Busted

Peacenik has been asking this question of Peacenik's self: Could Peacenik be wrong? Garth Turner is wondering the same thing. The crazy thing is that Canada may have escaped the worst of the housing bubble but in a desperate effort to re-inflate the bubble economy the powers that be are going to insure that Canada follows the U.S. and the U.K. and Spain, and everywhere else, right down the toilet. Canada already has a huge deficit. Canada already has had to bail out Canadian banks. Canadian pension plans are already woefully underfunded. Canada already has record unemployment. Is this present housing bubble going to pop? Garth thinks so. So does Peacenik.

by Garth Turner

My, my. Could I be wrong? Just a bearded broken-down piece of meat? (If you saw ‘The Wrestler’ imagine me now with flowing blonde locks, a bursting heart and tights.)

After all, my words of caution to those people rushing into real estate deals seem to be falling on deaf ears. According to the MSM, we are on the cusp of recovery and hot property is all the proof necessary. So, this week’s new housing report was heralded as wonderful news, even though starts are down by a third nationally, and have been squished by half in Ontario. Big Bank economists have been lining up at microphones, saying since car and house sales are the first things to crash when recession hits, it makes sense they’ll soar when recovery noses out of the earth.

But, car sales are still dismal. The preponderance of real estate sales are to inexperienced buyers. And today’s jobs report shows the economy’s still a dangerous thing. But, whadda I know?

Read on...

5 Reasons House Prices May Never Recover

John Carney

House prices will eventually stop falling, probably in about two years. But will they ever recover to the levels we saw during the heights of boom? In some areas, prices might climb that high again. But for most markets, such a recovery will probably never happen, and would take decades it were to occur.

In an essay published today, Charles Hugh Smith explains that the bubble vaulations are probably never coming back.

1. Once the bubble in an asset class pops, it never reflates. "It is simply a truism that bubbles never reflate, ever. Tulip bulb valuations did not rise to stratospheric heights after the Tulip Craze popped, and the Nasdaq dot-com bubble did not reinflate, either, for the very good reason that bubbles are never based on rational valuations--they are based on the psychological state of mania which cannot be reinstated once lost," Smith writes.

Read on...

Peacenik thought Stephen Harper said the Canadian banking system was strong...an example for the world. Why then did the Bank of Canada lower interest rates to .25% and promise to keep them there for a year? Peacenik thinks someone is desperately trying to re-inflate the housing bubble. Charles Hugh Smith says it is not going to happen. The Japanese tried zero or negative interest rates for 10 years...their lost decade...and it didn't help.

The financial crisis cannot be solved by low interest rates. It cannot be solved by any of the programs Obama and others are trying, because it cannot be solved. It must play out. It will play out. Depression. Deflation. Collapse. The Black Hole wins. But at least Peacenik is leading his playoff hockey pool.