Over the last thirty days just under 500,000 people came to this blog and looked at stuff 796,000 times. That’s about 16,000 visitors a day, of which 99% know enough to read, shut up and move on. Smart. That way they avoid being contaminated by BPOE or having Smoking Man throw up on them.

Others – that elusive 1% – choose to leave a comment. Most are respectful. Many insightful.  Some brilliant. Some pitiful. A few I sell to adult web sites and offshore pet food manufacturers. But things get most interesting when I offer a prize, as happened last weekend.

The question I posed: do you think the housing market in Canada will correct and, if so, by how much? The incredibly valuable swag was my current book, Money Road, – five copies to five bloggers who somehow distinguished themselves with their responses. As you may have noticed, there were well over 300 entries, which shows how many people possess no friends. (I rent.)

The comments were of a particularly erudite nature, I thought. Judging was tougher than when I was an MP and had to pick two winners from 28 entries in a baby contest in my riding. By then end of that, 26 families had decided not to vote for me.

Anyway, here are the runners-up:

Dutch 4505
American Werewolf
Queen City Renter
Tomahawk, and
Mr Buyer

Honourable mentions include:

terces – who might have won, but pissed me off by asking for an iPad2 instead of a book, and
Raj – who sucked up so much I had to shower.

And the winners of an autographed, personalized book with my DNA on the envelope are:
UVZ, for presenting the only cogent mathematical argument for price declines.
Samsora, for telling us how studying rodents and turtles forecasts house prices.
CraigM, because he showed how a comment on a financial blog can attract hot women.
Utopia, because he made me want to sleep, and that was good, and…
Cow Man who, in a couple of sentences spoke the truth as only a wizened bovine kisser can.

I will send you books as soon as the dedicated public servants at the post office are legislated back to work, and when you forward me your address (to [email protected]).

Now, on the topic of what happens to real estate, yesterday I said this:

Houses will surely become one of the worst-performing asset classes of this decade. The residue of this post-crash era will be mountainous debt and a mangled middle class. And to think it all can be avoided, with five simple actions.

Actually there are more than five, and I will cover many of these concrete actions in the days to come. But let’s start with this:

Get out, and rent: If you’ve been thinking about selling, do it. If you have a big unrealized capital gain in your home, get it out. Take advantage of a unique time when greater fools still abound, and yet there’s a paucity of listings. Sell to a buyer who will let you stay on as a renter for a year or two. Or sell with a long close, like six months. Or just bail and rent, and let some dumbass REIN guy subsidize you. The time for buying will come.

List low: As the media grows darker about real estate, the perception spreads that sellers will take ‘less than the market.’ So why not play that game? List thousands (or tens of thousands) below what a buyer might expect. Set a time for offers, and wait. Chances are multiple bidders will show up, and the final price will bear no relation to the asking. If that doesn’t work, hire some good lawn Asians.

Lock in: The rummies on this pathetic blog claiming interest rates will never rise are wrong. Brother Carney will be jacking these suckers as soon as he can get away with it, and mortgage rates will tick higher over the next few years until they are normalized. If you bought a house in the last three years with a VRM, this will really suck. So, lock in. There are still bankers who will give you a fiver for south of four. Come 2015, that will melt hearts.

Suck equity: If you decide to stay in your paid-for house, despite the storm which might howl outside, why not put it to work? Rates are still near historic lows while house valuations are at all-time highs. Therefore removing some of your equity in the form of a HELOC and investing it in a portfolio suited to your risk tolerance, can be a winning move. Your equity actually pays you money and writing off the loan interest drops your tax bill.

Diversify: The one thing that will crush the unsuspecting in a housing rout is no Plan B. That real estate values will fall is a given. So why do people over 55 have an average of 77% of their wealth in one house? How can virgin buyers justify 100% of what they have in a single asset? The fact both young and old make the same house-horny mistakes should tell you the coming adjustment will be painful, and to avoid it you need money in multiple assets at the same time. Take 90 and deduct your age to determine the percentage of your net worth that should be maxed in a house.

Or, wait for the next contest.


#1 Greg Vezina on 06.23.11 at 9:23 pm

If that doesn’t work, hire some good lawn Asians.

Exactly how or where can I get one of these?

#2 Gold medal Day on 06.23.11 at 9:24 pm


Dont forget

rent with a view from the Olympic cauldron
and than talk and walk On
Gayson Street with a pair of
Oakley’s edition Depleted Uranium:()

#3 Ben Rabidoux on 06.23.11 at 9:31 pm


Good advice. Few people get that what is really driving house prices is mortgage debt. Not economic growth, income growth, rent growth, population growth, demographics….

It’s debt. Plain and simple. The correlation between house prices and mortgage debt as a percentage of GDP is very clear:

Those who are diversifying into financial assets and avoiding the rampant consumerism in our society will do well. Those embracing house lust, financed up the yin yang will be in for a world of hurt.

#4 Greek Roman Aryan Era on 06.23.11 at 9:34 pm


#5 LH on 06.23.11 at 9:34 pm

Re: “Suck Equity”: This move is akin to levering up and buying stock/bonds etc on margin. The best refi offer I’ve seen recently is 3% cash back and Prime-0.5% (five year fixed term), from CIBC (disclaimer: I don’t work for them, but took advantage of this offer a couple months ago). This is roughly equivalent to P-1.1~1.2, or as low as ~1.8-1.9% if Carney holds at 1% (looking more likely now). This rate might seem good compared to credit card or auto loans, however it is mediocre compared to what sophisticated investors (institutions, banks, and high net worth via private bank etc) get on their margin accounts!

#6 Stevermt on 06.23.11 at 9:40 pm

I think I’m one of those 1%’s, 1% of the time..just enjoy reading Nostradamus and Utopia, and scroll quickly through the rest. congrats to the winners.

#7 Ben on 06.23.11 at 9:43 pm

Canadian wages are so far behind the Canadian housing pyramid there lost in the curvature of our country’s landscape.
I make $50 an hour writing scripts in the U.S. for AT&T, it ain’t top buck but it’s a hell of a lot better then I can get at home. I’d be lucky if I could find a job pulling two pair for $25 an hour in Canada.
Go figure… and the U.S. is supposedly in worse shape job wise and housing is going for a 5th of the price they are at home.
Something don’t add up there man.

#8 GTA Girl on 06.23.11 at 9:43 pm

I would agree with selling, but only in a hot area. In and around the GTA there are homes that have been stagnant. Even with price drops.

But if you have a pretty decorated row house in Toronto, sell it now before someone finds out your sewage drainage is hooked up wrong. As most are.

In my area the 6 homes still sit. It will be 7 weeks on Sunday. Prices coming down, no bites. 5 more houses went up nearby. Nothing over $850,000 is moving

#9 Smoking Man on 06.23.11 at 9:48 pm

Garth do you remember back when you was a kid…..

There was bugs bunny episode where there was a reward out for daffy duck,

now bugs bunny got peved that there was a higher price on duffy’s head than his

so bugs bunny lost it, turned bad, he turned off Niagara falls and did all sorts of things to have the higest bounty on his head. And he did it.

Ah………. I made to front page, crack open a bottle. Woo hooooo

#10 allthatshewanted on 06.23.11 at 9:51 pm

You just made me glad that I rent and that I am almost (& by almost I mean so, so, so very close) to being debt free.

You suggest multiple assets, have any recommendations?

#11 bmoboy on 06.23.11 at 9:52 pm

Hey! Those winners deserved to be reprinted ON the blog. Think of the sweat, toil and the sole bearing that took place. Hang all that out in the sun. Ipad2’s suck.

#12 Smoking Man on 06.23.11 at 10:00 pm

#6 Ben on 06.23.11 at 9:43 pm

AT&T thats why it’s only 50

Work for a hedge fund . last time i checked even drunken programs that can’t spell worth a crap can easly bill 1200 per day, mind you, you need to be the best in your feild, are you?

#13 TurnerNation on 06.23.11 at 10:03 pm

Site is slow, this weblog is straining with the burden of its own petulance!!

#14 Trailer Park Boys on 06.23.11 at 10:07 pm

We knew it was rigged….
Ass kissers and plajerizers.

Any way…we hot wired a truck full of Garths books….
I’ts mostly cartoons and how to make voodoo dolls

Cash only….

#15 Smoking Man on 06.23.11 at 10:08 pm

Actully garth im supprised no smart @SS comment like,

“did you not notice you where number two, smoking man, I put BPOE name before yours” Your a losser you still can’t be number1 on the sht list.

Well Garth I did notice, I guess I just need to try a bit harder.

Damn that BPOE getting ahead of me.

#16 rbcboy on 06.23.11 at 10:10 pm

Short and to the point today….Just right. Keep up the great work.

#17 Elmer on 06.23.11 at 10:11 pm

This is the kind of geniuses we have “investing” in real estate.

#18 GooderFool on 06.23.11 at 10:12 pm

REIN guys are indeed dumbasses!

#19 Nonplused on 06.23.11 at 10:24 pm

Not even a runner up? Oh well I already got Money Road. It’s a snoozer but good advice if you can stay awake.

Let’s have the next contest then. Maybe a weekend the Detroit bunker/clubhouse?

#20 Jsan on 06.23.11 at 10:28 pm

Monthly home ownership costs higher than renting

“The cost of owning a home not only exceeds the cost of renting, Macquarie Securities said, but is near all-time highs………………the high monthly cost of owning compared to renting comes as a “somewhat” of a surprise given that interest rates are at historic lows.”

“Coupled with the debt-to-income ratio of Canadian households at 147 per cent – a record high – “it is not too hard to imagine the Canadian housing market making a serious correction if interest rates start to rise.”


#21 DML on 06.23.11 at 10:40 pm

Missed the contest but here is my 2 cents,

U.S. data taken from Case-Schiller,

Index peaked in Q2 2006 at 189.93
In Q1 2011 index is 125.41.
This is a 34% decline in about 5 years

Average price of a house in Canada,

$376,817 as of May 2011 according to CREA,


U.S. will decline another 6% over the next year for a 40%
decline over 6 years.

Canadian market has peaked and will track U.S. decline.

This gives us an average price of $226,090 by 2017.


#22 Ben on 06.23.11 at 10:44 pm

#12 Smoking Man on 06.23.11 at 10:00 pm

Okay, I might have been able to get $27 an hour in Canada. The 30 year Telus Engineers are at $34 an hour

#23 Ben on 06.23.11 at 10:50 pm

#12 Smoking Man on 06.23.11 at 10:00 pm

Okay, I might have been able to get $27 an hour, the 30+ year Telus Engineers are at $34 an hour.
Oh ya… my fully furnished all inclusive accomodation wouldn’t be $730 a month back in Canada.

#24 mid-Ontario on 06.23.11 at 10:57 pm

It’s nice to be considered a runner-up, I guess; but I really wanted that free book.
All I have are piles of metal and nothing to read.
Maybe I should diversify.

#25 Kimi on 06.23.11 at 11:05 pm

Hey! Congratulations Utopia!! … I’m glad you won. Your comments are always on target and have great entertainment value as well! No squirrel tonite … just pass the champagne please.

#26 The InvestorsFriend (Shawn Allen) on 06.23.11 at 11:30 pm


In yesterday’s round of Battle-of-the-Lunatics-with-nothing-better-to-do (aka the comments on this blog), we had DECIPLE rant against debt. He said:

Debt=Slavery. Debt is unnecessary. It’s promotion is based on the myth of scarcity. Debt is the reason for the fall of the Roman Senate, the oppression of the Dark Ages, the instigation of agricultural and industrial Slavery of the 17th through 20th centuries, the prominence of the divine right of Kings.

Well, let’s think about how debt really started.

I imagine it was something like this.

Caveman A had succeeded in killing a Wooley Mammoth and had ample food for the next month. In fact, with no refrigeration he had excess food that he could not possibly use.

Caveman B had come down sick and could not hunt but expected to be better soon. Without food he was going to die and he was too sick to go get any food on his own. He went into debt and borrowed some food from Caveman A, promising to pay it back.

Later he was better and he had a successful hunt and paid back the food he borrowed with interest (he paid back more food than he borrowed). Caveman A took it easy that week and stayed home to make spears instead of going hunting.

In this example you see how debt and credit allows those with extra goods and services to loan some of that to others in need in return for promise that they will pay it back (with interest).

Debt and credit are incredibly important to the functioning of our economy that frankly has most of living much better than Kings lived a few hundred years ago.

Debt is good.

But if mis-used and over indulged in of course debt can create problems. But overall it is great.

Without debt you know, there can be no return on investment.

Anyhow, enough said. All but lunatics recognise that debt is not an inherently bad thing.

#27 Raincouver on 06.23.11 at 11:33 pm

In Vancouver its a good for traffic when people buy two houses each and sit on them empty. The traffic is so much easier to drive this year what use to take 45 mins now takes under 20 mins.

#28 Nostradamus Le Mad Vlad on 06.23.11 at 11:44 pm

Are free strips of paper strong investment vehicles?

Your response “. . . who, in a couple of sentences spoke the truth as only a wizened bovine kisser can”; is this a good portrait? Ass Kisser!

“And to think it all can be avoided, with five simple actions.” — Yes, in the world I would have liked to had, we would have sold a couple of years ago, then rented a townhome or similar.

But to reduce my options to one, I use a TFSA — buy low, sell medium or high, invest the proceeds and live adequately. That is sufficient.
Rich Same old, same old. The rich are richer than pre-crash levels; Greek deficit? Try Britain’s for size; 3:31 clip Avoid college — it’s expensively toxic; Yuan and Ruble in, US$ out; EU + IMF and India PMs imports surge; Planned Economy The best laid plans of mice, men and the Eurozone, but Papandreou things otherwise.

Chaos — following links: Quake One (link in), 7.3 Mag. near Aleutians, Alaska and and Links in Northern California with HAARP; OHarperbama Just as these two signed away border controls, so the same is headed for the EU; Solar Panels Costs are coming down.

Yemen and S.Arabia first, then Pakistan and Iran which brings Russia and China into the mix; Yemen and Saudi Arabia are next for wars, which explains why the US is pulling out of Af’stan and possibly Iraq, Troop pull-out Guess it will be a July – Aug. invasion; Military tensions between China and US.

Different War Bilderberg vs. SCO.

#29 shanks on 06.23.11 at 11:44 pm

woohoo! Garths personal email! [email protected]
hello adult websites and offshore pet food companies ; )

now if i can just convince my inlaws that now is the time to sell their house…

#30 Axehead on 06.23.11 at 11:46 pm

“erudite”…OK Garth, I’ll get my dictionary, I actually like to do that.

#31 td6969er on 06.23.11 at 11:54 pm


this isn’t the stock market

#32 greg on 06.24.11 at 12:00 am

Most people think cause their house goes up in value that makes them richer when this is short sighted. what is really going on is we are getting poorer as a whole. Inflation is said to be the cruelest tax of them all. Back in the 70’s you could buy a house for around 25,000 dollars depending on where you lived in Canada. Today its somewhere around 450,000. what has changed? well for one the U.S. left the gold standard in 71, basically taking the reigns of the banksters and allowing them to rape and pillage us all. our wages do not keep up with inflation and the inflation numbers we are given from the government is a lie. the reason why families in the 50’s could own a house 2 cars and have 4 kids with no credit cards and with only papa working is their dollar was an honest one pegged to gold so inflation wasnt an issue. but today, families struggle to own a smaller house with only one child and both parents working with maxed out debt, as garth has said the housing boom was a credit boom, really nothing to do with houses but credit. When you go to the bank and sign for a mortgage the bank takes that paper and adds it to their liabilities then turns around and lends out 10 times that amount which is considered assets. basically as soon as you signed that paper money was created magically out of thin air then out of that magic money they lend it out 10 times with interest. same goes when u pay with your credit card, or make a deposit. this is how most of our money comes into existence , its a ponzi scheme , fractional reserve banking makes us poor and the banks rich. housing wasn’t the best investment last decade it was gold. and gold and silver will be again this decade ( though Gold is really money as is silver but silver is an investment as well, i know many dont see gold as money but history says it is so you are wrong). how many wars have been fought to beat so called evil communism , where they have centralized governments and banks. but today in our society we allow these institutions to tell us what to do, they are the ones who causes bubbles and crashes, they make you believe somehow we are better off with them, but to the contrary they make things worse. by allowing interest rates to stay so low for so long they pushed people to buy a house and pushed savers into the stock market where they get wiped out, why pay tons of fees in mutual funds or hand your money over to a salesman (financial planner) who makes less money then you, its a rigged game where you put up all the money and risk and they pick away at it with fees regardless how you do, its a suckers game. we are in the middle of a commodity bull market silver and gold is going to go through the roof as all countries around the world print money endlessly. Silver is in over 90 percent of all electronics, 86 times more rare then gold (as far as it gets consumed and thrown away) and there is only 10 years worth of supply left known in the ground. basically in 10 years the most reflective conductive metal in the world will be completely gone, first metal off of the periodic table to go extinct . and with asia getting a middle class who wants tv’s , cell phones refridgerators, you cant tell me a well diversified portfolio in a over priced stock market thats about to crash will beat out silver as an investment. Silver is used in… most electronics, appliances, Band aids, water purification, solar panels, passports, rfid chips, thermal devices, missiles( same ones used with your tax paper money to kill children in libya for the name of oil) , anti freeze, coins, medical equipment and the list goes on and on, or buy an IOU piece of paper that is taxed and has many fees. If you have no Idea who John Law is you better find out as you are bound to repeat history and get wiped out, enjoy your paper IOU assets, i will stick with something that has real value not a piece of paper telling that its worth something

#33 Jas Girn on 06.24.11 at 12:10 am

BPOE is still lurking around this site and bugging you Garth?? Just give him a free book to zip him up. Lol.

#34 Househunter on 06.24.11 at 12:14 am

I’m kinda starting to understand the time frames. Originally I wanted a quick 20% correction. But now I get it. There are too many factors out there to predict the eventual correction which are all messing with carney’s head. So now I’m going more Budha and less Mr Type A. I’ll wait this one out. I’ve got the time and I like the 90 minus your age rule. Party on, Garth n thanks for the contrarian blog.

#35 kilby on 06.24.11 at 12:21 am

Having 19.99% of net worth in real estate feels good for now. Never thought to check until reading todays words of wisdom.

#36 tran, Calgary on 06.24.11 at 12:22 am

With so many hits, must be worth alot.
It could be Garth’s retirement ticket.

#37 Bill Gable on 06.24.11 at 12:34 am

A major earthquake of 7.4 magnitude hit in the Pacific Ocean Thursday 172 kilometres east of Atka, Alaska in the Aleutian Islands, at a depth of about 40 kilometres, and a tsunami warning was in effect for coastal Alaska, warning agencies said.

A second quake of the same magnitude hit in the same vicinity and at the same depth a half-minute later, the U.S. Geological Survey said.

“A Tsunami warning is now in effect which includes the coastal areas of Alaska from Unimak Pass, Alaska [129 kilometres northeast of Dutch Harbor] to Amchitka Pass, Alaska (200 kilometres west of Adak),” the West Coast and Alaska Tsunami Warning Centre said.

The centre monitors tsunami risk only for the west coast of North America from the Mexican border to Alaska.

> Vancouver is overdue – how’s the insurance?

Read more:

#38 Canuck Abroad on 06.24.11 at 12:40 am

Jsan thanks for posting that article. Unfortunately it was poorly written, but the comments were great. Always, always there is someone who argues that once their house is paid off they have no more housing costs, when in fact they are completely ignoring the fact that this house represents hundreds of thousands of idle dollars that could be put to work more efficiently (not to mention all the running costs). I thought it was also interesting that US apartment REITS did so well last year. I will definitely look into this some more. Thanks!

#39 Canuck Abroad on 06.24.11 at 12:51 am

GTA Girl do you mind me asking what part of TO this is, just generally? Ie is it north/west/east/central?:

Garth, same question – you mentioned someone emailed you with a friend who bid on a house in Toronto that went for $120k over asking. Wherabouts, generally?

#40 Mark on 06.24.11 at 1:04 am

Next few years: “home equity” converted into ‘bank equity’, as bankers can raise interest rates with inpunity, and any defaults merely get sent to the CMHC for repayment/redemption at 100 cents on the dollar.

The past decade of housing total return (ie: price appreciation + imputed rent) being greater than the total return on a mortgage bond is quite unusual historically, and most definitely will not be repeated.

#41 Jack Mehoff on 06.24.11 at 1:07 am

#7… Ben, I can’t agree with you more, man. With all the bitching and complaining about a “bad” U.S. economy, I just don’t believe it is as bad as what we have going on here in Canada, specifically Vancouver. Cost of living is WAY lower in the U.S. and they’re making a shit tonne more money than we do, but they don’t even pay near the taxes. Something doesn’t add up and it hasn’t added up for a long time. I think I figured it out a long time ago and the culprit is our media and government. They are lying to us and pumping this “Canada is Awesome” campaign down our throats to the point it is sickening. Let’s face it… the U.S. is our God in most every way (whether we want to admit it or not) and that is the standard by which we judge ourselves in most everything. This is why we always have to bring the Yanks up in 9 out of 10 conversations. Its complete bullshit what we’re being told and it is only a matter of time before people start taking notice. I make $21/hour for a job I could earn nearly $40/hour for in Portland, Oreon. Cost of living in Portland is about 40% less than what it is in Vancouver. Its f*&$ing pathetic we keep buying into this ideal that we’re any different. We’re worse off and we don’t even know it. The government and media have succeeded in making us ignorant. We have succeeded in allowing them to do it.

#42 Lawn (South) Asian on 06.24.11 at 1:26 am

Lawn-Asian (of the South Asian Variety) for rent. Greater Vancouver/Lower Mainland Area. Will bring friends. Pay per head per hour. You supply food and toilets.

Message me.

#43 Utopia on 06.24.11 at 1:43 am

“Utopia, because he made me want to sleep, and that was good…” ~~Garth Turner.

I’m boring. Hooray! Best compliment I had all week. Don’t try buttering me up though Turner. I have been around long enough to know that roasting always follows the buttering.

At least that’s how I cook my chickens.

I will be sure to forward your comments to my ex. She will naturally feel quite vindicated. I used to put her to sleep too. She would say “talk dirty to me baby” and I would do a monologue on banking reform in bed.

What a sex life we had! (Guess that’s why she is my still my Ex, no second wedding in the forecast) All kidding aside, I look forward to the book. DNA and all.

#44 Basil Fawlty on 06.24.11 at 1:51 am

The derivative beast, in the form of credit default swaps, raises it’s ugly head in Greece.
This article contains subject matter closely related to doom and may cause consternation and/or bunions for the fashionable rose coloured glasses contingent.

#45 vanman on 06.24.11 at 2:48 am

Get on a strata council in the LM and start to feel the buyers remorse. The feel is brewing. It is 1995 and running… the door.

#46 Alan on 06.24.11 at 3:02 am

A year ago on this blog it was pointed out that D-Day for real estate was going to be the arrival of the HST along with the elimination of long term amortizations was the start of the long decline in real estate. So of course nothing happened, real estate went higher and those that sold according to Garth’s advice were wondering whether they pulled out and gave away the farm.

Whether you like it or not, the track record for real estate price predictions on this blog is god awfull. You can go back as far as you want and this blog has been wrong for years.

The only saving grace may be the annual soft patch that happens during the summer where listings go unnoticed until September when everyone gets back from vacation. Until then you can state that the begining of the end has come but we all know like every other summer previous to this one, we’ll continue to see interest in good real estate in Canada.

Garth, congrats on the eye balls this blog receives. It’s one piece of real estate you can take to the bank.

Those are parochial comments. As expected, residential real estate has slowed to a torpid crawl in many markets across the country. Where prices continue to rise, so do the risks. But feel free to ignore them. — Garth

#47 Utopia on 06.24.11 at 3:19 am

The following statement by Mark Carney before the Standing Senate Committee on Banking, Trade and Commerce was published the 22nd of June. It is worth reading if you have the time as it gives a very good indication of the current thinking that is a determinant of future rate policy.

There are comments directed to residential real estate. With reference to the high level of household indebtedness, Mr Carney stated:

“There are some offsets. Debt is largely fixed rate and household net worth is at an all-time high. However, borrowers should remember that a fixed-rate mortgage will reprice a number of times over the life of the mortgage and, while asset prices can rise and fall, debt endures”.

Words to the wise. Equity prices rise and fall. But debt endures.

Please note the reference to fixed rate mortgages repricing over the life of the mortgage. This of course leaves open the suggestion of rate changes over time. As you know well, we already have the lowest rates in most of modern history. They can only go up from here.

I would just like to add my own thoughts to this train of thought. Has it occurred to anyone else that despite the fact we currently have some of the lowest rates ever seen, that banks are in some cases now behaving as though we are actually in a tight money regime? Perhaps not yet in Canada, but certainly in the US and much of Europe.

I mean, this is a very strange environment we are in where in much of the Western world, money is cheap but qualifying is becoming increasingly difficult. That is coming to Canada too (soon enough) so get prepared. Low rates do not always mean good times.

Sailors in days gone by had an expression for just this kind of a situation. From “The Rime of the Ancient Mariner” by Samuel Taylor Coleridge we have the words they would recite when at sea….

“Water, water, everywhere, but not a drop to drink”

The poem goes on to discuss an albatross around the captains neck but hey, I don’t want to get too deep into the symbolism of this thing all at once!

Getting back to my point, I think it is worth warning borrowers that while money is easy to access right now, that ease will not last. At the first hints of a real recession the banks will unilaterally restrict credit to only the most credit worthy of customers.

The price of credit itself will not necessarily matter in a riskier environment. And so the borrowers lament may well become “money, money everywhere, but not a buck to spend”.

Just my thought for the day.

Here is Mark Carney’s comments from the 22nd of June:

#48 Smoking Man on 06.24.11 at 6:25 am

#41 Jack Mehoff on 06.24.11 at 1:07 am

Congrats you have woken up…………………..

The real estate market is on fire, media gets it orders to put some cold water on it.


then they wait a few weeks to see the impact, if it changes and falls the blow sunshine, if its still a raging bull they give it more water.

That how it goes, everybody knows…………..

#49 GTA Girl on 06.24.11 at 6:31 am

To Canuck Abroad: N08 Vaughan & King. Very expensive homes have been built in last 6years.

Kleinburg used to sell fast. Prices were as high as $1.8mil, and actually sell. Prices are dropping. With a recent 4,400 sqft, bells whistles home now down from $1.4 to now waving for some attention at $1.18. Still no buyers.

Woodbridge estates on The National Golf club have stagnated. One has slipped down to $2mill, while all his neighbors poured $4-10mill to build palaces. All will be white elephants.

#50 T.O. Bubble Boy on 06.24.11 at 6:47 am

@ #46 Utopia:

Thanks for the link to Carney’s remarks (and congrats on the book win).

Now I’m certain that he reads this blog (as Garth has stated), and he sees the constant stream of posters that don’t understand that mortgage rates reset after 5 years — or instantly if you’re variable.

The fact that the Bank of Canada needs to actually say this type of statement is ridiculous:
“borrowers should remember that a fixed-rate mortgage will reprice a number of times over the life of the mortgage and, while asset prices can rise and fall, debt endures”

Where is that Financial Literacy Task Force that Harper/Flaherty promised? Maybe they’ll just rely on Carney’s future rate hikes to teach Canadians the debt lessons that they so desparately need?

#51 Aussie Roy on 06.24.11 at 7:14 am

Aussie Update

Prof Steve Keen on Max Keiser.

Immigration falls 50%

Clearance rates continue to fall across Australia

But Industry calls (falling clearance rates and prices) a BOOM.

So all is normal here in the upside down, back to front world of Aussie RE.

#52 Mike Rotch on 06.24.11 at 7:44 am

@ #50 T.O. Bubble Boy:

I did not have the fortune of truly understanding the time-value of money and the effect of compounding until a university level economics course.

Financial literacy classes at Senior Elementary and High School would be a damned good idea.

Now, I wonder how many teachers understand it, as I suspect a fair percentage of them are caught in the same debt trap that seems to be plaguing Canadians………….

#53 TurnerNation on 06.24.11 at 7:58 am

#26 The InvestorsFriend (Shawn Allen) on 06.23.11 at 11:30

You are fogetting one thing…we no longer own the MEANS of production; only multi national corps own the tools of capitalism. We are left to shuffle paper or assemble widgets. That’s how we repay our debts.

#54 spindly on 06.24.11 at 8:51 am

My parents in KW are selling their house and downsizing again. Been about 3 months on the market. Dropped their price three times now. Nobody coming. No offers. Just lookie-loos for weekly open houses. I think they were a few months too late for the big sale. But they don’t listen to me – I’m just a dumb kid, even though I’m 40.

#55 disciple on 06.24.11 at 9:15 am

#26 InvestorsFiend…
Unfortunately, it seems you have about as much understanding of the concept of debt and the modern global banking system as Utopia…(no offense, Utopia)

I remain firmly steadfast in the conviction that this ancient system of institutional slavery will eventually change once your real rulers run out of bread and circuses, and/or when the Messiah comes. Christ is a psylocibin mushroom, by the way.

#56 Medic on 06.24.11 at 9:17 am

#17 Elmer

Nice link to that dumbass asking for RE advice. I enjoyed the following statement from the guy.

“To be honest, I will still be out of pocket for around $700 to $800 per month after factoring all expenses. But since the location is very good and the developer is known, I’m hoping the condo price appreciation will cover the additional monthly payments I’m making. ”

Best of luck to the guy.

#57 Ronaldo on 06.24.11 at 9:17 am

#32 Gregg – you are right on sir.

#58 disciple on 06.24.11 at 9:31 am

The ancient ancestors of the modern day banker families were sea-faring masters of the world. Before our “recorded” history, they operated trade routes for mining and agricultural products and amassed great fortunes by siphoning off the labour and wealth of indigenous cultures. By controlling all the shipping lanes (they still do), effectually, you control the world.

They operate still under maritime Admiralty law. Much of the nomenclature of modern finance still betrays this link with the past. For example: curren(t)cy, (mer)chant, Cash Flow, Deposit, Withdraw, Liquidisation, Bank, Treasury, Floating, Frozen assets, underwater, revenue stream, and lots more! The joke is on us, tax farm wage-slaves…

#59 not 1st on 06.24.11 at 10:03 am

So imagine you are a typical middle to lower class boomer age 55-60 or so, in good health and you want to retire or at least semi retire. Your assets include your house, car, some company pension and some self directed RRSPs and in 5 years you will qualify for whatever CPP there is.

Now you must liquidate something to get you over until CPP, then you should be ok income wise.

In this situation, which would be typical of most boomers, most are going to start living on whatever company pension they have and/or dumping RRSPs. In the U.S. it will be the 401Ks that get dumped. Your house will be the last thing you let go for cash and most boomers plan to stay in their homes for a long time yet and probably will it on to their kids or grandkids.

A boomer led sell off of real estate for cash is a fallacy and has no facts to back it up The stock market is much more vulnerable to a serious correction when boomers get a chance to pull their stakes out of the casino, they will. That will evaporate several trillion in investments and haircut the dow by 5,000 points.

70% of boomers have no corporate pension. 40% have no savings. Your argument is kaput. — Garth

#60 Utopia on 06.24.11 at 10:24 am

#41 Jack Mehoff wrote….

“Cost of living is WAY lower in the U.S. and they’re making a shit tonne more money than we do, but they don’t even pay near the taxes.”

Yeah, that tax thingy Jack. Might just be what separates us from them right now. I will give you just one example of how that chicken is coming home to roost. California alone has laid off 19,000 teachers as it grapples with a massive budget deficit. Many municipalities meanwhile are going broke as they are unable to service their debts and no help will be forthcoming from the Federal government as the debt ceiling has been reached again. So sure, you can make a lot more money. Just ask the 19,000 teachers how they feel about the new income levels. Guess it will be easier to get by though. You know. It’s so much cheaper to live down there.

Video: New York teacher layoffs:
Article: 19,000 California teachers get pink slips.

#61 Kevin on 06.24.11 at 10:48 am


“When you go to the bank and sign for a mortgage the bank takes that paper and adds it to their liabilities then turns around and lends out 10 times that amount which is considered assets.”


Greg, buddy, you SERIOUSLY need to read up on how fractional reserve banking works. Please explain to me how in the world when the bank LENDS you $300,000 to buy a house, that they somehow also end up magically creating another $3,000,000 (10x the mortgage – your numbers!) to lend to other people?

And here, I thought banks were lending DEPOSITS! But you’re saying the more banks lend, the more they’re able to lend?

“basically as soon as you signed that paper money was created magically out of thin air then out of that magic money they lend it out 10 times with interest. ”

Greg buddy, seriously, think about what you’re writing. You’re saying that when the bank creates money to lend to people, it simultaneously creates 10x MORE money. How in the world does that make any sense to you? Where is all this magic money coming from?

With fractional reserve banking, banks can lend out up to 90% of DEPOSITS (not loans!) to borrowers, keeping 10% of the cash in reserve. That’s how money is created in the fractional reserve system. The bank cannot lend money it does not have. No money is created out of thin air. Banks do not have the power to create money out of nothing. They’re simply permitted to lend out depositors money, while telling the depositors their money is still safe and sound (which it is, because it’s CDIC insured).

#62 45north on 06.24.11 at 10:53 am

Utopia yesterday talking about Canadian banks:

The damn fools did not know when enough was enough and they allowed the marketing teams to drive them into uncharted and risky lending practices in the search for continued revenues.

thanks for the info

do you think that the Canadian banks will be as reluctant to foreclose as the US banks?

#63 Canuck Abroad on 06.24.11 at 11:05 am

GTA Girl, thanks. Interesting, I will check it out.

#64 maxx on 06.24.11 at 11:10 am

#36 tran, Calgary on 06.24.11 at 12:22 am-

….retirement ticket.”

More power to him, he created it and many benefit.

#65 Abitibidoug on 06.24.11 at 11:12 am

@Alan #46:
Patience is a virtue, not a vice. Real estate corrections have occured in the past (early 1990’s and early 1980’s) and will happen again. When the inevitable correction occurs (it has already started in some markets) in runaway markets, still driven by speculators, like Toronto or Vancouver, you’ll be able to buy the property you want, at a decent price, and without a bidding war. That’s already happening now in the United States, if you want a preview of what’s coming in Canada. It’s the next best thing to actual time travel to the future and back.

#66 maxx on 06.24.11 at 11:32 am

#50 T.O. Bubble Boy on 06.24.11 at 6:47 am

“Where is that Financial Literacy Task Force that Harper/Flaherty promised? Maybe they’ll just rely on Carney’s future rate hikes to teach Canadians the debt lessons that they so desparately need?”

You’re correct, it was promised, however financial literacy, were it also started at home, say, with the first allowance, would solve most of the ignorance. Any additional education in a formal setting would make for a fiscally outstanding citizenry.
When I was a wee thing of seven years of age, I owed a friend 10 cents. When allowance time came around, mom asked “you will pay your friend, won’t you?” I replied that I would pay her the next week. Like a flash mom said “Good accounts make good friends”. The lesson stuck. This simplest of lessons was accompanied by exquisite timing. Set helped set me up for the rest of my life. My mother was by no means a financial wizard by today’s standards (you don’t need to be) but she owed not a single cent.

#67 disciple on 06.24.11 at 11:33 am

#61 Kevin…your lack of knowledge is stunning and yet not surprising at the same time…what happens when you finally realize that the truth is the opposite of what you are saying? You seem the type that can’t handle the truth…you are not ready, young Padawan, the Force is not strong with you…

#68 Devore on 06.24.11 at 11:44 am

#50 T.O. Bubble Boy

Now I’m certain that he reads this blog (as Garth has stated), and he sees the constant stream of posters that don’t understand that mortgage rates reset after 5 years — or instantly if you’re variable.

Maybe just another symptom of people reading economic analysis of US and applying it to Canada? While it is easily proven that buying at low price/high rate is always better than high price/low rate, even if the monthly payments are the same, in Canada you don’t even have to prove anything, it is a fact, because all mortgages reset every 3-5 years, so your high price/low rate mortgage can overnight become high price/high interest.

#69 Devore on 06.24.11 at 11:53 am

#32 greg

Ow, that hurt to read. Did the return key on your keyboard break?

When you go to the bank and sign for a mortgage the bank takes that paper and adds it to their liabilities then turns around and lends out 10 times that amount which is considered assets.

How can one loan be a liability, and another an asset?

A loan is YOUR liability, but a bank asset. You are completely wrong and you should delete your post from memory.

#70 Jaydee on 06.24.11 at 11:58 am


Greg is more right than you think. When bank A lends you $300,000, it gets deposited into Bank B, and Bank B gets to claim $300,000 as a deposit. In aggregate, this mean for every $1 lent, there is a $1 deposit. Greg is right, money is created out of thin air. That is why the whole response of the financial crisis was to stimulate more lending, without lending we have nothing.

#71 Jaydee on 06.24.11 at 12:01 pm


Furthermore, banks are allowed to loan a multiple of their deposits, 9X or more. Welcome to F.R.B.

#72 rangergord on 06.24.11 at 12:03 pm

Suck it out is just plain bad advice. Debt is the problem not the solution. Leveraged investments are the riskiest of all. Being debt free has given me the largest returns to net worth.

#73 Mr. Lahey on 06.24.11 at 12:11 pm

#61 Kevin Kevin buddy, you and Greg need to read up on how fractional reserve banking works. Banks can indeed create money out of thin air, this is what fractional reserve banking is. Against their deposits, banks can turn around and create multiple times the deposits in loans. These loans are fractions of deposits in the banks, they are merely debt obligations that the borrowers have with the banks and the money was indeed created electronically as a debt obligation and is not backed by anything but a very small fraction of deposits. For all intensive purposes, any given loan is probably more than 90% money created out of the banker’s sleight of hand trick known as fractional reserve banking. Check out this article that will explain it in more detail.

#74 Mr. Lahey on 06.24.11 at 12:12 pm

Correction in my previous post. Should have read, “these loans are NOT fractions of deposits held in banks…”

#75 Hoof - Hearted on 06.24.11 at 12:17 pm

7.1 implementation of the Federal Immigrant Investor mutation

7.1 implementation of the Federal Immigrant Investor mutation
Investment immigration , global , office
The new policy from July 1, 2011 to June 2012 30 federal immigration worldwide investment only receive 700 applications, 700 applications received after the Federal Immigration Department to stop receiving applications after the applications will be submitted be returned, until July 1, 2012 to reopen only after submission.

From July 1, 2011 start of the federal investment in all immigration applications are submitted to the Office of the Federal Department of Immigration

And from July 1, 2011 start of the 700 application is to simplify the application (Simplified Application), but in order to prevent federal immigration department to prepare in advance a simplified application form updated, the new form is said in the July 1, 2011 will be announced , a new application must be updated by July 2011 version of the form can be received.

Impact on our analysis of the following

1,700 cases of the target too small, and is within the scope of the world, it is estimated will be full within 1 week
2, for all passenger applicant has submitted, it is good news, at least, that there will be more federal resources to deal with customers has been submitted
3, for not being prepared to submit information out of the federal investment in people, it is recommended to submit before July 1 to go out, if enough time, immediately after 1 July 1997 to prepare the summary table the New Deal, and urged the agency the first time direct canada, keep up the save in case


SIR GARTH could you please translate this ??? ie what it means and the implications ?

#76 James O'Neill on 06.24.11 at 12:19 pm

#32 greg on 06.24.11 at 12:00 am
Most people think cause their house goes up in value that makes them richer when this is short sighted. what is… blah blah blah… your paper IOU assets, i will stick with something that has real value not a piece of paper telling that its worth something.


Can we get the short version?

#77 MikeT on 06.24.11 at 12:23 pm

modern day’s fractional reserve banking is actually a fictional reserve banking

#78 Victoria on 06.24.11 at 12:27 pm

Our monthly mortgage payment is $3,000 including taxes (not including utilities of course). This is 3 1/2 x our income. However, we have put a lot of money into this money pit (nice house but needed total renovation -it was like walking into the 80s) and there is still much more to do and we will never see a dime. The Broadmead homes are money pits. Windows are starting to go on most homes.

I want to get out and rent. Hard to find a suitable house though – we have 4 kids, 3 cats and 2 dogs and in Victoria every single place for rent says NO PETS – I didn’t realise that people in Victoria were such animal haters. Children I can understand :-).

Anyway, are there companies that will help you find a rental? Years ago in Winnipeg there used to be companies that did this. You paid a fee and they did the leg work.

Just asking????

Anyway, husband won’t budge. Won’t even discuss it. Might look at Bear Moutain. I am thinking there are many homes to rent as many people bought them as investment properties.

#79 SwampLily on 06.24.11 at 12:32 pm

#37 Bill Gable: you can get earthquake insurance in Canada, but no flood insurance. If a tsunami hits, all of us, insured or not, are SOL.

#80 BrianT on 06.24.11 at 12:34 pm

#60Utopia-Jack didn’t even mention health insurance-I have seen estimates as high as $20000 per annum for a family of four, which is backbreaking. Often the employer is paying, which keeps many Americans stuck in lousy jobs with good medical coverage.

#81 Blitzkrieg on 06.24.11 at 12:38 pm


Greg is correct, fractional reserve banking is a 9-1 leverage level. Investment houses can take leverage up to 30, even 100 to 1. Keep in mind the money is paper/electronic, its rarely physical, therefore it needs not to exist. It is based on principle that not everyone will demand, money at once. As long as its within the system it will function. That is why bank runs can take banks down as the money is not really there. Also to a bank deposits are liabilities and loans are assets.


#82 garrulous squirrel on 06.24.11 at 12:38 pm

Keep the home fires burning…says Carney. He’s written off Rat-Couver obviously.

The ‘general’ has made the decision to abandon the west coast to the Chinese and drug money invasion in the face of the overwhelming political odds against making an anti Chinese statement in what has become an strictly Asian enclave.

The six billion drug industry is of no interest to the federal government because of the political BACKLASH FROM THE OFFICIAL OPPOSITION WHO FAVOUR DRUG CULTURE.

Either way you can forget about buying anything beyond a 500 sq ft litter box in Vancouver when the druggies and the foriegn nationals have been given the upper hand. Rat-Couver…….apropo…….our government has abandoned the ship.

#83 MikeT on 06.24.11 at 12:41 pm

@60 Utopia: you seem to miss the fact that ~20% of the US budget gets spent on the Defense department… Their military spending is by far the largest in the world. Well, I don’t see (m)any hostile armies at its shores. They might as well reduce that and spend more on schools. The problem is, schools don’t lobby as well as the army boys and all the Lockheeds and Haliburtons, etc.

Percentage comes from here:

#84 BrianT on 06.24.11 at 12:43 pm

#59Not-IMO the issue for equity markets going forward won’t be individual accts as much as pension funds. Example: Teacher’s pension fund of Ontario originally had 10 teachers paying for every retiree-obviously the fund’s assets grew easily. Now it is at 1.5 to 1 (from memory) and declining. Eventually the fund will basically be in a permanent decline or selling posture re the markets. It is the same story for all the funds-the kids of today are not going to have pension coverage so it is impossible for pension fund growth overall.

#85 B Keddy on 06.24.11 at 12:47 pm

Hello Garth

My husband and I appreciate your column. We haven’t been to your one of your seminars for quite a while-any in the near future?
I have a question. My daughter has a registered disability plan, she is 40 and available cash for investing at this time of $6100. Not a lot of money but it is a start. Any recommendations from you regarding where to invest this money for the future would be greatly appreciated.

#86 Dan in Victoria on 06.24.11 at 12:59 pm

[email protected]
And maybe the next chapter also.

#87 Mister Obvious on 06.24.11 at 1:06 pm

#46 Alan

“A year ago on this blog it was pointed out that D-Day for real estate was going to be the arrival of the HST along with the elimination of long term amortizations was the start of the long decline in real estate. So of course nothing happened, real estate went higher and those that sold according to Garth’s advice were wondering whether they pulled out and gave away the farm.”

You couldn’t be further off the mark, buddy. The housing market in the Okanogan, for example, is now a real live horror show. Whereas a year ago you were still able to get out reasonably quick with most of your equity intact, listings are rising and prices are now falling daily.

I have friends trying to sell their deceased mother’s beautiful lakeside home in Vernon. They are waiting to “get their price”. That price was easily realized last year. Today, the home languishes with zero interest. It’s not going to get any better any time soon.

I have other friends with a recreational property on Saltspring Island having similar problems. A lovely ocean side property that would have easily fetched $500K a year ago can’t find a single bite at $400K. They plan to wait it out until next year. Of course, then it will be far worse.

Don’t let the brain-dead shenanigans in Vancouver color your thinking too much. That city will be the main event soon enough. Right now the supporting acts are taking up the stage. But that’s a pretty good show too.

#88 greg on 06.24.11 at 1:15 pm

Kevin #61. I am in the understanding that a bank uses your mortgage as a liability, i may be wrong but have heard from robert kiyosaki and max keiser same with using your credit card creates more money circulation that never existed before till you used your credit card, you are right they need to keep 10 percent or so of their deposits in theory. ive found an article online that describes american banking system, i know we has some different rules for banking in canada but we are pretty similar………………..heres the article….. in Answering a question like that can be a simple matter of definitions. Getting definition for Ponzi schemes is easy; here’s Wikipedia’s.

A Ponzi scheme is a fraudulent investment operation that pays returns … from … money paid by subsequent investors rather than from any actual profit earned.

But to define the U.S. banking system is not as easy. For that, I’ve had to turn to a real expert: Robert Prechter, EWI’s founder and president. Here’s what Bob writes in Chapter 10 of his Conquer the Crash*, “Money, Credit and the Federal Reserve Banking System” (excerpt; italics added):

Under the structure of our “fractional reserve” system, banks … were allowed by regulation to lend out 90 percent of their deposits, which meant that banks had to keep 10 percent of deposits on hand (“in reserve”) to cover withdrawals. Because of competition from money market funds, banks began using fancy financial manipulation to get around reserve requirements. In the early 1990s, the Federal Reserve Board under Chairman Alan Greenspan took a controversial step and removed banks’ reserve requirements almost entirely.

To do so, it first lowered to zero the reserve requirement on all accounts other than checking accounts. Then it let banks pretend that they have almost no checking account balances by allowing them to “sweep” those deposits into various savings accounts and money market funds at the end of each business day. Magically, when monitors check the banks’ balances at night, they find the value of checking accounts artificially understated by hundreds of billions of dollars. The net result is that banks today conveniently meet their nominally required reserves (currently about $45b.) with the cash in their vaults that they need to hold for everyday transactions anyway.

By this change in regulation, the Fed essentially removed itself from the businesses of requiring banks to hold reserves and of manipulating the level of those reserves. This move took place during a recession and while S&P earnings per share were undergoing their biggest drop since the 1940s. The temporary cure for that economic contraction was the ultimate in “easy money.”

We still have a fractional reserve system on the books, but we do not have one in actuality. Now banks can lend out virtually all of their deposits. In fact, they can lend out more than all of their deposits, because banks’ parent companies can issue stock, bonds, commercial paper or any financial instrument and lend the proceeds to their subsidiary banks, upon which assets the banks can make new loans. In other words, to a limited degree, banks can arrange to create their own new money for lending purposes. Today, U.S. banks have extended 25 percent more total credit than they have in total deposits ($5.4 trillion vs. $4.3 trillion). Since all banks do not engage in this practice, others must be quite aggressive at it. For more on this theme, see Chapter 19.

Recall that when banks lend money, it gets deposited in other banks, which can lend it out again. Without a reserve requirement, the multiplier effect is no longer restricted to ten times deposits; it is virtually unlimited. Every new dollar deposited can be lent over and over throughout the system: A deposit becomes a loan becomes a deposit becomes a loan, and so on. As you can see, the fiat money system has encouraged inflation via both money creation and the expansion of credit. The effective elimination of reserve requirements a decade ago extended that trend to one of historic proportion.

So, are today’s banks “massive Ponzi schemes”? No, I wouldn’t go that far. But you have to agree that there are some parallels. A Ponzi scheme can only pay out as long as there are new deposits. If a bank lends out all of its deposits — or even 25% over that amount — what happens if a lot of customers want to make withdrawals at once? Oh, right — there is the safety net of the Federal Reserve Bank…

#89 Tim Rikerad on 06.24.11 at 1:19 pm

Vancouver pizza boy: Sell your house now!

#90 brainsail on 06.24.11 at 1:32 pm


“Yeah, that tax thingy Jack. Might just be what separates us from them right now. I will give you just one example of how that chicken is coming home to roost.”

Keep in mind that the main reasons for the budget problems are the result of the lost revenue from the housing and employment correction that resulted in reduced property, state income tax and sales tax revenues.

I wish I had kept the link to the report that I read a couple a couple of weeks ago that explained that the reason alot of states are having financial problems is due to the fact that they spent the increased revenue from the good times with reckless abandonment while assuming that tax revenue would never decrease. Canada has not had a recent major housing or employment correction, yet.

#91 Fukushima on 06.24.11 at 1:32 pm

Fukushima: It’s much worse than you think

Please help get the word out. West coast BC media needs to pick up on this. Check your car filter.

#92 fancy_pants on 06.24.11 at 2:02 pm

minus a few blog dogs, for most folk here your take home nugget is widely accepted and embraced- RE will drop over time. The timing is the hard part.

but how are you making $ of this site? where’s all your advertising links? Are enough of the hits materializing into sold books? Or do you have stacks of these in your basement? tough times out there even for prophets.

Surely you aint doing this for the love of the common sheeple. What’s the bottom line?

It just seems like you keep walking the same stretch of highway. You getting $ for each posted blog, comment or website hit? otherwise you could post weekly and we wouldn’t miss a beat.

Rates are going nowhere in a hurry. Either I’m going to be right or going to be happy so I don’t care which one comes to fruition.

#93 Phil on 06.24.11 at 2:17 pm

I forgot, HAM is all heresay.

#94 disciple on 06.24.11 at 2:19 pm

#88 greg….
Yes, I would go that far. The whole financial system IS a Ponzi scheme because we allow banks to create money out of thin air, lend it to their friends at zero interest, and then obediently pay them back with our labour and ingenuity, money which DID NOT EXIST in the first place.

The cherry on top of all of that, we also pay income taxes which merely pay the INTEREST on that money that DID NOT EXIST in the first place, and that we did not have to borrow in the first place. It is designed to fail, and we are the ones that clean up the mess that the financial parasite class intentionally make.

You’re on the right path, there is much more for you to discover…see my post on the origins of banking earlier today…understanding the past is the key to shaping the future…

#95 Dan in Victoria on 06.24.11 at 2:22 pm

Victoria @ 78
Lots of property management companies in town offer rentals.
Look around.
We found plenty of rentals that take pets, just have to put some effort into finding them. Not a lot true, but they are there.

#96 Cato on 06.24.11 at 2:34 pm

Congrats to the contest winners. Hopefully everyone reading Garths blog will be in the small cadre winners protecting wealth over next decade & maintaining their current standard of living. Its been interesting last few years, now its going to get very interesting.

The right plan of action is going to vary according to circumstance. This isn’t just a pure dollars & cents calculation anymore, economic storms bring social storms – how well do you know and trust your neighbours?

We need to play careful attention to flow of HAM over the next 6-9 months – there is an outside chance this isn’t just sheeple specuvestor herd behaviour but prelude to a larger end game scenario certain economists have been putting forward, if true the ramifications are serious.

#97 MikeT on 06.24.11 at 3:13 pm

@96 Cato:
you really intrigued me with this “if true the ramifications are serious” and “prelude to a larger end game scenario”. Can you elaborate please?
Really excited to learn what you mean.

#98 RichieRich on 06.24.11 at 3:21 pm

Garth- could you please post just the five “winning” comments from your article? Perhaps even on a separate link/article. Most readers don’t want to have to scroll through the 100’s of comments. Thanks.

#99 brainsail on 06.24.11 at 3:33 pm

Canadians are buying more homes in the US than the Chinese.

“Chinese accounted for 9 percent of U.S. home purchases by foreigners in the 12 months ended in March of this year and last, up from 5 percent from the same period in 2009, according to a survey released in May by the National Association of Realtors. That’s second to Canadians, who accounted for 23 percent of international sales. ”

#100 brainsail on 06.24.11 at 4:03 pm

Canadians are buying more homes in the US than the Chinese.

“Overall, foreign buyers accounted for almost 8 percent of the $1.07 trillion in U.S. housing sales during the 12 months ended in March.”

I had to review these numbers.

8% of $1.07T = $85.6B (total international sales)

23% of $85.6B = $19.7B (total Canadian sales)

median US house price = $155K

$19.7B/$155K = 127K houses bought by Canadians in the last 12 months. Wow.

Assuming 2.3 people live in single family dwelling, Canada bought the equivalent of a US city with the population of 292K.

#101 Joe on 06.24.11 at 4:15 pm

Garth, You recommend renting instead of buying which I somewhat agree with. But I’ve been reviewing rents for the last week in the Yonge/Eglinton and Yonge/Sheppard areas for condos and they want to make me throw up just like the prices. A decent but nothing special 650 sq.ft. is around $1500 – 1600 monthly not including parking , cable , internet, etc. So basically about $2000 monthly . This is ridiculous and the rents need to come down too. But when ? Any opinion on that subject ?



#102 Imstupid on 06.24.11 at 4:23 pm

# 52 Mike Rotch

You are absolutely correct. I remember reading a paper in university written by Sir Wilfred Laurier (hope the spelling is right) I don’t remember what it was on, but he wrote it as an under grad. The point is that while reading it I came to the realization that my education at the same level is far less than those of previous generations. A bachelors degree today is equal to a high school diploma of years past. It’s sad that our “leaders” are content in keeping us stupid. You must ask yourself why?

I assume that an intelligent population would ask too many questions. It would lead to a true, fair and equal society and the “leaders” would be thrown out on their ass. It’s very simple to control an under educated population. Its like playing go fish with a 5 year old, you can cheat lie and steal and the 5 year old will never know.

This is the market, individuals who couldn’t add, subtract or multiply in school are now giving financial advice. It makes me laugh. While the ones running the show have deniability when things go wrong.

Lol, stupidity is now the most valued trait when going into the financial services sector because you can’t go to jail if your to stupid to realize your actions were wrong.

#103 nonplused on 06.24.11 at 4:24 pm

Someone is stealing Garth’s ideas in the Globe!

#104 jess on 06.24.11 at 4:27 pm

#105 René Kabis on 06.24.11 at 4:30 pm

I chose #3 – Lock in.

I have been seeing the writing on the wall since 2005 (just before the US crash), but was forced to purchase in late 2006 because it was the only way to get my other half to say “yes” at the altar (and I have yet to regret that “yes” by the way – in terms of my other half, of course – as it seems that our union is particularly well-engineered despite us being virtual opposites).

About a year ago, having seen the first rate hike since late 2008, I dragged my other half down to our mortgage specialist and locked in for a fixed-rate 10 years at a whisker under 6%. Why? Because I truly believe that we will see double-digit mortgage rates within a few years, and I want to be laughing all the way to the bank. If the US slips into hyperinflation (a foregone conclusion if there is a confidence issue with the $USD) that same hyperinflation will hit us hard as well. It has no choice but to do so, as about 86+% of our economy is directly linked with the States. If their monetary system crashes, so will ours.

So let the rates shoot to the sky! I will invest my slush funds wisely, pay the minimum mortgage payments, and then pay the mortgage out in the 10th year with the proceeds of my investments converted into vastly inflation-decimated dollars. With enough luck, the NPV (Net Present Value) of the home (after it is all paid out) in 2006 dollars will be less than the paper value on the day we bought it.

Until then, I know exactly what I need to pay each and every month, which makes planning and monetary allocation much simpler than those poor people who are barely making ends meet with a 3% floating rate. When the average mortgage goes up to 8% (its historical average), those poor saps will be foreclosed upon at renewal time, whereas I will be paying 2% less than everyone else. Boo-yeah!

#106 jess on 06.24.11 at 4:35 pm

tax lien vultures – can collect up to eleven years,charge high interest fees making it impossible to pay than foreclose .

#107 René Kabis on 06.24.11 at 4:43 pm

I should point out that the Okanagan is going particularly crazy right about now. Last year at about this time, there were – maybe – four or five units for sale in my apartment complex. Now the complex’s sign post has over a dozen REALTOR® slip-signs stapled onto that sign post, so that the bottom most one is jammed into the ground and the topmost one is actually obscuring the name of the complex and its street number. Lock-boxes by the gross are crowding the railing leading into the underground parking.

It wasn’t this bad, even back in 2008 – it’s at least twice as bad now!! (And Kelowna saw a 26% drop in home values between March 08 and Jan 09) Can we say free-fall time ahead? The next twelve months are certainly going to be interesting!

#108 greg on 06.24.11 at 4:52 pm

Heres a good link if anyone is interested in listening to what is really happening in greece and the housing doom going on in the states. Its called the ‘THE KEISER REPORT’ and you can watch it on you tube. its on RT tv ,best news source i have ever seen, cable news is a joke.

#109 salonist on 06.24.11 at 4:53 pm

Sweden_negative interest rate

#110 LuckyRenter on 06.24.11 at 5:06 pm

My good friends just bought 2 bedroom condo in Toronto (near Eglinton / yonge ) few days ago for $395000 . Two years ago, after reading this blog, they sold their condo and lost 45 grand, just to repeat the same mistake all over again. I told them that this time their haircut is going to be a lot bigger. Another house horny greater fools .

#111 zombiedelight on 06.24.11 at 5:07 pm

#62 Kevin
No money is created out of thin air. Banks do not have the power to create money out of nothing.

– Of course banks have the power to create money from thin air… its called “money printing”.
The central bank will print money and give it away to private banks at near 0% interest.
The central bank is private, too….

#112 Hoof - Hearted on 06.24.11 at 5:08 pm

Data firm pinpoints housing bubble

It’s been touted as the centre of Vancouver’s so-called property bubble and now somebody has produced the data that just may back up that claim.

Local firm Landcor Data Corp. says it has been tracking property tax assessment bills to pinpoint the percentage of transactions driven by foreign investors in Vancouver’s suburbs — a trend the real estate industry says has been driving up average prices in the country’s priciest city.

The latest data from the Canadian Real Estate Association shows the average price of a home sold in May in Vancouver was $831,555, a 25.7% increase from a year ago. CREA has said the sale of multimillion-dollar homes has skewed the city’s average sale price and done the same nationally.

Richmond and the west side of Vancouver, favourites of Chinese investors, were the focus of a first-quarter report form Landcor’s which looked at the profile of buyers from 2008 to 2010. It found buyers from the “Middle Kingdom,” as the company put it, dominated purchases.

#113 VICTORIA TEA PARTY on 06.24.11 at 5:55 pm


So, who’s getting whacked the most by our country’s ongoing postal dispute miasma?

–the posties whose pay has stopped, and who’ll NEVER regain that lost pay. EVER;

-poor people with no Internet or courier access, the real victims, here;

-NDP Official Opposition, conductors of this silly confabulated filibuster, at the next federal general election.

Who’s winning?

-All those former postal customers who’ve left “town” for other mail delivery outfits;

-people who dislike CUPW (all of us);

-Prime Minister Harper, Mr. Strings-Puller to a fair-thee- well.


Mr. Harper can, in the twinkling of an eye, have closure on debate invoked. That will start the next steps necessary to pass legislation then impose it on the parties, who will then return to work.

I love watching the earnest new NDP caucus members, primped up before the cameras, wankering on and on describing this issue as one of the world’s great human rights’ dramas. Poppycock!

These ninnies haven’t studied their history. Perhaps they should read some of the endless tracts written by one of their favourite leftie heroes, the late, great, not-missed, world class monster, V.I. Lenin.

He had a term for that chorus of garglers, yowling on the Opposition benches: Useful Idiots.


As I see it, Mr. Layton’s Lame Team will be allowed to grind on and on until the Tories have read the tea leaves of the latest pollings, following which there will be a grandiose public pin-pulling annoucement, that will send the posties scuttling back to their mail barns; that is, if there’s any work left for them to do!

All I get is junk mail. And since the walkout began I’ve been switching my business to the onliners! How about that Mr. Postman!

You’re Fired!


Conrad Black will have to spend another 13 months housed somewhere in America’s vast Gulag Archipelago, the most populous prisons system on Earth!

He’s been deemed a criminal, through various court proceedings and verdicts, which means now’s time for him to regain his Canadian citizenship and come home.

He may have hit a few rough and dodgy patches from time to time. But he is a skilled writer and a valuable man-of-the-world, whose “like” is more scarce than hens’ teeth. The vapidity of Political Correctness has yet to fire a shot across his bow!


The Dow had a very bad ending today but was slightly up on the week. The economic news out of the US continues to get worse and worse.

Toronto’s stock market ended lower, but investors here must still think they’re invincible to world market forces, because this market still has a certain bouyancy that is absent in the US and Europe, our two main trading partners.

What are Canadian investors thinking? That they’re invincible just like some ignoramous buying a 40th floor cement box somewhere, hoping to make a buck or two ahead of the rest of the pack? Could they be the SAME person? One of these days we’ll all find out! That’ll be called a Bad Day at Black Rock!

Congratulations to the winners of Garth’s book. One per cent, eh? Hmmm.

#114 45north on 06.24.11 at 6:25 pm

Cato: This isn’t just a pure dollars & cents calculation anymore, economic storms bring social storms – how well do you know and trust your neighbours?

well enough thank you very much

there is an outside chance that this is prelude to a larger end game

my aunt says “I don’t know what’s going to happen but we’re not going to like it”

[email protected]

#115 Nostradamus Le Mad Vlad on 06.24.11 at 6:50 pm

4:46 clip Dirty old men! Heard a loud boom today, just after noon. It was cloudy outside, so I figured it might be the remains of what lies between my ears (greasy slimeballs) or a clap of thunder. It was the former, having solidified itself while dribbling down my face.
From Cradle To Grave Retirement is dead; Bank Giveaway “Ooohhhh, wotagiveaway!” — MPFC; Banxters declare war on commodities; Oil down, US$ up.

Italian banks sell-off of Euro bites the hand that feeds it; Stock Markets of socialized countries have outperformed US stocks since Reagan’s days, plus other links; Economic Hell Step right up, ‘coz you’re here and I’m Satan! George Carlin Prophet of his own time? With a few other clips re: Bilderbergs; 2012 Food bombs and Wall St.

Libya “Translation: The US will shoot down a passenger jet and blame it on “Muslims” to kick off a new escalation of the war.” From the same playbook as 9-11, although slightly different tactics; Fukushima Is the radiation too hot for drones? It appears so; Fort Calhoun Storage and flood alert; Speed of Disasters This makes sense, because as the WH, Pentagon, 24 Sussex Drive, 10 Downing Street place military in all the wrong places for the wrong reasons, it leaves people vulnerable to things they know nothing about. Sheeple are expendable; TSA Just stay away from Uncle Sam!

Apps one can use to spy on police, so the tables are turned; E-mails and things are reviewed and stored; This is how the US drags other countries into wars — arm them with freebies, then let them go warring; Brocolli Yes, it’s good for us but way tastier with cheese sauce on top!

#116 45north on 06.24.11 at 7:10 pm

Mister Obvious: talking about the decline of real estate in the Okanagan:

Right now the supporting acts are taking up the stage. But that’s a pretty good show too.

pretty funny

#117 Cato on 06.24.11 at 7:24 pm

#97 MikeT –
Here’s the theory for what its worth.

We all know China has been carrying a large trade imbalance for the last 30 years. They’ve produced, we’ve consumed. It was never a sustainable economic model, but it was kept alive for mutual benefit by China artificially suppressing currency and cycling that trade imbalance back into western consumer & gov’t debt. Trade imbalance grew larger, debt load grew larger.

Lets premise that perception can often be more important than reality. Perhaps fiscal reality is the west (in particular the US) does have ability to manage current debt, but thats not the perception in much of the world (in particular China). Chinese are inundated with anit-western propoganda that western lifestyles are exorbitant and driven by debt. That US spending is out of control.

The Chinese are a nation of savers, and like all savers they expect savings lent to others to be repaid. Perception has now shifted that perhaps these savings won’t be repaid, that savings will be lost. They have justifiable concerns that the west will simply monetize debt and pay obligations with inflated dollars & euros. Perception is turning into reality that western debt is no longer safe, nor are its currencies.

Chinese capital is shifting from savings to assets. For the state this means investing in hard assets like commodities, for individuals this often means hard assets like gold and real estate. The chinese initially started diversification with what was most easily attainable. For state companies this meant going after resources in Africa, for citizens it meant domestic Real Estate (forming what is likely a RE bubble).

This is just a drop in the pond of available chinese capital. Chinese still have a lot of capital perceived to be “at risk” and are now likely to repatriate dollars into assets. In Canada this would mean resource companies & real estate. What we are witnessing and calling HAM may indeed be start of flow of capital once destined for debt now being put into a hard assets.

So the end game scenerio is as follows:

Both the chinese gov’t and its citizens no longer cycle trade imbalance into western debt but instead turn to western assets. Asset classes seen as “safe” continue to rise.

Capital no longer flows into western debt so western interest rates start to spike. This would hurt Chinese exports. The west will sees inflation in not only commodities by Chinese goods, suddenly shopping at wal-mart becomes much far less affordable.

China starts shifting means of production to focus more on internal demand. Buying power of average Chinese increases, suddenly western consumers who no longer control means of production are competing with eastern consumers for similar items. Factories begin retooling and focus more on satisfying Chinese tastes leaving less production to satisfy the west.

At the end of the scenario (likely 10-15 years) chinese citizens own far more western assets then they do currently (which means more HAM in segments of Vancouver RE) and China overtakes the US as world’s largest consumer. If HAM doesn’t stop flowing soon this could be the scenario that is at play.

#118 Will on 06.24.11 at 7:24 pm

@Kevin The Canadian banking system has no reserve requirements. When Greenspan authorized sweeps in the US where chequeing accounts could be transferred overnight to savings accounts which had no reserve requirements the US effectively has no reserve requirements either.

When a loan is made (and money created) its safe to say someone will go and deposit that money right back into the banking system. That money will than be used as the basis for more loans so in fact a small initial deposit can grow to a very large multiple in loans when you follow the process.

#119 jess on 06.24.11 at 7:25 pm

Warren Buffett Wants Your Taxes
David Cay Johnston | Mar. 1, 2011 08:08 PM EST

Legendary Omaha investor Warren Buffett loves stuffing tax dollars into his pockets, which means that money never gets to schools, police, and libraries. Now it looks as if he is about to defeat an Oregon law intended to ensure taxes go for public purposes, not private gain.

It also shows a major reason why the use of holding companies is damaging to utility customers and taxpayers and why requiring all utilities to be stand-alone companies would reduce costs, streamline expensive regulatory proceedings, create transparency, and stop the conversion of tax dollars into private profits.

Americans pay billions of dollars each year to cover the corporate income taxes of legal monopolies — electric, gas, water, cable, and other utilities. The taxes are built into the regulated prices that utilities charge, prices set by the Federal Energy Regulatory Commission for interstate operations like pipelines and by state agencies like the Oregon Public Utility Commission (PUC) for intrastate utilities.

Diverting taxes for private gain was a story that hit Oregon with a wallop nine years ago when I revealed that Enron, which owned the state’s biggest electric utility, Portland General Electric (PGE), did not pay income taxes for years. Close to $1 billion of federal and state taxes built into PGE rates never got to government.1

David Cay Johnston | Mar. 1, 2011 08:08 PM EST

#120 penpal on 06.24.11 at 7:30 pm

# 49 GTA Girl

4,400 well finished feet with a full basement on a good lot is below cost at the reduced ASKING PRICE of $ 1.18 million. Even if they built it themselves.

All the small-time “builders” and “developers” have all their profits locked up in their current ‘palace’. Gonna be pretty awful for some families – lots of divorices coming.

#121 syd on 06.24.11 at 7:32 pm

#122 Jack Mehoff on 06.24.11 at 7:42 pm

BrianT, thank you for proving my point.

#123 Jwb on 06.24.11 at 7:52 pm

We are renting a place on Maui where values have dropped by around 40% since peak and still heading south. You can tell who the owners are they sit in the hot tub complaining about their monthly fees for upkeep on these creaky, poorly made houses they paid three times too much for. Interesting the big spenders around town are vacationers from guess where? The big V.

#124 Killer Chicken or Imploding Boomer? on 06.24.11 at 8:15 pm

88 Greg has said

“Recall that when banks lend money, it gets deposited in
other banks, which can lend it out again.”

So if the loan becomes a deposit over and over, how can
you possibly loan out ten times the deposits??

#125 Devore on 06.24.11 at 9:15 pm

#109 salonist

Sweden_negative interest rate

Stimulating the economy with more debt with an unsustainable short rate. I wonder how this will end?

#126 TurnerNation on 06.24.11 at 9:18 pm

Metalheads: Silver is on its way to $27-28, as any chart indicates…

#127 debtified on 06.24.11 at 9:31 pm

Congratulations to the contest winners!

I’m back in Vancouver and, just like the other times I was here in the last few weeks, another client of my brother declared bankruptcy. My brother is a carpenter who does renovations in GVA. This one had his garage converted into a rental and had a Korean ESL student renting it for $500 to subsidize the mortgage. Eventually, the heavy debt load was too much that bankruptcy was the only option left. This happened despite no material change to the person’s income.

I realize the overall bankruptcy rate in Canada is still low but this is proof that riskless lending (aka subprime mortgage) exists. That is why the debt-to-income ratio is now approaching 150%. It’s just a matter of time when the inevitable deleveraging begins and adversely affect 60% (consumer spending) of our GDP.

#128 debtified on 06.24.11 at 9:33 pm

Previous post correction: “riskless lending” should read “reckless lending”.

#129 disciple on 06.24.11 at 9:40 pm

Killer chicken…a good resource for you with which to embark on your discovery of the central banking fraud is Money Masters on Youtube. I believe they also show why the Gold standard is not the answer either…

#130 TurnerNation on 06.24.11 at 10:10 pm

Is the title Winners, or Whiners? ;)

And Blog Dog Carney is certainly sending mixed messages about rate hikes or not.

#131 Killer Chicken or Imploding Boomer? on 06.24.11 at 10:41 pm

128 Disciple – I’ll bet you’ll take my cheque.

#132 UVZ on 06.24.11 at 10:51 pm

Garth, Thank you for the recognition. This contest was fun.

I continue to enjoy your blog and learn from you as well as from the comments of your readers — Smoking Man and all!

Must say that while you and some of your readers appreciate the contrarian, objective angle on RE, I am careful discussing my thoughts on the subject in polite conversation. People either glaze their eyes and shut down or they begin to parrot mass media type of logic – in an indignant way!

Look forward to your latest book.

#133 Abitibidoug on 06.25.11 at 10:38 am

@Jwb post#123:
Those big spenders from the big V (and I don’t mean a former chain of drug stores in Ontario) are probably those who saw the writing on the wall, sold their overpriced house, took the money and ran, and are now living the good life. Can you blame them?

#134 Ronaldo on 06.25.11 at 11:07 am

#126 Turner Nation – then it will be time to back up the truck once again.

#135 Dave in Victoria on 06.25.11 at 11:22 am

#78 Victoria on 06.24.11 at 12:27 pm

Maybe it’s where you’re living. In my opinion Broadmead and Bear Mountain are two of the most terrible places in Victoria to live.

We were looking at rentals recently and for $2000 you could have rented a 5 bedroom house at Ten Mile Point on 1/2 an acre. The more expensive for houses in that ilk were around $2400.

Broadmead is where snotty new money lives, and Bear Mountain is where Len Barrie type developers fleece yippie wannabees and people who love traffic.

I hear you on the no animals, but heh, lose the pet and move on. The kids will keep each other company.

#136 terces on 06.25.11 at 12:39 pm

Ben Rabidoux – your comment that it is credit that drives the market is right – partially. (your blog rates right up there with this one) What is driving this last froth on the market is sentiment by a nano-particle of one percent of the market. How many homes have sold in Van during the last 15% to 30% rise in prices? 15,000? 20,000? 25,000? I don’t know the number, just guessing, but considering the population of 6M and the available buyers from china, it is a very small percentage who where holding this real estate party, along with their cheerleaders – the media, and facilitators – the realtors. When the tide turns, as it will, this last 15% to 30% increase will likely be stripped out of the market and reversed very quickly. I can tell you from the street that this is what happened in Calgary, and then prices started the long grind, bump, grind sideways and down. The only questions really are what will trip the sentiment switch and when.

The rout in the frothy silver market may be a good parallel although real estate by comparison is more glacial in the speed of its price movements

We will see if recent events may contribute to the change in sentiment, but in the meantime I am going out this week to buy my own Ipad2.