Bubble case-studies: Ireland and Canada

As I travel around and visit many different places, the disparity in the speed at which the credit crunch is unfolding in different places is readily apparent, and with it the attitudes of local people to warnings of hard times to come. In places where the bursting of the credit bubble is more advanced, such as Ireland, people are generally more interested in understanding what went wrong and what they can do for themselves and their communities. In such places, where homes may already only be worth 40% of the mortgage on them, there is more public recognition and discussion of the issues, even if there is still a great deal of collective denial.

In other places where the impact of the bubble has yet to be felt, for instance Canada, where I am currently, there is still a sense of invulnerability. We haven’t got as far as denial yet. That’s hardly surprising when you can’t tell a crack-shack from a mansion in places like Vancouver. This is bubble psychology at its most extreme, where no one cares what they pay for something, because they think someone else will always pay more, and no one cares what they owe, so long as the monthly payment is manageable in the short-term. Most other Canadian cities are  still in the grip of bubble psychology as well, although not to the same extent. Needless to say, the level of public discussion in Canada is abysmally low. Continue reading “Bubble case-studies: Ireland and Canada”

Welcome to the Gingerbread Hotel

Bailouts are NEVER for the little guy no matter what spin their proponents use to sell them to the public (who will be paying for them through their taxes). The role of the little guy in a Ponzi scheme is to be the empty-bag holder. This is the tragedy of our times, and there’s nothing anyone can do to prevent it, whether or not they might want to. The losses have already occurred, but as yet still lie out of sight in illiquid ‘asset’ accounts supposedly worth hundreds of trillions of dollars, but actually worth close to nothing.

A predatory lending structure has been sucking the wealth out of ordinary people through debt enslavement for a long time, by encouraging them to buy far more than they could actually afford on margin (ie with borrowed money). That is a recipe for paying far over the odds for everything, while the financiers collect the excess – an excess collected preferentially from those near the bottom of the income scale, who were most likely to carry a perpetual credit balance at a predatory rate. This is how credit bubbles form – a combination of predators and all-too-willing prey that doesn’t understand the nature of the trap. Hansel and Gretel and the witch’s Gingerbread House comes to mind, minus the escape at the end. Continue reading “Welcome to the Gingerbread Hotel”