Wake up Canuck!: The global financial crisis will eventually hit us hard!

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!

And here is Ron Paul to back this up, that eventually all currencies collapse:

 


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5 responses to “Wake up Canuck!: The global financial crisis will eventually hit us hard!

  1. I saw this Keiser report yesterday. While I don’t disagree with his guest’s conclusions, she was talking out of her ass about the banks. We in fact do not have 40 year mortgages with 0% down – a look at CMHC or GE will confirm this. Our banks are not more solvent because our bankers are less greedy (I’m a former), they were hamstrung by the Charter and weren’t able to play with the big boys. Remember all that whining about how they couldn’t compete? That said there is very much the chance of a major liquidity crisi that will turn off the capital taps and push our economy off of a cliff. This has more to do with our currency and monetary policy than bank balance sheets.

    Also, Canada is so large and diverse you simply can’t make blanket assertions about the economy, much less anything else. It’s going to suck to live in Vancouver when the housing bubble there pops, but much of the rest of the country (my province of Alberta excluded) have seen significant adjustments already. I almost choke when she confidently stated we could see a 90% devaluation. Not even Detroit has suffered that FFS!

    As the US goes so do we. When demand from our largest trading partner drops we either have to lump it and find other markets or match them and surpass them in the currency devaluation race. We’re going to get hurt, no doubt, but what that woman said was ridiculous.

    • Just thought of another issue of significance. Mark Carney has been responsible for the shift of pension wealth out of the country, and into public pension plans with the ridiculous suggestion of tax leakage of income trusts. This is no doubt a fooling of the Canadian people to move pension income out of the hands of the middle class in the effort to put us further at the mercy of government. And, like Greece, austerity is easily foisted upon government pension plans. We know too that this is happening throughout the U.S. – the shift of power from the people to the government.

  2. hc, agree that 90% seems extreme, but again what about 40 to 50% deflated housing? That, on top of the credit crunch you mention? Is it time to forget the global economy and bring back protectionism? I think of the basics – get back to farmers in Canada supplying food to Canadians. We can ill afford hyperinflated food prices as when the Depression hits, people will be less concerned with the cool Christmas presents, and more concerned with having food for the table, heat for the house, and light and power.

  3. I agree completely that globalism is the disease that’s eating us up. It’s hard for a person who lists Adam Smith as his hero to admit that protectionism is the answer, but there you go! I’m not an apologist for the Banks and certainly not for global corporate interests. I’m probably as negative as you can be for ours and the worlds prospects given current conditions. I just can’t stand someone supporting what is essentially a correct argument with a load of rubbish.

    That said this isn’t a Canadian problem, the Corporate takeover of the governments of the world has been happening for 60 years. Protectionism isn’t a long term answer but something must be done to take back control of our economy from the Corporatocracy. There would be BIG short term pain as the big uns of the world’s financial elite turned on us, but we’d come through stronger for it and with a redeveloped and diverse economy.

    BTW – It’s not going to be much fun in southern Ontario either. The rust belt of Canada is on its way to oxidising into nothing! If the financial service sector ever starts to implode then you’ve really got problems!

    • Yeah, and don’t we recall hearing both Harper and Angela Merkel of Germany suggesting that Protectionism is not the answer. And Harper, at the G20 telling Canadians “on repeated occasions” that this is a global economy, as he as a matter of factly informed us we no longer have sovereignty. Last time I looked that was treason!

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