23 | December | 2010 | Make it Eight, eh? Hockey again for Winnipeg!

In the below interview with Max Keiser (maxkeiser.com), Nicole Foss explains to us fellow Canucks that our buck is not immune to the problems others in the world are seeing. We are just at the peak of the bubble, but make no mistake, the bubble will burst:

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

Some points from the interview with Keiser:

we had 40 year mortgages with no money down
30 yr mortgages with 5% down
avg house price in Vancouver is $1 million
when you are in the thick of a bubble, you can’t see it (“these are other people’s problems”)
Canadians are in more debt than residents of other nations
in some cases (esp. Vancouver) 50 to 70% of income goes to pay for mortgage costs
Even in St. Johns, NFLD, housing prices have skyrocketed
we have deferred the crisis, but not escaped it
we are reinsurers in the derivatives market
Canadian real estate values could fall by as much as 90% in some areas (what if they even fell by 50%? – how would that impact the average home borrower?)
there will be a deflationary credit collapse, where scarce cash will still buy real estate, but at incredibly reduced prices (goodbye easy credit!)
our housing industry represents 20% of GDP
we sell 80% of exports to the U.S. so when their economy collapses, it will impact our export market

So Canada, how is it exactly we will come out unscathed?

So, as hyperinflation eventually kicks in for the Americans, it will create a ripple economic tsunami in Canada. What else will happen, according to Mike Maloney (goldsilver.com)? How will the dead cat bounce (Bernanke is dumber than gold)?

Mike says:

a $trillion collapse (10%) of U.S. currency supply
there will be real deflation (contraction of currency supply)
markets in U.S. are “way overvalued” (back into a bubble)
the P/E ratios for the S&P are over 20 (bubble territory)
dividend yields are a mere 1.9% (dividend yields have not been lower than this dating back to the reconstruction of the market data from 188o to 1998)
since 200o, Mike has noticed that global markets are in “lockstep” with whatever direction the U.S. stock market is going – they are interlinked.
as the U.S. market goes down, deflation, government panic, and hyperinflation
with hard times, people will not borrow and spend, the currency supply will collapse
if the Fed buys U.S. treasuries, it represents a debt of the American people to the private Fed Reserve, and it is an inefficient means to borrow (bureaucracy leading to a lag and inefficient way to propel the economy)
gold should be measured in how much real estate, stocks, and stuff it can purchase
gold is undervalued currently
China is encouraging the purchase of gold and silver
When China comes into silver, the explosion will be “nuclear” (silver is a very small market)
last Bull market was only in North America in the 70′s – this time it is the whole world
the spot prices are set by exchanges worldwide
GATA has evidence that the U.S. has been selling gold into the markets
to keep prices of gold down, a large holder would have to supply China and others seeking large quantities of gold outside the markets.
the bulk of the currency supply is not created by Bernanke, but by fractional reserve banking by loans from banks
Bernanke does not have control over the free markets – only manipulate them – and it will lead to higher gold prices

The bottom line is hedging against the collapse of the dollar, and rising inflation with real money – gold and silver. That, and food reserves might just save the bacon of your family when the bubble (yes, here in Canada people!) finally hits, and hits hard!