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December 28th, 2008 at 8:45 am
People,
Even during a recession or a great depression, people still spend. But people do spend on their creature comforts. Your priorities are not theirs and neither do theirs on yourself. So you need to be careful on how you judge people spend during this holiday season. What’s clear is that, Vancouver is not immune to the global credit crunch and recessionary pitfalls.
We’re just late into the party.
There’s been a lot of talk about Japan and its decade long recession and how inflating the money supply doesn’t work for them.
That’s not entirely true either. If you ever visit Japan during the recessionary years, which I did cause I used to work for a Japan conglomerate, the first few years were evident — lots of hardship and cutting back. But then as people got used to the recessionary climate as humans always do, things on the street went back to normal.
If you’re from Mars and you’ve just landed on Japan in the mid 90s, not knowing they are in the deflationary spiral, walking through the streets of Tokyo you could never tell that a recession was ongoing. That’s because, life does go on. People who cocooned themselves into this depressive state of self-helplessness usually end up in homeless shelters or in parks. In fact, during that decade, the Japanese economy helped spawn a new breed of youngsters called Freeters (or in Japanese Fruita), which are people who don’t or can’t hold full time jobs either by choice or by economic reasons. We have our own freeter workforce — Angus One for example. But unlike Angus One, people can go from being temporary to full employment, in Japan freeters can’t. They are outcasted by big corporations. It’s called loosing face, in which Asians are very sensitive of, unlike us North Americans where loosing face is really not a big deal.
Another problem with Japan during the lost decade is in the form of immigration. Japan does not like foreign immigration. In fact, you can’t easily become a Japanese like you could in the States or in Canada by means of application. Japan has a much older workforce than North Americans do, and most of their young ones died massively in the war. The Kamikazi attacks were brilliant in execution, except that you need young soldiers, your future citizens that all went into the graves because of the war. So basically, no massive stimulant packages are going to excite old people to spend.
As we all get older, we get a bit wiser. We’ve been there and done that and do not wish to accumulate junk or toys any longer. People you see lining up on Starbucks or in the shopping malls are mostly young people. They hadn’t live the full interesting life that we old farts had, so it’s understandable that they will spend more than we do. Just look at who buy those iPhones the most and subscribe to text messaging plans?
Unfortunately, the baby boomers population outweigh these youngsters by a bit. What could they possibly spend on? More TVs? More cars? More vacations?
December 28th, 2008 at 8:38 am
Fri Dec 26, 1:54 PM Yahoo.ca (Front page Headlines)
What’s this
By Brenda Bouw, The Canadian Press
VANCOUVER, B.C. – Canada’s housing market made skeptics (like vancouvercondo.info) proud and put eternal optimists to shame in 2008 as the favour turned quickly to buyers, after years of smug sellers having the upper hand.
The shock was how quickly the tables turned.
House prices across Canada have dropped 11 per cent since hitting a peak of $316,896 in May 2008, down to $280,880 in November, according to latest figures from the Canadian Real Estate Association.
The drop is weighed heavily by cities such as Vancouver, Canada’s most expensive housing market, where prices have also fallen almost 13 per cent since May.
Across Canada, prices have dropped 10 per cent since November 2007, when the average home cost $311,485. Sales slipped 42 per cent year-over-year.
December 28th, 2008 at 8:21 am
Hey realpaul, just because US retail sales are plunging doesn’t mean the same is happening in Vancouver. I watched on the news that there are more interac swipes this holiday season in BC compared to last year
Part of the reason is because, most of these people’s credit limit had been lowered without notice, sometimes to half the amount or more. Ours did and we have high FICO scores to boot. We have a friend who recently noticed that his limit was lowered from $5000 down to $1500 on the credit statement he got. He phoned of course to inquire only to get a reply saying that he didn’t spend enough and so, he doesn’t need that much of a limit. He didn’t ask for more, because he was recently laid off.. But seriously, $1500 can be easily spent buying gifts and toys this season. The rest however, he needs to pay it via Interac..
December 28th, 2008 at 7:28 am
Post # 94
Simply stated…
As the global economic crash scene gets analyzed, it would be fair to say that its been a
Ponzi scheme within a ponzi scheme within a ponzi scheme, within…..
Many of us had suspicions that what we saw going on was on par with the “smoke and mirrors ” Dorothy , Toto and crew saw the Wizard of Oz’s closing scenes.
Xmas 2008 is not an indicator, it is more an delay mechanism….where people can take a break from reality,…perhaps a timely break and allow us all to re-focus on what is truly important.
If people feel better believing Canda is immune….we are different than the U.S. …etc etc. that one’s right.
The rest of us call it denial.
December 28th, 2008 at 1:45 am
I have also noticed that BC does indeed seem to be delayed to the global party, including apparent lack of massive drop in consumer spending. But it will come here. It will be comparably as bad as everywhere else. It will simply start more sharply because of a delayed start.
December 28th, 2008 at 12:57 am
Hey realpaul, just because US retail sales are plunging doesn’t mean the same is happening in Vancouver. I watched on the news that there are more interac swipes this holiday season in BC compared to last year. The people that are spending, do they have their heads buried up their asses? That’s what I wonder, I walked around Richmond Centre today and everyone’s out spending or lining up at the Starbucks there for drinks. That to me is ridiculous. I’m glad I don’t spend money on ripoff drinks. I spent only $65 this entire month on one x’mas gift, that’s it, and my salary is more than $75k/year. I got no debts and no bills to pay off. I leech off free living from my parents and I still feel like I’m poor because I did not buy a million dollar house.
December 28th, 2008 at 12:50 am
You people sound so negative. Isn’t anyone here optimistic? I’m just a ‘fence sitter’ so I’m neutral on this.
“I also read an article that foresees a lot of store closures after Xmas, even the Big Box chains. Then you’ll see discounts and fire sales that will make Boxing Day look like a rip -off”
I’m not so sure if fire sales will come in Vancouver. We’re not the United States here. I heard everything is also fine in Seattle. There are a lot of cocky bastards in Vancouver and Seattle bragging about how loaded they are from the housing boom. They’re also showing me how high real estate prices are and they expect it to go up more next year.
I’ve been travelling around the past 6 months and I saw a lot of unemployment and deflationary pressures in Europe, the Middle East and Asia going on. I don’t understand why Vancouver is still holding up well, isn’t this supposed to be a global problem? I go to restaurants and there are lineups. The Asians in Richmond are eating out all the time even during the day in weekdays, don’t they have to work?
December 28th, 2008 at 12:12 am
“generation of people who will be bankrupt and homeless right at the beginning of their adult lives.”
Tragic in some ways, but it is the beginning, so they have lots of time to recover. There’ll be a lot boomers at or near retirement age who won’t recover — and many more who will run out of inadequate retirement funds long before they die. Not all boomers have well-paid management jobs that allow them to keep working indefinitely, and many were counting on their over-inflated house value to fund their retirement. (Oops.)
December 27th, 2008 at 8:12 pm
#90 Supraboy, the official stats on spending don’t jibe with your eyeball analysis. Here is one example out of hundreds of articles you can look at.
http://ca.news.finance.yahoo.c.....ssion.html
#91 Observer , CPI is manipulated by the BOC specifically to produce a “headline number’, it excludes food, energy, housing, transportation , wage demands and everything else a person would consume day to day. The government does this because it says that these goods and services are ‘volitile’ and aren’t easily tracked. I’m sure you have unofficially tracked the real rate of inflation by asking yourself why your grocery bill has gone up so much year after year.
What they do include in the CPI are things like T-shirts, computer keyboards, technology upgrades ( hedonic measurement)and redundancies, in other words the things an average person does not consume on a regular basis. So when you refer to production capacity meeting demand, I wonder what the person who eats macaroni four times a week now instead of once a month would say about this government hubris and hedonic measurement of inflation.
The BOC is quite simply full of ‘it’, and everyone seems to know except the few deniers. I’ve got news pally, “DE Nile is not just a river in Egypt”.
http://investingforthesoul.com.....US-CPI.htm
December 27th, 2008 at 7:35 pm
Boxing Day sales as an economic indicator?
The last gasp of the lemmings…
Shows me there are people who buy TVs but don’t watch the
frikkin N-E-W-S on TV!
Why would I buy a 52 inch flat screen HD TV for $899 (as one party bragged on the news yesterday ) when I can more than likley get it for free once the foreclosures occur (like what happened in Southern California and they had to hire companies to come in and throw out all the contents ).
Maybe they they will even pay you to take it away…
I also read an article that foresees a lot of store closures after Xmas, even the Big Box chains. Then you’ll see discounts and fire sales that will make Boxing Day look like a rip -off
December 27th, 2008 at 7:21 pm
Regarding the inflation/deflation debate, my take on things is consumers in the developed world have a lot of room in which they can cut back on spending and still be well off. What we are seeing is a readjustment period by consumers and banks as to where best to put their money following years of excess and bubble crashes.
Even though the money supply has been increasing for some time now, sparking the tech and housing bubbles, none of these produced much cpi inflation because productive capacity was sufficient to meet demand (in the developed world and using cheap labor from developing nations). But in a certain sense, it produced asset price inflation. Now because of the scandals and bubbles, money has been cashed out from theses assets due to waste and prices which could never be justified in terms of achievable future earnings.
This money is out there, but it does not seem like it will produce cpi inflation unless there are shortages of any essential kind and a lot of the excess money is in the hands of consumers. If the money is mainly held in reserve by banks, then cpi inflation seems even less likely. Even if there are shortages, provided they can be met by simply building capacity, the money will simply flow into those activities (but of course if it is an essential shortage like no more oil, that could be a problem).
In a way, a recession (but not depression) may be good in the long term because it will allow this money on the sidelines to make its way to more productive and important economic activities.
December 27th, 2008 at 6:57 pm
All this carnage that is supposed to be expected doesn’t seem to have happened. I was out on Boxing day and it seemed like everyone’s got money to blow away. Are we being too negative here? I was looking at the real estate newspaper and I still see tonnes of houses listed well over a million. Houses in Marpole is not worth a million but why are those crappy 33×120 lots going for more than that?
December 27th, 2008 at 3:36 pm
great read for those who think Canada is insulated from recessionary effects.
Think Globally Not Locally
http://www.globeinvestor.com/s.....7/GIStory/
December 27th, 2008 at 3:03 pm
#86 PS I love your line about
” I expect it will be a great, self-inflicted tragedy… a generation of people who will be bankrupt and homeless right at the beginning of their adult lives”.
Right on, this is exactly on the money. As I have said in previous posts
The recessions create many victims, some who will never recover”.
Keep your thinking cap on.
December 27th, 2008 at 2:13 pm
Thanks realpaul, that confirms what I’m expecting. Personally I’m in a fairly good position with no debt, but with only meager savings since I shed the student title only recently. I meet your list of qualities to possess to weather this storm, with the exception of seniority, and I can’t help that at this point.
That said, I’m in a FAR better position than the vast majority of my peers. I cannot name a single friend/co-worker/associate in my age group that has not purchased an expensive car/condo/boat/etc. at the very moment their income was sufficient to make the monthly payments. You and all the other older posters here would be surprised as to how fiscally reckless and arrogant they are, since as I said we’ve had absolute job security, up until now. I expect it will be a great, self-inflicted tragedy… a generation of people who will be bankrupt and homeless right at the beginning of their adult lives.
And yet the headlines only ramble on about how due to the market crash, the boomers have to suffer through another terrible five years of working their cushy management jobs before they can retire. Again, this is a common topic of moaning that I hear from the higher-ups at my office. It’s not that I’m bitter about this, it’s just the way it is. But as for preparing for the worst, after all is said and done I would not be surprised to see some civil unrest here at home, akin to that seen in the current youth riots in Greece.
December 27th, 2008 at 12:19 pm
#74 Alexcanuck. Bingo
#72 No Rush . I don’t want to depress you, I get no pleasure out of anyones pain, I’m neither bull or bear, just a realist with a long memory. There are many people who make it through recessions alive. These are generally people who have many irons in the fire, many contingency plans at work simutaneously and specialty educations with saleable skills as well as seniority. I began to refer to it as the ” F-U Resume”.
A big underlying factor in your survival is ‘ do you have a big nest egg to cushion you’ through readjustment periods which you may encounter. I do remember some interviews on TV of persons in the unemployment line with real rare specialties which had no practical application , like a Ph.D in Entemology.
As a junior CA you may at least be able to find part time gigs if the worst scenario unfolds. A freind of mine at the time was a CGA ( who couldn’t get work with a B.Sc in enviornmental engineering, duh)and he kept books for some local pubs, picking up a cheque here and a cheque there. Unfortunatly for him the pressure turned him into an alcoholic and he lost everything. If you’re a junior guy in any industry sector though it may be tough to find or keep a full time gig, so keep your cash up and debt down for awhile.
Huge numbers of people are/will be dislocated from the work force. It happens in waves often brutally, and then moves on to another sector, as if the recession is a beast with a cruel sick mind of it’s own.
One area which doesn’t fare badly is unionized senior government workers, go figure. Although during the 80′s recession these people were affected by revolving redundencies. Many of the senior workers were unscathed, fairly or not. No meritocracy in the union movement, favouring the entrenched and brutalizing the young workers.
Late recession behaviour by the government is increased hiring numbers. Allways too late for many. It does nothing exept create another layer of parasites for the union movement to manipulate. The cumulative effect of this is something like 12% of the CDN pop now works for the government. Socialist economics at work.
December 27th, 2008 at 12:19 pm
10 Reasons Vancouver will become the new Financial/Trade centre of Canada…
1/
Matts Sundin carries with him the Captaincy, the insignia of the new Leadership from Toronto to Vancouver.
2/
Vancouver has three ski mountains overlooking it’s city, Toronto has none.
3/
Vancouver never gets snow/rain and it’s always sunny/mild.
Toronto needs brick homes for winter and central air for humid summers.
4/
Vancouver has culture like Wreck Beach while Toronto can only attract Off Broadway.
5/
Toronto has a phony Greek Village, they serve Pork instead of Lamb with bread buns while Vancouver’s Stephos serves Lamb and properly oil smeared pita.
6/
Vancouver is closer to Maui whileToronto is closer to Saint Pierre and Miquelon.
7/
Vancouver has city casinos while Toronto has none.
8/
Vancouver has the Olympics…sorry Toronto.
9/
Vancouverites live to a ripe old age of 100 due to its healty climate…sorry Toronto.
and 10/
Vancouver has been quietly relocating all the power brokers from California and Toronto….shhhhhh
December 27th, 2008 at 12:02 pm
Madoff’s ($50 Billion Ponzi scheme) Victim List
http://clusterstock.alleyinsid.....lient-list
December 27th, 2008 at 11:06 am
Happy New Year Everyone….here are the closing gold prices in USD since 2,000
2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438, 40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — ?
It will be interesting to see if it keeps rising inverse to home prices as it has in the last two year (U.S.) and if so making it totally obvious that it has performed better than any other investment out there. Will this trend continue? Will silver outperform gold?
These are things to think about as one looks for a place to park their savings while waiting for the opportune time to shift back into real estate in say 4 or 5 years (guessing of course)
December 27th, 2008 at 10:36 am
Hanna,
You can’t separate the drug-addicted from the mentally ill. A lot of drug use is the mentally ill self-medicating. Also, even though there were lots of jobs to go around, very few employers were ready (or able) to take-on street people.
You are right, though, when you refuse to give to panhandlers. Its better to give to the Union Gospel Mission/Salvation Army/local food bank. At least you know your money is going to help these people with basic needs.
December 27th, 2008 at 10:31 am
Or maybe it will be that you can pick out a panhandler to give some food to, who will be grateful for the food because it is not drugs they really want.
I gave a big donation to Union Gospel Mission this year.
December 27th, 2008 at 10:24 am
HHH “However, when we were having our economic boom I was (and still am) constantly accosted by beggars sitting outside stores who I KNOW just wanted the money for drugs. People were begging for people to come work for them and these people preferred to get high instead.” That scene will probably change drastically by next winter. Unemployment reaching 10 % in the city will triple the homeless and panhandling will no longer support any drug habits as it is hard to panhandle when most people on the street are in the same or worse circumstances. Security guards will be one of the few “careers”
that is a growth industry. It will be like Africa where it was a rule of thumb five years ago to hire a personal vehicle guard every time you parked anywhere. So don’t worry panhandlers will go extinct!
December 27th, 2008 at 10:15 am
re: U.S. Dollar:
I have given up on making “logical” sense why the US dollar tends to be quite strong historically ….even if it is one of the world’s greatest debtor nations.
My fall back rationale is its military superpower status aka relative political stability/ relative democracy. As World Cop….the U.S. has expanded its influence elsewhere and will continue to do so. All the aforementioned has bearing on the value of the US dollar.
The same rationale explains why Russia would not be a strong currency. Only twice in my lifetime have I seen the Canadian dollar worth more than the US, and both times were short – lived.
Canada always has and always will follow in the US jetstream.
December 27th, 2008 at 9:58 am
Saw on the news that California, one of the world’s top 10 economies, is within 2 months of going broke.
Go Green Governorator Schwarzenegger is pulling back on the enviro-throttle, stating they should create work with more vehicular friendly projects(highway improvements etc.)
December 27th, 2008 at 9:50 am
Lily Pad #68:
I agree with most of that article, up until he turns so bullish on the US$. I think the amount of treasuries held overseas may start to come home, that is, get turned back into the local currency of the countries that hold them. Primarily China and the Gulf States. In addition the new liabilities the US govt has taken on in the bailouts can only add to the currency devaluation expectations for the US$. All that adds up to selling pressure on the US$. At the same time, all currencies, US included, have deflation pushing them up. So I conclude it is not so simple and easy as Wiess makes it out to be.
The US is in a lot of trouble, and the real economy in the US is probably more distorted than anywhere else in the world. In the article they talk about the trillions of dollars the Eurozone has loaned, very true, but the entire financial sector in Europe could go up in flames, and the real economy would stumble a bit, but then pick itself up and continue on much the same. They can get on fine without the rich! Much more of the economy there is producing and using the things you need everyday, that is the advantage of having a lot of poor, not too much frivolous, discretionary activity to suddenly disappear. They kept more manufacturing there, held on to the old fashioned idea of buying only what you need, and then buy high quality that will last.
I currently hold some US$ bear funds.
December 27th, 2008 at 9:25 am
I realize that there is a problem with homelessness in Greater Vancouver. And I also understand that many of the homeless are mentally impaired and should be helped at no cost to them and should be shouldered by the taxpayer. However, when we were having our economic boom I was (and still am) constantly accosted by beggars sitting outside stores who I KNOW just wanted the money for drugs. People were begging for people to come work for them and these people preferred to get high instead. And people were giving them money which only makes the problem worse. I suggest that if people stopped being such bleeding hearts and stopped giving these drug addicts money then they would be forced to get a job. I have no sympathy for these losers. Help the mentally ill and screw the addicts. (They should issue I.D. cards so we can tell the difference.) If one more of these self indulgent lazy wastes of space breaks into my car I’m going to go ballistic!
Sorry, I just hate meth heads.
Oh yeah, Merry Christmas and peace on earth and all that.
December 27th, 2008 at 9:12 am
Peter Schiff has had some mention recently. I’d like to point out he has been stunningly wrong on the past few months with regard to currency moves and “Decoupling”, and the funds he manages have suffered as a result. He may yet prove to have been right in theory but wrong only in timing, but at the moment he has lost a lot of credibility in my mind.
Have a look at this chart of central bank reserves, and the growth history.
Lower in the article, he talks about and links to some Schiff stuff, but my point is the chart. How can you see current and future inflation in that? PAST inflation, well, YEAH, but it seems to have abruptly stopped.
BTW, that immense past inflation was largely masked by the impact of falling consumer prices caused by manufacturing efficiencies and China, helped along by an insistence that the CPI is a true measure of inflation by Governments and media. (Both knew better, the latter at least should have shouted it out.)
Now that further price drops will be very difficult to achieve, and IF deflation is here, expect to see consumer essentials prices with mild upward pressure, consumer discretionary with “Craigslist pressure” down, and asset values with MAJOR downward pressure, as that is where the past credit bubble/inflation has largely parked itself. IF deflation is here; I hold an open mind. It looks like it right now, it really does. That may change, but to dismiss the possibility as absurd could be very dangerous right now.
December 26th, 2008 at 11:34 pm
FSU = Financial Sense University
http://www.financialsense.com/...../1212.html
December 26th, 2008 at 10:46 pm
realpaul,
Speaking as someone who is relatively young and has not experienced even a minor recession while being a member of the general workforce, I appreciate you sharing your anecdotes regarding past recessions and find them very interesting. I’m risk adverse by nature and happen to be good with numbers, so I pursued a career in accounting (recent CA grad) in a conscious effort to have one of the so-called ‘recession-proof’ jobs. I’m not so arrogant to believe that my job will be guaranteed to exist through the upcoming turmoil, but the impression I’m getting from you is that nobody is safe. Is there any truth as to those who are accountants, nurses, etc. are safer than others? Would it be possible for you to expand on the demographics of those you encountered in those days on the street?
And further, might I suggest that you submit a discussion topic to Pope with a few stories, in hopes that others may share their recession experiences for the benefit of those of us who are ignorant as to the upcoming day-to-day changes for life in Vancouver.
December 26th, 2008 at 10:16 pm
I’ve been checking-out the residential real estate in Palm Springs this past week (I got out of Vancouver just before all the snow started to fall). The snow is apparently still falling in Vancouver and real estate prices are still falling here in Southern California. In fact, the average price of a single family home here in Palm Springs fell from $319k in December 2007 to $276k today. That’s a pretty decent decline considering that last December people were already hurting from the declines in 2007.
Anyways, I guess it makes me suspect that Vancouver’s market will fall for a longer period of time than I had hoped. I was hoping that we would find a bottom by early 2010 but it probably could keep falling beyond that date.
December 26th, 2008 at 10:02 pm
#62 Lilypad, I think you’re on the right track with the macro. The energy story going forward is a no brainer. Eco 101. There was a very good 1 hr doc on BNN re: nuclear power generation and the uranium mining story this morning. I’m sure you can pull it off the archives.
The upside of this financial scenario is that it has put some very good companies on sale ; one of which you mentioned. The uranium story is very compelling. We have had a rough ride recently on the investment side but it is not company or industry specific/related: the recovery in this area will pay handsome dividends longer term. IMHO
Anon #60 Keynsian economics modelling such as the monetary expansion (you seem to be alluding to) has produced what is now being referred to as a ‘failed experiment’. To monetize debt and re-inflate at this point is to encourage hyperinflation, Weimar Republic style. As I said earlier, there is a global process occuring to deflate asset prices, you may have noticed the concerted efforts to curtail inflation for the time being by central governments. The fact that this recession was so sudden and global shouldn’t be a surprise to anyone. They are doing it on purpose. You don’t think they play peaknuckle at those G-20 meetings do you?
The inflation train has run out of track. Ignore this at your peril. I can tell you right now that the smart money is on the sidelines.
An old analogy in the markets is ” Money eventually finds it’s way back to it’s rightful owners”. That is precisly what is happening now.
December 26th, 2008 at 9:43 pm
Yalie,
You are so right. US is in major shit with their debt. We will see double digit interets rates soon.
December 26th, 2008 at 8:53 pm
Does anyone agree with the hypothesis propounded in this article that the US currency is the centre of all currencies?
“Jack: The third reason is the flight to the center. Think of the world currency market as a solar system. The dollar is the sun; the other currencies, the planets. As the system expands, investors migrate from the core currency, the U.S. dollar, to the inner planets — currencies like the euro, the Swiss franc or the pound.
And as the system expands even more, they migrate to the next tier of currencies, like the Australian dollar or the Canadian dollar … and then, still further, to the system’s periphery — outer planets like the Brazilian real, the Mexican peso or the South African rand. At each step of the way, they take more risk with less stable economies, use more leverage, go for bigger returns — all fueled by abundant dollar credit.
Martin:
OK. What happens when the global economy contracts?
Jack: Precisely the reverse. As the global economy begins to come unglued, they rush back to the center, creating a massive flight back to the U.S. dollar. They have no love affair with the dollar. They just see the peripheral economies going down and they dump those currencies. These are the first risky investments they sell, almost invariably switching back to U.S. dollars.
The U.S. economy, despite all its troubles, is still the dominant world economy. Militarily, it’s the only remaining superpower. Financially, it’s still the world’s capital. So it’s natural that when investors are running from risk, they rush back to the dollar, bidding up its value.”
http://www.marketoracle.co.uk/Article7939.html
December 26th, 2008 at 6:35 pm
Here is an interesting article/discussion I found on Greater Fool’s site about how the Big Three took the pension money contributed by the workers in the 1980s and 1990s when the companies were making billions and invested it overseas and how the overseas capital will be protected from bankruptcy leaving the N.American pensioners s.c.r.e.w.e.d.
http://investorshub.advfn.com/.....d=34385578
December 26th, 2008 at 6:06 pm
alexcanuck, the poll was about 2009 real estate prices. What I am saying is that in the next year, two or three we might witness a situation where nominal prices go up because money injected into fractional reserve system and currently stuck there (i.e. banks are not willing to lend, borrowers are being more careful) gets unstuck and starts flowing creating a massive surge in available dollars.
What you are referring to is not simply an asset meltdown, it is a debt crisis. Debt is the foundation of this monetary system and debt problem must be fixed. In the process of “fixing” this debt crisis central banks will inflate money supply. Creating inflation is the definition of Bank of Canada job.
Anyway, since you agree that significant and noticeable inflation is very much a possibility as the result of what is going on now, it seems like we are in a violent agreement
December 26th, 2008 at 5:47 pm
What is happening is excess inventory liquidation.
Are you talking retail prices?
I had in mind more that virtually every index of value in the world, with the notable exception of gold, is down. That means the value of a dollar is up, doesn’t it? My dollar can buy more than it could 6 months ago. Consumer prices are but a small aspect of inflation, and even they are flat or falling. I don’t expect consumer basics to have the devaluation that asset prices will, especially as the past decade or more of high inflation went mainly into asset values.
You can term it asset meltdown or forced selling if you wish, but it just does not look like inflation. This may change, I’m very open to that possibility, but right now I am betting that assets continue to decline, so I hold no assets. Cash and bear funds have been very good to me this year.
This may change, if so I will change, but right now cash is king!
December 26th, 2008 at 5:25 pm
“Right now it looks like deflation is happening.”
Where does it look like it? What is happening is excess inventory liquidation. This is not a monetary development. The monetary development that is going on is inflation.
“just yelling at and insulting anyone with an open mind”
What are you talking about?
December 26th, 2008 at 5:08 pm
Inflation?
OR Deflation?
Keep in mind this is a global bubble
All Gov’ts have to synchronize their efforts.
Anna ONE anna TWO anna THREE….
Everybody in Gov’ts everywhere Suck OR Blow at the same time !!!
December 26th, 2008 at 5:02 pm
Hi. I don’t know why four people down clicked my Christmas card, but maybe it is because they agree with the bailouts to the financials. The criticism of the bailouts was the main message of my card.
On the other hand, the down-clickers may have disagreed with the angry tired teachers message that children are suffering and some may have interpreted this to mean that the teachers want a bailout for the people who took out subprime and alt-A loans, but that was not the intention of why I posted it. My intention was just to say the bailouts to the financials who caused this mess is WRONG. Why should the ones who caused this mess be bailed out while so many children have been left in stressful situations? The poor and uneducated were targeted by the mortgage companies according to a CBC radio documentary I heard. They actually went and concentrated on targeting poor neighborhoods in the states to take on these loans. They harassed people into signing — wouldn’t leave them alone.
I think deflation is here for consumer goods such as houses, cars, oil, and electronics but inflation is here for food, coffee, fruit, vegetables and toiletries.
So, if someone were to hedge his or her bets it would be ideal to buy into commodities such as suncor and uranium for power since China and India are growing and need the energy and power. They will increase a year from now.
However, for deflation, it is better to hold CASH so you can buy up some real estate and cars, boats, electronics, etc. IFF you need them in the near term.
Also, buy some hard gold in case things get really bad and you need to buy some coffee and staples in the short term in the case that our banks fail.
So, Merry Christmas everyone and thanks to all of you for cyber friendship over the years.
December 26th, 2008 at 5:01 pm
Hope you figure out what’s going on before you run out of room in your pockets to hold million dollar bills.
Inflation may yet prove to be the big problem. Right now it looks like deflation is happening. That may change, and may change quickly. But if you are dismissing the possibility of deflation, and just yelling at and insulting anyone with an open mind, I would suspect you are the one smoking. Unless you think the meaning of inflation is the CPI, in which case you’re so far out of the loop you should stop talking and start listening. It may do your retirement fund some good.
December 26th, 2008 at 4:30 pm
“#46 Why aren’t you considering the prospect of mass deflation?. Too scary?”
Your first mistake is that you assume that i am not considering something. The second mistake is that you assume that your assumption is a fact and then you look for reasons- like “too scary”. Stop assuming.
“The inflation train has derailed and now deflation must take place in order to reprice assets.”
What are you smoking? The “inflation train” is called “Bank of Canada” along with the fractional reserve system that this institution oversees. Neither Bank of Canada nor the fractional reserve banking system have collapsed yet.
“I think deflation is more politically palatable than reveluation to western governments who at that point would have to admit failure.”
Hope you figure out what’s going on before you run out of room in your pockets to hold million dollar bills.
December 26th, 2008 at 3:55 pm
#56, Canadian dollars are being devalued at exactly the same pace as their US counterpart. The current M3 in Canada as last eported was 13.4% p/a. Meaning? , Every year the CDN dollar purchasing Parity Power recedes an additional 13.4% by adding 13.4% more paper money into the system. This makes every dollar in your pocket worth 13.4% less valuable evry year. Effectivly , you are being swindled.That’s real inflation !!!!!
As has been the practice for many years ( particularily under the Liberals) the Bank of Canada will aggresively print CDN dollars to sell into the market at a loss to force the CDN dollar down against all currencies. This is how they have kept all those anti buisness anti competition corrupt unions in Ontario and Quebec afloat for so long.
December 26th, 2008 at 3:44 pm
what other choice does Canadian Central bank have?
They need us more than we need them. Energy. We don’t HAVE to hold a peg to a diving currency.
No matter what, this will be painful. Exactly how it plays out is VERY important. Keep it coming.
December 26th, 2008 at 3:22 pm
mino3, post #55:
My guess it refers to the link: http://www.financialsense.com/...../1203.html ( FINANCIAL SENSE ® ONLINE)
December 26th, 2008 at 3:12 pm
alexcanuck (post #30):
I agree with you that Canada is more fiscally conservative, however if USD is devalued (which is what they are trying to accomplish by printing money), Canadian central bank will have to follow suit. Indeed, with 87% of exports going to US, and with exports being 45% of Canadian GDP what other choice does Canadian Central bank have?
Regarding Japan: That is true, they did have deflation throughout the nineties, but it is important to note that crash in Japan started when it was a creditor nation, and they had a positive trade balance. US on the other hand is a huge debtor, it might not be able to find enough buyers for T-bills to finance its growing 1 trillion dollar annual deficit. So, the T-bills will be purchased internally by freshly printed USD. Therefore US default will take shape of currency devaluation against other currencies, and against commodities. Internally this process will be seen as inflation. This inflation will manifest itself in a stagflation type of environment as oppossed to the inflation cased by an overheating economy and rapidly raising wages.
Here is an interesting quote on the subject of the US default: “Countries can and do go bankrupt. The United
States, with its $65.9 trillion fiscal gap, seems
clearly headed down that path. The country needs
to stop shooting itself in the foot. It needs to adopt
generational accounting as its standard method
of budgeting and fiscal analysis, and it needs to
adopt fundamental tax, Social Security, and
healthcare reforms that will redeem our children’s
future.” — Laurence J. Kotlikoff, Is the United States Bankrupt? http://research.stlouisfed.org.....likoff.pdf
December 26th, 2008 at 3:03 pm
What does FSU mean? I tried to google it, but mostly got university names. I can’t infer its definition from the context it’s used in either.
December 26th, 2008 at 2:18 pm
Yalie:
Just in briefly. Check out peter-schiff-replies-to-deflation and the linked posts that started it, including the FSU article by Schiff.
Gotta go, more later.
PS. Seymour is AMAZING. So much snow!
December 26th, 2008 at 1:58 pm
AC – you forgot to mention Peter Schiff, who has been probably the single most prescient forecaster of the current market disaster. Not only does he predict massive inflation, but he also explains why the US will not follow Japan’s post-bubble path.
According to Peter, Japan’s population had (and continues to have) an enormous saving’s rate, which meant that all the government’s attempts at economic stimulation (both monetary and fiscal) were mopped up by the Japanese people themselves. Rather than spend, they chose to save. Furthermore, the nation was and is a net creditor, so all of those Japanese bonds the government pumped out stayed in the country. In the US, they have a negative savings rate and a massive net foreign debt. Unlike Japan, the US has been running a huge trade deficit for decades. They have been buying on a massive credit card called the US Treasury Bond, and very soon, those IOUs will come flooding back into the US, buying up everything in site and leading to huge inflation.
There is no way around it… US gov’t debt is massive and growing at warp speed – the government is pumping out more and more every day in an attempt to “stimulate” the economy with even more debt. There is currently a bubble in the bond market, but that’s a very temporary “flight to safety” that every bank and financial institution in the world is caught up in. Once the panic settles down and the world realizes they’re holding a bunch of low-yielding worthless paper, the final bubble (ie the US treasury bond bubble) will pop and the US dollar will be history.
December 26th, 2008 at 1:51 pm
Yes indeed if Central Bankers could have, they would have reflated.
The reflation tool is broken. Those who have debt loads geared for infation are screwed.
Overextended landlords, bend over, and yes it will hurt, I say with pleasure.
December 26th, 2008 at 1:50 pm
Proof of 0.5% vacancy in the rental market:
Metropolitan Towers (Seymour/Nelson) is offering tenants a $200 bonus for referring new tenants.
Tight rental market indeed.