Is it finally time to use the dreaded D-word?

[darkbeaver]

The Bankers Manifesto of 1892: History Repeated

Congressman Charles A. Lindbergh, Sr. revealed the Bankers Manifesto of 1892 to the U.S. Congress somewhere between 1907 and 1917.

We (the bankers) must proceed with caution and guard every move made, for the lower order of people are already showing signs of restless commotion. Prudence will therefore show a policy of apparently yielding to the popular will until our plans are so far consummated that we can declare our designs without fear of any organized resistance.
Organizations in the United States should be carefully watched by our trusted men, and we must take immediate steps to control these organizations in our interest or disrupt them.
At the coming Omaha convention to be held July 4, 1892, our men must attend and direct its movement or else there will be set on foot such antagonism to our designs as may require force to overcome.
This at the present time would be premature. We are not yet ready for such a crisis. Capital must protect itself in every possible manner through combination (conspiracy) and legislation.
The courts must be called to our aid, debts must be collected, bonds and mortgages foreclosed as rapidly as possible.
When, through the process of law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of the government applied to a central power of imperial wealth under the control of the leading financiers.
People without homes will not quarrel with their leaders. History repeats itself in regular cycles. This truth is well known among our principal men who are engaged in forming an imperialism of the world. While they are doing this, the people must be kept in a state of political antagonism.
The question of tariff reform must be urged through the organization known as the Democratic Party, and the question of protection with the reciprocity must be forced to view through the Republican Party.
By thus dividing voters, we can get them to expend their energies in fighting over questions of no importance to us, except as teachers to the common herd. Thus, by discrete actions, we can secure all that has been so generously planned and successfully accomplished.
Sounds kind of familiar doesn’t it?

 

[darkbeaver]

Capitalist Bankers will be legally hunted to extinction someday soon, all we need is a scrap of paper making it the law of the people.

 

[Tyr]

This cannot be called a depression, not yet anyway. While conditions are grim, the statistics are not even comparable to the recession of the 80s.

In the 80s, we had high inflation, high unemployment, high interest rates etc. Stock market tanked big time in the 80s, it took ten years to recover it. I think there was a ten year period in 70s and 80s, where the stock market barely moved. After that it took off, with increases of 13 to 15% annually.

So we have not even approached the dire economic conditions of the 80s. If we didn’t call it depression at that time, why call it a depression now?

I think we have been spoiled by the prosperity of the recent years, we have forgotten (or in the case of youngsters, they haven’t seen first hand) what real hardship is like.

So no, it is definitely not a depression yet. The conditions will have to get much worse before it can be called a depression.

In the 80s, we had high inflation, high unemployment, high interest rates etc.

those are not classic indicators of a depression. Depression are characterized by successive quarters of GDP "shrinkage". One quarter = a recession. 2 in a row = a depression

I'll agree with the short term prognosis as most companies have a fiscal yr end March 31st. If the indicators are any pretense to what will come. I will be more than ready to say we will be in a depression late April/09.

 

[Tyr]

Capitalist Bankers will be legally hunted to extinction someday soon, all we need is a scrap of paper making it the law of the people.

Funny you should say that.

I had always thought of the "slimiest" profession to be a Lawyer. Now I've come to rethink my criteria.

(in order)

1. Lawyer
2. Banker
3. Journalist
4. Union Leader
5. Gov't worker
6. Insurance Agent

 

[Tyr]

This just in. Scotiabank reported earnings today, and they actually report an increase in profits for the quarter of 1%. Incredible.


Overall the six biggest banks - Royal, CIBC, Bank of Montreal, Scotiabank, TD Bank and National Bank - earned profits of nearly $3.1 billion for the quarter, up from $2.1 billion for the same quarter a year earlier.

Kudo's to our banking system.

The root of the problem is obviously bad loans. Canada has a banking policy whereby they will only loan out $10 to every $1 in assets. They are currently at $7 for every dollar loaned. Not the absolute optimum, but pretty damm good

In comparison, the USA and The EU are currently at

USA $24 - $1
EU $61 - $1

I'm not sure what Japan is at but because of their "0%" interest rate policy, I'm guessing it's pretty high

 

[JLM]

Contrary to what some believe, banks making money is a good thing and the more they make the better. All our pensions and investments have some involvement with the banks, where we are all in fact share holders either directly or indirectly. We want our investments in pensions etc. showing a profit. Further to your remark I.P. about Sir Rupe being right, we again have to agree to disagree. Yep, interest rates were sky high in the early 80s but if you check your dates that was before the recession. I know, I bought my house in Parksville in '85 at the height of the recession when real estate was rock bottom and interest rates had dropped from the 22% you mention to 12%.

 

[SirJosephPorter]

Depression are characterized by successive quarters of GDP "shrinkage". One quarter = a recession. 2 in a row = a depression

Where did you read that, Tyr? You have got it wrong. Recession is defined as shrinkage in GDP two quarters in a row. There is no set definition of depression.

If there were, it would be easy to answer if we are in a depression or not. But there isn’t a specific definition of depression, hence the arguments (as to whether we are in depression).

 

[SirJosephPorter]

I bought my house in Parksville in '85 at the height of the recession when real estate was rock bottom and interest rates had dropped from the 22% you mention to 12%.

Surely even 12% is quite high JLM, compared to today anyway. The point isn’t whether interest rates in the 80s were 22%, 12%, or 10% (I bought a house in 1987, I got interest of 10%, and I thought that was low at the time), the point is that interest rates were high in the 80s. Much higher compared to today.

 

[Cannuck]

Funny you should say that.

I had always thought of the "slimiest" profession to be a Lawyer. Now I've come to rethink my criteria.

(in order)

1. Lawyer
2. Banker
3. Journalist
4. Union Leader
5. Gov't worker
6. Insurance Agent

I would have to say that anybody that makes a dollar off of the defense industry would rank higher than any of those.

 

[#juan]

Depression are characterized by successive quarters of GDP "shrinkage". One quarter = a recession. 2 in a row = a depression

Where did you read that, Tyr? You have got it wrong. Recession is defined as shrinkage in GDP two quarters in a row. There is no set definition of depression.

If there were, it would be easy to answer if we are in a depression or not. But there isn’t a specific definition of depression, hence the arguments (as to whether we are in depression).

During the great depression in the thirties, unemployment went over twenty percent. The threat of war brought millions of jobs. The military was recruiting and unemployment dove under five percent by the end of 1939. I don't think we are anywhere near a depression. We are in a mild recession related to the problems in the U.S.. By next year at this time, it will all be better except we will be paying higher taxes to pay off the increased debt.

 

[CanadianLove]

The Russian Psychics are predicting Martial Law for the US this year.

CTV.ca | Russian scholar says U.S. will collapse next year

 

[JLM]

I bought my house in Parksville in '85 at the height of the recession when real estate was rock bottom and interest rates had dropped from the 22% you mention to 12%.

Surely even 12% is quite high JLM, compared to today anyway. The point isn’t whether interest rates in the 80s were 22%, 12%, or 10% (I bought a house in 1987, I got interest of 10%, and I thought that was low at the time), the point is that interest rates were high in the 80s. Much higher compared to today.

Yep, and those of us with money invested in fixed income accounts were shoveling in "the gravy".

 

[JLM]

No JLM, I agree with Sirrup here. In the early 80's interest rates were as high as 22% on a mtg. In the late 80's we built a lovely home here on the island where house and land together cost us $125,000. Interest rates were still so high that we sold that house in 15 months as we transferred to another town on the Island and we lived in Quarters. We were happy to go because the 12.5% interest rate made our payment so high it was really hard to keep up. The Bank of Canada announced today that it has lowered it's rate to .05%. We'll see now how low the other banks go. That's if they decide to follow suit.

All the news sources I've listened to are touting this as the worst since the Hungary Thirties. Employment may (temporarily) be higher than the 80s, but we're coming off a stretch of record high employment, so just give it another couple of months. We'll see what happens come spring when employment traditionally picks up (if it does I'll eat my words) but sadly I think the decline may continue through spring and summer.

 

[darkbeaver]

America's Fiscal Collapse - by Michel Chossudovsky - 2009-03-02
The most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people.

Financial Disarmament
There are no solutions under the prevailing global financial architecture. Meaningful policies cannot be achieved without radically reforming the workings of the international banking system.
What is required is an overhaul of the monetary system including the functions and ownership of the central bank, the arrest and prosecution of those involved in financial fraud both in the financial system and in governmental agencies, the freeze of all accounts where fraudulent transfers have been deposited, the cancellation of debts resulting from fraudulent trade and/or market manipulation.
People across the land, nationally and internationally, must mobilize. This struggle to democratise the financial and fiscal apparatus must be broad-based and democratic encompassing all sectors of society at all levels, in all countries. What is ultimately required is to disarm the financial establishment:

-confiscate those assets which were obtained through fraud and financial manipulation.
-restore the savings of households through reverse transfers
-return the bailout money to the Treasury, freeze the activities of the hedge funds. .
- freeze the gamut of speculative transactions including short-selling and derivative trade.






​

 

[Trex]

All the news sources I've listened to are touting this as the worst since the Hungary Thirties. Employment may (temporarily) be higher than the 80s, but we're coming off a stretch of record high employment, so just give it another couple of months. We'll see what happens come spring when employment traditionally picks up (if it does I'll eat my words) but sadly I think the decline may continue through spring and summer.

^I agree.

As to the thread starter it is too soon to call it a depression but in my opinion it almost certainly will become one.
A recession is defined as two consecutive loosing quarters while a depression is defined as multiple consecutive quarters in a recession.
By the end of 2009 or early 2010 it could be properly be defined as a depression.

The American housing industry reports that of the 100 major real estate markets in the USA almost every one showed a net loss in housing value. A handful of markets maintained.
In 2009 they predict 40 of the 100 major markets will drop again, 60 will maintain and 2 of the markets will increase slightly.
2010 could see the losses drop down to 20% of the markets with very slight increases in value starting to appear in the odd market.
Given that Canada is assumed to be trending a year behind the USA in this recession that could mean Canada has 3 or 4 years of real estate devaluations to look forward to.
Macleans magazine recently reported that Canadian real estate is presently overvalued by 20 to 25%.
There are still a huge amount of mortgages worldwide which are either presently under or soon will be under water .

The combined world's stock market's are still busily melting down.
The bottom is, as yet, out of sight.
GM reports that even with bail outs it can not turn a profit until 2017.
AIG wants billions and billions more.
American financial analysts say there is another 20 to 25% downside in the Dow.
Currently the losses in the American markets are the worst in recorded history with the exception of the 1929 depression.
There is at least three more years worth of toxic paper floating around that has yet to come due and when it does world governments will undoubtedly have to pick almost all of that up.
Financially this recession is already worse than any other excepting the Great Depression and we have not found the bottom yet.

The Canadian government recently cut the prime to .5%.
The only thing left now for the Canadian Fed is for the government to either cut taxes or start buying up bad paper.

The banks are still frozen up around the world. Perfectly viable companies are going underwater because they cannot access operating credit. There may need to be a mass round of bank nationalization before credit begins to flow normally once again.
It is estimated that the Government of the USA will have to shell out 2 to 4 Trillion dollars in taxpayers money before this this depression ends.
Canada and the rest of the world will be expected to follow suit proportionally.

I expect a full 20% of all retail storefronts will be gone by 2010.
Either bankrupt or merged/bought out.
That's a heck of a lot of lost jobs to come down the pipe.
Earlier someone posted that unemployment has not as yet reached levels seen in the 1980's.
I disagree with the logic.
The 1980's started with higher levels of unemployment before it went into recession thus the comparison is invalid.
Presently the rate of increases in job losses in both the USA and Canada are the highest they have ever been with the exception of the Great Depression and that is the really important data.
Canada probably will see unemployment at 10% by early 2010.
If we wallow in an extended slow patch for a few years following hitting bottom in 2010 unemployment will probably easily pass the 12% we saw in the 1980's.
Thailand is estimating that their unemployment rate could hit 50% before this is over.

Sorry for the negative viewpoint but that's how I see it.
The upside is that this coming depression like all other downturns will pass and life goes on much as before.

I suggest exercising caution in the coming times.
We are just in the beginning of this thing and we probably have a long way yet to go.
I suggest trying to save some money and cut debt if possible.
If you have a job work hard at keeping it.
Now is probably not a good time to venture into riskier enterprises.

As to investing, the smart money agrees that cash is now the king.
If you have the cash to invest the future will offer once in a lifetime opportunities to make unheard of gains.
More will probably loose than win, however if you like to gamble the coming opportunities should be spectacular.
Pharmaceuticals, health care providers, power generation facilities , utilities and the like are all considered very safe investments but probably have had their share prices beaten down far more than they deserve.
Commodities are where fortunes are typically lost or made and this recession should offer ample opportunities for either event to occur to an investor.

Personally I would avoid Canadian financial stocks.
Probably no safer than utilities with virtually no upside.
Most banks share value is expected to wallow comparatively speaking for the foreseeable future.
My own banker thinks banks are probably going to be lame performer.

Just my take on it.

Trex

 

[Tyr]

I would have to say that anybody that makes a dollar off of the defense industry would rank higher than any of those.

I had always thought of the "slimiest" profession to be a Lawyer. Now I've come to rethink my criteria.

(in order)

1. Lawyer
2. Banker
3. Journalist
4. Union Leader
5. Gov't worker
6. Insurance Agent


...and you have a problem with the defence industry? I guess you rank soldiers as "slimeballs"

Hmmmm..

btw - I'm not limited to "the Defence Industry". I "do" aerospace also - CanadArm and RADARSAT. Maybe those are "slimy" too.

 

[SirJosephPorter]

Personally I would avoid Canadian financial stocks.
Probably no safer than utilities with virtually no upside.
Most banks share value is expected to wallow comparatively speaking for the foreseeable future.
My own banker thinks banks are probably going to be lame performer.

Trex, nobody knows for sure what will happen in the future, but here is my take on Canadian banks.

Currently all the Canadian banks have a very sound balance sheet, they all are making handsome profits, they have put away cushions to absorb any future credit losses.

Will banks go up in value the next few years, or will they be ‘lame performers’ as you put it? I don’t know. However, I do know that banks are paying substantial dividends, ranging from 7% to 10% (that 10% is Bank of Montreal). In terms of interest income, that translates into an annual return of 10% to 13%.

I don’t care if bank stocks go up in value, as long as they keep paying me a substantial dividend. Since all the banks are firmly in the black at present, the economic situation will have to deteriorate substantially (will have to approach depression) for the banks to curt dividend. Even if they cut the dividend by half, they will still give attractive returns (5% to 6.5% annually), much better than can be obtained with money market funds or GICs.

The Canadian bank stocks have come down substantially (for no other reason than the fact that American banks are in trouble). So forget about share values going up, I will be quite happy with a return of 10 to 13% annually for the next few years.

 

[JLM]

I had always thought of the "slimiest" profession to be a Lawyer. Now I've come to rethink my criteria.

(in order)

1. Lawyer
2. Banker
3. Journalist
4. Union Leader
5. Gov't worker
6. Insurance Agent


...and you have a problem with the defence industry? I guess you rank soldiers as "slimeballs"

Hmmmm..

btw - I'm not limited to "the Defence Industry". I "do" aerospace also - CanadArm and RADARSAT. Maybe those are "slimy" too.

I always considered pimps to be the lowest followed closely by defense lawyers.

 

[Trex]

Personally I would avoid Canadian financial stocks.
Probably no safer than utilities with virtually no upside.
Most banks share value is expected to wallow comparatively speaking for the foreseeable future.
My own banker thinks banks are probably going to be lame performer.

Trex, nobody knows for sure what will happen in the future, but here is my take on Canadian banks.

Currently all the Canadian banks have a very sound balance sheet, they all are making handsome profits, they have put away cushions to absorb any future credit losses.

Will banks go up in value the next few years, or will they be ‘lame performers’ as you put it? I don’t know. However, I do know that banks are paying substantial dividends, ranging from 7% to 10% (that 10% is Bank of Montreal). In terms of interest income, that translates into an annual return of 10% to 13%.

I don’t care if bank stocks go up in value, as long as they keep paying me a substantial dividend. Since all the banks are firmly in the black at present, the economic situation will have to deteriorate substantially (will have to approach depression) for the banks to curt dividend. Even if they cut the dividend by half, they will still give attractive returns (5% to 6.5% annually), much better than can be obtained with money market funds or GICs.

The Canadian bank stocks have come down substantially (for no other reason than the fact that American banks are in trouble). So forget about share values going up, I will be quite happy with a return of 10 to 13% annually for the next few years.

Sir JP,

When I stated that I was avoiding banks I really was not specifically referring to your earlier statement regarding your investing in financials.
For one thing I have no idea if you are buying stocks or bonds or both.
For another these days if your timing is spot on just about anything will return a profit.

A bond ladder composed of bank bonds possibly with a few GIC's thrown in is a smart way to hold money right now in my opinion.
So in some ways banks are a very wise spot to park cash.
Having said that bonds are way, way riskier than they used to be.
Hence the higher returns and possibly depreciating values if sold before vestment date.

Personally I was 100% out of all stocks and mutuals long before the crash.
I was heavily into cash, blue chip bonds and some A+, insured and well backed commercial paper.
I still lost some serious money.

As to Canadian bank stocks, I stand by what I said.
I don't think that bank stocks are going to go anywhere soon.

Companies like Walmart, drug store chains, utility companies, manufacturers of inexpensive food products and things of the like are in my opinion probably safer and more stable than the banks with way more upside potential.

But what do I know?
I lost money.

Trex

 

[SirJosephPorter]

Personally I was 100% out of all stocks and mutual long before the crash.

That was a wise decision, Trex. I did sell of some stocks when the market was riding high, but I kept majority of my stocks (I think I am invested about 60% in stocks).

These days most of my stocks tend to be dividend paying companies, such as banks, BCE etc.

I still lost some serious money.

As to that, so did everybody. My portfolio was down 15% last year.

Having said that bonds are way, way riskier than they used to be.
Hence the higher returns and possibly depreciating values if sold before vestment date.

Well, depends upon which bonds you buy. If you bought Lehman Brothers bonds (or perhaps GM bonds), there is a risk. However, most corporate bonds still are a good investment.

And of course, if you hold the bonds to their maturity value, you are guaranteed the capital.

As to Canadian bank stocks, I stand by what I said.
I don't think that bank stocks are going to go anywhere soon.

And as I said, I don’t care, as long as they keep giving me a return of 10 to 13% per year (in the form of dividend); I am not bothered if the stock price doesn’t go up.