When the Globe and Mail announced it was erecting a paywall around its web site two weeks ago, users went postal. The potential damage, a well-placed insider told me, could be incalculable. “There are unknown numbers of people we’ve pissed off forever. But what’s the choice?”


Postmedia, publisher of the National Post, is about to do the same. And the Toronto Star. But this is just the tip of a problem so big it’s unsolvable. Advertising revenues are in the dumpster – a big reason Sun Media laid off 500 people this week and closed two plants.

“Clearly this is a blow to journalism in Canada,” said the newspaper guild.

You don’t have to look far to find out why. Go visit a furniture store.

On Monday Leon’s said it will swallow The Brick in a friendly takeover. On Tuesday it announced flat sales and falling earnings, underscoring that the merger is a defence against the future. “The slowdown in the economy continues to affect our results and we do not see any immediate signs of improvement,” Leon’s said. “As such, we anticipate that consumer discretionary spending will remain soft for the balance of 2012.”

In a slow economy, you retrench, close stores, lose momentum and mindshare, and hope for the best. Or, you eat the competition, chasing enough new dollars to stay alive. With real estate chilling fast and families more concerned about monthly payments than new loveseats, doing nothing is a death sentence.

From fridges to reporters to paying for web content – it’s pretty much a straight line, running smack through real estate.

Of course, when a bunch of newspaper people are laid off or one giant furniture chain cannibalizes another, jobs die. Jobs are confidence. No confidence, no real estate market. No new homeowners, no GE Profile Side-by-Side refrigerators. No fridges, no furniture store. No store, no ads. No ads, no paper. No paper, no reporters.

This is what happens when you let an economy become more than 20% dependent on housing. Now that Canada has one of the highest home ownership rates in the world, and families have absorbed a record load of debt getting there, we’re amazingly dependent upon the fortunes of real estate. When equity falls, as it is about to, the so-called ‘wealth effect’ dissipates. First-time owners who got in with 5% down quickly go to zero. Families who felt rich and special because their homes doubled in value now doubt things. Boomers who planned on selling in three or four years to make up for a paucity of savings realize they may be hooped.

In other words, when 70% of people own the same thing, and it declines, we all have a problem.

This may be about to get a little worse, of course. Whatever may be left of the ‘fall market’ – traditionally the second-best time of the year for listings and offers – is about to be hurled off the American fiscal cliff.

As this pathetic blog has explained, if Republicans and Democrats in Washington don’t come to a deal, automatic spending cuts and tax hikes will trigger in six weeks. Economists expect this will lead to a US recession and jack unemployment back above 9%. Canadian exports will fall and so will jobs. Nobody needs this.

Already investors have retreated into the safety of bonds, driving prices up and yields down, while stock markets are skittish and dangly. Agents used to selling expensive mid-Toronto homes in just days to guys working on Bay Street are suddenly idle. In the space of one week since the presidential slugfest ended, the cliff issue has mushroomed.

While I fully expect a compromise deal to be reached, most Americans don’t. A new poll shows 51% predict a crash-landing, while just 38% agree with me. This loss of confidence is as injurious as any financial chasm. This means the two months ahead of us will unsettled and vexing, and could lead us into the kind of spring I’ve been flubbing about.


Well, remember what I said a year ago? Blessed are the liquid

avatarGarth Turner - The Greater Fool posted Tuesday, November 13th, 2012.

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