelievable what you can get for under $50K. Properties selling for $25K in Orlando would go for $250K in downtown Toronto.

#97 Men With Hats on 08.19.09 at 4:26 pm

#70 rKr on 08.19.09 at 1:11 pm

Funny,funny stuff . A veritable comic genius .
Seek help !

#98 poorguy on 08.19.09 at 4:30 pm

GTA Resale Numbers

June First 2 weeks : 5185 ,Avg $407,706
July –Same period: 4437 ,Avg $394,750
August —Same : 3832 ,Avg $383,796

Can you see the pattern ?

And this
“The results for the first half of August indicate that many households in the GTA
remain confident in their ability to purchase and pay for a home over the long
term,” said TREB President Tom Lebour.

He must be joking -:)

#99 the Coming Depression on 08.19.09 at 4:41 pm

rKr your a la la land. This is a good time to buy real estate? When rates are lowest ever, the price is high, its high time (spring), beginning of a DEPRESSION, the herd buys..Aren’t you supposed to do the opposite? Buy when the snow is 5′ deep, nobody is on the street and it’s a blizzard, when rates are so high that they cannot afford the payments anymore and real estate crashes like the 80’s? Are you THAT DUMB?

#100 wayupnorth on 08.19.09 at 4:42 pm

#67 + #71- AMEN

The biggest failure of the last year is the idiotic idea that there is a one solution fits all to the worlds economies. Then to make that solution based on trying to repeat the past. The fact is, every country needs a different made at home solution to fix the underlying problems they have built into local economy.

China who last year had an economy based 70% on exports rightly recognized that they needed to build an internal one. Unfortunately they followed the U.S. in massive stimulation programs that their people used to stockpile commodities for the next export boom instead. They could have done it much more simply by doubling wages and creating demand. But that would have made them less competative globally and was at odds with the cling to the past mentality that man seems to be doomed with.

Of course the U.S. is failing miserably at trying to restart the false economy of the last twenty years and nothing short of revolution to remove corporate control over their government will make any difference. They will ultimately have to force competition back into their economy by breaking companies into maximum half billion dollar size.

Germany, Denmark, Poland and others are fairing better because they have ignored the call to uniformaty and followed their own plans.

Russa wants to lynch Putin as they realize a lesson Canada must learn. Basing an economy on selling natural resources without using them to make something first is a recipe in disaster when those same resources fall in value. The second lesson is that allowing only a few people to profit from those resources means that there is little left to the majority of the population to create a local economy.

So where does that leave us? The perfect time to wean ourselves from a resource based economy is now when sales will be at the lowest. Start with forestry and permenantly end the sale of raw logs. If anbody wants forest products then only sell paper, lumber or finished products. Within five years end the sale of mining products like ore and ore concentrates. We should sell only ingots, sheets, plates, wire etc. of smelted metals if someone needs them and even better, products made from those primary goods. Finally oil, which should be cut off when we build enough refineries to process it. then we can sell plastic pellets, home heating oil, diesel, etc. to any customer that needs our resource.

It doesn’t matter whether we ae competative or not because if we start it now countries like Russia, South Africa and eventually all resource rich countries will follow to increase the standard of living in their borders and the pockets of their businesses. At the end of the day there will be great pain switching to what is needed which will be better than the long term slow death if we don’t switch. Also at the end of the day the only way forward for the world is destruction and breakup of multi national corperations into national companies that are subject to control by national, regional and local governments once again.

End of sermon.

#101 malbadon on 08.19.09 at 4:48 pm

Don’t worry, everything is perfect in Calgary! Who needs manufacturing!

Haworth furniture closing its Calgary manufacturing plant and relocating to Michigan, chasing 22 million in tax breaks. 600 Canadian jobs…..poof!

#102 JoeCalgary on 08.19.09 at 4:49 pm

#71, Got A Watch, take a look at some German manufacturing:

#103 wetcoaster on 08.19.09 at 4:56 pm

I saw Ozzie on Global today and he was having an orgasm with the anchor about housing sales and pronounced his belief that the massive money injection will cause major inflation and house prices to go up with it. No mention of affordability indexes,no mention of higher interest rates,no mention of unemployment,no mention of so many things. Just buy baby !

#104 JO on 08.19.09 at 5:35 pm

# 5 – in major deflation/depsression, the last place you want to put your money is on deposit with any bank or otehr FI. The only thing you should own is short term gov of Canada T Bills.

CDIC is a ponzi scheme enabler (has a tiny reserve fund against all insured deposits). Most banks are done if they get hit with a run. The CAD banking system operates with roughly 16-18 dollars in loans outstanding, much of that made to the weakest homebuyers at aritifically low rates secured against an artificially inflated, illiquid asset (houses), against each dollar on deposit. It literally is a debt based ponzi scheme.

We are now in the very early stages of a massive credit contraction which will see the global economy shrink the excessive debt before we can stabilize. The by product of this will be shocking drops in nominal asset prices for a while (2-5 yrs?).

Gold bullion (15-20 % of net worth), and most money in a Gov Canada TBILL is the safest way to invest. If gold drops below 700, i would add more in preparation for the inevitable high inflation. Putting your money on deposit with a bank or in a bank SDB defeats the purpose of staying safe. Even if the CAD gov’t honours depositors (very likely), it may be months before you get your money back.

# 9 – Good comment, I agree.

#105 Men With Hats on 08.19.09 at 5:36 pm

#89 Barb .. a reader in Calgary on 08.19.09 at 3:39 pm

I would have said yea,sure . I also have a million bucks to donate to your campaign if you can figure out a way to give me a two million dollar tax receipt .

#106 seanmhair on 08.19.09 at 5:42 pm

We used to head over to Detroit all the time. Have fond memories of Red Wings games, the Auto Show, coney island dogs, theatre, ballet. museums, concerts of every flavour, State Fair, Mexican & Greek towns. Miss those days…but I wouldn’t visit Detroit today. So very sad too see a once vibrant city in shambles.

Windsor (fortunately) is not there yet. Hope it will never be, but….
The view from my front steps: Two of them are POS

#107 Danforth on 08.19.09 at 5:56 pm

@ #93

RIM is one of my corporate customers in the course of my employment. I’ve had meetings in their facilities, including the manufacturing facility in Waterloo.

There are certainly Blackberries still made in a facility in Waterloo, Ontario – though my personal Crackberry has a “Made in Mexico” embossment underneath the battery!

#108 Nostradamus Le Mad Vlad on 08.19.09 at 6:13 pm

Today’s KDC reports the BC wildfire costs now exceed $200 mln., and $68 mln. was budgeted. Combined with maintenance costs / upgrades for the ‘lympix (a bln., give or take by the time they’re over), the HST, esp. with an economy in the doldrums will amount to an increase of around zero in personal spending habits, so govt. has screwed itself (unless it was pre-planned so the US ends up in charge).

A few days ago, I read a link that said the Mexican drug cartel had started the present round of Calif. wildfires, so as to mess their finances up even more , which may lead to these two:

#13 Samantha on 08.19.09 at 6:41 am — “Our future gig as piñatas won’t be sufficient to compensate for the national debt, fallout from personal debt and resurrection of our manufacturing sector.”

— and —

#27 Mike (Authentic) on 08.19.09 at 8:15 am — “. . . The 77 million Baby Boomers— those born in 1946 through 1964 — will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare. ”

Take 77 mln. boomers in the US, rounded off to 82 mln. (Af’stan and other service-people permanently disabled in wars, receiving benefits), nine (rounded off to 10.5 mln. here), not sure what the UK is, but the one MP said recently that they would be better off with a pop. of 30 mln. — that is a 50% pop. decrease and this leads to the introduction of the ‘swine flu pandemic’.

I haven’t included the 500 mln. or more people living in the EU, but one can understand why the IMF and WHO would be in ‘charge’ of everything now.

Who controls the IMF and WHO? Not too hard to guess, but the end result in a few years’ time, tax systems will have be drawn up and restructured again, but this continent has conveniently lost approx. 100 mln. folks in the process.

Start again with a NWO govt., calling the shots from HQ in Berne, London, Rome or Brussels — the elite will be happy to see what has unfolded before them!

#109 Peter Wiener on 08.19.09 at 6:19 pm

re #55 rory

You nailed Buffet’s mo (modus operandi) exactly in my books. Good thinking on your part!

#110 Herb on 08.19.09 at 6:19 pm

Joe Calgary @ # 100,

very impressive factory. Keep in mind that it builds the Cadillac of the VW line.

How much did it cost the federal, state (=provincial), and municipal governments?

#111 Eduardo on 08.19.09 at 6:20 pm

Garth, my home sold above list in <14 days with a 15% deposit. You should be proud of me for once!

#112 Peter Wiener on 08.19.09 at 6:21 pm

355 rory
meant to say good analysis and thinking on your part!

#113 Shawn on 08.19.09 at 6:28 pm

Wealth is created by producing anything that others will pay for.

Wealth ultimately is the ability to consume.

The market will tell us how it values shoes, houses, cigaratets, blogs and even porn.

The production of life insurance may be more valuable or less valuable than shoes, the market will tell us.

Buffett dewscribes monetary wealth as being “claim checks” on goods and services.

If wealth is consumption then we need production of that which we wish to consume.

It seems we value things like leafs tickets more than shoes… so be it…

#114 viewwest on 08.19.09 at 6:35 pm

I worked in a company that used to be one of the biggest manufacturers in BC.(500+ employees) They were world renowned for their home decor products. But their customers (retailers) kept demanding lower and lower prices. Simultaneously, competitors that were sourcing their goods offshore kept offering the retailers ever lower prices. So the only way for the BC company to survive was to outsource all their manufacturing offshore . This , at least, kept a small group of people employed in BC instead of everyone losing their jobs. What I observe is that North Americans SAY they are frustrated by loss of jobs to global nations. BUT, they don’t act to stop it. Imagine this scenario….tomorrow all Canadians or Americans just STOPPED BUYING anything Made in China( or other offshore, low wage countries). Can you imagine how quickly the corporations would take note and change gears. The power is in the hands of the consumer. As long as the consumer keeps buying offshore goods then it is THEY, and NOT the corporations who are guilty of destroying our economic base. There is a great saying in India, “when you point your finger at someone else, 3 fingers point back at yourself”. Hey folks, stop feeling righteous by blaming the corporations/politicians and start taking responsibility for what you’ve helped to create. Buy local, Buy Canadian. Talk to your local store management/owners and tell them why you won’t shop in their stores until they carry Canadian goods…. or don’t complain that there are no jobs in your communities. And yes, I know it may mean paying ‘more’ for things and so you won’t be able to buy as many things…but we’ll have jobs and an economy and we’ll survive. If you don’t believe me, read “CHEAP, THe High Cost of Discount Culture” by Ellen Ruppel Shell.

#115 Albertaboy on 08.19.09 at 6:39 pm

#70 – I have $1000 burning a hole in my pocket that says TO condos will be at LEAST 5% lower (probably more, but 5% is a good start) by next summer.

You’re delusional.

#116 Peter Wiener on 08.19.09 at 6:42 pm


When you talk about keeping your money in T-bills of Cdn gov’t, I presume you mean of short term duration for flexibility and to avoid undue interest rate risk.

Could you let us know what you think is an appropriate timeframe for said T-bills (i.e. 30, 60, 90, 180 days) at a time. For instance would you favour say 30 days and then continue to just roll it over or would you ‘ladder’ it using different maturities? Are there provincial issues of T-bills that may afford a better risk adjusted reward (in that they ultimately are wards of Ottawa should they fail)?

Do you not think that gold would drop in price if we to experience the deflationary effects as in your view? I believe that happened INITIALLY in the GD, and then prices increased as the Depresion unfolded.

thx in advance for any light you shine on the topic.

PS – I enjoy your insightful comments and wish you would post more often. I think you are helping a lot of people who read this blog to understand the potentialities out there and their ramifications in the real world. Good work!

#117 AM on 08.19.09 at 6:46 pm

What the heck are all you guys talking about eh?
Don’t you know it is different out here in Canada?

More cool aid please…..

#118 robert on 08.19.09 at 7:09 pm

#90 Azza
Hey glad I could make you smile!
I understand what you are saying vis-a-vis the very rich but is this not legally sanctioned tax avoidance? And besides which, how many of us are the Donald? I guess the point I was trying to make was who will have the income or assets left to tax? If I do not make more than a subsistance income how are my taxes going to pay for all the government largesse?
It’s the guy on the margin who’s buying all this stuff with easy credit. What happens when he loses his job and his access to credit? And if he’s paying more in taxes and interest he won’t be buying more “stuff” now will he? Do you honestly believe someone who has lost his income and is in debt up to his eyeballs is going to willingly rollover and pay more taxes? Not a chance. Especially when he can continue to live in his house without any consequences after getting a notice of default (US) and also get his credit card debt cut in half by the card issuer, simply by refusing to pay anything. Interestingly it is the rich, or perhaps I should say, faux rich, who hold a lot of this non-performing garbage in their portfolios. Talk about a comeuppance pending. I think too many of us conflate wealthy with smart. Me, I’m just a simple retired guy who wants little and needs less. Cheers!

#119 Dan in Victoria on 08.19.09 at 7:19 pm

Well, going to go fishing,crabbing and beer drinking for a few days with some of my old friends,we’ll have all the problems in the world sorted out around the campfire.Housing affects our group, should be an interesting discussion.Don’t worry about any beer shortage, I notified the brewery to add an extra shift.Hey…… my beer is still made in Canada isn’t it?

#120 andrew black on 08.19.09 at 7:51 pm

#102 JO … great investment advice. short term gov of Canada T Bills are currently paying a “healthy” 0.14% interest.

#121 David on 08.19.09 at 7:56 pm

The creation of these post industrial rust bowl wastelands has been an ongoing 30 year project of disinvestment by corporations and neglect by governments at all levels. The biggest critics of deindustrialisation were for the most part from the progressive community and people can read the books of Bennett and Bluestone, Robert Reich, James Laxer and scores of others who were worried by what they saw happening to our collective manufacturing sector. The financial services “industry” is now bigger than the industrial sector. New job creation for the past few decades has been in the low wage service sector which has far lower levels of productivity output and a much smaller economic multiplier effect. The very sectors that had the most growth were in what is euphemistically called domestically non tradable services. It is really tough to generate much wealth creation through nail studios and restaurants.

#122 Live Within Your Means on 08.19.09 at 8:03 pm

#54 Smith-Martin on 08.19.09 at 10:39 am

In my high school years and later I worked for Eatons. I worked in their buying office and worked with the Mtl. ‘rag trade’, attended runway shows (with Twiggy even). Yep dating myself. In those days there were lots of Mtl. clothing mfgrs./designers and the city was the most DYNAMIC place to live in Canada IMHO. Its still a great place, but, unfortunately, with globalisation, there’s very few clothing mfgrs., if any now, that have survived. I’m all for helping out the 3rd world, but we’ve got to protect our industries. If we and other supposdely 1st world countries don’t, who’se going to afford to support those 3rd world ones. We’ve got to find a balance. Govt. is encouraging more training – but in what? Will they just end up in another Macjob service industry. This govt. doesn’t seem to believe in science or the arts.

Well, I doubt I’ll be around to see to ‘devastation’, but I do worry about the next generation tho we have no children. Pardon my rant.

#123 jess on 08.19.09 at 9:01 pm

Is “Croft’s Canada” (royal bank) v shaped or the Zarnowitz rule?

Who is Victor Zarnowitz? What was his contribution to the financial cycles theories? Victor Zarnowitz fled the Nazis in 1939 only to end up in a Soviet gulag. He made his way to the US and became professor of economics at the University of Chicago. Later at the National Bureau of Economic Research, he studied and dated recessions and expansions. Essentially, the Zarnowitz rule says that deep recessions are almost always followed by rapid rebounds.

I believe Minsky states it best.

In Minsky’s words,

Three distinct income-debt relations for economic units, which are labeled as hedge, speculative, and Ponzi finance, can be identified.

Hedge financing units are those which can fulfill all of their contractual payment obligations by their cash flows: the greater the weight of equity financing in the liability structure, the greater the likelihood that the unit is a hedge financing unit.

Speculative finance units are units that can meet their payment commitments on ‘income account’ on their liabilities, even as they cannot repay the principal out of income cash flows. Such units need to ‘roll over’ their liabilities: (e.g. issue new debt to meet commitments on maturing debt). Governments with floating debts, corporations with floating debts of commercial paper, and banks are typically hedge units [sic?].[nb 1]

For Ponzi units, the cash flows from operations are not sufficient to fill either the repayment of principal or the interest on outstanding debts by their cash flows from operations. Such units can sell assets or borrow. Borrowing to pay interest or selling assets to pay interest (and even dividends) on common stocks lowers the equity of a unit, even as it increases liabilities and the prior commitment of future incomes. A unit that Ponzi finances lowers the margin of safety that it offers the holders of its debts.

It can be shown that if hedge financing dominates, then the economy may well be an equilibrium-seeking and containing system. In contrast, the greater the weight of speculative and Ponzi finance, the greater the likelihood that the economy is a deviation-amplifying system. The first theorem of the financial instability hypothesis is that the economy has financing regimes under which it is stable, and financing regimes in which it is unstable. The second theorem of the financial instability hypothesis is that over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.

In particular, over a protracted period of good times, capitalist economies tend to move to a financial structure in which there is a large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make positions by selling out positions. This is likely to lead to a collapse of asset values. [5]

The inevitable disillusionment of the Ponzi borrower, when the bubble pops, i.e., the asset price ceases to increase, can lead to seizure of the credit system. The speculative borrower, who needed no more than debt rollover, can no longer refinance the principal despite the borrowers ability to cover interest payments. The collapse of the speculative borrowers can then bring down even hedge borrowers, who are unable to find loans despite the apparent soundness of the underlying investments.

#124 Bottoms_Up on 08.19.09 at 9:07 pm

Housing starts have fallen off a cliff:

#125 Nostradamus Le Mad Vlad on 08.19.09 at 9:11 pm

Sirius used to be a red blob; now it’s pink – purple – blue and any color you like! —
A cartoon is sometimes the best way to view the economy! —
These would, in one way or another, be linked. Comment at end by and no, it doesn’t have anything to do with the links! —;_ylt=AvyjCylOjn0kZJq2x2K6s8.7YWsA;_ylu=X3oDMTE2ZnM4MDI5BHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDYnVmZmV0dHdlcmVn?tickers=tbt,tlt,udn,uup,brk-a,brk-b,spy&sec=topStories&pos=9&asset=&ccode=
(Scroll down a little for the last one)

Swine flu vaccine Baxter linked to Dyncorp´s mercs h1n1 patents —

“Modern medicine’s cure is to grind up pieces of sick dead animals and inject it into us. Sounds reeeeeeeeally scientific” (Pandemic BS.)
I am not overly familiar with the Dems’ new health care bill, but The Angry Bear does not give it rave reviews. A lot of stuff in small print is in the link, but the second has a different ring to it. —
Most already know The Brick still has gung-ho sales, but this from John Thompson’s column on today:

“A major furniture retailer has been thrown a financial lifeline by its largest investor as the company announced a stunning plunge in sales and profit, saying it is taking immediate steps to turn the business around.

“The Brick Group Income Fund, which owns The Brick furniture store chain, said that Fairfax has agreed to issue a $25 million letter of credit to the Brick’s largest lender. The Fairfax letter of credit will be to “backstop” additional letters of credit to certain suppliers, the fund said.

“The company said it lost $146 million in the quarter.

“The new financing gives the company “the necessary financial flexibility and capital resources to manage our business as we move into the second half of the year,” president and chief executive officer Bill Gregson said in a statement.

“The retailer would move quickly to improve “shortcomings” in four areas: including its in-stock position, marketing and advertising, sales force levels and cost controls.”

And this tidbit of info. on IKEA:

“For all my readers that continually send emails about a rumour that IKEA is opening in Kelowna (and we get a lot of them), the next store out west is scheduled for Winnipeg.

“I just found out that IKEA is not Swedish at all, but a holding company of Ingka Holding, a Dutch company which itself is owned by the tax exempt Stiching Ingka Foundation. In 1982 founder Ingvar Kamprad donated all his shares to Stitching Ingka, thereby creating the world’s richest charity foundation. In 2007 it had a net worth of $36 billion.

“IKEA is the third largest consumer of wood in the world just a bit behind Home Depot and Lowes.”

#126 john m on 08.19.09 at 9:15 pm

“For the price of an average home in Toronto, you can buy 65 of them in Detroit. That’s practically a village. You could be mayor.”………..the future for a whole helluva lot of places in Canada out TO,Vancouver and Alberta –the day of reckoning is just hovering there in the sidelines waiting to pounce and it will as sure as “bears poop in the woods” :-)

#127 Peter Wiener on 08.19.09 at 9:18 pm

# 67 Industrial guy

Denmark has 5.4 million people (Statistics Denmark, 2009) who are among the most highly subsidized per capita of all EU members and affiliates, by the EU. There are generally many more pigs and turkeys in the country than people as their agrticulture (and every other industry) is highly EU subsidized as the EU courts their support and full entry into the EMU (they use Danish Kronor, not euro as national currency).

Marginal tax rates over the equivalent of about 110K Canadian approach 70%. New cars are taxed at 246% of lowest wholesale cost, meaning a Jeep Cherokee that is 50K Cdn with taxes is about 95 to 110 k Cdn dolar eqivalent with all taxes. The tax department has the powers of search and seizure without warrant if they believe someone is hiding money or assets which are not paying the applicable taxes. The people are xenophobic , yet at any given time, 15 to 20% of the population is out of the country, seeing the rest of the world. Go figure.

I know this because I had to live in Copenhagen for 18 months on a job. Socially adept German, American, Canadian and English friends and acquaintences living there for a decade all told me that they still had no real Danish friends after all that time. Getting laid not a problem though for either sex, trust me on this. Their alcoholism rates are among the highest in the world as is their domestic violence statistics. They are seriously crazy drunks (too much repressed angst?) and some are very tough and large. The police are neo-facists generally.

Vestas Wind Systems, the company you refer to in your post has been a “favourite son” of every political party for the past 20 years and is seen as a national champion like Nortel used to be and RIM is today for us. Their technology is no better than GE’s, Siemen’s or anything we can create – they are simple turbines when you get right down to it – they have just been doing it longer and with more indirect subsidies than anyone else.

I guarantee you would not want to live there for more than one year despite the fact that they have some of the best looking women in the world that will probably out drink you and I know for sure, unless you have a pocket of Viagra, they will outdo you in that department.

All this shit in their society and they can make windmills. Big deal.

The Chinese make stuff pretty cheap to their credit, but check your human rights,etc. at the door. There is always another way to view others. Praising the Danes for one product ignores an awful lot of crap they deal with in their society.

#128 Industrial Guy on 08.19.09 at 9:24 pm

Hmmmmm …. so the financial services sector is now larger than the industrial sector. No problem!! We can all get rich selling each other bonds, stocks and insurance policies. I have a great product to tell you about. Mortgage backed securities ……

It really doesn’t matter that industrial sector investors and union pensions funds were some of the largest players in the financial markets. Does the term “underfunded liability” make you break out in a cold sweat? It should. Governments will be bailing out faltering pension plans (like Air Canada’s) with alarming regularity. Taxpayers could be on the hook for billions in emergency funding. The ripples in the upcoming financial tsunami are already becoming waves. Just add some stiff tax increases and this stew is done.

So many of the McJobs in the new economy do not offer benefits or security. Fast food chains are quietly closing franchises all over Southern Ontario as families stay home.

Dentists in Ontario are claiming their business has dropped off a cliff. A report this weekend indicated a significant number of patients don’t have the money to buy their prescriptions after they have seen their family doctor.

Everything is connected.

#129 jess on 08.19.09 at 9:28 pm

I read this on Roubini’s blog that in Detroit “Many of them who have 401k plans are paying cash for the foreclosure next to them and walking on their own house. “

#130 piccaso on 08.19.09 at 9:36 pm

Blackberries suck. Buy Nokia

#131 grandeprairie girl on 08.19.09 at 9:52 pm

#112 viewwest
I’ve been doing that for quite some time and it’s getting tougher all the time avoiding ‘Made in China’.
So I do the Need-Want-Need-Want debate and it’s amazing how often I end up not buying anything.
Ever since the melamine(or whatever it was)pet food scandal I treat chinese products like the plague.
However I’m only one person and my lonely effort will make no difference whatsoever, but it’s the principle of all the things everyone here mentions. Plus I’m a redneck commie hating Albertan, or something like that.
My dog’s food is Made in Canada- Abbotsford,B.C.
I read all grocery labels and seeing Product of China more and more. Guess this could help me lose a few pounds if everything eventually comes from there.
If they were ‘fortifying’ the pet food then what else do you think they’re doing?
And #120 live within your means – Made in Canada clothing can still be found at Cleo’s. Up until a few years ago there was also Northern Reflections but everything there is now Vietnam,China or wherever else.
For the vitamin fans out there please note that 80% of the world’s vitamin c is sourced from China.
Jamieson’s is now offering European sourced vitamin C, I take it that would exclude China? I hope so.
And shoes are a real bitch. The last time I visited a shoe store I checked quite a few brands – all Made in China. Only 2 exceptions were SAS-Made in Texas and some other brand was Made in Brazil. And the kicker was nothing for less than $100.00
Shoes made for pennies in China,shipped back here and sold for premium prices. Clarks,Rockport,Naturalizer etc. etc. etc.
Greedy corporate bastards.
That’s my rant. Thank you.

#132 Barb .. a reader in Calgary on 08.19.09 at 9:57 pm

#103 Men With Hats “a two million dollar tax receipt “

MWH, good one. A walk down memory lane, those days of In & Out Scam. Say, I hear they plan on doing the same damn In & Out Scam again this next election. Cons.

#133 grandeprairie girl on 08.19.09 at 10:02 pm

I forgot to mention there are also numerous companies/distributors who fail to list on their packaging where a product is actually made. What you will see is “Imported for” or “Imported by”.
Wonder where those products could possibly be coming from? Lemme guess…China??!!

#134 Basil Fawlty on 08.19.09 at 10:04 pm

“Premier Gordon Campbell may lose his seat after the next provincial election but he had no choice but to implement the HST – to SAVE, not necessarily expand, his province’s manufacturing sector.”
Is it not ironic that the same people pushing for harmonized sales taxes worldwide, to save industry, are responsible for the full court press propaganda campaign pushing “free trade”, globalization and the outsourcing of North America’s manufacturing base? These people could really care less about Canadian or BC manufacturing, which is evidenced by their punishment of savers, which short circuits the way to economic success; savings-investment-production. Equating HST with the protection of industry is a red herring designed to cover up one of the largest tax shifts in history. $1.9B shifted from business to consumers, while social services are attacked due to lack of funding, and the Sheeple just go baaaaa.

#135 taxpayer like you on 08.19.09 at 10:21 pm

73 rip-off said:

“I wouldnt buy one of those shacks with your money
because I dont want hookers, drugs, dogs and guns as
my neighbour.”

Well you could spend 500K and live in Surrey BC…….

Sorry RO , couldnt pass on that one! (Sorry to people in Surrey too!)

102 Jo

I’ve never bought T-Bills directly. Dont they come in huge denominations? And when I have one, how do I turn it into “cash” as opposed to a “Bank deposit”? So of course what I’m thinking is if the Govt issues me a “cheque” when the T-bill matures, and I deposit this cheque in my bank, how is it any better than my present deposit? Sorry if it sounds like a stupid question, but I am not
at all familiar with the actual mechanism.

Rory/Peter on Buffett

I’m no expert on Buffett either, but isnt he heralded as the ultimate “deep value buy-and-hold” investor? I wouldnt think he would own anything that was in such poor shape that it needed a bailout. I did hear he took a hit of billions, but if he practices what he preaches, he knows that his measured “wealth” is purely what a
bunch of financiers say it is, while in fact, he still owns what he owns.

111 Shawn “Wealth ultimately is the ability to consume”

In a word – NO. True wealth is freedom. Freedom from worry. Freedom to do the things that are important to you. Yes, that may be consuming, but very often, it is learning to enjoy things that are “free” – family, friends, swim at the lake………

Didnt know I could be so warm and fuzzy did ya. Group hug with Garth……

#136 Wealthy Renter on 08.19.09 at 10:27 pm

I met my dad to play golf in Milton tonight, and I noticed the Mattamy Homes factory was being torn down. I guess they are moving it, or things ain’t so good in new home construction.

That factory has gotten a lot of press. I wonder what is happening?

#137 Future Expatriate on 08.19.09 at 10:48 pm

#113- You’re right, #70 is delusional.

5% off? He left off the trailing zero… 50% off will be more like it.

#138 Dan in Victoria on 08.19.09 at 11:19 pm

Opps,Victoria we have a problem,can we move that HST thingy up a little.Wait till the “olympics debacle “bills have to be paid.Yeah and wait and see what happens when people stop spending as much because of the HST.

#139 Peter Wiener on 08.19.09 at 11:26 pm

re # 133

I was referring to the fact that Buffet made several investments like WFC and GS and was getting skunked and accepted government largesse. At that time he was supportive of TARP and whatever else got his sorry ass onside. Now that he is somewhat in the clear, he critisizes.

Just because this guy has done well does not mean that he doesn’t make mistakes. Contrary to public opinion, he ain’t God , nor does he have God’s batting average. Are you aware that he has bet essentially his entire net worth on selling euro settlement put options tied to S&p performance. He received approx 4 BILLION in premiums for those trades up front, but has literally bet the farm. To the best of anyone’s knowledge, those puts are still outstanding and at S&P 666, I believe he was underwater about 24 BILLION, obviously since recovering a lot of it. Don’t believe me, do a little research. And this is from a guy that calls derivatives (which is what a long dated put is) financial WMD’s (Weapons of Mass Destruction).

And oh yeah, give me the float of an insurance company for 47 years and a father who was very politically and financially connected and then add a multi-year internship with Ben Graham, the guy who invented Value investing, then add in the exponential growth that post WW 2 America enjoyed (he started on his own in 1946), and , well this guy had rather a strong wind at his back since childhood.

Important life lesson: THERE IS ALWAYS A BACK-STORY!

#140 Azza on 08.20.09 at 12:02 am

#116 robert

No, Robert. I think your perspective is wrong. I’m not Donald either, but there are definitely ways for rich to avoid high taxes. GT shared here some of the tricks and good accountant will do the same. Rich don’t need to be smart. They can pay smart guys to manage their assets and they will be out of troubles way before the time that bad news hit the market.
Rich do not have any of mortgage garbage in portfolios. I think they stock up on cheap blue chips companies during last downturn and by the time next downturn starts they will be all in cash waiting for new bargains.
That is always middle class guy who will hold the bag – taxes, rates or market loses. That is the way it is and that will not change.
Add to that that people are lazy. I lost good portion of my RRSP last year, then switched it to Bond Index Fund and get all loses back by June, now I’m going to transfer all of that into 1 year GIC. There is only 1 person at my workplace who do check performance of his investments. Other does not invest (or invest in RRSP) or don’t actively manage it. Rich hired people to manage their assets day and night. They will lose minimum if at all, and they get all of it back and then some.
You are asking how you are going to pay higher taxes. And the answer is: with blood through the nose. I’m truly believe in this.

#141 Shawn Allen on 08.20.09 at 12:05 am

Okay then Wealth is the freedom to consume what you need and a fair anmout of what you want as well.

Agreed all wealth is certainly not financial, ultimately I guess wealth is the ability and freedom to have a certain quality of life that appeals to you.

#142 Mike (Authentic) on 08.20.09 at 4:11 am

#118 andrew black “short term gov of Canada T Bills are currently paying a “healthy” 0.14% interest. ”

T-Bills up 7% in one day! It’s a rally, buy now!
(Now .14% yielding .15%)

.15%, who would buy them and lock your money up for that? 1 year Gov’t GIC’s are paying .28% (down from 2.13% 08/10/2008)

Insanely low rates. You can do better at HSBC for 1% savings account. But it’s way better to be a saver than a spender.


#143 robert on 08.20.09 at 12:15 pm

#138 Azza
Agree with much of what you say however how are those folks who invested with “smart guy” Bernard Madoff doing? Was anyone in that cozy little club not rich? Listen, I’m not rich by any stretch but I do like to read – a lot. Not just current events but history and plenty of it. The rich do not have a special immunity to economic hardship. What happened to the rich in France after 1720? in Russia after 1917? in Europe after 1933? What happened to the rich in America in the 1870s and 1930s? Granted there will always be exceptions like Joseph Kennedy who was indeed a smart interpreter of the zeitgeist. The story of many other prominently rich of that recent era of excess and depression is considerably less inspiring. Also their tax burden grew rather alarmingly did it not?
Anyway, sorry to hear about your RSP but good move on the bonds (corporate I presume) and current “port in the storm” GIC positioning. I do not discuss positions or strategy (mine is so unique as to be considered borderline crazy) but it has served me very well. And yes I do all my own research and have not used a broker for seventeen years. Cheers!