Comparing today’s recession/depression to the 1980 recession

Comparing today's recession/depression to the 1980 recession

"Much like today, Americans were concerned not only with high unemployment but increasing budget deficits in the early 1980s. A September 1983 Gallup poll found that three-fourths of the public agreed that the federal government's budget deficit was a great threat (42%) or some

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Why savers are getting screwed

Why savers are getting screwed

"Without the intervention of economic policymakers, interest rates would be naturally higher. That would increase the cost of borrowing for businesses and consumers, but there would be some offsetting economic benefits. Savers are getting screwed by the current monetary policy

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Geithner admits USA bankrupt to US Senate

Geithner admits USA bankrupt to US Senate

"Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses

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Real reason for electricity blackouts hitting southern US

Real reason for electricity blackouts hitting southern US

“Large oil companies have for a decade artificially shorted the gasoline market to drive up prices,” said FTCR president Jamie Court. “Oil companies know they can make more money by making less gasoline.” The following article was written by Paul Joseph Watson. He is t

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World economies on verge of currency revaluations to deal with debt

World economies on verge of currency revaluations to deal with debt

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford Basically what the world central banks are doing is increasing their money by devaluin

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Is Obama the next Mugabe of Zimbabwe?

Is Obama the next Mugabe of Zimbabwe?

"America, Britain, Japan, Germany, France, Sweden, Holland, Norway, Canada and Australia make up the Fishmongers Group and their meeting on Tuesday will deliberate on the state of the inclusive government, debt relief, public finance administration and the controversial economi

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US raiding foreign countries with dollars, not soldiers

US raiding foreign countries with dollars, not soldiers

""The United States is going to China and saying: we want you to commit economic suicide, just like Japan did. We want you to follow the same thing: we want you to revalue your currency, we want you to squeeze your companies, we want you to go bankrupt,” says Michael Hudson,

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FDIC wants your retirement cash to save banks: Bloomberg

FDIC wants your retirement cash to save banks: Bloomberg

“The FDIC is constantly looking at structures where we can get the greatest opportunity to tap into capital that we have not had the success reaching through previous disposition methods,” FDIC spokeswoman Michele Heller said in an e-mailed statement. “We welcome and work

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Canadian government admits recovery never happened

Canadian government admits recovery never happened

“Not only did their stimulus fail to create the jobs of tomorrow, it also failed to protect the jobs of today,” Scott Brison, the opposition Liberal Party’s spokesman for finance issues, said by telephone. "Most of us were shaking our heads in disbelief early last year w

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How Western society is brainwashed and crumbling

How Western society is brainwashed and crumbling

"The cultural embrace of illusion, and the celebrity culture that has risen up around it, have accompanied a growing system of casino capitalism, with its complicated and unregulated deals of turning debt into magical assets, to create fictional wealth for us, and vast wealth f

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Will we see double digit interest rates from the 1980s?

Will we see double digit interest rates from the 1980s?

"And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -- Thomas Jefferson Spending is

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Greenspan: credit crunch “by far the greatest financial crisis”

Greenspan: credit crunch by far the greatest financial crisis

Greenspan said that while the economy was in worse shape in the Great Depression, the recent financial crisis was potentially more harmful than that in the 1930s because “never had short-term credit literally withdrawn.” Greenspan just said that the current credit crunch

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house of 20 dollar canadian bills

“The economist who received an award for being the first to sound the alarm on the U.S. housing bubble, is warning the same could happen in Canada if we aren’t careful. Dean Baker with the Centre for Economic Policy and Research says housing prices here might collapse if interest rates rise by about two percentage points.” — 570news

According to Ed Wilmot, there is a question mark concerning your nest egg the value of your home. There may be a crack in that egg! The value of Canadian homes has been growing in leaps and bounds averaging some 10 per cent a year here in London [ Ontario]. The bubble may be about to burst. American economist Dean Baker says Canadian house prices are too high and could very easily take a tumble. Baker says there’s no reason why average home prices in Canada should be 50 per cent higher than they are in the U.S. and warns that if interest rates rise by 2 percentage points Canadian housing prices would collapse by 30 per cent. As for his credentials Baker is the economist who warned of the U.S. housing meltdown 5 years before it happened!

Will Canada have a bad real estate downturn?

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That is how the housing market collapsed in the States: the interest rates were low making it easy to borrow and prices went up because of the new demand. Then, interest rates went up and demand decreased and prices fell. The extra increase made it hard for homeowners to make payments and their homes were now worth less than what they paid originally. Are we doing the same thing here in Canada? The price of homes in some areas of this country is staggering. If interest rates are raised will the market value of these homes decrease?

Some basic research will show that in many areas of Canada, house prices have risen faster than both the Consumer Price Index rate of inflation and wages in recent years. It is not possible for this to continue forever unchecked. If wages/disposable incomes do not move up somewhat to accommodate current housing prices, then it is likely there will be at least some moderation in those prices, although don’t expect that less than 25 to 30 percent according to Garth Turner, former politician and economist.

Why is real estate so high in Canada?

One reason is foreign ownership. The Government of Canada allows wealthy citizens from China and other parts of the world to buy up the real estate in Vancouver/Major cities and force average Canadians to move into the hinterland or leave the province altogether. This is happening for years and not a mention of it anywhere. This is a major root of the issue – pricey real estate with no substantial economic wage base.

If we were really in a free market there would be a shortage in the money supply right now since the majority of people are already overextended with debt. Therefore banks wouldn’t have the funds or the willingness to approve mortgages large enough to cover the current price of homes. That would mean that prices would fall dramatically. Those of us who chose to be disciplined savers and avoided debt would be able to buy houses for reasonable prices again. I’m a free-market guy and would welcome that. Would you?

Unfortunately the government hasn’t allowed it to happen. It instead increased its influence by allowing the CMHC to insure more and larger mortgages, and the Bank of Canada, just like the Federal Reserve in the States, has been keeping interest rates artificially low and increasing the money supply to prevent the free-market correction from occurring.

To all of those who are upset about high prices, the left-wing approach (price caps, housing subsidies, etc.) is NOT the answer. The true right-wing approach (leaving the free market correct itself) is. Unfortunately no one besides Ron Paul in the U.S. has had the courage to advocate such a policy.

Is capitalism to blame?

The current system is not true capitalism (more like crony capitalism or socialism, whatever you want to call it). The government (CMHC) is using taxpayer dollars to insure bank loans to what would otherwise be considered under qualified borrowers, all in the name of keeping prices artificially inflated. That’s not capitalism, that’s corporate socialism.

In a true capitalistic society banks would be more conservative with their lending. If not they would go under when the bubble inevitably bursts, and the bankers who authorized the risky loans would end up on the street where they belong. If banks knew that their own money was on the line (ie. not insured by the big government), I guarantee you that they would require a 25% down payment and wouldn’t risk an amortization period longer than 25 years. That was the norm for decades before the big government got involved. We’d be all for that.

Related posts:

  1. Mortgage, real estate taking another hit across North AmericaAll the news reports from US and Canadian real estate associations touting that the housing “recession has ended” is just about as worthless as the hot air coming out of...
  2. Canadian housing market collapse certainty: TurnerGarth Turner, financial journalist, and Rob Carrick discuss a collapsing Canadian real estate market. * What are the indicators that there will be a housing market crash? * How bad...
  3. 3 reasons Canada’s real estate market is about to implode“The worst stimulus the government provided has not even hit the balance sheet. It was CMHC providing access to cheap credit for previously unqualified borrowers.” In 2009, CMHC’s guarantee business...
  4. Drastic deflation in housing prices coming: analystsWhat goes up must come down, and what we’re about to experience in the USA is the worst fallout because houses in the country are approximately double the historical average,...
  5. Canadian tourism heavily affected by downturn, passport requirementIn a previous article we explored how the sex industry is a forgotten economic barometer never used in analysis.   However, economists do use tourism statistics in their findings —...
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This entry was posted on Wednesday, November 17th, 2010 at 10:22 pm and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Comments

  1. January 7, 2011 @ 11:27 pm


    Canadian homes prices need to decline at least 30%. People have taken on too much debt. At the rate we’re going we’re heading into a US style melt.

    Posted by lilly
  2. January 7, 2011 @ 11:51 pm


    You are right. We haven’t caught the US’ cold yet, but we will. They already sneezed; actually they got a terminal pneumonia/flu and we’re going to get it. There is always a 2-3 year lag between what happens in the US and then to us.

    Posted by Jason

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