The end

BEER FLOOD

Because owning a pharmacy isn’t what it used to be, Alvin bailed a few months ago. Gone are the days when revenues were more predictable, and the big chains left the little guys a decent slice of the market. “I’ve had it,” he told me in the summer. By September he had a cheque a for $1.2 million, no business and no job. Not easy after 24 years.

But what to do with the cash?

“I’ll tell ya,” he said to me Monday. “I’m not doing anything until this US debt ceiling crisis thing is over and done. Too damn scary.”

Well, that’s too bad. If 2011 is any guide, this could be one sweet buying opportunity. So long as it isn’t the financial Apocalypse and we all perish. Should know that in about a week.

In case you’ve been busy plumbing, tiling and grouting the guest bathroom for a month, this is all about the ability of the States to borrow money. The federal debt limit was created during WW1 to lump war-financing bonds together so politicians wouldn’t have to vote on each one. This turned into a debt limit which was automatically raised for almost a century until two years ago when Republicans turned it into a political tool to curtail government spending and nuke Obama.

In fact in 2011 the same battle we’re seeing now cost the US its triple-A credit rating, resulted in a law mandating automatic spending cuts, and sent stock markets down 20%. This time, pushed by the more radical Tea Party faction, the Republicans are trying to stall, kill or maim Obamacare. They apparently forget they lost an election on this just a year ago.

What’s it all mean? Well, the current US debt ceiling is $16.7 trillion, which isn’t enough. Bonds that come due on a few weeks won’t be honoured without the new cash. Already the federal government has been shut down because of the impasse. The feds are making big noises about a looming default, since a week from Thursday it runs out of day-to-day cash (up to $60 billion). The opposition is pushing this issue to the wall to make a point: spending and borrowing are out of control.

Of course, it’s all politics. Capping the debt ceiling won’t cut spending that Congress has already approved. This new borrowing is just to pay existing bills. And without it, the consequences could indeed be dire. Most significantly, the US would default on debt obligations, which would irritate the Chinese and Japanese, who hold $4 trillion in American bonds. But the ripples go far beyond.

In fact, some people claim this would make 2008 look like a rehearsal. The US government actually makes up 20% of the world’s biggest economy, whose bonds are considered the safest asset in existence. What happens in a default? Here is how Bloomberg News – not usually prone to exaggeration, describes it:

A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.

Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression.

Among the consequences – in Canada as well as the US – could be a massive spike in interest rates, a drying up-of credit making car loans or mortgages impossible, plunging real estate and commodity prices, a stock market dump and the certainty of mounting unemployment. Five years of economic recovery, massive government stimulus spending and the most impactful real estate bubble in Canadian history, would be wiped away in a number of months.

After all, the crisis of 2008 did not turn into a depression only because of the emergency measures taken by central banks, including the $3 trillion transfusion the US Fed made to the American economy. Imagine a scenario in which that money was not available, with debt payments missed and the global credit market freezing, triggering a series of sovereign defaults.

This is what the Tea Party nutjobs apparently want, or at least are willing to risk. And it’s why it will never happen.

“It’s like a nuclear bomb,” says Warren Buffet, “too horrible to use.”

Few beyond the fringes believe a compromise won’t be struck to avert Armageddon. There are tools and levers the US Treasury Department and the Fed have to prevent a meltdown even if the deadline is missed. Negotiations continue far below the media’s radar, since all players know the politicians who deliberately trigger a depression will be forever unelectable.

But the rhetoric and the sparks will amp up for days to come. Volatility will likely pop, and many investors go defensive, taking money off the table, causing markets to swoon. It’s a movie we’ve seen before. You should know how it ends. So should Alvin, the ex-druggist.

A balanced portfolio built in 2011 before the last debt ceiling crisis has returned about 6% a year since. One built during the crisis has averaged 9.5% annually.

Bring it on.

Debt-Ceiling-wide

158 comments ↓

#1 Jsan on 10.07.13 at 8:41 pm

I’m not sure if this was brought up before. I was listening to Michael Campbells show on the weekend. He usually brings Ozzie Jurock on near the end of the show for his real estate bit but instead he was on almost immediately. They wanted to talk about how Canada Revenue Agency has now, recently been instructing mortgage lenders to report to them all individuals who have rental properties on their mortgage application and who have not reported them on their tax returns. In other words if you are holding a mortgage for a rental property but have never declared or paid tax on your rental property income, you can possibly expect an audit and allot of explaining to do.
Anyway’s they seemed aghast that the CRA would have banks snitching on those individuals who have rental properties but do not declare their rental income on their tax returns. This is the same Michael Campbell who preaches weekly for most of the first half an hour of his show how governments are running out of money and will not have the money to fund future pension/health care obligations. I like listening to him and his show and generally agree with allot he has to say. The thing that gets me though is he preaches so much about individuals and their huge, dangerous levels of debt yet I have never heard him say ONE TINY WORD…….EVER….. about the massive mortgages these people are taking on which is creating so much of his debt. WHY??? Again, the media in this country seem to not want to ever ruffle the feathers of the industry that funds so much of their ad revenue. In other words, just another of a very long list of Canadian shows that has sold their souls to the real estate industry.

#2 CalgaryGuy on 10.07.13 at 8:43 pm

When does it end? everyone keeps saying that the debt has to be increased but at what point does it become financial suicide. If this were a family managing their finances this way, Garth, you would be excoriating them for their stupidity. I wish, also, that you could stop referring to tea party types as “nutjobs” and “whackos” and other such endearing terms for simply wanting to stop the endless rush to financial suicide. Feel free to call me a nutjob.

They are stopping nothing, and risking all. — Garth

#3 Fed-up on 10.07.13 at 8:46 pm

I own property there, but the US remains one the world’s great mysteries to me right now (financially speaking).

#4 gladiator on 10.07.13 at 8:48 pm

Garth, since you wrote about the US debt ceiling, here’s something in that context:

http://www.zerohedge.com/news/2013-10-07/debt-ceiling-humor-i-therefore-intend-oppose-effort-increase-americas-debt-limit

#5 Steve on 10.07.13 at 8:48 pm

Hey Garth,

Have a source on Chinese and Japanese US debt holdings is 4 trillion? All sources I have found have it pegged around 2.4 trillion…

I enjoy your blog, and Im not trying to be an internet dick. I just wanted to know if I am looking at the wrong info…

#6 AisA on 10.07.13 at 8:49 pm

All life on Earth is not worth 16.7 trillion if you stop to consider the effort required to give that sum any value.

Back to beer.

#7 Valley Renter Chick on 10.07.13 at 8:51 pm

Aha! I have been hoping for a post on the US debt ceiling! Thank you for some clarification on the matter. I nervously await a potential buying opportunity.

#8 Stocks on 10.07.13 at 8:53 pm

“Volatility will likely pop, and many investors go defensive, taking money off the table, causing markets to swoon.” By how much of a pull back would we see in the equity markets before they all come to a agreement?

#9 Siva on 10.07.13 at 8:53 pm

Stephen Harper told mounting mortgage debt is putting ‘our national economy at risk’

http://www.financialpost.com/m/wp/personal-finance/mortgages-real-estate/blog.html?b=business.financialpost.com/2013/10/07/mounting-mortgage-debt-is-puttingour-national-economy-at-risk-cities-tell-stephen-harper

#10 Smoking Man on 10.07.13 at 8:53 pm

The biggest threat to the way things are , are the tea party.

Constitutionalism the fastest growing political movement in the USA , encompassing the military, police, local grass roots government. The x middle class.

They are the biggest threat to the two party puppet system. Not knocking it, I’ve done well under it even as a Canadian.

There are not enough FMA camps to house all those millions of disgruntled loons, texting emailing, phoning as the NSA has there hands full they can’t keep up.

The boat protest on the Vages Strip, The truckers going to washington to arrest congressmen

What better way to kill the movement than to default, create a world of pain.

Round out the radicals, and have the feminized begging for more status quo.

This tin foil fedora looks good on me.

#11 MiniMe on 10.07.13 at 8:53 pm

Are these guys idiots?
http://www.businessinsider.com/druckenmiller-icahn-and-buffett-on-the-stock-market-2013-9

The market tells you that you are doing well, but I don’t think a lot of companies are doing that well. They are taking advantage of very low interest rates. So, obviously, you don’t have to be a financial genius to understand if I can borrow at 3% or 4% and buy assets maybe my own stock that is yielding 9%, 10% or 11%, I am going to make a lot of money. In one sense or another that is what is going on….I do think at 17x that you have to be pretty well hedged.” These comments come a little more than a week after Stanley Druckenmiller opined that, “But if you tell me QE is going to be removed over nine or 12 months, that’s a big deal because when it’s my belief that QE has subsidized all asset prices. And you remove that subsidization, the market will go down.

Read more: http://www.businessinsider.com/druckenmiller-icahn-and-buffett-on-the-stock-market-2013-9#ixzz2h5TlkiDu

#12 Devore on 10.07.13 at 8:54 pm

I expect a rough replay of 2011. Debt ceiling will be raised, “crisis” averted. Keeping more than the usual amount of powder dry and on hand.

#13 AK on 10.07.13 at 8:54 pm

“This is what the Tea Party nutjobs apparently want, or at least are willing to risk. And it’s why it will never happen.”
====================================
Of course it will never happen, as the Democrats already have almost enough votes to pass a raise in the debt ceiling. I believe that they need about 7 votes from the Republicans which they will get without a great difficulty.

I was hoping that the U.S. Market would have a 20% correction while this bullshit was going on, but that’s going to happen.

#14 AK on 10.07.13 at 8:56 pm

I mean it’s NOT going to happen.

#15 MiniMe on 10.07.13 at 9:00 pm

My previous post goes back to our discussion, “why don’t you/they borrow money from the banks” to make more money as above?
Short answer: that 8% annual return is not possible unless there are greaterfools there.
This is the same game as in RE investing. “Talk the suckers into buying them”

#16 DaleFromCalgary on 10.07.13 at 9:00 pm

#1 – If someone has a mortgage on a rental property and is not declaring the income, then they are not getting the tax deductions on the property either. They could be deducting the mortgage payments, property taxes, utilities, maintenance and repairs. Done correctly, this can mean a bigger tax refund than the rent.

Be careful though if you’re thinking of renting a basement suite in your house, especially to a family member. (The CRA has a favourite catch-phrase: “at arm’s length”.) Also, it may affect your capital cost allowance. Ask a professional accountant before you try this.

#17 Devore on 10.07.13 at 9:00 pm

#1 Jsan

I like his show as well, but mostly treat is as entertainment. He is first and foremost a radio talk show host, and so will say whatever will get him the most listeners and mindshare. This is why some things he says are sensible and make sense, and others (and especially the ones he does NOT talk about) are real head scratchers, sometimes being polar opposites. His close relationship with Ozzie Jurock pretty much cements this view.

#18 Siva on 10.07.13 at 9:01 pm

#2 CalgaryGuy on 10.07.13 at 8:43 pm

Tea party guys are nut jobs and racists. It was formed the moment Obama was elected. Where were they when Bush was spending like a drunken sailor? The 2003 Medicare boondoggle was nothing but a bribe by Bush to get re-elected. Nobody heard of tea party then.

#19 Brian Romanchuk on 10.07.13 at 9:03 pm

By the way, I recall reading that Canada has a similar limit, but the government raises it at the same time they do the budget and figure out how much they will need to borrow. I guess you would have some details on that? Thanks.

No legislated debt limit in Canada, or almost anywhere else in the world. — Garth

#20 Jan on 10.07.13 at 9:04 pm

I heard on the news today that Us quantitative easing will not end in our lifetime as there is no real inflation in the us.
There is also a perdiction for gold to hit $7000 an ounce by 2025,

Radio Free Redneck? — Garth

#21 AisA on 10.07.13 at 9:04 pm

Think about it…. 16 thousand billions to break even. Shoot, I ain’t never dug a hole that deep.

#22 tigerbaby on 10.07.13 at 9:13 pm

> By how much of a pull back would we see in the equity markets before they all come to a agreement?

as soon as they lose more in their portfolio than they would be paying in “Obamacare taxes” :-O

#23 Deano on 10.07.13 at 9:15 pm

I sincerely hope we aren’t underestimating crazy.

#24 Max Jones on 10.07.13 at 9:18 pm

At the end of the day, Obama will simply issue an executive order directing the Treasury Department to continue borrowing “to avoid harm to the nation”. Wouldn’t be the first time a president broke the law.

Or they play it for what’s it worth. After Wall Street crashes the Republicans won’t be able to raise a dime in political contributions and get wiped out in the next round of elections. So much for a two party system.

#25 Yuus bin Haad on 10.07.13 at 9:19 pm

Where’s David Suzuki when you really need him?

#26 Jan on 10.07.13 at 9:19 pm

I heard on the news today that Us quantitative easing will not end in our lifetime as there is no real inflation in the us.
There is also a perdiction for gold to hit $7000 an ounce by 2025,

Radio Free Redneck? — Garth

Actually, CBC news.

#27 tigerbaby on 10.07.13 at 9:21 pm

> No legislated debt limit in Canada, or almost anywhere else in the world.

American exceptionalism at its most …. American.
https://www.youtube.com/watch?v=KIbkoop4AYE

#28 Cici on 10.07.13 at 9:21 pm

# 18 Siva
responding to # 2 CalgaryGuy on 10.07.13 at 8:43 pm

Tea party guys are nut jobs and racists. It was formed the moment Obama was elected. Where were they when Bush was spending like a drunken sailor? The 2003 Medicare boondoggle was nothing but a bribe by Bush to get re-elected. Nobody heard of tea party then.
____________________________________________

I agree 100% Siva. It’s like they all had amnesia and forgot that Bush and Greenspan created this mess, and that Obama has been busting his buns trying his best to save the nation. Oh the irony, arrogance, and gall of it all.

#29 timmy on 10.07.13 at 9:21 pm

Re #9 Stephen Harper told mounting mortgage debt is putting ‘our national economy at risk’

Why would Stephen Harper care? He doesn’t care about the welfare of Canadians, he just cares about sucking up to big oil companies. He’s systematically dismantled many environmental laws, reduced public debate, antagonized the US over Keystone, prorouged parliament 3 times now, the last time to avoid answering on the corrupt Senators with all of the bogus expenses–even though he campaigned on reforming the senate. He created this housing bubble by keeping rates artificially low, allowing the banks to transfer liability for mortgates to CMHC so taxpayers are now on the hook, he has not taken any steps to limit speculation and foreign investment in real estate, which has had a huge effect on prices. Harper doesn’t care.

#30 Canadian Watchdog on 10.07.13 at 9:23 pm

Bonds that come due on a few weeks won’t be honoured without the new cash.

Not quite. The Treasury would prioritize payments and continue to pay bondholders and most entitlements, so no defaults in the short term. After Oct 17, Washington can still fund 2/3 of its expenses, although they'd have to stop payments on discretionary items. This would effect GDP growth.

Markets are now beginning to price-in the possibility of a dysfunctional Congress going past the deadline into a royal rumble cage match negotiation. How deep the situation gets and how long it lasts is anybody's guess.

This is why passive investors always lose their gains. Too much complacency with no plan b.

#31 AisA on 10.07.13 at 9:23 pm

“Among the consequences – in Canada as well as the US – could be a massive spike in interest rates, a drying up-of credit making car loans or mortgages impossible, plunging real estate and commodity prices, a stock market dump and the certainty of mounting unemployment. Five years of economic recovery, massive government stimulus spending and the most impactful real estate bubble in Canadian history, would be wiped away in a number of months.”

OH NO, OH GOD NO, ANYTHING BUT CONSEQUENCES!

It’s a great post, but the poor still have nothing to lose, don’t get me wrong, I’m an arch capitalist at heart, but unearned anything is fodder for the fates in my book.

#32 Smoking Man on 10.07.13 at 9:25 pm

#18 Siva on 10.07.13 at 9:01 pm
#2 CalgaryGuy on 10.07.13 at 8:43 pm

Tea party guys are nut jobs and racists.
………………………………………………………….

You see dude I don’t judge people like that.

Everyone apart from me has a belief system and when you project your beliefs like you just did, it might make ya feel good but it makes you vulnerable to a tuned in Smoking Man waiting to take advantage of you.

Never show you hand. Even when you have won the pot.

#33 TurnerNation on 10.07.13 at 9:32 pm

Looks like the Long Branch Beer Store – flooded. Nooo…

#34 Cristian on 10.07.13 at 9:32 pm

“This time, pushed by the more radical Tea Party faction, the Republicans are trying to stall, kill or maim Obamacare. They apparently forget they lost an election on this just a year ago.”

Well, Garth, there’s more to life than the last or next election. There’s something called principles.
Maybe I am naive thinking that some in the Tea Party faction may have principles, but what they are trying to do is the right thing. Nobody should have the right to force future generations to pay their present debts.
Will the stock markets crash because of this? Fine. They will go up again later, isn’t that what you always say?…

The least of consequences would be a market correction. — Garth

#35 Cow Man on 10.07.13 at 9:34 pm

Sir Garth:

Are you not the same Garth Turner who ran a campaign with a debt clock strapped to his back?

Now if elected Representative say “enough is enough” they are in your words “Nut Jobs.” Nice!

This is not the time for rich right-wingers to murder the economy. — Garth

#36 James Bond in Goldfinger on 10.07.13 at 9:34 pm

The real question is what happens to gold? In 2011 when they raised the debt ceiling gold shot up from 1500 to 1900 if I’m correct. So if they raise it, and likely they will have to, then gold goes to the moon?
Or since gold is on a downtrend, this time we might see all the money pouring into the dollar and DOW, while gold is left to die?
Garth what are your thoughts here?

#37 NoOneOfConsequence on 10.07.13 at 9:38 pm

My concern is that the fools try to walk too close to the line, and then we get a natural disaster or something that accidentally pushes us off the cliff.

A tsunami, meteor strike, earthquake….in the wrong place at the wrong time and this political theater turns into “oops…”.

A direct hit by a solar flare would do it….shut down electronics in the states for a week at the wrong time.

At times like this, one really questions if current leadership is simply incapable of dealing with the scope of the problems.

#38 Soylent Green is People on 10.07.13 at 9:41 pm

CON CLOWNS at it again:

Maldives President Mohamed Waheed complained to Harper about John Baird’s conduct during recent Commonwealth meetings in New York. Waheed alleges Baird made “inappropriate and derogatory remarks” and “posed several harshly worded questions” to his acting foreign minister.

http://www.winnipegfreepress.com/canada/baird-allegedly-made-inappropriate-and-derogatory-remarks-to-maldives-official-226793011.html

.
.
.
.
.

p.s. Are we all ready for Harper’s snap Federal election this spring 2014 or Fall 2014? Harper’s racing around trying to buy votes like CRAXY.

http://www.huffingtonpost.ca/social/MyTake?action=comments

.

#39 Uh Oh Canada on 10.07.13 at 9:45 pm

Garth, I really don’t understand how you remain so hopeful about the US. Those of us who’ve studied history can see the writing on the wall. Capitalism is unsustainable and the result is an unpayable massive debt. Not to mention the internal moral decay- this all leads to one thing: the modern day fall of an empire- which has already begun.

#40 Nosty in Knickersville on 10.07.13 at 9:45 pm

#193 Smoking Man on 10.07.13 at 7:53 pm — “. . . what better way to decimate the challengers to the status quo, The Tea Party, to default, cause a whole lot of pain, guaranteeing they will be crushed next election.”
— and —
“This is what the Tea Party nutjobs apparently want, or at least are willing to risk.” — Garth
— plus —
#10 Smoking Man — “The biggest threat to the way things are , are the tea party. This tin foil fedora looks good on me.”

Apparently, big tobacco and The Koch Brothers (right wing yahoos) created and run the Tea Party (few billionaires in there). Add in ObamaCare, coupla wars and we’re pretty much set for a great xmas!

A new understanding of the US Fed.

#41 Victor V on 10.07.13 at 9:46 pm

David Chilton, author of The Wealthy Barber Returns and “Dragon” venture capitalist on CBC’s Dragons’ Den, offers advice to young people who don’t believe they’ll ever be able to afford a house if they don’t jump into the market now:

http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/20130905theglobeandmailltidavidchiltonpart01mp4/article14422961/

#42 Inglorious Investor on 10.07.13 at 9:51 pm

“This turned into a debt limit which was automatically raised for almost a century until two years ago when Republicans turned it into a political tool to curtail government spending and nuke Obama.”

Politicians using the debt ceiling as a political tool? I’m shocked! Shocked, I tell you!! In reality, the debt “ceiling” is a sad joke. How can it be called a “debt ceiling” when they simply raise it whenever they reach it? It’s utterly meaningless at this point. EXCEPT––as a political tool. And I would not be surprised if they actually tried it out (that is, not raising the debt ceiling) simply for said political purposes. However, if they actually decided to not raise the debt ceiling, it would be the beginning of a new era of real prosperity for the US. Sure, there would be some serious short-term pain (maybe lasting many years), but it would be a step in the right direction whereby the US (and the world, maybe) was actually forced to live within their means and we could have growth in real wealth, not just growth in debt masquerading as wealth.
——————

“They apparently forget they lost an election on this just a year ago.”

Democracy, debate, or even politics, should not cease between elections.
—————–

“Already the federal government has been shut down because of the impasse.”

Most of the government is still operational. The fact that the media keeps reporting on that the government is “shut down” just proves that they are using the shut down for politics and public relations.
—————–

“This new borrowing is just to pay existing bills.”

That’s right. They can’t even pay their current bills without borrowing more. Rather than using this fact to dismiss the issue, it should make people realize just how bad the fiscal situation actually is.
—————–

“The US government actually makes up 20% of the world’s biggest economy[…]”

First of all, having the federal government alone comprise 20% of the US economy is ludicrous. When you factor in State and local governments, how much of the economy the “government” actually make up?

Second, the numbers, as given, may overstate the government’s role. In purchasing power parity terms the US economy is about 20% of global GDP (a far cry from its peak in 1985). This means that at 20% of the US economy, the federal government represents about 4% of the global economy. That’s huge to be sure (and far to large IMO) but a reduction in government spending would not be that large as a percentage of global GDP––unless they stopped spending money outright. Right…
——————–

“Five years of economic recovery, massive government stimulus spending and the most impactful real estate bubble in Canadian history, would be wiped away in a number of months.”

There has not been a real recovery yet. And wiping a way a real estate bubble fuelled primarily by cheap credit would be a good thing because it would bring home prices down to fair value (after a downside overshoot, perhaps).
———————-

“Imagine a scenario in which that money was not available, with debt payments missed and the global credit market freezing, triggering a series of sovereign defaults.”

That’s going to happen anyway––unless real growth on a massive scale happens. The only other “solution” is the one they are currently employing: monetary dilution (inflation) and confiscation of assets (e.g. bail-ins, pension controls, forced purchases of government debt, etc.)

And besides, the money was not really available. The currency was. The Fed simply created those currency units out of thin air, which is their primary function, after all. So, yeah, bravo, Ben! That’s a pretty big can you were able to kick down the road.
———————–

“Most significantly, the US would default on debt obligations, which would irritate the Chinese and Japanese, who hold $4 trillion in American bonds.”

Japan is a de facto US mandate so since WW II the US has used them like a tool to serve it ends. But China is taking steps to prepare for the day that the US dollar is no longer the world’s reserve currency. Bilateral agreements. Gold. Spending their US dollars to buy real assets. Etc.
————————

“There are tools and levers the US Treasury Department and the Fed have to prevent a meltdown even if the deadline is missed. ”

That’s right. They can just confiscate the funds. For example, they can take the money from other sources, like pension funds and also force investors to purchase Treasuries or be be fined. Like Obamacare. You must by insurance for the IRS will find you.
———————

The game is already over. It’s just taking time for the reality to sink in. Pray for free energy. It may be the only hope. Oh, and a short-term flow of funds into the US if the rest of the world sinks would also provide a period of grace.

By the way, the US has defaulted on debt payments in the past. It was not the end of the world. Just because they may technically default, the rest of the world will not suddenly turn their backs on the US as long as 1) they need the Treasury/dollar system to stay functional and 2) the US military can push them around.

The only comparable US default was in 1790. Be careful what you wish for. — Garth

#43 Devore on 10.07.13 at 10:00 pm

http://www.theglobeandmail.com/report-on-business/gm-canada-chief-concerned-about-credit-driven-car-bubble/article14736583/

GM Canada chief frets over credit-driven car sales

Auto loan debt rose 8.6 per cent in the second quarter from year-earlier levels, outpacing the increase of 6.1 per cent in total debt, according to numbers compiled by Equifax Canada.

/…/

Consulting firm J.D. Power and Associates said last month that 64 per cent of Canadians who finance vehicle purchases are taking on terms of six years or longer.

Yay for free money! Gogo economy! What happens in 3-5 years? Who cares, someone else’s problem!

Debt up 8.6%, while inflation and wage growth below 2%? No worries. 2/3 of car purchases (yes, including used cars) on 6+ year financing? Oh hell, I love to owe more for things than they are worth. Makes me look like a sophisticated consumer who is comfortable with debt. It’s the future.

#44 Max Jones on 10.07.13 at 10:06 pm

14th Amendment – Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

Frankly the Republicans are doomed. They will be found to be holding the Constitution hostage if pensions are not paid and lose all credibility.

#45 Canadian Watchdog on 10.07.13 at 10:08 pm

GM Canada chief frets over credit-driven car sales

The president of General Motors of Canada Ltd. is worried that ultra-cheap auto loans could be causing Canadian vehicle sales to spike just as home sales did during the U.S. housing bubble.

Canadians are on pace to drive more than 1.73 million new vehicles off dealers’ lots this year, breaking the record of 1.703 million, but that’s a higher level than economic indicators suggest sales should be, Kevin Williams told The Globe and Mail’s editorial board Monday.

LOL chart  You all know how this ends right?

#46 Ronaldo on 10.07.13 at 10:17 pm

#21 AisA – and here is what only 1000 billion looks like.

http://www.pagetutor.com/trillion/index.html?utm_source=StandFirm&utm_medium=post&utm_campaign=link

Pretty impressive isn’t it? Now multiply that by 16.7 and we see the problem the U.S. has.

#47 not 1st on 10.07.13 at 10:18 pm

Garth, my friend Mr Black Swan want to meet you.

#48 Wonk on 10.07.13 at 10:20 pm

google shadow stat’s………….in the states, unemployment, measured on equivalent terms, is worse then the 30’s. Food stamp use is at record leaves. There most be a few pissed off people down south. The tea party is merely a reflection of this. I don’t think this discontent is going away till some balance is returned. Interesting times, interesting times indeed.

#49 Retired Boomer - WI on 10.07.13 at 10:25 pm

Am I a “nut job?” Might be. You be the judge. For the past 40 years have paid taxes, social security, state, local, and property taxes. Typical American. I saw the Federal Debt begin exploding in the early 1980’s under a “Conservative” Ronald Reagan. It expanded as tax rates were cut, on capital gains, and income tax rates. Next we had “conservative Bush 1 Mr. “no new taxes.” He reneged on that one, and lost to Mr. Clinton. The deficit still rose, though slower. Then came Bush 2 when the deficit really zoomed, with 2 wars and more tax cuts! Enter Obama who barely raised taxes, and the deficit spending is falling, as the deep recession recedes.

What I see is a failure to TAX our asses effectively, AND to control spending, especially that “military Industrial complex” which all tolled comprises about 40% of our economy.

Minimum wages have not been raised in what 6 years, yet we geezers get a “cost of living” raise almost every year.
Now, the fight allegedly is over “Obamacare” a health care initiative to expand our private deformed medical insurance scheme. It is not a panacea, but the “conservatives” have offered no alternatives, except the unwritten ‘die early’ idea.
What I see is demonstrably incompetent leadership that has been expressed over the greater part of the last 33 years! Those that do not understand math, and compounding have led to this mess.

No easy solutions here, but it CAN be managed. The Federal Government has not brought a budget in on time since 1997. Try doing that in your own home, and you WILL be bankrupt.
Political parties must learn to work together to reduce spending, AND increase tax revenue.

The alternative is too unthinkable to contemplate.

Unless you are a Tea Party GREATEST FOOL!

#50 Inglorious Investor on 10.07.13 at 10:25 pm

#39 Uh Oh Canada on 10.07.13 at 9:45 pm

Capitalism is not unsustainable. Don’t confuse the current organized-crime kleptocracy that runs the US for true capitalism. Capitalism with regulated free markets is the only economic system that can work in the long run because it is in line with the human desires for life, liberty and the pursuit of happiness.

What’s happened today is we’ve had a corrupt monetary system that employed perpetual inflationary debt to serve the co-mingled interests of big government and the big money centre banks. As we reached the limits of our debt-carrying capacity, where productivity outpaced wealth creation, those with the power to do so have taken over the system to transfer what wealth remains into their own hands. These same entities may have once been the symbols of capitalism, but they are not capitalists. They are kleptocrats and thieves.

#51 Jay on 10.07.13 at 10:33 pm

For those who don’t know about 1790, the newly formed Federal government assumed the bonds issued by individual states during the revolutionary war, and as part of the assumption of debt, deferred interest until 1801.

It’s safe to say that that era didn’t really mean the same thing as today.

That time period was really interesting though, because it also contained one of the most interesting recessions of US history. A bunch of extremely protectionist tariffs were implemented, and rather than helping US interests, it actually caused a huge recession and helped spur piracy in the great lakes area. It’s one of the only recessions in US history that couldn’t be directly attributed to a monetary bubble bursting. (For goldbugs, the fact that the bubbles happened according to gold rushes driving up the money supply should really show that gold isn’t a great way to prevent monetary bubbles)

#52 AisA on 10.07.13 at 10:35 pm

#46 Ronaldo

“Pretty impressive isn’t it? Now multiply that by 16.7 and we see the problem the U.S. has.”

It’s not the figure per say that has ever troubled me, it’s the perceived value that said figure is to represent. In my mind that figure represents the cost and effort of colonizing planets, not ‘servicing’ opulence through the public largesse.

#53 Inglorious Investor on 10.07.13 at 10:35 pm

#34 Cristian on 10.07.13 at 9:32 pm

“Maybe I am naive thinking that some in the Tea Party faction may have principles, but what they are trying to do is the right thing.”

History teaches us that “right” and “wrong” are defined by self interest. If something serves our interest, then it is “right.” If something serves the interests of ‘the other’, to our detriment, then it is “wrong.” Morals, ethics and laws are for the little people, not for those who run the sytem.

#54 Obvious Truth on 10.07.13 at 10:36 pm

Just watched Grover (the red one) on CNN and as I predicted more spending is in order.

He is letting his hard liners off the hook if they gain long term entitlement reform. That’s their win. In return they give Democrats (and themselves in contested seats)some sequester spending.

New prediction is that Paul Ryan comes to the rescue with this and Grover knows it. He is the great red hope in 2016.

Politicians are too predictable. Spend to be elected. The long term cuts can be rolled back later and you look like a hero for doing nothing again.

If you look at TIPS they started to tank as sequester took hold. They need to spend more money. The spending cuts were undoing QE. Need both for at least another year.

Play book is they fail this weekend. Go past the 17th and strike a deal on Sunday the 20th. Good drama and lots of TV hero time for all.

#55 Jon on 10.07.13 at 10:50 pm

Garth,

I have a question on a different topic than tonight’s posting, but related to one of the themes you address from time to time. I live in the US and, at some point, intend to return to Canada. I’m struggling to figure out if and how I can establish a TFSA. Is there any way to do this when one is temporarily living elsewhere?

No. Contribution room is earned by residency. — Garth

#56 dienekes on 10.07.13 at 10:52 pm

The US as super power will never change. The debt crises will be resolved and it will continue to march on.
All this ‘China is planning for the day when the US dollar is not a reserve currency’, what a laugh. US problems nothing like China’s.
Bet against the US, I’ll take your money.

#57 Inglorious Investor on 10.07.13 at 11:12 pm

#56 dienekes on 10.07.13 at 10:52 pm

“The US as super power will never change.”

I’m sure the Victorians felt the same way about that empire on which “the sun never set.” And the Spanish before that. Not to mention the Romans long before them. Or, more recently, how long did that ‘thousand-year reich’ actually last?

In each and every case, they all thought that they were ‘special.’ Right…

#58 Concessionman on 10.07.13 at 11:14 pm

I found the greater fools! A whole flock of them lol

https://www.facebook.com/groups/219268201473762/permalink/588133621253883/

#59 Canadian Watchdog on 10.07.13 at 11:40 pm

#50 Inglorious Investor

Capitalism with regulated free markets is the only economic system that can work in the long run because it is in line with the human desires for life, liberty and the pursuit of happiness.

As Karl Polanyi argued in his book The Great Transformation, stating that when the desires of human life and our  biological commons, i.e., water, agricultural seeds, human reproduction, environmental development, etc., were commoditized and controlled in the self-interest of movements (elitists), it would be the end of capitalism as the very foundations of life reach a point of self-destruction. These elements are essential needs to human life that have never throughout history been privatized. Think Monsanto. 

For you high level thinkers, watch the video below with Professor Nancy Fraser explaining Polanyi's warnings on capitalism and its affect on societies of our time. More interestingly, she introduces her own element built upon Polanyi's framework, arguing of another movement, whose goal is to emancipate woman, adding even more implications to social and economic stability.

Video

#60 Renter's Revenge! on 10.07.13 at 11:56 pm

“This is not the time for rich right-wingers to murder the economy.” — Garth

Then when is the time for rich right-wingers to murder the economy?

#61 Ogopogo on 10.08.13 at 12:51 am

#9 Siva on 10.07.13 at 8:53 pm
Stephen Harper told mounting mortgage debt is putting ‘our national economy at risk’

http://www.financialpost.com/m/wp/personal-finance/mortgages-real-estate/blog.html?b=business.financialpost.com/2013/10/07/mounting-mortgage-debt-is-puttingour-national-economy-at-risk-cities-tell-stephen-harper

The most voted commenter to this article clearly is a Garth fan.

;-)

#62 Ogopogo on 10.08.13 at 12:56 am

I meant the commenter to this article’s link in the Financial Post:

http://business.financialpost.com/2013/10/07/mounting-mortgage-debt-is-puttingour-national-economy-at-risk-cities-tell-stephen-harper/

See the most voted comment by a chap that goes by the handle “Brunnenburg”.

#63 The R on 10.08.13 at 1:03 am

Thank-you for this blog ,

Question– If my doomer like feelings prevail & I sell most of my stocks tonight ,from my TFSA (at a slight lost) and wait with cash to buy them back after/during the upcoming/ongoing swoon . Can I report this loss agaist income when I do the dreaded taxs ?

befor I ger scolded for not going to the U of google to research on my own — jus consider this as my research please…

side bar* hey SM – does posting in an imagernary person help you cope with the stresses of real life ?

#64 Tony on 10.08.13 at 1:06 am

It’s not a question of if it’s a question of when will America default on all their loan obligations? America was bankrupt a long, long time ago and as Ron Paul says the American public is being bamboozled.

http://www.zerohedge.com/news/2013-10-02/ron-paul-country-bankrupt-people-are-being-bamboozled

Commodities will soar in price when America finally puts the stamp of approval on permanent bankruptcy as the massive fall in the dollar will trump higher interest rates.

#65 cynically on 10.08.13 at 1:35 am

#1 Jsan – the name Ozzie Jurock and Real Estate are interchangeable so that is why you won’t hear an
honest RE conversation on Michael Campbell’s program.
#2 CalgaryGuy – I’ll call you “nutjob” if you really believe that the teapartiers only desire is to reduce Obama’s spending. Where were they when Bush was outspending all previous presidents? After all they are all Republicans so maybe the motives might be ill-feelings toward a black president at the lower end of the membership and the presidency, Senate and House at the top end. That’s where the power lies and gaining that power by any means seems justifiable to them. By the way nobody has mentioned the “Canadian” is the present political leader of the movement.

#66 ronthecivil on 10.08.13 at 1:40 am

Only problem is some of the hard core tea partiers would probably be happy to see the US default as they simply view the US defaulting as inevitable anyways and the longer it’s put off (the proverbial can being kicked down the road) the worse it’s going to be when it comes. So might as well hold a hard line, kill some entitlements, and bring in the ultimate financial nuclear bomb to entitlements, default.

#67 Mocha on 10.08.13 at 1:55 am

on the chart you can really see the spike start in the bush years and accelerate even worse in the Obama years. What a mess.

#68 Buy? Curious? on 10.08.13 at 2:26 am

Anyone who has followed US politics for a nanosecond knows full well that the government isn’t run by politicians. It’s policies are dictated to them by special interest groups. Why do you think banks were given, and some of them forced to take a bailout of $700 BILLION and not one person investigated for any wrong doing? They were even allowed to pay out bonuses for this recklessness. If anyone think the US gov’t is going to default next week, you watch WAY too much TV.

As for the picture of the Beer Store, do you think a little standing water is going to stop someone from getting beer? Where else can you if you want to buy some beer? If it’s out there near Kirkland Lake, the nearest Beer Store is like a 30min drive. Though, you wouldn’t have that problem with marijuana. I’d probably build a raft with used milk cartons and charge $2 for rides.

#69 Henry on 10.08.13 at 2:56 am

Hi Garth
i’ve seen your comment on a number of occasions against Smith Maneuvre. Can you tell more why you think what you do? Thanks

#70 T.C. on 10.08.13 at 3:35 am

C’mon Garth. Get the facts straight. Why beat up on Tea Partiers when – as you say – commander Zero won the election and the Democrates won the Senate where all this occurred?

Or do you feel obliged to carry water for the Obama adminstration?

It was a Democrat-controlled senate that voted for this, not “Tea-party nutjobs.” And the impetus came from the average American taxpayer who is forced to pay steep monthly health-care premiums, who lost their jobs because OBcare forced companies to downsize, and who are now part-time instead of full time – again thanks to OBcare.

Anyway, O’bumbles can just deal with this by signing-off on a budget that doesn’t include OBcare. The “debt-ceiling” has nothing to do with OBcare. OBcare is an issue he can return to at anytime – next month, next year… Why does Barry want to make the debt-ceiling the issue? This is like threatening to shoot the dog because the wife didn’t serve him steak for dinner. A temper-tantrum from a snivelling child.

And government shut-down is a tactic used at least 18 times since the late 70’s, particularly by Democrats against Republican presidents. What kind of nutjobs would those Democrats be?

And unlike Clinton, Reagan or Bush (x2), Barry can’t seem to understand what it takes to lead as president. Instead his mode of operation is as a bagman for small-time Chicago politicians – threats and temper tantrums.

This is the culmination of actions from a president who is so inept he hasn’t managed to produce a budget in five years. Somone who goes after his enemies using the IRS. Kind of scary when you think this vindictive choom-addled idiot is in charge of the world’s largest economy.

If there is a market melt-down it will be the result of Ditherington O’bumbles throwing a hissy-fit because he isn’t getting his way. Kind of counting on it myself.

As you seem to be.

It’s just that you seem to be parroting the narrative straight from the CBC. I thought you and your blog were a little bit more independent minded than that?

One genesis of trouble for America and the world was the housing bubble which Mr. Bush encouraged, because home ownership was a ‘conservative’ value. Sound familiar? Take your blinkers off and understand the problem now transcends bad politicians and the kind of ideology you espouse. — Garth

#71 Future Expatriate on 10.08.13 at 3:38 am

There’s only one problem with “this is not the time for the rich right wing to murder the economy.” They don’t think they’re murdering the economy, they think they’re only murdering the Presidency. They know the right wing is finished in the US, and thus, their control. When single payer finally is implemented, Big Insurance, one of their biggest johns, which pays into the right wing politicians’ coffers and PACS billions a year, will go bye-bye, forever. Logistics alone was destroying the right wing party; full healthcare after the left regains the House next year (inevitable) will be the last nail on the coffin.

What these people cannot control, they destroy. As multinational corporates, I will be surprised if they don’t go all the way. There will always be other countries to plunder and to escape to.

And Obama will not utilize the 14th amendment either. Why should he, when the crash caused by the right will INSURE their demise forever, and he has the American People firmly behind him.

Besides, if he did, they’d immediately impeach him, and they have the votes. Clinton redux, again, against the will of the overwhelming majority of the American People.

I don’t see any way out of this. The unthinkable is always possible when you’re dealing with a dying cornered thrashing dinosaur. There’s no Prince with a magic sword this time. The GOP will own the next Great Depression, and it will be their end.

Balanced portfolios had better be bullet-proof.

#72 backwardsevolution on 10.08.13 at 3:44 am

#59 Canadian Watchdog – interesting video. Three things that I came away with were: dangerous liaisons, seeing the big picture, and unintended consequences.

She said that perhaps specialization has blinded us to the big picture (I certainly agree), made it impossible for us to get a bead on what’s really going on, to be “sucked” in by certain interests, and to see the unintended consequences only when we look back.

I am beginning to see the big picture, and I believe these dangerous liaisons were only ever intended to be dangerous for one-half of the equation, the ignorant and naive masses, and that the other part of the equation enjoyed nothing short of “beneficial” liaisons with exactly the consequences they intended all along.

History keeps repeating, and most people are ignorant in that regard. You need to know about psychology, human behaviour, propaganda, Machiavelli…..a process that takes time (which most people don’t have, unfortunately).

If we don’t see the big picture, we won’t see anything, until it is too late.

#73 Sgip on 10.08.13 at 4:45 am

Chris Hedges: The Radical Christian Right and the War on Government – Chris Hedges http://t.co/wdi8EO7ha9 #StopRush #UniteBlue #GOPShutdown

O
O

#74 Basil Fawlty on 10.08.13 at 6:21 am

The debt ceiling is a big problem, but so is the size of the US debt. Foreigners are reducing their holdings, which is forcing the US to purchase their own bonds at a rate of $45B per month. These funds are created out of thin air and called QE. If QE is discontinued interest rates will spike and kill the economy. Therefore, tapering is a myth and one should expect QE to infinity.

#75 Smoking Man on 10.08.13 at 7:18 am

#63 The R on 10.08.13 at 1:03 am

hey SM – does posting in an imagernary person help you cope with the stresses of real life ?.
……………….

Was waiting for someone to ask.

The dog that shows up at the tax farm is an imaginary person.

The husband coming home to his wife is an imaginary person.

The father, uncle, friend, associate is an imaginary person.

SMOKING MAN is as real as it gets………

#76 Mr. Frugal on 10.08.13 at 7:37 am

Anyone remember the “cliff” that the U.S. was supposed to go over at the beginning of the year. That was a great time to buy too. Bring on the drama, freak out everyone and then swoop in and steal the dessert. That’s how it’s done!

#77 brainsail on 10.08.13 at 7:43 am

“Shutdown mess? No, it’s democracy”

“First of all America has gone through shutdowns before. Andrew Stiles notes in National Review that the U.S government has shut down 17 times since 1976. The vast majority of those shutdowns happened when the Democrats controlled the House.”

“Those shutdowns remind us that U.S. politics have always been partisan and rancorous — as the two-party system was established with the intention of being. Honest, heated debate is part of being a democratic nation.”

“America is not Britain, where a party’s control of one aspect of government (the House of Commons) effectively guarantees control over the entire system. The American way has the potential for divided government built into it, precisely because its founders wanted to protect against the growth of the state and to keep it in check by making it hard to pursue utopian manifestoes through to their glorious end. Passing lots of laws and spending lots of money ought to be a difficult, complex business.”

http://www.cnn.com/2013/10/07/opinion/stanley-shutdown/index.html?hpt=hp_t4

#78 frank on 10.08.13 at 7:59 am

Time for Class
1. Sheepal are irrational
2. Capitalism creates greed, greed feeds off of sheepal
3. Eventually the system falls apart
4. Hit Reboot, see #1

#79 fancy_pants on 10.08.13 at 8:03 am

Five years of economic recovery … would be wiped away in a number of months.
Few beyond the fringes believe a compromise won’t be struck to avert Armageddon

Garth, you would suggest that they continue to inflate their way to armagedon a while longer? There is no averting financial armageddon – only postponing it. I would prefer the higher rates over eventual hyperinflation and then higher rates. The US is bankrupt, plain and simple.

Better to default now and let the markets adjust and the healing begin (painful, yes) rather than allow big government to continue to “fix” their way out of this with the printing presses. They are playing a hand they can’t win. Time to fold already.

Then you have no idea how a US government default could destroy the wealth of you and everyone else on this blog. — Garth

#80 pbrasseur on 10.08.13 at 8:11 am

Default of the US is about as likely as me becoming Pope and a Saint afterwards

Hail to the idiots who will panic and sell their stocks to buy gold or whatever. If they havn’t learn anything in 2010 and 2011 they never will.

Don’t let the current situation fool you, Canada and some of its provinces will have budget crisis much sooner than the US.

#81 no default on 10.08.13 at 8:18 am

there will be NO US default on Debt. their Chinese masters said so…

#82 fancy_pants on 10.08.13 at 8:32 am

Game of Texas Hold em. Team USA is planning their next move. They played hard on the flop and again on the turn. There is some disagreement among the ranks on how to bet on the river. ALL of Team USA knows they can’t win the hand.

The sober tea drinkers on the team realize they can play another hand if they fold now. Will be a very painful loss but know they will still be at the table for the next hand if they fold. They will not be able to afford another round of drinks, chips and salsa but at least they will still be in the game. The rest want to raise on the river, a complete bluff, “but who cares” they think, the players switch out every hand and another round of whiskey and chips is too attractive to ignore.

Garth and I are on team USA. Garth would like to play the river. I say fold. What do you say?

#83 WhiteKat on 10.08.13 at 8:33 am

@ #55 Jon

Another reason not to have a TFSA or any other bank account in Canada, while living in USA, is that with the American law called FATCA (foreign account tax compliance act) coming July 2014, Canadian banks will be reporting to IRS on all your Canadian bank accounts. This will be a problem for you if you have not already been reporting them voluntarily yourself on FBARS (foreign bank account reports) to the IRS. Penalties for non-reporting of ‘foreign’ bank accounts can easily exceed the value of the account.

Another point to keep in mind for when you move back to Canada, is that if you keep your green card or have a US birthplace or have acquired US citizenship, then your Canadian banks will continue to report your ‘foreign’ (aka Canadian) bank accounts to IRS even though you have moved back to Canada, presuming FATCA is accepted by the Canadian government. Canada is having a hard time saying no to this USA law (FATCA) because it is literally being forced onto Canada through extortionist threats of 30% withholdings on USA sourced payments to banks should banks not cough up names and account balance of persons with ‘US indicia’.

FYI, USA taxes based on ‘citizenship’ (green card, US birthplace, naturalized citizen) which is very different than all other countries (except Eritrea) which tax based on residency. In other words, you can check out anytime you like, but you can never leave, unless you do it formally. So, ditch the green card formally, or renounce if you return to Canada. Otherwise, you can forget about TFSA’s which are taxable in USA for a ‘US person’ living in Canada. Also, TFSA’s are considered ‘foreign trusts’ by IRS and subject to incomprehensible tax forms which are even worse if you are dumb enough to invest in Canadian mutual funds (considered ‘passive foreign income corporations’ by IRS). So, there is one more reason not to invest in Canadian mutual funds, besides the fact that Garth says not to.

For more information on FATCA (foreign account tax compliance act) and USA’s unique to the world policy of CBT (citizenship based taxation), which USA is now starting to enforce through FATCA, visit isaacbrocksociety.ca, a Canadian blog dedicated to educating, and fighting FATCA in Canada.

FYI, for anyone who is interested, there will be an anti-FATCA protest on Parliament Hill Oct 16, 2013. Details can be found at isaacbrocksociety.ca

#84 Smoking Man on 10.08.13 at 8:34 am

To Marginal and Ottawa Mike

Counter to your chirps from the weekend when I stated basicly shrinks are nothing but theorist, with no science behind them just collective opinions.

Chirp no more…

http://life.nationalpost.com/2013/10/07/dozens-of-mental-disorders-dont-exist-and-dsm-5-is-a-fiction-of-ideology-u-s-therapist-claims-ahead-of-world-mental-health-day/

http://www.garygreenbergonline.com/

#85 TurnerNation on 10.08.13 at 8:40 am

#49 Retired Boomer – WI

Relax. Anyone may become president in the great USA.
Let’s see from 1980 onwards: Bush Sr was VP, then President; Mr. Clinton next, then Bush Jr. Now Ms. Clinton is front & centre, at least #3 in rank. Even next prez.? Almost 35 years. A Die-nasty of sorts.

#86 gladiator on 10.08.13 at 9:35 am

@26 JSan:
“Radio Free Redneck? — Garth
Actually, CBC news.”

What’s the difference?

#87 Siva on 10.08.13 at 9:38 am

#32 Smoking Man on 10.07.13 at 9:25 pm
#18 Siva on 10.07.13 at 9:01 pm
#2 CalgaryGuy on 10.07.13 at 8:43 pm

Tea party guys are nut jobs and racists.
………………………………………………………….

You see dude I don’t judge people like that.

Everyone apart from me has a belief system and when you project your beliefs like you just did, it might make ya feel good ….
_____________________________________________

Ok, how should we address a group of people holding banners that says “keep your government hands off my Medicare” and waving confederation flags?

#88 economictsunami on 10.08.13 at 10:04 am

The Tea Party are described as a loosely knit group of “market fundamentalists” that arose from the frustrated ashes of Ron Paul’s 2008 election campaign.

They have been co opted by the GOP and are mainly used much like a hard to control junkyard dog.

The voters mostly keep a short leash on their elected representatives through the power of recall; so political horse trading becomes exponentially more difficult.

Much like the poison pill sequester, I would highly suspect getting yet another bad deal will be increasingly seen as better then no deal at all…

#89 Bobbo on 10.08.13 at 10:08 am

Enough already. Let the SHTF. It’s the buying opportunity I have been waiting for. The good companies will still be here the next day.

#90 pbrasseur on 10.08.13 at 10:08 am

One genesis of trouble for America and the world was the housing bubble which Mr. Bush encouraged, because home ownership was a ‘conservative’ value. Sound familiar? Take your blinkers off and understand the problem now transcends bad politicians and the kind of ideology you espouse. — Garth –

You seem to forget that many democrats participated in creating this bubble going back as far as Bill Clinton.

Goes to show you can take the politician ou of politics you can never take the politics out of the politician.

Also, about blaming the Tea Party:

Like 50 Tea Party can control a chamber that has 435 members! Come on, you know better than that!

Actually the TP nuts exert much influence within Repub ranks. As for the housing bubble, Mr. Bush was there for the eight most formative years, and the unwinding. There’s plenty of blame to go around. — Garth

#91 Canadian Watchdog on 10.08.13 at 10:16 am

Scarborough subway debate resumes at council

Toronto city council will decide this week whether or not to embrace a tax hike to fund a subway extension in Scarborough. In order to extend the Bloor-Danforth subway line from Kennedy Station to  Sheppard Avenue,  Toronto's city manager says property taxes would have to go up at least 1.6 per cent to cover a 30-year loan.

Tuckey Keesmaat & Associates are winning! Smile for the camera!

#92 Doug in London on 10.08.13 at 10:24 am

A balanced portfolio built in 2011 before the last debt ceiling crisis has returned about 6% a year since. One built during the crisis has averaged 9.5% annually. Bring it on.
———————————————————-
That’s what I thought. Who says you have to wait until Black Friday or Boxing Day to scoop up some great bargains?

#93 miketheengineer on 10.08.13 at 10:31 am

Garth et al:

So with all this USA – “BS” issues that are coming….so I have a question…HOW DO WE MAKE SOME $$!
If you have any interesting ways to do this…please enlighten us with your divine knowledge…

We all would like to make some cashola for Christmas.

Mike

p.s. really have enjoyed your postings lately, including the charts etc. The most interesting was the mortgage loan applications…but I would have like to have seen this one expanded to include going back to 1990’s (if the data were available) and see if there was any trends from that recession…ie mortgage loans drop here and then XXX months later BOOM, another recession.

#94 srv on 10.08.13 at 10:37 am

A bit off topic, but speaking of Greater Fools this is hilarious… TWTRQ (a tiny penny stock) bid up by 1800% by fools (or ‘bots’) thinking it was the, yet to be issued, Twitter IPO… :-)

http://www.zerohedge.com/news/2013-10-08/greater-idiots-are-saved-twtrq-changes-its-ticker

#95 fancy_pants on 10.08.13 at 10:44 am

99.9% agree a default will not happen. too much on the line. But boy, just pushing ugly down the road. Lipstick on a pig is the best alternative now, and the pig call the shots. No more attractive options to choose from.

but just in case, here’s your take home notes: yummysquirrelrecipes.com ;)

#96 Retired Boomer - WI on 10.08.13 at 11:08 am

continuation of post #49

The trouble in America

32 years of Wrong Turns and Tax Amnesia

As we endure tje ceaseless political rhetoric surrounding our national budget and debt. I have come to the conclusion that we as a nation, have actually chosen to put ourselves in this quasi-insolvent position.

There are a number of critical turning points where our political and business leadership chose the wrong path with our support. Here are some of the major wrong turns that have occurred over the last 32 years.

In 1980 we adopted “supply side economics” also known as “trickle down economics” and we adopted the philosophy that budgets never needed to be balanced.

The theory states that increasing the net wealth possessed by the economic elite generates the best stimulator of economic activity.

These wealth-owners will invest any marginal wealth-gain from tax cuts on things that will increase “supply” – factories, new businesses, innovative goods and services, thus “Supply Side Economics.”

Belief in this economic heresy continues and many current office holders, and candidates for public office actually advocate further tax cuts.

Because of this heretic belief, politically driven and popular tax cuts were pit into place that were based on expanding our national debt from 907 billion in 1980 to $3 Trillion in 1990 to $5 Trillion in 2000 to $10 Trillion in 2008 and $16 Trillion in 2012. These Tax Cuts continue unabated and are expected to drive our national debt to $22 Trillion by 2016 -A 34-fold increase since 1980.

We also entered diabolical free trade agreements with Tax incentives that encouraged manufactured product imports and job exports. In 32 years we have managed to export over 60,000 factories and over 23 million jobs. Our trade policy continues unabated.

We deregulated the financial sector and freed Wall Street to be “creative”. This permitted the destruction of $16 Trillion of our collective wealth and returned us to 1992 wealth levels nationally. Financial deregulation essentially continues unabated along with super-sized banker bonuses with no bankers in jail.

Following the 9-11 attacks, we committed $4 Trillion (off-budget) to occupy Iraq and Afghanistan. Taxes were not imposed to finance the occupation. The occupations continue with no end in sight.

We implemented Medicare Part D at an incremental cost of $180 Billion a year. No taxes for this were imposed and drug companies were not required to negotiate prices with Medicare. This mismanaged program continues and is growing.

Student loans now total over $1 Trillion as our public and private universities and colleges took advantage of the easy money available to students for education. At UW Madison for example, resident undergraduate tuition in 1980 was $709, today it is $8,592 or an 11 fold increase. Sadly, it was reported recently that a new retiree was having their social security check garnished to repay student loans over 30 years old.

So are we broke? Indeed we are! And we have clearly chosen to be.

Because of these major wrong turns we have also managed to concentrate wealth to levels not seen since 1929.

The reduction in top marginal income tax rates has been anything except modest. Rates have been reduced from 70% in 1980 to 35% currently. As late as 1964 they were 91%. The average top marginal rate from 1915 to 2012 is 57.8%. We are operating at 60.6% of the 97-year average.

We did not stop there. Our Capital gains tax was reduced as well from 39.9% in 1978 to 15% currently. The 100 year average on capital gained is 26.9%. We are operating at 44% of he 100 year average.

In 2003 we also reduced the top marginal dividend tax rate from 35% to 15%. This is 25% of the 91 year average.

And, to completely ensure we would never ever have a balanced budget, we reduced the corporate income tax from 46% in 1980 to 35% today. The 100 year average on corporations is 46.7%. We are operating at 75% of the 100 year average.

We are attempting to have our 16 Trillion economy operate with top marginal Tax rates at essentially 50% of
the 100 year average for he Republic!!

It should come as no surprise that this entire tax cutting strategy is not working, and we continue to grow our deficits.

Bottom Line: Conservative Policies have NOT served us well.

Despite their rhetoric Conservative policies have impoverished the average working American, saddled his progeny with debt, shrunk employment opportunities, and now threaten the economic viability of he Republic threatening a default on our Debt.

Should America HAVE a next election, may our citizens chose well……

#97 Ralph Cramdown on 10.08.13 at 11:11 am

#79 fancy_pants — “Garth, you would suggest that they continue to inflate their way to armagedon a while longer? There is no averting financial armageddon – only postponing it.”

Two charts for you, fancy_pants:

In the first one, the trade-weighted US dollar index, spot the inflation:
http://research.stlouisfed.org/fred2/series/TWEXB

Using the second one, which shows the US Federal government’s tax receipts as a percentage of GDP, expand on your theory that the U.S. is ‘bankrupt.’
http://research.stlouisfed.org/fred2/graph/?g=nb6

P.S. Your poker analogy stinks. Just because you don’t have a good hand doesn’t mean you can’t win.

#98 Smoking Man on 10.08.13 at 11:11 am

#87 Siva on 10.08.13 at 9:38 am#32

Smoking Man on 10.07.13 at 9:25 pm#18 Siva on 10.07.13 at 9:01 pm#2 CalgaryGuy on 10.07.13 at 8:43 pmTea party guys are nut jobs and racists.………………………………………………………….

You see dude I don’t judge people like that.Everyone apart from me has a belief system and when you project your beliefs like you just did, it might make ya feel good …._____________________________________________

Ok, how should we address a group of people holding banners that says “keep your government hands off my Medicare” and waving confederation flags?-.

……………………

Go to China website and source flag makers, then sell them confederation flags… :)

#99 Sydcixel on 10.08.13 at 11:13 am

Garth was in error by stating, “the Republicans are trying to stall, kill or maim Obamacare. They apparently forget they lost an election on this just a year ago.”

They didn’t “forget” anything. The Republicans simply do not accept the decision of the electorate. They do not respect democracy. They will kill Obamacare by any means that will succeed – without regard in the least for what the public thinks. They rationalize that they know better than anybody else…and that’s that.

#100 Siva on 10.08.13 at 11:27 am

It’s a blood bath!

Some Toronto condo buyers ‘scrambling’ to close deals

“Many investors who bought units intending to flip them on completion, or rent them out for a few years, have also been shocked to find they thought they had pre-approvals, but they are no longer being honoured.”

http://read.thestar.com/?origref=http%3A%2F%2Ft.co%2FCSjYDgKSDJ?origref=http%3A%2F%2Ft.co%2FCSjYDgKSDJ#!/article/5253eed0ec069106f10c988f-toronto-real-estate-condo-buyers-scrambling-to-close-deals

#101 pbrasseur on 10.08.13 at 11:36 am

“the TP nuts” -Garth

Paul Ryan is a nut?

I only wish there were a few nuts like him in our own parliament!

(and that they had the right to speak…)

Squirrels swoon as he passes. — Garth

#102 pbrasseur on 10.08.13 at 11:39 am

Sydcixel

” They (republicans) do not respect democracy.”

Since when voting your conscience is not respecting democracy?

Obama does not hold the house of representatives, that is a democratic fact, he should act accordingly.

#103 HogtownIndebted on 10.08.13 at 11:45 am

Re: Siva #100

Was reading that myself, thinking uh..oh….this looks like the game about to change quickly.

The funniest part was the guy who says no problem, condo investors can just borrow against their principal residences to get the (now) 50% they may need to close on a condo.

The fact that banks are not lending against the appreciated values of condos, but what they were when bought two or three years ago only, is also ominous.

The Pigg is now flying, it appears…….

This will not end well.

http://www.thestar.com/business/personal_finance/spending_saving/2013/10/08/toronto_real_estate_some_condo_buyers_scrambling_to_close_deals.html

#104 Siva on 10.08.13 at 11:54 am

#98 smoking man
Go to China website and source flag makers, then sell them confederation flags… :) –
_____________________________________________

That’s funny. Reminds me of a skit by Dave Chappelle

http://www.liveleak.com/view?i=8cc_1352405973

#105 Penny Henny on 10.08.13 at 12:08 pm

re photo?
did someone spill Labatt’s Blue in the parking lot?

#106 backwardsevolution on 10.08.13 at 12:10 pm

Of course the U.S. keeps having to raise their “debt ceiling”. Millions of jobs have been offshored to Asia, and their tax base is dwindling.

“Over 61 million people get a check from Social Security, over 50 million draw Medicare benefits, another 50 million get Medicaid benefits, 47 million receive SNAP food stamp benefits, 22 million people work directly for the state on all levels, millions more work for government contractors that are effectively proxies of the state, millions more receive Federally funded extended unemployment, retirement checks, Section 8 housing benefits, and so on.”

When those jobs got offshored, the U.S. needed to compensate for the loss of tax revenue by increasing taxes on the corporations that were offshoring jobs in order to increase their profits, but they didn’t.

If citizens are not working, they’re not consuming or paying taxes.

If they keep kicking the can down the road and raising the debt ceiling, sooner or later the can is going to kick back.

#107 Nemesis on 10.08.13 at 12:14 pm

“This is not the time for rich right-wingers to murder the economy.” — HonGT

Did I miss something? I thought BushRedux had already declared, “MissionAccomplished!”

Meanwhile, back in ‘RedNeckRadioLand’… [aka Surrey – where anyone owning a functioning radio qualifies as TheAristocracy]….

[CBC] – Surrey trailer park without power for 3 weeks

…”The cabins at the rundown Beledean Trailer Park off King George Boulevard and 82nd Avenue had allegedly become dens of drug-dealing and prostitution…

…Lillian Bailey, 88, has lived at the trailer park for 21 years and has resorted to flashlights to light her home.

“I have never, ever, ever lived like this before in my life… you’re living in dark all the time,” she said.

Lillian says she’s lucky to have a propane cooking stove, but some people in the trailer park haven’t had a hot meal in weeks.”…

http://www.cbc.ca/news/canada/british-columbia/surrey-trailer-park-without-power-for-3-weeks-1.1929155

[NoteToSelf: SeriesIdea! – Entrepreneurial FrontierGrannies cater to lonely ‘Prospectors’ and WoodsMen whom happenstance delivers to their IsolatedTradingPost. PlagiarizePolyani for PlotPoints.]

#108 Siva on 10.08.13 at 12:26 pm

If banks are demanding 50% down on investment condos how much are they expecting the market to correct?

#109 Toronto condo market is major trouble on 10.08.13 at 12:29 pm

The condo market in Toronto looks like a house of cards that’s going to come crashing down. All backed by debt.

http://www.cbc.ca/video/news/audioplayer.html?clipid=2408420530#sthash.t5p7ccCq.dpuf

#110 robert james on 10.08.13 at 12:31 pm

# 100 Siva Maybe that bald headed lamb chops will spot the suckers a bit of cash to see them through.. Looks like it is time for the greedy parasites to reap it…

#111 Nemesis on 10.08.13 at 12:56 pm

Oh yes… an egregious error of IronicOmission… or should that be, “Iranic”?… SaltyDogz, Nemesis presents your TuesdayMorningZen…

[FP] – ‘Death to America’ slogan prompts debate in Iran

…”Iran can “stand against powers which threaten our national interests with prudence rather than with slogans”, Mr Rouhani said on Tuesday, adding that his government had achieved more in foreign policy in 50 days than “could be done in 500 days”.

Akbar Hashemi Rafsanjani, a former president and a pillar of the political establishment, has also gone public with his opposition to the continued use of the phrase, recounting a private conversation with Ayatollah Ruhollah Khomeini, founder of Iran’s revolution, who according to Mr Rafsanjani said the “Death to America” slogan could be dropped. “…

http://www.ft.com/intl/cms/s/0/f0145f96-2fff-11e3-80a4-00144feab7de.html?siteedition=intl

NoteToGT: Is this merely a ForeignPolicy RebrandingExercise – or have the Ayatollahs finally decided that, much like flogging a DeadDonkey, their cherished political rhetoric has outlived its usefulness? Or are they just feeling sorry for UncleSam?

#112 Devore on 10.08.13 at 1:03 pm

#78 frank

2. Capitalism creates greed, greed feeds off of sheepal

There is no greed in communist or socialist countries. Sheesh.

#113 JuliaS on 10.08.13 at 1:29 pm

No need to raise debt ceiling if it’s a genuine recovery.

#114 jess on 10.08.13 at 1:37 pm

….”Tax refunds for vacant business properties soared
75 per cent last year.”
http://www.therecord.com/news-story/4145721-hard-times-hit-struggling-tax-base-waterloo-region/

#115 Nemesis on 10.08.13 at 1:42 pm

BonusZen #YouCan’tMakeUpThisS**t

…”But how do you calculate the effect that demons have on property value?

You ask Randall Bell.

The 54-year-old Laguna Beach resident is a doom-and-gloom real estate appraiser. He has carved out a singular niche, fielding calls from governments, big businesses, crime victims and international media, all seeking insight into the worth of stigmatized properties.”…

[LAT] – Does Satan worship lower a Las Vegas mansion’s value?

http://www.latimes.com/business/la-fi-c1-vegas-satan-20131008-dto,0,3242326.htmlstory

#116 angela on 10.08.13 at 1:51 pm

There are tools and levers the US Treasury Department and the Fed have to prevent a meltdown ~Garth
yes I think its called confiscation of 401ks bail ins, bail outs, federal pension cuts . funny you didn’t mention what the tools are or just don’t want to tell us that governments can just create debt out of thin air unlike humans who have credit card ,heloc limits that we should all max out and default on most successful people I know milk a company for everything they can then bankruptcy it so as not to pay the pensioners (think MF Global,Nortel)

You are now embarrassing yourself, a state I believed impossible. — Garth

#117 Smoking Man on 10.08.13 at 1:58 pm

USA Treasury Auction, Wow yields way up,

Market betting on default……

#118 A Yank in BC on 10.08.13 at 2:21 pm

As a Dual-Citizen who spends a lot of time living in both countries, I do wonder why it is that my fellow Canadians find it necessary to be so opinionated on political matters in the US. I can assure you that it’s not reciprocal. Americans overwhelmingly believe that Canadians are best qualified to decide what happens in Canada, and fully respect those decisions and the process by which they are reached. Why can’t Canadians return that simple favor?

#119 fancy_pants on 10.08.13 at 2:28 pm

#97 Ralph Cramdown on 10.08.13 at 11:11 am

a bunch of charts whose source reveals is from the board of governors of the federal reserve is all you got? Hey, just between us, CREA’s charts tell me it’s a good time to buy a house. Shhh. maybe we’re onto something.

The US is bankrupt b/c the only way it can pay off it’s debt is to create more debt. It is in a cycle it can no longer break free from. Perhaps we have differing views of what bankrupt means.

If you think of it in your terms, Greece is a printing press short of a good economy as well. Too bad it joined the Eurozone.

By the way, after the river is revealed, you may want to take a mental note that the low hand does not win.

#120 dienekes on 10.08.13 at 2:33 pm

57 Inglorious Investor on 10.07.13 at 11:12 pm
My money is all in the US.
Is yours all in China?

#121 angela on 10.08.13 at 2:36 pm

One genesis of trouble for America and the world was the housing bubble which Mr. Bush encouraged, because home ownership was a ‘conservative’ value. Sound familiar? Take your blinkers off and understand the problem now transcends bad politicians and the kind of ideology you espouse. — Garth
that wasn’t Bush that made NINJA loans it was his campain contributors the banks that did that

#122 jess on 10.08.13 at 2:43 pm

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

09/30/2008 – 10,024,724,896,912.49

09/30/2000 5,674,178,209,886.86

#123 Canadian Watchdog on 10.08.13 at 2:51 pm

Tom Keen: Go to Cash

"I speculate there can’t be a better time to sell than now."

The real question is: Who' we selling this to?

#124 happity on 10.08.13 at 3:21 pm

The debt ceiling is not what it is about.

The USA is bankrupt and can’t end it’s addiction to printing money out of thin air.

That is the big picture.

#125 Pulp Faction on 10.08.13 at 3:31 pm

If a couple makes $130,000/yr between them, how can they possibly pay off a mortgage for a $500,000 home in 25 years ?

This home would end up costing them something like $1.3 M by the time they have it paid off, am I right ?

#126 jess on 10.08.13 at 3:47 pm

#107 Nemesis

% view
http://faculty.wcas.northwestern.edu/~jnd260/cab/CAB2012%20-%20Page1.pdf

The Faux Hyper-Meritocracy that Threatens to Destroy Us
Posted on October 8, 2013 by Devin Smith | Leave a comment
By William K. Black
http://neweconomicperspectives.org/2013/10/faux-hyper-meritocracy-threatens-destroy-us.html#more-6562

#127 Holy Crap Wheres The Tylenol on 10.08.13 at 3:51 pm

Interesting times Indeed.

Due to Congress’s failure to pass legislation to fund the government, the information on this web site may not be up to date. Some submissions may not be processed, and we may not be able to respond to your inquiries.

Information about government operating status and resumption of normal operations is available at USA.GOV.

http://www.whitehouse.gov/live

#128 Holy Crap Wheres The Tylenol on 10.08.13 at 3:59 pm

#111 Nemesis on 10.08.13 at 12:56 pm
Oh yes… an egregious error of IronicOmission… or should that be, “Iranic”?… SaltyDogz, Nemesis presents your TuesdayMorningZen…
[FP] – ‘Death to America’ slogan prompts debate in Iran
Mr Rafsanjani said the “Death to America” slogan could be dropped. “…
_____________________________________________

What will happen to the news crew at AlJazeer if they drop this slogan?

http://www.youtube.com/watch?v=TS4v_kj9rw4

#129 Future Expatriate on 10.08.13 at 4:02 pm

#102 “Since when voting your conscience is not respecting democracy?”

Uh, when you’re not voting your conscience at all, merely lying about it, because you’re an utter whore to big business which is Mussolini’s textbook definition of fascism which he called CORPORATISM.

#130 Future Expatriate on 10.08.13 at 4:08 pm

#112 There have NEVER been any communist or socialist countries ever. Just right wing military dictatorships that LIED about being communist and/or socialist countries to dupe their people into giving them power. Here’s a hint: If the leader wears a uniform or wore a uniform, it’s a right wing MILITARY DICTATORSHIP. You know, like when Bush II crawled onto the deck of the USS Abraham Lincoln.

#131 Form Man on 10.08.13 at 4:17 pm

#124 happity

The U.S. is not bankrupt. It is actually not possible when they control the money printing ( a fact that Garth continually points out ). Too much money printing can result in hyper inflation, but there is zero evidence of that threat anytime soon.
Take a deep breath, relax, and do some research into macro-economics somewhere else than lunatic doomer sites.

#132 Inglorious Investor on 10.08.13 at 4:27 pm

#120 dienekes on 10.08.13 at 2:33 pm

Putting ALL your money in ANY single country is imprudent.

#133 cynically on 10.08.13 at 4:37 pm

#90 pbrasseur – The Republicans control the House by anywhere from 32 to 35 members, there being 3 vacancies late september. That leaves them at 232 vs the Democrats 200. If your 50 TP figure is correct then the remaining 182 non-TPs are threatened with being primaryed (you google it) by the billionaires who fund and promote the TeaParty movement. Once you understand primarying you’ll understand their control in the House.

#134 devore on 10.08.13 at 4:44 pm

#100 Siva

How could they think they had pre-approvals? Did their banks give them a hold for 3 years? Oh, right, amateurs. “Investors” my ass.

#135 Inglorious Investor on 10.08.13 at 4:49 pm

#59 Canadian Watchdog on 10.07.13 at 11:40 pm

I totally agree that there are some things that should never be commoditized, controlled or owned by private interests. This is why I believe in REGULATED free markets, as I said. Our governments have failed us in this regard, and yes, this problem has the potential to destroy our civilization in the long run (or perhaps the not-so-long run).

However, people should not confuse this corruption with a failure of capitalism per se, as many have done recently. Back in the ’30s the communist movement in the US was quite large, as a response to the devastation of the the Great Depression. There was a backlash against capitalism then too. All socioeconomic systems have flaws. In the end it comes down to a choice of having the State set your limits or having your limits sets by your own potential and ambitions.

#136 ripped on 10.08.13 at 5:01 pm

#56 dienekes

“The US as super power will never change”

Not in your life time it won’t.

#137 dienekes on 10.08.13 at 5:08 pm

#133 Inglorious Investor on 10.08.13 at 4:27 pm

Its all an unstable pile of shit, rich people scrambling to stay rich.

#138 Old Man on 10.08.13 at 5:30 pm

I have been going for years shopping once a day as have nothing better to do in life, and took one look at the Loblaws Superstore which might hold 1000 cars in the parking lot, as they really have a great assortment of products to sell, but the cars have all disappeared. I also took a look at Tim Hortons with the cars lined up forever to get a fix. The window is still getting some action, but counted 3 lined up, so the cashflow is still coming in, but the lines have disappeared.

#139 Old Man on 10.08.13 at 6:04 pm

Now for you that think the USA will default on debt, just watch as such will never happen, as the Elite in this world who controls all says not now, but will come later with BIS, as they are working out a plan for a new world currency, so don’t rush them, and have a target date, but 2013 is not on the page. Trust me, as know the inside stuff; there will be no default soon in 2013.

#140 WhiteKat on 10.08.13 at 6:06 pm

@ A Yank in BC, re: ” Americans overwhelmingly believe that Canadians are best qualified to decide what happens in Canada, and fully respect those decisions and the process by which they are reached. Why can’t Canadians return that simple favor? ”

Unequivocally NOT true!

Have you heard of FATCA? FATCA is a new US extraterritorial law imposed on all financial institutions in the world, under promise of 30% withholding penalties on all US sourced income and assets, for non-compliance. FATCA forces financial institutions to identify ‘US persons’ (green card holders, US birthplace, US citizenship) and to report to IRS the balances of all accounts for which ‘US persons’ have signing authority.

To enforce FATCA in Canada probably violates the Canadian Charter of Rights and Freedoms, but USA is not respecting Canada by forcing their law on our country and on Canadian citizens and residents.

#141 bigtown on 10.08.13 at 6:11 pm

It is unfortunate that condo buyers put their deposit on units 2 or 3 years ago and now are in bad shape as their financing has fallen through but one has to be prepared to respect that prices are subject to change in real estate and that includes prices going down and development fees going up and banks changing their mortgage funding. Prepaying for real estate is a high risk strategy.

#142 WhiteKat on 10.08.13 at 6:15 pm

Re: previous post, only accounts with a balance over 50K must be reported. However this is an aggregate amount, so having more than 50K split into several accounts at the same banking institution will trigger FATCA reporting.

#143 OffshoreObserver on 10.08.13 at 6:24 pm

#Jsan:

The CRA is not the only tax authority trolling for extra tax dollars and penalties thereon. Here is my tale:

I know a guy who has a cabin in the area around Mount Baker (it is South of Vancouver and the Lower Mainland in Washington State.)

His retirement has a few problems:

1. His wife has the school teacher’s pension, not he.

2. While the principal residence is mortgage-free–located in Canada–one would have to precipitate a divorce in order to split the equity therein.

3. I do not know, but I assume when someone sells his U.S.-based real estate the tax authorities look at the transaction. Of course, my acquaintance would be liable for the capital gains tax–both in the U.S. and there would be Canadian tax ramifications. BUT, the biggie:

Did you file a U.S. Tax Return and declare the rental income? In his case, I doubt it.

Also, following along on your reporting of the CRA action. I presume they are also going to look at those landlords who earn rental income from foreign students?

It will be interesting to see what happens.

From Southeast Asia with love!

#144 WhiteKat on 10.08.13 at 6:29 pm

Re: previous post, (wish there was an edit function), the 30% withholding penalty I refer to is applied to the financial institutions (in case that wasn’t clear). This is the only reason that financial institutions are spending millions on preparing for FATCA; they don’t actually want it, but cannot afford not to. They are choosing to break Canadian law in order to accommodate USA law.

#145 Randy Macho Man Savage on 10.08.13 at 6:39 pm

With all the turmoil in the US, and the sense that the dems and the GOP are currently miles apart, wondering what you blog dogs think about buying a volatility stock (like HVU) in the very short term? The stock market seems like a roller coaster lately and just thinking how more of the same is probably to be expected…

#146 TurnerNation on 10.08.13 at 6:52 pm

Cdn Watchdog can you make one of you-know-who wearing a mullet?

#147 Phil Indablanque on 10.08.13 at 6:59 pm

#126 Pulp Faction

…”If a couple makes $130,000/yr between them, how can they possibly pay off a mortgage for a $500,000 home in 25 years ?”

Head of Nail, Hammer …. CONTACT!!

#148 eddy on 10.08.13 at 7:06 pm

Interesting talk from Bill Still-

Still Report #103 – Bill’s Speech in Turkey

https://www.youtube.com/watch?v=PBo8J5gSbaQ&feature=c4-overview&list=UUhZRoC9bMegevAxFmee1oSA

#149 jj on 10.08.13 at 7:26 pm

“You are now embarrassing yourself, a state I believed impossible. — Garth”

Titanic has gone down in history as the ship that was called unsinkable.

“.”

#150 Doug in London on 10.08.13 at 7:30 pm

@A Yank in BC post #118:
Good question. My guess is because the United States is our nearest neighbor and biggest trading partner, so what goes on there affects us whether we like it or not. The U.S has a big media effect on us also, we get a lot in the news about what is going on there, a lot more than Americans get about us. I believe that’s why you hear a lot of discussion about American politics among Canadians, including opinions about these matters.

#151 Obvious Truth on 10.08.13 at 7:44 pm

Didn’t anyone take politics in high school. The wind of change are blowing in the Republican Party. Moderates are fed up with boehner and someone else wants to be the public hero. Boehner lost his chance today. Think he’s drinking the tea.

#152 espressobob on 10.08.13 at 7:52 pm

#146 Randy Macho Man Savage

HVU? Seriously? Thats pure speculation!!!! And all the more reason to avoid ‘beta-pro’ ETFs altogether!!! No investing stradegy there. Leave those products to the pro’s who can get it wrong for you! Keep it real!

http://www.horizonsetfs.com/pub/en/etfs/?etf=HVU&tab=overview

#153 CrowdedElevatorfartz on 10.08.13 at 8:10 pm

@#1 Jsan.
Ozzie Jurock is the #1 reason I stopped listening to Michael Campbell’s Saturday morning radio show.

Constantly pumping real estate in Vancouver until even he realized it was ridiculously priced. Then he moved on to US real estate after the meltdown……
He’s currently in litigation with investors that bought some property from him in Northern BC.

And then we have Micheal Cambell’s other guest. Financial advisor Michael Levy.
The man who once declared personal bankruptcy…..

Michael Campbell is a shill for advertisers.
CKNW is a shill for advertizers
Bill Good is a shill for advertisers.

getting the picture.

#154 Old Man on 10.08.13 at 8:22 pm

#146 Randy Macho – the Democrats and the Republicans in USA are one bird with two wings, and is nothing more than a stage show for the masses to have something for emotional entertainment. There is only one political party in USA, and the puppet master behind the curtain controls all decisions of importance, so all becomes an illusion, as the real power is hidden.

#155 Canadian Watchdog on 10.08.13 at 8:30 pm

#147 TurnerNation

This guy?

#156 Mr. Monday Night on 10.08.13 at 8:31 pm

Bit late for tonight’s post…could this truly be ‘the end’?

#157 TRiP on 10.09.13 at 3:27 am

When you are running a giant ponzi scheme and fully admit the only way you can pay your upcoming bills into the distant future is to borrow it

and that if you cannot borrow it, you will default then only the “not-so-bright” think a default is not coming.

the only choice left is HOW & WHEN to default left, either straight up the honest way at some point, or inflate it away.

BOTH ARE DEFAULT.

#158 Old Man on 10.11.13 at 11:45 am

Now do not tell a soul, but a few tricks have been pulled over the weeks. The ceiling is just a panic number, as it already has been exceeded by about $65 billion. Now all go back to sleep and relax; take it easy; ride your bike; and enjoy the nice weather.