Best Buy. Home Depot. Chapters. PetSmart. Winners. Mark’s Work Wearhouse.
Drive through town on the highway. This could be any place. The big box stores loom over acres of parking and point their signs at the traffic streaming by. Most cars are new. Most houses are new. The roads, too. And the citizens.
This is one of the dozen towns and cities which hover on the fringe of the nation’s biggest and richest metropolis. From here commuter trains and buses stream into the core, while two major freeways and a toll highway clog with vehicles. You can imagine an entire town of seventy thousand having a shower, walking the dog, and then displacing each morning to somewhere else.
Young couples camped out overnight here to buy new homes. Sometimes in such numbers the cops were called to keep the queue off the road outside the sales trailer. Once in, they spent an average of 15 minutes buying an unbuilt home and arranging hundreds of thousands in financing. Few could find a new pair of jeans so fast.
This is upper middle Canada. The average house is four hundred thousand. Minivans procreate at night. The edges of town are rough and noisy as fields turn into cul-de-sacs. Everybody has cable and gas, HD TVs and a barbeque the size of a Dodge. Driving into the treeless subdivisions, you would swear it was the set of Desperate Housewives.
My lawyer lives here, and has for thirty years. Probably closes more real estate deals than anyone.
The day before Christmas I stopped by for signatures and talk. While the housing market’s still riotous, he said, another side of his business has been swelling uncontrollably. Refis.
“It’s simply incredible,” he said, putting down his half-rims and looking sage, “how many mortgage refinancing are happening. In 33 years of practice, I have never seen anything like it.”
But these refis are not to save money by remortgaging at a lower rate – after all, the cost of money will only be rising. Instead, there’s a stream of people coming into my lawyer’s office to increase the size of their home loans by adding outstanding credit card debt.
“One guy came in last week to sign after the bank sent over the papers adding the outstanding card balance he and his wife had racked up – more than $100,000.” He had a look of co-mingled disgust and ennui. “I simply can’t believe how people are living now. Or what’s happening to this town.”
Of course, it’s not one community. It’s a thousand. Scratch a little at the thin veneer of middle classness, and out oozes a stream of debt. As you know, Canadian families now owe, on average, more than American households do – interesting since they’re four years into a recession which has decimated personal finances. We have a trillion dollars in mortgage debt for the first time and are on the hook for $1.50 in loans for every dollar earned.
Routinely I talk to couples within ten years of retirement who have no corporate pensions, piteous levels of savings, a mortgage and (worst of all) no clue what they’re actually going to live on. Others have hundreds of thousands sitting, earning almost nothing, in the same banks whose credit cards are charging them 19% on unpaid balances. And the most common sin is committed by all those who dutifully opened TFSAs, giving them taxless gains on all their investments, but put the cash into dead savings.
No wonder Mark Carney’s flummoxed. The central bank boss has done everything but streak to try and get out the message that (a) he’ll raise interest rates in 2011, (b) this will be serious bad news for housing, and (c) anyone with piles of debt is toast. So, does that mean it makes sense to fold 19% credit card debt into a mortgage at, say, 3%?
In terms of cash flow, seems so. The move takes a big cash obligation and buries it inside real estate, bumping up the monthly by a relatively small amount. But every dollar of additional mortgage debt cancels out a dollar of equity. In addition, a simple debt is turned into an amortized one, which means you can make payments for years and repay precious little of the principal.
Most worrisome, however, is what happens if Carney’s thunder turns into lightening, torching the real estate market. A rise in mortgage rates of just 2% over the next year or so would have disastrous consequences, knocking out first-time buyers, causing renewal heartache and torpedoing house values which are now wobbling at historic highs. It’s then that those who turned equity into debt learn the consequences. The worth of your home may fall fast, but the mortgage does not.
In fact, using up home equity in a rising market was how millions of American families fell into negative equity in the crash which followed. Astonishingly, this group now includes 25% of all mortgaged homeowners – people who can’t even afford to sell their properties, since they’d need a fat cheque on closing day.
Imagine that happening in my lawyer’s town where, all day, he processes 5/35 mortgages for kids who think they deserve houses because they lined up all night.
If there’s one overriding reason we need to worry, it’s us.
196 comments ↓
You make alot of sense Garth……..but as always most people won’t listen and heed your warnings. All that is left to do is to let them go…….for they will become the blog-dogs breakfast!
Merry Christmas Everyone!
Looking forward to 2011……
What you said +
– modified CMHC rules – 10/30 anyone?
As much as you like being an “outsider” Garth, you’re much m ore inside than most of us loyal blawgdawgs and I’m guessing you still chat with some folks on the hill.
Dish ;-)
Maybe the Easter Bunny will bring good tidings at springtime ;)
Merry Christmas Milton!
You’ve gone from worshipping this:
http://www.torontolife.com/daily/informer/gimme-shelter/2010/12/15/house-of-the-week-1-6-million-for-this-1892-classic-in-milton/
to this:
http://www.realtor.ca/propertyDetails.aspx?propertyId=9918409&PidKey=978503159
Garth et al…it was discussed months ago on this blog site that all the Hinterlands of Canada were prone to major Real Estate Corrections.
…Over time, Canadians will see cut backs in Public Service Jobs, Salaries & Pensions.
The Private Sector’s Manufacturing Economy in Ontario is not competitive with China.
That leaves Federal and Provincial Govt’s to focus their services in the major cities…..and thats the place for the working class will need to relocate to in order to survive.
We know the Western Provinces have a plethora of natural resources w/ only 12.5 million citizens.
This region is a no brainer, “safe” location to relocate to.
All of Asia acknowledges it…..maybe it has something to do with the fact that billions and billions of people live there.
Nostradamus jr.
I am glad I read your blog. I have not bought a house yet but I know when the right moment will be thanks to your smart and honest advices. From my heart, Merry Christmas to you, your family, friends, and all people that read your blog.
Sounds like Milton to me.
refi for credit card and other debt reasons is really a very desperate measure. Sure short term it sounds good, freeing up much needed cash flow but ammort that over 25 years and youll still be paying for that LCD tv/washer/dryer long after you have disposed off it at the dump.
People that do this often do not have the discipline to not get into the same situation again. Spending and saving are really lifestyle choices just like staying healthy is. Think about it, most people that loose weight gain it back because they only addressed the symptons and not the underlying cause of their problem. Same with debt.
There something that is very true in retail, the price posted is the CASH discount price, because if it is purchased on credit, then the price posted increases exponitally every month until its paid off.
reminds me of an ex girlfriend i dated while in university, she had a rich taste in all things fashion, well, she would still be paying for her high end fashion long after she donated it to goodwill. Didnt matter how many times I told her, it never got through to her. Funny thing is she was a top tier student– in humanities.
I just drove back from Guelph and through Milton.
Was thinking the same thing.
Back in 2003/2004 I remember driving out to Milton to visit a friend that recently moved there. I got the feeling that one day the whole place would just collapse. Place was full of young newlyweds with shiny SUVs and what were still (and maybe not by today’s standards) hefty mortgages that would take many, many, many years to hopefully pay down.
We are almost in 2011, how much longer can this continue???
Can Mark Carney be any more specific?
Maybe he should take a page from Susan Powter:
“Stop the insanity!”
From what ive seen, people look at their yearly income and then add to it, the increase in value of their home.
This then equals total income and they promptly spend it.
The psychology has been great. People have felt good about themselves. Income and capital appreciation means everybody is doing well.
It would be fine if income was increasing at the same rate as property apprectiation was.
When properties start falling in value, will they take their yearly income and subtract off the loss of value? No!
But the debt will still be there, and every night when they lie in bed and try to sleep, the spectre of higher interest rates, tighter lending criteria, short terms comes a calling.
I call it FIT mania.
F=finance – too much easy money.
I=Interest rates – emergency rates – too low for too long.
T=Excessive mortgage repayment terms.
I doubt youd want it garth, but its your if you like.
The FIT mania. I think has a nice ring for a nasty economic reality.
China’s also getting into the trouble they have built entire cities that no one lives in. Investors buy the apartments and they just sit empty.
http://www.youtube.com/watch?v=0h7V3Twb-Qk
If China crashes and burns so will commodity prices and that will hurt Canada.
#203 Junius previous post
Ever hear of book smarts and street smarts. Which do you think you have?
Merry Christmas! Ho!Ho!HO!
“If there’s one overriding reason we need to worry, it’s us.” – Garth
No, it’s Mark.
I read an interesting article summarizing some research that suggests the natural human inclination is to use a fairly high discount rate when discounting the future. They suggested it could be as high as 20%. It’s all due to uncertainty, will you die or there be a war or your spouse leave you and take half, all that good stuff. So the interest rate has to be fairly high (but not 20%, history teaches us 6-8% will do it) or we quickly convert tomorrow into today and hence yesterday. Even the New Testament teaches us “tomorrow will take care of itself”. Humans are not naturally savers. We’re hunter-gatherers. Plunder is the preferred option, and only those raised in agricultural societies seem to understand a better way.
So when Mark lowered the rate to 0.25% in what can only be described as a huge market manipulation, he got what we deserved. A one time spending orgy because “the world was ending” fuelled by debt. He could not have done otherwise without being lynched, but he is to blame. He took the job, and executed the grim procedures upon the hapless victims. He dropped the executioner’s axe.
Now that the economy has been executed, the way forward is clear. Mark (or the next executioner) will have to raise rates eventually, and that will kill everyone else.
PS the article concluded that governments tend to use the highest discount rate of all. If it won’t get them elected in 4 years it doesn’t get done. So figure what CPP sill be worth NPV if you apply the same 20% discount rate to it that the government is.
Also explains maybe why China is going crazy with economic growth. The leaders there only have to ward of a revolution, not a 4 year election cycle, so they can use a lower discount rate.
St.Catharine & Niagara Falls malls are empty this year in comparison to other years. Even the Eaton’s Centre didn’t seem that busy.
I wonder if the F-man and Steve-O have figured out what the political consequences of this middle-class disaster will be.
The worm turns slowly. Garth’s message lately has gone beyond real estate to looking after family wealth and retirement, which is why he may be hintin at hanging this blog up, perhaps to replace with something more boomer-centric?
The housing message is still important, buy for shelter, not as a magic money machine. Or if buying for investment, maybe cash flow is important after all. Some on the blog are asking when the correction will happen so they can jump in – kind of like buying last weeks 649 number. Nobody really knows when prices will fall, or for how long, but fall they will. Don’t be roadkill, and have a merry Christmas.
The ex left me because I didn’t take her to Mexico,and my truck ,and t.v. was old.”You gotta live ” she would say.Let the guy she left me for pay for the catfood they”ll be living off in their retirement.
This is awesome for Canadian bank shares because now CC debt will largely have been dumped onto the CMHC as well, instead of being a bad ‘asset’ of Canadian bank lenders.
I suspect the banks are racing to ‘encourage’ their clients roll all their debt into a single CMHC-backed mortgage.
Miltonia is crazy too.
It seems to be overflow from Mississaugians and area.
I don’t know, Nostradamus jr, there may be some competition there-
it has waterfalls, natural rock climbing, downhill skiing and MounTain bike riding, beach, niagara escarpment runs through- it has the prettiest scenery for about 5 seconds on the 401 for at least a 2 hour distance– and, yeah, all those box stores just beckon for you to take the exit- ha
**Garth and readers, wishing you and yours a Merry Christmas
-even if you have to work-on nights-or, you have a crisis–may the Peace be with you
I know three families whom inherited a house or townhouse 8 to 10 years ago, Valued at approxiately 250,000 to 300,000.
Over the years house values kept on going up, now worth approxiately 600,000 to 700,000.
but get this, 10 years ago they owned the house with next to no mortgage, but today they have refinance until they have about 10 to 20% down and now owe close to half a million to the bank.
Two of the couples are about to divorce because the lady of the house is addicted to spending. They are basically using their house equity to obtain more debt so they can continue with their 10 year spending spree
Merry X-mas everyone and happy holidays to non-Christians ….
The last few years has been crazy. The US house prices going lower & lower, the US/CA debt going higher, California on the brink of losing it, Iceland, Greece, Ireland, and so many other countries, states/provinces, towns have lost it or are on the brink … can Canada be so formidable to survive what comes next intact?
From a risk mitigation view point, having all your eggs in one basket is suicide. Financial management 101.
Carp the fish
Hung out in downtown T.O. on the 23rd. Lots of people in the malls, but rarely anyone with a shopping bag of any sort. Probably a bloodbath overall for the retaillers.
Merry Christmas Garth and fellow blog dogs! Garth, thank you for your time, commitment, and perseverance to getting the message out on your blog. You helped me and my family and we are appreciative for all the info you have shared (relentlessly). Don’t throw the towel in!
Best of the season to all.
Is anyone really surprised about this? In high school we learn nothing about money and finance, most of us have parents who are not financially savvy. When we get to University they had us a credit card, I remember I got a credit card during the first week of University. There are too many people willing to lend us money, things will never change until people start to see that debt is a problem. See the works of Nicolas Nassim Taleb the Black Swan guy when explains why debt always leads to problems in society. A one sentence explanation of his theory about debt is that “debt forces you to be accurate in your predictions about the future , and that predicting the future accurately is not possible therefore debt will always lead to a disaster.”
WOW!
This article really makes you think.
Living in Edmonton, ALberta we are closer to spending 200% of every dollar we make and many friends admitted that they’re hoping interest rates don’t rise or they may be in big trouble.
I guess only time will tell how rotten the real estate market will get!
Happy Crimble and a Merry Goo Year to Garth and all the blogdogs!
Here’s hoping the New Year finds everyone debt-free with highly liquid, high yielding assets.
2011 will mark the start of our BC job search; hopefully we will relocate to BC before our home state of California goes bankrupt…
“Do you need 10, 30 or even $300,000..why we can cut you a cheque in most cases the nxt day!”
For months and months in Vancouver..Heck for even a couple of years or more in fact.. There has been a firm offering you money on your home..
“especially when the bank says no”.. “getting your home equity working for you…****** Credit” the jingle sings.
Needless to say these ads have always disgusted me. I was especially sickened when they INCREASED the frequency of them the week of Sept 15, 2008.
Why I am writing today is that for the entire run of the commercials on a local radio station that caters to the sports market..Top media personalities from regional sports TV and local sports Radio would tout the services of this firm. Even “The Voice of the Local NHL TEAM” in all his sneering arrogance was the voice of some of these ads. Leading the sheep to slaughter.
But what I have found interesting is just a month or so ago, as F’s words have sounded more alarming, as the sycophantic newspapers and TV news rooms have stopped reading REB press releases verbatim…at least less often. All of the “local sports media personalities” have lost the cojones to tout the services of said company. Oh sure, management will take the dough to keep running the catchy jingle… But now only the anonymous but sexy and sultry voice of a siren sings out the praises of the company.
I guess the big media studs dont want to have to answer to some angry hockey Dad as his F350, sled, quad, boat and wife are repossessed because “The Voice of the Local NHL Team” walked this poor schlemiel down the garden path of free n’ easy money.
But I wont forget. And i wont miss the opportunity to remind your public. You oughtta be ashamed of yourselves you arrogant whores.
Merry Christmas.
Funny how most people fail to acknowledge that the real-estate system is like a game of Janga:
when it one too many peaces is taken out, the whole thing collapses.
I doubt it, but sometimes wonder if a part of canada will do like Detroit, and shrink by 50%?
We are no different here. The bankers set the tune and our country is just another pawn in the game called “Leverage” in which no sovereign governments exist, there are no borders, and politicians are servants to money masters.
I invite all of those who believe we are immune from housing collapse in Canada to look retrospectively how the story unfolded in the United States beginning with George W. Bush proposing the “American Dream Downpayment Fund” on May 17, 2002
…
and an article published March 19, 2009 by Rolling Stone magazine about the “group of psychopaths on Wall Street whom Americans allowed to gang-rape the American Dream”.
George W. Bush proposes “American Dream Downpayment Fund”
http://www.youtube.com/watch?v=kNqQx7sjoS8
Matt Taibbi: The Big Takeover
http://broadcatching.wordpress.com/2009/04/06/matt-taiibi-the-big-takeover-rolling-stone-magazine/
=====================================
“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”
————–(c) Jesse Livermore
The double whammy to this is that after consolidating the $100k of credit card debt into the mortgage, many folks will likely run out and rack up the card again.
Oh, and this also transforms an unsecured debt into a secured one.
Merry Christmas to all, and to all a good night.
I, for one, will be laughing my head off at all the stupid kids who bought with five percent down. These are the same kids who are the “Entitled Generation,” who think they are God’s gift to the world, aren’t willing to do a little hard work, think they deserve everything, and want things now, now, now! I’ll truly be laughing! Losers!
I have achieved my goal of 5% gold holdings. I bought my wife a gold necklace.
198 expat_engineer on 12.24.10 at 6:45 pm
#187 Mark
An engineer in China can buy the same quality of house, and the same basket of consumer goods for 1/10th to 1/5th the price,
>>>>>>>>>>>>>>
You are totally wrong. The same quality of house and goods costs almost the same here and there.
The engineers there work for 1/10 of the wages here and consume 1/10 of the good and services of the engineers here.
Thats why engineers line up in the immigration queue to enter Canada and the US.
damn I hit the wrong button before
This was discussed on iTulip a while ago … some folks thought house prices in ?China were equal to US prices.
Turns out they had been looking at prices in foreign worker enclaves – on web sites and papers meant for the consumption of visiting managerial “professionals” and executives – they were NOT looking at what the natives buy in average areas.
The native houses in average-decent areas are far cheaper, like 1/10th the price.
________
198 expat_engineer on 12.24.10 at 6:45 pm
#187 Mark
An engineer in China can buy the same quality of house, and the same basket of consumer goods for 1/10th to 1/5th the price,
>>>>>>>>>>>>>>
You are totally wrong. The same quality of house and goods costs almost the same here and there.
The engineers there work for 1/10 of the wages here and consume 1/10 of the good and services of the engineers here.
Thats why engineers line up in the immigration queue to enter Canada and the US.
One of Mr. Magoo (who sometimes answers to “Sir Alan Greenspan”) ‘s most famous speeches was about how great it was homeowners were refinancing, adding credit card debt to mortgages, and taking cash out in the same transaction / deal.
That was just before the feces hit the rotating impeller.
Interesting post …borrowing money to pay off borrowed money is not a good practice but in this case makes sense considering the lower interest rate……….. but it takes a whole lot of special kinds of fools to get in this situation in the first place……my bet is a good share of them are already running up their credit card balances again.
It’s going to be the worst decade on record for home owners who have less than 30% ownership. It will start with the 0/40’s – 10/30’s for the first 24 months but after that servicing RE that will drop 3-5% per quarter will be deadly!
Canadian’s are great at lowering expectations and being taken out quietly (that’s how we’re different!)
#16 You sound miserable and unhappy. Why would someone’s heartache bring you happiness? Get help.
1-2-3:
1. Household finances are not like a nation’s finances.
Countries can print money and never repay their debt as long as they stay within an acceptable debt-to-GDP ratio, households can’t. Households need to repay their debt. My prediction has been that the house of cards would come crashing down when a mass of boomers would reach retirement age because you can borrow to study but you can’t borrow to retire. We’re just about there.
So imagine the impact on GDP when households start saving 5% (or paying down debt) instead of spending 5% more than they make. That’s a 10% discrepancy while business plans revolve around that 5% increment.
2. Easy come, easy go.
A few will get to enjoy a free lunch but most who got free money will lose it as fast as they gained it. Money is like water as most take it for granted. The refi phenomenon is just one of the many ways fools and their money are easily parted.
3. Lifestyles are sticky.
Reality is for the depressed. Psychologically healthy people are deluded. Most people in a bind will stay optimistic and spend all their savings before changing their ways. In the US, people refied to get cash. Now they are liquidating their investments. In Canada, they are still in refi mode. Soon they’ll be liquidating their investments. As long as they have cash flow, they’ll hold onto their lifestyles.
Merry Christmas Garth and family! Thank you SO much for all that you do!
#182 (yesterday’s post) Live Within Your Means on 12.24.10 at 5:29 pm
To answer your question in more detail, taken from an unknown source on the web, this sums up what I was trying to convey. Basically telling someone to hang in there. There is also more vegetable information that could applied to the looming real estate market conditions and also the players involved…
—-
French argot (slang) can be difficult to understand, but it’s really quite fun. So, today, we’ll talk about some expressions involving food that don’t have so much to do with food really, but might be useful to know. For example, if you want to say that you are a bit down in the dumps, you could say “J’en ai gros sur la patate” because ‘patate‘ although it really means ‘(potato) spud’ in English, is often used to refer to many other things when using French slang. So, be careful, because ‘patate’ can also mean ‘idiot’ as in “Il est vraiment une patate”. Or if you want to say that you have a friend who parties all night because he has a lot of energy or stamina, you could say “Il a la patate” or if you are wondering how you can get your energy back when you are sick with a cold, for example, you could ask “Qu’est-ce que je dois prendre pour avoir la patate?”. If you’ve been overloaded with information and your head is going to explode, you could say “J’ai la tête comme une patate!“. If you want to encourage someone by telling them to hang in there and not give up, you can say “Lâche pas la patate!” and although we could go on and on with the spuds (the French do grow 20 different varieties and perhaps for this reason, they seem to love using the word) finally, “patati patata” means ‘blah, blah, blah…’.
Moving on to sausages… If someone calls you “une andouille”, don’t thank them as they are calling you ‘a fool’. If your mother or someone else tells you “Fais pas l’andouille!”, they are telling you not to be silly (or, rather, not to do silly things).
As for other foods, a really bad movie is referred to as “un navet” (a turnip). “Chou” (cabbage) can mean ‘honey’, ’sweatheart’, ‘granny’ and ‘love’ when talking about another person. “Bête comme chou” refers to something that is really easy or ‘easy as pie’. “Faire chou blanc” means to ‘draw a blank’.
And just to throw a few fruits in, ‘”une poire” (a pear) or even “une pomme” (an apple) can mean ‘a sucker’ as in someone who is gullible and falls for anything. “Avoir la pêche” (peach) means to feel great and energetic just like “avoir la patate” above.
#35Sam-these people like Alan Greenspan are not stupid-unethical yes, but clearly smart. They look out for themselves-Greenspan has always done well and continues to do well, now he is grifting for Pimco. They will literally say anything if it furthers their agenda-truth telling is for suckers in their sphere. When you hear them speak publicly, you should imagine you are sitting at the poker table against them and they are discussing the cards they are holding and making banter to distract and rattle you.
#39Moneta-there is evidence that the widespread use of antidepressants in the USA has helped to fuel RE and stock manias.
Merry Christmas everyone.
First, since those who roll their cc debt into their mortgages don’t have the money to pay off that debt, it makes a lot of sense for the to do that – even at the cost of losing a dollar of equity for a dollar of debt. It’ll be interesting what happens when the equity starts deflating in 2011 or 2012…
Second, why are you so sure that Carney will be raising rates next year, and raise them by a lot? It’s easy to be wrong on this. It’s more probable he will raise them a little – just enough to slow down this crazy wave of borrowing, and not too much to crash the (very fragile) economy. I highly doubt a significant increase in rates is in the cards, not that I expect anyone to give a damn about what I think.
Third, given all this frenzy of house buying, refi-ing, I see that there is a distinct group of people that make REALLY good money: builders, RE agents, lawyers -your friend included, a whole army of companies/people who offer services to them, etc. This generates amazing cash flows for all of these people and while it creates trouble down the road for the buyers, while we scream here on this blog that “this will not end well”, someone feasts on the situation and pad their pockets with cool cash amounts. Dunno whether this cash goes into the economy, but if it gets consumed (which seems to be the case), then when it all ends, there will be a double whammy for the economy: house owners deep in debt who can’t buy much after their mortgage payments, and the “RE industry” people who don’t make money because of a dead housing market… Consumption will be squeezed quite a bit… US housing market scenario in Canada anyone?
How many compounding factors have we got in this fourth coming debaucle?
*Demographics
*Unsustainable Housing prices
*Debt(mortgage)
*Debt(Credit Card)
*Debt
*Pension Liabilities
*Increasing Taxes, Fee’s, Insurance, and Energy cost
*Bond Bandits
*Debt
……I am sure I missed a few….
What or where will be the tipping point?
Once this comes apart regardless of what seem bursts first, how will each crises play off against the next?
Example: How will the Bond Market affect rates…which will affect lending…which will affect inflation/deflation…which will housing values…which will affect banks….which will affect CMHC…which will affect pensions…..etc…etc…Debtetc..
Anyone…..Any thoughts?
#18 Mark on 12.25.10 at 1:48 am
This is awesome for Canadian bank shares because now CC debt will largely have been dumped onto the CMHC as well, instead of being a bad ‘asset’ of Canadian bank lenders.
I suspect the banks are racing to ‘encourage’ their clients roll all their debt into a single CMHC-backed mortgage.
*******************
Good thinking-great observation-
You nailed it-our World envy Banks will use every angle possible to suck up the last of the Money Supply with the blessing of Government-
Now we’ll be paying off those all weekend shopping sprees-topped off with triple cheezeburgers plus the new boat/car/house and that holiday in the Caribbeans–
“Set a beggar on horseback, he’ll ride to the devil.”
Shakespeare-
>>Mr. Turner has been warning us:
Check this –
“China’s central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.
The People’s Bank of China said it will raise the benchmark lending rate by 25 basis points to 5.81% and lift the benchmark deposit rate by 25 basis points to 2.75%.
The central bank said in a statement on its website (www.pbc.gov.cn) that the latest rate rise would take effect on Sunday.
The move came after Beijing said earlier in December it was switching to a “prudent” monetary policy, from its earlier “moderately loose” stance.
Read more:
http://tinyurl.com/2em4mmy
Something to think about…
“A study commissioned by Wall Street after World War II reported that, when respondents were asked their opinion of the stock market, “most people believed Wall Street was home to some of the nation’s slickest, most accomplished crooks, while a substantial segment thought the stock market was a place where cattle was sold.” Predictably, the best decade in the twentieth century for stock market returns was the 1950s.
So the population is growing and suburbia is expanding… sounds logical to me.
So people are buying into the advertised lifestyle of keeping up with the Jones’ or surpassing them for appearance sake. What do you expect when the average person watches 4 hours of television a day of which at least is advertising.
Hell Christmas isn’t about Christmas, it’s about whether sales are up or down.
It’s not just housing, it’s the car it’s dinners out it’s X-Box, it’s iPhones, it’s “STUFF”, it’s crap, it’s garbage it’s bling.
People buy the bling thinking it’s what they want but they don’t really want that. They don’t want the granite, stainless and hardwood they want the sharing of a good glass of wine with friends over the granite. but that could just as easily, more often better, be done over Arborite, Lenolium and baked enamel. They don’t wan the Hummer or BMW they want the relationship it might attract which can as easily be found with an old Pontiac. People don’t want “STUFF”. They want people and they are spending as much as they can trying to buy that which is free and right before their noses.
It’s hard to do but let go of the stuff. Even the wealthiest man seeks that which the poorest man can have – relationships, which sometimes wealth can get in the way of.
Before you buy anything ask yourself “Why is that important to me” and then as of the answer “And why is that important to me” and then again ask yourself “And why is THAT important to me” and then again as many as 5, 6 or 7 times. Eventually you will realize what it is you truly need. It’s not about the bling it’s about your 5, 6 and 7 and they invariably are free.
And that is my gift to you… Merry Christmas.
Personal Lines of Credit (often secured by Mortgages) through the roof in the last decade. This kind of looks like US Deja vu.
http://www.troymedia.com/2010/12/18/the-household-debt-conundrum-facing-the-bank-of-canada/
Lets not forget that the Canadian Real Estate market got very lucky when the Fed cut interest rates in 2008 and 2009, this gave the Bank of Canada the ability to cut rates and let people borrow their brains out.
Holy Crap…
EJ hit it directly on the head.
If you owe $100,000 on credit cards, what you should be doing is declaring bankruptcy and taking your mulligan and getting some counselling.
Happy Festivus everybody. The countdown to 2012 continues tomorrow!
worked for a cdn bank for years before moving to USA. no secret that refinance is a win for the bank and a losing step for the client. changing unsecured debt to secured debt. anyone with some equity and a half decent job qualifies. I suspect there are still some people making second mortgage payments in 2010 for vacations taken ten to fifteen years ago.
merry christmas
I have long suspected that the huge numbers of high end Lexus, Audi, BMW, Mercedes etc. cruising the streets of Hamilton are really Heloc financed. You can not come out of a Timmy’s without counting at least 2 or 3 of them. Obviously lots of people qualify for the $50-70000 for some automotive jewelery and they step up and purchase it.?
#50 Devil’s Advocate
I agree for the most part… However that doesn’t hold true for misanthropes… Id rather have the X-box than a glass of wine with a few friends. Granted I dont leverage my xbox purchase at 19 percent on a CC.
39Moneta-there is evidence that the widespread use of antidepressants in the USA has helped to fuel RE and stock manias.
——-
LOL. So now we can also blame the health care system that just won’ t let people accept their fate in life!
#24 ams
Read “Fooled by Randomness” a few weeks ago, and am close to the end of “black swan” now. Nassim is a refreshing read, especially when affronted by people saying RE never goes down, This or that will never happen in the markets , this is a sure bet… Just reiterates the need for diversity in ones portfolio, from a philosophical POV.
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Refi this.
Splendid Christmas. Went out with the extended family Xmas Eve for a great Chinese meal.
Life is too short to become engrossed in something that no one can prevent from happening.
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Pix Of The Year from space. Some real beauts.
Chatter The NWO are the real terrorists, and they have upped their talk level.
China Booming trade with Africa.
Solar Magnetic Ap hits zero, which means “. . . the sun’s magnetic field is low, and its magneto is idling rather than revving up as it should be on the way to solar max. True, it’s just a couple of data points, but as NOAA’s SWPC predicts the solar cycle, we should be further along instead of having a wide gap.” Plus — Ireland Not only are they indebted serfs now, GC is taking a grip as well. Snow in Hawaii.
Eurozone “At this point, many analysts are convinced that a full-blown financial implosion in Europe has become inevitable.”
Hank Paulson 2004 seems to be the year when the melt began.
Turbo Tax A couple of funnies on Tiny Timmy.
nonpulsed from yesterday,
My statements are logical statements, they are either one or the other, like alive or dead, both can not be true at the same time, and you can’t mix the statements or misapply them. If someone says a false statement because they’re ignorant you cant apply the truth or lying logic because it’s the wrong class of reason, you must consider they are sincere but are they informed or uniformed, understanding or ignorance.
If you don’t understand what I’m saying then you’re just being difficult or pedantic or ignorant or stupid. This is a logical statement also.
# 18 Mark
I’m with you on this one. Thats exactly what happened in the U.S. of my A. Party hard, buy the toys, vacations,vacation homes,cars trucks etc. Roll all that into your mortgage, walk away. You had the good times and you own all that stuff. Of course encouraged by F, Carney and the banks. These leaches both the home owners and their accomplices are the winners. They know what they are doing and the taxpayers of today and tomorrow will pay very dearly for this one big party.
I know an M.D. who has 4 leased luxury vehicles (100K each) and lives with tonnes of flash, travel, clothes, bling but he is in debt with Rev Canada and Master Card big time.
Just goes to show you, don’t be jealous by what you see around you. That guy in the apartment down the street with the used car is a whole lot richer…even the homeless guy is worth more on paper.
As far as inflation/deflation. We’ve had a massive credit expansion for 40 years now and the US has been exporting dollars in exchange for products for over a decade, consumers are racked to the hilt with debt, so once the bond market gives up on the dollar its value will plummet and the avalanche of debt will slide back into the USA. I think the situations is very precarious. DSP, I looked at those charts and they show a recent change from borrowing to saving but look at all the years of borrowing, I don’t think its going to get paid back and default is not deflation, its default, it gets expended by the lender, not canceled.
We don’t have to agree, I know this is a huge topic of debate. Merry Xmas.
… We have a trillion dollars in mortgage debt for the first time and are on the hook for $1.50 in loans for every dollar earned…
The country will pay for this one day. Any mis step in the economy that we could have an American style housing crash.
That should have said ‘expensed by the lender’
# 27 Media Fraud
I’ve received mass flyers from these fraud artists. The sales pitch is that if the banks don’t lend you the money, we will if you own your home. In other words sign up for a second mortgage and kiss your ass goodbye. the interest rate on these loans are 29.99% per annum. They list various examples of total borrowed and brag about how little the monthly payment is. Its so easy to handle those payments. Outrageous! Loan sharking is legal.
To #1 Jim,
You’re right, let those non believers cry like babies when 2011 rolls around.
My co-workers laugh at me mentioning what will happen soon.
These are the ones buying Iphones, laptops, etc. & toys for their Porsche, Bimmers, ….
Good luck to all the laughing idiots.
Merry Xmas Garth.
Will you be having a seminar in Vancouver in 2011.
Equity is fleeting…. debt is forever.
#43 BrianT
Probably the opposite…imo
#62 Cookie Monster on 12.25.10 at 4:27 pm
I don’t think its going to get paid back and default is not deflation,
Ok, this is the point of contention. In my book default is deflation as the world is dependent of massive amounts of credit. As the system continues to contract, defaults will cause credit to be rationed. Only AAA+ clients will be able to get credit and they won’t want any because they wish to maintain there AAA+ rating. All I can tell you is that this has repeated through financial history for hundreds of years. Why it is different this time? In the 1825 bubble the collapse was so bad bankers gave out loans at zero percent to prevent a depression. Of course this did not work and the depression came anyway. What can I tell you? If you believe in cycles patterns and the fallibility of man then this is the model. I could go on for hours about this as I have collected 1TB of data and documents about this subject. But it’s X-mas and the second calling for desert is here.
#62 Cookie Monster on 12.25.10 at 4:27 pm
As far as inflation/deflation. We’ve had a massive credit expansion for 40 years now and the US has been exporting dollars in exchange for products for over a decade, consumers are racked to the hilt with debt, so once the bond market gives up on the dollar its value will plummet and the avalanche of debt will slide back into the USA. I think the situations is very precarious. DSP, I looked at those charts and they show a recent change from borrowing to saving but look at all the years of borrowing, I don’t think its going to get paid back and default is not deflation, its default, it gets expended by the lender, not canceled.
We don’t have to agree, I know this is a huge topic of debate. Merry Xmas.
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CM-merry x-mas to you and all the bloggers-
I agree about the debt transfer from the foreclosed borrower back to the lender and now-because of the extremly clueless led around by the nose government we have-transfed from the lender back to the taxpayer through CMHC-
That-in and of itself is not deflation but it is extremely deflationary as it sucks money from the taxpayer and crimps their purchasing power and incewntive to borrow and alsotakes from governments ability to spend-as tax revenues decrease in-spite of higher taxes-simply because of their own idiotic policies-that always have a blowback effect-
The debt always remains-until it’s paid down or defaulted on-
The default must come from the Banks or as is now the case-the taxpayers/government-
As for the bond market-i agree except in light of the global situation-there are so many more basket cases that are much worse off then the US with it’s deep capital markets and its on the prowl military-which is solely for the purpose of corporatist profit-
“Confessions of an economic hit-man”
Sentiment still holds the USD/Bond as a refuge of safety as does the CHF-both of those have large gold reserves-tucked away in their vaults (at least we think)
Eventually the vigilantes will arrive at the USD/Bond but not before many others are savaged first-
This CDS spread rating is about a year old and has no doubt with the PIIG blowups-spiked the spreads but the point being-you can see where the US sits as measured to default risk-
http://4.bp.blogspot.com/_FM71j6-VkNE/SbnEjCCMQDI/AAAAAAAABX0/fgFbsfq2pZ8/s1600-h/sovchart3.jpg
I think our biggest problem in keeping all this in check is the fact that we suspect how it’s all eventually going to end up-in some form of default caused by a bond market revolt-but for the time being-the USD/Bond is still rated number one and we have to respect the market-
But these refis are not to save money by remortgaging at a lower rate – after all, the cost of money will only be rising. Instead, there’s a stream of people coming into my lawyer’s office to increase the size of their home loans by adding outstanding credit card debt.
Yes, I’m seeing the same thing. I spoke to the branch manager at the bank before X-mas. He said that he had spent the last five weeks doing re-fi paper work for customers. People are borrowing their brains out. Great, looks like 15% decline in housing is going to be the warm up. Bond holder get ready for a major buzz cut!
Your comment was valid until the bond part. You are obsessed with defaults that will not materialize in Canada. — Garth
#10 Peter Breedveld on 12.25.10 at 1:00 am
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If our country had 1,600 million citizens with an economy expanding at 8-10% and millions of poor people flooding into urban centres every year, I’m sure we’d be building ghost cities too. Not long before they’d be filled.
#50 Devil’s Advocate
I ‘truly needed’ my ‘classic’ 1964.5 Mustang collector.
Just like this one…Needs and Wants…Garbage? Haaa!
http://content.answcdn.com/main/content/img/getty/8/0/53061580.jpg
#63 dd on 12.25.10 at 4:28 pm
————————————
1 trillion of mortgage debt is only $32,000 per capita.
And for a family of four, $130,000.
$260,000 if one out of every two families has a mortgage.
Not an astronomical number by any means.
The greedy make me laugh. Today they are “look at me I drive a BMW, have a flat screen, live in this upper class area, bla, bla, bla… i’m super cool and you want to be me…” Well no and I’ll bet all that junk is owned by their lenders not them. What a farce. If this is you, you are living a lie and it’s now time to face the truth and it’s gonna hurt. Well hurt your pocket book and if that is where your happiness is found….well, good luck with that.
I never tried to keep up with the “Jones” and i’m so glad I just never got the point of mass consumption, granite counter tops and the latest consumer products you just need to have.
My wife and I live almost debt free, rent an ocean view house on an Island, drive a used car and cruise the ocean in our paid for used boat. We keep a garden to grow food and spend more time being rather than consuming. We would rather experience than accumulate. We buy stuff after we have saved the cash for it. It’s a modest life yet very fulfilling and happy and no large monkey on our back(debt). We believe less is more and at the end of the day those that believe you need more stuff to be happy are the ones that will suffer in the years to come.
#61 Sue
Yup, have agree with you about “people and their image”.
I knew a software saleman about 20 years ago who had a fake antennae and fake car phone installed( he couldnt afford a real one). When I asked him about it.
His reply, “Image is EVERYTHING”.
Its a shame but it flows from the bottom up. I know guys that own (no mortgage) 4, 5 houses that they rent out ( millionaires ) but they dress like bums and drive crappy old trucks. Amazing how they get treated at a store when someone else with “bling” walks in….
Anywho, thats my Christmas “rant”
Enjoy the holidays fellow Bloggers, see you next year.
#61 sue
Smart people do stupid things all the time. However,
the M.D. probably has a lot of potential money coming his way. The homeless guys potential is pretty low.
M.D.’s tend to make more money than ‘homeless’ folks.
Your comment was valid until the bond part. You are obsessed with defaults that will not materialize in Canada. — Garth
As Mr Spock would say, “Fascinating”. Sorry, I have to disagree. Default is the natural order of our current monetary system. Fraction reserve systems always end in default period! No country and/or empire ever survived debt and interest payments that cannot be paid. In fact the only monetary system that was stable over a long period of time was the “Tally Stick System” in England. This made it difficult for elite to pay for military adventures. They could no longer use the old inflation tax to pay the troops or steal from the populace. On the tally stick system the elite had to pay for conquests and “land grabs”out of their own pockets. Not cool!
Of course the tally stick system was retired to make way for the bank of England in 1694. Let the credit inflation/wealth transfer machine start, YEAH BABY YEAH. In fact you can go to the Bank Of England museum and see the original tally sticks used to purchase the founding shares in the Bank. NICE!
These are the hard cold facts, to say it’s different this time or “we are smarter” is to blind yourself to what is right in front of you. It has been this way in every bubble 1435,1620,1720,1772,1825,1873,1929,2000.
Systems, be they economic, people, engineering, science, nature or mathematics all follow cycles and patterns. Just look around you, the trees, the birds, the bees your hummer, even your wife. All driven by cycles and patterns, if it does not follow a cycle or pattern it cannot exist!
Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”. Governments and private individuals have defaulted on their bond commitments in every major bubble, why would it be different this time?
http://upload.wikimedia.org/wikipedia/commons/4/4a/Modern_Money_Mechanics.pdf
Your comment was valid until the bond part. You are obsessed with defaults that will not materialize in Canada. — Garth
Here is a great video that explains the exponential function as it relates to the current world by Dr. Albert A. Bartlett. Debt that expands exponential cannot be paid, these are just the hard cold facts. Debt will be defaulted on…..Sorry….it sucks.
http://www.youtube.com/watch?v=F-QA2rkpBSY
#17 farmboybc on 12.25.10 at 1:45 am
The ex left me because I didn’t take her to Mexico,and my truck ,and t.v. was old.”You gotta live ” she would say. Let the guy she left me for pay for the catfood they”ll be living off in their retirement.
_____________________
karma dude … they’ll be beaten to pulps in Mexico.
Anybody read this one?
The Blood Bankers: Tales from the Global Underground Economy
Jim Henry’s book The Blood Bankers, published in 2005, is one of the best ever (and perhaps the best) investigative exposés of the blood and guts of the operations of global private banks (or pirate banks, as some call them) in developing countries. These institutions aggressively fostered and encouraged vast illicit financial flows, making large profits and leading to many countries being saddled with unsupportable debt, while their élites who had gorged on the borrowing salted away their winnings offshore. In Africa, the problem was bad enough, as this study indicates. In Latin America, the scale was far larger.
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Capital Flight And Capital Controls In Developing Countries
Edited by Gerald A. Epstein, Professor of Economics and Co-Director, Political Economy Research Institute (PERI), University of Massachusetts-Amherst, US
============================
December 19, 2010
Already struggling with a massive debt crisis that is shrinking its economy, Greece is also facing a rising tide of illegal immigration.
The country’s land border with Turkey makes it a major gateway to the European Union, which says more than 90 percent of this year’s illegal immigrants entered through Greece.
Despite EU assistance, Greece is overwhelmed by the influx of migrants who believe the financially crippled nation still has more to offer than their home countries.
============
December 6, 2010—Corruption fighters from around the globe are gathering December 6 to 8 at the World Bank in Washington, DC, to up the ante on fraud in development projects – part of an effort to halt practices that cause $20-40 billion to be stolen each year from developing countries.
In the first meeting of its kind, more than 200 members of the International Corruption Hunters Alliance from 134 countries aim to create an international enforcement regime to track and resolve bribery and fraud cases that reach beyond borders to affect more than one country.
Major goals include increasing the number of corruption cases prosecuted in both developing and wealthy countries, and resolving cases so that settlements – and liability findings – are comprehensive and multijurisdictional.
https://blogs.worldbank.org/peoplemove/remittances-data-watch
http://blogs.worldbank.org/peoplemove/
http://www.economist.com/node/17733061?story_id=17733061&fsrc=rss
Merrill Banker Indicted With 18 in Brazil Says He’s Scapegoat
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a_EY9MLo0vtk
…”Prosecutors charged Caiado with arranging illegal fund transfers for Merrill clients — part of what has become a four- year investigation into bankers helping clients secretly move undeclared money abroad to evade Brazilian income taxes, Bloomberg Markets magazine reports in its December issue. “
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Cristmas Card From A Lawyer
GW — The species (us) will survive! Plus — Paris Airport. 2:18 clip GW and GG.
0:41 clip How the elite retain control.
Au revoir incl. “The Deindustrialization Of America That Will Blow Your Mind.”
9:51 clip The Sleeping Giant. Twenty times larger than the SAF, the New Madrid fault is showing signs of life.
BRIC + A China invites Africa to join BRIC.
Two Clips Black Friday in the US.
Don Cherry endorses War and Mortgages….Check ’em out…
http://www.youtube.com/watch?v=-e9SUQ0Ti6c
http://www.cbc.ca/sports/hockey/story/2010/12/25/sp-cherry-afghanistan.html
#26 Fiendish Thingy – From Cali to BC is like jumping out of the pan into the fire.
After one has lived in the hills up the 73 as well as Ground Zero of Sili Valley, the pointless pressure-cooker bickering, expense, and soul-draining constant rain of the lower BC mainland would be disastrous. If CA has crashed, then BC is on the cusp and the cornice will break off any time.
At least there was some industry for awhile to support the prices of million-dollar post-war dumps of the lower Bay Area, Palo Alto, etc. And rarely did it snow up in the hills past Los Gatos. In fact the biggest population of Canadians outside of Canada lives in California.
If you have limitless cash, don’t mind squandering it on insane tax rates, like living indoors most of the time, can tell the difference between old money and debt, and are just as at home playing tennis over at Hollyburn as in Laguna Niguel then go for it. Even West Van has a ton of Persian refugees just like Irvine.
However, if you’re looking for a cheaper life after cashing out on real estate gains, Washington or Oregon will still be a better choice. Unless of course you want to work in drilling rig camps up by Fort Nelson or try your hand going broke running a farm in Peace River country.
Is the town Milton? Is the lawyer Barney Henderson?
Thought so.
Merry Xmas Garth…Love your blog….
Just thought you’d like to check out this website, which has damning evidence in the FRAUD perpetrated by the BC Liberal gov’t when they “sold (er…gave away) BC Rail to CN: http://alexgtsakumis.com/2010/12/23/breaking-news-christy-clark-campaign-derailing-over-bc-rail-the-history-and-the-histrionics/
Alex is a reporter from BC, and a good one at that!!! He’s got the goods on the Liberals and we hope it ends in Canada’s first provincial premier going to jail for malfeasance. Hey, if it can happen to a faux blue-blooder like Conrad Black, then Guido Campbell and his minions should not be untouchable. It’s just a matter of time before one of them starts singing the high notes.
And with these revelations, where are the RCMP? Oh yeah, negotiating a plum 20 year contract with said unscrupulous provincial Libs, thereby costing us taxpayers HUGE amounts of taxes.
Time to turf the whole lot of them and instill Auditors like Sheila Fraser to keep the fraud from spreading (of course with huge penalties for malfeasance like minimum 20 year hard labor jail terms and even guillotine in the town square!!!)
As I said before, merry Xmas and hope you and yours are doing great……
Merry Christmas, Garth. Thanks for the insightful blogs this year. Best wishes for 2011.
Alberta mortgages arrears are all ready at record highs and housing prices are only down 15%. In Alberta if you have only one house that you live in, you can just walk away.
Can anyone contradict my above statement ?
#84 Timing is Everything,
glad I’m retired. I never could have served in Don Cherry’s Army.
Garth, your new picture shows the future of domestic politics south of the border – and up here.
Ugleee!
BB–agree Bank/Government Debt Default is genuine Deflation-
Default is a spooky word-so lets give it another name-
Let’s call it debt repudiation and let’s give it a classy title-something like
“for the sake of hungry children in far off lands program”
It will go like this-
When there’s nothing left to bleed from the taxpayers and GDP even as skewed as it is-cannot be papered over anymore-
Bond buyers know the game and when the above happens-the game is over-
At that point-debt must be shed either voluntarily or it will be forced by the bond market-
I suspect before it gets to the US/CA a panic stricken G-20 meeting will be convened and after a weekend of intense debate the”best financial minds in the world” (lol) will come to a market forced agreement and our very own F will address the media and say once again-
“Canada by its own sound government policies and fiscally structured banks and -has saved the world”
But-by any other name it will be a default–and–
for the first time in my life-
I’ll be able to agree with F-
Except-
As usual-F wont have a friggen clue what any of it means-or why C told him to say that-
That being said-i wouldn’t short US/CAD bonds at this point either-
“The best financial jokes of 2010”
http://business.financialpost.com/2010/12/24/the-best-financial-jokes-of-2010/
Margin debt in the US is now at its highest level since Sept 2008…. seems like US investors are playing “all in” like Texas holdem. They got punished when unbridled optimism overrode economic fundamentals… I think we have the same thing brewing again…. look out folks…. as they say on the East Coast… “She’s some ugly”.
http://globaleconomicanalysis.blogspot.com/
I hope everyone had a FANTASTIC Xmas day.
Jeannie on 12.25.10 at 6:34 am
For Aussie Roy…we’re currently hosting a couple from
Australia, and are hearing first-hand about the seriousness of your economy.
Say hello for me – Aussie Roy in the Barrosa Valley SA..
Aussie Update
Some interesting headlines over the past couple of days.
AUSSIE banks, once held up as the envy of the world, are now at the mercy of foreign lenders.
Despite the Federal Government’s measures to boost competition in the banking market, little has been done to address the huge reliance on overseas lenders to fund our mortgage market.
Official figures show our banks now owe overseas investors a record $352.7 billion, equivalent to 27 per cent of the country’s entire economic output.
The extraordinary figure, contained in data from the Australian Bureau of Statistics, is fuelling concerns Australia’s financial system is becoming over-stretched.
http://www.heraldsun.com.au/ipad-application/foreign-lenders-get-the-property-jitters/story-fn6bn9st-1225976177345
CONSUMERS are being begged to spend up big today and save Queensland businesses from going broke.
Queensland retailers are set to rake in about $11 million an hour in Boxing Day sales – or about $700 million this week – as consumers are wooed with savings of up to 70 per cent.
http://www.couriermail.com.au/lifestyle/whitelabels/queenslanders-begged-to-spend-big-in-boxing-day-sales/story-e6frer8o-1225976205457
China’s central bank announced on Saturday that it was raising interest rates for the second time in about two months in what appears to be a long-term campaign to suppress inflation as many ordinary Chinese express discontent with rising consumer prices.
http://www.nytimes.com/2010/12/26/business/global/26chinarates.html?_r=1&src=busln
Human beings are a fairly predictable lot.
We do indeed run in herds. Every single one of us who comes to this blog will personally know quite a number of people who have fallen into the ongoing debt trap. All together at the same time too. The whole country sea to shining sea took a huge leap of faith in credit.
Like lemmings off a cliff. It was a sight to behold.
We have watched family and friends build a prison of liabilties, mortgages, credit card debt and car payments while they treated us all their stories about the trips to hot spots or the Carribean. We listened as the bragged about the monster truck, the new car, the investment property and the cabin at the lake.
They went further. They laughed at some of us for not buying houses when a bubble was obviosly forming. Were dismissive of our concerns for them, got angry about advice they thought was idiotic and even tried to make some of the savers feel guilty for not participating in the madness of the day.
This has been a pretty incredible run hasn’t it? And now the party is over and the hangover begins. With the highest levels of home ownership this country has ever seen, an event that coincides with some of the most extreme price to rent ratios compunded by record personal indebtedness, there is only one sure way for this market to go.
The fact that so few of these people have any net savings to speak of just means they have sacrificed their freedom at the altar of greed. They have no financial flexibility at their disposal anymore.
The debts must be repaid. These folks had better pray that good economic times are on the horizon and nothing goes wrong in the future that drives employment numbers in the wrong direction. Do those odds look good to anyone out there right now?
Many of us have seen this coming for a long time though. And now it is about to get more interesting. We have a listings boom that is now shaping up. We really do run in herds.
After having been told by three people this week alone that they are going to list in the spring I just clued in that this is actually a national sentiment. The same flocking behaviour that brought so many easy real estate wealth is going to undo all those good time gains and leave many hanging in negative equity.
Exactly as it was with the buying binge, so it will be with the rush to the exits. And the herd mentality is saying that this spring is the last good opportunity to sell at the top.
Too late for many already though. We already ran out of firepower on the newbie buyer and greater fool front about six months ago. Debt is at record highs and little real demand awaits the sellers. It is safe to say this coming spring is going to see some of the sharper price reductions in a long while.
For anyone absolutely needing to sell, the lower prices they accept will bring down the valuations of all their neighbors.
That’s how it always works. No way out. Herd mentaility.
Merry Christmas to everyone.
21011 Almost Here. So, Where is the growth? The US won’t pay enough TAX to cover our spending, Wars etc.
Our President is clueless our senate and house even more so.
Real Estate is still in the pooper, we expect more price depreciation as people have no cash and crappy credit.
So, I sit with a paid for house, no payements, nearly 700K in savings that earned 12.4% this year, thus far on average, – and NO the rteturns are NOT guaranteed-
I have a good job, good wife, we both look forward to some corporate retirement benefits, & decent health care plans (for now). Approaching 60 this year.
WHY am I reading this blog? I care that my fellow citizens are in deep doo-doo. I care that the whole shooting match could stumble, maybe not topple but cause a lot of pain.
I am wondering how people can be soo stupid with money? Nobody is born with good money habits, they are developed over time. Do my fellow citizens have time left, to sort out mixed siginals from their governments, along with their own personal game plans for winning with money? Life is finite ya know?
The numbers tell me time has left the building.
#90, I can contradict your statement, “Albertans can walk away” with logic.
a) If the mortgage is CMHC insured, it is not eligible for the ‘walk away’ provisions of Alberta law.
b) A rational house owner will seek CMHC insurance on a refinance, before they end up defaulting/walking away, since they will still have some equity, unless things crash 20-30% overnight.
c) Loans that were originally written at less than a 20% downpayment would be CMHC-insured anyways.
Hence, the Alberta ‘walk away’ provisions (sorry, ‘walk away’ isn’t the proper legal term….) are essentially meaningless, as everyone will (rationally) attempt to refinance a mortgage into a CMHC product before they end up walking away.
Hence, the risk, once again, and the defaults, get dumped right onto the CMHC.
throwstone: Once this comes apart regardless of what seem bursts first, how will each crises play off against the next?
Anyone…..Any thoughts?
My thought is that you are trying to throw off anyone trying to identify you. So you make obvious spelling and grammatical mistakes. You are someone who routinely writes thousands of words with very few mistakes.
I am so happy I got Money Road for Christmas. Gotta love it!!
Dude, more with Sarah! Easily the #1 Photo subject on this blog.
I’m sensing infatuation here.
–
Differing POV from Garth’s.
Sarkozy and SDRs Giving the IMF control over currencies?
Oz retail recession; probably goes with the housing bubble deflating.
JPM and copper. Better explained.
Obama “Another email has been circulating about Obama’s eligibility.”
CC maxed out Sooner or later, the bills have to be paid.
Interest Rates going up, just in time for 2011.
Spam Spam Wiki and Spam Curiously interesting, esp. first para.
#32 Brian1,
The mark up for manufacture and retail on a gold necklace is most of the cost. So, sadly, you probably only have 1.5% exposure to the gold market for your 5% investment. Unless you bought it at The Bay, because they had them 50% off!
However the other portion can be considered an investment in the marriage. Women seem to love gold and diamonds.
54 Ret,
I used to think you either had to be stupid or rich to buy a BMW, but then I realised they are no more than a domestic truck!
Funny the pickle we are in with the newer vehicles, too. My 04 has pretty light mileage but all the electronics are conking out. Last time I had them fix the back up detectors it cost $750 and here 6 months later they don’t work anymore, so I’m back to using the mirrors. Not going to fix them again. My little fuel economy / compass computer also died. The news must have been too bad. Hopefully the one that keeps it running is a little more robust. Fortunately my truck didn’t come with a DVD player. If the $150 dollar add on breaks I won’t feel so bad tossing it and getting a new one, but the “installed” version in my wife’s rig is $1500 if it goes.
#59 Cookie Monster,
“If you don’t understand what I’m saying then you’re just being difficult or pedantic or ignorant or stupid. This is a logical statement also.”
That, my friend, is name calling, not logic. You won’t get far in life assuming everyone who disagrees with you or misunderstands you is “stupid”.
Fact is we all know next to nothing compared to the scope of what there is to know. Even specialists in there field these days don’t know the half of it. But you’ve got it figured out and are going to tell me who is stupid and who is difficult and such and such by reference to their acceptance or non-acceptance of your enlightened views?
People work from incomplete knowledge. They also tend to disagree. And at some point they learn to do it in a civilized manner for the most part, but never without relapses. But what no one ever does is accept someone else’s point of view just because they would be called names if they didn’t. This is why I think you must be young. It is a trait of the young to see the world through their own eyes only and “objectify” other people, treating them like rocks or toys that must confirm to their own view of existence. Of course psychopaths (otherwise known as antisocial, they aren’t all axe murderers) do the same thing all their lives, but I am giving you the benefit of the doubt and assume you are fairly well educated, fairly intelligent, read some stuff that normally doesn’t interest your age group, but under 25.
I saw a funny on Comedy Central once: The guy says, “When I was young, my dad was a complete idiot. But as I got older, he seemed to get smarter and smarter. He’s pretty cool now.”
#78B.B,
I think Garth meant that bonds wouldn’t default, not that consumers wouldn’t. Even in the US most mortgages go into mortgage backed securities, which are a different animal than bonds.
However, I am with you that I think there is a high risk that a number of bonds will default, especially at the US municipal level and possibly in Europe. But Canadian bonds are still pretty safe. For now. The greater risk with Canadian bonds is that they don’t keep up with inflation.
#69 Bullion.Bunny on 12.25.10 at 6:01 pm
OK, lets stick with the point of contention. I’m saying default is not deflation, and you’re saying it is.
So here’s the scenario.
A bank creates a loan out of thin air and lends it to the borrower, the borrower in turn spends the money in the economy and then promptly goes bankrupt, the borrower does not repay one cent of his loan and the bank is unable to collect anything from him. Assume this is an unsecured loan (Sort of like Canadian real estate, joke).
Anyway, upon creating the new loan the bank records the loan value as an asset on its balance sheet. Repayment of the loan principle over time would normally chip away at this asset entry dollar for dollar over time until it’s value is zero. Of course the interest spread paid over time on these payments is the banks profit. However, if the loan defaults at 100% full value, the principle asset remains at full value on the bank’s balance sheet (like many bad mortgages currently held by many US institutions) waiting to be written down as a bad loan or loss. The actual process of writing down the bad loan to remove it from the balance sheet is to expense it, it becomes an expense or a loss for the bank and it comes out of their reserves.
But, this act alone by the bank does not remove the original loan amount circulating in the economy, it is still out there, somebody has it, so hence the default is not deflationary. The credit expansion remains in circulation, the loss only reduces the banks reserves; increasing their loan to reserve ratio.
Then, if a lot of loans go bad, the government steps in to start monetizing the losses because if they don’t the cumulative losses or expenses will bankrupt the bank. Their reserves will be wiped out, and monetization of once bad debt creates new high powered money to replenish reserves, which is base money once again, which can then be lent out once again at ratio by the leverage according to the fractional reserve, whatever that ratio is, 20:1
So, lets say worst case, if a bank lends out at full capacity and then losses 100% of all its loans at a 20:1 ratio and then they turn around and recapitalize their balance sheet by monetizing some of the bad debt, they will then be once again in position to lever-up all over again, even though all the original credit from the first crash is still in circulation in the market. Hence massive inflation.
Correction to last paragraph. They would have to monetize all of the bad loans 100% at 20:1 in order to break even and retain the reserve base money they originally started with, but once recovered, they would then be in position to start lending out new loans all over again against their restored reserve.
I declared bankruptcy from a mortgage ball and chain and major credit card debt under a year ago – best decision I ever made, I was able to rent a place with candid honesty and not making debt payments has given me oodles of extra cash. Never again will I be a slave to the banks, gently used cars and rental homes for me, thank you. Yes it is possible to rent a nice place with bad credit for the record!
Marry Christmas and Happy New Year!
The new year promises to be very interesting. Many people will get poorer but smarter. Oh well, – nothing is free in this world.
#69 Bullion.Bunny
One Terra byte of data. Interesting! Have you parsed anything on portfolio hedging. Options vs Short ETF`s vs QID (quatity, income,and diversification)?
No defaults, they just invented credit default swaps. They work great, Just ask AIG and Goldman Sachs.
Why do you use BSD when there are so many good linux distro`s available (opensuse,redhat,ubuntu)?
BSD is experimental software supported by the University of California at Berkeley, the FBI, and the CIA.
Has anyone noticed how, THAN turns into THEN and QUALITY turns into QUATITY on this blog?
#104 nonplused on 12.26.10 at 3:18 am
Funny the pickle we are in with the newer vehicles, too. My 04 has pretty light mileage but all the electronics are conking out.
European or domestic and do you live on the coast?
However, I am with you that I think there is a high risk that a number of bonds will default, especially at the US municipal level and possibly in Europe. But Canadian bonds are still pretty safe. For now. The greater risk with Canadian bonds is that they don’t keep up with inflation.
Canadian bonds will get sucked into the vortex of deflation, just like all the others. It’s only a matter of when. Remember all governments in Canada are borrowing money to meet their needs plus to pay interest on old debt. In addition they are all hiding loads of off-book debt. Ontario universities, hospitals and other institutions are now required under GAAP accounting principles to move all off-book debt onto the ledger. This was a four year program and is almost complete, so the true debt picture is ugly. Quebec is apparently a real debt basket case. I’ve been told by a friend of mine in government that Quebec is hiding massive amounts of debt, apparently the carpet has big lumps!
Canada is nothing special in the economic sense and is subject to the same rules as all the other countries. Bankers and international markets only need to become worried about repayment to turn the credit taps off. Remember 1996, when the CND dollar went in the tank and the Liberal government went into cost cutting mode? That was the start of a bond revulsion, had they continued with their profligate spending ways Canada’s bonds would have been under pressure. At this time we are not 1996, no internet bubble and increasing revenues to save us. Incomes are falling, debt is rising and our trading partners are in the dumper. Sounds like a bond default in the future to me.
You cannot win when you are fighting the exponential function. The cards are stacked against you, it’s a losing battle.
http://www.youtube.com/watch?v=F-QA2rkpBSY
#104 nonplused on 12.26.10 at 3:18 am
P.S., I’ve been shorting the crap out of the 30 year U.S. bond and so far its been a wining trade. Remember when you were told that QE 2 was going to bring rates down. Well the Federal Reserve did the same thing in the 1960’s it was called operation twist. The end result was 19% interest rates in the 1980’s. Yes they are smarter than everyone else. Plus they never learn even from there own mistakes.
#77 Timing is everything.
Yes, he made over 300K a year (via 4 jobs in medicine) but spent around 450K a year and never paid any taxes up front and was 3 yrs behind filing at any given time. Threats of imprisonment were normal, as were the multiple calls from creditors. I lived with him and one day he said “Honey, remove all your belongings from the Audi because the bailiff may be coming to take the car.” LOL…really? the bailiff? sigh
I’m sooooo thankful he’s out of my life and I can happily rent, drive my used car while planning my financial future with optimism.
My experience with finances is that most men drag you down..that’s just me though. lol
Garth thank you for the nice comment Xmas eve.
Aussie Update
Loan standards drop to keep the bubble afloat
At present, you need a $30,000 deposit to bid $1 million for a property if you get a loan from the Commonwealth Bank, which currently has one of the highest maximum LVRs of 97%: “The maximum we will lend you is 95% of the valuation amount. We also add the Lenders Mortgage Insurance or a Low Deposit Premium to your loan (up to a maximum of 97%), so it doesn’t cost you anything upfront”.
This press release implies that you could approach St George (division of Westpac Bank) with $20,000 in savings, be given a $1 million loan, and have it recorded as a 95% LVR loan (since St George probably has the same maximum published LVR as Westpac of 95%) where $20,000 was your actual deposit and the effective LVR was actually 98%.
The effect of this trick is to expand the pool of potential borrowers to whom St George can extend a loan, while appearing not to alter its lending standards.
Westpac is now allowing potential borrowers to treat their rental payments as “evidence of genuine savings” when applying for a home loan.
http://www.debtdeflation.com/blogs/2010/12/23/loan-standards-drop-to-keep-the-bubble-afloat/
I’m sure we (Aust and Canada) haven’t seen the last of the efforts to keep the bubbles inflated.
The current trend is that all levels of Govt. will locate their key, principal or primary services in the City Centres.
Regardless of the fact that there will eventually be “clawback” of both Public & Govt Service Jobs and their Pensions.
Western Canada is the envy of the world with its plethora of natural resources, only 12.5 million citizens and its location being the “safest”.
BC’s HST rejection vote next year is the first step of the Western Provinces seceding from Canada.
Pundits here predict higher commodity prices.
Yet Eastern Canadians take itself for granted that it Politically controls all of Canada, that it is entitled to Federal taxes being funneled there and that Western Canada will continue as E C’s wholesale supplier of commodities.
Ontario and Quebec continues to pile on their Provincial Debt, hoping Western Canada doesn’t notice.
Looks to me, Garth is describing Milton’s future as the next Windsor.
Peace, eh
Nostradamus jr.
#109 Macrath on 12.26.10 at 9:46 am
#69 Bullion.Bunny
One Terra byte of data. Interesting! Have you parsed anything on portfolio hedging. Options vs Short ETF`s vs QID (quatity, income,and diversification)?
I look at historical patterns and long term cycles (i.e. hundreds of years) Not a huge fan of options or Short ETF’s, due to the time decay. But I do use them from time to time when the opportunity presents itself. QID only works well in a credit expansion as all boats are lifted on a rising tide. QID during a credit contraction is tricky and you have to cherry pick.
Jesse LiveryMore said it best
“the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.”
This is what I like to do, I’ve been long gold ten years.
Not really hot on anything right now, everything is looking “overdone” to the upside.
Long Gold and gold stocks, looking for a correction soon maybe Jan 2011. Can’t really say, the market wants to party. So party close to the exit.
No defaults, they just invented credit default swaps. They work great, Just ask AIG and Goldman Sachs.
All systems have limits, when you exceed those limits things self-destruct. Credit default swaps only function to transfer debt from the private to the public. What happens when the public can not longer pay. See exponential function video, it’s a losing battle.
http://www.youtube.com/watch?v=F-QA2rkpBSY
Why do you use BSD when there are so many good linux distro`s available (opensuse,redhat,ubuntu)?
BSD is experimental software supported by the University of California at Berkeley, the FBI, and the CIA.
Really like BSD because of the encryption. However I’m rethinking my position due to the latest scandal. Other than that its a really solid product that’s used as the backbone of the internet.
http://news.cnet.com/8301-31921_3-20025767-281.html
#114 sue
Well, there’s always the ‘homeless’ dude. He’s a cheap date…You can watch the world go by. Sounds romantic.
However, the guy in the apartment with the old car is sounds like a ‘match made in heaven’. ;)
#11 thetruth,
Ahhh. I have read your posts and you are neither. This is the cry of the ignorant right up to the moment they become roadkill for their supposed street smarts.
OK, here’s another financial noob question: why/how do bond rates drive the interest rates of banks? I thought the Bank of Canada set rates according to what it thinks the economy is doing/needs to do, then the private lenders follow their lead?
I guess what I’m getting at is – with interest rates having so much effect on the economy in general – is the BOC’s ability to control them overstated?
The BoC controls short-term rates, which include the bank primes and variable-rate mortgages. Long-term rates are set in the bond market by forces of supply and demand (including quantitative easing), and they determine fixed mortgage rates. — Garth
Nice link on Social Darwinism
http://dailybail.com/home/black-friday-shopping-in-post-apocalyptic-america.html
Default is deflation! Remember that the debt is offset on the balance sheet as a deposit, or a “saving” when considering bonds, etc. As debt is destroyed, so are the savings. Hugely deflationary! Monetization of the debt is
a reaction to the deflationary force.
#109/Macrath:
Re: BSD
You have no idea what you are talking about.
The CSRG at UCB hasn’t worked on BSD releases in nearly a decade. Its initial funding was principally through DARPA. If this had not occurred, you would have probably not seen companies like Sun or Cisco emerge in the 80s.
OpenSSH from OpenBSD is the single most widely deployed open source app out there. Experimental software, my ass.
Everyone else’s mileage may vary.
–Your friendly neighbourhood OpenBSD developer
timing is everything
LOL…probably as long as their is no consumer debt. I have nothing against homeowners as long as they have their sh*t together.
Tall, handsome, athletic and hot….well, I wouldn’t hold that against him. :)
#100
45NORTH…
FYI…I tend to read quite a bit more than I write. I am not really concerned about what people may or may not think of what my “identity” is; as their is only one of me. In regards to the apparent misleading spelling and grammatical errors, there just simple errors, usually from a missed key stroke or single draft submissions void of proofreading.
While your at it, why don’t you start dissecting Garth’s posts; as I’m sure there may be a spelling or grammatical error to be found.
My thoughts are that you may have taken personal offense to my previous comments on your defensive, self-righteous, CUPE mentality of entitlement and comfort at the expense of the tax payer.
You simply have no defense or rebuttal to the fact that our federal public service employee’s are receiving premium wage, benefits and pensions far superior to what can be found in similar positions held in the private sector.
I actually find it funny that you attempt to defend the notion that the abundant compensation you receive is warranted by either merit or entitilement; it is simply too generous.
So if you could, do the private sector a favor; try to treat those who pay your way with respect and humility.
Cheers! Happy New Year!….Whenever you do get back to work drafting the next strike action plan….
#98 Roy Stacey
” I am wondering how people can be soo stupid with money? Nobody is born with good money habits, they are developed over time”
++++++++++++++++++++++++++++++++++++
Excellent statement.
It should LAW that it must be posted above the entranceway of every Bank in North America.
Unfortunately, the customers entering that same bank would be in too much of a hurry making a minimum payment on their line of credit to notice.
The BoC controls short-term rates, which include the bank primes and variable-rate mortgages. Long-term rates are set in the bond market by forces of supply and demand (including quantitative easing), and they determine fixed mortgage rates. — Garth
And both are going up. Higher and quicker than many folks in Canada are prepared. How many folks?….
…Sno-cone please.
#96 Aussie Roy
I have to admit that bubble of yours down under is a real source of fascination to me. It is a little like watching a train about to go off the rails. When it does finally wreck the consequences for your country should be fairly dire.
What were they thinking?!!!
It has not escaped my attention that the acronym for the Home Owners Grant down there is HOG. The banks must be giddy after having consumed so much at the countries expense and put your whole country into debt purgatory for a generation of two. Almost all your debts are mortgage related.
Sad how a single asset class has enslaved your nation.
#5 Nostradamus jr.
Hey, Vancouver Real Estate has not increased by 50% as per your prediction and you fail to live up to your promise to never come back until it does. What are you doing here?
Garth,
I am watching hundred’s of Canadian’s borrowing against their equity to buy a property in Arizona because the prices are low and the dollar is near par. It seems that for every house purchased by a Canadian, the U.S. banks dump another one from their stack of foreclosures. Regardless of the deal this is scary if their own residential value drops quickly
China, as some quote on this sight, will not have an impact on metal prices. Here are the facts:
TIANJIN – China’s major gold mining companies are planning to ramp up efforts to expand overseas as gold demand rises in China and domestic reserves fall precipitously.
China National Gold Group Corp, the nation’s largest gold producer, said it will increase its annual capacity to 50 tons in five years, 30 to 40 percent of which will be produced overseas.
“We are looking for gold resources in Congo, Brazil, Russia, Venezuela and Mongolia, and most of them are in the early stages of geological exploration,” said Du Haiqing, vice-president of the company.
This will end well for some.
For the some that put careful consideration into their decisions and followed established good practices, it will end the way they had planned it to end. We counted on an eventual bust in this forestry town. We knew it would come sooner or later, it is cyclical. We bought in a bust cycle, knowing it would come around again. We counted on one of us losing our job, even though it never happened.
For the guy that went out with no money, just got a good job, and bought the nicest, most expensive house in town for a first house, with a mortgage that will handcuff him upside down for 35 years, maybe it will be not so good.
But is that wrong ? Is it a tragedy ?
The guy spent more time in the drive-thru deciding what to have for lunch, than he spent thinking about a lifelong purchase.
Isn’t that the way the system is supposed to work ?
People who are careless with their finances get into trouble, and people who exercise caution and self-control stand a better chance of success ?
I think our society will be much better off in the long run, once we break everybody of their “crack-habit greed”.
Q:
What the hell is a truck driver doing with a $500k, 2200 sq ft palace, living alone, single income, paying close to $3000/mo for a mortgage, (makes only $4000/mo) ?
A:
Going under….But he firmly believes that the short term sufferage will result in easy early retirement, and nobody can change his mind about it.
#117 Bullion.Bunny
Thanks. I played with BSD years ago to learn some UNIX.
I`m using SUSE now and i`m quite impressed especially since it`s free and puts Microsoft to shame. I guess thats why M$ is buying Novell. Kill the free and monopolize as usual.
You might enjoy this interview.
A conversation with Bob Prechter, final end game
http://www.financialsense.com/financial-sense-newshour
Exquisite Malevolence –
Vancouver RE Bull Uses Quotes From ‘It’s A Wonderful Life’ To Torture Bears On Xmas Day
http://wp.me/pcq1o-1Ge
Nostra LMV Be careful king steve and his minions layton ,iggie and the GG may make you a criminal .
http://thetyee.ca/Opinion/2010/12/20/NewMcMarthyism/
It’s only apartheid if it happens in africa .
#105 Cookie Monster on 12.26.10 at 6:51 am
I agree with everything you have stated; however I believe you have made a few assumptions that lead you to this conclusion. First let me open with a quote from Ludwig von Mises.
“An increase in the quantity of money or fiduciary media is an indispensable condition of the emergence of a boom. The recurrence of boom periods, followed by periods of depression, is the unavoidable outcome of repeated attempts to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
The breakdown appears as soon as the banks become frightened by the accelerated pace of the boom and begin to abstain from further credit expansion. The change in the banks’ conduct does not create the crisis. It merely makes visible the havoc spread by the faults which business has committed in the boom period.
The dearth of credit which marks the crisis is caused not by contraction but by the abstention from further credit expansion. It hurts all enterprises – not only those which are doomed at any rate, but no less those whose business is sound and could flourish if appropriate credit were available. As the outstanding debts are not paid back, the banks lack the means to grant credits even to the most solid firms. The crisis becomes general and forces all branches of business and all firms to restrict their activities. But there is no means of avoiding these consequences of the preceding boom.
Prices of the factors of production – both material and human – have reached an excessive height in the boom period. They must come down before business can become profitable again. The recovery and return to “normalcy” can only begin when prices and wage rates are so low that a sufficient number of people assume that they will not drop still more.”
You are assuming that national and international credit markets are going to continue granting credit knowing that it will never be repaid. Yes, direct money printing and bond purchasing can continue. The entire economy is on government life support and yes this is driving inflation. As you are aware this can only go on for so long, eventually the people revolt. I think the average person “Gets It”, debt will need to be paid back. Just look at the local election in Toronto, “Rob Ford”? People are revolting, no more gravy train and no more big spending on stuff we don’t need. The Politics of tax and spend are about to get interesting.
Deflation will rear its ugly head as markets ration credit and the populace halts the government gravy train. Yes, it takes time for all of this to happen and the forces of deflation and inflation will be doing battle for some time.
Hyper-inflation only really flourishes in monetary systems that are devoid of credit markets combined with governments that have a direct transfer mechanism into the economy.
Examples are as follows.
Germany (Weimar Republic 1923)………
No, or very small credit market. Heavy government involvement in the economy via direct government spending. Also huge war time reparation payments that were paid via printing. Ends as they always do, people starving in the streets and the populace completely pissed-off. Hitler comes to power in 1933
Yugoslavia 1996.
Yugoslavian government runs out of foreign currency and starts to print local currency to pay its obligations. Direct spending in the economy for welfare, daily expenses, old age pensions and large government enterprises leads to out of control hyper-inflation. As in Germany of 1923, credit markets are not present to choke off the spending and money printing continues until hyper-inflation sets in. Same result as Germany, populace is dirt poor and pissed off. Old hatreds reappear and Yugoslavia becomes a war zone.
Zimbabwe around 2009.
Same stuff, just look it up. Government prints and spends……hyperinflation….no credit markets……war, death, destruction….blah,blah,blah. Same story nobody ever learns, history is repeated.
Here is a list of other examples, please note that during the period of hyper-inflation all of the countries had limited or non-functional credit markets. Credit markets serve as the deflation mechanism, credit is cut-off then the entire system goes into deflationary collapse. We have all been witness to these phenomena in 2008. Governments around the world bailed out the entire system and continue to hold it up. How long can they continue and how long do you think people will tolerate it? How many more banker bonus rounds do you think the population will tolerate? How much more wealth transfer will the populace tolerate? In addition our governments are growing in size and scope, are you willing to have your life micro managed by a bureaucrat t? I say NO, and so will many others.
http://en.wikipedia.org/wiki/Hyperinflation
In conclusion, functioning credit markets choke off hyper-inflation by rationing credit to only “AAA+” clients only. Clients that have “AAA+” ratings are reluctant to borrow because they wish to maintain there “AAA+” rating. The economy grinds to a halt as cash only transactions are possible as credit is not available. Its been this way in each of the examples Rome,1435,1620,1720,1772,1825,1873,1929. Why is it different this time?
Yes I know what you are thinking. What if government spends to infinity overrides credit markets and takes over every industry in its universe? Sure that is possible, if it does happen look out. The populace will revolt in a fire storm as all wealth is transferred to the state. In the end all we have is history to guide us along with cycles and patterns. People are people and Human Nature has not changed, this was the basis of Ludwig von Mises book “Human Action” written in 1911. The more things change the more they stay the same.
You’ve posted here ad nausea today. Isn’t it time to go and lick your bullion? — Garth
#122 Dark Sad Monster Bunny on 12.26.10 at 1:21 pm
Cool handle dude……but how about
Dark Sad Monster Golden Chocolate Thunder Bunny c/w side order of Cookie Monster?
A conversation with Bob Prechter, final end game
_____________________________________________________
Bob Prechter is a horrible Elliottician. Do the opposite of what he says. You’ll make tons of money that way.
#133 Macrath on 12.26.10 at 2:14 pm
free and puts Microsoft to shame. I guess thats why M$ is buying Novell. Kill the free and monopolize as usual.
Got to get over the “US VS THEM” attitude. Microsoft makes a fine product that operates in a free market. As always nothing goes up forever. Many Microsoft employees have either cashed out or become so old they don’t care anymore. Microsoft is feeling the pinch on growth and profits. Or as I let to say they have been “Apple Sauced”. In a free and open market everyone has a chance to either fail or succeed. Now it’s Microsoft’s turn for a good beating for all the crap they have been releasing. Apple is on the rise for one reason, great products that people want to buy in a free market.
OpenBSD, FreeBSD, Linux, SUSE and all the others are made by nerd and used by nerds. I don’t think “Joe public” is going to care about infrastructure too much.
P.S. I use XP and Windows 7 on my desktop and laptops as they are the only products that will run my C.A.D. software. Also operating systems don’t matter that much anymore as VMware and Intel’s hardware virtualization lets you run anything on any platform. Hackintosh on your Windows 7 laptop anyone?
Dec 26th – 2010 – HALIFAX –
Public debt in the Maritimes has crept so high that social tensions might erupt over the next two years as programs are slashed and facilities closed, says a respected professor of public administration.
Schools, hospitals and public infrastructure built over the past 50 years will start to shut down to control the red ink, Donald Savoie, a professor of public administration at the University of Moncton, said in a recent interview.
Savoie, the author of numerous books on public finances, said the region is at the beginning of a downsizing era that will be a preview to what much of Canada might face as a financial reckoning arrives.
“We are about to put the public sector in reverse. That’s what we’re about to do. Instead of creating new hospitals, we will be closing hospitals. Instead of establishing new schools, we’ll be closing them,” he said.
“It’s a different world. It’s a much, much, much more difficult world.”
http://tinyurl.com/27ct7bj
Garth what happened to the picture of Sarah Palin, so fitting for this time of the year.
She was yesterday’s news. — Garth
#129 dd,
My thoughts exactly.
#134 Vreea,
Quite amazing that the bull crowd would draw any inspiration from “Its a Wonderful Life.” in the movie Jimmy Stewart’s character is standing up for affordable housing and fighting against the corruption of Mr. Potter. At one point Potter even tries to buy him off.
Potter and his like are the current bankster/Re industry mafia. They control the media, control the system and have created a system that will impoverish the middle and working class with debt.
You’ve posted here ad nausea today. Isn’t it time to go and lick your bullion? — Garth
Wow, someone piss on your cornflakes? Besides I did that on Dec 24th. Don’t want to lick too much. What’s the problem, can’t handle logic?
#123 Another Albertan
You have no idea what you are talking about.
——————————————————————-
You are absolutely correct. The experimental,FBI, CIA part was meant as a joke.
I`ll load it up check it out and get back to you for tech support. I hope it runs X server and has Nvidia drivers.
It was a 100% command line Devil when I last used it long ago.
So what are the kids at Berkley using these days and why do you develop BSD? Engineering apps ?
From [email protected]:
“Jimmy Stewart’s character is standing up for affordable
housing….”
George was a reactional reserve lender!
http://www.youtube.com/watch?v=EOzMdEwYmDU
oops make that “fractional reserve lender”
too many rumballs for monsta bunny……hic…..
sarcasm on Yes and this time it is sooooo much different. No comparison what-so-ever. sarcasm off
The correction shall be commensurate with the unwarranted exuberance which preceded it, nothing more, nothing less. No surprises here.
throwstone: You simply have no defense or rebuttal to the fact that our federal public service employee’s are receiving premium wage, benefits and pensions far superior to what can be found in similar positions held in the private sector.
well no I don’t but I did react to the notion that federal public servants download porn at work – they don’t
if we are going to effect any constructive useful change then we must not overstate our case
one criticism I have is Treasury Board’s common-look-and-feel
http://www.tbs-sct.gc.ca/clf2-nsi2/index-eng.asp
it insists on an abstract and unrealistic level of bilingualism. One result is that valuable information is removed from Federal web sites because it’s not bilingual. Another result is added cost. Another requirement is that the web sites be accessible to the visually handicapped. It is impossible to convey the information in maps by an automatic voice-over. This requirement adds additional costs.
I have seen up close the added costs of the common-look-and-feel requirements. Cost is in the hundreds of millions.
BB, Mises is talking about a boom-bust cycle where a correction is ‘allowed’ to happen, that’s the point, with bailouts, it’s not being allowed to happen. This was the logical conclusion Peter Schiff arrived at when arguing with guest Robert Prechter on Nov 8. They agreed on everything in terms of the mechanics of money, they only disagreed on the actions of government. Peter believes they will continue doing what they are doing, Prechter believes they will stop quantitative easing and let the banks fail. I agree with Schiff.
If their is no monetization when defaults occur then “yes” there would be deflation, loss of capital reserves at banks and corollary credit contraction would make it very hard to obtain new lending, this is exactly right, but they will print, because governments will not allow the banks to fail.
And once they do that and the market loses faith in the dollar and avalanche of dollar savings/reserves sitting offshore will rush into the market and collapse the value of the dollar, interest rates will rocket etc. Gold and silver will become king once again.
Why are these funds broke?
Poor planning /Management before the recesssion ,
“forward financing” gave way to a “pay-as-you-go”
model.
Many states have exhausted their unemployment insurance trust fund reserves borrowing (+/- $40.9 billion )from the Fed. at zero interest.
======
There is pressure on the Congress to extend the interest waiver these state loans through 2012.
Read more: http://www.mcclatchydc.com/2010/12/20/105585/employers-seek-to-avoid-higher.html#ixzz19FVy3JHU
=============================
http://www.mcclatchydc.com/2010/12/20/105585/employers-seek-to-avoid-higher.html
http://projects.propublica.org
=
SWAPS of a different kind
http://www.propublica.org/article/for-brain-injured-soldiers-top-quality-care-from-a-philanthropist-not-the-p
Garth I like your picture of the goat today. It symbolizes the precarious position of our housing market today.
Before you buy anything ask yourself “Why is that important to me” and then as of the answer “And why is that important to me” and then again ask yourself “And why is THAT important to me” and then again as many as 5, 6 or 7 times. Eventually you will realize what it is you truly need. It’s not about the bling it’s about your 5, 6 and 7 and they invariably are free.
This condescending piece of claptrap is brought to you buy a realtor – a profession that espouses frugality and simple living. This summer, didn’t you claim to write a number of your posts from your boat, while whining about the difficulty you had keying the messages into your Blackberry? Yes, I am sure that you never participate in conspicuous consumption. A blackberry and boat are certainly rock solid needs.
Client: “We want you to sell our modest 2 bedroom, condo and help us buy that 700K home we have always dreamed of. The condo is paid for. Do you think you can help us?”
Altruistic DA: “Well, you know, I have some have some philosophies of life with regards to your question. [now quoted verbatim] I believe that eventually you will realize what it is you truly need. It’s not about the bling it’s about your 5, 6 and 7 and they invariably are free. [end] Have you consulted with your 5, 6 and 7 today? I truly don’t think that you need that new home, and I wholly refuse to sell your condo. I personally abhor needless consumption and feel a moral obligation to not take your commission cheque. Furthermore, I feel it is not in your best interests to sell you my client’s home. Although you may want it, you simply don’t need it. If you need more lectures on what is important, and what you truly need, I will be glad to assist you.”
This message was brought to you by a self important wanker who drives real estate clients around in a Benz
He must also forget complaining about the difficulty has keying message into his $800 iphone while sitting on his boat.
Oh my god, I just listened to Bob Prechter say that he sees no way how the US government can devalue their currency, because he says ‘devalue against what, there has to be something to devalue against’. What!? try devalue against every single item available for sale in the entire market, that’s what. What an idiot.
Here’s the interview, already posted by someone above:
http://www.financialsense.com/financial-sense-newshour
Hi Garth / Webmaster,
Please remove my response to DA (just above) I didn’t proofread before sending it.
Thanks,
#143 Junius
Are you telling us that, if the government set about implementing policies which presented to you opportunity to reap great rewards for your efforts, you would not exploit the opportunity?
Who was it the Banksters, the R/E industry mafia, the First Time Buyer Greater Fools, the Mortgage Brokers, the BMW dealers… who was it that took advantage of unwarranted fiscal and monetary policies of late aimed at thwarting the natural coming of an economic cooling thus compounding it yet further.
We are ALL to blame Junius. Those who took advantage of it for their contribution in further inflating it to the precarious levels it is and those who were too busy looking a gift horse in the mouth to put themselves in a better position to deal with the inevitable correction. Either way we are all to blame and will all share in the associated corrective costs.
There are just too many sleazy fund salesmen collecting commissions while locking people into deferred sales charges. Too many bank employees masquerading as caring friends while they condemn seniors to penury. Too many brokerage account reps who churn their way through clients’ funds. Too many lenders devoid of principles. Too much fear. Too much greed.
The game’s rigged, it’s time for god, guns, gold, grub, oh yeah and squirrel meat futures.
Junius,
Banks and realtors do not make people buy. People make a choice to buy or rent. The decision to sign on the dotted line is their responsibility. The same goes for irresponsible renting
______
Potter and his like are the current bankster/Re industry mafia. They control the media, control the system and have created a system that will impoverish the middle and working class with debt.
.
Although posted in the U.S. – this just says it all.
I wonder how many stories like this are out there:
“Yesterday morning we spent 2 hours cleaning and tidying up our house because we had TWO showings that afternoon. We were very excited and my husband said, ”this is the day it sells. I can just feel it!”
The house looked perfect, with fresh flowers on the dining room table, a bowlful of sparkling lemons in a black bowl for a punch of colour in our black and white kitchen.
All the beds were made with not a wrinkle in one duvet cover.
The ugly, massive microwave was back in the garage and all remnants of a homework project hidden in a box in the closet.
Did I mention the sun was briefly shining and the smell of the ocean was in the air?
The first showing lasted about 4 minutes. The house is too small they said. Not much we can do about that.
The second showing lasted about 2 minutes. No comment from the potential buyers of a house (not our house!).
That is okay… Our house has only been listed for 20 days, 5 hours and 22 minutes.
SOMEONE will fall in love with it, just like we did.”
http://tinyurl.com/29v357u
Sitting here in NYC watching the snow fall and catching the news on CNN. Respected economist from Moody’s says house prices to keep falling for another 6-12 months.
You can buy a home on the golf course in Phoenix for less than a small condo box in Vancouver.
Oh yes, I forgot it is different in Canada. Happy holidays!
#17 farmboybc on 12.25.10 at 1:45 am
“The ex left me because I didn’t take her to Mexico,and my truck ,and t.v. was old.”You gotta live ” she would say.
——————–
This happened similarly to me earlier this year. I wasn’t keeping up with the impressions that her adult children created with their newer homes, vehicles, clothes, computers, trips, toys, and propensity to spend. My older TV and other stuff worked fine ’cause fancy just isn’t my way. I’m a recycler, reuser and generally frugal type, prefer saving to spending and trying to position myself for the future, including retirement.
Her kids helped her to “see the light”, to get something “better”, so she moved to a pricier place having first renovated it. Now she has a (not a small) mortgage into her forthcoming retirement (which starts in a few years).
Oh well … no longer “my problem”.
Default is deflation! Remember that the debt is offset on the balance sheet as a deposit, or a “saving” when considering bonds, etc. As debt is destroyed, so are the savings. Hugely deflationary! Monetization of the debt is
a reaction to the deflationary force.
————
The expansion is hugely inflationary, the default not so much because the bank can not call in all their loans to maintain their capital reserve ratio at say 20:1, so what happens instead is as their capital is consumed via expense/losses their reserve ration simply increases and if enough losses occur the reserves become zero, then their reserve ration is some huge amount of outstanding loans 19:0 or infinity which is bankruptcy.
So the defaults are not nearly as deflationary as the expansion was inflationary.
I meant to type ratio in the above post, not ration. Im suffering from an automatic typological error by adding the n to io, ion.
#150 Cookie Monster on 12.26.10 at 4:13 pm
Ok, lets agree to disagree on this point and call it a day.
The person putting on the credit card debt onto a mortgage would not be doing a bad thing if they changed their wasteful spending so that they could pay off their loan more quickly at a lower rate living within their means. Unfortunately, I would imagine that it is hard to break bad habits and they will be racking up their credit cards once again.
#136 Bullion.Bunny on 12.26.10 at 2:58 pm
I just reread, very good post and I know a lot of effort goes into writing it, thanks. Why is Garth giving you a hard time, I don’t know? I appreciate your opinion.
And ‘Dark Sad Monster Bunny’, Great name!
#57 Northern_dirt on 12.25.10 at 3:13 pm
#24 ams
Read “Fooled by Randomness” a few weeks ago, and am close to the end of “black swan” now. Nassim is a refreshing read, especially when affronted by people saying RE never goes down, This or that will never happen in the markets , this is a sure bet… Just reiterates the need for diversity in ones portfolio, from a philosophical POV.
______________________
Taleb can be instructive but please remember that lots of these things are NOT black swans.
Eric Jansen told people to get out of the dot-bombs in March 2000 and started warning of a housing bubble in 2005
Steve Sjuggerud called the husing bubble burst in 2006 just a couple of weeks after it started
James Chanos shorted Enron massively before it burst – supposedly that was a “black swan” too
So I have no idea how Taleb can call any of these things black swans – folks who were paid to look the other way (like Greenspan & Bernanke & the FIRE (Finance Insurance & Real Estate)) complex “couldn’t” see it coming but smart guys who are not blinded by greed, looking at all the facts WERE ABLE to see these things coming.
Garth, you talk about people without pensions being in trouble — as if people *with* pensions are okay. But are they really okay?
Some US municipalities are already going bankrupt trying to keep with their pension obligations. Some are forking over 70% of the tax revenue to retired former employees! Automakers are passing on the high costs of their mortgage obligations in the over-pricing of their cars, and even so, some have already gone under.
And that’s as the boomers just *start* retiring.
How can you contract to pay someone an ever-rising sum of money 40 years from now, not knowing anything about how the future will pan out?
How can yesterday’s governments and corporate leaders make future governments and leaders be on the hook for deals made far in the past, especially since they put no money aside to cover these pensions?
Maybe this is my Gen-X cynicism coming out, but organizations and businesses will soon figure out how to get out of paying their pension obligations. They have to if they want to survive. Once a few organizations do it, then they all will.
I don’t have a pension, and I’m just as glad. It’s an illusion of security. Nobody’s going to pay you money they don’t have, no matter what your contract says.
Great news out of China with interest rates going higher. Guess where China will be parking all their moolah. West Side Vancouver no doubt. Looks like gold will be hitting $1500 by Easter as well. Only other good news left is for Canadians to start defaulting on their debts so we can mop up the cheap Asks on their homes. China has the guts to raise interest rates. That will never happen under the Harper regime —–
……BEIJING, China – China increased interest rates Saturday for the second time in little more than two months as the government steps up its fight against rising inflation that could threaten political stability.
The move by the People’s Bank of China had been expected by the end of the year or early next year.
Effective from Sunday, the benchmark one-year lending rate will climb 25 basis points to 5.81 per cent, while the one-year deposit rate will go up the same amount to 2.75 per cent, the central bank said on its website
–
#135 Debtfree — Thanks for the link. I am well aware of which side Harper, Iggy, Layton and many others follow.
Dion didn’t, and that was one of the reasons he was trounced in the last election.
But all dogs have their day, and now it is Mad Dogs and Englishmen time in the midday sun — a lot of ordinary, level-headed folk have become zombies, focused entirely on money (greed) and power.
Not too long to go before the present cycles all finish, and new ones replace them.
#140 Bill Grable — “We are about to put the public sector in reverse. That’s what we’re about to do. Instead of creating new hospitals, we will be closing hospitals. Instead of establishing new schools, we’ll be closing them,”. . .
Good post. As well as decimating the workforce by waving goodbye to mfg., industrial and IT sectors (a lot of those have already gone), the next to go are govt. unions and the like.
This is another cycle that is ending — good paying jobs are going / have gone, now having less jobs overall means that this continent will be on the dole for a long, long time.
Sure glad I’m getting old.
Macrath:
I can take an OpenBSD installation and throw it on the internet and be confident that it isn’t going to be rootkitted in short order.
It also has the cleanest source tree, which makes it extremely suitable for creating secure, lightweight embedded systems. [I’m really a 50%-suit/50%-steel-toed-boots engineer]. (And do you really trust the binary blobs distributed with your Linux systems? If you want to make a Men-In-Black-Helicopters comment, it should be about systems running unauditable code…)
As for support, you’re on your own. We don’t develop for users’ benefit. We develop for our own benefit and then give away the results. We don’t hold your hand.
The development philosophies and intellectual property licensing are very co-linear with my own inclinations. This can’t be understated.
Everyone else’s mileage may vary.
162 Cookie – So with as little as 5% defaults at a 20:1
ratio our bank is insolvent. Oh yeah, they would be calling in the next 5% of demand LOCs to cover that, which would drive more to default which etc. Despite the first “small” percentage of default, that would still be
extremely deflationary. (example sans CMHC/CDIC of
course)
Also please consider defaults in private mortgage funds, and the bond market (don’t know if that was part of original discussion – too many rumballs…..hic…)
BB, look at all the examples you gave, everytime the governments did the same thing, they printed, they devalued, they inflated, they never to the right thing, they never let the banks fail. Why would they this time?
China raised intrest rates on the 25th to counter a 5.1% food cost inflation. In Canada we saw a 40% rise in food costs and the governemt decided to do nothing….ZIRP!!
China is concerned with social unrest…in Canada we can walk over the starving bodies of children and seniors who wait long hours in the lines at the food bank line and pretend that its business as usual without a second thought.
The lines at the Gospel Missions Christmas dinner last night were thousands of bodies long. As usual the families with children were swept in to a back room away from the media’s cameras’s so that Canadians didn’t have to see whats really going on.
That taxes are going way up to pay for the continued folly of the Finance Minister ‘F’ goes without saying. There is no way to pay for the crushing national debt. Cities and municipalities are already paying out over 90% of the budgets in salaries and pension perks to the fat cat civil servants greed and there is no room to offload anymore debt onto the minor governments to additionally tax citizens except to add property tax increases and addition mill rate fees for services. Provincial income taxes will go up…no doubt.
The Americans are bemoaning the fact that 70% of budgets are been clawed away for the civil service pensions….hah hahahahahahahahah they should come to Canada and witness the 90% carnage that the civic pigs have stolen from us.
http://globaleconomicanalysis.blogspot.com/2010/12/pensions-eat-70-of-decatur-illinois.html
Even Garth says ‘there will be no defaults’ so this means government must monetize bad debts when the collapse comes.
See nonpulsed, this is rational logic, either there is going to be bankruptcy or bailout, one or the other, this is an exclusive-or function. This is how the human mind works, this is cognition and ratiocination.
Or the economy will sputter along, taxes will increase and governments will continue to service their debts. That is the likely outcome. — Garth
#166 Cookie Monster on 12.26.10 at 5:58 pm
Why is Garth giving you a hard time, I don’t know? I appreciate your opinion.
Garth and I have history. He needs to poke the bear from time to time. (i.e. me) Plus he has a boner for Gold people (too much of your net worth in one asset, I know). I’m sure the price movements are driving him nutty. When it hits $2,200 next year he is going to blow a gasket, skip a tooth on his timing belt or even worse blow the line pressure proportional valve in the hummer transmission. (I know Garth, I know, balanced portfolio, income generation…..tax free dividends…..blah,blah,blah…….I get it, I know…..already there.)
I know the deflation perspective is hard to understand, it took my years to “get it”. If you have the time read the book “The King, The Crook and the Gambler”. It’s a history of the South Sea Bubble, it’s the book the brought it home for me.
Or the economy will sputter along, taxes will increase and governments will continue to service their debts. That is the likely outcome. — Garth
————
I’m not that optimistic!
Maybe this is my Gen-X cynicism coming out, but organizations and businesses will soon figure out how to get out of paying their pension obligations. They have to if they want to survive. Once a few organizations do it, then they all will.
——–
It’s called inflation but rates have been coming down for so long that no one can even believe it can happen.
People will get their promised pensions $$$, it just won’t buy much.
But then again, maybe our austere perma-deflationists will be right and our leaders will write down all the bad debt. LOL… as if!
Or the economy will sputter along, taxes will increase and governments will continue to service their debts. That is the likely outcome. — Garth
Where is your evidence to support this claim? This is normalcy bias thinking.
nonpulsed, agreement with Garth’s or does not invalidate my previous exclusive-or statement. Logic must be set in an if-then statement. If banks face bankruptcy, then the government will bailout or let fail.
If somehow we make it through is not seriously considered its because the probability of that scenario seems low based on all the knowledge currently available. But as always, the future is uncertain.
#171 Another Albertan
I did some reading while waiting for your reply. Proprietary, Alberta, oil and gas , remote locations,
VPN, embeded systems. I think I get the picture now.
I`m really interested in the live CD concept for security.
Thank`s for the tips. Much appreciated.
“Or the economy will sputter along, taxes will increase and governments will continue to service their debts. That is the likely outcome. — Garth”
I have absolutely no problem agreeing with this. Plus decreased services, increased user fees, and many other consequences we don’t want to face.
#175 Cookie Monster
…‘there will be no defaults’ …
It is funny, nobody runs the numbers before making comments like ‘there will be no defaults’ or ‘don’t bet against America’. Many cities and countries around the world are in default today. Wishing upon a star will not change this fact.
http://www.cbsnews.com/video/watch/?id=7166293n&tag=cbsnewsMainColumnArea.5
In Beijing real estate is so tied up in speculation that working people are forced to live in cellars and bomb shelters….rooms less than 100 sq ft, no bathrooms, closets or emergency exits…oh and no sunlight.
http://www.spiegel.de/international/world/0,1518,736035,00.html
Apparently all the affordable buildings have been bulldozed for redevelopment into flats no one except well connected speculators can buy. Government points to the above ground scene of empty condos as ‘success’ but has dealt the commoner a blow by failing to meet the basic reality of the working people.
Its like Canada where we have a fat sucking civil servant class with guaranteed paycjeaques and pensions drive luxury SUV’s and hold huge mortgages while hundreds of thousands of ordinary people line up for a free dinner several nights a week and eat Kibbles the rest of the time.
Total denial and a greedy unionized civil service willing to piss on the poor in order to act ‘rich’. Thats some great strides froward in the class war the unions are waging eh? Real winners our civil servants.
In Russia and Cuba where the aspirations of the communists was for equal pay for both doctors and cabbies…here in Canada it has been the unions unsucessful class war with the educated class that has caused them to turn on the poor in order to satisfy their lust for ‘wealth’.
“Canada where we have a fat sucking civil servant class with guaranteed paycjeaques and pensions drive luxury SUV’s and hold huge mortgages while hundreds of thousands of ordinary people line up for a free dinner several nights a week and eat Kibbles the rest of the time.” You need help, dude. I’m going to assist by giving you some time off. — Garth
#173 Cookie Monster on 12.26.10 at 7:27 pm
BB, look at all the examples you gave, every time the governments did the same thing, they printed, they devalued, they inflated, they never to the right thing, they never let the banks fail. Why would they this time?
Always a possibility, but eventually faith is lost and hard core deflation takes over. Look for the patterns they are always there. Here are some general ideas.
• Governments ALWAYS run economies into the ground. It’s what they do. Old habits die hard.
• In between depressions you have ten or eleven business cycle recessions. Debt obligations accumulate until the interest can no longer be paid and end in default. It’s worked this way for a long time. I provided the dates in an earlier post.
• Business cycle booms end when the yield curve inverts. Twelve to sixteen months later the recession starts.
• In the fractional reserve system, economies tend to have a twenty year period of asset inflation in paper assets. The price of gold goes down as investors move from gold into paper. (i.e. stocks, bonds etc)
• After paper assets are fully inflated they pop and the trade moves the other way for twenty years. Investors move from paper assets into gold.
• Have a look at John Exter’s inverse pyramid, in a credit inflation everyone moves up the pyramid from gold into more illiquid assets. During the credit deflation everyone moves down the pyramid from illiquid assets into the most liquid assets, cash, T-Bills and YEAH BABY YEAH GOLD!
http://wapedia.mobi/en/John_Exter
• Countries that have reserve currency status are in a special position. They can take money from the rest of the world issue debt in the reserve currency to fund commodity and infrastructure projects. Once the debt becomes large enough “as in right now”, interest payments cannot be made. In an act of desperation the borrowers sell everything in order to raise “reserve currency fiat”. This places pressure on the reserve currency and forces it up. This has happened in Britain during the 1930 as they had been the reserve currency at the time. It’s also happening right now, the U.S. dollar is in a massive short squeeze as large borrowers scramble for dollars. This major crisis will come as the U.S. gains strength and governments are powerless to inflate there debts to zero. Don’t believe me! Then get it from the horse’s mouth. The B.I.S., the mother ship of central banks.
http://www.bis.org/publ/qtrpdf/r_qt0903f.pdf
These are generalizations and exceptions always apply, governments can do nutty things. For the most part they repeat with remarkable fidelity.
#153 Wealthy Renter
You’ve got to be asking yourself why it is I have these things and you do not. More to the point you ought to be asking yourself why I am happier than you appear to be. You could take those “things” away from me and it would not matter nearly so much to me as it seems to bother you that you do not have them.
BTW you can spend $5,000 on a boat or $5,000,000. In my experience those who spend $5,000 generally have a whole lot more fun with them.
#174 realpaul
…China raised intrest rates … to counter a 5.1% food cost inflation.,,Canada we saw a 40% rise in food costs…
China’s population spend more on food as total budget compared to Canada’s population. China will have to do more, like unpeg the currency.
I personally didn’t see my food bill go up 40% this year however.
From another forum I follow, one town in New Jersey just voted to raise water rates by 20%.
I think we will have a two-class system, Soviet style: the min wage serfs and then the golden class made up of bankers, Party members (and appointed senators), govt. employees with iron clad pensions, the enforcers and security arm of the Party (see: G20, police & courts as revenue generators).
Perhaps good old bible thumper Stockwell Day is indeed a visionary and they’re gonna fill the prisons with the underclasses.
“N.J. towns must contribute 22 percent more to pension fund ”
http://www.nj.com/news/index.ssf/2010/09/nj_towns_must_contribute_22_pe.html
“Unfunded N.J. pension liability grows to $53.9B
http://www.nj.com/news/index.ssf/2010/12/nj_pension_shortfall_grows_mor.html#incart_mce
Additionally, the state has a $66.8 billion unfunded promise to future and current employees for lifetime health benefits, the report found. “
–
The lead pic on http://rense.com/ gives a good reason to avoid Monsanto food; this is junk food at its best, designed to kill, ‘Tho farmers here are standing up to the big brute.
3:46 clip Somewhat ear-splitting (but correct) post by an unknown blogger who calls it like it really is. About halfway through, the reasons are spelled out as to why this is fast becoming a welfare continent, totally reliant on govts. (pensions, benefits are disappearing).
Palestine Interesting that the EU is seriously considering recognizing Palestine prior to 1967 borders, a lot of south American countries are doing the same; ‘spose Chindia and Russia will do eventually. Which is fair, after all.
Obama No different than Regan in The Exorcist. He appears ready to implement death squads (get rid of old fogeys like us).
GW1 — Apparently, pigs do fly — GW2; and 2:26 clip GW3. “We are under a thunderstorm as I type these words (Hawaii), our fourth in a week. This is an unusually high incidence of such storms which means there is a greater amount of ice in the upper atmosphere, a requirement for the creation of lightning.” wrh.com.
Fading Optimism As NATO and the US are planning to escalate a losing war in AfPak, can anyone blame the Americans for losing their morale? Another.
H1N1 is making a comeback, but this is curious.
At last! The first sentence should read: “Last week, The Toilet issued its annual . . .” as this is what al Qaeda translates to.
UK — Nine Days To Spend Like Hell and Save Economy. Happy April Fools! Silly Labor Day!
Sang Jim Morrison, “People Are Strange”. Right on the money!
To my mind Carney’s threats of higher interest rates don’t resonate.
Like it or not Canada is still economically handcuffed to the US. Our economy has an enormous dependence on export trade to the US, and as long as the US Fed is determined to keep interest rates near zero Canada cannot afford to raise rates much for fear of the C$ rocketing above the US$ & crippling trade.
I’m well aware that far too many people are credit & debt morons, but I just don’t see how Carney can push rates up more than slightly above US rates without dire consequences to our struggling economy.
Unless & until US rates rise, Canadian rates will have to stay extremely low too.
Am I missing something?
#189 Nostradamus Le Mad Vlad on 12.26.10 at 9:20 pm
Coldest December in Sweden in 110 years
Not to worry, chicks from Sweden are super hot and love to **** like bunnies. Maybe even bullion bunnies!
This video is very instructive.
http://www.youtube.com/watch?v=m-J9ZpQYW8s
#174
since you didn’t read my #240 on 12.25.10 at 10:33 am or it didn’t sink in, let me repeat it for you:
#190Roy-I know what you are stating is popular with the MSM, but think about it for one second: the premise is either that A: USA interest rates can never rise again, ever or B: USA interest rates can only rise when the mythical “recovery” occurs. The further simple premise is that high interest rates hurt the economy and low interest rates help the economy, so let’s all agree that we need LOW interest rates-that problem is solved, now on to the next one.
#160Bobby-True, but the flip side is that when oil hits $200 Phoenix RE will likely be a lot cheaper than it is today. These inland desert cities were built for the cheap energy era.
” trust-preferred securities” how contradictory!
….the irish miami?
Read more: http://www.miamiherald.com/2010/12/25/1988021/risky-banks-us-inaction-fed-meltdown.html#ixzz19H1lFtUE
I fully agree with realpaul #184 Garth. I lived on our family farm in Halton for 60 years. I watched the Region of Halton, the City of Burlington and the Province of Ontario regulate me out of business shrinking 153 acres of farmland into only 92 workable acres through designation. No compensation and then Greenbelting us. Pure extortion, from my point of view. Are you going to give me time off as well for speaking the truth?