Idiots

Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it went on the market for $24 million. And there it sits. Splendour in the grass.

Shockingly, the number of million-dollar digs is piling up in the horsey country that surrounds the Big Smoke. The local paper, fired for free onto my driveway by a Kamikaze in a Hyundai, has been reduced to a few news stories about prize heifers and snowmobile maintenance which fill in around the ads for unloved and unwanted estates built by people who should have known better.

As they’ve already discovered in places like Calgary, the first parts of a real estate market to die are the gilded ones. Overbuilt McMansions with massive Wolf stoves and man caves are now eschewed even by buyers who can afford them. This follows a trend in the US where some municipalities have changed zoning laws to allow endless houses in once-exclusive estate subdivisions to become multiple units. Yup, just like the fate which befell early 20th Century mansions as they morphed into rooming houses and great-looking brothels.

That this would happen should surprise nobody.

First, they cost a fortune to maintain – a burden which will increase as energy costs and property taxes rise. Both are inevitable. Second, only a fool would buy one with cash, since there’s a 100% chance of depreciation. But with mortgage rates now assured of jumping in the next year (according to Mark Carney), smart people who yearn for 12,000 square feet of space and a separate dog bathing room, will wait for the inevitable consequence – even more depreciation.

Big houses are also gauche, especially in a world where people like Nicole Foss get to wander and foment hairy revolution. Have you priced a private army lately? It’s ridiculous.

Mostly though, demographics are the enemy of big, expensive, suburban palaces. Even the best-off Boomers are reaching the realization few people want a house where you need to send an email to see if dinner’s ready; and is rapidly turning into a financial sinkhole. As a result, some are now listed for 50% of what they cost to build.

But is this a canary in the coalmine? You bet. Along with two other doomed species – the loft condo and the lakefront cottage. One will be the victim of oversupply and tightening mortgage conditions, and the other of an endless recession which has people retrenching to a single property. All three are about to exemplify what deflation really means.

And there’s another compelling reason why real estate as an asset class is doomed. Increasingly it spells danger. Just like precious metals.

By every measure, a house in Markham or Delta is not worth its current valuation. Daily this blog has listed the reasons why so many families have made such grievous errors in listening to the siren call of  property. The days of capital appreciation are over, just as the years of higher financing costs and illiquidity are about to begin. The wise among us will use any stiffening local markets to get the hell out, harvesting capital gains which will likely evaporate and not return in this lifetime.

Yesterday I raked Nicole Foss of The Automatic Earth for forecasting a 90% drop in Canadian real estate values. She deserved it. Extreme statements only give doubters a valid reason to continue being idiots. Likewise, I happily denigrate Polyannas like Helmut Pastrick, the nutbar economist at Central 1 Credit Union who made headlines days ago by saying Canadian debt levels are nothing to worry about.

There will be no crash. There will be no boom. We are now citizens of an economic purgatory and range-bound market which will simply grind up those families and countries that fail to adapt – who cling to the old notions of what wealth and success are.

I despair for all the young couples who come to this pathetic blog to see when real estate values will crash, so they can pile on, buy large, and turn into their parents. The good news is, a year from now there will be fewer of them, as the housing body count increases.

Often I’ve told you to love only one mistress. She lives without  shelter. Moves without effort. Satisfies endlessly. Opens all doors. Makes free.

Liquidity.

225 comments ↓

#1 Mikey the Realtor on 12.22.10 at 11:18 pm

Since we’re talking about mistresses I just bought my sweetie that chinchilla fur coat I was talking about a few weeks ago, after a few nice sales, why not? Thanks to my clients it has been a great year and 2011 will be even better.

Why not shave your back and wrap it? Weasel’s in this year. — Garth

#2 RAINBIRD on 12.22.10 at 11:20 pm

With so much debt, everywhere, why are bonds issued at such cheap % rate? I thought long bonds controlled mortgage rates; if not who – the Government?

In 1982 the CSB rate was 19% – why was that – because the BOC controlled interest rates?

What gives? Why are interest rates so low?

Are bond purchasers that stupid?

#3 MKUltra on 12.22.10 at 11:24 pm

Coming to a pension near you! Listen to the ‘Stelco’ experience:

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

May explain away some of the retirement problems coming to a neighbourhood near you…

#4 Debt's Dark Embrace on 12.22.10 at 11:31 pm

Some are predicting a crash, you are predicting a slow melt. Either way, 5 years from now property values will be down 20 to 35%. I think you are right.

#5 R on 12.22.10 at 11:33 pm

I don’t find much comfort in knowing that our entire prospects for recovery rest on the US recovery, which consists of Ben Bernanke’s money printing project, QE.

Maybe we need to find some new customers besides deadbeat uncle Sam.

#6 InvestorsFriend (Shawn Allen) on 12.22.10 at 11:34 pm

People who are Sadly in the Dark often rave on about paper money and inflation.

I suspect most of these people don’t have much money of either the paper or the metalic variety.

Weirdly, they don’t even understand that when they borrow, that is someone eles’s savings that they borrowed.

Don’t knock until you’ve had it…

#7 Birthdayboy on 12.22.10 at 11:34 pm

“separate dog bathing room” made my day!! Will consider it a birthday gift haha. Garth, I’m new to your blog, what do you think of Silver? Another bubble?

Sucker’s bullion. — Garth

#8 Mr. Lee on 12.22.10 at 11:36 pm

As per usual Mr. Turner, an eloquent blog. One though I fear that will continue to fall on deaf ears. We have to types of people. One is the Nicole Fossites that dwell on RT and Mr. Keiser a la Mr. Alex Jones. Then we have the cheer leader crowd. Common sense and using those two globes in one’s head, commonly referred to as eyes, have taken a back seat to reason.
Does anyone actually believe double digit increases in housing coupled with perpetual low interest rates? Does anyone believe that the US dollar will default although there is no reserve global currency and that the USA is still the largest economy in the world and will be for some time? Silver is undervalued to gold, or perhaps Gold is overvalued to silver? Whatever one believes the truth is simple, you can not live past your means and acquire debt continuously without consequences. Friends, we are living in the ear of consequences.

#9 DJ on 12.22.10 at 11:37 pm

Yeah. 90%. Crazy number based on what? The worst slum in Detriot, maybe. You’re crazy too, Garth, but your message of liquidity and a balanced portfolio hedges all bets. Boring but effective. Did I mention you are mean as well?

Come over here & say that, pansy. — Garth

#10 InvestorsFriend (Shawn Allen) on 12.22.10 at 11:39 pm

Too much Debt to be re-paid?

Don’t worry, governments and people will continue to repay their debts.

Well, that is, as long as the banks keep lending them more money to repay the old loans.

For people we call it a consolidation loan.

Corporations call it “rolling over their debt”. Has a nicer ring to it than,” borrowing new money to re-pay old debts”.

Governments don’t call it anything, they just do it. And they don’t really need anyone’s permission to do it. There is always a line up of people ready to lend to the governments even at record low interest rates.

It is indeed a strange world.

Thank goodness I am here to explain it.

#11 Min in Mission on 12.22.10 at 11:41 pm

That pic has to be “photo-shopped”.

So far have seen prices drop by 30K to 50K. One house has been on the market for 9 months, dropped 50K and has had only a couple of viewings and no offers.

Haven’t heard of any increases in wages lately either.

#12 TD69 on 12.22.10 at 11:43 pm

Concise Garth. Demographics. Always demographics. Bulls and bears make money – pigs you know what happens. That’s why America is screwed because Corporate America isn’t changing to suit old glory but chasing 3 billion consumers on the up tick. That’s the deal and all we have left to off is quality of life and quickly eroding schooling as Harvard China sets up campus. Look at where we were just in 2000 and today. Imagine 2020. 20/20 for all of us unfortunately.

#13 Taxpayer like everyone else on 12.22.10 at 11:44 pm

So at what point (in size) does a “spacious family home” become a “Mcmansion”? It would be interesting to hear (or read I guess) some opinions.

#14 Denisa on 12.22.10 at 11:45 pm

Garth,
Your closing statements describe our mistress. We have been making free since 2005!

#15 TD69 on 12.22.10 at 11:59 pm

Nice ape hangers Garth. HHHAAAAWWWGGGG

#16 T.O. Bubble Boy on 12.23.10 at 12:05 am

Liquidity — was that the girl with guns from yesterday? She was amazing! (even with the weird stripper name)

#17 M I K E on 12.23.10 at 12:07 am

Here’s an article on yahoo echoing Garth today.

http://ca.finance.yahoo.com/news/Could-U-S-style-collapse-yahoofinanceca-2480210207.html

#18 CanadianAmerican on 12.23.10 at 12:10 am

In a world where you can’t count on much …”Alabama Town’s Failed Pension Is a Warning” http://www.nytimes.com/2010/12/23/business/23prichard.html?ref=businessFreedom
Another great post Mr. Turner!
Liquidity=Flexibility=Freedom

#19 Jen on 12.23.10 at 12:11 am

@ Taxpayer,

“So at what point (in size) does a “spacious family home” become a “Mcmansion”?”

I think this has more to do with style than size, but here’s the Wiki entry for “McMansion” : http://bit.ly/giddNy

“Typically it will have a floor area over 3,000 square feet , ceilings 9–10 feet high, a two-story portico, a front door hall with a chandelier hanging from 16–20 feet, two or more garages, several bedrooms and bathrooms, and lavish interiors. The house often covers a larger portion of the lot than the construction it replaces.

Don’t forget the “Snout House”, which is a particularly nasty blight on the Canadian landscape: http://bit.ly/g5SNXa

“Such design is typically employed in the United States and Canada to make a dwelling affordable for a family of modest income by combining a narrow lot (sometimes as small as 35 feet (10.6 metres) in width) with a minimum 5 feet setback from each side line – which results in a 25 foot (7.5 metre) wide house. When a two car garage is added- typically of up to 20 feet (6 metres) or better in width, with no back of lot access, the garage dominates the frontage.”

#20 S.B. on 12.23.10 at 12:11 am

:arrow: Why does Garth not have a Paypal “donation” (begging) link front and centre on his web site, like on Betty Crocker’s site?

Maybe because Garth is a success in the REAL WORLD, and does not rely upon internet crazies to expound a radical ( but entertaining) doomsday message.

(Well I did buy a book, but it was not a donation) :D

#21 S.B. on 12.23.10 at 12:13 am

“Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it went on the market for $24 million. And there it sits. Splendour in the grass.”

Is this the Stronach family, or something?

#22 Farm Renter on 12.23.10 at 12:15 am

100% liquid and loving the freedom!

Thanks Garth!

#23 nonplused on 12.23.10 at 12:17 am

I’m still loving the mistress from yesterday.

$24 mil hey? That’s more than the bunker cost I bet.

Here in Calgary a lot of listings seem to be expiring and not be relisted as we head into the holidays. And they definitely aren’t being listed for less than what it cost to build, not even the McMansions. You can still build for $200/sqft, listings are well north of that even after counting some amount for the lot. And old houses do not depreciate, even if you appreciate the lot. But not much is selling. Spring should be interesting.

I find Garth’s economic forecasting to be pretty good, for an “all clear” scenario. But I don’t think it’s time yet for the “all clear” signal. 2011 looks to be quite interesting. In the same way that TARP caused the stock market crash (by confusing investors as to what the law was or whether it would be followed), QE2 and the other bailouts of government debt will probably have unintended consequences too.

I will also disagree with Garth on the risk associated with gold. Of course it’s risky, so is any speculative investment. But it’s a currency, and the only currency that doesn’t depend on a bunch of liars to maintain. And don’t trot out the old “barbarous relic” arguments, almost every central bank in the world still holds gold (not including Canada). Why? Because it’s a currency. It’s readily convertible into any other currency, liquid, portable, and better than some currencies in that it is in limited supply. But being a currency it’s value floats, so there is risk. A lot of risk. A strong dollar means weak gold. A weak dollar, strong gold. About the last thing I am worried about right now is strong paper currencies.

I have a couple new definitions I think are original:

Paper money: A promise to pay you something issued by a liar who owes money all over town.

Government pensions (including CPP): A promise to pay you a lot more later if you defer payment now, made by a lair who owes money all over town and can’t pay you now.

Union pensions: A promise to pay later made by a liar who can’t pay you now made under extortion.

Modern democracy: A bunch of liars making promises to get elected and then making more promises they can’t keep to raise the money nobody has and they can’t pay back to satisfy their electoral promises, if and when they keep those promises.

Saving for retirement: believing the broke liars are going to pay you back.

The fact of the matter is there is a lot of real wealth in the world, both physical and intellectual, and it will all still be here when the current money system implodes. But that real wealth is the only wealth there ever was and ever will be (except as it grows through capital additions, by which I mean building something new or improving the land, not printing more money). There will be a tomorrow either way, because the capital exists. But it isn’t paper and never was. The paper is just a giant social control mechanism. When the paper goes away it’ll be a few dark years, but a metallic coin based currency system will arise almost over night and life will go on. In fact, once governments are deprived of their ability to borrow phantom wealth from banks that don’t have any real assets, the human condition might actually improve considerably and be free to take advantage of all the new technology coming down the pipes.

A good example of how little capital the banks have is provided by comparing them to BP. BP caused the largest oil spill in US history, yet it’s starting to appear like they might be able to pay for it by selling assets. Sure, they will be a smaller company but the loss will not be total. Compare that to just about any US bank, and they could not survive a fairly “contained” problem with their subprime mortgages without massive, astronomical bailouts and a complete abandonment of common law and due process.

The whole current paper financial system is a lie, concealed by deception, wrapped in a mystery. The banks do not have any money besides your deposits, and those are lies too. Do not trust any of it beyond 4 years. When calculating the net present value of future benefits of any kind promised, a 20% discount rate is about right. But if you are not that pessimistic, use the target CPP (2%) with a risk premium (I suggest at least 5%).

Bottom line: You might get your promised paper money in 20 years. But the purchasing power of the dollar has declined catastrophically in the last 20 years, and will again in the next 20 years. Only this time there will be no cost of living adjustment.

Garth always says the biggest retirement risk is running out of money before you run out of time. But there is an additional risk: Having enough money today but it isn’t worth what it used to be tomorrow. Inflation destroys all nations that employ it.

#24 JB on 12.23.10 at 12:18 am

“Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it went on the market for $24 million. And there it sits. Splendour in the grass.”

Asper family.

Their $24 Million mansion is for sale in Florida.

#25 GenXer on 12.23.10 at 12:23 am

S.B. – my guess is they used to run a department store chain, and the place might look a little like this:

http://www.insidecaledon.com/caledon/200908443-hawkridge-farm-eaton-family-mansionestate-still-for-sale-in-caledon/

#26 Maxamillion on 12.23.10 at 12:27 am

What’s wrong with having a separate shower for your dog? Take a look at this beauty for $4.9 million.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10015160&PidKey=-1829950295

More details here:
http://www.43maryvale.com/

#27 Leanne on 12.23.10 at 12:35 am

#11 Min in Mission on 12.22.10 at 11:41 pm
That pic has to be “photo-shopped”.

It is photoshopped – that’s Sarah Palin’s chopper.

#28 garth turner jr on 12.23.10 at 12:36 am

“and a separate dog bathing room,”

…Stopped bathing my dogs five years ago…I got fed up…all that hair getting stuck to my tongue.

#29 BrianT on 12.23.10 at 12:36 am

#2Rain-#1-it is not their money they are playing with, it is yours. #2-they are stupid enough to believe that you will bail them out of their stupid bets to infinity, even though this is a relatively recent phenomenom, and the public is basically tapped out.

#30 Elmer on 12.23.10 at 12:42 am

I’m not so sure about condos. As all the boomers retire and as their kids move out, they’ll be looking to downsize either because they can’t afford their detached houses, or they don’t need the space, or they get too senile to maintain them, or whatever, and they’ll move into condos. The demand for condos will go way up over the next decade while the demand for houses will go down.

#31 Big Al on 12.23.10 at 12:43 am

Ok I still can’t stop looking at the girl in your previous post. I’ve got a buddy in Oakville who’s been trying to sell for 5 months now in what was the hottest market. In the last 5 months he’s had 4 showings. His asking price 799k a year ago it was a 900k. My expectation, because there still are people who will take the leap, he will only sell when it reflects a price under 500k and that’s optimistic. My wife and I are heading south for a week in Jan to Florida visit our paid for floating condo heck the slip fee is the average cost of a typical Condos maintenance. Oh ya sold that anchor up here this past Feb ended up renting after a lifetime of owning numerous houses. I’ve seen this cycle of boom bust in RE in the big smoke 3 times, this one’s long in the tooth and when it goes it may be one for the history books. In my humble opinion it stands to correct to the tune of 30% when it’s all said and done which will be good for my kids. Good thing cause us boomers have pretty much screwed up everything else for them.

#32 Moneta on 12.23.10 at 12:45 am

So at what point (in size) does a “spacious family home” become a “Mcmansion”? It would be interesting to hear (or read I guess) some opinions
———
It’s not only the size.

“McMansion compares the generic quality of these pseudo-luxury homes with mass-produced meals.”

#33 kitchener1 on 12.23.10 at 12:45 am

Garth is correct and wrong in the same paragraph.

Cross country, the decline will be a modest 15% with a slow (5%) melt yearly. That much will be true when looking at National numbers.

Locally, things will be much much worse then 15%, its already happened and worsening in areas of the GTA. Im sure Van city will be down a lot more as well.

Either way things are going down. I still disagree though, I think it will be a very hard crash at first- im thinking 20% plus for the average home in the average area followed but a modest melt and then another leg down when people throw in the towel and it sinks in that housing is not coming back for a decade at least.

#34 SpaceMonkey on 12.23.10 at 12:45 am

I was going to guess the Eaton family.

#35 Daniel on 12.23.10 at 12:48 am

Houses are definitely dropping in Calgary.

You can get 1900 sqft houses in almost any outer community for $375k – $400k, these were $450 – $475 a year ago; a drop of about 15%. These are leading the way …

If interest rates rise it will be the 310k houses that drop to $260k, watch out – Calgary is leading the way.

As an aside, I’m looking at a great place in Phoenix – 2000 sqft, outer area, 68k. That’s more like it.

#36 SpaceMonkey on 12.23.10 at 12:50 am

yup, I think I might be right…

http://www.insidecaledon.com/caledon/200908443-hawkridge-farm-eaton-family-mansionestate-still-for-sale-in-caledon/

#37 SpaceMonkey on 12.23.10 at 12:51 am

Yup, I think I might be right

http://www.insidecaledon.com/caledon/200908443-hawkridge-farm-eaton-family-mansionestate-still-for-sale-in-caledon

Is that the one?

#38 Jeff Smith on 12.23.10 at 12:59 am

>#1 Mikey the Realtor on 12.22.10 at 11:18 pm
>Since we’re talking about mistresses I just bought my
>sweetie that chinchilla fur coat I was talking about a
>few weeks ago, after a few nice sales, why not?
>Thanks to my clients it has been a great year and
>2011 will be even better.
>>Why not shave your back and wrap it? Weasel’s in this year. — Garth

Actually I heard from many sources that realtors did quite well this year Garth. Thanks to hormonal young couples and low interest rates.

#39 Ruben on 12.23.10 at 1:00 am

It is always hard to tell when you are serious Garth, but to be fair Nicole Foss has never fomented revolution, unless you call reasoned arguments fomenting.

And, to be useful, Garth, if you are going to say there will be no crash, you must ell us how you define crash.

#40 Jeff Smith on 12.23.10 at 1:02 am

>.#2 RAINBIRD on 12.22.10 at 11:20 pm
>With so much debt, everywhere, why are bonds
>issued at such cheap % rate? I thought long bonds
>controlled mortgage rates; if not who – the
>Government?
>In 1982 the CSB rate was 19% – why was that –
>because the BOC controlled interest rates?

>What gives? Why are interest rates so low?
>Are bond purchasers that stupid?.

We are living in a paranormal quasi-economy right now. Where cost of livings are rising rapidly, ever been to a grocery store, or a gas pump? While income is falling, not stagnating, falling. However these kind of conditions tend to eventually collapse catastrophically in order for a real normal conditions to be established.

#41 mad as hell on 12.23.10 at 1:07 am

garth,
I think you are a bloody wanker and have no mistress and never will. I bet you cant remember when was the last time you got laid. The real idiots are those who keep reading your crap but I guess idiots like to read idiotic stuff. You have been wrong for so long, get a life.

#42 Jeff Smith on 12.23.10 at 1:07 am

>#3 MKUltra on 12.22.10 at 11:24 pm
>Coming to a pension near you! Listen to the ‘Stelco’
>experience:
>
http://www.youtube.com/watch?v=MHGoywnCbgM

>May explain away some of the retirement problems
>coming to a neighbourhood near you…

Correct me if I am wrong? But wasn’t the Canadian government at the provincial level or possibly the federal level in on the structuring of the bankruptcy and eventual selling of Stelco? I mean didn’t this whole thing have the blessing of our government?

#43 Tim on 12.23.10 at 1:08 am

Garth,
I agree with you that condos are going to plunge. You don’t own the land and the asset depreciates with use. Many of the recently-built condos in Vancouver have outrageous monthly fees: $300-$400 per month. For a new building! Imaging when it ages and needs repairs. What will happen when people start foreclosing on them? Will the remaining owners fees increase? Won’t they have to? Why would anyone own a condo where the fees alone are over a third of the cost to rent an equivalent apartment? We haven’t even talked about property tax…Condos are a bad investment, except for this 8 year anomaly we just went through. In Vancouver, unless you’re a physician or drug dealer, or did something stupid like put 10 percent down, the majority of people who have bought in the last ten years here could only afford to buy a condo. Note, we haven’t even mentioned the typical shoddy construction and cheap building materials. Guess what’s about to happen…

#44 Jeff Smith on 12.23.10 at 1:10 am

>#21 S.B. on 12.23.10 at 12:13 am
>“Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it
>went on the market for $24 million. And there it sits. Splendour in the grass.”

>Is this the Stronach family, or something?

Only castle I know is the Casa Loma. So the bunker is somewhere in the Annex ?

#45 BRUCE CORELL on 12.23.10 at 1:13 am

oK WHATS WRONG WITH THIS PICTURE.
2700SQ FEET ON 80FT FRONTAGE ON OCEAN IN MANASOTA KEY fLORIDA. LISTED 565k U.S.
2100SQ FEET WASAGA BEACH ON GEORGIAN BAY 50FT FRONTAGE. 799k CANADIAN..
ARE YOU KDDING ME….COME BACK TO ME IN 12MONTHS…
THIS IS SICK. 799k BEACH FRONT IN A FROZEN TUNDRA?????…..iTS CHEAPER JUST TO FLY TO FLORIDA EVERY wEEKEND

#46 christian on 12.23.10 at 1:14 am

Hyundai rocks. It never needed oxygen and brain surgery like GM and Chrysler.

#47 garth turner jr on 12.23.10 at 1:14 am

Don’t see no Mcmansions sitting empty around my neck of the woods.

No Detroit or Windsor out here either.

Can’t spend too much time convincing Eastern Canadians….what with Grouse Grind then skiing in the mornings, followed by golf in the pm, then concerts at a soon to be third city casino theatre, or the Ford or QE theatres , cruise ships, no HST soon enough…my dogs love paradise…woof woof

#48 dd on 12.23.10 at 1:18 am

….There will be no crash. There will be no boom….

Yup. No crash no boom any where in the world. The US is safe. Crashes only happen else where; like Ireland, Spain … . Big brother to the south isn’t looking so good. Hold on, this kind of sounds like real estate. It is different here. Too funny.

#49 dd on 12.23.10 at 1:21 am

#2 RAINBIRD

…With so much debt, everywhere, why are bonds issued at such cheap % rate?…

It is call quantitative easing. It can only last so long.

#50 Tim on 12.23.10 at 1:21 am

There are many reasons why housing is higher in Canada than the states. People like it here. We don’t have the highest income inequality in the developed world. We don’t have multiple cities on the verge of bankruptcy. Although guns have become more prevalent here, they aren’t legal and we don’t have anywhere near the amount of random shootings they do in the US. To the folks in the last post who hear about a random shooting in Van in a news bite and draw generalizations, be reminded that the number of robberies in the US was 65% higher than in Canada, the rate for aggravated assault was more than double, and murder rate in the US is triple that of Canada. The US has over 100 military bases and despite the money wasted on recent wars, not to mention the body count, they have managed to make the world a less safer place than it was five years ago. The majority here were dumb enough to vote in a neo-con, but at least we’re not getting suckered into getting even fewer services due to God-Fearing Republicans. Vancouver over Seattle any day…

#51 TD69 on 12.23.10 at 1:25 am

#23 non pulsed. Read your comments twice, the very best I have read since started reading this blog. You are correct to the financial reality. Oil. How can one company negatively, directly, and permanently affect 60 million Americans and still be in business. Your thoughts on paper money and what’s behind it are exactly why I have sold 40% of real estate holdings over the dead cat bounce of 2010 but will keep the rest. People need to screw their heads on tight for what’s ahead. If you cannot afford your ways now-liquidate. But hold on to what real assets you may have if possible. This is not democracy or free market at work. That does not exist and is irrelevant in the “new world order”. It’s elitist bankers calling the shots directed by forces we can’t possibly imagine but we all know do exist. We are downshifting and dumping baggage in the developed world and in the third they are gearing up without the acquisition of 7 tvs and 3 ex wives. Smart. Lean and mean and ruthless and zero “pc”. Ruthless. You don’t need a traditional war to turn people into the 15th century types. 25% unemployment will show you barbarism. 50% medieval. Instead of Nottingham it will be corporations.
So now most folks are understanding-they get it and get how bad it can get- but have absolutely no understanding of what to do. And who could blame us. It’s hard for even the brightest folks on this turnaround in fate. So how did we get here? Why? Why? Before we can offer answers we need to understand the factors that got us here. We all played nice and were industrious but now the vacuum has sucked up our futures? What’s the real plan? The Global plan-?
Ex BC Premier Campbell can attend a secret elitist group meeting-Bilderberg-on BC taxpayers-but keep it a secret and be cleared as “enlightenment”after the expense was questioned. The same person who would never sell BC Rail (an opposition promise) but instead just leased it-for 1000 years. We are not to blame. We trusted. We are in a “den of vipers and thieves” who
will stop at nothing to keep control. Money control. Nothing else matters. Banking “rope a dope “.

Garth you must see it better than 98% of us.

#52 huh I thought it was the Eatons on 12.23.10 at 1:29 am

21 S.B. on 12.23.10 at 12:13 am
Aspers, perchance Eatons?

********************************
“Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it went on the market for $24 million. And there it sits. Splendour in the grass.”

Is this the Stronach family, or something?

#53 BC Bring Cash on 12.23.10 at 1:43 am

TD Ceo Mr Clark just recently said that Canadians are taking on too much debt and something should be done about it. Here is one of his solutions, or is it really another smoke screen. Recently I received a letter from TD explaining that if I wish I could make an interest only payment on my line of credit, instead of the usual 3% monthly payment of the total balance owing.For example on a $20000 bal. owing the 3% rule meant a minimum monthly payment of $600 a month. Under the new plan the minimum payment is reduced to approx. $79.00 per month. Sounds like to me he wants us to pile on more debt. The easy credit punch bowl is still there but for how long I wonder. How long will this lunacy go on for?

#54 Nostradamus Le Mad Vlad on 12.23.10 at 1:47 am


“More Idiots and great-looking brothels.” — Well I’m a boomer but I don’t have a Supersized McBrothel yet!

“We are now citizens of an economic purgatory . . .” — First purgatory; then hell (for those who bought way beyond their means). Gonna be hard alright, esp. as jobs continue exiting and nothing replaces them

A link from the previous post said that business people now simply want a workforce of part-timers. Do as much work as you want, just stay part-time.

No benefits, no pension plan, no nothing. Individuals have to pay for everything themselves. Further reasons why it will be survival of the fittest and smartest.
*
New Bank failures in Europe.

Top Ten Trends for 2011. Sure gonna be an interesting year.

Muni Bonds Why are all the investors fleeing? Plus — Bond Two.

Hot Money New circuits printed right into into notes.

Irish developers still enjoying the high life.

SpewBarfVomit Subsidize too big to fail banks. Privatize the profits, socialize the losses. Ain’t socialism great? Sheeples are always hoodwinked.

Sarah Palin, as well as being on Garth’s blog has also collected an award for 2010.

#55 Wise Guy on 12.23.10 at 2:02 am

Liquidity

Ex.1
Went for a beer with my buddy tonight. His condo in downtown Toronto was on the market for 2 months. He had one offer as there were 4 other condos on his same floor up for sale. One offer that fell through. He now has taken his condo off the market to list in a better market?

Ex.2
Neighbours home was purchased for just over $1 million in the working class neighbourhood of Bloor West Village back in May. Paid probably $200,000 too much and that’s not an over statement However, this family that purchased this home still hasn’t been able to sell their old home and now are renting it out.

#56 VMT on 12.23.10 at 2:49 am

All three are about to exemplify what deflation really means.

If I may, – I’d like to share with you, lady and gentlemen, what deflation realy means as well.

Since 1999 the Canadian residential real estate roughly double in value IF we measure the appreciation in … dollars.

At the same time since 1999 gold roughly quadroupled in value if measured against the dollar.

Conclusion? If measured against gold the real estate in Canada deflated – lost half of its value since 1999.

That’s quite a deflation.

#57 Jet Pilot on 12.23.10 at 2:54 am

“Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it went on the market for $24 million. And there it sits. Splendour in the grass.”

My guess was going to be the Eaton family.

#58 Linda Pearson on 12.23.10 at 2:55 am

“Some years ago one of the richest families in Canada built a castle on a hill not far from the Bunker. Soon after the kids had bankrupted the inherited business, it went on the market for $24 million. And there it sits. Splendour in the grass.”

The Timothy Eaton estate near Forks of the Credit, I’ll bet.

#59 Patz on 12.23.10 at 3:09 am

It was encouraging to see how many regulars here are also regular TAE readers. And I thought Betty Crocker’s (aka Nicole’s) riposte yesterday was right on. You both are providing valuable info in a treacherous time. But I have to give the edge to NF as she has a deeper understanding of the energy constraints we live under. To think we can’t have a major depression is a kind of “end of history,” Fukuyama mindset.

People aren’t smarter than in the 30s, leaders haven’t wised up, in fact the signs going in this time are much worse. Ironically, discounting the possibility of depression is another way of saying “it’s different this time.” It is but also it ain’t.

#60 InvestorsFriend (Shawn Allen) on 12.23.10 at 3:22 am

Number 2 Rainbird asks:

“With so much debt, everywhere, why are bonds issued at such cheap % rate? I thought long bonds controlled mortgage rates; if not who – the Government?”

Your post almost answers itself… Think Supply and Demand…

Oviuosly there is an EXCESS amount of money to be lent out.

Incredibly there are lots of rich people and a few rich countries (think China).

There are so many people and orporations and even some Countries with excess cash that there is more money available to be lent than there are qualified borrowers.

Hence savers must compete with each other and in this “borrowers market” the price of long-term bonds has been driven down.

Simple Supply and Demand…

Yes the government gets in and tries to pull the interest rate down a bit more by printing money and buying bonds.

But at the end of the day lots of corporations and investors are buying bonds (with their savings) at record low rates. No one forces them to. It’s just the market price for lending money has fallen in a world awash in savings.

Thank goodness I here to explain this.

#61 Utopia on 12.23.10 at 3:38 am

A few weeks back I made some comments about Ethiopia. I noted how poor that country was for lack of resources and how we all knew it.

Those comments were not quite fair though and after a complaint from a friend (who objected strenuously) I decided to write a little more on the subject.

You see, I have lived in that country.

Actually I have spent quite a bit of time in North Africa and the Middle East over the years. It gives you a different perspective on life; how economies function and some insights that are not available by watching prime-time TV.

In Africa you can travel from a country in a deep economic depression to one that is robust and growing and then onward to another that is experiencing a bitter hyperinflation. All in a single day.

There seems to be a lot of guilt associated with Ethiopia here in the West. Few understand the country and the media has done it no service by continually pumping out the same “death and destruction” mantra day after agonizing day.

There seems so little to celebrate; nothing good to hear and certainly no hope. Nothing could be further from the truth though and you would never know that unless you had actually gone and lived there for awhile.

Ethiopians themselves are amazingly optimistic about the future though. Their country is roaring ahead with GDP exceeding 10% growth annually.

The country is experiencing one hell of a positive cycle right now that is completely off the radar. This is almost totally unknown in the West where we are treated to daily (paid) depressing advertising from charity fund-raisers that keep a distorted image of the country high in our minds.

We are treated to non-stop images of poverty and need while Ethiopia itself is in the early stages of experiencing a surge of industrial and economic development. The fund raisers don’t give a damn about the negative impact they are creating. They are in the business of raising money, not awareness. I recommend you ignore them after today.

So I wrote a Christmas story. A hopeful story too, and one that is focussed on the investment potential of Ethiopia. It is not for everyone.

The bleeding hearts will likely have none of it. Others will be offended that any right minded person could even conceivably think of investing in that tragic country. They need charity not investment dollars of course. Right?………………………..WRONG!!

I could really pull my hair out some days just listening to the bull coming off of the lips of people who have never been there and have absolutely no idea what is actually taking place in that country today.

Ethiopia is booming. Just that simple. Money from Asia is the fuel for the fire and dam construction is the key to that countries future success.

They are building a great many dams actually. By the end of the decade, Ethiopian power and electrification will light up all of North Africa and beyond. It is an incredible story that I hope all of you will take an interest in and so I am posting that article up here as a message of hope for the the future of a country that has been as hard hit as any in the 20th century.

This is a story about inflation too, about how the current commodity boom has impacted the Third World and why we need to reflect on our own good fortune during this Christmas season.

So here is the article for those who can handle it. It is an incredible untold story. Have a look. The title is “Ethiopia on Track to Become Africa’s Energy Superpower”…….. And it is all true.

http://seekingalpha.com/instablog/325016-abegaz/123009-ethiopia-on-track-to-become-africas-energy-superpower#comments_header

Your comments are more than welcome.

#62 punnoval on 12.23.10 at 3:50 am

GT sez:

Big houses are also gauche, especially in a world where people like Nicole Foss get to wander and foment hairy revolution. Have you priced a private army lately? It’s ridiculous.

Anybody have an idea what this means? Or has GT decided to become a stream-of-consiousness popstar!

#63 Utopia on 12.23.10 at 3:51 am

Let’s just try that link again. Hopefully this time it works! (I am an idiot with computers).

http://seekingalpha.com/instablog/325016-abegaz/123009-ethiopia-on-track-to-become-africas-energy-superpower#comments_header

#64 Burnt Norton on 12.23.10 at 3:52 am

Yesterday: insurance. Today: liquidity.

Let’s expand the scope of both topics to include consideration of not just one’s assets, but also one’s remaining duration of life with quality.

Remember the Freedom 55 ads that London Life used to run on Hockey Night in Canada in the late 80’s and 90’s? The prevailing message was (and still is): “Work as hard as you can and then retire to a life of leisure as soon as possible”.

Now there’s a prima facie appeal to this message. Inherited from the Boomers, most Gen-Xers watching London Life ads in between periods on HNIC in the 80’s and 90’s have been brainwashed into it. I grew up with a guy whose dad worked high up for London Life and I expect that he would quietly agree with my epiphany that the actors rejoicing in the Freedom 55 ads are actually meant to represent London Life executives and not Johnny Canuck waiting for Coach’s Corner to start.

Not only are we encouraged to work like dogs while we are young and healthy, we are supposed to buy insurance “products” to protect the lifestyle that our hard work props up around us. Again, there’s a prima facie appeal to the notion of protecting ourselves and our loved ones against disaster. Insurance provides us with the illusion that we have control over our vulnerability and mortality. Our often ignored and unconscious fear makes the offer of insurance irresistible for most of us. The universal appeal of it is why Warren Buffett is rich.

Quality adjusted life years (QALY’s) are a health economist’s way of determining if it’s worth spending a third party’s money on fixing you.

http://en.wikipedia.org/wiki/Quality-adjusted_life_year

If you are 30 and need a cornea transplant, you’re in like Flynn. If you are 90 and need cataracts removed, here’s a white cane and dark glasses for you Gramps. Of course, the health care purse strings will be strangling more and more of us in the years to come.

I work all the time with people in their 50’s and 60’s who are in hospital after having a stroke a few months into retirement. Some of them can’t toilet themselves, others can’t talk. It ain’t pretty.

Prioritize the liquidity of your time while healthy. You can’t insure against the loss of life quality that necessarily comes with aging. You adapt to it. Enjoy life now, while your dick still works without performance-enhancing drugs and before your titanium hip keeps you from breezing through airport security.

“Some day soon though I’m gonna have to settle down before my bones start making that metal on metal sound”
– Buck 65 (cue the anti-hip hop Hummer).

#65 Utopia on 12.23.10 at 3:54 am

Apparently the article starts at the end (?). You will have to scroll up to get to the beginning. Lord help us Neanderthals.

#66 Jody on 12.23.10 at 3:55 am

When does a house become a McMansion? I’d say over 4000 square feet, I mean really, who the hell needs that much space? As for real estate, although I don’t agree with the sky is falling lady I do think 50% in less than 2 years is very possible, especially once the US decides to start WW3 to take everyones mind off their toilet paper currency. The US is just itching to start another war in Korea and they will, assholes. The US will bring in the draft and because Harper does nothing but kiss Yankee ass Canada will as well. In fact I predict some kind of “terrorist,” attack being staged in North America to scare us into submitting to the facist scum now running our countries. A further decline in housing prices when a lot of potential house buying men are slaughtered to feed the military industrial complex. Forget 2012, more like 2011.

#67 Derek on 12.23.10 at 3:55 am

A currency is what the government will accept in payment of taxes. Doesn’t matter whether it’s made of gold or paper. If the government won’t accept it as a tax payment, it’s not money. If the Canadian government will accept gold in payment of taxes it’s a Canadian currency. Otherwise it’s just a commodity that you have to convert into currency so you can pay your taxes.

#68 Jody on 12.23.10 at 3:57 am

Oh yea, I keep going to Costco, I’ve got like 5000 pounds of tin foil stored up in my basement fallout shelter. Anyone need a hat?

#69 Another Albertan on 12.23.10 at 4:10 am

#21/24:

More like the Eatons…

All I want for Christmas is for a number of people (on this blog and in real life) to act with much less douchebaggery.

Everyone else’s mileage may vary.

#70 Thetruth on 12.23.10 at 5:24 am

Record immigration numbers in 2010. Google news it. This doesn’t include ‘temporary immigrants’.

Wonder if this will be censored??

Does this have an affect on the demand side for housing.

#71 Aussie Roy on 12.23.10 at 5:26 am

Aussie Update

http://www.theaustralian.com.au/business/property/stung-investor-pleads-for-price-fixing-probe-as-agency-collapses/story-e6frg9gx-1225975187844

A FAMILY blamed in part for the collapse of a top real estate agency has issued a plea to the chain’s national chairman, Brian White.
They want him to investigate an alleged price-fixing scheme that affected the values of multi-million-dollar properties on the Gold Coast.

The collapse of Ray White Broadbeach, which was placed in receivership on Tuesday with debts of up to $5 million, follows a severe market downturn as well as a relentless campaign by aggrieved investors Rod Lambert and his wife, Lisa, who have made allegations of fraud that are under investigation.

The appointment of receivers to the leading agency has rung alarm bells across the property market on the Gold Coast, where beachfront values have plunged by as much as 50 per cent since the peak of the boom in 2008.

http://www.theage.com.au/business/shops-feel-the-drop-20101222-195om.html

SAGGING consumer confidence has racked up its third retail victim in two weeks, with women’s fashion retailer Noni B issuing a profit downgrade and blaming uncertainty since the federal election for shoppers’ reluctance to spend.

With only two shopping days before Christmas, retailers are facing one of the worst holiday trading seasons in years as a cluster of events including higher interest rates, rising energy prices, a thrifty mood among consumers and a poor start to summer threatens sales.

#72 BigAl (Original) on 12.23.10 at 6:08 am

#18 CanadianAmerican on 12.23.10 at 12:10 am
wrote:
In a world where you can’t count on much …”Alabama Town’s Failed Pension Is a Warning” http://www.nytimes.com/2010/12/23/business/23prichard.html?ref=businessFreedom
Another great post Mr. Turner!
Liquidity=Flexibility=Freedom
==================================

I just read the article above, about how this Alabama’s town’s municipal government retirees aren’t being paid, are living in misery, with one even dying off without having been able to pay hydro or water bills.

I suppose there are a few on this board who are now laughing out loud about these “damn civil servants” getting what, in their minds, they deserve? Like the former fire marshall, and police officers, and everyone else.

Sad.

#73 Lifetime Renter on 12.23.10 at 6:14 am

Realturd’s ad on the back page of the local Real Estate Weakly (Vancouver westside) invites you to visit their website if you’re looking for the “ultimate family Christmas gift”. And I thought the notion of giving a Mercedes for Christmas was outrageous….

#74 Deliverator on 12.23.10 at 6:15 am

Investors Friend (Shawn Allen): “Weirdly, they don’t even understand that when they borrow, that is someone eles’s savings that they borrowed.”

Stop now. You don’t know what you are talking about. You have no idea how the fraction reserve baking system that is used everywhere in the world works. You have no concept of how money is created in today’s world.

When you borrow money, around 1% of that money is someone else’s savings. (Some think we operate ina 10% fractional reserve environment. The reality is it is less than 1%). The rest is created with the stroke of an electronic pen out of nothing. That’s right. The banks print money. Over 90% of the money created in the world today is created by the banks.

Watch this:

http://www.youtube.com/watch?v=pC8I3J-1GSM
(Fractional Reserve Banking Explained)

You might learn something, and hopefully you will stop spreading around that nonsense you wrote above. Someone might believe it.

#75 steve hodgkins on 12.23.10 at 6:42 am

Great MSM article on Canadian housing bubble although ive read it all here before.
http://ca.finance.yahoo.com/news/Could-U-S-style-collapse-yahoofinanceca-2480210207.html

#76 Cookie Monster on 12.23.10 at 8:15 am

Wow, some really great posts on here today. I think I’m falling in love with this blog and I haven’t put my pants on since yesterday.

#77 ts harpoon on 12.23.10 at 8:18 am

#13 Taxpayer like everyone else

Regarding McMansions. I would suggest the following as provided by Canadian Architect Avi Friedman to provide context to your comment:

“The term “smaller” is open to a wide range of interpretations. Many postwar homes measured between 40 and 80m2 (400 and 800 ft2) and frequently accommodated families of six. It is fair to assume today that a home that measures between 100 and 150m2 (1,000 and 1,500 ft2) will be considered small by the standard of North American merchant builders, and in some markets even a home of 200m2 (2,000 ft2) is viewed as small. Statistics indicate that homes of this size accommodate households composed of an average of three people.”

Read more: http://books.google.ca/books?id=iXyspExABKcC&lpg=PP1&ots=vLt1-P02y6&dq=the%20grow%20home%20avi%20friedman&pg=PP1#v=onepage&q&f=false

#78 CTO on 12.23.10 at 8:34 am

#41 mad as hell

Are you a realtor in Calgary???

#79 CTO on 12.23.10 at 8:42 am

#70 Thetruth

STUDIES IN T.O SHOW THAT MORE IMMIGRATION IS GOING TO OVERLOAD THE SYSTEM, INFRASTRUCTURE AND PERSONAL FINANCES CREATING NO GO ZONES IN T.O OVER THE NEXT 5 YRS OR SO.

WILL THIS BE GOOD FOR HOUSING?

#80 T.O. Bubble Boy on 12.23.10 at 8:44 am

For those wondering about the $24M estate in Caledon:

http://www.insidecaledon.com/caledon/200908443-hawkridge-farm-eaton-family-mansionestate-still-for-sale-in-caledon/

The Eaton family are the ones with the kids who bankrupted the business.

#81 T.O. Bubble Boy on 12.23.10 at 8:47 am

You could also take that $24M and go to Manhattan and buy the “largest single-family home in Tribeca”:

http://www.nypost.com/p/news/local/manhattan/man_oh_manse_2KAdlruFRxhhzMT6ijmncK

#82 bigrider on 12.23.10 at 8:50 am

Real Estate = Liability

Gold= No Liability

RE going down… Gold going Up

#83 T.O. Bubble Boy on 12.23.10 at 9:02 am

@ #70 Thetruth:

Yes, Canada had a higher immigration number in Q3:
http://www.vancouversun.com/news/Summer+immigrant+surge+highest+over+decade+StatsCan/4017783/story.html

But – if you’re trying to tie that to bubbly housing prices, think again… in B.C. the largest immigrant group was from the Philippines (immigrating as nurses and nannies):

“Tam said those workers have noticed a marked increase in immigrants this year, in particular from the Philippines, which he said has recently overtaken mainland China as the top source of immigrants to B.C.

He speculated the immigration increase may be due to the ramping up, in recent years, of the Provincial Nominee Program, which lets the B.C. government select immigrants to meet specific needs in the labour force, such as health care workers.”

#84 X on 12.23.10 at 9:10 am

I can’t speak for the Delta, but in Markham, there are townhouses going for half a million…makes no sense.

I work too hard for my money to pay that much for a house, as I would have to work even more to pay for the house, that I would not be able to fully enjoy.

#85 Live Within Your Means on 12.23.10 at 9:20 am

#1 Mikey the Realtor on 12.22.10 at 11:18 pm
Since we’re talking about mistresses I just bought my sweetie that chinchilla fur coat I was talking about a few weeks ago, after a few nice sales, why not? Thanks to my clients it has been a great year and 2011 will be even better.

Why not shave your back and wrap it? Weasel’s in this year. — Garth

……………………

Fabulous and funny retort!!

………………………..

#10 InvestorsFriend (Shawn Allen) on 12.22.10 at 11:39 pm
Too much Debt to be re-paid?

Don’t worry, governments and people will continue to repay their debts.

Well, that is, as long as the banks keep lending them more money to repay the old loans.

For people we call it a consolidation loan.

……………..

Did one myself about 23+ yrs. ago – About $1,500 – seems minor now but not then. Paid it off and swore I’d never pay interest again on a credit card or a bank overdraft loan. Paid off our mtg. in 7 yrs. and have bought used cars with cash. Probably not wise with today’s low interest rates, but at least we could sleep at night and take advantage of ‘deals’ with cash on hand. Only started investing in MF’s 10 yrs ago as we didn’t know any better.

………………….

#30 Elmer on 12.23.10 at 12:42 am
I’m not so sure about condos. As all the boomers retire and as their kids move out, they’ll be looking to downsize either because they can’t afford their detached houses, or they don’t need the space, or they get too senile to maintain them, or whatever, and they’ll move into condos. The demand for condos will go way up over the next decade while the demand for houses will go down.

………………..

Why wouldn’t they rent instead and avoid those strata, or what we call, condo fees. I’ve lived in a condo townhouse and would never consider it again.

#86 Moneta on 12.23.10 at 9:39 am

We don’t have multiple cities on the verge of bankruptcy.
———-
Their cities were doing just fine until the RE bubble burst. When the bubble bursts here, we’ll follow.

I thought eveybody got connect the dots books when they were young.

#87 Bullion.Bunny on 12.23.10 at 9:52 am

Baltic Dry Index Drops Again……..

http://www.zerohedge.com/article/baltic-dry-index-drops-another-19-hits-1795

Look out below.

#88 Moneta on 12.23.10 at 9:53 am

When does a house become a McMansion? I’d say over 4000 square feet, I mean really, who the hell needs that much space?
——–
2300 square feet. Thanks to walking and jogging in many neighborhoods across Canada, I’ve determined that’s the cutoff where many households can’t maintain them properly over the long term.

#89 Sand Piper on 12.23.10 at 10:02 am

As we inch closer to Christmas – I would like to first extend a warm hearty Christmas Cheer to G-Man and the extended bloggers…

To the A-hole who whined like a little girl about this site – you mock this site – but you go as far as to write also – who’s the true knob… you blow buddy! Go read the Toronto Star and the fairy dust they will blow up your keaster!

Take the content on this web site at face value, gauge what is being said – and with that info make your own determination on what may or may not unfold in the future – as my grandfather always use to say – information can be your best friend and worst enemy all at the same time-

its nice that Garth spends his time and energy challenging mainstream media with all their BS – that has completely and utterly outright lied or witheld what really is transpiring … shame on them –

Thanks again Garth for what you have provided – and to the vast majority of contributors – there has been some wicket insight – ( I really enjoyed yesterday’s update on the Baltic shipping stats – the numbers dropped and not a Fu#%^& peep from any financial newspapers on the seriousness of those facts…)

Garth – thank-you for what you have done – and have a Merry Christmas and Happy New Year!!

Cheers to everyone –

#90 Aussie Roy on 12.23.10 at 10:03 am

74 Deliverator on 12.23.10 at 6:15 am

Dont you find it funny how many people dont understand FRB…

I like this one… It also touches on positive feedback, which is the basis of all bubbles (booms).

The US needs another Andrew Jackson, come to think of it we probably need several around the world.

http://www.youtube.com/watch?v=KWPVsQ111ew

#91 Moneta on 12.23.10 at 10:03 am

The demand for condos will go way up over the next decade while the demand for houses will go down.
—-
I was driving in the countryside with my hubby one beautiful fall day and couldn’t help but notice all the new McMansions scattered around.

Then I asked him which areas he thought would get hit the most. His answer was everywhere there are boomers. I think it makes sense.

Small badly maintained houses will become tear downs. Huge houses will become multi-generational be split up to become old folks homes. Some retirees will build in the country while some will move back to the city leaving the house empty.

It is going to be a a hodge-podge.

#92 Aussie Roy on 12.23.10 at 10:22 am

Moneta on 12.23.10 at 9:39 am

More great stuff.

I am so surprised that people say in the US unemployment caused the housing crash, when in fact the bubble bursting caused the unemployment. Which in turn caused falling tax revenues.

So many people put the cart before the horse. People seem to look at the results and think they are the causes. Hopefully sites like this can help stop the confusion.

#93 Cello on 12.23.10 at 10:25 am

In a letter published last Friday Howard Marks of Oaktree Capital Management takes on the topic of gold.

“I have no doubt: gold is the ideal investment. It serves as a reliable store of value, especially in challenging and uncertain times. It’s a hedge against inflation, since its price rises in sympathy with the general level of prices. It exists without the involvement of man-made constructs such as governments. And it’s desired and accepted all around the world (and always has been).

The supply of gold is finite. It can’t be created out of thin air. Thus it’s not subject to dilution or debasement, as is paper currency when governments decide to print more. In comparison, currency can be similarly reliable only if backed by gold.

Finally, gold is tangible, meaning you can take delivery and store it. Most other investment media exist only in the form of figures on a computer screen. But gold is something you can actually hold and know you own. Thus it’s one of the few things you can depend on in an uncertain world. Gold is perfect.

Except, of course, gold is nothing but a shiny metal. Since its real-world applications are limited to jewelry and electronics, very little of its value comes from actual usefulness. Further, the amount put to those uses each year is small compared to the total amount in existence, so its value for those purposes is at the margin and can’t be of much help in putting a price on the world’s gold reserves.

There’s little intrinsic to gold that enables it to serve as a store of value and a hedge against inflation. Gold serves those purposes only because people impute to it the ability to do so. It’s self-deception, nothing but the object of mass hysteria like that exhibited in “The Emperor’s New Clothes.” Gold has no financial value other than that which people accord it, and thus it should have no role in a serious investment program. Of this I’m certain.”

#94 Agio on 12.23.10 at 10:29 am

Hey Turner
Yesterday I avoided visiting The Automatic Earth. Today you again made mention and due to your omnipotent powers of persuasion I could not restrain myself. They seem to absolutely adore you. Are you getting a cut of their Paypal action?
It doesn’t matter, I just wanted to personally thank you for making my eyes bleed.

My goal has then been accomplished. — Garth

#95 Cookie Monster on 12.23.10 at 10:30 am

Good read from the Euro Pacific site.

No, Krugman, You’re Eating America Alive
December 22, 2010 – 1:52pm — europac admin
By:
Neeraj Chaudhary
Wednesday, December 22, 2010

Here we go again. This week, Paul Krugman, the 2008 Nobel Prize winner in economics and the go-to guy for progressives who need a morale boost, launched another misguided attack on Austrian School economists. From his New York Times soapbox, he referred to the free-market Austrian “hard money” philosophy as a “zombie idea” that is inexplicably eating the brains of the voting public.

The attack would hardly be worth a reaction if it weren’t for the fact that column did create a buzz. In the piece, he repeated a refrain that has become common for the empirically defeated Keynesians. Said Krugman, “many economists, myself included, warned from the beginning that [President Obama’s original stimulus plan] was grossly inadequate.” He continued, “[a] policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.”

When looking for zombies, the first place Mr. Krugman should look is in the mirror. He has one answer to every problem: eat more taxpayers. He isn’t even a true Keynesian. Mr. Krugman is the guardian of a system that died a long time ago. He is the walking undead of the New Deal era.

What Keynes actually said about government spending is that during recessions, governments should run budget deficits to boost aggregate demand, and during expansions, governments should run budget surpluses in order to save up for the inevitable recession years.

Now, whether you agree with this or not – and I happen to disagree with this approach – what we have actually done is run deficits, year-in, year-out, almost every single year for 40 years! And, as a result, we have accumulated a national debt approaching 100% of our annual gross domestic product.

This level of indebtedness has been shown to reduce the level of growth in an economy, no matter how advanced. Yet, Mr. Krugman argues that we should spend more money and run even higher deficits. So, who are the real zombies: those economists who mindlessly favor more and more government deficits in perpetuity, or those who have struggled to warn their fellow man that we are approaching a point of no return?

In the 1990s, the Austrians warned of a tech bubble. The Krugmanites urged lower interest rates and more government spending. In the 2000s, the Austrians warned of a housing bubble. The Krugmanites urged lower interest rates and more government spending. Today, the Austrians warn of a bond bubble that will lead to potential sovereign default. And, with the terrifying zeal of a flesh-eating corpse, Krugman urges lower interest rates and more government spending.

To me, it’s very clear: just as a family or a business cannot continuously spend more than it earns, governments must live within their means as well. The US government has had special privileges since 1944 because our currency serves as the international reserve. But we are not behaving as good stewards of this responsibility, and, if we are not careful, the world is going to dump the dollar. If that happens, the trillions of dollars that are held by foreign central banks could come flooding back into the US economy, causing an inflationary period that dwarfs the stagflation era of the 1970s. It certainly won’t help that our nation is more dependent than ever on foreign oil. [For those looking to gain investment exposure to the North American energy market, be sure to read Euro Pacific’s new special report, “What’s Ahead for Canadian Energy Trusts?” Click Here to download.]

Austrians believe foremost in sound money – the idea that the amount of currency in the economy should be relatively stable, so that its purchasing power is maintained over time. This minimizes inflation, and allows consumers, businesses, and lenders to make efficient financial decisions. It also keeps government in check, because the Treasury cannot run perpetual deficits and simply print new money when the bills come due. It is no coincidence that our nation’s descent into near-constant annual deficits took place right around the same time as President Nixon took us off the gold standard.

Austrians believe that free markets are largely self-regulating. This means that people will tend to make choices in what they perceive to be their own best interest. Government interventions are almost always meant to override individual choice because politicians think they know better. This is not only personally offensive, but leaves us with an economy that can provide less of what people actually want and too much of what they don’t want. Look at the housing bubble. Government incentives caused miles and miles of McMansions to be built across the country – houses that most people could not actually afford. In the meantime, productivity was diverted from producing things people actually need and can afford. The result is an economic depression and heart-breaking dislocation for millions of Americans.

Austrian School economists are not zombies. Our philosophy promotes life, liberty, and prosperity – last time I checked these are not the goals which get zombies up in the morning. Meanwhile, economists such as Mr. Krugman continue to argue for lower interest rates, more intervention, more spending, and larger deficits. He advocates for an economic system that feeds off the productive strata of society to support the unproductive. Now there’s a philosophy that any self-respecting zombie could support!

Where does it end, Mr. Krugman? At what point do we stop running our deficits and start to pay back the money that we have borrowed? At what point will enough wealth be extracted from producers to support your voracious appetite for spending? Perhaps you think we should we mindlessly devour the purchasing power of our fellow nations until there is nothing left, but what happens when they take a shotgun to our heads?

http://www.europac.net/commentaries/no_krugman_youre_eating_america_alive

#96 Got A Watch on 12.23.10 at 10:40 am

“Why not shave your back and wrap it? Weasel’s in this year. — Garth”

ROFL Garth. You should get Christmas cards printed up with that motto, and send them to all the Realt(ho)rs(TM) across Canada.

Garth, Best Wishes for A Very Merry Christmas and A Happy New Year to you, and thanks for the time and effort you put into the Blog. A needed antidote to toxic MSM spin.

And to all the Blawg Dawgs, woof, woof. Keep on barking.

#97 Ben on 12.23.10 at 10:46 am

That $24 million house sure seems to have a lot of issues. Buyer beware.

http://www.canadiansforproperlybuilthomes.com/html/letters/dec2006/eatonmansion.html

#98 Live Within Your Means on 12.23.10 at 10:54 am

#77 ts harpoon on 12.23.10 at 8:18 am
#13 Taxpayer like everyone else

Regarding McMansions. I would suggest the following as provided by Canadian Architect Avi Friedman to provide context to your comment:

“The term “smaller” is open to a wide range of interpretations. Many postwar homes measured between 40 and 80m2 (400 and 800 ft2) and frequently accommodated families of six. It is fair to assume today that a home that measures between 100 and 150m2 (1,000 and 1,500 ft2) will be considered small by the standard of North American merchant builders, and in some markets even a home of 200m2 (2,000 ft2) is viewed as small. Statistics indicate that homes of this size accommodate households composed of an average of three people.”

……………….

In the early 50’s we lived in a wartime home of the size you mentioned. Dad worked for Cdn Arsenals, as it was called then. Believe we paid $30/mo rent for the house. They were in high demand. When Dad accepted the job all he could find was a 2 bed rental (kitchen/living room combined in Charlemagne, PQ with 5 kids. We ended up having bed bugs!!. Then moved into what were called the ‘hostels’ where the immigrants from Europe were housed for about 6 months until they were ‘dispersed’ to other parts of Canada. Two families shared a kitchen and a bathroom separated by a hallway and sometimes ‘drapery’ to separate living conditions. We children loved it. Moved to a farm with no running water. Then, a war time house became available. Wow. We actually had a small SF house (2 bedrooms down and 2 under the eaves) with a yard, etc. Only heating in the house was a propane furnace in the hallway downstairs & grates in the ceiling to the 2 bedrooms upstairs. We had our Sat. night bath, 2 or 3 sharing the same bath water. My youngest brother was born there. I have great memories of my early childhood there and am glad that I grew up in that generation. I revisited it about 15+ years ago and didn’t recognize it.

Now I and my husband live in a house 2X that size – stupid!!

http://en.wikipedia.org/wiki/Le_Gardeur,_Quebec

Pardon my nostalgic rant – listening to too much Xmas music, etc.

#99 Moneta on 12.23.10 at 10:57 am

Aussie Roy on 12.23.10 at 10:22 am
——-
I think the one that makes my blood boil most is when they say that households are fine because net worth is up.

The circular logic drives me batty!

#100 GregW, Oakville on 12.23.10 at 10:58 am

Hi Garth, re: pic, talk about white knuckle ridding. Do you think it helps get more blood into the helmet?

Here a bit of ‘double-speak’ acronym for today, WTF
WTF? CIA Sets Up Wikileaks Task Force
http://www.infowars.com/wtf-cia-sets-up-wikileaks-task-force/

#101 Contrarian on 12.23.10 at 11:09 am

>>Mostly though, demographics are the enemy of big, expensive, suburban palaces. Even the best-off Boomers are reaching the realization few people want a house where you need to send an email to see if dinner’s ready; and is rapidly turning into a financial sinkhole. As a result, some are now listed for 50% of what they cost to build.

This would explain why average house prices in the GTA are rising more than the median price.

#102 CTO on 12.23.10 at 11:10 am

#50 Tim

I’d rather live in Canada as well,…I think most Canadians know that.
Don’t forget ththough that Canadian law allows a Canadaian citizen to ensure that they have a roof over their head without actually buying an extremly over priced house or condo. One can rent, you know, and why not at 1/2 the cost of owning, why wouldn’t you???

As for this such cherished land of canada,…the future is more uncertine now than it has ever been before!

Recent studies show that our larger Cities are decaying, wages are dropping, and costs are increasing. Lets hope that kind hearted, good willed Canadains have the ware-with-all to peacefully weather the coming storm of DELEVERAGING …

#103 Brad on 12.23.10 at 11:18 am

Garth, you are the Michael Moore of the Canadian economy. Although you’ve done a wonderful job of describing the Canadian real estate bubble, you only scratch the surface of the larger global financial system. Perhaps you should have a conversation with Nicole Foss before writing her off. I’m sure she would be happy to speak with you. If you would like to discount her arguments then perhaps you can provide more detail instead of one or two lines. When you’re selling books and the Automatic Earth is trying to warn and help people understanding credit contraction, it’s easy to see the bias.

#104 Bullion.Bunny on 12.23.10 at 11:20 am

#95 Cookie Monster on 12.23.10 at 10:30 am

Gandhi said it best……

1.) First they ignore you
2.) then they ridicule you
3.) then they fight you
4.) then you win

We are now at stage three “the fight for the minds of the people” It’s becoming obvious that the current monetary system is nothing but a giant wealth transfer scheme. It transfers wealth from the population to the state. This is the history of our planet, the state grows until it can grow no longer. Collapse and/or restructuring are inevitable it’s only a matter of time. Paul Krugman is nothing more than a tool of state power, a mouth piece that is needed to enforce the status quo. The “Paul Krugman” monsters of the world promote there half baked ideas until the entire system is in rubble. In the end only to say, “we did not spend enough” and “it should have worked because I’m smarter than you”. Please I’ve heard this my entire life, only to be left with mess to clean up.

#105 Calgary Bust Day? on 12.23.10 at 11:29 am

Was December 22nd the D-day for Calgary RE? What caused 400+ new listings in one day…? Who wants to list their house 3 days before Christmas and why did over 400 people do that this year???

(The 400 listings represent just under 10% of the total MLS listings for Calgary right now.)

http://www.realtor.ca/map.aspx#acr:false;ac:false;baths:0-0;beds:0-0;fp:false;gar:false;pmin:0;pmax:0;rmin:0;rmax:0;openh:false;pool:false;stories:0-0;buildingstyle:;buildingtypeid:;viewtypeid:;waterfront:false;forsale:true;forrent:false;orderBy:A;sortBy:1;LisStartDate:22/12/2010;mapZ:10;page:1;mapC:51.03621279582445, -114.12803649902344;curView:;curStyle:r;chkSchl:false;chkTran:false;chkPol:false;chkMed:false;chkWrk:false;chkFire:false;chkAll:false

#106 Agio on 12.23.10 at 11:32 am

nonplused @ 23
Interesting post but a couple of thoughts. I’m not sure and I’m sure you’ll correct me if I’m wrong but I don’t believe gold is a currency anywhere today.
That aside, I believe less than 5% of the population holds any type of precious metal, be it gold or silver-think it’s closer to 1%. Certain governments hold a substantial amount which leads me to this thought.
Given that 95% of the population or more have no physical holding of PM’s, if there is a collapse in the fiat currency system and all hell breaks loose who are the 95% going to turn to? Their Governments. Like it or not, governments control all things wonderful and have the power to do pretty much what they damn well please and they control everything including the military.
The biggest flaw in the argument that PM’s are a safe haven is ignoring that vast majority of the population who have no PM’s. They will turn to the government and the government will respond in whatever means necessary to sustain order. Though people love to hate them, in a crisis they always turn to the government.
Be it 5% or 1% who hold PM’s, the governments will; if a financial Armageddon occurs, do whatever it takes to sustain order and pacify the majority putting the huge minority in a bit of a pickle. Given governments are probably the largest holders of PM’s that alone gives them incredible power to do as they wish with the shiny stuff.
The above is of course irrelevant if one is a believer in the entire social, societal and governmental collapse where anarchy reigns supreme. I don’t think you’re one of them.

#107 Contrarian Canuck on 12.23.10 at 11:33 am

@ #6 Investor’s Friend

“Weirdly, they don’t even understand that when they borrow, that is someone eles’s savings that they borrowed.”

No it’s not. If that statement were true, how would you explain the fact that bank credit dwarfs all measures of monetary aggregate in the US? Think about it. The notion that all debt is balanced by someone else’s savings is blatantly false. See the Fed’s flow of funds data for reference.

#108 Alberta Ed on 12.23.10 at 11:40 am

Canmore’s ripe for the picking. There are any number of stupendous McMansions sitting empty 99% of the year.

#109 Rich Renter on 12.23.10 at 11:45 am

Meanwhile in the Queens country, BOE announced interest rates will rise to 5%, when is Canada going to get spanked Mark?

#110 dark sad person on 12.23.10 at 11:49 am

74 Deliverator on 12.23.10 at 6:15 am

Investors Friend (Shawn Allen): “Weirdly, they don’t even understand that when they borrow, that is someone eles’s savings that they borrowed.”

Stop now. You don’t know what you are talking about. You have no idea how the fraction reserve baking system that is used everywhere in the world works. You have no concept of how money is created in today’s world.

*******************

Thanks Deliverator–

Saves me kicking his dumb ass around again-
How friggen clueless to the reality of the Markets is this constantly bragging bonehead-
If it wasn’t so dark and sad-it would be funny reading the daily comedy drama-of someone who has it all so assbackwards-he thinks he’s first-

#111 Taxpayer like everyone else on 12.23.10 at 11:50 am

74 Deliverator – this topic was blogged-out days ago. Easily addressed by a simple example:

Do you consider a term deposit you hold in a bank as
savings?

#112 best post on this site on 12.23.10 at 11:53 am

here is how this works…Our massive bubble.
1st you need low low rates to boost up prices.
Next you need a slow down in sales.
Then inventory rises.
We are in phase 2 going on phase 3 as we speak.
Next inventory rise which is projected this spring and it will not have the sales numbers to back up we had in 2009 and 1st half of 2010. Every accountant an finance person knows whats coming…….Its our time…..Back in 2006 everyone in the US said. Not US…..In the words of John McEnroe. (ARE YOU KIDDING ME!!!!!!!!) OH another tip….3 4 5 year rates just went up……This will effect 100,ooo home owners imediately.
Once BOC raises in May. 250000 homes will be effected.. Dont believe it….ASK CHMC……they have an internal note that will never get reported……

#113 Toxicosis on 12.23.10 at 11:56 am

What? Energy costs inclusive of electricity and oil and oil by products(virtually everything we consume) to rise with excessive demand on the part of us Canadians, the developed and the developing world just to survive, but they’ll be no crash? Garth you may be spot on with your present assessment of this world and Canadian housing bubble, but are either full of hopium or denial that a severe economic crash lays in wait. Default or deleveraging on consumer debt is one thing, the possibility of sovereign default is altogether entirely different. As the U.S. collapses into economic and social destitution and despair from their own obvious debt woes, and our reliance and dependency on their importation of our goods, how fare thee here in Canada. Can the federal and provincial governments pay off their debts? Not on your life!! Who are they going to tax?
Certainly not those working in manufacturing, production, or construction. We lose and have lost manufacturing jobs since FREE TRADE circa 1991. Government workers make more now generally with benefits well more than those working in the private sector. Where do those people get their money? From the private sector tax base. Show us when, where, or how these higher paying non-financial, non-technology, non-service sector, non-retail jobs are coming back. There not!! They were sent on a slow boat to China especially over the last ten years primarily. We are on our way to all and excessive levels of such of personal, provincial and federal(sovereign) default. There is another way that only the federal government and our private central bank BOC can do, and that’s to print money. The ponzi scheme has not ceased in the U.S., the IMF just announced that Canada may have to keep stimulating. That would mean austerity, borrowing from the taxpayer of the present and the future, a future IMF bailout, or QE(money printing). You like the Canadian dollar so much Garth???
Has our purchasing power decreased since oh…the end of World War 1. Damn right it has. Keep holding on to those wonderful IOU notes Garth. Keep holding on to the naive and wishful thinking fantasy notion that somehow we’ll just muddle through despite significant increases in the prices of food, fuel, and utilities. Yes houses will deflate around us, only to see the cost of living from things we consume and need everyday to survive skyrocket. Good luck Garth, you’re gonna need it.

Anyone can scare a horse. It takes skill to ride. This incessant wailing about sovereign default is groundless. It’s you who need luck, I fear. — Garth

#114 Cookie Monster on 12.23.10 at 11:59 am

Bullion Bunny, yup, socialists have long hated capitalism because it destroys their class structure. Under capitalism anybody with determination and a bit of luck can rise to the top and become an elitist just like them and they hate it.

#115 TheBigLebowski on 12.23.10 at 11:59 am

Try not paying your property taxes for a few years and see what happens. Does a person ever really own their home? Or do they simply rent it from the government and are allowed to live there as long as the pay rent aka taxes. One of the main mandates of the U.N is to abolish private property where only the ultra rich will be able to afford to maintain a personal dwelling. The clamps are being tightened with higher utilities, taxes, green/eco friendly mandatory upgrades and dependable local jobs. If you own a house , you must have a reliable job within driving distance in most cases to support that location. We, more and more are becoming a transient workforce on the hunt for employment to fill the gaps, not unlike a third world country.

#116 Toxicosis on 12.23.10 at 12:04 pm

@AGIO- So how’s that we’ll turn to the government thing working out in Ireland, Greece, Spain, Italy, and Britain just to name a few. The government is there is save themselves not you, not me. They will offer you bread and circuses not bailout and certainly not help. They are an entity all into themselves, and worry exclusively about their self-preservation. They will see the populace starve and suffer. That’s why revolutions started in the past, and that’s why there beginning to happen again. Thinking that the government will step in to save the day is just an extra heaping of denial on top of the energy it takes to maintain that level of naivety.

#117 Aussie Roy on 12.23.10 at 12:04 pm

99 Moneta on 12.23.10 at 10:57 am

Yes, we get it here to, “its ok because most debt is owed by those of high worth”. Their high worth is all based on high house prices. Love the circular logic – LOL.

I like your logic by the way, you are always one of the posters I stop to read.. Merry Xmas to you and yours.

#118 Cookie Monster on 12.23.10 at 12:05 pm

Agio, you don’t need gold to barter and that’s all that money is, a medium of exchange. There will be enough gold and silver and other items moving about so that trade can and will continue no matter who has a lot of gold or none.

I personally have no gold but I have inventory that I can exchange for gold, some people have only labour to contribute, but it’s value too.

#119 garth turner jr on 12.23.10 at 12:06 pm

Wilkeleaks has declared it has 3 jigibytes of emails between world and business leaders and they will be released in January.

Rumor circulating is that all are relocating to Vancouver BC, Canada, for its climate, safety and lifestyle.

BC will be renamed, “SuperForest”, one giant Commune.

Cost is $5 million per family…present homeowners excepted.

Existing Renters will continue in their Current Service Industry occupations.

Sounds very Utopian if you ask me.

That’s the rumor spreading around folks.

#120 Mouldy Basement Renter on 12.23.10 at 12:13 pm

@ #41 mad as hell
=====================================I think you are a bloody wanker and have no mistress and never will. I bet you cant remember when was the last time you got laid. The real idiots are those who keep reading your crap but I guess idiots like to read idiotic stuff. You have been wrong for so long, get a life.
====================================
Wow, an illiterate vulgarian with a brit “accent” to his writing,with the vocabulary of a troglodite. I HAVE lived to see the day………

#121 Live Within Your Means on 12.23.10 at 12:13 pm

A PS to my post # 98 before I go out to do more grocery shopping for the holidays !!!. While we kids enjoyed those younger years in PQ, for my Mom it was very difficult. She grew up with 5 bros. & her parents were big fish in a tiny pond. Parents owned a beautiful home in what is still an extremely desireable and expensive area of Halifax. They even had a French maid/nanny. Just saying that one’s future can turn on a dime.

#122 Macrath on 12.23.10 at 12:16 pm

Sucker’s bullion. — Garth
———————————-

Suckers bullion no doubt, but I like it`s entertainment value. There is a $5 floor backed by the Gov on the coins.
I`m thinking coin collecting and bored boomers.

The true nihilists are suggesting ammo as currency. The perfect hoard, for Colonel G. Turner to pay the New Caledon Militia.

http://www.youtube.com/watch?v=sNdSqUMaXc4

#123 Basil Fawlty on 12.23.10 at 12:24 pm

“There will be no crash. There will be no boom.”
You continually neglect to say, “in your opinion”. How can anyone be so certain of economics and finance? The one thing I know for sure is that I don’t know, no one does. There are too many factors occurring at the same time to make definitive predictions in economics.
I don’t necessarily agree with Nicole Foss either, however she could be right. Who really knows how the biggest credit bubble in world history, with a multi-trillion money printing orgy, bound up in a quadrillion dollar derivative beast, will all wind down. The only one who could predict the outcome of this total madness is the great spirit and he is too busy laughing his head off at our stupidity.

#124 DM in Calgary on 12.23.10 at 12:26 pm

So here’s a question to the blog dogs — hubby and I still have a ton of RRSP contribution room ($100k) available to us — do we take a loan now and get it working for us, or do we whittle it away over the next few years (with the thought that interest rates will rise thus the cost of carrying a loan like that will rise) — and that’s on top of a $50k catch up loan I took last year — we have no other debts, no mortgage. We can make the pymts, no problem.

I would rather be saddled with a huge RRSP catch up loan at prime +1 than say, a mortgage.

What would you do?

#125 Cookie Monster on 12.23.10 at 12:28 pm

Agio, the reason I have no gold is precisely because gold is money and I’ve spent all my money in my business on things like inventory. So if I held gold it would just be non-productive capital or savings. So I’ve invested all my capital and more because I also have a bit of CAD $ debt to boot.

And I think my debt is good debt because as inflation roars in the future, and since my debt is in the same debt boat as the government’s debt because the government is a big debtor with a printing press, I’m a wisely invested debtor so I expect the government will drive our boat by the wind of inflation. So it’s sad to see savers get robbed as the value of their dollar savings is diminished but that’s why gold bugs say if you have savings buy gold because gold has intrinsic value. You can also buy stocks or anything that has intrinsic value to protect yourself from inflation, just don’t hold FIAT money or a promise to be paid FIAT money in the future.

#126 Mouldy Basement Renter on 12.23.10 at 12:32 pm

As for todays’ photo Garth.
Is that how Bikers dry their armpits after their once a month bath ?

#127 Cookie Monster on 12.23.10 at 12:39 pm

Looks like we might be getting a Korean War for Christmas!

This is one war I actually think I support because I think N.K. is a brutal dictatorship and liberation would be moral.

#128 Patz on 12.23.10 at 12:42 pm

#114 Cookie Monster
Bullion Bunny, yup, socialists have long hated capitalism because it destroys their class structure. Under capitalism anybody with determination and a bit of luck can rise to the top and become an elitist just like them and they hate it.

Smugly said sir! But perhaps you’d like to explain why in recent studies it’s been shown that there is a statistically insignificant movement upwards in both financial and economic terms in the UBS (United Banana States) aka USA. There is considerable movement downwards however so maybe you’re looking at things upside–down. Hmmm.

#129 Pr on 12.23.10 at 12:43 pm

…There will be no crash. There will be no boom..
In the history of global finance, we have never faced a sovereign debt crisis like we are seeing now. All over the globe governments are being suffocated by absolutely crushing debt loads. Once a couple of dominoes fall, it is going to be really hard to keep the rest of the dominoes from falling. I don’t want to scare anyone but I am considering investing in barbed wire and storable food, things are not looking good and rates are heading higher. smile.

#130 Canadian in the U.S. on 12.23.10 at 12:48 pm

Tim, pride cometh before the fall. I disagree with you. Housing in Canada is only higher for right now. Housing in Canada will be coming down, and probably more than it did in the U.S. Your reasons as to why Vancouver vs. Seattle are all hindsight or in rhetoric, and they have very little if anything at all to do with either of the actual two cities. I currently live in San Francisco, and here is my take:

1. People love it in the U.S. too. I’ve learned most of what I was taught about the U.S. is a complete lie and sensationalism, probably only to make us feel better about where we were living in Canada (from B.C.). Probably more than anything, I’ve found Americans to be the most inviting people I’ve ever encountered, and I’ve lived in a lot of places and countries, including Canada, U.K., Belgium, and The Netherlands. Also, I find Americans to have a refreshingly different perspective on social, political, economic matters that I honesty had never considered. These are anything but stupid people. This is a country that values and respects individualism. Americans are, contrary to what many believe, probably the most globally connected and educated people on Earth. It became in vogue to poke fun at them some 10 years ago, much of it based on false information and frankly jealousy. What I’ve realized about Canadian media is any information that places the U.S. at the slightest disadvantage is either sensationalized, or it is presented as a we-are-better than the U.S. piece. This is not reporting the news, this is imperialism. I now believe Canadians are the most imperialistic people I’ve ever known – not Americans. Americans actually state their faults and embrace them to do better. This is perhaps why they excel so much more than others.

2. Americans do have the highest levels of wealth on Earth, allowing for ease of life and quality of life to be better than many. Americans also work more than any other country on Earth and on a per-capita basis are the most productive people. Is this a bad thing for them and should they be punished for this? This would prompt people to want to live here. However, I believe this propels much of the anti-American sentiments that have exploded over the past five years. Sure, they’ve made some severe mistakes with respect to war. But, in typical American fashion, they are picking themselves up and rebuilding/reinventing themselves. The world is actually following, once again, the U.S’s lead. To be living outside of the U.S. and looking in, it would be difficult to capture what this actually means and what is really going on. I live here now, and it is amazing to think I am a part of this. The U.S. political system is, undoubtedly, the worst system in the world, except for every other political system on Earth.

3. Canada doesn’t have multiple cities on the verge of bankruptcy….yet. Believe me, it is coming, though. Canadians are tapped out and raising taxes again isn’t going to fare well for people to cover government debts. This action, coupled with higher taxes to cover CMHC losses will be horrific. Raising taxes decreases consumer spending, and it also deteriorates ability to purchase and pay for homes. It becomes a nasty cycle that is difficult to break. This is a major contributing factor as well to property devaluation. So, using home values as a reason why people would prefer Canada is a losing argument, only to excel as time passes.

4. I actually conduct quite a bit of business in Seattle, and in my humble opinion, Seattle does surpass Vancouver on nearly every level. I am originally from Vancouver, B.C., and I do love it there too. But, Canadians just yell louder when they recognize a good thing in Canada, like Vancouver. It does not, however, make it true. Seattle is a much nicer city with more to do, more vibrance, better looking, and a much better economy.

5. Canada will never have nearly the number of random shootings as found in the U.S. The U.S. is 10 times the size of Canada, and will therefore have higher numbers of incidents, good and bad, than Canada. The RATE of shooting is what is important here.

6. The U.S. does have over 100 military bases, which protects not only the U.S., but Canada as well. The largest beneficiary of the U.S. military might, apart from the U.S., is Canada. And, the American tax payer is footing the bill to pay for the protection efforts of the citizens of Canada. Canada would be toast without the U.S. military, so some gratitude should be in order to the general American population as they pay for our protection without asking for reimbursement.

7. The U.S. job market is slowly healing, and the U.S. economy is slowly picking up. Canada is only beginning its decline, which will probably surpass the decline of what was seen in the U.S. Number do not lie and there is no other way around it. I know it is difficult to understand right now, much like it was here in the U.S. only four years ago. As the U.S. picks itself up, Canada will be in free fall and the Canadian dollar’s value will rapidly diminish. I wouldn’t doubt it if Canada ultimately approaches the U.S. for assistance and additional aid beyond that of what the U.S. already provides.

My verdict: Seattle, or any other major U.S. city on the West Coast, over Vancouver any day.

#131 ralph on 12.23.10 at 1:00 pm

Horror story:

http://www.edmontonjournal.com/business/fp/money/Landlord+held+hostage+real+estate+investments/3988718/story.html

#132 CTO on 12.23.10 at 1:01 pm

#123 Basil Fawlty

“I don’t know, no one does”

Yup, your right, there are so many factors at play…but one thing has proven us time and time again:

The seasons always change
For every action there is an equal and opposite reaction
What goes up, always comes down or vs versa
Pride comes before a fall

Those parables are enough to keep even the uneducated informed enough to choose the right road.

#133 Hoof Hearted on 12.23.10 at 1:01 pm

Good article Garth:

People do NOT learn from history.

In Vancouvers Shaughnessy area, mansions were built till the Depression hit. Many of the owners went bankrupt. The area became known as Poverty Heights. Many mansions were converted to rooming houses, hospitals, even stratas to this very day.

After Expo 86, and many Asians moved to BC, they built McMansions(ie 5000-6000 sq.ft houses). Many of these already look old and dated …getting to be 25 years old. Many of the buyers of these homes are guess what!!! turning them into rooming houses !!!!

What I can foresee is a vast array of mini-ghettos not in a specific location, but throughout the city. You’ll have an McMansion full of people, and pissing off the neighbours.

This will become a nightmare for property values, and City officials will have their hands full trying to keep the peace.

#134 jwkimba on 12.23.10 at 1:03 pm

Live within your means – thanks for the memories.

I’ll also throw my hat into the McMansion question. TO me, lot siuzeis also an issue. if the sf of the house is larger than that of the lot, you are looking at a Mcmansion.

A standard 25×100 (ie 2500 sf) ft lot stuffed with a 3500sf McMan leaves a ~ 8 ft front yard and a patio sized backyard. all the neigbouring bungalows are 1200sf max.

#135 dark sad person on 12.23.10 at 1:06 pm

And there’s another compelling reason why real estate as an asset class is doomed. Increasingly it spells danger. Just like precious metals.

*************************

You’re a deflationist yet you miss the deflation trade-

USD/CHF/Treasuries/Gold will be the trade-
“all” competing as safehavens-
Don’t rule out a double dip–

Here’s the Deflation trade-how it looked during the last crash-
Gold-USD-Treasuries up and Equities crashing-why would that trade not come back into play?

What was hot and what was not-

http://1.bp.blogspot.com/_nSTO-vZpSgc/SezT5Kf6YcI/AAAAAAAAF9A/Y8bOUxCK4po/s1600-h/metals.png

http://1.bp.blogspot.com/_nSTO-vZpSgc/SezSIpSoF7I/AAAAAAAAF8Y/yjeIdurgW_A/s1600-h/currencies.png

http://4.bp.blogspot.com/_nSTO-vZpSgc/SezSZzAWAgI/AAAAAAAAF8g/umI0PfGb3vQ/s1600-h/energy.png

http://2.bp.blogspot.com/_nSTO-vZpSgc/SezTCeI-n1I/AAAAAAAAF8w/kz8d1LKxch0/s1600-h/Grains.png

http://1.bp.blogspot.com/_nSTO-vZpSgc/SezTbiv4YGI/AAAAAAAAF84/kmFU0pbicz0/s1600-h/Indices.png

Also-
Gold “is” a Currency and trades as a Currency-right under the noses of the blind-

http://4.bp.blogspot.com/_nSTO-vZpSgc/RbmVmJlgCkI/AAAAAAAAAPs/uJ8e5vdJSj8/s1600-h/SpotGold.png

Gold has done well in every Deflation-
Why?
Because it is Money and Money does extremely well in Deflation-

It always has-why wouldn’t it again-is it “different” now?

http://2.bp.blogspot.com/_nSTO-vZpSgc/RbmMtplgCjI/AAAAAAAAAPk/NtN5JDlwHio/s1600-h/homestake.png

http://4.bp.blogspot.com/_nSTO-vZpSgc/RbZwf5lgCXI/AAAAAAAAAN0/WJYO6dh-ogg/s1600-h/Gold-CPI-FF-Rate.png

#136 vreaa on 12.23.10 at 1:13 pm

Spot The Vancouver Speculators #22 –
“The realtor himself owns four, rented out, and plans to sell and retire with the equity a few years from now.”

see:
http://wp.me/pcq1o-1FR

#137 rory on 12.23.10 at 1:19 pm

#50 Tim you said: “… The majority here were dumb enough to vote in a neo-con…”

This is a yikes. You tell me who is dumber. I pick Liberal Iggy.

http://ezralevant.com/2010/12/what-would-an-ignatiff-governm.html

#138 Agio on 12.23.10 at 1:22 pm

Cookie Monster x 2
If you re-read my initial post I said nothing about gold having or not having any intrinsic value nor was I seeking a definition of barter. Nor was I, to cover some other persons idiotic rant (not you CM) saying the government would step in and ‘save’ us-I guess a Grade 9 writing level was too high for their reading comprehension.
I was and am saying that if, in the event of a fiat crash the vast majority of people do not have PM’s and that majority will look to the government and the government has both the means and power to do whatever they please and to restore order they will do whatever it takes-particularly as the majority will be clamouring.
That’s not saving anyone, that’s called an intervention and you can beat your Gold Maple Leaf that they will indeed intervene in the event of such an event. In a heartbeat they could equalize gold and what could be done by the 1-5 percenters? Nothing aside from impotent snivelling.
Lastly I think you are contradicting yourself in respect to stocks having intrinsic value. If a collapse were to happen, stocks would have no value. They trade in fiat currency. That by the way is one of the gold bugs principal arguments for holding PM’s, which I think is a fallacy. I rank it up there with squirrel soup being tasty.

#139 Utopia on 12.23.10 at 1:30 pm

#212 The American on 12.23.10 wrote:

“At #189: Tim, you asked who would want to live in America? The short answer for you is about 300 million people more than who would want to live in Canada”.
————————————————–

Don’t get tied in a knot over Tim’s comment American guy. There are plenty more of us up here who love the States and have spent lot’s of time visiting down there.

Seems half the people I know spend all their time surfing the U.S. real estate ads lately, eyes bugged out over how affordable places are in some of the most sought after of destinations.

I have always been amazed at how the attitude changes for the better once you get across the border heading South. Americans are pretty stoic considering all the trashing the economy there has taken these last couple years.

I am not sure we will be quite so relaxed when the chicken comes home to roost up here and R/E prices actually fall in a way that wakes people up from the complacent slumber they are in.

#140 Industrial Guy on 12.23.10 at 1:32 pm

The Canadian economy is a confusing mess of statistics ……..

We’re still hewers of wood and drawers of water…..
According to Stats Canada, October was a good month is you’re in the Mining and oil and gas extraction business.
Mining and oil and gas extraction rose 2.4% in October. Output at copper, nickel, lead and zinc mines continued to recover following the end of labour disputes. There’s also good news in forestry as industry giant AbitibiBowater emerged from Bankruptcy protection in December. So, If you’re looking for work, move to Edmonton, Estevan, St John’s, Sudbury or Timmins.

Manufacturing declines again. The middle class in Southern Ontario gets slammed on the head once again!! Manufacturing decreased 0.6% in October, manufacturers of non-durable goods cutting back production by 2.3% (27.6% annualized) The sale of auto parts are up. It’s too bad so many parts plants closed last year. Many of these enormous facilities remain vacant. The weeds which popped up in parking lot asphalt during the Springtime, are now small trees.

An increase in the home resale market in several parts of the country led to a 5.1% rise in the output of real estate agents and brokers, marking a third consecutive monthly gain and yet new home construction actually declined as residential building construction fell 1.7%. Roughly a annual decrease of 20.4%. Single dwellings and renovations led the drop. So the deckhands of this Titanic are still making money shuffling the chairs but industry health is far from rosy.

Decline in retail
Retail trade fell 0.4% after an increase of a similar magnitude in September. The decline in October was largely attributable to clothing stores and general merchandise stores (which include department stores). This drop could be attributed to the market waiting for “Black Friday” and the Christmas Sales which are on everywhere right now.

The recover seems to be sector driven. While one rises …another declines. The really disturbing news comes from Southern Ontario. The manufacturing heartland continues to decline at an alarming rate. The corresponding loss of middle class jobs also means less revenues for governments. Until this changes, either deficits will become structural or significant tax increases or on the way. I would bet on the tax solution, after all it’s Canada, eh.

Let’s be realistic ……many families in Canada are desperate …. they try to maintain their lifestyles and pay for their children’s educations by digging deeper into debt. Everyone knows this is unsustainable but, what choices do they have? Salaries have remained stagnant for a decade while the price of everything has soared. Reports which claim that many families are one pay cheque away from disaster demonstrate our reliance on debt to cover basic expenses.

This sham of a recovery is built on mountains of family debt. All the Bank of Canada’s actions seem to have achieved is to delay the inevitable and possibly make it much worse. It’s no wonder the head of the Bank of Canada is warning people not to use credit cards to finance their Christmas spending. At the same time, economists from the major banks are hitting the airwaves telling us it’s OK. We can afford all this debt. 1.48% of income is not a problem. Buy a car, buy a house … My bank’s profits depend on it….

The decision by many of the Baby Boomer to place all their retirement financing in the escalating value of their homes was for many not a conscious decision. It was more likely just a last resort. Even if they couldn’t afford their annual RSP contribution, at least the market value of the house was rising. Real estate became the retirement emergency parachute. Now it’s time to hit the silk….

As the housing market continues to decline, the likelihood this parachute will function as hoped becomes more and more remote. We are truly embarking on a decade of despair as The Baby Boomers start retiring in large numbers. Many comments made by Government officials and economists indicate that, only now has the severity of this issue hit home. How we deal with this underclass of elderly poor will be the primary political issue in this country for the next 20 years.

http://www.statcan.gc.ca/daily-quotidien/101223/dq101223a-eng.htm

#141 Iconoclast on 12.23.10 at 1:32 pm

“If something can’t go on forever, it won’t.”

But what does it look like when it finally stops?
I don’t really see any endgame other than sovereign defaults.

Irish bonds are back to 9% and rising. Greek at 12%.
At some point they will just throw in the towel. They’ll have to.

The first nation to do it will be pilloried, but will survive. Once everyone else sees that, they’ll fall like dominoes. The Greater Fool will be any country that punishes it’s citizens to try to pay off debt, especially foreign.

After all, it’s all just ones and zeroes in a computer.
As long as we can still eat and the lights stay on, what’s the problem?

#142 Rich Renter on 12.23.10 at 1:46 pm

#124,
I would pay off the $50k debt, having 100K contribution room for an RSP is not real money.
I would also invest my cash in a TFSA instead of an RSP.

#143 R on 12.23.10 at 1:49 pm

Crude just hit $91 per barrel. Don’t worry, it’s not inflation. Don’t worry that gas is $3+ in the US, or that States and Municipalities can’t fund their pensions, or that Best Buy cut its earnings forecast, or that after QE 3, 4, 5, & 6, there will surely be 7 & 8, it’s all good. Everything is good for stocks, just buy Apple on the dip. Recovery is at hand, and with that, our rickety, debt ridden boat will rise! Kool-Aid is still cheap!

#144 bill on 12.23.10 at 1:49 pm

Merry Christmas Everybody….trolls and gits too.

i am surprised Garths comment on silver hasnt generated any outrage.
i would have thought the pm bugs would be all over this one.
if you insist on ”investing” in silver it is very volatile.
supply may not be as tight as many think it is.
ect.
fwiw I am going to cash in my silver jr slowly but surely.
you cant make a profit unless you sell….

#145 Mikey the Realtor on 12.23.10 at 1:52 pm

Why not shave your back and wrap it? Weasel’s in this year. — Garth

LOL, well at least your humour will keep the pups and poodles around, your predictions definitely wont. Merry Xmas to everyone and don’t hesitate to call for all you RE needs.

#146 The InvestorsFriend (Shawn Allen) on 12.23.10 at 1:52 pm

Dear Fractional Reserve Nutbars:

Is there a term for irrational fear of fractional reserve banking? If so I will use it in place of the general term “nutbar”.

Here is the wikipedia link on this:

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

Yes it is true that brand new deposit from outside the banking system create loans of about 19 times that amount. It also creates deposits of 20 times that amount. Remember the bank lends out about 95% of the depostis. The trick is every loan tends to come back in as a new deposit of which about 95% or more can be loaned out again.

The thing is, brand new deposits are rare. Your pay check is only a transfer from your employer, not a new deposit. Your pay check does not create new money the way a new deposit from outside the system does.

The Fed can indeed create new money and make brand new deposits which spons about 19 times that amount in new loans as the new deposit is loaned out, redeposited and 95% of it loaned out again and so on.

There is really nothing nefarious about it. Although if abused it can certainly lead to inflation.

Nutbars think bank’s loan out more than their deposits. Well check the balance sheet of any bank and you will see that is not true.

If you think banks can create money at will, then for gods sake, buy their shares.

Get in the game people. Instead of whining about paper money. Go out and earn some of it.

…Thank goodness I am here to explain this.

#147 Rook on 12.23.10 at 2:01 pm

Inflation vs. Deflation?

Garth I get confused when you mention deflation. I’ve been reading your blog long enough to know that you expect the Bank of Canada will soon need to raise interest rates in order to tame inflation. You also seem to agree that most commodities will go up in nominal value.

My question is do you forecast a housing bust (15% crash, 5% annual melt afterward) in real or nominal value. I have no doubt the housing market is overvalued (which is why I’m renting and invested in a diversified portfolio heavy in energy and commodity ETFs), but I’m not sure if the correction will produce such a loss of nominal value during high inflation. There’s no doubt it would still hurt a lot of people as interest rates go up and values stagnate. In either case, it would be interesting if you could clarify your views on inflation vs. deflation.

#148 Anotherlowlyrenter on 12.23.10 at 2:04 pm

thought you’d like this:

http://www.mnn.com/your-home/green-building-remodeling/blogs/beijings-incredible-inedible-egg-house

#149 GregW, Oakville on 12.23.10 at 2:05 pm

Hello Garth, fyi
Below are just some of the headline-links articles today at http://www.infowars.com/
If anyone cares to have a look?

Has The Financial Collapse Of Europe Now Become Inevitable?
‘We are witnessing the slow motion collapse of the euro and of the European financial system.’

French president says must consider SDR role
‘French President’s agenda to reform the international monetary system would look at widening the role of the IMF’s Special Drawing Rights.’

Spoiled Nations Reflect A Spoiled Economy
‘Germany may be sliding into areas we haven’t seen since the early 1930s.’

Down Argentine Way
‘The economic lesson to be learned from the Argentina experience is wealth and resources can be destroyed by big government and financial mismanagement.’

Are you Domesticated? “Travel-trained: Americans take security with sigh”
‘The latest all-propaganda piece to come out this week from the AP highlights the “sighing American.” ‘

Austin Woman Thrown to Floor, Arrested for Refusing Pat Down at Airport
‘Arrested and banned from airport because she didn’t want the TSA fondling her breasts.’

Terrorists may poison the food supply (but the food companies already have)
‘If you’re a terrorist looking to poison the U.S. food supply, get in line, buddy! The food companies have beat you to it!’

#150 UrbanCowboy on 12.23.10 at 2:25 pm

So long as there is economic turmoil precious metals will continue their rise. Currencies are not in any better shape, only worse, going into the new year. Where to go USD, Euro, Yen? Only gold/silver can’t be reproduced/printed. Only way to fix the currency problem is to return to the gold standard which would send the price of gold to the stratoshpere.

#151 Thetruth on 12.23.10 at 2:27 pm

#83 TO Bubble Boy

Don’t disagree with you…. That said, just trying to bring attention to the blog readers that these immigration numbers don’t include ‘temporary’ immigrants. These number over 250,000 per year over and above the regular permanent resident immigrants.

Over the next years the Regular immigrant numbers will increase because there is a new immigration class called the Canadian Experience Class. This fast tracks temporary residents into permanent ones in three years.

So the real immigration numbers are much higher (see statscan website) and this has a direct affect on the demand for housing, price of business, vacancy rates.

Most immigrant businesses with help wanted signs are just bringing relatives into Canada through this process.

I am neither for nor against immigration. Just stating that immigration has an affect on housing and that is why friends continue to buy condos to house multiple temporary immigrants to one suite.

#152 realpaul on 12.23.10 at 2:29 pm

As was predicted in the beginning the Olympic Village site has begun its transition into a social housing complex. No one ever thought it would sell at the outrageous prices on offer given the ‘middle of nowhere’ location and the cheap and shoddy construction.

http://www.vancouversun.com/business/First+tenants+move+into+subsidized+housing+Olympic+Village/4016384/story.html

Predictabley the first ‘human shields’ are being trotted out to field off the obvious reactions regarding what a lieing bunch we have at ‘Shitty Hall’. The council is using a few disabled persons to hide behind because of course they think that no one is going to be able to speak out against such a huge waste of taxpayers dollars if there is a disabled person in the headlines. Cheap politics…scummy.

But I hope this is a generational lesson for new voters as to what happens when you let politicians develop real estate.

#153 BrianT on 12.23.10 at 2:38 pm

#130Canadian-One can’t even post a rebuttal to such nonsense-it doesn’t reach the minimum level necessary.

#154 613 Happy where I am on 12.23.10 at 2:42 pm

Thank you Garth for praising smaller houses. I live in a 3 bedroom townhouse in downtown Ottawa with just under 1000 sq ft. 3 bedrooms, 2 bathrooms.

I chose the house because of its location and the fact that I am able to walk to Chinatown, Bank and Elgin Streets, even to work in Hull… I have lived her for 22 years and have no plans to move.

Friends of mine, who need some kind of gratification that monster homes gives them, have all thought I was crazy to live in that small space… I just smile politely while they all try to justify why 2 people need all the space in one of those monster homes where they need a car to get anywhere…

If you actually need a monster home because you have 19 kids or a large extended family, by all means, go out and buy one. But the average family can live in a house considerably smaller which is cheaper to maintain and less work to clean.

#155 Coraline on 12.23.10 at 2:44 pm

Email to find out if dinner is ready, private armies, weasel coat, all very funny!

#156 realpaul on 12.23.10 at 2:44 pm

Why don’t these stories make it into the local papers? Is there an agreement between the guilty parties not to ‘out’ one another in order to not cause anger amongst the population.

The fat sucking Canadian civil servants certainly want to keep secret the outrageous compensation salaries and pensions they recieve. Is taxpayer funded advertising budgets administered by civil servants a kind of payola to keep the Canadian msm from publishing the truth?

http://story.argentinastar.com/index.php/ct/9/cid/e974f944f2e7496e/id/41492130/ht/Hydro-One-CEOs-bid-for-464K-pension-rejected/

If the general public realized the extent of the robbery it would be very difficult to keep the lid on this outrageous waste and abuse of tax money.

The fallacy that ‘they have to pay higher salaries to attract the best’ is just total BS. In fact the governement hires from within on the basis of seniority NOT merit. No one in the private sector recieves this compensation and pension for equivelant work.

#157 Toxicosis on 12.23.10 at 2:46 pm

@Garth- The horse thing is a nice platitude/analogy but once again you’ve provided no reason how Canada much less any severely indebted nation can pay off it’s own national debts via taxation or it’s international debts via taxation and trade. Facts not fear is what I proffer and offer, if you can provide evidence and facts to the contrary as to what our nation and many other nations at present are facing than have at it. Healthcare costs alone which in the last twenty years have exponentially and mercilessly risen especially in developed countries are enough to break the bank. Pension availability is a paltry second when it comes to social safety net programs. Once again look at what is happening in Europe, do you pay attention, or think that it cannot, will not, or shall not happen here? North Americans have turned into quite the passive bunch, with Canadians being guilty hands down the biggest winner or loser have you. Don’t speak of higher energy prices, no depression, 20% depression(“survivalist post”), higher property taxes, higher debt to income ratio than any other OECD, we’ll muddle through, and other such talking out of both sides of your mouth. Is sovereign default nonsense. Check your history, how many times have countries gone bankrupt and came right back. We call that sovereign default eh. We have already supplied so called solvent banks in this country 75 billion. But they’re solvent so what gives? QE is hot already both in the U.S. and the U.K. Their citizen personal debt road has been followed by us and many other countries. And how well are they doing. Not fear Garth just facts. Hope is for children, reality is for adults. I prefer to prepare and deal with reality and understand the value and necessary financial literacy of survival. You offer your advice, I’ll offer mine, and then we’ll see who’s can be verified against reality. For she always wins.

Canada is not bankrupt. No federal or provincial bond issue will go into default. — Garth

#158 Aussie Roy on 12.23.10 at 2:47 pm

Dear Fractional Reserve Nutbars:

LOL

http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

Merry Xmas…

#159 wes_coast on 12.23.10 at 3:08 pm

Hi Garth,

I know you predict a slow deflation and I can see where you are coming from with that prediction. However, does it not seem like the only reason Canada (or at least western Canada) has weathered this global storm relatively well is because of the inflation in commodities offsetting the US style deflation we likely would have seen otherwise? Australia seems to be in the same boat as us. I feel the chances of a China bubble bust (similar to Japan 20+ years ago) is likely. If you agree with that statement, do you also feel that will cause a crash here? I see a lot of diverse businesses getting crowded out by the commodity and RE inflation and feel that our diversification as a nation is dwindling and setting us up for an even harder fall.

Anyhow, just some thoughts I’d love to hear your opinion on.

#160 Gold, Silver and Arithmetic on 12.23.10 at 3:10 pm

Since we’re talking about mistresses I just bought my sweetie that chinchilla fur coat I was talking about a few weeks ago, after a few nice sales, why not? Thanks to my clients it has been a great year and 2011 will be even better.

Why not shave your back and wrap it? Weasel’s in this year. — Garth

This is the funniest response to a comment I have seen EVER. You have a way with words, Garth

#161 Roial1 on 12.23.10 at 3:15 pm

Anyone can scare a horse. It takes skill to ride. This incessant wailing about sovereign default is groundless. It’s you who need luck, I fear. — Garth

Garth, I tend to agree with you———AND then I think of Iceland.
It could happen.
Would we have the guts to “Just Say NO!”

#162 C on 12.23.10 at 3:20 pm

I think Bullion Bunny mentioned this yesterday, and she is correct, the Baltic Dry Index is looking very bad. Go to stockcharts.com and type in the symbol $bdi. It made 2 attempts to break through the 200 day moving average (in September and October 2010) and got rejected. Since, it’s been falling and gathering speed to the downside by the day. A similar path occurred back in July and August 2008. We know what happened when September 2008 arrived.

As for gold stocks now is the time to buy and buy big!!!! I am. We had a mini correction recently and we are again ready to rumble back up!!! This move up will be a biggie!!

Garth, I know you don’t like gold but I still love the site. Don’t hate it, embrace it. If something is been in a 10 year bull market that’s a good thing. Think US stocks from 1982-1992. The best was yet to come. Gold will end in a bubble but it’s still a ways off. By that time the next game in town will be US stocks perhaps?

As for real estate, I’m still getting scoffed at when I tell people I rent and a stiff correction could be coming. My Aunt said to me this morning “never bet against real estate. I’ve seen many people get out, and when they wanted back in it’s been too expensive”. Sounds like something you would hear at the top rather than the bottom doesn’t it. How about “don’t touch real estate, I’ve seen countless people lose hundreds of thousands of dollars”. That would be a good time to buy! Truely astounding how bling the average Joe is as to what is coming in Canadian real estate.

#163 This is Wonderland on 12.23.10 at 3:32 pm

#28 garth turner jr

OMG!!!
You made my day; I have tears running down my cheeks.

Thanks jr.

#164 kc on 12.23.10 at 3:52 pm

119 garth turner jr on 12.23.10 at 12:06 pm

Nosty JR must be back

#165 dark sad person on 12.23.10 at 3:54 pm

#139 Agio on 12.23.10 at 1:22 pm

That’s not saving anyone, that’s called an intervention and you can beat your Gold Maple Leaf that they will indeed intervene in the event of such an event. In a heartbeat they could equalize gold and what could be done by the 1-5 percenters? Nothing aside from impotent snivelling.

****************************

What a ridiculous comment-
In case you didn’t know-Gold trades in the Futures Market-
I’d like to see the Government try to “equalize” Gold-whatever the hell that’s supposed to mean-
Maybe they can equalize Oil as well?

Sovereign Governments are powerless to control the Market-
I’ll bet the ladies of India would have more influence over the Gold market then the Government-
Governments are not selling Gold-they are buying it-

You are way to Canadian centric-
Canada hardly even registers in most data bases-
We’re too tiny to even matter-we couldn’t effect the price of anything-

#166 garth turner jr on 12.23.10 at 4:03 pm

Wow, where is stability left in the world?

Where are the refugees headed?

Europe?

Asia?…Billions and billions of mouths to feed

Arabia?…can’t eat oil

Africa?

Israel?

South America?

Caribean/Gulf/US east coast?

Eastern Canada?

omg, there is no where safe to live!

Guess I’ll stick it out on the Left Coast

#167 Cookie Monster on 12.23.10 at 4:19 pm

Agio, stocks are ownership in a company and if the company makes a product or provides a service then it has a value based on its ability to provide those consumer goods. How you measure the value is irrelevant whether the stock trades in Canada in CAD currency and lets say the value of the CAD $ gets wiped out by 50%, meaning it losses half its purchasing power due to inflation, increase in the amount of money in circulation, then the products of the company you’re invested in will simply raise there prices and keep producing items of ‘value’ to the ‘market’ and there will be plenty of new money out their because of the new inflation to support the higher prices. So ownership in a sound company is protection against destruction of a currency, any currency.

#168 Moneta on 12.23.10 at 4:21 pm

Aussie Roy on 12.23.10 at 12:04 pm
——
The feeling is mutual… and best wishes for the holidays!

http://link.brightcove.com/services/player/bcpid1909243034?bctid=53156488001

#169 Al on 12.23.10 at 4:25 pm

100% liquid and worth less every hour as costs go up inflation !

Liquid does not mean cash, of course. It means investments that can quickly be converted into cash. — Garth

#170 Ted bukle on 12.23.10 at 4:46 pm

CMHC out of control.

http://www.cbc.ca/fp/story/2010/12/23/4019930.html

#171 VICTORIA TEA PARTY on 12.23.10 at 4:50 pm

RABBIT, RABBIT, RABBIT…

The (London) MailOnline’s headline, today, is emphatic about it all:

“Fresh humiliation for eurozone as China says it will bail out debt-ridden nations”.

Imagine, Charles de Gaulle must be spinning in his grave. The gall of those Asians! Sacre bleu! Good for that old louse.

Coinciding with the upcoming Chinese Year of the Rabbit (2011), it is reported that the Chinese premier offered to buy Greek bonds in October, and has since agreed to buy out Portuguese paper.

What is about to happen here is what’s been happening in a lot of places this year for China. Remember, that in order to avoid dealing with the ailing USD, China has been buying up raw resources all over the world.

Now, it looks like it’s about to take out a first mortgage on its largest trading partner, downtown Europe!

Going through the entrails of Chinese astrology yields, perhaps, a reason for this sudden interest in the “old country.”

Here is the story of the Year of the Rabbit:

“…the Rabbit brings a year in which you can catch your breath and calm your nerves. It is a time for negotiation. Don’t try to force issues, because if you do you will ultimately fail. To gain the greatest benefits from this time, focus on…security, diplomacy…Make it a goal to create a safe, peaceful lifestyle, so you will be able to calmly deal with any problem that may arise.”

So, what happens to the Eiffel Tower for example? Decorate it with noodles? How about some Welsh Rabbit with that? Mais, non!

In Rome, they’ll be dismantling the colliseum and relocating it outside the Forbidden City! Bread and circuses for the Chinese masses! Wonton soup for you, Comrade!

Spain? They’ll be exporting those bulls. I know, a bull in a China shop!

Greece? That Parthenon could use a face-lift in, say, Shanghai!

Portugal? Sardines and bread (loaves and fishes)! How about a little sherry?

So, China, not only buys its future supplies of resources; it also buys its VERY OWN trading partner, which means that it will be trading with itself?!? How the heck does that work?

What’ll happen to all of those European labour unions? Gone as landfill to that next big earthen dam project on the Yangtse? Don’t laugh. The ramifications, in all seriousness, are endless, stunning, amazing.

Meanwhile this same story also reports this!

“China could overtake America as the world’s biggest economy within two years,” according to the US Conference Board. “In terms of purchasing power, taking into account the goods and services a country actually buys at home, China is well on its way to outstripping its fading competitor (USA).”

Hot Damn!

2011 is shaping up to be cannon fodder for the rest of us; rabbits, Peking Duck, chicken fried rice. Whatever! Pass the soya sauce!

#172 CTO on 12.23.10 at 4:54 pm

#146 Mikey the Realtor

Merry Xmas Mikey and…no problem-i will not be calling…unless you sell Re that has value like in Florida were it’s 1/3 the price and 10x the value of the dumps for sale in Canada in crappy hoods….

#173 jess on 12.23.10 at 5:08 pm

3 MKUltra /#18 CanadianAmerican
outrageous !

=

Are you one of the lucky ones? Have a good job, live in a nice neighborhood, enjoy your cozy home? Think foreclosure only impacts the reckless or the unemployed?

Think again.

George Mahoney worked and saved and built his cozy colonial-style home in Lynnfield, Massachusetts in 1981. There, he and his wife raised three lovely daughters. For many years, the Mahoneys paid down their relatively small mortgage with their local bank — a division of Bank of America (BofA). In 2007, they took out a second mortgage to help a daughter start a small business. Two wage earners, a great credit record — the loan was a breeze. That was when the trouble began.

About a year after getting the second mortgage, BofA started notifying George that his payments were late. Soon they jacked his credit card interest rates from seven percent to twenty-eight percent. Next, they ruined his credit record. His Sears card dropped from a $10,000 limit to a $500 dollar limit. Then one day in the fall of 2009, BofA initiated foreclosure on the house he had built and owned for 28 years.

The only problem? The Mahoneys had never missed a single payment on either their first or second mortgage….red further
http://www.prwatch.org/node/9818
=================================================
“Today’s Wall Street Journal has a stunning exposé on a publicly-traded company called Life Partners Holdings. Are you ready for this? Life Partners creeps around asking the unemployed, the elderly and the sick (especially people with HIV/AIDS) to sell them their life insurance policies for cash. Then they bundle these policies into securities and sell them to vultures — oh, I am sorry, “investors.” Then the “investors” sit around and wait for people to die — the sooner the better for the purchasers of these death bonds. The future of this industry “looks bright,” chirps National Underwriters. …”
http://www.prwatch.org/headlines

======
Happy Thanksgiving! You’re Tele-Fired
corporationseconomypharmaceuticals
Source: HuffingtonPost, December 17, 2010

On November 30, employees at the world’s fourth biggest drugmaker, Sanofi-Aventis, got an email from the company wishing them a happy Thanksgiving. It instructed them to check their email again starting at 5:00 AM on Tuesday, December 2. A sales representative who wishes to remain anonymous says she and her co-workers each got one of the two mass emails the company sent out on Tuesday morning. Both emails contained an 800-number, a code and a time to call, at either 8:00 or 8:30 AM that day. The employees who were instructed to call at the earlier time got an automated recording telling them that they were going to keep their jobs, but 1,700 employees who were told to call in at 8:30 AM got a voice telling them that they were laid off and should quit working immediately. The anonymous worker who got laid off said a representative from a third-party company hired by Sanofi-Aventis came by almost immediately after the call to repossess the company car she had been driving. She had sold her personal car just three months earlier because her manager had told her the company was in good financial shape.

#174 Aussie Roy on 12.23.10 at 5:09 pm

Interesting Story

http://www.zerohedge.com/article/john-taylor-says-play-coming-end-global-reliquification-shorting-australia#comment-826913

#175 realpaul on 12.23.10 at 5:30 pm

#2 Rainbird…….there are no private bond buyers for government debt. The governemt ‘issues’ the debt ( bonds) and buys it all back in the same transaction. Thatsd why rates are so low. But btw…..this is also why the national debt is skyrocketing. When the IMF points out that Canada’s debt is unsustainable as it has breached the 100%/GDP level you should understand the extent of the trouble we’re in.

And don’t forget that CDN cities and muni’s are also issuing massive amounts of ‘bonds’ as they have had all their costs loaded down by the Feds…..add it up ( as they did recently in TO and ONT and you have functional bankruptcy. Of course a government in control of the ability to raise taxes can’t technically go bankrupt. But the last report I saw was that direct and indirect taxation was over 90% in canada. The ‘wriggle room’ they talk about is biblical …like the threading the eye of a needle…..basically we’re screwed and we can expect the government to raise taxes to try and support the legions of blood sucking civil servants before they build any infrastructure to feed the starving seniors or kids.

Municipalities in Ontario, among others, are forbidden from carrying debt. They issue no bonds. ‘Munis’ are an American invention. — Garth

#176 Bullion.Bunny on 12.23.10 at 5:35 pm

#163 C on 12.23.10 at 3:20 pm

Yes, lets see if it crashes below $1,700 on the index. If so look out below, this includes gold stocks plus silver. Yup, your right that wedge pattern was amazing bouncing between the 200 day MA and the 50 day MA. As it came to the choke point you could see it was going to fall apart. You are right gold is heading to the moon we have Big Ben to thank for that, QE1,QE2 and QE3 + QE4,5,6,7,8,9,10—–> to infinity and beyond. I’m still waiting for a good correction and it looks like it my be coming soon.

#177 Bullion.Bunny on 12.23.10 at 5:36 pm

P.S. Max Keiser has a new video.

#178 rory on 12.23.10 at 5:53 pm

#127 Cookie Monster you said: “Looks like we might be getting a Korean War for Christmas! This is one war I actually think I support because I think N.K. is a brutal dictatorship and liberation would be moral.”

You are one screwed up monster …a Korean war will not be 5,000 dead soldiers over 5 years …it will be tens of thousands of military and civilians deaths in weeks … it will be brutal … I think you need to jump on the first available flight and sign up to do your duty as fodder for the canons… jeez.

#179 bill on 12.23.10 at 5:53 pm

thankyou aussi roy

#180 poco on 12.23.10 at 5:58 pm

During this festive season I was wondering how these recent home sellers in the tri-cities area will be celebrating their Christmas

mls#V856316-308-1661 Fraser Pt.Coq.
bought dec.07 — 309.9k
listed mar.10 — 359.9k
sold 283.5k

mls#V856371-317-2477 Kelly Pt coq
bought sept 08 — 343.9k
sold 308k

mls#V850889 — 307 2958 Whisper Way Coq.
bought dec 07-365k
listed dec09-389k
sold-319k

mls#V854267 — 702 1185 High St. Coq.
bought mar 09 — 372.9
sold (foreclosure) 280k

add in bc property purchase tax–lawyer fees–realtor fees and hst—one hell of a loss

I wonder if their realtors will send them a Xmas card or a condolence card this year

there’s plenty of home owners in the tri-cities in the same boat as these 4

#181 HouseBuster on 12.23.10 at 6:00 pm

Yeah but if you have a nice huge McMansion it proves that you are better than your friends.

#182 S.B. on 12.23.10 at 6:14 pm

:arrow: #19 Jen – Snout houses.

Everyone, take a look at “beautiful” Markham ON. Can all of these houses be worth 600-800k? Yikes,

http://en.wikipedia.org/wiki/File:Markham-suburbs.id.jpg.jpg

:arrow: And, are the banksters tightening the credit noose?

A popular Charlottetown cycling store has shut its doors after more than 15 years in operation because the owner’s bank says the company isn’t able to cover costs.

Jared Stretch, owner of Smooth Cycle, said the business was doing well, but his bank didn’t see it that way.

A few weeks ago, a letter arrived from the Royal Bank’s head office, stating Stretch didn’t have enough inventory to cover his loans.

“Some Joe Blow up in Toronto sitting in a cubicle factoring out debt ratios, kindly asked for all our loans and lines of credit and everything be paid back,” said Stretch. “I definitely didn’t have it in my bank account, and I definitely didn’t have it sitting in a mattress

Read more: http://www.cbc.ca/canada/prince-edward-island/story/2010/12/23/pei-smooth-cycle-close-584.html?ref=rss#ixzz18yUayXMV

#183 Agio on 12.23.10 at 6:17 pm

dark sad person @166
Where did I mention Canada anywhere in my post? Nice display of insular thinking on your part though.
Yes, you’re correct, Governments are buying gold. Consequently they have leverage for the ‘Doomsday Scenario’
Soveriegn Governments are powerless in respect to the markets? You are either 2 years old or have the attention span of a gnat.
If you don’t know what equalization means try using google, that’s where I learned you could trade gold on the futures market.
You’ll get the last word as I’m done with you.

#184 Agio on 12.23.10 at 6:31 pm

CM @ 168
I know what a stock is and agree to some extent with the barter argument and quality of co’s etc. If a financial collapse happens we are still back at square one though. What IS the currency? No matter, my point was about the weakness of the ‘buy gold the world is ending’ argument.

Oops did a double post responding to dsp, hope the mods catch it.

#185 jess on 12.23.10 at 6:37 pm

Mr Paulsen writewashing –
insolvent & illiquid
socialize the losses and privatize the profits

“The report (IMF)provides strong support for our plan to return to budgetary balance and commends the recent decision to extend the deadline on some infrastructure projects,” Flaherty said in a statement. “I also welcome the IMF’s strong endorsement of the government’s policies to promote Canada’s long-term growth prospects, notably infrastructure spending, corporate income-tax cuts and progress toward implementation of a Canadian securities regulator.”

Code for CUT health care spending/social spending
rinse lather repeat

#186 thecomingdepression on 12.23.10 at 6:48 pm

Yesterday I raked Nicole Foss of The Automatic Earth for forecasting a 90% drop in Canadian real estate values. She deserved it.
Yes Garth, sort of like the call on GOLD! John Templeton, before he died, stated Real Estate will go DOWN 90% AROUND the world. Should we be listening to your great predictions or his? Just wondering. You know as much as all the posters on this board and that is…

Hey, how’s that depression working out for ya? Must be depressing. — Garth

#187 Aussie Roy on 12.23.10 at 7:16 pm

Hey Investors friend.

ROF deposits 500k in NEW bank.

YHB borrows 400k to buy mortgage free house from AOF.

AOF deposits 400k in bank from selling his house.

Bank now has 900k in deposits and outstanding loan of 400k. How much can they now lend out?. Ever considered that some deposits are actually the proceeds of an existing loan.

#188 arctodus on 12.23.10 at 7:17 pm

It is all rather ridiculously simple really.

Garth, and most on here simply do not grasp how all encompassing and serious the Peak Oil event is.

It is the bedrock reason (yes the actual main underpinning reason) for the economic meltdown that commenced worldwide in 2007-2008.

All the other BS (derivatives, real estate, currency debasement etc etc ad naseum) are merely the mild symptoms of an economic system that has just had it’s life support sysyetm cutoff for all time.

Oil is surging back over 100.00 per barrel shortly….and yes currency debasment plays a role….

but mainly the reason is simple…..

we are running out of the stuff (yes I do mean running out of it…..we would not even be attempting the joke of the tar sands otherwise).

Garth is simply put…wrong…..

There will not be stagflation there will not be a range bound market (unless you mean only on the upside).

There will be blood…real blood…on real streets…..not the fanciful theoretical “economic kind”….although there will be plenty of that also.

The belief of “the norm” or the return to a long term fiscal global mean reflects belief in fairies, the afterlife and some kind of non factually based reality were what humans wish to happen, will happen

It ain’t so (said with an appropropriate hillbilly accent)

The turmoil in the world markets will not end now for we are in a fight globally that we cannot win. Our resource base is finished (look up and understand EROEI).

enjoy the holidays and cease belief in economic gurus…they are all fallacious

I’ve actually written about peak oil, and believe it’s one reason oil will eventually retest its high. The blood part is fantasy. — Garth

#189 allisun on 12.23.10 at 7:18 pm

Re #13: “spacious family home”, I believe is more than 500 square feet per individual in the household, based on, for example, a family of 3. More than 1500 square feet is becoming large. This is based on a North American lifestyle. In Japan, the square footage per person is less: perhaps 250 – 300 square feet per person. Above these figures could be considered”McMansion”-sized, in other words excessive, just like some of the meals – and their results – served by McDonalds.

#190 Moneta on 12.23.10 at 7:23 pm

Municipalities in Ontario, among others, are forbidden from carrying debt. They issue no bonds. ‘Munis’ are an American invention. — Garth
—————-

SHERBROOKE MUNI 6.30 S 2011/08/15 102.72 1.92 M 0.61 CDNMUNI
SEPT-ISLES QUEBEC MUNI 5.15 S 2013/09/02 106.56 2.59 M 2.47 CDNMUNI
PEEL REGION MUNI 6.55 S 2011/12/14 104.77 1.53 M 0.94 CDNMUNI
PEEL REGION MUNI 6.65 S 2015/12/14 111.32 4.10 M 4.25 CDNMU
SASKATOON SASK MUNI 4.45 S 2018/06/27 100.55 4.36 M 6.32 CDNMUNI
YORK REGION MUNI 4.37 S 2025/09/27 177.26 4.83 C 5.09 CDNMUNI
WINNIPEG MUNI 9.12 S 2015/05/12 124.16 3.16 M 3.69 CDNMUNI
WINNIPEG MUNI 5.35 S 2013/01/17 104.23 3.20 M 1.90 CDNMUNI
WATERLOO ONT. MUNI 8.00 S 2011/01/15 100.50 0.00 M 0.05 CDNMUNI
WATERLOO ONT. MUNI 4.95 S 2021/11/19 100.93 4.84 M 8.31 CDNMUNI
WATERLOO ONT. MUNI 5.45 S 2013/11/21 107.73 2.66 M 2.68 CDNMUNI
SALABERRY VALLEY MUNI 4.20 S 2015/09/07 104.10 3.25 M 4.19 CDNMUNI
SAGUENAY MUNI 4.80 S 2014/11/24 106.50 3.02 M 3.55 CDNMUNI

For more:
http://www.globeinvestor.com/servlet/Page/document/v5/data/bonds?type=muni

I am corrected. Ontario municipalities can issue debentures, not bonds, and now carry long-term bank financing (section 305). — Garth

#191 realpaul on 12.23.10 at 7:47 pm

Sorry Garth, I was referring to the multi billion dollar debts that the cities have swallowed and farmed out to lesser governments and surrounding area taxpayers by way of introducing a myriad of new taxes and fees to all who use city services and infrastructure boondoggles. Offloading onto Crown Corps has been another way of playing the tax shuffle shell game that keeps the misdirection and obfuscation game going. I think someone once quipped “A rose by any other name would smell as sweet.”

The jiggery pokery of debt shifting has become an art in CDN governments since first introduced by Mr Turner in order to ‘balance the budget’ when debt was off loaded onto the backs of the taxpayers through the local governments. I stand corrected.

Meanwhile more jiggy poke is why F is a big fat liar when it comes to banks lending and consumers borrowing. This gem from the Edmonton Journal..

“The reason consumers are borrowing so much is that the government has been encouraging them, just as it’s also been encouraging the banks to lend. It’s called CMHC insurance and the way it works is that Ottawa guarantees virtually all of the risky home loans made by the banks.

The program was originally conceived as a way for low-income Canadians to get mortgages and buy homes.

That’s a good thing but it also provides a key benefit to the lenders since it removes risk of default. In effect, CMHC insured home loans are as safe as government bonds and that’s allowed the banks to treat them as such.

“What’s happened is it’s become the major source of bank financing in Canada,” said Mr. Kilgour. “At a time when you’ve got basically a stagnant economy you have free-flowing liquidity to residential credit.”

Simply put, loans that would otherwise be regarded as less than top quality are transformed into triple A gold, courtesy of the tax payer.

“If the government wanted to slow down the growth in consumer debt, a hugely effective policy move would be to reduce the cap on the level of mortgages that CMHC is allowed to insure,” said Mr. Kilgour.

Read more: http://www.edmontonjournal.com/business/fp/CMHC+answer+ballooning+consumer+debt/4019930/story.html#ixzz18yqLiygH

#192 Bullion.Bunny on 12.23.10 at 7:48 pm

Canada is not bankrupt. No federal or provincial bond issue will go into default. — Garth

Are you sure. I thought you said “nothing is guaranteed”? Or is it different here? Please tell me how Ontario is going to pay $220 billion back?

Why does it have to? Servicing a debt without principal repayment is BAU. There will be no default. — Garth

#193 JSP on 12.23.10 at 8:06 pm

#60 Shawn Allen.

Dude did you even read your comment. It doesnt even make sense. There is a demand for bonds, which is driving prices up as investors are willing to take a lower return for their excess savings to protect their principal (better than a savings account). There is excess liquidity in the system but not as much demand for credit bc ppl are all tapped out…so savers compete with each other to grab yield wherever they can (I.e. The bond market where it’s supposedly safer than the stock market…supposedly…). Man why are there so many morons on this blog that don’t understand the way the financial system works…

#194 JSP on 12.23.10 at 8:09 pm

#60

Bond prices up equals yield down; whereas bond prices down equals yield up…all a function of monetary policy (i.e. The current market rates, which affects liquidity in the system as lower rates mean the printing presses are a running at full capacity)

#195 Bullion.Bunny on 12.23.10 at 8:10 pm

Why does it have to? Servicing a debt without principal repayment is BAU. There will be no default. — Garth

Until credit taps are turned off and income continues to fall. Lets look at England…..

George Osborne was given a pre-Christmas shock yesterday as Britain dived deeper into the red. Borrowing jumped to a record £23.3billion in November despite the Chancellor’s austerity drive, according to the Office for National Statistics. That is £777million a day and £5.9billion more than in the same month last year.[..]

A collapse in confidence in Britain’s ability to tackle the deficit could send the economy into another tailspin. The Government has borrowed £104.4billion in the first eight months of the fiscal year – only just below the £105.1billion this time last year. City economist 155billion in 2010-11 – less than the record £156billion deficit racked up by Labour but more than the £148.5billion planned by the Chancellor.

There are limits to borrowing by Governments, companies and individuals. When those limits are reached credit is cut off. Here is an example, Nightmare in New York……

http://www.youtube.com/watch?v=Ex-iMzSNcrE

Please view time index 3:03….” No bankers came to the bond sale” This BBC documentary is very instructive and shows what happens when cities, states and governments borrow too much. Although New York did recover with a Federal Bailout, this was just one city! This time around most cities, provinces and governments are in need of a bail out. It will be interesting to see how this will all work out without defaulting.

#196 cellar dweller on 12.23.10 at 8:17 pm

@153 Realpaul
EVERYTHING you stated about the Owe-Limpic Village and the current incompetants in “Silly Hall” is TOTALLY RIGHT !
Im glad at least some people in Vancouver aren’t “dipping into their stash” ala BestPlaceonEarth and TD(TotallyDemented)69.
Have a good Christmas.

#197 Bullion.Bunny on 12.23.10 at 8:19 pm

http://en.wikiquote.org/wiki/Talk:Margaret_Thatcher

The problem with socialism is that eventually you run out of other people’s money

#198 Sam on 12.23.10 at 8:26 pm

#74 Deliverator on 12.23.10 at 6:15 am

Stop now. You don’t know what you are talking about
> When you borrow money, around 1% of
> that money is someone else’s savings.
____
You should have stopped too.

Canada has no reserve requirement. If a bank has reserves it’s at the bank’s discretion – BoC requires zero fractional reserve.

http://www.google.com/search?hl=en&q=%22Bank+of+Canada%22+%22reserve+requirement%22&btnG=Search&aq=f&aqi=&aql=&oq=&gs_rfai=

#199 Ben on 12.23.10 at 8:37 pm

“CMHC” is how you spell “sub prime” in Canada

#200 Cookie Monster on 12.23.10 at 8:41 pm

Bullion bunny, just watching part 2 of the ‘nightmare in NY’ thanks. I don’t think I’ve seen this before.

Do you know what song that is in the first part? I think it’s Latin lyrics and and it builds and builds into a powerful climax. What song is that?

#201 Sam on 12.23.10 at 8:45 pm

In Canada, same as they could before – same as if they had zero deposits.

See my post #74 above

Also, I’m surprised you’re not familiar with Steve Keen’s opinion that banks lend as much as they want (even when there is a reserve requirement) and the central bank comes along later and expands the monetary base as required. This is common on the US where the banks have lent way above the fractional limits for decades.
_________________
#188 Aussie Roy on 12.23.10 at 7:16 pm

Hey Investors friend.

ROF deposits 500k in NEW bank.

YHB borrows 400k to buy mortgage free house from AOF.

AOF deposits 400k in bank from selling his house.

Bank now has 900k in deposits and outstanding loan of 400k. How much can they now lend out?. Ever considered that some deposits are actually the proceeds of an existing loan.
_______

#202 S.B. on 12.23.10 at 8:53 pm

#153 realpaul – I do not see granite and stainless in the newspaper Olympic Village photo!?!

#203 Bullion.Bunny on 12.23.10 at 8:54 pm

#192 realpaul on 12.23.10 at 7:47 pm

Agree it’s a complete mess. Now governments and banks are pointing at each other. Looks like they are getting ready to play the “Blame Game”. I call it “Silo Management”, everyone worries about building a bigger empires. As you are well aware this will end in a complete mess. Of course this could be fixed with a free floating market based interest rate system (i.e. get rid of central bank interference). Rates would have risen quickly as the demand for money and the risk increased. The housing bubble never would have happened. However, everyone likes a good party. They only hate it when the bills come due.

#204 Nostradamus Le Mad Vlad on 12.23.10 at 8:58 pm


#66 Jody — “. . . some kind of “terrorist,” attack being staged in North America . . .”

Correct. Obama wants as many FFs to falsely justify invading other countries and, as you say, bringing back the draft ASAP.

This will reduce the unemployment lines, increase the military and thus cause more havoc in the world. The only terrorists live and work in the WH.

#104 Bullion.Bunny — “We are now at stage three “the fight for the minds of the people”

Mind control techniques, brought to us courtesy of the CIA and others.

Can’t do anything with my mind, ‘tho — it’s full of emptiness!

#127 Cookie Monster — “. . . N.K. is a brutal dictatorship and liberation would be moral.”

Except that South Korea has already admitted that it fired first on NK, China and Russia have taken the NK view, so ask the WH who is behind all this.

#143 Rich Renter — “I would also invest my cash in a TFSA instead of an RSP.”

Ditto. With the right investments, one can live a self-sufficient life, without being dependent on govts.

#150 GregW, Oakville — “Down Argentine Way ‘The economic lesson to be learned from the Argentina experience is wealth and resources can be destroyed by big government and financial mismanagement’.”

Good links, Greg. Another earlier poster said that deleveraging was well under way, which goes along with all the FFs, wars, Monsanto, big pharma etc.

#167 garth turner jr — “Guess I’ll stick it out on the Left Coast”

Us too. The Okanagan may not be everyone’s cup of tea, but it’s as close to paradise for us.

#172 VICTORIA TEA PARTY — “Hot Damn! 2011 is shaping up to be cannon fodder for the rest of us; rabbits, Peking Duck, chicken fried rice. Whatever! Pass the soya sauce!”

Excellent post!

#174 jess — Great post re: e-firing; almost like e-dating then e-dumping.
*
White Trash Red Neck Christmas!

Link in. First para. is interesting (Rothschilds).

#205 Jacen on 12.23.10 at 9:11 pm

#95 Cookie Monster

This is a straw man fallacy if I ever saw one. Krugman is all in favour of balancing budgets (see support of Clinton, 1999-2000) in the good times, and spending in the bad. 40% of the last stimulus was tax cuts, with negligible impact. The latest cave-in on high-income tax relief won’t stimulate the economy either.

The Housing crash is the US was as much as a result of lax regulation than Fannie Mae/Freddie Mac (who, by the way, were also significantly further de-regulated under GWB).

Pushing your opinion is one thing, but get the facts straight first. The Austrian school is as discredited as anything else; the bank failures of the GFC are largely a result of de-regulation. Free Markets find equilibrium in certain cases, though with a very key (but often overlooked) assumption of nearly unlimited competitition. Virtually all discussion of economic equilibrium relies on this basic assumption, which is far from reality.
Keynesian & behavioural economists realize this; Neo-classical economists (i.e. Chicago school) have not.

#206 jess on 12.23.10 at 9:20 pm

and yet those banksters keep promoting China!

…his report to the Chinese government and the UN, De Schutter also raised the case of Tibetan and Mongolian nomads who have been relocated from the grasslands under a controversial resettlement scheme, and pressed the Chinese government to ensure that consumers have the freedom to complain when food safety is compromised.

He spoke specifically about Zhao Lianhai, a former food-safety worker who was jailed last month for organising a campaign for compensation over a contaminated milk scandal that left 300,000 ill and killed at least six babies.

“I’m concerned this will have a chilling effect on consumers who want to complain,” he said. “You cannot protect the right to food without the right to freedom of expression and organisation.”

#207 Sam on 12.23.10 at 9:27 pm

> See my post #74 above

pfffffffffffffffffffffttttt ….

see my post # 197, a reply to post 74

That bare fact (zero reserve requirements in Canada) was in my introductory economics textbook years & years ago.

It’s not a secret, never has been since it was enacted.

#208 Brittany on 12.23.10 at 10:14 pm

Hi Garth :)
Still renting in our suite in lower mainland BC and recently just maxed out our TFSA’s for the first time, have them invested in a balanced portfolio which has made us some money already.. content to rent! Thanks again for your common sense approach.

#209 Bullion.Bunny on 12.23.10 at 10:24 pm

#201 Cookie Monster on 12.23.10 at 8:41 pm

Bullion bunny, just watching part 2 of the ‘nightmare in NY’ thanks. I don’t think I’ve seen this before.

Yeah, it’s an eye opener for sure! Wait until you get to the part when they show the vault full of bonds that had come due with no money to pay them. Does this sound oh so familiar?
If you really want to know how banking works have a look at this gem.

http://video.google.com/videoplay?docid=8730885410534535770#

Also Modern Money Mechanics by the Federal Reserve, another stunner.

http://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf

Do you know what song that is in the first part? I think it’s Latin lyrics and and it builds and builds into a powerful climax. What song is that?

Sorry don’t know the song.

#206 Jacen on 12.23.10 at 9:11 pm

WRONG,WRONG,WRONG…….WRONG…..WRONG

Plenty of regulation to go around, it’s the constant interference from central banks and the political types. Here watch this..

http://www.pbs.org/wgbh/pages/frontline/warning/view/

Brooksley Born a regulator with the CFTC tried to do her job and shut these financial innovations down. Watch the movie become informed.

——————————————————-
The Austrian school is as discredited as anything else;

What are you smoking? Obviously you have never read any of the Austrian School material. Most of the material in the Austrian School predicted this crisis almost 100 years ago. The credit market leads the stock market, leads the economy. It’s that simple and the Austrian school explains it beautifully. In fact it’s the only economic model that takes credit markets and cycles into account.

Human Action ……Ludwig Von Mises

Money Bank Credit and Economic Cycles….Jesus Huerta de Soto

Bulls and Bears of New York: with the crisis of 1873 and the cause.

Bring some facts to the table before you make unsupportable blanket statements.

#210 dark sad person on 12.23.10 at 10:27 pm

#184 Agio on 12.23.10 at 6:17 pm

dark sad person @166
Where did I mention Canada anywhere in my post? Nice display of insular thinking on your part though.
Yes, you’re correct, Governments are buying gold. Consequently they have leverage for the ‘Doomsday Scenario’
Soveriegn Governments are powerless in respect to the markets? You are either 2 years old or have the attention span of a gnat.
If you don’t know what equalization means try using google, that’s where I learned you could trade gold on the futures market.
You’ll get the last word as I’m done with you.

**********************

I was and am saying that if, in the event of a fiat crash the vast majority of people do not have PM’s and that majority will look to the government and the government has both the means and power to do whatever they please and to restore order they will do whatever it takes-particularly as the majority will be clamouring.

**********************
Nice try at backpedaling Agio-

You live in Canada and so do I-
So what other “Government” is going to come in and “Neutralize” Gold

Here-I’ll blow your delusional pipe dream away-with my “last word”

“If” a Currency crashes-the Government of that Country is “powerless over Gold-
Gold cannot be purchased in that Currency-ask Zimbabwe-and-(get this)

If a Countries Currency was crashing and they did have Gold (Canada does not Oooops-there goes your leverage story) that Country would have no choice-but to weight that Currency with their Gold-

Here’s the deal–

You don’t know what you’re talking about-

#211 Tim on 12.23.10 at 10:47 pm

RE #130
I too have American friends, and I feel sorry that they are suffering.
To say that Canadians are more imperialist than Americans is laughable. The yanks have caused untold grief in Central and South America for decades. What they’ve done in Iraq and the mess they’ve made in Afghanistan is causing grief for Canada and Europe. The world is less safer than it was five or ten years ago, thanks in large part to American foreign policy. I don’t see how killing over 100, 000 innocent Iraquies equates to protecting Canadians.

As for income inequality, average US CEOs make 90 times what average US workers make. In a country where 3/4 of the growth in the last five years was captured by the richest one percent of the population, while they have almost 40 million people on food stamps, I can’t see how that resembles equality. An friend had to spend a year in Seattle and when I asked him of the biggest differences between Vancouver and Seattle, the fist thing he said was that he didn’t feel safe walking around at night in Seattle. I’d take Van over Seattle any day. As for the rate of shootings, like I pointed out in my last post, the US has triple the murder rate. I.E rate is independent of the differences in population. I met a young woman from the states who was in good health, but due to her employment situation she had a 10, 000 deductible for health care. How many Americans have been financially ruined because they can’t pay their health care bills?

#212 Tim on 12.23.10 at 10:53 pm

re#154 you can’t because you don’t have the capacity

#213 Timing is Everything on 12.23.10 at 11:20 pm

oops sorry about that…

#213 too…new laptop. Sorry mister moderator

#214 Timing is Everything on 12.23.10 at 11:22 pm

#172 VICTORIA TEA PARTY

Easy there….Hop Sing

http://biz.thestar.com.my/news/story.asp?file=/2010/12/24/business/7678049&sec=business

#215 Bill Grable on 12.23.10 at 11:41 pm

Ok – this wins the prize for the trenchant comment of the year, sir.

“Have you priced a private army lately? It’s ridiculous.”

Had a friend gifted with two of your books. Since I am traveling for the next few months, early Christmas present.

He phoned this morning – he has finally put down the Koolaid. Another saved soul.

Thanks to you, Mr. Turner for this blog. No mean feat with a schedule like yours.

Happy Christmas, fellow Dawgies and have a safe and prosperous 2011.

Nicole Foss on line one, Mr. Turner. I said you were in Abu Dhabi.

#216 Nostradamus Le Mad Vlad on 12.24.10 at 12:25 am

*
3:46 clip We are being warned — GC could lead to rising food costs along with deteriorating crops. Depopulation is here.

0:51 clip Super powers (China and US) could start WW3. Plus — 7:51 clip South Korea and US provoking tensions, but it is the elite (Soros et al) who are pushing Obama’s buttons.

From wrh.com: “1. The US was unable to convince China to revalue its currency at the last G-20.

“2. The US government will never be able to pay back the billions it owes China, which have been used to finance its wars without end.

“3. If the US would be successful in a military confrontation with China (which is where a North/South Korea shooting war would almost ultimately lead), that billions of dollars’ worth of debt would be wiped out.”

Greece passes austerity budget, soon to followed by North America.

US — “The reason America still has diplomatic currency to spend in Asia as well as actual currency to borrow demonstrates its indispensable role: no one, least of all Chinese Premier Wen Jiabao or Russian Prime Minister Vladimir Putin, wants America to fail.” Increasingly, life is becoming a conundrum. Should we stay or should we go?

Spoilers Citizens of Germany don’t want to bail any more countries out.

The Toilet “Ramping up the fear ahead of a really huge false-flag attack? Will Al Qaeda (nudge nudge wink wink) bomb the Vatican Christmas day? After Pope Benny the Ratz’ comments on child sexual molestation being “normal”, would anyone really care?” wrh.com.

BP Can anyone say a cover-up?

JPM In a word, yes.

Eurozone Debt too high — more tax on the peasants!

4:01 clip The IMF, global banxters. Remember: It is to the elite’s financial advantage to cause confusion and have a WW. People are cannon fodder.

Pensions Stopped Small- to medium Alabama town or city.

#217 Cookie Monster on 12.24.10 at 12:28 am

#206 Jacen on 12.23.10 at 9:11 pm

If you look at my post #95 you’ll notice I didn’t actually write it, I just pasted it from an article by Neeraj Chaudhary on the Eruo Pacific website. I happen to agree with it and the Austrian principles and like Neeraj Chaudhary says, Krugman is advocating a doctrine far beyond even what Keynes proposed.

Good books, I own both.

Human Action ……Ludwig Von Mises

Money Bank Credit and Economic Cycles….Jesus Huerta de Soto

#218 Derek on 12.24.10 at 12:33 am

The Latin song in the NY documentary is O Fortuna from Carl Orff’s excellent work, Carmina Burana. Roughly translated the lyrics say “Life sucks and then you die”.

#219 Cookie Monster on 12.24.10 at 12:40 am

#219 Derek on 12.24.10 at 12:33 am
O Fortuna, what a brilliant song. I’ll look for it and the lyrics on the web. Thanks.

#220 Timing is Everything on 12.24.10 at 1:03 am

#109 Rich Renter

Sooner than most think.

#221 Aussie Roy on 12.24.10 at 2:03 am

Sam on 12.23.10 at 8:45 pm

Hi Sam yes Steves link is the one I posted above for I.F. to read, thought it might be too hard to read, hence my little example.

Merry Xmas…

#222 Austrian on 12.24.10 at 6:25 am

Just when I thought this was the best comments section in the history of this blog, along comes a Keynesian to scr3w it up.
Jacen:
“The Austrian school is… discredited…”
/citation, please.

“…bank failures are largely a result of de-regulation. ”
/citation, please.

“Free Markets find equilibrium in certain cases, though with a very key (but often overlooked) assumption of nearly unlimited competitition.”

Fair enough.

But that doesn’t mean we hitch our pony to the Keynesians. You’ve been spending us into the poorhouse for 75 years. Your time is up.
The Chicago School is just the flipside of the same coin: instead of fiscal policy, they want to jack monetary policy.

The Austrians are well on their way to being proved right. Not sure how you can’t see this.

#223 Calgary Bust Day? on 12.24.10 at 7:15 am

#211 dark sad person “If a Countries Currency was crashing and they did have Gold (Canada does not Oooops-there goes your leverage story) that Country would have no choice-but to weight that Currency with their Gold-… .You don’t know what you’re talking about-

Dark sad person, sorry to interject, but you have no idea what you are talking about either. Canada does have gold reserves. Now your whole arguement is out the window. Plus you have you be (gold) NUTZ to think the CDN will crash as it is a COMMODITY currency… (ie. Gold, oil, lumber, etc)… so better gold agaist the CDN is the SAME THING…

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

#224 Cookie Monster on 12.24.10 at 3:29 pm

“Free Markets find equilibrium in certain cases, though with a very key (but often overlooked) assumption of nearly unlimited competitition.”

Fair enough.
—————–
This is not true or necessary. This mathematical statistical approach of balanced and ideal circumstances are fantasy analysis. There’s no such thing as perfect competition. The fact is all products compete in a market with all other products whether they’re of the same nature or not.

Equilibrium theory is only a thinking tool, markets are not static and there’s never equilibrium.

#225 realestatescum on 12.24.10 at 3:46 pm

I’m keeping getting the looks, the stares, from people who think my opinions regarding real estate are completely wacko.

I have now started to not insert myself around discussions with my friends or co workers who think that real estate market is a sound investment. I have tried to desuade them from purchasing real estate time after time, yet they will not listen. I put a lot of effort into it because afterall, some of them are my dearest friends that I have known for years… But, I have drawn the line yesterday after two friends of mine were discussing their purchasing plans. One was looking at the Junction area in Toronto. MY other friend says “Get in now, the values are only going to get higher” I wanted to knock some sense in them, but I have tried many times before and nothing but looks and stares…The other friend is looking at getting a bigger home with 4 or 5 bedrooms, because his wife just gave birth to their first child and their current home (3 bedrooms on a 50 foot lot) dont meet their needs…HA! Ive given up, however, ill be there for them if they need a life line…