Eat the rich

When the Huffington Post called me this week for an interview on the growing gap between wealthy and poor, I sensed they were rooting for the rich. The reporter sounded hot, so I could imagine her sitting there in pearls and heels, researching an amusing piece about the little people. Or walking to the window, suggestively parting her stole and taunting the sooty protestors below with, ‘Try occupying this, losers!’

Ah well. It was an interesting premise: the canyon between wealthy and struggling is exploding, and nowhere is this more evident than with real estate. That’s because the wealthy tend to buy properties they can afford, and usually do so with cash, while the rest of society now buys homes they can hardly afford, and do it with credit. This has turned the middle class into the sucker class. When real estate corrects, it’s the indebted who suffer.

What’s more, hot money (as opposed to hot reporters) has skewed values in places like Toronto and Vancouver. After all, it doesn’t take a lot of multi-million dollar purchases by HAM or European bond refugees to kick up the average price of a SFH. Real estate boards gleefully report prices, focus on year-over-year gains, and purposefully create the impression of a rising market. So everyone piles on – even those with no money.

The pattern repeats. We buy at the top. And when 95% of the money used is borrowed, risk goes off the chart.

But, I hear them chanting in the streets below, aren’t interest rates going to be low forever? Why shouldn’t we buy, mesiah?

Good questions, rabble. As we know, the Bank of Canada’s latest forecast is frosty. Weak growth in the US, dithering in Europe, and an economy here that’ll barely grow by 2% next year – less than inflation. That reasonably means no interest rate increase until well into 2012, unless Apple decides to buy some sovereign debt and flood the market with iGreeks.

However, cheap money alone is not enough to fuel ever-higher prices, even in 416 or the west side. Just because rates are low doesn’t mean borrowing and demand will jump. For real estate to appreciate, and hold its gains, we must have an expanding economy, more money sloshing around and higher household incomes. That’s exactly what Brother Carney said ain’t going to happen.

Also factor in current near-saturation levels of home ownership, lousy demographics (house-rich, cash-poor wrinkly Boomers) plus government austerity, and I stand fearlessly by my predictions of a real estate market on the edge. In fact, as this pathetic blog has previously pointed out, it’s already happening. When there are 116 properties for sale between $1 million and $2 million in a city of 330,000 where the average family earns just $76,650, you know we’re screwed. Well, at least Victoria is.

You can also see the magic of numbers in Toronto, where the average SFH in the 416 are now sells for $706,288, but 51% of all homes in this massive market changed hands last month for less than $399,000. Fully 70% were sold for less than $490,000. In other words the bulk of the buying is being done at lower end of the market, where tanker loads of new debt are being created.

In most markets sales are eroding and listings are rising. The lousy weather approaches, and the economy’s cooling. The fact rates will stay where they’ve been is hardly news, or even meaningful.

That most people will borrow too much to buy something destined to fall in value and cost them half their income to own is a given.

That other people will borrow at 3% to buy assets paying them 6% and write off the interest against their income is more interesting.

No wonder she has pearls.


#1 dylan on 10.25.11 at 8:48 pm

good job

#2 T.O. Bubble Boy on 10.25.11 at 9:09 pm

Gordon Pape must be so proud:

Local governments in Beijing are planning to experiment with reverse mortgages as a way for people to finance nursing home care.

#3 Jsan on 10.25.11 at 9:10 pm

Just another step in the direction of never needing to use a realtor again.

“Listings website pries open property data vault ”

#4 Tim on 10.25.11 at 9:11 pm

“That other people will borrow at 3% to buy assets paying them 6% and write off the interest against their income is more interesting.”

Are you advocating leverage for investing in this volatile period?

For the right assets, absolutely. — Garth

#5 Aaron - Melbourne on 10.25.11 at 9:14 pm

youtube – Elizabeth Warren – The coming collapse of the middle class.

watched this vid (an hour long) after I saw it linked here a fews days ago. Highly relevant to today’s post.

#6 Onemorething on 10.25.11 at 9:17 pm

Ha, Middle Class = Sucker Class!

That’s right, 30 years of it Garth, the best swindle of funds and the loudest sucking sound over the last 10!

Experience shows when supply reaches high levels followed by lengthy active listings only with lower end sales mean two things, buyers are affraid to take on too much risk or these are downsizing clients.

This is followed by a battle at the top end to dump props quickly and this means the beginning of the slide then followed by upper mid, middle etc.

There are only so many buyers! The downturn clearly now underway.

#7 T.O. Bubble Boy on 10.25.11 at 9:17 pm

Deja Vu?

This feel a lot like 2008, when Flaherty infamously called for “no recession in Canada” only weeks before the global financial crisis:

Canada’s Conservative government has backed away from its pledge to balance the federal budget by early 2015 as prospects for the economy darken.

#8 Debt's Dark Embrace on 10.25.11 at 9:23 pm

From Kelowna, I know some people who bought small townhouses about 4 years ago for between 240 and 260k. The only sales in that complex in the last 2 years have been for 215k, 210k, and 205k in that order. Seems like prices are dropping in that corner of the market.

#9 special-k on 10.25.11 at 9:27 pm

North Vancouver has a population of only 126,000 with 170 properties for sale between 1 mil. and 2 mil…and a lower avg. household income… my grade 8 math says that’s about twice as bad as Victoria.

Also screwed. — Garth

#10 vyw on 10.25.11 at 9:33 pm

The 2.2 % forecast is real growth (after inflation).

I think it will be downgraded again.

All Govt deficits are $54 billion annualized. This provides enough stimulus to keep the credit party going BUT commodity prices crash, the TSX wll correct and maybe the private credit bubble will deflate, then the housing bubble.

Unless that happens, the house prices in choice neighbourhoods will just continue to climb even though some local markets ie. Kelowna, Victoria continue to correct.

#11 eaglebay - Parksville on 10.25.11 at 9:34 pm

Anybody tried yet from Rogers Communications?
This should become the Canadian “”.
Looks good so far.

#12 Signpost in the bushes on 10.25.11 at 9:44 pm

#4 Tim
“Are you advocating leverage for investing in this volatile period?”
“For the right assets, absolutely.”-Garth

Warren Buffett on borrowing; “One has to be pretty smart to use leverage correctly, so dumb people have no business borrowing, and intelligent people are usually smart enough to know that it’s a dumb idea in the first place!”

Buffet leverages billions. — Garth

#13 vyw on 10.25.11 at 9:46 pm

Someone posted the global debt clock yesterday.
Debt is just the accumulation of deficits borrowed from savers. For the trillion or so of CDN debt, we have about 70% from CDN savers, the rest from foreigners who sold us stuff (we have a trade and current account deficit).

The point is that the global debt clock represents the accumulated savings of the world. Debt is not a bad thing as long as GDP grows faster. In fact Canada has been in debt since 1867 and ramped up in modern times (after the 70’s). If you pay down debt, savers will go elsewhere – maybe overseas ie. Indian prime rate is over 8%, that’s why many South Asians are moving money there.

For households, debt can be a problem if you cannot service it or if the asset that was purchased ie. a house falls in value so that the debt is too high. If you default and go bankrupt, then the lender (usually the bank, but maybe relatives, etc) must eat the loss.

If you have a Canada Savings Bond, do you want the Govt to pay down the debt and pay you back? Usually, you want the Govt to offer a new Bond when it’s time to renew.

Debt = Savings, and that’s not a bad thing if managed properly.

#14 Not 1st on 10.25.11 at 9:49 pm

Not true Garth. Many middle class people people have gotten rich buying real estate with credit and doing nothing but making their monthly payment. Its not the death trap you make it out to be.

Warren Buffet himself advocates using someone else’s money wherever possible.

Now where did I say it was a death trap? Go buy with 5% down and tell us how it works out. — Garth

#15 jess on 10.25.11 at 9:52 pm

T.O. Bubble Boy

In 2008, HUD changed rules that had been in place since 1989 that said reverse-mortgage borrowers and their heirs would never owe more than the home was worth at the time of repayment, according to the AARP release. Under the new HUD policy, an heir or surviving spouse must pay the mortgage balance to keep the home — even if that loan balance is higher than the property’s value.

AARP says change to federal rule is forcing surviving spouses out of homes.

reverse mortgage fraud

…“There are multiple levels of fraud in this one case,” said Ferrer. “Because of this fraud, some of these [victims] are having to fight off foreclosure.”

Here’s how the scheme worked, according to an information filed by the U.S. Attorney’s Office:

Beginning in March 2009, Incandela, 24, and Echevarria, 29, called senior citizens to pitch a reverse mortgage, which is a type of loan where a bank purchases a homeowner’s equity and makes installment payments to the borrower.

After the seniors filled out the applications, Incandela and Echevarria had the homes appraised and then inflated the property’s worth in order to create the appearance of substantial equity in the home.

After receiving the inflated loan proceeds from Genworth, closing agent Mackey would divert a substantial portion of the money into a personal account managed by Incandela, rather than paying off the existing mortgages.

The group would then stage fraudulent “short sales”—transactions where a property sells for less than the outstanding mortgage—with the first lender, and pocket the difference between the inflated reverse mortgage amount, and what they paid in the short sale.

Throughout the process, falsified closing documents and loan applications were used to hide the fraud from Genworth and from the government.

Affected homeowners span from South Florida to Stockton, Calif. There is one victim in Sunrise and three in Palm Beach County.

“These are seniors who are on Medicare, limited incomes, desperate for help,” said Tony West, U.S. assistant attorney general for the Civil Division. “Money that should’ve gone to help seniors with modest incomes instead went to line the pockets of fraudsters.”

In Sunrise, an elderly condo owner on Aragon Boulevard applied for a reverse mortgage on a property appraised at $31,000. Gendason, 42, changed the appraisal report to say that the condo was worth $275,000 in order to obtain an inflated reverse mortgage loan, the attorney general’s office alleges. When Genworth paid out the loan, closing agent Mackey, 46, allegedly wired $123,000 to the fraud ring rather than paying off the existing mortgage.

The defendants appeared in court on Wednesday to face the charges. Each faces a maximum prison sentence of 30 years.
Read more:

#16 Marco from the bestest place on the smallest part of earth on 10.25.11 at 9:55 pm

If this is happening in a country with seemingly boundless wealth (so much so it is shipping it abroad) wh can’t it happen in one where the economy is practically stagnant? Might it be because property values are not intrinsic but based on what people are willing and able to


#17 Marco from the bestest place on the smallest part of earth on 10.25.11 at 9:59 pm


To pay whitch in turn is directly related to the cost of money, no?

Unhappy  Shanghai homeowners  protested at real estate showrooms this past weekend after developers cut residential home prices by 25 to 30 percent to attract new buyers. Around 400 homeowners demanded either refunds or the right to cancel their contracts. Protesters were injured and one sales office was damaged by the angry homeowners. Adding fuel to the fire was recent news that new home sales in Shanghai per square footage dropped 20.1 percent and major commercial banks raised interest rates charges on first-home purchases.

#18 disciple on 10.25.11 at 10:18 pm

Financial advisers are the equivalent of realtors. Neither have your best interests in mind, but you can use their knowledge to your advantage.

The moment I can walk up to a company’s head office and buy a piece of their business, without the hidden taxes we call by other names, is the moment we won’t need realtors.

The financial exchanges are the equivalent of the CREA, you have to a “licence” to parasitically suck money from the buying and selling of others.

Like I’ve said before, all you have are exclusive clubs, gangs, and mind control. Which is why democracy, capitalism, and free markets will never work as intended.

#19 Peter B on 10.25.11 at 10:30 pm

Another factor that may hurt housing prices is rational fear about the world’s future. A lot of stuff seems to be going wrong with the world.

Europe in Economic crises
Uncertainty about the Euro currency
America’s huge debt and continuing housing meltdown
Japan’s real meltdown
Tea Party vs Occupy Wall Street
Iran trying to get nukes
North Korea having Nukes
Uncertainty about N. Africa and Middle East revolutions

Really is now the time to borrow half a million to buy a house?

#20 Junius on 10.25.11 at 10:33 pm

#13 vyw,

What you are missing is the fact that the world’s debt is vastly larger than its assets. When you factor in derivatives and other exotic instruments we are facing far more debt then we can manage. Eventually massive amounts will have to be written down.

#21 OttawaMike on 10.25.11 at 10:33 pm

The wealthy pay cash.

I toured a 1/2 finished 2500 square foot ultra modern infill today a couple of blocks from the canal but still in a just OK area.

I asked my buddy running the project what the owner would have in it with the tear down purchase and all in.

“Just over a million and Mom and Dad are paying.”

The same area sold a 75 year old semi last week with a bid enticing low listing and got $65k over in the $500,000’s.

#22 Samson on 10.25.11 at 10:34 pm

oh yeah – now I know why I keep coming back here.

“…unless Apple decides to buy some sovereign debt and flood the market with iGreeks.”

a classic Garthism. I hope somebody is compiling a “Garth’s Greatest” somewhere…

#23 disciple on 10.25.11 at 10:36 pm

Everyone for himself or herself, and everyone else be damned. If you truly believe this, you are fighting a losing battle. At some point, aren’t you everyone else?

It’s amusing to me, watching you scramble to keep afloat the last remaining vestiges of the grand illusion that you can assign monetary value to anything. Once you understand that everything is indeed free, money is obsolete as a store of wealth.

Everyday, we throw away perfectly good food and materials so that the PRICE is sustained at whatever level. Housing is no exception. Stupid insanity, disease of the mind.

#24 45north on 10.25.11 at 10:37 pm

Aaron: The coming collapse of the middle class.

she describes the family in which I grew up, Dad went to work, Mom stayed home. She describes the strength of the family and compares it with the modern two income family. “Todays family need 104 paychecks to make the mortgage”. I think she grew up in the traditional family and that she truly fears for the modern two income family.

#25 Patz on 10.25.11 at 10:38 pm

As we edge ever closer to our shambolic future the Lorelie (think our media) murmurs something that sounds like “Whistle While You Work” we’ll be outta this by 2013, ya well 2014 at the latest with a balanced budget.

I heard an interview with a dude from the Conference Board of Canada (or is that Conference Bored?). Yup, everything fine here. Real estate’s a balanced market everywhere, Yup, no worries mate. Vancouver, huh, everybody should be so lucky.

I was a news and doc producer for 30 years. Never did anything I was ashamed of; never knowingly lied–Ok, once. But nowadays, oh my Lord! Small example Global TV. Yeah I know, what should I expect? But this little one really got me.

The story was on the Occupy Vancouver camp–out at the Art Gallery. There was a montage of footage. Included in that was a shot of a native drumming circle right at the (main) intersection of Georgia and Granville (a block from the camp-in). Part of the protest right? wrong! It was part of a Native protest against the inquiry into the murder of women from the downtown Eastside by Willy Pickton. They were right outside the building where the inquiry is taking place and they’re protesting the exclusion of many of the native and other groups representing Eastside women’s interests.

Ok, maybe the reporter is just stupid, I dunno.

#26 martin on 10.25.11 at 10:38 pm

great confrence call today Garth!! thanks for letting us hear you and your partner’s opinions about the markets. i would be more than happy to pay a certain fee in the next future just to listen to more conferences whenever they happen about the market. thank you and iam very greatfull !! plz
take my request in consideration [email protected]

#27 dd on 10.25.11 at 10:41 pm

Conrad Black is – was rich. He couldn’t afford his house in Florida.

#28 Marc L on 10.25.11 at 10:43 pm

it is all getting a little tired…

#29 Patz on 10.25.11 at 10:46 pm

@vyw #13

v–may I call you v? Please wait until you’ve passed Econ 101 and are into 201 before you lecture us on debt. And btw, you’re wrong: debt can be incurred without recourse to borrowing from another’s savings. D- (I’m feeling generous).

#30 Alero01 on 10.25.11 at 10:53 pm

I look forward to reading the article in the Huffington Post. I have no doubt that it will draw comments from people who have lived the experience about which you have been warning us.

#31 Tim on 10.25.11 at 11:03 pm

Warren spends a bit more time than most of us researching companies and has a bit more grey matter…
Using leverage in this environment would require a lot of antacids…

#32 john on 10.25.11 at 11:14 pm

what would be the right assets to purchase if one was to borrow to invest?

#33 Devore on 10.25.11 at 11:38 pm

#12 Signpost in the bushes

Ignore what Buffet says, watch what he does.

#34 Scalgary on 10.25.11 at 11:46 pm

iGreeks… Hilarious..!

iPaid to own iGreeks…

Great post again Garth. BoC made low interest rate meaningless… “fear” will take care of it.


#35 Nostradamus Le Mad Vlad on 10.26.11 at 12:22 am

“Eat the rich. This has turned the middle class into the sucker class.” — Instead of focusing our short attention spans on a bunch of barfspewed numbers, I suggest a Five Year Plan, which various govt. leaders have put to good use, mainly because none of them work, and by the time five years comes around, they will all be long-forgotten anyway. Enjoy the Spewshow!
Oboy WND may not be the greatest site, but the headline is accurate; CPC Here is Harper’s govt. in action; Brussels Sprouts are probably not going to be part of the bailout; Waiting For Lehman Similar to Waiting For Godot, who never returned; Greek Austerity State of shock sinking in! Entitlements No one is entitled to anything, unless they have earned it.

EU – EAU As the EU winds down, so the Eurasian Union rises, and this could be why Germany is holding out on the EU; Link In US citizens with Swiss bank accounts to be revealed, and probably goes with immediate prior link — the dreaded Hyperinflation character, leading to TSHTF time; Everyone’s insolvent, so Bank run starts, so Apply enough pressure and Germany does the foxtrot to tango music; 9:16 clip Niall Ferguson on the EU; 14:38 clip China’s ghost cities; The Tip of the iceberg is straight ahead, in full view.

7:03 clip HAARP and ‘quakes. The Turkey quake was unnatural, and this. The NMF is mentioned here; The Bee Gees Stayin’ Alive (just). Terrific musicians; Bush and Blair At last! Now they just have to find them, and bring them to trial (a dose of what they did to Gadaafi would be fair justice); Fukushima Furious worker tells all, and Radiation Levels are higher; Harley Recall Check brakes, Garth.

Libya Another fine NATO-botched job. It was for water – gold – oil, and to stop them using a gold-backed currency; Is this the kind of world we have to look forward to? For a few years, yes; Beyond Our Control Tsunamis, asteroids, brain salad surgery etc.; Eat the rich with a Robin Hood tax; Fireballs, CMEs and the like.

#36 Kilby on 10.26.11 at 12:32 am

Had some retired friends borrow $100,000 to invest, their “financial advisor” told them they could claim the interest on the loan used for investments. That was earlier this year and now their investment is worth $90,000….So use leverage but use it wisely, there are a lot of financial planners out there that haven’t a clue. One that I know has herself and family buying houses in Newfoundland because of the oil offshore “prices will just keep going up” Needless to say, she is not handling any of our money.

#37 Gord In Vancouver on 10.26.11 at 12:46 am

Thanks for the great post, Garth.

#38 the Phantom on 10.26.11 at 12:50 am

Evening Garth and bloggers:

“When there are 116 properties for sale between $1 million and $2 million…”

Although our mortgage is miniscule over and against some of the ones spoken of here, that quote Garth makes the $190,000 my friend paid for a s x s (only one unit) last year seem not quite as daunting as I thought it was one year ago.

To quip a phrase: “What were you thinking…?”

the Phantom

#39 michael smith on 10.26.11 at 12:57 am

this is one confusing blog – been reading it for a while.
what is the author’s point???
is he advocating owning real estate in Canada or against it?
pick a side already!

couple weeks back you clearly stated owning Real Estate right now is the most dangerous asset to own today.

couple weeks later, he admits he is actively buying and selling today.

and now today, hes going Tom Vu on our ass…

“That other people will borrow at 3% to buy assets paying them 6% and write off the interest against their income is more interesting.”

Are you advocating leverage for investing in this volatile period?

For the right assets, absolutely. — Garth

– come on already, you cant be talking both sides and be expected to be taken seriously !

You confuse easily. Real estate is like any asset. Strive to hold it in the right proportion for your net worth and personal goals. Overweight, and you lose. Buy at the wrong price, lose again. Get it cheap and you will mitigate risk. The key to financial survival in a volatile world is diversification, which means financial assets are equally important as real ones. The leverage we mindlessly use for real estate can actually be used more safely there. All of these thoughts have been explored and illustrated on this blog. — Garth

#40 InvestorsFriend (Shawn Allen) on 10.26.11 at 1:13 am

VYw at 13 said:

Debt = Savings, and that’s not a bad thing if managed properly.

In other words, debt has been borrowed from savers.

to advocate no debt is to advocate no savings.

vYm, you are absolutely correct but will be attacked by nut bars forthwith who think that debt is borrowed from unborn children or martians or something.

#41 Coho on 10.26.11 at 1:40 am

Yes, we have a vanishing middle class where working people realize an ever smaller portion of the fruits of their labour. And an effective way for the elite to harvest middle class wealth and ultimately make slaves out of people are these booms and busts. These “economic cycles” are really harvest time on middle class wealth.

When people overpay for something big like a house and gorge on credit, by the time they pay taxes, mortgage interest, credit card debt, which those higher up the pyramid harvest, they are left with very little showing for their life long labour. It is a person’s labour that has real value and it is so sad to see people trading their valuable labour for overpriced housing and trinkets. Yes, people are free to sell at inflated house values, and realize a capital gain but how many do, when people are programmed through mainstream media to think houses will rise forever?

Most people don’t begrudge another’s financial success. A wealthy entrepreneur grows a company and provides jobs. If the company is run well and is profitable and the employees are paid fairly, then everyone is happy. Unfortunately, a culture of greed so pervasive and unreasonable and the emergence of these aberrant “too big to fails” has left people with no money and little hope. Now they’ve taken to the streets. It’s not from jealousy or sour grapes towards the rich, per se. It is the abberation of these too big to fails that like a parasite suck the life out of nations but try to convince people they are needed.

If people have real opportunity and can make their own way, they’ll likely not care how much the rich are making.

There are debates about socialism and capitalism on which is better. I’d guess a combination of both may work best, but it really doesn’t matter what the systems are. It’s not so much the systems, it is how they are run. Given any system, the problem of evil and humanity’s embracement of it will always corrupt it. And what is the solution out of economic doldrums? Why, it is war of course. World war –the ultimate re-boot of the system every generation or two to help get economies going again. And who pays most dearly? Why “the little people” of course, with their money and blood. Tens of millions (a lowball estimate) of deaths pave the way for many trillions to be made by the highest echelon.

#42 BPOE on 10.26.11 at 2:25 am

Folks, everything is wonderful. Low low interest rates for decades to come. Solid economy. Offshore money pouring in. Love it. Love BPOE

#43 Carp on 10.26.11 at 3:14 am is an awesome site from what I can see. I’m happy I sold my place last year and happy to rent this place for a few years and then buy it since folks in this neighborhood are asking way too much. It should be noted, the realtor that rented this place to us was dead on a market price versus the boomers trying to cash in around us.

#44 Steven Rowlandson on 10.26.11 at 6:49 am

Doubtfull that the rich could satisfy the tax collectors even with 100% confiscation of income and assets.
Once the wealth is used up do you think there will be more? Get real the rich will be poor and quit doing anything that results in their mistreatment.
The problem is that government refuses to quit its excessive spending and quit borrowing and pay down its debts. That is the biggest problem in the world of finance followed closely by the excesses of the real estate market.

#45 Devil's Advocate on 10.26.11 at 7:36 am

When are 116 properties for sale between $1 million and $2 million in a city of 330,000 where the average family earns just $76,650, you know we’re screwed. Well, at least Victoria is. – Garth

Try 167 properties for sale between $1 million and $2 million in a city of 160,000 where the average family earns just $66,000 like Kelowna.

You can also see the magic of numbers in Toronto, where the average SFH in the 416 are now sells for $706,288, but 51% of all homes in this massive market changed hands last month for less than $399,000. Fully 70% were sold for less than $490,000. In other words the bulk of the buying is being done at lower end of the market, where tanker loads of new debt are being created. – Garth

Or the magic of numbers in Kelowna, where the average SFH in the 416 are now sells for $450,000, but 56% of all homes in this not so massive market changed hands last month for less than $399,000. Fully 77% were sold for less than $490,000. In other words the bulk of the buying is being done at lower end of the market. Yet the results of our most recent buyers survey tells us that borrowing to buy a home is retreating across the board.

In most markets sales are eroding and listings are rising. – Garth

But like I am only too familiar with here in Kelowna, Sales are not eroding and at least a third of those listings are being offered by sellers lacking any serious motivation who thus really aren’t seriously on the market at all.

That other people will borrow at 3% to buy assets paying them 6% and write off the interest against their income is more interesting. – Garth

Why do I sense you need equity in real estate that you can take to the bank to use as collateral in order to secure that loan – the proceeds of which you propose one invest in financials? For how else, would you propose, might one secure such a favourable interest rate for such a purpose?

I sense the advice laid out in your next blog will not be such an opportunity for the “struggling”, “sooty protester” “losers” – the already too “indebted sufferers” who could only dream of making ends meet let alone invest in financials. Still THAT IS a story we want to read. HOW DOES ONE secure a tax deductible loan at 3.0% and investments that yield a safe 6.0% so as not to put their financial futures, let alone the home that secures, at substantially leveraged risk?

You are missing your audience Garth – that 70 or 77%, depending on the market, who have less than $490,000 invested in their home with “tanker loads” of debt in mortgages at that. Or is it “the rich” or “hot sounding reporters” who are your audience?

No, I suspect your audience is those increasing numbers of “Baby Boomers” who have substantial equity in their homes but little or no retirement savings. Don’t you think it is they you ought to be writing to – as I suspect you will in tomorrow’s blog?

Fact is the majority of they who post on this “pathetic blog” are not your intended audience at all. But they do make for good cannon fodder to that true audience you seek.

No matter for together, you and I have both warned them well enough were they to have listened. But they do not listen. They hear only what they want to hear. They hear you say that prices will fall through the floor even though you have suggested nothing much more than 15% with as much as 30% in particularly bubbly areas. They hear me spewing “SPIN to my own personal gain” although I am only warning them that it is not nearly so bad as they think and they ought to be fearful that their negativity might cause them to miss the next opportunity by which to lift themselves up from where they would like to escape.

If you can bear to hear the truth you’ve spoken, twisted by knaves to make a trap for fools, – Rudyard Kipling

#46 Tim in Victoria on 10.26.11 at 7:38 am

Garth, I’m trying to remember what determines the banks’ borrowing rates. I thought the bond market did it. So where does the Bank of Canada’s rate come into play?

BoC influences short-term rates, the bond market longer, fixed rates. — Garth

#47 MarcFromOttawa on 10.26.11 at 7:41 am


XDV would be a good purchase IMO (or some type of REIT). You would want the yield on the security to be much higher than the interest on the loan.

#48 Moneta on 10.26.11 at 7:58 am

I have been waiting for a few cues to know when our market would peak using the US experience of course.

The funny thing is that everyone keeps on telling me Canada is not the US. Yet, apart from the title problem and the CDO packaging, which admittedly are big things, everything else is identical. One has to look at other countries to realize that you don’t need those 2 events to have a market implosions. In Canada right now, many households are having trouble making ends meet and our debt levels are already higher than the US level was at the peak. And as long as home prices hold up, households will keep on piling on the debt, making things even worse by the time it all goes down.

I knew we’d hit a peak when we’d get the equivalent of zillow. Well, we just got it. Canada now has

Now tracking the price drop will as easy as 1-2-3. LOL!

#49 T.O. Bubble Boy on 10.26.11 at 8:17 am

@ #42 BPOE

Folks, everything is wonderful. Low low interest rates for decades to come. Solid economy. Offshore money pouring in. Love it. Love BPOE

“Low low interest rates for decades to come”… where have we heard that before???

Oh ya – Japan. Remind me, how did their property market hold up again?


#50 Devil's Advocate on 10.26.11 at 8:21 am

And that’s just it, for this is not a real estate blog at all. This is a financial investment blog. It is just that you have picked up an interested and interesting audience of listeners, readers and watchers along the way to which you have become a reluctant messiah. You craftily use this mob who “occupy” the courtyard and streets of your “pathetic blog” as megaphone to draw the attention of your true audience – they who quietly reside between them and the “truly wealthy”. For your blog followers cannot afford your advice and the “truly wealthy” do not need it.

Your actual intended audience though has much vested in real estate and little in other such financial securities. You warn them against their lack of diversification. What better way to make your point but through exaggeration. But you are an honest man and would not be disingenuous. But let your “blog dogs” do so you can with an occasional tug on their choke chain but not so much they become passive poodles.

I get it.

Real estate makes people hot and horny. People don’t think rationally when hot and horny. They do things they ought not under the influence. Like driving a car intoxicated it leads to carnage.

“If it bleads it leads.”

Greater Fools, Cannon Fodder… Naïveté

Sigmund of Kelowna. — Garth

#51 Hammer1 on 10.26.11 at 8:30 am

#23 disciple
yes..the grand illusion..we are all the same
now I’ll have that song in my head all day

#52 boomer62 on 10.26.11 at 8:39 am

@ garth…

When the Huffington Post called me this week for an interview on the growing gap between wealthy and poor, I sensed they were rooting for the rich. The reporter sounded hot, so I could imagine her sitting there in pearls and heels, researching an amusing piece about the little people. Or walking to the window, suggestively parting her stole and taunting the sooty protestors below with, ‘Try occupying this, losers!’

Garth, were your senses distorted by testosterone and your primal urges?
Arianna might be sympathetic to the plight of the indebted especially those in her native homeland.
Did you do the interview?

#53 TurnerNation on 10.26.11 at 8:43 am

What if the Canadian government imposed a 20% downpayment requirement

(Are they allowed to interfere in free markets? What am I saying, of course the Harper govt. will seek control over out markets. And how’s that ole’ Free Trade agreement working out…jobs aplenty??).

“The state has no place in the bedroom…buying…of Canadians” (tuning up an old phrase!).

#54 [email protected] on 10.26.11 at 8:44 am

Ten years of monies collected from Obama’s tax the rich proposal will plug four months of the current US federal government budget hole.

#55 disciple on 10.26.11 at 9:14 am

Many of our most powerful and wealthy people are miserable dupes and captives in a treadmill, who, with the rarest exceptions, have not the ghost of a notion how to spend and enjoy money. These are your idols?

If I had been a Heathen,
I’d have praised the purple vine,
My slaves would dig the vineyards,
And I would drink the wine;
But Higgins is a Heathen,
And his slaves grow lean and grey,
That he may drink some tepid milk
Exactly twice a day.

The welfare state is an act of guilt, a symptom of a greater problem. There is neither humanity in a cut-throat dog-eat-dog system, or in a handout society. If you were a wealthy business owner/manager, and you felt sorry for your poor tax farm slaves, you may grow a heart and decide to pay them double. Experience shows that they would then show up for work half the time. What most capitalists with a Protestant ethic don’t grasp is that the majority of people value time for goofing off more than money.

Rats given a choice to either sustain themselves with real food, or lick on some sugar water, will lick till they die. Die for the high. Sound familiar? End the rat-race. The end result is not what you were mind-controlled into thinking it would be. There never was any social contract. You have been fooled. The greater fool continues to deny that he is a fool. The lesser fool still does not realize that he is a fool. Which one are you?

#56 Stevenson on 10.26.11 at 9:26 am

Wealthy people don’t sit around and WAIT for things to happen. There is a reason why some people are better off then others. Canada is already a place where it subsidizes too much to the poor. It creates lazy people. I am not saying some don’t work hard, but that doesn’t make you smart.

Developers borrow and leverage from banks for construction and they make 10’s millions off RE. Why occupy all your cash when you don’t need to?

With today’s interest rates I didn’t even bother paying off the total with cash. Holding onto 80% more of what I put down for the properties paying next to zero interests is great. Simply invest your money somewhere else.

#57 disciple on 10.26.11 at 9:51 am

Well, it’s been fun describing the difference between actual materialism (a good thing) and the fake substitute that is really Mammon in disguise that passes for it in our society, but the point is that intense expectations are fizzled out in our culture.

The girl was gorgeous but the guy was impotent. But since there must be something somewhere, expectation is kindled again to keep us all going for that golden, galuptious goodie at the end of the line. What could it be? The children knew it well especially during Christmas, until they got caught in the ratrace.

Now it is symptomatic of our rusty-beer-can type of sanity that our culture produces very few magical objects. Jewelry is slick and uninteresting. Architecture is almost totally bereft of exuberance, obsessed with erecting glass boxes. Children’s books are written by serious ladies with three names and no imagination, and as for comics, I’m a monkey’s uncle if that wasn’t a dead art form? The potentially magical ceremonies of your local church are either garbled away at top speed, or rationalized with the aid of a commentator. Drama or ritual in everyday behavior is considered affectation and bad form, and manners have become indistinguishable from manerisms—where they exist at all. We produce nothing comparable to the great Oriental carpets, Persian glass, tiles, and illuminated books, Arabian leatherwork, Spanish marquetry, Hindu textiles, Chinese porcelain and embroidery, Japanese lacquer and brocade, French tapestries, or Inca jewelry. (Though, incidentally, there are certain rather small electronic devices that come unwittingly close to fine jewels.)

The reason is not just that we are too much in a hurry and have no sense of the present; not just that we cannot afford the type of labor that such things would now involve, nor just that we prefer money to materials. The reason is that we have scrubbed the world clean of magic. We have lost even the vision of paradise, so that our artists and craftsmen can no longer discern its forms.

#58 Devil's Advocate on 10.26.11 at 9:53 am

Sigmund of Kelowna. — Garth

Nope , not at all – quite to the contrary just very slow on the uptake and rather embarrassed by it. Too much time fighting windmills ;-) But I suspect yours was a sarcastic jab in the first place. Again a little slow…

#59 Deliverator on 10.26.11 at 9:57 am

Debt = Savings, and that’s not a bad thing if managed properly.

Sigh. Not at all true in a fractional reserve banking system, which we have worldwide.

#60 eaglebay - Parksville on 10.26.11 at 9:58 am

#54 [email protected] on 10.26.11 at 8:44 am

Tax the rich? What a fallacy.
Now, think about it. Who do you think will actually pay?
Isn’t it always the consumer?

#61 Macrath on 10.26.11 at 9:59 am

Macleans – What’s the use of saving money?

“Welcome to the world of ultra-low interest rates, where profligacy is richly rewarded and saving is, well, for suckers.
Mark Carney and Finance Minister Jim Flaherty have repeatedly warned Canadians not to take on too much debt, but their policies, have had the opposite effect…”

#62 boomer62 on 10.26.11 at 10:09 am

Garth or any others,
any thoughts on this….”Royal Bank Of Canada Launches $2B 3-Year Deal” ?

#63 VicBC on 10.26.11 at 10:14 am

Ten years of monies collected from Obama’s tax the rich proposal will plug four months of the current US federal government budget hole.

Does this mean it’s pointless for the rich to pay their fair share of taxes?

#64 The American on 10.26.11 at 10:17 am

At #11: Eaglebay – Parksville… I’ve reviewed Although the site is trying its best to position and brand itself as “opening a vault of information,” it is definitely NOTHING like Zillow. Compare for yourself. Here’s why: Zoocasa is nothing more than a glorified MLS that has consolidated other real estate transaction efforts in an easy portal for the buyer to see. Example, the site provides the actual listing, photos of the property, direct contact with a lender, a mortgage calculator, and a lot of information about the buying process itself. That’s nice and all, but still does not provide you some of the most important information necessary to make a decision. Zillow provides everything Zoocasa provides (in an even more powerful fashion, as Zoocasa appears to be sponsored by RBC Bank) Zillow has no official Bank sponsor, so the end user has an opportunity to shop for more loan programs from more providers (basically, they provide more competition), also provides THE most powerful piece of information, and that would be ALL previous sales history pulled directly from Public Records. This really helps to educate the consumer what the property is REALLY worth. Zillow does provide all previous history on every property. This is a tremendous accomplishment. Additionally, Zillow provides “Zestimates” or what is an estimate of a Real Market Value (RMV) for what the property is truly worth, based on all current comps. It also provides rental values of the property (this is a good indicator if the property is valued correctly). It also provides 30-day or trending changes in the property’s values. Zillow also provides the specific comps, MLS numbers for those comps, and sales history there as well. Zillow also provides Rentals themselves, For-Sale-By-Owners (FSBOs), a Make-Me-Move function where Sellers can input their home’s information and not place it on the MLS and name their price, home improvement experts within a band of specialties too big to get into who are located in the area you’re seeking to purchase, a competitive spectrum of lenders (not just one like Zoocasa), Agents within an area, Escrow, Appraisals, Notary, Moving, Property Mgmt, Staging, Title, and etc.

I would not put my name on Zoocasa as “The Canadian Zillow.” That would be an embarrassment. Zoocasa is just another website that can’t seem to pull from Public Records. The Public Records information is what creates the transparency which is so vital in understanding the value of a property.

One last thing, there is another website called Trulia. It is much like Zillow, but also provides heat maps of neighborhood values, statistics on the neighborhoods, etc. Also an extremely powerful tool.

Compare for yourself:

#65 boomer62 on 10.26.11 at 10:19 am


Garth, what are they going to do with all that money?

#66 The American on 10.26.11 at 10:22 am

One last thing.. For the record, I do recognize Zoocasa has an “Average Property Value” area, but this is worthless information. It does not look at the specific subject property and provide an estimated value, based on comps and previous sales. Also, the “RBC” bank thing has me a little nervous as I do not understand if this is just a method a Bank could be supporting in order to help property values. Can anyone provide some clarification here?

#67 boomer62 on 10.26.11 at 10:51 am

@ #66 The American on 10.26.11 at 10:22 am

The RBC (and other Canadian banks) thing looks more like an inexpensive fund raiser. I hope someone can give us a clue as to what is the significance to the banks….does it speak to lack of confidence in similar/competing investments/institutions?

#68 Daisy Mae on 10.26.11 at 10:52 am

“A Canadian would need to spend at least $500,000…”
Good grief. See below.

“Finally, great news, the latest version of the Retirement Visa for Canadians we have been lobbying for since the fourth edition of The Border Guide in the mid-1990s, has returned. Over 15 years, Bob Keats personally had countless meetings with US Senators and other political figures, immigration attorneys and Chambers of Commerce. Many readers of The Border Guide have written letters to their local politicians and Chambers of Commerce to try to get this Visa. The Retirement Visa will allow Canadians age 50+ to spend as much as 240 days annually in the US Sunbelt without worrying about immigration issues, plus they will be able to save a great deal of income tax to boot. Incredibly, we are getting some action in the US Congress and we believe since it is bipartisan, being pushed by some senior Senators, and with our having a Republican House, it has a very good chance of passing this time around.

The bill, S. 1746, also proposes a homeownership visa that would allow Canadians of any age to live in the US year-round and save a bundle in income taxes too. To qualify, a Canadian would need to spend at least $500,000 in acquiring a US home and other US residential property.

Bob Keats believes this will be a superior job creating bill than the current Jobs Bill being pushed by President Obama, at a cost to the American taxpayers of over $500 billion. This visa bill will cost virtually nothing, yet it will be an incredible jobs creator while simultaneously helping Canadians reduce their taxes and enjoy a lower cost-of-living lifestyle in a warm climate, without snow! Although Canadians will not be able to work on the retirement or homeownership visas, these visas provide a bridge to a work visa with proper immigration planning.

We are very optimistic and excited about the Retirement Visa as it has been such a long time coming. We will keep you informed as the bill works its way through the US political process to become law. We do expect it to become law within the first quarter of 2012, unless a major obstacle is thrown at it and it is delayed until after the 2012 US elections in November.”

Feel free to contact me at [email protected] or (602)955-5007

#69 Moneta on 10.26.11 at 11:09 am

Does this mean it’s pointless for the rich to pay their fair share of taxes?
No. It just means that it’s only one of many problems plaguing us.

#70 Moneta on 10.26.11 at 11:14 am

The American on 10.26.11 at 10:17 am
At #11: Eaglebay – Parksville… I’ve reviewed Although the site is trying its best to position and brand itself as “opening a vault of information,” it is definitely NOTHING like Zillow.
Does it really matter?

Whehter Zillow values were ponctually precise or not, the market tanked anyways, so in the end Zillow had no predictive value whatsoever.

So who cares if Zillow and Zoollow are precise or not? For me, their creation reflects a world where people are putting too much focus on non-productive assets that are way too expensive.

They both mean BUBBLE!

#71 Moneta on 10.26.11 at 11:22 am

So who cares if Zillow and Zoollow are precise or not? For me, their creation reflects a world where people are putting too much focus on non-productive assets that are way too expensive.
And I spot checked a few McMansions. The Zoocasa prices reflect the exact price my friends and all the bubble heads would say their house would sell for. So if you ask me, I think it does a very good job of reflecting the current values attributed by our current mass mania.

Let’s revisit those values a year or 2. LOL!

#72 on 10.26.11 at 11:27 am

Re the post about a US retirement visa… it is such a bad idea on so many levels the whole thing is just absurd.

First of all it’ll never happen and even if it did, there are real risks that most people never think about. Here’s the first clue the plan is ill-conceived.

The Retirement Visa will allow Canadians age 50+ to spend as much as 240 days annually in the US Sunbelt without worrying about immigration issues, plus they will be able to save a great deal of income tax to boot.

So you’re gonna drop 500k on a house, but only stay 2/3 of the year? Uh, ok. Immigration issues are ALWAYS a worry it doesn’t matter what the visa category is, there are always risks it can be revoked. It is probably is not a good idea to mess with tax residencies around retirement time. If you do make such a move be sure to consult GOOD cross border tax and immigration consultants.

This whole thing smells of desperation.

#73 duesouth on 10.26.11 at 11:30 am

The U.S. is still in a losing battle on housing sales according to their Commerce Department

#74 Peakoilist on 10.26.11 at 11:39 am

Yes, eat the rich
eat less big business produced meat. The other day I talked about how big business is controlling our food supply. The production of our meat supply is one of the most cruel practices that our modern society contributes to. These new videos are produced by MERCY FOR ANIMALS and will air across the US soon on MTV. See how our meat is produced for yourself by corporations that only see profit as important.BTW Mercy for animals is now coming to Canada, and will pressure lawmakers and producers to change these barbaric practices. Have a look for yourself.

#75 Devil's Advocate on 10.26.11 at 11:47 am

A new study says Canadians are working longer into what were once their retirement years.

Suprise, suprise.

#76 Peakoilist on 10.26.11 at 11:48 am

#55 disciple
Though I hate to admit it, I think I’m finally getting what you’re talking about with the Mind control by those in power. Can you give us some practical information about how to protect ourselves more. I know that over the last few years I have avoided violent media as a rule ( It does scare the crap out of me), but I also had this sense that it wouldn’t be good for my mental state. Am I off base here? Any other things to avoid? any things that I could research? thanks.

#77 disciple on 10.26.11 at 11:52 am

Forget all the mind games you are hearing on Libya. disciple will tell you why Gaddafi was taken out. He demanded payment in gold dinars for his oil. Simple. This is American foreign policy in a nutshell. Just like Saddam demanded euros for his oil instead of US dollars. Europe simply could not afford to pay him in gold just like the US could not afford to pay Saddam in euros. Iran is next and God forbid should Canada be involved in this unfolding fiasco.

Garth has alluded to it many times, as long as the US dollar is the world reserve currency, all is good and there is Pax Americana. But the Barbarians are at the gate. Do I believe that gold is money? Hell no. Money doesn’t exist.

#78 Derek R on 10.26.11 at 12:13 pm

#13 vyw on 10.25.11 at 9:46 pm wrote:
Debt = Savings, and that’s not a bad thing if managed properly.

Hmmm. So I bet you 5,000 Trillion dollars that this coin flip will come up heads. You agree and it comes up tails. You now owe me 5,000 Trilllion dollars. That’s a big Debt. What Savings does it equal ?

Now since it’s just you and me I’ll magnanimously forgive you the debt and save the world economy. The trouble is that there are firms like AIG who have made bets like this with the banks. The banks are counting on the insurance firms to pay up if they lose the bet. But the insurance companies don’t have enough savings to cover those debts. When they don’t pay their debts there will be trouble.

At that point it will be become abundantly clear that Debt does not have to equal Savings when gambling is involved.

#79 Ron on 10.26.11 at 12:17 pm

I’m still looking for a house in Toronto and haven’t seen anything symbolizing a downturn yet.

$450k houses are still the shacks that were once $300k.

#80 disciple on 10.26.11 at 12:22 pm

Today, 70% of all the attorneys in the world reside in the West – America, to be exact, and 95% of all lawsuits in the world are filed under US jurisdiction.

The Wizard of Oz encodes the story of what really happened in the 30’s. The Wicked Witch of the West and Miss Gulch, represent judges and attorneys; i.e. the legal system. They are the executioners and primary henchmen for transferring all wealth from the people over to the banks and government. The Wicked Witch of the West wanted the silver slippers, the precious metals, and her counterpart, Miss Gulch, wanted to take Toto. What does the word “toto” mean… in “attorney language,” i.e., Latin? “Everything!”

The Law Society is not your society. It’s an exclusive club, the Just-Us system. Their god is Saturn, represented by their black robes and funny attire. Their language is doublespeak, and their laws apply to the high seas, MERcantile Uniform Commercial Code.

#81 Dorothy on 10.26.11 at 12:34 pm

I think DA has a point when he says that the majority of the blog dogs are not members of your target audience Garth. Much of your advice is aimed at those who have money to invest, or who are in a position to sell their home and invest the proceeds. And, based on most of the comments I read on this blog, neither of those circumstances apply to most of the writers.

The most important point, missed by many of those who participate in this forum, is that if and when you do decide to buy real estate, make sure you have a big enough down payment to be able to survive a downturn without going underwater. That means you should have a MINIMUM of 15% down, preferably more. Also, do your research and be prepared to negotiate the best price possible. It never ceases to amaze me how many people just pay asking or close to asking price on many assets, not just real estate. I negotiate for everything I buy, from cars to furniture, even the services of trades people who come to the house, and 90% of the time I’m successful in getting a price reduction. Try it folks, you’ll be surprised how much money you can save.

Finally, housing is definitely correcting at the moment, but life experience tells me it won’t continue forever. At some point the bottom will have been reached, and prices will stabilize. After a while they will then slowly begin to climb again, although I doubt they will ever return to the heady levels of the recent past. But rise again they will, and too much negativity can result in a missed opportunity for many. So follow the market closely, save as big of a down payment as you can afford, and when you begin to see a turnaround do your homework and try to negotiate the best price possible.

You can also shop around for a lawyer and negotiate the fee paid, ditto for the financial institution from which you get your mortgage. If you have a good credit rating you should be able to negotiate a better rate than the one posted.

If you do all these things you can become a homeowner one day, which (despite all the negativity) is what I suspect many of you aspire to be.

#82 Bailing in BC on 10.26.11 at 12:40 pm

Does this mean that Canadian taxpayers will be paying the increasing health costs of retirees while the US will see the majority of the benefits of their consumption?

#83 Sky on 10.26.11 at 12:56 pm

@ # 63 VicBC:

“Ten years of monies collected from Obama’s tax the rich proposal will plug four months of the current US federal government budget hole.

Does this mean it’s pointless for the rich to pay their fair share of taxes?”


Taxes serve the same purpose they always have. Oppression of the masses. It’s the elite’s way of siphoning off your productive labor into their own pockets. With a gun pointed at your head of course. Try not paying your taxes.

Anyone that buys the myth that your tax dollars are paying for infrastructure and social programs has rocks in their head. No matter how much money you throw at govt it is NEVER enough. Govt gets bigger and bigger and the debt hole gets deeper and deeper. Why is that?

Simple. The system was designed that way. Taxes are meant to keep you poor so that the mega corporations that are running the show rarely face any up and coming competition from the great unwashed.

It’s tax free foundations and off-shoring for THEM and crappy little RRSPs and TFSAs for US. Fair, isn’t it?

It’s a very sick and very evil game. Do the math. How can a small percentage of productive citizens possibly pay enough taxes to fund the lavish salaries and perks of a bureaucratic state? Impossible.

And they always manage to find the ” money” somewhere for ever more destructive weapon’s systems and wars. The books are cooked, but we’ll never know what the true govt debt numbers are. Who audits the govts? Oh, that would be somebody else on the INSIDE.

We’re all forced to play the game. They shove the national debt in your face so they can jack up taxes and decrease any services that actually do GOOD for the peoples. Choke it down, guys. But make sure you leave enough room to swallow their biggest lie : that tax increases and austerity measures will balance the govt books. HAHAHA!

#84 Van guy waiting on 10.26.11 at 12:58 pm


You need to get your word out on Global or CTV. Ozzie Jerkoff used to be a regular on Global to give advice. Obviously his advice turned people against him when his investments effed up.

#85 Victoria on 10.26.11 at 12:58 pm

Does anyone know where Garth’s post on Halifax is i.e. what is the title. I can’t seem to find it. RE agents think there is going to be massive speculation on the Halfiax market because of the ship building contract.

Thanks for any info.

#86 Kilby on 10.26.11 at 1:07 pm

I just got a letter from Jim Flaherty dated October 19th, in it he states “Now that the world economy is recovering from recession, our Government is committed to returning to balanced budgets by 2014-2015”

Pretty sure of yourself James! The recovery is at least taking place in your office.

Nice post “Devil’s advocate” Very observant…

#87 Snowboid on 10.26.11 at 1:08 pm

#64 The American on 10.26.11 at 10:17 am…

I agree 100% – Zoocasa needs a pile more information to be compared to Zillow.

Just like needs to double the information available to match what is available through US sites.

68 Daisy Mae on 10.26.11 at 10:52 am…

I believe the 240 day visa will only be available to Canadians who own property in the US (no $ amount stated). Of course this doesn’t help most snowbirds because you can’t get health insurance for more than 6 months – and lose other provincial benefits if away longer than that.

The ability to stay longer would definitely be for the ‘well-heeled’ as $ 500K for a home is only the start – how about medical costs, etc.

It’s a cool day finally in the Valley of the Sun – a few sprinkles last night with an unexpected thunderstorm.

Got to go, one of our closest neighbours from BC just arrived – have to welcome them back!

#88 Lawrence Braul on 10.26.11 at 1:08 pm

Ahh Garth. I have missed reading your comments for the past year or so and, while on vacation at Myrtle Beach SC I decided to see if there is another tune in that old hymn book called Garth Turner’s Dire Warnings of Impending Doom. Like any old fundamentalist, once you get your message memorized, it becomes increasingly hard to depart from the script. Nothing worse than being bound up by ideology (or theology for that matter).

Fortunately for you, there are people out there who actually like to hear someone berate the masses. Hey, it worked for Samuel and Ezekeal and many others. Keep it up if it pays the bills.

I have come to view with increasing suspicion the views of those who are driven first and foremost by dogma and ideology. It is the difference between apologists and intellectuals. One is defending previously held beliefs (that would be you) and the others are trying to describe the new realities that we face in terms that are novel and cogent.

Where I sit, the economy in the US continues to sputter along but there are finally some legitimate “green shoots” in the economy. Families have had three or four years to rebalance, refocus, and get their “houses” in order. Corporations have done well. At some point they will begin to increase projections for sales and perhaps do some hiring, finally. The four million homes in foreclosure are still a problem but not every where.

It will be another two or more years but eventually, the US economy will realize the benefits of not fighting two wars, the annual deficits will fall, there may even be a peace dividend if these good folks would finally realize that their international interventions are not needed and not wanted.

It is looking more hopeful. I know I know. Garth the master of “the sky is falling” will find more reasons for fear and armaggedon. My question to you is, “is this all you got?”

#89 jess on 10.26.11 at 1:16 pm

eat your fellow students

#90 fancy_pants on 10.26.11 at 1:35 pm

so the Hammer (MC) continues to pound softly with a rubber mallet. no surprise there.

This is like worrying about drowning in the tub when the facet has a drip. If we don’t all sink from falling prices we will die watching it all enfold.

Go ahead and put the Depends back on the shelf for a while.

#91 The InvestorsFriend on 10.26.11 at 1:38 pm

Deliverator at 59 said:

Debt = Savings, and that’s not a bad thing if managed properly.

Sigh. Not at all true in a fractional reserve banking system, which we have worldwide


Sigh, learn to read a bank balance sheet.

Debt is always owed to someone. If you owe me money I count that as an asset , as part of my savings.

You mis understand fractional reserve which does indeed create money BUT only if bank customers cooperator by depositing the proceeds of loans back to the bank.

Loan is made, spent, vendor deposits the proceeds, which are loaned out again another vendor deposits that. We now have two debtors and two savers and so on. If the reserve requirment is zero this can go on forever and yet debt equals savings at all times.

If all savers showed up at once to withdraw the money then… Houston we have a problem. But the savers don’t all show up at once and the bank keeps some money on reserve. And some of the savings are bank equity which cannot be withdrawn at will.

Suggest you rent, It’s a Wonderful Life movie….

Mary Poppins also has a wonderful bank run scene…

#92 poco on 10.26.11 at 1:52 pm

#48 Moneta–you said

I knew we’d hit a peak when we’d get the equivalent of zillow. Well, we just got it. Canada now has

Now tracking the price drop will as easy as 1-2-3. LOL!

i take that as a bit of a sarcastic quote—i hope it was
tried zoocasa this am–one property listed at 508k that i’ve been watching came out at 846k–a bit high don’t you think
a condo i tried -listed at 309k (recent sale at 304k) came in at 264k
i think this site needs a little work—if you follow and know pricing in a certain area –any new listing you get in that area should be comparable to others within that same area
i most definitely agree with #64 and #66 The American that zoocasa doesn’t compare to “willow” in any meaningful way

the only way Canadians will be on a level playing field–ie: instant access to new listings–price changes–property ass.– taxes–list date –price changes–when a property gets a new mls# and new dom start date–previous sales–and all that “other info” we are not privy to ,is to have access to MLXchange
this is the web site where licensed realtors (yearly fee) obtain all their info on properties across Canada—we as potential buyers don’t stand a chance
Disadvantaged–you bet we are –i believe the term is “Monopoly”
the only way to access it, is to obtain the information from a realtor—-amazing the BS put out by most of them concerning the strong market we’re having when in fact it ain’t
there are approx. 100k realtors in Canada –everyone must have a good friend or relative who’s in the business–go visit them –sit down with them–get them to show you the mlxchange system–you’ll be amazed

#93 Beach Girl on 10.26.11 at 2:01 pm

Toronto Star today. Middle Class is almost extinct. Along with the weather, this is depressing. Apparently there will be years of this financial funk.

#94 Regan on 10.26.11 at 2:07 pm

One thought on boomer downsizing leading to the great suburban sell-off – I’ve been buying up antique furniture recently from people who are selling. “Finally downsizing” they say, because they’ve been working longer, paying off debts and haven’t really shifted to retirement mode. They are most often in their 70s, not 60s. So, is the anticipated real-estate sell-off being delayed because of the debt and uncertainty? p.s. antiques are getting cheaper as this process picks up steam, so much so that I just bought hand-carved Queen Anne dining chairs from the turn of the century for less than a solid-but-uninspired set from Ikea.

#95 jess on 10.26.11 at 2:15 pm

eating contest as in a race to the bottom

Big employers such as navistar , continental , motorola, ford, chrysler, mitsubushi, pocket their workers income tax. If you are a new hire all is assigned and with old hires half.

The Paycheck Deduction Racket Every American Should Know About


The current tax code is full of perks and preferences that create a great deal of unfairness in the tax system. Some large multinational corporations pay little or no federal income taxes, year after year, while domestic‐based businesses large and small commonly pay a quarter or even a third of their income in federal taxes. Some very wealthy taxpayers pay an effective rate almost half of that paid by middle‐income workers. We need tax reform that:

Stops corporations, large and small, and millionaire investors from avoiding the taxes that support the essential goods and services that government provides.
Ends the gaming that has turned corporate tax departments into profit centers.
Provides sufficient revenues for vital services, job creation, and deficit reduction.

We ask Congress to enact tax reform that:

Ends Corporate Tax Deferral on Foreign Earnings and enacts a true worldwide system of taxing U.S.‐based multinational corporations. Enacts Interim Measures to curtail abuse of current system until a true worldwide system is completely phased in. Rejects a RepatriationTax Holiday that is, in effect, an amnesty for corporations that have dodged their taxes bysending profits and jobs offshore. Rejects a Territorial System that would give multinationals a permanent zero rate on their foreign earnings.
Utilizes a “G.E. Rule” that corporate tax reform should be guided by a principle similar to the “Buffett Rule”: multinational corporations should not be paying tax at a lower rate than the small businesses that line Main Street.
Closes Corporate Tax Loopholes that allow some profitable companies to pay little or no federal income tax while others pay much higher rates.
Limits Use of S Corporation Rules that allow companies with billions of dollars in revenue to reap the benefits created for “small business.”
Requires Publicly‐Traded Companies to Disclose Actual Taxes Paid to the IRS so that the public knows the real story about how little taxes some companies pay.
Improves Enforcement and Closes the “Tax Gap”
Combats tax haven abuse
Increases Internal Revenue Service resources
Requires automatic tax information exchange with other countries
Enacts country‐by‐country reporting of financial information by publicly listed companies
Requires disclosure of the beneficial owners of all U.S. corporations
Enacts measures requiring MORE, not less, third‐party reporting
Enacts the Tax Lien Simplification Act
Allows the IRS to publish a Tax Delinquents List
7. Changes the Rules and Closes Individual Tax Loopholes that allow millionaires to pay a lower rate than middle‐class workers.


#96 Moneta on 10.26.11 at 2:19 pm

i think this site needs a little work—if you follow and know pricing in a certain area
Of course I’m laughing at the whole thing. Zillow Zoocasa. Potato, Potaato…

More work to serve what purpose? The values are a farce. Comparables are ponctual. In the end, a house is worth what someone is willing to pay.

Like I said, I spot checked a few houses and they all came in in waht the owners told me they house was worth. Mine came in in the range I expected if I sold today.

One house I know could list at 850K and Zoocasa gave it 880K, but I’m convinced it won’t fetch more than 500-600K in a few years. There are over 50 houses in that area asking for 700+.

You can do the best appraisal in the world but it still does not mean that your house will be owrth that price in 1 year.

#97 Cristian on 10.26.11 at 2:22 pm

One of Garth’s posts of a few days ago was talking about the “booming companies” in North America…

Today’s article in The Globe:
“Thomson Reuters measures earnings sentiment through the negative to positive, or N/P, ratio. While 89 companies have lowered third quarter expectations, 37 have raised expectations. That puts the current N/P ratio at 2.4 compared with 2.0 at this time last year. Current negativity even exceeds the long-term aggregate. Since 1995 – a period that witnessed the technology tumble of 2000 and the global financial meltdown of 2008 – the N/P ratio has averaged 2.3.”

Read the whole article at:

So much for the booming economy…

My reference was to corporate profits, not ‘earnings sentiment.’ Relative to current earnings the S&P is trading 24% below its 10-year average. That means equities are cheap by historic standard. This is based on real dollars, not expectations. I’ll take the money, thanks. — Garth

#98 Timing is Everything on 10.26.11 at 2:27 pm

disciple – “Many of our most powerful and wealthy people are miserable dupes…”

Hence, ‘Celebrity Rehab’. Sigh. It’s ALL entertainment.
Including this miserable blog.

#99 disciple on 10.26.11 at 2:29 pm

#83 Sky…
These are great observations, but there is a missing element to your analysis. Do you not suppose that if it were YOU running the show with the tax-free offshoring and taxes to help only your banker friends, would you give away your fortune? Would you take the silver spoon out of your mouth and hand it to a Zulu or Bengali?

The real question is not “can you see how screwed up everything is?”, the real question is “why can’t I see that everything is messed up because I am messed up?” You cannot ever hope to change the world, without changing the man in the mirror. YOU are the system. YOU are helping to sustain it every single freakin’ day.

We’ve had two decades of mass disclosure. We know or should know by now, who our real enemies/rulers are. Unless of course you were too busy with Nintendo and or chasing that obscure accounting concept called money. The next step, is to actually take, the next step. Put your money where your mouth is. As Turner Nation showed us, it ain’t hard to determine who is poisoning us. So, what will you do? Continue to gulp down at McDonald’s because it’s cheaper? Invest in bank stocks? Because you want to make your 3% spread? Do you see how insane that is? Perhaps not. That’s why you have disciple, to help you lose your fear of the word conspiracy (that’s likely the first time I’ve used it- okay maybe second time).

#100 Blacksheep on 10.26.11 at 2:34 pm

Vym # 13,

“Debt is not a bad thing as long as GDP grows faster.”

It’s time for the world to review, what we think we know as truth.

This is a Gov. of Canada site

5.41 From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls.


Of your quoted current 1 trillion in Can. debt, what % is accumulated interest only?
How exactly is paying this unnecessary cost, beneficial to Canadian taxpayers?
Investors Friend # 40,

“vYm, you are absolutely correct but will be attacked by nut bars forthwith who think that debt is borrowed from unborn children or martians or something.”

Incorrect. see below.

So, the bank makes Loan #1 of $90,000 and keeps $10,000 on reserve. This is the critical point where the bank creates money. According to the bank’s balance sheet, the $90,000 loan to the borrower is also a $90,000 asset for the bank. By its own brand of money magic, the bank has created $90,000 out of thin air.”

Federal Reserve rules allow the bank to make five to six loans based on the original $100,000 deposit. Each loan creates an additional asset. We’ll stop at three loans, review the process, and add up how much money the bank has created.

You deposit $100,000 into a CD. The bank creates three loans based on the original $100,000 deposit. Loan /Asset #1 = $90,000 Loan/Asset #2 = $81,000. Loan/Asset #3 = $72,900. The total = $243,900 in assets for the bank. This is $243,900 in new money.


And you give investment advise?

take care,

#101 E on 10.26.11 at 2:45 pm

Facebook update from a real estate agent: “Have a busted LCD tv sitting around? I want it for staging….let me know :-)”

#102 disciple on 10.26.11 at 2:54 pm

#76 Peaky… I’ve been possessed since Monday with the shamanistic impulse to burn the effigy of modern distractions. Just in time for Halloween when traditionally, the old “self” was burned and the new “self” was reborn, my favourite time of year. Remember that I entered this blog about a year ago with an appeal to fellow readers to suffer my “mumblings” (thanks Form Man) as I embarked on a new journey to find my “green monolith”. I am forever a student, forever a scientist. My experience will definitely be different than yours, but this time of year was recognized by our ancestors as a good time for this process to begin.

The mind control aspect of our current fascist state is very real. Any media communication received by your ears or eyes is advertising selling something. Even this “Book and Web Log” as Garth puts it. Let me know in which specific direction you want to explore and I am happy to help. I think the most difficult aspect is “unlearning”, what you assumed to be true, but isn’t. Like dinosaurs which are mechanically impossible (sorry, this is one of my favourites, LOL).

#103 Whosyourdaddy on 10.26.11 at 3:06 pm

Yo! Beardman! Check it out!

#104 Habs 76-79 on 10.26.11 at 3:08 pm

Investors Friend,

Your post on fractional reserve banking missed one notable point, COMPOUNDING INTEREST!

Balance sheets show debt and assets as you note but the debtor has to repay that “fiat” loan with compounding interest.

So in time the ever growing compounding interest will catch up to any productive growth from said fiat lending. On top of that a host of other issues can and will effect this monetary cycle. Not enough space and time here to hi-lite them.

#105 Boycott on 10.26.11 at 3:16 pm

Dow may fall to around 3000….
Scary outlook from Harry Dent

His best-before date was 1995. — Garth

#106 jess on 10.26.11 at 3:20 pm

Half of American Workers Make Less Than $27,000 a Year…Worst in 12 Years

Have a look at the offical numbers of what those median paychecks are from the official data on 2010 paychecks,

median paycheck — fell 2010, down 1.2 percent to $26,364. //$507 a week, the lowest level, after adjusting for inflation, since 1999.

the Bureau of Labor Statistics’ data on workers by hours-per-week is here.

#107 GTA Girl on 10.26.11 at 3:29 pm


I have found the same w/antiques being a bargain. Kids want to sell them from their grandparents/parents. With no understanding of history or worth.

This is worrisome. The disposable mentality undermines everything. Looking at the crap they sell in new slick furniture stores, that are eaten up by these debt junkies. $20k for a sectional that’s condo sized and fabric covered plywood?

This can be applied to the new build condos. 400sqft closet all glass new build for $450k vs. Anything else older that sells for 30% less.

Consumerism has gone nuts in this country.

#108 MoneyMyHoney on 10.26.11 at 3:37 pm

It is easy to dilute the whole 1% vs. 99% into real estate. The housing meltdown in the US was started by the endless greed of the 1%, the architects of the meltdown. The middle class got sucked into it. Don’t forget that these architects repackaged the garbage and sold it world wide.

The 1% still takes bonuses in billions and still suckles on bail out money. The remaining 99% is left out to dry.

Garth calls them ‘intelligent investor’ (That’s because the wealthy tend to buy properties they can afford, and usually do so with cash, while the rest of society now buys homes they can hardly afford, and do it with credit – Correct me if I understood it wrong.)

The US politicians said class wars are ‘unAmerican’. Let them not forget that class wars automatically spring up when there is a huge disparity between the rich and the poor. It had happened in the past in the US. So, to my mind, there is nothing ‘unAmerican’ about it.

Why does the CEO of the bank make millions when the teller is paid the min. wage and has to depend on food banks?

Easy to say, if the teller doesn’t like the wage, he or she can look for some other job. Wait a second, WHERE? Everywhere the CEOs are paid in millions and the leftovers are divided among the remaining 99% of the employees.

How many millions does the CEO need to carry on with a luxurious life style? Yes, the CEO is wealthy and can pay cash. The employee is not able to do the same because of lower income. So the employee is a dumb ass! Good logic, Garth.

The banks say they do lot of charity. Let their charity start at home by paying better wages to their employees.

And yes, Garth, you need to defend the super rich 1% because you are one among them. Keep defending.

So, revolt. — Garth

#109 Devil's Advocate on 10.26.11 at 3:47 pm


Thank you for the credit on your earlier comment at #81 ;-)

and on this…

You can also shop around for a lawyer and negotiate the fee paid, ditto for the financial institution from which you get your mortgage. If you have a good credit rating you should be able to negotiate a better rate than the one posted.
#81Dorothy on 10.26.11 at 12:34 pm

Good post Dorothy. And don’t forget you can also shop around for a REALTOR and negotiate the fee paid them up front on down to when you receive a deal (which is the better time to do so it when they can smell the commission cheque oh so close ;-) ).

Please do me a favour; go tell Melanie Atkinson of the Competition Bureau that for me will ya. She doesn’t seem to want to listen to us.

#110 Nemesis on 10.26.11 at 3:57 pm

Sigmund of Kelowna. — Hon. GT

There’s only one Zigmunt, OldPol… and he don’t ‘do’ Kelowna (although his work nicely encapsulates the region’s ZeitGeist).

#111 Moneta on 10.26.11 at 4:01 pm

My reference was to corporate profits, not ‘earnings sentiment.’ Relative to current earnings the S&P is trading 24% below its 10-year average. That means equities are cheap by historic standard. This is based on real dollars, not expectations. I’ll take the money, thanks. — Garth

page 21.

Are they going up or down over the next next 12 months? Because that will have a huge impact on the market.

#112 Sky on 10.26.11 at 4:19 pm

@ disciple…”The real question is not “can you see how screwed up everything is?”, the real question is “why can’t I see that everything is messed up because I am messed up?”

Sorry, disciple I don’t buy the collective guilt trip.

True enough that many people are messed up. We live in a pathocratic (diseased) system and it’s no surprise that many have adopted pathocratic values simply in order to survive. Or, in order for their children to survive.

Eichmann was Hitler’s logistical henchman. He organized the most efficient way of mass extermination of the Jews. But Eichmann didn’t hate Jews. In fact he had Jewish friends. He was just doing his job for uber-pathocratic Nazi Germany. Eichmann had adopted the pathocratic values of a pathocratic state.

The Milgram experiment and the Stanford Prison experiment both show us how very easily the vast majority of us are programmed by those in charge. Our own ethics and morals are instantly dumped in favor of whatever the authorities ask of us.

Now, how much of the blame is ours? And how much of the blame goes to those who are responsible for deliberately lying and brainwashing the people?

Wherever power accrues you will find the same type of individual- the essential psychopath. They’re running the show. These genetic mutants are cold-blooded and don’t have normal emotions. Zero empathy, zero conscience !

Most people don’t understand psychopathology and I won’t get into it now other than to say that Ted Bundy and Hannibal Lecter were 2 of the more innocuous psychopaths.

The psychopathic agenda is incrementally advancing us into the post-industrial phase. Transhumanism is next.

I’ll go kicking and screaming all the way. Many won’t. They’ll embrace it. I see them as victims.

#113 Humpty Dumpty on 10.26.11 at 4:30 pm

I stand fearlessly by my predictions of a real estate market on the edge.

Friends, r/e isn’t the only thing on the edge these days.

Repentance is the only way out of this….


#114 zeeman1 on 10.26.11 at 4:46 pm

#88 Lawrence Braul

Do you even read Garth’s posts? He is the farthest thing from doom and gloom. He preaches caution, diversification and active financial management as methods to get by in an era of economic shrinkage and massive debt. I call it common sense. What are your solutions?

#115 johnny5z on 10.26.11 at 4:57 pm

This reminds me – Eat the Rich, a Treatise on Economics, was a book written by PJ O’Rourke.

Perhaps the best book on ecces I’ve ever read.

#116 vyw on 10.26.11 at 4:57 pm

then they write down the debt

the debt is borrowed from someone ie the lender, the saver, etc

some critics have an agenda but I do agree that people need to kill high-interest debt

the modern banking system does not use a fractional reserve system. Banks are not reserve constrained. They lend if it makes sense to lend. Credit is created first, then the loan is deposited into the banking system by the borrower. At the end of the day, banks check to their balances and may borrow from each other if they are short.

you answered your own question – they don’t pay.
Debts are either paid, defaulted, restructured, or forgiven (voluntarily or involuntarily ie. going to war. Most of us honour our debts otherwise the whole system collapses. But there are companies/individuals that default, restructure or get the debt forgiven.

Bottom bottom line – the global net debt = the global net savings. The various Govt create money by spending it into their economies – this is where the interest comes from. So folks who are pushing this money + interest > money doomsday message have got it wrong. If it’s true, we would have busted up long ago.

#117 prairie gal on 10.26.11 at 4:58 pm

Thanks, Garth. Now I will forever obsess over whether my posts make me seem hot.

#118 Van guy waiting on 10.26.11 at 5:08 pm

Bidding wars continue in Van East for some sfh. While Van West, Richmond, and parts of Coquitlam are starting to flood. Can anyone explain this? Probably not eh?

#119 Blame Japan on 10.26.11 at 5:13 pm

Recession a-brewin’:

Blame Japan (or Europe):

#120 Cato on 10.26.11 at 5:17 pm

The whole issue of disparity would never have gotten this bad had it not been for so many fools in the middle class. Had a conversation with an #occupier the other day, one of the many who had multiple degrees in obscure subject matter that any fool would realize a job would never exist for (think french literature or environmental philosophy). Should this 30 something loser have the right to reach in back pocket of a kid barely out of highschool breaking his body in the oil patch trying to get ahead? Who is the victim here, who is really being oppressed?

Who gets to define “rich”? Is a working professional living life of relative frugality “richer” than his blue collar neighbour making 1/3rd the income who thanks to easy credit is living 3 times the lifestyle. When the party ends and the hapless fool is whining about hardship & oppression pointing at his “rich” neighbour who do you think will have their retirement fund raided through taxation?

I think you could roll back the clock 40 years, confiscate wealth of todays top 1% and be in a far worse predicament then we are today. The real problem is within the ranks of the 99%, victims of their own stupidity. The real estate bubble is just part of a larger systemic problem brought on by a sense of entitlement where anything can just be taken and never earned. Its game over for most of them, too many fools are sinking the boat and its time to cull the herd.

#121 Devil's Advocate on 10.26.11 at 5:51 pm

The real estate bubble is just part of a larger systemic problem brought on by a sense of entitlement where anything can just be taken and never earned. Its game over for most of them, too many fools are sinking the boat and its time to cull the herd. – #120Cato on 10.26.11 at 5:17 pm

Bang on Cato. I was thinking of posting something to that effect just the other day but refrained as I well know coming from me it wouldn’t be taken quite so seiously. Hopefully they hear you better.

“Mr. Market” as Garth put it the other day,

When are we going to learn; you don’t mess with Mother Nature and you don’t mess with “Mr. Market”(AKA the Free Market) . “Mr. Market” is going do what needs to be done and there is not a damned thing we can do about it. The costs we incur today that we might resuscitate Mr. Market are nothing less than the consequence of the gifts gave him when he was not really in need at all – gifts that coddled as a parent might a child. Gifts that allowed “Mr. Market” to grow fat, lazy and inefficient. Mr. Market is a spoilt child – a child who will have it no other way but his own.

Yes there will be casualties along the road to recovery. And so there should be, for they who have not by then taken advantage of this window of opportunity to make themselves financially fit enough to keep up with the herd ought naturally meet their fate – as sure as it is a law of natural selection. It is not like they have not been given ample warning. It is not like the pack is entirely without compassion as it slowed giving the weak some time to heal and catch up. But ultimately move forward we must and will, for it is that or perish along with the weak who cannot or will not keep up as they frolic in the latitude our compassion has afforded them.

“Time to cull the herd” indeed.

#122 I agree Ron on 10.26.11 at 5:54 pm

#79 Ron on 10.26.11 at 12:17 pm
I’m still looking for a house in Toronto and haven’t seen anything symbolizing a downturn yet.

$450k houses are still the shacks that were once $300k.

I’ve been renting for 7 years thinking that the GTA was out of control. Still is. Can’t justify a death sentence for a tarpaper semi on Ossington for $700K

I’m going to give notice and buy a house in the Hammer in the $250 range.

enough is enough.

#123 vyw on 10.26.11 at 5:55 pm

Since they’re talking about federal net debt – it’s about $550 billion.
As the auditor general basically outlines a small amount is the actual over-spending over the years and the rest is compounded interest (because of deficit budgets).
But read the next paragraph re the debt to GDP
it was up at 108% during WWII and
it’s not around 35% today and this is the main point…

If GDP grows faster than debt, then as a %, the net debt will fall and the actual amount of debt especially in a low interest environment is not a factor. This is what has happened the last 20 years until the 2008 recession.

Through it all, the debt of the government is purchased by individuals and corporations and some foreign entities. Also, some Govt debt held by the Bank of Canada (and in the US by the US Federal Reserve) – this debt could just be cancelled because the Govt and the BoC is one and the same.

#124 Westernman on 10.26.11 at 5:57 pm

Prairie Girl,
Don’t bother obsessing, they don’t.

#125 Westernman on 10.26.11 at 6:02 pm

All the comments about the unfairness of a very few being rich and the rest poor made me laugh – the rich are rich because they take educated, calculated risks, work like dogs, think big and COMMIT themselves to being wealthy.
The poor, on the other hand fill their minds with who won the hockey game, who is on dancing with the stars, playing the lotto scam etc.
You could take all the money from the rich and give it to the poor and within five years they would have it all back again.

#126 Cato Response on 10.26.11 at 6:12 pm


Technically, many homeless people I chat with every day on my way to work have more money than the vast majority of my “white-collar” (mortgaged-to-the-hilt) friends.

Not only this: But the bum on the street ultimately has more freedom.

Time to break out the cardboard box.

#127 Nostradamus Le Mad Vlad on 10.26.11 at 6:20 pm

Abcess Make The Fart Go Honda but the stuff in this world is all a bunch of junglenuts anyway.
#93 Beach Girl –“Middle Class is almost extinct.”
— and —
#83 Sky — “Taxes serve the same purpose they always have. Oppression of the masses.”

Well, austerity will take care of the middle class for once and for all by placing us in a huge, inescapable quicksand.

Then the oppression of the masses takes over — “Do as I say, not as I do.” Chances are this is why the CPC was put in power, so Harper could crack his whip (sadomasochist PM?) while living the high life at our expense.

But doncha jes’ luv unexpected things happening at times when least expected? That is what makes life so interesting, having to deal with things we know nothing about, and then making the best of what we’ve got.
Interesting Geithner promises to bend over backward to help the EU, and the EU bails out Wall St.’s banks. Who is helping who? Creditors? BoA Latest sob story from them; 1:22 clip Fist fight . . . in Italy’s parliament; HUD “Making rampant joblessness environmentally friendly.”; Wall St. Cheaters Unlimited.

Rubber Bullets See the headline; Immunity “This is Iran-Contra all over again! If the people were to ever find out what we have done, we would be chased down the streets and lynched.” — George Bush, cited in the June, 1992 Sarah McClendon Newsletter.” This is the Iran – Contra affair; Killary Clinton She already knew that Gadaafi had waved a white flag or towel to surrender, and she howled with laughter when learning of his death; Somalia Two more ‘unnoticed’ wars.

#128 Ziggy on 10.26.11 at 6:23 pm

Just wondering… has anyone ever run a comparison of housing built to population growth for the US vs. Canada over the last decade?

Kind of curious what the ratio of Population growth to housing starts would be over the past 10 years for both countries.

I blogged on that some days ago. Look it up. — Garth

#129 Boycott on 10.26.11 at 6:28 pm

Harry Dent

His best-before date was 1995. — Garth

He was right about the bull run prior to the crash and also he was right about the 2008 crash.

He has no creds. — Garth

#130 Timing is Everything on 10.26.11 at 6:44 pm

#93 Beach Girl “there will be years of this financial funk.”

Good. The world needs a good funking. Boo!
#99 disciple’s question: “why can’t I see that everything is messed up because I am messed up?”

Why not view the world as ‘God’ would see it? Are you struggling to fix the world?

‘If you can see the world as an infinite evolution – the way God would see it – You would know that it’s more or less perfect and does not need fixing. It’s only when we view the world within the finite context of our emotions and ego that it looks less than perfect.’ – Stuart Wilde

#131 Ron on 10.26.11 at 6:56 pm


Excuse my ignorance, where´s the Hammer? Hamilton?

Let me know how you do.


#132 Ben on 10.26.11 at 7:00 pm

Facebook Calgary friend posts….

– Out of the house for yet another showing, come on house SELL!!!

– sell sell
– got my fingers crossed
– hurry up and sell

#133 Devil's Advocate on 10.26.11 at 7:13 pm

#129Boycott on 10.26.11 at 6:28 pm

Harry Dent

His best-before date was 1995. — Garth

He was right about the bull run prior to the crash and also he was right about the 2008 crash.

He has no creds. — Garth

Dent like so many others is riding on his past success looking for his next but not finding it so quick as he’d like. As they say; even a broken clock is right twice a day. Sooner or later we all get it right. His time will return too. But noone has a crystal ball.

All we know is what IS happening right HERE and NOW. And I don’t know about you as they are admittedly hard to see through the still prevalent gloom talk, but I see green shoots. Hell there’s even an increasing optomism on this “pathetic blog” as more and becoming downright frightfully positive – or at least less discouraged.

#134 Steven Rowlandson on 10.26.11 at 7:23 pm

Why impose or pay taxes at all? Government can mint cash at minimal cost and invest in mortgages and corperate stocks and bonds and live off an honest income stream for a very long time as long as it maintains a debt free fiscal policy and no social programs. Imagine that, the government going legit as an investor and not a taxer.
Sounds too good to work?

#135 eaglebay - Parksville on 10.26.11 at 7:25 pm

#78 Derek R on 10.26.11 at 12:13 pm

Should you enforce the payment of the gambling debt, the loser would have to save money to pay you. Therefore “savings”.

#136 BPOE on 10.26.11 at 7:35 pm

11 CONSECUTIVE MONTHS. Beautiful just beautiful
SNBPOE Super Natural Best Place on Earth. For all the Americans whining and foot stomping he’s wrong month after month after month. This is typical American jealousy folks – they can’t stand being second fiddle to the real deal.
Vancouver home resale prices rose in August, its 11th consecutive monthly gain, according to a report released Wednesday

#137 Nostradamus Le Mad Vlad on 10.26.11 at 7:35 pm

Sources or Sauces “There are a few problems here. First, experts say the EFSF would need about 4 trillion Euros. Second, whatever the EFSF has represents yet another loan, which means the crisis just kicked down the road a bit, not solved. Third, the sources are not named.”; Billions lost “But if you steal a six-pack from the 7-11, you will go to jail!”; Financial Hackers “…So, what I think this story is really about is setting the stage for portraying the coming economic crash as a computer crash and blaming the protesters for it.”; G&G Germany and Greece; Debt Crisis “Remember all those news reports from the American media that a deal was “just around the corner” and how you should go on buying stocks, especially bank stocks? They were lying. Again.”; Euro tanks “Which is why today’s upward surge on the DOW looks increasingly like a government intervention.”; Motivation behind OWS; Difference between a taxpayer and a slave; 1:45 clip The United States of Europe didn’t last long — it’s already collapsing; 2:51 clip China is doing fine (or so we think).

1:09 clip Proof NATO was at Gadaafi’s surrender / death; Snooping The question is: Why? Whose purpose does it serve for goft. ‘net snooping? Atheism Headline is right — The Christ would be an atheist if he came back today; High Cholesterol Women live longer; 5:14 clip Police try removing brutality scenes from ‘net; Uganda “Because … well … just because!” — Official White Horse Souse.; Ruissia and radar jammers; DC’s agenda The US-backed rebels have asked NATO to stay in Libya. They are scared of the truth getting out; OWS in support of Palestine; Oliar Libya is a recipe for success? Pix of the US “But trust us, your carbon dioxide is what is wrecking the planet!” — The Goracle.

#138 eaglebay - Parksville on 10.26.11 at 7:39 pm

#95 jess on 10.26.11 at 2:15 pm

Tel me Jess, who actually pays the corporate taxes?
It’s you and me.
Corporate taxes are a joke. They should be abolished.

#139 eaglebay - Parksville on 10.26.11 at 7:47 pm

#99 disciple on 10.26.11 at 2:29 pm

You’re polluting my iPad.
Half your rubbish doen’t make sense and the other
half is just plain dumb.
What are you? A teacher?

#140 eaglebay - Parksville on 10.26.11 at 7:51 pm

#100 Blacksheep on 10.26.11 at 2:34 pm

Wrong, again learn to read Financial Statements.
You must be another teacher.
Where do all these people come from?
Let’s hear it from the nutbars.

#141 45north on 10.26.11 at 7:58 pm

WhosYourDaddy: Plunge-O-Meter: I checked it out. So Toronto’s 4 months off the peak. 4 months isn’t a long time. You could argue that it’s just seasonal. I remember the American blogs – in the fall of 2006 most of US had hit its peak although Washington State and Utah had another year to go. People in the US weren’t convinced. It took another year before people started to realize that the bubble had burst.

I’d say that it will be another 8 months before people in Canada start to realize the bubble has burst. If everything else stays more or less the same. I’m thinking it won’t.

#142 eaglebay - Parksville on 10.26.11 at 8:02 pm

#120 Cato on 10.26.11 at 5:17 pm

Well said. There is common sense in some people.
Good work.

#143 The thing in the basement on 10.26.11 at 8:41 pm

116 vee-why-dubya – good responses there. Debt, credit,
savings seem to be concepts not grokked by many who
post here.

#144 Derek Ross on 10.26.11 at 8:42 pm

#135 eaglebay – Parksville on 10.26.11 at 7:25 pm wrote:
Should you enforce the payment of the gambling debt, the loser would have to save money to pay you. Therefore “savings”.

And you seriously think it is possible for any loser to save 5,000 Trillion dollars ? There aren’t that many in the world. First thing you’d have to do is persuade the Fed to print them. But you’re no Keynesian so you wouldn’t do that. Would you?

Nah. Here on planet Earth the best you could hope to get out of me would be the sum total of all dollars which have been printed up till the day I die because I can’t save what hasn’t been printed.

In the real world debts are often worth less than their face value. Fact of life.

#145 disciple on 10.26.11 at 8:53 pm

Perhaps you’re not supposed to understand it eaglebay. If you don’t understand it, then it’s not intended for you. Scroll down and continue in your ignorant bliss. I encourage that. Good luck.

#146 disciple on 10.26.11 at 9:03 pm

#130 Timing is everything… no, there is no struggle. As Bruce Lee said, “there is no fight”. And as Aristotle showed us, ” the end objective of all moral action is contemplation”. Also, we CAN only view the world within the finite context of our emotions and ego, so Stuart Wilde is failing to see that you cannot separate “God” from the world, they are one and the same.

#147 Blacksheep on 10.26.11 at 9:24 pm

Vyw # 123,

“But read the next paragraph re the debt to GDP”

I’m not discussing debt to GDP ratios. Our ability to pay is of no concern. Canada is a sovereign in control of their own currency, think MMT.

I know taxation forces the masses to chase dollars to cover their Gov. imposed liabilities.
I know they don’t need our tax dollars to function.
I know taxation is a tool used to regulate volume of dollars in circulation.

I also know, supply vs demand applies to all things, so while they can print, the Can. dollar pool is relatively small and it wouldn’t be long before inflation reared it’s ugly head.

So what I’m pointing out is, why tax the Shite out of the masses to pay interest to a private party when it’s completely unnecessary?

What, we couldn’t print $37 billion since the Confederation of our nation? PLEASE.

I’m sure the $386 billion in interest paid, could find a more productive use.

Eaglebay – Parksville # 140,

“Let’s hear it from the nutbars.”

That’s it? no content?

take care,

#148 Blacksheep on 10.26.11 at 9:33 pm

Eaglebay # 142,

“Well said. There is common sense in some people.
Good work”

Just read Cato # 120, all I need to know.

take care,

#149 neo on 10.26.11 at 9:38 pm


Please stop talking about debt.

Bottom line, compounded interest by it’s very nature grows exponentially. The REAL economy doesn’t. Therefore, when debts levels get to high it is impossible for the REAL economy to catch up. Even with austerity and tax hikes. The only solution is massive debt writedowns which is anathema to the very power brokers who have greatly profited by this arrangement. I read a great quote last week.

‘Keynesian economics is regarded by the naive as true, by the wise as false, and by rulers as useful.’

#150 disciple on 10.26.11 at 9:45 pm

#112 Sky… I agree with you. But what I am asking you to do is move to a higher level of understanding. Indeed you are well ahead of the pack in realizing that there are psychopathic members in our midst, and they tend to gravitate towards politics, gov’t, and military.

B U T, we allow them to operate, so the blame is on us. It always comes back to not blaming others for your problems. Freedom is a state of mind.

I know, you don’t want to accept this. It’s one of the hardest things to do. To not “just do your job”. Why do you assume that this is not possible? Because you fear death and believe in scarcity. So you have already lost. And about that Holocaust analogy, I don’t believe it quite happened the way it is portrayed… the word itself means “burnt offering” and gives you a clue as to the real purpose.

#151 2Lock on 10.26.11 at 10:00 pm

[email protected]#50….Assvocate…..Scientist, G told you off right…

#152 Timing is Everything on 10.26.11 at 11:50 pm

So, revolt. — Garth

So, revolt(ing)….But hey…It’ll happen sooner or later to one degree or another. Prepare to defend yourself! Ha!!!

#153 Sky on 10.27.11 at 3:53 am

@ disciple:

Here we are. On planet earth. Where death is a way of life. How do you like it so far? At the microscopic level you’ll find colonies of bacteria and viruses battling it out for supremacy. No harmony, just constant warfare.

Humans are forced to kill. Whether plants or animals,we need to eat. Rebel against this basic law by refusing to eat and the punishment is death. You starve.That’s the nature of this existence and it’s brutal.

New Age philosophy gets on my nerves because it denies the existence of evil and shifts the blame onto the victim. Got some horrible disease? Oh, then it’s your own fault because you were too angry or your vibes weren’t right or some such nonsense.

Your statement: “It always comes back to not blaming others for your problems. Freedom is a state of mind.”….
This is a good example of more New Age craziness.

Freedom is far more than just a state of mind in this physical realm of existence. When the Nazis busted the door down in the middle of the night and hauled the Jews to the death camps or when Stalin starved millions in the Ukraine, should these innocent victims have blamed themselves? New Age says, ” Yes.”

Raise your consciousness all you want. Mediate your heart out. But when a person calls evil something other than what it is or if he willfully ignores such evil…. then woe unto him. That makes him an apologist for evil and he becomes complicit in evil’s spread.

Preceding the Holocaust there was a long period of time where the Jews incrementally lost their rights as citizens. The Nazis even confiscated their pets. The Jews put up with all this because of their long history of persecution in country after country. When things turned violently uglier, few had the means to escape.

In the Ukraine it was different. Ukranians fought the Reds tooth and nail during the Russian Civil War with not only a White Army, but a Ukranian Green and Black Army as well. The Ukraine held out for years and was one of the last regions to fall. But fall it did. And then came the horror of the Holodomor.

Fear of death doesn’t factor into my revulsion at these crimes. It’s not fear of death that drives me. It’s a burning hatred of evil.

So, thanks, but you can stop coaching me, disciple. I will never reach the level of consciousness where I can transcend the pain that the deliberate murder of millions upon millions of innocents inflicts on me.

No, I’ll never reach that level of consciousness. Nor would I want to.

#154 disciple on 10.27.11 at 9:32 am

#153 Sky… your response proves the accuracy of my point. You are complicit in the very system that you have a “burning hatred” for. Humans are forced to kill? I’m not your coach. I simply pointed out the hypocrisy.

You are looking at only the effect and ignoring the cause. You are responding to the acts of evil, and completely missing (willfully I might add as you said – “nor would I want to”) the origins of evil. It’s a pragmatic view, but pragmatically in error.

Turn the other cheek. There is nothing New Age about that. I don’t take well to labels, and those who label other people, do so, because their willful ignorance prods them to do so. I am merely using words. If my words mean anything to you, then, great. If not, to hell with you. Goodbye and good luck.

#155 Sky on 10.27.11 at 9:53 am

Disciple- Humans are forced to kill IN ORDER TO EAT. The entire animal kingdom is bound by the same law. Unless you’re eating rocks or sand or something , then you are forced to take the life of a living organism to sustain your own life. Wheat is alive too until it gets turned into bread.

It’s -4 here in the banana belt this am. Your suggestion of going to hell sounds mighty tempting. I could use a good dose of fire and brimstone right about now. Maybe I’ll take you up on it. :-)

#156 vyw on 10.27.11 at 10:44 am

Actually MMT provides a very model.
The Govt can choose to pay off the debt or even monetize it but as I suggested in may other post:

net govt debt = net private savings

Kill the debt and savers will have fewer safer choices – they can lend to more riskier ventures or they might move money overseas ie. South Asians investing in Indian bonds paying 8%.

I agree that the Govt can spend into the economy and I believe that they should now that it’s clear from the BoC that we will not close the output gap til the end of 2013. The Govt should spend 1-2% more in GDP – $17 – $34 billion a year for 2 years. The extra money in the system will boost demand and employment.

#149 neo

Compound interest especially at high rates is a problem. The key for households as seen in the graph at the bottom of Garth’s post on Oct 27th is that consumer debt to GDP is high and continues to rise. We’re in a private debt bubble.

Actually Keynesians have been more right than wrong on this crisis. What they missed was the debt overhang at the household level – we’re stuck until it’s unwound or warehoused or forgiven.

#157 refinow on 10.27.11 at 11:44 am

Now this is really funny… Royal Lepage is finally coming out of the closet and admitting to the reduction of the housing market in Canada… But guess what it has noting to do with the economy…….It is the WEATHER’s FAULT….. ROTFL

“TORONTO, 2011 – An unusually snowy winter, a prolonged rainy spring, or a blistering hot summer – such as the recent heat wave in central Canada – can have a significant near-term impact on home sales, according to a national survey of real estate agents conducted by Royal LePage Real Estate Services.
Just over 41 per cent of the 1,434 agents surveyed say they have noticed that the unusual weather patterns experienced over the past five years have affected housing market activity. If a region is experiencing a heat wave or an unusually long winter, sellers may be more reluctant to list their homes and buyers may be less willing to get out into the market to look for a property.
“With all the different factors that affect the housing market, weather can often be over-looked. Severe weather, be it extreme heat, wet or cold, can prolong or delay seasonal sales cycles by weeks or even months,” said Phil Soper, chief executive officer of Royal LePage Real Estate Services. “The findings indicate that harsh weather may impact the number of homes bought and sold during a particular trading period. While this doesn’t speak directly to housing prices, a short-term drop in demand can impact local home values for a period of time. There is no evidence, however, that weather events change home prices over the longer term.”
Of all the factors that affect home buying activity in a given season, the weather is something Canadian real estate agents are watching closely. When asked how much of an impact inclement weather can have on the housing market, 55 per cent of agents surveyed said it has some impact, while 22 per cent said the weather has a significant impact. Thirty per cent of agents surveyed say they will counsel clients against listing their homes for sale at certain times of the year, due to the weather.
For Canadians who want to sell their homes during seasons when the climate is unpredictable, there are strategies to beat the weather, according to the Royal LePage agents surveyed. When listing a home in the hot summer months, sellers are advised to invest in air conditioning or other solutions to cool off a home during open houses. In the depth of winter, heating your home to a cozy temperature is most important, as is ensuring your property is accessible with roadways cleared of snow.
“People love to talk about the weather and the real estate market. While it is interesting that the former can impact the later, variables such as interest rates and employment levels are more important in determining the trajectory of our housing industry,” concluded Soper.”

What next ?? LOCUSTS???

#158 disciple on 10.27.11 at 1:42 pm

#155 Sky… you contradict yourself, left, right and centre. You talk of killing for no reason other than evil (genocide), and then you talk about killing to eat. Why are you confusing these two on purpose? Surely, you are old enough to understand the difference?

Here’s a great story relating to “Eat the Rich”:

I know a man who decided to kill himself by isolating himself in the woods until he died of starvation. What happened was that he was visited by a group of foxes and they seemed to wonder what he was doing. Guess what, after a few days, the foxes brought him some type of freshly killed dead bird that they had caught. Just laid it down in front of him and left. Like they pitied him. This is how he discovered the raw meat diet. So, tell me, Sky, what is the law of the jungle again? There is nothing inherently evil about killing to eat. Humans are the only species that kill members of their own species for sport, for the thrill.

But, it’s not your fault that you can’t see the contradictions, our culture produces this schizophrenia. On the one hand, we are taught to be independent thinkers, to never become fascists, but then on the other hand, we must conform to our cultural authority, to the dictates of the priestly class (educators and gov’t) for fear of being labeled “nutbars”. Fear rules. Fear is only a tool, mastered by your real rulers, to manipulate your thoughts and hence, control behaviour.

#159 new_era on 10.27.11 at 4:03 pm

Garth interesting lecture by peter schiff about US housing bubble

Kind of sounds like us