Run

On Friday she had her rural property appraised, just days after she signed a lease with a tenant for $1,588 a month. “I have been investing in RE for the last 10 years and had been such a strong believer it was the best investment,” Wendy wrote me yesterday. And the good news is she has about $220,000 in equity. The bad news, the property is too far away to commute to her job.

So, here’s her plan. Or, at least, the one cooked up by a mortgage broker and her realtor friend: “She has me pre-approved to refinance the acreage home, withdrawing $120k through a new mortgage at 40 yr amort. at 2.85 variable. Then with a minimum 20% down payment I am pre-approved for a new home mortgage at $370k with 40 yr amort. at 2.58%, both on a 5yr term.”

In other words, Wendy is about ready to borrow $490,000 at variable rates (soon to rise) on a 40-year amortization (just renting money) to buy a home in which she’ll have no equity. She has no savings, and no investments, other than the soon-to-be-mortgaged rural home.

Welcome to our sub-prime nation. 100% financing. Teaser mortgage rates. Excessive buying. Tomorrow’s failure. With funds courtesy of a major Canadian bank.

But there is hope. “I was recommended to talk to a relative that knows a lot about the market,” she says. “Spoke to him and he referred your blogs and I couldn’t believe what I was reading. But I believe it now.  I would sooo greatly appreciate some kind words of advice and recommendations.”

Ignorance, if not stupidity, surrounds us. As this era ends, there is no doubt millions of people will find themselves trapped in real estate illiquidity. Those who continue to goad folks into catching a falling knife will have to live with the consequences.

Like Sano Stante, the ebullient prez of the disingenuous Calgary Real Estate Board. On the weekend CREB talked to media about a resurgence in the local housing market, where prices peaked four years ago. This, he said, is because young people are flocking to buy condos. Specifically, these were his words: “Improved housing demand is being fueled by a younger demographic and, with the affordability of homes in Calgary, we are continuing to see young Calgarians pursue ownership over rentals.”

The statistical evidence backing this no-qualifier statement? Well, er, there isn’t any. Seems nobody keeps numbers on the age of buyers, and Santo’s pronouncement came (as the Calgary Herald reported) through “anecdotal evidence from the Calgary Real Estate Board, showing such buyers are back in the marketplace.” Anecdotal is a New Age word for making-it-up.

However, we do know these things. Last month 581 condos sold in Calgary. That was a drop from the 738 units which changed hands two summers ago. We also know any property virgin who bought the average-priced condo in Cowtown last summer has lost money – values are down about 3%, despite $100 oil supposedly bringing all those juicy new energy jobs to town.

Ignoring this, Stante soldiers on: “Historically, Calgary’s average family income has been higher than the national average – and a younger, more mobile demographic has been attracted to good-paying professional jobs in Calgary. As the economy continues to build momentum, we expect this same trend to support a balanced and healthy housing market in the second half of this year and into 2012.”

Is there a whiff of Alberta fumier-de-vache in the air? Are realtor guys like Stante, and slithering nothing-down mortgage brokers setting folks like Wendy up for HouseAgeddon?

Ha. And I a stud?

Now, here’s a bit of context for you. Trading in Dow Jones Index futures started at 6 pm last night. In five minutes they’d dropped 127 points. The US dollar fell, gold increased and bonds yelped. Markets were reacting in a knee jerk fashion to the monumental game of political chicken being played out in Washington.

Incredible as it seems, Tea Party wackos in Congress, hijackers of the Republican Party, may force a temporary and partial (and meaningless) default on US government securities. What does this mean? Short-term interest rates may rise a half point, long rates jump 1% and the States see its AAA credit rating downgraded. Why is this happening? To hobble Barack Obama and set the stage for the 2012 presidential election. It is 100% politics and 0% economics. Also stunning to see a major political party sacrifice the common good on the altar of ambition.

Nonetheless, there will be ramifications in the coming weeks. If you are an investor, get out your chequebook. This is not a financial crisis because a quasi-bankrupt, spent America is staggering. It’s a buying opportunity since some rabid neocons are foaming. Soon their brains will explode.

If you’re Wendy, however, it’s a disaster.

The last thing the real estate market needs, with most families tapped out, indebted, devoid of savings and over their heads, is turmoil. The manufactured debt ceiling crisis shows us in spades the anti-Obama forces will do anything to win. By refusing to allow a long-term borrowing fix for America, they are guaranteeing this crisis reignites right in the middle of the coming campaign. At that time they will hang the deficit, the debt, the housing crisis and the decimation of the middle class around his neck.

The scariest thought? Middle America elected these guys.

So run, Wendy. Fast. God’s army approaches.

230 comments ↓

#1 tigerbaby on 07.24.11 at 9:30 pm

Would someone please explain to me how banks can get into financial trouble if they have the ability to create money “out of thin air”??

#2 Phil on 07.24.11 at 9:34 pm

There will be no default.

#3 BPOE -Better Prepare for Overwhelming Exit on 07.24.11 at 9:37 pm

Young couple I know are thinking about leaving Van and moving to Calgary. They both have good jobs, but can’t make a go of it. Kids are out of the question; they need both incomes just to pay rent. And they aren’t alone. Several of their friends are ready to make the long trek east.

Van apparently is the Boulevard of Broken Dreams North.

#4 TurnerNation on 07.24.11 at 9:38 pm

With this weekend’s blog infrastructure upgrade I guess it means this acerbic weblog is almost mainstream and no longer a fringe, subversive underground site frequented by wild-eyed scruffy basement dwellers (aka Mortgage Helpers) from West Van!

When the topic of house prices arises at the next dinner party and you cheerfully mention Greaterfool.ca, no longer will you hear the clattering of forks onto plates, or the spitting of wine back into glasses, nor feel the kick of your spouse from under the table. :)

#5 Debtfree on 07.24.11 at 9:40 pm

DELETED. Over and out. This is the second time (under two names) your racist butt is being thrown off this blog. We don’t need another Anders Behring Breivik to tell us about immigrants. — Garth

Thank you Garth . There is only one race of humans on the earth ….. The human race .

#6 Cow Man on 07.24.11 at 9:42 pm

Amigos:

1% of the US taxpayers, pay 40% of Federal Taxes? 6% pay 64% of Federal Taxes? If correct it also shows the concentration of wealth. The inverse shows the concentration of debt.

#7 HouseBuster on 07.24.11 at 9:51 pm

They’ve been planning this from the day he got elected.

#8 Ex-Cowtown on 07.24.11 at 9:52 pm

#1 tigerbaby:

Banks can’t print money. Only the government can. Banks can print new shares and sell them, but that dilutes the value of existing shareholders, so the value of each share sinks on the stock market.

Print enough new cash or new shares and they all become toilet paper.

The banks biggest problem is not so much not having access to money, the gov’t will supply it. The problem will be at what cost. As Greece found out, no investor cares what the government wants to peg interest rates at; the investor will demand a premium (higher interest rate) commensurate with the risk.

The banks or the government may want to borrow money at 1%, but the only guys willing to lend them money may demand 5%. And thats what interest rates move to. The government wishes are largely irrelevant.

#9 Devore on 07.24.11 at 9:53 pm

“Wackos” got elected, because that’s what happens when “none of the above” is not an option on the ballot. Regardless, they are not yet vested enough to care about the political implication of their actions. Soon they will be part of the good old boys club (or voted out), and life will return to normal.

#10 smartalox on 07.24.11 at 9:53 pm

So if we’ve sold our real estate, maxed out our TFSA contributions, and have cash in hand, AND now is the time to buy American securities, which sectors should we be looking at?

#11 Sol del Toro on 07.24.11 at 9:54 pm

There will never be a US default right Garth?

Sell your metals.

#12 Mr. Lahey on 07.24.11 at 9:54 pm

#1 Tigerbaby – Banks get into trouble because while they can create money out of thin air, they have to maintain ratios set out by the feds. There has never been a major bank failure in Canada but in the USA, many 1000s of banks have failed over the years. When they have too many non performing loans, the gig is up and the bank regulators come in and sell off performing loans to a healthy bank. Depositors up to whatever limit the feds in the various states set are covered by the federal insurance program for this. In Canada it is the CDIC and the limit is $100000 per account holder. So while the fractional reserve system is money out of thin air, the banks do have limits on how much money they can create. The central banks of countries regulate what the reserves to loans have to be. And now you know the rest of the story.

Randy, the boys are up to no good again. They hijacked Rita MacNeil’s bus and are forcing her to harvest their friggin weed…

#13 Ex-Cowtown on 07.24.11 at 9:59 pm

Disagree with you on one issue Garth. The Pro-Obama forces can only see to the next election and don’t want to have to run on this issue. They would love to kick the can down the road so that they can get re-elected.

Republicans aren’t much better, but at least they say they want a permanent solution instead of a series of ongoing Greek tragedies.

I place the odds of default at 30%. Remember WWI didn’t start because everyone wanted a war. It ultimately started because two train loads of opposing troops ended up in the same train station at the same time even though the leaders were all trying to stop the trains and recall them.

Sometimes games of chicken have unintended consequences.

#14 Killer Chicken or Imploding Boomer? on 07.24.11 at 9:59 pm

1 tigerbaby – let me try to explain this way. first wash your mind of the notion of “money”. What a bank actually creates is a contract, and acts as an intermediary between depositors and borrowers. The borrowers promises to repay the “money” but in fact is agreeing to
transfer some of his/her future labour back to the bank. The bank in turn will return some of this labour back to
depositors, who are storing the “excess” labour they
have at the bank.

Money is only the quantifier of the contract.

#15 Don P on 07.24.11 at 10:03 pm

@tigerbaby:
Read this
http://en.wikipedia.org/wiki/Fractional-reserve_banking
and then click on the link for “reserve ratio” and read that.
Banks are not allowed to “create” money indefinitely.

#16 45north on 07.24.11 at 10:03 pm

Wendy is about ready to borrow $490,000

from a a major Canadian bank that couldn’t care less

great post Garth

#17 Led on 07.24.11 at 10:05 pm

Bill Still said it best:
http://www.youtube.com/watch?v=c9U3lHCgylo

#18 bsallergy on 07.24.11 at 10:09 pm

The brits have their own thanksgiving. They give thanks for having shipped the last of the puritans to america. God bless amrika, they bought the Rupert Murdoch’s (descendant of a british convict exiled to Australia) nonsense hook line and sinker. We’ll suffer, but not as much as the descendants of the greatest british export, white trash, to the south. Good on them!

#19 Andrew on 07.24.11 at 10:10 pm

“Would someone please explain to me how banks can get into financial trouble if they have the ability to create money “out of thin air”??”

Banks don’t create money out of thin air. They borrow money from central banks. Unless you’re talking about central banks. They do make money out of thin air. However, it’s not the central banks that get into trouble, it’s everyone else.

#20 Bobby on 07.24.11 at 10:11 pm

To the Blog Dawgs,

What are your recommendations for short-term gain?

#21 bullion.bunny on 07.24.11 at 10:11 pm

#1 tigerbaby on 07.24.11 at 9:30 pm

One of the best questions to date! The reserve ratio limits what banks can create in the U.S. anyway. Banks can create more credit to try and replace bad, but eventually they run out of reserves and hit the reserve ratio limit. In which case they must either go to the market place to re-capitalize or ask the central bank for a bailout. In either case the common stock becomes diluted.

It should get interesting since the Canadian banks have a reserve ratio of ZERO and have been bailed out to the tune of $110 billion dollars. Thanks of course to the Canadian tax payer!

#22 brainsail on 07.24.11 at 10:11 pm

Obama is going to learn to how to be very humble when he has to give up the keys to his “spiffy ride” AF1.

There will not be a default. It’s all about political postering for the 2012 elections and Obama is going to play this hockey game to the end not realizing that he is missing a goalie.

#23 Basil Fawlty on 07.24.11 at 10:12 pm

The US national debt is $14.7 Trillion and the annual budget deficit is $1.6T. In addition, they want to increase the debt ceiling by a couple more trillion, which will enable them to cover the deficit for this fiscal year. So, is this like a debt perpetual motion machine? How does the US get off this Merry-go-Round, as every year the principal and interest payments increase? We are witnessing a slow motion train wreck. The definition of insanity is, “making the same mistake over and over, while expecting different results”.
How can these people expect to be taken seriously?

#24 Rocket Boy on 07.24.11 at 10:14 pm

US Defaulting, just smoke and mirrors. My professor would always rant that when alot of noise was being made over here, what you really should be looking at is what’s happening over there.

Oh, I would love to share my story on my heated conversation with my “Greek”friend which we go back to grade school. The heated point, how other’s in the Euro need to help and provide for those countries less fortunate. I really lost it when he quibbed that during world war II, Germany invaded Greece and that itself should be worth billions. I laughed right in his face – it was Italy that originally invaded Greece. They got into trouble and their Axis partner [Germany] that was fighting battles on all fronts had to come to their rescue.

God, that evening did not end well – why is it that countries now are not asking, but demanding handouts. Some type of entitlement. I told him, imagine Canada, US and Mexico in a same type of arrangement. Mexico lied to get in, most don’t pay taxes and retire at 55. When the day to confront the truth, they ask Canadians to pay more in taxes and work longer to cover their lifestyles. Yeah, that would go over real well –

This just can’t end well – in time the house of cards will crush us all. Maybe G’s book on cemented your propane tank wasn’t such a wacky idea after all!

#25 Mrs Loquacious on 07.24.11 at 10:16 pm

Oh how I hate the Tea Party and all that those extremist Republicans stand for! I hope that in 2012 Obama can mobilize the vote again; I’d like to see him in for a second term and I sure as heck don’t want a Republican anywhere near the presidency.

#26 bullion.bunny on 07.24.11 at 10:19 pm

“Raising the debt limit to solve the budget crisis is like raising the blood alcohol limit to solve the drunk driving problem!”

America cannot continue to spend at the current pace, it must stop. Continue with this reckless behavior and risk the nation if not the planet. Spending within a nations means is to be encouraged, not scorned. Delaying the inevitable will only make matters worse resulting in an ever larger collapse. Get rid of them all and bring in a Ron Paul constitutional government.

And a permanent depression. RP is a whackjob. — Garth

#27 john on 07.24.11 at 10:21 pm

The Washington drama will continue. No default, just some good old fashion politics. The can will be pushed down the road till early 2013. The debate will continue once Obama gets re-elected in Nov 2012.

High interest rates will squeeze out the middle and low income class. Gold, silver and oil will continue to rise taking the entire commodity complex with them. Stagflation will create many money making opportunities to the ones who have half a brain. right Garth?

#28 Min in Mission on 07.24.11 at 10:21 pm

There has to be some kind of change. I think that there will be some sort of “soft” default, a mediocre attempt at cutting the budget, a nominal attempt to “keep the deficit under control”, and a tendency to try and hang all of this on Obama. Poor guy was only a kid when the problem actually started!!

I find it so strange that, with all the info available, people are still rushing headlong into purchasing real estate. I nearly own my house. But, when I look at the cost, in time, in money, in worry, I often think that just renting something equivalent would have given me more time, less worry, and probably more money.

#29 thinktank on 07.24.11 at 10:22 pm

Garth …have been reading your blog since about April of this year. I think its great and agree on your real estate outlook for the Canadian Real estate marketplace. I wont shower you with adoration – you get enough of that from your regulars as far as I can tell from reading the plethora of responses to your many posts over the past months. I live in Toronto and I’m in finance – I will just leave it at that. I think in light of the developments over the weekend (or lack of) regarding the US debt ceiling and your recent post pertaining to exiting precious metals, I will present you with FACTS which challenge that advice. Before I do that I will say in your defense, you mention over the “months to come” for investors who are long the metals. Personally, I could drive a truck through that advice. Having said all that … here is something to chew on. – Keep up the good work – I think you are wrong this time but thats ok …a difference of opinions are what make a market … hope your legion of readers also enjoy this post to put things in perspective …

1) Inflation is caused by paper money dilution. Money dilution is used when nations cannot balance their books.
Do you believe the USA can return to a budget surplus?
If yes, then paper money will rise and gold will go down. If not, paper money will lose purchasing power through dilution and gold will continue its rise.
Same holds true for commodities

2)If you take a long enough time period without choosing the window period that suits your argument, gold has been the best inflation hedge bar-none.
For example, in 1921, one ounce of gold ($21) would buy you a good suit. Today , at $1600, it still buys you a good suit.
BTW, $21 at 4% for 90 years compounds to only $716 and that’s not counting the taxes payable along the way.
Moreover, from 1980 to 2000 central banks were net sellers of gold to suppress its price appreciation to hide the inflation governments were creating.
They no longer have any left and now eastern central banks are net gold buyers.

3)Gold is physical, unaltered, permanent, it stays the same forever. One ounce is one ounce.
It’s not gold that has a price. It is more along the lines of: How many dollars can we issue with one ounce of gold in reserve.
That answer was $20 dollars per ounce when the USA was created. Inflation was zero for more than one hundred years.
The federal reserve act stipulated that 40% gold reserves must be held to account for the money supply.
That means the money supply can be no more than 2.5 times the number of gold ounces held in reserve.
The Federal reserve states that they hold 261 million (unaudited) ounces in reserve.
Using M2 as the money supply, the US has 8.5 trillion dollars in circulation.
(8.5 trillion x .4)/261 million= $13,027 per ounce
If you use M3 (14 trillion) as the money supply… you can do the math!

I’ve read these arguments a thousand times, and remain unimpressed. We live in dollars, and that will not change. This is not Zimbabwe or the Wiemar Republic. Economic growth will resume and metals will fade – just like the last time a PM bubble had people lining up to buy silver, before being crushed. Having a PM position of 5-15% of net worth as an inflationary hedge is fine with me (I’ve been advocating such for years), but investing is about harvesting gains, which is what I’ve been suggesting to the metalheads. So long as life is denominated in currency, and so long as gold won’t actually buy anything, then a sane strategy is to ensure you have lots of money. Real money. The kind you work ‘in finance’ every day to get. — Garth

#30 Andrew on 07.24.11 at 10:27 pm

#138 Imstupid from previous blog, “Denial”

“Also did you notice that all the bullion freaks never respond to my post. They too have no idea what they are doing when buying PM’s. They only respond to theoretical opposition to their believes. Once actual numbers are in place they run for the hills because their arguments don’t hold water. But I guess a 1% gain in six months is really something to be invested in. And that number is best case. The downside can net unimaginable losses.”

I read through your previous posts from the last blog. I’m not sure what it is you want people to respond to. You can demonstrate how little profit is made after GST, capital gains, currency exchanges, shipping, storage, etc, are taken into account. The problem is you still don’t seem to understand what gold and silver are traded for. The idea is not to turn a profit in the short to medium term. The idea to protect evaporation of wealth through hyperinflation. Let’s suppose that Wiemar Germany was going to happen all over again. With strong positions in gold and silver, you’re going to outperform everything, including stocks (which are traded in useless currency). Maybe your gold and silver won’t outperform food and fuel, but you would be wise to invest in a bit of those as well. Gold and silver has a much better shelf life than food, after all.

Let’s say hyperinflation does take place. You might have entered the PM market late in the game, and end up losing 30% of your wealth in real terms when the crisis does hit. But when all your neighbors are losing 95-99% of their wealth, that’s a pretty sweet deal.

Also, I may have a stronger than suggested position on PMs, but I am also heavily exposed to high-volatility stocks. I’m on the fence whether the government stimulative policies will be taken so far as to _completely_ destroy the currencies and the stocks that trade in those currencies. I’m thinking that in the short to medium term, performance of stocks such as miners and foreign companies will significantly outperform hard metals, and if I feel in a couple years that things aren’t getting any better, I can cash in some of my stocks and buy more metals.

It’s get nothing to do with being a metal head. I just genuinely disagree with the idea all of these bailouts and QE are going to be magically washed away by a mysterious economic turnaround. I also have absolutely no faith in voters to compel politicians to do the right thing. The vast majority of people don’t have the foggiest clue what the right thing really is.

#31 DML on 07.24.11 at 10:31 pm

Anecdotal evidence is an oxymoron.

#32 UD on 07.24.11 at 10:31 pm

The tea party is led by a woman Sarah(I can see Canada from my front porch) Palin. Obama will make mince meat out of her in the next election. US will not default but we will see some economic turbulance for awhile which is a buying opportunity.

#33 BrianT on 07.24.11 at 10:34 pm

If those tea party wackos hadn’t showed up, the USA would be running a giant surplus right now and hope and change would be running like a fine Swiss watch.

#34 Dr Doom on 07.24.11 at 10:36 pm

…..Nonetheless, there will be ramifications in the coming weeks. If you are an investor, get out your chequebook. This is not a financial crisis because a quasi-bankrupt, spent America is staggering. It’s a buying opportunity since some rabid neocons are foaming…..

===================================

So I moved 5k over to my brokerage account. Any advice Garth as to which sector we should be looking to buy into? Any clues? Hints?

Rabies vaccine. — Garth

#35 Hoof-Hearted on 07.24.11 at 10:37 pm

Good video of how we got into the mess….

http://www.youtube.com/watch?v=ucS9qBChmBA&feature=related

#36 Dr Doom on 07.24.11 at 10:45 pm

Rabies vaccine. — Garth

=============================

Nice. It was serious question.

And I don’t give specific investment advice to anonymous people. Ever heard of ethics? — Garth

#37 bullion.bunny on 07.24.11 at 10:47 pm

And a permanent depression. RP is a whackjob. — Garth

Far from it, the only whackjobs here are the nut cases that want a continual state of war, uncontrolled spending on pork and the continual printing of money through QE1,2,3,4,5,6,7……infinity. Ron Paul is far from a whack job, he is one of the few political types that makes any sense. Yes lets spend our way to prosperity, the U.S. does not have to default. It just has to spend less. Garth just because you live in fantasy liberal land does not mean the rest of us do. Personally I’m no fan of anyone being a debt slave to the banks or governments for that matter. Keep printing and watch what happens next.

#38 Killer Chicken or Imploding Boomer? on 07.24.11 at 10:47 pm

tigerbaby – sorry, forgot, if borrowers refuse/cant provide that future labour, then we have a problem.

#39 Toon Town Boomer on 07.24.11 at 10:47 pm

Went for a walk this evening & came across a Condo for sale sign by Hallmark. Interestingly, beneath that sign was another sign advertising a free down payment through Scotia Bank. All you need to do is just ask this realtor about the details. Makes me sick!

#40 Hoof-Hearted on 07.24.11 at 10:52 pm

The US presidency has been a joke for the last 111 years.

I have been doing some personal research since I heard about this beast called ” Federal Reserve”.

The US presidents have been a litany of treachery and traitors to their own citizens since at least Woodrow Wilson, allowing the vested interests to rape and pillage the US citizens using various means.

Even Roosevelt said Presidents are not elected ….they are selected.

Obama? what a joke.

Simply a plant and a puppet.
His only skill is as a silver -tongued orator, usually ends up badly.

#41 pablo on 07.24.11 at 10:55 pm

Incredible as it seems, Tea Party wackos in Congress, hijackers of the Republican Party, may force a temporary and partial (and meaningless) default on US government securities.

But didn’t you say in a post or three ago that there wouldn’t be any default by the U.S.! So Garth, which is it; default or no default?
The shitwinds are blowing, there’s a shitstorm coming, the shithawks are flying. _tbs

I think you already got some on you. — Garth

#42 bah on 07.24.11 at 10:57 pm

Why does the U.S. bother setting a debt level? It will be more real when other countries stop loaning them money.

#43 name-calling ain't rational on 07.24.11 at 10:59 pm

Garth,

Republican or Democrat…it doesn’t really matter. The same corporate agenda continues. Obama has continued to support and implement (and even expand) a plethora of Bush policies; in fact, most of his “advisors” are former Bush admin..

The REAL “tea-party wackos” (as you call them) are not trying to prevent Obama’s re-election…they are, rather, trying to save a country–from both sides of the political coin.

Obama has accumulated MORE DEBT than the previous 43 presidents combined. In fact, he spent 1 trillion dollors in the past 7 MONTHS!

Why would any rational person call those who challenge this type of economic policy (i.e., tea partiers) “wackos”?

Garth, buddy, of course politics are involved. But saying that these “wackos” are motivated 0% by economic factors is just plain wrong…and more than vicious.

Also, how can you consistently decry those who name-call on your site, when you yourself sling the same irrational mud?

“Wackos”? C’mon. You can do better.

Food for thought.

The economic consequences of a Tea Party-dominated Congress will be ones you do not want to live through. Theirs is the most simplistic, sophomoric, destructive approach imaginable to a complex global challenge. If the GOP wins in 2012 I might change my mind about investing in guns, gold and coonhounds. — Garth

#44 Miko on 07.24.11 at 11:00 pm

“And I don’t give specific investment advice to anonymous people. Ever heard of ethics? — Garth”

he only asked what sector, he wasn’t asking for a stock pick. You certainly don’t have problems advising people to sell the Real estate sector.

Real estate is an asset class, as are equities. I do not give equity advice on this blog. — Garth

#45 Sp on 07.24.11 at 11:01 pm

#28. Are you sure that you are not James Turk or Jim Puplava? I have heard these same-old tired arguments from Gold Bugs all the time, and yet they were wrong in 2008. And listening to them has costed me money. Now I know that the Bugs are completely wrong about the actual working of the modern monetary system. In fact, in a way their views are more wrong than the Keynesian that they often like to discredit. Ok. Gold is going up (so was real estate by the way) but it does not mean “fiat”currencies are being debased. Gold is up simple because it is in a bubble. It is important to have a correct view of the modern monetary system if one wants to strive going forward. And listening to the Bugs is not going to help.

#46 Josh L on 07.24.11 at 11:10 pm

#13 excowtown,
The democrats aren’t trying to kick the can down the road. They just recognize that spending cuts are only part of the solution. Cut costs and raise revenues by closing tax loopholes. The Republicans are just trying to sabotage Obama. They’re being stubborn by not meeting half way (both tax increases and spending cuts).

#47 City Slicker on 07.24.11 at 11:16 pm

Nicely written Garth. So far looks like point for the God-gold crowd.
BTW I was looking at a townhouse in Calgary today for $419,000 and the real estate agent told me prices were going up 12% soon, go figure ;)

#48 squidly77 on 07.24.11 at 11:18 pm

The American bond market is calm as calm can be, only ones in a panic are the Gold Bugs – The Ultimate Doomers.

#49 City Slicker on 07.24.11 at 11:19 pm

Oh and this place is been on the market since February. The real estate guru said it sold twice! Sounds like in its demand, but I was a bit confused if it “sold twice” why is it still for sale, he said:
1. First buyer couldn’t get financing
2. 2nd buyer low balled it so it was turned down

Still confused by “sold twice” – double RE talk?

#50 brainsail on 07.24.11 at 11:24 pm

Does anyone know what is happening in Canadian politics these days? Sorry, whoops, forgot that transparency only exists the US.

#51 Helicopter Ben on 07.24.11 at 11:24 pm

Funny how many times bush and the republicans raised the debt ceiling and Obama was against it, now its all turned around, i really am amazed that adults still vote, like somehow it matters and every politician isnt paid off. Ron Paul is one of the few that isnt but they will never let him win the GOP, he would easily win it if they let it play out naturally but that will never happen. Its past the point of voting now, its revolution or enslavement. i think after the next election you will see greek like riots in the states. it seems to take a really long time before the average person is aware of whats really happening, but once food gets too expensive i am not sure they will care why they are rioting they will just be. People are already stealing A.C. units from churches, copper wire from power lines, fire hydrants and man hole covers, troughs from peoples houses, its crazy. U.S. foreign policy is do what we say or we will starve your people, now it seems they will be doing it to their own. the few people in the world that have all the money and power are absolute tyrants, on the same level as Hitler. I am not sure what their long term plan is, when they die what do they think is going to happen?

#52 Peakoilist on 07.24.11 at 11:27 pm

Whoohoo! welcome back Garth !! You were gone for awhile and I was worried.. (maybe you were blogging from a beach somewhere :)
best posting in weeks.

#53 Abitibi Doug on 07.24.11 at 11:30 pm

If that temporary default occurs and shakes up markets, I will have my chequebook ready. let the good times roll!

#54 Helicopter Ben on 07.24.11 at 11:36 pm

#46 SP less then 1 % of north americans own gold or silver how is that a bubble? there isnt enough gold and silver in the world i dont think to supply a world wide bubble. if you own gold in 2008 how did you lose money? did you drop your gold down a drain? and of course fiat money is being debased there really is no arguing that. if you could explain a little more how you lost money and how gold bugs are wrong when it has gone up steadily.

#55 Not 1st on 07.24.11 at 11:38 pm

Didn’t 40 year amortizations get thrown out by the feds a couple years ago?

And “quasi-bankrupt” must be a mis-spelling. Fully bankrupt and insolvent is more like it.

#56 Not 1st on 07.24.11 at 11:43 pm

Folks, the U.S. has already defaulted and the world is just figuring it out.

If I have to go to my bank to borrow $100 bucks to pay my power bill, thats a default. I have just determined I didn’t have enough money to pay my bills and had to borrow to get by.

Or if I have already borrowed $100 last month and need to borrow another $100 this month to cover the same bill, thats a default too. I can’t pay my bills but this time I need to ask for more credit (i.e. debt ceiling) to get by.

The U.S. faces either one of these scenarios right now, unless they cut 100s of billions of dollars in discretionary spending right now.

#57 JohnnyBravo on 07.24.11 at 11:48 pm

From what I know about the Tea Party (which, admittedly, is not much), my sense is, they mean what they say. As I said in a previous post, I would not be surprised if they prevent an on-time budget agreement, which could lead to some kind of technical default (or the gov can take more money from social security to cover the payments for a little while longer).

You can be sure that very heavy political and financial forces are bearing down on individual members with all their weight to convince them to “get onboard.” The fact that the Tea Party members do not seem to be bowing to the pressure en masse may be a testament to their convictions and the will of the people they represent.

Recall that, back in ’08, the vast majority of Americans polled, as I remember, were vehemently against the TARP banker bailout (which, I’m sure most people are not aware, was the biggest bait and switch in history). At first, Congress followed the will of the people, but then the bankers put the proverbial gun to the members’ heads and eventually they folded like a cheap lawn chair in a hurricane.

But America seems to have lost its patience and acceptance of more banker bailouts. And there are those, Tea Party members included, who have done a good job convincing many middle Americans that a debt ceiling hike will only benefit the bankers. And who can blame them? The Europeans already know that any bailout of a country, like Greece, is not a bailout of the country, but a bailout of the banks who hold the sovereign bonds. In short, the people are starting to wake up. And that, incredibly, may now include middle Americans.

The so-called “Tea Party” is not a cohesive political party, like the Republicans or Democrats. They seem to be united, not by official political dogma, as much as by a grass-roots, historically-based, fundamental vision of “America.” In that sense, the Tea Party is more of a movement that has yet to coalesce into a true political organization. Collectively, they seem to represent the idea that somewhere along the road, America has lost its way––that government is too corrupt, that Wall Street has hijacked the country, that freedoms are being destroyed by unfair laws and crushing debt, and that the US constitution is under attack––and they want to change things before they completely lose their beloved country.

I don’t how how this whole debt ceiling debate will be resolved, but it sure seems like something has changed, that some inflection point may have been reached. Recall, the US has raised the debt ceiling almost countless times in the past 30 years with nary a word from the media or a peep from middle America. But now, all of a sudden, it’s the number one issue facing the country, at a time when most economists and the bond market are seemingly saying that America’s fiscal point of no return is still years into the future, if at all. Whatever the short-term outcome, this is not trivial. It may, in fact, turn out to be quite historic. We’ll see.

#58 Ronaldo on 07.24.11 at 11:50 pm

#46- Sp – had you purchased silver as I did in November of 08 and sold it just before the big drop on May 1 before the markets in Asia and Europe opened for trading you would have been up 400% as I was. The objective is to buy low and sell high. You don’t have to be a gold or silver bug to invest in precious metals. You just have to know how.

Do you also believe silver to be in a bubble?

#59 Utopia on 07.24.11 at 11:50 pm

I am a little puzzled about why the latest blog did not appear on my screen for more than 45 minutes after it had been published. I had signed in quite a few times only to see the old post still up (and still showing only 110 posts which is even stranger because it suggested no activity since before noon today).

Is it my computer that is not working or is it the new site?

#60 Robert Dudek on 07.24.11 at 11:57 pm

Commercial banks do create money when they make loans. These loans are credited to an account (as if by magic), then this money is used by the recipients in the real economy. Thus money is created.

The loan is paid back piecemeal.

So commercial banks do create money – but they do not keep it for themselves (it is owed to them). If enough of the loans become non-performing, the bank will have less money to cover their liabilities, i.e. deposits (which a bank holds, but which belong to depositors, not the bank).

Plenty of small banks have become insolvent in the US since the crisis, even though they were creating money with every loan they made.

The big ones would have too, but they were backstopped by the central bank and the federal government.

While there are usually rules that prevent commercial banks from creating too much money in the form of loans (i.e limiting their exposure to defaults), there is no limit to what the central bank can create.

But…

If total production of goods and services is A, and total money in the system is B, then the value of a currency unit is a function of A divided by B.

So if you make a large increase in B without similarly increasing A, then you are debasing your money.

In fact that is what has happened: rather than saying the price of gold has gone up, it is more accurate to say that the value of the currency unit has gone down.

#61 Karl on 07.25.11 at 12:00 am

DELETED. Over and out. This is the second time (under two names) your racist butt is being thrown off this blog. We don’t need another Anders Behring Breivik to tell us about immigrants. — Garth

Thank you Garth . There is only one race of humans on the earth ….. The human race .
===========================================================

Couldn’t have said it better myself. Glad to see I’m not the only one who’s growing tired of hatred and biggotry.

#62 Robert Dudek on 07.25.11 at 12:06 am

Gold is up simple because it is in a bubble. It is important to have a correct view of the modern monetary system if one wants to strive going forward.

How can gold be in a bubble if so few people own it in significant quantities. It is a property of all financial manias that there is a veritable frenzy to own something that builds to a crescendo before the collapse. We are seeing nothing like that in gold.

If you look at the mainstream media (and I include Garth here as well) there is still a preponderance of negativity towards gold.

#63 nonplused on 07.25.11 at 12:08 am

Good post tonight Garth, I think you got most of it right except one point:

While I agree that the debt ceiling limit thing is political crap of the foulest smelling type and the debt limit should be scrapped (they just keep raising it anyway, and will shortly after the 2012 election no matter who wins), it does highlight a point. The US debt is rising exponentially, and there is no plan to arrest that situation. It must be addressed sooner or later, or Weimar here we come. No country has ever found a way to survive exponential debt creation. None. And none ever will, as my HP graphing calculator says it’s impossible. Oh sure, Japan has survived so far, but for how long can it last? Greece isn’t a one off, stand alone problem. Once debt starts rising faster than GPD, the goose is in the pot.

But that said, it is an economic event. Not that serious as far as calamities go. It’s hopeless, but not serious.

#1 tigerbaby

Banks cannot create money out of thin air, they can create loans out of thin air. Banks get in trouble if they create a loan and then the borrower isn’t going to pay them back, because they have to write the loan value down and they only have so much capital supporting the loans. Leverage is often 30 times capital (they have lent out 30 times more money than they have). In Canada I think the ratio is lower, but the same principle exists, be it at 20 times capital or wherever it is.

Central banks can create money out of thin air, so in our case that is the Bank of Canada for Canadian dollars or the Federal Reserve for US dollars. How do they do it? It is simplicity itself. They buy assets like treasury bonds or mortgage backed securities, and literally print up the money to pay for them (most times electronically). The money is in theory backed by the assets, but that’s just an accounting trick. If the assets fail so does the money. In times past central banks would only buy Aaa securities or gold. Now they buy anything, witness the ECB and the Fed. No indication the BoC is doing this yet, looks like CMHC is the vehicle of choice for whitewashing bad loans in Canada to this point. While CMHC may not have a charter as a second central bank, using more of an insurance mandate they are acting a lot like one right now. They don’t print money per se, but they buy the loans at 100% of face value and then refuse to mark them to market.

#2 Phil

Watch. If not now, eventually.

#8 Ex-Cowtown

I think your answer is mostly correct too.

Garth on #26

You are calling Ron Paul a whack job? You???

Ad-homenin attack my friend, you of anyone should know better. Tell us why his arguments are bad and no, “great big scary depression with no end sure to result, no argument necessary” won’t do because that is a “straw man”, amongst other problems.

Ron Paul’s ideas are certainly not mainstream, but he is a pretty accomplished individual and thinks pretty “Texas” (i.e. straightforward, let’s use the real name when describing something.)

And that big depression is coming either way. It won’t be Ron Paul who sets it off, it’ll be peak oil. No way out.

#31 DML

I like that.

#64 Ex-Cowtown on 07.25.11 at 12:12 am

#47 Josh L.

I tend to agree with you in that tax increases as well as spending cuts are needed.

I’m no fan of the Republicans, but I doubt that they are actively trying to “sabotage” Obama any more than Jack Layton tries to actively “sabotage” Canada through idiotic environmental policies. Rather, I see it all driven by a fairly narrow view of the problem, both on the right and on the left.

I don’t see Obama coming up with a solution either. He just seems intent on pontificating and asking rhetorical questions.

As Obama pointed out, “Everyone is in favor of change in the abstract, but change in reality is really hard”. And it appears to be tough for him as well.

#65 Watching on 07.25.11 at 12:15 am

The economic consequences of a Tea Party-dominated Congress will be ones you do not want to live through. Theirs is the most simplistic, sophomoric, destructive approach imaginable to a complex global challenge.

And I guess you’re suggesting Garth, that Obama and his crazy spending is the solution? If that keeps up they will have their own Greek crisis. Also, I pity the Americans who will have to queue in line for medical care like we do up here if ObamaCare survives. Imagine that, nowhere for Canadian elites who need medical care to go and jump the lines!

#66 Mr. Reality on 07.25.11 at 12:15 am

Garth, What’s wrong with recession 2012 coming to a country near you?

That is looking more and more feasible each week that goes by. Especially looking at a 6 month lag after QE2 was completed. We are done. You can no longer hide the decline.

Mr. R.

#67 Amarillo on 07.25.11 at 12:16 am

The medium is the message, ie societal problems are now so complex that we’re being rewired as a result. There is something appealing about dropping out and living a simpler rural lifestyle not far from a small city. Politics has gotten so nasty that it now self-selects the kind of people we don’t want in there. Maybe we should pick our politicians by lottery, pay them well and bonus them for positive results.

#68 DML on 07.25.11 at 12:16 am

The economic consequences of a Tea Party-dominated Congress will be ones you do not want to live through. Theirs is the most simplistic, sophomoric, destructive approach imaginable to a complex global challenge. If the GOP wins in 2012 I might change my mind about investing in guns, gold and coonhounds. — Garth

Not true,Christine O’Donnell will cast a few spells and fix everything.

#69 Jas Girn on 07.25.11 at 12:16 am

Garth, so if the debt ceiling keeps being raised, would not we have a worst recession later on??

#70 Bill Gable on 07.25.11 at 12:30 am

Laugh out loud funny and yet wants to make you weep that people can be this dense.

I couldn’t deal with the stress of managing people’s money anyway, much less folks that are dumb as Ann Coulter.

#71 Utopia on 07.25.11 at 12:34 am

#138 Imstupid on 07.24.11 at 5:34 pm

“Also, did you notice that all the bullion freaks never respond to my post. They too have no idea what they are doing when buying PM’s”
—————————————

You made some great points yesterday regarding exchange rates, interest etcetera. I am not surprised the Gold-Huggers are ignoring you.

This is one of the very few sites that offers to disagree with some of the emotion driven gold buying sentiment and suggests that all is not necessarily so rosy in gold country. Most other blogs just get over-run with all the rhetoric and idiotic one-liners and then give in to the group-think as the gold-huggers just overwhelm them.

Gold does have its place of course. We cannot ignore it if indeed currencies are going to be debased. I own it too but am just put off by the religious (zealotry) nature of some of those who promote it.

I just hate it when others work to manipulate otherwise good ideas for their own personal gain. I hate it more when they spew mindless rhetoric and embellish facts to suit their own purpose.

If we could stick to facts I would be more amenable.

By the way, why do you call yourself ImStupid when you are obviously bright? Time for a name change I think.

#72 obert on 07.25.11 at 12:35 am

GT, do you like Obama so much??
If it’s good for the US gov to increase their debt spending, you sure would approve of increasing the limit the CMHC can insure – from current 600 billion to say 1000 billion now, and in a year to say 1.5 trillion.
In this way the house prices can continue to increase… from current decent house for 600 K, to 1000 K, and then to 1500 K.

I don’t think you are right about the tea party – the old republican party and democtrats bancrupted the US; the same our parties may bankrupt Canada (with most of debt spending hidden in CMHC).

The Tea Party may have a chance to stop the maddness. I do hope that the individuals and governments live within their means – if citizens want services from the government they should pay more taxes, not to make the government borrow and borrow and borrow.

#73 BPOE on 07.25.11 at 12:43 am

As I have stated for sometime there is a high probability for the US to default. This is not meaningless. Note: Gold going much much higher folks. Anyone thinking that raising the debt ceiling is going to curb the appetite for gold is out to lunch. Furthermore most gold stocks have lagged way way wayyyyy behind the price of gold. One final note tonight. The baby boomers will not be selling their homes for decades. That’s right folks contrary to what you read on this blog there will be NO boomers selling period. You see folks you don’t need investments or a pension when you retire. What you need is cash flow. What you need is a massive credit line. It’s simple folks. If you own a home in Vancouver and have no pension just borrow a million plus in the form of a line and enjoy the high life. Finally no significant interest rates increase for AT LEAST 20 years. You can take that one to the bank\/////////////////////////////////

Incredible as it seems, Tea Party wackos in Congress, hijackers of the Republican Party, may force a temporary and partial (and meaningless) default on US government securities.

#74 BPOE on 07.25.11 at 12:49 am

Gold just hit a fresh new record. No folks lets be clear hear. Gold will thrash around moving up a $100 and down a $100 in short order. So in a few days from now if it moves down don’t get too excited. Like Vancouver nothing moves straight up. There are dips or buying opportunities along the way. The average price of Vancouver could easily exceed 3 million with in the next decade. But it won’t be a straight line up. The world is discovering that Vancouver is perfect and they want in on the action. Regardless if the US defaults or if it doesn’t (flip a coin) both gold and Vancouver are the ultimate safe havens. Buffet got it wrong folks. Nobody is perfect

#75 VICTORIA TEA PARTY on 07.25.11 at 12:51 am

THEY KNOW NOT WHAT THEY DO…

In my last post I predicted the markets would determine whether or not the US has defaulted.

And sure ’nuff, it has.

Whatever the pols do to patch something together in the way of debt default prevention won’t be worth the powder to blow it to Hell.

The markets have spoken, and they’ll be chattering for the next period of time, no doubt.

The US Empire is in serious do-do.

Look at gold, silver and the Dow futures.

But other commodities are down, even though the USD also is, because investors are worried that demand will slacken because of an even possibly weaker world economy to come, thanks to what’s going on in DC.

These best laid Republican Party plans are aimed at making Mr. Obama a one-term president by trotting out debt default as his big failure during the 2012 election season.

But what started out as setting fire to the couch on the old front porch is turning into a financial conflagration. They’re burning down the house!

The stock markets, driven by private and institutional investors over the next period of time, will be driving the American financial agenda.

In other words the US, whose debt is already unrepayable, will lose control over its monetary and fiscal future.

This is something brand new in our experience.

Brace for something really big and bad. What a sh*t show!

#76 Hoof-Hearted on 07.25.11 at 12:54 am

A little review

……was the Glass Stegall Act was repealed under Clinton administration…was it not…pre Bush.

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

Oct.-Nov. 1999

Congress passes Financial Services Modernization Act

After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.

On Oct. 21, with the House-Senate conference committee deadlocked after marathon negotiations, the main sticking point is partisan bickering over the bill’s effect on the Community Reinvestment Act, which sets rules for lending to poor communities. Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.

On Oct. 22, Weill and John Reed issue a statement congratulating Congress and President Clinton, including 19 administration officials and lawmakers by name. The House and Senate approve a final version of the bill on Nov. 4, and Clinton signs it into law later that month.

Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill’s chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, “You’re buying the government?”

#77 Corban on 07.25.11 at 12:55 am

Yay, you updated your footer!

#78 Gord In Vancouver on 07.25.11 at 12:55 am

Those who continue to goad folks into catching a falling knife will have to live with the consequences.
_________________________________________

Global BC/Vancouver better have a backup plan.

#79 Hoof-Hearted on 07.25.11 at 1:02 am

Also…..the US political system is bought and sold.

It simply whose turn is it to give the Voters the delusion of democracy…do you want “vanilla and strawberry”…or “strawberry and vanilla”

Any 3rd choice is often set up to split the vote.

Remember Ross Perot ?

Tea Party? ….tools to split the vote so Obama can complete his mission….The last one term President was George H Bush….almost 20 years ago ..remember ?

#80 JohnnyBravo on 07.25.11 at 1:04 am

As fun as they can be, I try not to get caught up in unsubstantiated conspiracy theories, or other terrific historical theories, except for their entertainment value. (Did Annunaki from Nibiru seed planet Earth with alien-human hybrids? Sure, why not? But show me the evidence.)

However, one does not always require forensic evidence to put forth a logical, plausible case. Lawyers will tell you that most criminal trials are decided on circumstantial evidence. In other words, common sense has a place in the law. Common sense has a place our understanding or our political and economic systems as well.

We all know that “money is potential power.” We see the “truth” of this in our lives everyday, in relationships at all levels: familial, social, communal, business, political, etc. In politics, in particular, we see how dependent most politicians are on campaign contributions. I think most people will accept the notion that most contributors do not pay up simply to support the democratic process, but in fact, most expect something in return for their largesse. My cousin is a city counsellor; I’ve heard the myriad tales of corruption, back-room favours, and political intrigues–and that’s at the local level.

It would seem to make common sense that those who possess and/or control the most money in our society should, logically, wield the most power, particularly within their respective realms of influence.

(One can get a pretty good idea of this by listening to Arron Russo’s exposé of his relationship with Nick Rockefeller. Take if for what it’s worth: http://www.youtube.com/watch?v=YGAaPjqdbgQ&feature=related

For an absolutely fantastic, and surprisingly relevant speech on the power of money today, see Ned Beatty’s high water mark “sales pitch” to Peter Finch in Network. http://www.youtube.com/watch?v=zI5hrcwU7Dk&feature=related Better yet, just watch the whole, wonderful film.)

So, if money makes the world go round, and there are those who have and/or control vast sums, does it not make common sense that the power of the president of the United States is largely titular? Would those who wield real power through money really allow a temporary figurehead to act against their vested interests–the interests they paid good money to protect? Finally, watch this clip from Capitalsim: A Love Story http://www.youtube.com/watch?v=QTcL6Xc_eMM&feature=related

#81 Nostradamus Le Mad Vlad on 07.25.11 at 1:05 am


Run when others walk, sell when they buy (at the top) and vice versa (excellent stock buying time). Good advice from W. Buffett.

“Ignorance, if not stupidity, surrounds us.” — As ignorance of the law is no excuse, so ignorance of basic finances is also not an option. You teach us children well, Garth but how many are there who still have blinkers on?

“Ha. And I a stud?” — The hypotheopathetical possibility does exist, but demons go where angels fear to tread, so I exercise my right to plead the fifth!
*
The Pentagram is complete. Amy Winehouse, Janis Joplin, Kurt Cobain, Jimi Hendrix and Jim Morrison all died at 27. Strange but true.
*
Further to what Garth says, there will be no US default, which makes one wonder: What the hell is all the fuss about anyway? 4:53 clip Aug. 2 is not the end of the world, but there is suffering, so identify the root cause (cancer – banxters), then destroy it; Closer to the truth than most realize; 2:23 clip California — Squatter City.

Pensions? Fuggedaboud id! US Economy Destroyed, but by whom? New lingo for bubbles; Chinese Banks May have seen better days; Eurogeddon Wot about Arseholegeddon?

2:28 clip ;Quakeocano time — SoCal; Fukushima and FOX News “The Fukushima nuclear plants, with their incredible resilience, almost certainly saved many, many lives.” From what? Death? Gonna happen anyway; Libya One of three reasons for NATO’s illegal invasion, the other two being oil and gold. Who wants the water? Y’all know.

Just as Goliath fell (metaphor), so the west must follow; Chile White earthquake? Six feet of snow in one fall is somewhat unusual;
*
Chaos — CME’s and other events beyond our capacity to cope with. PS — Cherries, nectarines and apricots at full steam now, plus The Borg are back!

#82 Hoof-Hearted on 07.25.11 at 1:11 am

#52 Helicopter Ben

The US will go down as one of the biggest disasters in history.

IMHO…the gutless Gov’t should have taken steps as discussed earlier…..and let the banks collapse, or take them over…..what’s the difference..except benefit the citizens.

Now….they have no plan, because the citizens are waking up to the betrayal.

Don’t think the US hasn’t done this before?……only elsewhere.

Deanna Spingola – Dwight D. Eisenhower’s death camps in Germany – excerpt

http://www.youtube.com/watch?v=dW6_WifFPug&feature=related

#83 AB Bust on 07.25.11 at 1:16 am

I’m guessing Gold will have a high of $1650 (Monday) due to a couple of school girls who can’t get along in Washington….any other guesses?

#84 Onemorething on 07.25.11 at 1:22 am

GOLD HA…you better have that gold in concrete surrounded by coffee grounds and ready to sit on it for 20 years.

Confiscation kids…Confiscation!

#85 TJ on 07.25.11 at 1:39 am

I wouldn’t get my hopes up about rates spiking over a default. Stocks will get pummeled, possibly flash crashed, which will give treasuries a safe haven bid in the short run. In the long run, a transitory default likely means the U.S. will get it’s act together and get their spending down to something remotely sustainable which is also bullish for treasuries for two reasons 1) the inevitable austerity can lead to another recession 2) If they sort out their deficit problems their debt rating outlook improves. So as you see, yields may very well go down.

Furthermore, those who do sell U.S. treasuries will be moving their money into gov’t bonds of countries like Canada, so more downward pressure on rates for us.

#86 Coho on 07.25.11 at 1:43 am

If the USA continues to let the war drum beating cheerleaders inflate her ego and push her into wars by being the” global cop” which is playing a big role in bankrupting her.

Add to that career politicians putting politics and feathering their own nest before people and country.

Add to that continued outsourcing of decent jobs to the emerging middle class in China to the point where almost half of Americans don’t pay tax anymore because they don’t make enough to pay taxes.

Add to that the constant attack against the peoples’ Bill of Rights.

Add to that 350 billion paid each year to the shareholders of the “Federal Reserve”, which isn’t federal, nor a reserve. Funny how CNN’s John (I’ve got a nice mouth) King, in reference to the debt ceiling debate, listed financial obligations of the US gov on a big board. Guess what held the top spot? You’re right….interest on the debt was the first thing he wrote down. He proceeded to put together 2 or 3 different combinations of what gets paid, ie medicare, pensions, education, etc and who gets left out because of the monthly intake to expenditure shortfall. Of course the current 29 billion per month interest payment on the debt was always in the mix. There’s a chosen few (nobody knows who they really are) who are getting richer by the second…BIG TIME…and we complain about so-called excessive entitlements to teachers and other dwindling middle class groups.
I heard that Dubya Bush had borrowed more than all presidents before him and Obama has borrowed more than all the presidents before him, including George Dubya Bush. Looks like we’re on a bullet train first to insanity and then mercifully into a granite wall.

The USA, not so long ago, a seemingly invincible nation has been brought to its knees. Just goes to show how effectively the power behind world affairs can build countries up and crush them whenever they want.

#87 Aussie Roy on 07.25.11 at 1:51 am

Aussie Update

Speculators ‘locking up’ empty dwellings that could be homes.

PROPERTY speculators have locked up 46,220 empty homes in metropolitan Melbourne, the housing campaign group Earthsharing Australia says.

In a documentary soon to be released, Real Estate 4 Ransom, the group says that 4.95 per cent of the city’s potential housing stock is unoccupied, double the rental vacancy rate of 2.4 per cent published last week by the Real Estate Institute of Victoria.

http://theage.domain.com.au/real-estate-news/speculators-locking-up-empty-dwellings-that-could-be-homes-20110724-1hvf0.html

Agents plot to seize control of home sales data.

A POWERFUL consortium of real estate agents backed by the Real Estate Institute of Victoria is planning to seize control of all private sale and auction results

http://www.theage.com.au/victoria/agents-plot-to-seize-control-of-home-sales-data-20110723-1hub9.html#ixzz1T5pmaHyP

More retail woes, Premier Retail shuts 50 fashion shops

Premier Retail, the owner of major fashion brands Just Jeans, Jay Jays, Peter Alexander, Portmans and others, will close 50 loss-making stores and shed staff in a response to “challenging” retail conditions.

http://www.theage.com.au/business/more-retail-woes-premier-shuts-50-fashion-shops-20110725-1hw37.html#ixzz1T5q9Vi5a

Rate cuts won’t happen anytime soon, says Access

http://www.theage.com.au/business/rate-cuts-wont-happen-anytime-soon-says-access-20110724-1hvhj.html#ixzz1T5qZKQoz

Don’t wish a fall in interest rates on us

http://www.theage.com.au/business/dont-wish-a-fall-in-interest-rates-on-us-20110724-1hvat.html#ixzz1T5qhQ6lT

#88 happy renting on 07.25.11 at 1:55 am

We sold our duplex in Vancouver for $1.44 M three years ago. Now it is back to the market for $2.2M!

And I have a question: the listing is using our then home pictures (very nice furnishing). The current house has different furnishing. I think it is misrepresentation. Is it legal?

#89 Jimmers on 07.25.11 at 3:00 am

All GT’s political hackery aside, he right about one thing, thats the goal of all this, the destruction of the middle-class.

#90 SafetyBear on 07.25.11 at 3:18 am

Ah, why not let the US default. It’s going to happen sooner or later and I want to hear their creditors howl.

#91 Cookie Monster on 07.25.11 at 3:58 am

And a permanent depression. RP is a whackjob. — Garth

The economic consequences of a Tea Party-dominated Congress will be ones you do not want to live through. Theirs is the most simplistic, sophomoric, destructive approach imaginable to a complex global challenge. If the GOP wins in 2012 I might change my mind about investing in guns, gold and coonhounds. — Garth

———–

Wow, two of your worst responses ever. Very revealing.

Yes, crime is a complex and wicked web that can not be repaired easily if at all, the truth is honest economics is actually simple, it’s only complicated when governments try to have your cake and eat it too.

Like Ben Bernanke, some dudes have no clue about economics, real money or the meaning of freedom and liberty.

To state that Ron Paul is a whack job just goes to show who the whack job is. Ron Paul stands for a constitutional republic, the greatest experiment in human history for the freedom of man. To oppose man’s freedom is to support tyranny. To be against Ron Paul is to be against the United States Constitution, THE SUPREME LAW OF THE UNITED STATES.

I think you need to rethink your position regarding Ron Paul, and maybe you should take a break from writing so much and try reading a bit more, you definitely have a lot to learn and a lot of misconceptions to purge.

Stop humming ‘Battle Hymn of the Republic.’ Constitutional purists are almost as dangerous as those who take the Bible literally. God and gold won’t solve this one. — Garth

#92 Cookie Monster on 07.25.11 at 4:32 am

Reading suggestions:

First read Peter Schiff’s “How an Economy Grows and Why it Crashes”. Written in a childs picture book fashion and targeted towards politicians and government types of readers.

Then read Peter Shciff’s “Crash proof 2.0” where he comments on his original version 1 release of the book and holds strong to his convictions firmly grounded in the truth about economics by per the Austrian school of understanding.

#93 timo on 07.25.11 at 5:19 am

you made me smile Garth!

“So run, Wendy. Fast. God’s army approaches.”

ROFLMAOF!!! :)

#94 WaterlooResident on 07.25.11 at 5:31 am

What if we are wrong, what if the US really does default?
What then?

#95 Imstupid on 07.25.11 at 6:30 am

#30 Andrew

I understand why people buy PMS my point is that their are better ways to protect your wealth from hyper inflation. If currency does so as long as you don’t hold currency you protect your wealth. Did I at any point in my posts suggest holding currency? No I said it would be better to hold shares in companies that provide goods of neccesity. Let’s assume it does happen, do I lose my wealth holding shares in pharmaceuticals and energy? No, but if it doesn’t happen I still don’t lose wealth from them. While PMS retreat. With PMS they only have one side of the equation covered. That’s hardly a wise choice.

#96 Neo on 07.25.11 at 7:18 am

Garth,

One of your main arguments with the housing bubble is that the principle people are carrying is unsustainable and will be unserviceable once interest rates start normalizing. How is that any different for a country who has the largest principle and deficit in the world? The U.S. simply cannot afford to have interest rates normalize EVER. Each 1% rise increases there interest payments by $100 billion dollars. You talk about growth pulling them out of there predicament but at the same time you talk about austerity being imminent. Austerity is a drag on growth. Deflation is a drag on growth. Excessive debt and monetary expansion and failed Keynes philosophy is only going to make the austerity measures more pronounced. The U.S. has painted themselves into a corner with no REAL catalyst to pull themselves out with any vigour. They will continue to have an anemic “recovery” for as far as the eye can see with the path they are on. There is only one thing that has crushed Gold the only other time in history it climbed in this fashion and at this pace….A massive interest rate hike. That’s it. Nothing else. Do you see that happening Garth? This isn’t 1982. The national debt doesn’t have a “principle” of $1 trillion the same way a homeowner doesn’t have a $50,000 mortgage anymore. If interest rates spike, sure Gold with plummet to $400/ounce or less but the U.S. will default. There alternative is to continue in there current liquidity trap with $1.5 trillion dollar deficits as far as the eye can see and destroy there currency and middle class. Either way, as you say, it won’t end well.

#97 pbrasseur on 07.25.11 at 7:23 am

Garth – The Tea Party don’t hold enough seats in the house to force Obama to do anything.

If the administration is unable to reach a deal that’s his responsibility.

Americans are fed up with the limitless spending of their federal governement, and rightly so.

#98 SquareNinja on 07.25.11 at 7:24 am

#35 Hoof-Hearted on 07.24.11 at 10:37 pm

Thank-you for that awesome video!

#99 Utopia on 07.25.11 at 7:35 am

#57 WaterlooResident on 07.25.11 at 5:31 am

“What if we are wrong, what if the US really does default? What then?”
—————————–

A Real default? Hmmm.

A stock market crash of major proportion, widespread layoffs at most levels of government as the money ran out, consumption crashing, private sector retrenchment, multitudes of business failures, elimination of some social programs, serious cuts to remaining entitlements like pensions, medical services, welfare and veterans allowances followed by bank failures, municipal defaults, municipal tax sales of houses endemic, rationing, panic, civil unrest, riots etc, etc.

Not a pretty picture. Yeah, it would be a bad depression.

#100 househornyhousewife on 07.25.11 at 8:09 am

Wendy,

For heaven’s sake, consider the position that the two individuals who are consulting you are in. The realtor (whether truly a friend or not) stands to make a healthy commission on the new sale and quite obviously the mortgage broker has his or her own agenda.

If you want to own a property that is closer to where you work, why not wait a year, close the lease, sell the house and put that equity into the new place ? Then at least you are not stretched even further with debt.

If you absolutely must buy a place, rather than rent one, be very careful about what you buy. I grew up when condos were becoming popular and I have to admit that I have never quite understood why condos are so attractive. Unless you plan to purchase a condo with a spectacular view and floor to ceiling windows or a box with some other “location feature” such as an affluent neighbourhood with trendy shopping closeby, I honestly don’t understand why one would buy into what is essentially a large box stacked on top of other boxes. Not only do you have to fork out the purchase price and shoulder the other burdens of ownership such as property taxes and repairs, but you also get to pay rent in the form of condo fees AND you have to put up with neighbours all around you, as if you are in a rental apartment. To me, condo living equals the worst of both worlds. But I guess you don’t have to mow the lawn or clean the gutters (heck for the price of those condo fees, you can hire ten companies to come and do the job).

In any real estate market, the key to purchasing property is to buy something that has some uniquely attractive features … in case you should ever have to sell. That’s not to say that you may not loose money if you decide to sell it down the road but at least you won’t get stuck with the property forever. Attractive features such as wonderful view, an attractive and classic architecture, a very private, green yard with mature trees within a large busy city or a sought after location are examples. Don’t be in such a rush to buy a property and try to use your head rather than your heart (although you DO also have to be in love with the place or you’ll be moving sooner rather than later).

If you absolutely have to own a place then tread carefully and know exactly what you are getting into. If you are looking at purchasing a new place for around $500,000.00, then the $220,000.00 equity on your current place should get you a healthy 30% downpayment, closing costs and a little something set aside for what I like to call … “move in surprises” .. fixes that you did not get the seller to pay for because your good for nothing inspector was too busy admiring the sellers’ decorating skills instead of doing his job.

If you don’t have to own a place, then either keep renting your house and use any profits from the rental to rent a new place closer to work .. or just close the lease when you can, sell the place and use the money to start a retirement fund for yourself … or a nice boat that you can live in .. life is all about choices after all.

Oh and if you want to test your friendship with that realtor, Wendy, ask her to forgo the commission on the sale of your place and in exchange, you will give her the purchase contract on the new place. See what she says (it would certainly be a good deal for her).

Good luck.

HHHW

#101 TurnerNation on 07.25.11 at 8:16 am

And – well of course it is, the truth will be hidden from us in the same way Columbine court records were sealed for 20 years!! Again, in that case every eye witness saw greater than 2 people involved. Two case concidences?

“Norway Shooting Suspect Breivik’s First Court Appearance Closed to Public
A Norwegian court closed the first hearing involving Anders Behring Breivik, the man detained for killing as many as 93 people in a Norwegian shooting rampage and bombing, to prevent it from hindering the investigation.”

#102 TurnerNation on 07.25.11 at 8:19 am

Waterloo housing market?

Mon Jul. 25 2011 7:37:08 AM | The Canadian Press

“WATERLOO, Ont. — Research In Motion says it will cut about 2,000 jobs from its operations this year.

The BlackBerry-maker provided the details after first revealing a plan to reduce its workforce about a month ago.

At that time, it did not say how many jobs it would eliminate”

#103 TurnerNation on 07.25.11 at 8:25 am

Orwellian double speak…Norway’s PM said MORE democracy is the answer. Hidden trials!? Turn off that tee-vee/trauma based mind “programming” device. They don’t call it “programming” for no reason.

“Norway Shooting Suspect Breivik’s First Court Appearance Closed to Public
A Norwegian court closed the first hearing involving Anders Behring Breivik, the man detained for killing as many as 93 people in a Norwegian shooting rampage and bombing, to prevent it from hindering the investigation.”

#104 Q on 07.25.11 at 8:40 am

What default? The political bottomfeeders probably cut a bad deal (for the public) weeks ago, but the default theater gives them an opportunity to convince the public (voters) that they are working hard and actually earning their paycheques. As for real estate in Ontario as an investment….get a grip! My wife and I just looked at a rural property to rent, as I am waiting for the collapse before I buy and we want to see how she will take to “life on the farm”. The owners have 5 “investment” farm properties. They would ask $1,250,000 as an option price(they paid $990,000 2 years ago), but the rent was $2,000 per month (negotiable). Rental also included free firewood and use of farm equipment. Not rocket science here. For purchase with $250,000 down, the mortgage would be about $6,000/month, taxes $500/month, maintenance $500/month, total about $7,000 give or take a few $ and not including the “free firewood” or cost to repair the mess and damage left by previous tenants (estimated at more than $5,000). They indicated that they would be content with $1,800/month in rent (2 years lease), meaning that they were prepared to subsidize me about $5,000/month to live in their property. Great investment strategy….must find out which bank holds their mortgages….so I can sell any stock I have in that bank!

#105 timo on 07.25.11 at 8:48 am

http://www.usatoday.com/money/perfi/retirement/2011-07-24-social-security-price-structure_n.htm

the butcher is near the sacred cow?!

I can just see the massive increase in spending with anyone over 40 and worried about retirement. Housing prices are going down big-time in the US and when Canada open’s its eyes it will see that all is not well. Sell that property quick because buyers are going to get nervous.

http://www.google.com/hostednews/afp/article/ALeqM5hYlg1Biy6jOw8MgehPlWDxeAoY7A?docId=CNG.aa2204e49b3820f2f1ab5a4a771183bd.971&index=0

#106 Q on 07.25.11 at 9:07 am

re: tigerbaby #1

here is a link to a simple and realistic explanation of “smoke and mirrors” banking… http://www.basicincome.com/basic_banks.htm

#107 Herb on 07.25.11 at 9:08 am

#58 Johnny Bravo,

and where were the TEA partiers while Bush was driving the economy and country into the ditch? Oh, just good Republicans quietly onboard with their President.

Nice propaganda trick making Obama the first president to start with an absolutely clean slate and bankrupt the country in a year or two. The worst part is that there are people dumb enough to believe it in numbers large enough to affect an election.

#108 timo on 07.25.11 at 9:12 am

“Underemployment is also underreported. According to the BLS, underemployment is “persons employed part time for economic reasons.” Underemployment is a job of 1-34 hours a week. As of June, 8.6 million workers were considered underemployed. When including the underemployed, the “real’ unemployment rate spikes to 16.2%.”

Pitchforks and torches if it does not improve. Get that bunker built folks because we are part of this, we just don’t know it yet.

http://www.examiner.com/unemployment-in-rochester/millions-of-long-term-unemployed-are-living-desperately-on-the-edge

#109 Q on 07.25.11 at 9:36 am

I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.
Thomas Jefferson

#110 mackie on 07.25.11 at 9:41 am

SP must have sold at the tail end of the collapse. Good move. lol. You should have been buying gold at that point rather than selling. No wonder you lost money. Investors sold gold in 2008 to cover their losses in everything else. As a result gold prices fell. If you were not forced to sell gold to cover your losses, you were a fool to sell. That’s when you buy. Whether it’s gold or silver or good solid equity stocks, only fools sell low and buy high.
Is it time to take profit in Gold and silver as Garth says? maybe. I think it might be wise to take some profit at some point this week if gold and silver climbs as a result of the debt crisis. But I’ll be buying back in after the fall because there is plenty of upside left in those markets.

You have no idea what upside there is. Gold is now a complete speculative gamble. — Garth

#111 disciple on 07.25.11 at 9:50 am

Hope everyone had a great weekend…judging from the comments on banking, it seems that disciple is very much needed today…so let’s get started:

Please distinguish between central banks and their minions, the retail banking sector. Central banks create money out of thin air because you as the government allow them to do so. The idea behind this is that the future labour and capital of the citizenry will pay this back in no time. This is conceptually correct.

BUT…the problem is this: the money is loaned out to the general economy at INTEREST. It’s this portion that is used to CONTROL. The central bank cares not so much about the principal or whether it’s ever paid back, it’s the interest that they are concerned with. The interest is paid by YOU through income taxes (completely unnecessary). IF the central banks loaned out money free of usury, there would be no incentive for them to exist, and these 300 or so families would return to Europe from whence they came, or start picking on some other poor country. Good riddance, we don’t need them. The economy will function just fine without them. Anyone care to argue with me on this point?

There would be no budgetary deficits, no recessions, no backsliding economically. It would be a one-way ticket to stupendous profits, equality and standard of living. Hierarchical command structures, stupid wars and the myth of scarcity forever abolished to the relic shelf of the museum of history, next to religion and politics.

There is nothing standing in the way of this except your greed and fear. Your vain desire to have more than your peers, to think that you are more deserving or more evolved than someone else. That is how you give the abstract concept of money its power to control you…or more exactly to control your mind.

You said: “these 300 or so families would return to Europe from whence they came.” Tell me what this references. Which families? — Garth

#112 young & foolish on 07.25.11 at 9:57 am

Te coming austerity measures are certainly going to make life a lot more difficult for the “little people”…. and yes that means you!

“The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few.”

………… Charles Moore

You can drown in illusions of luxury you can’t afford, or you can grab the coattails of the “rich” (as Garth says) and invest what little capital you have …. cause the next few years will be treading water ….

#113 Kevin on 07.25.11 at 9:58 am

@Mr. Lahey:

“So while the fractional reserve system is money out of thin air, the banks do have limits on how much money they can create.”

You use a lot of big words for someone who clearly doesn’t understand fractional reserve banking.

For one thing, Canadian banks have no reserve limit. They are legally allowed to lend out up to 100% of deposits, if they so choose. That makes the money supply theoretically limitless. But don’t let that stop you from pontificating about how the “Central Bank” (maybe you meant the Bank of Canada?) regulates the money supply.

And what does CDIC insurance have to do with fractional reserve banking?

#114 disciple on 07.25.11 at 10:04 am

Why does miketheengineer just want a good-paying job with benefits etc…? Because as a graduate of the corporate-designed public education system, he believes that he needs money. What he doesn’t realize is that HE IS MONEY.

For all of you lurkers out there, let this sink in for a few minutes, and try to understand what I’m saying. How many different ways can you envision the fact that you are the money in any economic system? I heed you to use this revelation to your advantage. In so doing, you will help us all.

Everyone should be actively seeking out to create their own job or jobs. I know this seems hard, but it will happen anyway, in one form or another, when your back is up against the wall, and you see no other easy way out. You will come face to face with your true self and realize what money actually is. It is a Darth Vader unmasking moment.

#115 JohnnyBravo on 07.25.11 at 10:11 am

#108 Herb on 07.25.11 at 9:08 am

I’ve seen Tea Partiers who were just as critical of Bush’s economic and fiscal policies as they are of Obama’s. However, I don’t follow the Tea Party closely enough to offer an informed critique on this point. But, as a movement, the Tea Partiers seems to be attempting to fill a political vacuum caused by the public’s perception that both Democrats and traditional Republicans have been bought by Wall Street, and therefore no longer serve “we the people.” There is certainly a case to be made for this.

I don’t know how you can say Obama started with a clean slate. The country was in deep trouble at the time of his election and inauguration, and everyone knew it. Obama was elected in order to save the country from the evil, corrupt, white old-boys network personified by the likes of Bush and Cheney. In his own inaugural address, Obama, much to my chagrin, proclaimed that, despite the rumours, he was not born in a manger, but rather, he came from the planet Krypton––just about the silliest words I’ve ever heard come from the mouth of a US president, save Bush.

But look at Obama’s record so far. Other than his skilled oratory, demeanour, accent, and skin colour, how different is he really from Bush? IMO, Obama is even more dangerous than Bush because with Bush, at least you knew what they were doing was evil. Cheney admitted on national TV that he didn’t care what the people thought, and would not allow public opinion to inform their policies. Obama, on the other hand, with his boyish charm and promise of change, seems to be able to screw the people in such a crafty way that they think he’s actually doing them a favour.

#116 Not 1st on 07.25.11 at 10:12 am

U.S. is done, finished, over.

http://online.wsj.com/video/jim-rogers-us-already-has-lost-aaa-rating/0C0AC21B-3518-47C6-AF55-17FF74505470.html

There may well be a rating downgrade. It does not mean the US is toast. An extreme statement. — Garth

#117 Jilli on 07.25.11 at 10:19 am

Garth – what IF interest rates stay low until 2015 or 2020? Why will real estate prices go down? Have you considered that?

We could also be in the path of an asteroid. Rates will normalize. Get used to it. And duck. — Garth

#118 Dr Doom on 07.25.11 at 10:19 am

Nice. It was serious question.

And I don’t give specific investment advice to anonymous people. Ever heard of ethics? — Garth

=================================

Fair enough. Actually, I was not expecting specific rather than perhaps sectors to be watching…

#119 Pr on 07.25.11 at 10:24 am

…The scariest thought? Middle America elected these guys…
Gold Gives A Standing Ovation for the Obama-Boehner Masterpiece of Political Theater +21.90$ (1622.20$)
With all the information you have access now and you still want to buy a house for PROFIT in the next couples of year , go a head, smart Canadian, go buy a house in this environment! People get what they deserve!

#120 Cato on 07.25.11 at 10:24 am

Calgary – 1/9 the population of Paris yet 9x the geographic area. Its a completely unsustainable, unliveable city due to is reliance on the car. Its ironic, high oil prices will likely be the downfall of cow-town.

Middle Canada now bears a striking resemblance to middle America. There is a perception of what Canada should be, and then there is reality. The reality is Canada has been transformed into US style consumerism with a greater sense of entitlement. It can’t be sustained, too many are taking from the pot and not enough are giving back.

Washington will be brought to its knees, big gov’t is about to die. This is the end result after decades of big brother deliberately dumbing down middle america. Instead of an engaged populace capable of rational dialogue we are left with the mob. Mobs are dangerous, they tend to burn establishments down and leave anarchy in its place but the alternative is would be alot worse.

This perpetual cycle of debt needs to end, and the welfare warfare state needs to die. Americans are waking up to fact that there are no messiahs, that a strong society is one with engaged citizenry. Washington wanted to kick the problem down the road, the mob is pushing back.

We’ll have one more debt orgy. Then will come an austerity forced by the bond market. Investing in this environment isn’t about yield, its about safety. What vehicle will be a store of value to preserve wealth from those hell bent to destroy it.

Fact is the US is trapped by an output gap, the good old days will not be returning. The big problem for housing is not the bubble but the loss of high paying, productive jobs. Doesn’t matter who controls political power in either Washington or Ottawa, the end point is going to be the same.

#121 Bottoms_Up on 07.25.11 at 10:25 am

#103 TurnerNation on 07.25.11 at 8:19 am
——————————————–
They’re reducing the global workforce by 2000. Not sure how many jobs will be eliminated in Waterloo, but I suspect this will have minimal impact on the Waterloo housing market.

#122 Utopia on 07.25.11 at 10:30 am

“Anecdotal is a New Age word for making-it-up.” ~~Garth
————–

That was a pretty good line. Cracked me up. So true.

Now I have not yet bothered to respond to Wendy’s situation. Mostly because it is so breathtaking in it’s stupidity considering all the evidence around us. But alas, Wendy asked for kind words of advice and I don’t have many for her. I will try though.

All I can say is that if Wendy has really been reading this site and digesting the salient bits she surely must already know how insane it is to take a half million dollar credit gamble at a time like this.

Of course, she needs to ask more serious questions. Like how she might extricate herself from all that debt as our own housing market finally begins to decline.

Dearest Wendy. Soon enough, the only damn thing that will matter is how much money you have in the bank and how liquid your assets are. Yes sweetie, we are going to have an asset deflation just like everyone else in the Western world and it is going to be very painful for most.

Demographics alone make that a certainty, interest rates also guarantee the credit party will end and home values fall and last, the agony of Americans is closer than most think as our economy slows on the tails of the evolving recession down there.

That means lost jobs, a declining standard of living and plenty of opportunity to buy good stuff cheap for those with real cash. It is going to be murder for anyone trapped in debt though.

Do you really want to join that group? What is the rush?

#123 vyw on 07.25.11 at 10:31 am

Beware of owning condos:

[Jennifer] Dom paid $73,000 for a condo in the 42-unit Roosevelt Apartments, and now she and other owners are facing a bill of $35,000 each for repairs to the “100-per-cent leaky-condo building,” Dom said.

http://www.theprovince.com/business/Real+estate+guru+Ozzie+Jurock+knew+building+problems+sold+condos+anyway/5152686/story.html

#124 Daisy Mae on 07.25.11 at 10:32 am

Devore on 07.24.11 at 9:53 pm “Wackos got elected, because that’s what happens when “none of the above” is not an option on the ballot.”

I guess the only option is to deliberately spoil the ballet to show our dissatisfaction.

Maybe, just maybe — sooner or later –someone, somewhere, will notice and care enuf to change the system? I dunno…..

#125 Kevin on 07.25.11 at 10:37 am

@Not 1st:

“Didn’t 40 year amortizations get thrown out by the feds a couple years ago?”

No. Insurance on them did. Banks can offer whatever loans they want, at whatever interest rate (up to 60%) and amortization they want. But if you have less than 20% to put down, they’re going to demand insurance, and CMHC will not insure mortgages longer than 30 years, with less than 20% down. If you have the 20% (or more), then insurance isn’t required, and you can take whatever amort the bank is willing to offer.

#126 Kevin on 07.25.11 at 10:43 am

@Robert Dudek:

“Commercial banks do create money when they make loans. These loans are credited to an account (as if by magic), then this money is used by the recipients in the real economy. Thus money is created. “

This is what I’m talking about. How can people state such nonsense as though it were authoritative fact?

Robert, how can a bank lend money it doesn’t have? You say they just magically credit the account, but when the individual goes to withdraw that money, the bank must have actual paper money to hand him. Where does that paper money come from? From an armored car, of course. But those armored cars don’t just show up and hand over canvas bags of cash. A corresponding electronic transfer must occur between the recipient bank, and the Bank of Canada. Thus, the bank must have actual deposits backing that paper.

Banks can only lend money that’s been deposited by other customers. Banks cannot just magically create money out of nothing, with a few keystrokes. That’s just not how it works. And every time one of you fiat scaremongers claims it is, it exposes your ignorance of the banking system.

#127 Utopia on 07.25.11 at 10:44 am

#115 Disciple…..

“Everyone should be actively seeking out to create their own job or jobs. I know this seems hard, but it will happen anyway, in one form or another…”
—————————————-
Actually, that is how countries usually break out of recession and economic downturns.

People tend to build new enterprises and reinvestment takes off along with new ideas. There is an explosion of ideas as people become entrepreneurial again.

But this time around, the very dearth of savings means most will be unable to explore that route. It takes cash to buy equipment, let buildings, buy stock, start advertising etcetera.

Yes money. Your own. Not bank credit.

Once our credit contraction begins it will be virtually impossible for most to borrow at any cost. Proving you have a big fat mortgage and line of credit will just prove you don’t have anything at all.

I worry that as housing prices slide too many will learn this little lesson too late. They will discover they have no resources to work with at all.

And all that equity wealth that made them so proud will eat them up in their bad dreams every single night as it evaporates day after agonizing day.

#128 Peakoilist on 07.25.11 at 10:48 am

#66 Watching on 07.25.11 at 12:15 am
Also, I pity the Americans who will have to queue in line for medical care like we do up here if ObamaCare survives.
===================================
oh, us poor Canadians, having to line up for our health care. Very nicely embellished ! but every one of us gets to receive it…
Canadians are statistically healthier, have a longer life expectancy, lower infant mortality rates and lower pregnancy rates. http://international-comparison.quarryvillage.org/intl_comp_files/sheet013.htm
I wonder why ?

#129 Peakoilist on 07.25.11 at 10:52 am

In my last post I meant to state lower teenage pregnancy rates here in Canada, compared to US of A.

http://www.nationmaster.com/graph/hea_tee_pre_percap-health-teenage-pregnancy-per-capita

Yes, another leading economic indicator. — Garth

#130 Bottoms_Up on 07.25.11 at 10:54 am

#89 happy renting on 07.25.11 at 1:55 am
——————————————-
It’s the house that is for sale, not the furnishings, so I would think that based on furnishings alone this is not an illegal practice.

However, if the house has received substantial wear-and-tear over the past couple of years, then it’s possible that using old pictures misrepresents the current state of the house. Anyone buying the place though would likely see it in person, thus negating the fact that the pictures are misrepresentative?

#131 Kevin on 07.25.11 at 10:54 am

@Q

That “smoke and mirrors” banking website is completely wrong. It’s simply provably factually wrong.

“Do you know where the bank gets the $160,000 for your mortgage? It’s very simple. Someone walks over to a computer and types 160,000 beside your name.”

That’s utter nonsense, and belies a total lack of understanding about how banking works in Canada.

Garth, the ignorance on this topic appears endemic. Any chance you could spare a day’s post to devote to educating your readers about how deposits, loans, and fractional reserve banking actually works in Canada?

What, and get the metalheads, apocalyptics and doomsters up my wazoo again? — Garth

#132 The American on 07.25.11 at 10:57 am

At #44: Name callin’ aint’ rational: You need to get your facts straight. First, Obama has not incurred more debt than all previous presidents combined. That would have been Bush. Statistics will show that Bush took a surplus, and in less than 8 years he drove up nearly 10 TRILLION in debt due to his wars and trying to finish what his daddy couldn’t. Obama has run up about $3.7 Trillion so far, most of it due to the debt service costs to cover the previous $10Trillion ran up from little Bush loser (who wasn’t elected in either election, mind you). Keep in mind that $3.7Trillion is still a large sum, but over $1 Trilion is to cover debt from little Bush. Either way, he’s spending at a rate that is SIGNIFICANTLY less that little Bush. Additionally, if you choose to become educated on the matter, you may want to consider reviewing each Presidential term. You’ll discover there is a pretty clear picture that is painted. National spending DECREASES under democrats (contrary to what Republicans want you to believe), and spending and debt levels soar under Republican administrations. Get educated and stop making false statements.

#133 bill on 07.25.11 at 10:58 am

I see Ozzie Jurock is the subject of a lengthy article in the province this morning…..
he wasnt available for comment as yet

#134 Daisy Mae on 07.25.11 at 11:01 am

#95 WaterlooResident on 07.25.11 at 5:31 am “What if we are wrong, what if the US really does default?
What then?”

It won’t happen. It’s just ‘games people play…’

#135 Bottoms_Up on 07.25.11 at 11:04 am

#81 JohnnyBravo on 07.25.11 at 1:04 am
——————————————–
Common sense tells us that that woman in Florida killed her daughter.

There was no direct evidence proving it, thus she got off.

Thus, common sense is an important attribute, but having actual evidence to support that common sense is very important.

(“common sense” use to tell us that the earth was flat, that the sun rotated around the earth, that heaven was above the clouds…how’d that all turn out once we actually got the evidence?)

#136 Devore on 07.25.11 at 11:09 am

#125 Daisy Mae

I guess the only option is to deliberately spoil the ballet to show our dissatisfaction.

No one counts spoiled ballots, and no intent is carried through.

Like many here, I think it may just be a protest vote. Widespread dissatisfaction with both mainstream parties. They won their seats fair and square, in most cases displacing Republican-run candidates, who see them enough of a threat (and a vote getter) to co-opt their agenda and step into the leadership vacuum, possibly in an effort to discredit the movement.

Shades of Green Party anyone? Yeah, whatever happened to those guys? No one cares, you’re supposed to vote Democrat now.

#137 BPOE on 07.25.11 at 11:10 am

Vancouver is designed for the brightest, the richest and the BEST. Canadians can’t stand the heat so they should get out of the way as the big boys are mopping up the bids here
/////////////////////////////////////
BPOE -Better Prepare for Overwhelming Exit on 07.24.11 at 9:37 pm
Young couple I know are thinking about leaving Van and moving to Calgary. They both have good jobs, but can’t make a go of it. Kids are out of the question; they need both incomes just to pay rent. And they aren’t alone. Several of their friends are ready to make the long trek east.

Van apparently is the Boulevard of Broken Dreams North.
.

#138 bill on 07.25.11 at 11:13 am

Good morning Garth
any chance of a ‘Best of Garths Comments on the Blog Comments’ book?
perhaps the title could be changed to a less unwieldy name …..

#139 Peakoilist on 07.25.11 at 11:15 am

I think the Tea Party is rockin’.
I think we’ll go down and check them out at the Festival of Friends in Hamilton on Saturday, Aug 6.

This Rock N Roll Picnic is happening all Civic holiday weekend.(Aug 5-7 at the Ancaster fairgrounds; this festival formally ran for years at Gage Park)

Other acts include Saga, Helix, the Nylons, The Reason, The Sheepdogs and America, to name just a few.

http://www.creativearts.on.ca/

#140 vyw on 07.25.11 at 11:20 am

btw,

Gold Is Falling Against Every Currency Except the World’s Reserve Currency:

http://dragonflycap.com/2011/07/22/gold-is-falling-against-every-currency-except-the-worlds-reserve-currency/

check out Gold in CDN prices:
http://www.kitco.com/gold_currency/charts.htm?CAD

The last peak is $1540 CDN on July 18th or last Monday.

#141 Chaos on 07.25.11 at 11:21 am

Vlad

Already had the opportunity to sample some of B.C.’s finest and I must say that this years crop is legendary.

FYI, on August the 5th, Neptune begins a long retreat back into the 11th house(politics, the future, large groups, hopes and dreams, technology, friends, rebellion, unusual situations) and so clouds or envelopes all of these areas in secrecy.

Neptune does not enter the 12th house again until late 2012, where it will stay for the next 12-14 years.

Can you imagine 12-14 years of the nuttiness that we have just endured for the last few months. Everyday waking up to “crazy” as the new normal.

Oh well maybe that’s what the Mayans mean by the end of the world. We all go crazy.

On a lighter note , the personal revolution continues unabated with Uranus still in it’s very early degrees of Aries and retrograding right now.

My guess is that’s why there are almost 7 billion souls on earth right now, everyone wants to come to the “party”.

I see that the “Irish Rovers” are making a comeback… just in time, I would say.

#142 wetcoaster on 07.25.11 at 11:21 am

Here’s the Ozzie article, love his quote from 2001 :

“In a 2001 newspaper column, Jurock addressed “scams and shams,” saying, “Someone comes along and sings a seductive song and there it is. People simply hand over their money because they believe. All the victim has to do is make the judgment that the other person knows what he’s doing and is a good person who will take care of them.”

When real-estate markets heat up, “the marketers come out of the woodworks,” Jurock wrote. “You know, you go to a seminar and are told that in this city or that city in the United States, Europe or elsewhere, there is this great deal. While some of them are legitimate, caveat emptor [‘buyer beware’] . . . on the rest.”

http://www.theprovince.com/business/Real+estate+guru+Ozzie+Jurock+knew+building+problems+sold+condos+anyway/5152686/story.html

#143 disciple on 07.25.11 at 11:22 am

#112 Garth…don’t worry, I’m not referring to any particular group, be it linguistic or religious, or creed, or race, etc…because that would be pure nonsense. LOL. I know you are thinking the exact same thing about some of the things I post, ha!

Although it is possible to speculate on the origins of the financial parasite class in the ancient sea-faring peoples of the world who originally controlled international trade,…my assertion is that at the root of all the economic problems in the world is central banking. It is a new face on an old beast, a beast born from the conception of a small handful of the human race, which I estimate to be about 300 families. These are the top of the pyramid of the not-so-secret societies.

I had an interesting conversation the other day about those payday loan stores. I ended up with this pearl:

One is to make money, not buy it. Because when you make it, it is real, when you buy it, it is most likely fake. This applies logically to my overall premise, that central banks create fake money, and only gov’t suckers buy it, because they are too lazy to figure out how to make it on their own. (Through industry). A failure of leadership.

#144 disciple on 07.25.11 at 11:31 am

Kevin, Kevin, Kevin…actual paper note legal tender and coin money only comprises 3% of the money supply. The rest is in electronic form. Will that help you to visualize the fallacy of your logic? Let me guess, you work for an investment bank?

#145 mikett on 07.25.11 at 11:33 am

#127

Kevin

Banks operate under certain governmental regulations that allow them to loan multiples more than what the money that they hold. I am not totally into the specifics today but I remember that it was called something like multiplier ratio. It is legal and is how the bank profits from their operations.
The only issue is that they ans the government are counting on the situation that all the customers want back all their deposits in a short period of time. This, I believe is called a run on a bank and the bank either calls back in their demand loans, stops lending or the government or central bank either buys their loans, thus giving them cash… to lend out again or satisfy their customer withdrawals.
Does 75 billion purchase of mortgages ring a bell?

#146 disciple on 07.25.11 at 11:36 am

#127 Kevin…
“Banks can only lend money that’s been deposited by other customers. Banks cannot just magically create money out of nothing, with a few keystrokes. That’s just not how it works. And every time one of you fiat scaremongers claims it is, it exposes your ignorance of the banking system.”
—————————————–
You must have been talking to The Investors Friend…
Nobody is scaremongering, only exposing the truth, if you are scared of that…well…okay then. There is nothing to fear. Please “cure” my ignorance of the banking system…just for laughs, Kevin.

#147 Victoria on 07.25.11 at 11:38 am

BPOE,

We are thinking of the same thing – but leaving Victoria.

#148 Kevin Barker on 07.25.11 at 11:47 am

Either the US gets its fiscal house in order by reigning in its budget or the rating agencies downgrade, either way the banks are toast, cooked books and free money from the fed who is also the biggest holder of US T’s. This blog has been recommending Bank preferred shares, wonder why the author of this blog is all in favor of the ponzi spending continuing? You think those insolvent banks might go bankrupt? Not so good for the share price I would think and please no Canadian banks are different, makes you sound like a realtor.

Canadian banks are not insolvent. Stop making stuff up. — Garth

#149 BrianT on 07.25.11 at 11:47 am

In related news, Gordon Gekko and friends have just completed their leveraged buyout of the country of ireland http://finance.yahoo.com/news/Bank-of-Ireland-to-be-apf-2862982517.html?x=0&sec=topStories&pos=3&asset=&ccode=

#150 Midas on 07.25.11 at 11:57 am

Robert Dudek writes: “If enough of the loans become non-performing, the bank will have less money to cover their liabilities, i.e. deposits (which a bank holds, but which belong to depositors, not the bank).”

A deposit is owned by the bank, until or if the bank lends it out. Your sentence gives the impression that demand accounts are bailment accounts, which is false.

#151 Kevin on 07.25.11 at 11:59 am

@mikett

You know just enough to be dangerous.

Yes, banks are allowed to loan more than they hold. That is, they can lend out pretty much all of their customers’ deposits, and only “hold” a small fraction in reserve deposits.

The problem I have is when people give the impression that banks are lending out money they don’t even have.

Before a bank can loan someone $100,000, someone else must have deposited that same $100,000.

A bank with an empty vault cannot make any loans.

“I remember that it was called something like multiplier ratio.”

It’s called the reserve ratio, actually, and Canada hasn’t had one since the early 1990’s. Banks in Canada can lend out every last penny if they want. They don’t, of course, but there’s no “reserve ratio” requirement in Canada that legally prevents them from doing so.

#152 JohnnyBravo on 07.25.11 at 12:03 pm

#1 tigerbaby on 07.24.11 at 9:30 pm

There have been many responses, some well informed, some just silly, to the question of bank insolvency.

Here’s my inflation-adjusted two cents. Sorry for the length…

First of all, the key point to understand is that, in our system, almost all money is debt. Historically, commercial banks create most of the money (today things are bit different in the US). Central banks create money as well. When commercial banks create money (via loans) they are creating private debt. When the central bank creates money (by buying government bonds or other securities), they are creating public debt.

For those who think that deposits don’t come primarily from loans, here is a quote straight from the Federal Reserve: ” In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency.” This is just one side of the coin, as it does not address the mechanism by which one person’s loan can become another’s deposit when the loan money is spent on some good or service, and subsequently deposited in the seller’s bank.

Because money is debt, money is a liability. When a bank issues a loan, that new money is spent on some real-world goods or services, which cost real money. But the borrower doesn’t have the money to pay for it, so via the loan the bank basically monetizes the borrower’s future income. The bank then has a claim on the borrower’s future income, plus interest.

That’s the dirty little secret of banking. When you take out a loan you are actually borrowing from yourself, not from the bank. The banks have the legal privilege of allowing you to monetize your own future income. And for this service you agree to pay the bank interest and fees. You may also have to pledge collateral, which the bank can claim in case you can’t pay the loan back. When private citizens lend money, they cannot create new money/debt/liability. The money must already exist.

This by the way is why credit is not money. Credit does not become money/debt until it is spent into the economy. The act of spending the credit is what actually creates the new money/debt, realized by the goods and services it was spent on.

Because a bank loan is a claim on your future income plus interest, loans represent a revenue stream, and are therefore deemed assets. But remember, even though the bank created the money out of nothing, the money was spent on a real world good or service that represents actual wealth. So a real liability is attached to the loan. If the borrower cannot pay back the loan, and there is insufficient collateral value to make up the difference, the liability then falls to the bank, or whoever actually holds the loan on their books.

While bank loans are their assets, bank deposits are their liabilities. In the strictest sense, banks are perpetually cash flow insolvent. Because deposits can be drawn at any time, but bank loans are paid back over a period of time, the bank never has enough cash on-hand to cover all deposits. But because a bank run is a very rare occurrence, this fractional reserve, or zero-reserve system is possible under normal circumstances.

Banks are required to maintain capital-to-asset ratios to hedge against the risk of loan defaults. The primary bank capital is shareholder equity, so if a large percentage of bank assets (loans) go bad, the common shareholders take the first and biggest hit as the market will adjust the value of the shares to reflect the loss. If the bank goes kaput, shareholders are wiped out. Depositors are covered by deposit insurance.

#153 Mr. Plow on 07.25.11 at 12:05 pm

#89 happy renting

Why does it bother you that they are using the old pictures?

If it really bothers you, call the realtor and ask him/her to take them down. I am no lawyer, but pretty sure as long as you didn’t copyright protect those pics as soon as you put them out into the public realm, i.e., the internet, you lost sole possession of them.

Sleazy and lazy to use them? Yes. Illegal? I doubt it.

#154 dd on 07.25.11 at 12:14 pm

buy wendy buy,

Why? Because real estate always goes up. Ha.

#155 dd on 07.25.11 at 12:18 pm

BPOE,
Leaving Victoria to get ahead is nothing new. The place has been a wasteland for young people for decades. Go, earn money and visit the velet rut on holidays.

DD

#156 JohnnyBravo on 07.25.11 at 12:26 pm

#136 Bottoms_Up on 07.25.11 at 11:04 am

OK, but come on; we all know common sense is not perfect, to say the least. Then again, neither is direct evidence usually.

BTW: who said, “There is nothing common about common sense”?

Actually, if you want to see or read a fascinating history of how our common knowledge determines our perception of the universe and reality, see or read “The Day the Universe Changed” by James Burke.

#157 LB on 07.25.11 at 12:31 pm

For all those advocating purchasing gold/precious metals as a primary “secure” investment:

How do you factor in the likely response by governments to this strategy, who historically have invoked gold confiscation legislation, as Roosevelt did in the US in the 1930’s, and as Australia did in 1959?

#158 Midas on 07.25.11 at 12:32 pm

Kevin writes: “Banks can only lend money that’s been deposited by other customers. Banks cannot just magically create money out of nothing, with a few keystrokes.”

Joe deposits a hundred dollars. The bank lends ninety to Moe. Joe thinks he owns the hundred. Moe owns the ninety (until he spends it). The bank owns the ten.

There was a hundred dollars. Now there’s $190. That’s the money ‘out of thin air’ people are referring to.

#159 Future Expatriate on 07.25.11 at 12:52 pm

I seen Obama’s new balls. I seen the right wing GOP. I seen the Tea Party. I seen the radiation levels in the rain on Vancouver Island. (but I digress).

I think the US is going to default. But then, I’ve always been a pessimist. I’ve always thought the US recovery was BS, and headed for a double dip depression.

The default only lays the blame on the right wing.

What’s not to love? It’s easier to dig out from the bottom, than from halfway. From halfway, you have just as much chance at digging further down as you do up.

And goldheads, as I used to be? One word: confiscation.

There is no answer. But there’s only one way out, and that’s UP.

#160 saanichtonian on 07.25.11 at 12:54 pm

Some of the most frank evidence on banking practices was given by Graham F. Towers, Governor of the Central Bank of Canada (from 1934 to 1955), before the
“Canadian Government’s Committee on Banking and Commerce, in 1939. Its proceedings cover 850 pages. (Standing Committee on Banking and Commerce, Minutes of Proceedings and Evidence Respecting the Bank of Canada, Ottawa, J.O. Patenaude, I.S.O., Printer to the King’s Most Excellent Majesty, 1939.) Most of the evidence quoted was the result of interrogation by Mr. “Gerry” McGeer, K.C., a former mayor of Vancouver, who clearly understood the essentials of central banking. Here are a few excerpts:

Q. But there is no question about it that banks create the medium of exchange?

Mr. Towers: That is right. That is what they are for… That is the Banking business, just in the same way that a steel plant makes steel. (p. 287)

The manufacturing process consists of making a pen-and-ink or typewriter entry on a card in a book. That is all. (pp. 76 and 238)

Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money. (pp. 113 and 238)

Broadly speaking, all new money comes out of a Bank in the form of loans.

As loans are debts, then under the present system all money is debt. (p. 459)

Q. When $1,000,000 worth of bonds is presented (by the government) to the bank, a million dollars of new money or the equivalent is created?

Mr. Towers: Yes.

Q. Is it a fact that a million dollars of new money is created?

Mr. Towers: That is right.

Q. Now, the same thing holds true when the municipality or the province goes to the bank?

Mr. Towers: Or an individual borrower.

Q. Or when a private person goes to a bank?

Mr. Towers: Yes.

Q. When I borrow $100 from the bank as a private citizen, the bank makes a bookkeeping entry, and there is a $100 increase in the deposits of that bank, in the total deposits of that bank?

Mr. Towers: Yes. (p. 238)

Q. Mr. Towers, when you allow the merchant banking system to issue bank deposits which, with the practice of using the cheques as we have it in vogue today, constitutes the medium of exchange upon which I think 95 per cent of our public and private business is transacted, you virtually allow the banks to issue an effective substitute for money, do you not?

Mr. Towers: The bank deposits are actual money in that sense, yes.

Q. In that sense they are actual money, but, as a matter of fact, they are not actual money but credit, bookkeeping accounts, which are used as a substitute for money?

Mr. Towers: Yes.

Q. Then we authorize the banks to issue a substitute for money?

Mr. Towers: Yes, I think that is a very fair statement of banking. (p. 285)

Q. 12 per cent of the money in use in Canada is issued by the Government through the Mint and the Bank of Canada, and 88 per cent is issued by the merchant banks of Canada on the reserves issued by the Bank of Canada?

Mr. Towers: Yes.

Q. But if the issue of currency and money is a high prerogative of government, then that high prerogative has been transferred to the extent of 88 per cent from the Government to the merchant banking system?

Mr. Towers: Yes. (p. 286)

Q. Will you tell me why a government with power to create money, should give that power away to a private monopoly, and then borrow that which parliament can create itself, back at interest, to the point of national bankruptcy?

Mr. Towers: If parliament wants to change the form of operating the banking system, then certainly that is within the power of parliament. (p. 394)

Q. So far as war is concerned, to defend the integrity of the nation, there will be no difficulty in raising the means of financing, whatever those requirements may be?

Mr. Towers: The limit of the possibilities depends on men and materials.

Q. And where you have an abundance of men and materials, you have no difficulty, under our present banking system, in putting forth the medium of exchange that is necessary to put the men and materials to work in defence of the realm?

Mr. Towers: That is right. (p. 649)

Q. Would you admit that anything physically possible and desirable, can be made financially possible?

Mr. Towers: Certainly. (p. 771)”

Reference:
,
Pages 169 – 195
Pages 197 – 220
Pages 221 – 245
Pages 248 – 315
Pages 317 – 460
Pages 461 – 500
Pages 621 – 701
Pages 756 – 780

As to the question of how much currency exists…

Bank notes in circulation ………………..56.022 Billion

http://www.bankofcanada.ca/wp-content/uploads/2011/06/statement_financial_position_310511.pdf
(top right)

June figures due out shortly.
http://www.bankofcanada.ca/about/corporate-governance/bank-of-canada-statement-financial-position/

Link for G. G. McGeer’s book “The Conquest of Poverty”
http://www.scribd.com/doc/47883435/Conquest-of-Poverty-1933-Gerald-Grattan-McGeer

The more things change…

#161 jen on 07.25.11 at 1:08 pm

The madness continues – An interesting link right here:

http://www.theprovince.com/business/Real+estate+guru+Ozzie+Jurock+knew+building+problems+sold+condos+anyway/5152686/story.html

#162 MondayMorningOracle on 07.25.11 at 1:18 pm

Larry Berman says gold is going higher, and higher, and higher. He’s the Monday morning oracle.

#163 Cookie Monster on 07.25.11 at 1:23 pm

#130 Peakoilist on 07.25.11 at 10:52 am

In my last post I meant to state lower teenage pregnancy rates here in Canada, compared to US of A.

http://www.nationmaster.com/graph/hea_tee_pre_percap-health-teenage-pregnancy-per-capita

Yes, another leading economic indicator. — Garth
———-
Nice statistic. Ever heard of abortion?
I think on average, a girl at age 20 has had 1.5.

Garth, the blog is wicked fast now, awesome!

#164 Cookie Monster on 07.25.11 at 1:34 pm

What, and get the metalheads, apocalyptics and doomsters up my wazoo again? — Garth
—-
Garth has done a great job at beating the drum about the real estate insanity as being the most obvious symptom of a broken monetary system and I agree it’s high time Garth widens the scope of this blog to start explaining economic realities and fallacies so that we can all work at sorting out and understanding the causes and cures to a good economy and rising standard of living. This blog could be truly heroic!

Trouble awaits us all so lets debate the problems and solutions and be informed little doggies. Ignorance will not be bliss much longer.

#165 bill on 07.25.11 at 1:42 pm

What, and get the metalheads, apocalyptics and doomsters up my wazoo again? -Garth

see ? you weren’t even trying and you came up with a great work in progress title.

#166 Veej on 07.25.11 at 1:42 pm

For any fool that thinks a debt deal will be bad for gold….

http://www.jsmineset.com/wp-content/uploads/2011/07/clip_image00214.jpg

Printing money out of thin air and increasing debt in Europe and North America has been nothing but great for precious metals since 2001 when gold was $250 an ounce. The opening of the asian metals exchange on Friday won’t hurt it too much either. The summer is typically the low point of the year for gold and silver (July 15th to be precise) and here we are at fresh records. Selling precious metals now is perhaps the worst financial advice I have ever heard. Gold, silver, HUI, GDX and GDXJ will be much higher by December 31st. Precious metals equities are an absolute steal here. See you in December.

#167 Jan Etter on 07.25.11 at 1:47 pm

#105 Q on 07.25.11 at 8:40 am
…The owners have 5 “investment” farm properties. They would ask $1,250,000 as an option price(they paid $990,000 2 years ago), but the rent was $2,000 per month (negotiable). Rental also included free firewood and use of farm equipment. Not rocket science here. …They indicated that they would be content with $1,800/month in rent (2 years lease), meaning that they were prepared to subsidize me about $5,000/month to live in their property. Great investment strategy….must find out which bank holds their mortgages….so I can sell any stock I have in that bank!”

If they are land-banking property developers, there are property tax advantages to having actively-used farmland vs. vacant land considered inventory for future development, so the math may not be as bad for them as you think.

#168 City Slicker on 07.25.11 at 1:55 pm

Garth I know a few people selling houses and they’ve been on the market for 7-8 months. Is this becoming a long time to sell a home and a good indicator things are slowing? What is the standard time to sell a home?

#169 Kevin on 07.25.11 at 1:59 pm

@Midas:

Yes, that’s absolutely correct. That’s how fractional reserve banking works.

Some here have made outrageously ridiculous comments, like that a bank can create money by simply typing some keys on a computer and magically depositing $160,000 into your account. Those are the gross misrepresentations I was trying to correct.

#170 BrianT on 07.25.11 at 2:08 pm

I am rather impressed to see that the average poster on this site (and likely the average reader) appears to be unwilling to swallow the MSM nonsense being spewed.

#171 Cookie Monster on 07.25.11 at 2:08 pm

JonnyBravo,
While bank loans are their assets, bank deposits are their liabilities. In the strictest sense, banks are perpetually cash flow insolvent. Because deposits can be drawn at any time, but bank loans are paid back over a period of time, the bank never has enough cash on-hand to cover all deposits.
—–
Close, you’re missing one aspect about deposits, there are two types of deposits, time deposits and demand deposits. Time deposits are bonds, GICs or agreements to transfer ownership of property (money) to the bank for a set period of time at an agreed rate of interest in exchange for its use. Demand deposits are a service the bank provides and can charge for, ownership is not transferred and therefore it can not be loaned out. This is what historic jurisprudence over the last millennial has firmly held. Whether it’s actually still practiced I don’t know, doubt it?

#172 Brett on 07.25.11 at 2:17 pm

Garth is a hopeless dollar bug, he sees a gold bubble, when in reality we are in a dollar bubble that is already bursting. He sees no risk of USA default, when the past shows us that the yanks have defaulted at least three times….
— In 1934, the government banned ownership of gold and eliminated the right to exchange gold certificates for gold coins. It then immediately revalued gold from $20.67 per troy ounce to $35, thus devaluing the dollar holdings of all Americans by 40 percent.

— From 1934 to 1968, the federal government continued to issue and redeem silver certificates, notes that circulated as legal tender that could be redeemed for silver coins or silver bars. In 1968, Congress unilaterally reneged on this obligation, too.

— From 1934 to 1971, foreign governments were permitted by the U.S. government to exchange their dollars for gold through the gold window. In 1971, President Richard Nixon severed this final link between the dollar and gold by closing the gold window, thus in effect defaulting once again on a debt obligation of the U.S. government.

Do you guys just cut and paste from your doomer gold web sites? Stop it. B-o-r-i-n-g. — Garth

#173 Thoughts on 07.25.11 at 2:19 pm

Am I the only one who notices that BPOE uses the word folks in ever single one of his posts? I get it, you are trying to appear folksy and appealing like the manipulative politicans you emulate, but you only come across as insincere.

#174 Peakoilist on 07.25.11 at 2:25 pm

#164 Cookie Monster on 07.25.11 at 1:23 pm & Cookie Monster on 07.25.11 at 1:34 pm
Nice statistic. Ever heard of abortion?
I think on average, a girl at age 20 has had 1.5.
=================================
where is your statistic? I think you’re way off on that one.http://www.nationmaster.com/graph/hea_abo_percap-health-abortions-per-capita . My point to the poster was that our universal system, though not perfect by any stretch, is more geared towards prevention, because of its universality…
to your second point, I totally agree. I was thinking exactly the same thing as Garth was poking fun at the “doomers”, as he always does ( although many have said that he has crackpot ideas as well. I would hope that Garth will recognize the natural evolution of this site.the sharing of ideas, no matter how crazy sounding sometimes. What is happening right now is huge and I know more people are feeling it and want to have an open minded forum to voice their opinions.

#175 Thoughts on 07.25.11 at 2:28 pm

You said: “these 300 or so families would return to Europe from whence they came.” Tell me what this references. Which families? — Garth

—————————————————–

Garth you know which families he is implying.

Give me a J, give me an E, give me an….

#176 Jody on 07.25.11 at 2:30 pm

It’s people like Wendy who are going to be crying when it all turns bad, and what will people like her expect? People like me to bail her out. No, no, no, sorry Wendy but I’ve had just about enough crap from people like you to last me a lifetime. If you go under sweety you’re living on the street, because frankly with your snot nosed attitude that you “deserve,” it, well, you “deserve,” it. You’re living beyond your means lady, take your head out of the sand and let reality slap you. People like Wendy are the reason I hate paying taxes, learn how to take care of yourselves people, educate yourselves, it’s not to hard and the subject matter isn’t fuc**** rocket science. Sell Wendy, sell, by PM’s, buy bonds, some ETF’s, guns and ammo.

#177 Bill Gable on 07.25.11 at 2:33 pm

Why is NO ONE in mainstream media talking about RADIATION from Fukushima, now here in BC, in our water, and in our food chain?

Talk about turning a Market ‘radioactive’ – but I didn’t think it would be literal.

Strange days indeed. Incredible, in fact.

#178 Jody on 07.25.11 at 2:38 pm

Oh yeah, the US is going to default, Greece is going to default, in less than three months an economic hurricane is going to nail us real good, a run on banks, gold over $2000, food shortages, etc. , that’s if WW3 hasn’t already started. I’ll buy 12 books from Garth if we’re all here in October, still commenting and business is going on as usual. Chaos by the end of October. Halloween will be a real scream this year. Honestly, I’d rather deal with a zombie apocolypse than the coming economic one.

I’m processing your book order. — Garth

#179 Brett on 07.25.11 at 2:39 pm

You have no idea what upside there is. Gold is now a complete speculative gamble. — Garth

Garth, at the very least, would you admit that cash and gov bonds are also complete speculative gambles now?

-you have no idea how close we are to the gold parabola, even as you pound the table saying, sell bullion, i wonder why you put your reputation at stake. You are on the wrong side of the trade garth, the banksters are MAKING gold go higher, they demand a revaluation so they can collect on their trillion dollar winning bets in OTC’Ds , and when gold peaks, it will not crash like in 1980, it will stay in a range for probably 30 years, all top callers will find themselves on the breadline.

#180 Nemesis on 07.25.11 at 2:46 pm

Thank you for the political insights, GT. Agreed, cynical expedience/calculation is one thing… but the politics of ‘conviction’ are more dangerous by far [orders of magnitude].

On a lighter note (well, you did mention “BattleHymn”)…

“A fella could have a pretty good weekend in Vegas with all that stuff.” – Major Kong (Slim Pickens)

http://tinyurl.com/yzna7ep

#181 JohnnyBravo on 07.25.11 at 2:59 pm

Hang on a second, Cookie Monster.

Today, demand deposit accounts also include savings and money market accounts, which definitely pay interest––crappy interest, to be sure, but interest none the less.

Deposits, in whatever form they take, are loans to the bank. They are only differentiated by the repayment terms. Demand deposits have a zero maturity. As for checking accounts, I would be shocked if banks did not put this money work too. But because checking accounts have high transactional costs, they don’t pay interest. Banks may also charge transaction fees for savings accounts (death by a thousand cuts), but that does not change what they are: perpetually revolving loans.

#182 disciple on 07.25.11 at 3:00 pm

Jack the Ripper was Winston Churchill’s father:

http://tinyurl.com/3bkv4f5

Totally unrelated and completely out of the blue…because I’m sick of bank talk…

#183 RL on 07.25.11 at 3:05 pm

Now the scary part, Johnny Homeowner (enmasse) realizes that the writing is on the wall and the home he bought 2 years ago is heading 30% south of what he paid for it and there are no bidding wars in the driveway anymore and that maybe this and other blogs were right all along and you gotta know that the numbers the Governor and the Minister are seeing are way scarier than we will ever know – you can buy a house on your Gold card now in parts of BC. I never thought I would see the day…

#184 Seeker on 07.25.11 at 3:16 pm

In Calgary, it is not what it seems. Good jobs are hard to find, as it is not what you know, it’s who you know. The cost of living is high. After two degrees and a good paying job I would still be in over my head if I bought a house here at these exhorbitant prices. Colleagues at work can’t sell their house, realtors are asking for price drops, but the seller would lose their investment. Builders are building particle board houses in the old curry barracks faster than ever, closer together to save money, and sell before anyone notices prices are dropping. It is all really smoke and mirrors. Things need to change everywhere, so people can live without all their money tied up in a house. A housing correction would benefit all.

#185 disciple on 07.25.11 at 3:38 pm

A man from Ajax is riding his bicycle to work in Mississauga on the 401, a major highway in Southern Ontario. He’s received over 75 traffic citations, but says he will not pay them. He and his wife have gone from a two-car family to a one-car family because of the cost of living. He says that the safest place on the highway is the centre lane because that is where drivers will see you. In a way, he is a courageous trail-blazer.

Reminds me of the Third World, where not only bicycles, but all kinds of vehicles share the roadways. A vision of our future country, if we let the banksters have their way with us.

http://www.cbc.ca/thisisthat/

#186 Devore on 07.25.11 at 3:51 pm

#175 Peakoilist

our universal system, though not perfect by any stretch, is more geared towards prevention, because of its universality

Well, that is one way of looking at it. Universality as prevention works only when there are sufficient resources for everyone to actually be able to obtain this preventative treatment. This is clearly not the case. Universal health care is strictly rationed. There are long waiting lists for critical and necessary procedures, never mind preventative ones.

On the other hand, you could easily argue a pay-per-use system encourages preventative measures, because of the high cost associated with treating acute and chronic conditions resulting from lack of preventative care.

#187 Ben on 07.25.11 at 3:54 pm

The 21st Century Tulip Mania

$$$$$$$$$ GOLD $$$$$$$$$$

#188 Steven Rowlandson on 07.25.11 at 4:02 pm

When the young man in the picture was giving the finger was he being rude for fun?
Or was he thinking about all the legal and financial problems and impossibilities he is going to be confronted with when he grows up?

#189 The InvestorsFriend on 07.25.11 at 4:05 pm

Yes, the banking system (TOGETHER WITH ITS CUSTOMERS) creates money.

No, that is not a bad thing.

It’s gone on for at least 800 years and the standard of living of the average human has never been higher and there are a lot more of us. Look around. Where there is more banking the standard of living is the highest.

Banking, just like everything has its bad apples and warts but overall it has a profoundly positive impact on our ability to create physical goods and needed services.

Think of your money as a claim check on real goods and services. You can exchange your money for real goods and services. Same thing for all your assets -house, stocks. Think of your liabilities and debt as deductions from your claims on real goods and services.

Your net worth is your net claim on the actual wealth of the world.

A bank making a loan increases both money and debt and that has no immediate impact on anyone’s net worth at the outset.

It’s (probbaly) not even true that these bank-created increases in the money supply are inflationary since there is no change in anyone’s net claims on the wealth of the world.

When the Federal bank prints money it buys bonds with created money, that I believe is inflationary. (The net worth of the federal bank increases with no correspoding liability)

I don’t pretend to fully understand all the mechanics of money creation. (I’m not sure anyone does.)

I do know banking as an institution is totally required and is highly beneficial. Some people gorge on food and some gorge on debt but that does not mean either food or debt are inherently bad.

Now get out to work and earn some money and you will be okay.

#190 Brad in Cowtown on 07.25.11 at 4:08 pm

“Do you guys just cut and paste from your doomer gold web sites? Stop it. B-o-r-i-n-g. — Garth ”

Garth, truthfully, I don’t even read any of those gold doomer websites. I know you like to paint all of us metalheads with the same brush. But the one thing many of us have in common (respectfully, you seem to overlook this aspect often) we’re not really gold bulls. We’re dollar bears. We can’t see any scenario where gold will materially fall, because we are so bearish on the U.S. dollar. So, by saying it’s time to sell gold, you might as well be telling people to go long on the dollar. The effect will be the same.
I agree with you that harvesting profits is a key to investing. But most people are supposed to know their exit points before they buy. It’s not greed for me to say my exit point hasn’t been reached yet. So I’ll say it again until I’m blue in the face… The fundamentals for holding gold have not changed – the very fundamentals you spoke about last September in those youtube clips.

#191 Mister Obvious on 07.25.11 at 4:10 pm

#169 City Slicker

“What is the standard time to sell a home?”

Isn’t that rather like asking how long it takes to swim across a river?

Try doing your own thought experiment.

For any given home there exists a price at which it would sell immediately and another price at which it would sit on the market forever.

The seller positions himself between these extremes and thereby determines for himself the time spent on the market.

#192 March of the Pigs on 07.25.11 at 4:15 pm

BNN story: Is The CMHC Canada’s Fannie Mae:

http://www.bnn.ca/News/2011/7/25/Is-the-CMHC-Canadas-Fannie-Mae-.aspx

#193 Timing is Everything on 07.25.11 at 4:19 pm

#158 LB

‘X’ marks the spot.

#194 Cookie Monster on 07.25.11 at 5:04 pm

#175 Peakoilist on 07.25.11 at 2:25 pm
——-
Actually, I just made 1.5 up, but anecdotally I would bet it’s near 5-10% of all girls by the age of 20 have had one. I know speaking to a young girl a couple of years ago who was saying that her generation and friends all think nothing of it, everyone does it if they need to, and she knows dozens of girls who’ve had them done, and she was only first year university, not even 20 yet. I also know a few older women who have them done, some only once, and one as many as 3 or 4.

#195 Junius on 07.25.11 at 5:14 pm

#193 March of the Pigs,

Thanks for posting this. What drivel.

Prof sets out 3 reasons CMHC is not Freddie or Fannie:

1) Our banks are more prudent than the US.

No. Our banks don’t care when the Gov’t is back stopping the loan. What planet are you from? Oh, you point out that the US bankers were “go-go” bankers in the 70s when you worked in mortgage finance. Welcome to Canadian banking post 2000.

2) Are consumers are more conservative.

Right. Read this blog everyday and you know this is pile of BS. Canadians are every bit as indebted as US consumers. Not true.

3) Regulatory Framework.

huh? He then goes on about the 0/40 and how they needed to be reigned in by David Dodge and Finance. We can put our trust in B of C and Finance he says.

What a load!

CMHC is our Fannie and Freddie. It will be different in Canada but what will be the same is that the tax payer is going to pay for the lax policies implemented by the Cons and our banks made off like bandits.

Different, yes. But similar enough to cause serious pain.

#196 Cookie Monster on 07.25.11 at 5:24 pm

JonnyBravo,
Yes, you’re probably right since there seems to be no rules to how banks operate today. They problably offer interest today because they do use it as part of their reserves, I think I heard to also include cheuqing account funds too, so a lot of bad practices that in essence amount to fraud and misallocation of funds.

What I was saying is historically correct and an important discernment though for sound banking practices. I learned about these important distinctions and the long history of jurisprudence behind them from reading “Money, Bank Credit, and Economic Cycles” by Jesus Huerta de Soto, professor of economics, University of Madrid, second edition, 2009. Available from Mises.org.
I’ve only read about 1/4 of the book so far last year, since it’s a bit dry, but the history is interesting. Talks about he bank of Amsterdam too, the longest most stable bank in world history, that operated with a policy of 100% gold reserves for near 200 years, until it was finally corrupted by government and failed in the 1800’s I believe.

#197 Imstupid on 07.25.11 at 5:45 pm

UTOPIA

I call myself stupid because I alway ask why, when someone is trying to convince me of something. If I were smart I would just say yes an be a sheep to the slaughter. You too are stupid, just like me. The new meaning of stupid is someone who formulates an opinion bases on all available facts, irregardless of what others think. As most times opinions bases on rational, logical, well informed research will have consequences of labeling the person stupid. Garth too is stupid, for his view on Canadian housing, so was the guy who predicted the sub prime market in the USA as well as the housing collapse.

I am stupid and proud. You should be too.

#198 VICTORIA TEA PARTY on 07.25.11 at 5:48 pm

MORE THAN ONE “THING” CAUSES A PLANE CRASH

That’s what the ground school instructor pounded into my mushy head while I was taking my commercial pilot’s licence course years ago (I earned it by the way!).

For example, the pilot checks out an engine gauge that looks wonky, then corrects his flight path to compensate for his lack of attention, then it’s something else, and so on until the plane crashes.

That’s what’s going on in Washington and downtown Europe right now. Possibly in China, too.

Only instead of a pilot who should know better, it is a bunch of our “betters” who apparently know it all!

NO THEY DON’T!!

Therefore, it ALSO takes more than one element to crash an economy. This crashing process works off two basic elements: fear that pushes markets down and greed that pushes them up.

What’s happening right now is a mix of the two and the results amongst the “pilots and co-pilots” in our economic cockpit is total panic.

Everyone from Little Timmy Geithner, Mr. Obama, Congressional leaders, and Wall Street racketeers are in there thrashing about , shouting orders, making rash decisions and throwing up their hands in despair.

GIVEN THEIR COLLECTIVE TRACK RECORD TO DATE…

They don’t have a clue and have driven this the whole kit and kabooble into the place of your choice: mountainside, ditch, brickwall, your mother-in-law’s basement suite.

The markets have partially discounted a US debt default, just as it has also partially discounted whatever passes for economic rescue efforts in Europe. But markets still closed “down” because there is still an element of fear out there. Quite a lot of fear, actually.

AN EXAMPLE OF THIS “FEAR” FROM EUROPE

Remember last week’s market happiness when the new Greek bailout was announced and the lead players all clucked that the problem was solved and everything would be alright?

Like Hell. Over this past weekend, the number crunchers checked the figures and determined that the Greek debt bailout was so flawed that today the debt was downgraded AGAIN! The second time in about a month!

WHAT YOU MUST DO IN RESULT

My only observation is for ordinary folks to take fiscal matters into their own hands. Study history and compared it to what’s shakin’ right now.

Get suitably scared witless, then take strategic action. It’s the only way you’ll survive what’s still to come: black swans, flocks of ’em.

Your strategy has to be focussed on immediate debt reduction, precious metals accumulation, food storage, networking with friends, and just other basic survivial stuff. That way “nothing bad will happen.” Right? I still don’t know how this will all shake out.

As the nice-looking Greek lady economist said on BBC-TV business news today, the financial system out there has never been more “complicated.”

She speaks with such charming understatement!

I wonder what HER conflict of interest is?

#199 Nostradamus Le Mad Vlad on 07.25.11 at 6:05 pm

#85 Onemorething — “Confiscation kids…Confiscation!”

Tungsten filled Mars Bars may be a better alternative!

#142 Chaos — “My guess is that’s why there are almost 7 billion souls on earth right now, everyone wants to come to the “party”.”

Afternoon Chaos. Well said. Yes, you are right so it’s not a guess. As this Kali Yuga, the fourth of four ages winds down (roughly 427K years left, which isn’t long as the karmic pace of time has been deliberately sped up), there is a line-up of individuals more than happy to come here for their life’s lessons.

That is what the illusion of this current US debt default is — toy with sheeple’s emotions, get them all worked up into a tizzy about things they can do nothing about, toss in politics and that’s all she wrote. As long as Obama gets himself re-elected, nothing else matters.

Because the present bunch of political and uber-rich nutbars, those controlling the planet presently, have done so much damage, it will require a few rebirths of the scientists / teachers from Atlantis, who were far ahead of where we are now to get us ship-shape again.

Only then will the cycles of human rebirth start before this age concludes. Are you coming back? I am, as it’s a lotta fun here (as long as the economy and politics are taken with a large grain of salt, and generally ignored)!

#145 disciple — “. . . actual paper note legal tender and coin money only comprises 3% of the money supply. The rest is in electronic form.”

That is what I have seen before, so it would be mildly interesting if someone inadvertently hit the delete key, re-started the system so 97% of everyone’s savings were kaput. It may level the playing field, to some extent.
*
Wot happened to your site? Did I slow down or did you spped up?

#200 thecomingdepression on 07.25.11 at 6:26 pm

Tulip bubble in GOLD..BWAAAAAA..I’m sure you meant fiat CURRENCY? There some dumb people on this blog..see what you’ve turned people into GARTH? Dumb media zombies. SELL GOLD BUY THE DOLLAR..stupid hillbillies.

#201 Mr. Plow on 07.25.11 at 6:39 pm

#198 Imstupid

I’m sorry I can’t help it.

I know the “grammar police” is someone that no one likes. But because your post was about how you are “stupid” I can’t help it.

You made up a word. My sister in law does it all the time, the word “irregardless” does not exist.

“Regardless” will work just fine.

Once again, sorry but I had no choice because of the irony.

#202 EB on 07.25.11 at 6:46 pm

#178 Bill Gable – Unless the government is actively falsifying the data, there doesn’t appear to be any ongoing contamination. We undeniably got a bit of fallout in April though.

link – http://www.hc-sc.gc.ca/hc-ps/ed-ud/respond/nuclea/data-donnees-eng.php#ddrl_july2011

There was the “hot particle” scare a few weeks ago but I’ve yet to see any credible followup on it to suggest that it’s anything real.

#203 Mr. Lahey on 07.25.11 at 7:23 pm

Kevin baby it is you that is in ignorance of how fractional reserve banking. Here is a video that will explain it to you. You might want to check out Kenneth Galbraith’s book Money for further information or Funny Money by Paul Hellyer (former minister of National Defence), someone who Captain Garth probably knows. Fractional reserve banking is the greatest financial sleight of hand trick known to man. Almost everyone thinks, erroneously, as you do, that banks only lend out money they have on deposit. Not! They create debt obligations from borrowers with nothing backing these obligations except a mere fraction of the debt obligations held as deposits by the banks. Overwhemingly, private banks create all the money in society via debt obligations. Garth doesn’t want to address this issue, even though he should, because his buddies at the banks would have his ass. Banks love it when individuals such as you believe what you do. Watch the video and learn! Hell, even Bubbles and Ricky got it after they watched the video. Randy, pour me another drink and let’s find out what Julian is up to.

http://www.youtube.com/watch?v=3HdmA3vPbSU

#204 Mr. Lahey on 07.25.11 at 7:29 pm

I will quote a line from the beginning of the video I posted in my previous comment. “The bank gets to conjure into existence the amount of the loan”. Financial sleight of hand at its best. You will note the banker in the video is dressed as a magician. Garth, as money is the central topic of this blog, why don’t you set fractional reserve banking straight once and for all so that all this confusion will end. Carney won’t send his henchmen after you, promise. Ricky, Julian, Bubbles and Cyrus have vowed to protect you from the bankster…

#205 Markey on 07.25.11 at 7:37 pm

Interesting article in MarketWatch on the debt-ceiling crisis: http://www.marketwatch.com/story/10-craziest-things-about-the-debt-ceiling-crisis-2011-07-25?link=home_carousel

#206 jess on 07.25.11 at 7:54 pm

Kevin

http://www.law.yale.edu/documents/pdf/cbl/Herring_Senate_Testimony.pdf
Lumpy Economics 101

THEY CONCLUDED :
1. this financial crisis was avoidable.
2. widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets.
3. dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.
4. a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.
5. the government was ill prepared for the crisis, and its inconsistent response added to the uncertainty and panic in the financial markets.
6. there was a systemic breakdown in accountability and ethics.
7. collapsing mortgage-lending standards and the mortgage securitization pipeline lit and spread the flame of contagion and crisis.
8. over-the-counter derivatives contributed significantly to this crisis.
9. the failures of credit rating agencies were essential cogs in the wheel of financial destruction.
=

Happy talk?

February 08, 2000
|By Merrill Goozner, Washington Bureau.
The budget President Clinton unveiled Monday would raise $95.9 billion over the next 10 years by ending what the president called abusive tax shelters and removing some corporate tax breaks.

In his 2004 speech – The Great Moderation – Bernanke claimed that:

“One of the most striking features of the economic landscape over the past twenty years or so has been a substantial decline in macroeconomic volatility”
====================
IRS has made the investigation of abusive tax schemes a national priority,” said IRS Special Agent in Charge Charles Pine. “People trust their attorneys and Certified Public Accountants to hold the highest standards when dealing in financial transactions. The arrogant behavior of anyone who thinks he is above the law will not be tolerated. No one gets a free pass to get rich on the backs of hard-working American taxpayers.”
The proposals are little changed from legislation that died in Congress a year ago with one glaring exception: a crackdown on loopholes and tax shelters would net 50 percent more revenue than last year’s proposed changes.

==========

#207 Ben on 07.25.11 at 8:08 pm

#201 thecomingdepression on 07.25.11 at 6:26 pm

Tulip bubble in GOLD..BWAAAAAA..I’m sure you meant fiat CURRENCY?

Ya, I thought I’d just head down to Walmart, I need a lawn hose.
Got my 1/8 oz of gold and jack knife, I’ll just shave a sliver and pay the cashier.

#208 Hoof - Hearted on 07.25.11 at 8:25 pm

BTW who is the guy next to Obama in photo….

=================================
JOKE

The Sierra Club and the U.S. Forest Service were presenting an alternative to the Wyoming ranchers for controlling the coyote population.

It seems that after years of the ranchers using the tried and true method of shooting or trapping the predators, the Sierra Club had a “more humane” solution to this issue.

What they were proposing was for the animals to be captured alive. The males would then be castrated and let loose.

This was ACTUALLY proposed by the Sierra Club and the U.S. Forest Service.

The ranchers thought about this amazing idea for a couple of minutes. Finally an old fellow wearing a big cowboy hat in the back of the conference room stood up, tipped his hat back and said:

“Son, I don’t think you understand our problem here. These coyotes ain’t f**kin’ our sheep … they’re eatin’ ’em!”

The meeting never really got back to order.

================

About says it re Gov’t and the disconnect with the masses…..eh….

#209 a prairie dawg on 07.25.11 at 8:31 pm

#201 thecomingdepression

Give it a rest troll. And stop spamming other unrelated sites to promote your own. That’s as lame as it gets. It doesn’t say much about you, or your site, if you have to resort to it either. Comes off as amateurish.

Maybe a whole bunch of the blog dawgs here should show up on your site and start discussing the finer points of something you don’t want discussed. Like jock itch, or yeast infections. And then we’d refuse to leave. Keep plugging up your site each day with needless bullshit. Reverse spamming. It could happen. Easily.

You getting the point yet dufus.

#210 Bottoms_Up on 07.25.11 at 8:39 pm

#178 Bill Gable on 07.25.11 at 2:33 pm
——————————————–
It’s because you get more radiation from 1 minute in the sun, or being a foot from your television, or flying in an airplane.

Yes, the Japanese radiation has made it to Canada. But, it is not potent so nothing to worry about.

#211 smartalox on 07.25.11 at 8:43 pm

A lot of talk here about how banks “create money” for nothing, but precious little about how banks and government create VALUE – which is interesting, because unless an economy actually creates something valuable (or adds value to something someone else has created) all it really does is move money from one location to another. Money, is not value, and neither is gold, nor is real estate, for that matter.

If you frame economic debates in terms of actual, increase or decrease in value, as opposed to getting all hot and bothered about the fluctuations of money (i.e., the perception of value) things get real clear, real quick:

– most houses are not worth their perceived values.
– the intrinsic value of gold is limited to its scarcity, and should be contingent on the physical properties that are unique to that metal.
– retail banks are supposed to build value by using investors’ dollars to finance projects where value is created or increased. The value created represents the return on the investment, net of costs, profits, etc.

Talking about money is a sucker’s game. Smoke and mirrors cooked up by politicians who want to keep voters from realizing how much they’ve lost, how much poor stewardship of the public trust (the economy, human resources, education, industry) has really cost them.

Start asking yourselves “where’s the value in this”, and the decision-making gets pretty easy, pretty quickly.

#212 Utopia on 07.25.11 at 8:50 pm

Really sorry to hear Jack Layton is not doing so well. With luck he will pull through it OK. Jack is truly one of Canada’s most charismatic and engaging leaders. And a hell of a interesting guy as well. He has accomplished more for his party than almost any that came before him and done a tremendous job in speaking directly to the public.

#213 TurnerNation on 07.25.11 at 8:52 pm

What’s this, new Trump Towers condo in Toronto assigned at a $1 million discount?

http://www.toronto-condos-homes.com/14a_read.php?ltl=968238

Description: Reduced to Sell ..!!
$1,000,000 under current asking price
One Million Start up tax free Equity !

Area: Financial Disrtict

Major Intersection: Bay & Adelaide

List Price: $1,399,000.00

Maintenance Fee: $1,200.00

#214 TurnerNation on 07.25.11 at 8:53 pm

p.s. time to short/sell Silver at $40 here, imo.

#215 Utopia on 07.25.11 at 8:55 pm

So why is it that people like Wendy who ask the blog dawgs for advice never respond to anything that is written. Kind of makes the whole exercise a waste of time because there is rarely ever any feedback.

In other words. Her mind was already made up anyway and she is just wasting everyone’s time.

#216 Utopia on 07.25.11 at 9:13 pm

#201 thecomingdepression on 07.25.11 at 6:26 pm

“Tulip bubble in GOLD..BWAAAAAA..I’m sure you meant fiat CURRENCY? There some dumb people on this blog..see what you’ve turned people into GARTH? Dumb media zombies. SELL GOLD BUY THE DOLLAR..stupid hillbillies”.
——————————–

Hillbillies Eh? It seems you are the damn fool. Ben Bernanke may indeed print billions upon billions of dollars but there is still one little detail you and your cadre of fools always overlook.

We are not Americans. We do not pay our bills in US dollars.

Yeah, that’s right. It is not the Canadian dollar that is being inflated away. Not yet anyway. And so the really big gains in Gold have been less stellar in our own currency than in Greenbacks.

Other posters have already pointed this out but you seem to have neglected to notice that our rising dollar partially offsets the bonus growth in Gold. That yellow metal is not gaining equally in every currency.

This is in fact just more evidence of the purely speculative nature of gold right now as it rises even against strong currencies. And by the way, you call yourself TheComingDepression…..did you mean to say “The Coming Hyperinflation” by any chance?

Why don’t you just consider for a moment that should the US dollar rise, Gold will fall. If interest rates rise, gold will fall. If an accomodation is made on the debt ceiling, Gold will fall. If the Chinese property bubble implodes or the Euro goes South on default concerns……then Gold will fall.

Bet you are not ready for any of those scenarios are you smart guy?

#217 Snowman on 07.25.11 at 9:40 pm

“However, we do know these things. Last month 581 condos sold in Calgary. That was a drop from the 738 units which changed hands two summers ago. We also know any property virgin who bought the average-priced condo in Cowtown last summer has lost money – values are down about 3%, despite $100 oil supposedly bringing all those juicy new energy jobs to town.”

LOL … Garth’s original recipe: mix sales from two years ago, prices from last year, interest rates from mid 80s and oil prices from 2011, stir it well then let it stay for one day and serve it to the dogs with fries on the side.

Sales and prices down while oil is up. Seems simple to me. Somebody in Calgary is lying. — Garth

#218 Killer Chicken or Imploding Boomer? on 07.25.11 at 9:57 pm

204 – Mr L

But I bet you take cheques……

#219 45north on 07.25.11 at 10:01 pm

Hoof-hearted: The ranchers thought about this amazing idea for a couple of minutes. Finally an old fellow wearing a big cowboy hat in the back of the conference room stood up, tipped his hat back and said:

“Son, I don’t think you understand our problem here. These coyotes ain’t f**kin’ our sheep … they’re eatin’ ‘em!”

pretty funny

#220 nemesis on 07.25.11 at 10:13 pm

For the historically inclined [& other ‘FortuneTellers’]…

http://tinyurl.com/q3jo4w

PS – sorry, GT – I just call ’em the way I see ’em.

#221 BrianT on 07.25.11 at 10:23 pm

#217Utopia-Your assumptions on the future price of gold are very weak. So far, the consistent response to every economic crisis (such as a few you predict) has been massive currency dilution. If you think the price of gold gets derailed by a sickening global economy you simply have a problem with reality perception IMO.

#222 Mr. Lahey on 07.25.11 at 10:24 pm

#219 Killer Chicken Of course I take cheques and for that matter, fractional reserve banking has served me well over the years because in the hands of prudent banksters, it works and makes them a bundle of cash. It also works for those in society that know how to use the credit that it produces, that is as investment debt and not consumer debt. Explaining how it works doesn’t mean I haven’t made money from it over the years. It would have better served Canadians and citizens of other lands if this great money generation machine was in the hands of the government and not the private banksters. Randy, rev up the car, Ricky is up to no good again.

#223 bullion.bunny on 07.25.11 at 10:40 pm

#215 TurnerNation on 07.25.11 at 8:53 pm

p.s. time to short/sell Silver at $40 here, imo.

Go for it, stand in-front of the train.

#224 appraiser on 07.25.11 at 10:42 pm

Let’s do the math here for Wendy.

The blended interst rate for the two new mortgages is 2.63% x 490,000 = $1,653 per month.

She has rented her rural property for $1,588 per month, which almost covers the entire cost of the financing.

Wendy of course, will have to cover the realty taxes now on two properties – but she was already paying those taxes on the rural property anyway.

So other than the realty taxes on the new home, she is not incurring much in the way of new monthly expenses, which will be somewhat mitigated by reduced commuter costs.

#225 Killer Chicken or Imploding Boomer? on 07.25.11 at 10:56 pm

223 Mr L – Good answer! But how do we tell if a cheque we receive has been written on either “good” or “excessive” credit? If we look at the banks financial
statements, we see increases in both debt and in
deposits. Without those increases, how would our
personal bank balances look?

We’ve also seen bloggers who describe FRB as a great “fraud” or a “sleight of hand”. But how can you
or I claim any wealth from a fraud or trickery? That
would make us willing participants in it.

#226 Aussie Roy on 07.25.11 at 11:37 pm

Aussie Update

Economist bulls and bears go head to head on whether Australian housing is a bubble.

http://www.thebull.com.au/articles/a/21122-will-the-property-bubble-burst-or-simply-deflate.html

Countries outside of Australia are showing definite signs of housing bubbles – but which will be the first to pop?

http://www.thebull.com.au/articles/a/19511-where's-the-next-housing-bubble.html

Is Australias GPT (property development company) using BPOE as it’s media advisor?. An interview last night their CEO claimed that “Australian real estate is a rolled gold safe haven like no other place in the world”. I was waiting for him to finish with “folks” but alas it must have been edited out.

Probably the fanciest example yet of the saying it’s different here. Of course he must have his eyes shut to the carnage currently being unleashed in sections of the housing market.

#227 Ronaldo on 07.25.11 at 11:46 pm

#215 Turner Nation – “time to short/sell silver at $40 here, imo”

Good luck with that. While you are selling short, those holding the massive short positions will be scrambling once again to cover their shorts and further buying pressure from abroad will cause the price to head upwards once again. Keep in mind that rising demand from China is huge and their trading in silver is not subject to Comex margin hikes which was partly responsible for the major drop back at the beginning of May. You could find yourself with your shorts down around your ankles.

#228 Utopia on 07.26.11 at 2:09 am

#222 BrianT on 07.25.11 at 10:23 pm

“#217Utopia-Your assumptions on the future price of gold are very weak.”
======================
What assumptions, pray tell, BrianT?

And how are they weak? Like most Gold-Huggers, you seem to struggle with simple ideas. You have not even managed to address the few easy, simple points I made.

You have no contrary ideas and have not articulated an opinion that tells me you have a good case to make in your own defense.

You seem to prefer the rhetoric of your trade and that of the gold-buggers ideology (oops, I meant Gold-Huggers).

Give me something I can sink my teeth into friend. Then we can talk.

In other words, you don’t know what you are talking about.

#229 Brett on 07.26.11 at 10:23 am

Do you guys just cut and paste from your doomer gold web sites? Stop it. B-o-r-i-n-g. — Garth

I pointed out 3 US defaults, thats SEXY…your response was, B-o-r-i-n-g, but of course you cannot argue my point, so I understand your avoidance.

#230 yamaha on 07.26.11 at 1:53 pm

DELETED. Over and out. This is the second time (under two names) your racist butt is being thrown off this blog. We don’t need another Anders Behring Breivik to tell us about immigrants. — Garth

Thank you Garth . There is only one race of humans on the earth ….. The human race .
===========================================================

Couldn’t have said it better myself. Glad to see I’m not the only one who’s growing tired of hatred and bigotry.

Ok… so why are we allowed to form Black, Chinese and Indian social groups but white is not ok? I’m ethnically Chinese, but I hate the label as I was born here and I am Canadian. Why the double standards for my white friends? True equality = no more affirmative action based on race or race based groups, afrocentric schools, I want to be hired based on my qualifications. The next time I see someone tell me there is no race besides the human race, ask them if they filled out a minority check box on their last job application. Who are the real racists now?