# Weird Feeling About the Economy



## tygrus (Mar 13, 2012)

Call this just gut instinct, but I feel that we could see some major changes in the global economy in short order. I think things are going to shift again, some due to technological change, some due to outside other forces.

I am betting that the US is on the cusp of a fairly major resurgence and we are just seeing some of the volatility ahead of it. At the same time, there are a number of nations I feel could be entering something akin to what the US has already gone through, Canada being one of them.

Canada is bubble all over the place, especially housing. Prick any one of those and we drift down pretty fast. And this time we cannot count on our southern neighbor. They need much less of our oil and natural resources and manufacturing is coming home now. Ontario is the canary.

Europe will face political and economic turmoil for the foreseeable future. An extreme socialist state will find it increasingly hard to meet the expectations of its citizens. It also faces political turmoil and likely to flirt with a break up at some point.

Australia will follow Canada, maybe even worse so because they bet all their horses on China.

Middle east will be in flames for a long time. With less oil revenue or alternate economy, these places become incredibly shaky.

So that just leaves the BRIC nations. So lets call Brazil what it is right now, a corrupt nation with extreme wealth differences. They will continue to export a bit depending on supply demand but they will not emerge a player until they address their internal problems. India has nothing really to offer except cheap labour which is quickly becoming offset by automation and technology gains. Plus their focus will become what to do with an extra 500 million people coming in 20 years. Russia will be isolated and cut off and only dictators and 3rd world nations will do business there.

So just leaves China which is on course for some major hurt, the first will be financial as they get a lessen in modern economics. A solely export driven construction based economy with enormous debt and a huge unregulated shadow economy is doomed eventually. Construction is double what it is in the west and consumer spending is 1/3. Add to that amazing gains in technology and automation that is rendering their cheap labour obsolete and you can see how it ends.


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## sags (May 15, 2010)

Some Canadian bubbles have already started to deflate............potash (world oversupply)...............grain prices (huge projected US harvest)..........some real estate. (Victoria BC.....Saskatchewan farmland)

Oil...........is a difficult one to predict. Canada has lots of it to develop, but it is becoming increasingly more expensive and debt dependent to do so. The lack of pipeline transport is also going to inhibit the expansion of Canadian oil and gas.

Fracking in the US has already had a big impact. The US will become a net exporter in the next year. But fracking is not without it's own problems.

In areas of high fracking concentration, Oklahoma for example.........the incident rate of earthquakes has increased dramatically. Scientists don't know exactly what is going on............but they know something is happening and it isn't good.

On the investment side........fracked wells are very expensive and short term. The degradation of the wells begins almost immediately, and many of the small companies that are drilling are gorging on debt. They borrow to drill a well.............with a debt repayment schedule...........and the well caps out before the debt is completely paid off. They borrow more and move on to the next well. Their debt is starting to mount and investors are becoming reluctant to continue to invest or lend for new projects by companies that already have large debt loads.

The bottom line...........the US fracking economy may grind to a sudden halt if overburdened by past debt........and that would be good news for Canada.

Canadian housing prices, are I believe the most dangerous of the bubbles.

It isn't simply the loss of equity and what that would involve (cancelled HELOC for example), but the related construction, real estate, and housing retail business sectors that would be affected.

Retailers in Canada are already experiencing trouble.......as demonstrated by all the layoffs and store closings.

Overall...........Canada is bouncing along..........but things can change in a hurry.

As an example of how fast things can change...........

We inherited some farm land in Saskatchewan years ago, but it took until January 2014 to get the property in our name. We put it up for sale and eventually sold it........but had we sold it last year in 2013, we would have received 30% more for the land. The price of land changed suddenly and dramatically........when the railroad couldn't haul the grain. Farmers didn't receive payment, stopped buying land, and the price fell immediately. There were many more sellers than buyers.

So in a matter of a few months we lost 30% of the value of the land.

The same scenario is happening in Ontario right now, with the fall of corn prices. It isn't nearly as dramatic......but it has been reported as a downward pressure on land prices.

That is how fast it can happen.

I think single family homeowners will mostly be okay.......depending on their location.

But, for those people who bought $500,000 condos in a concrete apartment building..........good luck to them when 20 other people in the same building list their condos for sale. If any of the units at all sell.........it will be the ones with the highest end finishing touches........exotic hardwood, gourmet kitchens etc.


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## tygrus (Mar 13, 2012)

I think there are also a LOT of people who haven't seen a real downturn, aka like 1982 or 1990. In 2000, when the tech bubble burst, that only affected a small percentage of people invested in it. The rest never even noticed. In 2008, In Canada at least, hardly anyone noticed when the TSX dropped in half, because only about 15% of the population is invested in it, and govt stimulus made it short lived anyway. 

But a broader break in the long term demand-supply curve in a number of industries could be devastating and many people will not survive it with their extended debt loads.


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## fraser (May 15, 2010)

I happen to agree with you. Our economy has been in transition for some time. The latest employment numbers appear to indicate that Canada has recovered the 'easy' jobs-jobs where there was capacity and where workers were needed. The disturbing picture is that the number of manufacturing jobs in Ontario is now at the same level that they were in 1976 (and this is only because we do not have reliable numbers going back any further). This is a disaster. Quebec cannot be much better.

This does not say a lot for the Federal of Provincial governments efforts to really stimulate the economy. Other than resource sector suppliers there does not appear to be very much capital investment-either in plant or in technology/equipment to enhance productively. This is counter to what is currently transpiring in the US. It is, IMHO a very dangerous situation for Canada. Add in an inflated housing market in some markets with the US Fed and the UK looking at increasing interest rates within the next six months and Canada will have an even larger problem.

The Harper Gov't keeps blowing smoke up our skirts and whispering good things about the economy. I think that we are entering a stage now where the performance of our economy will be below that of some other G7 countries. There are some good things but I fear that the recession/downturn has increased the speed of the transition and the Government is doing little or nothing to address this shift.


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## tygrus (Mar 13, 2012)

I don't want to use that phrase its different this time, but I think it really is this time, and not in a good way. We are training our young people for an economy that existed last century or sending them into tech which eats itself every two years or is easily automated with great disruption to that labour segment.

We are also telling them to get a big house and go into huge debt and all will be well when they are 70.


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## Just a Guy (Mar 27, 2012)

Personally, I think canada is too large and diverse to have the entire place suffer all at once. I do think there will be a downturn, but I think the west will suffer a lot less than the east...with places like Alberta returning to a "normal" level at worst...of course they'll complain about suffering, but nowhere near the levels of the east.

I could see real estate dropping more than 50% without blinking...especially if interest rates increase. Foreclosures will be rampant as people can't afford the payment increases this will bring. Unions will demand pay increases so their members can "afford to keep their houses", strikes will become prevalent, government will print more money to try and fix the problem, and it will just spiral out of control...

The eventual result from wanting everything today, with no fiscal sense.


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## fatcat (Nov 11, 2009)

pick a country, with all its problems, where you want to live from this list:

canada, usa, uk, france, spain, portugal, ireland, norway, denmark, australia, singapore

pick form all the first world ... they are all facing huge problems, australia is hitched to china, singapore is crowded and expensive, norway and denmark have big problems with housing affordability and especially assimilation of immigrants, the uk is slowly devolving into a crypto-fascist state, france has a huge immigrant problem of unassimilated immigrants, the usa has crumbling infrastructure unaffordable healthcare and a shrinking middle clas and a huge immigrant problem

canada strikes me as one of the better choices of the lot, and the fact is, housing prices are slowly correcting exactly as we want them too bit people are willing to pay more up here because we have a very good set of pluses to offset the minuses

show me anywhere in the world with a decent standard of living the isn't facing huge challenges


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## donald (Apr 18, 2011)

Amen fatcat,there is no such thing as 'perfect' the economy like life cycles,always things that could be better.....challenges are part of everything past/present and future
when has north america or canada or whatever country we are talking about ever been problem free?answer:never.just like life itself...challenges/change is what is normal not some notion of perfect problem free....essence of life.


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## kaleb0 (Apr 26, 2011)

As someone who professionally develops automation software, I think alot of people will be taken by complete surprise by how disruptive automation technologies can be. I think efficiencies enabled by the advancement and adoption of technology/automation is, and will continue to be one of the primary drags on job creation for the next decade or more.
Too many people naively say 'you can never replace a human doing x job with a machine' but I think people will be blindsided when it actually happens to many of those very jobs. Never say never.
For an extreme but very relevant example, look at Google's self-driving car technology, and other autonomous navigation technologies like autonomous drones. Consider the huge potential implications of this technology displacing truck drivers, bus drivers, parcel delivery, etc. Is the technology viable yet? Not quite, but it will get there, it's only a matter of time.


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## tygrus (Mar 13, 2012)

kaleb0 said:


> As someone who professionally develops automation software, I think alot of people will be taken by complete surprise by how disruptive automation technologies can be.


Remember in the late 1990s the biggest tech business was basically building web pages. Everyone and their dog had a web page building business. Now just 20 years later a lot of that is gone and now your grandma can build a webpage from automated tools in an afternoon.

Also whats stunning is that they used to say, people prefer dealing with other people, even if a machine can do the job. I find its totally the opposite. People would rather not deal with another person. As long as the technology is fairly sound, they prefer a machine to do it. 

So deal with tuned out know nothing grumpy sales clerk, or just press click on Amazon. I know which I would choose.


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## alingva (Aug 17, 2013)

Just a Guy said:


> I do think there will be a downturn, but I think the west will suffer a lot less than the east...with places like Alberta returning to a "normal" level at worst...of course they'll complain about suffering, but nowhere near the levels of the east.


 AB does not produce anything except of oil. If or when its price goes down - AB can suffer much more than people expect. I work in the financial industry in AB. NOBODY can even imagine that prices of real estate can go down 5% (I am talking about people i deal with). It is just insane. I lived thru 2000 bubble but even then there were people who told it was a bubble. 
But if price of oil goes to $150+ AB will suffer too because to extract oil you need oil and if prices go up your expenses go up too.


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## Just a Guy (Mar 27, 2012)

Don't tell that to the farmers and forestry industry...quite a bit of mining as well, though the oil guys would have you believe they are the only game in town.


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## DayTek (Sep 26, 2013)

I was adamant that BoC would increase interest rates next year, but I'm not so sure any more. BoC is practically begging people to dig themselves out of debt - It ain't happening. I started working in the financial sector in 2005, so I've watched this fiasco from the beginning; People are more apathetic to debt than ever...Using LOCs to take trips and do home renos without considering they may not have a job the next week to make the interest payments alone.

I'm trying to keep positive about Canada's economy (as an Ontarian, that's a challenge). I try to be a "expect the best, prepare for the worst" kind of person - That goes for my perspective financially as well. I have a $30,000+ LOC sitting at $0 and an emergency savings. We haven't been on a major trip or made any large purchases in 3 years. My husband is in manufacturing and is trying to get out after experiencing several layoffs in the last few years. Whatever happens, we'll just keep grinding away at the mortgage and pumping up savings, sitting soundly knowing we've put ourselves in a position to survive if things turn sour...The difficult part would be watching most of our family members and friends figure out what to do


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## KaeJS (Sep 28, 2010)

Just a Guy said:


> I could see real estate dropping more than 50% without blinking...especially if interest rates increase.
> The eventual result from wanting everything today, with no fiscal sense.


I really don't understand why people feel the housing market is going to burst.

Is it a bubble? Maybe a little. But the fact is that people are still buying and affording these houses and there is no shortage of immigration. 

Housing is not going to drop by 50%. If anything, it will just remain flat.


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## KaeJS (Sep 28, 2010)

alingva said:


> But if price of oil goes to $150+ AB will suffer too because to extract oil you need oil and if prices go up your expenses go up too.


How does this make sense?

Oil goes up. You sell oil for more. It costs more to produce that oil. 

Seems like a 45 degree line chart to me...


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## tygrus (Mar 13, 2012)

KaeJS said:


> I really don't understand why people feel the housing market is going to burst.
> 
> Is it a bubble? Maybe a little. But the fact is that people are still buying and affording these houses and there is no shortage of immigration.


KJS, you have bought into the realtor association line. Housing tied to two things, interest rates and wages, nothing else.

Now ask yourself will interest rates stay at 3% for another decade? No, because a decade ago they were in the 4.75% range so they will definately move another couple points higher. Now look at your town and tell me about all the super high wage earners moving in there or your neighbors who got a huge raise increase. Its all an illusion. Its built on lax lending standards, low rates and marketing debt to younger people who typically don't buy until their 30s. 

This thing is over and done and cooked and a 30% drop is in the works and a lot of people will be ruined by it. You can take that to the bank.


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## Eclectic12 (Oct 20, 2010)

tygrus said:


> ... In 2000, when the tech bubble burst, that only affected a small percentage of people invested in it. The rest never even noticed...


Odd ... from your point of view, XIU going from $17+ down to $9+ in twelve months was a "tech" situation that only affected a small percentage of people?

Many of those paying attention and complaining about the drop had no idea how to invest in a tech stock. They were also looking at their mutual funds, most of which were not tech dominated.




tygrus said:


> ... In 2008, In Canada at least, hardly anyone noticed when the TSX dropped in half, because only about 15% of the population is invested in it, and govt stimulus made it short lived anyway...


So most of the population *and* their pension funds were smart enough to get out of the TSX before it fell? If so, why are people saying they have to delay their retirement *because* of the 2008/2009 drop?

Then too, people I know were selling in late 2008 as they felt they couldn't afford more "losses".


I find these numbers and viewpoint highly doubtful.



Cheers


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## Just a Guy (Mar 27, 2012)

KaeJS said:


> I really don't understand why people feel the housing market is going to burst.
> 
> Is it a bubble? Maybe a little. But the fact is that people are still buying and affording these houses and there is no shortage of immigration.
> 
> Housing is not going to drop by 50%. If anything, it will just remain flat.


KaeJS, 

Simple mathematics...

Most people think real estate is priced high but, due to low interest rates, they can still (barely) afford to buy homes. So they buy their home at 350-500k and lock in at 3% for 5 years and they can make their payments. 

Fast forward five years, interest rates could not go any lower, so the government decides to slowly raise the rates maybe 0.5%/year...nothing serious. Time for the mortgage to be renewed...interest rates are now 5.5%.

Monthly mortgage payment for a $350k house is now nearly an *extra* $850/month...on the $500k house they are looking at nearly $1250/month more. I don't know to many people who can handle that kind of a payment increase, so they try to sell...

Of course, all their neighbours are also in the same boat as mortgages come up for renewal, so the market is flooded with houses, and no one is buying because they can't afford the monthly payments...foreclosures will become common.

That is why prices will drop if interest rates rise.


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## RBull (Jan 20, 2013)

I just read this thread and got to the post by Eclectic 12 ready to comment along the same lines.

Tygrus, I don't follow the part where you're saying "government stimulus made it short lived". The TSX has just now got back to the former 2008 levels.

I know many people that were negatively affected by the 2008 correction and changed their retirement dates and/or retirement lifestyle expectations, as a result.


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## BigMFfan (Feb 23, 2013)

Just a Guy said:


> Monthly mortgage payment for a $350k house is now nearly an *extra* $850/month...on the $500k house they are looking at nearly $1250/month more. I don't know to many people who can handle that kind of a payment increase, so they try to sell...
> 
> Of course, *all their neighbours are also in the same boat* as mortgages come up for renewal, so the market is flooded with houses, and no one is buying because they can't afford the monthly payments...foreclosures will become common.
> 
> That is why prices will drop if interest rates rise.


I'm curious, but what percentage of all homeowners do you think have purchased their homes in the last couple of years?


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## Just a Guy (Mar 27, 2012)

Average Canadian moves every 7 years, there are about 13.5 million households in Canada...statistically speaking, probably a lot more than you realize.


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## protomok (Jul 9, 2012)

Just a Guy said:


> KaeJS,
> Of course, all their neighbours are also in the same boat as mortgages come up for renewal, so the market is flooded with houses, and no one is buying because they can't afford the monthly payments...foreclosures will become common.
> 
> That is why prices will drop if interest rates rise.


Yes, house prices will likely take a hit when interest rates rise. But I am not sure that prices are going to plunge 30 or 40% like some are predicting. For example, suppose condo prices drop 20% in Toronto and Vancouver, these are some of the most multicultural cities in the world, imagine how many folks from other countries will be lining up to take advantage of these discounts...and from economies that are rapidly growing.

This IMO is an important difference between the U.S housing crash and a potential Canadian Real Estate correction. The Chinese were not lining up to buy bungalows in Oklahoma, but if a housing correction happened in Canada I think we could see massive amounts of foreign money injected into our real estate market.

I could be wrong, but I see something more like a flat real estate market or a <20% correction.


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## HaroldCrump (Jun 10, 2009)

tygrus said:


> This thing is over and done and cooked and a 30% drop is in the works and a lot of people will be ruined by it. You can take that to the bank.


Are you willing to put your money where your mouth is?
If you truly believe that, you should short the 6 major Canadian bank stocks right now, as well as other home mortgage lenders/originators such as HCG, FN, etc.

Regardless, a 30% drop in residential housing market within a short period of time will devastate the Canadian economy.
This is not the US where the central bank can inject $3 Trillion within 3 years to drive bond yields down by several % points.

Unless you work for the government, your job will probably be at risk too.
Be careful what you wish for.

Governments & central bankers past and present have hooked the Canadian economy to the R/E market like a drug, and now it is impossible to withdraw.


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## Just a Guy (Mar 27, 2012)

In Vancouver, foreign buyers may not be too eager to buy houses on land they do not own. The native land claim case and land leases could play a big role in in vancouver's future.


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## donald (Apr 18, 2011)

I also tend to think vancouver is somewhat insulated.
No matter what is happening in the canadian economy the chinese and iranians(saudi oil money)come her/there so they can give their children/family a better life(political)people around the world realize how great our country is!(maybe the best country on planet earth for a host of reasons)
Keep in mind that canadian real estate is CHEAPER still than hong kong and the like!
wealthy foreigner want to be here and a million or 2 for housing to a lot of them is peanuts.
vancouver/new york/paris/london(maybe toronto to a lesser degree)are the worlds best cities(there are over 7 billion people on earth,only 34 million or so are canadian)


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## Just a Guy (Mar 27, 2012)

Canada is also a lot larger than two cities.

I've been buying places that are 50-60% below their selling price from 3 years ago in come of those other cities for the past year...so it is happening to a small extent already.


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## donald (Apr 18, 2011)

I don't think 'us' average joe's(a typical canadian trying to save a million dollars or whatever in there lifetime)realize how wealthy some of these people are.
To ALOT of these foreigner's a couple million is nothing(these are not the people that are reading millionaire next door books or listen to dave ramsey.


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## Eclectic12 (Oct 20, 2010)

donald said:


> I also tend to think vancouver is somewhat insulated...
> Keep in mind that canadian real estate is CHEAPER still than hong kong and the like!


Then too, there are people like my cousin who prefer the climate compared to Oshawa ... so it's hard to gauge as there is a demand there, over and above the rest of the country.




donald said:


> I don't think 'us' average joe's(a typical canadian trying to save a million dollars or whatever in there lifetime)realize how wealthy some of these people are.


Those who read a lot ... have a bit of an idea.

I can recall an article around the 2000's where that cited the estimate from the previous year that Asians were expected to buy $1 billion in Toronto real estate. The article highlighted that this estimate had been surpassed in four months.

There was also an article interviewing an Asian buyer of multiple properties. She said the sixty million she was working with was a trial amount. If it all worked out, she was next in line to take charge of the much larger family holdings.


Cheers


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## KaeJS (Sep 28, 2010)

tygrus said:


> KJS, you have bought into the realtor association line. Housing tied to two things, interest rates and wages, nothing else.
> 
> Now ask yourself will interest rates stay at 3% for another decade?


tygrus, I know that interest rates will not stay at 3% for another decade. In fact, they won't even stay there for probably another 2 years. But, I don't think this is going to cause prices to decline. I think it will cause prices to be flat, as immigration is a huge factor and people will find ways to pay for their home. Spend less, get a second job, stop buying that "new car", etc.



Just a Guy said:


> KaeJS,
> 
> Simple mathematics...
> 
> ...


Simple mathematics?

$350,000 over a 25 year Amortization at 3% Fixed is $1656.36/month.

$350,000 over a 25 year Amortization at 5.5% Fixed is $2136.37/month.

This is a difference of $480.01/month. Your simple mathematics are incorrect.

The difference on a $500k home with the same terms is $685.73/month. None of my calculations factor in any down payments, extra payments or typical equity increases through payments. However, even $350k amortized at 20 years at 5.5% would be a difference of $739.01/month. That's not considering any pay down in principal.

I am not disagreeing that the increase in rates and the slow wage increases (if any) will hurt homeowners. It definitely will. In fact, it will even hurt me when I renew my mortgage in 3 years from now. But to be honest, I don't see it being a problem, but more of an inconvenience. It just means (for myself) that I will have to cut down on the beer consumption and either pick up a second job, carpool to work, or get a job closer to home. Maybe I will have to increase the rent for my tenants a little.

I think that most homeowners will be able to pull through. The interest rates are not going to skyrocket. It will be a slow process which gives those people without any financial sense to catch themselves up with reality.

Just a Guy, as a personal example:

My mortgage payments are currently $222.18/week. I am at 2.99% and my original mortgage loan amount was $188,000 over 25 years. My weekly mortgage payments are $222.18.

Doing a calculation of what the perceived loan amount would be in the next 3 years ($150,000) when it is time to renew, at a rate of 5.5% fixed, my weekly payment would be $256.65. This is a monthly difference of $149.37.

Easily affordable, especially since I have 3 years to prepare.


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## Just a Guy (Mar 27, 2012)

Most people can barely make their minimum payments as it stands, they don't have tenants, and have no way to make up an extra $500 after tax. They don't make extra payments, they put the minimum down, they refinance to "pay off" their credit cards, they buy the most house they can afford. We're not talking about CMF people here, we're talking the typical Canadian.

Heck, I've bought a number of properties over the last year, I'm not worried about any of them, nor the others I already own...but I'm not a typical Canadian. 

I'm buying foreclosures, in major cities, which have decreased in value more than 50% over the last 3-5 years. There aren't a lot on the market so far, but there were *none* a few years ago. Saying it can't, or won't happen because it's not happening to you doesn't mean it's not going to happen, especially when it's already starting.

The real collapse of the USA market probably had more to do with the fact that most people couldn't refinance their property before the balloon payments kicked in...they couldn't handle the interest rate increase to their payment...well in Canada we don't have balloon payments, but we face the same issues when renewal time comes...


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## KaeJS (Sep 28, 2010)

I think most people are stupid - don't get me wrong.

But I think when it comes down to losing their house, people will be a little bit more organized. Also, you can't disregard that foreign investment probably will not have this problem. Either way, the only way to know for sure is to let time run it's course. I think the market will just stay flat for a number of years (maybe even a decade). It seems to be a reasonable scenario to me considering that wages will also probably be stagnant for that same period of time.

Just a Guy, for people like you and I, a correction would be a good thing. We could sit on property and buy bank stocks at 50% off. :biggrin:


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## Just a Guy (Mar 27, 2012)

I'd probably buy more houses...while I own bank stocks which I bought in 2008, it only makes me a small amount compared to the real estate which I can finance 100% and make huge profits on. I'm averaging $75k/door which generate an average of $1050 each. I expect a downturn would allow me to have my pick of the market...and I'm young enough to benefit from the eventual recovery.


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## kaleb0 (Apr 26, 2011)

*Humans need not appy*

I saw this video on youtube which I thought is an incredible look at the automation dilemma. Pretty much every sector of the economy can be automated, even the creative and professional classes. Worth the 15 minutes to watch


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## Nemo2 (Mar 1, 2012)

kaleb0 said:


> Worth the 15 minutes to watch


Definitely! +1


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## Just a Guy (Mar 27, 2012)

Has anyone ever looked up the original definition of computer? One may be a little surprised to lean that no electronics were involved...

http://en.m.wikipedia.org/wiki/Human_computer

When the first mechanical computers were invented, millions of jobs eventually ended...

The assembly line likewise had a similar effect.

Not only that, but the world population has increased by a huge amount since all theses jobs disappeared.

As for jobs like lawyers, they got it confused with legal assistants...very few lawyers write anything, nor do they go through papers...they hire peons. True, these jobs can be replaced, but if you search for "heavy oil" on google (a good example of computer automation, you can get results ranging from the oil industry to Mexican deep fried recipes. In law, where you look for subtle variations, it usually takes a human to understand the vague subtleties which can make or break a case. True, the vast amount of work could be done by a computer, but the human element is still important. And that doesn't even get into all the new lawsuits which will open up due to computer mistakes...

I don't disagree that automation is coming, nor that it won't have significant changes...but Wall Street still has a lot of people employed despite a automation...so do old industries such as auto manufacturing which have been undergoing automation for nearly 100 years...

Then again, I'm hoping my kids turn out to be good investors so they won't have to work.

By the way, I know people who are into horses...it's a big industry from what I can see, and I'd love to be a horse today...maybe give your owner a ride once or twice a week and the rest of the time eat...a lot better life than their ancestors had.


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## sags (May 15, 2010)

There will be a point in time, where the negative consequences of automation will halt it's implementation.

It won't be that further advances couldn't be developed............but that further advances would do more harm than good.


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## andrewf (Mar 1, 2010)

I don't know why automation would be bad in itself. Worst case, the government can pay some people to dig ditches and other people to fill them in again.

More likely, we'll start to see basic income type schemes be implemented and expanded, funded by taxes on capital and resources/land.


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## cainvest (May 1, 2013)

IMO that video was stretching things a fair bit as it went on. Sure automation will make an impact but I think it'll take much more time than that video is leading us to believe. Though I'm not up on the latest research, in the self driving cars example I can't see that tech being commonly used for decades unless significant dedicated infrastructure is put in place to support it. Now given that we can't seem to keep a large number of our roads in good shape, some areas better than others of course, do you think making the roads more expensive to maintain will work ... likely not. Now having some automation corridors on major routes may work, might even improve traffic flow in some areas or allow some automated distribution trucks/cars to operate 24/7, a more likely first step I'd imagine. In any case, I like many types of automation and look forward to seeing more of this technology, of course this is a given for me, as it's also my job.


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## james4beach (Nov 15, 2012)

KaeJS said:


> I think most people are stupid - don't get me wrong.


In my working years, I've heard this a lot and it's usually come from people who greatly over-estimate their own intelligence.

The people who are _actually_ very smart tend to not go around telling others how smart they are.

Remember, being smart or stupid isn't just about analytical thinking and math. That's only like 10% of the equation... perhaps less. True intelligence also involves emotional intelligence, the ability to interact with people, be persuasive, be practical, have street smarts, know how to stay out of trouble, know how to forge and maintain good relationship, know how to look after your health, know how to be happy, etc.


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## lightcycle (Mar 24, 2012)

james4beach said:


> The people who are _actually_ very smart tend to not go around telling others how smart they are.


I've heard this a lot, but I don't believe it for a second.

Modesty (a form of etiquette) and intelligence are not linked in anyway. What drives a person to have to prove they are the smartest person in the room are personality quirks that can't be suppressed or overcome by just being smart. 

I've seen it time and time again in working environments by Alpha Geeks who nobody likes being around because they rub their knowledge and intelligence in everyone's face in the most condescending way. These people exist, but just tend to be outnumbered by those who *think* they are smart but aren't and have no qualms telling it to the rest of the world, thus propagating the "smart but don't have to advertise it" trope.


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## carverman (Nov 8, 2010)

tygrus said:


> I am betting that the US is on the cusp of a fairly major resurgence and we are just seeing some of the volatility ahead of it. At the same time, there are a number of nations I feel could be entering something akin to what the US has already gone through, Canada being one of them.


I've had this feeling for a long time that we are in for major changes in the next 5-10 years. The US economy seems to be running on empty, they owe more money (18 trillion now), than they have ever owed in their history, and that has to eventually have some impact on the US gov't. A lot of the jobs that their labour force depended on (manufacturing/high tech) has been exported to other countries.

Dan Arnold, don't know if he is a financial doom&gloom soothsayer or just a nutbar/chicken little that is predicting "THE GREAT BUST AHEAD", but you have to wonder with the current indicators what is going to happen next. 
http://thegreatbustahead.com/


The low interest rates are stimulating the housing market, but what happens if the interest rates start to rise rapidly and on the next renewal term..the mortgage payments on that house that couples buy now (at cheaper mortgage rates) rise to the point that the mortgage rates are not affordable to them. Will they sell in a panic
and many like them, causing the housing market to collapse? Who knows? 



> Canada is bubble all over the place, especially housing. Prick any one of those and we drift down pretty fast.





> Australia will follow Canada, maybe even worse so because they bet all their horses on China.
> Middle east will be in flames for a long time. With less oil revenue or alternate economy, these places become incredibly shaky.


No body can predict what will happen in China's overheated economy. They keep it a secret. 
The Middle east?
we haven't been able to count on those countries for decades on anything now..
except the Arab oil exported to the US..which keeps their economies booming right now..until the world prices start to drop.

The big question is..will the world economy, so dependent on oil (currently US $97 per barrel)..start to falter when the price of a barrel hits $120? Gas is already around $1.38 a litre, what happens when the price goes up
to $1.50 a litre or even more...will drivers be willing to pay that amount )$6 a US gallon) and what happens to
prices if the gasoline and other oil dependent manufactured products go up..up..up as well?
http://zfacts.com/p/196.html





> So just leaves China which is on course for some major hurt, the first will be financial as they get a lessen in modern economics. A solely export driven construction based economy with enormous debt and a huge unregulated shadow economy is doomed eventually. Construction is double what it is in the west and consumer spending is 1/3. Add to that amazing gains in technology and automation that is rendering their cheap labour obsolete and you can see how it ends.


China is certainly in a building boom, with the influx of manufacturing from other countries that prefer to have
their goods made their due to cheaper labour costs..but if the demand for big screen Tvs and iphones etc,
drops off....what happens to their factories and factory workers?


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## carverman (Nov 8, 2010)

Just a Guy said:


> Fast forward five years, interest rates could not go any lower, so the government decides to slowly raise the rates maybe 0.5%/year...nothing serious. Time for the mortgage to be renewed...interest rates are now 5.5%.
> 
> *Monthly mortgage payment for a $350k house is now nearly an extra $850/month...on the $500k house they are looking at nearly $1250/month more.* I don't know to many people who can handle that kind of a payment increase, so they try to sell...
> 
> That is why prices will drop if interest rates rise.


Historically, this has already happened in Toronto (and maybe Vancouver I believe), sometime around the 80s.
I remember those times, when interest rates went very high (around 8% I think), and people that bought homes in Toronto at much lower interest rates and hardly any down payment (on marginal finances before the jump in
interest rates), had to renew their mortgage term at the much higher rate than they were prepared to pay. 
In some cases, the monthly mortgage payments practically doubled .

There was also a recession, in Ontario in those days, and employers as in many recessions started to cut staff to maintain profitably, due to high interest for commercial borrowing rates.

This was not good news for any home buyers already saddled with big mortgages and debt, many decided to default (just couldn't afford the homes) and walk away..which had the result of too many houses on the market due to bank power of sale and that dropped property prices dramatically.


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## Just a Guy (Mar 27, 2012)

There is a reason I think investors should study history...I remember the 80's when mortgage rates hit 21%. Coupled with a downturn in the economy. I wasn't in the market back then, but I remember it...unlike the generation today which hasn't seen a rate above 5%.


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## tygrus (Mar 13, 2012)

KJS, I want to offer you a stark example of the housing bubble in Canada. 

Start with Vancouver. Vancouver and Seattle are identical cities in every respect, yet in Seattle you can buy a house for 1/3 of the value. You could live in seattle and spend the other money commuting to Vancouver every day.

Next is Toronto. The sales claim is that its becoming a modern urban world destination and a cosmopolitan center. Thats nice, and its a nice city, but better than London or Paris or NY. Nope. 

Calgary, extreme rising prices based totally on oil exuberance. The reality hasn`t hit that place yet that there is a glut of product and a lot of what Canada has got is going to stay in the ground due to pipeline politics and climate change.

I live on the Prairies so I have experience with whats happening here in Regina and Saskatoon. Prices have tripled based on what exactly. Yes, the economy is doing ok, but we don`t have hordes of big paying jobs here. Most are in the service or construction sector. Sask is still the one trick resource pony it has always been and those prices will come sliding down when that all hits the fan. Some one on the street next to me built a 5 million dollar house in Regina. If you had 5 million would you build in Regina. Not me.

Its done. The only debate is where the top was and how fast the slide is.


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## tygrus (Mar 13, 2012)

sags said:


> There will be a point in time, where the negative consequences of automation will halt it's implementation.
> 
> It won't be that further advances couldn't be developed............but that further advances would do more harm than good.


sags, thats not going to happen. Companies will continue to push down this path no matter what, even if they unknowingly put themselves out of business. And I don`t want to see human progress stopped because of antiqued wealth transfer mechanisms. The capitalism of the this centur won`t work in the next.


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## tygrus (Mar 13, 2012)

Regarding automation and tech, people are really in the dark about whats coming at them.

Lets get some real numbers about the impacts.

Right now we are at 7 billion people. All estimates point to another 2 billion being added in the next generation and most of those will not know what a job even is. On top of that, the demographic 65+ and 85+ is growing, probably going to be a billion of them around and a lot of them in underdevelped countries.

Now add on that estimate that 2 billion jobs will be obsolete or replaced by tech in 20 years. 

So you now have more than 50% functionally unemployed on the planet. 2 billion new youth unemployable, 2 billion former workers displaced, 1 billion too old to work or even be hired and struggling to live on dwindling resources and govt programs that are insolvent.


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## Just a Guy (Mar 27, 2012)

I think you're assuming that nothing new gets created, let's look at a little history...

In 1900, during the height of the industrial revolution, the world population was under 2 billion...automation went wild (cutting out entire professions) over the next 100 years, as well as world population (7.5 billion). Yet world unemployment is nowhere near 25% (extrapolating just from a 3.5x growth in population, forget about the job elimination).

Not all the people today are employed in "high level jobs", there were no baristas in the 1900s for example, and there probably won't be in 2100, but there will be other jobs.


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## cainvest (May 1, 2013)

tygrus said:


> Now add on that estimate that 2 billion jobs will be obsolete or replaced by tech in 20 years.


How can you estimate that 2 billion jobs will be lost (and not replaced by other jobs) in 20 years?


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## tygrus (Mar 13, 2012)

JG, yes there will be new jobs we cant even think of created. I give you that, but nowhere near enough and of the type to solve that kind of unemployment.

Technology is on an ever increasing exponential path, while jobs are often destroyed fast and then `recreated` in fits and starts like we have seen in the past 5-7 years. Eventually they drastically diverge and this is the start of that trend.

Even a lot of companies are whistling in the dark. Once something like 3D printing becomes mainstream, major industries like manufacturing, transport and retail will be shaken.


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## tygrus (Mar 13, 2012)

cainvest said:


> How can you estimate that 2 billion jobs will be lost (and not replaced by other jobs) in 20 years?


Two well researched studies came out at the end of 2013 which quoted these kinds of numbers of job losses. 

The replacement jobs they identified were things like social media engineer etc and said that a new creative class (i.e. amateur artists) would emerge. I am not putting a lot of faith in those new jobs.

There are also a ton of `old dogs` in the workforce. People who have been able to keep their jobs while tech rose beside them all while making no effort to learn or adopt it. Their thinking is, `I am 15 years to retirement, I don`t have to retrain` Don`t be surprised when tech obsoletes them 10 years shy of their retirement goal. And somebody who is replaced by technology usually just gets a lower paying job and then complains. Did you see auto assembly line workers getting retrained to robotics engineers. Nope. Once someone is steamrolled by tech or offshoring or some other circumstance, they don`t retain, they join the ranks of disgruntled.


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## Just a Guy (Mar 27, 2012)

We've had injection moulding for decades which has changed manufacturing...

In reality, how many items are made from one material, or even a handful? 

3D printing will have an impact, but it's not like you'll print off a pair of skates, a car, a computer, or even a ball...heck even to print off a metal screw probably won't be cost effective. 

New technologies don't always replace, sometimes they compliment.


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## carverman (Nov 8, 2010)

Just a Guy said:


> There is a reason I think investors should study history...I remember the 80's when mortgage rates hit 21%. Coupled with a downturn in the economy. I wasn't in the market back then, but I remember it...unlike the generation today which hasn't seen a rate above 5%.


That was certainly a bizarre time in our financial history. 
I remember gold soaring and so did silver bullion..around the early 80's, when the Hunt Bros
tried to corner that market, then almost overnight the silver market collapsed and it went way way down.

Before that I bought some 1 oz gold wafers and 1 oz silver wafers as an investment from my local branch and kept it thinking it would continue to rise like it has in the past few years before the 80s from around $26 an ounce in the
late 60s. Iit went up a bit from the price I bought it at, but after the silver market collapsed, (practically overnight due to panic selling), those silver 1 oz bars that I paid $10+ a piece fell down to about $4 on the precious metals
market. 
I sold off the gold wafers, didn't really make anything on them, but fortunately, at least I didn't lose like I did on the silver wafers.. Thankfully I only bought 10 or 12 of both gold and silver wafers, them, so I figure I lost about $60-$80 dollars on the silver. I kept them and gave them away at Christmas time in the family's stockings.

Wasn' t worth going to the bank with them.

I got out of gold bullion then and never returned to buy any more..too volatile back then, but the world economies were a lot different 35 years ago...as they are now.


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## carverman (Nov 8, 2010)

Just a Guy said:


> 7
> *3D printing will have an impact, but it's not like you'll print off a pair of skates, a car, a computer, or even a ball.*..heck even to print off a metal screw probably won't be cost effective.
> 
> New technologies don't always replace, sometimes they compliment.


3D printing is a novelty tecbnolgy.and why do they call it "printing" when in fact it is 3D fabricating of "one offs" or prototypes.
No way it would be cost effect for mass production. Too slow.


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## Just a Guy (Mar 27, 2012)

They said the same thing about home computers...remember the Altair? I assume they'll get better...

Being in real estate I tend to look several decades down the road with investing...


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## tygrus (Mar 13, 2012)

Just a Guy said:


> In reality, how many items are made from one material, or even a handful?


JG, do a little googling on it. Clothes, concrete, houses, cars are all on tap. Carbon composites are poised to replace a lot of metal and that will be printed too. Its as disruptive as the discovery of oil was 150 years ago.

Watch that doc again that was posted. It didn`t say tech has to be perfect, it only has to be as good as a person. That baxter robot is slow and simple but it works 24-7 on pennies an hour and never needs a break or gets sick or wants a raise. Compared with a person, its efficiency over time scale is enormous.

Apple has been making its stuff in china for 20 years. Last year, it repatriated its MacPro factory to the USA. But very few employees were hired, but a lot of robots were bought.

https://www.youtube.com/watch?v=IbWOQWw1wkM


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## carverman (Nov 8, 2010)

tygrus said:


> R
> Right now we are at 7 billion people. All estimates point to another 2 billion being added in the next generation and most of those will not know what a job even is. On top of that, the demographic 65+ and 85+ is growing, probably going to be a billion of them around and a lot of them in underdeveloped countries.


Yes the 65 year plus "baby boomer segment" is growing, and as we age, our requirements for products diminishes.certainly once we get to our 80s..even if some of us don't make it to that age. This was what Dan Arnold says in "the great bust ahead"..whether it will materialize as he is predicting (and nobody can predict that far ahead), one thing for sure..the largest market segment right now are the pre-boomers, (50 to 65) that have not retired yet andhave biggest spending potential.

The younger generation is deeper in debt than ever before , and the next generation, still in school, not knowing where the jobs will be... may be in trouble. Look at the influx of TFW at McD's and elsewhere.



> Now add on that estimate that 2 billion jobs will be obsolete or replaced by tech in 20 years.


Technology is already replacing the human factor on assembly. Look at the huge investment in robotics for car and motorcycle assembly and other things. The days of union workers drawing big hourly wages and collecting DB pensions are over. Practically all employers out there are shifting/converting to part time workers rather than RFTs..lots of change starting in the workplace.



> So you now have more than 50% functionally unemployed on the planet. *2 billion new youth unemployable, 2 billion former workers displaced*, 1 billion too old to work or even be hired and struggling to live on dwindling resources and govt programs that are insolvent.


Certainly with billions of workers displaced due to technology,automation or workplace evolution, there will be retraining for more IT types and at the same time..more opportunity for cyber crimes....you think cyber crime and scamming is already on the rise?..wait for another 10-20 years!


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## tygrus (Mar 13, 2012)

carverman said:


> No way it would be cost effect for mass production. Too slow.


Carver, thats what you are missing. The mass production model is dying, customization is the future and one offs work perfectly for that.

And the amount of resources that will be saved will be enormous. Less energy into transport and much less waste. Instead of throwing things out, it will be melted down and reprinted and repurposed.

But the biggest impact will be on our economic model. Things will get dirt cheap, but at the same time the divergence of the 1% will be off the scale. Right now, this group owns the factors of production and financial assets and they employ the rest of us. In the future, they will own more of the factors of production and contribute a miniscule tax to your guaranteed liveable income benefit as administer by the govt.


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## carverman (Nov 8, 2010)

Just a Guy said:


> They said the same thing about home computers..*.remember the Altair*? I assume they'll get better...
> 
> Being in real estate I tend to look several decades down the road with investing...


Yes, I remember the Altair..That was in the early 70s, when the first processor microchip was available. I don't think it was the Intel 8080 either..something less than that..a 4 bit processor that computed in microseconds rather than nanosecs.
However to get from the Intel 4004 to the powerful Pentiums and Quad processor technology took..about 50 years and a multi billion dollar investment from the semiconductor industry, because there was a growing need for better and faster computers...most now are 64 bit data processors.

I remember years ago, a Data General mini computers reading punched paper tape for the ABL (absolute binary loader-bootstrap loader), and and 1 instruction took 1.2 microsecs to complete..that's why Data General called it a Nova 1200. (1200 Nano sec cycle time and 4 bits at that per cycle). 

Not saying that 3D tech isn't a viable technology in the future..but right now..its still in its infancy and could even be considered a novelty technology right now..but who know what will happen in 25 years or more. I remember the first cell phones in the 70s..big bulky and expensive, only sales people had them then. All you could do was to make a voice call on them,..now 40 years+ later...kids can stream TV and movies on them and with all the apps available, there is no telling what the next generation of Iphones or Tablets will bring us.


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## carverman (Nov 8, 2010)

tygrus said:


> Carver, thats what you are missing. The mass production model is dying, customization is the future and one offs work perfectly for that.
> 
> And the amount of resources that will be saved will be enormous. Less energy into transport and much less waste. Instead of throwing things out, it will be melted down and reprinted and repurposed.
> 
> But the biggest impact will be on our economic model. T*hings will get dirt cheap, but at the same time the divergence of the 1% will be off the scale. * Right now, this group owns the factors of production and financial assets and they employ the rest of us. In the future, they will own more of the factors of production and *contribute a miniscule tax to your guaranteed liveable income benefit as administer by the govt*.



In our disposalable society, we first need to overcome the basic requirement for that to happen:
1. Has to be cheaper than goods made in China.
2. Has to be usable for more than a few operations
3. Gov't need to stop medding with industry and give them free reign, not like today where companies are taxed to death and
prefer to send their mass production off shore and import the finished product..with no overhead.


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## RBull (Jan 20, 2013)

tygrus said:


> Two well researched studies came out at the end of 2013 which quoted these kinds of numbers of job losses.
> 
> The replacement jobs they identified were things like social media engineer etc and said that a new creative class (i.e. amateur artists) would emerge. I am not putting a lot of faith in those new jobs.
> 
> There are also a ton of `old dogs` in the workforce. People who have been able to keep their jobs while tech rose beside them all while making no effort to learn or adopt it. Their thinking is, `I am 15 years to retirement, I don`t have to retrain` Don`t be surprised when tech obsoletes them 10 years shy of their retirement goal. And somebody who is replaced by technology usually just gets a lower paying job and then complains. Did you see auto assembly line workers getting retrained to robotics engineers. Nope. *Once someone is steamrolled by tech or offshoring or some other circumstance, they don`t retain, they join the ranks of disgruntled.*


You're taking an extreme viewpoint. Some do yes, some don't. I speak from my own experience - working 22 years of my career in an industry that is shrinking and on the way out. My job was eliminated a few years before the co shut down and I had planned to work another 7 years approx. I didn't join the disgruntled and neither did almost any of my colleagues. Just complaining doesn't get much done. I started my own company and most others found good jobs as their skills were largely transferable.....almost all in provincial government.


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## cainvest (May 1, 2013)

tygrus said:


> Two well researched studies came out at the end of 2013 which quoted these kinds of numbers of job losses.
> 
> The replacement jobs they identified were things like social media engineer etc and said that a new creative class (i.e. amateur artists) would emerge. I am not putting a lot of faith in those new jobs.


Well researched or not, peoples ability for forecasting the future is less than stellar. 



tygrus said:


> Watch that doc again that was posted. It didn`t say tech has to be perfect, it only has to be as good as a person.


Yes it has to be "at least" as good as a person ... it also needs to maintain that in all driving conditions, good luck with that.  There is also the added cost of these new automated drivers ... how much will that be? In other words, would a typical consumer pay 100-500% more for the same car that has automated driving?



tygrus said:


> That baxter robot is slow and simple but it works 24-7 on pennies an hour and never needs a break or gets sick or wants a raise. Compared with a person, its efficiency over time scale is enormous.


Lets look at the other side ... robots cost a lot of money and require a capital outlay up front. Robots also do get sick, as in they need repairs and mantenance over time. Sometimes these pay off over time, especially when speed is concerned with specific repeated operations but not always. 

One thing that will slow automation, at least for smart/sudo-AI types, is computer speeds are not really increasing like they were in the past. Sure they're adding parallel computational power, which can be a benefit, but that's not the same.


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## tygrus (Mar 13, 2012)

cainvest said:


> Lets look at the other side ... robots cost a lot of money and require a capital outlay up front. Robots also do get sick, as in they need repairs and mantenance over time. Sometimes these pay off over time, especially when speed is concerned with specific repeated operations but not always.


From what I understand, the economics on something like baxter are clear cut. Cost about the same as a chinese workers annual salary and then works for pennies a day after that. Has a 3 year life. 

The efficiencies of robots are proven for more than 30 years. Its just that now they can walk up to the assembly line and do learn your job too.


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## sags (May 15, 2010)

The government of the day, will pass stiff "technology taxes" on corporations that employ technology that eliminate jobs.

The financial disincentive will be large enough, that although technology is available.........nobody will use it.

Redistribution of wealth is a simple process.........but the negative affects aren't as simple.

Paying people not to work.........creates a huge disincentive for those required to keep society functioning.

The military, police force, fire department, hospitals, government, old age homes...(and endless list) .........

If half the population was paid not to work,...........the other half isn't going to want to work.


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## cainvest (May 1, 2013)

tygrus said:


> From what I understand, the economics on something like baxter are clear cut. Cost about the same as a chinese workers annual salary and then works for pennies a day after that. Has a 3 year life.
> 
> The efficiencies of robots are proven for more than 30 years. Its just that now they can walk up to the assembly line and do learn your job too.


If that is indeed the case we should be seeing baxters everywhere shortly and many other robotic companies producing the same type of robot in competition because sales are so high. Are we seeing that now?

And of course you know baxter can't walk right?


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