What were they thinking?

As Obama finished speaking last night gold prices were about the same. So was oil. Stock futures fell a tad. Asian markets steadied. You could almost hear the guys who run end-of-days web sites like  The Coming Depression quietly whimpering. There will be no crisis in town tonight.

The debt ceiling slugfest in Washington which has melodramatically gripped the planet (”The whole world is watching,” Obama said) is a non-event. As I said yesterday, it might actually result in a weeny little default for a few days, but so what? Even that dire result – courtesy of the Tea Party knuckle-draggers in Congress – would be ultimately inconsequential. In fact, as I also mentioned, this could be a fat buying opportunity.

Here’s why.

A temporary US default will not mean the country’s insolvent. It ain’t. Existing taxes will be used to pay existing bondholders. The Fed has almost $3 trillion in cab money in the basement (in the form of Treasury bills). There’s $400 billion in yellow rocks in Fort Knox which can be sold to the greater fools on this blog. And Washington has a giant pile of marketable mortgage bonds that can be floated at any time.

The debt ceiling thingy, therefore, is largely theatre. This is not Greece or Portugal or even horny Italy. Nobody holding US dollar-denominated debt is going to take a haircut.

Of course, that has not stopped the price of precious metals from spiking, oil from falling or equities from stuttering. And herein probably lies that chance for aggressive investors to score. As sure as Sarah Palin rises in the west, there will be a reaction when the crew in Washington reaches a compromise. Metals will fall, oil and stocks will climb, the US dollar jump and bond yields rise. Probably on Friday.

Will this stop America from having a credit downgrade? Nope, don’t think so. That one looks way more certain. And, of course, this is what matters most to us.

A move off the AAA rating will ultimately put upward pressure on rates. Obama warned last night of exactly that – “skyrocketing” interest on business loans, credit cards and mortgages. Higher rates will make federal debt harder to pay, natch, but the killer is what it all does to consumer spending. An American downgrade will mean an end to the cheapest home loans in American history, and give the housing market another shot in the chops.

So what about us?

A US downgrade will leave Canada as the only AAA-rated country in North America. This likely means a boatload of new money will move into Canadian bonds, since the world is still a scary place and billions are looking for a safe haven. As demand rises, so do bond prices – proving once again why every investors should have a balanced portfolio with a fat little fixed income component.

Rising bond prices will mean a capital gain for bond owners – people who are already getting paid a steady stream of interest just for holding the debt of the country, provinces, utilities, crown corporations or blue chippers. Also more evidence of the powerful negative correlation between stocks and bonds (when money flies screaming out of stocks it usually lands in bonds).

Okay, good for investors. At least the ones with the cajones to time the market, or the wisdom to know capital gains often flow faster out of debt than from equity.

But this is not so good for the economy. And it sucks for real estate.

A USA downgrade (odds are now about 100% that it will happen at some point) means corporate America pays more for money, hurting jobs and growth. It slows the housing recovery, which kicks consumer spending. It makes everyone cough up more in debt servicing charges, and it naturally means we get slapped around. After all, these guys remain our largest trading partner, already saddled with a painful jobless rate and swelling government spending. While the US will recover from this, the Tea Party-created circus just guaranteed a few more lousy years.

My advice remains. Residential housing’s a wealth trap. If you have to buy real estate, make sure it has cash flow. Brace for volatility with a balanced portfolio. Diversify fast. Eschew direct equity holdings. Learn about ETFs. Lock in your mortgage. Lock up the property virgins. And if you’re too busy having a life, get some help.

No apocalypse this week. No depression this lifetime. Just a rolling crisis.

Piece of cake.

168 comments ↓

#1 Mighty Moose on 07.25.11 at 10:40 pm

its gonna be choas

#2 mid-Ontario on 07.25.11 at 10:41 pm

From last night:
““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
———————————————————-
This must have been the alcohol talking last night. I am very disappointed in you. You can disagree with Ron Paul’s solutions for the USA financial problems but “whackjob”, no way. He is one of the few people who have stood up for years telling the public that they cannot put their mortgage payments on their credit card.
You of all people should respect him for that.

The logic is self-evident. The solutions are suicidal. — Garth

#3 Hoof-Hearted on 07.25.11 at 10:41 pm

Fruuurrrrrssszzzttttt!

#4 Hoof-Hearted on 07.25.11 at 10:46 pm

RIM adjusts to new reality by slashing 2,000 jobs

http://money.ca.msn.com/investing/news/breaking-news/rim-adjusts-to-new-reality-by-slashing-2000-jobs

#5 JoeTheBruce on 07.25.11 at 10:48 pm

If foreign $ flows into Canadian bonds driving bond prices up, won’t that send yields lower? And isn’t it the yield that determines fixed mortgage rates? Doesnt this mean fixed rates will stay low?
Be kind Garth………

Irrelevant. Mortgages are already at 3%. — Garth

#6 Randis on 07.25.11 at 10:50 pm

More good advice from Garth. I have had people questioned me on my view on fixed income, specifically corporate bonds, as they think I am nuts to recommend debt securities given all the debt crisis happening in the world … Anyhow, those who listened were rewarded very handsomely over the past few years, and Garth kind of reinforces it … “diversify” and “balance” are the 2 key words in investment management, not “real estate” ..

#7 NFN_NLN on 07.25.11 at 10:50 pm

I know you don’t like giving investments specifics, but a long time ago a commenter asked if he should buy XRB and you replied: “I am”. So, I bought a bunch of XRB at that time and I’m happy with their performance.

http://canadiancouchpotato.com/2010/09/08/choosing-a-canadian-bond-index-fund/

These guys are advocating XBB. I don’t get the difference between XRB and XBB. Does it make sense to double dip or are they pretty much the same thing?

#8 The InvestorsFriend (Shawn Allen) on 07.25.11 at 10:57 pm

Garth makes the great point that the U.S. of A has other options if it can’t borrow more money. Namely sell of assets. Garth suggest bonds and Gold.

How about we get a bit more creative, and really solve this problem?

Sometimes a stricken ship has to toss a few bodies over board to lighten the load.

I am positive China could use a sparesly populated state or two to send its people to. They would pay top dollar for Montana and few Americans would even miss it.

The Russians might be keen to buy Alaska back, it aint’ even attached to the continguous lower 48.

The French might want Lousiana back.

Cuba would surely snatch up Florida.

Alberta has dibs on Arizona…

Let the bidding begin…

#9 squidly77 on 07.25.11 at 11:01 pm

Doomer par excellence

#10 American Werewolf on 07.25.11 at 11:02 pm

There will be no US default. Its just a charade; a manufactured crisis to promote the alternative–namely austerity–as the rational choice. The closer they get to the Big Scary is the easier it is to manipulate the masses into accepting whatever cuts they bundle together in a “deal”.

There will be no default. There are no real negotiations (its called posturing and stagecraft). The “deal” is already finalized. All the handwaving in the meantime is about selling it and polarizing voters.

Obama’s job is making austerity look as cool and reasonable as he made the Bush Tax Cuts look necessary. He is passing with flying colors. Don’t buy the hype.

#11 Dr.NickRiviera on 07.25.11 at 11:02 pm

“There’s $400 billion in yellow rocks in Fort Knox which can be sold to the greater fools on this blog.”

*Tin Foil Hat On*

I doubt it! Hasn’t been an audit of the Fort Knox gold in years… it’s probably all been sold off over the past 30 years or so and replaced with gold plated tungsten :)

*Tin Foil Hat Off*

#12 JohnnyBravo on 07.25.11 at 11:05 pm

#197 Cookie Monster on 07.25.11 at 5:24 pm

Thanks for the book recommendation.

#13 Not 1st on 07.25.11 at 11:05 pm

I am afraid Garth might be waiting for another Reagan moment in the good old U.S.of A.

He is going to be waiting a long time cause it really is different this time.

#14 Wise Guy on 07.25.11 at 11:08 pm

Question:
My pension plan at work gives me a series of funds through Sun Life Financial which I must choose. I’m not very happy about having to solely contribute to these funds, but it is what it is.
Currently, I have a fair amount sitting in cash. Would it be prudent now to invest it into the BOND funds as most of my other portfolio is relatively balanced (at least I think it is).
I wish I could take this locked in money and have a professional diversify it for me…

A decent and caring fee-based advisor will make those selections for you and monitor the locked-in pension money, free of charge, if you are asking him or her to manage other funds for you. — Garth

#15 Dr.NickRiviera on 07.25.11 at 11:09 pm

…by the way, Ron Paul (who is most definitely NOT a “wack job” as you say, Garth) is pushing for a Fort Knox audit, just in case the so called conspiracy turns out to be true after all.

http://www.goldalert.com/2011/06/ron-paul-seeks-audit-of-fort-knox-gold/

Just like Trump and Obama’s birth certificate. WJ. — Garth

#16 Lloyd on 07.25.11 at 11:10 pm

Garth,

For once I gotta say, you seem really naive to think all that gold is still there. The corrupts have not had to prove or show anything to anyone for many years, highly unlikely all that is still there after all the criminals that have worked in all the power positions.

Just sayin….

Some days this blog makes me throw up. — Garth

#17 Basil Fawlty on 07.25.11 at 11:10 pm

Does this qualify as market manipulation? From the recent audit of the US Fed:
“As a result of this audit,we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world. This is a clear case of socialism for the rich and rugged,you’re-on-your-own individualism for everyone else.” Senator Bernie
Sanders VT
Who says money can’t buy happiness?

#18 librarykaren on 07.25.11 at 11:15 pm

I agree that the debt ceiling stuff is theatre, but surely there is a limit. Rolling crisis…reasonable label; just part of the stage we all live upon?

#19 Abitibi Doug on 07.25.11 at 11:17 pm

Garth said: There’s $400 billion in yellow rocks in Fort Knox which can be sold to the greater fools on this blog.

Got a good laugh from that comment!

@The Investor’s friend, #8: Cuba will want Florida, but why not sell part of it to Canada, seeing as many Canadians have homes there they spend half the year in anyways? Part of Louisiana could also go to Canada, after all those Cajuns there originally came from New Brunswick and Nova Scotia.

#20 American Werewolf on 07.25.11 at 11:18 pm

@The InvestorsFriend (Shawn Allen)
Garth makes the great point that the U.S. of A has other options if it can’t borrow more money. Namely sell of assets.

Im not sure why people can’t connect the dots….its not about raising funds. Think about it.

Lawmakers are unwilling to raise revenues, they are unwilling to rollback the worthless Bush Tax Cuts, they are unwilling to wind down the Department of Defense, they refuse to consider tariffs on foreign goods to raise funds, they wont touch farm subsidies that go to undeserving corporate interests, etc….In other words: they are not serious about solving the new “debt crisis”.

So what is on the table? A social insurance program with a 2+ trillion dollar surplus that the government has been borrowing from to pay for their excessive corporatist policies. A program forbidden by law to contribute to the US debt, and one that is already being pilfered.

The “debt crisis” is just a bullshit excuse to pursue austerity. Its an excuse to make the poorest suffer to cover the losses of the richest after their bubbles have all popped and their trade policies have gone awry. Shame on the president for validating and promoting the lies. If he thinks austerity is the answer of the day, approach the subject with an honest debate instead of letting the crooks metaphorically negotiate with a gun to the head of the American people. Its sickening that its been allowed to go this far.

#21 mid-Ontario on 07.25.11 at 11:20 pm

Regarding Ron Paul

The logic is self-evident. The solutions are suicidal.” — Garth

I wish both statements were true. No-one in the US is following the self evident logic. Spend money like water on unwinable wars against made up enemies. Accept lobby money (40% from banksters) to arrange to have the taxpayers pay all bankster debts…QE1+2

I could go on. I just wish that there were many Ron Pauls with the logic to do something about the wasteful spending.

As for his solutions, well that’s where I am not as comfortable.
————————————————
No default August 2nd. Obama will defer until Fall.
————————————————–
Many, many RE signs growing around me up here. The slowdown has begun.

#22 vyw on 07.25.11 at 11:23 pm

Another great post Garth. A couple of points:
1. Gold prices are falling in other currencies since last week. Did people buy last week in CDN$?
2. US bonds may not suffer a downgrade; not when the US economy at $15T is almost 25% of world GDP, and the USD is the reserve currency.
3. The debt limit has already been raised de facto when the Govt approved its budget earlier this year. Nothing to see here. OK, failing that, the US Mint could just sell a set of coins with face value $1 Trillion to the Fed and pass the proceeds (new money) back to the Govt. Obama could just issue an executive order. What’s all the drama about?

I agree with you on the buying opportunity but perhaps people should use the upswing to get into cash for better buying opportunities in the fall. The Govt may let stock prices correct first before announcing QE3. Someone yesterday remarked about “digging out from the bottom”??

Finally, re banking….yes loans are created electronically, but banks must balance loans against deposits at the end of the day, subject to reserves, and may seek loans from each other if they are short. One has to consider that banking is only one part of the economy. There’s production of goods and services, there’s payment for labour, energy and inputs. There’s repayment and destruction of debt. There’s also a sum of money that isn’t deposited and parts of the economy that use barter and another medium of exchange. Also one needs to also consider the velocity of the money supply when assessing inflation – it’s not just the money supply. The key is the interest rate – and we see the impact of 1% bank rate on real estate values here in Canada.

#23 bullion.bunny on 07.25.11 at 11:24 pm

The logic is self-evident. The solutions are suicidal. — Garth

So let’s spend our way into oblivion, let’s kick the can down the road, let’s in-debt our children, grandchildren and all future generations! Better yet, let’s create more entitlements funded by borrowing and overspending knowing full well they cannot continue. Let’s be even more irresponsible by borrowing more from foreign governments and spend it on silly stimulus projects that are nothing more than pork. YES, IT MAY BE SUICIDAL NOW, BUT LEFT UNCHECKED IT WILL BE CATASTROPHIC DOWN THE ROAD (I.E. MAD MAX)

What you suggest is nothing short of complete madness! Debt that cannot be serviced, will not be repaid.

P.S. The U.S. does not have any Gold, the last audit was in the 1950’s. Many have requested a full Fort Knox audit for sixty years, all have been flatly refused.

#2 mid-Ontario on 07.25.11 at 10:41 pm

Thanks for your support!

#24 tigerbaby on 07.25.11 at 11:27 pm

Would someone please explain to me why bank suffer losses from non performing loans if the loan was made from thin air?

Also I read here that bank loans mostly get deposited back into banks (as part of the “money from thin air” mechanism) so how does reserve ratio come into play?

#25 Nostradamus Le Mad Vlad on 07.25.11 at 11:34 pm


“That one [a credit downgrade] looks way more certain. . . hurting jobs and growth.

“As sure as Sarah Palin rises in the west, Michelle Bachmann in the east with Ann Coulter, Hillary Clinton and Nancy Pelosi having a catfight over Santa . . .” — Slugfest Of The Sentury!

“And if you’re too busy having a life, get some help.” — Your bunker or mine, and is the doctor in?
*
#10 American Werewolf — Good post. This whole can of worms has been designed to get sheeple’s emotions running high, so they will be completely bamboozled into living with ‘austerity measures’ such as Europeans.
*
2:46 clip This is how the US keeps wars going on indefinitely — funding the enemy! 4closure Fraud Something smells rotten in the US; Pensions Money junkies are so addicted, this has become similar to the last days of Rome; 5:44 clip Germany seems to be the catalyst in the Euro; IMF First para. is interesting — whole story is a short read, and it sorta goes with this 5:23 clip — US Fed transfer of wealth; SS, CPP, OAS and GIS — are not entitlements.

Turkey Cancels US$ buying plus other stuff; US$175 burgers no more Sign of the times? Rothschilds and GS What comes around goes around . . .; Company Profits but no job additions, and GE — Exporting more jobs to China like a good corporate citizen.

11 min. clip “Guantanamo Bay continues to wreck lives, despite President Obama’s pledge to shut the notorious prison.” Another fine Obama pledge (lie); 6:48 clip About the only thing the ‘moral west’ does regularly now is blatantly lie; Go Norway! Hence the attacks. “Have you noticed that when the media thought it was a Muslim, he was described as a terrorist, and as soon as it became known he was a Christian-Zionist, he is described as a “Madman” or “Lunatic?” wrh.com. Change a person’s color, change their title to suit the flavor of the day.

Pakistan “This is how America treats their friends. Maybe it is time for the ISI to start leaking more tidbits about who really did 9-11.” wrh.com; 1:04 clip Horn of Africa — Imperialism at its’ worst; Monsanto Hungary takes a stand, plus Using food as a weapon.

#26 The InvestorsFriend (Shawn Allen) on 07.25.11 at 11:45 pm

S&P should definitely down grade the U.S. of A and right now.

And hang the consequences. S&P’s job is to set the ratings, not to worry about the consequences of a down grade.

How can a country that is openly talking about default have a AAA rating?

You can bet the folks at S&P and Moody’s are thinking about this right now and thinking. Enough of this bullsh*t, you are down graded right now due to your own actions. Call us when you grow up.

I am seriously thinking of cutting my equity exposure way back tomorrow. I see not a lot of downside to getting into cash and a lot of possible downside if I stay too heavily invested. If the sh*t really hits the fan I want to have lots of cash on hand to buy at distressed prices. Sanity will ultimately prevail. But meantime it could possibly get ugly.

#27 Dr.NickRiviera on 07.25.11 at 11:47 pm

#22 bullion.bunny – Totally agree!

Garth has told us a number of times over the past week what a terrible thing the Tea Party Freak Show is doing as they attempt to prevent a US debt ceiling increase. We’re told what they are preaching will lead to financial suicide if actually implemented.

So what happens one, five… or twenty years from now when the US government has kicked this can down the road so many times there is nothing left of the can except a debt bomb of financial mass destruction? Why not bite the bullet and take care of business now?

I understand that it has to be done carefully and you can’t just cut all spending at once, but the situation is not getting any better the way it has been dealt with since this crisis began.

Garth, do you thing it makes sense for the US to keep increasing their debt ceiling over and over again with round after round of quantitative easing? Where will this road take them, and the rest of the world? If you were in Bernanke’s shoes, what would you do?

#28 Joe on 07.25.11 at 11:48 pm

#25 Tigerbaby,

Only the central bank makes money out of thin air.

The commercial banks loan out money they already have. There is no “money out of thin air” with fractional reserve banking.

#29 Led on 07.25.11 at 11:48 pm

Garth – why doesn’t the government just print whatever money it needs? why is the FED even involved? why does the USA have to “borrow” money it creates?
I have asked this question before and the answer is always because it would create inflation or would decrease the value of the dollar…would that be so bad?
maybe then the USA could compete with the Chinese currency. Maybe people would be able to pay off these mortgages.

seems we would rather owe trillions. even Zimbabwe doesn’t have an inflation problem anymore (for the inflationists out there). And Iceland is doing fine now.

During the fascist years of Spain, they had no taxes yet still had money for low income housing and free health care. what gives? with the euro, now they are finished.

I am no economist, but there has to be a better way.

#30 CrowdedElevatorfartz on 07.25.11 at 11:51 pm

Well………..good to know the Ft Knox conspiracy theorists have been given an electronic ‘soap box”.
…has anyone seen BPOE lately?

I’m lonely and my fartz are wasted without his flaring nostrils to abuse.

#31 Utopia on 07.25.11 at 11:54 pm

#3 Hoof-Hearted on 07.25.11 at 10:41 pm

“Fruuurrrrrssszzzttttt!”
———————————-
Oh, shut the hell up. You firster’s are bloody idiots and a total waste of daily blog space. I am honestly surprised that a Fifty-plus year old man like yourself would act like a child almost every single day on this storied site.

And then feel proud of it too. You are just an imbecile in my opinion.

#32 Dr.NickRiviera on 07.25.11 at 11:55 pm

PS. Forgot to mention… we just sold our house here in Edmonton and are moving into a rental condo in Spruce Grove in a few weeks and will be investing our equity for a while.

Thanks for the great advice, Garth – I completely agree with you on everything real estate (and most things otherwise).

#33 Mr. Reality on 07.25.11 at 11:57 pm

Garth. Good one tonight, me likes.

I for one think your buying opportunity, though feasible, will get squashed by Chinese contraction. There is nothing on this planet capable of stopping contraction in China. All their “consumers” are broke – Europe and the USA. Mix in a little bad debt, a massive property bubble and little success curbing inflation and you have a big problem. One that will bring down everyone.

How often does shoddy accounting by countries end up historically?

I totally agree what you said about what kind of blow Canada will be dealt.

After all this is done we will have the buying opportunity of a lifetime.

Put some shorts in your portfolio people. Short the TSX.

Mr. R.

#34 Utopia on 07.25.11 at 11:58 pm

Did I mention yet that I thought you are an imbecile Who-Farted? Yeah, that’s exactly how I feel. You are obviously an idiot and so are the others who keep saying “first” every freaking day and wasting everyones time.

I am starting to hate reading this site lately.

#35 Dr Doom on 07.26.11 at 12:01 am

I know you don’t like giving investments specifics, but a long time ago a commenter asked if he should buy XRB and you replied: “I am”. So, I bought a bunch of XRB at that time and I’m happy with their performance.

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

XRB is returning 2%, when Garth suggested bonds almost a year ago I bought into this:

CIBC CDN Bond Fund Premium Class

Fund Price: $10.95 (as at July 25, 2011)
Returns as at June 30, 2011
Fund Group Avg Index*
1 Month -0.12% -0.13% -0.13%
3 Months 2.41% 1.91% 1.91%
6 Months 2.51% 1.61% 1.59%
1 Year 5.30% 3.34% 3.46%

Ya, I am happy with that return……..

I guess what I am saying Garth, the blog has people that want to read and glean advice. After the Madoff scandal, I dropped my advisor and have self directed since.

So keep the advice coming, more specific would be wonderful, but keep it coming…..

#36 bullion.bunny on 07.26.11 at 12:02 am

#25 tigerbaby on 07.25.11 at 11:27 pm

http://video.google.com/videoplay?docid=-2550156453790090544

http://en.wikisource.org/wiki/Modern_Money_Mechanics

http://www.4shared.com/document/mtT8QIWP/Modern_money_mechanics_-_Feder.html

Watch and read the above, this will explain all.

#37 Gerge on 07.26.11 at 12:10 am

Garth has been calling for a housing correction for three years and it hasn’t happend on any significant level. He’s also been calling for the rates to rise for about three years and they have yet to rise significantly. One of the Banks just wrote a report the other day predicting that interest rates wouldn’t rise even to their average levels until at least 2013, so Garth will probably delete this post, as he doesn’t like it when people call him on his predictions that fail to materialize

Housing has corrected in numerous markets and rates rose three times last year. Don’t be as impatient as you are ill informed. — Garth

#38 waterloo Resident on 07.26.11 at 12:10 am

You know, it takes a little bit of time for them to actually pass legislation, approximately 48 hours from the time the agree on what should be passed to actually passing it ( 2 days ). So this means that they have until Saturday evening to iron out a plan. Its only Monday night now, so they’ve got 5 more days to get some type of plan together. I think they will. I hope they will.

#39 Calgary Illusion on 07.26.11 at 12:17 am

If there was 400 billion in gold in Fort Knox – there would not be any hesitation to audit it. Bet your bottom dollar that it has been all leased out….

#40 JohnnyBravo on 07.26.11 at 12:17 am

DebtCon 2: Obama Near Panic.

“My fellow Americans, this is all Bush’s fault. He got us into multiple wars (which I am expanding). He lowered taxes on the rich (which I am keeping in place). He borrowed too much money (and I borrowed even more). He gave billions to the banks (and I gave trillions more). Now we are in deep $h!†. But we need to go into even deeper $h!†. So please call your congressman right now and threaten their lives if necessary in order to convince them to not just raise the debt ceiling, but eliminate it once and for all, or the economy will collapse, and you will not only lose your job tomorrow, but your workplace will actually evaporate instantly, and perhaps your home will too, and you will be forced to eat cat food and tree bark, if you even survive. Oh, and America will be destroyed. But most importantly, it may make me look bad before the next election. I––I mean we––don’t want that. So call your congressman and tell him or her to forget about fiscal responsibility. Tell them you want more debt, not less. Tell them if they don’t eliminate the debt ceiling they better say a prayer before they start their cars in the morning. And let’s proudly show the world how stupid the American people can be by mindlessly taking an active role in your own destruction. Thank you. And may Goldman––I mean may God bless the United States of America.”

#41 LJ on 07.26.11 at 12:19 am

I’ll buy some of the US assets:

The US keeps gold bullion on its books at $42/ounce. I’ll take some of that action.

The mortgage bonds on the Feds books should sell for about 30 cents on the dollar. Maybe a couple of those as well – although it is a little higher risk…

Canadian bonds might be on order as well if the CMHC does not bankrupt the country.

#42 dollarcollaspe on 07.26.11 at 12:20 am

we are all doomed.

#43 Jody on 07.26.11 at 12:23 am

So they came to an agreement on the debt ceiling, big deal. They still have to pay the piper for printing all that fiat toilet paper, then there is Europe, za Germans are very pissed. I’d like to think countries will be okay even if they default but if the rest of the world goes down so will the yanks. Everyone agress Greece is kaput, next is Italy, Spain, Portugal and Ireland, the dominoes will fall just as surely as Stephen Harper reads “History of the Fork.”

As for gold in Fort Knox, hahahahahahahahahahaahaha!!!!!!!!!!!!!!!!!!! Bwahhahahahahahahahahahaha!!!!!!!!!!!!!!!!

If the yanks would get rid of the federal reserve and cut their military to the bone they’d come out of this fine, but they won’t, so the poop will hit the fan.

#44 Cookie Monster on 07.26.11 at 12:23 am

12 JohnnyBravo on 07.25.11 at 11:05 pm

#197 Cookie Monster on 07.25.11 at 5:24 pm

Thanks for the book recommendation.

You’re welcome. I recommended a couple of books to Garth yesterday too, I’m still waiting for his thank you.

———
The Fed has almost $3 trillion in cab money in the basement (in the form of Treasury bills). There’s $400 billion in yellow rocks in Fort Knox which can be sold to the greater fools on this blog. And Washington has a giant pile of marketable mortgage bonds that can be floated at any time.

Switch from major buyer to major seller of mortgage bonds and T bills will send interest rates soaring. Rating agencies are irrelevant. Selling their Au would be a big no no. The BRICs would buy it all in a heart beat.

——-
#212 smartalox on 07.25.11 at 8:43 pm
Value in economics are an enumerated ordering of subjective value judgments held by each individual. Some standard market values exist, such as if a 2 year old cow is worth four weeks of hard labour and also worth 1 oz of gold, then 1oz gold is also worth four weeks labour. The gold has a perceived value based on what people know it can be traded for, paper money is the same. Difference is gold can not be printed.

There’s also a marginal value theory which says that up to a certain quantity of a given item the value can be quite high, but then after that number the marginal value of any additional pieces of that item will diminish rapidly. For example if 100 pieces of an electronic component might be worth $1 each for a company who builds 100 radios, the 101 part is not worth spending an extra dollar for, but maybe the next five are worth 50 cents in order to have a few extra parts lying around, but then any additional pieces above 105 are worth nothing, because they would just never get used. Also if only 99 were available, the 100th part might be worth $10 in order to build a 100th whole radio that if completed is worth much more than the extra $9 of cost to buy the 100th special part.

It’s all subjective, and different values for different things applies to each radio maker or other manufacturers of other things, and others might never buy any of the parts to make a radio, but they might buy the whole radio.

#45 waterloo Resident on 07.26.11 at 12:23 am

If you want to decide what’s the difference between the two ETFs: XRB.to and XRB.to, just look at this graph and it will show you the difference in performance of the two. :

http://finance.yahoo.com/q/bc?t=2y&s=XBB.TO&l=on&z=l&q=l&c=xrb.to

#46 john on 07.26.11 at 12:24 am

There’s $400 billion in yellow rocks in Fort Knox which can be sold to the greater fools on this blog.

hahahahaha….

#47 waterloo Resident on 07.26.11 at 12:31 am

You know, I would REALLY like to see Ron Paul as president, now THAT would be a turn for the better !

#48 Devore on 07.26.11 at 12:36 am

Nah, gold will drop on the 27th, not Friday, like it does on nearly every options expiry day.

#49 smartalox on 07.26.11 at 12:38 am

Garth,

If this is Canada’s time in the foreign investment limelight, can you please call in any favours you might have at Revenue, and have them start cranking out bonds so that we can DO something to improve our infrastructure in this country. You know, invest in our bridges, our waterworks, sewers, power grids and telecom…. Maybe sock a little away in a sovereign wealth fund so that we can have a little something for a rainy day?

Let’s take advantage of this once in a generation opportunity to make this country more productive!

#50 Tom from Mississauga on 07.26.11 at 12:39 am

Another great post here Garth. It’s nice to have a calm voice of reason out there. I’ve stuck with your advice of a balanced portfolio with a commodity stock overweight for a while now and made 19% over the last year ending June 30. And I’ve not worried too much about holding on even when bad news presents itself. I know several poeple in the community be it at hockey, family or church that have just gotten murdered by being in ‘high interest’ and a house. The over 3% price inflation, nobody I talked to could have imagined it this time last year. The middle class is listing (naval term)badly. Commodity stocks are the best hedge against another year of inflation and corporate bonds/preferreds that beat my mortgage rate, this should be easy too piece together. But commenters here are arguing about the placement of some yellow metal. Hard to believe. Thanks dude!

#51 Killer Chicken or Imploding Boomer? on 07.26.11 at 12:42 am

29 Joe

DUCK AND COVER!!

#52 Golden Stewie on 07.26.11 at 12:44 am

This blog is split into ….

1. People who think the banks and government in charge of the current mess have your best interests in mind and you can actually print and spend your way out of debt, and that the endless paper “assets” are actually assets. In this magical land where the US have debts greater than the entire worlds GDP, people actually think they will pay it back and most the European countries no better off than the US. Lets call these people paper bugs.

or

2. People who think the banks and government are one and the same and it doesn’t matter who you vote for because the government always win the election. These people (generally) look at the bigger picture and see a world laden with debt with no way out except money printing. Lets call these people gold bugs.

Yes you can make money trading bonds and other paper junk if you are very good and you sleep with your finger on a huge red button that says SELL. If/When the market implodes in europe/asia by the time you wake up in Canada and try to sell the market will be in the toilet.

You have to make your own mind up, pick a side and live with your decision. To steal a line from clint eastwood “You’ve got to ask yourself one question: ‘Do I feel lucky?’ Well, do ya punk?”

Id rather take my chances with dirty harry than believe the people who created this financial system have any chance of getting out of it without debasing almost every currency on earth.

I made my decision with the help of the good people at http://www.gata.org

However I still enjoy the banter, maybe a paper bug on this blog will one day come up with a valid point and I change my mind!

#53 Mr. Lahey on 07.26.11 at 12:47 am

#226 Killer Chicken from the previous blog. Good question. The financial sleight of hand that fractional reserve banking is, does work and is a far superior system to the gold standard which produced deflation and depressions on a regular basis. It is not a perfect system either as it leads to booms and the consequent busts. I mentioned in my post and others have as well in past posts where this was discussed that rather than private banks being the beneficiaries of this fiat windfall, the government/citizens of a country should be. The billions generated by the fractional reserve system in Canada should be used by the government to help the citizens of this country rather than be in the hands of private bankers. The fact that private bankers have this amazing priviledge of creating debt obligations and not the government is the part that is wrong. The actual mechanism of fractional reserve banking is better than the gold standard, my argument is that private entities shouldn’t be granted this right.

Randy, listen to that noise in the wind. It’s the shithawks Randy, and they’re getting closer…

#54 Taipan on 07.26.11 at 12:47 am

Garth im 100% on board with the real estate issue. Caused by a ponzi scheme of debt. World wide – not just Canada

But governments just like households cannot live beyond their means.

GFC2 will be with us before xmas. You cannot keep printing money. Sooner or later it blows up in your face.
Even when you are the reserve currency.

Ill pose a question/thought.

The massive amount of money that has been lent to China in particular in US$.

China is pegged against the US$.

GFC2 hits, the US$ might rebound for a short time, before plunging massively against all currencies.

Repayment of debt remains in US$. But the currency risk has hit the offshore lenders, who now have lost 50%?

Unless, unless, China unlocks from the US$ and floats their currency.

Suddenly US is now a competitive currency for reestablishing business and exporting.

What the US government and reserve is currently doing we were taught in economics 101 not to do. It makes absolutely no sense – so why are they doing it, unless it is part of a bigger economic war, which is raging but never declared.

Some people need to get their heads around that nobody seems to have considered the end game of excess borrowing world wide, because this has been building for 20 years.

Gold wont be the answer. Companies will still trade and make profits and pay dividends, but many companies wont survive

It didnt work in Japan, it wont work elsewhere. A good result might be stagflation. Low growth, higher inflation and higher interest rates and that aint pretty.

Any way you look at it, housing prices are going down big time.

#55 Garth's Evil triplet on 07.26.11 at 12:47 am

Give me all your $$$$ , Gold…RE..Silver..False Teeth…1st and 2nd born…….Rookie Cards……….Stones farewell tour # 666

I will give you advice………N/C………..

Cue evil laugh………….

#56 nonplused on 07.26.11 at 12:50 am

When the bank creates the loan out of thin air and credits an account with a bunch of repositioned electrons, they have to produce an asset that backs those electrons. That asset is the loan itself. They have a promise to pay backing the money they just created, and in theory as the loan is repaid they will end up with all the money that was loaned out, making the loop complete. So technically it’s all good.

When the loan doesn’t get paid back, they have a problem. They just credited an account with a bunch of money, but the money won’t be coming back in on the other side. So they have to make up the “loss” with shareholder capital. If enough loans go bad, they run out of shareholder capital. Oh ya, they also use deposits to fund loans, so that’s why you get a bank run if enough loans go bad. It is the repayment of the loans that provides the banks with the cash to make good on deposits in the future.

Banks are not legally entitled to credit accounts money unless they have an asset to back it up, even if though that asset might be a loan they themselves created. Only the central banks have a charter to print money to buy assets.

I know it isn’t clear the first time through, but here it is again hopefully a different way. The banks must have an asset to back the money the loan out. That asset is about 3% “reserves” (deposits and equity) and 97% the loan itself, which promises them a future cash flow. However, if the loan goes bad (into default or something), the future cash flow isn’t there and they have to get the money they credited the account from somewhere else. Hence, they go “bankrupt” once they eat through the reserves.

So when you here that a central bank has told the banks in the country to “raise reserves” (like in China, it doesn’t happen in the west anymore they only lower them), it means the central bank doesn’t think the banks have adequately set aside enough money to cover bad loans.

So can the banks just print up the loaned money and credit the account, or just add the amount electronically? No, they have to borrow it from the central bank or other banks, and they use their newly created loan as the asset that backs up that loan.

The buck stops at the central bank, which does all the actual money creation.

Garth,

We are in a foul mood tonight, aren’t we? You seem extremely harsh on responders tonight. You are even calling people names, which I thought you didn’t like.

With regards to the debt ceiling and gold prices, maybe there will be a reaction when they raise the limit, but it will be short lived. If you plot gold prices on the right axis and the debt limit on the left axis (and hence the debt, because they always hit the limit in short order), you will see that the true relationship has been that gold prices rise with the debt and that has been going on for a long time. More US debt means higher US gold prices, not lower, although short term anything can happen.

Also, money does not “go into” stocks any more than money “goes into” groceries, excepting perhaps if a company does an IPO or an issue and retains the proceeds. On the stock market itself, money is but a medium of exchange. For every fool out there who buys Apple at $500, there is a lesser fool who has sold at $500, and the money merely moves from one account to the other. The only thing that is changing is the price of the stock, not the amount of money “in the market”. I suppose you could say a bunch of money moved into the market to bid prices up, but that money moves right back out again on the sell side.

Whenever there is a buy at a higher price, there is also a sell. Unless it’s a new issue, no net money went in, no matter how the dunderheads in the MSM choose to describe it.

And the only money that moves “out of the market” is dividends. All the rest is just Mark to Market notional wealth.

Money does move into bonds though, because there is a never ending limitless supply of new government debt being issued almost every single day, sucking up a lot of cash. But the money doesn’t stay there, the government spends it, mostly with a lot of waste.

Money also “moves” out of bonds in the form of interest payments and retirements. But there is always a new bond issue to suck it all back up.

#29 Joe

I don’t think you have it quite right. The whole point of fractional reserve banking is that the bank only has a fraction of cash on hand compared to their loans outstanding. So if the fractional reserve is 10%, they have loaned out 10 times as much money as they have. But the idea is that the borrowers are good for the cash so it’s all coming back in a timely manner. And they don’t need to have the cash on hand to make the loan and credit the account, they only need to create the loan agreement and keep it in good standing.

The banks do not have $1 in deposits for every $1 in loans the make. It’s more like $3 in deposits for every $100 in loans. It all works if the loans are good. And the reserve varies by country. I believe Canadian banks are levered about 20 to 1.

#30 Led

Why don’t we just use Monopoly money and skip the government altogether? Heck, $15 dollars to buy a Monopoly game would yield tousands of dollars in new cash. And it wouldn’t take long for people to figure out that they can use the last $15 Monopoly dollars they have to buy the next game.

Governments can only “coin” money, they can’t print it unless at the end of the barrel of a gun. Central banks can print it, but in theory they back all of the printed money with a purchased asset, although in practice that’s all bull$hit. Every dollar they print to buy a paper asset creates inflation. If they were just printing them and not buying assets, inflation would be hyperbolic.

#57 Brad in Cowtown on 07.26.11 at 12:50 am

#25tigerbaby on 07.25.11 at 11:27 pm
Would someone please explain to me why bank suffer losses from non performing loans if the loan was made from thin air?
Also I read here that bank loans mostly get deposited back into banks (as part of the “money from thin air” mechanism) so how does reserve ratio come into play?

The reason banks can suffer losses from non-performance is because once the loan is created, it’s created on both sides of their balance sheet – a loan receivable on the asset side, and a demand deposit liability on the other side.

Conversely, from the client’s perspective, he/she has cash on their asset side, and a loan repayable on their liability side. Say he/she decided to spend that money carelessly. Maybe on meth. Whatever. And then he/she loses her job. Suddenly, the bank receivable is not going to be repaid. So the bank’s balance sheet looks alot different. Their loan receivable has been wiped out, but their demand liability is still intact (i.e. the cash didn’t disappear from above… it only changed hands, by going into the pocket of the meth dealer.)

Obviously, this is an extreme example. The bank wouldn’t lend money to a meth addict, after all. :)

#58 nonplused on 07.26.11 at 12:51 am

Oops, the first part of that was for tigerbaby.

#59 Devore on 07.26.11 at 12:57 am

#19 librarykaren

The “rolling crisis” is just kicking the can down the road. With each kick the can gets larger and heavier, and more difficult to punt. The goal is that you can roll it down far enough that some economic or technology miracle will happen and solve all our problems. It’s worked so far.

#60 Jon B on 07.26.11 at 12:57 am

Canadian exporters need a break. We’ve been hammered by a strong dollar while selling our stuff to the Yanks and receiving weakened USD. It seems to me the politicians aren’t too concerned about this situation.

#61 Mackie on 07.26.11 at 12:57 am

I say the Americans caused this world wide economic collapse, let them go down in flames. Lol

#62 BPOE on 07.26.11 at 1:06 am

Folks, this US debt crisis is a HUGE HUGE HUGE boon for Vancouver. Can you say up up and away. It’s simple folks interest rates are NOT going up. You think Canada would raise the interest rates with the States defaulting? Get serious. Not happening for decades to come. What is happening is Vancouver is GOIN UP

#63 kilby on 07.26.11 at 1:11 am

I think we should all get gold Fiats with guns as suggested here a few days ago, damn the bond market!

#64 timo on 07.26.11 at 1:19 am

great post Garth, this is what you should switch to as it will really peak interest.

I agree and want to point out that in my opinion being an exporting country our high dollar will make our labour costs finally impact bottom line. We will hear soon that to compete we must reduce labour costs due to cheaper imports . We are in a catch-22 and if your manufacturing anything here for export your probably in a panic.

I remember the crash of our dollar 30+ years ago and how people worried. Funny how you realize that a stronger dollar will really hurt our manufacturing to a point where we could just be forced to ship raw product due to trade agreements.

#65 Hoof Hearted on 07.26.11 at 1:19 am

Garth…

Disagree.

The Joker -in -the -Deck is what the agenda of the Rothschilds, Rockefellers and Bilderbergs is.

One can use cob-webbed and knee – jerked models re: some sort of economic equilibria if “X” happens..”Y” kicks in.

The U.S. is toast err tostitos……R.I.P. …..as its founders turn in their graves .

The model now is “how far will the IMF/NWO etc. get away with murder ” VERSUS the people say F*ck -Off..time for an economic Nuremberg Trial.

Otherwise…this is starting to look like a saloon scene in a Western whereby the public tap-dances to the elites shooting at their feet.

#66 Nostradamus Le Mad Vlad on 07.26.11 at 1:19 am


Nice pic at top.
*
Obama If this is true, then it provides further evidence of a declining US, and could be a reason for the Beverly Hillbillies debt nonsense, to draw attention away from the military and Pentagon; Fukushima Food chain infected; Propaganda, and sheeple fell for it. As much as the US debt crisis is pure slapstick, so Toyota was raked over the coals for no reason; Land Grab The US feds. are being quite sneaky about this.

East Coast Heads Up! 450 minor ‘quakes, leading to Megatsunami Two clips, showing height differences.

Critical Thinking — unsustainable (sheeple can’t think for themselves anymore); October cons. theory? Hmmm; Germany Not difficult to understand why the population wants to go back to the Deutschemark — why should they be saddled with funding Libya’s rebels? 3:53 clip FIAT vs. Gold money, and US$ down; Canada is enjoying a nice ride in investments now; Bull Market — but is it a gored bull?

#67 The American on 07.26.11 at 1:20 am

At #10: American Werewolf, I gotta admit, I think you’ve hit the nail on the head. The deal is already cut, there will be absolutely ZERO default (as I’ve already stated for a while), and the charade we witness now is only to help manage expectations for the forthcoming tax increases that will hit the most wealthy (which, frankly, need to happen as their REAL tax basis is SIGNIFICANTLY LESS than the average American on a percentage basis, once all deductions are accounted for), and entitlement/”safety net” programs are slashed (which needs to happen as well). In the long term, this will be a GOOD thing for the U.S. and will help us get back on track to innovation and creativity. There’s really no other way around it, and this is definitely being used as a catapult to make it happen. Red herring comes to mind :-) Oh, and that credit rating thingy is a farce too. Downgrade the U.S., and watch it all (meaning the global economy) collapse.

#68 The American on 07.26.11 at 1:29 am

At #23: VYW, you said it best, “2. US bonds may not suffer a downgrade; not when the US economy at $15T is almost 25% of world GDP, and the USD is the reserve currency.” I’m banking there will be no downgrade either. The World can’t afford it. Period. Hell, the rating agencies can’t afford to do it. Its essentially biting the hand that feeds them. They know better. Hence, the reason they’ve only been barking and not biting. The downgrade would have happened by now. When the “deal” is finally cut and announced to the masses, there WILL be a plan of action to get the debt under control. It certainly won’t be at this time the U.S. credit is downgraded. That’s like scolding a dog for shitting on the carpet from last week, only to have house trained him and get his behavior in a more desirable place in the meantime. No downgrade will happen. The time for that has already passed.

#69 timo on 07.26.11 at 1:40 am

#30 led,

most of the printing was to give to banks to buy the bad loans from r/e and insurance obligations on that debt. if they did not do that all the banks would of failed and AIG would of collapsed forcing all banks to write down their debt around the world. The ponzi scheme would of collapsed.

It still will collapse unless they continue to print to cover losses in the private sector if banks are still overleveraged. this will be mostly from a continued drop in r/e prices due to budget cutbacks.

when r/e levels back to 3x income where ever that will be with job losses this game is over, ….or….the world runs out of money

#70 Cookie Monster on 07.26.11 at 1:43 am

Do not take your eye off the ball and remember what the end game is, to inflate the US dollar money supply by more than 100% from 2007 levels such that the banks and insurance companies balance sheet assesta are made whole, such that asset prices equal market value, and also to inflate away the governments debt burden. The goal is a massive expansion of the money supply with out spiking interest rates in essence to steal from everyone via debasement of currency and capital gains taxes.

So, make all your decisions on with this premise in mind. Good luck. Buy gold.

#71 Cookie Monster on 07.26.11 at 1:53 am

PS, the above is the plan Obama and Bernanke are trying to implement and is why they are so desperate to get the ceiling raised, so Boehner is and the tea partyers are definitely throwing a wrench into it, so keep this in mind in case the ceiling is not raised. I think it will ultimately be raised for at least the next 6 months.

#72 Thetruth on 07.26.11 at 2:13 am

So 5 year mortgage rates heading down to 2% ??

If so Garth, get ready for another big leg up in residential real estate in Vancity and TDot.

In this case, most of the monthly mortgage payments will be goin towards principal. Renters/Savers will really lose big time.

#73 Thetruth on 07.26.11 at 2:14 am

Why is it different in these two cities??

How about 1000 and 2000 people per week respectively moving here. This is not including the temp workers and students.

#74 Midas on 07.26.11 at 2:56 am

A parable from that ‘wacko’ Ron Paul on the debt ceiling.

http://lewrockwell.com/paul/paul754.html

#75 keny65 on 07.26.11 at 3:42 am

The two sides of this one party system is creating this media circus to create an environment of fear…wich is the only way to keep this illusion of wealth going.The 200+year plan of the jesuits is finally coming to fruition…america is broke!!!!The jesuit creation,the C.I.A. did a good job of bringing america to it’s knees… gold is not money,gold is not money,gold is not money,gold is not money…I’m trying your technique garth of repeating something enough until it sounds true…By the way Garth we never hear you talking religion,you would not be a catholic by any chance…like the jesuit co-adjutor Alex Jones.False rebels mixing up alot of truth with some lies to divert attention and buy some time until the veil that is covering our eyes is finaly lifted and we realize that it is too late.

#76 Sasquatch on 07.26.11 at 4:21 am

I agree with Garth. America is too big to fail. Downgrade in status, okay.

Rome did not fall in a day or a year. it was a long, slow decent. The barbarians at the gate didn’t win by crashing the gates. the barbarians became citizens of the empire.

The same goes for the States. their fall from king of the hill has only started and is still slow in happening. Nor will the States fall into oblivion. The other powers will simply be on the same playing field.

I do not think that crooked politicians stole the gold reserve. Gold is too difficult to walk off with when easier methods exist of fleecing the people. Even if the gold is gone or less than estimated, the country will still find a way to weasel out of it.

#77 nemesis on 07.26.11 at 5:44 am

…”giant pile of ‘marketable’ mortgage bonds”…

And some people here say you have no sense of humour…

In other news…

[Bloomberg] – Wall Street Helps Boehner Boost Fundraising as House Speaker

“Since January, U.S. House Speaker John Boehner has raised $6.6 million for his campaign committee, six times more than the Ohio Republican received during the same period two years ago when he was the chamber’s minority leader. Three of the five biggest sources of Boehner’s campaign cash this year are employees of three Wall Street investment houses, a shift from the 2010 election cycle when such contributors weren’t ranked among his top 10 donors.”…

http://tinyurl.com/43laqgl

#78 nemesis on 07.26.11 at 6:03 am

And while we’re talking about Boehner’s new ‘best friends forever’ on the TheStreet why not have a closer look at what one of them has been up to recently…

[WSJ] – Big Fine in Metals Case: Moore Capital Trader to Pay $1 Million in Market-Manipulation Settlement to CFTC.

“Christopher Pia—former head trader at hedge fund Moore Capital and a major player at the fund for 18 years—agreed to pay $1 million to settle civil allegations by the Commodity Futures Trading Commission, the regulator said in a release Monday.”…

http://tinyurl.com/3pjrpu4

#79 blase on 07.26.11 at 6:04 am

I miss housing talk!

This whole debt ceiling show is a scam. In 2 weeks it’ll be business as usual. Get a grip bullion cubes.

#80 BrianT on 07.26.11 at 7:00 am

#15Nick-Audits are wrong-we all need to learn to trust, and if you can’t trust these guys completely, who can you trust?

#81 Smoking Man on 07.26.11 at 7:42 am

So USA can’t get the China to inflate it yen?
The brains meet in the back room and come up with a plan.

We have the demos on one side the tea baggers on the other.
Grand Theater………

Their will be no deal, the USA want’s to kill it’s own dollar, with out the apperance it’s doing it on.
The trade def is HUGE. Only way to get america working again is to kill the dollar.

#82 Cow Man on 07.26.11 at 8:07 am

Amigos:

Anyone who believes that the gold reserves, in Fort Knox are as stated, without an audit, is truly the Greater Fool. Just like buying residential real estate in Florida, site unseen.

#83 bigrider on 07.26.11 at 8:07 am

I really wish this blog would get back to talk related to the canadian housing bubble.

Gold, debt ceilings, etfs/mutual funds, conspiracies, flouride, etc.

Who cares?

#84 Lead Paint on 07.26.11 at 8:28 am

#32 Utopia on 07.25.11 at 11:54 pm + #35

Agreed. I ignore everything they type. They’re disrespectful of the blog and audience and don’t deserve any attention.

#85 Moneta on 07.26.11 at 9:08 am

Joe on 07.25.11 at 11:48 pm
#25 Tigerbaby,

Only the central bank makes money out of thin air.

The commercial banks loan out money they already have. There is no “money out of thin air” with fractional reserve banking.
—————
The generalized level of self-assurance based on distorted truths is mind boggling. Hundreds of millions of people who think they are experts when they know nothing. No wonder we are in this credit pickle.

We’ve never had such easy access to information , yet people cling to their ideas without checking out the facts.

#86 Daisy Mae on 07.26.11 at 9:16 am

Gordon Pape – My view: “Keep PRPPs as basic and low-cost as possible. Don’t weigh them down with administration expenses. These plans should really be nothing more than highly efficient RRSPs.”

PRPPs are being ‘fast-tracked’ thru parliament by…guess who? Our very favorite Finance Minister, Flaherty.

#87 crashing yuppy on 07.26.11 at 9:28 am

Garth, Why do you allow that absolute MORON hoof hearted keep saying first.

Is this blog now just a joke?

#88 timo on 07.26.11 at 9:56 am

http://www.bloomberg.com/news/2011-07-26/california-seeks-5-billion-loan-as-states-gird-for-u-s-default.html

its a race to the bottom folks but lets keep are head in the sand and repeat that r/e only goes up.

http://www.bloomberg.com/news/2011-07-26/fha-may-be-next-in-line-for-bailout-commentary-by-delisle-and-papagianis.html

budget cutbacks in the US will really help out the FHA when the unemployment rate hits 10%+.

and what is not reported is that bars are turning off the cash registers in greece to protest taxes and service cutbacks.

Enjoy the party because there will be a hang-over.

#89 Brett on 07.26.11 at 10:01 am

But what if your predictions are wrong Garth. Professionals dont predict price, they react to price, so what do you do if the US dollar crumbles on friday or next friday, and gold goes impossibly higher…are you on the buy with your favourite asset as it gets cheaper, will you short gold? will you use stop loss (take loss)? will you price chase gold as it “gets away”?

Betting on short term price predictions is gambling, most people suck at gambling, you shouldnt encourage it.

#90 JG on 07.26.11 at 10:11 am

How do you respond to people who say “if you are already in the (RE) market the price increase doesn’t matter”. The reason: because you already have a house it has gone up in price too; therefore the fact that your next house is “up” is not relevant because you will get more for your current place.

I bought in YWG in 2001 – $130. 3bdr. Excellent area with 2x garage and superb back yard. Also close to K-6 school. I need 1 or 2 more bdrs today (in the next 2 years so there is still time), so spend could be 650. Say I sell for ~300, and the difference is 350+130 = 480 my total spend on housing. I’m not sure if the high end houses will loose as much as the mid grade ones, or at all. Less supply, wealthier (assumption) owners, etc. who can wait if they want to. Don’t know, just guessing. NHL coming as well, no doubt good for expensive houses around here?

I have seriously looked for/at rentals in areas I want. They have been in low supply and in terrible condition, even when described as “executive” on kijiji. They do not have what I need, and would likely mean moving the family more than owning. Moving is hard, I (neat freak) need the place cleaned top to bottom, it won’t be just the way I wanted anyway. Changing mailing info is a nightmare. Stuff gets lost! Uprooting a bunch of kids (3 now, 1 on the way) is no fun either, I think they need stability, especially going in to their school years. Landlords have the opposite goal from renters… landlords want to maximize return, meaning things that renters want (fix the hot water, etc) will be done as cheaply as possible or not done at all. I know plenty about renting having grown up in a downtown apartment. Also, we have allot of “stuff” by that I mean junk which impedes moving big time but we still seem to hang on to it all.

Please rip this post to shreds. Or feel free to spend an entire entry on me – I can supply all the gory details.

Final question in this random mess of a post ( I apologize to all who have read this far ) – for the “garthRatio” do we use the paid price of the house or the current expected value?

#91 Daisy Mae on 07.26.11 at 10:19 am

“Garth, we are in a foul mood tonight, aren’t we? You seem extremely harsh on responders tonight. You are even calling people names, which I thought you didn’t like.”

Actually, I think he’s always very patient with us….it must be extremely exasperating at times. He’s just human. LOL

#92 Heart of the World on 07.26.11 at 10:27 am

It appears that the tea party knuckledraggers are really driving the bus on this one — they are the minority that will drive events. Check out what Tea Party luminary Ron Paul wrote recently: in effect, ‘that it will be less damaging in the long run to default now than in X years’. So if these guys drive the bus off the cliff, here is Standard and Poors figures will be the outcome (courtesy of Buttonwood in the Economist):

Standard & Poor’s has considered this scenario and suggests that

‘Failure to pay off maturing debt or missing interest payments (approximately $62 billion of interest is payable on Aug. 15) would constitute a selective default pursuant to our criteria, and Standard & Poor’s expects it would lower the sovereign rating to ‘SD’. Even if the Fed and other central banks managed to keep the financial system functioning, we expect that markets around the world would be severely damaged. In such a hypothetical scenario, we expect that equity markets would generally plunge, borrowing costs and interbank lending rates would soar, and corporate credit markets would be closed to all but the highest quality issuers. We envisage that consumers and businesses would likely stop spending on all but essential items, and the value of the dollar would drop by 10% or more against other major currencies. With the dollar heading lower, investors would likely look for hard assets like oil and other commodities, driving prices higher.’

Maybe time to load up on yellow rocks?

#93 rory on 07.26.11 at 10:30 am

Garth, I am NOT getting it.

You say stocks and bonds are good investments today. The USA will not default, yada, yada. You banged on the Cons about $60B in deficit spending yet you seem to point a rosy pic that staggering .gov borrowing and spending in the USA is okay and everyone else is nuts for not thinking this.

My question, USA biased, is when does borrowing $1.5T or 43% of your total budget year after year actually start to affect things. I get the idea you think it can go on forever. Extend & pretend, no worry mates. Government living within their means is for losers.

Like I say – I do not get it.

#94 Peakoilist on 07.26.11 at 10:55 am

Gold is dangerous. US real estate is a buy. And you are a fruit. — Garth
C’mon Garth…you need to develop a thicker skin..for gawd’s sakes you’re gonna stoop to derogatory name calling now. Remember that you have a diverse crowd visiting this site…politicians never go that level..they know how to bite their tongues in the public domain.
I mean it’s not even anonymous with you. everyone else can hide behind their fake name here but you can’t..and remember many of us have bought your books and voted for you in 2 elections.
btw James Howard Kunstler never comments on his blog and he gets sh*t on sometimes and adored by many others too.
Everyone who visits here think you rock or else we wouldn’t keep coming here. :)

#95 Mr. Reality on 07.26.11 at 11:01 am

Utopia

The anger and retchidness on this blog recently is proof how tough times really are. Too many crazies with all their eggs in one basket be it real estate or yellow rocks are feeling the pressure and lashing out. People are hell bent on making money drinking greed by the gallons and when you become a self proclaimed investing genius you learn teh hard way. Most investors lose money.

Heck i work in oil and gas country and the rampid debt flying everywhere is strarting to hammer folks making 6 figures! Either way its good news for us realists because the debt reckoning is upon us.

Who would of thought the poor man on the street with no money has more than most Canadians. Why? He has no debt.

Mr. R.

#96 Peakoilist on 07.26.11 at 11:03 am

#42 JohnnyBravo on 07.26.11 at 12:17 am
I am an Obama fan but that truly made me LMFAO !
thanks

#97 from kits on 07.26.11 at 11:21 am

Garth,

Help me understand why I should lock in my mortgage? The bank of Canada is going to raise rates, there is no doubt about this but how fast..who knows?

I have a prime-0.75 mortgage rate, even if prime goes up 2%, I’m still only a little higher than the fixed rates currently being offered on the market.

If it takes 3-4 years for prime to rise 2%, I’m looking pretty good no?

Just not seeing the benefit..the banks were trying to convince me to lock-in for a fixed rate when we started this mortgage in 2008.

As prime goes up the variable rates get better as well, I could break contract and get a prime – 0.85 right now.

maybe I’m missing something?

#98 Midas on 07.26.11 at 11:33 am

Another ‘wacko’, Dr. Sowell, on the debt ceiling. His advice? Repeal.

http://www.nationalreview.com/articles/272690/debt-ceiling-chicken-thomas-sowell

#99 timo on 07.26.11 at 11:35 am

http://www.economonitor.com/channel/europe/

There is clear videotaped evidence showing certain apparently violent individuals doing things like happily entering police stations, and receiving clubs while hanging out with the police.

The Greek and international media have been successfully portraying the protests as the violence of hoodlums.

That video you posted from Clusterstock today (the policeman walks up and strikes the protester down with a club) is much more provocative if you understand Greek. Just before the protester is whacked, he cries out, “Don’t hit me!” Then random rubbish is thrown at the police – but then loud shouts are heard from the protesters, “Don’t throw anything at them!”

I am hearing this from co-workers as well as 2nd cousin’s that the nation as a whole is really pissed!

http://www.economonitor.com/blog/2011/07/scary-chart-of-the-day-irelands-bank-run/

Roughly 14% of Irish GDP is leaving its banks.

Hopefully the domino’s don’t tip over otherwise it might just draw back the curtain and expose the naked truth…..

#100 Living in AB on 07.26.11 at 11:45 am

Man…. what was all the hate about last night. I thought last nights post was very informative. Haters, a little grain of salt. I don’t think Garth has a crystal ball and can predict every single event, hence why gold is still on the rise.

#101 Utopia on 07.26.11 at 11:52 am

#86 Lead Paint to #32 Utopia

“Agreed. I ignore everything they type. They’re disrespectful of the blog and audience and don’t deserve any attention”.
———————————-

Well thanks. But actually this time it is me who is in the wrong. I was having a bad day and lost my temper when I wrote in my comments last night. I owe Hoof an apology.

Sorry Hoof. I was out of line with those remarks I left.

#102 Peakoilist on 07.26.11 at 11:59 am

#85 bigrider on 07.26.11 at 8:07 am
I really wish this blog would get back to talk related to the canadian housing bubble.
====================================
the doggies are apparently getting bored with that slow motion train wreck..its like watching paint dry or grass grow..we need excitement ! :)

#103 Devore on 07.26.11 at 12:01 pm

#92 JG

There is nothing to “rip to shreds” because you haven’t really said anything.

Sure, your house will go up. But so will your next house. Instead of selling at $200 and buying at $300, you’ll be selling at $400 and buying at $800, or whatever the difference will be. You’ll need MORE money for your next house, a significantly bigger mortgage than you originally had, and you haven’t even paid off your first one yet.

I don’t think taking on more and more debt is how the property ladder is supposed to work.

#104 smartalox on 07.26.11 at 12:06 pm

@cookie monster:
Thanks for the economy lesson, but I am well aware of how value can be perceived differently in different situations. The value in my work comes from the fact that, on a regular basis, one week of my work saves three or for other people from each having to do four weeks of additional work. For this, I am paid the equivalent of several ounces of gold, but not nearly the equivalent of the value of what I save my employer. Still, my current employed values my work more highly than my former employer, so this is why I work where I do.

When I’m not dogging this blog, of course!

#105 EdmontonJim on 07.26.11 at 12:07 pm

The debt crisis is complete theatre put on by a government who is trying to pretend it still has control over the economy. Whether or not it can borrow more money is sort of besides the point, the only two questions that matter are
1. Will the U.S. government continue to pay its bills?, and
2. Will the U.S. government continue to provide services?
The answer to the first question is of course it will. It might be late, but everyone who it owed money by the government will be paid. Actually, this could be an interesting revelation on where the government’s priorities actually lie. Who gets paid first? who gets paid last? It will be a political song and dance for sure.

The answer to the next question is less certain. As federal departments become nervous about future funding, I might expect many will start preparing for austerity measures through hiring freezes, stocking up on assets like computers and equipment, and spending more time securing their jobs and less time actually doing them. If I were a federal employee or contractor, I’d be nervous right now.

Of course this will have some impact on the economy, for one reason only: The U.S. Federal government is one of the largest corporations and employers in the world.

There is a paradox in this that most members of congress don’t seem to grasp: Government taxation takes away jobs, but government spending creates jobs. Most people agree on this (even in congress) but the disagreement is on the ratio. I’d argue that the govenrment can create more jobs than private industry for the very reason that it is less efficient at creating products. It takes 120 government employees/contractors to do the same job as 100 private employees. Of course neither side of the debate will admit this, but for different reasons. I just say it to point out that neither side actually cares about creating jobs.

Money (credit, debt, shiny rocks, paper slips, bits of data) is never really the issue. The real issue is power and trust. Money is just one medium of exchange for power and trust. The refusal of congress to raise the debt ceiling is evidence of a government that doesn’t trust itself anymore, nothing more or less. A credit rating is also a statement of trust, as are gold prices, stock prices, bond yeilds, interest rates and inflation rates.
But inspite of it’s disfunction, the United States is still the most stable super-power in the world. Most of the world will continue to trust in the U.S. because the alternative is much more scary.
The consistent message of this blog has been to be smart about where you put your trust. Don’t put all your eggs in one basket, and don’t, for the love of Garth, put your all your trust in an inanimate chunk of dirt (gold or RE). They might make you feel safe, but they won’t actually do anything, ever, they just sit there, doing nothing, forever. Of course you can trust it to do that, but it won’t get you anywhere.

That was long.
My point is this: Life goes on, you have to trust people eventually, and the only question you have to ask yourself is which ones?

#106 The InvestorsFriend on 07.26.11 at 12:15 pm

As the Canadian dollar marches higher, watch for a stampede of cross border shopping.

The new moto will be, “Buy American, it’s cheaper”

We should see lower prices on lots of imported goods too, from cars to cloths to electronics to movies…

Watch for layoffs in Ontario manufacturing.

Which should put some pressure on Ontario home prices.

It’s all good unless you work in manufacturing or tourism in Canada.

It’s a boon to pensioners in particular. Geezers rise again!

#107 vyw on 07.26.11 at 12:17 pm

US RE prices continue to tumble YOY.

In May 2011, the 10- and 20-City [Case-Shiller] Composites recorded annual returns of -3.6% and -4.5%, respectively:
http://tinyurl.com/3mon5tr

#108 appraiser on 07.26.11 at 12:19 pm

Canadian dollar holding above $1.07 today. Yikes!

#109 A lesson for "The American" on 07.26.11 at 12:51 pm

Dear “The American”:

In response to yesterday’s illogical comment:

Sigh. You provide no evidence (of course) to back up your claims. Just senseless name-calling.

As such, perhaps it is YOU who need to get better educated:

Read this, and begin to learn:

http://www.politifact.com/truth-o-meter/statements/2011/jun/01/sarah-palin/sarah-palin-says-obama-has-accumulated-more-debt-p/

Like it says:

“Rep. Eric Cantor, R-Va., said last fall, that ‘the budget submitted by Obama will add more to the debt than the outstanding debt of the previous 43 presidents combined.’ We rated that True.”

#110 Utopia on 07.26.11 at 1:06 pm

#96 Mr Reality

Actually I am not all that angry. I just read a post from JohnyBravo a few minutes ago and almost killed myself laughing. I love the creative side and he hit the spot with that post he left. I don’t even have to agree with the idea…but it was still hilarious.

About that whole Hoof thing…..it’s really my own problem. Not his. I don’t feel happy about that bad post I left.

Tomorrow is another day though.

#111 Hoof Hearted on 07.26.11 at 1:09 pm

Why isn’t Wall Street panicking about the default crisis yet?

X3oDMTNhNGgwaHNvBHBrZwM1NDUxOWJmZC00YmQ5LTNiYjAtOTgzOC02MTFkMzc4MjhhZDMEcG9zAzEEc2VjA01lZGlhSnVtYm90cm9uBHZlcgMwNjdjYjgyMC1iNzkyLTExZTAtYmZmZi1lOGIxYjdjMDliZGU

Indeed, the current “crisis” is a manufactured one. Of course the United States needs to get its fiscal house in order. Of course the debt has ballooned to threatening levels. But the problem remains long-term and mostly about ensuring job growth and bending down the health care cost curve. Still, it is not clear what the scale of the catastrophe could be should Congress fail to raise the debt ceiling. Some investment banks speculate that the market reaction might not be as bad as people think, with government going into a very short-lived shutdown, voter anger forcing Congress to get its act together, and the market rolling its eyes even if it dumps some bonds.

(More from Slate: A primer on the debt-ceiling crisis)

But others believe consequences will be horrible. The International Monetary Fund warns that it fears “universally large and negative effects.” The Bipartisan Policy Center notes that the Treasury will have to halt about 40 percent of its monthly payments—meaning Treasury Secretary Timothy Geithner will need to decide between hospitals, troops, seniors, prison guards, bondholders, and a thousand other constituencies. As Simon Johnson explains in Slate, Americans can expect everything from long lines at the ATM to mass unemployment to higher mortgage costs if the country goes into default. Forecasters like Macroeconomic Advisers predict an instant recession.

#112 Daystar on 07.26.11 at 1:18 pm

Lots of comments over the last 24 hours, good to see, nice to see different points of views, its healthy to engage, to articulate our opinions, learn from others… and here’s my own spin.

Lets not take the U.S. debt crisis lightly. Some are. Some have thrown humor at it, others downplaying the seriousness of it, others minimizing its ability to disrupt world markets and all I can say watching this so called “manufactured crisis” unfold is… don’t.

I offer 3 simple links this morning as proof.

IMF sends out words of warning:
http://www.ctv.ca/CTVNews/TopStories/20110726/debt-ceiling-standoff-110726/

Loonie now stands at more than 1.06 U.S.:
http://news.ca.msn.com/top-stories/loonie-leaps-to-nearly-4-year-high-1

War of words:
http://news.ca.msn.com/top-stories/us-debt-ceiling-battle-becomes-war-of-words-1

All three links tell a story if this isn’t resolved. The U.S. will face higher interest rates, stalling any chance of a housing recovery in the U.S.A until at least 2013 (note, ARMS need to unwind there until last quarter of 2012) if their debt ceiling isn’t raised. The potential for a spiralling U.S. dollar and higher interest rates compounding their borrowing woes cannot be understated.

Lets call the obvious for what it is, shall we? U.S. intergovernmental debt to GDP (nominal) is at 100%. Thats high and yet, this is a nation that is the biggest defence spender in the world, next to North Korea…. thats a problem. The feds need to cut spending dramatically and raise taxes… likely dramatically. The good news to come out this is if the U.S. congress and whitehouse have what it takes to do it.

Its ugly medicine. They are pricing in savings of wars ending in the middle east as “cuts to spending”. Does that smell bad to us normal folk? The Dems don’t want to cut social spending but will, Republicans don’t want to raise taxes but have to, and all the while, both parties will somehow have to tippy toe cuts to defense, hardly a thing either side wants to talk about… at least publically.

The bad news is what comes out of the good news. Spending cuts and tax raises will hurt their economy, of this I have no doubt but it must be done if they hope to save their “too big to fail” currency from an ugly spiral and if these jokers can’t act in their nations best interest and all political posing aside, the bad news gets much worse if they don’t do what needs to be done.

In essence, without raising taxes and cutting spending including and especially so defence, their debt continues to balloon and they reach a numerical tipping point where all taxes are for is to pay off debt, to rob from the tax payer to pay off banks with tax revenues spent on nothing else other than debt, defense and government administration. (has this been the CEO elite’s goal all along? If so, how utterly dumb and uneducated the average taxpayer is to allow this to happen, thanks GWB) Education & postal services privatized, social programs erased, taxes are paid to apply against debt and spend on defense and little else. Some system of systems the world can be proud of, eh? Their forefathers would be so proud.

Its an ugly story no matter how one looks at it. The U.S. deb orgy has hit a wall, its bad if they continue, its bad if they don’t and the more press it garners, the greater the shocks to their currency and their reputation as a whole, all draped in an ugly reality that they have a monster debt problem which leaves no painless solutions.

So… here’s what I think will happen. It pretty much mirrors Garths sentiment. There will be 2 months of market spiral and its likely to be global and it will create excellent buying opportunities. I think the bottom arrives in late september. It doesn’t matter now, what solutions come out of the U.S. debt impasse, reduced spending, weaker dollar, higher inflation and in parellel, higher interest rates will cool the U.S. economy for some time to come, no recovery there. Japanese economic numbers will suck and blow. More ugly news will come from the PIGGS and China, China will show signs of stumbling. While commodity values get a lift from a crumbling dollar, it won’t help the buildup of inventories and values drop regardless. Gold peaks at $1750 an ounce (I called it 3 or 4 months ago, may as well own it) and drops as the feds finally hammer out a deal, likely in October. Expect a hard selloff in the markets until then.

And no, the world economy will not collapse. Money will still be exchanged. It will be business as usual, but there be a couple months of fear and panic especially with the notion of higher interest rates coming, possibly dramatically and the one thing that all smart investors look for (and for some, pray for).

Capitulation.

On another note, check out what most of us missed in the markets last week with common shares: NKL: ventures BER: Ventures
Thats why I like the stock exchange over bonds… one cannot see anyomalies like this occur in bond markets can they? :)

#113 Debtfree on 07.26.11 at 1:28 pm

so it would appear that Boehner is going for the gold bug vote . Btw I’ve been playing Hoehner harps for year as have dozens of my musician friends and I have never heard me or anyone else pronounce them hayners . I guess this also proves if you say something often enough it becomes true . Noam Chomski must laugh every time he hears someone utter boehners name. If he gets to screw them hard enough maybe they’ll get what I’m getting at . What a circus .

#114 Fort Knox and Obama on 07.26.11 at 1:30 pm

Garth,

How can you make such a claim about how much gold is in Fort Knox, when it hasn’t been independently audited for decades and decades?

Even the Mint keeps the info. secretive:

Says CBSMoneywatch:

“A U.S. Mint spokesman said in an email statement to MoneyWatch that the accounting firm KPMG, which audits the Mint, ‘has been present in the vault at Fort Knox.’ The Mint won’t comment on exactly how much gold is in there, though.”

Your tea-party “knuckle-draggers” are fighting to have the guarded complex audited.

Again, why does this make them “wackos”, as you say?

Maybe you have been fooled into thinking that the neo-cons you see on FOX are the REAL “tea-party” members?

If that’s the case, you need to turn off the corporate-controlled mainstream media.

For example, why do you keep implying (over and over again) that “tea-partiers” are necessarily Republican?

Reality is much more complex than this–as you are so fond of saying so yourself.

By the way, in response to an above comment: the “live certificate of birth” Obama produced has been shown to be overtly fraudulent.

Download it yourself from the government’s official web source: You can open it up in Photoshop and break apart the dozens of layers on your own computer, and see with your OWN EYES how it was (poorly) produced and manipulated.

Or, if you are too busy: watch other people do so on Youtube.

Of course, this doesn’t put the issue to rest; he may well be a citizen of the U.S.; but, so far, no real proof to demonstrate such has been produced.

Why do I have to produce more evidence to get a passport, then he does to hold presidency of the world’s most powerful country?

If you respond, try to do so logically, without all the name-calling…I dare ya :)

Or can you and yours only produce emotionally-driven arguments when confronted with such information?

Food for thought, buddy.

No gold. Conspiracies. Obama born in Africa. Good luck with yourself. — Garth

#115 dd on 07.26.11 at 1:52 pm

“yellow rocks”

Funny, that the government dsn’t sell the stuff. Maybe they think it is money.

Please no more predictions on the metals. You are out of your knowledge zone.

#116 dd on 07.26.11 at 1:55 pm

“no haircut on us bonds”

Oh yes they are, in the form of negative real rates in the future. Very high risk of dollars desolving into pennies. It has in the past and will in the future.

#117 thecomingdepression on 07.26.11 at 1:55 pm

ALL TIME worst article ever written by a media shill. Keep lying to your stupid readers to make them dumber. GOLD will be over $1700 within weeks. The USA has already defaulted, CANADA is going down with it. You’re articles are becoming more absurd as we go deep into the abyss. A default will lead to DEPRESSION. EVERYTHING you have ever stated will not come true, is..Ala. county readies for possible record bankruptcy..

Holy crap. Have you told the prime minister and the stock market about this? — Garth

#118 Marnic on 07.26.11 at 2:03 pm

$400 billion of gold in Fort Knox. If true, great…but it’s under three per cent of what they owe, or enough to keep the US going for another 3 months or so. A bit like me getting a Visa bill for $14,000 and flogging the 1/4oz gold coin I have in my basement to throw at it.

#119 Cookie Monster on 07.26.11 at 2:20 pm

My point is this: Life goes on, you have to trust people eventually, and the only question you have to ask yourself is which ones?
——-
Wrong, no you don’t. That’s why you buy gold so you don’t have to TRUST ANYONE or any government. TRUST IN GOLD and take possession of it by physical delivery.

#120 Cato on 07.26.11 at 2:23 pm

One form of default is the same as the other. At least we’ve run out of road, its fitting boomers won’t escape the coming austerity.

Economies are most influenced by faith. Like it or not an entire belief system is being shaken to its core, a very old economic religion is about to re-assert itself. Its a religion of class warfare between have and have nots. Its where opportunities are reserved for some and denied to others. Its ironic, the boomers railed against this very notion in the 60’s yet they were the ones to set the stage to return us to the world written about by Dickens. What a wasted generation.

There is an economic transition going on that most are oblivious to. Corp. profits have been strong for two reasons – slashing western payrolls & emerging market growth. The corporate world is changing horses, swapping tired debt ridden western consumers for fresh eastern consumers.

The purpose of stimulus spending, debt ceilings & deficits aren’t to kick start domestic growth. The true purpose is to buy just a little more time for the investor class to transition the world economy. It was sold to the lower classes as the only way to put country back to prosperity but its a lie, they are simply placing an enormous burden of debt on backs of their children for benefit of a privileged few.

If this were a game of chess the lower class is now in check mate. Its too late for the mob to change the game. There is just one escape for those in the middle class, be employed in the few economic sectors that will thrive in this new world order and hang on for dear life. The economic lives of your children and grand children will depend on it. Living in poverty while social safety net is crumbling is modern day equivalent of slavery, and like in the past anyone born a slave usually died a slave.

Canada will benefit from flight to safety until gov’t is forced to intervene in currency markets under the misguided belief the Canadian economy won’t survive the strong $CDN (think 1.10 is likely red alert territory). Canadian manufacturing can’t be saved, but that doesn’t matter when politics are at play. We have expensive tastes in Canada and we’ve used a creative way to hide our true debt – its made us arrogant and oblivious to the danger the country is in. Its time to start getting in the lifeboats, the titanic is going down and there isn’t enough room for everyone.

#121 HSC on 07.26.11 at 2:26 pm

I would like to officially nominate the phrase “kick the can down the road” as the the most over-used expression of 2011.

And turning to another worn-out expression, if it’s true that “gold is money”, why can’t I use it to buy my groceries, fill up my gas tank or purchase anything, anywhere in any store?

I now fully expect to be pounced upon by a thousand goldbugs on this blog… but I don’t really care. Life is much happier when you’re not obsessing over financial doomsday, the downfall of civil society, and the next great depression. The only depression we really need to be concerned with is the one that afflicts so many readers of this blog. Lighten up people. Come out of your backyard bunkers and enjoy the summer. :)

#122 Onemorething on 07.26.11 at 2:27 pm

ok I’m on vacation in Whistler for a few weeks and 1 in 10 chalets are listed. Either investors from outside Canada (US owners who need it) or anyone taking profits but the message the same. I’m going to toss an unreasable offer at a few just to see which of the above it is to prove my point.

Stay tuned

#123 JohnnyBravo on 07.26.11 at 2:28 pm

Now, Boehner’s turn:

“Good evening, I’m John Boehner. That’s pronounced ‘Bay-ner’ not ‘Boner.’ You don’t know me because you are probably completely ignorant about your government, but I serve as speaker of the House. No, I’m not talking about your intercom, I’m talking about the House of Representatives. Before I served in Congress, I ran a small business in Ohio. Yes, the heartland of America. You see, I am just like you. Well, perhaps not JUST like you. I probably bathe a lot more often. When I first came to Washington, I was amazed at how much money your government wasted. Because of that, we are now in deep $h!†. Now, truth is, I am part of the problem. But I really want you to think that I am not, so I am making this speech. I want you to blame Obama. I want you to believe that our spending and debt problems are all his fault. The only good thing to come from all this spending is John Stewart got to make a few really funny jokes. OK, it was almost worth it, but now it must stop. No, really, it’s Obama’s fault. Yes, it’s true that for years Congress was a major part of the problem, but now we must cut spending because that is what our poll numbers tell is the most politically expedient thing to do–– at least this week. So, me and my team––but mostly me––put together a totally ineffectual plan called “Cut the Crap and Bull$h!†” plan. But the president said he would veto it. I tried. I really, really tried. But that prick Obama… You see, it’s him, not me. I really want to make you think that I want to cut Washington’s spending. Even though I am part of “Washington.” Because when I say “Washington”, I really want you to think “White House.” Now, I have two daughters, just like you if you have two daughters. I want to cut spending for them. This debate is not about President Obama (even though it’s all his fault, not mine). This debate is about not spending more than you make. For example, let’s say you are an average American with three cats and who makes $13,000 per year, and who is underwater on their mortgage so you stopped making payments altogether… You can’t spend more than $13,000 per year on food and shelter if you also want an iPad. But this debate is not about partisan politics. That’s what this speech is for. This debate is about shirking the blame for our problems so that I can deflect the seething anger you must surely feel away from me and onto those who are truly to blame (hint: Obama). If we come together as a nation we can solve this problem for our families. Maybe your family can survive, too. With luck. May Goldman–– I mean, may God bless the United States of America.

#124 westernman on 07.26.11 at 2:37 pm

Garth,garth, garth…
Your knowledge of real estate is awesome but your grasp of macro economics and the REAL state of human nature is sadly lacking. There IS no gold in the basement of Fort Knox – the foxes have bee ” gaurding ” that henhouse for over 50 years and the only thing in the basement there is cobwebs. I’m disappointed – I thought you were more of a realist.

#125 Devore on 07.26.11 at 2:48 pm

#106 EdmontonJim

I’d argue that the govenrment can create more jobs than private industry for the very reason that it is less efficient at creating products. It takes 120 government employees/contractors to do the same job as 100 private employees.

What are you really saying here? Government can “create” as many jobs as it wishes, and it has nothing to do with efficiency or lack of it. Efficiency, profits, market demand, technological advancement, these are not the basis for government hiring. We can achieve full employment overnight: just have government assign everyone a “job” and send them a paycheck.

This is how it worked in the Soviet block.

#126 City Slicker on 07.26.11 at 2:59 pm

Garth as I have said before, I thoroughly enjoy your blog and the public service enlightenment you provide about real estate.
But so far you have never been right about gold, and you will still be denying its staying power when it hits 2000/oz and beyond.
And yes its not the first time I’ve heard suspicions about the value of Fort Knox.
“Gold-God-Guns” all the way man! See ya on the flip side brother.

#127 Bottoms_Up on 07.26.11 at 3:01 pm

#110 A lesson for “The American” on 07.26.11 at 12:51 pm
———————————————-
That makes absolutely no sense.

Do you always believe everything you read?

#128 Keith on 07.26.11 at 3:02 pm

How do we know that the US has $400 billion in Fort Knox? I heard that GWB lost it in a poker game.

#129 Ram 32 on 07.26.11 at 3:08 pm

I’m beginning to doubt you more and more lately, Garth. While I agree Canadian real estate is overpriced, your timing continues to be way off.

TIMING MATTERS! BIG TIME!

You are going to find you’re wrong on some other markets too. PM’s investors will probably see nice returns for years to come. The gold market will get bubbly, and then plummet, but it’s not there yet.

You continue to tell people to bail out of winning markets way too early.

#130 The American on 07.26.11 at 3:12 pm

At #110: Enough said. This proves my point from yesterday’s post. Eat it, dude. Can’t argue with hard facts.

http://en.wikipedia.org/wiki/National_debt_by_U.S._presidential_terms

#131 Thoughts on 07.26.11 at 3:22 pm

See what I mean about the conspiracy theories?

There’s no gold in Fort Knox, Goldfinger got to it already! WERE DOOOOOOOOOOOOOOOOMED

#132 The American on 07.26.11 at 3:24 pm

At #110: “A Lesson for The American”: One more thing… I prefer NOT to get my “news” from any headline that reads “Sarah Palin says Obama has accumulated more debt than previous 43 presidents combined” Seriously, what does this say about you? Are you truly this naive and ignorant to support a Tea Party radical? You’re going to take the news from a woman who doesn’t even understand and rewrites U.S. history (Paul Revere incident), can’t even state a single publication she reads on a daily basis, failed in the previous election, couldn’t even finish her term as a Governor of Alaska so she QUIT, has been implicated in scandal after scandal, has a failed reality TV show, a failed movie that is now pay-per-view only, and “can see Russia from [my] house!” Sheesh, you’re a friggin’ moron.

#133 April Showers on 07.26.11 at 3:27 pm

AHAHAHAHAHAHAHAHAH!!!! “The American” just CRUSHED “A Lesson for The American!!!” WAY TO GO!!! One thing I have learned is “The American” can and does back up his facts. He is rarely if ever incorrect in his writings.

#134 Deliverator on 07.26.11 at 3:33 pm

Ex-Cowtown: “Banks do not print money.”

Technically, no. The Crown prints the dollar bills and stamps the coins in circulation.

Banks do, however, CREATE money. Every loan they issue creates those funds, backed only by their reserve requirements, which these days is less than 3%.

Look up fractional reserve banking and how it works.

#135 JohnnyBravo on 07.26.11 at 3:38 pm

I notice the comments have been getting progressively more hostile of late. I have attempted to lighten the mood a bit with some non-partisan, political satire that I hope people will enjoy.

That said, while I think it’s fine to disagree with a blog host’s opinion, I don’t think it helps anyone to launch verbal assaults intended to insult or discredit said host. It is discourteous, disrespectful and counterproductive to the purpose of this discourse.

Publishing your opinions and predictions online every day and exposing yourself to criticism is not an easy thing to do–especially if you are a well-known public figure with a large audience.

If you disagree with something the host says, keep it factual and non-personal. And try to support your claims with actual evidence.

#136 BrianT on 07.26.11 at 4:04 pm

#120Einstein: The bottom line is the bottom line-everyone wants to make money, including yourself, so put your bigotry aside for 5 minutes.

#137 Helicopter Ben on 07.26.11 at 4:16 pm

Centralized banks make money out of thin air with interest and they in turn lend to the commercial banks who make loans basically out of thin air, commercial banks are the “multiplier”of credit and are the ones who create most of the money and credit in circulation. atleast this is my understanding of it, they basically do make money out of thin air as money =Debt and they supply credit to the masses which is also debt. this is why everyone is in debt. everyone owes the Rothschild’s basically. its a system meant to enslave you to the bankers through debt and has worked pretty well for them so far, Gold and silver gets you out of this rat race.

#138 Timing is Everything on 07.26.11 at 4:47 pm

#110 A lesson for “The American”
#129 The American

Does this help the ‘debate’? Can we trust the CBC? ;)

‘Select the name of the president to display more information on how the debt load grew under each leader.’

http://www.cbc.ca/news/interactives/debt-limit/

#139 The InvestorsFriend on 07.26.11 at 4:49 pm

United States Can Still borrow at 2.95% for ten years!

Despite talk of Default, investors are willing today to lend money to the United States at just 2.95% for 10 years.

At that rate it takes about 24 years to double your purchasing power assuming no inflation. And that assumes a non-taxed account. With any reasonable tax and inflation assumption investors appear to be parking their money for a real return of zero or even negative.

What factors might explain such a low borrowing rate:

Here are some ideas:

1. the Fed is buying up these bonds driving the rate down? Yes that is true but still a lot of other big institutions own these, so why do they hold at such a low return?

2. Investors expect rates to drop and they will get a capital gain? Okay but why do they expect that rates that are already at about 50-year lows will go lower especially in the middle of threats of default and debt rating downgrades?

3. Investors expect rates to drop because Japan rates are far lower? Maybe and which begs the question what are these Japanese bond investors thinking?

4. There is simply a huge a surplus of savings in the world? Talk of excess debt is fine, but one can’t borrow without someone to borrow from. Could it be that legions of Geezers, insurance companies and also China simply have such massive gobs of money to lend that supply and demand has forrced the cost of money down? This almost has to be at least part of the reason.

5. Investors accept these low rates beause all the other kids are doing it. Don’t count this out as a reason. Buffett calls this the institutional imperative. Big companies imitate each other. They move a s herd. If all the other big companies are investing in these bonds at 2.95% then it “must” be okay.

Low rates are not likely to last forever. It’s probaly a question of when will they end, not if. Most of the above reasons for low rates don’t hold much water.

Every bubble tends to pop eventually and low interest rates are probbaly another bubble.

#140 kilby on 07.26.11 at 4:55 pm

If I put all my savings in PM’s how will have any fun spending it? One person I know has a closet full of 100 oz silver bars and all they talk about is how they want to buy more, the problem is that they aren’t rich enough to buy too much more unless they suspend all the fun stuff in life…..We’re both around 60, seems sad.

#141 Debtfree on 07.26.11 at 5:00 pm

The whole thing is just a joke ,theater . Obama doesn’t even need boner or any of them .All he has to do is use the 14th amendment and just do it . On the other hand he is showing the whole world the kind of idiots he’s got to deal with . False flag wavers .

#142 Hoof-Hearted on 07.26.11 at 5:04 pm

Germany is NOT autonomous and has been a controlled colony of US ? and will be for decades ?

Approx 75 minute …excellent info but goes all the way back 1066 and usury…….

Last 15 minutes may indicate OUR future

http://www.archive.org/details/DeannaSpingolaAndStephenGoodson-HistoryOfTheJewishBankersAndTheir

#143 The InvestorsFriend on 07.26.11 at 5:16 pm

Helicopter Ben at 137 says:

“everyone owes the Rothschild’s basically. its a system meant to enslave you to the bankers through debt and has worked pretty well for them so far, Gold and silver gets you out of this rat race.”

Hmmm well, most people borrow voluntarily…

Should we borrow money and then invest that in Gold and silver? will that work?

If someone has excess money to invest in Gold and Silver why are they in debt?

Don’t any of the bank haters have any money on deposit with a bank and don’t you know that this is the money they lend out?

Yes a bank can create a loan and a deposit from thin air if you will but as soon as that deposit is spent to buy a car or whatever, the bank needs a new deposit to replace that.

I too will lend you money as long as you agree to let me keep it. I will loan you unlimited amounts on that basis. But I want interest. I am not greedy, 1% will do per year.

If I buy gold, the vendor will take my money that I paid and put it in the bank. (My money did not go into Gold after all)

Money may be debt, but it might be my money and your debt. The fact that my money (bank deposit) is offset by your debt does not bother me. And you applied to borrow it so you should thank me profusely for depositing money at the bank that you might borrow it.

What kind of people borrow money and then cry about it? like the bank forced it on them…

Now go out and earn some money all of ya.

#144 Devore on 07.26.11 at 5:23 pm

#140 kilby

If I put all my savings in PM’s how will have any fun spending it?

Simple, sell them, get cash, buy stuff!

Oh, but the precioussss…

A couple months ago, shortly before the big metals drop, I took all my silver bars to VBCE. The lady at the place was surprised I was selling, because “everyone is buying” and they can’t keep enough in stock. I just mumbled something about needing money, and walked out with my check.

#145 VICTORIA TEA PARTY on 07.26.11 at 5:56 pm

WAITING FOR GODOT, ER I MEAN, THE NEW AMERICAN RENAISSANCE

In awaiting the outcome of the non-stop US debt-debacle debate, whose resolution will apparently bring strawberries and cream to all of us, we might as well get comfortable, because I STILL don’t believe this sound and fury will end well.

BECAUSE:

–one out of five American males is jobless;

–blacks and Hispanics have crappier “lifestyles” than do the whites and others;

–CNN, etc., are pounding mercilessly on their viewers seeking support for Obama’s apparently directionless “cure” for America’s ills;

–elsewhere in DC even the Republicans, under their House leader John Boehner, are flummoxed by an internal Tea Party-driven revolt about their leader’s debt-ceiling “cure” too!

–the foreign wars go on.

MEANWHILE, BEHIND THE SCENES, IT’S PANIC AT THE WHITE HOUSE

Fox News quoted Obamaites, this day, as telling the Wall Street banks that there will be no default! How do they know?!

Read this:

‘Major ratings firms — namely Standard & Poor’s and Moody’s — have said even if the country raises the debt ceiling and doesn’t default, there’s a strong likelihood that the triple-A bond rating will be cut to double-A unless a budget can be crafted that results in $4 trillion in savings, the result of the massive debt load the country has accumulated in recent years. The nation’s outstanding debt is more than $14 trillion.

A senior banking official told FOX Business that administration officials have provided guidance to them that even though a default is off the table, a downgrade “is a real possibility for no other reason than S&P and Moody’s have to cover (themselves) since they’ve been speaking out on the debt cap so much.”

This guidance is a big reason why Wall Street has largely dismissed the possibility of default, and though the markets have been jittery amid the talk of default, they haven’t imploded as would be the case, many economists fear, if the nation missed a payment on its debt…While bank officials do not believe there will be a “catastrophic” effect to a downgrade, that’s not to say there won’t be negative ripple effects, notably to bond deals and derivatives priced off triple-A-rated Treasurys.’

SO…

Garth is correct when he writes that it’s all about the cost of money, obviously, since that fact of economic life permeates all aspects of our system.

BUT, I still can’t be as sanguine as Garth is once a debt deal is found, because the deal won’t solve a thing. It is still a can-kicking ceremony and economic ennui will continue apace across the world.

Yeah, it’s nice for the Yanks to have stashed a few trillions of rainy-day dollars. But once spent where do they find more? Print it? Why? That’s the nuts of the problem right now! Currency debasement!

Investment gems can always be found in any pile of economic manure. History tells us that it is so. But that is just for investors to find and is not a society-wide panacea for the jobless, homeless, hopeless and others who’ve slipped through the so-called cracks.

This debate, ongoing on Capitol Hill in DC, outlines not only that the 60s-generated Culture War continues, but in just another form, it outlines that we are living next door to a major American tragedy whose outcome is not anywhere near clearly resolved.

Because if it was, these debates would usher in some sensible conclusion that, I feel, Garth is being a little bit premature in promoting than is warranted at this point in history. One day, yes. Today, no.

The markets, today, BTW ended badly. Again. They HATE confusion!

#146 Helicopter Ben on 07.26.11 at 6:37 pm

#144 INVESTOR FRIEND. Why do nations have to pay interest to central banks who offer no service? why do we have to pay our taxes to these corrupt organizations. Gold puts restraints on these banks. can someone explain to me why there was all those wars to fight evil communism when we have centralized banks and governments our selves. centralized government and bank’s is communism , in the states though its more of fascism. I have no problem with the banks loaning out money with interest, i just think they should have more reserves and not deal in CDS and derivatives, thats not their place. Why is bank of america betting big with Credit Default Swaps in Greece and if they fail why do people have to pay for it?. Privatizing Profits and Socializing Losses isnt capitalism. I know Canadian banks are better then the states but they had to be bailed as well and will again in next crash that is coming. If i borrow a lot of money and lose it all in the stock market i dont expect you to bail me out. Its right in your face whether you see it or not, there is a money transfer happening right now , the super rich of the world are making a move to take everything, the middle class is about to get wiped out. You say we borrow voluntarily but where are you supposed to go if you want a house? the bank charges you for them to make money of your deposit, they should be paying me for keeping my money there. i dont have much money in the bank, i dont want them to make money of me.

#147 jess on 07.26.11 at 6:41 pm

Check out the Luxembourg CASH hoard

Figure 3. Pension fund asset allocation for selected
investment categories in selected OECD countries, 2010
As a % of total investment
by André Laboul, Head of the Financial Affairs Division
page 6/24
http://www.oecd.org/dataoecd/63/61/48438405.pdf
==============
paradox?
Tuesday, July 26, 2011
one of France’s top investigating magistrates, from an interview published last year in the SudDeutsche Zeitung (hat tip: Markus Meinzer and the TJN-Deutschland blog.)

http://steuergerechtigkeit.blogspot.com/2010/06/luxemburg-drehscheibe-fur-schwarzgeld.html

=
HFT have rebranded themselves as “automated trading professionals” Why don’t they call themselves the “skimmers”

#148 thecomingdepression on 07.26.11 at 7:00 pm

Holy crap. Have you told the prime minister and the stock market about this? — Garth

Quite funny, GARTH thinks that the economy is geared by the stock market! So if it goes way up then everything is good. WOW! One word: Algorithmics..go look it up. The prime minister already knows about “it”.

#149 Markey on 07.26.11 at 7:57 pm

According to yesterday’s Vancouver Sun, “Housing bubble fears over-inflated”. See http://www.vancouversun.com/business/Housing+bubble+fears+over+inflated/5157153/story.html . Unbelievable.

#150 Utopia on 07.26.11 at 7:59 pm

So what has the dollar lost just this month alone?

Three cents more or less. That is about four percent of it’s purchasing power. That is how much it has devalued against the basket of currencies that measure it’s worth.

So a good old fashioned political hissy-fit really can make America more competitive after all. This is actually good for business and could even lead to jobs growth as US companies take the advantage of the exchange rate differential and ramp up exports.

Naturally, as the dollar weakens, imports also decline. That is good for changing the balance of trade deficit numbers. Good for improving one’s chances at getting re-elected too. More jobs, less trade imbalance, greater economic activity and thus are eventually sown the seeds of renewal.

Sorry Doomer’s. Growth will be returning. The world will not end as the dollar declines. This is just part of the business cycle. It is a necessary sin.

And see, you don’t need to print billions of dollars to weaken your currency after all. You don’t even need a sneaky stealth default every other month either. All you need to do is scare the crap out of the sissies in the schoolyard and send them running for their mammies.

And down goes the buck.

“Hey!”, shouts Obama happily. “We just bought more time. Shaved some of the “real” debt burden to boot. Let’s argue again tomorrow. By the end of the week we will be in fine shape. Now take it to the eleventh hour boys”!

I would actually love to see the insider studies and statistics. You know they do them. At what point does the dollar need to fall too before it acts as it’s own stimulus and American exports surge ahead of competitor nations?

Would 65 cents do it? 63 maybe? Anyone think it might be as low as 62 or even less? The thing is, at a low enough level, the economy will actually start to boom again as reinvestment in America will become affordable and the world beats a path to the door to buy US production.

And there is plenty to choose from. The US is still the worlds leading manufacturer and producer of goods, let’s not forget that.

It’s tough on the average consumer though. Losing buying power means you actually are poorer in real terms. You have to keep ahead of the curve, keep your investments working….not allow them to fall below the hidden inflation rate or the ongoing devaluation of the buck.

This is getting very interesting now. The gold-huggers actually made pretty good money this month too as the dollar devalued 4 percent but gold increased by 9. I hate to have to admit that part. Oh well.

Hmmm. I might have to buy a bit more for insurance.

#151 Utopia on 07.26.11 at 8:06 pm

#149 thecomingdepression…..

“Quite funny, GARTH thinks that the economy is geared by the stock market!”
————————————
Actually it does. What happens in the stock market has a major impact on what takes place in the economy. If investor sentiments are strong and markets rising that reflects back on the health of the economy. t is of utmost importance that investors feel positive about future prospects. As we have seen, they do despite the headwinds.

Remember 1929?

#152 Nostradamus Le Mad Vlad on 07.26.11 at 8:07 pm


Good comments today.
*
Big Pharma “The cost of prescription medicines used by millions of people every day is about to plummet.”; Provocation NATO and US missile defense shields, and more of the same; Blacklist Testy relations between the US and Russia; Glenn Beck Tea Party nutbar; Gadaafi Should he stay or go? Well, the west is so screwed up it doesn’t know anymore, and this is one reason why he might stay; CC Not on Venus, and there is 96% CO2 there! Carbonazi Stupidity Minnesota is usually quite cold in winter. Is this normal? Microsoft A parasitic organization.

So It Begins Chicago Mercantile Exchange has announced that it will give less credit for U.S. treasury bills and foreign sovereign debt posted as collateral; Buy Bonds Some are; 2:33 clip Where would the world be without criminals? Hypocrisy Team Boener wins hands down; Deadlocked Whaddaya expect? Pure showmanship, that’s all; 3:09 clip A lady called the US Fed a ponzi scheme on TV. Is she right? Executive Order 6102 FDR banning private ownership of gold, and Gold demand outstrips inventory.

GS “The absurdity of this stunt is that nobody knows when the wars will end (if ever) and even more absurd, places Qaddafi in the position of being able to crash the US Government’s credit rating by simply staying where he is for another few months!” wrh.com; California bridge loan to pay bills. Where is The Terminator? Spain Dreaming of sun-drenched days in a bankrupt country; Excess Liquidity, or watering down the US$; Austerity = Doom, which is where the Eurozone is headed; Merkel Deutschemark better than Euro? Soros ‘Spose he has other things to do, like passing the reins over to China and Russia and bypassing the west; Increase In Poverty The US govt. is destroying its own people.

#153 simkev on 07.26.11 at 8:13 pm

#2 Mid-Ontario
I agree with you that Ron Paul is really the only politician that speaks in an honest and plain way. His methods are subject to review just like anyone else’s, but tell me that our current crop of “thinkers” in Ottawa and especially Washington have actually done better?
Garth there are day’s when I think that you are a non-contrarian disguised as a contrarian!
It was’nt that long ago you were selling squirrel recipes cookbooks and listing the virtues of Honda generators …. hey …just saying! Other than that Garth, most things you say I agree with.
peace!

#154 from kits on 07.26.11 at 8:17 pm

@devore

you sold your silver way to early….70 coming our way

retail demand is almost non-existent..silver etf’s coming online in asia, demand hasn’t even started but congrats on owning silver far before any of this insanity started! no doubt you’ve done very well :-)

#155 BrianT on 07.26.11 at 8:26 pm

#51Ut-You constantly throw out these “doomers” and “goldhuggers” insults while you consistently type line after line of idiocy. You should consider a little more thinking and a little less typing.

#156 The InvestorsFriend (Shawn Allen) on 07.26.11 at 8:33 pm

Utopia at 151 said:

“So what has the dollar lost just this month alone?

Three cents more or less. That is about four percent of it’s purchasing power. That is how much it has devalued against the basket of currencies that measure it’s worth.

… This is actually good for business and could even lead to jobs growth as US companies take the advantage of the exchange rate differential and ramp up exports.”

Utopia, you will be relieved to know I agree with your idea that the lower U.S. dollar will help their economy and jobs.

I would add though that the U.S. dollar has not necessarily lost ANY purchasing power inside the U.S. because of this. If it has that will show up through inflation.

In Canada our dollar went from U.S. 63 cents to U.S. $1.10 yet in Canada inflation was pretty steady all the while. Our dollar gyrated wildly in terms of what it would buy in the United States but what it would buy in Canada was pretty steady all those years, a slow decline in purchasing power due to inflation, but no wild gyrations.

Similarly the American dollar can gyrate wildly against world currencies and it has very little impact on the average American. (The vast majority of Americans do not travel and spend all their money in the good old U.S.A.). And as Utopia alluded, Americ mostly makes its own stuff on a percentage basis it is not actually a huge importer. Canada imports 33% of GDP, in the U.S. I believe the figure is closer to 10%. Consider we are one of their largest trading partners despite that they are ten times bigger. Big trade to us, is small to them.

#157 Hoof Hearted on 07.26.11 at 8:38 pm

Anyone seen this before?

” Not Yours To Give ”

Col. David Crockett
US Representative from Tennessee (in office March 4, 1833 – March 3, 1835 )

http://www.juntosociety.com/patriotism/inytg.html

QUOTE:

One day in the House of Representatives a bill was taken up appropriating money for the benefit of a widow of a distinguished naval officer. Several beautiful speeches had been made in its support. The Speaker was just about to put the question when Crockett arose:

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

QUOTE:

“ ‘No, Colonel, there’s no mistake. Though I live in the backwoods and seldom go from home, I take the papers from Washington and read very carefully all the proceedings of Congress. My papers say that last winter you voted for a bill to appropriate $20,000 to some sufferers by a fire in Georgetown. Is that true?’

” ‘Well, my friend; I may as well own up. You have got me there. But certainly nobody will complain that a great and rich country like ours should give the insignificant sum of $20,000 to relieve its suffering women and children, particularly with a full and overflowing Treasury, and I am sure, if you had been there, you would have done just as I did.’

” ‘It is not the amount, Colonel, that I complain of; it is the principle. In the first place, the government ought to have in the Treasury no more than enough for its legitimate purposes. But that has nothing with the question. The power of collecting and disbursing money at pleasure is the most dangerous power that can be entrusted to man, particularly under our system of collecting revenue by a tariff, which reaches every man in the country, no matter how poor he may be, and the poorer he is the more he pays in proportion to his means. What is worse, it presses upon him without his knowledge where the weight centers, for there is not a man in the United States who can ever guess how much he pays to the government. So you see, that while you are contributing to relieve one, you are drawing it from thousands who are even worse off than he. If you had the right to give anything, the amount was simply a matter of discretion with you, and you had as much right to give $20,000,000 as $20,000. If you have the right to give to one, you have the right to give to all; and, as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism, on the one hand, and for robbing the people on the other. ‘No, Colonel, Congress has no right to give charity. Individual members may give as much of their own money as they please, but they have no right to touch a dollar of the public money for that purpose. If twice as many houses had been burned in this county as in Georgetown, neither you nor any other member of Congress would have thought of appropriating a dollar for our relief. There are about two hundred and forty members of Congress. If they had shown their sympathy for the sufferers by contributing each one week’s pay, it would have made over $13,000. There are plenty of wealthy men in and around Washington who could have given $20,000 without depriving themselves of even a luxury of life.’ “The congressmen chose to keep their own money, which, if reports be true, some of them spend not very creditably; and the people about Washington, no doubt, applauded you for relieving them from the necessity of giving by giving what was not yours to give. The people have delegated to Congress, by the Constitution, the power to do certain things. To do these, it is authorized to collect and pay moneys, and for nothing else. Everything beyond this is usurpation, and a violation of the Constitution.’

” ‘So you see, Colonel, you have violated the Constitution in what I consider a vital point. It is a precedent fraught with danger to the country, for when Congress once begins to stretch its power beyond the limits of the Constitution, there is no limit to it, and no security for the people. I have no doubt you acted honestly, but that does not make it any better, except as far as you are personally concerned, and you see that I cannot vote for you.’

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

Anyway..see the link for the whole speech .

The gist of this was Crockett, was out campaigning and met a constituent who was pissed off and KNEW his stuff.

At this point, The Constitution was passed in 1787 , barely 50 years previously, yet it was already being manipulated by the elected.

This is a great speech by a humbled politician.

#158 Trailer Park Boys on 07.26.11 at 8:39 pm

Listen…

Silver is more valuable.

Ever seen Gold kill a vampire ?

No ?

Then STFU

#159 bcPaul on 07.26.11 at 9:06 pm

Garth, what do you expect? It’s like you posting messages in UFO forums and wondering why the conspiracy guys respond.

Talk about default and gold and this is what comes out of the woodwork.

#160 Response to Fort Knox and Obama on 07.26.11 at 9:08 pm

Garth:

In response to my earlier comment: I didn’t say anything about Obama being born in Africa; nor did I say that Fort Knox is empty.

Putting words in someone’s mouth in order to “prove” some sort of point is not very credible–nor is the pulling out of the old “conspiratorial” designator.

Do you think that history ain’t full of conspiracy FACTS?

Essentially, “conspiracy theorist” is just another name to call people in order to shut down “unwanted” conversation–conversation that threatens your current mental paradigm.

Again, seems like an emotionally-driven…rather than logical response.

Interesting.

And for “The American”:

1. I tend not to get my credible evidence from “Wikipedia”…like you.

2. The evidence presented has nothing to do with Palin; the info. comes from Rep. Eric Cantor–perhaps you can make fun of him instead?

3. You are picking up some nasty name-calling habits from Garth in order to “win” your arguments.

Food for thought, buddy boys.

#161 Utopia on 07.26.11 at 9:12 pm

#156 BrianT on 07.26.11 at 8:26 pm

Those are not insults. They are terms of endearment Brian.

#162 avenirv on 07.26.11 at 9:29 pm

Sasquatch,
the roman empire lasted, in 2 forms, more then 2000 years.
the ottoman empire lasted for 700 years.
the russian empire is alive for 500 years.
the british empire lasted for 200 years.
do you see the trend ?
but the chinese as a true empire are up for about 1000 years.

USA is a true force for the last 150 years.

#163 Aussie Roy on 07.26.11 at 9:56 pm

Aussie Update

The RBA Gov slows down his consumption of kool-aide. Has he been reading Prof Steve Keen?.
Says yes house buyers have been consuming a large amount of the debt drug, but no hangover is expected.

“Using the Treasury’s series for private wealth, from 1960 to 1995 the annual average per capita rate of increase in total wealth, in real terms, was 2.6 per cent. That is, it was broadly similar to the per capita growth rate of real GDP, which is what one would expect. So the growth from 1995 to 2005 was at a pace well over double the average of the preceding three or four decades. A large part of the additional growth was in the value of dwellings. The extent of leverage against the dwelling stock also tended to increase, with the ratio of debt to total assets rising from 11 per cent at the start of 1995 to around 17½ per cent by the end of 2005. It has tended to rise a little further since then.

Had we really found a powerful, hitherto unknown route to genuine wealth? Or was this period unusual?

Looking back, it appears the latter was the case. In 2008, the trend changed. Real assets per person declined for a period during the financial crisis. Given the nature of that event and the potential risks it presented, that is not surprising. Real asset prices have since risen again but, so far, have not resumed the earlier trend rate of increase, and at this stage they show no signs of doing so. They look very much like they are on a much flatter trend.”

So yeah, house prices are too high but no prices fall just a flatline growth – LOL.

http://www.rba.gov.au/speeches/2011/sp-gov-260711.html

Goodbye retail boom times, hello unhappy nation

http://www.smh.com.au/business/goodbye-retail-boom-times-hello-unhappy-nation-20110726-1hylx.html

Moody’s warns on Aussie housing market

The Australian residential mortgage-backed securities (‘RMBS’) market’s performance has to date been positive, with low underlying mortgage default rates and minimal house price declines. However, the wider housing sector remains characterized by the substantial price run-ups and household indebtedness growth over the past two decades. The experience of other countries shows that housing crises may occur notwithstanding good prior performance.

In this context, Moody’s is undertaking a re-assessment of its Australian RMBS methodology. We plan to outline our specific proposals in a Request for Comment in late August. We anticipate increases to Moody’s Aaa mortgage default probability and house price stress rate assumptions. Separately, Moody’s also expects to modify its approach towards incorporating lenders’ mortgage insurance in Australian RMBS.

http://macrobusiness.com.au/2011/07/moodys-warns-on-aussie-housing-market/

#164 Davey Boy on 07.26.11 at 11:33 pm

Let’s face it. People will defend any position that suites their purposes, often without enough research to base their position on. At least GT presents facts to back his opinion and many would be smart to use it as an additional source of information in order to make a sound decision as opposed to attacking an opposing view blindly.

#165 thecomingdepression on 07.27.11 at 1:09 pm

UTOPIA go tell the Zimbabwe gov’t that the stock market is good when its HIGH. All is well. Learn some inflation/fiat currency collapse economics! DUH.

#166 jess on 07.27.11 at 3:21 pm

…Mad Vlad ….hmo’s might start to get upset if one starts poaching your customers?

New Yorker writer and FRONTLINE correspondent Atul Gawande reports on a doctor in Camden, N.J., who actually seeks out the community’s sickest — and most expensive — patients.
http://www.pbs.org/wgbh/pages/frontline/doctor-hotspot/
Read more: http://www.pbs.org/wgbh/pages/frontline/doctor-hotspot/#ixzz1TKpuNe8n

Medical Report
The Hot Spotters
Can we lower medical costs by giving the neediest patients better care?by Atul Gawande

Read more http://www.newyorker.com/reporting/2011/01/24/110124fa_fact_gawande#ixzz1TKpcb5iE

#167 Evangeline on 07.27.11 at 4:59 pm

((The debt limit has already been raised de facto when the Govt approved its budget earlier this year. ))

I think that is incorrect. AFAIK the only budget that the WH has sent to Congress since the Democrats were elected was for 2012, and that budget was voted down unanimously by both parties.

#168 The Bankers are pulling the plug on Canada on 07.27.11 at 7:52 pm

#159 Mikey the Realtor or soon to be Mikey the “no sales” Realtor. LOL you must be in a world of hurt. That pain is only going to get worse. The bankers are pulling the plug on the last two biggest housing bubbles in the world. Assies and Canada. It’s going to be a nasty crash!