Chill

Boomer1

If you enjoyed the intergenerational eye gouge that went on here yesterday, you’ll love what’s coming.

This war is primarily between the Boomers, who seem to have everything and fear losing it, and their adult children who, at 37 or 42 or whatever, have more debt than equity and see there’s no way out. The kids blame their parents for inflated home prices and eternal mortgages. The parents cling to houses now that interest rates have collapsed and the stock market bites.

Nobody’s net worth is going up, and most people dread the future. Hard to deny what’s coming – higher rates, higher taxes, higher prices.

Meanwhile the times confound. I mean, look at events of the last day or two:

  • The dollar soars to 94 cents despite desperate attempts by the Bank of Canada to quash it. This is the absolute last thing our manufacturing, exporting and tourism sectors (if we still have any) need. By the way, I predicted a dollar at par by the end of the year. Ouch.
  • Inflation has turned into deflation. The consumer price index last month was negative 0.8%, about where it sat the month before. This comes despite $1-a-litre gas and that bubblicious real estate market. Face it: with slagging consumer demand prices cannot rise, no matter how cheap you make money or how loudly you insist things are great.
  • The poohbahs (Flaherty, Bernanke, Carney) say the recession’s over. But they also say unemployment has yet to peak. That should happen next year, and it looks like 10%, or maybe 15% when discouraged workers are counted. So, how does that work?
  • Despite this, house prices are at an all-time high, and people are paying huge amounts of money for crap. Like this.cottage

I showed you this North Van one-bedroom cottage when it was just an over-priced listing. Now it’s sold. Yeah, full price. Over a million, LTT included. (I am told the land is assessed for $775K and the house for $35K.)

.
To summarize: Prices fall while real estate values hit an historic high. Unemployment jumps along with personal debt. The economy’s at risk because of an uncompetitive currency. And everybody knows a wave of inflation is coming, based on energy, tax and interest. Family incomes won’t keep up, since big wage hikes seem years off. House values and mortgage rates have only one direction in which to travel (have you received your LOC letter yet?). And 9,000,000 baby boomers will be cashing in their chips so they can buy cardigans and drool along with Mick Jagger.

Given these realities, I caution you not to be fooled. The next few years could be decidedly unfun. And by the time we have arrived at a new plateau of normalcy (which will not be 3% mortgages, bidding wars or tax cuts), the Boomers will be collecting what’s left of CPP and their 45-year-old kids will be faced with an interesting dilemma.

Real estate values will be lower, and mortgage rates will be higher. The HST and EI premium will be sucking off new billions and incomes will flatline. Hundreds of thousands of people will be wondering what to do about homes they bought in 2009 and 2010 at the top of the market, while real estate-heavy seniors will be kicking themselves for not bailing out at the peak. As has happened at several interesting moments in recent history, folks will realize a house is a home, not an investment or a retirement plan. Families will live in dread of mortgage renewals.

Health care costs will be skyrocketing as the largest population group queues for new knees, hips, corneas and little blue pills. Governments that fell into deficit in fiscal 2010 will still be there as 2020 approaches. Of course, this is what happens when you export jobs, borrow to pay the bills and totally ignore the reality of an aging population.

So, yeah, the kids are right. It doesn’t get better from here. It gets worse – unless we change some stuff damn quick.

So knock it off.

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126 comments ↓

#1 may on 09.17.09 at 10:53 pm

I made an offer for this house for 422000 and was told it is way too low. I am wondering what is the highest bidding price?
http://www.realtor.ca/propertyDetails.aspx?propertyId=8680083

#2 atrax on 09.17.09 at 11:02 pm

graphic and editing is poor but content in inresting.

“This is a serious journalism piece that asks the tough questions directly to such politicians as Former Prime Minister of Canada Paul Martin, Canadian Finance Minister Jim Flaherty, Green Party Leader Elizabeth May, Ontario Gas Man Dan McTeague, NDP Leader Jack Layton, Mayor of Oshawa John Gray, Former Prime Minister of Canada John Turner and many more!”

Garth you should have a look at this its quite funny:
http://www.tagtele.com/videos/voir/43342/1/

Having your impression as well can be good to.

Best regards.

Been posted here before. It’s riddled with inaccuracies, watch for entertainment value only. — Garth

#3 Kurt on 09.17.09 at 11:09 pm

I really scratch my head about the coming mess. I just don’t see away around it: the vast majority of Canadians are going have to figure out how to live a little poorer; maybe a lot poorer. Not that material goods are everything – past an income of about 15k/yr (global average – probably higher in expensive geographies), there’s pretty much no correlation between money and happiness. But your average Canuck gets all pissy when you tell him the truth, so we get “leaders” who lie instead of doing something to wind down the current mess and get started on clean-up. With any luck, a real leader would have better ideas than me.

#4 Best place on meth (aka NJ's Analyst) on 09.17.09 at 11:10 pm

Maybe Logan’s Run is not far off now – watch out Garth, you’re next to get put on the turntable!

I hear Obama’s already setting up Death Panels down south – or so the conservatards say.

Speaking of which, hat’s off to Canada’s Cons who are tonight celebrating the 25 year anniversary of an event that they will never witness again.

The swearing in of a Conservative majority government.

:)

#5 taxpayer like you on 09.17.09 at 11:20 pm

I like the simpsons episode when grandpa is walking down the street looking at all the “bums” and grumbling that they should just quit mooching and get a job.

He then walks into the government office and announces “I’m old! Gimmee gimmee gimmee!”

#6 Jon B on 09.17.09 at 11:23 pm

Garth, once again, you are using too many indisputable hard facts, perfectly sound logic and examples of history to predict what will happen in the future. If there are masses of unemployed young people that cannot be bothered to find work and live off their credit cards – call it funemployment – then what’s to say economic fundamentals have any relevance anymore? I don’t think anyone predicted the government bail-outs before the storm hit last fall. I bet these so called “leaders” will change the rules of the game again and will intervene to keep interest rates low for an entire generation.

#7 hal smith on 09.17.09 at 11:30 pm

I had an interesting conversation with four “twenty something” kids last night. We exchanged views on real estate and the economy. My views are pretty much the same as yours Garth, give or take a few percent and few cuss words. Their views are buy now, it’s your last chance, rates will never be this low again. Real estate will only go up in value. This is what I learned about them from the conversation:
1. They are young testosterone driven optimists and
they are greedy.
2. They have parental backup.
3.They have no fear of debt.
4. They have no fear of risk.
5. They have no fear of lifetime mortgages.
6. They have no fear of unemployment.
7. If things go into the dumper they will inherit their
way out of trouble.
This is what they told me: ” Your views are well thought out and all that but you are wrong. That can’t happen.”
Wanna hear something even funnier? One of them is unemployed , one is in the forest industry,and another one is maybe 20 or 30% underwater on his Kelowna townhouse and heloc since he bought it in 2007. It could get real ugly out there………

#8 Shawn Allen on 09.17.09 at 11:42 pm

Garth mentions HSt abd EI increasing which drains off money.

CPP deductions also likely to rise.

And pension contributions are rising rapidly.

Example:

Governement employees in Alberta are set to see pension deductions rise by 36% on January 1 and they will be paying 9.95% of gross wages on average into the pension plan, up from about 7.31% currently. That’s nice haircut of 2.6% of gross pay that about wipes out their raises for the year.

And taxpayers kick in a equal amount 7.31% currently and going up to 9.95% average on January 1.

So pensions are sucking more and more money out of anyone in a pension plan, all the contributions are going up like crazy to cover shortfalls.

But at least the people on the plans get to collect someday. Government pensions are half funded by taxpayers who just get to pay, not collect.

So lots of challenges ahead. Consumer spending has to fall.

#9 DrC on 09.17.09 at 11:42 pm

Nothing like an intergenerational eye-goughing session to waste time in the blogosphere (psst, that’s another name for the internets Grandpa). Many things need to change, but attitudes must change first. I’m more frugal (frugaler?) than most people my age (see range above) but I too fall to flatscreen/new car/house envy. And frequently. Nothing will change until folks shake free of the symptoms of their entitlemenia.

#10 nonplused on 09.17.09 at 11:45 pm

Hey I’m one of those 40 somethings that’s supposed to do all the heavy lifting…. Wait, no fair!

I got a different idea what comes next (maybe starting already) with government finances. Can you say “funding crises”?

Fact is, all this talk of an “intergenerational wealth transfer” where the boomers leave all kinds of bigger and bigger debts for the alphabets (X,Y,Z etc) to clean up hasn’t got a snowball’s chance in hell of happening. It’s never been done before, it won’t work this time either. Instead, there simply won’t be enough alphabets to pay the required taxes and the government will default on it’s debt and be unable to fund it’s various commitments to the boomers. Then the real fun begins. This is some years off mind you but with the deficits various governments are running already, only 1 year into the crises, it may happen faster than one would hope.

Social Security, Medicare, UI, the whole system actually, is nothing more than a big Ponzi scheme. It is wholly dependant on a continuously growing labor force to pay the commitments to the growing population on the receiving end. Unfortunately, the boomers forgot to have the number of kids required to keep the scheme funded and Gen X was even worse. No new Ponzis, no more Ponzi scheme. Immigration was supposed to be the stop gap but I am not sure the numbers are sufficient, and anyway we are already knocking on 10% unemployment so I am not sure more bodies is the immediate answer.

And no, Social Security is not funded until 2020 or whenever. The government spent all the money through the unified accounting system. To pay Social Security back will require replacing the IOU’s from the government to the fund with IOU’s to somebody else, i.e. it immediately requires larger government deficits.

UI premiums are on the way up now too due to a lack of funding, or so I heard on talk radio today. That is in essence another tax increase on those who are working, which will depress some incomes in favor of others. Net-net I am not sure it is deductive to the overall economy, but it will make it just a little bit harder for those who have jobs to pay the bills, while those on UI can’t pay the bills anyway, so it could artificially raise delinquency rates on mortgages.

Critics used to say “we’re spending our way into oblivion!” I am betting in the next 10 years or less we will have a good idea what “oblivion” looks like.

#11 Coho on 09.18.09 at 12:13 am

Garth, great article but then you end with It doesn’t get better from here. It gets worse – unless we change some stuff damn quick.

I don’t know what it’ll take for people to realize that “we” cannot change anything. The administrators of this orb have decided which direction this world is to go , which is:

The end of the middle class

The end of nations

A NWO with a One World Government

Very few haves with armies to protect them from the many many have nots

Depopulation

World War

Wishful thinking, hoping, and dreaming won’t make things better, not now, not ever. The sooner people grapple with this reality and deal with it, the better off they’ll be emotionally, psychologically, and spiritually.

#12 Coho on 09.18.09 at 12:17 am

Oops, the italics were supposed to end after the first paragraph of my post above.

#13 HJD on 09.18.09 at 12:43 am

“So, yeah, the kids are right. It doesn’t get better from here. It gets worse – unless we change some stuff damn quick.”

What specific strategy you think politicians and Carney should be utilizing to deal with our current dilemma? If you were the PM, what stuff would you change, damn quick?

#14 Dean on 09.18.09 at 1:02 am

Some of us boomer kids bought reasonable homes before the bubble, stayed put as prices skyrocketed and have used the low rates to obliterate our debt. We used our equity to secure cheap lines of credit and toast out high interest things like student loans and credit card balances from when we were dumb. We’re also using this stock market crash to balance out our stock portfolios and pick up some bargains. Great time to buy a car too, particularly used ones which are now pretty much worthless with all the incentives put on new car purchases.

Now we’ve locked in the mortgage for 5 years at ridiculously low levels, and head for a well deserved vacation to the US, where our dollar is nearly on par and their tourism is decimated and the deals are great.

Sure, the job market isn’t that great. But that’s why you show a little loyalty and make yourself indispensible when times are good. After all, even a 15% unemployment rate, means an 85% employment rate. But just in case, put a few months worth of dough in a tax free acount and drive a focus instead of a hummer.

Glass is half full Garth. Aloha!

#15 Men With Hats on 09.18.09 at 1:02 am

And things get curioser and curioser .

#16 Cordoroy Cowboy on 09.18.09 at 1:31 am

Oh here we go again. Let the boomer bashing begin. I never blamed my parents/grandparents for world war II, the great depression or other atrocities and mishaps. I never thanked/blamed them for the creation of the almighty boomer generation either; because it was all out of their hands. We are all victims of other generations and semi-powerless within our own. It’s called life. Suck it up. Many good things came from the boomers and I mean MANY. Anyone of the complainers and finger pointers of generation X would have behaved exactly as the boomers have if they had been born into the generation. People are people.Circumstance of where a person is born is not a choice. I’m tired of the portrayal of the boomers as monsters that aspire to eat their young, while many enjoy the fruits of their parents and grandparents labor. I assure you it was not the intent of the boomers to screw the next generation over. Demographics have been beaten to death. Yeah it’s a big pile of people requiring a big pile of resources blah, blah, blah. Things may get worse, or not. No one gets out alive. All we can do is deal with it. When i check out my children will be well provided for by this boomer due to my frugal ways and oh, news flash, they won’t be getting rich on the money I will have saved from my CPP or OAS if it’s still there to collect when i become of age. Who knows I may get sick and after paying for my own care, leave them zero. Nothing is a given in this world, so get used to it. Boomers have a vested interest in the next generation because it contains our children and grandchildren so let’s not cast aspersions when none are warranted.

#17 rp on 09.18.09 at 3:17 am

I’m 30 and it’s long been obvious that we’re going to pay for this mess. Big deal. We can easily afford it by buying less crap.

But what I am really concerned about is funding for schools and services for my kids. Boomers and DINKs can easily outvote the parents of the youngest generation, and I don’t want my kids to get a crap education to pay for Viagra and medical benefits for dogs.

#18 TaxHaven on 09.18.09 at 3:26 am

You can bet governments will go NUTS, desperate for revenue. They will seek out and destroy any and all sources of investment return. Anything that is bought or sold. Anything that is moved or transferred from one name to another. Any money coming in, or any going out. Eventually they will create a thriving and vibrant underground free economy through their attempts to tax the hell out of even vegetables… And don’t attempt to be generous with gifts. And forget about death as a way out.

I predict a new dawn for methods of Taking Your Money and Running. There’ll be a lot of under-the-table work and one-to-one trading between people. Lots of farmer’s markets, lots of Ebay. I predict a lot of money either leaves Canada and the west in general or never comes in, whether or not its owners decide to live in Canada or not. I can see good times ahead for those used to living frugally, within budget and without borrowing.

Lower house prices! Affordable housing at last!

#19 Grumpydawgs on 09.18.09 at 4:16 am

Well Garth, we disagree on the dollar as usual. But its really funny to watch the shenaigans down at the BOC while they try to pin the $CDN to stay below the plunging USD.

I’m sure Flahrety and Carney both know they have to raise rates before RE triples along with the price of teverything else in an uncontrolled bubble. But now the world sees that $CDN as more valuable than the raging USD and want to bid it up knowing that the BOC has little choice in controlling the ascent. The campaign of short selling the dollar didn’t work, the jawboning backfired at a time when the USD is tanking.

How low can they go beforre the CDN decouples? How long can they keep the bubble inflating? What about the seniors who see thier savings disappear even as they stand in line at the foodbank?

A higher dollar will come with higher interest rates and save the savers while at the same time cooling the bubble. Don’t fight what needs to happen. That is CDN business needs a strong dollar so that they can upgrade thier capital equipment and become more productive like Britian, Germany, Japan, USA etc.

Why does the government want to keep CDN indudtry in the 19th century?

#20 NOBODY on 09.18.09 at 5:21 am

That blue shack sold for $1M?
Must be some rich guy with too much money who bought for the LOT. He’ll probably level that shed and build on top.
C’mon Garth, I know you are trying to support your arguments but we’re not that dumb.

Someone here keep track of the address for future re-development…

#21 David Bakody on 09.18.09 at 6:09 am

Just when I thought I read it all along comes this early morning overview of the so called good life we once lived in. I have seen and lived in much of what has been written, empty streets at the height of the tourist season …. empty restaurants ….grim faces and packed malls with people lined up at the fast foot counters with “NO” bags in hand. Yes people drive around, the highways and byways are full …. but where are they going? …..perhaps just out of house to stop thinking …. off to Tim’s to share this and more.

#22 Kris on 09.18.09 at 6:09 am

Are you looking forward to collecting your first CPP cheque? As a boomer child…I’m not factoring any CPP income into my retirement plans.

#23 SaraBeth on 09.18.09 at 6:46 am

“As has happened at several interesting moments in recent history, folks will realize a house is a home, not an investment or a retirement plan.”

Indeed. I am 54 years old, and have never owned a home. I have rented. I am renting now… Always wanted a HOME as opposed to a HOUSE… I have never seen it as an investment…

Now, unless I am able to buy one outright for cash I will never own one…I will not take on a mortgage. I’m waiting… will become a vulture if the opportunity comes.

Up in northern Ontario prices are way down… you can get some nice properties now for less than $100,000…..Saw a 4 bed, 2 bath home…really nice… for $50,000.

#24 mattbg on 09.18.09 at 7:00 am

There’s also the $100-billion-plus backlog in infrastructure maintenance in Canada, too…

I was just looking at Oakville real estate and it seems to have gone completely nuts. It has been awhile since I looked, but the entire east end seems to be $700K+ and the only things in the neighbourhood of $300K in the whole city (single detached) are houses with no description other than things along the line of “build your dream home” — derelict houses sold mostly for the lot.

And this is OAKVILLE. Obviously not as bad as some areas of BC, but what in Oakville warrants this kind of pricing?

#25 Jack the Lad on 09.18.09 at 7:17 am

Regarding that blue shack in North Van, how big was the lot?

Who cares about the shack, maybe the lot on it is all that counts in the eyes of the buyer…

#26 Charles T. on 09.18.09 at 7:19 am

“Today, there is only one way to describe the amount of debt in the world – absolutely frightening. Future generations will look back in amazement at the herds of politicians, bankers, corporate leaders and establishment economists who have refused to address or even acknowledge the extent of the problem, and who, in fact, have contributed greatly to it. Like Nero, they have their fiddles. And, yes, while Rome burns, they play, and play, and play”

http://www.opinion250.com/blog/view/7308/1/invasion%2Bof%2Bthe%2Bmoneylenders%2B%96%2Bpart%2B3%2B%96%2B%93the%2Bblack%2Bhole%2Bof%2Bdebt%94

#27 Torquemada on 09.18.09 at 7:19 am

The funding crisis can easily be solved with massive estate taxes. The boomers dying off end up paying for the remaining boomers. CPP premiums don’t go up and the system is saved for us gen-x, gen-y types. Will it ever happen? Probably not for two reasons:

1. Us gen x/gen y types don’t vote
2. Boomers will have reverse mortgaged their estates by the time they shuffle off this mortal coil

#28 mooncake on 09.18.09 at 7:19 am

Garth, dont’ forget rising foods prices and gas prices in the near future due to our rising population on earth. With Higher taxes, higher interest rates there will be no recovery for a long while.

#29 Tom Araxias on 09.18.09 at 7:27 am

@ Grumpydawgs post #19

“But now the world sees that $CDN as more valuable than the raging USD and want to bid it up knowing that the BOC has little choice in controlling the ascent. ”

A CB may have difficulty in defending a particular currency but NEVER has any difficulty in debasing it. All it has to do is start the printing press. Carney can easily push the CND$ lower by announcing a QE program.

“That is CDN business needs a strong dollar so that they can upgrade thier capital equipment and become more productive like Britian, Germany, Japan, USA etc.”

Upgrade, and sell to whom??? Canadian industry, what’s left of it, is DEAD with a strong dollar especially when every nation’s strategy in dealing with this economic crisis is to beggar thy neighbor.

#30 Devil's Advocate on 09.18.09 at 8:08 am

The Babyboomers are really guilty of doing nothing more thanthat which anyone else does at any given age. They have just done it in overwhelmingly greater numbers. The huge number of Babyboomers entered the workforce and started buying houses, cars, cribs, groceries, etc at the same time. Now that they are en mass winding down, wearing the same 10 year old pair of plaid pants on the golf course, coupon clipping and no longer earning and consequently penny pinching the absence of their recent unprecedented demand is being felt in the economy.

What Babyboomers failed to do is as a generation is they did not propogate enough offspring to replace their own masses. That is however being done today in other such countries as India and China where similarly their standard of living is catching up to and will eventually surpass that of our own as ours falls.

Economics is the backstory of history and demographics is the backstory of economics. Demographics is entirely predictable and thereby so to is economics and only to a modest lesser degree future history which has proven doomed to repeat itself.

#31 Devil's Advocate on 09.18.09 at 8:10 am

sorry,,, small keyboard, big fingers

#32 Munch on 09.18.09 at 8:31 am

Yeah, true Garth true!

And here in SA we are trying to deal with this …

“25 armed men rob shopping mall”

http://www.iol.co.za/index.php?art_id=vn20090917113242617C673385

We have been dealing with about one mall storming a day for the last month

Now listen up!

Your problems are solvable, ya hear?

Ours, on the other hand, are NOT!

Grow up, Canada!

#33 Denis on 09.18.09 at 8:33 am

#1 may on 09.17.09 at 10:53 pm
I made an offer for this house for 422000 and was told it is way too low. I am wondering what is the highest bidding price?
http://www.realtor.ca/propertyDetails.aspx?propertyId=8680083
——————
Creating a bidding war on an “AS IS” property (i.e. POS Power of Sale or Piece of S*** … However you want to call it) … This can’t end well.

Even at $422k … How much work does this place need? You never know until you get started on a POS. People that get kicked out of their home by the Sheriff (or Enforcement Officers as they like to call them here in Ontario) don’t leave happy.

#34 Johnny on the Spot on 09.18.09 at 8:48 am

Not trying to beligerently disagree but deflation is a load. I haven’t seen the price of ANYTHING go down. Stats Can will give you some BS about flat screen TVs going down in price for example – you buy ONE about once every 10 years. It doesn’t really count. Food has SKYROCKETED – most stores have gone to the little trick of keeping the price the same but severly reducing the content. Example? Dog food. Used to be $19.95 for a 20 lb bag. Year later? $23.99 for a 17.5 pound bag. Go look at what apples cost. They are in season so no excuses here. They were 99 cents a pound this time last year, and $1.29 this year. So there you go > 30% inflation (not that I intend on eating dog food, but you never know).

Food has gone up. Real estate has gone up. Taxes are going up (property taxes and fees aready have). Oil is going up. Natural Gas is going up. Gasoline is going back up. . . All this effects ME and it is Inflation.

#35 David on 09.18.09 at 8:50 am

I agree with some of the comments:

The boomers weren’t inherently stupid or evil, they made the decisions that most people, born at their time and with the situation they had, would make.
Plus, they did a lot of things right with Canada. That’s why its the country it is.

So, blaming them, or anyone else, for what happened is pointless.

The key will be, what is their legacy, now that they SHOULD BE old enough, and smart enough to see the long term consequences of their actions? Will they realize that they CANNOT keep expanded health care spending at a completely unsustainable rate?
(Look at a graph of health care spending vs. other spending for any province in Canada and tell me that can go on for long).
Will they realize that they cannot bail out every warehouse, dog house and out house in the country that is going to fail, in the current “leave no banker behind” policy?
Will they not make the decisions to cut school spending to build more seniors complexes?
Will they not favor interest rate policies that inflate absurd asset bubbles, making housing too expensive for young generations to have the kids that will be paying for their health care?

The past is done. Only historians want to argue over who is responsible.

What is clear is that boomers run the world, right now, and for a long time in the future.

So are they going to rule with INTEGRITY, or rule like a corrupt African Dictator whose only in it for how much loot he can take out of the country?

Because, so far, the judgement wouldn’t be that kind to the boomers.

#36 FY on 09.18.09 at 8:58 am

Two excellently written pieces that I am sure many would enjoy.

http://marketdepth.typepad.com/marketdepth/2009/09/welcome-to-kanada.html

http://marketdepth.typepad.com/marketdepth/2009/09/winter-in-japan.html

#37 missing_the_point_AND_the_peak on 09.18.09 at 9:01 am

I’m confused.

I’ve trudged through a fair amount of (…yawn…) David K. Foot’s work, which I understand is still respected and referred to (at least they let him on Paikin’s Agenda now and again).

So Mr. Foot defines boomers as those in Canada born between 1946 and 1964. A typical 1946-born early Boomer retires this year in his middle 60s, but did NOT contribute many children to the Baby Bust Generation (born 1965-1977, with the first wave being 37-45 years old now).

In other words, whatever fight Garth is talking about is not between Boomers and their children… it is between Boomers and Busters.

Tear me a new one if I’m wrong, but David K. Foot’s populist writing is not exactly riveting, nor prophetic. I’d hate to think I muddled through it and didn’t even get the basic generational structure down pat.

By the way, Foot says there is a lot of confusion in the media; typically Gen X. (late generation Boomers up to 1964) gets mixed up with Baby Busters, and I suppose this is roughly around the same time-frame where I find Garth’s post confusing too.

Whatever the demographics, the people retiring at 65 over the next 10-years are noted to have had it pretty good. Then it all goes downhill, as it has for education, job opportunities, and advancement during the lives of late Boomers and Busters (relative to early Boomers).

The solution is, of course, to move retirement age to 85 or so. You shouldn’t expect a capitalist government to let a ton of people retire if they’re healthy enough to work in the mines.

I’m sorry, but only magnates, politicians and other such elite will have that pleasure.

#38 Calgary_Rip_off on 09.18.09 at 9:09 am

“folks will realize a house is a home, not an investment or a retirement plan”

As it was once and always should be.

#39 Ruraldude on 09.18.09 at 9:13 am

Garth
You encapsulated the present going forward very nicely. I wish it could be more positive but it’s hard to see positives in our dire situation isn’t it!

#40 Gord In Vancouver on 09.18.09 at 9:24 am

Now we’ve locked in the mortgage for 5 years at ridiculously low levels, and head for a well deserved vacation to the US, where our dollar is nearly on par and their tourism is decimated and the deals are great.
___________________________________________

Congratulations on getting a home at a reasonable price but, unless you’re independently wealthy, putting a high Canadian dollar on a pedestal is downright stupid.

You’re “a high Cdn. $ makes trips to the USA less expensive” argument is, based on what I’ve seen, what most uneducated people say. I’m not questioning your overall intelligence but feel you should watch what you wish for.

#41 Samantha on 09.18.09 at 9:28 am

#16 Cordoroy Cowboy –

I got home yesterday after a very long and trying day, read the responses from yesterday and was unable to formulate a response.

Your post is excellent and as they say ‘took the words out of my mouth’. Thank you for injecting some common sense and truth into the discussion.

#10 nonplused

“Social Security, Medicare, UI, the whole system actually, is nothing more than a big Ponzi scheme. It is wholly dependant on a continuously growing labor force to pay the commitments to the growing population on the receiving end. Unfortunately, the boomers forgot to have the number of kids required to keep the scheme funded and Gen X was even worse.”

I don’t believe that our Canadian pension plan was intended to be a ponzi scheme. However, those responsible for it failed to increase premiums to a level over time that would have made a substantial difference in outcome.

Medicare is not a ponzi scheme. Tommy Douglas fought for medicare because of a personal experience and if you haven’t read his story, please do.

The medicare issue became a mess when greed driven health care workers began flooding out of Canada. I am talking about the late ‘70’s. When that began to happen, appropriate planning and response was necessary to stop the flood of workers out of Canada.

The other side of the Medicare issue is bloated administrative costs and again, poor planning.

I don’t think UI is a ponzi scheme. The intent to defraud underpins a ponzi scheme. I do believe that the people who fought for a better quality of life and protection for Canadians in retirement, health and unemployment had good intent.

Poor houses, debtor’s prisons, refusal of health care, and starvation used to happen when people faced those situations. Those three plans gave people a chance to experience a better and healthier standard of living.

#42 Calgary_Rip_off on 09.18.09 at 9:35 am

Hey Garth,

here is the latest bull from the Calgary Herald:http://www.calgaryherald.com/business/Slump+effects+likely+linger+Alberta+recover+faster+economist/2007356/story.html

The writer forgets that Alberta has nothing attractive to offer besides a decent paying job which is nullified by the cost of living here and the cold. That newspaper should be extinct.

#43 Makeorbreak on 09.18.09 at 9:47 am

If the boomers are to be blamed for one thing, it is for having spoiled their children too much. Boomers didn’t have it any easier than gen Xers. There was a lot of competition for jobs in those days. A lot of them had to start well below their competencies to get into the job market.

I am a boomer and debt was not a way of life for us. I remember as a struggling young adult how happy we were if we got an old dining room or living room set from some parents’ cottage, or an old mattress or disparate dishes from the Salvation army for next to nothing. We even used milk boxes for living room tables and storage. If you ended up with your mother’s old car, then you were really lucky. I remember a friend of mine was driving his mother’s 1965 yellow Rambler and we all envied him. The year: 1978.

In these pre-credit/ATM card days, we had to make do with what we had. Long distance calls were a luxury. Anybody remembers how miserable we felt when we couldn’t get to the bank before 3:00 on a Friday afternoon? We had to rely on our friends’ generosity or we wouldn’t have had any money for the week-end. Needless to say that we paid our friends back first thing on Monday morning, after the banks opened.

So are boomers really to blame for the current situation?

#44 My_View on 09.18.09 at 9:55 am

“By the way, I predicted a dollar at par by the end of the year. Ouch”.

You also predicted $100 oil and the prime rate doubled. But was that the end of this year or by June 2010? Whatever! Has anyone look into mortgage rates lately, they are down, the variable rate is now prime 2.25%. It’s interesting that you comment on the people who bought at the peak of 2009-2010, so you’re guessing 2010 will be another stellar year?

“The dollar soars to 94 cents despite desperate attempts by the Bank of Canada to quash it.”

What were the desperate attempts? I can’t find anything on the BOC scrambling. Just imagine what will happen to the CAD$ if % rates rise, WOW!

Garth, you love to generalize everything and forecast events well into the future. That has not worked out well for you in the past, 1999.

Oil and the prime will achieve the targets I suggested, based on current trends. Real estate mania will of course continue as rates increase and the industry claims affordability will plunge (quite the opposite will occur). And the BoC has been very actively attempting to cool the dollar through foreign exchange markets and direct statements by the governor. As you might imagine, Mr. Carney is freaking out at the inevitable rise in the currency as the central bank is forced to raise rates, and its new bond yields. Much flak to come. — Garth

#45 mattbg on 09.18.09 at 9:55 am

@David (#35), I’m not sure it’s accurate to say that the Boomers did a lot right with Canada. They have essentially perpetuated ideas developed in the 1960s as far into the future as they will go, and there was very little planning for the future done beyond that.

Things have done well between then and now because of the entrails of the legacy of the people BEFORE the Boomers.

Things take time to deteriorate and the problems only become apparent when the lack of maintenance of society leads to a tipping point and then an overwhelming problem, as we are starting to see develop.

Even Unions are still stuck in the 1960s and the only option is to tolerate them until you can get rid of them. They have not evolved and the only option left is a slow death.

Is it any coincidence that these bubbles (dot-com and then housing) coincided with the Boomers taking the reigns of power in the most senior positions in society? I don’t think so.

#46 Sailor-man on 09.18.09 at 10:07 am

Garth … With the Can $ pushing for parity and no sign of inflation, do you still think interest rates are heading north. I really can’t see that happening for another year. My broker is recommending a laddered Corporate Bond ETF as an alternative to GICs. No sure this is a great strategy, but few other choices with rates under 1% and the markets still a bit shaky Thoughts?

Buy a strip bond. Buy a bond fund. Buy a real return bond. Buy an equity ETF. Short bonds. Get a new advisor. — Garth

#47 D in London on 09.18.09 at 10:12 am

# 41 – Samantha

You refer to Corduroy Cowboy’s post as “common sense and truth”? You must still be tired from your “long and trying day”. His rant was just that of another self-righteous-holier-than-thou person letting off some steam. I was very, very surprised to see your post commending him, as you are one of the few posters I follow regularly and I usually admire your common sense and clear-headed arguments.

As for those who agree with Samantha and the Cowboy (and those that vehemently disagree) I refer you to my post on yesterday’s blog, http://www.greaterfool.ca/2009/09/16/loser/#comment-43318

#48 Evangeline on 09.18.09 at 10:14 am

#10 nonplused

((UI premiums are on the way up now too due to a lack of funding, or so I heard on talk radio today. That is in essence another tax increase on those who are working, which will depress some incomes in favor of others.))

If taxes keep increasing forever, the inevitable end is our being taxed at a rate of 100%. So the increases HAVE to stop some time, the question is WHEN?

There is a huge trend bubbling up in the U.S. of A. , witness the thousands of non-partisan tea parties, both Dems and Reps fed up to the gills with the incompetence of their congress critters on both sides of the aisle. You can hardly turn on the teevee any more without hearing Ron Paul explaining how government, in collusion with the central banks, have wrecked prosperity. Once upon a time Paul was virtually ignored by the mainstream media but now they are all over him listening to his ideas on what a free society has to do to maintain itself and prosper.

#49 Joe Provoloni on 09.18.09 at 10:25 am

If only Stephan Dion had become Prime Minister and implemented his carbon tax we would not be in the state we are in today.

His new tax would have meant no deficit, lower interest rates, higher exports, new jobs, and most of all would have reversed the future catastrophic event we will experience due to global warming.

Too bad. Things could have been a lot better.

#50 Roial1 on 09.18.09 at 10:36 am

Here is a view from “away” as the NFLDers would say.

Just goes to the arguments placed before us by Garth.

This guy has been a British financial adviser for a long time.

http://www.pattayamail.com/current/columns.shtml

It could end VERY badly.

#51 somecatchphrase on 09.18.09 at 10:56 am

The boomer legacy –

What follows below is an essay on the negative spending and tax consequences of the generational thinking that prevailed in 1969……

Woodstock-esque thinking bloated government by more than 53%

The federal government spends 280 per cent more today than it did back then. In 1969, program spending was $12.9 billion – $74.7 billion adjusted to 2009 dollars. It has exploded to $229.1 billion. If spending had grown at the same rate as population and inflation, then it would only stand around $150 billion. Woodstock-esque thinking has grown government by over 53 per cent.

From:

“Woodstock Hangover: Spend Now, Pay Later,” Financial Post, August 21, 2009

http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2009/08/21/woodstock-hangover-spend-now-pay-later.aspx

#52 kitchener1 on 09.18.09 at 11:01 am

I made an offer for this house for 422000 and was told it is way too low. I am wondering what is the highest bidding price?
http://www.realtor.ca/propertyDetails.aspx?propertyId=8680083

That property sold for 550K, almost 200K more then asking price and that home was sold “as is”.

Thats what happens when you have to much emotion and low interest rates.

This will not end well.

#53 JeffinPickering on 09.18.09 at 11:05 am

Saying there is deflation is trickery BS in the same league as saying the recession is over; both based on skewed/biased data and nonsense technical definitions.
As has been pointed out, important daily items (like FOOD) are still up.

In today’s news:
Overall inflation may be negative in Canada, but most items cost more today than they did a year ago, a testament to the heavy weight gas prices exert on the index.
Only three of the eight major components that comprise consumer price index recorded declines in August — transportation, which includes gasoline, as well as shelter, and clothing and footwear.

#54 PeckedToDeathByDucks on 09.18.09 at 11:08 am

Loaves & fishes, bull horns of plenty…

All this sqabbling from the whiners & geezer squeezers. Open your eyes and quit fighting over garbage scraps. Look South for the answers. There is the recipee for unending wealth.

Chaaaaarge it! There new home buyers get $8,000 credit. A proposal is in the works to inrease it to $15,000 for ALL buyers. Cash for clunkers and appliances. Billions in banker’s bonuses. Tax rebates and stimulus cheques.

Folllow the trend there…debt upon debt and nobody ever pays except with effortless, newly printed money which we Hosers gladly still trade for precious oil and metal.

The paperprestidigitizer paradigm provides a plethora of profits. It’s a modern financial miracle equivalent to the miracle of loaves and fishes. If Obama can do it, so can we. Yes we can!

#55 rory on 09.18.09 at 11:14 am

Hello, David (the coddled, never had to fight for anything in his life David) how you doing.

And here you go again, blogging instead of working at your G job…go figure.

You said in #35 referring to Boomers:
“The key will be, what is their legacy, now that they SHOULD BE old enough, and smart enough to see the long term consequences of their actions?”

Are you inferring “smart enough” comes with age and experience …if so I guess that just makes you an inexperienced dumbass …you to will grow up and be experienced and smart…patience (you know what that means, right)….only 16 years to go …better party hardy …your life is almost over.

Best part you get to instill your ‘winning’ attitude into your children so when they grow up they can plot to ruin your life as well …maybe they have already started …have fun with that…ain’t life grand when parents have to look over their shoulders to see their children with that look of disdain in their eyes …seen that yet …your Ma & Pa should have kicked you out at 18 ‘cuz subsidizing you past that age is appearing to be a waste of everyones time, effort and money…your a piece of work dude as in one selfish guy – me, me and more me.

P.S. – Do your parents get an exemption or are they the first to be culled?

P.S. 2 – For all those ‘Logan’s Run’ types …the dead age was 27 …how does it feel to be 28 or 34 (David) …quit with the slippery slope crap and make your life your own.

#56 daystar on 09.18.09 at 11:15 am

These are strange times. Few would blame the Bank of Canada when one thinks about it, to keep BoC rates at or near zero and the logic is simple. The U.S., with its own bond market troubles and world plan in the G20 to keep rates low try to stimilate its RE industries with cheap rates to get their nations of their recession, is still facing Green back pressure to fall. The U.S. can’t risk damaging a housing/financials recovery, so it must keep interest rates low and try to instill a low policy everywhere in the western world, but… there are nations outside of the G20 ditching the Greenback regardless and so it’s currency will drop and likely continue to do so until interest rates rise.

What does this do the the looney? Forces it up. And is a higher loonie contributing to deflation? Yes it is. Imports are cheaper. And the BoC hasn’t got much for options other than what it’s already done. (keep rates low) The big question everyone should be askng is…. why is this Conservative government intentionally creating a RE bubble with its loose regulations in CMHC in the face of record low interest rates? I mean, after all, we just had a RE bubble peak in 2008 generated by their own 40 year nothing down mortgages that wasnt given enough time to deflate. In case people didn’t catch on, it was too inflated then…

Of all times, CMHC needs tigher regulations during this time of record low fed rates to keep this system from seeing the biggest, most dangerous RE bubble its ever seen and instead, Flarehty/Harpers policy has been the opposite. One can only assume the Conservatives want the “wealth effect” of high RE valuations to create a rise in equity or personal wealth enough to keep Canadians happy and “confident” with this government, so happy they elect a Harper majority.

And the price this nation will pay for such a self gain policy will be extreme. By this time next year, a world recovery is likely. A U.S. housing recovery is likely. Mortgage rates will likely be at 4 – 5% this time next year and climbing quickly in Canada as a result and as these rates rise, RE valuations and stockmarkets fall. Equity shrinks, the “poverty effect” sets in, a Canadian recession is reborn especially in financials, Retail, services and construction, the loonie begins its fall especially as deficits continue to soar, GDP still slumps even in the face of rising commodities and Canadians across this land begin to face the big hurt, likely living with a majority government they freshly elected that created the whole mess to begin with, a majority that they might have to live with for 5 whole years.

And the lower loonie will help manufacturing… whats left of it. Will it attract more? With Canada in a beginning of the second dip of a double dip recession be the investment place to be in new manufacturing? And commodities, where will they be… higher, but will it be enough to offset the unemployment generated specifically by a RE led Canadian recession?

Tough times ahead. Tough times indeed. And we do need to make quick changes now. We needed these changes back in March in CMHC to keep this RE bubble from grossly inflating and change hasn’t come. People are seriously underestimating the damage this unrestrained, uncontrolled grossly inflating RE bubble will do. They underestimate what will happen to their own personal wealth when this bubble bursts. Canadians are setting themselves up for the worst of times and don’t see it coming and thats sad because all we ever had to do is look at whats happened to the U.S. to see whats happening to us now. The past 3 years in the U.S. is our future, beginning next year for us Canadians. Its just not that hard to see it coming, but so many of us are now unaware. Its not surprising, but it is sad. Sad, because its preventable, Sad because we are trusting leadership that doesn’t know what its doing, because media is desperate, blind and foreign controlled and most of all, sad because we are too engaged with our individual lives to notice and it should not be.

#57 Roial1 on 09.18.09 at 11:18 am

#35 David on 09.18.09 at 8:50 am

(Look at a graph of health care spending vs. other spending for any province in Canada and tell me that can go on for long).

And look at the sudden jump that went on right after the Con. Government gave in to big Pharma and granted huge extentions to them on patents.

Oh yes wasn’t our Wonderful PM a lobbyist for big Pharma????? (AKA National “Citizens???” Coalition.)

#58 Nathan in Edmonton on 09.18.09 at 11:22 am

#18 TaxHaven

Good post — Barter and exchange will be the economy that arises from the debt riddled one we have now. Learning a real still (making and fixing things) will be key to having any quality of life which will be more about food on the table than plasma TVs. I’m thinking blacksmith or small scale farmer… financial advisor, not so much.

#59 gold bugger on 09.18.09 at 11:24 am

Get real. We don’t have deflation. Nor does there “have” to be just because people are losing their jobs.

Money is being created at a crazy rate. That money shows up in higher prices all over the place: in the housing market, in the stock market, at the grocery store, and at Home Depot.

CPI in August was negative point eight. In July negative point nine. That’s deflation. — Garth

#60 POL-CAN on 09.18.09 at 11:41 am

#49 Joe Provoloni

Give your head a shake and then go back to watching American Idol k?

If you think that any new tax would have made a difference in the past year or that it will make a difference going forward then there is no hope for you.

Global warming is just an excuse for yet another ponzi scam sold to sheep as a “carbon tax”.

Everything in this universe is carbon based you TOOL….

#61 rory on 09.18.09 at 11:41 am

Ahh my life as a future short story guy … I can just see David telling his kids a bed time story:

David says: You know Grandma and Grandpa …well they are losers, boomer losers feasting off of us. They ruined my life and they will ruin yours …that is why when they invite us over for supper and give you presents they are not doing it out of love …they are trying to buy you so you won’t hate them like I do.

Kids say: So why do we visit them for daddy.

David says: I play nice with them so I can get their money …pretty smart right…then we can buy more stuff and all live happily ever after.

Kids: Daddy you are so cool …I can’t wait to have kids too …night daddy …sleep tight.

Can you tell that this debate has me riled …it is rife with crap that we lose sight of everything that really is important – family, community, hope, humanity, civilization….the slippery slope to oblivion.

This arguement is ‘dumbing’ me done to the lowest common denominator which is appearing to be ‘the seven deadly sins’ which is apparently affecting a few/all of the generations.

Lust, gluttony, greed, despair, sloth, wrath, envy, pride – anyone see some/most of these in David’s writings…most of my writings are in the wrath/anger category …rofl.

#62 Ben on 09.18.09 at 11:48 am

@ Goldbugger #59

You don’t entirely understand inflation. You can have a massive expansion of the monetary base, yet if the velocity of that money is collapsing at a rate equal to or exceeding the expansion of the money supply, you get deflation. Garth is right. Deflation is in our immediate future. Inflation will take hold once the velocity of money begins to increase.

#63 Devil's Advocate on 09.18.09 at 11:51 am

I sense for the balance of this year the U.S. Dollar falling (as US economy fails to show signs of the “reported” improvements), stock markets falling (as investors take their profits and run), unemployment rising (as employers see no market for goods and services), interest rates falling (as banks jocky to improve market share for year end and lenders of last resort do similar but with more room to discount) , gold rising (as people seek something perceivably safe tangable and secure). Thoughts?

#64 RJAG2034 on 09.18.09 at 11:59 am

#49 Joe Provoloni on 09.18.09 at 10:25 am

Are you serious? Thats a pretty simplistic view of whats happening. Whatever you’re smoking, pass some my way

#65 rory on 09.18.09 at 12:01 pm

A few parting quotes…

Voltaire:
Monsieur l’abbe, I detest what you write, but I would give my life to make it possible for you to continue to write.

Voltaire:
What is tolerance? — it is the consequence of humanity. We are all formed of frailty and error; let us pardon reciprocally each other’s folly — that is the first law of nature.

Voltaire:
Think for yourselves and let others enjoy the privilege to do so too.

Bertrand Russell:
Collective fear stimulates herd instinct, and tends to produce ferocity toward those who are not regarded as members of the herd.

Rene Dubos:
Human diversity makes tolerance more than a virtue; it makes it a requirement for survival – Celebrations of Life, 1981

#66 X on 09.18.09 at 12:20 pm

When HST kicks in next year, is that included in CPI numbers?

#67 J Walker on 09.18.09 at 12:21 pm

#60 POL-CAN….guy get a clue a recognize sarcasm when you see it, down boy! I said DOWN! There’s a good boy, go back to the corner and chew on that milk bone

#68 TJ on 09.18.09 at 12:22 pm

Had a java with a twenty something yesterday.

He has just returned from his first trip to the seductive shores of Maui. Maui – the island with ‘slap me’ food prices.
The Island where your power bill is at the mercy of monthly ‘over rides’ if the rest of the Islanders use too much power – 12% tax on tourist rooms and five dollar Fuji apples.

He and his new bride were so pumped. They just bought their new home in North Vancouver, and to celebrate they decided a trip to Maui was a just reward.
My heart just about stopped when he told me they had also decided to ‘buy a piece of paradise’ and now have one week in a time share in Honokawai.

This young couple make, maybe $100K a year between them. He is a web designer and she is a dog walker. They put 5% down and 5% of Dad’s money into a $490,000 condo on the North Shore, and they were just pumped.
“We got a thirty year…so the monthly is not too bad…”. ‘The Maui deal was crazy – we only paid 126,000 US’. (DOH!!!)

He is the same kid that had been begging me for input on how to cut down on their credit card debt, only a few months ago. They both have student loans. They have ZERO in the bank.

He was convinced he was being clever.
“Real Estate is going nowhere but up here….this is an Olympic City and everyone wants to move here…”.
I stopped him cold – “was there a land rush in Lillehammer, Nagano…Turino, Salt Lake City…because of the two week party….”?

People are living in dream land, and I sure hope the sane among us don’t have to bailout these riverboat gamblers.

This will end very badly.

#69 Samantha on 09.18.09 at 12:24 pm

#47 – D in London

I went back and read his post again and I’m just not seeing where
“His rant was just that of another self-righteous-holier-than-thou person letting off some steam.”

I may be more burnt out than I realize, but to give you an idea of why I thought his comments were good, here’s some examples with my comments in between:

“We are all victims of other generations and semi-powerless within our own.”

I took that statement as truth because none of us controls what came before us, and while we do have the power to change some things, there are problems which we are powerless to change. It is those problems that we hope future generations can solve.

“People are people. Circumstance of where a person is born is not a choice.”

We don’t choose our place in time. We arrive and do the best we can during the time we have.

“I assure you it was not the intent of the boomers to screw the next generation over.”

I think he was trying to get boomer bashers to consider intent. People deliberately hurting one another is not limited to generations.

And this last quote:

“Boomers have a vested interest in the next generation because it contains our children and grandchildren so let’s not cast aspersions when none are warranted.”

I was raised to respect people, regardless of age because everyone has wisdom, life experience, and skill sets that could help me navigate my life journey.

Times are tough now. I think it is difficult to find a point in history when times weren’t tough in some way.

However, ageist slurs at any generation are pointless when each generation stands on the shoulders of the one before it.

We are all in this together and I would much rather focus on solutions than bashing anyone.

#70 PeckedToDeathByDucks on 09.18.09 at 12:29 pm

Garth is right. We have deflation.

Yea, I know that the bills are all higher than last year….but I’m confident and trusting that all the rebate cheques for overpaying are in the mail. yes indeedy

#71 Chaostrology on 09.18.09 at 12:31 pm

The principle of separation of state and church is in the American constitutiion.

In the future perhaps we will finally keep business at arms length from our govt and politicians.

We need a separation of state (or in our case the crown) and business.

The business of business is business.
The business of business is not governing.
Corporations and shareholders should not be deciding the economic conditions of our country’s citizens with their relentless search of rationalization, ROI, share value and escalating profit.

We have given up our country and our future to the sociopathic corporation and political party system.
Debt is slavery and the puppet masters have made it so easy for us to become slaves one desire at a time.
Most canadians have become addicted to consumerism and realistically are no different than a poor souls who are addicted to heroin.

Consumption is our way of exerting control over our environment (if only momentarily) when we can plainly see that we have no control over the chaos.
In the end our momentary high, takes away our power to decide what is right, as we are self-defeating. The worse it gets the more dope(stuff) the addict needs until at long last the addict loses everything and is just another smoking wreck at the side of the road. A cautionary tale that is forgotten once you are past it.

In the end only the addict can save themselves.

In the end only we can save our country.

God knows the people that we elect aren’t going to do it.

#72 Stretch from yonder on 09.18.09 at 12:43 pm

It think this all began in the mid 90s, free credit cards offered to frosh the first day on the university campus. This was never allowed before and how could a university student honestly be in the position of negative income/zero savings to be a good credit applicant?
This generation is now not use to being told no, as they buy over priced homes with again, no savings and the false safety of temporary low interest rate affordibilty.
I declined a credit card back then and I decline to over pay for a house I cannot afford………..yet I am the crazy one.

#73 Skye on 09.18.09 at 1:15 pm

I have a strong feeling that a lot of the FTB activity over the last few years, and especially now, is backed up by tapping boomer parent’s wealth. How else can 30 somethings in Vancouver be affording half million dollar condos on the low salaries here? When the kiddies RE implodes (OK, it might be a slow decline) is it going to take a lot of boomer’s nest eggs with it?

A lot of people assume that while the boomers’ retirement is going to be strain on govt services, it’s also going to be a “massive generational wealth transfer”. I wonder just how leveraged (co-sign, reverse mortgage) a lot of these supposed rich helicopter parents really are.

#74 Barb .. a reader in Calgary on 09.18.09 at 1:18 pm

#37 missing_the_point_AND_the_peak
The ‘point’ is that there is a lot of bull roar. It’s not actually all that hard to spot if you’re looking for it. To name just a few tactics: shooting or smearing the messenger, cloud the facts (ie the book you cited), make lots of people discontent or uncomfortable, divide and conquer, etc. It’s sad but true and that’s life. There’s always going to be imposers lying and scheming to control the camp. That why reasonable citizens always, always have to be vigilant, trust no one and very thoughtfully consider what one reads and hears.
If you’d like a good example of how well it works to create chaos just watch the unique demonstration in the newest season of Survivor. A multi-millionaire tells the camera he’s not there to win the million, he’s just there to demonstrate that by lying and creating chaos, that he can divide, control and win.
http://news.cincinnati.com/article/20090918/ENT/309180048/1175/+Survivor++loser++No+regrets

#75 Daystar on 09.18.09 at 1:31 pm

#71 Chaostrology on 09.18.09 at 12:31 pm

I can’t help but to appreciate both your message (even though your message is sometimes sobering and serious) and your style. I LIKE IT!

#76 Industrial Guy on 09.18.09 at 1:40 pm

Everything is connected……. lets look at some local headlines.
Ottawa plans to drop tariffs on manufacturing equipment
Strong loonie poses risk, bank warns
350 jobs lost as Brantford forklift maker closes.

Brantford is a 1 hour commute from West Toronto. You can still find a nice three bedroom house for under $200,000.00 and municipal taxes on that house a reasonable, around $2,000.00 per year. The city hosts a World class university (Laurier) and a college (Mohawk). Doesn’t sound too bad, does it?

Well, there are also abandoned office buildings and houses, conflicts with Canada’s First Nations over land claims and a local strike in its second year. The downtown is so rundown, it was used as a set in a horror flim. Where can you work? Well, there’s always the call centre. Almost everyone in town has done the three week training program and quit. After all, who wants to speak with angry customers about their overdue cable bill for close to minimum wage? There used to be large auto parts plants with well paying jobs all over the town. They all closed, sent their production to Mexico or went bankrupt after a major customer in a nearby city closed its doors.

There are some jobs at the giant Tim Hortons doughnut factory, the giant chocolate factory and the less than giant waffle factory. OK, so Brantford isn’t the place for you if you’re on a low carb, low fat diet. This scenario is being played out in cities, town and villages all through Southern Ontario. It’s a complete paradigm shift. Tires to TimBits.

Oh yes, add another 50 to 75 unemployed as the shops which supplied consumables and sub assemblies to that forklift plant close. ….. Everything is connected ……..

#77 The Vulture on 09.18.09 at 1:48 pm

A Do Run, Run, A Do, Run, Run…

If your spouse demands that you spend in excess of 500,000.00 for a starter home…RUN!

If your spouse demands hardware floors throughout the entire house yet has no job nor savings…RUN!

If your spouse demands granite counter tops throughout the entire house yet has no job nor savings…RUN!

If your spouse demands a full blown media room in the house yet has no job nor savings…RUN!

If your spouse demands a pool, hot tub, glass showers, back splash, HD Wide Screen, SUV, IPhone, Blue Ray player, 3 vacations a year, laptops, Beemer, leather couches, widows walk, central air conditioning, central vacuum, professional landscaped garden, brass bed, DVD players amd TV’s in every room, custom cabinetry in the kitchen, custom doll house and fantasy boys and girls rooms, pool table, leather jackets and pants and wine cellar, custom deck outside, potlights and has a
HUGE sense of entitlement…all with no money down and no income check…

R
U
N

A
S

Fast

AS

YOU

CAN……………………..!!!!!

#78 Barb .. a reader in Calgary on 09.18.09 at 2:02 pm

#71 re: sociopathic corporations

Chaostrology,

From this week’s news – plus some wise, historic quotes:

The corporation is on the verge of becoming superpersons in a pending court decision in the U.S. to allow them to fund political campaigns. Some justices on the Supreme Court seem hungry to usher in a new “corporate democracy.” The spectacular outburst of conservative judicial activism will enthrone corporations, diverting them from their job of generating wealth through economic activity and radically changing their role in law and society.
Of course that will be the death knell to society but those types could care less.

We should be as clear-eyed today as Abraham Lincoln was in 1864 when he said that “as a result of the war, corporations have become enthroned, and an era of corruption in high places will follow. The money power of the country will endeavor to prolong its rule by preying upon the prejudices of the people until all wealth is concentrated in a few hands and the Republic is destroyed.”

And we should be as passionate in defense of popular government as Thomas Jefferson, who wrote in 1816: “I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial of strength and bid defiance the laws of our country.”

And here’s the thorniest footnote of all:

Legally the court’s intent back in 1886 had not been to allow corporations to be persons. It was an intentional clerical “error” deviously inserted by the court reporter! He just happened to be a president of a corporation and slipped a private conversation into the court decision. And voila, corporations unjustly became ‘persons’. And just look what ensued, despite wise men’s warnings.

#79 jussupow on 09.18.09 at 2:06 pm

“Hundreds of thousands of people will be wondering what to do about homes they bought in 2009 and 2010 at the top of the market…”

So much for the perpetuated statement (yours) canada trailing us in our respective re bubble cycles by two years. Plus your freshly baked dates on prime doubling (36 months) and tripling (60). 5 years? Should ppl sell their homes and wait it out? Should they have done it last year? And what is for that guy that waited out 2003, 2004, 2005, 2006, 2007, 2008 to do? Who’s the greater fool now, Garth (no, not you. I am not implying that at all, but…)? I am afraid – you sucked. Karma. If you truly believe in something then do what is right. Voting for FTB pillage their RSP to put a foot in the market was a gaffe. A bad mistake.

Now you are underestimating the resilience of the central banks throughout the world to keep (and lower) the interest rates as well as our government willingness (and populace silent acceptance…well mitigated by cash for clunkers, mullah for appliances, mazumah for FTBs, green stuff must spent on home depot, and other off helicopter variety) to pile new debt. Future (within the boundaries you defined) looks not that bright indeed (though for different reasons).

Anyways although you are not very keen to recognize your past mistakes I’ll be nevertheless awaiting for “I suck” numero duo.

Don’t hold your breath. — Garth

#80 D in London on 09.18.09 at 2:12 pm

# 69 – Samantha

Examples of rant from Cowboy’s post:

– It’s called life. Suck it up.

– Many good things came from the boomers and I mean MANY.

– I’m tired of the portrayal of the boomers as monsters that aspire to eat their young, while many enjoy the fruits of their parents and grandparents labor

– Demographics have been beaten to death.

– Yeah it’s a big pile of people requiring a big pile of resources blah, blah, blah. (I love the respect that “blah blah blah” implies – D.)

– When i check out my children will be well provided for by this boomer due to my frugal ways and oh, news flash, they won’t be getting rich on the money I will have saved from my CPP or OAS if it’s still there to collect when i become of age.

– Nothing is a given in this world, so get used to it.

…and Samantha, don’t say I am selectively quoting, because these lines come from throughout his entire post. Plus there is someting in the overall tone that is difficult for me to express (I know, that part is only my personal opinion).

I agree with you about the lines you quoted from his post – those are valid points. I agree with all but the last (“Boomers have a vested interest…”).

That is because the next generation IS NOT comprised of his children and grandchildren. The next generation is us (Gen X) – and our parents were largely from the Silent Generation, not boomers. The people that are his children are the Gen Y’s, the very people that are vilified daily on this blog as the “twenty-somethings that want it all now, and with granite”. If there is any ageism going on here it is largely directed at the Gen Ys for their “careless and foolhardy ways” that are “driving up the price of real estate” and “reinflating the bubble” (coincidentally they also seem to be the generation without a voice in here).

My disappointment arises because you are usually able to cut to the heart of the matter and you usually hold writers accountable for their posts. For some reason today on this particular post you seem very one-sided.

Please don’t say that I am one-sided too, as I agree with the points you brought up and I am merely pointing out the ones you did not seem to see.

I am not interested in a flame war (been there, done that, ouch!). But you are one of the more insightful posters here and I guess I hold you to a higher standard – sorry for being such a harpie.

Can we shake hands and make up?

#81 JeffinPickering on 09.18.09 at 2:22 pm

If we really have deflation, can someone please tell me what is cheaper?

See http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm

So, really, all that’s cheaper vs. last year is gas, and excluding it we’re actually mildly inflationary.

#82 D in London on 09.18.09 at 2:27 pm

# 77 – Vulture

My stomach dropped into my shoes when I read your post.

What do we do if we have a spouse that wants all those things but does have a job and savings – and a pretty good one too?

#83 jess on 09.18.09 at 2:28 pm

“unless we change some stuff damn quick.”

Eliotness?

How about bribery which is against the law ….what about just enforcing it.

Confirm or deny has to change. Judges lately seem to be going for the heads at the top. Very interesting.

Why is intergovernmental bribery not considered bribery?

Why do the government books never seem to read what the other guy says they do Garth?
===============================

http://www.pbs.org/wgbh/pages/frontline/video/flv/generic.html?s=frow03s200bq745

Bribery investigations focus on China’s richest
China is cracking down on corruption inside the country — and the super-rich are not immune. According to a report in the newspaper China Daily, nearly 30 of China’s wealthiest people are either under investigation or charged with bribery. The investigations span all kinds of industries — from power generation to medical devices to the flower business. But the motives for the most recent anti-corruption campaign may not be completely pure, writes New York Times reporter David Barboza, who cites several experts that see the recent investigations and arrests as symptom of the power struggle within the communist party.

http://www.pbs.org/wgbh/pages/frontline/video/flv/generic.html?s=frow03s200bq74

====================================================
CEO Surrenders to FBI for $11 Million Mortgage Fraud Scheme

NEWARK, NJ—David Findel is best known for his purchase of exclusive seats at a local football stadium. Now, he will be known for another reason. Today, Special Agent In Charge Weysan Dun announced the surrender of Findel, the 44-year-old President and CEO of Worldwide Financial Resources, on a single charge of wire fraud.

A criminal complaint filed today in Newark charges Findel, of Colts Neck, New Jersey, with submitting false documents to financial institutions in a mortgage reselling scheme. Findel’s actions caused those institutions to wire money to Findel’s company, Worldwide Financial Resources (herein referred to as “WFR”) located at 50 Route 9 North, Morganville, New Jersey. Originally started as a financial planning company, WFR had been expanded by Findel to include a variety of home mortgage services, to include mortgage origination and banking. This allowed WFR to both initiate and fund mortgages for its clients by borrowing money from a “warehouse lender.” To repay the lender, WFR would resell each home mortgage it originated in the secondary mortgage market at a profit.

Because of the housing crisis, WFR experienced a liquidity crisis in January 2008. That is when Findel perpetrated a scheme to defraud mortgage banks by reselling the same mortgages to multiple financial institutions, according to the criminal complaint. It is important to note that once WFR sold a mortgage, it relinquished any and all financial interest in that mortgage. But Findel would then create a second set of fraudulent mortgage documents (loan applications, promissory notes, closing sheets, settlement forms, etc.) and resell—for a second time—the same mortgage to a different secondary lender. Funds from the secondary lender’s account were wired through an escrow company to the account of WFR. Findel allegedly used those funds to pay corporate and personal expenses. The complaint alleges that Findel obtained more than $11 million from secondary lenders through his fraudulent mortgage transactions.

“This is a man who had it all,” said Weysan Dun. “Mr. Findel made this company what it was. He had the skill and savvy for this business. But what I find most remarkable is that despite his wealth and success, it simply wasn’t enough. Mr. Findel let greed beat him.”

http://newark.fbi.gov/pressrel/2009/nk090809.htm

======================
The inquiry intends to determine whether fees paid to placement agents amount to bribes to associates of pension fund officials. Mr. Cuomo has filed criminal charges against six people, including a onetime aide to the former New York State comptroller, Alan G. Hevesi. Of those, two have pleaded guilty and four are contesting the charges.

“This case will go a long way to cleaning up the New York State comptroller’s office,” Mr. Cuomo said in a conference call Thursday afternoon.

Several other private equity firms, including the Carlyle Group and Riverstone Holdings, have already agreed to pay settlements and to stop using placement agents. The Quadrangle Group and its former head, Steven Rattner, are among others in talks with Mr. Cuomo’s office.

A code of conduct laid out by Mr. Cuomo prohibits investment firms from doing business with public pension funds for two years after having donated money to elected officials overseeing the funds. The Securities and Exchange Commission has proposed similar guidelines.
But the bank filed its legal arguments under seal, so that the public is not allowed to read them.
http://www.nytimes.com/2009/09/18/business/18norris.html
In a ruling last week, Judge Shira A. Scheindlin of United States District Court in New York refused to dismiss the case, meaning it will go to trial unless it is settled.

According to her decision, it was “standard procedure” at Bank of America Securities “to enter data about restricted stock with the same ticker in the same way as the trading stock unless otherwise instructed by the client.” By doing so, the restricted shares automatically were valued at the same price.

According to the judge, a Lancer fund bought restricted stock in one company for a bit more than four cents a share and told Bank of America to record them as being worth $1.50 each, which it did. The result was that a $1.7 million investment was shown as rising 3,384 percent, to $60 million.

#84 Samantha on 09.18.09 at 2:35 pm

#80 D

You’re not a “harpie”. I can see your point about the rant angle from the quotes you selected.

I shouldn’t have tried posting when I wasn’t fully up to it.

“Can we shake hands and make up?”

You bet, D – and here’s a hug, too (((D))).

#85 David on 09.18.09 at 2:38 pm

When one is assessing the balance sheet, it is neccesary to look at two factors:

1. DEBT.
2. NPV of Future Obligations

So, if you look at the Nation’s Balance Sheet in the Late 1960’s, it was wonderful. Very little debt, very small cost of future obligations.

Than a bunch of boomers voted for a fiscal LUNATIC, who was followed by a variety of other vote buying lunatics from both parties, and look at the countries balance sheet today.

1. Debt – Very high, but manageable.
2. NPV of future obligations – Crushing. Absolutely unmanageable, with future health care expenses being the largest by far.

Who developed all this debt? Who voted for it? Who still votes for it? Who is the Future Obligations (health care) primarily for?

Anyone who doesn’t consider this the Baby Boomers the source and biggest contributor to this problem just isn’t thinking.

Hopefully they can be the biggest solution, by stopping encouraging politicians to
1. Run up the Debt
2. Run up the value of future health care obligations

Until I see some action, don’t try to tell me the Boomers acknowledge the problem, or give a damn about doing anything about it.

“Family and community” don’t run up massive debts and pile it on other generations.

Ever think you might have benefited from Boomer-built national social and physical infrastructure? Cuts both ways. — Garth

#86 miketheengineer on 09.18.09 at 2:55 pm

Garth et al:

One way to fix this mess….drop the price of fuel, all fuel….fast. More buying power to the poor people who still have cash. Those extra dollar not being fed to the big energy companies, will go directly into the economy.

The oil and gas companies have sucked the life blood outa the economy. The way outa this mess is to not pay soo much money for energy.

Would it be o.k. for the big oil companies to only make 1/2 a billion profit instead of 1 billion? What about the banks. If they only made 1/2 a billion instead of 1 billion, and gave reduced “bank charges” so that the grand mothers on pension, had a bit more money to buy decent food.

Money in the hands of people to spend, save or whatever, is better than billions, going to shareholders, who are most likely rich anyway.

Then do the following:

1) Layoff 20% of all government workers. Hell 50% of the manufacturing base has now dissappeared. Why hasn’t anyone in the government lost their jobs. Why are they soooo special. Unemployment in the private sector is unbelieveable, yet the public sector has not laid off , not even one, of their employees. Where are the mass firings of the public workers? Yet we have to go into bigger national debt for them?

Makes me sick to my stomach.

#87 POL-CAN on 09.18.09 at 3:03 pm

# 67 J Walker wrote:

“#60 POL-CAN….guy get a clue a recognize sarcasm when you see it, down boy! I said DOWN! There’s a good boy, go back to the corner and chew on that milk bone”

I am so sorry master! It will never happen again. I promise to be a good little sheep from now on. Come on, don’t be mad. Throw the ball please. That milk bone was great! Thanks.

Seriously though… Is that the best you can do?

#88 McSteve on 09.18.09 at 3:43 pm

“A crisis is a terrible thing to waste” (Paul Romer?)

There is always opportunity with monumental shifts such as these. As an individual, I see a lot of sense in what Garth is saying, but I refuse to become a victim of it. In fact, there has to be opportunity for those smart enough to root it out. Here are my thoughts:

Your home is not an investment unless it generates income greater than it costs. It is a home. I plan to buy a home, even in this economy, because of my stage in life, but have held off until the following conditions were satisfied

1) Steady employment
2) >20% downpayment
2) a mortgage 5 year outlook, how can you not win with energy stocks? If China and US want our energy, the pipelines are also clear winners.

– World population is growing at something like 70+ million a year for the next decade – I like agriculture stocks

– Closer to home, the government supports the legalized extortion of the bank cartel – if you can’t beat ‘em, join ‘em

– For the gold and silver bugs, a little bit of money (5%) in the PM space never hurt anybody. Don’t chase the price expecting $6,000 gold. Buy as insurance and hope you never need it. Have a little bullion but the reality is you pay a huge premium to buy, sell or hold shiny metal. PM companies still make money when bullion prices fluctuate up and down but once you’ve bought physical PMs, you’re stuck with the prices you paid.

– I think it’s a like early for a big move in the health care space, but in another 5 years – look out.

– Always have some good old fashioned cash on hand. Although inflation costs, it is nothing compared to the cost a missed opportunity.

– Be thankful you live in Canada and try to make the country a better place to live. No other place in the world will survive better than we will from peak oil, global warming, population growth, etc. The number one threat to all Canadians is not any of the macro realities heading our way – it is poor management of national affairs and petty regionalism that politicians play on for their own personal gain.

I’d appreciate any thoughts on my thesis – I’m trying to focus on opportunities that will keep me from being run over by realities we can all see heading straight at us from a mile away.

#89 jess on 09.18.09 at 3:44 pm

“money in the hands of the people”
you might like this story since banks hoard and people must spend to live.

http://peoplesstimulus.org/

We’ve been inspired by the story of Alabama pharmacist, Danny Cottrell, whose company launched a homegrown stimulus package in order to pay it forward. In that spirit we’ve created The People’s Stimulus Package. We’ve started by giving each of our 200+ employees a packet of $2 bills to spend at their community shops to help stimulate the local economy. The response has been remarkable as other companies have stepped up to participate.

We’re inviting businesses and organizations from across the country to join our effort to pay it forward. And as you see the $2 bills circulating around your community, we hope it will inspire you and your employees during these tough economic times. Click here to participate in the People’s Stimulus Package

Danny Cottrell, owner of The Medical Center Pharmacy, made his two dozen employees very nervous when he called them in for a meeting in early March. But after a few words regarding the dismal state of the economy, he did something unexpected: He handed each an envelope containing hundreds of dollars in $2 bills.

Cottrell distributed $16,000 in bonus money — $700 each to full-time and $300 to part-time employees. He asked his workers to give 15% to a charitable cause and spend the rest locally.

“I didn’t think it would make a major impact, but it took on life of its own,” he recalls. “Brewton needed something right then — some good news. We had been hit during the worst week of the market, and it was just the right story at the right time. My employees went to stores they’d never been in before.”

#90 My_View on 09.18.09 at 3:49 pm

Here’s another dozzy;

Should this materialize, he added, the central bank could communicate to markets its decision to keep the policy rate at 0.25% for a longer period of time–applying further downward pressure on rates and make the Canadian dollar less attractive.

http://www.nationalpost.com/related/topics/story.html?id=2005876

#91 Live Within Your Means on 09.18.09 at 4:03 pm

#69 Samantha on 09.18.09 at 12:24 pm

Well said Samantha. I’m a boomer – born in ’47. Every generation has its problems. I especially appreciated your last comment. I’m astounded by the boomer bashing I read as though the average boomers were the cause of this financial fiasco. We worked, lived our lives as best we could, like every generation before and after

#92 Subversive on 09.18.09 at 4:06 pm

Garth, you say “stuff” needs to be changed “damn quick”. Can you be more specific? I’d really like to hear how you believe this can be fixed.

#93 dumdora on 09.18.09 at 4:12 pm

#46 Sailor-man Garth … With the Can $ pushing for parity and no sign of inflation, do you still think interest rates are heading north. I really can’t see that happening for another year. My broker is recommending a laddered Corporate Bond ETF as an alternative to GICs. No sure this is a great strategy, but few other choices with rates under 1% and the markets still a bit shaky Thoughts?

Buy a strip bond. Buy a bond fund. Buy a real return bond. Buy an equity ETF. Short bonds. Get a new advisor. — Garth

I’m a new reader who admittedly knows squat about economics, stocks, bonds etc (I don’t even know what you are talking about half the time) so please be gentle with me. I’m trying to get myself educated but with all the conflicting voices out there it’s a steep learning curve. So far you seem to have the most common sense of anyone. Recognizing my vast deficiencies, I have a financial advisor (actually, my third as the first two moved on to “other opportunities”). We had a meeting last night, and he recommended that we pull out of precious metals, emerging markets, and energy (our only mutual fund that has been going back up lately); our Canada investments, and put every thing into “corporate bonds” for the next 3 to six months as his head honchos have been telling him that we are in for another dip and the corporate bonds will protect our gains. Then I read the above post today, where you advise Sailor Boy to get a new advisor. How do I know a good advisor from a bad one? Can you send me the name of someone who thinks like you in Kelowna?

Bonds will drop in value as rates rise. As bond yields increase the worth of existing bonds diminishes, which means a capital loss. Corporate bonds are also less creditworthy than GoC bonds, so I sure hope your advisor knows what he is doing. Are you after income or portfolio gains? — Garth

#94 Bobby on 09.18.09 at 4:18 pm

What kind of idiot bids up the price of a home. Probably the same idiot that buys a one week timeshare in Maui for 126K.

When I was there the thickest part of the local newspaper was the foreclosure notices.

It’s gonna get ugly!!!!

#95 FerrisWheel on 09.18.09 at 4:32 pm

From CREA website:
“Resale activity in August 2009 was up from year-ago levels in about approximately three-quarters of all local markets. Year-over-year gains in Vancouver (117 per cent), Toronto (27 per cent), Calgary (17 per cent) and Montreal (nine per cent) contributed most to the national increase in activity. Aggregate MLS® home sales activity for 25 major markets posted the third consecutive increase from year-ago levels of more than 20 per cent in August.

Demand continues to improve in Canada’s more expensive housing markets, drawing the national average price upward. The national MLS® residential average price rose 11.3 per cent from year-ago levels to $324,779. This is the highest national average price for the month of August.

The MLS® residential average price for the month of August set records in every province except Alberta. A sustained increase in sales activity, including a rebound in activity at the higher end of the price spectrum in some of Canada’s priciest markets, is skewing the national average price upward.”

So Garth, when is your home price crash coming? I’ve lived in the same apartment for 20 years and have saved to put a good down payment on a home but prices kept crawling up and I’ve been holding back. My kids are teenagers and the gouvernment is doing all it can to destroy savers like me. With 1% interest rates, why save? Man, am I pissed.

What’s a saver to do?

Ciao,
FerrisWheel

I never forecast a crash. If you are looking for a correction, it’s coming. Don’t blame the past 20 years of rent on me, though, dude. — Garth

#96 Bast on 09.18.09 at 5:17 pm

@#76 Industrial Guy

Last time I checked Laurier was in Waterloo, not Brantford….

#97 Public vs Private on 09.18.09 at 5:24 pm

86

Ah, poor Mikey wants the government workers to be slashed simply because the public sector was slashed.

Well, Mikey, when you take a position in the private sector you have to count on these types of recessions happening, with changes in demand and supply. You take more risks in the private sector, hence the generally bigger compensation packages.

I always laugh when I read comments like yours. During the boom years, those in the public sector were criticized and laughed at by their private sector counterparts for their “low wages.” Now, when the tables have turned, its that darn public sector with their “huge” salaries, job security and benefits that is the drag on the economy, and who should be “cut” as well.

During the past 7 years, you had people that could barely pick up a hammer making professional type salaries in the construction business simply because of a “shortage of labour.” You had 2 year college grads working in the finance and investment sector making six figures with no experience, simply because there was money to be made and not enough warm bodies. Now that the largesse is over, you want to complain about the public sector workers who actually “missed out” on those wonderful boom years?

The private/public sector divide is pretty much a tortoise and hare situation. In the private sector, you are prone to business cycles where there are great strides forward with lots of money to be made, and then lean years where you earning potential is pretty much at a resting phase. So if you are in the private sector, be sure to maximize your income during the good years so that you can weather the lean years.

In contrast, those public sector tortoises count on their “decent” salaries, pensions and perks, and relative job security to get them through the boom and bust years, and to get them “slowly” to the same point down the road that that hare is heading for – financial independence.

#98 Investx on 09.18.09 at 5:27 pm

Johnny on the Spot:

“Not trying to beligerently disagree but deflation is a load. I haven’t seen the price of ANYTHING go down. Stats Can will give you some BS about flat screen TVs going down in price for example – you buy ONE about once every 10 years. It doesn’t really count. Food has SKYROCKETED –…”

To your list, add Tim Horton’s coffee in Toronto. Prices just went up.

#99 Nostradamus Le Mad Vlad on 09.18.09 at 5:29 pm

Received this today . . . there is hope for us boomers!
***
SENIOR HEALTH CARE

While discussing the under funding of Canada’s Health Care Program and the recently announced drastic cuts to British Columbia’s health care budget, especially for seniors, with a friend the other day, I think we have found the solution.

I am sure you have heard the ideas that if you’re a senior you need to suck it up and give up the idea that you need any health care.

A new hip? Unheard of! We simply can’t afford to take care of you anymore. You don’t need any medications for your high blood pressure, diabetes, heart problems, etc.

Let’s take care of the young people. After all, they will be ruling the world very soon.

So here is the solution. When you turn 70, you get a gun and 4 bullets. You are allowed to shoot two federal Conservative M.P.’s and 2 BC Liberal MLA’s.

Of course, you will be sent to prison for life where you will get 3 meals a day, a roof over your head and all the health care you need!

New teeth, absolutely! Need glasses, no problem. New hip, knee, kidney, heart? Well bring it on. And who will be paying for all of this?

The same government that just told you that you are too old for health care.

And, since you are a prisoner, you don’t have to pay any income tax…

#100 WillsDad on 09.18.09 at 5:39 pm

SarahBeth,

Can you post an mls link to the $50,000 house you mentioned in your post? Or tell us what the town name is? I’d like to know where the good deals are in Ontario, for real. Thanks!

#101 The Vulture on 09.18.09 at 5:55 pm

G.R.E.E.D

“If Money be not thy servant, it will be thy master. The covetous man cannot so properly be said to possess wealth, as that may be said to possess him.”

– Francis Bacon

#102 J Walker on 09.18.09 at 5:56 pm

#87 Pavlov would be proud. good dog.

#103 asp on 09.18.09 at 5:58 pm

What exactly needs to be done?
What legislation changes should I be sending to my MP? Changes to CMHC rules? Doubling or quadrupling CPP premiums?

#104 RM in Oakville on 09.18.09 at 6:05 pm

Uncanny timing with your post today Garth. I just received a letter from TD advising me of their intention to raise my HELOC mortgage rate a full point, from 2.25 to 3.25%. I’m going to fight it of course…having been a TD customer for 30 years (since I was a teen), hopefully I’ll be able to negotiate a discount. I expected rates to rise maybe next year, this caught me a little flat-footed.

I predict things one day in advance. Like Environment Canada. — Garth

#105 stevep on 09.18.09 at 6:24 pm

Garth, you need understand something about inflation and deflation. inflation is a net increase in money supply and credit relative to goods and services and deflation is the opposite, deflation is a net decrease in money supply and credit relative to goods and services. inflation and deflation are not changes in price levels. you muddy the waters when talk about inflation in those terms. other than that you are generally a pretty smart guy

Inflation is not a measure of money supply or vice versa. Try again. — Garth

#106 IW in Milton on 09.18.09 at 6:30 pm

Garth…your not going to believe this! I just drove by the Mattamy Milton Sales Centre and there are 50 young couples camping out in front for a new house release tomorrow….Unbelievable……

Go back! We want pix. — Garth

#107 TJ on 09.18.09 at 7:35 pm

Bank analyst Meredith Whitney says home prices have another leg to drop, perhaps 25 percent.

“Fourth quarter, then you see another leg down,” she told CNBC.

“No bank underwrote a loan with 10 percent unemployment on the horizon,” Whitney said.

“I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when.”

More

#108 Albertaboy on 09.18.09 at 7:53 pm

Inflation is not a measure of money supply or vice versa. Try again. — Garth

Inflation is the result of loose monetary policies (ie: QE) plain & simple. And Canada is on board with that!

Has anyone noticed that North America is one of the few places in the world where families don’t live together generationally? Many cultures have 3 or more generations living in one home, hence there is no need for RE and the lifetime of hard work & saving is passed on to the next generation. I suspect that the need to “leave the nest” has robbed our Western culture of both strong familial ties and helped to drive the overheated RE market.

There is no more relationship between quantitative easing and inflation than there is between Jim Flaherty and Beyonce. — Garth

#109 dumdora on 09.18.09 at 8:05 pm

Thanks for your response re: corporate bonds. I’m looking for portfolio gains – I have another 15 years until retirement. But I have no way of knowing if my advisor knows what he is doing…how do I find out? (I don’t want to just wait and see :) He’s the one with the economics degree but I hate just blindly following…I already lost about 1/2 my portfolio last fall, and only my mutual with precious metals/emerging/ energy has gone back up to where it was before the crash. It all seems like a pretty big crap-shoot for unedjicated ejuts like me. sigh

#110 POL-CAN on 09.18.09 at 8:06 pm

# 102 J Walker

Nope… Not good enough. Flex those mental muscles a little harder. It won’t kill you to excercise them once in a while you know.

I know you can do better so try again please.

#111 Eduardo on 09.18.09 at 8:55 pm

Garth,

Please clarify to your readers that QE is the same thing as printing money except its electronic. They can therefore decided whether thats MONETARY inflation, which it is.

It does not immediately inflate prices, but when there’s more dollars in the system the price of assets go up. I’m sure you’ve heard about this market rally being caused by the huge amount of money on the sidelines. The reason is because many people pulled their money out (there are winners and losers in every trade) and are sitting on HUGE reserves. There are more dollars in the system than there have ever been by a large margin.

More dollars competing for the same amount of goods will cause price inflation.

CPI is a measure of PRICES only. Cheaper prices is simply a function of supply and demand or “utilization” as it is referred to in the industrial indexes.

PRICE DEFLATION and MONETARY INFLATION are possible at the same time but both result in the system having more money to chase less goods.

#112 Finanzkrise on 09.18.09 at 9:21 pm

105 Steve P: “Garth, you need understand something about inflation and deflation. inflation is a net increase in money supply and credit relative to goods and services and deflation is the opposite, deflation is a net decrease in money supply and credit relative to goods and services. inflation and deflation are not changes in price levels. you muddy the waters when talk about inflation in those terms. other than that you are generally a pretty smart guy”

“Inflation is not a measure of money supply or vice versa. Try again. — Garth”
————————————————
Garth is correct – The economics definition of inflation is the rise of prices in an economy over time.

However, your point is a good one. Changes in money supply (and credit) can cause inflation or deflation of consumer and producer prices, but not evenly across the board. Credit is not often discussed along with the measurement of money supply (e.g. M0, M1, M3).

After the credit hyper-expansion we’ve had over the past 20-25 years, further significant contraction of credit could potentially dwarf central banks QE efforts and rock bottom interest rates. There is still a real risk of accelerating deflation.

#113 Barb .. a reader in Calgary on 09.18.09 at 9:27 pm

#97 Public vs Private

P.V.P., that was a great post…. Tortoise vs Hare…
I like it, very good analogy!

#114 Ben on 09.18.09 at 9:42 pm

“Inflation is not a measure of money supply or vice versa. Try again. — Garth”

Well, Garth, I have to disagree on this one. If inflation is not a monetary phenomenon associated with the expansion of the monetary base and credit, then what is it? SteveP makes a good point. Inflation is NOT an increase in consumer goods and asset prices. Those are SYMPTOMS. Just as a cold is not defined as a runny nose.

#115 J Walker on 09.18.09 at 10:19 pm

#110 Pol-Can
not sure what your looking for. you misinterpreted the post regarding the carbon tax and looked foolish. There is nothing to try again. go bark up another tree.

#116 Cordoroy Cowboy on 09.18.09 at 11:31 pm

Samantha and D in London I’m glad that my post could precipitate such debate. I’m pleased that Samantha thought my post to be noteworthy and quoteworthy. Thank you for your consideration, I am honored.

D in London, I did not intend for my post to be a rant, nor do I think that it was it one. However I see that I have touched a nerve with you and you felt compelled to defend your position. Fair enough, but your post did seem to me to come off as a bit of a rant of it’s own. But never mind, that is your opinion and you are certainly entitled to make your point and Samantha is entitled to her opinion as well. Sorry that you thought that she was under par in her observations. But she seems to have forgiven you. Before I sign off, I would however like to address your following quote.

That is because the next generation IS NOT comprised of his children and grandchildren. The next generation is us (Gen X) – and our parents were largely from the Silent Generation, not boomers. The people that are his children are the Gen Y’s, the very people that are vilified daily on this blog as the “twenty-somethings that want it all now, and with granite”.

Thank you for that elaborate interpretation, but I think I know which generation my children and grandchildren are in. You really seemed to have missed the whole point, but then your perception may be clouded by whatever nerve I touched and for that I am sorry. To reiterate, we really are all in this together. You, me, Samantha…group hug.

#117 Industrial Guy on 09.18.09 at 11:31 pm

#96 Bast on 09.18.09 at 5:17 pm
@#76 Industrial Guy
“Last time I checked Laurier was in Waterloo, not Brantford….”

Geeez, There’s always one in a crowd ……..
Laurier is also in Brantford ….. My step son just graduated from their criminology program … in Brantford. The convocation was IN BRANTFORD.

#118 steven rowlandson on 09.19.09 at 10:24 am

Hello Garth.
Perhaps its time to make a few new laws in order to make things right for young adults.

1. Ban forever all federally funded social programs.

2. By fiat knock 2 or 3 zeros off real estate prices and freeze those prices for one thousand years. If Canadians want to get rich they can start a business or buy into one.

3. Ban immigration so that rich foriegners can not move to canada and buy up and out bid canadian young adult home buyers.

4. Impliment Morton Schulmans advice on home buying as explained in his book “Anyone can become a Millionaire. I have given a summary of it in previous posts.

5. Ban womens lib , homosexuality and divorce and all laws that impinge on guy stuff. Which is largely much of the legislation of the last 50 or 60 years.

Society isn’t going to grow or function right untill this done any way.

Steven

Thank you, Mr. Swift. — Garth

#119 pessimisticprof on 09.19.09 at 5:07 pm

Hi Garth,

I see one solution to both the RE bubble and the government’s looming financial crisis – lift the capital gains exemption on the sale of primary residences, or at least create a scaled exemption that rewards long-term owners. This gift to the Canadian homeowner was originally intended to reward people who bought “homes” and lived in them for 30-40 years, but it now rewards flippers who personally profit from a socially created increase in property values over the short term. I work my butt off at two jobs, pay upwards of 40% tax on every dollar I earn, and still cannot afford a house in Vancouver, while the flippers here drive prices out of reach while walking away with Lotto-sized tax-free profits. So much for rewarding hard work – but of course that is no longer what the system (or society) values. All hail the speculator, for (s)he is the engine of economic growth!

#120 stevep on 09.19.09 at 6:23 pm

Garth, just trying to help you

Before we can begin any discussion, it is imperative to agree on the meaning of terms. I happen to believe in Austrian economics and the definition I use when I speak of inflation is a net increase in money supply and credit. Deflation is the opposite, a net decrease in money supply and credit.

to increase your knowledge on this you need to start reading the following blogs, automatic earth, mish shedlock, steve keen’s debtwatch.

i believe the automatic earth has a link to your website that is how much they respect you.

I love Austrian economics. The icing is so special. — Garth

#121 David Bakody on 09.20.09 at 2:21 am

Ladies and Gentlemen ……think? We all have only one life to live and if a real pr icy home is what y’all want to live the good life ( by the way the family makes the home, not money) look at this in comparison for a city property …. ocean front is available within 20-30 minutes for about the same price.

http://www.homesinhalifax.ca/listings/Listings_All.html

Yes, there are many professional high paid jobs in Halifax city is full of them.

#122 Future Expatriate on 09.20.09 at 6:56 am

#116 – You forgot #6, Steve-rOw

6. Kick all people who can’t spell the word “implement” or spell check it with google out of Canada and replace them with folks from the US who can.

Especially feminists, homosexuals and divorcées.

#123 D from London, ON on 09.20.09 at 9:04 pm

# 116 Cordoroy Cowboy

Your last post makes you look like a pompous ass. You must really not like being called out (or maybe people rarely call you out). Sorry I touched a nerve.

I got your “whole point”. I just don’t agree with a lot of what you said in your post (though, as noted above, I agree with many other of your points). You made the point that we are all in this together, while taking several shots at a subgroup of people who you are supposed to be in this with. That sort of undermines the “together” part of your point, don’t ya think?

As for my nerve, readers here have seen my posts (including rants) in the past and my feelings on these matters is well documented. Obviously they are diametrically opposed to yours, which is no surprise since we have experienced the last 45 years from very different places.

Regarding the generations of your children and grandchildren, I appologize – you are correct – you know best, as I do not know the years they were born in, but you do. And since you seem to be such a warm-hearted, forgiving fellow I am sure you and they have sat down and had many open, non-judgemental discussions on the how the world looks from each point-of-view. Haven’t you?

#124 Cordoroy Cowboy on 09.21.09 at 2:46 pm

D-My kids and I had a good laugh over your post this morning over coffee, especially the pompous ass bit (they found that to be a real knee slapper). They both kissed me and told me they loved me as they left for their prospective job, and no they don’t live with me, both are self sufficient young adults making their way in the world, they just like to hang out with dear old dad when they have a chance. I must say the pompous ass will be getting some mileage for some time around here, lol.

#125 Cordoroy Cowboy on 09.21.09 at 2:48 pm

D-My kids and I had a good laugh over your post this morning over coffee, especially the pompous ass bit (they found that to be a real knee slapper). They both kissed me and told me they loved me as they left for their prospective jobs, and no they don’t live with me, both are self sufficient young adults making their way in the world, they just like to hang out with dear old dad when they have a chance. I must say the “pompous ass” bit will be getting some mileage for some time around here, lol.

#126 Tony on 09.21.09 at 10:24 pm

#59 gold bugger

Wrong pal, the world is presently in a deflationary collapse. It’s suckers like you that daydream and buy gold who lose every time because they can’t think for themselves and listen to other stupid people. Gold and silver will crash as will oil again. Interest rates will stay at present levels for many, many more years as nothing but lies comes out of the US. Negative growth rates will be with America for at least the next three years and nothing will inflate.