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The strategy

Garth Turner
By Garth Turner / November 25, 2010

Ontario announced it’s spending $90 billion on a power plan which will double electricity bills. Ottawa revealed a big jump in inflation, of which the HST figures prominently. F told MPs there is no housing bubble, while he prepares an austerity budget for the new year.

In short, there’s instability, global debt excess, country risk and rising prices – at the same time governments figure they have no choice but to turn off the spending taps. This means hundreds of thousands of laid-off civil servants in Britain. Higher retirement ages in France and elsewhere. Budget massacre in the PIGS. A Tea Party austerity binge in the USA, and belt-tightening here.

In this world now unfolding, prices will keep rising while asset values fall. So you’ll pay more for power, food, insurance and taxes, while your house loses value and your wages flatline. If you happen to be like any of the people I’ve tried to help this week, and lived your life as your parents wanted you to, well, you’re pretty much toast. As I keep telling anyone who will listen, having the bulk of your net worth in one piece of property over the next few years will be like betting your future on Butterbutt in the fifth. Not diversifying into multiple asset classes, or thinking a baby needs a 2,500-square-foot, is an equal gamble.

Some people come to this sorry blog because they’re anxiously awaiting a 50% plunge in housing values so they can buy one. Others come to argue a housing collapse is impossible and sustained demand (as we see now) will propel it higher, emasculating mortgage debt. Neither group gets it.

It’s not that housing won’t correct. It will. But Vancouver won’t become Phoenix or Toronto turn into Toledo. By the same token, without a burst of economic growth, more jobs and higher salaries, no boom’s possible. Instead, it’s the dangerous, muddling middle that we have to understand.

Modest, but sustained, price declines. Economic torpor. Unemployed, boomers especially, who never work again. Young homeowners under water, until their kids move out. No bang. Many whimpers.

Some people have no time to recover. Millions do.

You?

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About the author

Garth Turner

Honourable J. Garth Turner PC

  • Best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics
  • Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques.
  • Influential commentator on public and financial affairs through blogging, media, books and personal appearances.
  • Member of the Canadian Parliamant for nine years, serving as Member of Parliament, Cabinet Minister (in charge of Revenue Canada), national leadership contender (Progressive Conservative Party of Canada), House of Commons Standing Committee member and chairman (Consumer and Corporate Affairs, Finance), Special Advisor to the Leader of the Official Opposition. Member of the Privy Council of Canada. Medals recipient.

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