It’s that simple

dwight duncan1

Ont Treasurer Dwight Duncan: busted

It’d be hard to make this stuff up.

  • One of Canada’s biggest banks is slapped with a debt review and a likely credit downgrade.
  • The country’s biggest province says half its business taxes vanished, and doubles its deficit. It, too, gets a debt downgrade.
  • And it’s taken a mere 12 months for Ontario and Canada itself to pile $83 billion more in debt on taxpayers’ shoulders. In fact Ontario alone figures new debt will hit $70 billion over the next three years, while the national government heaps on $200 billion.

Was it only a year ago we heard this: “We will not be running a deficit. We will keep our spending within our means. It is that simple. The alternative is not a plan. It is just the consequence of complete panic, and this government will not panic at a time of uncertainty.”

So spoke PMSH last October. The prime minister also promised the recession would not come here. So it’s a good thing he’s not running a major Canadian corporation like Bank of Montreal. Oh, sorry. Bad example.

But this is not to dis the political class, now guaranteeing through their actions that your taxes will increase. Instead it’s to remind you of the fragility of the economy and how, in many ways, we have created the illusion of prosperity. Dig down a little, and you’ll wish you hadn’t.

For example, imagine if something really costly happened. Like 30% of the workforce staying home for three weeks because of H1N1. Or some religious fundamentalist whackjobs blowing up the Toronto subway. Or maybe a real estate decline of 15% causing a wave of mortgage defaults on high-ratio loans.

Which brings me to CMHC. Again,

The reason government finances have fallen off a cliff, along with those of carmakers, resource companies, steelmakers, tool and die companies, casinos, exporters and a host of other folks is simple. The economy sucks. People are out of work. Businesses losing money don’t pay taxes. The prime minister was wrong. Apparently you can’t fight global recession with a soundbite.

But meanwhile, two things are booming: Real estate and lending money. House sales are up by a third nationally. The average price is ahead 11% on average. Mortgage loans have hit an all-time high – rising an estimated 12% in 2009 alone. Consumer credit has soared 9% during the recession. And we now owe more, per head, than the Yanks. Household debt in Canada is 140% of income. Down south, it’s 132%.

So why do we have a real estate boom, when they are still wallowing in their bust?

Simply because CMHC, a federal government agency, backs all high-risk mortgages with taxpayer dough. By removing all risk from the banks, it lets them lend to people without money and little prospect of paying their loans off. It allows them to give the cheapest, lowest rate to those with the highest default risk. In case that sounds familiar, we used to call them ‘subprime.’

In fact, the government encourages this. It obviously wants a housing bubble. It’s doubled CMHC’s debt threshold to $600 billion, just slightly higher than the current national debt – an amount of money which goes 100% into high-ratio loans and which is guaranteed by taxpayers. At least those still working.

What’s more, these mortgages are being bought from the banks which originated them (also paid for with tax dollars) so they can make more of them. CMHC then bundles the loans together and sells them as MBS units – mortgage-backed securities, just as Wall Street securitized subprime loans and sold them globally, precipitating a crisis.

The big difference between the two countries, however, is that in America the selling of mortgages was done privately by corporations. So when enough mortgages failed, so did the securities. Here the mortgages are guaranteed by the federal government, so they cannot fail. Unless, of course, CMHC does.

But what’s to worry?

It has six hundred billion in insured loans. And eight billion in equity.

By the way, the Bank of Canada says the recession will be over in 2011.

Hard to make this stuff up.


#1 viamede on 10.22.09 at 10:07 pm

Dwight’s gonna drop 50 lbs in the next year. Inspiration to the whole Province. Lean and mean.

Equity…CMHC? Print away…print away..

#2 kc on 10.22.09 at 10:07 pm

“By the way, the Bank of Canada says the recession will be over in 2011.”

What recession??? We haven’t started to hit this recession yet…. The recession will start when the housing cools and more and more people wake up to the fact that the party is over… we aren’t there yet. soon thou… real soon. too many people still have their heads buried in the sand or up their asses.

#3 DrC on 10.22.09 at 10:14 pm

It’s hard to explain to folks that subprime defaults are a symptom and not the cause of the GFC. Last suckers in to the bubble are those least creditworthy. The greatest fools (though with non-recourse, and jinglemail who was fooling who?)

Are we seeing the same here, are illegal strawberry pickers being offered $700k loans on $20k annual incomes, or simply that everyone overall is being offered on average more debt?

#4 Iain on 10.22.09 at 10:17 pm

Interesting words from my favourite financial commentator (after you, Garth, of course),PGJ,^GSPC,^dji,SPY,LMT,RTN

#5 Cash is King on 10.22.09 at 10:18 pm

Since the Tories in Ottawa and Lib’s in Ontario are adding to the debt load, I guess Jack of the NDP is feeling left out.

Doubling CPP monthly payments to $1,817/mnth. Adding 2.5% to CPP contributions (match of course by your cash strapped employer) and picking up the tab for Nortel worker pensions. Hey it’s only money!

Household debt in Canada is 140% of income??? Damn, I can’t sleep with my household debt of 39%. How do these people sleep at night?

I thought Mark Carney & the Bank of Canada said the recession ended in July 2009?

#6 Andrew toronto on 10.22.09 at 10:31 pm

Unreal Garth ..Whatever happened to accountability, I wonder with the higher debits ontario and Ottawa are racking up, how much taxes will be going up to pay for all this, not to mention the HST coming in 8months. People could barely pay what they have now, sounds like the government is creating a death spiraling deflation all by itself. What a mess

#7 double mike on 10.22.09 at 10:39 pm

Oh, c’mon Garth! Do you really begrudge poor bankers their bonuses? People’ve been through hell recently, sure they deserve a little payback! And where they would get their dough but from our friendly politicians?

Look at some provincial PM for example. Let’s say for some strange reason the guy is unelectable. So should he starve on his meager pension? No, sir, he will for sure get some productive job in some think tank or whatever. And who would blame him if the placement is sponsored by, say, an insurance consortium? Friends should help each other in dire straits, shouldn’t they?

#8 Rob in NVan on 10.22.09 at 10:43 pm

I’m sure many of you have seen this. I love the part where Carney says, “We expect, and we have confidence in, prudence from Canadians”. A nice contrast to all the . . . what do you call them? . . . oh, right, “facts”.

“Mr. Carney said the central bank is studying the (unsustainable surge in home buying) and will have more to say when it releases its review of the financial system in December. In particular, policy makers will break down the home buying by income groups to see if people might be taking out loans they won’t be able to afford as interest rates rise.

“We are watching the growth in consumer credit in Canada,” Mr. Carney said. “We expect prudence from lenders. We expect, and we have confidence in, prudence from Canadians. We remind people that borrowing is for the period you are going to borrow, not just for the moment you take out the loan.”

I believe this is what they call foreshadowing . . .

#9 Boombust on 10.22.09 at 10:55 pm

Thanks, Garth.

Well done.

Now, if the a$$holes at Global and The Vancouver Sun et al could get onto this.

Sheesh! Just think of it!

But, on the other hand, it might skare away dat revenoo…

#10 Steve on 10.22.09 at 11:07 pm

Duncan really needs to hit the gym. Wow.

#11 Joshua on 10.22.09 at 11:50 pm


Im in a safe position in terms of liquidity and control of when to buy. However, I still hope you are right about all this. I truly believe you know your stuff and love the blogs you enter each day. Keep them coming because all the economy recession stuff is real interesting.

#12 nonplused on 10.22.09 at 11:53 pm

Which pill am I supposed to take to stay in the matrix again? The blue one? Ok. No wait, NOOOO! Plug me back in!!!!!

So what are our sounder stronger gentler kinder smarter wiser banks doing with so much US debt? I thought they eschewed such practices? They couldn’t have any exposure to say, commercial real estate in Canada could they? What about construction financing? Credit cards?

CMHC should be ok though. That 8 billion should cover a loan loss provision of nearly 2.7%. If they go to 600 billion, it’ll still be 1.3% and the 8 billion will probably grow by some amount as they underwrite the new loans and collect fees. Seems like plenty to me.

Damn you Mortious!

Click your heels and repeat “There is no place like home”. We’ll all be alright once we get back to Kansasada.

So, since the prophet George Orwell seems to have been right on with 1984 (timing about 20 years early, technological developments are so hard to predict), will he eventually score with Animal Farm too? If bankers are pigs it looks like they are already “more equal” than the other animals in the US already. Could that happen here? Well, CMHC didn’t come to me and offer to insure my business receivables. If my clients decide not to pay (or can’t), I’m in trouble.

I think I’ll grab a drink and watch “Brazil” again.

I got to hand it to the MSM and the government though, they have done such a bang up “Orwellian” job controlling the sound bites, or “memes” as Dawkins calls them, that it is almost like one should be cheering for them for a job well done. CSIS must have a bunch of high brain power psychologists working on this full time to figure out what sound bite to float next and how to spin it. Kind of like the Germans did. Uh oh, that couldn’t be good.

Nuclear technology still presents itself as a Pandora’s box. Probably knowledge that the scientists were going to develop regardless but it should have remained a study outside of general implementation. As Einstein, when asked what weapons would be use to fight the 3rd world war, is attributed to have said: “I don’t know what weapons will be used in the 3rd world war. But the 4th world war will be fought with sticks and stones”.

But, I think, the modern understanding possessed by those who have an interest in such things as how the human mind actually works, is equally dangerous. The reason being simple: They know how to manipulate the masses, but they are using the same sort of brain to decide the ends toward which they should be manipulated. Thus, we have the 6 year old with a pistol problem all over again. They manipulate very successfully, towards the goals of their own ape-ish desires.

As the French say (roughly translated): “First me, then the deluge”.

Yes, that means we are being manipulated by apes every bit as ape-like as we are. But for their own betterment, not ours. The people that send us out to battle do not die in the wars. The people that profit from debt do not have debt themselves. The people that manipulate the currency are not exposed to the currency themselves. And as they have proven in the states (I am sure we have some too) the people that set the tax rates do not pay taxes themselves.

A constitutional republic is the only way to go. But the “contract” (the constitution) needs to be vigorously defended by the courts or all is lost. Unfortunately, the governing powers appoint the important judges, and they appoint those they deem favorable to their cause. So eventually (already done) the constitution becomes “just a piece of paper – GWB”.

#13 kitchener1 on 10.23.09 at 12:02 am

Some bad news today for those that live in Ontario.

Huge tax increases at every level of government with less service in return.

With the boomer demographic timebomb about to go off in a few years that means that the govt(all levels) will have to pay off more debt then ever before with a declining tax base.

CRAZY, that is like someone that makes $40/hour taking out a million dollar loan and losing his job, getting another that makes $10 hour, yet he has to service the same debt and interest payments. With a 100% guarantee that his interest rate will rise.


One thing to think about, our debt levels are currently being financed at crazy low rates on bonds, when (not if) rates start to rise, our public debt will rise expontially as we will have to pay a higher interest rate to service the same debt.

Its a viscious cycle, as, with huge # like 24 Billion or 50 Billion at the Federal level a 1 or 2% rise in interest rates to carry that will negate all of the cost cutting measures in place. So, more cuts and increased taxes. Eventually, taxes will kill small business investment and this “recession” will turn into a “lost decade” or two.

Garth, mark this day down in the calendar, 2008 may very well have been the last year ever that Canada had a surplus. At this pace, we are going the way of the US with increasing defecits YOY for eternity.

It really does suck to be a 30 year old, knowing that the future holds nothing but reduced services, increased taxes etc…

#14 Nostradamus jr. on 10.23.09 at 12:12 am

“”One of Canada’s biggest banks is slapped with a debt review and a likely credit downgrade””

Moody’s Rating Agency also said the U.S. Banks may be downgraded…but Moody’s will need three years before they decide.

…Moody’s and the other two rating agencies are crooked offshoots of the US govt/wall street…just trying to manipulate foreign banks like BMO

“”But meanwhile, two things are booming: Real estate and lending money. House sales are up by a third nationally.””

Garth, Where else can you expect citizens to invest?

Stocks, bonds currency?….the whole house of Capitalism is imploding because wall street is a crooked POS.

Nostradamus jr.

#15 alberta ed on 10.23.09 at 12:19 am

Diane Francis picked this up, too, with a nice attribute to this blog. Maybe the financially illiterate mass media will pick up on this impending crisis. But it’s hard to know whether to laugh, cry, or go for a ride. With heated grips, naturally. Did that today, in fact.

#16 Chaostrology on 10.23.09 at 12:35 am

Now would be the time to quietly and calmly make your way to the lifeboats and prepare to abandon ship.

Steer away from the vortex.

Keep your eyes on the horizon.

Don’t look back.

#17 Nostradamus Le Mad Vlad on 10.23.09 at 12:51 am

“. . . we heard this: ‘We will not be running a deficit. We will keep our spending within our means’.”

Sometime before, I listened as H&F said, “. . . the CPC will never tax Income Trusts”, then did (LIE).

Maybe it’s all just a figment of my imagination, none of this verbal diarrhea ever happened, possibly I’ve been in a nightmare for several years, but ever since dubya stated publicly that Sadaam had WMD and posed a major threat to civilization, that regime change was necessary, the world has been all sweetness, light, balloons filled with happy pills for all of us to enjoy the sheer ecstasy of life shared with Ali Baba and the 40 Thieves, plus living with politicians who tell bigger and bigger lies.

All have Pinnochio as their names, and every time they breathe their noses grow a foot or two. The point is, we keep believing them, keep re-electing them, they keep lying to us, we keep believing them then re-electing them.

Didn’t I just say that? See how de-sensitized I’ve become to life?

That’s why we vote Green in elections now. Better to vote for someone who won’t win than waste our time on these evil charlatans.

BMO (if that is the bank) was spoken about recently about not being in the best of health. Then again, nothing lasts forever.

“CMHC then bundles the loans together and sells them as MBS units . . .” — If CMHC is selling these units, is it the Cdn. banks they are selling them to?

If so, it seems to be a rather large ponzi scheme and the stench is revolting; if a bank continually takes unsustainable hits (from bad investments, etc.), then crashes who will pick up the tab for this?

As with anything, the rich are getting richer and the rest of us get the scraps. Power corrupts. Absolute power corrupts, absolutely.
A good one from; explains the mess the people living here are in. Most of us are not part of the private elite, but they are the ones profiting from this.

THOUGHT FOR THE DAY! “War is the public agenda for the hidden desires of a private elite” — Bodazey

Speaking of the elite, first para of this is right on the money, goes with the Thought Of The Day above and gives a much clearer picture as to who REALLY calls the shots. Hint: It is none of the so-called ‘elected’ parties or leaders. — Energy

#18 Onemorething on 10.23.09 at 1:39 am

Good ole’ Dwight! The boy needs to stick a bookmark in his mouth so he remembers where to eat!

There will be a RE crash, there will be significantly more layoffs, there will be haircuts for anyone salaried, including govn employees, there will be higher gas prices, the TSX will retest lows, there will be huge tax increases on top the ridiculous levels being paid today, cheap money will be nothing when you cant handle the payments on what you bought with it in the first.

Those not working for the government on paper will be in reality as you will get to take home Fridays pay only, but wait, your down to a 4 days work with!

The Fat Boy is about to sing!

#19 confused and a little crazed on 10.23.09 at 2:37 am

basically there will be no crash as long as govt will ing to back up the mortgages with tax payer $$$ even if it a 200 billion defecit

#20 G. on 10.23.09 at 2:51 am

I looked at that report and wow!
2007: $148,168 million worth of ‘rope’.
2008: $203,512 million worth of ‘rope’.
Year over year increase: $55 billion or ~33%!
Who’s gonna borrow the next $55 billion?
When is this debt market going to saturate?

And it has to, soon.

In 2003, once we finally got onto the internet, and I could look up the MLS online, I noticed that prices were at the point where it was cheaper to buy than rent. Two babies, one income, no money to buy a house.
Soon, other people noticed, too.
And how.

In 2005 I made a now or never mid-life career change. Rather than be on my deathbed saying ‘I coulda been a contenda’.
Actually, going back to school at that time seems quite the contrarian investment. (Despite the opportunity cost.)
Even though everyone thought I was crazy because people just don’t go back to school when they are almost forty.
Especially when all your peers are people who have settled for their lot in life.
But you have to enjoy your work, at the very least to set an example for your kids. If your job is grinds your soul to dust you might as well open a vein in the bathtub and be done with it. Too many novels detail how the protagonists father hated his work. Or just did the best he could.

A lot of people who had better jobs then are going back to school now. And I don’t have to compete with them for classroom space. Or a job. And tuition is higher now that the government is paying people to retrain in their mid-life economic crisis.
I’d be priced out of that, too, if I had waited another year or more.
There is this inertia thing that comes with making a decision like that.
And anger broke me out of mine.

The worst time to do anything bold is when the government is giving you money to do it.

I do make an exception for the daycare subsidy that we relied on for three years. That was a hand up not a hand out and I will be eternally grateful for that. I know that the money the government invested in me then will be repaid in kind in productivity and taxes.

When I am older, I want to establish a scholarship at my old school just for people like me.
Because there wasn’t a scholarship there for people like me.

By 2008, when I moved to another city for work after graduation, I landed in the middle of a market mania where prices had increased by 150% over the years I was in school.
A co-worker has a pre-bubble mortgage payment of $700/mo.
Less than my REIT owned apartment rent.
REITs are another can of worms, eh?
If I bought the same house today mine would be $1800/mo.
Relatively speaking, even though we have equivalent positions this gives him a 25 year advantage of $1100/mo. in disposable income.
Iff I buy a house in this market at this time.

Now, in 2009, I am a Kremlinologist (funny how the spell-checker doesn’t underline that word) deciphering the new speak and the double think that is journalism and politics.
Happy in my work.
Enjoying the evenings and weekends that I get to spend with my wife and kids that were impossible four years ago.
I watch baseball with my kids and I tell them anybody but the Yankees now that Boston is out.
There’s more to life than owning a house right now.

If we could just do something about that cable bill…

#21 A Fist Full of Dollar$ on 10.23.09 at 3:17 am

I’m 42 years old, I’ve been reading your blogs for about 4 years, and I have bought 3 of your books. This is the first time I have been compelled to post a message. I can relate to your message that you have been trying to get across to people regarding the future of our economy. What I can’t relate to is how our government is spending us into the largest tax burden this country has ever seen with little to no effect. At the same time watching its citizens spend their way to the largest personal debt load this country has ever seen with an unrealistic expectation of their debt reconciliation. You say “this will not end well”; I say “it can’t end any other way than bad”. How can we sustain this? I just don’t know what to say to people anymore. In my youth, I never thought that I would spend so much time thinking about how bleak my future could be. Where’s the hope???

#22 Cert Bhapman on 10.23.09 at 3:32 am

They almost had me. I was thinking just the other day that none of this made any sense. The prediction of a collapse was wrong, maybe it isn’t coming, maybe the baldheaded (somewhat sleazy, I don’t know him, but I wouldn’t leave him alone with my dead goldfish for fear he’d sell it to a neighbourhood kid as a pet) was right. I actually started to discuss the possibility of buying a home with the misses. I even called my realtor friend to keep an eye out for something reasonably priced in town (I live between Calgary and Edmonton. Alberta advantage is non-existent unless you like country, rodeos, and trucks with testicles hanging from the trailer hitch The annoucement by government today was the announcement I expected 3-4 months ago. It’s nice to see the logical thought process paid off in the end… least for us who opted not to buy $400,000.00 worth of MDF.

#23 frank pasquale on 10.23.09 at 4:59 am

That guys chin is the size of my bicep

#24 SaraBeth on 10.23.09 at 5:33 am

Socializing risk….. privatizing profits….

Sounds like (Mega) Business as usual to me… :-/

#25 Samantha on 10.23.09 at 6:00 am

50 jobs gone in less than a month in my little town.

One closure was ag based industry, the other retail food chain. However, not all doom and gloom with the food store part of our Co-op is expanding by 6000 sq. ft.

Our mayor wants to get an EDO (Economic Development Officer) in place.

House prices still inflated here, but sales appear to have slowed somewhat from last couple of years.

Still, someone built a 1.2 million dollar home on the lake this year. Strange times.

And further in the ‘strange but good’ department, a shift that now urges ‘prudence’ from this mornings’ Globe & Mail:

#26 Weeping in Windsor on 10.23.09 at 6:03 am

Hydro cutoffs rise 22 per cent in 4 years
By Craig Pearson, The Windsor Star October 22, 2009

WINDSOR, Ont. — Utility disconnections are rising in Windsor while energy consumption is falling, which experts call the latest sign of a community weakened by an economic crisis.

Enwin Utilities, owned by the City of Windsor but run as a stand-alone corporation as required by provincial law, provided numbers to The Star that show disconnections have risen from 1,840 in 2006 to a projected 2,237 for this year, an increase of almost 22 per cent.

Meanwhile, electricity consumption from January through June over the same period has dropped from 1.6 billion kilowatt hours to 1.2 billion kilowatt hours, or 25 per cent.

“When you look at the statistics in our community, they’re very alarming,” said Marion Overholt, a lawyer for Legal Assistance Windsor

“Social assistance rates don’t meet basic expenses. When people fall behind, they fall behind on hydro bills and rent bills. They try to conserve energy as much as they can to keep their bills in line. But it’s hard to stay up when you’re not getting enough money.”

Overholt notes that some 24,000 people in Windsor and Essex County collect unemployment insurance while a record 9,000-plus families are on welfare rolls.

“There is a record demand for services from food banks,” Overholt said. “Now that we’re moving into the colder season, there’s going to be more demand on services and more concern about whether people can pay their monthly bills.”

#27 Bill-Muskoka (NAM) on 10.23.09 at 6:48 am

Oh my, poor widdle Dwight went doo doo! He piddled on our parade! (Actually, he only handling the problem he was given)

LOL He is a grain of sand in a hurricane compared to what FedRes Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and the U.S. FedRes did to us. try $27 TRILLION in vapourized investor’s money in the shadowy derivatives market.

I strongly recommend watching PBS ‘Frontline’s’ excellent expose of how a few bad men, locked into their self-serving ideology, have destroyed the world’s economy…AGAIN!

The Warning

Yes, they KNEW way back and no one acted. Some tried (Born) but were shut down to protect the GUILTY!

I also recommend watching the other Frontline episodes on the financial tsunami that has hit all of us. Learn WHO is the real cause of each bit of this disaster. Then REMEMBER and never forget these scumbags.

#28 Patiently Waiting on 10.23.09 at 7:09 am

The authority that oversees public housing Metro Vancouver is worried about growing vacancies as tenants are lured into home ownership.

A three percent vacancy rate.

I hope every single parent family who has been forced to live in a moldy basement becomes aware of this story. Lots of cheap, above-ground housing available if they choose to pursue it. At least someone deserving is going to benefit from the bubble.

#29 David Bakody on 10.23.09 at 7:20 am

Not all of Ontario is doing so badly.

Front page news here in Halifax

Sidney losing funding battle … Industry minister Ontario riding gets 15 times more cash.

In any rate every small town and city mayor has their own tale to tell. Couple and couch all this very selective spending, loan guarantees and low interest loans and guess who will end up paying for it. All Canadians coast to coast to coast expect the selective few who are PMSH Christmas dinner list.

Winter electricity was the hot topic at an AGM and a long discussion took place from those wanting it to remain free (small summer fee for all) some fine committee members had a plan for a user pay over winter (winter costs are now deadly) …. near the end I had enough … raised my hand and stood up … I said in part who is going to pay the bill ? Everyone in increased dues, it’s just that simple so let’s cut to the chase and vote on the user pay plan! In short only one person voted against it. So Canadians who is going to pay for all those give-a-way items and poor financial judgements listed above by Mr. Turner ….. if y’all said taxpayers go to the front of the class ….. and for those 40% who want PMSH to have a majority hang on to your hats because he is going to tax every last cent y’all have also. And that you can take to the bank.

#30 robert on 10.23.09 at 7:20 am

I don’t know where this news is going to take the share price but I do know that on August 25 you called BMO a buy at $49.11 after dismissing stories about problems at the bank including reports from as far back as last December of an excessive Tier 1 capital ratio and low market cap to share holder equity ratio. Since then it traded as high as $54.75 (the same week in which the rumours of its demise were circulating). It closed yesterday at $53.08.

And I was right. — Garth

#31 Toronto C9 Renter on 10.23.09 at 7:24 am

Good post Garth.

The “surprise” Ontario deficit is appalling, incompetence plain and simple. Other provinces, get ready for your surprises!

By the way, re: BMO Debt review — this is silly. I’m no fan of Big Banks, but Moodys has no credibility and I’m surprised they’re even capable of generating news these days. These are the same guys that assigned (and maintained) high ratings on mortgage-backed securities, all the while having no clue what the true risks were.

#32 613 Happy where I am on 10.23.09 at 7:30 am

“Hard to make this stuff up”

And hard to stomach, too!!!!

#33 Al on 10.23.09 at 7:31 am

Going through the CHMC’s financial statements, they have set aside $676 mil to cover guarantees of $234 bil. So they can handle .3% of their guarantees using provisions. Equity is $8 Bil as Garth points out, so that would handle 3.4%. It appears they have enough liquid assets to raise the $8 Bil and then some (cash and equivalents are close to $3 Bil.)

The $600 Bil is only the allowable limit, so they have a fair ways to go ($234 Bil since 31 Dec 08 + whatever they have done this year). Assuming a 25% increase from last year’s $148 Bil (=$185 Bil), they will have guarantees worth $419 Bil by the end of this year. Assuming capital is up to $10 Bil by then, they can cover 2.4% of their guarantees.

As of 31 Dec 08, Guarantees + liabilities = $329 Bil. With $8 Bil in equity, they are good for 2.4% of their maximum exposure.

True enough, but the statements are almost a year old and CMHC has just allowed more new mortgages to be insured this year than ever – necessitating its limit to rise to $600 billion. I posted the 2009 numbers here several days ago. — Garth

#34 jeff on 10.23.09 at 7:34 am

Would public sentiment change if this information was presented in a news documentary….ie., The Fifth Estate? Your arguments, which I agree with, seem pretty tight!

#35 The Vulture on 10.23.09 at 7:50 am

— The Greatest Depression —
All The Fools Rush In to Their Inevitable Financial Deaths


“SOME CONCERN…Obviously, consumer borrowing cannot grow faster than the economy forever.” (Mark Carney – on current Real Estate Environment)

“Bank of Canada Governor Mark Carney is warning homebuyers against taking on too much debt because today’s low interest rates will not last forever.” (Toronto Star)

Bank of Canada Governor Mark Carney is warning homebuyers against taking on too much debt because today’s low interest rates will not last forever.

“People should manage their affairs prudently in anticipation that, at some point, rates will return to a more normal level,” Carney said after releasing his quarterly economic review.

“Obviously, rates are exceptionally low,” (let’s go for 0% overnight rate Carney..come on, I know you want to do it!) he said, noting that the central bank has used its interest-rate-setting influence to drive down consumer borrowing costs to record lows to help stimulate economic activity.

Carney said the housing market is showing strength and he has “some concern” that low rates and increasing demand by homebuyers could create an artificial price bubble of the kind that plunged the United States into a severe recession when it burst in 2007.

Some concern you must discern before the end of your term.


Not on my watch,


— TOCK ——————————–++++



#36 near tears on 10.23.09 at 8:07 am

$500 increased in insurance premium got this woman worried? She lives near the beach homes, $1 kool mil, near water under water. What the hey it’s only $500 dollars. Stroll along the beach it’ll dry up the tears, all the trouble is yesterday

#37 Evangeline on 10.23.09 at 8:17 am

If anyone read #79 Jess’s link in the previous thread …

As long as there are investors hidden in the non-transparent mists of the mortgage derivatives market *** who make 9 times more off foreclosures than off paid-back mortgages *** the big push to sell mortgages that will likely foreclose will continue unabated, (until this kind of financial shenenigans is not allowed any more.)

The scam is continuing in the U.S. and the would-be profiteers must be drooling like bloodhounds over the future profits they will be making off upcoming Canadian foreclosures.

#38 T.O. Bubble Boy on 10.23.09 at 8:20 am

Speaking of “you can’t make this stuff up”…

I had posted my concerns on the extreme risk that the CMHC has created to Diane Finley (, who I believe is the Conservative MP in charge of the CMHC.

Some of my key questions:
– at what % of mortgage defaults will lead to the CMHC’s insurance payouts to the banks exceeding its assets?
– what actions are being taken to reign in the extreme rate of growth in CMHC programs?
– if the stated goal of CMHC is to “help house Canadians across the country at an affordable price” (taken from the FAQ on the CMHC website), isn’t it actually doing the opposite?
– why do Canada’s banks not share in the risk of the mortgages that are insured via CMHC?

So, the honourable MP’s response:

“Dear Sir or Madam:

On behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development, I wish to thank you for your Internet message.

Please be assured that the matter you have raised will be given proper consideration.”

I guess some of us just have a different definition of “proper consideration”.

#39 T.O. Bubble Boy on 10.23.09 at 8:21 am

Oh – and that wasn’t some auto-email response… a person was actually paid to write that!

#40 Into The Sunset on 10.23.09 at 8:42 am

As I stated on Wednesday, there are alternatives before you have to “take to a life boat”. Then you can sit back and watch the country burn like a Canuck Nero!

This wouldn’t prevent you from commenting on what Garth posts, only you could stop the whining and realize there is no way in this lifetime of preventing government insanity.

#41 Herb on 10.23.09 at 8:54 am

Of course it’s that simple:

Consumer demand is going to be at the heart of this recovery” – Carney Mark, @

Someone tell BOC and GOC that, having bailed out the financial and selected industrial sectors, they not only forgot to bail out consumers, but are weighing them down further. As long as gasoline sales are a measure of consumer confidence, that confidence will “rise” as long as the price of gasoline is manipulated upwards.

It’s not consumer “mojo”, but private sector establishment and political nerve. We are in the hands of dolts and knaves!

#42 Paul on 10.23.09 at 9:00 am

Our problems are over.

#43 lgre on 10.23.09 at 9:14 am

Be careful, low rates won’t last, says top banker–be-careful-low-rates-won-t-last-says-top-banker

OTTAWA–Bank of Canada Governor Mark Carney is warning homebuyers against taking on too much debt because today’s low interest rates will not last forever.

“People should manage their affairs prudently in anticipation that, at some point, rates will return to a more normal level,”

I cant believe that he is actually saying this..I have a little more respect for him now.

#44 Vicguy on 10.23.09 at 9:18 am

“Ontario alone figures new debt will hit $70 billion over the next three years, while the national government heaps on $200 billion.”

In the early 90’s, Ontario NDP Premier Bob Rae tried — unsuccessfully — to spend that province out of a recession, and ran their dept up to just over $12B (which seemed like a staggering number at the time).

It looks like chicken-feed compared to the numbers we’re hearing today…

#45 Popeye on 10.23.09 at 9:20 am

I can see the headlines now:

“Boat load of Canadians washes ashore in Siam”

“Millions of illegal immigrants escape into Mexico”


#46 DaleFromCalgary on 10.23.09 at 9:21 am

For message #14: “Where else can you expect citizens to invest?”

Physical gold and silver. Buy the 1-ounce Maple Leafs, store them in a safe place, and years from now, whenever you need some fiat currency you can cash in as little or as much as you like for whatever amount the currency has depreciated to per ounce. No counterparty risk, no interest required because gold and silver hold their value.

I also own physical conventional oil (mineral rights, partnership units in producing wells, private equity) but these may be difficult to find if you don’t live in a petroleum-producing area. No publicly-traded stocks, which are gamed by the traders on Bay Street. No oilsands or offshore oil because they need high prices; conventional oil can still break even at $20 per barrel.

For #15: “Maybe the financially illiterate mass media will pick up on this impending crisis.”

They haven’t a clue. They’re too busy reviewing reality shows to pay any attention to the reality around them. Calgary coin and bullion dealers have lineups in them every day, but there is nothing in the mass media.

#47 Nostradamus jr. on 10.23.09 at 9:23 am

#16 Chaostrology
“”Now would be the time to quietly and calmly make your way to the lifeboats and prepare to abandon ship.
Steer away from the vortex.
Keep your eyes on the horizon.
Don’t look back.””

… You almost have it right Chaostrology

….It is exactly the feeling of millions & millions of citizens all over the 3rd World who are gazing the horizon towards Canada.

…To them, Canada is the “Safe Land in the World”.

You don’t realize how lucky you really are.

Nostradamus jr.

#48 Jojo on 10.23.09 at 9:25 am

Did anybody watch the videos? Any comments?

#49 Gord In Vancouver on 10.23.09 at 9:26 am

Too little too – way too late

Carney urges ‘prudence’ in housing market

Banks have begun raising some of their mortgage rates this month. Nevertheless, it would be easy to view the bank’s decision to drive interest rates down to 25 basis points and the government’s program to buy billions in mortgages as key elements in the runup in the real estate market, Mr. Stewart suggested.

“Limited as they are, anecdotal stories out of the Vancouver area suggested to us that it was not so much pent up demand that was driving activity as a fertile monetary environment.”

#50 Paul on 10.23.09 at 9:27 am

Are problems are over

#51 Pjwlk on 10.23.09 at 9:47 am

Sad day today, the last of the three people I was able to discuss the issues presented on this blog at length with has gently faded away. I guess he got tired of me confusing the issues with facts…lol. Bummer though, because he was a very good debater for the lemming’s side… C’est la vie.

#52 pezzazz on 10.23.09 at 9:48 am

There are many issues that are going to take down this house of cards. The fact that Mark Carney thinks that Canadians will use prudence frustrates me a great deal. Does he not believe in the maddness of crowds and that these crowds are very good at acting irrationally. What Carney can rely on is that Canadians (like any other human out there) will take advantage of whatever he/she can take advantage of. Period. If you give them the opportunity to do something they will not only do it but they will convince their friends its the best thing they can do. There is NO prudence! I plead with you Garth and the followers of this blog to tell as many people as you can that the music is going to stop and there are going to be very few chairs left to sit in.

As much of a believer in realpolitik that I am. I am also a Canadian and the politicians are hurting our country. Stop manipulating our marketplaces and laissez faire! We live in a socialized country but we do not want a command economy. Please allow the invisible hand to issue a spanking to those who have not had the foresight to see this happen. The sooner we do this the less brutal the national calamity will be.

#53 Bill-Muskoka (NAM) on 10.23.09 at 9:50 am

#49 Paul on 10.23.09 at 9:27 am

Are Our problems are over

What problems? We don’t have no stinkin’ problems. We are the greatest nation on earth! Just ask any Canadian/Canadien. Ask Steve, Jimmy, Dalty, or any other ‘leader’ and they will tell you the same thing.

Move along now. Nothing to see here! (Sayeth the little man behind the green curtain) ;-)

#54 Shawn on 10.23.09 at 9:56 am

#3 DrC asked

Are we seeing the same here, are illegal strawberry pickers being offered $700k loans on $20k annual incomes, or simply that everyone overall is being offered on average more debt?

Yes everyone is being offered more debt than they can really handlle 32% of gross income to your mortgage payment. And that is based on house prices that are probably going to fall and is based on unrealsticly low interest rates that are certain to rise. (I mean Carney even has interest rates scheduled to rise next year) And is given out in an environement where people are losing jobs.

And yes CMHC has provisions for unverified income aka Liar loans.

See “Self-employed without 3rd party income verification…. hahahaha moronic…

So a strawberry picker on contract becomes “self employed” with a self reported income.

A secretary (who may soon lose her job) can nicely qualify for $300k. Bank need not worry, tax payers gurantee the mortgage coutesy of CMHC.

#55 jess on 10.23.09 at 10:02 am

IN predatorial 101 the reasoning is:

When these investment banks write the mortgage, sell the bond and then buy the credit default swap. : Why take mortgage payments when the default swap is worth more than the mortgage regardless of home price?


“You can always get the most recent data from the New York Fed. The Fails are on Page 5 (last page) of their weekly report. ” (trimbath)

“At the peak in 2004, some 40% of trades in MBS failed to settle. ” (trimbath)

For the week ended October 7, 2009, failures to deliver (FTD) in Treasuries were $24.6 Billion, up $5.5 billion from the previous week. Primary dealers report “cumulative” fails. The usual way to understand this is that $24.6 billion in Treasury FTDs are an average of $3.5 billion failed to deliver for 7 straight days; or $24.6 billion failed to deliver for only 1 day. In any event, weekly average reported FTDs this year ($65.3 billion through Oct 7) are still 50 percent higher than they were in 2007 ($42.3 billion, in the same period).

Trade Settlement Failures in U.S. Bond Markets

Susanne Trimbath

September 23, 2008

STP Working Paper No. STP2007_1

In this study (an update and revision to our 2007 working paper), we estimate the total value of trade settlement failures in the US bond markets. Analyzing data from multiple sources, we show that the value of settlement failures is rising. Regulatory and market efforts to reduce the problem have been largely unsuccessful. In April 2008 fails to deliver in bond markets reached a peak value of $600 billion, a fail rate of nearly 9%. We calculate the resulting loss of tax revenue on payments in lieu of interest (on tax-exempt municipal and Treasury securities) to be $42 million per year to the federal government and $271 million per year to the states. We calculate the loss of use of funds to investors as a result of securities paid for but not received to be $7 billion per year.

Keywords: failure to deliver

JEL Classifications: G10, G14, G38

Working Paper Series
Date posted: September 29, 2007 ; Last revised: September 28, 2008
Suggested Citation

Trimbath, Susanne, Trade Settlement Failures in U.S. Bond Markets (September 23, 2008). STP Working Paper No. STP2007_1. Available at SSRN:

#56 Watched Bubble Never Pops on 10.23.09 at 10:23 am

#2 kc

“What recession???”


#57 smw on 10.23.09 at 10:27 am

Tax revolt Ontario…

If anyone with half a brain yet hasn’t figured out the benifits of over inflated property values better make a pit stop at the local padded room.

The extra taxes will go a long way for McGuinty to spend more of the tax payer’s money on magic beans and government positions for his “friends”.

…and wait till credit starts drying up, again!

And yeah, Dwight Duncan could afford to miss a meal, like the soon to be many impoverished these idiots are creating.

#58 Mad as Hell on 10.23.09 at 10:29 am

The Ontario Liberal’s will not have one M.P.standing for the next three Election’s when they pass the July.
Ontario Residents are Mad as Hell and will not take it anymore.Just Watch Us Dalton.

#59 Soylent Green is People on 10.23.09 at 10:36 am

Dwight Duncan: a portrait in zexie

Please flash a warning when you post pictures of hideous melted cheese chins like this.


#60 Eduardo on 10.23.09 at 10:43 am

Re 13 – “It really does suck to be a 30 year old, knowing that the future holds nothing but reduced services, increased taxes etc…”

Exactly. All we hear is how our parents (who have squandered lots, consumed lots and always demanded more), think they should be entitled to larger pensions, more services, etc so they can maintain their quality of life.

It’s too bad that their quality of life of will come fully at the expense of my quality of life.

Re 21 – “In my youth, I never thought that I would spend so much time thinking about how bleak my future could be. Where’s the hope???”

I’m only 26 and I find myself thinking like that all the time. I actually get mad.

Major issues I have to look forward to:
-Paying for health care of boomers
-Paying for pensions of boomers
-Higher taxes to pay for it all
-Rising energy prices (and taxes on energy to fight climate change)
-Potential for fresh water shortages
-One big wave of inflation in the intermediate term
-etc etc

#61 Jake on 10.23.09 at 10:54 am

#12 Nonplused,
Thanks for the post. Have you watched this yet?

#44 LOL. I am actually planning on being sewn into the seat of a tractor trailer in order to get into mexico…….wait a minute, the trucks only come this way….I guess we’ll have to be “wetbacks” afterall.

PS. I worked on a construction crew in the states, and the Mexicans were by far the most productive and genuinely honest employees on the crew. They made my boss a pile of money and caused him very little headache. Something tells me Mexican bosses won’t be as excited to hire illegal immigrants from USA/Canada.

#62 Questioning on 10.23.09 at 11:00 am

If the CMHC is backstopped by the government, who has the ability to print money and lend it more and more, then what is the worry? It is too big to fail, and the feds control the means to keep this going forever….

I wish our sub-prime loans were guaranteed by corporations – this would be over. As it stands, this bubble could last years and years and years…..

The rules of changed. If there is not correction soon, I am buying – I will join the vast majority of Canadians with nothing on the line, and benefit from high property prices

#63 miketheengineer on 10.23.09 at 11:03 am

Don’t worry so much Garth:

The Obama man is going to save us all.

OH, and don’t forget to roll up your sleve and get your dose of mecury and squalene….

#64 Watched Bubble Never Pops on 10.23.09 at 11:29 am

#33 jeff

“Would public sentiment change if this information was presented in a news documentary….ie., The Fifth Estate? Your arguments, which I agree with, seem pretty tight!”

Arguments are wasted breath if there is no political capital to enact change.

In effect, those who have similar minds about the bleak future of real estate would be told to go into a corner and ‘talk amoungst yourselves’ (which is happening now anyway).

#65 Kelly McMae on 10.23.09 at 11:46 am

#23 SaraBeth on 10.23.09 at 5:33 am
“Socializing risk….. privatizing profits…. Sounds like (Mega) Business as usual to me… :-/ ”

Exactly, sounds like, looks like, smells like new aged fascism. Guess we too were infected post-WWII along with our southern second cousins.

#66 Weeping in Windsor on 10.23.09 at 11:48 am

Has anyone seen this?

Ontario eyes health-care cuts

TORONTO — Pinned under a $25-billion deficit, the Dalton McGuinty government has secretly hired cost-cutting consultants to go over the public drug plan for seniors and welfare recipients, Sun Media has learned.

The contract with McKinsey and Co. was so under wraps that health ministry officials initially denied its existence, and then when pressed refused to release the consultants’ recommendations or the cost of the contract to the Sun.

Health Minister Deb Matthews later overruled her staff and allowed the contract’s $750,000 price tag to be revealed.

Details of the contract came on the same day Finance Minister Dwight Duncan confirmed the province’s deficit is now $24.7 billion. That’s double the previous record of $12.4 billion under Bob Rae.

#67 SWM on 10.23.09 at 11:57 am

Just curious about the 132% US household debt figure. Other sources quote different figures that imply Canada is not as bad as the US. For example 150% here:

Check this and this and this. The point is, debt kills. It demolished swaths of the US middle class, and if Canadians are dumb enough to paddle the same stream, they risk the same outcome. — Garth

#68 OttawaMike on 10.23.09 at 11:57 am

The uppercrust somehow let me slip into an arts council fundraiser last night in east Ottawa. In attendance were the usual gaggle of municipal, provincial and federal past and standing politicos. Bob Charelli was there and I asked him back as mayor saying all is forgiven. He claims to be mulling another run as Mayor McCheese of our fine capital.
In defence of the realtors who take a continuous assault from everbody including me on this blog: The organizing committee for the gala was partly comprised of realtors and some of the highest value items in the silent auction were donated by various realtors. So yes, they do have souls.

One interesting comment that a 40 yr. veteran agent had for me when I asked her how this bubble was sustainable? She mentioned the mitigating factor of inheritances and newly combined families due to a divorce or death being a large driver of the boom. This apart from the almost free mortgage money. I’m not sure if I can buy into that theory?

Another intriguing talk that I had at the bar was with a CDIC staffer. I asked the obvious question about the stability of our banks. He said the top 6 were rock solid but there is concern with 4 of the smallest banks that are insured by them. I couldn’t get him to actually name the banks but he said it was easy to figure out.

#69 KK on 10.23.09 at 11:58 am

I found this in an article from the Star today that seem to contradict what’s posted here. What’s the truth?–be-careful-low-rates-won-t-last-says-top-banker#

But the debt burden in Canada has not reached the alarming levels faced by U.S. consumers before the recession, he said.

“Canadian consumer balance sheets are starting from a much stronger position than U.S. consumer balance sheets” were in ahead of the economic downturn, Carney told reporters.

No longer the case. US savings rates are up, ours have cratered and we are borrowing record amounts. — Garth

#70 David Bakody on 10.23.09 at 12:15 pm

Just wondering …. (listening MSM?) If Mr. Garth Turner is correct and Canada experiences it’s own style of a sub prime melt down and CMHC (Canadian taxpayers) step in will: a) Banks demand and receive full compensation for their toxic mortgage and other loans …. AND… b) will all Bank CEO’s and others take a 90% pay cut having received Canadian Taxpayer bailout money?

#71 Chaostrology on 10.23.09 at 12:28 pm

Nostradamous Jr.

I was writing figuratively, not literally.

I would never leave my country. This country was built for me by generations of family that went to war, made sacrifices, risked their lives for an unknown future.

They all came home, got married, raised families, bought houses, built schools, roads, a health care system, put kids through university, paid taxes and were proud, silent contributors.

These people came from nothing and did okay for themselves. So what if they had a few nightmares and on November the 11th every year would go a 1 day bender. The next day they went back to work, business as usual. If you ever saw this, you would understand my sorrow of the situation that we Canadians find ourselves in. We are at war, we just haven’t realized it yet and we are going to lose some really good people and waste a lot of human potential, just like any world war.

I’ve always realized just how lucky I am, I never had to pick up a gun and go off to kill an unknown enemy.
I’ve been able to enjoy the spoils of my family’s world war sacrifices. No thanks was ever expected from me, just a small recognition, once a year. Oh, and some times I had to listen to the drunken war stories. When I was a child I used to pray that I would never have to go to war. Lucky? You bet your ass I’m lucky and I know it.

Luck of the draw. I was born to a Canadian family. Yep, we’ve got it all, and it makes me incredibly sad that we are content to piss it all away. As we shift into a 2nd world country, a have not, let us not be content to raise everyone else up at our expense.

Figuratively, the ship has hit the iceberg, but it’s all right because it has water tight compartments and it is afterall on it’s maiden voyage, the ship cannot sink. Cue the band, break-out the champagne. Party on.

Literally, the lifeboat represents the method or plan that will provide for your survival, the vortex is debt, the horizon is the future and what we leave behind us are all things that we will lose.

I come from a navy family and 2 things that my father drilled into me were, never volunteer and never go down with the ship.

#72 Keith in Calgary on 10.23.09 at 12:50 pm

Can anyone tell me with accuracy who is buying all of the CMHC MBS ?

#73 PeckedToDeathByDucks on 10.23.09 at 1:00 pm

@jess – that’s interesting stuff. but I have no idea what it means
would you be able to summarize the jist of it in a “For Dummies” version

#74 Pjwlk on 10.23.09 at 1:08 pm

#25 Weeping in Windsor on 10.23.09 at 6:03 am

Your post reminded me of a comment one of my buddies made to me a couple of weeks ago. He operates one of the nuclear reactors at Pickering and said that they such a large over-capacity right now that they frequently have to vent some of the turbine steam to as a result. Apparently the output levels of the reactor can’t change very quickly.

I can’t remember the percentages but he told me that it was due to huge drop in demand from the steel, auto and other big industries in Ontario. The recession is not over…

#75 Leaving Town on 10.23.09 at 1:11 pm

So the CMHC has tons of money to keep this bubble going forever. The federal government backs it up, and it can keep lending till its heart is content. I guess that since the “rules have changed,” this hot market can keep on going. The feds won’t go under, so why not borrow cheap money. Maybe not everyone is a greater fool that buys now

#76 BAD on 10.23.09 at 1:17 pm

Some news:

Canada August Deficit Widens to C$5.3 Bln as Tax Revenue Drops

Corporate tax revenue fell 79 percent to C$273 million in August and personal income tax dropped 5.5 percent to C$8.54 billion. Jobless benefits rose 78 percent to C$2.01 billion in August and were up 54 percent to C$8.98 billion in the first five months of the fiscal year.


#77 David Bakody on 10.23.09 at 1:41 pm

CBC News Update:

Recession fight leads to deepening federal deficit
Corporate tax receipts plunge 79%

“Bang on again Mr, Turner”

One point ….. did Mr’s Harper & Flaherty plus that Carney guy not say the recession is over, so what gives?

#78 Daystar on 10.23.09 at 1:45 pm

More evidence of a nation wide bubble due to unsustainable credit expansion policy:

Everyone should worry :-(

#79 TJ on 10.23.09 at 1:50 pm

The Canadian Government is now the LARGEST SUB-PRIME LENDER IN THE WORLD.

#80 Popeye on 10.23.09 at 1:55 pm

#52 Bill-Muskoka (NAM) on 10.23.09 at 9:50 am
Sorry Bill, we’re only the 2nd greatest nation (our cold weather drops us a notch):

“Canada is No. 2 in the Country Brand ratings”

#81 GregW., Oakville on 10.23.09 at 1:58 pm

Hi Garth, FYI (from low carbon news, and CANDU stuff)

Nuclear changes needed to meet low-carbon targets
10/22/2009 9:20:05 AM
“Nuclear power can play a key role in cutting carbon emissions and bolstering energy security. It needs to be part of a broad-based energy mix that includes wind and other renewable sources, gas and clean coal.”[email protected]

I hope they build some Canadian CANDU’s in Britain!
Much let energy needed to make/process the fuel for the CANDU heavy water reactors, then the light water reactors.
In Ontario it is often not windy on the Hottest and coldest days! No birds are killed by Ontario’s CANDU power plants.

I hope the PMO office doesn’t give away the Canadian peoples CANDU technology to there corporate gang/buddies?

(PS, I’m not in favor of nuclear bombs. or improper storage of wastes.
What is happening now with the toxic waste to make so-called renewable power, or coal power? How much with be made to make the same amount of power as a CANDU nuclear power plant can and does produce?
Is it stored/kept from getting into the environment?
Do you eat bananas? They have potassium witch is radioactive, should you worry about radiation from a banana, I don’t think so.)

For more on Canada’s CANDU, and nuclear power stuff;

books(free info video,1st link below),

Gwyneth Cravens, Power to Save the World: The truth about nuclear energy and our changing climate.

Kicking the Carbon Habit: Global Warming and the Case for Renewable and Nuclear Energy
William Sweet

a New book just out, probable good?

Now or Never: Why We Must ACT Now to End Climate Change and Create a Sustainable Future
Author: Tim Flannery, Tim

#82 Two-thirds on 10.23.09 at 2:09 pm

Canadian office markets show signs of life: report

“Winnipeg led all Canadian markets with absorption of almost 800,000 square feet, while Ottawa, Saint John, Halifax, and St. John’s also experienced positive absorption Cushman & Wakefield said.

The Toronto market showed strong absorption of more than 350,000 square feet, rebounding from the past two quarters when absorption averaged negative 770,000 square feet per quarter.

In Alberta, absorption was negative in both Calgary and Edmonton. Calgary continued to “bear the brunt” of soft natural gas prices, the report said, and the city’s office market was worst overall in the country with absorption at negative 690,000 square feet over the quarter. Edmonton reported negative absorption of 185,000.

Vancouver’s central area also saw slight negative absorption, but its suburban markets did not fare as well, as tenants downsized or closed due to the economic downturn.”

Gotta love the second-to-last paragraph:

“Vacancy rose across Canadian markets, climbing to 8.2 percent from 7.6 percent in the second quarter, and was mostly attributable to new supply.”

The market shows signs of life, but vacancy is up.


#83 Daystar on 10.23.09 at 2:20 pm

The largest subprime lender in the world is now the Canadian government:

#84 Two-thirds on 10.23.09 at 2:26 pm

#70 Keith in Calgary on 10.23.09 at 12:50 pm

Can anyone tell me with accuracy who is buying all of the CMHC MBS ?

I wonder if that info could be obtained by launching a request under the Access to information Act?

Garth, would you consider championing this initiative? Becoming the “Audit the CHMC” guy?

You’d likely have the support of us b-dogs, and perhaps some other organisations.

#85 Mike (Authentic) on 10.23.09 at 2:28 pm

Death and Taxes.

I think that says it all right there.


#86 Debtfree on 10.23.09 at 2:29 pm

Ross Rabagliati is running against stockwell day …. I hope he smokes him .

#87 Sphinx on 10.23.09 at 2:30 pm

I’ve a hunch that this month will mark the beginning of a long grinding deep recession, and the top of the RE market in Canada. The rubber band was stretched too much in one direction for so many years, it is about time for the ugly reality…

#88 Skye on 10.23.09 at 2:37 pm

The authority that oversees public housing Metro Vancouver is worried about growing vacancies as tenants are lured into home ownership.

If people have trouble finding tenants for their “mortgage helper” suites, that will be catastrophic. When you get your mortgage, 50% of your rental income is counted, that’s the only way people here can qualify for 3/4 mil mortages on East Van crap shacks.

He operates one of the nuclear reactors at Pickering and said that they such a large over-capacity right now that they frequently have to vent some of the turbine steam to as a result

So I guess that means electricity prices should fall like a rock if they’re so over-capacity right? Fat chance.

#89 ralph on 10.23.09 at 2:41 pm

Looks like there is an obesity problem in the Ont Legislature.

#90 Mike in Montreal on 10.23.09 at 2:42 pm

I don’t know if anyone has posted this yet, but there is a good description of the CMHC problem at

Regards to all.


#91 victoria reader on 10.23.09 at 2:45 pm

What I find strange is that with all the educated people in this field out there that there is so few who speak the way you do Garth. I totally agree with what you have been saying on the economy and I have been trying to structure my life by getting rid of all of my credit. Keep up the good work.

#92 Watched Bubble Never Pops on 10.23.09 at 2:57 pm

#74 Leaving Town

“So the CMHC has tons of money to keep this bubble going forever. The federal government backs it up, and it can keep lending till its heart is content. I guess that since the “rules have changed,” this hot market can keep on going. The feds won’t go under, so why not borrow cheap money. Maybe not everyone is a greater fool that buys now.”

Homebuyers have had the upper hand in the view of the economy for nearly a decade now. Doomsayers have been stuck in a corner playing with themselves for years.

#93 jess on 10.23.09 at 3:05 pm

mike with regard to Squalene (are you saving the sharks?
…” is a natural organic compound originally obtained for commercial purposes primarily from shark liver oil, though botanic sources (primarily vegetable oils) are used as well, including amaranth seed, rice bran, wheat germ, and olives. All higher organisms produce squalene, including humans. It is a hydrocarbon and a triterpene. Squalene is a natural and vital part of the synthesis of cholesterol, steroid hormones, and vitamin D in the human body.[1] Squalene is used in cosmetics, and more recently as an immunologic adjuvant in vaccines.” (wiki)


Peck to death
what part of that information did you find the most interesting? And what part was the most confusing?

#94 Supported By the Taxpayer on 10.23.09 at 3:25 pm

Who cares if the CMHC backstops more and more mortgages. The taxpayer will fund everything, so no need to be worried.

Can anyone actually give a reason why they should be worried? Logically, this “could” end badly, whatever that means. Logically, the market should not have ballooned during a recession, but that does not stop market realities.

Getting a house cheaply has never been easier, whether you are a six figure banker or a 5 figure waiter. If all of us are going to pay for this “eventually” why not all benefit by owning our own houses now.

You can be a smart renter sitting on the sidelines with a big cash down payment, but you are still going to have to pay for this “mess” as a taxpayer if things go sideways, or you still have to sit and watch prices go up if it doesn’t go sideways and continues for years and years and years.

And if that happens, well then, that would have been a 10 year bubble, which makes me think that maybe it was not a bubble.

Either way, you are not any better off than the “greaterfools” jumping in today or in the last six months. Sorry.

#95 Dan in Victoria on 10.23.09 at 3:28 pm

Young Gordy/Dwight/Mark/Jim lived in Canada and bought a donkey for $100.
The farmer agreed to deliver the donkey the next day.
The next day the farmer drove up,”Sorry son but I have some bad news,the donkey died.”
Gordy replied”Well give me my money back”The farmer replied”Can’t do that I already spent the money”
Gordy said “Okay then bring me the dead donkey”
The farmer asked”What are you going to do with a dead donkey?”

Gordy said”I’m going to raffle him off.”
The farmer says”You can’t raffle off a dead donkey.”
Gordy says”Sure I can,I just won’t tell anyone he’s dead”
A month later the farmer met up with Gordy and asks”What happened with that dead Donkey?”
Gordy said”I raffled him off,I sold 500 tickets at $2 each and made a profit of $898″
The farmer said”Didn’t anyone complain?”
Gordy said just the guy who “Won”so I gave him his $2 back.
Gordy now works for the government.

#96 Tony on 10.23.09 at 4:09 pm

Some housing boom??!! I still have townhouses and apartments in Edmonton that have fallen more than 50 percent over the last 2 and a half years. I’d like to know what housing boom Garth is talking about. We’re still talking about the planet Earth aren’t we?

#97 PTDBD on 10.23.09 at 4:55 pm

@Jess: I found it puzzling that both investors and governments were being hit with these massive losses due to the Failure To Deliver and there was no mention of law suits to seek payment. Are they eventually paid off or does everyone just shrug it off? Is the high possibility of default built into the pricing.I guess I don’t understand the whole thing. I did find it interesting that the street walker simile is used again. When all this first started, Bloomberg used that analogy to describe the derivatives.

#98 Real Estate Deal or No Deal on 10.23.09 at 4:56 pm

Nice pic of Dwight.

Not all policitians are hogs feeding on the public trough, but then again …

#99 Bill-Muskoka (NAM) on 10.23.09 at 5:02 pm

#79 Popeye

Aye Matey, but I yam what I yam! now, let’s have some spinach, eh? LOL

#100 Grantmi on 10.23.09 at 5:20 pm

I think Duncan has a slightly less better chance of bring this under control.. then Cartman signaling the Aliens!!

“Move Along.. nothing to see here!!”</b?

#101 Peter Wiener on 10.23.09 at 5:24 pm

# 91 Supported By The Taxpayer

What are you doing wasting important time posting here for?

You should be out buying more houses – as many as you can – you can’t lose according to your reasoning – go for it!

#102 pbrasseur on 10.23.09 at 5:58 pm

Actually the gov does not want to create a real estate bubble, what it wants is to help give people access to property and at the same time stimulate the economy. Nothing but good intentions here.

That’s called socialism.

And as usual it will end in a sorry disaster.

#103 Supported By the Taxpayer on 10.23.09 at 5:58 pm


Nice attempt at refuting the logic weiner…

#104 Bonnie N BC on 10.23.09 at 6:13 pm

You see Garth I am so off topic but…

I never, ever, ever imagined that some guy that sounds like David Duke would gain a seat in the European Parliament and by proxy try to usurp the new order for Great Britain.

The guy’s name is Nick Griffin of the BNP and he he may appeal to the desperation of people drowning in debt in the UK and he cleverly undermines the inclusive society of Great Britain.

We have our traditions here in Canada and in the UK for a parliamentary democracy but it just dawned on me why you talk about bunkers and I thought it was poetic license. Until now…

It had never occurred to me that civil people would get so desperate that they would accept a guy like this as mainstream and vote for him.

Jeepers, what could happen here? Rob Anders becomes the great white hope here in Canada?

Oh i am sure I am over reacting but we need to pay attention as things are really unwinding and I am deeply concerned.

Please just watch this and tell me what you think.

#105 Maureen on 10.23.09 at 6:17 pm

I have to disagree with your lumping of “high risk” mortgages with “sub prime”
The mortgages insured by CMHC are high risk because of the loan to value ratio based on the property value. They are currently at higher risk because of what may be an inflated market. The lender underwrites the convenant according to CMHC guidelines. This involves the client having a decent credit score on his credit bureau, decent job stability and generally a gross debt service ratio of 32%. The lenders are vigilant about confirmation of income, employment, down payment etc. and they paper the file to insure that if there is a loss down the road, they have done their due diligence.
CMHC approves the property. If they feel the property is overvalued, they may request an appraisal or reduce the amount of the approval. This has happened frequently this year.
Alternatively, a sub-prime mortgage generally is offered to clients with bruised credit, income which cannot be verified, or income that is not sufficient based on a 32% GDSR to service the mortgage. In the US NINJA (NO INCOME NO JOB APPROVED) mortgages were the cornerstone of the sub prime market.

#106 Dropper on 10.23.09 at 6:21 pm


Trying to blame a financial bubble on socialism? Amazing, absolutely amazing.

#107 Nostradamus Le Mad Vlad on 10.23.09 at 6:36 pm

Good reading today. Most days, actually.

Something’s up here. — Credit and Greenback and Whoa babyInflation

Could lead to spill-over effects here. Japan has been in the dumps for a couple of decades or so, and it can happen anywhere to anyone.
Don’t worry be happy! Have as many vaccines as you like — they’re all good for us and free! “There’s a huge shift underway from drugs designed for sick people to a whole new class of drugs manufactured for healthy people.” Vaccinations
2:25 clip (Japanese) of Windows 7. Ummmmm — Windows failed again

#108 Peter Wiener on 10.23.09 at 7:14 pm


You present no logic to refute.
Your ignorance on the matter is so absolute that I doubt you’d understand the ‘logic’ as you term it if I took the time to go through it with you, so I won’t.
And that’s Mr. Wiener to you

#109 Supported By the Taxpayer on 10.23.09 at 7:19 pm


“You can be a smart renter sitting on the sidelines with a big cash down payment, but you are still going to have to pay for this “mess” as a taxpayer if things go sideways, or you still have to sit and watch prices go up if it doesn’t go sideways and continues for years and years and years.”

The logic being, either way you are screwed….fitting for someone with your last name….

#110 Onemorething on 10.23.09 at 7:33 pm

#91, spoken like a true enabler! I suggest you go out and buy more property, increased taxes or not, see how you fare!

I believe there is likely “A No Better Time To Buy Than Now!” Blog you should be parked at! Step Off!

#111 Devil's Advocate on 10.23.09 at 7:51 pm

An example of what runs our country…

“Ross Rebagliati is taking a run at politics. Rebagliati, the first man to win a gold medal in snowboarding at the 1998 Olympics, is seeking the federal Liberal nomination in the riding of Okanagan Coquihalla.
The riding is currently held by International Trade Minister, Stockwell Day. ” Rebagliati Oct 2009 Kelly Hayes_F6_512K.flv

No Ross… I don’t know… ya know…

#112 Dan on 10.23.09 at 7:58 pm

Maureen “I have to disagree with your lumping of “high risk” mortgages with “sub prime””

That is becqause you are clueless to face reality. If the free market were allow to be FREE stupid people would be punished with finaicaial ruin and the prudent would be rewarded.

#113 Paul B in Ontario on 10.23.09 at 8:09 pm

$8B in equity vs $600B in insured mortgages. Sounds bad, but is it really that bad?

Say I have a mortgage for $400K (I don’t) and it is insured by the CMHC and I default for some reason, what happens?

Whoever takes possession of my house (probably the bank), will sell it to recover what they can…if my market value has dropped 20%, then the difference that the CMHC has to cover is $80K – or 20% of my CMHC insured debt. They don’t have to cover 100% of my debt because the house is not worthless. Of course, I may have already paid off partof my mortgage, so the actual amount would be lower still.

I suppose if all $600B in mortgages were to default (which is unlikely), then worst case $120B would be required by CMHC to cover the insurance due to the drop in market value- not $600B.

In reality, 100% of the mortgages will not default. Maybe 10% will in the worst case scenario (a wild guess) and so the insurance coverage would have to be $600B x 10% (the number defaulting on their mortgage) x $10% (the market value drop-any equity already paid off) or $6B….so it should be okay.

If the market drop exceeds 12% and the number of defaults exceeds 12%, then the CMHC is screwed. This is a scary scenario and would be a disaster.

Rough numbers….probably someone can figure out the actual exposure that CMHC has better than I….I’m not a mathematician.

Check the last CHMC blog. This was discussed in length by posters. If a real estate correction of 15% caused widespread defaults, you can be sure your home would not sell for 20% less, and also that it might take a year or more for that to transpire – with the insurance policy payable in the meantime. CMHC does not cover your debt, rather they provide insurance to the lenders on the value of the loan as originally made. If the loan defaults, the policy is invoked. Market reality is another matter. — Garth

#114 Daystar on 10.23.09 at 8:27 pm

Looks like Dianne Francis reads your blog, Garth. They gave the story a couple different headline looks.

Mark Carney takes the right questions.

#115 Herb on 10.23.09 at 9:03 pm



#116 Peter Wiener on 10.23.09 at 9:06 pm

re # 106

Let’s add juvenile to your list of vices.

But, heh, to go with your vulgar and juvenile comment re my name (really original btw, excuse me while I yawn) remember the weiner is the one that does the screwin’, buddy!

#117 Debtfree on 10.23.09 at 10:18 pm

108 what do you mean you don’t know ….. I don’t think Ross would be stupid enough to jet up on the beach in kelowna on a yamaha ….yah know …… he’s CANADIAN .

#118 ALF on 10.23.09 at 10:50 pm

A little musical interlude?
I often find myself contemplating these lyrics after reading any “adult” discussions related to politics, the economy etc.

(Tom Waits/K. Brennan)
When I’m lyin’ in my bed at night
I don’t wanna grow up
Nothin’ ever seems to turn out right
I don’t wanna grow up
How do you move in a world of fog
That’s always changing things
Makes me wish that I could be a dog
When I see the price that you pay
I don’t wanna grow up
I don’t ever wanna be that way
I don’t wanna grow up

Seems like folks turn into things
That they’d never want
The only thing to live for
Is today
I’m gonna put a hole in my TV set
I don’t wanna grow up
Open up the medicine chest
And I don’t wanna grow up
I don’t wanna have to shout it out
I don’t want my hair to fall out
I don’t wanna be filled with doubt
I don’t wanna be a good boy scout
I don’t wanna have to learn to count
I don’t wanna have the biggest amount
I don’t wanna grow up

Well when I see my parents fight
I don’t wanna grow up
They all go out and drinking all night
And I don’t wanna grow up
I’d rather stay here in my room
Nothin’ out there but sad and gloom
I don’t wanna live in a big old Tomb
On Grand Street

When I see the 5 o’clock news
I don’t wanna grow up
Comb their hair and shine their shoes
I don’t wanna grow up
Stay around in my old hometown
I don’t wanna put no money down
I don’t wanna get me a big old loan
Work them fingers to the bone
I don’t wanna float a broom
Fall in and get married then boom
How the hell did I get here so soon
I don’t wanna grow up

#119 joh2 on 10.23.09 at 11:04 pm

#109 Paul B in Ontario

CMHC has $7 billion in unearned revenues and provisions on the balance sheet. and the $8 billion in equity is after tax. This means CMHC can absorb $7B + $8/.74 = $17.8 billion in losses.

#120 Peter on 10.24.09 at 7:12 am

SURELY, Thanks to Mark and CMHC, many home buyers or home or condo gamblers who always think Canada will not have a bubble will soon feel the crap out of them when they see this recession is not finished and more undercapitalized homeowners will be pissing their pants off (eventhough they were putting a 25 % down and thought they were ahead of the game) when they see their value of their home goes down in drain in this deflationary asset prices environment and inflationary food and carrying cost environment and Mr. Carney’s “We Will AIM to Keep Our Rates Low” Variable Mortgage Rates…(Our Favorite HOTCAKES of 2008 and onwards)!!!

#121 pbrasseur on 10.24.09 at 8:52 am

@Dropper #`03

“Trying to blame a financial bubble on socialism? Amazing, absolutely amazing.”

Is it that hard for you to understand? Maybe you should pay more attention to what Garth is saying.

The financial crisis happened becauce too much credit was dedicated to housing and because that credit was way too easy to get.

How did that happen? Because initially governments made sure interest rates were kept low while encouraging access to property with numerous measures such as tax deductable mortgages and more importantly scams like the CMHC (Freddie, Fannie in the US).

Yes the market responded very well and ran with the ball, but the source of the problem was definitely government intervention.

And that my friend is called socialism.

It is entirely possible for capitalism to create crisis on its own, in fact it absolutely will, the thing is however those crisis would be smaller because unbalances would be exposed sooner. Take the current situation in Canada for example, do you think for one moment that the R-E bubble would still be growing righ now without governement intervention and the CMHC in particular? Oubviously not.

#122 David Bakody on 10.24.09 at 4:35 pm

Oops hit the wrong key, lost a dilly but in part. Here in our Halifax Newspaper in bold letters “Growing deficit a worry” goes on to say Canadian taxes must rise and TD has now predicted a $90B deficit and it is more like $100-$ 110 Billion! Bad government polices and a host of other dad moves has made things worst. We here have read Garth Turner’s words and now most will or have come true. In any rate economist are now protecting their own jobs by echoing Garth’s words …. strange thing about the truth it is hard to hide ….. Harper’s majority band wagon has a few loose wheels and for those who might see light at the end of the tunnel as stated by Mr. Flaherty …..careful it just might be a train.

#123 David Bakody on 10.24.09 at 4:52 pm

#109 Paul B in Ontario on 10.23.09 at 8:09 pm

Paul …. when markets (housing) go south they do so in a hurry, it is just like you wake up one morning and the bus has left town, you go to the bus station and they are all gone. Prices fall buyer’s wait for the bottom and those who do want to buy go for the throat. What is different this time Paul is all this is compounded with Job Insecurity & a Increase in both provincial and federal taxes. Couple this with poor world markets and a very good chance one G-20 member might start acting on their own and this buy American is real and they have yet to really play hard ball. So just be careful and look after #1, pay down debt, save and invest wisely.

#124 Bill on 10.24.09 at 5:02 pm

And here’s how our commodity leader is doing…


Potash giant announces layoffs for hundreds of workers in Saskatchewan
Fri Oct 23, 2009

By The Canadian Press

SASKATOON – A day after Postash Corp. (TSX: POT.TO) announced that its earnings had plunged, the company has announced it will issue temporary layoffs to roughly 800 workers at three mines in Saskatchewan.

Bill Johnson, a spokesman for the company, says workers at its Allan, Rocanville and Lanigan mines will be affected.

He says layoffs will happen in November and December and he expects they will last two or three months.

Johnson says some of the workers could end up doing other jobs with the company, including maintenance or construction.

There have been two other temporary layoff periods this year for workers at the company’s mine sites.

In 2008, the company earned about $1.2 billion US in the third quarter, compared to $248 million for the same period this year.

#125 » Links for October 26th on 10.26.09 at 12:19 pm

[…] It’s that simple — Greater Fool – The Troubled Future of Real Estate – […]