Our North American Housing Price Index registered a modest 1.67% increase from December, supported by a rise at the bottom of the market. The drop from May - when we started the Index - is now 14.46%, representing a massive fall in the North American housing markets, and likely correlated by a similar drop in the valuation of bank mortgage portfolios. On an annualised basis the Index suggests the market is down 21.69%, a truly stunning loss.
In the United States, IRS requirements have made claiming the house purchase tax credit rather arduous. This will put a damper on the 'no-money-down' schemes that were being used to have the tax credit stand in for a down payment. Apparently government-backed loans are now about 90% of the market in the US and essentially all in Canada (where many borrowers are having the nasty surprise of balloon notes coming due without any means to refinance them).
The cumbersome tax credit, along with the spectre of interest rate hikes in the future - thus influencing the interest rate on mortgages - will likely collude to continue depressing house prices across the continent. Simply put, the North American housing market is now stuck wheezing in the cold, heavy iron-lung of the state. The crash may be very prolonged, with Governments desperately attempted to prop up prices which should be falling.
Showing posts with label canada. Show all posts
Showing posts with label canada. Show all posts
Friday, January 22, 2010
Monday, November 16, 2009
Housing Price Report for November
Our result for the first six months of our North American Housing Price Index is a drop of 10.45%. This is a very serious drop, and has implication for more than just the house owners who need the value of their houses to say up. It also means that, on average: the housing collateral on bank balance sheets is impaired by around 10%; any and all securities of bundled mortgages have seen their value reduced by 10%; any house owners relying on the value of their house to keep up appearances have seen their appearances reduced by 10%.
Prices are showing some sign of improvement in the USA, which is to be expected thanks to the Federal Government's herculean efforts to prop up the industry.The 10% US Federal income tax credit has been extended, and all things being equal, this will tend to keep prices in the USA 10% higher than they otherwise would be. We'll be watching for a sudden fall when the program ends, if ever.
Interestingly enough, though, we are seeing some weakness in the Canadian housing market. This strikes us as rather odd, as the credit available to Canadian Citizens is still growing at a respectable clip. Additionally, the Federal Government has a very direct hand in guaranteeing mortgages in Canada, whereas the U.S. Federal Government only proves a wishy-washy guarantee to bail out banks.
Frankly, it seems that the animal spirits are friskier in the United States than Canada, undoubtedly supported by the U.S. Federal Government's housing tax credit. It is also possible U.S. Citizenry is a bit more credulous of the 'recession is over' propaganda than are the Canadians; it's time for Americans to do their patriotic duty and spend, spend, spend!
Prices are showing some sign of improvement in the USA, which is to be expected thanks to the Federal Government's herculean efforts to prop up the industry.The 10% US Federal income tax credit has been extended, and all things being equal, this will tend to keep prices in the USA 10% higher than they otherwise would be. We'll be watching for a sudden fall when the program ends, if ever.
Interestingly enough, though, we are seeing some weakness in the Canadian housing market. This strikes us as rather odd, as the credit available to Canadian Citizens is still growing at a respectable clip. Additionally, the Federal Government has a very direct hand in guaranteeing mortgages in Canada, whereas the U.S. Federal Government only proves a wishy-washy guarantee to bail out banks.
Frankly, it seems that the animal spirits are friskier in the United States than Canada, undoubtedly supported by the U.S. Federal Government's housing tax credit. It is also possible U.S. Citizenry is a bit more credulous of the 'recession is over' propaganda than are the Canadians; it's time for Americans to do their patriotic duty and spend, spend, spend!
Monday, June 8, 2009
Canada/U.S. Trade War?
We have been following the developments surrounding the "Buy American" policy of the United States with some interest. The return of aggressively nationalistic protectionism to U.S. policy is a very serious affair: the U.S. is presently the world's largest economy, and even as it shrinks it still is a disproportionate slice of the pie, if you will. When the number one economy puts up trade barriers, things will not be pretty.
As could be expected, Canada - as the U.S.'s single largest trading partner - would be the most affected, and quickest to notice. Indeed, notice Canada has: the Federation of Canadian Municipalities recently passed a resolution "to bar bids from companies whose countries impose trade restrictions with Canada." The FCM also voted to refrain from action for 120 days, but this is definitely a return salvo in a burgeoning trade war between Canada and the U.S.
It remains our opinion that integration with Canada is the U.S.'s best hope for economic salvation. If instead the U.S. insists on fomenting a trade war, it will likely only insure a very disastrous economic squabble. Although at present Canada needs the U.S. more than the U.S. needs Canada, a trade war will force Canada to rather more quickly cultivate trade with other nations. This will inevitably leave the U.S. bereft of the assets of its closest neighbour, and merely heir to a gutted industrial base (and collapsed banking industry, and a bankrupt Federal Government, and defaulted State Governments, and a grossly devalued currency, et cetera).
As could be expected, Canada - as the U.S.'s single largest trading partner - would be the most affected, and quickest to notice. Indeed, notice Canada has: the Federation of Canadian Municipalities recently passed a resolution "to bar bids from companies whose countries impose trade restrictions with Canada." The FCM also voted to refrain from action for 120 days, but this is definitely a return salvo in a burgeoning trade war between Canada and the U.S.
It remains our opinion that integration with Canada is the U.S.'s best hope for economic salvation. If instead the U.S. insists on fomenting a trade war, it will likely only insure a very disastrous economic squabble. Although at present Canada needs the U.S. more than the U.S. needs Canada, a trade war will force Canada to rather more quickly cultivate trade with other nations. This will inevitably leave the U.S. bereft of the assets of its closest neighbour, and merely heir to a gutted industrial base (and collapsed banking industry, and a bankrupt Federal Government, and defaulted State Governments, and a grossly devalued currency, et cetera).
Friday, April 24, 2009
Destructive Qualities of Stupidity in Government
Click here for part one of this topic.
Yesterday we wrote that we feel horrifyingly bad mis-investment has become the norm on the part of the U.S. Federal Government. As awful as that mis-investment is, at the same time, it only seems reasonable to assume that such activities can only go on for just so long before they cannot continue. When that end comes is anyone's guess, but we feel certain that the end will come.
At that time, American Citizens will collectively realise they live in a blasted country, and they will probably decide that changes are in order. The nation will have to learn humility and discipline. However, we feel the United States will likely have no domestic vision left to rebuild upon more-realistic and sustainable lines. The only choice will be to turn to the greatest economic and social friend the U.S. presently has: Canada.
As the largest trading partner of the U.S., as well as a cultural ally, Canada has been in a very good position to study the American mindset; it isn't a stretch to say that Canada understands the U.S. better than it does itself. In the future, it will likely be Canada, as the impartial observer, which will both understand the problems in the U.S., and have the best solutions.
That is, of course, unless the United States distances itself sufficiently from its northern neighbour. Although we understand the high-level visit by President Barack Obama to Canada was a warm success, we've been noticing what we feel is a very cold undercurrent in the Obama Administration. Point and case are the recent comments by Homeland Security Secretary Janet Napolitano. Here are some of the highlights:
Such a clamping-down on the U,S./Canadian border is the worst possible thing to do during the Depression. There is no other time when international friendship and cooperation more important than a Depression, and Canada is the nearest functional neighbour of the U.S. What Secretary Napolitano proposes to do is, in a word, madness. She is voicing a destructive, out-of-control obsession with 'terrorists' and 'national security,' and she does not have the wits to see what she is doing.
There are many more examples of this stupidity in the Federal Government, but we feel that Secretary Napolitano's personal brand does not get the attention it deserves. We frankly consider her as destructive as Treasury Secretary Timothy Geithner's incessant Goldman Sachs donations, or Federal Reserve Chairman Ben Bernanke's voodoo monetary policies. All three persons are working hard to destroy what hopes the United States has: Geithner destroys the wealth; Bernanke destroys the money; Napolitano destroys relationships with those who can help save us from the previous two.
Yesterday we wrote that we feel horrifyingly bad mis-investment has become the norm on the part of the U.S. Federal Government. As awful as that mis-investment is, at the same time, it only seems reasonable to assume that such activities can only go on for just so long before they cannot continue. When that end comes is anyone's guess, but we feel certain that the end will come.
At that time, American Citizens will collectively realise they live in a blasted country, and they will probably decide that changes are in order. The nation will have to learn humility and discipline. However, we feel the United States will likely have no domestic vision left to rebuild upon more-realistic and sustainable lines. The only choice will be to turn to the greatest economic and social friend the U.S. presently has: Canada.
As the largest trading partner of the U.S., as well as a cultural ally, Canada has been in a very good position to study the American mindset; it isn't a stretch to say that Canada understands the U.S. better than it does itself. In the future, it will likely be Canada, as the impartial observer, which will both understand the problems in the U.S., and have the best solutions.
That is, of course, unless the United States distances itself sufficiently from its northern neighbour. Although we understand the high-level visit by President Barack Obama to Canada was a warm success, we've been noticing what we feel is a very cold undercurrent in the Obama Administration. Point and case are the recent comments by Homeland Security Secretary Janet Napolitano. Here are some of the highlights:
"Yes, Canada is not Mexico... Nonetheless, to the extent that terrorists have come into our country or suspected or known terrorists have entered our country across a border, it's been across the Canadian border." "The fact of the matter is that Canada allows people into its country that we do not allow into ours."These are not the first blatantly untrue things the Secretary has stated (read our article here). It confuses us: Secretary Napolitano is supposed to be one of the most informed persons in the U.S. Federal Government. In her hands rest the administration of, well, homeland security. Nevertheless, her comments are hogwash. As the Canadian ambassador to the U.S., Michal Wilson, to comment:
As the 9/11 commission reported in 2004, all of the 9/11 terrorists arrived in the United States from outside North America. They flew to major U.S. airports. They entered the U.S. with documents issued by the United States government, and no 9/11 terrorists came from Canada.Since Secretary Napolitano should know this, we are forced to conclude she must, in fact, be an idiot. Her powerful position in the Obama Administration makes her a dangerous idiot. If she is successful in her attempts to strangle the U.S./Canadian border, in a manner akin to the U.S./Mexico border, we fear she will be negatively impacting the ability of the United States to pull itself together at the end of the 2007 Depression.
Such a clamping-down on the U,S./Canadian border is the worst possible thing to do during the Depression. There is no other time when international friendship and cooperation more important than a Depression, and Canada is the nearest functional neighbour of the U.S. What Secretary Napolitano proposes to do is, in a word, madness. She is voicing a destructive, out-of-control obsession with 'terrorists' and 'national security,' and she does not have the wits to see what she is doing.
There are many more examples of this stupidity in the Federal Government, but we feel that Secretary Napolitano's personal brand does not get the attention it deserves. We frankly consider her as destructive as Treasury Secretary Timothy Geithner's incessant Goldman Sachs donations, or Federal Reserve Chairman Ben Bernanke's voodoo monetary policies. All three persons are working hard to destroy what hopes the United States has: Geithner destroys the wealth; Bernanke destroys the money; Napolitano destroys relationships with those who can help save us from the previous two.
Thursday, April 23, 2009
The United States Needs Canada to Survive
We have been pointing at the problems of the concentration of decision-making quite a bit recently, but we feel it bears repeating. Much blame for the 2007 Depression can be placed on, for example, the U.S. Federal Government allowing the super-huge American banks to become... well, super-huge. It gave those banks, and therefore their respective managements, so much power that the bad decisions made by the banks had global implications. The rest, as they say, is history.
Now the United States is hurtling down the first dip of the 2007 Depression, and the programmes for a quick "recovery" back to the consumer economy are only opium-induced hallucinations. In our opinion, the only real way to bring the Depression to a close is the old-fashioned way: liquidation, down-sizing, and reformation. If we were the optimistic type, we would suggest that the Government is running out of time to allow this. Realistically, though, we fear that the point-of-no-return is several economic pot-holes in the past.
So... where does that leave the average American citizen? Nowhere comfortable is our reply; the Citizenry is faced with a mind-numbingly-large (and exponentially growing) national debt, the fallout from the imploded consumer economy, and a world in a Depression. Whether or not the Citizenry is aware of this is another matter; the important point is that the United States probably will not be able to bring itself out of the 2007 Depression by its lonesome anymore.
Hence, the U.S. will need friends. Specifically, friends with usable industrial capacity, a less-unsound currency, a less-irresponsible Federal Government, and a Citizenry with a healthy work ethic. Bonus points for having a border with the U.S., as well as being a major trading partner.
We would suggest Canada: it is the only functional country which borders the U.S., and it offers the qualities we listed above, more-or-less. Canadian Citizens have their problems, to be sure, but Canada has not done many important things: the Federal Government hasn't been usurped by the super-huge banks; it isn't running massive wars of occupation; it hasn't annihilated its cities and industrial capacity in favour of strip malls and hair salons, it is the U.S.'s largest trading partner.
It seems, however, that the U.S. Federal Government is intent on de-friending Canada. We'll write more on this topic tomorrow.
Read part two here.
Now the United States is hurtling down the first dip of the 2007 Depression, and the programmes for a quick "recovery" back to the consumer economy are only opium-induced hallucinations. In our opinion, the only real way to bring the Depression to a close is the old-fashioned way: liquidation, down-sizing, and reformation. If we were the optimistic type, we would suggest that the Government is running out of time to allow this. Realistically, though, we fear that the point-of-no-return is several economic pot-holes in the past.
So... where does that leave the average American citizen? Nowhere comfortable is our reply; the Citizenry is faced with a mind-numbingly-large (and exponentially growing) national debt, the fallout from the imploded consumer economy, and a world in a Depression. Whether or not the Citizenry is aware of this is another matter; the important point is that the United States probably will not be able to bring itself out of the 2007 Depression by its lonesome anymore.
Hence, the U.S. will need friends. Specifically, friends with usable industrial capacity, a less-unsound currency, a less-irresponsible Federal Government, and a Citizenry with a healthy work ethic. Bonus points for having a border with the U.S., as well as being a major trading partner.
We would suggest Canada: it is the only functional country which borders the U.S., and it offers the qualities we listed above, more-or-less. Canadian Citizens have their problems, to be sure, but Canada has not done many important things: the Federal Government hasn't been usurped by the super-huge banks; it isn't running massive wars of occupation; it hasn't annihilated its cities and industrial capacity in favour of strip malls and hair salons, it is the U.S.'s largest trading partner.
It seems, however, that the U.S. Federal Government is intent on de-friending Canada. We'll write more on this topic tomorrow.
Read part two here.
Sunday, April 12, 2009
The Rising Attraction of Socialism
A new Rasmussen Reports telephone poll has found that the percentile of American citizens who favour socialism is 20%, while 53% said capitalism is the better system. This is a very interesting trend, one that we will be watching with great interest. Although 20% is a relative minority in the United States, it is impressive to see this form of Governing garnering such popularity in the U.S.
This deserves a bit of reflection: socialism is antithetical to the American ethos. Socialism is a system which, in a basic interpretation, emphasises the importance of supporting the society as a whole. The Scandinavian countries, Germany, Switzerland, and Canada (as examples) all exhibit successful application of socialist policies; unsurprisingly, these nations give the appearance of being able to more easily soften the harsh blows of the Depression - it remains to be seen how that softening holds up in the future.
As the U.S. is a nation which promotes the individual at the cost of the greater society, socialism is typically regarded as a perversion at best, and a whole-sale attack on "freedom" at worst. For socialism to be supported by 20% of the Citizenry, we can only assume that the 2007 Depression is beginning to make people feel the need for a change.
We can't argue against that need. However, we suspect that people have the idea that President Obama is the man who will bring promised change. As we've said on numerous occasions, we do not think he will deliver the kind of socialism the 20% of Americans are expecting. The United States, since it has been so adamantly opposed to socialism (to the point of its being an outright violation of the Constitution), has no particular framework upon which to build a functional socialist system.
President Obama was elected on the promise of change, and that change is commonly considered to smack of socialism. However, if the continual, hapless bailout-ing of super-huge, super-insolvent banks, and trashy, useless, bankrupt automobile manufacturers is any indication, the Obama Administration's peculiar brand of socialism is the kind previously discovered in the Soviet Union.
It should be said, though, that the Government is merely building upon what previous Administrations have put in place. This is true going back further into American history than most would care to admit. One can point, and rightly so, an accusing finger at President Herbert Hoover as the first major lemon socialist. Lemon socialism is not proper socialism; it is sovietism.
This deserves a bit of reflection: socialism is antithetical to the American ethos. Socialism is a system which, in a basic interpretation, emphasises the importance of supporting the society as a whole. The Scandinavian countries, Germany, Switzerland, and Canada (as examples) all exhibit successful application of socialist policies; unsurprisingly, these nations give the appearance of being able to more easily soften the harsh blows of the Depression - it remains to be seen how that softening holds up in the future.
As the U.S. is a nation which promotes the individual at the cost of the greater society, socialism is typically regarded as a perversion at best, and a whole-sale attack on "freedom" at worst. For socialism to be supported by 20% of the Citizenry, we can only assume that the 2007 Depression is beginning to make people feel the need for a change.
We can't argue against that need. However, we suspect that people have the idea that President Obama is the man who will bring promised change. As we've said on numerous occasions, we do not think he will deliver the kind of socialism the 20% of Americans are expecting. The United States, since it has been so adamantly opposed to socialism (to the point of its being an outright violation of the Constitution), has no particular framework upon which to build a functional socialist system.
President Obama was elected on the promise of change, and that change is commonly considered to smack of socialism. However, if the continual, hapless bailout-ing of super-huge, super-insolvent banks, and trashy, useless, bankrupt automobile manufacturers is any indication, the Obama Administration's peculiar brand of socialism is the kind previously discovered in the Soviet Union.
It should be said, though, that the Government is merely building upon what previous Administrations have put in place. This is true going back further into American history than most would care to admit. One can point, and rightly so, an accusing finger at President Herbert Hoover as the first major lemon socialist. Lemon socialism is not proper socialism; it is sovietism.
Friday, March 27, 2009
Back-Door Protectionism
An article from the Globe and Mail caught out eye: Ms. Janet Napolitano, Secretary of the Department of Homeland Security, has stated that the U.S./Canadian border will be treated like "a real border," as she put it. “I've never actually spent much time on the Canadian border,” admits the Secretary, adding that she had commissioned a study to help educate her on the - dare we say lengthy? - subject.
This move by the Secretary is an ominous one; as the Globe and Mail put it, this is a "tariff-in-all-but-name." It is a bad precedent to set, as it is effectively an aggressive, protectionistic stance against the United State's far-better-off northern neighbour. Canada has a sounder banking system, and a sounder economy as a whole. The Secretary, in isolating the United States from the valuable asset that is Canada, is doing a very terrible disservice to her employer: the Citizens of the United States.
At the same time, though, we are not surprised by this new policy from the Obama Administration. If the Administration is indeed serious about creating jobs for Americans - any jobs will do - at all costs, then the relative soundness and functionality of Canada no longer seems like an asset for an ailing nation. Instead, Canada begins to look more like a threat. As the 2007 Depression continues, we would not be surprised if more anti-Canada policies, like this border-tightening, continue to appear.
In closing, we wish to repeat what the Globe and Mail observed at the end of the article:
This move by the Secretary is an ominous one; as the Globe and Mail put it, this is a "tariff-in-all-but-name." It is a bad precedent to set, as it is effectively an aggressive, protectionistic stance against the United State's far-better-off northern neighbour. Canada has a sounder banking system, and a sounder economy as a whole. The Secretary, in isolating the United States from the valuable asset that is Canada, is doing a very terrible disservice to her employer: the Citizens of the United States.
At the same time, though, we are not surprised by this new policy from the Obama Administration. If the Administration is indeed serious about creating jobs for Americans - any jobs will do - at all costs, then the relative soundness and functionality of Canada no longer seems like an asset for an ailing nation. Instead, Canada begins to look more like a threat. As the 2007 Depression continues, we would not be surprised if more anti-Canada policies, like this border-tightening, continue to appear.
In closing, we wish to repeat what the Globe and Mail observed at the end of the article:
"It seemed to be another lesson learned: when it comes to national security, the Obama administration's policies are often consonant with its Republican predecessor."
Monday, March 2, 2009
Ireland Blows Out
This article from the Telegraph speaks volumes. A few highlights: at one point during the boom, 1/5 of all workers were in construction; Ireland now has 350,000 empty houses (for a population of 4.2 million); house prices are expected to fall by 80%; there are 16,000 taxis in Dublin - a city of 500,000.
In high relief for all the world to see, Ireland's mania has gone completely to bust. The former tiger of the Eurozone is now a basket-case. If ever there were a case of classical economics at work, it is here: the Depression is a natural consequence of the mania that proceeded it; and the greater the mania, the greater the depression.
Just as the harlots enter the Kingdom of Heaven as the avant-garde, so Ireland will lead the nations that relied too much upon the FIRE (Finance, Insurance and Real Estate) Economy straight to economic Hell. In her train are the United Kingdom, and the United States. Perhaps Australia and Canada will escape the worst because they actually still produce things that people want - though this is looking increasing less likely since the world seems to be entering an 'all-fall-down' depression.
In high relief for all the world to see, Ireland's mania has gone completely to bust. The former tiger of the Eurozone is now a basket-case. If ever there were a case of classical economics at work, it is here: the Depression is a natural consequence of the mania that proceeded it; and the greater the mania, the greater the depression.
Just as the harlots enter the Kingdom of Heaven as the avant-garde, so Ireland will lead the nations that relied too much upon the FIRE (Finance, Insurance and Real Estate) Economy straight to economic Hell. In her train are the United Kingdom, and the United States. Perhaps Australia and Canada will escape the worst because they actually still produce things that people want - though this is looking increasing less likely since the world seems to be entering an 'all-fall-down' depression.
Monday, February 23, 2009
U.S. in Recession Since 1999
Thanks to the Canadian penchant for accurate, undoctored statistics, we've been able to find some pretty persuasive evidence that the United States entered into a recession in 1999 or 2000. This article from The Vancouver Sun spells it out very clearly, based on tourism from the U.S. to Canada.
First, a little analysis: Canada represents the cheapest, most convenient foreign tourism destination for the vast majority of American citizens. It is also the only 'safe' (i.e. family friendly) foreign nation one can drive to. The historically favourable strength that the U.S. Dollar has enjoyed against the Canadian Dollar also made tourism attractively affordable.
Considering all that, let's look at what The Sun has to say. In 1999, the number of same-day car volume between the U.S. and Canada was about 27.3 million cars. This presumably represents both day trips to Canada, and Americans cutting through Canada to get to other parts of the U.S. Now, fast forward to 2008: same-day car volume is down to 9.1 million cars, the lowest number on record since Statistics Canada began counting cars in 1972.
It gets even more impressive: Indian visitors to Canada has risen about 6.9% a year since 1995. Indian visitors to British Columbia went up 11.4% (to 35,000 visitors) last year alone, and December -- that cold, bleak month -- saw a 41.6% rise in Indian tourists over last year. 2008 saw American visitors (both same-day and overnight) drop 11.6% (to 4.4 million).
Although the sheer number of American tourists is impressive, the fact that a massive collapse of ~66% over ten years is a bad sign. Indians have much further to go than Americans, but yet their numbers are becoming greater every year for over a decade. This is very, very bad news for the financial position of a vast number of American citizens: if they have been increasingly unable to afford a trip to Canada over the past decade, then this economy is in significantly worse shape than is generally recognised.
First, a little analysis: Canada represents the cheapest, most convenient foreign tourism destination for the vast majority of American citizens. It is also the only 'safe' (i.e. family friendly) foreign nation one can drive to. The historically favourable strength that the U.S. Dollar has enjoyed against the Canadian Dollar also made tourism attractively affordable.
Considering all that, let's look at what The Sun has to say. In 1999, the number of same-day car volume between the U.S. and Canada was about 27.3 million cars. This presumably represents both day trips to Canada, and Americans cutting through Canada to get to other parts of the U.S. Now, fast forward to 2008: same-day car volume is down to 9.1 million cars, the lowest number on record since Statistics Canada began counting cars in 1972.
It gets even more impressive: Indian visitors to Canada has risen about 6.9% a year since 1995. Indian visitors to British Columbia went up 11.4% (to 35,000 visitors) last year alone, and December -- that cold, bleak month -- saw a 41.6% rise in Indian tourists over last year. 2008 saw American visitors (both same-day and overnight) drop 11.6% (to 4.4 million).
Although the sheer number of American tourists is impressive, the fact that a massive collapse of ~66% over ten years is a bad sign. Indians have much further to go than Americans, but yet their numbers are becoming greater every year for over a decade. This is very, very bad news for the financial position of a vast number of American citizens: if they have been increasingly unable to afford a trip to Canada over the past decade, then this economy is in significantly worse shape than is generally recognised.
Thursday, February 19, 2009
The Era of Peak Scam
It seems that not a day goes by we don't read about some juicy new financial scandal. The latest is the embezzlement of billions from funds earmarked to help 'rebuild' Iraq. The total cost to the American Citizenry may never be known, but as the article from The Independent notes, it's probably bigger than Bernard Madoff's $50 billion Ponzi scheme.
As we've remarked before, the 2007 Depression is an out-of-control freight train, hellbent on crushing anything and everything that doesn't get out of its way. At the same time, the still-present squeeze of Peak Oil (indeed, Peak Just-About-Everything) is working its own magic on the world economy. Together, these trends are forcing the world economy to continually shrink; one can see the effects of this shrinking in the entire world, from China to Canada.
With this world-wide crush ongoing, it will be very difficult for viable, legitimate businesses to survive. However, the crush will be even harder on the many, many scams of the world. Bernard Madoff was a smooth operator... but he was only the weakest hand in a whole world filled with smarter, bigger operators. The Galbraith Financial Principle comes into play at this point: the biggest and smartest fall last.
Scams, by their very nature, are unproductive and wasteful, and exist by leaching off of productive, honest endeavours. Time will tell if we are correct, but we suspect that the world has seen Peak Scam. Never again will the world enjoy such a perfect collaboration of cheap, widely available energy, and the impossibly loose financial environment of the past eighty years or so. There's a tonne of fat in the world economy, but that fat is being worked out... viciously.
As we've remarked before, the 2007 Depression is an out-of-control freight train, hellbent on crushing anything and everything that doesn't get out of its way. At the same time, the still-present squeeze of Peak Oil (indeed, Peak Just-About-Everything) is working its own magic on the world economy. Together, these trends are forcing the world economy to continually shrink; one can see the effects of this shrinking in the entire world, from China to Canada.
With this world-wide crush ongoing, it will be very difficult for viable, legitimate businesses to survive. However, the crush will be even harder on the many, many scams of the world. Bernard Madoff was a smooth operator... but he was only the weakest hand in a whole world filled with smarter, bigger operators. The Galbraith Financial Principle comes into play at this point: the biggest and smartest fall last.
Scams, by their very nature, are unproductive and wasteful, and exist by leaching off of productive, honest endeavours. Time will tell if we are correct, but we suspect that the world has seen Peak Scam. Never again will the world enjoy such a perfect collaboration of cheap, widely available energy, and the impossibly loose financial environment of the past eighty years or so. There's a tonne of fat in the world economy, but that fat is being worked out... viciously.
Wednesday, December 17, 2008
Where's the Bottom?
It is now pretty much universally acknowledged that the world's economy is in decline. Even a leader of the stature of Canada's Prime Minister without a Parliament, Mr. Harper, concedes a depression might be possible (source).
Thus, collectively society begins to leave the denial phase and move towards anger. One can expect to see more riots as in Greece and China; more factory occupations as in the U.S. and China; vendettas against banksters such as Mr. Madoff; and who knows what else.
After anger comes bargaining, depression, and finally acceptance. Whether this takes months or years remains to be seen. Even when everyone accepts the fact of the 2007 Depression, it doesn't mean that the economy has hit bottom.
The bottom will be found when failed and failing enterprises and institutions cease to be a drag on society's resources. At that point resources can be applied to meeting people's needs, and the economy can begin resuming more or less healthy functioning.
Generalities aside, what will the bottom look like? Probably half or more of the population will not be working full time, but getting by with a combination of self-employment, odd-jobs, informal work (much of it for barter), and so on. Large numbers will be jobless, homeless, and otherwise restive. There will likely be many disruptions to important services such as utilities, government, retail and banking. There may be many grand gestures by governments to turn things around, but likely they will be mostly for show.
What will turn things around is when people draw on their inner resources to become entrepreneurial - to spot opportunities to meet people's needs, learn new skills, and make new connections. New and surviving institutions will of necessity be extremely frugal and resourceful.
This is a very long way from where society is now. All the way down, people will be clamoring for bailouts, job programs, loans, and whatever else they imagine will remove from them the burden of responsibility to create their own means of living. You, Reader, would be wise to become entrepreneurial or align yourselves with such persons, if you are not already. Affiliation with dying enterprises and institutions may be maintained, but only if you are building up self-reliance on the side.
Thus, collectively society begins to leave the denial phase and move towards anger. One can expect to see more riots as in Greece and China; more factory occupations as in the U.S. and China; vendettas against banksters such as Mr. Madoff; and who knows what else.
After anger comes bargaining, depression, and finally acceptance. Whether this takes months or years remains to be seen. Even when everyone accepts the fact of the 2007 Depression, it doesn't mean that the economy has hit bottom.
The bottom will be found when failed and failing enterprises and institutions cease to be a drag on society's resources. At that point resources can be applied to meeting people's needs, and the economy can begin resuming more or less healthy functioning.
Generalities aside, what will the bottom look like? Probably half or more of the population will not be working full time, but getting by with a combination of self-employment, odd-jobs, informal work (much of it for barter), and so on. Large numbers will be jobless, homeless, and otherwise restive. There will likely be many disruptions to important services such as utilities, government, retail and banking. There may be many grand gestures by governments to turn things around, but likely they will be mostly for show.
What will turn things around is when people draw on their inner resources to become entrepreneurial - to spot opportunities to meet people's needs, learn new skills, and make new connections. New and surviving institutions will of necessity be extremely frugal and resourceful.
This is a very long way from where society is now. All the way down, people will be clamoring for bailouts, job programs, loans, and whatever else they imagine will remove from them the burden of responsibility to create their own means of living. You, Reader, would be wise to become entrepreneurial or align yourselves with such persons, if you are not already. Affiliation with dying enterprises and institutions may be maintained, but only if you are building up self-reliance on the side.
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