Tuesday, December 21, 2010

December 21 2010: Stoneleigh and Max Keiser Flatten the Canadian Economy

Arthur Rothstein Let it snow February 1940
"Guests in a Chillicothe, Ohio hotel lobby watching the snowstorm"

Ilargi: Wonder what reactions will come in to this one. Max was getting somewhat tired from all the mails he got from Canada whenever he said anything negative about the country. “Hey, I’m just the guy in the middle"... And so he called us in, the Canadians, so the complaints can now come our way. "Don’t you understand, we're different!" Yeah, right. Well, you can now explain that to a couple of fellow Canadians. Stoneleigh comes in about halfway through the episode.


Oh, Canada!

When Ilargi and I were in Paris recently, I did a couple of interviews with Max Keiser. The first you have already seen, and the second is being released today. The topic is Canada, and its enormous property bubble. Human beings are notorious for not being able to recognize a bubble when they are in one, and Canadians are no exception. We are a rationalizing species, not a rational one, and there are always rationalizations for why it's different this time - for why this time those outrageous valuations are justified. Well, its never different this time.

Bubbles create virtual wealth through speculation. People simply agree that something should be worth more (and more, and more) than it was before, although the underlying value has not changed at all. They will part with any sum in chasing momentum, because they think there will always be a Greater Fool who will pay more. Often they do this with borrowed money, leveraging their exposure to risk.

Eventually, the Greatest Fool, Biggest Sucker or Most Aggressive Speculator has been found and fleeced. Then there is nothing to support prices at anywhere near the stratospheric levels they have reached on the back of easy credit. People will then simply agree that the asset which has been the focus of speculation should be worth less (and less, and less) than it was before, as the asset bubble bursts. The virtual wealth component will eventually be more than wiped out, as all asset bubbles undershoot when they implode. For those who had been speculating with borrowed money, and for those who had been carrying the risk of that lending, the result is being wiped out. The leverage that seems to magically defy gravity on the way up will magnify the losses on the way down.

Canada is on the cusp of the shift from an extreme of complacency born of easy money to the fear of a sudden realization of being desperately over-stretched ("like butter spread over too much bread", as Bilbo said in The Lord of the Rings). Canadians carry a higher debt load than Americans, as well as using more energy per capita than anyone else in the world (with the worst structural dependency on cheap energy as a result), yet we feel special - insulated from the rest of the world, as if bad things only happen to others. Our bubble is set to implode, as all bubbles eventually do.

We have warned Canadians before at The Automatic Earth that they are living in financial fantasy world:

Bubble Case Studies: Ireland and Canada
In Canada, where I am currently, there is still a sense of invulnerability. We haven't got as far as denial yet. That's hardly surprising when you can't tell a crack-shack from a mansion in places like Vancouver.

Others have agreed with us that bubbles are not only identifiable in hindsight, but are actually clearly identifiable while in progress, if one knows what pattern to look for. When there is ample evidence of the same dynamic unfolding at different rates in so many other places, there really is no excuse for believing oneself immune to the force of financial gravity. 

As Mish points out:
Canadian Borrowing Gone Mad
Porter's statements are exactly the same kind of silliness we heard in the US regarding the central belief "massive debt is OK because it's supported by rising asset prices".

It was bad enough that anyone believed such nonsense a few years ago before the US property bubble blew sky high. That such beliefs still have proponents at the highest level of Canadian banks now seems rather amazing.

It just goes to show just how firm the belief "It's different here" is in Canada.

As always, a bubble is a society-wide phenomenon involving a toxic mix of predators, prey and a complete abdication of regulatory responsibility. Despite a warning from Mark Carney (Govenor of the Bank of Canada) that "Risk reversals when they happen can be fierce: the greater the complacency, the more brutal the reckoning.", no serious attempt is being made by regulators to take the punch bowl away from the party and reign in the debt binge. 

The banks are well aware that trouble is brewing, but are too busy profiting from a public determined to claim their role as the designated empty bag holders to prevent the situation getting even further out of hand.

Banks won't lead way on fixing debt problem
Mr. Clark said that no bank wants to be the first to impose stricter requirements on borrowers out of fear that it will suffer a major loss of customers to rivals. Personal banking "is a highly competitive industry," Mr. Clark said....

....Mr. Clark said it is impossible to expect any bank to crack the whip on borrowers because "market share loss is perceived as a strategic loss, not just a numerical or dollar loss."

This position is a bit rich coming from the CEO of TD Bank, given that TD is quietly giving its borrowers enough rope to hang themselves by offering ever more credit, but with requirements that pile all the risk on to borrowers in ways that people are unlikely to understand. See this gem from Garth Turner:
[TD bank] is registering all its new home loans as collateral mortgages, rather than conventional ones. If you have no idea what that means, you’re normal. A collateral mortgage is a loan which is backed by a promissory note which is in turned backed by security. A conventional mortgage, as you know, is just a loan secured by a house. Normally the only people who are asked to sign collateral mortgages are folks who use their houses to arrange lines of credit with balances that can balloon, not a regular mortgage with a fixed amount owing and a standardized payment.

With a conventional mortgage there are strict rules about how much you can borrow determined by the value of the property when you take the loan. Not so with a collateral mortgage, because it’s actually a loan which is backed by your promissory note. That means you can borrow more than your house is worth.

Yes, just like those old fast-talking Ditech.com TV commercials offering American homeowners mortgages worth 125% of their home’s value – the ones we used to snicker at. Well, giggle no longer. TD is now shopping 125% collateral mortgages.

In fact, bank customers (I’m told) are being encouraged to 'register' for 125% mortgages when they sign up, even if they don’t need all that money. It’s just there, the pitch goes, if you ever need it. Kinda like a built-in line of credit you don’t need to reapply for. (Of course, it should be lost on nobody that the bank just found a way around guidelines on loan-to-value ratios.)

OK, so much for the conservative Canadian bankers part. But it gets better. For the bank.

With a conventional mortgage it’s your house backing the loan, which means transferring a mortgage is simple, and can be done for a couple of hundred bucks. But collateral mortgages cannot be transferred, since they’re more akin to personal loans. That means one must be discharged and a new mortgage arranged elsewhere if you want to move. Since that can cost thousands, not hundreds, it pretty much ensures you won’t.

Stoneleigh: I strongly suggest people read the entire article in order to understand how deep a hole real estate purchasers are unwittingly, yet enthusiastically, digging themselves into in Canada. As always, the public is being set up to take the fall. Yes they are being greedy, but they are also being led up the garden path by those who should know better, and those who should know better are being far greedier in doing so.

Understanding bubble dynamics is vital, and seeing a bubble for what it is while still inside it is even more so. Canadians need to wake up.

Stoneleigh and Max Keiser Flatten the Canadian Economy

This time Max and Stacy talk about the rise of financial activism and about Janet Tavakoli's presentation and repairing the damage of fraud as a business model. In the second half Max talks to Nicole Foss about the unpopped bubble in Canada.

The Automatic Earth needs your support this Christmas season!

You can buy the DVD-Rom of Stoneleigh's famous lecture "A Century of Challenges", or the streaming file of the same lecture (see right hand column for both), you can simply make a donation - one-time or recurring - (see left hand column), and you can of course do any two of these or even all three! And don’t forget visit our advertisers -free of charge- on a regular basis. That's what they're here for.

Happy holidays to you and yours from Stoneleigh and Ilargi!

Cause for Canadians to worry? You betcha
by Arthur Donner And Doug Peters - Globe And Mail

Canada’s economic rebound out of recession has run out of steam. Canadian real GDP posted a meagre 1 per cent annualized rate of growth in the third quarter, the economy recorded a record high trade and current account deficit of 4.2 per cent of GDP, and job creation virtually ground to a halt in the last quarter. And this despite government efforts to stimulate the economy through infrastructure spending – which is scheduled to soon end.

For a change, the U.S. economy outpaced Canada’s, advancing at a 2.5 per cent annual rate in the third quarter of 2010. Nonetheless, both output and employment in Canada are above their previous peaks in 2008. In many respects, however, the U.S. economy is in worse shape than Canada’s.

Despite growing substantially stronger than Canada’s economy in the third quarter, the U.S. has restored only two-fifths of the jobs it lost during the downturn, the unemployment rate was 9.8 per cent in November, and a broader measure of unemployment, which includes discouraged workers and involuntary part-time work, was 17 per cent.

Moreover, it has required the application of extraordinarily hefty fiscal and monetary policies and corporate bailouts to keep the American economy growing. The U.S. government’s fiscal deficit is enormous, and proportionately as steep as the deficits of Ireland and Greece, countries that are experiencing great difficulty in funding their deficits. As of October, the U.S. government was running a $1.26-trillion budget deficit.

On the monetary policy side, because interest rates were virtually zero, the Federal Reserve has had to turn to new, rather untested policies to keep the U.S. economy growing. Thus, the Fed began a second round of quantitative easing with the intent of purchasing $600-billion of long-term Treasury securities over an eight-month period.
Given the recent slowdown in Canada’s economy and the U.S. economy’s apparent doldrums, is there cause for Canadians to worry? To quote Sarah Palin, “you betcha!”

• While Canada has replaced all of the jobs lost from the recent downturn, we still have some distance to go in terms of lowering the unemployment rate and providing a healthier jobs outlook.

• When the Canadian economy was shedding jobs (October of 2008 through July of 2009), we lost 496,000 full time jobs, while part-time jobs increased. To date, only 74 per cent of the full-time jobs lost before the summer of 2009 have been restored.

• There is a significant disconnect between the job prospects of younger Canadians and older ones. In November, the national unemployment rate was 7.6 per cent, while the unemployment rate for those between 15 and 24 was 13.6 per cent. While roughly half of Canada’s job losses between October of 2008 and July of 2009 were young people, there has been no recovery in youth employment.

• It’s more than a bit surprising that, in an environment of soaring commodity prices, Canada’s current account deficit should escalate as high as 4.2 per cent of GDP, its worst showing since the mid-1970s. Current account deficits of this magnitude make it very difficult for Canada’s economy to grow. With the trade and current account deficit escalating at an alarming pace, Canada’s international debtor status also becomes a concern.

The Bank of Canada, which recently commended our financial system, suggests that most of the risks at this time are external. Nonetheless, it’s correctly concerned that household indebtedness is too high. Such debt, in fact, has increased to 14.5 per cent of disposable income as Canadians have taken advantage of super-low interest rates to purchase homes and other consumer items on credit.

This rather high level of indebtedness would be fine if the economy were expanding at a decent pace and strong jobs growth could be counted on. But there are clear grounds for worry on many tacks, including the future growth rate of the economy and the pace of future job creation.

Indeed, as badly off as U.S. households are as a result of the Great Recession, they have sharply increased their personal savings out of disposable income and have in rather short order reduced their indebtedness back down to Canadian levels.

What’s missing from the Canadian scene is a substantial growth in jobs creating investments in manufacturing and new technologies, as well as growth in exports. The business community has been sitting on cash and not been investing sufficiently in new plant and equipment. Canadian business must also take advantage of export opportunities in those areas of strong economic growth such as China, India, Brazil and Germany.

Only when such opportunities are fully exploited by Canadian business will there be enough jobs for Canadians and for youth to gain their rightful opportunities to participate in our economy.

Bank of Canada asks: 'Do you feel lucky?'
by Calgary Herald

It may have the ring of an old-time preacher warning parishioners in his congregation about temptations that lead them a fiery destination, but the Bank of Canada was at it again recently about the high level of Canadian consumer debt.

In its December review of the financial system, the Bank of Canada looked abroad and at home to gauge the potential for unpleasant shocks to the financial system. Outside of Canada, the bank spotted global sovereign debt as a potential problem in the months and years ahead.

"A key concern is that the acute fiscal strains in peripheral Europe and weaknesses in the European financial system could reinforce each other and have adverse effects on other countries, including Canada, through several interconnected channels," wrote the bank's economists.

In layman's terms, what the bank is concerned about is the risk of default in some high-risk countries (think Ireland, Spain, Portugal and Greece for starters); that would force losses, perhaps massive ones, on bondholders and banks that hold such sovereign debt. Should such defaults occur, even partly, some banks with too much sovereign debt on their books may need to turn elsewhere to stay afloat. But at that junction, other financial institutions may be reluctant to lend money, even on a short-term basis.

Should such banks be located in countries where the governments are themselves already deeply in debt, then some other country or institutions such Germany or the European Union or the International Monetary Fund may have to step in to provide assistance and liquidity. But that can only happen so many times before either taxpayers in those countries refuse to ante up more money. In that scenario, contagion becomes a problem as some institutions and then countries may fail.

Such scenarios keep central bankers up at night and also have the potential, if they arise, to freeze up the world economy, much as happened in 2008 when credit dried up after the Lehman Bros. collapse, except that next time it might be a country's finances that collapse and send shock waves.

Which might be why the Bank of Canada sent out this other unsubtle hint to Canadians in the same report: Stop taking on so much debt. Canadians are taking on debt faster than their income is growing, noted the bank, and that's a potential problem.

Should international financial stresses indeed come to pass and banks start to pull back lending to preserve capital, a mutually reinforcing and negative downward circle will begin, where economies deteriorate and lenders are cautious; that will slow economies even further.

In the everyday world, that can mean layoffs and households unable to pay their bills. Of course there is good and bad debt, and mortgages -- especially ones for your principal residence and not speculative properties -- are not as troubling as other kinds of debt. Nevertheless, as Canadians consider their finances looking ahead to 2011, it's a good time to heed the central bank's warning and ask yourself this Clint Eastwood question: Do you feel lucky? If not, be careful how much debt you take on.

Alberta deficit at $5 billion
by Trevor Busch - Vauxhall Advance

The province's push for a balanced bottom line has been stymied in 2010 thanks to increased spending for disaster and emergency relief and continued revenue uncertainty. Last week, government released the second-quarter fiscal results, which indicate Alberta's forecast deficit for 2010-11 has escalated to $5 billion, an increase of $257 million from budget.

“It is not the fact that we’re spending more,” said Little Bow MLA Barry McFarland. “The revenue picture just doesn’t rebound with the quantity of gas being produced, and the low price. Right now, the gas portion of the royalties just aren’t adding up to what was anticipated earlier.”

Revenue is forecast at $34.1 billion, up $127 million from budget, but has been offset by a $384 million increase in expenses, to $39.1 billion. Operating expenses remained relatively flat compared to budget, while expenses for capital grants decreased $190 million. Spending increases were mainly required for disaster and emergency assistance for municipal flooding, wildfires, the agricultural sector and the campaign against mountain pine beetle infestations.

Higher-than-projected land lease sales, corporate income tax revenues and federal transfers are responsible for the increased total revenue of $127 million. However, total revenue also suffered from lower-than-expected personal income tax revenue, investment income and the increased cost of drilling stimulus initiative claims. “That’s what’s being anticipated, most of that (increase) is coming from the bitumen side. The downside is the natural gas — the prices are low and the volumes are taken down much lower,” said McFarland.

Sustainability Fund assets are forecast at $11 billion for year-end, a substantial increase of $2.8 billion from original budget estimations. “We’re bloody lucky we’ve got it there, because you’ve still got the deficit in the operating budget technically for the current year,” said McFarland. “That’s before you take into account that we can transfer money from the Sustainability Fund, which in layman’s language is like your savings account that you have in the bank, to offset it.”

The Heritage Fund earned $391 million in the second quarter due to positive returns in world equity markets, which offsets a first-quarter loss of $164 million, bringing to $227 million the total income earned by the fund in the first six months of the 2010-11 fiscal year. The fund's fair value is currently $14.8 billion.

Flaherty forges ahead with pooled pension plan scheme
by Stefania Moretti - Canoe.ca

Canada’s finance ministers have agreed to move forward with Finance Minister Jim Flaherty’s idea to develop a pooled private pension system designed for workers without a corporate savings plan. Flaherty was at odds with several provinces over PRPPs heading into Monday’s meetings on pensions and the economy at the Rocky Mountain resort of Kananaskis, Alta.

 The finance ministers of Quebec and Alberta backed the idea but their counterparts in Ontario and British Columbia wanted to see an expansion of the Canada Pension Plan instead. “We’re all agreed we want Canadians to save more,” Flaherty told reporters. “I’m particularly pleased to announce that we reached agreement on a framework for the introduction of a new kind of pension plan.”

Officials will continue to study various CPP options -- including higher regular contributions to the mandatory retirement fund -- before reconvening on the issue in June. “We are all concerned about a fragile economic recovery…so there is concern about not putting more burdens on employers right now,” Flaherty said. Critics have charged the PRPP is just another glorified savings vehicle.

“Of course it’s a savings plan. It’s a really important savings plan,” Flaherty said. “There is a group of people who work for relatively small employers or who are self employed who don’t have the option now of a pension plan and this new initiative will help alleviate that.”

PRPPs are expected to be mandatory for employers to offer, though employers most likely won’t forced to top off funds by making regular contributions on the workers’ behalf. The plans would offer defined contributions administered by a third party, probably a financial institution. The savings vehicle is supposed to be relatively low-cost because of its sheer size and simplicity.

Flaherty also warned provincial governments to trim budget deficits. “It is important to remember that Canada’s economy is recovering well before other nations precisely because we had our fiscal fundamentals in order going into the recession,” he said. “Returning to that position will give our recovery more traction and make us even stronger going forward—supporting jobs and growth and insulating us from these global shocks in the future.

Flaherty expects most governments to return to black by 2015. Canada's 2009-10 deficit totalled $55.6 billion, or 3.6 percent of gross domestic product. Ottawa aims to shrink that to $45.4 billion in 2010-11 before returning to surplus in 2015-16. Most of the provinces expect to have deficits of their own in the 2010-11 fiscal year. Ontario has the biggest shortfall at an estimated $18.7 billion this year.

UK budget deficit balloons to record high
by Telegraph

Britain's public borrowing unexpectedly hit a record £23.3bn in November, the Office for National Statistics (ONS) said on Tuesday. The figure, which excludes financial interventions by the Government, was a marked increase on the £17.4bn a year earlier and beat the previous highest monthly borrowing record of £21.1bn in December 2009, according to the official figures.

Total public borrowing for the year to date now stands at £104.4bn, the ONS said, creeping closer to the Government's target of £149bn for the financial year. Economists have warned the coalition is in danger of exceeding the target – and overshooting the Office for Budget Responsibility's recently downgraded forecast of £148.5bn for the year.

The bigger-than-expected figure will be seen by Chancellor George Osborne as supporting the need for recent austerity measures, which include an £81bn package of spending cuts and a hike in VAT next year. Economists were braced for a rise in the year-on-year level of public borrowing in November but none predicted a figure so high.

Jonathan Loynes, chief economist at Capital Economics, told PA: "Given that the economy has expanded rather more quickly than anticipated over recent quarters, we might have expected somewhat lower current borrowing, even allowing for the usual lags." The unprecedented £5.9bn leap in borrowing was mainly due to Government spending – up 10.8pc on last year. EU contributions and spending on health and defence were particularly high last month, the ONS said, while VAT receipts dipped by 0.1pc.

Net debt is now £863.1bn, which represents 58pc of gross domestic product (GDP) – another monthly record. A spokesman for the Treasury said the figures backed the Government's fiscal-tightening measures and were in line with the forecasts of the tax and spending watchdog. He said: "November's borrowing figures show why the Government has had to take decisive action to take Britain out of the financial danger zone.

"These outturns are also in line with the Office of Budget Responsibility's latest forecast for borrowing to fall by almost £10bn this year compared to last, and for tax receipts to increase by over 7pc year on year."

While total tax revenues are increasing, economists have warned the Government is battling against ever-increasing interest payments on its mammoth debt levels. Mr Loynes added: "Overall, there is nothing here to weaken the Government's determination to see through its austerity programme. But we continue to doubt that the economy will weather the coming fiscal storm as well as it hopes."

Fiscal squeeze will squash the poor
by Larry Elliott - Guardian

In many other countries it would be a recipe for civil unrest, perhaps even revolution. Britain, though, is a placid place and it takes quite a lot to get this country's dander up. Sure, we've had protests from students this autumn but the latest forecasts of expected trends in poverty were greeted with a resigned shrug of the shoulders.

Make no mistake, the findings from the Institute for Fiscal Studies (IFS) make depressing reading. Child poverty? Going up over the next three years. Poverty from working-age adults with children? Going up. Poverty for working adults without children? You guessed it. Going up also.

And these – lest you get the wrong end of the stick – are not increases in relative poverty. They are increases in absolute poverty: the number of people living on less than 60% of the national income adjusted for inflation. And they are not nugatory increases either: by 2013-14 an additional 900,000 people will have slipped below the breadline.

There is a stock response to findings of this sort. The first line of defence is to say that there is something wrong with the methodology – this has indeed been the default setting for David Cameron and Nick Clegg. Funnily enough, they found little to complain about when the IFS was using the same approach to question Labour's record on poverty.

A second line of defence is to say that even if the figures are right, an income of 60% of the national median is not real poverty in the sense that it is for someone living on less than $2 a day in sub-Saharan Africa. This, it has to be said, tends to be trotted out by those with little personal experience of rubbing along on benefits or the minimum wage topped up with tax credits.

Finally, it is argued that the UK needs a complete rethink of its approach towards poverty because the approach of the Blair-Brown governments between 1997 and 2010 failed by concentrating on state handouts rather than tackling the root causes of the problem: worklessness and dysfunctional families.

This is a more serious critique, though it ignores a few inconvenient truths. The first is that Labour did try to get the poor into work: employment reached record levels of above 30 million during the boom years. The second is that poverty did come down, if not by nearly as much as Blair and Brown hoped.

If the IFS is right – and, frankly, its record of sticking it to governments on both left and right gives it credibility – the encouraging progress made by Labour in its last couple of years in office is now about to go into reverse. After 2013-14, poverty will need to fall by 1.5 percentage points each year until 2020-21 to meet the legally binding goals in the Child Poverty Act. The IFS notes drily that this has not been accomplished in any period since comparable records began in 1961.

Tackling poverty is tough but it has been done before. The chronicles of Britain between the wars show that deprivation was deep and widespread, prompting the social reformer William Beveridge to identify the giants barring the way to progress: want, disease, ignorance, squalor and idleness.

The subsequent sharp fall in poverty after the second world war was the result of five interlocking policies. Expansionary macro-economic policies and a commitment to full employment meant there was plenty of work. Strong trade unions and a relatively protected economy meant that real wages rose in line with productivity, allowing workers to enjoy rising living standards. High levels of growth allowed governments to increase public spending on the NHS, schools and housing; an investment in the so-called social wage that particularly helped those on lower incomes. Fiscal policy redistributed higher taxes on the rich to the poor.

These four distinct policies combined to create greater social mobility: working families could see that they were better off than their parents and had higher aspirations for their children.

How do recent governments match up to this record? Labour under Blair and Brown had an expansionary macro-economic policy of sorts, albeit one far too dependent on the build-up in personal debt and the financial bubble in the City. They did far less to boost the level of real wages, which, as the International Labour Office showed last week, were falling in the last full year before the election, but they did boost public spending substantially.

Tax and benefit policy involved quiet redistribution from rich to poor and that helped blunt the increase in inequality. There was, as far as can be established, no improvement in social mobility. At best, therefore, Labour scores two and a half out of five.

The coalition government has begun the biggest fiscal squeeze since the second world war – a move that will cut national output by 0.5% in each of the next four years. The freeze in public-sector wages coupled with rising VAT means that real wages are set to fall. Departmental spending is being cut, with the austerity at local government level likely to have a particularly harsh impact on the poor. Tax and spending measures introduced by George Osborne (as opposed to the ones inherited from Alistair Darling) hit the poor harder than the rich. Apparently, though, this – coupled with the scrapping of the educational maintenance allowance and higher tuition fees – adds up to a recipe for greater social mobility. These people must take us for mugs.

Cameron and Clegg have all the right progressive talk about tackling the root causes of poverty but, as the IFS shows, threaten to make the problem worse. These are, of course, early days. Maybe George Osborne will do something in his budget to tackle poverty. Maybe the Universal Credit will be the answer when it is finally introduced. Maybe, though, this is simply a case of what you see is what you get: a deeply conservative government with a 1930s-style social policy to go with its 1930s-style economic policy.

Doug Kass: Gold will fall 25% in 2011

Emergency unemployment benefits reauthorized
by Auburn Reporter - Seattlepi

Thousands of Washington’s jobless workers may continue to receive up to 99 weeks of benefits, now that Congress and the president have reauthorized a federal unemployment benefits program that expired last month.

“This is welcome news for unemployed workers who are having a hard time finding a job,” said Joel Sacks, Deputy Commissioner for the Employment Security Department. “We need to keep a safety net in place until the economy gathers more steam.”

For the past year, eligible jobless workers could receive up to 99 weeks of unemployment benefits, collected in this order: up to 26 weeks of regular benefits, up to 53 weeks of emergency unemployment compensation (EUC) and up to 20 weeks of extended benefits. Today’s action extends the EUC program, but does not expand the total weeks available. Therefore, people who have already collected all of their EUC benefits are not eligible for these additional benefits. Depending on where individuals are in their claims cycle, they will fall primarily into two categories – those who are eligible for more benefits and those who are not.

Eligible for more benefits
When the EUC program lapsed at the end of November, individuals in tiers 1, 2 or 3 of the four-tiered EUC program could not advance to the next tier (e.g., could not move from tier 1 to tier 2), thereby losing access to the balance of their EUC benefits. Also, individuals who ran out of regular benefits after November could not enter the EUC program, thus limiting them to up to 46 weeks of benefits.

Under the new EUC extension, unemployed workers approved for regular state benefits or EUC tiers 1, 2 or 3 may claim their full entitlement of EUC benefits. Currently, about 300,000 people in Washington fall into these categories. These people will automatically move to the next tier of benefits and do not need to call Employment Security. Claimants who believe they have EUC benefits remaining but stopped claiming must call the EUC triage unit at 877-558-8509 to reopen their claims.

Not eligible for more benefits
Under the new legislation, the EUC program remains at a maximum of 53 weeks. Therefore, people in tier 4 of the EUC program, as well as those collecting “extended benefits” and those who have used up all of their benefits, are not eligible for additional benefits.

Weak Get Weaker as Muni Bonds Are Sold Off
by Tom Lauricella and Jeannette Neumann - Wall Street Journal

Amid the recent selloff in the municipal-bond market, investors are increasingly differentiating between state and local governments with strong finances and those facing big fiscal woes. That trend could have significant implications for holders of bonds issued by weaker state and local governments, some of which are already paying higher interest rates and have seen the prices of their bonds decline in value.

Tax changes lag housing prices by about three years Image: Hedgeye

The growing gap between what the strongest and weakest government issuers pay to borrow brings unpleasant echoes of the European debt crisis, where escalating yields paid by countries such as Greece and Ireland made their fiscal situations untenable. For muni investors, the scenario could prove similar—a series of rolling crises as the spotlight goes from one troubled issuer to the next.

Underlying this dynamic are issuers struggling not just with budget woes but with higher borrowing costs that end up inflating budget deficits. That prompts still more borrowing and also can result in ratings downgrades that can further raise borrowing costs. "It's a downward spiral," said George Rusnak, national director of fixed income for Wells Fargo Private Bank.

The news isn't great for investors in the $2.8 trillion municipal market, who include individual investors and property- and casualty-insurance companies, as well as more-recent investors, such as pension funds and foreign investors, attracted by a relatively new type of taxable muni bond. Over the past month and a half, the municipal-bond market has taken it on the chin. The yield on 30-year, triple-A-rated municipal bonds closed at 4.66% on Friday, according to a widely watched index published by Thomson Reuters Municipal Market Data. That is up from 3.86% on Nov. 1.

The hardest-hit borrowers generally have been those seen as in the most dire fiscal shape. The market typically punishes creditors perceived as riskier by demanding higher yields. Some analysts anticipate yields paid by the most troubled municipal borrowers will only continue to widen next year in comparison with the broader market.

For Illinois, rated the worst in the country by Moody's Investors Service at A1-negative, the gap between what the fiscally strapped state pays on its 10-year-maturity bonds is now 1.9 percentage points above that for the broader muni market. Just a month ago, the spread for Illinois stood at 1.6 percentage points, according to data from Municipal Market Data. A year ago, that gap was less than one percentage point. Spreads on Illinois bonds could reach as high as two percentage points next year, says Wells Fargo's Mr. Rusnak.

State-by-State Variations
Nevada, which carries a slightly better credit rating of Aa1-negative from Moody's and is seen as especially hard hit by the housing-market collapse, has seen its borrowing spread rise to 0.80 percentage point from 0.5 point on Nov. 1. In comparison, Pennsylvania, which has the same rating as Nevada but whose fortunes are perceived by the market as relatively brighter, is paying just 0.2 percentage point above that of the broader muni market, about the same as it was both a month ago and in late 2009.

For states with greater perceived risks, "investors are asking to be compensated for it," said Tom Kozlik, municipal credit analyst at Janney Capital Markets. The potential for spreads to widen comes as some analysts expect the level of yields on muni bonds broadly to be on the rise next year. One big reason is the end of the Build America Bonds program, which helped the muni market by diverting some $150 billion in issuance into the taxable-bond market.

Bank of America Merrill Lynch, for example, expects muni yields to rise 0.35 to 0.50 percentage point without the program. In the case of Illinois, which sold $10.9 billion in longer-term debt in 2010, an extra 0.35 percentage point on its debt would have meant an extra $38.2 million in interest payments.

Could Problems Spread?
A key unknown for investors is whether severe financing problems will remain isolated to individual struggling issuers or instead spread to healthier issuers. John Longo, investment strategist at advisory firm MDE Group in Morristown, N.J., thinks that as long as any defaults remain few and far between, the impact will localized to those issuers. However, "if there are many defaults, it could result in a macro, contagion-type risk," Mr. Longo said.

Comparisons to Europe are ill-placed, said John Sinsheimer, director of capital markets for Illinois, because Illinois doesn't roll over its debt in the same way some European countries do. "In Illinois, all our debt is paid off like clockwork every year," Mr. Sinsheimer said. There are other differences between the European government-bond market and munis. For example, local governments can try to turn to their states for support, and there are existing frameworks for municipalities to work through restructurings.

Janney's Mr. Kozlik notes that there also has long been the option to sell so-called deficit-reduction bonds, as Massachusetts did in 1990 to bridge a huge budget deficit. However, he notes, such bonds will still cost an issuer more money in interest. On the flip side, the European bond market has been propped up by bond purchases by the European Central Bank. Analysts say they can't recall a large-scale purchase of muni bonds by the Federal Reserve, and the law limits the Fed's ability to buy muni debt to only certain kinds of very short-term securities. However, some in the market speculate that, should a third round of quantitative easing—injecting cash into the market through bond buying—become needed to boost the economy, the Federal Reserve might buy munis.

The big question is whether the recent muni selloff will continue. Some of its catalysts could prove transitory, such as the rise in U.S. Treasury yields, which long-term munis tend to track. In addition, a burst of heavy selling by mutual-fund investors came close to the year's end, just as Wall Street brokerage firms are trying to keep inventories of bonds on their books as low as possible

But 2011 could see increasing strains on state and local governments' balance sheets. That is partly because of expectations that the job market will remain weak, depressing revenues brought in from payroll taxes and making it politically unpalatable to raise taxes on unemployed residents.

Diminishing Collections
At the same time, property taxes are "poised to decline" in coming years, the Congressional Budget Office said in a report this month. That is because homes aren't reassessed every year, so local property-tax revenue lags behind falling house prices by three years on average. "Even small declines in collections could cause fiscal stress when the cost of providing public services is growing," the report said. Also, state aid to local governments has already declined in many states and is expected to be cut by more states next year.

This is no small issue. Towns and cities rely on property taxes for nearly one-fourth of their revenue and state aid for another third, according to the CBO. "Municipalities are going to be doing belt tightening, but there's only so much belt tightening they can do," said MDE's Mr. Longo. If they are hit with higher borrowing costs and lower property-tax revenues, "that becomes an unsustainable position."

Ireland's 'bad bank' NAMA becomes one of world's biggest property lenders
by Lisa O'Carroll and Elena Moya - Guardian

Ireland's controversial new "bad bank" has overnight become one of the biggest property banks in the world after it completed the acquisition of developers' loans worth more than €70bn (£59bn). The National Asset Management Agency now controls the loans on hotels, housing estates, shopping centres and development sites across Ireland, the UK, mainland Europe and elsewhere, including part-ownership of landmark sites such as Battersea power station.

The agency, which is charged with clearing Ireland's debt mountain, has the legal right to acquire every single land and development loan from the five main banks in the country. The details from NAMA were released as the euro fell to a record low against the Swiss franc after Moody's downgraded some Irish and Spanish banks, fuelling investors' fears about the capacity of these troubled countries to pay their debts.

The credit agency cut the rating of Allied Irish Banks, Bank of Ireland, EBS Building Society, Irish Life & Permanent, and Irish Nationwide Building Society. The senior debt and bank deposit ratings of Anglo Irish Bank were also downgraded. The move follows last week's cut of Ireland's sovereign debt by the agency. "The banks' debt ratings are affected by the downgrade of the Irish government, as the high degree of systemic support from the government had so far largely mitigated the pressure stemming from a much weaker standalone credit profile of these banks," Moody's said.

The problems for Spanish banks also continue to mount. The agency, which recently warned Spain about a possible sovereign debt downgrade, placed the debt ratings of 30 Spanish banks on review for a possible cut. NAMA also announced that it had wrested €130m from unnamed developers who were trying to escape from its clutches by transferring property assets to their wives. In all, NAMA has acquired some 11,000 loans with a nominal value of €71.5bn from developers at the centre of the property crash in Ireland.

A spokesman said no geographical breakdown would be provided, but details released this year show that at least €10bn relates to property in the UK owned by the top 30 developers in the country. Last night the chairman of NAMA, Frank Daly, said developers had done enormous "damage" to the country and should work for nothing to help the state recoup the money for tax payers.

"A lot of these people have done an awful lot of damage to the country and they really should work for nothing for the country. That's the sort of anger I feel and the degree of upset I feel about this," Daly told RTE television.

Although NAMA has a policy of not naming developers now under its wing or the assets it has just acquired, some of London's best-known landmarks including Battersea power station, Bow Street magistrates court and the Pan Peninsula Ontario Towers in Docklands were bought or built by developers now in the bad bank. NAMA has paid about €30.2bn for the loans, representing an aggregate 58% discount.

One of the biggest developers affected is Real Estate Opportunities, which owns Battersea power station. It is relying on the support of NAMA to stay solvent. Bank of Ireland contributed €100m to the €600m used to acquire Battersea at the peak of the property boom in 2006. It has renegotiated terms of the loans relating to the acquisition with Lloyds and NAMA (which bought the Bank of Ireland loan) with repayment extended to August 2011.

The loans relating to the Maybourne Group, the Irish company that owns the five star Claridges, Connaught and Berkeley hotels have not been transferred to NAMA as they are currently the subject of a Supreme Court action by its owner Paddy McKillen who has argued that his loans are all performing and should not be hoovered up by the bad bank.

Gerry Barrett, who owns Bow Street magistrates court, is also in NAMA, as is the Ballymore Group, which owns several tower blocks and has developments in and around Canary Wharf. Developers are now required to run all their financial plans through NAMA, which said it has concluded its review of business plans from the top 30 developers which include REO, Gerry Barrett and Ballymore.

How Detroit turns into a prairie

Hardships of a Nation Push Horses Out to Die
by John F. Burns - New York Times

In this country of lush green landscapes, celebrated for its traditional love of horses and the generations of racing thoroughbreds it has bred to conquer the racetracks of the world, the Dunsink tip on the outskirts of the Irish capital is a place that wounds the heart.

Atop a muddy dome stretching over hundreds of windblown acres, bitingly cold in the bitterest early winter many here can remember, roam some of the tens of thousands of horses and ponies that have been abandoned amid Ireland’s financial nightmare. Only miles from the heart of Dublin, the tip, a former landfill now covered with a thin thatch of grass, is the end of the road for all but the hardiest animals, a place where death awaits from exposure, starvation, untended sickness and injury.

Beside a busy expressway, on one of the tip’s distant corners, mounds of fresh dirt mark the graves of the weakest horses, freed from suffering by animal welfare inspectors with .32-caliber pistol shots to their heads. Overhead, airliners climb out of Dublin’s international airport, where a plush new terminal matches Dublin’s sprawl of gleaming steel-and-glass buildings built for the investment tide of the boom years.

The distress among the country’s horses began showing up more than two years ago, when Ireland’s property boom collapsed. That was a grim marker on the road to the crunch that hit this month, when Ireland accepted a $90 billion international bailout package, pledged on the government’s promise of instituting the harshest austerity measures in Europe.

By rough economic estimates, the $20 billion in spending cuts and tax increases promised over the next four years by Prime Minister Brian Cowen’s government will lead to a 10 percent cut in the disposable income of Ireland’s middle class, and greater hardships still for many of the country’s poor. They will be hit by welfare cuts, public-sector job losses and a sharp reduction in the minimum wage, as well as a wider economic turndown, on top of the 15 percent shrinkage in the economy since 2008, if the emergency measures fail to restore economic growth.

But the horses that are such an enduring part of Irish culture are paying a price, too. For generations, keeping horses has been an Irish passion — for those who like to enter them in flat-racing, steeplechase and show-jumping competitions, for those who keep them for recreational occasions like hunts and equestrian events, and for still others who see horse ownership as a symbol of prosperity, much as other people find pleasure in owning luxury cars.

How many horses and ponies have been abandoned is a matter of informed guesswork. Irish laws require all owners to have their animals registered, and tagged with microchips for identification, but the laws have been only sporadically enforced. What is certain is that the boom years brought a rapid growth in breeding, and that tens of thousands of people who could not previously afford a horse or pony entered the market, many of them keeping their animals in gardens, on fenced-off building sites or on common land like the Dunsink tip.

With the economic downturn, many found that they could no longer afford to feed or stable the animals at costs that can run to $40 a day and more and abandoned them to wander untended around construction sites, through towns and villages and along rural roads. One common estimate, put forward by Joe Collins, president of the Veterinary Council of Ireland, is that there are 10,000 to 20,000 “surplus horses” across the country. Another leading expert on horses, Ted Walsh, the father of one of the country’s most famous steeplechase jockeys, Ruby Walsh, has said that the number could be as high as 100,000.

Another way to measure the scale of the problem is to visit the Dunsink tip. Celebrated in history as the site of one of Europe’s most famous astronomical observatories, established in 1785 at a time when Dunsink lay in open country, it became in more recent times a trysting place for drug dealers, car thieves and desperate people who came to its desolate reaches to hang themselves from the trees sheltering on the lower reaches of the land. The sense of desolation is accentuated by the scatter of concrete venting pipes that draw off lethal methane gas from the generations of decomposing garbage below.

But Dunsink was also traditionally a place to graze horses, common land where those without stables and land of their own could set their animals to roam, then return to recover them later. For some owners, that has not changed, and Dunsink still serves, for them, as a convenient and cost-free range. But for others, it has become a favorite dumping ground for horses and ponies they can no longer afford.

Differentiating between the various kinds of owners is not easy, as became clear in an encounter with Thomas Boyd, one of the few souls besides an animal inspector who had braved the near-arctic cold on a recent afternoon. Mr. Boyd, 33, recently released from Mountjoy Prison in Dublin after the latest in a series of terms for what he described as “law and order offenses,” along with problems with alcohol and drugs, arrived trailing a horse by a length of frayed plastic cord.

His story was an uncertain one, perhaps crafted to suit the encounter with the inspector, Tony McGovern of the Dublin Society for the Prevention of Cruelty to Animals. As Mr. Boyd told it, he had come to the tip with the 3-year-old skewbald mare to find her a “more nutritious” diet than that provided in the stables close to his home in the working-class district of Finglas. He said he would leave the mare for “a couple of weeks,” then recover her.

Mr. McGovern demurred, saying there was little or no nutrition in the tip’s winter grass. In any case, Mr. Boyd bade farewells and, apparently thinking himself beyond the inspector’s reach, released the skewbald and began fruitlessly pursuing two gray ponies scampering across the tip in a herd of 30 or 40 horses.

His account, later, was that he wanted to catch the ponies for his children, but Mr. McGovern said he believed that Mr. Boyd was leaving the skewbald to fend for herself while hoping to capture the ponies for resale in the Smithfield Horse Market, a largely unregulated event that is held once a month on the grounds of an abandoned distillery beside the River Liffey in Dublin.

There, end-of-the-line horses are traded for as little as $15 each, some as pets, some for slaughter. The animal welfare society has limited stabling capacity at its headquarters in the Dublin hills and a budget of only $500,000 for horses and ponies. And the society’s figures suggest that the problem is getting worse. In 2008, it took in 26 sick or injured horses and ponies; in 2009, it took in 106; and so far this year, 115.

On a recent morning, two American veterinarians who work as volunteers at the center, Judy Magowitz of Laurel, Md., and Katie Melick of Los Angeles, spent hours working feverishly to save a black Falabella miniature horse, Napoleon, which they had found collapsed in one of the center’s paddocks. Barely waist high, with a shaggy black coat, Napoleon was judged by nightfall to be beyond further help and put down, joining the dozens of other horses who have been brought to the center too late to be saved.

Taxes Schmaxes
by Dan Weintraub


Maxim Prodanov said...

I'm a fan of Max Keiser's show and I can say that you and Steve Keen are some of the most memorable guests there. If I remember well, you're a guest for the third time now, so thank you for the new and interesting information on credit/oil bubbles and deflation.

jal said...

You certainly got a big list of the problems for 2011. All of those states and all of those municipalities that need to find a source of money.

Of course, ... its going to come from the fed gov. ... that is the only solution. The best rate (0.25%)

It will not be a problem.

It is no different than when I go and borrow money from the bank.

The bank does not have the money to lend. The fed. gov. does not have the money to lend either. The fed gov. does not borrow the money from someone else. It prints it. It called QE for a reason.

The fed gov. will just makes a ledger entry that have lent the money and an ledger entry that it has been borrowed,( 0.25%).
I then go and pay off my loans and pay for my expenses from that book entry. At the end of the year, the bank adds the interest that I could not pay, to what I have borrowed and then they lends me more money that they don’t have and we do it all over again for another year.

All of those municipal bond will get honored and those investors will take their money and invest it in the private market where they will get a good return. The economy will be saved.

In a few years of doing this, the fed. gov. will forgive those state and municipal loans.

Everyone will live happily thereafter.

jal said...

I forgot ... now its up to you to apply the same mechanism to save the E. U. and the world economy.

Glennjeff said...

Mortgage Stress in Australia

Housing prices in Perth West Oz sound about on par with Toronto.

Race you to the bottom.

Ilargi said...

M (from last thread),

I have a lot of respect for Mish, period. But I don't share his views on unions and privatization, that's for sure.

The post is still where it is, I just needed to do a new one after 1 day, to accommodate for the interview with Max.

I don't recall where and when Stoneleigh said 2010 would be an unmitigated disaster, but I would certainly argue that it has indeed been one.

The fact that it's easy to make large swaths of people believe otherwise doesn't change that. 10 seconds before you drive off a cliff you may still have the idea that you're on a great ride, and, moreover, that you're a great driver.


Rumor said...

Details, Ilargi. 2010 hasn't been an unmitigated disaster. It's been mitigated, at least for some, by bulldozing money at the rich. Their potential disaster was mostly mitigated.

All the greater disaster for the rest, of course, but the devil is always in the details. And he is in need of some restraint.

TMO said...

Aside from a roughly 10% dip in late '08/early '09, Canadian real estate prices have been climbing strongly for about ten years now. We now sit at just about all-time highs, or thereabouts depending on the specific market.

My sister bought a new home in '05. It took several months for her to sell her existing home because of new construction in her area. But when she finally did sell her existing home, she got over 25% more than her original asking price. It's nice to be an accidental speculator (as long as you win, that is).

Mortgages are, of course, THE bread and butter for Canadian banks. Banks are still falling all over each other to sell somebody--anybody-- a nice fat mortgage.

And why not? The Can Gov, back in 2008, told the banks not to worry; any risk would be borne by the Canadian tax payers anyway via the CMHC purchasing of billions in Canadian mortgage pools from the banks. This took the risk off the banks' books and freed up more money to sell to dreamy-eyed would-be home owners at ever lower rates.

(It's interesting to note that before the "bank bailout" the Can Gov was in budgetary surplus. The deficit they announced shortly thereafter was almost exactly the same size as the bailout. Hmmm…)

I was recently at a TD Bank. I discovered that TD would be more than happy to now offer you a high LTV mortgage (at least as high as 85%) on COMMERCIAL property. An LTV of 85% may not sound high on residential mortgages these days, but on commercial mortgages that's probably historic.


TMO said...


BOC governor Carney warns of rising consumer debt. But with interest rates so low, and any slowdown in bank earnings tantamount to disaster, the Canadian banks are like pigs at a trough. The only way to stop the gorging is to take away the trough from all of the pigs at once.

Almost everyone is warning of higher interest rates. Most Canadian homeowners will be able to absorb modestly higher interest rates as long as they keep their jobs. Foreign interest in Canadian real estate still looks pretty strong and immigration is still very high. These, plus a restrained supply are keeping home prices high.

The biggest risk to the Canadian real estate market (outside of an external shock) is unemployment. If the jobs start to go in a big way, then this could be a real problem as so many Canadians, with very high debt levels, will not be able service their debts for very long.

If we get a real spike in rates, like the 15% or so of the early '90s AND high unemployment, then it would be a disaster of biblical proportions and the 90% drop predicted by Stoneleigh looks just about right to me.

If/when things do go bad for Canadian real estate, at least we can take comfort that the downturn won't be our fault. Our esteemed economists--the Porters, the Guattieris, the Crofts, the Suttons et al-- can just do what they always do: blame the US, eh.

Philippo said...

@stoneleigh: fantastic to see your on KR once again.

For the benefit of myself and your other, many UK followers, I'd be very grateful if you could spare the time to comment on the following:

You recommend holding cash in a deflation. Does this advice still hold true if your local currency is UK sterling? I have paid off the mortgage and hold 50% of my modest assets in sterling denominated bank notes and 50% in physical gold and silver. understand that you can't give specific advice . . . but I'd appreciate your opinion. We're feeling like 'rabbit in the headlights' in the UK. Should we buy dollar bills?!

Dan said...

@ all

What do people think of the Kucinich bill: "National Emergency Employment Defense Act of 2010"

Please take a moment to read and digest the contents. VERY interesting!


Sylvester M. McBean said...

TMO a simple point of clarification. You say
"The Can Gov, back in 2008, told the banks not to worry; any risk would be borne by the Canadian tax payers anyway via the CMHC purchasing of billions in Canadian mortgage pools from the banks. This took the risk off the banks' books and freed up more money to sell to dreamy-eyed would-be home owners at ever lower rates."

It wasn't the CMHC that bought the mortgage pools but rather the Bank of Canada. These pools had been insured by the CMHC so the risk was already off the bank's balance sheets and on to the backs of taxpayers. It was a solution to the banks liquidity problem and a rather elegant one IMO. Banks get needed cash when credit markets are frozen, Bank of Canada earns some money and there was no transfer of risk.

FWIW I also believe that situation in Canada is tenuous but I don't think it is as bad as it is being made out for a couple of reasons.

Firstly, virtually all mortgages written with an LTV of greater than %80 are insured. (lucky taxpayer, though there are three private companies offering insurance as well)

(speaking of lucky taxpayers)

Secondly there are no "non-recourse" jurisdictions in Canada (for home loans) so a homeowner can't walk away from a mortgage no matter how "upside down" it is without running the risk of bankruptcy.

Ilargi said...

"FWIW I also believe that situation in Canada is tenuous but I don't think it is as bad as it is being made out for a couple of reasons.

Firstly, virtually all mortgages written with an LTV of greater than 80% are insured. (lucky taxpayer[..])

Secondly there are no "non-recourse" jurisdictions in Canada (for home loans) so a homeowner can't walk away from a mortgage [..]."

Excuse me, but how and why is this supposed to make me feel better? The whole thing looks tailor designed to put all losses on the people, and spare the banks. What is good about that, provided you're not a banker?


Greenpa said...

Dan: "Please take a moment to read and digest the contents. VERY interesting!"

Not as interesting as it might be. :-)

It's not actually intended as legislation; it's pure political diatribe - which limits its effectiveness quite a lot.

Kucinich serves a good purpose, as the Gingrich of the Left - but what is then needed is good back-up; people who can take the noise and move it into reality. There Dennis has not been nearly as successful as Newt.

Rumor said...


In fact, it was the CMHC which purchased somewhere between $50 billion and $75 billion of mortgages from the Big 5 Banks, at the direction of the government. Separately, the Bank of Canada allowed 1:1 borrowing by the banks against risky assets.

See here and jere for what I could dig up at a moment's notice, but really, this point is well known and I'm not sure why you would assert otherwise without authorities.

In addition, Alberta is a "recourse" mortgage jurisdiction.

p01 said...

"FWIW I also believe that situation in Canada is tenuous but I don't think it is as bad as it is being made out for a couple of reasons:"

hidden reason #3:
It cannot be bad because I don't want it to be bad; that would mean that it's *really* bad...and it cannot be that bad. Rinse, repeat.


TMO said...

@ Sylvester M. McBean

Here is a quote from the CMHC press release:

"Canada Mortgage and Housing Corporation (CMHC) will purchase up to $25 billion in insured mortgage pools as part of the Government of Canada’s plan, announced today, to maintain the availability of longer-term credit in Canada." (Canada Mortgage and Housing Corporation Supports Canadian Credit Markets, CHMC Press Release, 10 October 2008)

The total package was something like 75 billion.

Mortgage insurance does not help someone service their debts. It actually makes it worse because of the extra cost to service that mortgage. So, one can argue that having insurance, while nice for the banks, actually increases the risk of defaults.

No recourse mortgages don't help people who can't service their debts. They only make it difficult to purposely default, which really only happens when the home owner does not WANT to pay the mortgage because of negative equity or some extreme rationale. In my opinion, factoring no recourse loans into a risk assessment of the Canadian real estate market underestimates the risk.

I'm not saying we are assuredly headed for disaster. But the risks are very high.

Rumor said...

Of course I meant earlier to say that Alberta ia a "non-recourse" jurisdiction.

Sylvester M. McBean said...

Ilargi .. I didn't mean it to sound good, just to point out two very specific differences between the Canadian situation and elsewhere. These differences will somewhat reign in the volatility and magnatute involved in any "race to the bottom".

I don't have a significant problem with holding people responsible for their actions and if there are greater risks involved in defaulting, in theory at least, fewer people will do so.

Once again don't get me wrong, I think it has been grossly irresponsible for the CMHC and the banks to allow and encourage people to finance with as little as 0 down and as long as 40 years, but that began changing quite some time ago, though 5% down and 35 years is still pretty stupid. Current regulations require that no matter what mortgage you want you must qualify at the five year fixed rate even if you are intending to take a cheaper mortgage, that should (or could) also help to mitagate against some of the volatility that we have seen elsewhere in the world.

Note to non-Canadian readers, in Canada the typical mortgage is written for no more than 5 years* even if the am. schedule goes out 30 years. The 5 year fixed mortgage is the most expensive option for all closed mortgages. There are penalties if you discharge the mortgage early.
* there are 7 and 10 year fixed mortgages available but they are a statistically insignificant share of the market.

Ric said...

Energy Bulletin has an interview with David Bainbridge, who wrote a fascinating book for desert farmers:

New Hope for Dry Lands: A Guide for Desert and Dryland

He studies traditional irrigation techniques used in deserts around the world. There's no use in talking about it, but I've been dismayed regarding farming options around my home in the American southwest. Farmers I've worked with use extremely non-sustainable, energy-and-plastic-intensive technologies using water pumped from hundreds of miles away. Combined with Brad Lancaster's water collection techniques and my pottery skills, it suddenly seems possible for a poor guy to make a go of it where there is almost no rainfall. I'm not saying its ideal, but the desert has been the home to plants, insects, animals, and humans, for thousands of years and will continue to be so for thousands more.

Dan said...

@ green pa

you make an excellent point. i find it interesting that, among other things, the antipathy toward the bankster class seems to cross ideological divides pretty fluidly. yes, i have read many anti-kucinich comments "out there" as i was feeling my way around the sentiment for the bill, but that does not nullify the pan-ideological sentiment for change that is somewhat of a growing "force", at least in blogland.

Sylvester M. McBean said...

TMO I apologize.. I'm damned if I know why I thought it was The BOC.
the point remains the mortgages were insured prior the the auctions and there was no new assumption of risk by the taxpayer.

P01 (paul) nope.. I've been looking for it to happen since '05when I got out bid on small farms three times in two years and got fed up.

Rumour I believe you meant "non-recourse" but Alberta changed in '04 for non NHA mortgages and any NHA mortgage ever written was not non recourse.

It aint gonna be pretty but I see it more like '88/'89 than '33.

scrofulous said...

Where did you find a problem in that post of mine ilargi?

TMO said...

@ Sylvester M. McBean

You said "…the point remains the mortgages were insured prior the the auctions and there was no new assumption of risk by the taxpayer."

Yeah, that's true, at least for the first 25 billion. But what about the other 50 billion? Did they only purchase insured mortgages with these funds also? I don't know.

Keep something else in mind RE: taxpayer risk: the gov had to issue bonds to finance the purchases. The banks hold some of that debt. So, we borrowed money from the banks (at interest) to give money to the banks.

In my next life I want to come back as a bank.

p01 said...

@Sylvester M. McBean
"It aint gonna be pretty but I see it more like '88/'89 than '33."

Are you paying attention to that itsy bitsy energy detail? You know, transport, heating, giving us stuff to eat and to work on; the small unimportant stuff, not the house prices and mortgages.

I see it more like '12... twenty twelve.


Sylvester M. McBean said...

TMO they only took insured mortgages in the program.

The final total authorized was 125 billion. They came close to using it up but the last couple auctions were not that heavily subscribed and I don't know if they ended up taking advantage of the whole amount. The program was very profitable for the CMHC (not the BoC .. gotta repeat that 100 times) and that profit was at the expense of the banks. As a taxpayer I approve of the CMHC making money this way, it means that I am on the hook for less.

Yes the funds used for the auctions were supplied by the Government but at least in this case the Government is going to get that money back. Heck they are even going to be paying themselves for the mortgages in the pools that default. (the spread between what the government paid to borrow the money and what the CMHC earned on the transactions was around 100bps in some of the early auctions (trying to dig up 2y/o notes)

found April 15.. 1.5 Billion done 5 year fixed
Average yield to the CMHC (NOT BoC)
Gov of canada 3 year benchmark rate

Anonymous said...

Interesting political twist to Wikileaks. Since our host reiterated in this latest post that the financial meltdown and response to it is a political problem, not a financial one, I thought I'd segue into the Wikileak's story by saying it too is not a legal problem, but a political one.

KKKarl is acting out his predictable, pathologically hypocritical maggot style.

Seems the "Turd Blossom", Bush's nickname for him in the Whitehouse, is in bed with Swedish Prime Minister Fredrik Reinfeldt,who has been dubbed "the Ronald Reagan of Europe". I have to go wash my hands just typing Rove's name.

Is Karl Rove Driving the Effort to Prosecute Julian Assange?


Phlogiston Água de Beber said...

Who would have guessed in the late 1940's that Fascism would come storming back to be the dominant political structure in the 21st century? Oh wait, there was that Englishman who plumed himself Orwell.

More recently, the late Chalmers Johnson (may he rest in peace) tried very hard to remind us that it is true that what goes around, comes around. Behold the blowback.

The French State Prepares for Class War

Sylvester M. McBean said...


Why do you think I've been looking for a farm?

I'm not discounting the energy issue, I don't know enough about it to really comment, but I do see a lot of luxuries that can get priced out of our energy budget before a collapse occurs. (Sadly environmentalism is probably going to be one of those "luxuries")

TMO said...

@ Sylvester M. McBean

Good stuff, McBean. Can't argue with the results.

However, keep in mind that fundamentally what the gov did was assume the risk for the banks. It's the old problem of privatized profits and socialized risks/losses. Fanny and Freddie anyone?

In this case it worked due essentially to an arbitrage made possible by extremely low interest rates (partly the result of stark fear in the markets) and a robust real estate market.

The question is: why not do this all the time?

It reminds me of zero down, zero interest promotions by the auto makers. They claim they increase sales dramatically. So why not do it all the time? Because it's only under certain extreme circumstances that it can make any financial sense, right?

In any case, give the CMHC credit, but I am fundamentally opposed to the tax payer assuming the risks of private enterprise. Mind you, this is nothing new and has always been implicit in our system. The GFC just made the implicit very much explicit.

Ilargi said...

It's likely just me guys, but I don't get why "at least the mortgages are insured" makes anyone feel any better about anything. You know what, just imagine a 50% on average drop in home values in Canada, and then tell me what that insurance is worth. And who, in an imaginary world, would end up paying for the difference.


Sylvester M. McBean said...

"but I am fundamentally opposed to the tax payer assuming the risks of private enterprise"

Believe me so am I. I've got a number of issues with how the CMHC opperates but that program wasn't one of them.

But if you think the CMHC is risky you should look at the BDC. (Business Development Bank)

jal said...

Any purchase where the down payment is less than 20% is considered a high-ratio mortgage, and the mortgage must be insured by the Canada Mortgage and Housing Corporation (CMHC)

The amount of the fee will depend on the amount you are borrowing and the percentage of your own down payment. Typical fees range from 0.5% to 2.9% of the principal amount of your mortgage.

In the event of default, the house will be sold by the bank. The bank will receive the sale price and any shortfall will be collected from CMHC OR from any other assets that they can seize from you and sell.

The fee insures the banks if you default. But you have to pay the premiums. Duuu!

Advice: Put 20% down and get accidental and life insurance.

Sylvester M. McBean said...

Ilargi, mortgages being insured does a couple things;

1) It eliminates the risk to investors makeing them more likely to advance money to create mortgages and keeps rates down.
The CMHC has a timely payment guarantee, principal and interest are paid to investors on schedule.

2) it lessens the risk that a spate of defaults taking down a mortgage issuer, with the other knock on effects that causes. (If memory serves there have been 3 mortgage issuers in the NHA program that have gone under at one point or another, there was no impact on mortgage investors or mortgage holders when this occured)

3 There are tools availabe through the CMHC (they call it a "default management team") to help both borrowers and lenders "cure" a default, insured lenders are more likely to work with a distressed borrower rather than simply evict them and liquidate the property.

Sure all of this seems mostly to be to the benefit the banks but it keeps costs down and creates stability which in turn helps borrowers. (Though helping borrowers was how we got into this mess in the first place) The stability created is one of the reasons I don't think we'll have as ugly a ride as they are haveing elsewhere.

TMO said...


You said, "It's likely just me guys, but I don't get why 'at least the mortgages are insured' makes anyone feel any better about anything."

I totally agree with you. That was a real risk. If the markets tanked, we the taxpayers would have been left holding the bag.

That is one of the reasons I oppose tax payer backstops for private risk, unless it's for new, productive ventures as financed by the BDC (as McBean alluded to). I won't go further on that since that's a whole other issue.

I am also opposed to this because it can distort markets, cause the misallocation of capital, and encourages reckless behaviour on the parts of both lenders and borrowers.

We only need to look to the US for proof of why this is not a good idea. Than again, much of that problem was due to outright fraud.

In this particular case, the IMPP by the CMHC seems to have been a success. If the program actually generated a real profit for the government, I give them credit for pulling it off, but I still don't agree with it fundamentally.

Unknown said...

A 90% drop on average?

On average? That means some houses will be sold for >90% less.

I'm bearish too, but that sounds arbitrarily high.

p01 said...

Keep your eyes on the ball (the image is not even on scale, for crying out loud):

The implosion will be HUGE:
90% on average and some will be so toxic as to be given away just to avoid paying taxes. Is that too hard to grasp?!

"Peak oil? What peak oil? We don't need no stinkin' peak oil"; we managed to finish the world with credit and derivations of real asset values; insurances and hedges.


Phlogiston Água de Beber said...

I was just listening to my collection of mp3 tracks. When this song finished, I thought of the valiant effort Stoneleigh, Ilargi, Max, Stacy, Dmitry, Julian and others are making to spread truth and some guidance. And how often it is dismissed or denigrated. This is Kris Kristofferson's answer.

Kris Kristofferson-To Beat the Devil

A couple of years back, I come across a great and wasted friend of mine in the hallway of a recording studio; and while he was reciting some poetry to me that he'd written, I saw that he was about a step away from dyin' and I couldn't help but wonder why. And the lines of this song occurred to me. I'm happy to say he's no longer wasted and he's got him a good woman. And I'd like to dedicate this to John and June, who helped show me how to beat the devil.

It was winter time in Nashville, down on music city row.
And I was lookin' for a place to get myself out of the cold.
To warm the frozen feelin' that was eatin' at my soul.
Keep the chilly wind off my guitar.

My thirsty wanted whisky; my hungry needed beans,
But it'd been of month of paydays since I'd heard that eagle scream.
So with a stomach full of empty and a pocket full of dreams,
I left my pride and stepped inside a bar.

Actually, I guess you'd could call it a Tavern:
Cigarette smoke to the ceiling and sawdust on the floor;
Friendly shadows.

I saw that there was just one old man sittin' at the bar.
And in the mirror I could see him checkin' me and my guitar.
An' he turned and said: "Come up here boy, and show us what you are."
I said: "I'm dry." He bought me a beer.

He nodded at my guitar and said: "It's a tough life, ain't it?"
I just looked at him. He said: "You ain't makin' any money, are you?"
I said: "You've been readin' my mail."
He just smiled and said: "Let me see that guitar.
"I've got something you oughta hear."
Then he laid it on me:

"If you waste your time a-talkin' to the people who don't listen,
"To the things that you are sayin', who do you think's gonna hear.
"And if you should die explainin' how the things that they complain about,
"Are things they could be changin', who do you think's gonna care?"

There were other lonely singers in a world turned deaf and blind,
Who were crucified for what they tried to show.
And their voices have been scattered by the swirling winds of time.
'Cos the truth remains that no-one wants to know.

Well, the old man was a stranger, but I'd heard his song before,
Back when failure had me locked out on the wrong side of the door.
When no-one stood behind me but my shadow on the floor,
And lonesome was more than a state of mind.

You see, the devil haunts a hungry man,
If you don't wanna join him, you got to beat him.
I ain't sayin' I beat the devil, but I drank his beer for nothing.
Then I stole his song.

And you still can hear me singin' to the people who don't listen,
To the things that I am sayin', prayin' someone's gonna hear.
And I guess I'll die explaining how the things that they complain about,
Are things they could be changin', hopin' someone's gonna care.

I was born a lonely singer, and I'm bound to die the same,
But I've got to feed the hunger in my soul.
And if I never have a nickle, I won't ever die ashamed.
'Cos I don't believe that no-one wants to know.

Anonymous said...


Love the site!
Great to see the Canadian debt issue getting more coverage. I've been warning about this on my own website. Keep up the great work.






Phlogiston Água de Beber said...


May I suggest that in future you avoid stacking two postings on one page. Skipping right past the "Post a Comment" link for the top post, which ends up somewhere in the middle of the page and unintentionally commenting instead on the bottom post is way to easy and it seems to be happening too often.

snuffy said...

I M nobody,

The afgan folks have several thousand years of being "moved in on".Their culture is essential tribal,with a honor/code as well as a deeply held belief in "vendetta".

The Usa,not-so-much.

Hell, we rebuild our enemies lands [and pay bribes to keep them from shooting our soldiers]and give them our industries so to have trading pardners with.
They have for the most part,a 12th century mindset with a lot of Wahhabi flavored Islam.
As their entire rural countryside still exists in the 12th century mindset,[Where everyone wears/carries guns,swords,and daggers]it is not hard to see them believing in following a strongman/warlord type....
That is a excellent link,I had no idea that fascism was rearing its ugly head,with heavy racist tones

Be good,or
bee careful


Anonymous said...


Saw you on Keiser this morning and was intrigued by the title of your blog as well as the topic of discussion.

Do you talk to Georgists? Are you familiar with the concept of taxing away the accumulating land value, so that bubbles can't happen?

When you take all the rewards of speculation out of the game, speculation stops. No more bubble.
The land market (which drives all the other markets) stabilizes. Plus, this leads to more affordable houses and business space, smart rather than dumb growth, and a host of other benefits.

Of course, as most Georgists would also say, you have to also untax real productive activities: labor, real investment, exchange... stop punishing people for doing good things.

I was interested in the banking racket long before I got interested in land. However, through peering into the mechanics of things one can discern that in large part, a credit bubble is a reflection of a land value bubble, that occurs because land is subject to 1) private ownership, 2) fixed supply, 3) usually growing demand and 4) the mania that values will keep rising forever. The banks, which nowadays lean so heavily on mortgage lending, fuel this. But they did not create the problem; it is a legal issue of who owns, and gets to reap the benefit of, the economic surplus that gets slurped up by land and resources: a private owner, or society at large?

When private owners get to appropriate society's surplus as captured in land value, then we get systemic inequalities, and we get a speculative economy overshadowing the productive one. We also then have a privileged elite with the surplus wealth to create and buy all sorts of other privileges from the state.

That's the sort of thing I write about, from what's known as a Georgist or geolibertarian slant.

Nassim said...

I. M. Nobody,

The article about Sarkozy is most interesting. I'm a bit out of touch, although I lived there for 12 years or so. The Gendarmerie Nationale was not part of the regular police for an excellent reason - to prevent a coup d'état. If they are all one now, that is quite dangerous to the rulers of France in the long term.

The acquisition of Israeli occupation technology and techniques is hardly surprising. Sarkozy may claims to be a catholic but his mother was Jewish (like Gaddafi's) and the Moslems of France as well as the unofficial aristocracy of France consider him to be Jewish. The vendetta between Sarkozy and de Villepin is riveting. Sarkozy got Chirac's (the previous president) blessing by dropping the investigation into his corruption - de Villepin had been Chirac's political heir apparent.

Nassim said...

Part 2

The Battle of Algiers was a "success" if you consider the control of one city is a success. However, all the killings and torture did not solve anything as the French had to leave soon after. When de Gaulle got France out of Algeria he was almost assassinated on several occasions. Many Sephardic Jews had lived for many generations in Algeria and the French gave them French nationality and other advantages for collaborating. Unsurprisingly, they had to leave with the French. Yves Saint Laurent's family fell into that category. There were also lots of Algerians (called Harkis) who collaborated and they had to leave - it is their grandchildren who are now stoning the cops. The footballer Zidane was accused of being of Harki descent but denied it. These guys fought bravely for France in two world wars plus Vietnam and so on.

I could not find reference to the exact numbers but over one million Algerians were killed by the French and 100,000 French soldiers and settlers (mostly people from France and Italy who were given land from the locals). As is usual in these situations, the people who got power after the French left were almost as rotten as the French had been. Now, the French are getting all they want out of Algeria without the need to station soldiers there. Ironic - however, I don't think Iraq will work out quite like that.

Right now, it is clear that in France the political pendulum is swinging far in one direction. But even Sarkozy is careful to keep French troops out of dangerous parts of Afghanistan. I think that France may eventually surprise us all.

p01 said...

I read your blog regularly. Excellent analysis. Keep'em coming, Ben!


Hombre said...

Dan - Taxes Schmaxes lays it out pretty good IMO.
Isn't it interesting how and why some politicians stick to arguments that did not even work in the expansion "good" times, and have no chance of working today!

Stoneleigh did another fine job with Max. He seems to screech and wail a bit less when the StoneLady is on, with her quick and articulate answers to his set-up scenarios.

Dan said...

@ all

I agree with Ilargi vis-a-vis Mish. Mish is wrong on unions:


Dan said...

Here is the youtube link to my refutation of Mish's anti-labor stance:


avalterra said...

I hope you will weigh in on the Kucinich bill to end the fed. Mish and Denniger are already yelling at each other over it. It could use some commentary from a person who is calm.


Unknown said...

@ Mr Illargi
You said that "as long as there is a market for US Debt, deflation will persist"
Currently is the Fed not proving that there is no market for US debt because they are monetizing $600 billion? or is this just a way for them to control interest rates? i.e. keep them from rising to higher levels

The Anonymous said...

"Stoneleigh said...We are a rationalizing species, not a rational one, and there are always rationalizations for why it's different this time - for why this time those outrageous valuations are justified. Well, its never different this time."

Really? Its never different this time?

Soo, America has "kicked the can down the road" time after time after time. Yet you are the one insisting, "this time is different -- this time, the can can be kicked no further..."

So which one is it Stoneleigh? You say "its never different this time", but yet when it comes to govt can kicking you think it will be different this time.

Hombre said...

Kucinich, the perennial progressive, has acted, authoring a bill straight out of the Libertarian manifesto!
Karl is "stunned", Mish is "at a loss", and Tea Partiers are, well, speechless!

"The Bill" of course has not a chance of passage, but oh what fun watching people squirm around the perimeters.

It kinda takes one's mind off the $90 oil! At least for a while.

scandia said...

@Ben, Just checked out your site- financialinsights. I'm always wanting more " insight " into Cdn conditions. I've added you to my favorites. Thanks for introducing yourself, for adding to the depth of knowledge on this board.

Ilargi said...

"The Anonymous said...
"America has "kicked the can down the road" time after time after time. Yet you are the one insisting, "this time is different -- this time, the can can be kicked no further..."

So which one is it Stoneleigh? You say "its never different this time", but yet when it comes to govt can kicking you think it will be different this time."

Yeah well, when you're anonymous, why would you care about losing your last bit of credibility?

"America has "kicked the can down the road" time after time after time.



Phlogiston Água de Beber said...


Thank you for your insightful commentary on France and Algeria. You are a real asset here.

As I so often do, I will here provide links to what I think are worth-a-read essays over at Counterpunch.

Ship of Fools 2

Iceberg Economies and Shadow Selves

Australia Rejects Israeli-Ordered Media Censorship

Dan said...

@ anon

Two words, just for fun:


The U.S. has nine lives in this debt-subsidized fiasco because, at least for now, the lots of stuff is still traded (for) in dollars. Hmmmmmmmm....what happens when THAT era comes to a close?

Anonymous said...

Thanks for your commentary on the Keyzer report, Stoneleigh, very interesting.
Only a small number of locals are bearish here in Vancouver, Ground Zero for the Canadian RE Bubble.
I'd thought my 50-66% off prediction was outlandishly bearish enough.
But, 90% off... Wow!
Yes, it is possible. We also foresee the deflationary wave that you are predicting.
Your call is reminiscent of John Templeton's call for 90% off UK housing. (He made it sometime in the last decade.)

For any of you interested, VREAA (the 'Vancouver Real Estate Anecdote Archive') is a blog that archives a chronology of personal anecdotes from the Vancouver RE Boom (and coming bust). It includes bearish commentary and collections of entertaining Bubble-denier quotes.


p01 said...

Check Ben's Primers (five of them). Really good analysis. I always go there for a bit of optimism and bullishness.


Anonymous said...

There are still companies in Canada selling HELOCs. 'enough said.

p01 said...

Master politician Turner after trying to sell survival gear (and not managing to fill his hummer with the sales), turns financial advisor (I guess deflationists don't make good financial advisors with the message to sit on cash, but he does not advise that) and book pusher (writer of sorts).

Then he comes out with this:

I'm going out to puke.


The Anonymous said...

And yet, the question remains, if its never "different this time" then why cant the govt kick the can 1 more time down the road?

Dan -- very much agree. The question though is, why does that era end "now" vs. 2015, 2020, etc?

nalcor said...

It is different this time because of demographics (boomers past peek spending years and retiring), debt to income never before in history this high (150%), jobs still being offshored and quality of remaining jobs minimum wage or low paying, interest rates at cycle low and will rise in time, peek housing ownership and peoples assets in 1 asset being housing, rampant corruption in all finance related so therefore limited trust in "the system", fire economy too big proportionally to remainder of economy,the stock market has been run up to extreme valuations by the same players who destroyed the markets in 08/09, there is nothing to replace the tech bubble, the housing bubble, the stock bubble, the commodity bubble. Only alternate energy but TPTB will not stand for that. These are just a few off the top of the head reasons why it is different this time. Is it the 80 year cycle some have illustrated? Wiser minds will have to answer that!

Gary said...

How about we compromise with post-ers like Anonymous and others who disagree with our esteemed I & S and their deflationary outlook by calling the next year or two as it probably will be: THE LAST HOORAH.
Rather than looking desperately around every corner and under every rock for impending doom, I say the more reasonable view is that indeed, we are headed for a world of pain and collapse due to the Peaks but that this beast has a bit of life left in it.

Personally, last year I was furloughed (contract reduced/salary lowered) but thankfully, still had a job with benefits. This year, my employer turns around and gives me a raise bringing my salary back up to pre-furlough levels for less work !!! Now, I could celebrate this as a sign of "recovery" and good tidings ahead. No, I'm not that naive. I see it as part of a grander plan I call THE LAST HOORAH. I predict in a year or two (not much longer than that), my salary will be once again reduced to reflect the slide we'll be in.......if I'm lucky enough to still have a job that is.

So, rather than taking sides about a future of unbridled growth or imminent collapse, what do y'all think about my theory......that we have entered a ersatz recovery replete with all the signs of a real one: higher stock prices, better balance sheets, etc but that it's the last gasp before we collectively give up the ghost.



Phlogiston Água de Beber said...

@ TA

Such deep questions have you. Now I have a question for you. How could you possibly expect anyone to "know" when it is going to end? PPT and bankster games or no, it will end when it ends. But, if no one ever issues a warning of possible imminence then we must assume that everybody will be all in when it does end. And that wouldn't be too good would it?

Stoneleigh took a chance and issued a warning. It didn't end yet, but at least we're having the conversation about it and the most cautious among us are all out or only in for a little. That's what we call being of service and putting yourself out there.

Now, how about if we make it your turn. Give us your guestimate of when it ends. If you make it far enough out there, chances are nobody will remember and you won't have to suffer the slings and arrows you are so anxious to throw at others. The intertubes might even be silent by then.

Nassim said...

I M Nobody,

Thank you for that. I just found a hilarious old book that explains how the French ended up occupying Algeria. Sketches of Algeria during the Kabyle War. Just take a look at the first few pages for fun!

BTW, Algeria used to be Christian and the Arabs had a dreadful time trying to occupy it. Most Algerians are not Arabs, they are Kabyle and are a Berber people with their own, very different, language and customs. They are a mountain people - a bit like the Afghans, Kurds, Gurkhas and so on.

Phlogiston Água de Beber said...


I have commented on several occasions that the train has been doing the accordian thing for many years. Even the so called booms were like giant billboards erected to conceal the progressively ugly econoscapes resulting from the internal contradictions inherent in an illogical and irrational system.

I have recently come to believe that the original inhabitants of this side of the world conceived cosmologies quite different from those our ancestors on the other side developed. I have come to think that, generally speaking, the native Americans were much better grounded and their visions more useful.

The Maya said via their calendar that it will be over by 2013. The Lakota visionary Black Elk thought our doom was near enough and his compassion was great enough that he agreed to have his visions interpreted and published.

So, I'll go with the Maya. The current system is over by the end of 2012. The Junta may be able to keep things sort of stable for a few years after. But by the end of the decade what I see is a scramble to establish and defend fiefs. Or, if Snuffy has his way, it's The Road.

@The Anonymous

That's how we hang it out there. Your turn.

Glennjeff said...

I'll go with the Mayan calander also, game over by 2013.

The Anonymous said...

I too think it all collapses. The one thing I question, vigorously, is the timing.

People have been predicting the economic collapse of the US since the mid 1870s (war debts exploded the national debt by a magnitude of 10X) -- same thing in the late 1930s (price supports on farm products were "unsustainable") -- each generation convinced that this time, THIS TIME the inevitable "collapse" was finally at hand. Yet all those people are dead now.

On this site, I regularly see comments, mostly from I&S, about how something is "impossible" or "will happen". For instance, ask Stoneleigh right now why we cannot stagnate for decades, or slowly disenegrate for several years, and she will quickly tell you why it "cannot" happen that way, and why it "will" be a steep decline.

IMO this is borderline arrogance. Outside of the sun coming up tomorrow, little is certain in this world. Thus, as Gary said, it would be nice to see things couched in terms of probabilities and the like.

As I see it, like I said before, I too think we blow up eventually -- my only question is timing. IMO, we have;

a 90% chance of blowing up in the next 300 years;

a 50% chance of blowing up in the next 50 years;

a 20% chance of blowing up in the next 10 years; and

a 10% chance of blowing up in the next 3 years.

This might seen unsatisfying to the hordes of doomers who are convinced we are on the precipice of collapse, but its actually quite breathtaking when you really consider it.

Still, whats to say that in the year 2133 people arent going to drag up this old thread and say, what a bunch of doomer idiots -- their problems were so tame in comparison to what we face now.

p01 said...

@The Anonymous
"For instance, ask Stoneleigh right now why we cannot stagnate for decades, or slowly disenegrate for several years, and she will quickly tell you why it "cannot" happen that way, and why it "will" be a steep decline."

Ummmm.... because flat or "negative" growth destroys the system we live in!
Did I win something?

And the arrogance comes from you, because you did not do your homework before asking these questions, but are quick to form opinions of others and of percentages of whatever you measure there.

Here one percentage for you:
100% by 2013.


john patrick said...

I agree with I&S's longterm outcome.

But, regarding timing... don't you think it all depends on when the dreamer(s) wakes up? This dream could go a long time.

The problem with dreams is you are unable to create. There is no hand in the clay for a solution. It could go on for a long time. Who's to say it hasn't been going on for the past 10K years? (with the dreamers just plain dying out)

Red pill or blue pill?

Hombre said...

Anonymouse - OK, so you say those of us who see a shorter term, very painful contraction and decline are "a bunch of doomer idiots."
Maybe. Maybe not. But remember the ole Boy Scout motto? Good advice!

A few questions: What's your point? Shall we not prepare? Why should we (how can we) ignore so many obvious forces at work against our future; huge debt, energy depletion and waste, tragic environmental stresses. Are you suggesting you are more astute on economics, energy, and related sciences than Ilargi and Stoneleigh? Make your case beyond merely casting aspersions at a timeline which, by the way, is not the point of TAE in any case.

jal said...

Local governments are responding to declining revenues by jacking up all taxes and fees. To counteract sharp declines in property values, municipalities are raising their property tax rates, squeezing more out of properties even as they drop in value. Though there are local variations, the result is the same: property taxes are rising.

Local government's property tax rates do not rise or fall with assessed value--they're set by budget requirements. So falling prices do not translate into lower property taxes.

Do you really think that municipal gov. will slash spending, and services to the point of balancing their budgets?

Do you think that municipal gov. will default on the pension and health care promises of their retired workers?

Either by re-assessment or by sales, assessed property values are falling around the nation, while local government can jack up tax rates by 10% or more annually.

In the worst hit areas, middle class are living rent free and tax free while waiting for their houses to get seized.

At some point those substantial increases will likely trigger resistance from homeowners who continue to see their home values stagnate or decline.

Resistance has not YET happened in those worst hit areas.
2011 will be a year of resistance.
2011 will result in the fed. gov. bailing out the municipalities to avoid the resistance.

Glennjeff said...

1. Financial = Poloitical crisis
2000 onwards

2. Peak Resource
2005 onwards.

3. Significant Climate Change
2005 onwards Katrina Rita Wilma

4. Holocene dieoff-extinction
2000 onwards

Nearly all of the connections between these 4 categories are positive feedeback loops that are adverse to our survivability.

December 21 2012: Sun conjuct Pluto conjunct Galactic Centre on the winter solstice. The penultimate "seperation by providence". The Final Judgement.

A very spiritual Saturnalia / Christmas to all.

Practice dharma, hide not ones light under a sack of corn but show it forth for the world to see.

Phlogiston Água de Beber said...


There is nothing borderline about YOUR arrogance. What really gobsmacks us is that you have shown nothing to justify arrogance. You ask the silliest of questions and have just now fulfilled my plan for you. By tossing out ridicules and completely unsupported by anything numbers you have revealed your inability or lack of desire to engage in useful conversation. Or, even to show that you have any understanding of why the conversation matters.

We do not deny being doomers and if there are still humans on Earth in 2133, I think most here believe their problems will be far worse than ours. There certainly won't be nearly as many of them.

All I can think is that someone here must have been humming this song today to call you forth on your unworthy mission. Whoever it was, please don't do it again. :)

JUDY COLLINS - Send In The Clowns

Draft said...

I can't believe I'm writing this, but I think The Anonymous has a point here: "I too think it all collapses. The one thing I question, vigorously, is the timing...On this site, I regularly see comments, mostly from I&S, about how something is "impossible" or "will happen". For instance, ask Stoneleigh right now why we cannot stagnate for decades, or slowly disenegrate for several years, and she will quickly tell you why it "cannot" happen that way, and why it "will" be a steep decline.

IMO this is borderline arrogance. Outside of the sun coming up tomorrow, little is certain in this world. Thus, as Gary said, it would be nice to see things couched in terms of probabilities and the like."

Even Dmitry Orlov doesn't say his predictions are solid, but says that everything should be taken "give or take half a decade" (which is +/- 5 years, that is, a 10 year range - quite a long time). I've learned a lot from reading and listening to Stoneleigh, and I would love to read her projections for two or three scenarios - say how things might look given certain defining events. (For example: say China decides to buy up all the bad debt in Europe while keeping its own bubble under control - then what would the 1, 2, 5, and 10 year pictures look like?)

Considering a few such outcomes might give a better picture, since nothing is certain.

p01 said...

(For example: say China decides to buy up all the bad debt in Europe while keeping its own bubble under control - then what would the 1, 2, 5, and 10 year pictures look like?)

Not a very fat chance, but then again they already started buying EU debt.
I simply don't see them doing what they do now for more than a year. The numbers are too big, just too big, much too big as you go up the 10% exponential.

Did I mention the numbers are too big? ;)

The numbers are just too damn big. It very much looks like game over.
The sucker rallys start blowing up any minute (see Bangladesh market) as the elite cashes the last remaining chips from the table.


paperwings said...

Stoneleigh-is Mike Ruppert reflecting you accurately that both you and he see major slides down right after the holidays?

In his Solstice message:

Thanks -
L. in Seattle

Draft said...

"p01 said..."

Sigh. I was hoping nobody would pick at my example as being a bad one - I'm not knowledgeable enough to know what possible defining events might look like. I don't want the main point to be lost: that there are such events and it'd be interesting to see how Stoneleigh would see things play out.

p01 said...

@canadian side of the board

No comments on Turner's take on his hummer self-sufficiency and Nicole Foss' lunacy? Hmmm...

I puked all day for my part. Violently!

Mom warned me about politicians, so I'm not that surprised.


Candace said...

My "crystal ball" says people who are currently in bonds or stocks or any "investment vehicle" will find that the are the "bag holders" (with a 99% likelihood) by April 2011. I give a 99% chance that we will all know the meaning of "Greater Depression" by Dec 31, 2012. If I'm wrong (and still have any money) I'll happily buy a round of drinks to celebrate being wrong!

Phlogiston Água de Beber said...


I discovered a long time ago that it is always best to keep things simple. Herb Stein said it best. If something cannot go on forever, it will stop. We're talking about the value exchange system of the entire world here and the exponential function says it will have to stop fairly soon.

If you are wondering if that will be bad, watch and listen to this man and imagine that instead of talking about his creation, he is discussing the Derivatives Beast and the mechanisms of Control Fraud that Bill Black is always harping on and all the other financial chicanery being exposed on almost a daily basis.

J. Robert Oppenheimer

Mr_L said...

hrm dont see your 90% reduction in housing here, its about 15% overvalued, if you have been to vancouver its about supply & demand and u have very little supply compared to demand, vancouver is most beautiful city in canada and everyone wants to live there, alot of the wealth has come from china and moved in vancouver hence the huge prices there & lack of supply

p01 said...

Not everyone wants to live there. I for one don't like broad daylight street brawls with shootings and gangs just yet, thank you. There will be enough time for those a bit later in the game, but up here where I am I hope gangs will freeze their asses and they'll go to Vancouver, so it's a big NONONO for me again ;)


Draft said...

"I. M. Nobody said... If something cannot go on forever, it will stop."

So I've known since I read The Limits To Growth that it cannot go on forever. Even in their revised version (the 30 year update) Donella and Dennis Meadows - giants in the field of big picture, global systems study - considered several scenarios based on different conditions, as they did in the original. (For example, they considered how having say twice as much natural resources would change their projections.)

A couple of years ago I started reading this blog. I've learned a ton from it. But I've always had that nagging thought in the back of my head that there could be different scenarios than the one offered here - not ones with a different eventual outcome but different timing and contours - and that we're collectively (the TAE community) blind to those other scenarios because we don't talk about them. Timing and contour matter - if they didn't, there would be nothing interesting for any of us to talk about, since we all know where things are headed eventually.

Maybe we should follow the lead of the Meadowses and come up with a few predictions, not just one?

Phlogiston Água de Beber said...

The San Francisco Bay Area was once full of Mr_L's who were also oh so sure that property only goes up and everybody wants to live here. They were quite wrong, they just didn't know it yet. Those who ignore Mr. Stein's words of wisdom are destined to find out for themselves.

OH, the unfairness of it all!

Ruben said...

@p01 re: Garth Turner.

He has never seen the doom potential. And after all, he is a financial advisor--he makes less if people move their savings into dried beans and farmland.

Still, his blog is always good schadenfodder

Phlogiston Água de Beber said...


I've often fantasized about what I could do to evildoers if I possessed an invincible super weapon. They actually had so much free time that they could fantasize about doubling Earth's natural resources and guestimate what that would do for growth? Amazing! As Dmitry has reminded us recently, we cannot import oil from another planet and this one is fast running dry. Thanks to our inept attempt to suck some extra out of the Gulf and then protect the culprits, it may also run cold.

Now I'm just a flea in the big picture/global systems game. No books to my credit. Not many people around who can vouch for my record as a seer. I do have plenty of free time, but I'm not going to do your heavy lifting for you. I freely share my thoughts on TEOTWAWKI, based on what I learn, a smidgeon of intuition and an old foggy crystal ball. Stoneleigh shares what she sees. You want different contours and timelines, bring'em yourself or bring some new information. I've already changed my forecast more than once.

Wolf at the Door said...

@ Draft,

"...and that we're collectively (the TAE community) blind to those other scenarios because we don't talk about them."

Gee ya think? Of course your right, which is why the whole discussion is getting sillier and sillier as time goes on. That is why the entire financial blogosphere is mostly irrelevant at this point, including TAE. As it sits right now we get a crushing deflationary depression, but that could be modified (not avoided, modified)with a few strategic pen strokes by our brilliant puppetmasters. But no matter we are in for a huge, bonecrushing "adjustment" to our lifestyles and standards of living. Basically we all end up eating dirt. 99 and 3/4% guar-an-teed of course. And anybody putting a timeline on it is either a charlatan or a fool. All you have to do is look back to what was being said for fall of 2008 around these parts to understand that.

Just prepare your ass off and let gravity take care of the rest. Nobody knows when she blows but it will be spectacular when the time comes.

snuffy said...

I.M Nobody,

Nah,I am not "The Road"...To tell you the truth,I followed greenpas advice and skipped seeing it.I have enough grim visions of tomorrow in my own head,seeing Someone Else's just depresses me.

Who is in control?I think there is a lot of people who THINK they are heavies,that "Believe"they are in control....god/fate/chaos laughs at them.

Honestly,I think TPTB will make a strong attempt at a fascist state...which will blow up in their face.. and end the American experiment.There is a high probability that the last real "Free and reasonably honest"election was Kennedy,and we saw how that one ended.I am pretty sure the ones who run things don't sit in the White house.

As I have said"They[the bad guys]won".
Our society is "owned" by a bunch of predatory thugs.
There still exist the trappings of freedom,but watch how the supreme court will gut anything that gets in the way of the continuing corporatization of the remaining "American" assets,like social security,medicare ect.And there is not one thing any of us could do to change it.

There is enough difference in the various regions of the USA to make several good-size country's.

If we miss the majority of the nukes and the smallpox[remember the soviet retaliation was nukes followed by dumping smallpox on the survivors]Here in Cascadia we have a pretty nice country.And,lots of talented,bright people,good water,deep sea ports,..

I don't know if all that will mean squat when it starts to get mean,and folks get hungry.

I don't know.

There are times,like tonight, when I watch the knockdown-drag-outs here at TAE,and just want to sit this one out


Bee good,or
Bee careful


Hombre said...

Is Europe in trouble? A clue from the East!

China says willing to help euro zone return to health
BEIJING (Reuters) – China is willing to help countries in the euro zone return to economic health and will support the International Monetary Fund element of a bailout package for the bloc, a Chinese Foreign Ministry spokeswoman said on Thursday.


A "return to health" anytime soon is of course about as likely as California's "return to solvency", like uncovering new gold fields ala 1849!
The Chinese though are smart enough to want to protect their markets. How about a sino bailout for incoming governor Jerry Brown!

p01 said...

Of course it's about money :)
Might it be also about political capital, being the only (ex)political figure who had the vision to see this mess?; the visionary hero raising the new army of undead to put some order in this mess (by all means deemed necessary)?
The comment section on his blog seems nuttier than a squirrel's turd (pun very much intended) these days, as all "contrarians" come out in the open. I've seen this type of "born again heroes" building their followings before.

Maybe I'm just paranoid.


Jim R said...

One more little data point ... the BDI is declining again.


Jim R said...

And it's down some more today. Tyler has better sources than I do.


Dan said...

@ anon

Agreed. Hard to know the timing. But, always best to assume the worst and prepare, while at the same time living a happy, optimistic, social, loving life.

Carter Apps, dabbler of stuff said...

I've be saying these very things for a couple of years and I was quite shocked when Canada didn't got pop when the U.S. did. I do think we are in for a crash and a world of financial pain but I cannot convince the majority of my friends and family to reduce debt and get fruggal/prepared for hard times

There has been a small shift in thinking over the last 2 years where I've gone from "our nutty friend who blogs about doom and needs to be medicated" to someone who is being asked to contribute a great deal of ideas and knowledge to such groups as our local transition town movement. While they seem to have far too much misplaced confidence in my abilities the fact that some are looking for alternatives is a start at least. That said I think its far too late and I'm predictiong 2011 as the year the SHTF in Canada.

TMO said...

Given the discussion on the Canadian housing market, and the 90% decline predicted by Stoneleigh, here is a very interesting excerpted statement from the Fed on the American housing market (via Denninger):

"With nearly half of total bank assets backed by residential real estate, both homeowners on the cusp of negative equity and the banking system as a whole remain concerned amid the resumption of home price declines.[8] This unease highlights the housing market’s fragility and suggests there may be no pain-free path to the eventual righting of the market. No perfect solution to the housing crisis exists. The latest price declines will undoubtedly cause more economic dislocation. As the crisis enters its fifth year, uncertainty is as prevalent as ever and continues to hinder a more robust economic recovery. Given that time has not proven beneficial in rendering pricing clarity, allowing the market to clear may be the path of least distress."

Repeat: "…allowing the market to clear may be the path of least distress."

Is this the Fed signalling capitulation?

People who follow the housing market in the US know that one way the banks have been trying to keep house prices falling further (and thus prop up their balance sheets) is not allowing foreclosed properties onto the market. This prevents the normal forces of supply and demand to establish a true market price, clear the overhang, and establish a new equilibrium.

So, is the Fed genuinely signalling some impending major policy change? They usually do what they say they will do. If so, this could be a huge step forward.

Any serious thoughts or further analysis would be welcome.

Phlogiston Água de Beber said...

@ Snuffy

I didn't see The Road either and have no interest in doing so. I just know what folks here have written about it. I'm afraid I am guilty of having used you as a "literary" device to introduce the idea that as I see it the post total-collapse world is either feudal or feral. I'm sure I owe you an apology for that and I hope you will consider it rendered.

For a couple of very nice years this past decade, I lived just up the road from you in Troutdale. I know fairly well what Cascadia has to offer. There is a heck of a lot to be said for having lots of trees around.

p01 said...

@ The Anonymous

Chill, baby!

Those indexes don't matter anymore to anyone who sees through the smoke. Get over it. It's finished.
Take your pills and go outside.

By 2013 you will not recognise the world you live in. TEOTWAWKI enough?

Have a listen:

Too mugh sci-fi on teevee these days, i tell you...Sheesh!


SRV ES339 said...

You may want to re-think the link to Garth Turner... he officially "threw you under the bus" over the Max K interview (The Survivalist)... he has a real problem with the 90% figure (a thinking person would surely understand you weren't saying all homes will lose 90%, but some may, and many high end country homes are closing in on 50% already). Anyway, thought I'd post my comment to Garth... of course he didn't post it... seems he can dish it out, but can't take it (even in jest)!

Breaking news from The Office of the Prime Minister…
Garth Turner will return to Prime Minister Harper’s inner circle as Minister of Financial Fantasies. Mr. Turner’s mandate is to discredit those attempting to inject truth in the reporting of the financial state of the country, with a focus on those attempting to disrupt the natural rebalance of the critical real estate sector of the economy. As a recent convert, Mr. Turner is positioned well to “ferret out” the offending individuals and use his loyal internet following to “spread the word” about the dangers of extreme predictions of dire consequences related to government efforts to facilitate a smooth transition during the rebalance.
We congratulate Garth on his return to “reality,” after an extended period of post rejection experimentation in the wing-nut, doom and gloom crowd… welcome back Garth!
Stephen, James, and Mark

Gravity said...

"I'd ask you to prepare, but, you're not going to anyway. And don't worry about the economy."
"What economy?" [economy shatters on the floor]
"That economy."
"I'm sorry..."
"I said don't worry about it. I'll get one of my kids to fix it."
"How did you know?"
"Ohh, what's really going to run your bank later on is, did you break it because gravity is a recursive algorithm, or in spite of it?"

Hombre said...

Gulf Oil Corp CEO predicts $100+ oil prices in the first quarter. And $150 by summer! (CNBC news 1 PM eastern)


p01 said...

Link please!


p01 said...

Oops, sorry. I see he did not post your comment. I would have loved to see the comments from the "contrarian" crowd.

jal said...

Okay ... okay!
I going to jump in on Predictions.

We need a blog that looks at the past predictions, lets say 2008, 2009, 2010, and the future for 2011.

Its not very interesting to look at my predictions since nobody care what I say and because, as far as I know, I have no influence of the outcome.

What we need is to compare the predictions of the LEAD COWS and look at the reasons that they got it wrong.

I did a quick search and came up with the following.


DECEMBER 23, 2010, 11:12 A.M. ET

The Year That Wasn't: Predictions Gone Wrong

A pick-up in consumer spending, healthy economic growth and falling unemployment resulting in modest stock gains -- that's what prominent economists predicted a year ago for 2010.
Missed 2010 forecasts and murky 2011 ones among experts could also be a sign that models are due for a change. "Most modeling has a one-size-fits-all attitude toward the economy," says Leamer.

Here are seven predictions where leading experts fell short in 2010 and their take on what's to come in 2011.


jal said...


Here is a fun site for predictions.

On the Record: Predictions
Discuss these predictions with the predictors themselves. If you decide you disagree, you can challenge a prediction and turn it into Long Bet.

The Anonymous said...

Paul - maybe I will recognize the world in 2013, maybe I wont.

But what we ALL will recognize is whether the DJIA and CS 20 will have collapsed by 2013.

So again, if it really is a 100% certainty of collapse by 2013, you should have absolutely no problem making a few predictive statements -- specifically:

The DJIA will get below _______ by 2013.


The CS 20 will get below _________ by 2013.

Now, if I may, I will be so bold and make a prediction. My prediction is p01 Paul is highly likely to continue to tapdance around the question and refuse to provide easily quantifyable, objective evidence of what will be in "100% certain" collapse by 2013.

So heres your chance p01 Paul -- prove my predictive powers incorrect and fill in the blanks about DJIA and CS 20 by 2013... or prove me to be a real Nostradamus and continue to go tippity tap tippity tap around the question.

Phlogiston Água de Beber said...


It looks like oil is trying pretty hard to reach the $100 mark before New Years. Maybe Mr. Gulf Oil has crystal balls. ;)

Hombre said...

I.M.N. - Either that, or he has his hand on the joystick! ;-)

The Q said...

p01 said...

"No comments on Turner's take on his hummer self-sufficiency and Nicole Foss' lunacy? Hmmm...

I puked all day for my part. Violently!"

Don't be too hard on him. He was warning about a real estate bubble years ago in his newspaper column, long before TAE or TOD. He has done well for himself playing within the framework set up for the benefit of the big boys. He most likely honestly believes that "the little guy" can continue to benefit from the system (capital gains exemptions and the like..."leveraging" your grandmother's gold teeth to feed the perpetual motion machine in the basement... etc..) He is probably unwilling (or unable)to accept the implications of what what Ilargi frequently states, that this is "a political crisis more than a financial crisis". He is frightened.

Jeotsu said...

I agree that predications of timing are difficult. In the face of this ongoing disaster we have the conflicting forces of people who are trying to do good (yes, I do believe there are some left, though they may end up doing the "wrong" thing while trying to fix the mess), and these do-gooders are in opposition with people trying to suck the last value from the collapse. Though, in trying to do evil, they may inadverantly do the "right" thing on occasion and help sustain the situation a bit longer. See "extend and pretend", as has been discussed frequently over the last 3 years.

But the fact remains that trying to "make money" in the markets right now is a fools game unless you happen to be personal friends with someone at GS or the Fed or the Treasury. HFT, Hedge Funds, backroom deals- there is no market left (stocks, bonds, commodities) where you could rightly think that there is free and open trading ongoing. The sharks circle, hoping you will throw your money in their pool. In these circumstances, whether the crash come in 2 days or 20 years, being very conservative in terms of cash and no debt is a smart move.

Finally, in terms of getting your lifeboat ready, an issue I have not seen discussed much (unless my memory has serious failed me)...


It is easy to talk about hordes of cannibal-zombie neighbors comming to steal your food/gold/guns. Check history- ancient and recent. Disease is the big killer. You will be especially vulnerable when you are weak and hungry.

Check what you health insurance (if you have it) or national health plan will cover. Consideer spenidng a few of your own dollars if necessary. Get boosters. Look into "third world" diseases for which you can get your jabs.

A good guide is to look at the 'travelers advisories' for going to a thrid world countries or some of the rougher former soviet republics. Get jabs for all those diseases. They may be coming soon to an no-longer-properly treated water supply near you.


p01 said...

@The Q
I know what you mean; I'm the first to admit I am frightened. Not as much as when I first realized that once you are born you are sure to expire, but still frightened :). It's just that he's lashing at the *completely* wrong people.

Oh, well, in the wake of what's coming to roost that's certainly just peanuts.


Phlogiston Água de Beber said...


You make a very good point about disease being the most dangerous of the horsemen. The medical system is already pretty wobbly. I am wondering if it won't prove to be a canary that, if carefully watched, might tell us when we're approaching the cliff.

There will be a lot more vectors than just water supply to worry about. And, since most of the world is now urbanized, at some point, an equally important concern will be whether or not anything at all comes out when the tap is opened.

zander said...

Treat yourself to the best nature bats last post ever....


BTW, do unnatural bats die prematurely?


Phlogiston Água de Beber said...


Thanks for the heads up. When I checked Guy's blog this morning that post wasn't there yet.

It reminds me of what I saw this past 4th of July. Our little town has a parade up Main Street on Independence Day. Lots of homemade floats, antique cars and tractors, a few politicians. My relatives and neighbors, all dressed up in psychedelic clothing, rode a float dedicated to Woodstock. The Community Church entered a float featuring young boys in camo carrying toy guns.

Guy hit this one right out of the park.

Ruben said...


That was awesome. It broke my heart when a dear friend joined the Canadian Army. I haven't talked to him since--at this point joining the Army is volunteering to mostly kill innocent people.

jal said...

Dammm! Its not even 2011.


The financially troubled suburb of Mobile turned to bankruptcy court in October 2009 when it "simply ran of money to pay its pension obligations," says the city's lawyer R. Scott Williams.

Prichard proposed capping benefits to current retirees at about $200 a month, down from monthly payments of as much as $3,000. "That's not a hair cut, that's a scalping," said Larry Voit, who represented a group of 40 retired city workers in Prichard, population 27,500.

Phlogiston Água de Beber said...

Charles Hugh Smith opines that this is, or at least ought to be, the Last Christmas in America (TLCIA).

I quite agree.

scandia said...

@Zander, Thanks for the McPherson essay.
Also true in Canada where the MP's play war games with the military. It is impossible at the moment to challenge such activities.
And what about all the journalists willingly imbedded in the military?
He is right on stating that war is the economy!

jal said...


How David Rosenberg foresaw the crash
Carlos Torres, Bloomberg News · Tuesday, Dec. 30, 2008


Merrill Lynch's David Rosenberg's 2009 Forecast

David Rosenberg's Outlook For 2010

Rosenberg: Ten Investment Themes for 2011

Greg L said...

I frequently lurk here and I've another question. Please read the following link (it's brief) about moving to a cashless society. Ostensibly, this is being proposed to thwart terrorists:


What they wish to do is make money totally digital on a global basis so it can be readily traced. Effectively, you wouldn't be able to buy or trade under this system unless you possessed a smart card with your biometric marker.

I post this mainly because preparing a lifeboat, as I understand it, includes accumulation and possession of physical currency. Going to a cashless society would likely mean that holding physical currency would be outlawed which would eliminate it as a medium of exchange. In light of what appears to be an upswing in terrorist attacks, I can easily see a "justification" for moving towards this.

Reactions? How does this affect the lifeboat?

Greg L said...

Forgot to check the box to get follow-up comments e-mailed.

Ilargi said...

New post up.

About that 90% drop in home prices...


swans-of-borg said...

I hate to burst your pessimism bubble, but the Canada.com network (Real Estate sales section) now has proof you're wrong about Canadian Real Estate...

Home prices expected to rise further: Royal LePage


Home prices expected to keep rising next year: Re/Max