Deflating

While the bread-&-circus thing goes on in London, the Brits are facing the certainty of a triple-dip recession. Austerity budgets are killing them. On this side of the ocean, bond yields have plunged to historic lows. Investors in 5-year US government debt get half a per cent. The rate for a year is zero. Despite a crisis in Europe, gold’s dead.  Growth in the American economy has slowed again. Unemployment around the world is now structural. Can’t be fixed. On Friday seven Canadian banks were downgraded. Why? Too much real estate exposure.

What does all this mean? Simple. Google ‘deflation.’

A year ago on this pathetically prophetic and occasionally prophylactic blog I warned you of an odd thing developing – price inflation at the same time as asset deflation. That’s when you own a house in Surrey which is losing value every week as the real estate market collapses, and yet you’re paying more to insure it, heat it and drive home to it from a job where there’s less security and no more income. This means in order to maintain your lifestyle, you have to add to the line of credit and lie to the spouse. It ain’t a winning strategy.

Most people who have dabbled in amateur economics, like my friend Sammy who runs the pizza place, or the prime minister, know only the classic definition of deflation, which is the opposite of inflation. That’s when the cost of living falls below 0%, the money supply contracts, credit dries up and the price of everything goes down. It can lead to a vicious cycle in which less demand equals less production, bringing fewer jobs and still less demand. Maybe depression, too.

So how can we have this thing today when prices are outpacing wages, governments are printing tons of money and banks will happily loan to a worthy-looking golden doodle? How could there not be tons of inflation with less valuable money, rising house prices and easier-to-pay mortgages?

Beats me. I just come here for the pictures.

But facts are fact. Despite massive government intervention in the economy, the injection of enough liquidity to bankrupt the next two generations, coordinated global monetary and fiscal policy, zero interest rates and HGTV, asset values are doomed. That’s why Standard & Poors cut the credit rating on banks which make mega-profits and why governments (Britain, Greece, Canada) that think less is more, are on the wrong track. Not that paying down debt and trimming deficits is bad. It’s not. If you like deflation.

Many people think this is now unstoppable. Makes sense. After all, interest rates can hardly go any lower, and if they did, would it matter? Government spending has already gone off the charts, with people being paid to buy houses, build a new BBQ deck, close a first real estate deal or get a pickup truck. Since early 2009, every trick in the book’s been used to try and rekindle inflationary growth. In the US it failed to stop the massive deflation of residential real estate. In Canada, the same seems set to occur.

This is why I’ve warned against having the bulk of your net worth in a house, with particular concern for two groups – the vacuous virgins and the decaying wrinklers. Young couples who bought with little or nothing down within the last couple of years have a big chance of being wiped out. And house-rich, financially-poor Boomers not only missed the last chance to harvest a windfall, but now risk being trapped inside illiquid assets.

It’s also why I’ve regularly showcased some viable alternatives. Like preferred shares. Real estate investment trusts. Apartment buildings in Chatham. Exchange-traded funds. And warned you off precious metals, rental condos and anywhere that people ride Vespas.

Deflation, or even the threat of it, makes money more valuable. Like now. This is why people buy bonds and accept no cash flow – because the rising value of protected money is return enough. It’s why stock markets and corporate profits can increase even when the economy falters – because smart firms (like Apple) have cash reserves, which augment in purchasing power daily. It’s why the holy grail of the investment world these days is not capital gains, but yield. And it’s why people like Jessica will reap what they sow.

Somebody asked me the other day if only dumb people write me, or if I only publish the dumb letters.

Actually this one is typical.

Be so thankful you did not marry this woman.

Dear Garth: I’m a “property virgin” from Victoria, BC, but trying to get into the market.  My brother-in-law reads your blog a lot and said that you would be the best person to ask for advice.

I’m 27 years old and recently married.  I just graduated university last year with a Psychology degree and just started working part time as a teacher’s assistant during the school year. (In the summer I can collect EI).  In the evenings I work at a local pub and make good tips.  My husband just started working as a piece-work technician at the local Telco company.  Combined we make betwen $80k – $120k annually, but it fluctuates depending on how many tips I make in a night, and how busy things are at the Telco company (very slow at the moment but usually gets busy in Sept/Oct).  I have about $40,000 in student loans, but I can pay these off over the next 20 years so I’m not worried.  My husband has about $20,000 debt from various Lines of Credit over the years buying cars and going on vacation etc.  He recently also purchased a vehicle for his job, so there’s a $26,000 car loan as well. We have no savings.

We are currently renting a 1 bedroom suite for $850/month but we are thinking about buying a house since the mortgage rates are so low and I really want to own our own home.  Why pay somebody elses mortgage, right?  The biggest problem we have is that my husband hasn’t done his taxes in 3-4 years so we can’t prove our income and get approved for a mortgage.  I’ve been trying to get him to do them, but he’s more concerned with playing XBOX and riding his bike.

My question is, how can I convince my husband to get off his a** and do his taxes to get the ball rolling?  And are we screwed if he can’t find all his receipts?  We’re excited to start the next chapter of our lives and buy our own home, but I just a little help/advice from you.  Much appreciated.

290 comments ↓

#1 TurnerNation on 07.29.12 at 8:32 pm

A quick look at Kommunist Kanada and its mandated taxpayer quotas to meet Party officals’ outrageous salaries.

Remember, you get the government you deserve. Why, we have Harper…
Toronto has Mayor Ford who is floating property tax hikes upon regular hikes for a wild subway plan.

I saw the former Mayor – Miller – at Pearson airport getting a shoeshine. I wonder, did he tell the rubbies about his legacy – the Toronto land transfer tax – that they’ll never be able to afford property?

(I voted against all three guys).

http://www.piquenewsmagazine.com/whistler/bc-cities-pay-top-officials-more-than-white-house-does/Content?oid=2309989

B.C. cities pay top officials more than White House does
Why be Obama’s chief of staff when you can make far more managing White Rock?

Earning a paltry $172,200 a year, Lew’s salary pales in comparison to George Duncan, the chief administrative officer of — wait for it — Richmond, B.C., who pocketed a cool $267,613 in 2010/11 for keeping the lights on in that Lower Mainland suburb.

And Duncan’s salary isn’t even an anomaly. The chief administrative officers or city managers of cities such as Delta, North Vancouver (City and District), Kelowna, Maple Ridge, West Vancouver, Burnaby, Kamloops, Langley City, Pitt Meadows, White Rock, Surrey, Vancouver and Victoria all earned more than the White House chief of staff last year, according to the Vancouver Sun’s Public Sector Salaries database.

In fact, according to the 30 cities covered by the Vancouver Sun’s database, 116 municipal employees in B.C. earned more than Obama’s chief of staff; 17 of TransLink’s top breadwinners pulled in more than poor old Lew as well.

The overall winner of the B.C. City Hall Pay Sweepstakes? Penny Ballem, Vancouver’s city manager, who banked a tidy $324,110, nearly double Lew’s salary.

And gold-plated municipal salaries aren’t just “a big city” phenomenon in B.C.

In the Town of Lillooet, the chief administrative officer is paid $120,316 annually to keep an eye on 2,322 local residents.

Or put another way: it costs each taxpayer in Lillooet roughly $110 to keep their CAO living in comfort, not even taking into account all of the other town employees they must pay for as well.

Now compare that Lillooet salary to Obama’s principal deputy press secretary Josh Earnest, described by the Washington Post as a key member of Obama’s message team, who makes $123,000 a year at his White House gig and is perpetually a slip of the tongue away from igniting an international incident.

Still keeping Josh Earnest’s pay in mind, consider the plight of Victoria’s hard-hit taxpayers.

In the capital city alone, there are 24 city employees who make more than Obama’s deputy press secretary; this in a city where the average wage earner pulls in less than $40,000 per year.

#2 Mark W on 07.29.12 at 8:35 pm

http://grist.org/list/america-has-40-million-big-houses-that-no-one-wants/

America has 40 million McMansions that no one wants.

#3 Keeping the Faith on 07.29.12 at 8:39 pm

WOW … you can’t make this stuff up.

If this woman’s letter were a video game, XBOX of course, you would hit the reset button and start over.

WOW is all I can say, WOW!

#4 Boomer21 on 07.29.12 at 8:47 pm

Come on Garth, your kidding right? Even in this day and age of young, got to have it all now, thant can’t be a real email! If it is, holy crap, as a country we are in much deeper shi* than the US, Greece, Italy or well I can’t even think of anything more depressing. Now that I have said that please tell me you are joking just to get everyone going!

#5 Mark W on 07.29.12 at 8:48 pm

http://money.usnews.com/money/blogs/flowchart/2010/07/16/why-deflation-is-worse-than-inflation

Why deflation is worse than inflation.

#6 TaxHaven on 07.29.12 at 8:48 pm

“How could there not be tons of inflation with less valuable money, rising house prices and easier-to-pay mortgages?

Beats me.”

It just might, COULD, indicate that stimulating “demand” isn’t working…that economic growth requires more than just more “money”…

Why don’t you try “capitalism”?

You know – encouraging saving, capital accumulation, less spending and less regulation…

#7 tkid on 07.29.12 at 8:49 pm

*laughs and laughs and laughs*

How to frustrate some idiot broad’s desire to pile up debt and not have any savings? Don’t do your taxes! Brilliant, O Spouse of This Woman!

This Woman! Get your debts, his and yours paid off. Get them paid off now! Forget buying a house until you have those debts eliminated.

Oh my God, where do you get these letters from, Garth?

#8 jon on 07.29.12 at 8:49 pm

That one actually seemed fake. As for the question you posed mid posting- the answer is deleveraging on a macro scale. Tis the age of deleveraging

No letter here is fake. At least not by my hand.– Garth

#9 coastal on 07.29.12 at 8:50 pm

“Despite a crisis in Europe, gold’s dead. ”

That’s the second thing you’re wrong about Garth, love your blog but you miss the boat on gold. It’s just come back to life and will break $2000 by year end as more QE4 and 5 etc is pumped out, it will rise to $3000 and peak there. I won’t mention the other thing cause who needs to dredge up the past.

#10 TRT on 07.29.12 at 8:50 pm

Here in central Surrey, prices (asking) just seem to be going up and up. Very strange considering we are in a slowdown. Seems like the South Asians are out to lunch… Houses for $800,000…WTF? Garth , if gov let’s this correct the way it should for the benefit of future generations, expect a crash and nothing less.

Oh , large blueberry farms north of the Fraser are filing for bankruptcy. Appraised at peak, got loans on it, now bankruptcy. Just crooked! Told you years ago that this would happen G man if RE headed south!

#11 Raj on 07.29.12 at 8:51 pm

Hi Garth,

Long time reader… first time poster. I am 27, sold my house in Mississauga last summer made about $80 K and currently investing it.

Staying liquid with the plan to rent for the next 3-4 years.

Thanks for all the advice, keep up the good work.

#12 Roial1 on 07.29.12 at 8:51 pm

Garth, If that is an “average” letter / email.

How do you keep your brain from full scale BOGGLE?

How do you decide who is the most idiotic, Him for not doing his tax, or her for marrying him?

Is this what gets out of university as a grad now.

All I will say now is, school-of-hard knocks,

“class is in session.”

#13 jack_the_lad on 07.29.12 at 8:51 pm

That letter from Victoria is too outrageous… not sure if I believe it’s real.

#14 Mark W on 07.29.12 at 8:54 pm

http://www.vancouversun.com/business/2035/cuts+ratings+seven+Canadian+banks/7005811/story.html

S&P cuts ratings on seven Canadian banks

#15 Einzatgruppen kanada on 07.29.12 at 8:54 pm

Stay in rental. Work psychology degree on husband to get his tax sorted. Get plan together to budget and pay down student debt. Also try to get TFSA or RRSP going. RRSP may work better for your tax situation.

#16 vinny on 07.29.12 at 8:57 pm

Be so thankful you did not marry this woman.

omg! it would be a diaster

#17 Frustrated Kiwi on 07.29.12 at 8:57 pm

Garth – you should publish more of these letters so we can all feel better about ourselves. Self esteem is key, right? :-) I have no idea how people like your letter writer stumble through life – 86K in debt and wants to buy a house at or near the top of the property cycle! And hubby doesn’t file taxes?!? Wow!

#18 Country Girl on 07.29.12 at 8:58 pm

Hilarious!

#19 Mitt Romney on 07.29.12 at 8:58 pm

Garth, so are you saying it is better to own blue chip equities with a long steady history of uninterrupted dividends, as opposed to holding just cash, or buy more gold or real estate? What is your outlook on Canadian banks that recently got downgraded by S&P? Thanks.

#20 bruce on 07.29.12 at 8:59 pm

when it is over – it is over

#21 Mitt Romney on 07.29.12 at 8:59 pm

Garth, one more question…is it time to buy US real estate yet, like Florida? Thanks.

#22 Dragan on 07.29.12 at 9:00 pm

Someone’s pulling your leg Garth, this woman can’t be for real!?!?

#23 Not 1st on 07.29.12 at 9:00 pm

“The biggest problem we have is that my husband hasn’t done his taxes in 3-4 years so we can’t prove our income and get approved for a mortgage.”

Nice catch there Jessica. A real keeper.

#24 Country Girl on 07.29.12 at 9:01 pm

Hilarious! (The photo and the “Dear Garth” story.)

#25 recession vs. depression on 07.29.12 at 9:02 pm

garth,

just wondering how you might (personally) define an economic “depression”.

in other words, at what point do you think “recession” becomes something more?

We are nowhere near. — Garth

#26 Regan on 07.29.12 at 9:03 pm

That letter… wow. Just wow.

#27 Harry Palms on 07.29.12 at 9:03 pm

I’m upset that Garth did not dignify that letter to the editor with his signature wit.

Where do you even start? Can’t wait to see what the other blog dogs come up with!

Assuming there’s some unlisted revolving debt, and assuming there’s a reason our subject’s beau hasn’t filed (like he owes a bunch??)…..well, these two might be well over $100K in the hole.

Take that, and couple it with nothing in the kitty and less than rock-solid employment………….and they want to buy a house.

Seriously, you can’t make this shit up!

#28 TurnerNation on 07.29.12 at 9:04 pm

Ps. did not notice if said rubbies were expectorating.

Today’s male protagonist reminds me of my recent comment:

http://www.greaterfool.ca/2012/07/01/planning-3/#comment-181897

“Men in my age group essentialy are overgrown self-indulgent, passive kids; I cannot count the number of the same, who while away their hours, drinking, watching sports, and playing video games. Their standard uniform is one of flip flops, shorts, ironic/slacker slogan t-shirt (from this weblog’s etymologic journey: the anthropomorphic
Sunglass-on-head-durango-driving-blackberry-on-hip character).

In short: followers. Track6ers? The path of least resistance! Get the peice of paper, be one of the boys at work, put in minmums, follow others into housing and marriage traps. Works well, being a cog in the system.

Until said system skips a beat – layoff, market crash, housing bubble, divorce, etc. Now what. Your social system – one of following – no longer works. Time to Lead. But where is your role model?”

#29 Junius on 07.29.12 at 9:06 pm

#195 John (previous blog),

Dear John,

The Conservatives created the housing bubble. That is a fact. Sure the CMHC was in existence before hand but the real relaxations of the rules happened under the Harper government by his diminutive finance Minister Flaherty.

Why do people keep wanting to argue with these facts? Conservative government in both Canada and the US have shown themselves to be both bigger spenders and more prone to irresponsible internetion then the so called left. This is fact.

#30 Suede on 07.29.12 at 9:06 pm

$86k in debt and neither of you went to medical or law school at 27 years of age? Ouch. I’m sure most people know integer math, but maybe i’m mistaken.

-86k – 400k mortgage gives you a net worth of negative half mill.

You can’t even answer the final question on jeopardy unless you’re in the positive territory, nevermind 500k out from Zero on the negative side.

If she buys a home, she’ll need to do paperwork. They could start the home buying process by getting a file cabinet which is $40 at staples on clearance these days – must be because no one is buying them any more.

#31 Randy on 07.29.12 at 9:07 pm

Can’t wait for QE3…haha

#32 T.O. Bubble Boy on 07.29.12 at 9:07 pm

Does “the next chapter of our lives” mean “chapter 11”?

Gotta love it when you start a new job and instantly need a new car (and $26k loan to go with it).

These 2 need Gail Vaz-Oxlade way before they need to worry about reading Garth.

#33 Montrealer on 07.29.12 at 9:07 pm

this letter seems fake. someone had fun trying to sound stupid.

I’m sure we’ll hear from her. — Garth

#34 bcc on 07.29.12 at 9:09 pm

So, the message today is inflation & deflation can happen at the same time. Obviously RE is deflating. And for bond, people are buying because of its ‘rising value of protected money.’

My question is, will precious metal and commodities like agriculture going to inflate?

Thanks Garth

#35 Freedom First on 07.29.12 at 9:10 pm

Garth, what a tasteless photo. Well done……hilarious:)

Jessica, yes.I can totally believe it is a typical e-mail to you. I have heard this kind of talk many times, and, most unfortunately, that thinking is not just from the young people. I am very, very, grateful not to be married to Jessica, but it does sound like her and her boy are a perfect match. Probably have lots of kids too. Canadians are so screwed.

#36 ms bboomer on 07.29.12 at 9:11 pm

That letter has got to be made up, no-one could be that ignorant of so many things.

#37 Scalgary on 07.29.12 at 9:14 pm

Garth,

Looking forward to your post on Preferred shares. Will it be a good choice for RESP account?

Thanks a lot for protecting me from this mess…!

Warm Regards…

#38 Sean on 07.29.12 at 9:15 pm

Wow, the couple is at least 86K in debt plus whatever surprises the hubby’s unfiled taxes might reveal.

Like other readers I would advise the girl not to consider buying anything else until her debts are under control. Neither has a secure job and with a deteriorating economy both would be amongst the first out the door.

I find the letter depressing because the woman doesn’t realize how much trouble she is in.

#39 Randy on 07.29.12 at 9:16 pm

“The biggest problem we have is that my husband hasn’t done his taxes in 3-4 years so we can’t prove our income and get approved for a mortgage. ”

Maybe this guy is a lot smarter than we are giving him credit for….since his wife is House Horny….

#40 T.O. Bubble Boy on 07.29.12 at 9:16 pm

Harry Dent recommends keeping a good amount of cash, and putting a bit into Natural Gas, shorting Europe, and shorting banks.

http://etfdailynews.com/2012/07/27/harry-dents-formula-for-surviving-the-great-bust-ahead/

His take on demographics seems to align with Garth’s (I.e. Boomers retiring doesn’t help houses or the economy in general).

Garth – is this guy still a ‘nut job’? He forecasts deflation, and says to get out of housing.

He was cool in 1988. — Garth

#41 Mark W on 07.29.12 at 9:16 pm

http://news.investors.com/article/620090/201207271807/gm-risky-subprime-auto-loans-fuel-sales.htm

GM Ramps Up Risky Subprime Auto Loans To Drive Sales

It ain’t just houses ….

#42 robert james on 07.29.12 at 9:17 pm

That woman sounds like some one from a Gerry Springer show.. I can`t believe she is real.

#43 phinny on 07.29.12 at 9:20 pm

Fake? Hah! Welcome to my demographic, yo.

How many friends of mine, in very similar positions, now ‘own’ a house. Co-signed with their folks, of course.

#44 Rich in Calgary on 07.29.12 at 9:22 pm

This is the real problem with Canada’s education system.

The teachers are dumber than their students.

I would suggest this woman speak with a Trustee now.

That way it won’t be such a surprise in 24 months

#45 Lee on 07.29.12 at 9:22 pm

I can’t wait to start my life either,

Oh wait I did and it’s all adventure sports, brewery tours and exotic vacations. My co-workers chose mortgages, high blood pressure and ulcers.

#46 TheWorstOne on 07.29.12 at 9:22 pm

Not surprise to me the Victoria’s lady story: wife and husband most of the time deserve each other. A psychology graduated married the king of the X-box games. This is why I wrote you the other day telling you owe us an analysis of the long term economic and social implications of the X generation coming into age. The future looks really like a scary proposition when the texting generation has to go to work, vote, have children, make investment decision and run the country :(

Garth, is this the typical letter? Can you please post some samples of the worst ones?

Cheers and keep up the good writing. We the contrarians need a little place to come together and have at least some hope.

#47 thinker on 07.29.12 at 9:24 pm

Garth, our opening on this post is EXACTLY correct. All in the inputs into owning a house will go up and the asset it self will go south. Which makes owning a house, i.e the carry will go up, rates will go down and homes will go down. This is exactly what happened in the US..

Part of the problem with low rates is that “other” inputs need to stay constant or go down to make it actually stimulate. But since the economy has so much excess capacity, we still need to feed the cable, power, garbage, local tax, school, etc….all those things have gone up. This is why stock markets are booming and houses are not in the US, the low rates have made room for people to use those savings to tack on to other increasing bills and why US corps now have records amount of cash…

#48 Lee on 07.29.12 at 9:24 pm

And I disagree about the letter being made up, I’ll ask around the friend groups, may even know the poor lass, or her gamer husband.

#49 neo on 07.29.12 at 9:24 pm

“On Friday seven Canadian banks were downgraded.”

They weren’t downgraded. They were put on negative outlook which in rating agency speak means that within 6-9 months they most likely will be downgraded. I believe only RBC has been downgraded because they have the largest exposure to real estate. It is somewhat ironic that the UK got a stable AAA rating the same day our banks got a negative outlook. The UK is bordering on a depression…not a recession. They have had three staight quarters of negative growth and 5 out of the past 7. And that is with all the QE they have done that is only rivalled by the Americans and Japanese.

#50 Stupesing in Cabbagetown on 07.29.12 at 9:25 pm

“Be so thankful you did not marry this woman.”

Really Garth? And her slack-jawed video-game-playing tax-evading husband is a better catch?

I foresee a divorce in this couple’s future. Too much stupidity and irresponsible behavior for it to last. And their collective existing debts will only add stress to the relationship. Does she really think his behaviour is going to change?

Hopefully they will NOT purchase real estate. So much better to give 60 days notice and go their separate ways. Otherwise, in a year or two, they will be attempting to sell a place worth less than when they bought it at the same time as they are trying to dissolve their marriage.

#51 Chaddywack on 07.29.12 at 9:27 pm

Who the heck would want to own a house in Surrey…..

#52 Randy on 07.29.12 at 9:29 pm

http://www.youtube.com/watch?feature=player_embedded&v=HGDuQLrCX1I

Biderman – > 100% Bearish…..A Bridge to Nowhere….haha

#53 Jon on 07.29.12 at 9:33 pm

LOL That letter. You can’t even make that sh1t up!

#54 Nemesis on 07.29.12 at 9:34 pm

“Despite a crisis in Europe….” – Hon. GT

“The reports of my death are greatly exaggerated.” – Samuel Clemens

#55 I'm stupid on 07.29.12 at 9:35 pm

Jessica’s comment was a joke right Garth?

I wish. — Garth

#56 neo on 07.29.12 at 9:36 pm

“So how can we have this thing today when prices are outpacing wages, governments are printing tons of money and banks will happily loan to a worthy-looking golden doodle? How could there not be tons of inflation with less valuable money, rising house prices and easier-to-pay mortgages?”

From 1920-2008 The Federal Reserve balance grew to $800 million. From 2008 to present it is bloated 350% to $2.8 trillion. None of which has made its way into the real economy as impaired banks from the financial crisis still aren’t lending and if they did the tsunami of inflation that would result would be catastrophic. That said, deflation is the ultimate result. As I’ve said before, the $1.5 trillion dollar a year deficit since 2008 along with the expansion of The Fed balance sheet is simply masking the Depression they are in. It hasn’t avoided it.

#57 Frank on 07.29.12 at 9:36 pm

This post makes absolutely nos sense. In one hand you say the world is doomed on the post responses you say we are no where near a depression. For the past wee you sounded more like middle of the road and now it’s back to hardcore doom blogging.

Where did I say we’re doomed? Those who understand this stuff will do just fine. — Garth

#58 Alberta Ed on 07.29.12 at 9:38 pm

Not filing your taxes can be very bad for your financial health; an acquaintance of mine had his classic wooden boat seized by Revenue Canada when they caught up with him — and he was living aboard it. Sounds like this couple is headed for disaster.

#59 Deflation is good. on 07.29.12 at 9:39 pm

I love Deflation and I hope for a 30’s style deflation which was needed to correct the credit bubble and set the right path for the US/world on the greatest economic boom but for that to happen deflation needs to correct this credit bubble. We live in an 1984 world where inflation = good , deflation = bad and war = peace. In 2008 and 2009 economic crash I went on a shopping spree and i think people will money will go out and shop shop shop when prices are normal and not inflated with those people with no money buying on credit. Garth you are a very smart man and smarter then most people including myself but I disagree with your thoughts of deflation where your hard earned money that you saved is worth MORE! I was able to buy MORE for my money in 2008/09 . How is your money which is worth more a bad thing?

#60 Casual Observer on 07.29.12 at 9:39 pm

#25 @ 9:02pm

just wondering how you might (personally) define an economic “depression”.

in other words, at what point do you think “recession” becomes something more?

*************************************

It’s a recession if your neighbor loses his job.

It’s a depression if you lose your job.

#61 dd on 07.29.12 at 9:40 pm

Google it:

Inflation = expansion of the monetary supply.

Price inflation = result of expansion of the monetary supply. Look it up.

More fiat needed to buy the same quality of goods.

#62 mid-Ontario on 07.29.12 at 9:41 pm

We are not heading to deflation.
The printing presses will run as long and as hard as possible to inflate our way out of any possibility of deflation.
Deflation is recognized as the worst scenario for the west.
It will not happen.

As for your letter tonight, I do not want to believe that it is real but if you say so Garth. Unfortunately, I know some people very close to that lifestyle.

#63 dd on 07.29.12 at 9:45 pm

#25recession vs. depression

..just wondering how you might (personally) define an economic “depression”…

We are nowhere near. — Garth
……………………………………………………………………..
Turn to Peter Schiff. He doesn’t cover Canada. But he sure looks at Europe and the US.

True … Canada isnt even close.

#64 Ron MacDonald on 07.29.12 at 9:48 pm

Someone is pulling your leg Garth, I doubt that letter is legit. If it is legit, her husband will be getting audited by the Canada Revenue Agency shortly after he files his return.

Don’t count on it. — Garth

#65 T.O. Bubble Boy on 07.29.12 at 9:50 pm

Bloomberg/Businessweek touches on some Housing Bubbles around the world (Hong Kong, Canada, Norway, Switzerland):
http://www.businessweek.com/news/2012-07-25/housing-bubbling-like-2008-on-4-trillion-stimulus-mortgages#p1

Eat up yet another HAM storyline:

Qiushi Zhang, a 25-year-old graduate from the University of Toronto, convinced his parents in the Chinese city of Wuhan to purchase a two-bedroom condominium at Cityplace, a development along Toronto’s waterfront.

“People have money in mainland China, but they don’t have good investment options,” Zhang said by phone.

Canada is regarded by investors from China, Singapore and India as a relatively stable and affordable place to seek returns on real estate, said Debbie Cosic, a founder and partner of In2ition Marketing Insights. The Mississauga, Ontario-based brokerage markets new homes for developers.

Canada Shelter
Cosic said her firm saw strong demand for properties in Toronto on a road show to Shanghai, Hong Kong and Singapore in October. Individuals looking to build a residential-property portfolio are increasingly viewing the Canadian city as an alternative to London and New York, she said by phone.

“It’s a safe country. The banking system didn’t melt down,” she said. “At the back of their minds they’re always thinking: ‘If I need to get out or I need to move money, this is my perfect way.”

Ya – those safe banks, fresh off a downgrade from S&P.

It’s different here – no, really.

#66 The Original Dave on 07.29.12 at 9:50 pm

The worst part about her comment was not that they want to buy a house, not that he lives to play x box, not that they have unstable jobs, and not that he hasn’t done his taxes. The worst comment she made refers to her frame of mind.

She sees the $20,000 debt obligation as a 40 year term. She’s doomed. Their outlook is beyond flawed.

#67 dd on 07.29.12 at 9:51 pm

Deflation, or even the threat of it, makes money more valuable….

As per Peter Schiff the US has been into a recession since 2001. Debt just covered things up. Now if money is more valuable and the US has been in a recession state since 2001 compare the US buck to commodities, gold, silver, and oil.

Yes the world is deflating but there is more and more money being brought into being. The world is awash in liquity or money. And liquidity doesn’t address insolvency.

#68 geogar on 07.29.12 at 9:52 pm

DELETED

#69 Sp on 07.29.12 at 9:52 pm

86k in debt? Playing XBox? No problems. Tell your husband to earn virtual dollars in the games to help paying off the debt.

#70 dd on 07.29.12 at 9:57 pm

Why bond rates are low in US:

http://video.cnbc.com/gallery/?video=3000105416

Bond yields are low because (in substantial part) prices are high since investors crave them. When equity markets recover, bond prices will tumble. — Garth

#71 gladiator on 07.29.12 at 9:57 pm

The picture I get is: dump a bunch of money into a useless degree that doesn’t even make you a real teacher, and allows you to work at the same level as a high school dropout (must have appropriate “assets” for restaurant work, though). Then, have 40k in debt, then marry a hairy human with underdeveloped mind, who has debt from frivolous spending, and cares more about xbox than about sorting his things out. And, after all that, WANTS a house at the peak of the cycle.
I say go all-in and buy the dang house! You need a big-time wake-up call; a huge freaking lesson that’ll teach you how life works. Buy it and never look back. You will get the best education ever and it’ll cost you very little – a couple hundred grand at least. That’s it!

#72 Golum on 07.29.12 at 9:57 pm

I have a sister like Jessica. The thing that is going to save that family is for him to continue playing X-box. As long as he keeps his job and ignores her pleas for a house, it can’t get any worse.
I doubt they could come up with a down payment at any rate. The change in mortgage rules was to stop people like this from owning a house until they took some responsibility for long commitments. Most people like this with warm fuzzy feelings about home ownership have NO idea about the additional costs. ( I just paid $7000 to have my shingles replaced) Houses that aren’t maintained quickly fall apart, and the resale value goes with it. And the cost of repairs add NOTHING to it’s value.

When I bought my current home, I carefully added up all the deferred maintenance items I could find, added 50% for unseen extras, and made my offer. The owner was furious. She thought that the house retained it’s value no matter what. Three weeks later I came back with the same offer and bought the house.

So many people go into home ownership without understanding the true cost. Condo owners that get $40k “special assessments”. One of those can break you and you have no choice except pay it.

Buy an extra game controller and join him. Believe me, Jessica, as a big brother, it’s for the best.

#73 youliana on 07.29.12 at 9:57 pm

I wonder why we never heard of a bank downgrade on the news, we heard of downgrades in so many other countries in Europe…

#74 Bobby on 07.29.12 at 9:57 pm

Jessica is the reason we chose private school for our kids. Sadly, there are many more Jessicas out there.
Collectively this couple has the IQ of a houseplant.

#75 skye on 07.29.12 at 9:58 pm

I don’t think the letter is made up. I just don’t think the letter writer has spent any time at all reading this blog. Or if she has .. I don’t know what to say to that. That would be mind boggling.

#76 American Werewolf in BC on 07.29.12 at 10:02 pm

#6 TaxHaven on 07.29.12 at 8:48 pm
It just might, COULD, indicate that stimulating “demand” isn’t working…that economic growth requires more than just more “money”…

Why don’t you try “capitalism”?

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

Economic growth takes surplus energy & materials (not the proper economic philosophy). Capitalism has just been a vehicle to distribute that surplus among a society for potential reinvestment. What is has also developed is swarms of crumbling infrastructure, debt needing to be serviced and wasteful markets (like iGiveafucks), which all suckle at the trough of available energy & resources. In the end, there simply isn’t anything left over to keep propping up Starbucks on every block in the great name of capitalistic progress. Maybe when you could stick a straw in the ground and get oil…

Those days are over….what you really need is a new paradigm, which Im going to suggest isn’t capitalism or communism. The two behemoths economic theories of the 20th century are frankly enemies to the notion steady-state economy–all that may be possible with declining EROI.

The sound we are hearing isn’t Ayn Rand sighing in her death bed. Its massive world-wide deleveraging, from a bubbled civilization driven by growth-centered theories that can no longer fuel their own bloat. Its like you are cheering on a morbidly obese man at a pie-eating contest, who can no longer lift the pie to his face. This is not going to end well.

#77 Min in Mission on 07.29.12 at 10:03 pm

I really want to call “fake” on that letter, but, I have a friend at work that is going down that same road. No savings, only he works and not at a great paying job, 3 hour total commute, renting a “so-so” apartment. But, looking at buying a house!!! One income, marginal job security, no savings, no down payment!! And two kids!!!

#78 JSS on 07.29.12 at 10:05 pm

Garth, are those Gen X’s who have invested in equities – dead?

#79 gladiator on 07.29.12 at 10:09 pm

offtopic: why am I seeing all these articles about “the best-looking player at the Olympics” (a Paraguayan lady); and about “the best-looking team at the Olympics”?
Is it not about Olympics anymore? Does it have to involve “best-looking” now? I thought it’s about strength, achievement, force, competition – you know, the usual Olympics… I guess KimK can now extend her reach for eyeballs now (hey, I am talking about EYEballs!!!)

#80 City Slicker on 07.29.12 at 10:10 pm

Yes the RE estate card was played in the US in 2001 to prop up what should have been a major recession from the .com bust. But it fell apart 5 years later when debt was at record levels and 70% home ownership.

Canada did the same thing 2007, played it’s RE card and here we are now 5 years later with record debt and 70% home ownership, sounds strikingly familiar eh.

QE has been used to again prop things up, but this is the end game. Inflation with deflation is called stagflation and the perfect breeding ground for gold, just give it a little more time, and remember 1979 and 1980 when gold ran from $100/oz to $900/oz and RE collapsed.
The Fed is up to bat and QE 3 will be coming before September.

No comparison. Inflation in 1980 was 13.5%. Gold crested at $900 then crashed to $250. — Garth

#81 brainsail on 07.29.12 at 10:11 pm

I hope that I never get to a point in my life where I need to visit a Psychologist.

#82 bruce on 07.29.12 at 10:12 pm

At times like this – I wish I was a divorce lawyer

#83 Joe on 07.29.12 at 10:16 pm

Hey chicky, Give me your husbands player name and I’ll melee his Halo a** for ya. Come to think of it, you should play xbox too…

#84 Steph on 07.29.12 at 10:18 pm

“Can’t be fixed.”

Don’t agree. It’s being fixed as we speak. Just watch, open your eyes.

You guys just see the trees. There is multiple forests.

#85 frank on 07.29.12 at 10:18 pm

I am a vulture however I am getting tired. I think nothing will happen with real estate prices at least nothing in the gta. Nonsense Canada beats all economic laws unfortunatellty.

#86 Saskatoon-Living on 07.29.12 at 10:19 pm

Advice to the moron in the letter: take away your husband’s bag of weed! Playing Xbox and riding your bike instead of doing your taxes for 4yrs is ridiculous! Another great post Garth. I totally agree that deflation is more than likely coming. There’s just too much debt in the world. US 10yr note hitting record lows is not a good sign.

#87 Hurly on 07.29.12 at 10:21 pm

Of course that letter is real. Why do you think we are in this mess? Only the readers of this pathetic blog and a few other intelligent people know what is really going on. That retard ? Sorry Jessica, you are dumb! Is she so house-horny that she can’t see the trees from the forest?This last generation of kids are born into a false sense of entitlement that teachers and mothers reinforce daily. I like to refer to these people as “precious little snowflakes”. Schools are the worst culprit . Teaching that there are no losers. Of course there are losers in life, who else is going to work at Walmart ? That girl needs a serious smack of reality. Pay off your debts then save some money. And who in the hell takes psychology? What a waste of time! And time is money. I am sorry you have to receive letters like that Garth. I suspect your next book is going to be titled “Stupid letters…The best of”. Could be next years best seller.

#88 Arse on 07.29.12 at 10:22 pm

#76American Werewolf in BC on 07.29.12 at 10:02 pm

—————————————————————-

Very well put.

#89 Boomer21 on 07.29.12 at 10:23 pm

Only 10:15 and already 81 comments. Winner, winner chicken dinner. Hit a cord I think.

#90 gloom and doom on 07.29.12 at 10:29 pm

well i people are still buying here in toronto haven,t seen any price dips

#91 TaxHaven on 07.29.12 at 10:31 pm

#76

You’re another character trying to claim that wealth is illusory and only energy & resources matter…

Last I looked, there didn’t seem to be any shortages of oil, firewood, gas, or metal.

The economic system DOES matter. As long as all these interfering governments persist in thinking they can suspend the laws of economics ~ human nature! ~ we’re going to have next-to-no wealth creation. (And Starbucks isn’t real wealth.)

The problem isn’t a shortage of stuff: it’s
government!

There are a lot of things that could be done (but they’re so “un-Canadian”!!!)

They have to quit rigging interest rates, abolish the BoC and prohibit fractional reserve lending.

Let debtors, borrowers and banks face the markets.

Eliminate labour-cost rigging minimum wages.

Eliminate business licenses & zoning regulations.

Cut taxes – all taxes.

Stop government borrowing: no issuing any new bonds.

Allow any & all home-based business ideas.

Slash government employee numbers.

Abolish import & export regulation and duties.

Free the liquor business, airports, border crossings, medical system, etc., from government control.

Do some of these things and I might feel like investing my money instead of socking it away in gold. When I can sell stuff off the back of my truck, on any vacant land, online or from my home entirely unmolested, I’ll KNOW we’re making progress…

But that would be so “un-Canadian”…!

#92 a prairie dawg on 07.29.12 at 10:34 pm

Introducing the new minimum-payment-lifetime-revolving-credit-line option, for the truly financially impaired.

We’ll lend you far more than you can afford, and you’ll take it out over outrageously long terms. You’ll never pay it off, so don’t worry. We take a percentage of your pay for the rest of your life, and when you die we get all your possessions.

You deserve a better lifestyle than you can afford. So don’t let life pass you by. Sign up for life today.

#93 Application for Amazon on 07.29.12 at 10:40 pm

Hello Mr Turner. I attach my resume for position of Amazon with your firm. I am firm too. I like Harleys

http://www.rt.com/sport/olympic-beauty-london2012-antonija-misura-croatia-basketball-331/

But can you dribble? — Garth

#94 Tim on 07.29.12 at 10:42 pm

With the downgrade, are you buying Canadian banks at these levels?

Debt or equity? — Garth

#95 Dan in Victoria on 07.29.12 at 10:46 pm

After reading that letter I need a cold shower.
At the Langford round about fountain.

#96 brainsail on 07.29.12 at 10:53 pm

I thought this was an excellent article explaining the global housing crisis.

“Housing Bubbling Like 2008 on $4 Trillion Stimulus: Mortgages”

“Canada Shelter ”

“Cosic said her firm saw strong demand for properties in Toronto on a road show to Shanghai, Hong Kong and Singapore in October. Individuals looking to build a residential-property portfolio are increasingly viewing the Canadian city as an alternative to London and New York, she said by phone.”

“It’s a safe country. The banking system didn’t melt down,” she said. “At the back of their minds they’re always thinking: ‘If I need to get out or I need to move money, this is my perfect way.”’

“In Canada, where government bond yields this week fell to the lowest level since 1950”

http://www.businessweek.com/news/2012-07-25/housing-bubbling-like-2008-on-4-trillion-stimulus-mortgages#p1

#97 Herethere on 07.29.12 at 10:53 pm

Nice letter. According to it, in Canada lots of villages must be missing people.

#98 2centsCdn on 07.29.12 at 10:57 pm

That couple sounds so stupid I don’t even think they deserve others wasting their time trying to figure out the steps to a solution. Cool how two such clueless people could find each other …. it was meant to be. Two pea’s in a bankruptcy office. I think it’s best he doesn’t do his taxes so they can’t get a mortgage …. somehow I know they would do the exact wrong thing if they got approved. Oops ….. wasted some thinking on them.

#99 new canadian on 07.29.12 at 11:05 pm

Woman is fake or not, I am sure there are people out there with similar situation that just got approved for a mortgage.
Look, she is getting good tips, she must have the tools to convince men. Jason Kennel (or Kenney you call) just banned all exotic dancer foreign workers. I believe there will be a shortage in this field and she has the experience and tools to succeed.

#100 MC on 07.29.12 at 11:10 pm

QE3 before the election….not gonna happen…very suspicious of the run up in risk lately seeing as august has shown cyclical bear markets. Wednesday should be interesting. Anyone got any bets on for the FOMC statement?

#101 sluggo on 07.29.12 at 11:13 pm

Revising an outlook from stable to negative is not the same as downgrade but it does foreshadow what’s in store.

#102 Ronaldo on 07.29.12 at 11:14 pm

I have read a lot of stories on this blog but this one has got to take the cake as the one sounding the most far fetched of them all. If this is typical of the emails you get Garth its no wonder we’re in the mess we are in today. Totally mind boggling.

#103 Canadian Watchdog on 07.29.12 at 11:14 pm

Gold looks great right now. http://postimage.org/image/3mijsk4j3/

Food drought, Euro uncertainty, U.S. debt ceiling, QE3, Indian wedding season, Chinese New Year and emerging market inflation all ahead in the next six months.

“No comparison. Inflation in 1980 was 13.5%. Gold crested at $900 then crashed to $250. — Garth”

Gold declined because of the Volcker shock. Until that happens again prices will persist.

#104 Timbo on 07.29.12 at 11:16 pm

http://theeconomiccollapseblog.com/archives/17-reasons-why-those-hoping-for-a-recession-in-2012-just-got-their-wish

” Believe it or not, the amount of waste being carted around on trains in the United States has an 82 percent correlation with U.S. economic growth. Unfortunately, right now the number of garbage carloads on trains is falling dramatically.”

http://twitpic.com/abugye
holy hamburger batman, the chart does not lie……

http://www.bloomberg.com/news/2012-07-29/deflation-dismissed-by-bond-measure-as-qe3-anticipation-abounds.html

“Higher inflation results in a tax on consumers and slows the economy down,” Michael Materasso, a senior portfolio manager and co-chairman of the fixed-income policy committee at Franklin Templeton Investments, which oversees $320 billion of bonds, said in a July 24 interview at Bloomberg headquarters in New York. “If you end up with a spike in commodity prices, have you done more harm than good?”

Harm in $8 bread and $10 milk? With all the raises around the corner it should be a no-brainier. Bring on the printing presses and watch stocks shoot for the moon……

#105 Patient in Richmond on 07.29.12 at 11:16 pm

this is what i find so amazing . I was taught never to buy anything i can not afford , hence we never bought a house yet .

Is that such a hard lesson ?

More people than you know live with unstable jobs , no savings , no clue and yet they will somehow manage to buy a house . The next few years will bring a reality check , DON’T BUY it IF YOU CAN NOT AFFORD IT.

What is so hard abut that ?

I remember we put an offer on a house and the realtor tried to convince me on how to finance it with his broker . He told me not to worry since his broker could get me unlimited funds .

My parents told me long time ago that there is no free money and if it sounds too good to be true it probably is not ….

We made a simple decision , we can not afford it, and even so it was our dream house we walked away . Now i just sit and wait until the market crashes , in the meantime play my x-box and enjoy a pint with no worries about my financial future as i don’t mind renting for another few years ………….

#106 Humpty Dumpty on 07.29.12 at 11:18 pm

When the deflationary push came, policymakers responded with an even larger unconventional inflationary shove. Deflationists beware: There is clear evidence that, under an elastic, fiat currency regime, the deflation endgame is, paradoxically, inflationary.

http://www.scribd.com/doc/98052992/The-Amphora-Report-From-Deflation-Push-to-Inflation-Shove

This is one CRACK thats only going to spread…

Unless your a plumber…..

#107 Tron on 07.29.12 at 11:20 pm

48 Lee on 07.29.12 at 9:24 pm
And I disagree about the letter being made up, I’ll ask around the friend groups, may even know the poor lass, or her gamer husband.

Dude from the 36,000,000 people that live in Canada you’re going to find out who these two are just by ‘asking around’. Light that pipe up and get to work…keep us posted on your progress.

#108 VicBC on 07.29.12 at 11:26 pm

#46 TheWorstOne

“The future looks really like a scary proposition when the texting generation has to go to work”.

By teaching your children how to standout from the current crop they will excel.

#109 David on 07.29.12 at 11:28 pm

We have a house worth 420K, we owe 190 K, we make double payments; it will be paid off in 6 years. So we contine this accelerated payment, or do we drop it back to the required payments and invest the difference.

#110 Alex on 07.29.12 at 11:28 pm

I think this letter is real, because government for the past 10 years made the rules that favors this very mindset that was expressed by a girl in this letter. If ten years ago that couple didn’t write a letter to Garth and just proceeded with a purchase of a house, they would be ahead by now.
That is why she doesn’t even realize the whole stupidity of what she put in words in her email. Evolution in action. Scary if you ask me.
I just don’t get it why those
who are running the show at the top think that by rewarding “such” winners will get their descendants a better Canada. This whole CMHC charade has already made millions to bankers and politicians by milking government purse, how much is enough?
Indeed sad story.

#111 Renter in Van on 07.29.12 at 11:31 pm

Is it really possible to be that dumb? I am speechless. I wish i could unread her email. Sigh. At least the airhead is asking the right person for help.

#112 neo on 07.29.12 at 11:31 pm

No comparison. Inflation in 1980 was 13.5%. Gold crested at $900 then crashed to $250. — Garth

Yet even with a 15% 10-year bond and 13.5% inflation we saw one of the most robust economic and stock market expansions in American history. The 10 year bond is now at 1.5% and heaven forbit it gets to 4 or 5%. Why? Debt saturation. More debt is just pushing on a string. The debt needs to be reset to start another credit cycle over again but the problem is this credit bubble was too large to unwind without causing major systemic damage that isn’t palatable to the government, corporations or citizens. So we let this charade go on.

National Debt $1 trillion in 1980.
National Debt $16 trillion in 2012.

We will never willingly see the U.S. Federal Reserve “normalize” rates again Garth.

Tempus Fugit…

#113 Jane on 07.29.12 at 11:34 pm

Wow, hon, remember taking care of the egg to find out how hard it was to take care of before having a baby? Try taking care of your current debt before getting a mortgage. Go find out all the monthly costs besides the mortgage before getting one of those babies. Thank god you can’t get a mortgage. There is a saying around here: you are so screwed.

#114 Jane on 07.29.12 at 11:35 pm

Garth, love the pic!

#115 Dave on 07.29.12 at 11:36 pm

That letter…..FACEPALM.

#116 skeptical on 07.29.12 at 11:44 pm

I don’t believe it. Who makes that kind of money from part-time employment? If so, why would anyone work full-time?

#117 Margaret on 07.29.12 at 11:55 pm

You either made that up, or she sent it in as gag.
Nobody can be that stupid ; She’s pulling your leg.

#118 Signpost in the bushes on 07.29.12 at 11:56 pm

“Women marry men and hope to change them, men marry women and hope they never change!” author unknown.

#119 Signpost in the bushes on 07.30.12 at 12:08 am

“Men marry women with the hope they will never change. “Women marry men with the hope they will change. “Invaribly they are both disappointed.” (Albert Einstein)

Correction; the author was always known.

#120 Herb on 07.30.12 at 12:08 am

John (from previous blog),

you, Sir (using the term loosely), made no attempt to answer the reasonable questions I posed at #184 (previous blog). Therefore, you are nothing but a Conservative shill. Shoo, Shill!

#121 Kurt on 07.30.12 at 12:09 am

Dear letter writer:

You have a psych degree, so I’m sure you will understand the words I am about to use. You are delusional, and in denial. You use rationalization in place of reason. You need to get help now. You probably can’t afford full rate counselling out of your pocket nor qualify for assistance, so dig through your classmates and find someone who did counselling psych and get started. You will save yourself a world of hurt. Yes, this sounds mean; I’m glad the anonymity of the Internet insulates me from the pain you’re going to feel when you realize how badly you’ve screwed yourself already. That same anonymity allows me to be very direct and, I truly hope, help you to stop the bleeding and change your ways before you injure yourself even more.

#122 TimV on 07.30.12 at 12:10 am

Jessica: Just a couple thoughts, my own only, of course. $40000 student debt might not be that horrible, if it’s guaranteed to always be at a very low interest rate. The $20000 line of credit is almost certainly not at a low interest rate, though; it would be advantageous to pay it off.

Car loans are often also guaranteed to be at a somewhat lowish interest rate (I think I was offered 1% by my dealership, or something ridiculous). However, I wonder if a used car might have been cheaper and just as effective for your husband’s job? I only mention this since it sounds like he frequently buys a new car.

For most legally employed people, it is in your advantage to file your taxes — think tax refund. And, in the cases where it is not in your advantage, it’s basically illegal not to file … so effectively it’s always in your interest to file.

Most financial planners will tell you that getting a tax refund means you paid too much taxes. I say bull-pluckish — these financial planners are ignoring real world psychological effects. Nothing provides an incentive to make charitable contributions and RRSP contributions like knowing that it will increase your tax refund at the end of the year. Aside from compounding interest, tax refunds are the next best invention in the world. Use the tax refund to buy a new xbox game. Seems like an obvious win-win.

Regarding the house: for my mortgage, I did not need to provide any tax receipts or tax notices of assessments. You will need to save a sufficiently large downpayment.

At $850/month for a 1 bed, you probably don’t have kids yet (are you planning to?). Let’s say your total annual living costs are around $50000 (maybe try to avoid expensive out-of-country vacations?). $80k to $120k annual income, but I bet you’re not paying taxes on some portion of that (the restaurant tips). Let’s say you average $80k after-tax income. Seems reasonable, especially since you will probably find a full-time job that doesn’t include summer-time EI payments (I’m assuming!!!). So target $30k/year of savings. Two years to pay off the line of credit and car loan. Another four years and you’ll have a decent home downpayment ($30 x 4 = $120k saved, and no debt except the low-interest student loan).

Average townhome in Victoria is currently $420k; average condo is $320k. So once you’ve paid-off the LOC and car loan, and then saved the roughly $120k to $150k, then you’re in about the right range of savings to buy a home and stop renting.

You’ll be age 32, which is also roughly the “now or never” time for having kids, if that’s what you’re interested in — so by that time you will have more knowledge about such plans and it will be easier to decide on what you “really” need from a home (and what you can afford).

Of course, all your savings will be in your home and you won’t have any explicit retirement savings. If it were me, I might choose to stretch-out the time period longer so that I could also put some money into my retirement savings (I like RRSPs across all income brackets and time frames, but some financial planners argue that TFSAs make more sense in certain cases). However, I do recognize that in certain circumstances, the value of a “forced savings” vehicle such as a mortgage does actually make sense … even if it’s not the financially smartest, it sometimes is the practically most realistic. Besides, you’d hardly be the only 32-year-olds with a house but no retirement savings (of course, the same could be said about lemmings and cliffs).

Anyhow, that’s a lot of rambling thoughts. I guess just recognize that because your so-called “financial IQ” is probably not as high as someone with a degree in accounting (psychology is great for stock investing, but when it comes to managing finances, accounting is probably better). To compensate for this, you need to generally be less aggressive with how you manage your financial affairs. Less aggressive really means: less leverage, or aka, less debt. Again, that’s just how I think of it, anyways. If I knew more and was smarter (like, say, our man Garth), then I would probably have more debt, too!

You might choose to rent a larger apartment and have kids earlier. Some people do this. Certainly a more risky approach, but if you want to have kids earlier, then there’s no way to avoid increase financial risk, I don’t think. I guess you’re trading financial risk for reproductive risk. Hehe. Doesn’t sound like the husband wants to make this tradeoff yet, though.

#123 FTP - First Time Poster on 07.30.12 at 12:15 am

I have a sister like this chicky poo that just wrote in. Told her when she was going for her BA in Psych to go for a BSW (Bachelor of Social Work) instead. She brushed me off like an annoying tick. Fast forward 12yrs later and she’s making less than half of someone w. a BSW and took almost the same courses!

My only hope is that these people dont breed.

#124 TimV on 07.30.12 at 12:15 am

#1 TurnerNation — Yes, clearly the Toronto land transfer tax is responsible for increasing prices of homes in the Toronto area. Without that transaction tax, I bet house prices would be at least 10% lower. After all, it’s been clearly shown by many studies that transactional fees cause an increase in speculative market behaviour.

It’s trivially obvious that with an increase in land transfer taxes, more and more people start flipping properties for profit.

#125 whynot on 07.30.12 at 12:16 am

Come on! She’s obviously trying to push your buttons (and doing a good job of it!)

#126 Island renters on 07.30.12 at 12:23 am

Sadly this chick and her man-child are real. And stop blaming the public education system for her. If you were to invest your private school tuition for 13 years you could afford more for your child than a psychology degree. Although a psychology degree is one of the more useless, increasingly the majority of bachelors degrees, even in sciences, lead to minimum wage jobs. The good jobs are in the clutches of all those boomers Garth tells us about who have no savings & can’t afford to retire. The tax breaks go to the (previously?) house Rich seniors. It’s a bumpy road for kids today & a precipitous cliff for those like this pair of winners who embrace debt so easily.

#127 eviee1973 on 07.30.12 at 12:32 am

My mother hated video games, however she did approve of me getting a motorcycle at 11 years. Do not know if I would have turned out like this chump if I had of been allowed video games as an adolescent.

#128 bankcrupt? on 07.30.12 at 12:36 am

Garth (or anyone else):

Answer this for me please. Bugs the hell out of me.

They have nothing, and likely will have nothing. What is wrong if they decide to mortgage big (i.e. leverage) and if it doesn’t pay off, declare bankruptcy?

#129 bankcrupt? on 07.30.12 at 12:36 am

I should add – they’re not screwed, we the tax payers are.

#130 Ronaldo on 07.30.12 at 12:41 am

#77 Min In Mission – ”I really want to call “fake” on that letter, but, I have a friend at work that is going down that same road. No savings, only he works and not at a great paying job, 3 hour total commute, renting a “so-so” apartment. But, looking at buying a house!!! One income, marginal job security, no savings, no down payment!! And two kids!!!”

If this was January of 09, all he would need is the ability to ”fog a mirror” and he would have gotten a mortgage. They would even have lent him the down payment and given him ”mortgage holidays” to boot.

#131 Nostradamus Le Mad Vlad on 07.30.12 at 12:58 am


Garth’s post 2nite and #1 TurnerNation’s blog are both spot on.

“Not that paying down debt and trimming deficits is bad. It’s not. If you like deflation.” — So the west has been caught in its own conununundrum — paying for costly, illegal wars and paying boomers CPP – SS – OAS – GIS, while having less and less children coming into the world (from the west’s perspective), which means less and less income for govts. to play around with.

I’m sure glad we’re getting old, ‘coz I wouldn’t like to be young again in this age.

#7 tkid — “Oh my God, where do you get these letters from, Garth?” — Apparently, they fell out of a truck.

#39 Randy — “Maybe this guy is a lot smarter than we are giving him credit for….since his wife is House Horny….” — If correct, then you’re right — genius does require a touch of madness!

#62 mid-Ontario — “Deflation is recognized as the worst scenario for the west. It will not happen.” — Respectfully disagree, as there are many variables, none of which are known, which can turn a country’s fortunes on a dime in less than a year. In this case, patience is a virtue, as well as stocking up on the necessities of life.

When equity markets recover, bond prices will tumble. — Garth” — Is that when interest rates head north, like here or here?
*
Global calamity before year’s end? Inflation What of a steady, prolonged bout of stagflation where nothing moves? Mfg. Sorry, cheap labor = higher profits; Samsung vs. Apple Could be costly; Stag-Unemployment; Beijing Bulls; UK High Street Bankruptcies up; Economic Impact of Mexican immigration to US. Doesn’t include illegals; End of the Road and this; ECB vs. Bundesbank.

Deflation As per Garth’s post; Pop Quiz; Financial Self-Defense; Metalheads Physical shortage of gold coming; R&R team up to buy US assets, then turn them over to China. Links in; When There Isn’t Enough Coming soon here; JCPenney Losing all checkout clerks; Leaving Spanish Vegas; Low income senior’s income tax shock (Canada); FTfm Lotsa links; London locals hit hard.
*
More on James Homes and Aurora, Colo. Different POV; US – Israel New POV, which is interesting; Syria Dutch photographer held hostage tells more of what is happening; 24:39 clip Who profits from US wars; Americans no longer own their own (collected) rainwater.

#132 TRT on 07.30.12 at 1:11 am

Bond yields are low because (in substantial part) prices are high since investors crave them. When equity markets recover, bond prices will tumble. — Garth

Do you have any idea how much larger the Bond market is?! Orders of magnitude larger than the Equities market.

#133 Oliver S on 07.30.12 at 1:11 am

Hi Garth, I love your column. Made me buy one of your books! Just a quick comment on a question you ask. You write:

“How could there not be tons of inflation with less valuable money, rising house prices and easier-to-pay mortgages?

Beats me. I just come here for the pictures.”

Keynes’ theory predicts the phenomenon of asset deflation without inflation – this is a sign of a liquidity trap. See http://en.wikipedia.org/wiki/Liquidity_trap. There is a lot of discussion of what causes liquidity traps, but the basic story is that people hoard money, regardless of how cheap it is, because they think they need to prepare for an adverse future.

#134 Motzu on 07.30.12 at 1:31 am

Online poker …

THIS is the solution to our economic problems. If every canadian win an average of 50k$ on online poker, the real estate market will be saved and houses will gain 5% by xmas.

Who said we need cheap credit and 40 years mortages to keep the show rolling ?

Nah han. Bullshit.

Buy now lady, or you ll be priced out forever …

#135 DUI on Money Road on 07.30.12 at 1:36 am

Given their debts and uncertain wages, they are doing the right thing by renting at $850. My advice would be to see if they could save $1200 per month while agressively paying down their debts. Do this for a year and then decide #1 were they able to do it and #2 did they enjoy the sacrifices necessary to accomplish the task? Only then will they know the pains of home ownership.

#136 joe on 07.30.12 at 2:08 am

Its so obvious what is happening in the housing market now only the most dillusional of the dillusionals are drinking the kool aid now. Went to a party today and 2 ppl in their 30’s started talking about a housing crash, its common knowledge now. And the chick in todays blog is making my genetalia soft, she is the greatest fool.

#137 vic_guy on 07.30.12 at 2:11 am

@ Patient in Richmond @ 105

You might like this Steve Martin’s SNL skit (don’t buy stuff you cannot afford) :

http://www.careinky.org/resources/video/CARE-saturday-night-live.m4v

#138 Ex-Edmonton Mortgage Broker on 07.30.12 at 2:15 am

use to deal with idiots like Ms. Psychology Degree and Mr. XBox champ all the time. There are more of their ilk than i’d like to admit that are proud owners of a lifetime debt. Don’t worry though, there’s always mommy and daddy to bail them out…oh snap! mommy and daddy need a bail out themselves cause they HELOC’d the shit out of their house to pay for the kitchen reno and the new merc. Don’t worry, house prices always go up and in a few months we’ll just increase the HELOC again like the last 3 times….

#139 tundra pete on 07.30.12 at 2:16 am

I make money off video games. yeeaah! x-box.
Don’t worry hon, keep that dumb-ass playing those games. Every time he does I make money.

#140 Canuck Abroad on 07.30.12 at 2:45 am

That was epic! I think everyone should be glad they did not marry the husband too. I do not see a divorce in this couple’s future. I think they are perfect for each other. She can fill out the bankruptcy paperwork for the two of them while he ponders the importance of tax returns from his prison cell.

#141 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 3:06 am

It can lead to a vicious cycle in which less demand equals less production, bringing fewer jobs and still less demand. Maybe depression, too.

This is false. I can tell you are up on modern theory. You should check out the Austrian school’s position on problems with deflation. They definitely will not agree with you. Like me. But I know better than to argue.

Great read none the less.

#142 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 3:12 am

Since early 2009, every trick in the book’s been used to try and rekindle inflationary growth. In the US it failed to stop the massive deflation of residential real estate. In Canada, the same seems set to occur.
—-
The inflation remains even though prices are dropping. Inflation was created during the boom, all the debt is inflation. When the price of housing falls, the debt remains, hence so does the inflation. Only repayment will cause deflation and for that we need higher interest rates.

Now, do you see how you and every other modern economist is wrong and why nothing is working? I bet not so I’ll give up now.

Great post otherwise.

Buy gold!

#143 Ryan on 07.30.12 at 3:50 am

Garth suggests not to buy gold. I think he might not be right. The uncertainty about the Euro, the fact that the US dollar will probably become volatile due to QE3, and the fact that central banks around the world are going to pump tons of liquidity into this market makes gold a lot more attractive simply as a store of value. I doubt the central banks are going to allow deflation to occur and will create so much liquidity that it leads to an inflationary recession scenario.

Gold prices are positively correlated to US M2 money supply. M2 has been growing very quickly over the last year or so. The growth has slowed down slightly of late but it will pick up again as soon as QE3 starts.

Money has to go somewhere. It certainly isn’t going to go to Europe and it may not go into US treasury bills forever if the fed keeps printing.

#144 kevsta on 07.30.12 at 4:06 am

“Despite a crisis in Europe, gold’s dead. “

this is absolutely incorrect, and possibly an unfortunate time to state this, although an easy mistake to make with the game being so heavily rigged.

gold can (and will) put on $3-500 in a month when the time comes, and the time draws near..

but even assuming violent deflation (as if they’re ever going to accept that without QE2Infinity&Beyond! (TM) ) $1000 gold would equal Dow 7-8k again, how will your REITs be doing under those circumstances?

this is the chart people need to be aware of

http://www.chpc.biz/gold_chart.html

#145 futureexpatriate on 07.30.12 at 4:13 am

#2 “America has over 40 million big houses that no one wants”.

Uh, LOWER THE GD prices until they sell. Take the GD loss.

Rocket scientists, all.

#146 betamax on 07.30.12 at 4:31 am

OMFG.

#147 Ex Canadian In Australia on 07.30.12 at 4:49 am

I do believe Jessica is real, I’ve known some people like her.

Anyway:
Jessica: you stay with your no good husband, you are going to get really screwed – financially that is ;) Revenue Canada, is going to make that 86k debt of yours go well over 100k, with fees and penalties. Leave the husband! He’s more interested in the XBOX than you and your life together anyhow.
Tips are not REAL income, they are FORTUNATE income. Don’t rely on tips for your future.
As for being a psychologist…why is it the people who need help the most, are psychologists! Get a real profession.
Do your country a service, have tubal ligation.

Jessica’s Husband: go to Revenue Canada, beg, plead, grovel for mercy.
Go to Jessica…say sorry…and leave her…she’s either too good or too stupid for you. You obviously need a woman with more where with alls than you.
Do your country a service, get a vasectomy.

To Revenue Canada; have mercy for they do not knoweth what they have doneth. Pitty these fools!

To the rest of Canada, “Woe is we!”, how many more dumbbells is this country going to have to eventually carry! What’s the odds these two will ever save a penny for their old age….can you imagine the cost of pensions to come with all these Jessica’s around!

Jessica…start meeting and learning from some more respecticable and intelligent people…stay away from the kum-bay-yah lefties, and learn that life is about hard work, saving, and earning everything you want! Cheap interest rates doesn’t entitle you to owning a house, especially when it is clear you don’t know the first thing about money, and the dire situtation you are in.

And this is only the beginning of the nightmare, folks!!

#148 SCIB on 07.30.12 at 5:20 am

#1 TURNER NATION
Excellent post.
I personally have little faith in Government any more.
VOTE AGAINST THEM or better yet.
DON’T VOTE AT ALL Your only legitimizing these thieves.

#149 Jody on 07.30.12 at 5:22 am

Wow! And people wonder why I tend towards Libertarianism and have a hate on for government, it means we have to support muppets like that 27 year old letter writer. Buy a house? Are you batshi** insane lady? If I was a banker and you came into my bank with a financial situation like yours I’d kick your rear end right back out the door. When you and your deadbeat husband lose your arse and end up on the street don’t come crying to me. Here’s a thought, save some friggin money. I also came out of university with a huge debt, but I slept on a thermarest for 5 years until I paid that debt off, learn to go without, you are not special. Suck it up sweetie pie. Where did people (and I mean all age groups, this disease isn’t the sole property of the young) get the I deserve everything because I am alive attitude from? Since when did owning anything become a right? It’s not a right, it’s a perk of workin’ your ass off and using your brain. Not to mention the fact that the CRA is gonna stomp all over your husband if he doesn’t get his act together. Wanna know the interest the feds charge? Makes a loan sharks look lovely. Your young and you want to buy a house, stupid idea, and living in lala land you’ll soon have to find good work, you gonna be a teaching assistant your whole life? Is that your goal? Is it your husbands goal to do occasional work for some phone company? I think not. Move to somewhere with lots of jobs, like Alberta, rent for 10 years and save your money, then go anywhere else in Canada and pay cash for your house. Things are about to crash big time, seeds, guns and bullets will do your more good over the next year than owning a home will.

#150 bigrider on 07.30.12 at 7:30 am

As a contrarion investor Garth, one with a moderate view of the economic world, you should be getting somewhat off the yield and preferred share/bond bandwagon and realize that growth oriented stocks with yield and yes, even growth stocks with no dividends are currently the most under-invested, un-loved category in the market.High yield stocks have been pushed to unheard of valuations(case and point Enbridge for example)

Disapointing that with your access to enormous amounts of information and your understanding of tactical and strategic asset allocation, you are not more positive on these assets at this juncture.

Seems amateurish to me.

Amateurs, at least those with less than seven figures to invest, buy individual equities. — Garth

#151 John on 07.30.12 at 7:35 am

Canadian Watchdog wrote:

“#159 Mr. Buyer #218 Daisy Mae #217 John

Q for any of you: What should the government have done to stabilize the economy or what other option was there?

Footnote: Canada’s economy is 89% smaller the the U.S.”
——–

This is a carryover, but it’s even more relevant given today’s article.

As Turner Nation said, “you get the government you deserve”.

This puts Canadian Watchdog’s question in the right perspective. In Iceland there was fortunately some political will to act on behalf of a population that elected it’s government.

That’s not the case in Canada. Consider what that means. It’s hard to shake off denial…painful. For everyone. But it is what it is…and we’re at where we’re at. Like it or not. Accepting it or not.

So what’s actually been going on then?

Iceland is smaller than Halifax. Irrelevant. — Garth

#152 MarcFromOttawa on 07.30.12 at 7:40 am

#143 Ryan

Gold prices are positively correlated to US M2 money supply. M2 has been growing very quickly over the last year or so. The growth has slowed down slightly of late but it will pick up again as soon as QE3 starts.

Wrong.

http://www.kitco.com/charts/historicalgold.html

http://research.stlouisfed.org/fred2/series/M2/

Gold hit 750$/ounce in 1980 and did not recover nominally until 2005 with inflation every step of the way (over 3x increase in M2).

#153 Timbo on 07.30.12 at 7:56 am

http://www.telegraph.co.uk/finance/economics/9437763/Biggest-fall-in-mortgage-lending-in-18-months.html

“Biggest fall in mortgage lending in 18 months
Mortgage approvals and lending slumped in June, Bank of England data showed, reflecting broader economic weakness due to extra public holidays and wet weather. ”

Thank goodness for excuses……

http://www.nakedcapitalism.com/2012/07/germans-getting-even-more-opposed-to-being-in-the-eurozone.html

“Only one third of Germans still believe Angela Merkel is making the right decisions over the euro zone debt crisis, according to a survey published on Sunday, pointing to a steep erosion in domestic support for the chancellor over the last weeks.

The survey by YouGov, due to be printed in Monday’s edition of Bild newspaper, found 33 percent in favor of her stance but 48 percent against, a setback for the chancellor who is to seek a third term in a 2013 federal election, which she has vowed to make a vote on Europe.”

Following public sentiment. Way to go Angela……

#154 T.O. Bubble Boy on 07.30.12 at 8:21 am

@ #96 brainsail

I thought this was an excellent article explaining the global housing crisis.

I dug into this a bit more… The person quoted for that article is (wait for it…) a mortgage broker for a condo marketing company.
http://www.in2ition.ca/about/

They have over 20 active condo developments to sell… I guess getting quoted by Bloomberg/Businessweek is just another way to market these places.

#155 Timbo on 07.30.12 at 8:23 am

http://www.businessinsider.com/the-chinese-are-making-an-offer-for-north-sea-oil-that-britain-cannot-refuse-2012-7

“$15.1bn (£9.7bn) bid for Canada’s Nexen, the second biggest oil producer in the North Sea. If successful, the takeover will be China’s largest ever foreign investment.

That same day, Chinese refiner Sinopec said it would pay $1.5bn for a 49pc stake in the UK unit of Canada’s Talisman Energy, also a top 10 oil and gas producer in the North Sea.”

That is going to spark a debate in Calgary. When China starts buying the rest of the supply chain maybe light bulbs will come on to the Walmart model. North american trucking anyone?………..

#156 Gypsy Kid on 07.30.12 at 8:36 am

sadly, i know many young people like this “jessica”…what a sorry state we’re in.

i used to think individuals should be responsible for their own financial well-being. now i’m convinced the government should do everything to protect idiots like jessica and her husband.
too bad that government is Harpo and his cronies.

we are soooooo screwed.

on a happier note, preferreds and reits doing well in my tfsa!

#157 Gotthardbahn on 07.30.12 at 8:38 am

Whoever wrote that letter ought to write for Jay Leno.

#158 Fools Are Born Every Day on 07.30.12 at 8:44 am

“We’re excited to start the next chapter of our lives and buy our own home, but I just a little help/advice from you. Much appreciated.”

The most assinine part of the letter is that she is asking a real estate bear like Garth who has posted daily since 2008 that Canada’s real estate market is going to tank, advice on whether she should buy a friggin house…

#159 Steven Rowlandson on 07.30.12 at 8:57 am

I would say that the couple in Victoria should not conform to the real estate market and its prices and should not combine incomes for buying a home.
They should not buy a home that costs more than 3 years pay for the husband and they should tell every one that disagrees with this to go to hell. The canadian real estate market should go to hell and stay there. Its greed and financial sodomy has disgraced it beyond redemption. Canadian employers pretend to pay a living wage and canadian workers by virtue of the real estate market are pretending to live in Canada because the is no way they can live here for real. The price is just too damned high! Now is a good time for a buyers strike and to shut down immigration and make realtors and home owners/ speculators twist in the wind.

#160 Jim on 07.30.12 at 9:17 am

As a mid-thirties guy with a fair number of younger friends (and the ability to attract women in Jessica’s age range, hence meeting single 26 year olds every now and then) I’d say that she is not an uncommon type.

I had to talk one of my 27 year old female friends in toronto from purchasing a 400k condo on a single, measly income. (Her parents were pitching in). This is a girl who did a bachelors of commerce with a specialization in finance. A psych grad I can excuse; a finance grad, not so much.

#161 In Garth Almighty not God Almighty We Trust on 07.30.12 at 9:26 am

#150 Big Rider

“Seems amateurish to me.”

Another insult to the bearded mystic oracle, all wise, all knowing, all seeing financial prognosticator without equal, denouncer of parliamentarian peckerheads and peckerettes, former minister of all revenues, lone voice of reason crying out in the HELOC infested wasteland of Canada and you may very well be zapped by a thunderous bolt of lightning. Tread carefully and choose your words wisely o’ mere mortal…

#162 Mr C on 07.30.12 at 9:36 am

Garth,
that email you printed cant be real. No one is that stupid.

#163 Toronto_CA on 07.30.12 at 9:39 am

Although Jessica sounds fake, she’s not.

I know way too many people in their late 20s and early 30s that are in this exact situation. Near maxed out credit cards, lines of credit, no savings, not putting anything into retirement plans, and craving to buy a condo at the peak.

Some of them rob what little they have saved up in their RRSPs using the Home Buyer’s Plan in order to scrimp together the closing costs (well, now 5% down thankfully) on an overpriced poorly built condo here in the GTA.

The only thing that isn’t normal is that she’s self aware enough to ask for advice from her brother in law and Garth. Normally if you’re smart enough to read this blog, you’re too smart to have these sorts of problems.

But outside of this blog, in the real world, people are really stupid. Financially speaking.

#96 brainsail on 07.29.12 at 10:53 pm – thanks for the link. That article is fascinating.

#164 kevsta on 07.30.12 at 9:40 am

#152 MarcFromOttawa

you need to be using this chart – True Money Supply

http://mises.org/content/nofed/chart.aspx

the correlation shown here seems fairly clear to me.

http://www.goldmoney.com/gold-research/alasdair-macleod/money-supply-explosion-will-lead-to-accelerating-inflation.html

“hyperinflation” we scoff.. :) ..well here’s the trading floor manager for UBS bank, with more than 50 years market experience and $612 BILLION under his management..

“this is a very very different time, from anything we’ve seen”

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/7/27_Art_Cashin_-_Current_Liquidity_In_System_Risks_Hyperinflation.html

this is the reason for Garth’s noting that its not actually deflation we have coming, it is simultaneous deflation in leveraged assets (things you borrow to buy) while we get inflation in things you need every day.

the globally unpayable debt is indeed too large to fight, and debt-based asset prices will eventually find their levels, but the printing that will be done in the meantime will propel every day necessities much higher comparatively.

Buy. Real. Things. Sell. Debt-Based. Assets.

I personally am looking forwards to scooping up a Sunseeker (from a very distressed owner) with what was once a modest amount of gold, a few years down the line.

There will be no hyper-inflation, quite the opposite. And gold is not money. — Garth

#165 TimV on 07.30.12 at 9:52 am

#158: Actually, if you read the letter closely, she wasn’t asking for advice on whether to buy a house — she was asking for advice on how to get a mortgage given that her husband doesn’t have his last four tax years to use as proof of income.

#166 over in Australia on 07.30.12 at 9:56 am

Happy to ride the PM train for a little longer Garth, Silver Bullion (physical) and Gold Mining Shares for me till this economic disaster looks drawing to a close.

There will be no disaster, unless you have a low tolerance for pain. — Garth

#167 Daisy Mae on 07.30.12 at 9:59 am

#38 Sean: “I find the letter depressing because the woman doesn’t realize how much trouble she is in.”

*********************

Married to a man who, rather than do his taxes, prefers to play with his XBox and ride his bike…..

How old is he — fifteen?

#168 Graham on 07.30.12 at 10:01 am

That e-mail? I quote Seinfeld: “Fake. Fake. Fake.” I’m not saying you faked it, but it seemed a little too obviously designed to illicit the kind of exasperated “I’m only cruel to be kind” response that so many of us come to this website to read.

That and your basic message. Diversify. Don’t put everything into real estate. And stop living beyond you means. All good advice. Tell it to the Prime Minister. F-35s are beyond our means.

Anyway. Now here’s a serious question. Late 30-something couple. Decent pensions (both are academics), no consumer debt, one car between them, renting, are augmenting their pensions with TFSA contributions. They have their 20% for a downpayment plus closing costs. Live in London, Ontario. Reading your blog, it’s no longer clear that they should buy now or indeed at all…should they?

#169 Ret on 07.30.12 at 10:03 am

Is Jessica still working her bar job? If her front looks like that plumber’s back and she’s working in a bar, she’s probably working off the books and pulling in $200 a night in tips while she pockets the E.I. Great scam Jess.

I got it. What happens in the bar, stays in the bar. Your husband hasn’t filed in years? Undeclared income perhaps?

My only surprise is that a bank hasn’t already given this couple a mortgage for $300,000 or more, all backed by CMHC. Party on Canada!

Also, a special thank you to the taxpayers of Canada who have guaranteed Jess’s $40,000 Canada Student Loan for the banks.

#170 refinow on 07.30.12 at 10:07 am

Now just imagine the realtor, who this likely represents their only buyer, trying to convince this couple the benefits of home ownership.

Next the newbie Mortgage Broker who this too is their only client, desperately & hopelessly trying to package this deal off and send to every lender on filogix.

Yes the scary thing is this scenario is not that foreign, and is actually starting to become more and more typical of what’s left for some of the 1st time home buyers.

Ignorance is bliss, until the ignorant want to buy a house.

Now take that exact same scenario and remove the lack of tax filings, and then 7 Bank’s who’s credit rating were dropped by S &P would be tripping over themselves and slashing mortgage rates to give them a no money down mortgage before the next wave of mortgage rules take effect.

#171 bigrider on 07.30.12 at 10:12 am

Garth to Bigrider at #150- “Amateurs at least those with less than 7 figures to invest buy individual equities”

Did not mean to imply that growth should be acquired through individual equities, etf’s would be preferrable, or whatever means suitable.

I’m sorry you mis interpreted my message but my point is the obsession with yield, dividends and ‘getting paid to wait’ smacks of a bubble in every respect. Valuations do as well. Enbridge was given only as an example.

Do you not advocate allocating to some of the most unloved and under appreciated areas of the market, through etf’s?

Why would you not be buying growth when the entire investing public is humping bonds, preferred’s and high dividend yielders ?

#172 Daisy Mae on 07.30.12 at 10:12 am

#49 Neo: “They weren’t downgraded…”

**************************

“Standard & Poor’s Ratings Services has cut its outlook from stable to negative on seven Canadian banks, over concerns about unsustainably high home prices and consumer debt levels, according to published reports Friday.”

Read more: http://www.vancouversun.com/business/2035/cuts+ratings+seven+Canadian+banks/7005811/story.html#ixzz227BiiDct

From ‘stable’ to ‘negative’. Sounds like a downgrade to me….

#173 Not 1st on 07.30.12 at 10:15 am

Garth, don’t you think if there is a real deflationary depression the economic pain that the 99% will go crazy and start forcefully overturning some of these govts and institutions?

Depends what’s on TV. — Garth

#174 Alistair McLaughlin on 07.30.12 at 10:15 am

Either the author of that email is trying to spoof the “stupid house-horny masses” with an unflattering caricature, and pulled a fast one on Garth, or the house-horny masses are even dumber than I thought. And that is scarcely possible. I pray that it is the former.

#175 Mr Buyer on 07.30.12 at 10:16 am

Fiber optic to the home internet (FTTH) across Canada. No messing around. Form an NPO and start in the sticks and work your way in. It all came to me when my three year old son slammed the car door on my fingers today. Not to worry, there is no danger of me running a publicly traded company and giving all your money away. I just want to connect 99.9% of houses up with 1Gb/sec fiber optic network. Call my miopic. Lets see how much is a meter of fiber optic cable and is it still protected by patents (cheap manufacture of the product likely is but who knows maybe a chance for a fully made in Canada solution. Corning is likely the best way to go though, at least at first). I can take the bubble, the unemployment and all the rest but there is is no way I am giving up my fiber optic to the home internet service. Everybody has limits they eventually ignore and I am no different.

#176 Derek Speed on 07.30.12 at 10:18 am

Advice for this woman, get rid of your man, cause if all he’s doing is playing XBOX, he is still a little boy. Secondly, your job is not secure, you work part-time and is on EI for 2+ months out of the year and rely on drunks for extra income. Now you want to pile on more debts…look yourself in the mirror, raise your right hand and slap yourself silly to wake you up.

#177 Daisy Mae on 07.30.12 at 10:23 am

Ron MacDonald on 07.29.12 at 9:48 pm
#64 Ron McDonald: “….If it is legit, her husband will be getting audited by the Canada Revenue Agency shortly after he files his return.”

“Don’t count on it.” — Garth

********************

Why not, Garth? I would think they’d be scrutinizing his activities from waaaay back.

#178 debtified on 07.30.12 at 10:23 am

Garth, what kind of anti-depressant pill do you take?

***********************************************

Fort McMurray RE Average Prices:

Date Single Family Multi Family Duplex
Dec-10 $685,970 $419,422 $443,786
Jan-11 $719,305 $395,488 $489,233
Mar-11 $705,835 $430,461 $503,400
Apr-11 $729,048 $441,075 $534,230
Jun-11 $746,315 $425,503 $530,544

Nov-11 $755,181 $408,005 $512,235
Dec-11 $729,092 $387,244 $550,983
Jan-12 $724,209 $392,261 $618,700
Feb-12 $755,756 $458,089 $543,000
Mar-12 $774,538 $403,590 $543,545
Apr-12 $737,412 $388,512 $526,030
May-12 $771,419 $442,178 $530,929
Jun-12 $759,501 $429,193 $482,625

Source: http://woodbuffalo.net/AboutCostHouse.html

#179 Mixed Bag on 07.30.12 at 10:28 am

Why not be so thankful you did not marry this MAN? I’m actually rather peeved that you didn’t write that Garth.

She works a second job to bring in extra income. He buys a car to get into more debt for a job that’s not giving him full-time hours. She takes a loan to get schooling, he takes a loan to go on vacation and buy cars. She’s taken the brunt of being skewered by the blog dogs by asking for financial advice, while he falls behind on his taxes playing X-Box instead. Man of the house, indeed.

There is nothing wrong with people wanting to own a home – there is something wrong with moving on that when your financial house is a mess. As someone commented in a previous post, it’s the authority figures – the banks – who are enabling young, inexperienced people to get into debt they will not be able to service.

I remember being 27, and not having much of an idea of how finance, real estate and the economy worked. She thinks she’s moving forward by buying real estate, as that’s what everyone else did prior, but she needs to realize the foundation that was set that enabled prior generations to do so.

To the young woman: Get all of your finances in order. Your husband must get his taxes done, before the CRA decides to go after him. I cannot tell you what to say to motivate him, other than it just needs to be done. (Is he feeling overwhelmed? Break up the task into smaller tasks, until all the receipts are found. As for unfound receipts, you’ll have to research that). Once your finances are in order, do not buy, yet. Start paying attention to the news, to the economic and business newscasts, read online, educate yourself. The last thing you want is to buy when prices are falling. Good luck.

#180 R on 07.30.12 at 10:46 am

In Victoria Jess would be considered a genius. Victorians and British Columbians aren’t the brightest bulbs.

#181 Mr Buyer on 07.30.12 at 10:49 am

The children are asleep and the wife is awake and what am I doing. I am posting mispelled giberish on this blog. I think I might be more than a little messed up.

#182 just learning on 07.30.12 at 10:52 am

#9 coastal

I found your comment interesting… Can you support your predictions with something please?

Thanks a lot.

(Please don’t say the markets will triple-crash and people always try to search safety in gold because it has proven to be the best safe place to put your money in hard times…)

#183 kevsta on 07.30.12 at 10:56 am

There will be no hyper-inflation, quite the opposite. And gold is not money. — Garth

I admire your confidence, but respectfully disagree with you on the second part. the symbols and paper you think of as money are temporary figments of collective imagination (currencies) and they always die eventually.

real money lost at the bottom of the sea is still valuable whether found 5, 50 or 500 years later.

interestingly, the part of the world that isn’t broke (not the West) are all quietly switching to it as their unofficial reserve currency, just as it’s looking likely to be reclassified as a Tier 1 asset (i.e as good as cash, along those other “risk free” assets, sovereign bonds lol!) by central banks, so it would seem that its not just me that disagrees?

and so presumably you’re saying that gold is merely “a commodity”? (as is cash if it comes to that) but could you elaborate then on why you think CBs worldwide are buying gold to store along with their paper reserves (but no other commodities?) China imported more gold in the last 5 months than the UK still owns.

no bells ringing anywhere? :)

This is the most useless debate I have ever been drawn into. When gold buys gas and Timbits, it’s money. Not before. — Garth

#184 John on 07.30.12 at 11:03 am

Jody wrote:

“Here’s a thought, save some friggin money. I also came out of university with a huge debt, but I slept on a thermarest for 5 years until I paid that debt off”
——–

Well you just won “fail of the year” with your post. You clearly don’t understand the system, nor a normal everyday person’s part in it.

You bought a thermarest made in China, positioned yourself in a society that leverages and creates an economy with debt…all in a system that discourages savers and promotes speculation.

Then you point a finger at a muppet? The muppets paid your way…what does that make you.

Anyway, your post was a faceplant. Which is as forgiveable as muppetry. Don’t you think?

#185 OLD MAN on 07.30.12 at 11:19 am

Graham what happened in London during the early 1990’s? The entire city crashed with power of sales everywhere, prices dropped like a rock, condo buildings had to be rented out, and it took a decade for prices to come back. Will history repeat itself? Keep on renting for now.

#186 live within your means on 07.30.12 at 11:27 am

# 131

“I’m sure glad we’re getting old, ‘coz I wouldn’t like to be young again in this age.”

Ditto.

#187 truth hammer on 07.30.12 at 11:33 am

So………HSBC…..China’s national offshore bank and main source of laundered funds into Canada ( as admitted to by the PRC itself) apologizes for laundering vast sums…..

http://www.theglobeandmail.com/report-on-business/international-business/european-business/hsbc-apologizes-takes-700-million-hit-to-cover-us-money-laundering-fines/article4448274/

Foriegn governments acjknowledge the problem….China has put some number in the hundreds of billions on the problem……but Garth and the apologist Liberals are adamant that there is no problem?

Just like we don’t have an over payment problem going on in the civil service….what universe do these politically correct apologists live in? It certainly isn’t here in Canada where the average citizen can see there is a huge problem.

The big question is why do the Liberal apologists have such a big problem telling the truth…..when issues such as HAM have had such a detrimental effect on Canadian families? Whats in it for the Liberals to destroy the Canadian family?

#188 American Werewolf in BC on 07.30.12 at 11:37 am

You’re another character trying to claim that wealth is illusory and only energy & resources matter…

Last I looked, there didn’t seem to be any shortages of oil, firewood, gas, or metal.

=====

What is “wealth”, other than the ability to command energy?

Of course there is no danger of running out of resources you mention, but we have already exhausted the “low hanging fruit” we used to build our behemoth civilization. Now, by wasting energy on deep sea drilling and bitumen refinement, there is less surplus energy for growth & maintenance.

As for your solutions…no taxes? Sigh…why argue with radical extremists?

#189 Sebee on 07.30.12 at 11:38 am

There will be no hyper-inflation, quite the opposite. And gold is not money. — Garth

When will these gold bugs realize that gold is not where you should keep all your money. It’s comic books!

But seriously, why are you so certain that hyper-inflation won’t happen? Obviously there has to be a probability. It seems that it’s pretty much one of few options on the table to wipe out all this debt. What are the options except for deflation, perhaps 25% annual inflation, hyper-inflation? Do you think that we’re going to follow the patterns set by Japan?

#190 cramar on 07.30.12 at 11:43 am

Just have to be like everyone else and shake my head at Jessica and her prize husband.

Garth you speak of price inflation and maintaining a lifestype. You didn’t mention food. Have you checked the price of corn an soybeans compared to 10 years ago? About triple. Which means that food prices are likely to dramatically increase during the next year. Hard to buy ever more expensive food in future when people are stretched to the limit now with mortgage debt.

“decaying wrinklers”

LOL! Hey Garth, ever compare yourself to the 1980s pix in Toronto Sun? Time marches for all of us.

#191 American Werewolf in BC on 07.30.12 at 11:44 am

#183 kevsta on 07.30.12 at 10:56 am

Real ‘money’ is food in your mouth, clothes on your back and shelter over your head. I have no more confidence in a gold coin being able to do that any better than paper if the doomsday scenarios you ascribe to come to fruition. Gold is, in itself, a symbol of wealth dependent upon man’s perceptions towards its value.

#192 Canadian Watchdog on 07.30.12 at 11:47 am

#151 John

“In Iceland there was fortunately some political will to act on behalf of a population that elected it’s government.”

Historically, citizens of a nation only act to reform government when there is a collective interest or loss amongst them. With Canada having a 65-70% home ownership rate, there is no incentive to pull the plug on an asset widely held by the majority.

————-

“There will be no hyper-inflation, quite the opposite. And gold is not money. — Garth”

Perhaps not money by means of common exchange, however the biggest news over the last few months was an FDIC memo regarding the re-classification of gold as a zero-risk-weighted asset. That’s a game changer for large financial institutional and central bank balance sheets.

#193 American Werewolf in BC on 07.30.12 at 11:49 am

There will be no disaster, unless you have a low tolerance for pain. — Garth

======

So are you predicting that a japanese style “lost decade” is not possible, or that this would not be a “disaster”?

#194 earlybird on 07.30.12 at 11:54 am

On the other age spectrum of that letter, I have a 56 year old female client, just divorced, deciding that she has to sell her SFH of 16yrs, to start over. She has no savings or private pension at all, heloced to the MAX to renovate, and is planning to sell it by herself (no agent) I said thats super, now you will have at least some cashflow, and investment for your retirement.” I dont know what that is” she replied. I said to get invested to recieve income…….. still no clue. Tried to explain extremely basic financial concepts. I kid you not, absolutely ZERO financial IQ! She finally said that she was going just buy another house and that should do it!!! I hear this daily from young and old….Sadly that email does not surprize me in the least….some folk are royally screwed……

#195 Ex-Edmonton Mortgage Broker on 07.30.12 at 12:09 pm

#160 Jim on 07.30.12 at 9:17 am

excusable or not, you’d be surprised that the majority of finance grads I know (BBAs, MBAs, CAs) are complete idiots when it comes to PERSONAL finances. They are as useless as the rest of the herd. Your giving us too much credit (figuratively) while the bank is giving the same (literally).

#196 cramar on 07.30.12 at 12:15 pm

This is the most useless debate I have ever been drawn into. When gold buys gas and Timbits, it’s money. Not before. — Garth

—————————-

Gold has been real ‘money’ for over 5,000 years! Fiat currencies have come and gone. Today I can buy a lot of gas and Timbits for 1 oz of gold. But yes, today I need to convert to paper to buy them intelligently. I’d be a fool to buy Timmies with gold, but the teenager would be a bigger fool if he didn’t accept it, throw in his own paper and pocket the gold!

Several decades ago I went to work for a high-tech company founded by 3 Germans who came to Canada after WWII. It was interesting asking one of the owners questions about what it was like there during and before the war. Once we asked, during the great Weimar inflation of the 1920s who survived best during that time. His answer, “Farmers because they grew food that people needed.”

So we asked the next obvious question, how did they prosper when the currency was destroyed?

His answer, “They demanded gold in payment for their food.”

Blah, blah, blah. — Garth

#197 live within your means on 07.30.12 at 12:32 pm

#173 Not 1st on 07.30.12 at 10:15 am
Garth, don’t you think if there is a real deflationary depression the economic pain that the 99% will go crazy and start forcefully overturning some of these govts and institutions?

Depends what’s on TV. — Garth
………………

Such a succinct response Garth & malheurusement SO true.

#198 Pat on 07.30.12 at 12:33 pm

@#168 Graham,

The answer is it does not matter. Especially if you have no children.

Now, do not embarrass the profession with pointless questions. Some of your students may be reading.

#199 coastal on 07.30.12 at 12:36 pm

#182 just learning,

Not saying the stock markets will crash at all, except the housing market that are at extreme over-valuations based on a temporary low interest rate environment.

The theory is simple, QE 3,4,5 etc will dilute currencies pushing the US dollar down and oil and gold will have to go up unless there is some out of the blue US government law where gold becomes so sort of new currency base and price is locked in. Central banks are buying gold not selling. Nothing tin foil hat there, it will peak and crash like everything else but not for a few years, world debt is out of control with OTC derivatives time bomb.

You guys are delusional. — Garth

#200 Canadian Watchdog on 07.30.12 at 12:40 pm

#191 American Werewolf in BC

“I have no more confidence in a gold coin being able to do that any better than paper if the doomsday scenarios you ascribe to come to fruition.”

Perhaps you may not value gold, but there are 3 billion people that do.

Gold demand in tons http://postimage.org/image/8qpnv8ovp/
Gold demand per capita http://postimage.org/image/8uigxomuz/

Confidence in the US dollar is what’s being lost and what matters to the world.

US$ is the global reserve currency. Nothing has changed. — Garth

#201 kevsta on 07.30.12 at 12:51 pm

This is the most useless debate I have ever been drawn into. When gold buys gas and Timbits, it’s money. Not before. — Garth

dodge noted :) which is unfortunate as all well as sampling public sentiment, I’m always happy to have my views and conclusions intelligently challenged (with evidence or data, “remember 1980” doesn’t really count, plus, I do remember, clearly)

but in my travels have yet to find an anti-gold analyst who is willing to address what I consider these relatively logical questions.

#182 just learning – on a technical basis gold (in USD) is waking up, it broke out of intermediate downtrend lines and through multiple important moving averages last week, momentum has turned positive, and it is now anticipating more QE.

if they genuinely disappoint, it will turn lower again in USD, no doubt, as will everything else. however step back and look globally, and the picture becomes very much clearer. wherever you are, and they are printing, gold compensates.

http://www.kitco.com/gold_currency/index.html?currency=no&timePeriod=d&flag=gold&otherChart=hardCur

i.e. if the EuroUSD breaks down hard below 1.20, most of the risk markets in the world are going to follow it down, but Gold priced in Euros will be at new highs very quickly, or if the Fed does announce QE3 gold will be through the previous $ highs in a heartbeat.

its bigger than any one currency, and will outlast them all, and, given the inescapable debt destruction (deflation) Garth correctly envisages, the one thing I am most confident in betting on, above all else, is a whole new level of printing from here on out.

Garth, Peace amigo. love the blog. I’m an “original” bubble caller (UK housing 2004/5) and have been on the right side of this trade ever since, so if you cant change my mind, maybe you can forgive me my false sense of security ;)

#202 truth hammer on 07.30.12 at 12:51 pm

Garth…don’t forget the ‘why’ gold crashed to $250……it was not based on the market….it was pure government intervention. Remember that this was the same time period that global socialism was creating the mess that we’re all in today by pumping out the vast sums of fiat currency that has now washed over the world as worthless in a controlled experiment to build an even larger global government.

http://blogs.telegraph.co.uk/finance/thomaspascoe/100018367/revealed-why-gordon-brown-sold-britains-gold-at-a-knock-down-price/

Canada and the UK sold ALL their gold into the market at knock down prices…….this is different than today when global government s are net buyers of gold….as opposed to being recipients of worthless paper cash. Now that there are no net sellers and that IMF gold when for sale is purchased in toto before it hits the open market…..and that there are no fixers like Gordon Brown or Paul Martin to attempt to screw with the global financial system…….the market for gold and curreny is entirely different than when as youy say ‘gold crashed to $250’…….. in fact it was a pricing amomaly created by socialist politicians seeking political gains that ‘crashed’ the market…….something that would be impossible today because ownership of gold is far more diverse over the community of governments and countries like Britain no longer have a place at the ‘golden table’.

Guns, god & gold. You neocons are so predictable. — Garth

#203 American Werewolf in BC on 07.30.12 at 12:51 pm

#200 Canadian Watchdog on 07.30.12 at 12:40 pm
Confidence in the US dollar is what’s being lost and what matters to the world.

=====

Yet people are buying up US treasuries with record low yields. Go figure.

#204 Sebee on 07.30.12 at 1:08 pm

Great bit by Gary North

>
I do not believe that hyperinflation is inevitable. I think it is unlikely. I do think that a Great Default is inevitable. Governments will default when the workers who are paying into Social Security and Medicare finally figure out that (1) this is not in their self-interest and (2) they outnumber the geezers.

Central bankers are arrogant. They really do think they have the upper hand. They really do think fiat money creation by central planners (themselves) is more powerful than free market forces (investors). They really do believe that they can find a suitable middle/muddle road between deflationary collapse and hyperinflation. So, they will not pull out all the stops. They will not hyperinflate unless Congress compels this.

Paul Volcker is the model. He reversed the policies of the ill-equipped G. William Miller, who was persuaded to resign by Carter after only 18 months in office. Volcker stuck to his guns from the fall of 1979 until August 13, 1982. By then, the public had lost its fear of inflation. It had gone through back-to-back recessions.

Volcker saved the dollar and the bond market. He let the politicians pay the price: first Carter, then Reagan. Reagan weathered the storm because the economy had turned back up by 1984. He smashed Walter Mondale.

The leverage is much greater today. The leverage of the big banks is much greater. The public still trusts Bernanke and Draghi. The investors think the central banks can save the system from a catastrophe. I don’t. But I think the central banks have their choice of catastrophes: deflation/depression vs. hyperinflation/depression. I think they will try to navigate a middle ground, but when push comes to shove, they will risk a controlled deflation, with selective bailouts for the largest banks.

The central banks are not there to save the governments, which come and go. They are there to save their clients: the largest banks. They know where their bread is buttered.

But if Congress ever nationalizes the FED, then hyperinflation is a real possibility.

#205 bigrider on 07.30.12 at 1:24 pm

Garth- “you guys are delusional” “blah blah blah” “when gold buys gas and timbits, it’s money, not before”

Garth, Eric Sprott called. He wants you to attend his next conference to advisors.

John Embry a guest speaker.

I heard Brad Lamb will be in attendence.

Sounds like a room full of your best buddies..LOL

#206 bigrider on 07.30.12 at 1:28 pm

Listen you house and gold humping fools, paper with the queens face on it is where it’s at. Ben Franklins face very handsome indeed as well.

Keynesians firmly in control.

#207 jess on 07.30.12 at 1:29 pm

Timbo

sand rush
in usa rail cars = fracking sand

=======

#208 Canadian Watchdog on 07.30.12 at 1:34 pm

“US$ is the global reserve currency. Nothing has changed. — Garth”

It doesn’t change overnight and if the BRICS continue to ditch USDs by arranging bilateral swaps agreements, then the West will once and for all feel what the BRICS feel every time the Fed prints money—double-digit inflation. http://postimage.org/image/87kw13lgx/

The deflation your seeing is due to i) over-valued housing market, by which is weighted one-fifth in the CPI basket ii) deflation on consumer staples caused by corporations cutting excess profit margins.

Higher prices will resume once fundamentals catch up.

#209 John on 07.30.12 at 1:38 pm

Canadian Watchdog responds to the discussion below:

#151 John

“In Iceland there was fortunately some political will to act on behalf of a population that elected it’s government.”
——-

Historically, citizens of a nation only act to reform government when there is a collective interest or loss amongst them. With Canada having a 65-70% home ownership rate, there is no incentive to pull the plug on an asset widely held by the majority.(CWD$

————-

“There will be no hyper-inflation, quite the opposite. And gold is not money. — Garth”
———-
“Perhaps not money by means of common exchange, however the biggest news over the last few months was an FDIC memo regarding the re-classification of gold as a zero-risk-weighted asset. That’s a game changer for large financial institutional and central bank balance sheets.”( CWD)
——
I think CWD’s points are sensible and well thought-out. But let’s not forget the order of operation here: Talking about what IS happening….and then speculate on what MIGHT happen.

Good debate.

#210 Bill Gable on 07.30.12 at 1:44 pm

CRA is in disarray and short of people – forget the audit for this maroon.

I am convinced that there are more people like this couple – but they at least have the brains enough to call Mr. Turner instead of write.

These people are BROKE.

As for the words Recession/Depression = bandied about – Europe’s PIIGS are feeling the Big D and America will feel the same wrath – if they don’t start making some jobs.

Peter Schiff says Depression. $14 Trillion = $15 trillion debt in one year is the total GDP of the States. BUSTOLA.

No jobs = Obama will be back to doing back room deals in Chicago with the charming Mr. Emmanuel, come November.

#211 daystar on 07.30.12 at 1:46 pm

Dear anonymous: (appears to be smarter than she’s already given credit for)

My question is, how can I convince my husband to get off his a** and do his taxes to get the ball rolling? And are we screwed if he can’t find all his receipts? – anonymous.

By telling him that most of his paper trail will come from bank and credit card statements that he can get upon request. He won’t need receipts for everything (food, lodging can be batch filed, both of you need to read the tax guide line for line, found online and printable for easy reading at your leisure) but whatever he has will help. (tell him too, that he’ll lose GST from tax years filed more than 4 years late and could face account freezes and confiscation from the tax revenue agency for not filing which could paralyze his finances for real at a time when he’s most busy potentially biting into future earnings)

Both of you could side step the DIY approach yourselves if you find an accountant that knows their stuff in the arena of personal tax returns, but thats easier said than done and even if you find a good accountant they will request the information you need to do a good DIY effort regardless. If you find a good accountant, they will give you a blueprint to work with in terms of filing returns for future filings. I recommend DIY because a contractor needs to know where the money is going to manage business effectively. Accountants free up time but contractors need to know the numbers to be successful regardless. In other words, unless time is an issue (its not if he’s got lots of time for gaming), filing his own tax returns is a part of learning how to be financially successful. Your husband doesn’t have to file his own tax returns but he does need to know how to do it if he wants to save money in past, present and future taxes.

Go through the tax guide line for line and call a tax agent for the questions that stump you, they are easy to deal with using the links within this link:

http://www.cra-arc.gc.ca/menu-eng.html

3 times out of 4, you will catch stuff that accountants miss simply because your hubby knows his financial history and they don’t or the accountant’s forte’ isn’t personal tax returns.

Now as for RE, like tax returns, to be young is not dumb, just naive and inexperienced. A few of us (nihilist’s to be precise) may write off experience as irrelevant but it is highly relevant and inexperience doesn’t make a person dumb, (limited potential does) it just makes a person make dumb choices. The RE environment has changed. We’ve had 6 years of loose regulation until lately coupled with record low interest rates since Febuary of 09′. This blog seems to miss why we haven’t had asset deflation since the late 90’s today so I’ll do a quick rundown.

The loonie has done nothing but appreciate since 2002 and first bottomed in 1998:

http://www.cbc.ca/news/interactives/map-history-dollar/

This has had a deflationary effect on imports that creates more consumer affordability which promotes asset inflation which is a win win for the economy. Interest rates:

http://www.tradingeconomics.com/canada/interest-rate

Have trended down since the early 90’s and this had had a tremendous positive impact on credit and thus, as borrowing power increases, drives asset valuations higher as it gets priced in. Taxes, contrary to those too inexperienced or ignorant of past taxation, has also fallen increasing net worth and incomes are worth a mention. While incomes have risen only modestly, they haven’t declined and have had some positive effects on affordability.

The problem, anonymous, is that this is all past. Its rear view mirror. The loonie from here, especially considering bloated gross public debt, is likely to fall causing inflation of imports cutting into consumer spending and biting into affordability. Personal income taxes are poised to go up (if anyone has looked at federal budget projections in the 2012 budget, we will face federal tax increases next year) Interest rates also have nowhere to go but up and if anyone pays attention to what the effects of gross public debt are on rates, all the drivers for higher rates within the next few years are there for this to occur.

Common sense lends to suggest that inflation of imports biting into affordability coupled with higher future interest rates increasing debt service costs and tax increases will also further reduce affordability eroding asset valuations that have already hit their peaks in well over 90% of Canada’s markets. The effects of reduced asset valuations alone will further reduce affordability created through credit and it too, if one pays attention to CMHC ceilings, is hitting its limit.

And lets be realistic? You have no money for a down payment so you can’t afford to buy a house if you wanted to and its a good thing since buying into a falling market is hardly a way to build equity regardless of the false “I’m paying someone else’s mortgage” belief. (to actually pay someone else’s mortgage, rent has to be higher than payments, not a common thing for most markets at present) So… take 6 months, pay off some debt and see what you can aborb from a site like this one in the meantime. No one here including Garth (he’s human after all) has all the answers but with a concerted effort, you’ll have a good chance at seeing things for what they are.

#212 agioblue on 07.30.12 at 1:50 pm

You may not publish the dumbest letters but you certainly know which will launch the throngs into an orgiastic frenzy. No wonder this site gets so many hits. Genius.

#213 daystar on 07.30.12 at 1:57 pm

One final note. We were all financially illiterate at one time without exception, just like our emailer here. Perhaps some of us have forgotten what its like to be financially “dependent”. I wouldn’t waste my time mocking those who are dependent or somewhat illiterate financially, we quite literally have better recourses to build our self esteem and as far as experience and “credentials” go, I’ll answer a simple question for us and the question is this.

“Does one need credentials to be taken seriously with an answer to a question? More to the point, does one need to be professionally trained with a degree to be taken seriously?”

Some would think so. Some us us believe that only through years of education and training will individuals come up with the correct answers or advice to important questions. A few believe that education and/or experience is irrelevant. (I’m not one of them) What I believe is that its not the messanger but the message that counts and thats based not just on experience, but potential. The bottom line is an accurate answer to the question and that often comes only through experience but a person still needs the senses to make sense of it. What separates the amateur from the professional is experience and there’s obviously more than one school to draw from. There’s the school of academic degrees and trades, of practicing what we’ve learned in the workplace earning an income and there’s the school of hard knocks. That last school, if you’ve learned later where you went wrong, the lessons although costly, contain tremendous value because you’ll never forget them and if you are wise, you’ll swallow the humility within the lesson and help others from repeating your own mistakes.

All of our experiences, whether they lead us to success or failure have something to teach us, something of value and if we minimize and demean such experiences within ourselves or others simply to inflate ourselves, such inflation is built on a lie. Experience has value, readers. Its in part why we’re here, to gain insight from our hosts experience and for some, to share our own (in itself a work in progress). Lets show some respect for it, from its infancy to elder come full circle.

#214 bigrider on 07.30.12 at 1:58 pm

Why is it that it’s always the girl who is excited about buying a house (she inserts ‘we’) and moving on with ‘their’ lives (she means ‘hers’ subconsciously, she just doesn’t realize it consciously).

She asks how she can get her man to get off his ass and get the ball rolling… After all ‘he’ is holding ‘her’ plans up..LMAO

Guys getting dragged to the alter, er gallos, er alter kickin and screamin, and then horse drawn after they are already dead..LOL

#215 groovin123 on 07.30.12 at 1:58 pm

Price inflation is a result of an increase of the money supply (inflation), and the velocity of money. The severe recession in the US has kept the velocity of money very low, so despite huge increases in the supply of money, the velocity is just not there to carry it through to asset inflation – although you will see “hotspots” of inflation reflected in food prices, gold price, oil price, etc.

The US is about 3 years away from being pressed into the same corner Euro-Land is in now. Fortunately, they have the printing press on their side and inflationary policy is the far more politically desirable route to take than either austerity or default/re-structuring.

If/when they take the inflationary high-road, you will witness the most epic of all bubbles collapsing – the long-term bond market. Canada is the tail on the dog and highly leveraged Canadians will end up in the financial blast-furnance.

Short of the long, CLEAR DEBTS, GET LIQUID.

#216 Glen on 07.30.12 at 2:04 pm

That email is unbelievably depressing. She can’t be serious…? I hope for her sake she was trolling.

If not, I wish them good luck in dealing with the CRA for starters.

#217 neo on 07.30.12 at 2:09 pm

Canadian Watchdog will like this chart. Given he is the chart guru on here (-;

http://www.businessinsider.com/chart-of-the-day-the-us-garbage-indicator-economy-2012-7

#218 avenirv on 07.30.12 at 2:09 pm

@TaxHaven

the communists say that what was in USSR was not the true comunism.
if in a democratic capitalist country we start to say that this is not capitalism we are doomed.
there is no idealistic capitalism. THIS is capitalism but we do not have something better.

#219 Junius on 07.30.12 at 2:20 pm

#187 truth hammer,

You said, “The big question is why do the Liberal apologists have such a big problem telling the truth…..when issues such as HAM have had such a detrimental effect on Canadian families? Whats in it for the Liberals to destroy the Canadian family?”

What are you smoking? No one is defending HSBC and HAM is a product of the Realtor pumpers. How do these have anything to do with Liberals?

Or do you need a straw man for every argument?

#220 GOLD HUGGERS WILL NEVER CONVINCE GARTH THAT GOLD IS MONEY on 07.30.12 at 2:25 pm

Attention all metal heads and gold huggers. Your ilk has tried for four friggin years to convince the bearded mystic oracle that runs this pathetic blog that gold is money and it has not worked. GIVE IT UP ladies and gentlemen!

#221 EdmontonJim on 07.30.12 at 2:29 pm

The central banks are completely unwilling to accept inflation, let alone hyperinflation. This alone in enough to assure deflation in at least parts of the economy – namely the most leveraged parts.

And the response of the governments that could actually do something to avoid disaster is exactly wrong. That is, they are responding with austerity when there is structural unemployement. This is akin to a sinking ship trying to lighten the load by throwing the bilge pumps overboard. It’s insane.

The sane response, I’ve said before, is to make targeted inflation/deflation. First by dropping interest rates to essentially zero, then by tightening lending restrictions to make leveraged speculation nearly impossible. For example, don’t allow any loans based on fixed assets like gold or land value.

Then raise taxes on property and capital gains, while lowering profit taxes. This will discourage rentism and encourage labor intensive industry.

Increase government spending on infrastructure and research until the private sector picks up the slack. Tie total infrastructure spending as a percentage of GDP to unemployment.

The net effect: Non-productive companies start dropping like flies, money flees out of fixed assets and into companies with high payroll/fixed assets ratios. The value of land drops precipitously as landlords find their yields eaten away by taxes. Company managers find it advantageous to raise payrolls to attract the most valuable workers.

The increased median wage increases demand for production at all levels, which further pushes up wages and drives down unemployment. The increased tax base allows the government to repay loans as they eventually raise interest rates when full employment is reached. They then cut spending as the productive capacity can be absorbed by the private sector.

Of course this will never happen, because it has the express purpose of attacking rentism and speculation with extreme prejudice, and the rentiers and speculators, (slavers and leeches) will buy as many votes as they need to stop it.

#222 Canadian Watchdog on 07.30.12 at 2:38 pm

TD: Canada banks seen by S&P as vulnerable if housing stumbles https://research.tdwaterhouse.ca/research/public/Stocks/NewsArticle/ca/TD?documentKey=100-109c0926-1

“Canada’s big banks are also buffered by their oligopoly in the market, with the five biggest banks stretching from coast-to-coast and two smaller regional players plugging the holes. The relative lack of competition compared with the hundreds of U.S. regional banks will allow them to raise fees or cut expenses if loan growth slows as consumers tighten their belts.”

——-

That’s what you get in return for bailing out banks Canada. Job cuts, no interest on savings and rising service fees. You muppets.

#223 Daniel on 07.30.12 at 2:44 pm

Garth on #183 … you said:

When gold buys gas and Timbits, it’s money. Not before.

You kind of remind me of Homer (Simpson), he was looking for a peanut that fell under the couch. Instead found $20, and said, “awwww”. Then his brain said, “Wait, money can be used to purchase goods and services – like peanuts.” Woohoo went Homer.

Gold does by gas. For instance 5 years ago when gas was $1.00 per litre – you could by 800 litres with 1 oz. of gold.

Now, you can buy 1600 litres with 1oz.

If you think gold is going up in the next 5 years, seems like a good idea to buy some.

Gold has purchasing power (like money) , it’s easily exchangeable for goods and services.

That’s not money. — Garth

#224 IM in C on 07.30.12 at 2:48 pm

Another reality of owning real estate!

http://www.aladelecaton.com/mobile?pathway=461&listingNumber=6891713

http://www.calgarysun.com/2012/07/29/fire-rips-through-northeast-calgary-homes

http://www.calgarysun.com/2012/07/30/bad-luck-drug-bust

#225 EdmontonJim on 07.30.12 at 3:00 pm

Another reason my dream will never happen is that even if you got enough revolutionaries to actually pull off the devaluation of land, landowners would pay a nice ransom for anyone willing and able to reverse the trend.

In fact, my extreme cynicism tells me that the whole ‘ownership society’ policies that got us into this mess was a plot to tie the financial future of a majority of the population into the fate of rentism.

In this way, it is like a Pyramid scheme. Even when it is obvious that the whole thing is a lie, people feel invested in the lie, because they know that as soon as the pyramid fails to lure in the next level of greater fools, the whole thing will come crashing down. So we lie to our children.

#226 TRT on 07.30.12 at 3:04 pm

Canada has 1 medal. A bronze.

The young are too busy flipping or paying off huge mortgages/student loans.

The Boomers are busy criticizing the young and are blind to their destructive policies…but soon…they will be the ‘social parasites’ they now despise. How ironic!

#227 Dr. WAYNE on 07.30.12 at 3:08 pm

“The only way to comprehend what mathematicians mean by infinity is to contemplate the extent of human stupidity.” –Voltaire

#228 Form Man on 07.30.12 at 3:12 pm

looks like ‘fracking’ is dramatically changing the oil production outlook for North America.

http://www.reuters.com/article/2012/07/30/us-oil-usa-pipelines-idUSBRE86T02820120730

Exploration and pipeline companies are rushing to construct new pipelines and reverse the flow in existing pipes, so they can export excess capacity to the world. Has it occurred to them that the same technology can be used anywhere, and the rest of the world may not have as much need for this extra oil by the time we are ready to export our ‘surplus’ ?

#229 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 3:13 pm

There will be no hyper-inflation, quite the opposite. And gold is not money. — Garth
—-
Sometimes I blush when I tell people I read Garth Turners blog. It’s statements like this that make me ashamed.

Housing, I don’t give a shit. It’s doomed and that’s a fact. Garth is right. So I’m not embarrassed to support you there buddy. And real estate is what people think of when I say I read here, so nothing to be ashamed about.

We just gotta work on the details or correctness of how everything fits together. The mechanics and incentives in the system.

Gold is in fact money to me and I’m right. But I’m here to help you when you have questions. Shoot!

Money is a medium of exchange not a repository of value. Gold fails. — Garth

#230 bill on 07.30.12 at 3:17 pm

Depends what’s on TV. — Garth
the short attention span would work against the 99%. organizing much past a piss-up is beyond their capabilities I fear…

#231 MoneyMyHoney on 07.30.12 at 3:24 pm

http://www.greaterfool.ca/2012/05/15/sit/#comment-172174

http://www.greaterfool.ca/2012/06/21/shock-awe/#comment-180057

I commented about some of the banks going on crutches more than 2.5 months ago. It won’t happen overnight. The neuro-muscular imbalance takes time to set a full scale limp. That is when crutches will be required.

You will see potential signs of limp only after May 2013.

By the way Mr. DeFlation is already knocking on the door. You may accept him and let him in or you can keep the doors closed and let him blast the doors open. Either way, he will be in.

Look for mattresses with pockets to store your money. They will prove to be better than banks.

The downgrade is meaningless in terms of bank stability. — Garth

#232 bill on 07.30.12 at 3:26 pm

better have lots of gold for the ‘Wiemar situation’
so to speak.
I have been reliably informed that my wedding ring [ a mixture of gold and platinum] at 5.44 grams would get me 5.4 grams of chicken…in Budapest at the end of ww2.
these worst case scenarios dont give top dollar for precious metals…
to put it in a most obvious way : 700+ dollars expended for a wedding band = 5.4 grams of chicken

#233 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 3:28 pm

Money is a medium of exchange not a repository of value. Gold fails. — Garth

It’s both. Sure, gold is not a currency today for gasoline and timbits, but you can use it to buy a national oil company or any currency in the world and it’s holding it’s value better then every fiat currency on the planet, hence gold price keeps rising, currencies are being debased. Race to the bottom.

Next question.

It’s not money, as you point out. Last comment on this topic. — Garth

#234 Canadian Watchdog on 07.30.12 at 3:32 pm

#201 American Werewolf in BC

“Yet people are buying up US treasuries with record low yields. Go figure.”

Who?: WSJ: Fed Buying 61 Percent of US Debt

#235 John Maynard Keynes on 07.30.12 at 3:35 pm

#204 Big Rider

“Keynesians firmly in control.”

Hear hear Big Rider. Thou has spoken correctly and it is so sweet to see my policies still going strong…

#236 American Werewolf in BC on 07.30.12 at 3:36 pm

#196 cramar

Moral of the story: if you want to make it through an economic downturn, own something real…like a farm.

#237 In Garth Almighty We Trust on 07.30.12 at 3:42 pm

#205 Big Rider

“Garth, Eric Sprott called. He wants you to attend his next conference to advisors.John Embry a guest speaker. I heard Brad Lamb will be in attendence.”

Big Rider, these clowns you cite are not worthy to wash the feet of the mystic bearded, all knowing, all wise, financial tea leaf reading oracle and prognosticator without equal who graces us mortals with his daily gems.

#238 Ronaldo on 07.30.12 at 3:44 pm

#213 – Daystar

“Does one need credentials to be taken seriously with an answer to a question? More to the point, does one need to be professionally trained with a degree to be taken seriously?”

Are you referring to Sherry Cooper?

#239 In Garth Almighty We Trust on 07.30.12 at 3:44 pm

“Most people who have dabbled in amateur economics, like my friend Sammy who runs the pizza place, or the prime minister.”

Now that is a low blow captain Garth. You have hit low before but this time you have gone well below the waistline. I know Sammy the pizza guy and he knows a ton more about economics that Stephen Harper! Puhleeze…

#240 Suede on 07.30.12 at 3:48 pm

How Garth gets several hundred comments and lots of traffic? Mention the four magic words:

Gold is not money

Why waste all your time trying to convince someone of your beliefs for validation. Who cares. If you think Gold is going up, then buy more.

lol

#241 panhead on 07.30.12 at 3:48 pm

#218 avenirv

Worked with a few Russians a while ago and one said of Canada: What you have here is what we were always promised at home but never got …

#242 American Werewolf in BC on 07.30.12 at 3:50 pm

#229 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 3:13 pm
Sometimes I blush when I tell people I read Garth Turners blog

=======

I would bet Garth blushes similarly when he talks about some of the people who read this blog

#243 shifty on 07.30.12 at 3:58 pm

Amateurs, at least those with less than seven figures to invest, buy individual equities. — Garth

If we are going into deflationary times would these securities not be overpriced at this time? Is there certain equities you may suggest or as suggested get a good consultant and a maybe a good Psychologist.

No. I do not buy individual stocks. — Garth

#244 American Werewolf in BC on 07.30.12 at 3:59 pm

#240 Suede on 07.30.12 at 3:48 pm
Who cares. If you think Gold is going up, then buy more.

=======

In theory, if they can convince enough people to trade in their dollars for gold, then they will naturally improve their position. Of course, these people are not Warren Buffet and the real world doesn’t give a shit about their investment advice.

#245 joe_blown_away_by_high_housing_costs on 07.30.12 at 4:10 pm

#196 cramar

“I’d be a fool to buy Timmies with gold, but the teenager would be a bigger fool if he didn’t accept it, throw in his own paper and pocket the gold!”

The teenager would probably be fired from their job at Tim Horton’s if they did that. I’ve worked at loads of min. wage service jobs like this. Head office policy usually forbids workers from doing this sort of thing–becoming a middle man in the payment transactions. When the American dollar used to be high compared to the Canadian dollar, retailers would usually accept American for less than what it was worth. Employees would sometimes try to buy the American money from the customer first and then enter Canadian money into the till. You can make a lot of money on the margin between the real exchange rate and the lower exchange rate offered at a retail store — if you have a store that gets a lot of American money. Head office of Tim Horton’s would not allow this kind of thing. I don’t even think Tim Horton’s head office would allow workers to recieve tips. They don’t have tip jars at Tim Horton’s, they have cannisters for collecting change for charities. I’ve worked at many places where the head office does not allow workers to recieve tips. Plus, I believe Tim Hortons has lots of cameras looking at those cash tills so it wouldn’t be so easy to get away with.

#246 Victoria Tea Party on 07.30.12 at 4:10 pm

ON EVERY SINKING SHIP…

There’s some febrile whack-job passenger who doesn’t know how to find ANY of the three following items: 1)lifejacket; 2)lifeboat or equivalent; 3)his/her derriere with both hands in any kind of “light situation (in the light or in the dark!).”

This Victoria property virgin must have noticed by now the innumerable for sale signs cropping up like annoying dandelions everywhere in this lovely backwater of a community (Canada’s only columbarium with a business district!).

Good luck, young thing; here’s hoping that the banking cipher clerk you’ll be dealing with has the jam to show you the door before your life becomes a shattered financial remnant of what could have been.

SPEAKING OF REMNANTS

Investors looking for 12 per cent yields in American markets should read this, then remember 2008 (as if any thinking person COULD EVER FORGET!)

From Karl Denninger’s Market Ticker comes this stunner. Read it carefully!

“AUTO FINANCING: You Don’t Need Decent Credit

But nobody could have seen this coming!

Sales of bonds tied to payments on subprime car loans are accelerating at the fastest pace in five years as investors seek high yields amid speculation the Federal Reserve will keep interest rates at record lows until mid-2015.

…The “attraction” for the issuers of these Frankenstein monsters is clear, if you read a bit further down:

The subprime auto finance business has grown during the past two years as new lenders compete to make loans with rates of about 17 percent annually, while being able to finance themselves at an average rate of less than 2 percent, (says) Moody’s Investors Service… With losses ranging from 1 percent to 3 percent, originators collect annual spreads of about 12 percent,…

Funding costs under 2% and rates charged to borrowers of 17% — on automobiles?!

No wonder auto sales are “up” — fog-a-mirror loans are back…Paying 17% for money to buy a car is just plain nuts.

This will seem to work just fine right up until that subprime borrower can’t pay, at which point the game will (again) come crashing down around their ears. …(however)…people will generally make their car payment before virtually anything else, since without a car you’re not going to get to work….”

AT THE SAME TIME THIS IS GOING ON

The major substructure of American heavy industry, GM and Ford, is crumbling again. Stock prices have been heading south, for a while now, at an alarming rate, according to market watchers. WHY? Because investors are nervous about excort markets, given that these companies have plants everywhere on the planet, and not enough customers to buy their vehicles, so-called.

AS FOR THE EU CROWD

of financial/governmental rocket scientists. Many are on vacation, as was discussed by the crainially-challenged hosts of CNBC ealier on.

These idiots were asking if it was OK for the eurocrats to stay on their annualc beach blanket bingo times on the Costas del Sol and some picturesque Greek islands with NOT their wives, sort of like fiddling while all of southern Europe “burns.”

The conclusion by one CNBCer? Maybe it’s a good idea for them to be on holiday as they”may come up with some better ideas” on how to solve this fiscal/monetary debalce!

That is wishful thinking of an amazing order of magnitude.

There IS NO SOLUTION, if all these ‘crats plan on doing is printing up as much money as it takes to bring on one of two conclusions” Weimer-style hyperinflation, or some wretched kind of deflation which none of us has ever witnessed before. Yuk!

#247 Investx on 07.30.12 at 4:14 pm

#204 Big Rider

“Keynesians firmly in control.”

—————————————

In control of poor fiscal policy that artificially sets interest rates and props of bubble markets like real estate.

#248 bigrider on 07.30.12 at 4:16 pm

I am not a ‘bug’ on anything really but what I don’t get is the about face Garth has done, from one of his own past books, where he worshipped the accumulation of gold more so than the biggest gold bug on this site.

Why the abrupt about face Garth on gold?

I can pull up the passage and quote your exact words if you like, including page numbers et al.

My position has been consistent: a gold weighting is just fine within a diversified portfolio, so long as it is small (5% is generous) and rebalanced consistently. The metal nuts who come here buy, never sell, never rebalance, take no profits, put everything in one asset and have completely lost focus. Are you trying to insult me today? Doing a fine job. — Garth

#249 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 4:23 pm

It’s not money, as you point out. Last comment on this topic. — Garth


Ok, that’s enough for one day. Let that sink into your sub conscience. The reality of the world we live in is astoundingly simple in the realm of economics. It’s not hard at all.

We live in a world where some people work hard and produce while another group, everyone else, don’t. Then we have the controllers, politicians and bankers who steal wealth, regulate and tax the productive people. Money is just the systems blood and the blood stream itself is poison.

That’s it.

#250 Devore on 07.30.12 at 4:35 pm

I have about $40,000 in student loans, but I can pay these off over the next 20 years so I’m not worried.

Dear Jessica,

While your financial situation is precarious, you should take advantage of it and apply for maximum student loan forgiveness. Let the taxpayers foot this bill, they’re already paying for your summers off. After all, it’s the Canadian way.

#251 neo on 07.30.12 at 4:40 pm

Federal Reserve Note.

This note is legal tender for all debts, public and private.

No reference to it being money, which is a store of value, is ever made. That would be contrary to what it is, which is a currency.

Money represents wealth, which is the state’s power to tax. Care for a crayon? — Garth

#252 Devore on 07.30.12 at 4:54 pm

#17 Frustrated Kiwi

I have no idea how people like your letter writer stumble through life

Lets face it, life in the modern western world just isn’t that hard. You can be a total moron, and not just survive, but procreate and flourish! Stumbling and bumbling your way through life takes no effort, and it works, so is it any surprise so many take this route?

#253 djealas on 07.30.12 at 5:04 pm

No, I beleive Garth published an actual letter from a human being, its just crazy enough to be true. As for advising people away from precious metals, its probably sensible anyways. I started working in public service in 1997 and bought gold until about 2010, and am up over 400%. Way better investment than anything else I’ve tried. Also bought a house in Toronto in 2006, sold in 2010 and made $210k in profit. Been renting since then. Gold isn’t a bad investment, Garth, but I don’t think anyone who hasn’t been buying it for years is in a position to even afford it now. Could go much higher, could get destroyed. Like anything else, if you want to make money in it, you buy low and sell high. I ain’t rich but have no debts, real money, cash in bank, and am not house horney. Hope the world doesn’t end this December, though. Thank you for this column, its not pathetic at all but very useful and informative compared to the real estate meatsack opinions in the newspapers and TV.

#254 Canadian Watchdog on 07.30.12 at 5:06 pm

“Money represents wealth, which is the state’s power to tax. Care for a crayon? — Garth”

10 year average personal income tax as a % of Canadian government revenue:

1930-1940 8.2%,
1940-1950 22.4%,
1950-1960 27.3%
1960-1970 32.8%
1970-1980 44.7%

1990-2000 46.2%
2000-2010 46.9%

How much more can the government pillage before the people figure out that half their income is still paying for World War I and II? That’s even excluding the current debt!

Governments will either default or hyper-inflate. These are the only options. As for when it happens, that’s another debate.

In North America neither will occur. — Garth

#255 bigrider on 07.30.12 at 5:32 pm

#248 Garth to Bigrider “….are you trying to insult me today. Doing a fine job”

No way, not a chance, Garth. Please don’t interpret anything I have said today, or any other day for that matter ,as an insult. Absolutely not my intention.

I don’t even insult the house humpers I come across everyday..LOL

Please do accept my posts as both supportive of your positions(as I have more often demonstrated) and sometimes as a challenge(today for instance) to some of the things that you post and others post.

I would hope that my almost daily visit to your blog demonstrates my general interest and support to the message you deliver.

#256 Smoking Man on 07.30.12 at 5:51 pm

Money represents wealth, which is the state’s power to tax. Care for a crayon? — Garth

Wrong

A mans Labour is wealth, withhold it in mass, all the money and gold in the world won’t get your shoes shined.

But then again ratio of track6ers to 5ers?

Just become a capitalist and exploit as many as you can.

#257 Smoking Man on 07.30.12 at 5:55 pm

LaughingCON no Smoking Man the Realtor posts today, you catch a cold, finger cramps from copy paste?

Where are you I miss your ever so creative posts.

#258 888realtor on 07.30.12 at 5:55 pm

#241
Worked with a few Russians a while ago and one said
of Canada: What you have here is what we were always promised at home but never got …
______________________________________________

Debt slavery has never been promised in Russia… quite opposite: Russian project was based on the idea that such thing as a loan interest rates should never been used
for the purpose of economic stimulation…

#259 cj on 07.30.12 at 6:00 pm

#128/129 bancrupt?
We are screwed because people like you put it out to the blog for feedback – if they should borrow to the max and then declare bancruptcy. We need to take personal responsibility for all our actions and not feel it is our right to entitlement.
This couple have messed up their finances and now need to change their habits before going further into debt.

#260 cramar on 07.30.12 at 6:05 pm

So it seems that we now have a confirmed Hindenburg Omen! “This Omen has appeared before all of the stock market crashes, or panic events, of the past 25 years except one, except the mini crash of July/August 2011. Except for that one crash, no stock market crash (a decline greater than 15 percent) occurred over the past 25 years without the presence of a Hindenburg Omen”

https://www.technicalindicatorindex.com/subscribers/guest-articles/Hindenburg%20Article%20JUly%2024th%2C%202012%20McHugh.pdf

#261 I stand corrected! on 07.30.12 at 6:37 pm

Holy Sh%t! She has a university degree? (student loans)Marries a man that hasn’t done taxes in years? And thinks she still can buy a house? Wow people really are dumb. Completely clueless, where does the sense of entitlement end and common sense begin? Please help!

#262 Victoria Tea Party on 07.30.12 at 6:39 pm

IN CASE YOU WERE WONDERING! I WAS…

For those of you trying to suss out the mangled thinking of America’s central Banker, Chopper Ben, and whether or not QE three is next up to prop up the unproppable, comes this from CNBC!

Republican president candidate Mitt Romney is starting to be touted as the next president, a good move for stocks, apparently, regardless of exploding PEs and dying trading partners the world over!

(CNBC)”…One analysis concludes that last week’s sharp three-day market surge can only mean that Wall Street is banking on a victory from…Romney.

That’s the logical interpretation one can draw from a rally amid conditions that otherwise would demand a selloff, Morgan Stanley chief U.S. equity strategist Adam S. Parker…(and)…asserts there is no other reason now to like stocks than a Romney win.

“The problem is that it’s impossible to be bullish and right for the right reasons,” Parker said …(He)…cites weak earnings and the likelihood that central bankers won’t be able to continue to save the day as bolstering the case against equities. The near-zero interest rate policies from the Federal Reserve and now the European Central Bank, in fact, are weakening the outlook for stock multiples, he said.

This is known as the market’s “faint hope clause.”

#263 coastal on 07.30.12 at 6:39 pm

“You guys are delusional. — Garth”

Thanks for deleting my last post as I tried to defend myself being classed as “delusional” with a logical post. As a long time reader and poster you just lost a lot of my respect. I’m not a guns and gold type, just have an opinion on how high gold will go. It was you who posted about gold, not me.

You’re welcome. You earned it. — Garth

#264 Nostradamus Le Mad Vlad on 07.30.12 at 6:39 pm

“US$ is the global reserve currency. Nothing has changed. — Garth” — Curious, and anyone can answer.

If the US$ is the global reserve currency, what is the foremost (first) currency?

#129 bankcrupt? — “I should add – they’re not screwed, we the tax payers are.” — Unless one is liquid — makes a huge difference.

#180 R — “Victorians and British Columbians aren’t the brightest bulbs.” — Hay! I represent that statement!

#181 Mr Buyer — “I think I might be more than a little messed up.” — Me too. I think I thought I should be seeing a shrink, but I forgot where I was supposed to go to.

#265 Devore on 07.30.12 at 6:51 pm

#141 Blue Monster Lover of Meats and Vegetables

This is false. I can tell you are up on modern theory. You should check out the Austrian school’s position on problems with deflation. They definitely will not agree with you. Like me. But I know better than to argue.

The Austrian have a fine theory, but we live in a debt economy. Without growth in money supply and debt (same thing) there is no economic growth. If private debt is not growing, there is no increase in demand, or in production, which, according to Austrians, must lead demand.

With periodic resets when compounding gets into exponential hockey stick territory, any economic system can survive indefinitely, provided the resets aren’t fatal.

#266 EdmontonJim on 07.30.12 at 6:52 pm

#256 Smoking Man

I usually like your comments, but this time you missed your reading comprehension quiz. Garth said money represents wealth. Which is true. Money is a place-holder, a token, an IOU. It’s the same way letters represent words, which represent ideas.

Money serves its purpose when it makes a clear and secure representation. You can look at a $20 bill, and instantly translate that into some real form of wealth.
Even better, you can look at a number on a trusted computer screen, such as an ATM or debit machine, and that representation is easily understood and trusted.

Gold makes for poor money because measuring out actual weights and listing prices in terms of weights and fineness is tedious and easy to mess up. Imagine how long the line at Timmy’s would be if everyone was fiddling for exact change in tiny gold coins. Imagine the cost to society if it was discoverd someone was passing 90% fine as 99%. Even when gold was used as money, it was only used for major transactions – like the entire contents of a ship. For everyday commerce or paying wages it was worse than useless.

In other words, money is only as good as the time it saves in transactions.

#267 Canadian Watchdog on 07.30.12 at 7:24 pm

“In North America neither will occur. — Garth”

Wrong. Because if Europe were to break up, eventually private capital would dump dollars and bonds to purchase cheap assets denominated in core and stronger peripheral currencies, leaving the U.S. and Canada with nothing but higher interest on bonds and trillions of dollars in debt, unless unless our central banks keep buying bonds, which is hyper-inflationish’.

Or what? Tax the citizens who are already maxed out on their debt?

In 2011, total Canadian government revenue was $237bn, of which personal income taxes was $113bn, representing 47% of total revenues. Even if you increased personal income tax 25% ($142bn revenue representing 60% of total revenue), it would still fall short to cover public debt charges (interest) currently running at $31bn annually, and that’s with super-low interest on bonds.

There is nobody left to tax; it is not practically possible to tax the millennials just to pay for long-term obligations promised to the boomers. They will revolt.

“Austerity is a necessary condition for rebalancing, but it is seldom sufficient. There are really only three options to reduce debt: restructuring, inflation and growth.” —Mark Carney

Growth has failed.

No default in NA. No hyper-inflation. Just lots of hyperventilating. — Garth

#268 daystar on 07.30.12 at 7:27 pm

#238 Ronaldo on 07.30.12 at 3:44 pm

lol, yeah… good ol’ Sherry.

#269 Devore on 07.30.12 at 7:39 pm

#183 kevsta

and so presumably you’re saying that gold is merely “a commodity”? (as is cash if it comes to that)

Money IS a commodity, it makes more sense to think of it like that. It is the most liquid and marketable commodity.

#270 Realtors don't like realtors either.... on 07.30.12 at 7:40 pm

I don’t have time to read all these awesome comments.

I am sure the girl with the degree is hot.
End of story – hot chicks do cool things and meet cool guys – debt is irrelevant. Just like the tatoo on her back and leg and shoulder, it’s all part of life.

I think the story is fake, but sadly, there are people like this.

And about South Asians in Surrey, they don’t read this blog, that is why their homes still sell for 800k.

Lastly, the blueberry farms foreclosing – this is how you rob a bank, 2010 style. You get the loan, buy your crap, and get foreclosed = the bank holds the bag.
Beats robbing them using a gun.

FACT – there are more blueberry farms in Richmond, Langley and Abbotsford than anywhere else in Canada.
Meaning, the bank downgrade is the tip of the iceberg for eating losses…

#271 Crazy Horse on 07.30.12 at 7:41 pm

Landlady in Stevston just committed suicide. Lived in a penthouse near Starbucks, family owned our commercial building and several others free and clear. 24 years old. Rumor has it her family in China lost their party membership and all access to development loans with it. Father and mother fell off their balcony on the same day.

Thinking about that ten hectares north of Smithers—.

#272 Blue Monster Lover of Meats and Vegetables on 07.30.12 at 7:52 pm

#265 Devore on 07.30.12 at 6:51 pm

#141 Blue Monster Lover of Meats and Vegetables

This is false. I can tell you are up on modern theory. You should check out the Austrian school’s position on problems with deflation. They definitely will not agree with you. Like me. But I know better than to argue.

The Austrian have a fine theory, but we live in a debt economy. Without growth in money supply and debt (same thing) there is no economic growth. If private debt is not growing, there is no increase in demand, or in production, which, according to Austrians, must lead demand.
—–
That’s wrong. We don’t need growth in money to have economic growth, production. As production increases, prices fall.

Production always precedes demand. And production is demand. When I as a producer want to consume, first I must produce and save so that I can consume. This goes for all producers. All consumers are first producers.

Is that clear?

If not, please read a book or I’ll have to start charging for this information and my time.

#273 Nostradamus Le Mad Vlad on 07.30.12 at 8:02 pm


Global QE is Coming So is Christmas, and ECB action plan weeks away; 4:04 clip We’re all slaves to the banxters. If we let ourselves; Four Iranians sentenced to death. “Now THAT is an idea whose time has come!” wrh.com. Add the Wall St. banxters / crooks as well; Pakistan – Iran Barter trading? If so, another nail in the petro-dollar coffin; Iran sets up consortium to make sure deliveries are made; Intervention? Everything else has failed so far; Fiscal Strategies for the US from the neocons; Does the US Fed really monetize debt? Or does it even know what it’s supposed to be doing?
*
6:05 clip Syria, SArabia and Iran. The ‘unrest’ in SArabia comes from the CIA and Mossad, and Syria West’s m$m propagandists shredded to pieces; Connection between mind control and gun control; China and Af’stan Increasing military cooperation; Age of Rage and the world revolution; Turkey, Syria and the Kurds “Such action by the Turkish government would result in a massive escalation of the fighting, resulting in turmoil in the entire Middle East, and perhaps beyond.” wrh.com; Patrolling the Pacific If the US places all their miliary resources away from home, who is left to defend? Tracing IPs of websites; 7:20 clip Soros and Obomba have led the US down the same path as ancient Rome; Jobs, the economy and the election What chance Obomba now that Romney is kissing Israel’s butt?

#274 TimV on 07.30.12 at 8:12 pm

#211 daystar: Good answer, and amazingly on-topic. It’s not clear if husband works on a contract basis or is just paid hourly (with taxes deducted at source). Anyhow, hopefully Jessica reads it.

Now, I have to go pay my tax bill with some gold bars that I carry in my back pocket.

#275 Smoking Man on 07.30.12 at 8:39 pm

Another house Sold in the hood went up last week

Hum?

#276 Daisy Mae on 07.30.12 at 8:45 pm

#185 Kevsta: “….and so presumably you’re saying that gold is merely “a commodity”…. but could you elaborate then on why you think CBs worldwide are buying gold to store along with their paper reserves (but no other commodities?) China imported more gold in the last 5 months than the UK still owns.”

************************

The world governments have screwed things up royally thus far….so I wouldn’t put much stock in any decisions they make going forward.

#277 AS on 07.30.12 at 8:51 pm

Goodness… this letter is so incredibly bad in all the right ways, it’s hard to believe it is not fabricated. Just reading it gives me the shivers … I cannot honestly say I really believed such people existed in the past … please say this isn’t for real … simply mind-blowing. Thank you for the reality check.

#278 Daisy Mae on 07.30.12 at 8:57 pm

#196 Cramer: “…Once we asked, during the great Weimar inflation of the 1920s who survived best during that time. His answer, “Farmers because they grew food that people needed.” So we asked the next obvious question, how did they prosper when the currency was destroyed? His answer, “They demanded gold in payment for their food.”

******************

I doubt that very much. What foolishness.

#279 Daisy Mae on 07.30.12 at 9:07 pm

#223 Daniel: “Gold does by gas. For instance 5 years ago when gas was $1.00 per litre – you could by 800 litres with 1 oz. of gold.”

*********************

It might have value…but what is the gas attendant going to do if you hand him 1 oz of gold?

#280 Daisy Mae on 07.30.12 at 9:15 pm

#248 Big Rider: “….from one of his own past books, where he worshipped the accumulation of gold….”

****************

I have most of Garths’ books and I have NEVER read where he ‘worshipped’ the accumulation of gold. Quite the contrary.

#281 wisewebwoman on 07.30.12 at 9:48 pm

I believe the letter. No question. I’m a tax accountant and specialize in delinquent filers. Her husband’s status is one of the best I’ve seen. Try the record of 27 years of arrears so a mortgage can be had!!!!

#282 g-unit on 07.30.12 at 10:44 pm

It looks like the husband is being more productive smoking weed and playing xbox, compared to the wife who is trying her darndest to blow hundreds of thousands of dollars on an asset that is set to implode.

#283 cramar on 07.30.12 at 11:01 pm

#278 Daisy Mae on 07.30.12 at 8:57 pm
#196 Cramer: “…Once we asked, during the great Weimar inflation of the 1920s who survived best during that time. His answer, “Farmers because they grew food that people needed.” So we asked the next obvious question, how did they prosper when the currency was destroyed? His answer, “They demanded gold in payment for their food.”

******************

I doubt that very much. What foolishness.

——————

I guess he was a liar! You know best. Obviously you were there.

#284 kevsta on 07.31.12 at 4:19 am

#276 Daisy Mae

The world governments have screwed things up royally thus far….so I wouldn’t put much stock in any decisions they make going forward.

I’m well aware of how ****ed up it is, and also of what the countries who aren’t all insolvent with unpayable debts are doing with their remaining *wealth* going forwards.

the writing is very clearly on the wall for several years now, its just amazing quite how many people can’t read.

“It is easier to fool a man, than to convince him he has been fooled…” Mark Twain

#285 Skip Breakfast on 07.31.12 at 4:42 am

It’s good to see the increasing awareness of the fact we’re in a deflation (and I truly believe we are). Because when an economy is in a deflation, it’s not in a little bit of trouble. It’s in A LOT of trouble. Deflations are actually rare and devastating economic events. Now is the time not just to divest yourself of over-inflated real estate, but to take further reaching action to maintain capital–namely cash. Finally the alarm bells are starting to ring. This is NOT just about real estate.

#286 disciple on 07.31.12 at 8:25 am

For the love of God, please tell me you made up this email. You said to be glad I’m not married to this woman, but I feel sympathy for the woman in this case…

BTW, Sean Connery played Ayatollah Khomeini… and Janet Napolitano is Roseanne Barr, no jokes…

#287 Daisy Mae on 07.31.12 at 10:26 am

#283 Cramer: “In 1923, with its currency effectively worthless (the exchange rate in December of that year was one dollar to 4,200,000,000,000 marks), the Weimar Republic was all but reduced to a barter economy. Expensive cigars, artworks and jewels were routinely exchanged for staples such as bread; a cinema ticket could be bought for a lump of coal, and a bottle of paraffin for a silk shirt….”

**************

I stand corrected. And no, I wasn’t there.

#288 Cynthia Woodson on 07.31.12 at 5:25 pm

Exactly why do people place much more efforts into video games compared to they do their own life?

#289 Shortymac on 07.31.12 at 6:00 pm

There for the grace of god go I…

I’m so lucky I had parents that taught me the important of personal finance when I was young. Most of my friend’s parents never talked to them or were clueless.

Easy cheap credit is the only thing keeping the economies of the first world afloat it seems. If people had to start paying cash for their toys everything would collapse.

My hubby was a dumbass like this but I refused to marry him until he got his act together. He’ll be finished his debts within a year.

My god, I have 15k in school debt for an MBA that got me a 60k job with pension and 15k in a Roth Ira in an index fund with a risk adjustment for retirement 2050. I think I’m behind!

#290 the Phantom on 08.01.12 at 3:20 pm

Garth: Its been sometime since I last contributed but couldn’t resist the temptation to post what I thought was an appropriate summation of this woman and her husband (who obviously has a promising career in motivational speaking).

Remember the movie Forest Gump when, on the first day of school, young Jenny looks at young Forest and asks in that southern drawl. “Are ewe stupid or somethin’?”

That about says it all.

the Phantom