sda2.jpg

January 26, 2009

I May Be A Nobody Artist With No Fancy Schmancy Degrees In Economics

But tomorrow we start work on the fortified compound.

Democrat Braintrust Update ... as though you needed one more reason to stock up on ammo.

Captain Capitalism makes some adjustments - "to get a real feel for how much money is being printed you have to compare it to GDP, the amounts of goods and services we're producing;"


Posted by Kate at January 26, 2009 10:39 AM
Comments

My God - It's another hockey Stick!!

Difference is, this one is true and will kill us all!

Posted by: Frenchie77 at January 26, 2009 11:00 AM

As Kate points out, this is only the beginning.

Being reasonably informed is becoming a burden. I find myself yearning for the ignorance of bliss.

This looks like a transfer of wealth to me.

Posted by: Indiana Homez at January 26, 2009 11:11 AM

Relax everybody. O'bomb-a, the Fed, Bank of Canada all tell us everything is under control. If your seat belts are tightened, you will hardly feel the bumpy ride ----- until we hit the wall!

Posted by: Rosco at January 26, 2009 11:11 AM


"I find myself yearning for the ignorance of bliss."

Dyslexic moment. It should say:

I find myself yearning for the bliss of ignorance.

Posted by: Indiana Homez at January 26, 2009 11:15 AM

Inflation is on its way, in a huge way. We just might see 21% interest on mortgages again, a Trudeau miracle that has never (yet) been repeated.

Posted by: Kevin in Sk at January 26, 2009 11:16 AM

I wish they would put the y-axis of such charts on a logarithmic scale. It makes it far easier to compare growth rates of today to those decades ago.

Posted by: rabbit at January 26, 2009 11:16 AM

Don't Worry, Be Happy

What else can you do at a time like this?

Posted by: foobert at January 26, 2009 11:20 AM

We just might see 21% interest on mortgages again, a Trudeau miracle that has never (yet) been repeated.

Kevin, your level of bliss has got to be illegal.

Posted by: philboyd at January 26, 2009 11:25 AM

By some estimates the leverage of U.S assets is as high as 50:1. It will take a lot more to buy fictional assets with fictional money.
By the way, Democrats are already indicating that they will funnel "stimulus" into their political programs. Welcome to the making of revolution.

Posted by: xiat at January 26, 2009 11:31 AM

Yikes, forget the seat belt strap on the safety harness. Obama is starting with a 1 trillion+ dollar deficit and the NDP under the brilliant leadership of Taliban Jack Layton would like to see the Canadian Government spend at least 120 billion dollars of borrowed money, co-signed by tax payers(of course), spent to 'stimulate' the economy. Billions to go to foreign owned companies, billions for overpaid GOOD union jobs and billions for transportation infastructure, all this to manufacture vehicles that according to NDP policies are detrimental to the environment so even if you buy them(which will be encouraged) they will not be welcomed as transportation vehicles by the eco-nazis. At least the new roads should last with pedal bicycles being the only vehicles allowed other than those LEGO smart cars. Hibernation will be mandatory for the everyone outside Toronto for the duration of winter. We will become marmots.

Posted by: uuess at January 26, 2009 11:33 AM

We've never been here before.
Thank you, George W Bush.
Thank you, Alan Greenspan.
You did a hell of a job.

Posted by: philboyd at January 26, 2009 11:34 AM

If the problem is that there is too much money being printed then I offer to do the noble thing and will accept a few of these billions of dollars to be stored under my mattress until they need to be spent. In fact all of the people I know would also happily take a few of these billions of dollars out of circulation - we promise!

Posted by: Fritz at January 26, 2009 11:35 AM

And then this added problem -derivative funds.
US billionaire Warren Buffett calls them the real 'weapons of mass destruction'. This market is worth more than $516 trillion, roughly 10 times the value of the entire world's output: it's been called the "ticking time-bomb". Gulp.

Posted by: Rich at January 26, 2009 11:40 AM

This new money has not yet hit the economy with its true impact yet. Most of the money has been loaned/given to the insolvent US banks. They have in turn used the money to buy US t-bills to shore up their balance sheets. They have not yet started to loan this money into the economy. When they do later this year because of fractional reserve banking the total amount of money created will be 10 times as large. Expect to see a whole lot of inflation in the future. This unfortunately will not solve our economic problems. It will give the economy a boost later this year but will ultimately just change what would have been a deflationary depression into a hyper-inflationary depression.

Posted by: Kevin at January 26, 2009 11:40 AM

A no-brainer for getting rid of Mugabe: hire him to run the Federal Reserve.

Posted by: edncda at January 26, 2009 11:43 AM

philboyd; trudeau caused 22% interest rates and high deficites and Mulroney brought in the GST to pay down the debt.Obama took the Federal govt to court to force Freddie Mac and Fannie May to make the loans that started all this then the democratic congress put in the steps so that the CEO's could milk these institutions for millions.Bush knew what this would lead to and tried to stop it but the democratic congress stoped him.Maybe you should read something other than publications of the democratic party.

Posted by: spike 1 at January 26, 2009 11:49 AM

We've never been here before.

Thanks a hell of a lot, Jimmy Carter and Bill Clinton.

Thanks a hell of a lot, Barney Frank and Acorn.

You did a hell of a job.

Posted by: Soccermom at January 26, 2009 11:52 AM

Pelosi is a hypocrite and a she-devil.

Posted by: TJ at January 26, 2009 11:56 AM

One year from now most Americans are going to wish for GWB back in charge.Two years from now everyone will wish for GWB to be in charge.

Posted by: spike 1 at January 26, 2009 11:57 AM

The interest rate in the USA in '82 was 21.5%. I suppose Trudeau was responsible for that.

Posted by: philboyd at January 26, 2009 11:57 AM

We have no other choice than to return the industry from China and India to North America.

Posted by: Aaron at January 26, 2009 12:01 PM

It is better to look at that data on a log scale:

http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=AMBNS&s[1][transformation]=log

The recent increase is entirely in keeping with Bernanke's understanding of the 1930s and what the Fed should have done.

But agreed. There's going to be an overhang.

Posted by: August1991 at January 26, 2009 12:01 PM

The first sign of smoke will be proportionately higher interest rates on long-term mortgages so lock in now.
How ironic for all the immigrants from third-world countries who thought they could find paradise in this life.
Some discomforting reading here - if you have a high pain threshold:
http://www.marketoracle.co.uk/Article2942.html

Posted by: edncda at January 26, 2009 12:02 PM

phil boyd - I believe spike 1 to be correct - this has been a problem long building in the US - in fact it can probably be argued that the US has been in recession for years now, and this was only masked because people were still able to tap home equity, prolonging the spending habits of the US residents.

As Peter Schiff says, it will take a long time to convert the shopping malls to factories. Debt in the 19th century US was used to build factories and a manufacturing base, debt for families now in the US is used to keep up with increasing health care costs, child care, transportation costs (suburbia), and mortgage payments (see the work of Elizabeth Warren, excellent vids on YouTube). Government sponsored enterprises are pretty dangerous and ultimately damaging . . . . . Cheers!

Posted by: Erik Larsen at January 26, 2009 12:03 PM

Soccermom. Bush came into office with a surplus on the books. In 8 years he's pissed it away and then some.
Come to think of it, Harper came to power with an even healthier balance sheet. It only took him three years to piss that away. Ain't conservatism wonderful.

Posted by: philboyd at January 26, 2009 12:06 PM

Did you ever hear of a fellow named Jimmy Carter? The US was going down the tubes with him.He and Trudeau were cut from the same cloth.

Posted by: spike 1 at January 26, 2009 12:07 PM

Gee, spike, and here I thought Reagan was president in '82. In '79 the interest rate was 11%.

Posted by: philboyd at January 26, 2009 12:13 PM

pillboy, the imaginary balance sheet you believe was left by the liebrals was achieved by off-loading financial responsibilities unto the provinces but mostly by GRAND LARCENY, as in the THEFT of over 54 BILLION dollars from the EI FUND that had been stolen from workers and especially employers by years of overcharging. Even the courts found this move was ILLEGAL.

Posted by: uuess at January 26, 2009 12:17 PM

If you don't spend your money, then the government will spend your money on your behalf.

All hail to those who know how to run your life better than you do.

The type of brilliant people of which philboy obviously imagines himself to be.

Posted by: set you free at January 26, 2009 12:19 PM

Martin got a surplus by transfering Federal govt responsibilities to the provinces and cutting govt funding for research for agriculture and industry.The liberal govt then put in programs that had to be paid for by the provinces and individuals.These programs are better refered to as UNFUNDED mandates.To make an example,cities that force homeowners to clean city sidewalks with no reduction in their taxes.

Posted by: spike 1 at January 26, 2009 12:20 PM

Philboyd,

Yes and Labour driven UK has put itself in a position where it cant raise axes, because it never cut them. The UK is on the verge of bankruptcy and default. Ain't Liberals and Socialists wonderful!

Quite frankly the cons could do nothing and things would return to some level of normalcy, maybe 6 months later. But they wouldnt survive and we would be stuck with a "da colaition".

As for the monetary increase....it is huge, and it is what is supposed to, and likely will bring growth back. It is also easier to mop up that money than it is to pay off the debt being incurred.

I have less trouble with that graph than I do with a deficit and debt graph. Inflation is a bad thing, but less bad than deflation. The amount of money being destroyed in the "crisis" required an infusion. We will get inflation, and there will be a devaluatio of the USD sometime in the next couple of years.

If Obama is lucky enough to avoid that then he better drive it to surplus and pay down some debt, I wouldnt count on the Chinese forever, not because the Chinese will refuse, they wont be able to and will be worrying about their own internal meltdown.

Let's see how many Chinese workers are asked to stay home after the new years is done. If you have friends or contacts in China, stay in touch. They will give you a better sense of things.

There have been riots in China, there will likely be more, and bigger ones in 2009.

Posted by: Stephen at January 26, 2009 12:20 PM

Pillboy
Conservatism is grand,thank you very much.It sure beats the hell out of lying and stealing Liberal ways.As for the balanced budget,the liberals balanced these budgets on the backs of the tax payer,slashing essential programs like health care and introducing useless boondoggles like the gun registry.I'll take conservatism over socialism any time.

Posted by: h.ryan at January 26, 2009 12:23 PM

So philboy, you're saying that massive spending by government will fix the problems? That hiding Gov't debt with skillful accounting, a la Paul Martin/ Bill Clinton, works to create a great economy.

Posted by: Gunney99 at January 26, 2009 12:24 PM

philboyd: "It only took him three years to piss that away. Ain't conservatism wonderful."

Surpluses are nothing but over-taxation. Reducing that surplus by taking in less in the future, what you call pissing away, is conservatism and yes, it is wonderful. However, if you think the government needs to have more money, they will cash any cheque you send them.

Posted by: Kathryn at January 26, 2009 12:24 PM

philboyd - the problem has been longstanding in the US. The US debt has grown nearly logarithmically until just recently, a few blips here and there with different presidents, but more or less a straight line on a log plot.

I'm not sure how much one can compare the macro to the micro - but I would say that it's just like me borrowing a ton of money every year to fund my consumption, not really planning to ever repay it, and calling myself wealthy because I can keep up to the monthly interest payments.

Another problem is that we're theoretically supposed to save in times of plenty (macro and micro) - but special interest groups have been successful in extracting tax monies - because times are good, right? Spread it around a bit.

Posted by: Erik Larsen at January 26, 2009 12:27 PM

Surpluses are nothing but over-taxation.

So deficits must be under-taxation, no?
Besides, surpluses are a fiction when one is sitting on a massive debt that must be serviced.

Posted by: philboyd at January 26, 2009 12:28 PM

Philboyd;In China under Mao,someone asked him how a certain program would work and he replied"ask me again 30 years after its implemented and I will tell you".In Canada it took about 30 years before the the policys set in place by Trudeau to really take effect as in a litigieous society and overpaid civil servants.In the USA the agreements between the auto makers and the unions made in the late 40's and early 50's are coming home to roost in 2009.

Posted by: spike 1 at January 26, 2009 12:31 PM

Kevin ...it will take a few years for deflation to run it's course. Financial deflation is only a visible symptom of the old systems going into the process of decay. The industrialized (mass) democracy runs into the twilight. There will be a run on Sterling, on U.S dollar, people will loose faith in their governments and thus currencies issue by those governments.There may be or may be not hyper-inflation before collapsing of the current monetary system. It is very hard to predict exact scenario of turbulent historical times. The idea of hyper-inflation feeds gold bugs, but you can not replace food with gold.
The wise people from the past knew that any society is three days away from hunger.
Regarding stocking on ammo, it would be most sensible of PMSH to grant Canadian citizens basic human right to safety and security by allowing to arm themselves. If you think this is ridiculous, ask yourself a question what will happen when your city or province will not have money for policing? What will happen when due to economic hardship the police will become either corrupt or ineffective?
So far the Canadian conservative government is clueless, narrowly focused on winning (not loosing) elections. Perhaps, they will wake up or ..perhaps they have to play its assigned role in history.
Am I an alarmist? Yeah, I guess so, the situation is more alarming then optimistic.

Posted by: xiat at January 26, 2009 12:32 PM

A trillion here, a trillion there, and pretty soon you're talking real money.

Posted by: Woodporter at January 26, 2009 12:32 PM

A royal commision to Zimbabwe might help. We need to know how to get all those zeros on our 1 trillion dollar bill. Maybe if you make them small enough they'll fit.

Posted by: Agent Smith at January 26, 2009 12:32 PM

Citigroup, the recently rescued just spent 50 million on a shiny new corporate jet. Made in France no less. Nice plane. via gatewaypundit

Posted by: Speedy at January 26, 2009 12:39 PM

And - to comment on the Pelosi article - once you view your citizens as "cost centres" to be reduced, rather than an "economic engine" to be grown, your nation is (the word that starts with f)

Posted by: Erik Larsen at January 26, 2009 12:40 PM

Where does one go to have a phony, sickly, silly smile permanently engraved on one's face anyway?

And, what the h3ll does she have to smile about??

Posted by: Joe Canuck at January 26, 2009 12:44 PM

Philboyd: "Besides, surpluses are a fiction when one is sitting on a massive debt that must be serviced."

I assume, then, that you've agreed with the Conservatives' practice of applying their surpluses (massively) to the national debt for the past three years. But you've also said that Harper "pissed away" the surplus. You'd better go back to your index cards to look for a new argument.

Posted by: MJ at January 26, 2009 12:45 PM

"So deficits must be under-taxation, no?"

No. A deficit is over-spending...something lefties excel at.

Posted by: Edward Teach at January 26, 2009 12:50 PM

Okay, serious question here: What can a family do to weather the coming storm? Seriously? I'm not interested in placing blame for the mess right now. It's already happened. How do I survive it?

Any serious suggestions? (And please don't tell me the government will save me.)

Posted by: Sean M. at January 26, 2009 12:50 PM

Philboyd,

deficits can be undertaxation or overspending or a combiantion of both. Surpluses are overtaxation, since spending by government is a choice.

It is all contextual. We are at the low end, actually the bottom, of the G7 in terms of Debt to GDP. So we have some flexibility to increase debt.

The problem with surpluses is that they get abused by the government of the day, especially if they are significantly large. This is the epitome of tax and spend.

Given that situation it is better that governments lower taxes and or pledge any surplus 100% to debt repayment in that budget year. Unplanned, last minute spending is the issue.

And for all the debt the US has, it has lots of taxing room, should it choose to use it. There is an argument that the US is undertaxed, I am not saying it is true only that there is a decent debate to be had.

I raise theUK again, because they didnt cut taxes and now they are totally boxed in. There may well be Tatcher like cuts to services or default on UK bonds.

If Canada plays its cards right then we can become a haven, we already are, sicne things are far far worse in the US and the UK.

Harper did crank up spending, of course I always heard it wasnt enough from the opposition but taxes have been cut. An infintely better situation than taxes not being cut.

The US has a better chance of wriggling out of this than does the UK. But Bush, who never cut any spending, definitley put them in a corner. Like Bush 41 and Clinton, Obama may well raise taxes a little. Wont take much, the US is an incredibly wealthy society.

Posted by: Stephen at January 26, 2009 12:52 PM

Nancy Pelosi must have an incredibly strong skull. It must be a medical miracle that someone who has absolutely nothing in her head does not have her skull implode into that empty space.

Philboyd - Think Freddy Mac and Fanny Mae. Then think Barney (sweet cheeks) Frank. GWB pressed the Democrat controlled House Finance Committee to institute some regulations and restrictions on the copious and huge loans they were making to people who otherwise were not credit worthy. Democrat after Democrat rose up and protested any changes because everyone who wanted a house should be able to get one. They did not want to see any changes and NONE WERE MADE.

In the end - when the rediculous "sub-prime" chickens came home to roost - it all came down like a house of cards. See if you can follow the progression:
- Freddy and Fannie are there to provide liquidity to the mortgage market.
- Some financial rocket scientist dreams up this scheme to provide housing money with a "sub-prime" interest rate - but for only a couple of years.
- Freddy and Fannie make loans to people who are not otherwise credit worthy but hey - don't worry - the interest rate is cheap.
- NO DOWN PAYMENT NEEDED!!!
- Interest-only payments are an option.
- Money is flowing like the Mississippi - folks are buying homes.
- House prices are going up and up and up.
- More folks are now buying even more expensive homes (not bigger or better - just more expensive)
- The "sub-prime" period is over - Time for payments to increase.
- Non credit-worthy folks can't meet the new monthly payments.
- Folks stop paying their mortgage - mortgage in default. People walk away from their (actually Freddy & Fannie's) house.
- F & F become the biggest owners of real estate in America.
F & F have alot of bad debt on the books.

The point is, philboyd, GWB was not the guy who made the rules on this. It sits on the lap of Barney Frank and his band of idiots.

Posted by: a different bob at January 26, 2009 12:53 PM

My argument, MJ, is the massive deficits Harper is about to commit this nation to, after pissing away
the surplus on ideological tax cuts. The numbers don't lie. It is what it is.
You can't put lipstick on that conservative pig.

Posted by: philboyd at January 26, 2009 12:55 PM

.. if I had a rocket launcher,
I would not hesitate.

Bruce Cockburn has such a, how should I say it, ethereal way with words...

Posted by: eastern paul at January 26, 2009 12:58 PM

Hey, Teach, don't you have some anti-oriental cross burning to go to?

Posted by: philboyd at January 26, 2009 12:59 PM

The whole world has debt up to it's eyeballs , what better way to diminish it than a nice bout of inflation , Watch those savings people -we are about to be robbed.

Posted by: bob at January 26, 2009 1:03 PM

I find it gratifying that conservatives are finally getting what Ron Paul has warned about for 8 years...the overactive Fed printing presses making fiat currency unbacked by tangible reserve value.

In a nutshell it ain't frational reserve gold backing this massive currency expansion...it's the government putting a promisory mortgage on confiscating larger and larger portions of the nation's future productivity (income taxing)...is this beginning to sound less like the tin foil hat conspiracy it was dismissed as 2 years ago when Paul held the Fed's feet to the fire to find out what the reserve to circulation ratio was?

I feel sorry for you if your savings or investments involve USD. But it's not like you weren't warned far in advance.

Posted by: WL Mackenzie Redux at January 26, 2009 1:07 PM

Hmmmmph.  And here I thought we'd never see "stagflation" ever again.

oh well.  Having a functioning economy was nice while it lasted...

Posted by: Garth Wood at January 26, 2009 1:09 PM

Philboy:
You haven't answered MJ's challenge.
He said "I assume, then, that you've agreed with the Conservatives' practice of applying their surpluses (massively) to the national debt for the past three years."
You brought up the National debt, don't be a chickenshit. Answer MJ, don't skirt the issue. Be a man.

Posted by: Ghost of Ed at January 26, 2009 1:12 PM

Anyone still thinking that this financial crisis is some garden variety recession that will rsolve in a couple years is crazy. We are going to see a lost generation like in Japan, probably worse, that lingered decades after their real estate melt down.

philboy, we tried public works projects in the Depression and at the end of the day the horrific unemployment numbers never budged because new private sector jobs were never created. It's ludicrous to think that all of the newly unemployed from the financial, real estate, retail and tech sectors are going to be pouring concrete and welding metal at new infrastructure jobs. Public infrastructure stimulous packages aren't going to work. Saving GM to build cars no one wants to buy won't work either. Getting rid of the bad paper still held by banks, cutting losers loose in failed industries and a permanent tax cut to individuals and businesses will help.

Obama and the Dems own this mess now. So far, their best ideas have all been tried and failed in the past. We are in unchartered waters here. Can the Empty Suit come up with one innovative original thought in his life? I doubt it.

Posted by: penny at January 26, 2009 1:13 PM

Phil you are not making sense.

Do you support debt repayment?

"Besides, surpluses are a fiction when one is sitting on a massive debt that must be serviced."

I'll take that as a yes.

Do you support a stimulus package?

Well if you are a Liberal or Dipper I suppose that is a yes; therefore, Harper is doing exactly what you'd have him do right?

Posted by: Indiana Homez at January 26, 2009 1:13 PM

Lets not forget that Barney Frank is completely innocent, that the Clintons and Walmart did not truss up the US and deliver it to China, that Jimmy Carter did not try to cut himself into Iranian oil deals and when refused pulled the plug on the Shah, that Democrats never received any funding from Fannie and Freddie after padding those organizations with cronies, that Hillary never tried to take the healthcare portfolio while unelected.

Let's hope that never changes.

Posted by: Shaken at January 26, 2009 1:13 PM

a bit of history

http://bigpicture.typepad.com/comments/files/1873Panic.pdf

Posted by: xiat at January 26, 2009 1:15 PM

philboyd: "You can't put lipstick on that conservative pig."

Something we can agree on. Racking up $64B in deficit in 2 years is disgusting. However, if the LPC/NDP/BQ hadn't pulled their little stunt in December, tomorrow's budget might have been conservative; we'll never know.

Now they're going to throw money at problems knowing full well it will do absolutely no economic good. It won't even do any political good - we know Layton is going to vote against it sight unseen, Iggy will grouse that it's either not enough or it's too much and Duceppe will say it's an affront to Quebec.

Posted by: Kathryn at January 26, 2009 1:17 PM

philboyd is reminding me what it's like to argue with the morally retarded.

Jesus f'in' Christ, boyd, do you even know what the money supply IS????????

The discount rate in the US is controlled by the Federal Reserve (also called "the Fed"), which is NOT responsive to the national government unless the Fed Chairman decides to be. Historically, they usually decide to be, but the early 80s were a notable exception. The Fed Chairman back then was a fellow named Paul Volcker, and he was primarily responsible for what we now refer to as "stagflation" in the US. The tussle between Volcker and President Reagan was all in the news at the time. If you remember it, I'm guessing you're hoping very badly nobody else here does. Oops, sorry, you lose.

You also need to be a bit more careful which interest rates you throw around. "The interest rate in the USA in '82 was 21.5%" refers to what rate, precisely? Certainly not the Fed discount rate that you quote just a few moments later; the highest it reached was 14.00, in May of '81. It was back down below 12% by July of '82.

The current rate is neither the fault of GWB, nor of Alan Greenspan, who resigned as Fed Chairman in early 2006. It's mostly the doing of Ben Bernanke. Bush probably agreed to some of the current policy, although I'm sure Bernanke has been consulting with Obama's economic advisors at least since November.

If you want a sort of general recounting of the policies that led to the current problems, check here: http://bit.ly/11B0u. Bush is partly at fault, Congress is largely at fault, Clinton and Carter are partly at fault, ACORN is partly at fault, the Fed is partly at fault, and a bunch of greedy investors and home buyers are in the mix as well. Your attempt to pin the entire thing on Bush and a Fed chairman who retired two years ago marks you as a truly brainless partisan. The partisans with brains would at least have gotten the Fed chairman right.

Posted by: Plumb Bob at January 26, 2009 1:25 PM

Healthcare IS NOT an essential service! It must be privatized top down. My dentists is worth many times more than a doctor, just proved it to myself last week once again.

Posted by: Aaron at January 26, 2009 1:35 PM

Do you support debt repayment?

Yes I do. I support fiscal prudence in good times and bad.
I also support taking responsibility for ones actions, unlike many here who want to give conservatives a pass.
It's the coalition's fault, it's jimmy Carter's fault, it's barney frank's, trudeau's, bill clinton's, tommy douglas's...etc...sheesh.

Posted by: philboyd at January 26, 2009 1:35 PM

Some people are so convinced of their point of view that they refuse to let facts get in the way. Sheeeeesh! indeed.

Posted by: a different bob at January 26, 2009 1:41 PM

pillboy wrote: "Hey, Teach, don't you have some anti-oriental cross burning to go to?"

Only in your imagination sport.

(Don't tell me you're sharing a brain with Hedy Fry!)

Posted by: Edward Teach at January 26, 2009 1:42 PM

Yes, dude, it is their fault. You nailed it on the head. Too bad we can't impale them on the fence poles.

Posted by: Aaron at January 26, 2009 1:47 PM


Sean M., I will try. You begin by trying to remember what your grandparents did after the depression.

Stock up on canned goods and rice and dried beans, when you buy your children clothes look for sales and stock up on larger sizes. Keep some money hidden in your home in case there is a run on banks.

This summer plant a victory garden, and learn to can your fruits and vegies.

Some things we can't get away from and that is our cars if there are no bus routes. Keep your car in tip - top condition. Lock in your mortgage for five years when it comes due.

Buy a couple of oil lamps and lamp oil.

Learn to enjoy the simple things in life.

Posted by: dolly at January 26, 2009 1:53 PM

Captain Capitalism does not count for the incredibly shrinking perceived money that were in the circulation (de-leveraging).
The other question on inflation is where the money will flow? While consumer staples and utilities should inflate, other asset classes can continue on vicious deflationary path.

Posted by: xiat at January 26, 2009 1:54 PM

"Learn to enjoy the simple things in life. "

Does that include Philboy?

Posted by: Woodporter at January 26, 2009 2:02 PM

Consider the ongoing turmoil in Iceland to be the canary in the coalmine. How close are we to a devastating domino effect within the larger western banking community?

It's a good time to know you have some land in the country for a plan "B" - another great reason to live in Saskatchestan!

Posted by: RRR at January 26, 2009 2:05 PM

Kate,

Could we have a separate post for discussing how to deal with the oncoming train wreck?

Dolly,

Thx. Home is paid for. Getting credit cards paid down. We're on an acreage so a big garden is coming this summer. Going to start stocking up on non-perishables that I find on sale. Getting the wood-burning stove installed as there's lots of fire wood.

Posted by: Sean M. at January 26, 2009 2:06 PM

Deficits after taxcuts beat deficits after spending.

But anyway, Canadians are getting what they asked for. If it is coming reluctantly or with strings attached then praise be to the financial gods.

I will wait and see what they announce...apparently some of it is already causing heartburn, matching funding. seems the municipalities and others were looking for grants. Of course the fact that municipalities are provincial creations seems ot be forgotten.

So are we going to hear about the both sides of the track argumen now, that there is a fiscal imbalance with the federal government being rich and that the cons have gone into deficit.

If the muni's want part of the GST then let them say they will harmonize with the GST and then have the provincs pass what they need to pass to put it in place. If Harper was soooo bad in cutting GST then the provinces or Muni's could have filled the vacated space.

But there are too many anti poverty, anti war, anti american, anti western rallies, conferences and seminars to attend and run rather than run a big city properly.

Posted by: Stephen at January 26, 2009 2:17 PM

LOL. Jeez, I think the hysteria is reaching fever pitch. Looks like it's time to buy again.

I remember back in the late 1970's or so, when we had a very serious economic downturn. I was in my teens, somewhat precocious financially, and was so worried about financial survival that I took most of my newspaper and catalog delivery income and bought gold and silver. I even made a bit of money before the Hunt brothers' scam to corner the silver market was foiled.

The sky was falling back then. Housewives and little old ladies headed to their local branch to buy 10 and 5 gram gold bars, Krugerands, and gold Maple Leaf coins.

I still have all the ones I bought: a few 20 Oz bars of silver and a few small bars of gold. Let's put it this way... Right now my return for those investments is far less than 1% annually compounded. If I had put the money in the crappiest of GICs, I would have done 10 times better.

The more people freak out and panic, the more I'm sure that we are close to bottom.

And I find that curve a big disingenuous - it seems to imply that all that extra money is being printed. But not really - I think that the money in discussion includes loan guarantees from the Fed. If no one is loaning, then there's not as much extra money as the graph suggests, and if they are lending, then the guarantees probably won't be required.

Remember the real-estate bubble burst of the late 1980's that we would "never recover from"?

Remember that the tech bubble was going to destroy North America's economy.

And remember how the failure of US steel was the sign of the failure of the US as an industrial power.

Things change. Everything evolves. No doubt times are tough, probably tougher than any time in my lifetime, but I place more faith in American drive and ingenuity than in any other force in the world. All bets look bad at this point, but any fool selling US dollars needs to tell me a safer bet.

If you buy US dollars, you are betting on Americans. If you don't, then who are you betting on? Europe? The Middle East? China (with its impending demographic implosion)?

And how many thousands of dollars can you store your mattress and what will they be worth with a couple of years of perfectly possible 22% Trudeau-like inflation?

Meh.

Posted by: Lori at January 26, 2009 2:21 PM

Only in your imagination sport.

Right, Teach, you're from Vancouver, so you know of what you speak.

Posted by: philboyd at January 26, 2009 2:26 PM

Sean m: Survival - get out of paper money. Buy gold and silver & keep it in your possession. These are real money & will keep their value thru good times and bad. If you have spare cash, venture into some precious metals stock and food related stocks.

Note that if word gets around that you have food stashed when all around you are starving, you may need to invest in something that will keep the riff-raff from stealing it.

Posted by: Rosco at January 26, 2009 2:30 PM

Capt Capitalism charts dont say what he thinks they say. Other than the one statement that they hover around 6%.

BUT

his link to inflation isnt there. In fact you have falling amounts of money as a % of GDP from the 50's throgh to the 80's....yet the great inflation was in the late 60's through to the late 80's, finally killed in the recession of the 90's. So that seems to contradict some of the statements.

None of the above though says you wont get some kind of inflationary burst, at some point, from this firehose spewing money all over the place.

You have to make up for the 2 - 3 trillion of losses in the US mtg market alone.

Posted by: Stephen at January 26, 2009 2:32 PM

The only fix is hyperinflation. Something they do in Kenya and Indonesia. And that does appear to be our goal.

Posted by: bill-tb at January 26, 2009 2:37 PM


Sean M, you will be fine.

My husband and I lost a home and business back in the 80's when the interest rates went through the roof. Time was tough, we had 5 young children and started over like newlyweds. We got through that, bought another home in time and educated the kids. We didn't have any savings left, but we ate - slept under a roof and came out of that stronger and our marriage intact. Fortunately my parents taught me how to be frugal and that helped. My husband being an electrician found work.

We aren't going to have a depression but even in the 80's it felt like it.

Posted by: dolly at January 26, 2009 2:49 PM

Lori - thanks for inserting some sense into these apocalyptic scenarios. Sheesh, it seems some of you are rejecting an AGW apocalyptic future and instead believing in a fiscal meltdown.

It isn't happening; it isn't going to happen, but restructuring MUST occur.

It isn't simply the fault of the US 'everyone must own their own home' socialist mantra of Clinton et al; this is happening world wide. What we are seeing is a restructuring of the global economic framework. It had been at one time, grounded firmly in the West (USA/Europe) with links from this Home Node stretching elsewhere. But all output and input rested in this Home Node.

Now, we are seeing multiple 'Home Nodes'. We now have China and India. And we'll be seeing more of Brazil and that part of the world as emerging middle classes over the world move into production and consumption roles. So, the economic framework of interactions, wheels and deals, is becoming more complex, with many interactions, cross-links and so on. This requires a restructuring and restructuring always includes destructuring.

The world won't end; the lights won't go out; we won't end up having to can our own fruits and vegetables (though there is something quite satisfying about this); and there'll be a new economic boom when this restructuring settles down.

This doesn't mean that there weren't serious flaws, errors and greed taking place; that there wasn't fraudulent lending (and there always is); poor regulation and lax lending.

But there has to be a structural transformation that focuses both on national economies and their operation in the global economy. This will take time and political will. Above all, political will, to acknowledge that we are in a global economy and the old singular dominance of the West is no longer valid.

Posted by: ET at January 26, 2009 2:49 PM

Lori...depends on time scale. If you start with decentralization of Byzantine Empire all events you experience in your life time are merely a noise. One thing it can be learned from history that it repeats itself including steady occurrence of events that had never taken the place before. Internet is one of these events and soon will be under attack by those who would like to keep the status quo. If I may digress, Kate ironically is on progressive side of history..heh.
The bear markets last in months (31-37,with outside chance of 63-72), the economic depressions in decades (1,2,3). There was an interesting period in U.S. and global financial history between 1873 and 1893. However, the magnitude of today's problems calls for even greater economic, social and political transformation then in the times of steam engine.

Posted by: xiat at January 26, 2009 2:53 PM

Perhaps a little less partisanship is needed here.

This started back in Clinton's time with his brilliant move to deregulate banking which enabled the likes of Price Waterhouse to merge with banks. BIG MISTAKE. Look what happens when you deregulate and let them go ad-hoc.

What we are witnessing now is a massive transfer of wealth from the middle class to the rich in the form of bank and other "bailouts". At least the US is more transparent about it. How many of you know that Harper moved $75B to our banking systems? And this amount isn't even included in the fiscal deficit.

Of course, for all the griping the Libs did about the Americans, they copied the exact same formulas during Chretien and Martin's reigns, setting us up for disaster. So you can thank Mulroney, Thatcher, Clinton, Bush, Chretien, Martin and Harper. Especially Harper.

As an economic major, he had to have known the risks and his attempt at creating political turmoil in order to divert our attention from this impending disaster is disgusting and no matter what your political affiliation, you should feel very very betrayed.

So now that we know the deficit is actually in the range of $155B, do you feel in better shape than the US now??

The US is insolvent. They owe over $53 trillion dollars, versus a GDP of about $8 Trillion.

We aren't in any better shape than them. By the time Harper piles on this huge tax burden called "stimulus", we will be insolvent too. We are already at a 75% debt to GDP burden before the load on of another $155+B added. And that doesn't even include the ponzi pension fund which we all know is broke.

Posted by: Aizlynne at January 26, 2009 3:14 PM

Et... yea, people will fall in love, trade and fight wars, but who would thought they will do this over the Net? Plowing the garden seems like healthy reaction:)))
However, one of characteristics of historical transformations is disruption of food supplies. It may not affect every region equally, it may create much bigger problem in the cities. When banks collapse, when manufacturers go out of business, while bankruptcy would be impossible for razor-sharp margin grocery stores like your local Safeway, Sobey's or Kruger ?

Posted by: xiat at January 26, 2009 3:23 PM

Pillboy shhhh! Grownups are talking.

Posted by: Edward Teach at January 26, 2009 3:28 PM

Aizlynne - Harper has been in power for merely two years. I'm sorry, but much as you would like to pin the blame for this global economic situation on him, that's invalid.

What Harper is doing with this current budget, is 'removing' the billions that he put into paying down the federal debt over the last two years and putting almost all of that money back into circulation to tide the country over the slowdown as the restructuring takes place.

I disagree with your claim that what is occurring is a 'massive transfer of wealth from the middle class to the rich'. There's no evidence of that. Instead, what we are seeing is an expansion of the middle class from its former location in the West, to the rest of the globe, particularly in India, China and S. America.

The GDP of the US is 14.58 trillion. The public debt is 60.8% of the GDP. Rather different from your figures. (CIA web site).

xiat - sorry, I don't get your claim that an historical transformation includes disruption of food supplies. I don't see why this should happen. I can understand transformation of the methods of production but that doesn't necessarily disrupt the supplies.

Posted by: ET at January 26, 2009 3:44 PM

ET - I do worry that there will be a portion of transfer of middle class wealth to the super wealthy and privileged - many middle classers in the US are right on the edge - and price inflation and increased taxation could hurt them badly (taxation on the state level, most of us forget that states are going broke from lack of corporate revenue)

Also - agree re not having disruption of food supplies - unless the US implements an updated Smoot-Hawley tariff act. (Actually, don't really know about the latter statement, but I wanted to use "Smoot" in my comment)

Posted by: Erik Larsen at January 26, 2009 3:57 PM

ET

While I see your point about restructuring, I will agree with X that there is a "redistribution of wealth" happening right now. Fell free to correct me where I'm wrong.

Printing money is simply the process of devaluing your currency(supply and demand). If the chart is accurate then we are printing money at a very fast rate and I suspect that this money is the same money that will stimulate the economy. Now if you consider how the money will be distributed it is likely it will be along the lines of population (ie. 40% to Ontario).

So there you have it. Everyone's assets lose value and the stimulus is distributed proportionately to the population; or, a redistribution of the wealth from western Canadians to central Canadians.

Posted by: Indiana Homez at January 26, 2009 4:03 PM

Actually, deficits are over-spending.

Posted by: Brian M. at January 26, 2009 4:14 PM

erik larsen - my view, which has nothing to recommend it as valid, is that when a system restructures in the way that the global economy is doing, the first phase of restructuring is that the 'energy/mass' (ie wealth, wealth-producing capacities) does set up a wealthy sector of the middle class.

Nothing wrong with that; indeed, it is necessary, for this set of the middle class function as wealth-creators for the rest of the population. They develop the industries, services, etc.

That is, rather than the government setting up the wealth-producing system, ie, the economy, of the nation, you have a Set of wealthy individuals, who are part of the middle class in that they've developed their own wealth...and this Set develops the businesses, the industries.

Then, below them so to speak, in terms of wealth control, are the medium size businesses; then the small businesses.

You need ALL three sections in a robust middle class capitalist economy.

So, if a nation has, for example, drifted too far into a socialist wealth distribution system, where the working individual's money is taken in heavy taxes and redistributed to non-wealth producing citizens....this can't be maintained.

Equally, it is unproductive for a government to enter into industrial development for the basic reason that a government industry is always socialist rather than capitalist. In other words, it is immune to the marketplace. A government industry can produce useless goods (like our CBC) and yet, it must still be funded by the taxpayer.

So, money must be retained by the private sector, and a nation that has moved too far into socialism, with the majority in the 'middle middle class'...must restructure this population to enable a strong, yet not too large, UPPER middle class. This Upper Middle Class is the Key Investor Class of a capitalist society. This class makes a lot of money and invests it in long term industrial and risk-taking infrastructures. The majority of the population, who are middle middle class, don't have that surplus and can't take those long term risks.

My point is that we require wealthy people for a robust, non-governmental interfering economy!

Posted by: ET at January 26, 2009 4:26 PM

Everyone owes to the banks. As soon as everyone accumulates some equity in grossly overpriced real estate, the banks tighten a noose and many go bankrupt. The banks now own devalued real estate. They loosen a noose and real estate shoots up. The banks re-sell it. Repeat as many times as neede. Here's the recipe for the economic cycles.

Posted by: Aaron at January 26, 2009 4:26 PM

Why are CDSs and the interest rate never mentioned in regards to the economic crisis. The sub-prime crisis on its own would have been enough to cause an economic downturn, but it was not the only factor leading to this mess whatsoever. Actions by Reagan, Clinton, Bush, Greenspan, greedy banks, lack of regulation, etc. coupled with the world markets clamoring for a decent return on their investments is what caused this problem. It's a massive problem going back years and years that spans political parties and geographical borders.

It'd be lovely to lay the blame on one person's shoulders (especially someone like Bernie Frank who looks and sounds like a muppet), but the problem is much bigger than that.

Posted by: Ebla at January 26, 2009 4:35 PM

Deregulation did not cause this. The fact that we have centrally planned banking systems caused this. It's called the FED and the BoC and the BoE, etc. When our central banks kept interest rates at very low rates for years two things occurred. The first was that banks lent to riskier and riskier clients because they had too much money. The second is that investors chased yield through riskier and riskier investments because they had too much money and treasuries were not yielding enough.

The second massive culprit was guaranteeing loans. Fannie and Freddie have been a disaster. The CMHC will be as well. The CMHC has about 8B of capital to cover 600B of real estate loans. Do the math. It's scary.

The third are deficits which all policitians are responible for. We are responsible as well for tolerating them.

If we want to fix things we need to stop blaming free markets and take away our governments' credit cards.

Posted by: Charles at January 26, 2009 4:47 PM

pillboy talks about "ideological tax cuts". As though the concept of leaving citizens with the fruits of their labour is "idealogical" but the thought that governments have an inalienable right to tax the hell out of the citizens thus effectively making them slaves to the state is not "idealogical".

Sorry, pillboy but I am not the least bit convinced by your featherweight logic.

Posted by: John Luft at January 26, 2009 4:49 PM

Charles - I agree with everything you wrote with the exception that deregulation did not play a role in the economic crisis. I don't believe completely deregulation is possible, so in the meantime we need to make due with what we have. And what we have did not fulfill its obligations.

How are investors to know if an investment is risky if it's given a AAA rating, the same as gov't bonds? That's where the industry failed us, and that's where the gov't failed us.

You do a good job of explaining how Greenspan helped contribute to burning trillions upon trillions of dollars, though, which isn't getting enough attention around here...

Posted by: Ebla at January 26, 2009 5:27 PM

Charles - I agree on the gov't cuts. In fact, the gov't should cut itself by 50% or more.

Ed - REAL stimulus would have been to give Canadians the money to either pay off debt, purchase things, get a better education, etc.

Instead, $75B at least is going into banks. And you are telling me that this isn't a transfer of wealth from you -- the taxpayer, to the bank -- who made GREEDY decisions by getting into hedge funds that no one is responsible for checking??

And how come no one is blaming these rating agencies that screwed people out of their savings? S&P executives should be arrested for rating bonds AAA that they knew were BBB at best.

As for Harper -- he has turned his back on any sense of conservatism in order to save his job. Don't make excuses for him. I stopped doing that months ago. If you think about it, he has quietly committed us to eternal slavery by committing us to a huge number of labour hours in order to transfer wealth from us to those undeserving, and who are by in large well off.

What I find equally disturbing is the lack of outrage by Canadians. I guess when hyperinflation hits us hard, then perhaps more will rise up in anger.

And we haven't even started the discussion about the effects of peak oil and population growths.

Posted by: Aizlynne at January 26, 2009 5:29 PM

"If we want to fix things we need to stop blaming free markets and take away our governments' credit cards."

You green blooded, inhuman... can take your logic back where you came from!

Posted by: Indiana Homez at January 26, 2009 5:39 PM

Very off-topic, SORRY, but I have to complain somewhere, now CBC is saying that Harper must have been inspired by Obama, as he appears to be cooperative and collaborative in this new budget.

Time for my technicolour yawn (ie liquid laugh, ie vomit)

Posted by: Erik Larsen at January 26, 2009 5:44 PM

" . . . tomorrow we start work on the fortified compound."

Well, I don't own any unregistered firearms so I can't help there. Somebody else will have to do that heavy lifting. On the other hand, I'm really handy and fit. I'm a plumber, electrician, carpenter and sheetmetal mechanic. Plus, I can move gravel truck loads of material with a shovel and a bucket.

Just tell me when and where.

Posted by: Schmautus at January 26, 2009 5:55 PM

After seeing the Captain's normalized (money/GDP) graph I feel a bit better about the regulators.

They are predicting that banks will be slow to give out loans. That will decrease the money supply (M2 and M3): exactly the wrong thing to do to an unstable economy. They want to pre-empt a recession by compensating for a decrease in bank-created money with an increase in government money.

Specifically, they want to counteract the panic mob who would hide their money in mattresses.

Take a look at the normalized graph. The money supply (M0) has taken a jump, but only to 1950 levels. This isn't Zimbabwe territory. It is just enough stimulus to spark a little inflation and give some pain to the mattress mob: and that's a good thing.

Posted by: pete e at January 26, 2009 6:38 PM

With regard to the MSM's reference to Harper, that Coalition, which was started by Layton and Dion BEFORE Harper's 'fiscal update', indeed, they started it immediately on losing the election - now, the same MSM told us that it was an example of, heh, 'cooperation and collaboration'. And an example of a blatant rejection of democracy and the rights of the electorate.

No, I don't blame Harper. This fiscal downturn is hardly due to him, aizlynne - no one individual has such a global power! And no, what he's doing is not about 'saving his job'. He has, however, acknowledged that Canada is a centralist, not left, not right, population. His government has to re-present their economic desires - which are 'centralist'.

He's been guiding the country into a decentralized federation rather than the centralist system of the Liberals and NDP of the 1960-80's. Trying to make it more democratic, ie, the Senate and other tasks - but it's not easy since the current MPs and Senators reject losing their power and privileges. And he's focusing on strengthening the private economy, ie, medium and small businesses.

Nonsense - none of us are moving into 'eternal slavery' (how's that for hyperbole!); and no, we aren't giving money to the 'undeserving who are well-off'. I've yet to see money transfered to the wealthy. Perhaps you should explain rather than just state this. Why are the wealthy 'undeserving'? Don't you think that their hard work at, say, developing a business, an industry, etc, has merit?

Population growth? What's your problem with that? Or are your concerns about the aging 'boomer' population? Again, how about explaining rather than just stating your opinion without any evidence.

Posted by: ET at January 26, 2009 6:44 PM

BTW, are you still a little shaky on the details of the graph and, say, how it compares to M2? Now is a great time to brush up on money supply (mercifully brief).

Posted by: pete e at January 26, 2009 6:45 PM

Aizlynne commented "which enabled the likes of Price Waterhouse to merge with banks"
When did Price Waterhouse merge with banks?
Price Waterhouse (an accounting firm) merged with Coopers Lybrand (another accounting firm) to form PriceWaterhouseCoopers.
They also do investment advisory services, as do banks, but that's a long way from "merging with banks". What are you on about?

Posted by: Jethro at January 26, 2009 6:45 PM

Instead, $75B at least is going into banks. And you are telling me that this isn't a transfer of wealth from you -- the taxpayer, to the bank -- who made GREEDY decisions by getting into hedge funds that no one is responsible for checking??
Posted by: Aizlynne at January 26, 2009 5:29 PM

Aizlynne -- the "transfer" you describe to the Canadian banks was not an out-and-out bail out, as you imply. The Canadian taxpayer purchased high-quality, CMHC-insured, revenue generating mortgage assets from the banks for that $75 billion. In all likelihood, the government will turn a profit when it can re-sell the assets when liquidity returns to normal in the banking system. In the meantime, the government earns the revenue from the noted mortgage assets.

Because global interbank lending largely ground to a halt in the fall/2008 (as many large US and global banks started to fold, banks suddenly became questionable credit risks to each other), the Canadian banks who were otherwise strong and stable (relative to their global peers), were having difficulty securing capital from their usual sources. Capital that was available was much more expensive (i.e. supply and demand).

I assure you, the banks would have preferred to keep those mortgage assets. However, it was a smart move by the government to inject liquidity into the Canadian banking system, while keeping risk to the taxpayer at an absolute minimum.

I'm not sure if your comments betray honest misunderstanding of the transaction in question, or deliberate partisan omission. If the former, I hope my comments shed some light on matters for you.

Posted by: Colin from Mission B.C. at January 26, 2009 6:58 PM

Kate,
This is kind of rich coming from you now, after all those years when you made fun of those who predicted that the US economy was headed for the dumpster (what happened to your '7-year recession watch posts', by the way?).

Turned out the doomers were right all along. Anybody with twelve functioning neurons could have seen this coming. The US economy has been running on gimmicks for the last 30 years, starting with Reagan's voodoo economics and all the 'bubbles' that followed. Now the party's over, all that's left is a huge tab and the mother of all hangovers.

It's just the beginning, folks. We're in for a ride.

And Kate, you compound doesn't need to be fortified. Minus 35 will keep the riffraff away.

Posted by: GreenNeck at January 26, 2009 7:07 PM

And all because we Democrats wanted to give people home loans they could not or should not have been able to obtain.

Thank you Jimmy Carter
Thank you Bill Clinton
Thank you Bawney's Fwank
and thank you Chris Dodd.

The 1977 CRA did it's magic. Titling at the redlining windmill has killed our economy.

Posted by: bill-tb at January 26, 2009 7:37 PM

"and thank you Chris Dodd."

Oh, yes, that's another one...

Incredible that so many lefties have no clue. Bill Tieleman on Bill Good's show a couple weeks ago, responding to a caller who said we need to find the people responsible and kick them out : He said "Well, he was kicked out - it was all GWB's fault". Good actually challenged him on that, saying he heard some democrats were to blame as well. Tieleman said, "Really?" And he calls himself a journalist. No clue.

Idiot.

Posted by: Soccermom at January 26, 2009 7:49 PM

sean: conservative diversification. If you can be in companies that own or operate income-producing assets - regulated utilities, like fortis railways like cn consumer goods like prcterandgamble provided they do not have much debt resourcecompanies that own the asset and realestate companies that operate residential rental units

But make sure to have some percentage in financials in the next few months because when the market bottoms - and it will - the moneychangers will make a fortune for you.

Posted by: Gord Tulk at January 26, 2009 8:27 PM

Why are you guys feeding the trolls? Jeeze, I go away for a couple weeks, I come back, here y'all are troll feeding. I despair.

Ok, enough of that. I agree, we've never been here before. But I remain skeptical that The End Is Nigh.

The end of Big Media is nigh, for sure. Big Auto likewise. Mega smokestack industries with megabucks invested I think may well be doomed. Because in all but a few very specialized cases, anything they can do, a guy can do in his garage. Cheaper.

Big Media is going first, because the Web attacks their profit centers directly. Which is -advertising-. Blogs did not kill the NY Times et al. Ebay, Google and Craig's List did.

Kate doesn't even need a garage to do media, just a PC and a dial-up connection. Total investment, maybe a grand at the outside most. How's the multi-zillion dollar print/TV/movie/music industry going to compete with that? They're screwed! All that investment? Kaput! Money, vanishing.

Manufacturing is right on the hairy edge of going the same way. Example, Ikea. The Swedish meatballs are not their secret. Their secret is -inventory control-.

They have good designs which are cheap to produce, but they really clean up with their showroom-to-raw material encompassing inventory control. You buy a chair, a computer someplace in China spits out an order for the raw lumber to make another chair. CNC is programmed, transport is scheduled, blah blah blah, pretty soon the multi-gigabuck manufacturing/storage/delivery system has topped up the store with the exactly right number of chairs they are going to sell this week. Ditto Walmart, only times about seven.

Pretty soon, and I mean like within maybe ten years at the outside, Joe Average be able to do that out of the living room. Post a requirement for an item to a web site, make a PayPal payment, magic happens, the thing arrives at your house to your exact, precise specification, unique, one of a kind, made for you. Made for you and -cheap-.

This is in motion already. Check out MFG.com. Blow your mind, kids. Thin edge of the wedge.

Here's where it gets interesting. Its easy to tax Ikea, Walmart, the Toronto (Red) Star, etc. Big companies, you know where they live. Same with their employees, you know where they work.

But how are you going to tax an unconnected cloud of one to ten man shops, buying and selling stuff in cash, who together match the output of Ikea? What's Big Brother going to do when a sizable fraction of the country goes completely off the radar like the construction industry already has? End of Big Socialism? Hard to squeeze blood out of a turnip, y'know.

Therefore my friends, I do not think this is the end of the world. It may be the end of a lot of things which make the world suck, though.

Posted by: The Phantom at January 26, 2009 9:08 PM

Jethro. They joined with TD Bank to form TD Price Waterhouse. Same for CIBC with Wood Gundy.

When Clinton reversed the Speigel (sp) Act, it allowed banks to merge their services with investment brokerages. This created the financial crisis within the banks. The hedge funds, especially, were totally unregulated. There is no requirement for them to show their books.

The wealth transfer occurs when taxpayers pay for the "bailouts". I heard at Merrill Lynch, the CEO paid out his and his executives their huge bonuses after they received TARP funds (which is US taxpayer money).

These huge bailouts on both sides of the border commit us, our kids and grandkids to eternal work in order to pay the debt. So not only can you not retire, neither can your kids or grandkids because we were either too unaware, or too sheeple minded to figure out what is really going on here - which is massive wealth transfer on the backs of the middle class, and perpetual slavery forced upon us in order to pay it all.

If Harper was a TRUE conservative, and a leader with some conviction, he would never agree to these conditions. Who would. So who is he really looking out after - you, or his own ass?

Posted by: Aizlynne at January 26, 2009 9:14 PM

ET. Our whole monetary system is based on the idea that growth = prosperity. And this isn't the truth. Surplus is what is required for growth, as well as prosperity.

The prosperity that the US and Canada use for GDP rates, etc. is "financial services" wealth which is mostly stock market, investments, home equity, etc. But none of this is "real" wealth, only paper wealth. Ask any Bernie Madoff investor.

So you can't use the GDP numbers from any gov't source as being accurate if 75% of the wealth calculated can be taken away in a heartbeat.

The brick wall we will hit is that we will eventually run out of oil. Exponential world population growth is placing roughly 70M new people on the planet every year. And the majority of this growth is in China and India, who want to live like we do so their demands for oil increase. Because they too live under the false assumption that growth = prosperity.

If your surplus runs out, then you can figure out pretty quickly what the results will be.

Posted by: Aizlynne at January 26, 2009 9:28 PM

Um, Aizlynne, TD Waterhouse and Price Waterhouse (actually now PriceWaterhouseCoopers) are two entirely separate and unrelated oranizations. They have this in common, the word Waterhouse.
There is no such thing as TD Price Waterhouse.

Posted by: Jethro at January 26, 2009 9:52 PM

aizlynne - I don't know where you are getting your 'data' from, but it's heavily inaccurate, as has been pointed out already many times.

Don't threaten us with apocalyptic scenarios of 'slaves to work'; it isn't true.

No, our market system isn't built on 'growth= prosperity' but on the ability to produce and invest surplus which is then exchanged in a free market and/or invested in long term infrastructures which generate more products/services. Our system is not a sustenance economy but a surplus economy. Surplus can involve growth, but, this growth might not be in simple numbers but in complexity.

No, the GDP is NOT a description of 'financial services' but of gross domestic products - all products, both material (agricultural, manufactured) and service.

So what if population increases? Manufacturing and service production increase as well. Inventions and innovative products and services increase as well. Your 'steady-state' suggestion actually would reduce the capacity of people to live a productive life.

Posted by: ET at January 26, 2009 10:14 PM

Stop blaming the greedy banks.
They have to be greedy by definition.

Blame the culprit - the moving of the industry to the 3d world. When industry goes, there go the earnings. People who are laid off find other jobs, but the cash moves overseas. The cash earned by the 3d world workers is getting spent to pay a) taxes that will be used to against us; b) for goods and services that are produced again in the 3d world. Instead of paying taxes in the West, the goods and services do so overseas.

What we get is cheap merchandize, what we loose is large portion of taxes, capital gains and spendable personal income.

You have to be deaf and blind not to see that John Doe from Pennsylvania who used to make the t-shirts, paid US income tax and spent his income buying US made goods, was replaced with 5 china men who pay taxes to the Communist party and buy made in China goods and services. US and Canadian cash vanishes and pays to train the spies sealing our technology, build copies of Aegis battleships and smuggle weapons to Hamas.

You can bend backwards but still fail to prove that globalization is such a wonderful thing. The only argument repeated over and over is that opposing globalization is selfish and the 3d world must be given a chance. I don't give a dead rat azz about 3d world when I have to feed my family, simply because the 3d world does not give a dead fly about me.

Posted by: Aaron at January 26, 2009 10:54 PM

stealing our technology.

Soon we will need their technology, but they won't allow immigration so easily as we did - they know.

Posted by: Aaron at January 26, 2009 10:57 PM

GreenNeck

Kate,
This is kind of rich coming from you now, after all those years when you made fun of those who predicted that the US economy was headed for the dumpster (what happened to your '7-year recession watch posts', by the way?).

remember , although this is the worlds best conservative blog it is basicly still a Canadian blog and since we had a positive growth quarter in the last quarter on 2008 , we cannot by definition go into recession in Canada till september 2009 , and that my friend is still up in the air.so the 7 year recession watch is still underway.

Posted by: cal2 at January 26, 2009 11:53 PM

ET / Jethro - here are just a few links to some of the info I provided on here. You can read it or not. It's up to you. Personally speaking, I would rather be prepared and look foolish if things upright themselves, then do nothing at all and be unprepared. Because the probability of a worse case global wide financial collapse scenario is real, even if the chance is small, it would do one well to be prepared, especially if others rely on them.

www.chrismartenson.com
www.europacific.com
www.wbrussee.wordpress.com

Posted by: Aizlynne at January 27, 2009 1:41 AM
Site
Meter