The middle

middle1

Is this a middle class blog? After all, we yak about housing markets, tax strategies, commodity prices and macroeconomics every day. We carve up people who have too much money and dis those with too little. We pontificate like CEOs and gossip-monger like hairdressers. We practice one-upmanship, have no pity and clobber each other with links. We aspire. What else could it be but middle class?

But, I wonder, do we still have a middle? Or is it endangered? And what is the middle class now, anyway?

The middle federal income tax bracket is from $75,769 to $123,184. The average family income is $61,800 (two kids), according to 2007 StatsCan numbers ($75,000 in Alberta). The percentage of us who own homes is 68.4.

But while we’re in the top segment of the planet’s population for income, we’re also at the top of the heap for debt.

British, American and Canadian households are the most indebted in the world, in that order. Our household debt now exceeds 140% of disposable income. Even outstanding student debt is out of control, at more than $13 billion. Mortgage debt has exploded along with house prices, rising by more than $100 billion last year and likely adding far more this year.

Speaking of real estate, what’s the deal when the middle class family struggles to afford the average home? Toronto houses averaged out at $450,000 last month, or almost six times the median income. In Vancouver the average detached home costs more than 10 times income. (When my father was a high school principal in the 1960s his salary was $10,000 and the big two-storey house he bought in the Toronto area cost $18,000 – 1.8 times his income.)

Today personal bankruptcy levels are shooting higher, up 47% in September. We have 74 million credit cards in a country of 32 million people, and have amassed $50 billion in charges.

There are 18 million workers, and only 25% of them have a corporate pension plan. Just 31% contributed to an RRSP last year and 45% have no retirement savings. Eight million people have no pension and no savings of any kind. But of those people, representing 45% of the workforce, we know between a third and 40% are homeowners. So, does that make them middle class?

Canada itself has never had a year this bad for finances. The feds are spending $56 billion more than they take in, Ontario’s spending $24 billion more than it makes and even little Alberta is $5 billion in the red. Our national debt just passed a half trillion dollars again last week, after years of improvement, and will be $620 billion soon. Does this makes us a middle class country, or have we lost it?

After all, only 17% of our economy now originates from actually manufacturing things. More than 60% comes from people borrowing money and buying things from each other. Maybe that’s why the prime minister has been spending weeks in India, China and Korea – visiting our jobs.

In any case, I’m wondering if this middle class thing is not a myth. We may have a lot of stuff, but we have no money. We possess more assets, but have far more debt. We get by today, but blank out tomorrow. We face higher taxes and interest rates, yet save nothing now.

So, where’s the prize?

Oh yeah. Forgot. We have each other.

150 comments ↓

#1 eddy on 12.06.09 at 10:09 pm

the middle class is a thing of the past. we should re name it the middle ‘slave class’ because debt = slavery, if it’s used for lifestyle

off topic but just as scary is ACTA, the money masters who control all media have figured that the internet need control

http://dissidentvoice.org/2009/11/the-struggle-for-net-neutrality/

#2 omg on 12.06.09 at 10:10 pm

I am hopeful for Canada. Much the same was said about Canada’s debt problems back i the early 1990s but some how we managed to get it under control and have on of the strongest fiscal footings of developed nations.

The Liberals balanced the budget many on the back of the the GST (brought in by one of the better PMs of the past 50 years) and lower debt costs due to continually declining interest rates.

Since interest rate reduction cannot save them this time, we may actually face cuts to the bloated federal and provincial governments.

Pity

#3 Sean on 12.06.09 at 10:22 pm

I find it shocking that people are willing to pay $300K and up in Toronto for a shoebox sized condo. When the interest rates begin to rise a couple of points will this cripple what’s left of the middle class? Will this result in ever higher taxes as federally insured mortgages go under water and the taxpayer has to pick up the tab?

#4 Tallyman on 12.06.09 at 10:24 pm

Great Picture!

That’s exactly how we will be judged by those young ones in a few years for all the gluttony and stupidity going on now.

As for the “classes”
just a bunch of different groups clinging to their section of the stinking toilet bowl proclaiming how much better it is in their end of the pool.

Gotta wonder what those tykes will have left by the time this party is over.

#5 Jojo on 12.06.09 at 10:26 pm

Inflate or die!
Stock market going up,Gold record high,Oil comming back, and houses record high.

#6 junius on 12.06.09 at 10:33 pm

Canada and the U.S. are in the same boat in this regard. Our corporate leadership has outsourced our economy to please the short term goals of Wall Street. What looks good in a boardroom as short term costs savings has undermined the long term viability of our economy.

HBO is running a great documentary right now called, “Schmatta: Rags to Riches”. It is the story of the garment industry and how it built New York City in the early decades of last century but no is pretty much gone. The same can be said for so many industries.

The middle class may not be gone but it is much weaker than it once was. It should be the engine that leads the recovery but it is hurting – big time.

#7 JFoo on 12.06.09 at 10:37 pm

Nice post. A good broad illustration of our current time.

#8 Ottawa_Tradesguy on 12.06.09 at 10:42 pm

Thought you guys might find this link interesting:

http://www.theglobeandmail.com/report-on-business/orphaned-homeowners-face-foreclosure/article1390721/

Looks like the impending crash is starting already. Oh wait, carney will jump in and stop this one too.

#9 BAD on 12.06.09 at 10:42 pm


Garth wrote:

When my father was a high school principal in the 1960s his salary was $10,000 and the big two-storey house he bought in the Toronto area cost $18,000 – 1.8 times his income.

In 2008 a high school principal would earn somewhere around $110,000.

Disclosure for 2008 under the Public Sector Salary Disclosure Act, 1996 – School Boards

If we keep the same ratio of 1.8 then a “big two-storey house” in Toronto area should be about $200,000. If we bump the ratio to 2.5 we get about $275,000 for the house.

Hmm… seems high school principal earnings aren’t what they used to be, eh?

#10 Bogdan on 12.06.09 at 10:49 pm

Is this a middle class blog? – definitely… maybe. If you consider the ones with low/no debt and low savings as middle class, then it’s a middle class blog… by a high class bloger.
If you consider Canada a middle class country (with a debt of ~$600 billion), then this is high class blog… as most of the blog dogs/readers are not as fucked up as the country is.

Otherwise, we are all in a very deep shit, waiting for it to hit the fan. The question is… who’s going to be in the first shit-wave, that’s hopefully going to chip away the fan?

#11 Debtfree on 12.06.09 at 10:54 pm

We possess more assets, but have far more debt. ????
If” we ” owned more assets “we ” would have nothing to worry about as assets put money in our pockets . Liabilities take money out of our pockets . A house is only an asset if it puts money in your pocket ie. rent or money from a sale of the house. Only the banks call things that one is paying for an asset and the ill informed . For the banks things like houses ,cars , boats and all the other toys are assets ,but they are the banks assets as they bring them ( put money in their pockets ) payments every month or biweekly.

#12 Ottawa_Tradesguy on 12.06.09 at 11:11 pm

Though you all might find this article interesting:

http://www.theglobeandmail.com/report-on-business/orphaned-homeowners-face-foreclosure/article1390721/

#13 Blobby on 12.06.09 at 11:16 pm

Its about time the REGULATORY body (CMHC) forced the banks to go back to “no more than 3 times your income, or 2.5 times your joint income”.

But that wont happen until after a crash and everyone is blaming the government for their own stupidity. Because stopping people being stupid isnt a vote winner (getting them to take untested vaccinations is!)

#14 T.O. Bubble Boy on 12.06.09 at 11:20 pm

Since we’ll all be bankrupted by the pending CMHC implosion, “class” can go back to meaning ‘how one carries him/herself’.

Dim Jim Flaherty and Harper telling bold-faced lies about our economy is class-less. (as are my grade-school insults, but hey, they’ve wasted a lot of my tax dollars on crappy reno credits and inflating the price of my next home)

#15 Jim on 12.06.09 at 11:25 pm

Garth,
you don’t allow posts that don’t support your point of view, so you are losing your credibility

Jim

Any post with a viewpoint to express is allowed. Those which attack other people to make that point are not. — Garth

#16 Ottawa on 12.06.09 at 11:25 pm

We’re missing the big picture. Canadians don’t notice the slow trend which started in the early 80’s. Real income has been decreasing by a fraction each year. Statscan inflation doesn’t include full asset prices. So if you were a young family starting out in the 70’s even with one income you could raise a family, buy a house and put the children through school. Now try that with two incomes.

Real median income is down, corporate profits have been up. inequality is rising as the top 5% (likely few people who read this board) has earned a larger share – the middle class is now shrinking.

Income tax as a percentage of gov’t income is climbing while corporate taxes are at 12% of income and continue to fall with a recent $50 billion reduction. I’m a supporter of business but the middle class needed that tax cut more.

This crisis is a crisis of income – instead of income increases consumption has been intentionally fueled by debt. Lately fantasy house prices have fueled fantasy wealth to fuel real purchases.

Debt can only take this economy so far. A growing percentage of income is needed to pay interest – as rates increase consumption will be further restrained. In the distant past this crisis might have caused greater redistribution but now it fuels further outsourcing as industry looks to cut costs. Business needed the middle class to purchase their products, now they look hungrily at the billion emerging middle class in the developing world.

Thankfully resources can’t be outsourced (although workers can be brought in).

#17 Wealthy Renter on 12.06.09 at 11:26 pm

In any case, I’m wondering if this middle class thing is not a myth.

Hi Garth,

I wonder the same thing all almost every single day, as I live virtual no-mans-land between a neighbourhood where houses cost around a cool million, and a downright ghetto where they average family income is around 20K. As we live well below our means and save lots money, my wife and I look at the late twenty-something’s buying the million dollar homes, and wonder how they keep their heads above water.

A really, really strange “new economy” job has popped up in my little Etobicoke neighbourhood – bottle collecting. I first noticed it about a year ago, when I returning bottles to the beer store, and a fairly well dressed woman was dropping a rag tag collection of bottles to collect the deposit money. I assumed that she was working for a restaurant, until I saw her scouring the blue boxes in my condo.

She is not the only one. I have probably seen 10 to 15 different bottle collectors digging through our blue boxes in the past six months. It is a daily occurrence. At least five trucks pull up daily looking for scrap metal. The kicker is that these folks do not look drunken, mentally ill, or homeless. In fact, they look like normal working class people who are really down on their luck.

I feel a lot of sympathy for these people. There cannot be a lot money in collecting bottles. I wonder how much of the economic recovery is a myth as well.

#18 AxeHead on 12.06.09 at 11:27 pm

My uncles lived throught the depression. They lived on a farm in southern Ontarion. They used to sheer their own sheep, wash the wool in the nearby creek, spin the yarn and then knit thier own mitts and socks. This is the generation prior to the baby boomers. This generation made stuff, like Heintzman pianos and fine Canadian furnature, and Chevy Nova’s.

All the problems we talk about on this site are symptoms of a society that makes nothing any more. All we do use consume cheap imitations of what this country used to build with pride but now other societies and countries make as fast as we can send them our money. If I had to use one word to describe our society today and the reason we’re in so much trouble, it would be….soft.

#19 nonplused on 12.06.09 at 11:32 pm

#2 omg

Brian Mulroney was responsible for the GST in1991:

http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(Canada)

Canada’s budget deficit was already out of control when Mulroney took office, and even though he never did get it under control he probably lost his job over efforts to reduce spending and increase taxes to curtail the deficit.

http://en.wikipedia.org/wiki/Brian_Mulroney

How the deficit was brought under control I do not know, but I suspect it was something to do with all the capital gains taxes resulting from the stock boom of the 90’s like with Clinton. If every bank, investor, and dog out there is reporting big capital gains, balancing the budget is easy! Especially if the investors go and spend those gains, which causes somebody else to pay tax on income.

Low interest rates through that period also reduced the cost of carrying existing debt, which might have also helped. But I doubt the Liberals were anything but lucky.

The reverse is true today, where crashing tax receipts are putting the government back into deficits again, with no change in policy. Now wait until rates rise and see what the deficit does! It could double again!

#4 Tallyman

There are only 3 classes now, The very rich and connected, government employees, and the screwed.

Garth,

Your numbers today are all very convincing, but they only reiterate your basic point since day one. Canadians are deeply in debt, the economy sucks, and yet Canada has the highest real estate prices in the world for comparable properties. Well, I guess we didn’t have the world’s highest real estate prices then, but since our market refuses to correct while the others do, we do now! I guess your point then was just “unreasonably high”.

I wonder how this can end well. It will end, everything that cannot continue eventually doesn’t. But what happens to Vancouver when property merely stops rising? How can a housing market exist at 10 times income if it is not guaranteed to continue up? Nobody can afford it if it even stays flat, as the mortgage interest is a loss, disproportionate with rent. All of the economics are based on equity gains repaying the mortgage payments plus some profit.

And don’t you fools go on about the “Hong Kong” money. I was riding the gondola just today with 2 ladies from Hong Kong, Canadian educated and back for a ski vacation. They both moved back to Hong Kong and things are booming for them, it seemed (although the one lady was in “money lending”. Don’t know how long that works out but business was good to here her talk.)

Anyway, my point is that if they are from Hong Kong, they aren’t moving here anymore, prospects are better there. And if they do move, their income becomes “Canadian” so even if they are declaring a fraction of their income here, the average income for Vancouver should be rising. And as they spend money on renos to their new mansions, carpenters should be reporting rising incomes. So something is out of whack.

#20 Onemorething on 12.06.09 at 11:33 pm

The classes should be only measured on net worth, that’s how I’ve always measured mine. This is the only way you can truly understand where you stand.

Google – How to Calc Net Worth!

Upon viewing these, you will notice given Garth’s statement of our household debt vs. disposable income at 140% of what you really do own.

During turbulant times, I calculate mine monthly or at least quarterly. I am also aware that RE and interest rates can change quickly so by selling RE and taking gains and potentially parking them in less volitile or liquid assets for most people can save their bacon and make it so they have actual positive net worth down the road.

Garth, I wonder on this net worth scale how many of Canadians today fall into the negatives, how many have less than $50K how many less than $100K.

Add a sizeable drop in RE values and how does this shake out!

REMEMBER DEBT IS CONSTANT – VALUATON A VARIABLE!

You can only value an asset given it’s saleability! A house valued at $500K, with no buyers has really no value until sales history can be formed. This is usually decided at the bottom.

The ability to service debt relies on you also being able to keep your income level constant during the term of valuation. Salary haircuts and layoffs are plaguing us as typically salary and jobs return however they wont be this time.

Again, watch the Boomers closely in the next 3-6 months likely start making changes which will take out the so-called middle class completely. All subprime and prime with less than 30% down.

#21 InvestX on 12.06.09 at 11:40 pm

What about the supposed rich Asians keeping the Vancouver real eastate market afloat? Any truth to this?

#22 nur on 12.06.09 at 11:44 pm

Garth, this is scary. I am amazed at the people happily amassing huge dept. The Govt. need to secure this 60% of its economy. With jobs fast drying up and salaries shrinking, this is a huge huge risk.

#23 prairiegopher on 12.06.09 at 11:48 pm

By the way, Alberta’s deficit is only 4.6 billion. Just a mere pitance for those lads!

#24 squidly77 on 12.06.09 at 11:48 pm

The government gives us all the finger

#25 Grey on 12.06.09 at 11:51 pm

You guys ready?

The first article that I have read from The Globe and Mail that actually hints that maybe, just maybe, we may have a problem:

http://tiny.cc/FkEH7

This case is in Hamilton. Not Michigan.
That’s right, Canadaland.

#26 grumpy on 12.06.09 at 11:52 pm

What you are saying is that the myth of a middle class is dead. The average person makes nothing even close to what would qualify them as middle class. There is a small class of elites who work for government who make above 120K p/a who also have the fat luxury of a pension. In fat the 25% you spaeak of is probably much lower as most pensions now out side of the parasitic government worker is a marginal contribution from the company if the worker can afford to put any aside. The fact is that CDNs are up shit creek on pensions.

The claw backs on seniors income is disgusting and shameful in a country that rode thier backs to ‘success’. But who has that success gone to? Not the people who put the money away.

#27 nonplused on 12.07.09 at 12:01 am

Oh ya, so back on Garth’s question about “what happened to the middle class?”. My contention is that it got replaced by the “government employees”.

I read a stat from California, that the average salary of a firefighter was $175,000 per year. Now don’t get me wrong, I am all in favor of our police, fire, EMS, and defense personnel. But the problem here as in California is not the annual wage, it’s the pension. They get to retire way too early compared to the rest of us, and the pension is guaranteed with cost of living adjustments. That’s what spikes up the annual wage. Plus in the US they get paid for top notch health care, which isn’t a consideration here.

But any government employee here too gets such a nice pension it’s no wonder they don’t bother to save. Why would they? 25 years of service and they are gold plated, at 50 years of age.

That includes teachers.

Ya sure it’s only 70% of their last 5 years, but they can keep working if they want, become principle, and jack up that 5 year average.

Nobody else has that anymore.

Nobody.

There are some legacy pensions left, but they are guaranteed by Ford or GM staying solvent, or maybe CP Rail.

So the new “middle class” is the government employees. Private sector employees might earn slightly more while they are working, but their pension is up to them, meaning they have none.

Tell your sons and daughters to work for the governments. In any capacity.

Gold:

Stage 2 still intact. But Adam misses something. Stage 3 cannot occur until banks think that’s the least risky place to lend money. So when you see margin requirements on gold going down (they have been going up), get ready to sell. That won’t be for a while.

http://www.zealllc.com/2009/goldpara.htm

http://www.zealllc.com/2009/goldpara.htm

#28 ralph on 12.07.09 at 12:04 am

“If stu­pid­ity got us in­to this mess, then why can’t it get us out?”

Will Rogers

#29 Edmonton Yahger in C-Gar on 12.07.09 at 12:09 am

The gap is widening between the haves and the have-nots. How can we fix this problem? Hmmm… I know! Let’s borrow more money!

#30 viamede on 12.07.09 at 12:20 am

They say our love won’t pay the rent
Before it’s earned, our money’s all been spent

I guess that’s so, we don’t have a pot
But at least I’m sure of all the things we got

#31 bcampbell on 12.07.09 at 12:23 am

Of the 25% of workers who get ‘corporate’ pensions how many are working for some crown corporation or some level of government. To the best of my knowledge they are the only group that still get fat pensions. In the private sector I know of almost no one who is expecting a decent pension.

#32 Dr.C. on 12.07.09 at 12:24 am

Yes, middle class could be considered a growing unlikely situation but; have we not been spoiled? We much more compared to our grandparents in mulitples (my estimates):
– housing X2, – cars X2+
– TVs X3+ – computers +3
– cell phones +3 – dinners out X6/month
– luxury goods, X10 – flights X10
– health car X10+ – education X10+
– & other entitlements X10+ – landlines X3+

I’m not saying some of this isn’t ‘good’ but, why must we be living so high… worse yet; expect it?

Perhaps if actually paid off our debt, lived with less and gave away less to those who choose not to contribute to our society then maybe we might be more able to foster innovation: that which creates more jobs.

Living with less, can it be that ‘bad’?

#33 Dr.C. on 12.07.09 at 12:26 am

BTW. Garth, really enjoy your work.
P.S. I’m new to your blog.

#34 GTASerfs on 12.07.09 at 12:31 am

UT’s Urban Centre published an interesting study at the end of 2007, geographically tracking the disappearing middle class in Toronto between 1970-2000 http://www.urbancentre.utoronto.ca/pdfs/researchbulletins/CUCSRB41_Hulchanski_Three_Cities_Toronto.pdf

#35 Eduardo on 12.07.09 at 12:35 am

The recent deficitestimate for Alberta is now 4.8 B$.

#36 Comfortable in a coma on 12.07.09 at 12:40 am

A quote from the G&M today…
” A few weeks ago, she received a letter from Xceed’s lawyers, explaining that she owes the company nearly $128,000. This means that, despite paying Xceed about $40,000 over the past three years, she now owes $1,000 more than she originally borrowed.”

This is where our middle class is today. $40K paid and she still hasn’t touched the principal. This will be a wake-up to all our new borrowers with 30 year ams.
The middle class used to be the income level where you got ahead over time. Now it just indicates where the banks are making the big money.

So sad to see peoples productive working lives squandered paying every available cent they have just to say ‘it’s my house”. All the wasted lives and broken families to support the real estate/banking industry.

#37 BDG YYC on 12.07.09 at 12:48 am

Great one Garth.

The prize ? You mean the PONY ? You know very well there ain’t no PONY !!! Of course that’s not a problem as long as DaBoyz can keep piling faster than the pigeons can dig. Ooooooooooo boy … its going to be ugly … NO PONY coming soon to a theatre near you !!! But hey … lots more ponies where that one came from.

As for the … “We have each other” … Now you are really scaring the hell out of me !!!

#38 taylor192 on 12.07.09 at 12:50 am

Garth,

The service industry isn’t all bad. There’s still good jobs available doing an honest day’s work, afterall, someone has to fix/install all the junk made in China. :)

Restaurants were one of the biggest wins in the last decade, people with more money tend to eat out more, and we haven’t outsourced cooking food in restaurants… yet.

Its still going to end bad, yet its not as bad as pictured.

#39 ralph on 12.07.09 at 1:00 am

Canada’s mutual fund industry recently held their Canadian Investment Awards and Gala in Toronto. Where they sat in circles around tables and stroked their egos.

Meanwhile, many people lost millions by getting suckered into buying and holding. Overpaid fund managers are collecting fees even when their funds don’t do any better then the indexes. In some cases worse.

As far as I am concerned it is a license to steal your money. What a racket!

#40 kitchener 1 on 12.07.09 at 1:02 am

Middle class is a game of semantics.

I think that the boomer generation( Garth et all) was the last generation to experience real middle class ideals, wealth growth, realtive low taxes compared to now (although at the time they were regarded as being the end of the world as we know it, anyone remeber the GST. LOL)

Our definations are changing, middles class used to be surbia but with most cities, even mid size one’s like Kitchener-Waterloo, revamping downtown cores areas, condo towers are the new middle class areas. 800 sq foot shoeboxes.

Living with huge debt loads well into our 30;s is the new defination of middle class, contionous job searchs and switching, no security or pensions, and higher taxes.

Couples working 3-4 jobs between them is the new fad.

#41 Skeptic on 12.07.09 at 1:04 am

I’d like some more background behind the claim that “household debt now exceeds 140% of disposable income.” I’ve been reading for at least five years that the debt-to-income ratio is over 100%. At the same time, we hear that many or most households live paycheque to paycheque. There’s obviously no way these two groups can overlap, at least for any length of time.

How does this work? How can people spend more than they earn? Are these people spending their savings? We’re also told that about half of Canadians HAVE no savings.

It sounds suspiciously like one of those instances of “lies, damned lies, and statistics.”

We apparently have some unknown percentage of people with more going out than coming in, at the same time that 45% of people have “no retirement savings … no pension and no savings of any kind.” Is it possible that the 140% figure comes at least partly from some anomalous group, say some of the upper earners somehow spending 400% of their income, or something else that skews the stat?

Prices in our major cities are supposed to be six (Toronto) to ten (Vancouver) times “the median income.” But, the median income where? Across the country? How is the amount that someone earns in Wawa or Quesnel relevant to the price of housing in Toronto and Vancouver?

How many people, in these two cities, are actually in the process of paying off a home that THEY purchased for six to ten times THEIR income? And even if there are some, how many of them are paying off a home that is ten times their income, without having made a significant downpayment? Maybe a few recent “greater fools.” But I’d bet that most people who are, say, earning $60,000 and paying off a $600,000 house don’t actually have a $600,000 mortgage, or anywhere close to it. Of course, I don’t know.

But these statistics have sometimes astonishing implications and connotations. A non-critical reader might be tempted to combine these numbers and conclude that everyone in Toronto and Vancouver is currently allocating 140% of their income to pay off a home that’s cost them (beyond their downpayment) six to ten times what they make. But what percentage of homes trade hands in any given year?

I’d love to see a more in-depth analysis of what’s going on here, because it seems to me that these numbers raise far more questions than they answer.

#42 West Coast on 12.07.09 at 1:06 am

This is old news circa Regan era:

There Was a Class War. The Rich Won It.

http://firedoglake.com/2008/07/13/there-was-a-class-war-the-rich-won-it/

#43 West Coast on 12.07.09 at 1:11 am

“We practice one-upmanship, have no pity and clobber each other with links.”

…another link:

Canadian Young earn less than parents did: Census

http://www.thestar.com/News/Canada/Census/article/420331

#44 Dan in Victoria on 12.07.09 at 1:21 am

The system we presently live in requires endless growth and ever more consumption.
I wonder what position we are at on The expotential curve?

#45 kc on 12.07.09 at 1:35 am

Interesting topic…. I am sure you are actually talking about the “mythical-class”. It is like chasing unicorns… you want to believe they exist, however, when you feel you spotted one you find out it is some kid who glued a phoney horn made out of crate paper to a horse.

Take away the credit card, and see who is swimming naked when the tide goes out. The bad thing about this is it is going to be getting worse. There are only 2 classes left in N. America, rich and poor. PERIOD. Service your debts the best you can and live payday to payday.

Funny you mention Harper visiting our old jobs. Was in Canadian Tire tonight looking for a motor for a furnace, (wich it turns out i didn’t need) and everytime I go into these stores I flip crap over to see where it is made. Even a good ol GE motor that once was made in Canada is made and imported from Mexico. (no real surprize here thou) You have to look long and hard to find anything made with the maple leaf behind it. I am curious as to how many people in here this year are spending way less than they did last year or the year before for Christmas? and how many have a cash purchases ONLY policy and leave the plastic at home if they venture out shopping? And I for one will only be buying items that say made in canada!! not imported by _____ in Ont. Our family this year is spending about 1/4 that we did last year. (and last year wasn’t anything grand I may add.)

cheers

#46 Nostradamus Le Mad Vlad on 12.07.09 at 1:40 am

“. . . we’re also at the top of the heap for debt. British, American and Canadian households are the most indebted in the world, in that order. . . . Does this makes us a middle class country, or have we lost it?”

The deluded masses of sheeple here have convinced themselves they are living a first-world lifestyle on a first-world continent, but this is a third-world place with fourth-world living conditions now. Everything is changing, borders are shifting.

There are reasons (anyone can figure them out, as it’s not that difficult) as to why the west is finishing its’ present cycle, and the east is awakening.

The pension link I posted at the tail-end of Garth’s prior post re: the US shows that sooner or later, Carney, Harper and Flaherty will gut plenty of social programs and may combine CPP / OAS / GIS into one program as well. We voted them in, so what can we expect?

Other than Global Farting / Burping (never mind warming / cooling or anything else), the best we can look to is a natural, unexpected event(s) (such as rogue asteroids, super-volcanoes, GS-JPM and / or ‘quakes) to mix things up nicely, to throw us from the frying pan into the cauldron of fire.

BTW, our daddy (16th century French seer Michel de Nostredame (Nostradamus) said in Quatrains 21:

“When those of the arctic pole are united together, (NWO)

Great terror and fear in the East: (China / Russia uniting and rising)

Newly elected, the great trembling supported,

Rhodes, Byzantium stained with Barbarian blood (probably ours).
——
China is going to keep buying US greenbacks, then exchange them for hard assets.
——
First comment / question is excellent. Copenhagen is a front for the creation of a one-world govt. (not going to happen), but from that stems a one-world currency — Carbon Scam

#47 hal smith on 12.07.09 at 1:53 am

Garth, the world has changed. Our view of it is no longer the prevailing view, we are in the minority and we are disappearing fast. People are totally into housing as an investment because stock markets collapse and are mismanaged by liars and thieves and fools and the overpaid. Pensions disappear. It’s live for today and don’t worry about tomorrow, debt is your friend and will make you rich eventually. A politician once said that perception is reality. A wise man once said that agreement is reality. So, this “housing bubble mentality” that we have is going to be with us for a while since it is the new reality out there. It is what people want. It may morph into something else eventually but it will be a long slow process I think.

#48 Chaostrology on 12.07.09 at 2:00 am

“Turn on, Tune in, Drop out…”

Timothy Leary (R.I.P.)

How do we interpret his message 40 years later?

Turn on your i-phone.
Tune in your i-pod.
Drop out of the social contract,( just pretend that other people aren’t there).

Yah, the middle class is dead, it’s been replaced by POD PEOPLE! (no pun intended)

“The medium is the message…”

Marshall McLuhan (R.I.P.)

What would he think of our circumstances?
Would he think that we are just a bunch of jug-heads?
Or, would he shudder at his prescience. Could he actually believe the speed at which the western world has been co-opted by the Media Machine?

The medium is the message…and the message is that
debt is good, DEBT IS VERY GOOD!

Would somebody please pass the Soma.

More on Huxley at a later date.

#49 average joe on 12.07.09 at 2:23 am

I was rather surprised to learn that I was in the upper middle class bracket , actually a bit in excess (but only about 5-10% in excess) of the middle class. Why then do I and my spouse need to account for every dollar? We did have more than 2 children, but we send them to universities locally and we set up RESPs.
Oh wait, could it be that our mortgage is on a property in the GTA? Could it also be that our RESPs tanked, and we didn’t have the funds to take out of the plan we paid into? Could it also be that my spouse has had to endure 2 years of salary cuts and has been drawn back from 6 weeks vacation to 3 weeks with no satuatory holidays?
The Middle Class doesn’t exist anymore. We are all struggling.

#50 Expat on 12.07.09 at 3:16 am

My rough Leave it to Beaver definition of middle class could be those families who are able to own a home (put down roots, commitment to a job, discipline to get together a down payment then make monthly payments similar to or lower than rent, live in a stable neighborhood for the benefit or the family) and save for the future.

How does the middle class do in a real estate run up? Wealth is created when selling by increasing the price of the same asset, real estate, without really creating much set, hence flipping and shoddy renos. The wealth is created by debt provided to the buyer by the banks, which the seller may then use to buy a new home (usually larger and with a larger mortgage), buy things – unfortunately mostly made elsewhere but perhaps at least using Canadian raw materials, or invest so others may borrow the money. Banks, who ultimately own (have title to) most property, make a killing because buyers are taking out ever larger loans that will probably never be paid in full, much like high interest credit cards with a minimum payment paid each month.

So back to the middle class. If homes appreciate more than earnings increase, the net effect will be that the middle class, as roughly defined above, becomes smaller as fewer people have the means to own (meaning paid off) their own home and debt and interest drown the new buyers, making purchasing a home a burden rather than a financial step up. Unless you are fortunate enough to have a greater fool come along to take it off your back.

Is this the lesson Mr. Turner? If we want a healthy middle class, don’t think of homes as investments?

#51 Onemorething on 12.07.09 at 3:57 am

The Are You Unemployed Gameshow? This is simple hilarious but very true on how things are calculated.

http://financialplan.about.com/od/personalfinance/ht/networthhowto.htm

#52 Onemorething on 12.07.09 at 3:58 am

sorry link below

http://www.youtube.com/watch?v=Ulu3SCAmeBA&feature=player_embedded#

#53 Onemorething on 12.07.09 at 3:59 am

sorry wrong link that was for Calculating Net Worth,

now watch the ARE YOU UNEMPLOYED GAMESHOW BELOW

http://www.youtube.com/watch?v=Ulu3SCAmeBA&feature=player_embedded#

#54 kc on 12.07.09 at 4:53 am

After examining and thinking a bit more about the “Vulture” comment in yesterday’s posts… I came up with your answer to what i think garth may have been saying…. Buy into companies that are completely on death’s door… However, i still like the vultures he alludes during the summer… of how to pick off the greedy home buyers with giving them that all too good to pass up… buy now and i live there for a year and you will still have to pay me to break the deals…. go back into June 5 09

http://ipsnews.net/news.asp?idnews=48147

http://www.earthtimes.org/articles/show/296549,vulture-funds-swoop-for-20-million-dollars-in-liberia-judgement.html

#55 MB on 12.07.09 at 5:21 am

Dear Garth,

It’s not how much you make, it’s how much you can borrow!

Let’s see… when the banks can create $20 from $1 worth of assets where exactly is the problem with people spending $1.40 from $1 worth of earnings?

If and when the lending rules change back to the rules of the days of yore we will all find “Middle Class” having a rigorous definition. So will the more generally applicable word “Poverty” by the way.

Big time.

Until that time, however, let the sun shine on our capitalist “keep the eonomoy growing” socalled indebted lives.

What’s the problem with debt if we all have food, clothing, shelter and family?

We don’t make the rules Garth, we just play by ’em.

Sincerely,
MB

#56 Betamax on 12.07.09 at 5:37 am

Not only does housing cost many more multiples of gross income than our parents’ generation paid, but we are also taxed much more than they were, taking home less net income and having even less than that after paying sales & service taxes.

On top of that, the middle class carries far more consumer debt than previous generations as it attempts to maintain an upscale ‘Starbucks’ lifestyle in which everyone overpays for everything (on credit) to prove how much money they supposedly make.

So not only do we pay much more for housing, we actually have less money with which to pay for it, which is why most of the middle class are now unable to save a dime for retirement. They’ve robbed their future selves to pay for present over-consumption.

For retirement, there’s no single investment which is going to match the long-term, brute-force wealth accumulation of savings: of regularly saving a significant portion of income and living well within your means to do so.

But the wannabe-upscale crowd would rather blow all their money and then some, and instead rely on housing or lottery tickets to fund their retirement, and the odds are about as good for both.

#57 Repatriated Expat on 12.07.09 at 6:59 am

I guess middle class is a relative thing so there will always be one – a sinking tide lowers all boats.

Your standard of living can drop until you are eating cat food to maintain your monthly mortgage payments – but you’d still be middle class.

#58 SaraBeth on 12.07.09 at 7:43 am

# 25 Dan in Victoria ~ You wrote:

“The system we presently live in requires endless growth and ever more consumption. I wonder what position we are at on The expotential curve?”

**********
Edward Abby said; “Growth for the sake of growth is the ideology of the cancer cell.”

:-( Not sure where we are on the curve exactly, but IMO, we are past the top and gaining speed…

#59 David Bakody on 12.07.09 at 7:47 am

#2 omg on 12.06.09 at 10:10

Ditto ….

I am not middle class and far from it, but I own my modest home and very little debt and survive quite fine in retirement.

Many here have passed on good advice to those who feel they have not yet made their mark achieving upper middle class status via route 101 Garth Turner.

All we have done basically has told them less is more and they can raise a family save wisely by doing the simple things …pay down debt live within your means and enjoy life. Yes there will be speculators on gold, stocks, bonds and even Real Estate. The best home like the car in the driveway is the one that is paid for and it easier to pay for a modest home and car than the most expensive flashy one on the street or lot. Good savings comes with education and keen attention to the fine print. Every quick fortune has it’s consequences and most if not all are fatal.

As for we who post here perhaps are most of what has been expressed above, but to-day modern technology has replaced letters to the editor, or opinion pages the stamps and foot work to the post box by the click of mouse.

There are millions, multi millions of words daily clicked on to the www. we are but a few, everyone has an opinion and they are just that but words have meaning and of course messages and if we are lucky we who read and type just might construct or read those words that do have profound messages. Bon Chance good luck … but keep reading and writing each and everyone, it truly is a gift and should words sound offensive or not interesting turn the page and move on.

#60 SaraBeth on 12.07.09 at 7:53 am

Sorry Dan in Victoria ~ I was quoting message #44 from you…

#61 ca on 12.07.09 at 7:54 am

Garth —

You may want to contact the Fed on this one: “Why Didn’t Canada’s Housing Market Go Bust?”

http://www.clevelandfed.org/research/commentary/2009/0909.cfm?ref=patrick.net

This link has been posted many times already. I don’t think we need an American academic’s condemnation of the US lending system to learn anything about us. — Garth

#62 SaraBeth on 12.07.09 at 7:58 am

Garth ~ Regarding “The Middle Class”…. up until the industrial age where oil became the fuel of choice there was no Middle Class per se… There was the Nobility, The Merchant Class, and everyone else…

We’re headed back that way again… Any kid that graduates HS today should take up a trade… we’re going to need them more than we will need financial advisers…

#63 Mikey on 12.07.09 at 8:10 am

Garth,Vulture. — Garth please explain?

Shane
********************

Garth speaks in riddles so he’s not likely to get back to you on this. He even responds in Chinese, so we have to go to Babblefish to understand his response. Garth is too clever for us mortal souls.

Garth, it would be great if you could give responses that mean something instead of giving a quick quip!

Like this? — Garth

#64 Toronto C9 Renter on 12.07.09 at 8:11 am

#16 Ottawa..

Great post. Don’t know if it started in the 80’s, but I know we had high inflation at that time so I’ll take your word for it

#65 pbrasseur on 12.07.09 at 8:22 am

I don’t think the middle class is a myth. It’s just that it’s becoming more and more difficult to make a decent living if you are not productive. In today’s very competitive global economy you can’t expect even the strongest union to protect your low skill high paying job. Only a government job can guaranty wall to wall security and pension, even when you are unproductive or incompetent, the rest of us are all second class citizens (who nevertheless pay for the formers…)

But if you don’t drop out of school and learn a useful trade or profession you’ll be just fine.

#66 Sean on 12.07.09 at 8:22 am

Interesting article from the anti-gold cartel via Bloomberg…

http://www.bloomberg.com/apps/news?pid=20601087&sid=axdpxBrQ9JTg&pos=3

A few points… it would have been almost impossible to buy gold at $850 in 1980. I think it only traded above $600 for a few days. That, BTW, is what a parabolic blow off top in gold does / will look like.

However, their point regarding gold being a generally poor investment as you wait for the end of the world, is well taken. Bear in mind, I myself am a gold bug. The message here is really not to fall in love with an investment. Gold is best viewed as insurance, not an investment… and it is one of the toughest speculations out there… consider the current two day bloodbath!

Play safe out there. Keep plenty of dry powder… But don’t live a life waiting and obsessing over the end of the world.

#67 Toronto C9 Renter on 12.07.09 at 8:29 am

27 nonplused on 12.07.09 at 12:01 am

“I read a stat from California, that the average salary of a firefighter was $175,000 per year”

Nonplused, I’m pretty sure the average fire captain / lieutenant would be more in the 60k to 80k range, although lots of opportunity for overtime.

#68 Sid on 12.07.09 at 8:56 am

the middle class is an artificial group that is not sustainable. For years unions, government subsidies and trade barriers have created inflated salaries for families that allowed them to live an unsustainable lifestyle. Supporting a family on manufacturing and uskilled labour is now non-existant. It will only get worse. The debt we’ve accumilated will only make the fall that much more painful.

#69 T.O. Bubble Boy on 12.07.09 at 8:56 am

@ #41 Skeptic:

http://www40.statcan.ca/l01/cst01/famil107a-eng.htm

You can maybe add 10% to those (since they are from 2006), but this should make you less of a skeptic on those average income or median income stats.

Notice: not one of these areas has a median income over $100k, yet the average house price across Canada is now over $400k I believe… meaning, almost anywhere you go, the ratio would be 4-to-1 or more (much higher than the 2.5x gross income that is a traditional affordability metric)

Obviously we all know that this data is skewed by the record low 1.5%-2.25% Variable and 3.5%-4% Fixed Rate mortgages, plus the 35-yr amortizations that CMHC backs for the majority of new mortgages.

$500k @8% for 25 years = $3800/month
$500k @2% for 35 years = $1600/month (MAGIC!)

If there’s anything to be “skeptical” of, it’s those kind of numbers right there… you tell me if over that 35-yr period if interest rates will average 2%.

#70 Rural Rick on 12.07.09 at 8:59 am

“Maybe that’s why the prime minister has been spending weeks in India, China and Korea – visiting our jobs.”

I wonder if Harper saw my old job when he was there? Maybe seeing the prime minister will make my job homesick and it will come back to Canada. Come back soon job. I miss you so much and I need your help to keep the wolf from the door.
Brillant turn of a phrase Garth, thank you once again for making me chuckle into my cornflakes.

#71 conf in Tor on 12.07.09 at 9:17 am

#18 AxeHead

You are NO Axehead friend!

Telling it like it is. This SOFT society is far more frequent in T.O. or other large similar citys. Many well educated office tower workers can’t even use a screwdriver! let alone, self sufficiency!
They seem to think the economy is now created from Banking, Insurance, realestate and lawyers…

They may know how to mix a screwdriver though…

#72 Kurt on 12.07.09 at 9:34 am

#41 Skeptic

“I’d like some more background behind the claim that ‘household debt now exceeds 140% of disposable income.’ ”

“How does this work? How can people spend more than they earn? Are these people spending their savings?”

What the %140 expresses is a debt servce ratio, not a payments service ratio. It’s a convenient yardstack for historical and cross-income comparison. If, after taxes etc. I take home $50 000 a year and I have a mortgage of 60 000 and 10 000 in credit card debt, I have debt that is 140
% of my disposable income. This is not unusual in our credit-based society, but it *does* mean that I am spending something like $5000 a year or 10% of my income on interest – a dead loss to the economy. This is also an average, so there are lots of people out there who are at %300 and %400, and these are the people who are currently driving the so-called recovery – hence the nail-biting.

#73 David Bakody on 12.07.09 at 9:38 am

21 InvestX on 12.06.09 at 11:40 pm

Numbers just numbers, it was the same here with people from Europe, the few which is large in a population of over 1.3 Billion is still large so rather than pay even more if available in Hong Kong/ China they buy in Vancouver just to own a home/investment.

Perhaps with home (Condo) prices like these Asians think Canada is a steal ( I think our $ is 7-1)

http://www.hongkonghomes.com/

The difference is Hong Kong just may be trying to attack the bubble

http://www.smh.com.au/business/hong-kong-worried-about-real-estate-bubble-20091207-keki.html

#74 Boombust on 12.07.09 at 9:43 am

“We may have a lot of stuff, but we have no money.”

And, we “responsible ones” can tell ’em to stuff it up their a$$e$.

#75 Ian on 12.07.09 at 9:59 am

(When my father was a high school principal in the 1960s his salary was $10,000 and the big two-storey house he bought in the Toronto area cost $18,000 – 1.8 times his income.)

And taxes in the 60s were much lower !

#76 Kash is King on 12.07.09 at 10:13 am

Garth, maybe one way out is for the Canadian Gov’t to issue it’s own money. We are a nation obviuosly rich in oil and metals; so why not create a “hard currency” of our own. The rest of the world would recognize it’s value, since they all have fiat money (like we do now).

Once the value of this new currency was recognized, then issue our own debt internally, not externally, and eliminate the nation’s debt this way?

#77 Nostradamus jr. on 12.07.09 at 10:23 am

U.S. is in process of bankrupting the world.

…Keep half ur assets in U.S. Dollar.

…Horders of Gold will one day resell it for food.

…Hongcouver/Vancouver will become North America’s Trade, Financial, Culture and Leisure Capital.

Nostradamus jr.

#78 Q on 12.07.09 at 10:27 am

and this weekend the middle class was out increasing their assets and debt all around the GTA!

#79 somecatchphrase on 12.07.09 at 10:39 am

The middle class in Canada and the United States is an endangered species.

I would hazard to guess that the vast majority of greaterfool.ca readers fall into what we would call middle class. Despite some of the idiotic commentary that you sometimes see here, I would also guess that greaterfool.ca readers are more financially literate than the average Canadian. In addition, I would guess that most greaterfool.ca readers are over 50.

At the very top, you have the indecently wealthy. The corporate elite. The people that Peter C Newman writes books about. Think Roy Thompson, Ted Rogers, Galen Weston, Paul Desmarais, and the Irving family. Most are over 50.

Next step down, you would have your affluent professionals, with a minimum income of say $200,000/a. This is what you might call your upper middle class. Doctors, CEOs, lawyers, Bay Street types, professional athletes, professional entertainers, etc. High income folks that don’t have sufficient assets to be considered truly wealthy. Many successful entrepreneurs would probably fit into this category. Most are over 50.

The true middle class, I would define very broadly as any household making between $80,000 – $200,000. Teachers, nurses, accountants, civil servants of all persuasions. A lot of what’s left of the middle class are employed by the public sector. Most are over 50. Many successful entrepreneurs would probably fall into this category.

Anyone trying to survive on less than $80,000 in household income is already in a very tight squeeze, and, things will soon get much worse with higher interest rates, taxes, energy prices, food prices, etc. Unfortunately, I suspect this is a very large chunk of the Canadian population.

#80 David on 12.07.09 at 10:45 am

http://globeinvestor.com/servlet/story/GAM.20091207.RMORTGAGE07ART1940/GIStory/

Garth, here is a story about our own little subprime industry, and the borrowers who can’t get their mortgages re-newed, because the subprime mortgage lenders can’t get any more money.
(But we don’t have subprime in Canada…right).

#81 Vicguy on 12.07.09 at 10:49 am

#4 Tallyman

“That’s exactly how we will be judged by those young ones in a few years for all the gluttony and stupidity going on now.”

We hear this all the time — that the young folks blame the boomers for the mess we’re in. But I see them behaving much worse that we ever did.

My parents born in the mid-20’s, were poor as kids but didn’t know it. They never went hungry, but there was zero money for frivolous things — dinner out, holidays, useless toys. My siblings and I born around ’50, were raised the same way. There was precious little extra money for the non-essentials.

When we entered the workforce, we bought old houses, fixed them up, rented out the basements, sold, and did it all again. Today, our modest houses are paid for, as we approach retirement, none of us have pension plans, but we have enough $$ in the bank to survive quite nicely.

But all the young folks we know won’t buy old houses – have to be new or near new, full of new furniture. Two new cars in the driveway. They have all the toys – laptops, berries, ebooks, big screen TV’s with HDTV and PVR’s, etc etc etc.

I have no data to back this up – I’ll likely be ‘shot down’. But it seems that most surviving Canadian manufacturing is now for crap – toys for the youngsters. The ‘meat and potatoes’ manufacturing – clothing, appliances, automobiles, etc etc, are going overseas. Canada’s high tech manufacturing flourishes; berries, computer games, and the like.

Yeah, we boomers lived well as we grew older – better than any previous generation, but don’t tell me that the young people are doing anything differently. They’re already worse than we were…

#82 OnlyTheBankersLaugh on 12.07.09 at 10:51 am

Two incomes and you can hardly buy a house right now without taking massive debt. Families with latch key kids. Wow, we’re really successful now. Few bring their own kids up because corporate careers (with inherent disappointmet when kicked out on street to meet numbers) are apparently more important than children. There are those who own houses and those who don’t. The differentiator today is not between smarts and brains and the ability to earn but whether you bought in the housing market which separates success from failure. Carney-val) guy continues to pontificate from on high after they let the horse out of the barn with CMHC interest rates and ridiculous terms. There is no going back now. Make a decision and then try to live with the craziness that you created but you’ve hurt many people to maintain the boomers “status quo” and wealth happiness for a bit longer… at least until a majority. Interesting article on trying to stop Bernake and his madness. I don’t blame Bernake totally as his buddy, Greenspan, had the major hand in it.

http://spectator.org/archives/2009/12/07/bernanke-versus-the-austrians

#83 Rene on 12.07.09 at 10:54 am

Roughly for how much would that “18k in 1960” house sell for today? I’m not from TO, but depending on the neighbourhood, I would suspect 600k-800k. Please advise.

So what? It’s the affordability relative to income that matters, not the asset value. — Garth

#84 Jim on 12.07.09 at 10:59 am

#19
Many people from Hong Kong move back or just do business in Hong Kong, but they don’t sell their houses here. They want the clean air, social services and nice surrounding we have here, but because of their greed, many make their money in Hong Kong. They whine about the taxes here, but they still choose to live here and that is why the market in HVancouver is priced beyond fundamentals. I live near Shaughnessey, one of the richest areas in Canada, and I can’t tell you how many vacant homes I see when I bike through the area. This is because our spineless government won’t tax speculators so the super rich buy homes as investments, keep the market inflated and do business elseswhere.

Jim

#85 Kurt on 12.07.09 at 11:01 am

#19 nonplused – I remember reading an interview with one of Paul Martin’s staff who recalled their deficit cutting discussions and that they realized that the GST was going to save their day. I’m going to see if I can find the link.

#86 junius on 12.07.09 at 11:10 am

I would consider our family middle class. My income is $120K per year and my wife remains off work to care for our 3 year old. We will need her second income in order to move up in the housing market to the next level. The “next level” in Vancouver is over $1 million dollars which for us would mean a mortgage of $500,000 or more if we want to get what like. While it is affordable now it would not be (without major sacrifices) if the rates returned to traditional levels of 6-8%.

We have decided this is all madness and are waiting for the market to drop. Who is going to buy all the baby boomers out of their West Vancouver houses? Not us – at least at the prices they want.

Excellent post Garth.

I know I already posted this on another post but it bears repeating – Elizabeth Warren’s excellent article on this subject in the Huffington Post – http://www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html

#87 T.O. Bubble Boy on 12.07.09 at 11:11 am

Wow – even the realtors can’t make the numbers work anymore!

http://www.calgaryherald.com/business/Price+isRIGHT/2307429/story.html

“With a typical 10-per-cent down payment and an average five-year fixed mortgage rate, the average monthly payment at the end of 2007 and beginning of 2008 for a condo was just over $2,000 per month.

It’s now closer to $1,500, says CMHC. By comparison, rents for the same period were $962 less per month than mortgage payments in late 2007.

Today, the difference is only $426 –and buyers are building equity at the same time.”

So, even with record low interest rates, you are losing $426/month to build probably $100/month in equity!

I’m also giving the benefit of the doubt here, assuming that the article was implying that they included property taxes, maintenance fees, etc. in that monthly payment.

“She bought a one-bedroom unit that she will move into in 2011 when the building is complete. “Don’t ever assume you can’t do it,” she says. “Right now, with interest rates so low and the prices out there, it can work.”

ummm… I hope she didn’t get a variable rate mortgage, or else in 2011 or 2012 (or whenever she takes ownership), the numbers won’t work so well.

#88 Bill on 12.07.09 at 11:15 am

Canadians are under a lot of debt. Other than a few people, no one here really cares anyway. No one forced them to buy buy and buy. They did as they liked. Look at all of the soccer moms driving Cadillac Escalades in Edmonton, just to go to Superstore.

If people are continually not under debt, this country would not run. Ditto for US, and Britain. Government and banks know this, and will keep people under debt forever. No savings because we are looking for elusive happiness from consumption, yet many are so miserable. And more broke.

Now…for those who are jealous of jobs going to India and China – get used to it. They can do the same, if not better job, than most Canadians for a cheaper price.

And for those who don’t like immigration from India and China – get used to it. Many are coming on investor basis with $1M +, after selling their assets in the homeland, and buying businesses. In another 20 years, they will be your bosses. East Indians and Chinese saved and saved and saved, while Canadians consumed.

You are responsible for your own destiny.

#89 junius on 12.07.09 at 11:16 am

Jim at #19,

I agree with you about Vancouver and speculators. I was at the Santa Clause parade yesterday and we could see into the Shangri-La tower. I could count at least a dozen suites sitting empty right now. This is no way to build a sustainable economy.

#90 (IHNM, WMM) I Have No Money, Where's My McMansion? on 12.07.09 at 11:19 am

It is August. In a small town on the South Coast of France, holiday season is in full swing, but it is the rainy season not much business is taking place. Everyone is heavily in debt. Luckily, a rich Russian tourist arrives in the foyer of the small local hotel. He asks for a room, puts a 100 Euro note on the reception counter, takes a key, and goes upstairs to inspect the room.

The hotel owner takes the banknote and rushes to his meat supplier, to whom he owes E100.

The butcher takes the money and races to his wholesale supplier to pay his debt.

The wholesaler rushes to the farmer to pay E100 for pigs he purchased some time ago.

The farmer triumphantly gives the E100 note to a local prostitute who gave him her services on credit.

The prostitute goes quickly to the hotel, as she owed the hotel for her hourly room use to entertain clients.

At that moment, the rich Russian comes back down to reception, informs the hotel owner that the proposed room is unsatisfactory, takes his E100 back, and departs.

There was no profit or income. But now no one has any debt and the residents of the small town look optimistically towards their future.

#91 pezzazz on 12.07.09 at 11:40 am

“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” —
Warren Buffett
New York Times, November 26, 2006.

#92 nur on 12.07.09 at 11:41 am

Back home the immigration consultants are running ads in the papers, saying that qualified business immigrants can have canadian immigration in four months if they deposit 150k for some time in a canadian bank.

False. — Garth

#93 BAD on 12.07.09 at 11:49 am


No wonder that Vancouver houses are going up in prices propped up by Chinese immigrants. They have to invest in something once they sell their garlic…

China’s ‘frenzied’ garlic trading

A “garlic mania”… who would’ve thought…

Interesting times we live in, interesting indeed.

#94 Hiteclowtec on 12.07.09 at 11:51 am

Garth how can we fight this taxation curse ?

According to the Fraser Institute, the total tax bill for the average family of two people in Canada in 2009 is $37,700. The average family pays $13,000 in income taxes, $5,800 in sales taxes, $2,900 in property taxes, $8,300 in security, medical and hospital taxes and then a bunch of other taxes.

“Canadians can expect to pay 43 per cent of their income in taxes,” says Niels Veldhuis, senior economist with the Fraser Institute. “Taxes are the largest portion of expenses, greater than food shelter and clothing, before and after their retirement.”

#95 robert on 12.07.09 at 12:00 pm

Did any of you true believers in the China “miracle” catch Joe Schlesinger’s piece on the National last night? I would not be counting on Asian money as a driving force in the Vancouver housing market going forward. Anyone read Martin Hutchinson? He too has an interesting “unconventional” take on China.

http://www.prudentbear.com/index.php/thebearslairview?art_id=10317

#96 dave99 on 12.07.09 at 12:23 pm

#90 (IHNM, WMM) I Have No Money, Where’s My McMansion?

Its been posted here before, and it is a meaningless story. Yes, everyone had a debt. They also had an identical receiveable asset. Even without the arrival of the russian tourist, they could have simply assigned their receivables to pay their debts.

There is nothing inappropriate nor scandalous about the story, and anyone who reads it and sees something wrong with it should reassess their understanding of economics and finance.

#97 Dan in Victoria on 12.07.09 at 12:24 pm

Post #58 Sara Beth Thanks for the cancer comparsion.Right on.
After I read this last night I got thinking of my young nephew and his wife. He works full time pumping gas and she works part time making pizzas. They are trying to raise a daughter and be part of the ” Amarikan Dream” Hell, middle class for them would be winning a few dollars in the lottery.
My other nephew is starting to panic, laid off from the rigs a year ago, I think its setting in that he’s not going back.
Two kids and a wife, no savings. Panic time.
I think there will be a working poor “middle class”
And a Heavily in debt ” middle class”
And yes we are seeing the can collectors here too, every second Tuesday we put the recycles out to be collected and the last week my wife watched a lady drive around getting the cans here.

#98 Genghis on 12.07.09 at 12:26 pm

This Bloomberg article posted at around 11am ET today.

Title: Bank of Canada Rates in House Boom Prompt Bubble Talk

http://www.bloomberg.com/apps/news?pid=20601082&sid=a7B1MLEUMVOw

#99 junius on 12.07.09 at 12:34 pm

I have nothing against people coming from China or anywhere else to live in Vancouver. However I would prefer people who want to live here and become part of our society and not use it as a tax dodge.

We need to attract entrepreneurs not retirees. We need to make B.C. a place to build a business not speculate on high end real estate.

Campbell has a lot of work to do. This party in February isn’t going to do it for us.

#100 tjmikey on 12.07.09 at 12:59 pm

So it finally comes out….Harper has just admitted that our biggest customer, the one customer we have built our entire economic model around…..just ain’t buying Canadian.

In fact, they just ain’t buying period.

So, the first cat is out of the bag, so now what?

Open trade talks with the East our leaders say, the only thing the East want’s from us is raw materials…feed stock. If we let them, the Chinese will be on us like locusts on a crop and they won’t give a crap what carnage they leave behind.

Eastern Canada is screwed, the West has the resources and access to major ports of the Pacific….if we do take on Asia as our next resource locust then you may well see the seperation domino’s start to fall quicker than you might want to believe.

Also, the class system is going to take a strong hold in North America…the standard of living for the poor and almost poor (the former middle class) is going to take a huge hit.

#101 Chris no longer in England on 12.07.09 at 1:06 pm

And here was me thinking that in the New World there is no class system. In England, the middle classes are what North Americans think of as “upper class”. The upper class in England are the landed gentry, many of which don’t actually have that much real money. A more modern view of the English middle class is that group of people who earn an above average salary and so can be squeezed to pay for everything the low earners cannot afford to pay, and the rich can avoid paying. Which brings me to why I escaped and now find myself here …..

#102 kc on 12.07.09 at 1:24 pm

Here are 2 well written and thought provoking articles, (and yes I have linked to these before) if you really wonder why we are in this PICKLE and no one truely seems to give a damn. It is laid out for you here.

Back in mid 90’s Angus Reid, published a book called, SHAKEDOWN, and in it he foreseen the future. Basically he stated that in 20 years the middle class would be a pipe dream. well worth the trip to the library to check it out.
review- http://www.consulttci.com/Book_reviews/Shakedown.html

Turning America into a Nation of Idiots, Fat, Drunk and Stupid is No Way to go Through Life

http://www.marketoracle.co.uk/Article12695.html

and….

The American Dream Built on Debt, Living in Beverly Hills

http://www.marketoracle.co.uk/Article13294.html

cheers, and PS one other problem we have going for us is that the youth today have NO IDEA what a library is nor how to use the dewydecimal system!

#103 Into The Sunset on 12.07.09 at 1:28 pm

Wealth is created. Bankers, lawyers, accountants, funeral directors, etc., etc. only provide services, they do not create wealth. We have to get back to creating wealth.

I have a suggestion.
We are looking to purchase a new range. If you review all the brands: Fridgidaire,GE, Whirpool, Maytag, LG, Inglis all you can find are negatives. None of these brands are built to last past five years. Twenty years ago a purchase of an appliance was looked upon as a 15-20 year investment before another was required.

Not today!

Some interprising entrepreneur(s) should design and manufacture in Canada a high quality line of appliances poviding 15 years of dependable service. I know we would be one of the first to purchase even if it cost more !!

#104 Computer Dude on 12.07.09 at 1:29 pm

Nonplused, re: #27…

Government pensions are turning out to be the goose that laid the golden egg.

Or rather, the golden egg itself. The thing is, this particular egg is going to kill the goose.

She’s okay so far, but she’s got a funny look on her face…

#105 BDG YYC on 12.07.09 at 1:45 pm

What the heck does that mean ? :-)

Here we go …

http://www.theglobeandmail.com/news/world/article772689.ece

Seems its a bit of a loose concept … with a lot of wiggle room for interpretation.

Seems to me its generally an income measure that is based on the “means” to a lifestyle that has some common characteristics that can vary quite extensively in terms of quality and quantity across a pretty broad range. It comes with trappings … like say a job, groceries on the table, a mortgage, TV’s and appliances, a car, education for the kids, etc. At the bottom end entry happens say with a starter home … whatever that and the mortgage looks like, wheels whatever that looks like and the income it takes to hold onto them. At the top end … its a nice house, new cars, vacations, the 50″ HDTV etc.

Somebody with a $50K household income likely has the means to make them part of the Canadian middle class and depending on circumstances less probably does it. Doesn’t mean life is necessarily “rosy” … but if you happen to be 20 something with a $50K income married or otherwise with no kids and a lifetime ahead of you its probably a nice place as compared to somebody making that income at 40 with 2 teenage kids etc. Still middle class, albeit not in the slot of say the middle class household with a combined income of $150K in their 50’s who are empty nested and with their mortgage paid off, no debt and a few bucks tucked away – who by the way, might not look nearly as well off as their neighbour next door with the 3 (not 2) car garage, newer bigger and better cars in the drivway the motor home parked in the back, kids out on their own, a $100K household income, a $300K mortgage, a $100K HELOC, a $20K credid card balance and some loose change sitting in an RRSP. Hell … you could take the last example and turn it around so the rich looking neighbout has the $150K income and the debt and cut the sad looking neighbouts income by a third without the debt … and … still all “middle class”. Hell … chances are that at the same time somebody who was making $50K but is currently on EI , renting a condo in a low rent part of town, with no debt, driving a beater is 40 something with $300K banked would not make the grade on the “middle class” stats sheet.

Middle class has not much at all to do with “wealth” it has to do with the means to the trappings of “wealth” … on the basis of a pretty a broad definition linked to income.

Middle class occurs at a personal level … you IS or you AIN’t … you have disposable income or you don’t, you have discretionary income or you don’t.

Seems to me that at an individual level we have a lot of the population that have lost the ability and interest to appreciate the difference between an income statement and a balance sheet at the most basic personal level.

The art of saving seems to have become distorted to become something that occurs at the retail level, if at all, and boils down to stretching every penny as far as it will go … to buy as much as possible … with every bloody cent that comes in and more. Seems that the fine art of saving, for very many, has morphed into something akin to saving $500 on the $1500 bigscreen purchased with money you don’t have and taking great pride in the fact you saved $500 to watch CNN in HD as they blather stupidity in sharper, crisper, larger life.

Its about the BALANCE SHEET STUPID … ! That comes from a bottom line on the income statement that is black … and that comes from living BELOW your means – pretty much forever – for pretty well most people – which is damned inconvenient but something I fear that a lot of people are in the process or soon to be forced to start getting used to.

Getting into the middle class is one thing … being able to stay there is another … regardless of where the standard of living goes. If your balance sheet is red … or near to it … if it takes all your income to pay the bills or near to it … if you can’t pay the bills without a pay check for a reasonable period of time or have your income cut in half and be OK for a good length of time and you aren’t working to get there – every paycheck – and your balance sheet isn’t improving chances are you may just be visiting the “middle class” for awhile.

Yup … unfortunately … for most of the “middle class” getting ahead means doing without some stuff.

Of course most of us are too soon old, too late wise in this regard and its not at all an optimal process as shit happens along the way – good and bad. Not fair … but reality anyway.

Its looking like there was a PONY under that pile all along – yesiree … and a talking one at that. So if you’ve been hoping and betting on it get ready … you’re about to get your wish.

All together now …..

LETS PONY UP !!!!!!!!!!!!!!!!!!!! ALL OF US !!!! ?????

For those who didn’t believe in the PONY … PONY-UP !!!

We all feed this PONY … what a PIG !!!!

Or maybe I’ve missed something ???

Luck to all …

#106 ruraldude on 12.07.09 at 1:58 pm

#20 Net worth doesn’t pay bills cash flow does. You can have a negative net worth and still be paying your bills. Net worth can be a poor indicator of wealth if it’s inflation made. That’s why so many people are in financial trouble today cause they used there inflated assets as a ATM and when the asset resets at a lower value than the out come is not good.
Another thing it doesn’t matter what the house is worth, up 25% or down 25%. Bottom line is you need roof and inflation or deflation is all relative so long as it cash flows.

#76 JFK tried to implement a currency based in the assets of the United States. He was a threat to the money masters and he paid with his life. The problem is the wrong people are being taken down. Mean while the whole world spirals down in fiat currency s that aren’t worth the paper of the notes there printed on and we pay interest to the money masters forever for something created out of thin air. The best thing people can do do thwart the evil Meisters is to go back to a cash based society.

#107 kitchener 1 on 12.07.09 at 2:12 pm

To the people that posted the article:

http://globeinvestor.com/servlet/story/GAM.20091207.RMORTGAGE07ART1940/GIStory/

Summary:
Women buys house 3 years ago, bad credit risk, goes with subprime lender, even after 3 years of no missed payments, she still owes $1000 more then house is worth. Interest rate is 9% range, subprime lender is not renewing mortgage after 3 years. The majority of this loans will reset in 2010.

Thanks, its a good read.

The points that stick out for me are:

Why is Ottawa even in talks with these lenders?? I thought we had a free market?

Where is the personal responsibility, should have read the mortgage document or had lawyers read it.

Home ownership is not a right

What will the implications on RE markets where people purchased with this type of loan products.

The article paints the home owner as a sort of “victim”, a mortgage document is a business contract, and honestly, when you apply for a mortgage and the banks say no, you get when anyway from a sketchy lender, you had to have a feeling it was going to end bad.

in my opinon , the person purchased a call option on RE market, had the market risen from when she purchases the house, we would be hearing how the owner was a savy investor, but when the market turns against you, its the victim card.

Personal responsibility!!!

People should really read up on mortgages, all the people in the past that brought with 0/40 or 5/35 mortgages are going to be in trouble if the market tanks by 5% when its renewal time as the banks will ask you to cover the 5% loss or not renew your house. I have a feeling that someone who could not come up with a 5% downpayment is not going to be able to cover that loss.

#108 Dan in Victoria on 12.07.09 at 2:42 pm

Post # 103 into the sunset. I can’t find the link right now, but a good story of Canadian manufacturing is the story of Hayes logging trucks. They were built in BC in the early thrities? and were a fixture in the logging community.First dual axle, first diesel engine, first self loading trailer etc.
These were indestructable trucks.
The story was they lasted so long that eventually they couldn’t sell enough of them to keep manufacturing. The last one H 17 was built in 1975 and I believe it is still going today. http://hankstruckpictures.ca/hayes4.htm page 8 some of these trucks are 40 plus years old. Any how just doing this from memory might be out a bit on facts.

#109 nonplused on 12.07.09 at 2:44 pm

Hey I just noticed that little kid is Dutch.

Here is a pretty simple explaination of why Bernanke (and thus Carney) will not raise rates any time soon, if ever:

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/why-the-fed-loves-inflation.aspx?uart=10&uarc=ratCntrl

Instead, the currency will be devalued. Again. Oh well, it’s been ongoing since 1973, so what’s the big deal if we just do it faster?

#110 S on 12.07.09 at 3:02 pm

#27 nonplused on 12.07.09 at 12:01 am, #68 Sid on 12.07.09 at 8:56 am

Very good point. Part of the answer is that, in my humble opinion, labour unions have become de facto governments of the western economies. Through collective action they are able to shut down entire sectors of economy until their demands are met. And those demands – which used to be about working conditions – are now almost always about pay and benefits. It is entirely possible that the recent financial crisis has been engineered to wrestle some of that power back. The concessions that the auto manufacturing unions were finally forced to give are pointing in that direction. (And remember how much criticism old GM management was subjected to last year for caving to union demands some years earlier?)
As salaries and benefits spiralled upwards it became more and more feasible to send the jobs abroad. If we want the jobs back salaries here will have to become more in line with those in other jurisdictions. When – or rather if – that ever happens presumably cost of living here should also become more in line with other places around the world. This is globalization at work. Our generation is caught up having to deal with the whirlwind of this re-adjustment.

#111 Ret on 12.07.09 at 3:03 pm

Re: #103 appliances- After university in 1973, I worked for 4 months at the Hotpoint/GE/ Westinghouse, Longwood Road appliance factory in Hamilton to pay off my student loans. Pretty dumb eh. I should have just skipped out on the loans like most of my classmates did.
Great workers, almost 1100 at one point, and a great product. I was thankful for the job and when I later bought a home, I purchased a 1979 Hotpoint refrigerator and stove. Both are still in daily use. (I wanted to change them out years ago but everyone warned me to keep what I had until they were unrepairable.)
About 8-10 years ago, the plant closed for good and 600 were out of work. Not a politician in the land so much as whimpered. Now the federal government and MixMaster University have gotten into bed together and are creating an “Innovation Park” on the former site. Reach for your wallet, it’s costing you millions of dollars of taxpayer cash.
Maybe the rocket scientists will figure out how to make a reliable refrigerator and stove in this country once again and we could put a 1000 or more people back into decent paying jobs to help pay for all this “new age economy” nonsense.

#112 S on 12.07.09 at 3:14 pm

#103 Into The Sunset on 12.07.09 at 1:28 pm

Quite right your appliance example. My kitchen is equipped with a twelve year old set up and all three pieces have malfunctioned at one time or another. Whenever I visit the repair shop I am always told that the equipment is designed to last five to seven years and should be replaced. I insist on ordering the parts anyway, replace them myself and so far so good. However, if I was to hire a repairman to do the job each time it would have been cheaper to replace the stuff. Interesting how it is that the Chinese can build a new dishwasher cheaper than a local expert can fix one…

#113 nonplused on 12.07.09 at 3:30 pm

#67 Toronto C9 Renter

To get to the higher number, the writer was including some sort of calculation for how much the fire fighter pension and health care was worth on a “per year worked” type basis. I have relatives who are fire fighters and am plenty familiar with the size of the paycheck. The point is the paycheck never stops and they retire very early compared to the rest of us. That is worth something.

$175K still seems high though. But I wonder how much you need to save per year for 25 years to fund a $60K pension plus free health care for say 35 more years (50 years old to 85 say), with cost of living adjustments every year. It’s got to be pretty close to the original salary.

Here in Canada everyone’s health care is funded by the government so I am sure the cost calculation for a fire fighter would be lower. However, we still pay for it.

The point is that government employee pensions are worth so much that it dramatically under states the full cost of their salary per year worked. They should have defined contribution pensions where the government matches their savings just like the rest of us. You’d see too things then: Government wages would go up a bit, and government employees would work longer. And the overall “hire-to-death” cost to hire a government employee would drop by possibly half.

I used the CNN money calculator to figure out what a 70% pension on $80k per year ($56k per year) would be worth. It’s $2,064,291 in 2034 or $985,917 today. So when the city hires a firefighter today, they have to deposit $985,917 today in the pension fund and see good fund performance for the whole 60 years the fire fighter is on the payroll/pension. That is worth $39,436 in year 1, with increasing amounts contributed each years as past contributions + earnings on investments plus current contributions has to grow to the $2,064,291 number by retirement.

At least that’s how I would have to fund my retirement. Fire fighter pensions are just thrown on the city when there is a shortfall.

So, even in Canada, a fire fighter who gets hired for $40,000 but can be expected to retire at $80,000 in 25 years is actually earning cash plus benefits of close to $80,000 in year 1.

This, folks, is why I say government employees are the new middle class. They don’t have to save, retire early, and have their retirement fully guaranteed by the taxpayers of our fair country. It is absolutely the best deal out there anywhere and you should encourage your children/niece/nephew/kid’s you coach/children’s friends/everyone starting their careers to get on board.

Tell your children to be teachers, nurses, snow plow drivers, garbage men, police, and fire fighters. Joining the army is also good if you can stay until retirement age. There is simply no other way to earn as much money without a lot of education and a lot of financial risk.

Planner link

http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

#114 LetsGetOurFactsStraight on 12.07.09 at 3:32 pm

#27

I’m a teacher. Teachers’ pensions plans vary from province to province, so your huge generalization is automatically incorrect.

In BC, indexing is no longer guaranteed but is subject to there being adequate funds in the Inflation Adjustment Account to pay the present value cost of the annual indexing increases. And we’re currently examining whether or not teachers are willing to continue to support indexing. If we do, our contributions will jump, possibly dramatically. In any case, younger teachers will need to make bigger contributions to the pension plan if it’s going to survive the front-end boomers.

I started teaching when I was 24 and there’s no way I’ll be retiring when I’m 49. I live in Vancouver, so I still don’t own my own home (older teachers used to be able to afford homes on the west side — that is no longer the case). I’m sure I’ll be lucky if I can retire when I’m 60. So I don’t know what 25 years of service and gold-plated pension you’re talking about! Let me know — maybe I should move to a different province.

Make sure you check out your facts before you go advising children to take on teaching as a career…. Constant cutbacks, frequent reductions in service, lack of respect from the public, and an obvious lack of understanding of what the job actually entails are good reasons NOT to go into teaching.

I don’t know if I’ll be advising my children to get into teaching if all they’re looking for is an early, gold-plated retirement!

#115 Nostradamus jr. on 12.07.09 at 3:43 pm

#101 Chris no longer in England

…You should relocate to North Vancouver, rent mansion, start indoor garden, get rich.

NOstradamus jr.

#116 Makeorbreak on 12.07.09 at 3:45 pm

Interesting article (in French) on how the ‘middle class’ in Iceland is doing after the meltdown.

http://www.lemonde.fr/la-crise-financiere/article/2009/11/24/les-islandais-s-adaptent-au-dur-regime-d-apres-crise_1271310_1101386.html

#117 dave from Oakville on 12.07.09 at 3:59 pm

What we consider middle class in Canada would be considered lower class in China.

Middle class in China own multiple homes, multiple luxury cars, do not cook are repair their own home. They hire help to do that. There is always an abundance of cheap labor. They don’t wait for 6 months for medical treatment. They are out at the restaurants almost everyday and they are cleaning out the stores of all the luxury brands.

No wonder all the big brands are flocking to China as their savior. Well actually everyone else too, including even our bozo PM who seriously messed up by continuing to insult the Chinese ever since being elected and had gotten blasted by them for not making a visit sooner. Total embarrassment to Canada. Guess he no longer minds selling out cdn values any longer for the almighty dollar. My how things change in 3 years.

In that 3 years while Canada has been sitting on the sidelines everyone else has been establishing huge business deals with China which will hurt all Canadians greatly especially now that the US is slowing in its purchasing of our resources.

#118 nonplused on 12.07.09 at 4:06 pm

I came across the article that originally got me going on government pensions:

http://www.city-journal.org/2009/eon1123sg.html

#119 lol on 12.07.09 at 4:08 pm

http://editorialcartoonists.com/cartoon/display.cfm/76106/

#120 Mimi on 12.07.09 at 4:08 pm

Great post.

Yup, another annoying 30-something that earns a decent wage here, well above average. But what does it matter if we can’t afford a house that isn’t a total dump in T.O.? We are stuck in a cycle of renting because we refuse to break our rules of 25% down, must be supportable by 1 income.

I’m worried though. How will our country, our cities, be the varied, vibrant and creative places they must be in the future to compete if people who contribute, who earn an “average” salary or even less, cannot afford decent shelter for their family in the places they work. Its nuts.

#121 jess on 12.07.09 at 4:36 pm

whether sovereign or domestic it is STILL debt
“formidable ”

1. arousing or likely to inspire fear or dread
2. extremely difficult to defeat, overcome, manage, etc. a formidable problem
3. tending to inspire awe or admiration because of great size, strength, excellence, etc.
[from Latin formīdābilis, from formīdāre to dread, from formīdō fear]

Speaking to the Economic Club of Washington, Bernanke said that the U.S. economy continues to face “formidable headwinds” that are likely to result in only a moderate recovery.

He said credit remains tight for consumers and small businesses and that the labor market remains weak, despite an end to the deep job losses earlier this year.

“Household spending is unlikely to grow rapidly when people remain worried about job security and have limited access to credit,” he said.

Bernanke repeated earlier assurances that inflation is not a deep concern, despite the trillions of dollars the Fed pumped into the economy.
==========
rental scams

Newfoundland landlord Joe Guiney found himself involved in an internet scam after he posted a condo rental ad on the internet classified site Kijiji.ca.

Guiney was hoping to find a good tenant for Jan. 1 for his St. John’s condo.

http://finance.sympatico.ca/Home/ContentPosting?newsitemid=consumer-rental-scam&feedname=CBC-CONSUMER-LIFE-V3&show=False&number=0&showbyline=False&subtitle=&detect=&abc=abc&date=False

#122 SaraBeth on 12.07.09 at 4:47 pm

#97 Dan in Victoria on 12.07.09 at 12:24 pm

I hear your worry about your nephews… I worry about my daughter…she’s in retail management – high end shoes *rolls eyes*…. They have frozen raises for all employees corporate wide…. I know what comes next…

:-(

#123 john m on 12.07.09 at 5:13 pm

IMO we have been scammed ,our Government (and no particular party…they all play a common game) have passed out billions to the real guys who run the country and are destroying our lifestyle while they play “soap opera” politics for the gullible. A serious recession created an opportunity to further the wealth of a few and low interest rates and propaganda sucked out the savings of many creating a population of submissive people with no alternative but to wallow down with only one dependence for survival—the whims of the government…………. Is this democracy or a genius scheme for control??………..i wonder?

#124 dave from Oakville on 12.07.09 at 5:21 pm

Oh yeah and the big city streets in china are not littered with pot holes and garbage and their transportation infrastructure is amazing with constantly improving faster high speed bullet trains,etc.

Thats what things are like when a country is practically free of debt with gdp of 8%.

#125 Kash is King on 12.07.09 at 5:42 pm

#106 Ruraldude… Thanks for pointing that out..

#105 BDG YYC: “Middle class has not much at all to do with “wealth” it has to do with the means to the trappings of “wealth” … on the basis of a pretty a broad definition linked to income. ”

Wow, your whole post is brilliant! The quote above made me realize something .

When they lament about the demise of the middle class, this is what they are talking about? Are we about to witness the loss of the ability to borrow one’s way into the “trappings” of ” middle class” and hang onto it?

Maybe we’ll have to redefine what “middle class” is. It won’t be as cheery for the bankers if it doesn’t involve lots of borrowing though.

#126 $fromA$ia ( :Po Y o ) on 12.07.09 at 5:52 pm

GARTH,

Wheres the correction???

Were waiting and wondering if its going to start as if it was a light switch being turned off or will it be a soft landing.

I cant stand that BS phrase, ” Soft Landing”.

#127 EB on 12.07.09 at 5:57 pm

“Middle class in China own multiple homes, multiple luxury cars, do not cook are repair their own home. They hire help to do that. There is always an abundance of cheap labor.”

Is it really a middle class when we’re talking about a few million of them versus the better part of a billion peasants?

Global arbitrage of slave-labour conditions has made a few people in China very wealthy, no argument.

#128 atrax on 12.07.09 at 5:59 pm

Major news but probably old here ?

http://www.smallbusinesssem.com/google-real-estate-borrowed-time/2492/

#129 Vancouver_Bear on 12.07.09 at 6:19 pm

Garth…..please report the clown to authorities…he encorages ppl to do what he is doing with his growop….this is how he makes money….see post #115 Nostradamus jr. on 12.07.09 at 3:43 pm …..
“start indoor garden, get rich.”

#130 TheBigLebowsky on 12.07.09 at 6:31 pm

How do you slaughter a Canadian sheep? First you fatten them up on cheap money . Then you proclaim what they exhail is a toxic waste, so you pass a carbon tax based on fraudulent schience(google Climategate to read the leaked emails). Then you sell them on the idea that untested vaccines laced with mercury and squalene are good for them . Bahh bahh, even you are surprised what the sheep will believe. A jobless recovery is perfectly normal you tell them, and the sheep believe it.
Feeling confident that the sheep will believe anything you begin to feel even more bold. You tell them there has never been a better time to buy a house. To your surprise they race out in record numbers. The U.N proposes that they are given the power to overrule Canadas soverign laws and the sheep love the idea. The sheep also feel that since Co2 is essentially a nuclear waste, that there should be a carbon tax on everything from steak to toilet paper. Even though the planet has been cooling for the past ten years. The sheep think its a terrifc idea to use our military to attack a soverign country, and the use them to gaurd the poppy fields. The shipments of opium have tripled since the invasion of Afganistan. All in the name of War on Terror, or is it War of Terror. Is it any wonder our country is taking a ride down the toilet.

#131 Ottawa on 12.07.09 at 6:32 pm

For simplicity, some trends:

– Productivity and GDP have continually climbed over the previous 3 decades.
– Industry profits have been up over the same timeframe by 170%.
– Real wages have stagnated or declined.
– Unions have shrunk in all areas of the economy.

Using brilliant analysis posters deduce that our problems must be unions and civil servants – some people deserve to be squeezed to lower class for stupidity alone.

http://www.macleans.ca/business/markets/article.jsp?content=20081022_87657_87657
The financial fallout hits your salary -Canada’s last two recessions resulted in big pay cuts

Thankfully for them growing oil industry has caused tight labour markets in Western Canada but downward pressure on wages will come there as well with increased temporary worker imports and desperate people willing to move for work.

#132 john m on 12.07.09 at 6:33 pm

As personal debt increases fueled by low interest rates dependency on the whims of the powers that be increases…creating a population of submissive people who have no option but to cower at their feet of our tax dollar financed money brokers……….personal survival depends on it!…………..hope for assistance from your elected Government officials is remote..considering they have encouraged (without objection) the policies that have created this bubble and financed them (without objection) with our tax dollars. Such is life……..survival , self esteem ,and independence have been sacrificed by the gullible fueled by tax dollar funded propaganda.

#133 rory on 12.07.09 at 6:35 pm

#118 nonplused

Hi all …the regulars on this blog know what I think about public service pensions, salaries and the sheer size gov’t is becoming …nice to see others getting a little excited about it …it is a true ‘class’ definer… an us versus them confrontation and so on.

Another good place to get pension info is at http://fairpensionsforall.blogspot.com/

#134 Jeff Smith on 12.07.09 at 6:38 pm

http://www.clevelandfed.org/research/commentary/2009/0909.cfm?ref=patrick.net

http://www.theglobeandmail.com/blogs/markets/us-looks-north-for-answers-to-housing-bubble/article1389199/?ref=patrick.net

Thanks to our wonderful government, Canada our country does not have a problem with bad banking practice and irresponsible financial behaviours. That’s why our system is so stable and superior. Come on man, we even generated thousands of jobs recently, wow!! The silent unwritten conclusion of all this is that Canada does not have housing bubble problem. So that means all those who wants to buy but have been sitting on the sidelines waiting for a price drop are gonna be waiting forever. A stable system like this will only guarantee real estate price increases. I guess Garth detractors have been right all along. We got misled by Garth :(

I can’t wait any longer, gotta go buy NOW!!!

http://www.youtube.com/watch?v=g0RW0sZ71AI

#135 JO on 12.07.09 at 7:39 pm

I am engaged to a teacher and she has a gov’t pension. Yes, they are nice, and for most of us in the private sector, they are a dream…i, like tens of thousands of others, have been laid off in this recession and had to accept a pay cut of about 30 % to get back to work….it is frustrating to see gov’t employees basically show up for work and not have much worry about lay offs and earn pensions most of us cannot even fathom..it is not right..but to be fair, the amount of money deducted from their pay cheques for their pensions/superannuation is ridiculous..a teacher with 5-10 yrs experience in the top pay scale will easily deduct 5-600/month off their pay…when i use to belong to a decent, private sector DB plan, i use to have about 240 / month deducted…

JO

#136 jess on 12.07.09 at 7:44 pm

EB

i agree with you about cheap wage effects in china. I would also like to add on the occupational /pollution etc cancers that these poor beings suffer? The chemical disaster in India how many years later to they finally have clean water to drink. Where is the responsiblity of these governments for their people.

#137 Nostradamus Le Mad Vlad on 12.07.09 at 7:49 pm

Other than experiencing it first-hand (I never have, so I don’t know what it’s like), reading a little tends to open up one’s eyes — No V- or W-shaped recovery This probably has a lot to do with the preceding.
——
Foreclosure Country. Seems we will follow suit shortly. Should run with the first link.

To Debt Or Not To Debt — that is the kweschun! 4:49 clip.

#138 Rene on 12.07.09 at 8:03 pm

Post #83
I wrote: Roughly for how much would that “18k in 1960″ house sell for today? I’m not from TO, but depending on the neighbourhood, I would suspect 600k-800k. Please advise.

You responded: So what? It’s the affordability relative to income that matters, not the asset value. — Garth

Garth, I was trying to use your reasoning, but was curious about the real figures. A reasonable person making 10k in the 60s could justify spending 18k on a fair size middle-class home. The person who wrote the #9 post says that the same job pays 110k today. By today’s standards, the mortgage amount would be 95% of purchase price, and that speaks to the affordability or lack thereof. I get 500$/month for every 100k financed with 35 yr am and 5% interest. For that same house your father bought, how much would he shell out today? I think the question is relevant.

#139 Jon B on 12.07.09 at 8:11 pm

I think there is some validity to the statement that debt = modern slavery. As for the middle class, I see the current realities of monster debt loads and no saving for tomorrow as a great way to become a two class society. What we now think of as rich and poor will become the debt free and the indebted respectively. How many members of the middle class have just a small manageable bit of debt? From what I’ve seen, those who are comfortable with debt go all the way and get in deep, real deep. Is it fair to say that debt and credit “products” are addictive?

#140 Sid on 12.07.09 at 8:13 pm

113, i think you got some calculations wrong

#141 Oakville Owner on 12.07.09 at 9:04 pm

Attn: NONPLUSED #113, 118, 27

Do you really want a 60 yr old plus male or female reponsible for carrying you out of a burning building or chasing down the guy who just stole your wallet at gun point. There are good reasons why police fire and ems are out the door by 60. As far as gold plated pensions go, if every person in Canada was forced to pay the 10% to 12% off of each and every pay cheque like our police and fire do, for their pensions the country would be alot better off. Alot of people out there could learn a thing or two from these very brave men and women.

#142 Jeannie on 12.07.09 at 9:23 pm

Reading all of your comments, and I can almost feel the stress levels that may of you are experiencing. This might be the most depressing list of messages on Garth’s blog to date.
What the hell happened to drag the country and it’s people down so quickly. My family have lived through Western Canada ‘boom and busts’ over the years, but always there was the belief that over time things would improve, which they did.
To-day I don’t get that sense of hope, just cynicism and anger directed toward Banks, political systems, big business, gov’t employees,seniors who benefitted from the sale of their homes,etc.,
It would take the wisdom of Solomon to make sense of the present crazy economy. Without meaning to gloat, I’m glad that I lived through the boring 50’s, raised kids in the exciting 60’s and retired in the booming 2000’s. Truly I’m sorry that so many of you are stressed out, and not even ‘Nostradamas’ is giving you much hope for a brighter future!

#143 Skeptic on 12.07.09 at 10:53 pm

Kurt

If, after taxes etc. I take home $50 000 a year and I have a mortgage of 60 000 and 10 000 in credit card debt, I have debt that is 140% of my disposable income. This is not unusual in our credit-based society …

Thanks for the explanation. Based on this, 140% is FAR better than anything my parents or their friends ever had. I’d love to be able to buy a place for that kind of debt service ratio. If there’s anywhere in the country where I could get close to that low, sign me up.

#144 Got a pension? on 12.07.09 at 10:54 pm

If you have a pension plan (public or private) ask
yourself these questions:

1) Does your employer contribute to it as well?

2) Do you pay fees for fund managers, finacial advisors, trades, commsions? Your employer may pay all, some, or
if your plan pays all, you will pay far less than the private
individual. A drag of as little as 1.2% compounded over
35 years results in $1.50 compared to $1.

3) Indexed whole or in part to inflation?

4) Defined benefit?

5) Backed by government?

If you answer “yes” to any of the above, you have a better deal than the rest of us. Be thankful.

#145 nonplused on 12.08.09 at 1:05 am

#114 LetsGetOurFactsStraight

I think I have my facts mostly straight. And of course a teacher wouldn’t think they are getting a fair shake. Nobody does, no matter how much you pay them.

The teachers at my kid’s school seem to command a fair amount of respect from the parents, at least the parents that value education, which isn’t all of them I will admit.

See my later post where I calculate the value of a fire fighter’s pension at least in the year he his hired. Granted, the fire fighter does not see the money today, but rather over the course of their life. But it’s still a huge benefit, almost equal to his wage.

#140,

Then redo it and let’s see what you come up with.

#141 Oakville Owner

There are lots of things a 60 year old police officer or fire fighter can do that don’t involve being on the front line. In fact we probably loose a lot of experience and talent by retiring them early. For example, why do our detectives have to be young and inexperienced? Let the old guys solve crimes, there is lots of work to go around. Right now we have massive amounts of uninvestigated financial fraud going on, and no resources to investigate. Can’t a 59 year old do that? I bet he can. He can start with the mortgage market.

Fact is, we retire our best police and fire fighters just when they really know the job and would make the best “coaches” for the younger guys.

#146 nonplused on 12.08.09 at 1:15 am

Ps #114,

If your union allows indexing to go away, you will loose one of the best parts of the plan. Don’t let the scary up front fees the government is throwing at you scare you off; they stand to save tons of money if they do not have to index pensions in the future. The future belongs to inflation.

#147 dave from Oakville on 12.08.09 at 1:50 am

#127 EB

Don’t criticize China for slave labor when it is the multinational companies profiting from it due to their ever increasing need to satisfy wall street with increased profits. And don’t forget its North American’s addiction to cheaper and cheaper products which is feeding all this. Where do you think these products end up? On our shelves. Yes in order for them to sell things cheap, requires cheap labor. We can all prevent this from happening if we all stop buying these cheap imported products. But can any of us afford too? If a million Chinese got rich off slave labor in China then at least 10 million Americans got even richer off because of this slave labor selling their goods.

Btw, they do have laws as well against slave labor and child labor.

Do you really think all of the big brand names, (Gucci, Louis Vuitton, Cartier, Armani, etc) are thriving in China because of a market consisting of only a few million wealthy Chinese? According to wiki “China could have over 600 million middle class citizens by 2015” from its current 100-200 million. That is an incredibly fast growing middle class with at least 30 million Chinese new middle class every year. Thats like all of Canada every year becoming middle class from lower class.

And this is not due to slave labor.

Although through taxes I am certainly a slave to the cdn government for about 6 months of every year and likely to be longer and longer in the years to come thanks to their insatiable appetite for spending.

#136 jess
“i agree with you about cheap wage effects in china. I would also like to add on the occupational /pollution etc cancers that these poor beings suffer?”

I am also disturbed by the treatment and prejudice towards Native Americans in both US and Canada but most of their stories and hardships are hushed up by the MSM. Have you seen the conditions they live in? To help them with H1N1 we ship them lots of body bags.

As for the chemical disaster in India by Union Carbide/Dow Chemical disaster; nice new slogan btw Dow uses “Combining Science & Technology With the Human Element”.

And you blame this disaster entirely on the government of India? How is this their doing? Oh because they sold out to a large multinational and expected them to build a plant with the same standards and failsafe mechanisms as they would have built if it was built in a large US city.

……. “Where is the responsiblity of these governments for their people.”

This company just packed up and left without any cleanup. Its all about money and greed.

Correct me if I’m wrong but I don’t think there was ever any company employees charged in the disaster in fact the company public stated they bear no responsibility for the leak.

Where is the responsibility of these companies to clean up their messes? They can’t even admit responsibility to the disaster.

How responsible is the US government in its handling of the aftermath of Katrina? I would give them a score of ‘F’

How about China’s handling of the Sichuan earthquake in 2008 where their president was on the ground in the area the very next day surveying the damage? At least for their immediate response to the disaster I’d score them a ‘B+’

#148 Evangeline on 12.08.09 at 8:20 am

#139 Jon B
((From what I’ve seen, those who are comfortable with debt go all the way and get in deep, real deep. Is it fair to say that debt and credit “products” are addictive?))

The addiction to debt starts at the top because businessess can make so darned much money based on debt. Like the group of subprime mortgage lenders that has been lobbying Ottawa for a bailout. They capitalized the mortgages that they issued — to people with high risk credit profiles — with borrowed money. But now that there’ s a credit crunch, the subprime lenders’ loans are not being renewed and they, in turn, are not renewing the mortgages they issued. Many people who made their mortgage payments in full faith and on time now cannot get refinancing.

Business models like the latter stink to high heaven. If they are not criminal they should be.

All those billionaire towers and skating rinks in Dubai? all built on debt. In the business world the addiction to debt gives a huge high because it is so lucrative.

Until it isn’t.

#149 pjwlk on 12.08.09 at 7:39 pm

#81 Vicguy said: “But all the young folks we know won’t buy old houses – have to be new or near new, full of new furniture.”

Yeah, my daughter and her husband ignored my recommendation about seeking out value in a home and went straight for new Home/Granite/Stainless etc. I asked them to think about a bigger yard/driveway/privacy etc. – in one ear and out the other. They bought a townhouse with a tiny back yard, shared single lane driveway & a big hydro transformer in their tiny front yard. No fences, trees or gargens.

Son-in-law is not happy about all of the work. Hmmm… My daughter finally admitted they should have waited for a while.

#150 pjwlk on 12.08.09 at 7:40 pm

#103 Into The Sunset said: “Some interprising entrepreneur(s) should design and manufacture in Canada a high quality line of appliances poviding 15 years of dependable service. I know we would be one of the first to purchase even if it cost more !!”

We tried that! The company was called Camco which was located in Hamilton Ontario. They built all kinds of appliances for a wide range of name plates. Seems that either there weren’t enough people standing in line to buy or the margins were too thin. Can you guess where the stuff is made now?