Good on em.

My mortgage is due in 6 months. I may just venture into a Credit Union.

There is a good article in today's NY Times
which I think does a good job of explaining the reasons why our lumber industry is in a state of collapse. It is written by Stephen Roach, who is the Chairman of Morgan Stanley in Asia.

The following is from that article.

"The current recession has been set off by the simultaneous bursting of property and credit bubbles. The unwinding of these excesses is likely to exact a lasting toll on both homebuilders and American consumers."

"Over the past six years, income-short consumers made up for the weak increases in their paychecks by extracting equity from the housing bubble through cut-rate borrowing that was subsidized by the credit bubble. That game is now over."

"In the early 1990s, Japan’s property and stock market bubbles burst. That implosion was worsened by a banking crisis and excess corporate debt. Nearly 20 years later, Japan is still struggling.

There are eerie similarities between the United States now and Japan then. The Bank of Japan ran an excessively accommodative monetary policy for most of the 1980s. In the United States, the Federal Reserve did the same thing beginning in the late 1990s. In both cases, loose money fueled liquidity booms that led to major bubbles."

"In America, an excess of household indebtedness could put equally serious and lasting restrictions on consumer spending"

"The toughest, and potentially most relevant, lesson to take from Japan’s economy in the 1990s was that the interplay between financial and real economic bubbles causes serious damage. An equally lethal interplay between the bursting of housing and credit bubbles is now at work in the United States.

American authorities, especially Federal Reserve officials, harbor the mistaken belief that swift action can forestall a Japan-like collapse. The greater imperative is to avoid toxic asset bubbles in the first place."

If anyone wishes to read the entire article, the following is the link to it

http://www.nytimes.com/2008/03/05/opinion/05roach.html?ref=opinion

The link in my post doesn't always work. To access the article you can also try typing the following into Google,

"double bubble trouble"

In this world of Corporate greed, it is nice to see that the credit unions will help out the workers.

Interesting post charles!
There's that damn "debt/credit" monster again!

"In the early 1990s, Japan’s property and stock market bubbles burst. That implosion was worsened by a banking crisis and excess corporate debt. Nearly 20 years later, Japan is still struggling.

There are eerie similarities between the United States now and Japan then. The Bank of Japan ran an excessively accommodative monetary policy for most of the 1980s. In the United States, the Federal Reserve did the same thing beginning in the late 1990s. In both cases, loose money fueled liquidity booms that led to major bubbles."

This and the federal gov't's removal of transfer payments caused so much turmoil in BC in the 1990's.

In this world of 'corporate greed' the Credit Union has little choice. For why would it want to foreclose on houses that it might have a hard time selling for enough to cover what it's lent? Such a move, if it were widespread enough, could seriously impact the CU's 'security' on all its mortgage backed loans. And its future ability to operate.

The whole financial services industry has got itself in a bit of a mess. Most of the 'interest' it charges on the credit it creates as 'loans' goes into the form of a premium against the risk of default, since banking is highly akin to 'insurance' in that it involves the pooling and sharing of projected 'risk'.

(The other two components of 'interest' are the actual operating costs involved in banking itself, including a provision for profit; and a projected allowance for expected inflation over the life of the loan. Since the interest will be received over considerable 'time', and there is normally a decline in the purchasing power of the money received over that time against the ongoing costs it has to cover.)

Now they can't raise the interest rate to cover rising defaults without engendering still more defaults, or causing a further shortage of eligable borrowers.

And if they do as Japan did, (and the industrial and money system in Japan is somewhat different from what we have here in that there has always been a widespread use of personal and small business 'promissory notes' used and accepted internally as 'money' there), and lower the interest rate to zero, or below, (I believe Japan had a 'negative' interest rate briefly, to attempt to induce more corporate spending), a number of interesting questions are apt to be asked about the whole nature of banking and money and credit. Ones which the upper echelons of the banking world are most anxious NOT be asked.

Here is another interesting read about the forest industry.
It is good to see the 'Credit Unions' taking these measures as you can see from the article below..its a huge situation. We are facing.

10,000 forestry jobs gone in past year
Sawmills are shutting down across the province -- some sporadically, some for good. The situation isn't likely to improve any time soon
Gordon Hamilton, Vancouver Sun
Published: Saturday, March 01, 2008
Almost 10,000 British Columbia forest sector workers are out of jobs as sawmills respond to the collapse lumber demand in the U.S. by cutting production and sending people home.

From Fort Nelson to Vancouver Island, mills are closing their doors, cutting back on shifts, operating sporadically or implementing job-sharing to get their costs down. A Vancouver Sun survey of companies that have announced layoffs since January 2007 shows 34 mills are down either permanently or indefinitely. Twenty-three have curtailed shifts or introduced job-sharing. The cost in jobs lost, both permanent and temporary, has climbed to 9,597.

The shutdowns are often sporadic, with mills re-evaluating start-up week-by-week. But most companies say they see nothing on the horizon to encourage them to restart.


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Font:****Where shutdowns are long-term, such as the northern town of Mackenzie, where two sawmills and a related paper mill went down, workers are looking for direction, said Mayor Stephanie Killam. The jobless face tough choices: Either leave for Alberta or retrain for other sectors, which often means leaving the community.

Bill Derbyshire, president of the Williams Lake local of the United Steelworkers union, said because many of the shutdowns are intermittent, it's difficult for workers to decide to quit to enroll in retraining programs.

He expects workers will face periods of layoff into 2010.

"I think we are just seeing the tip of the iceberg right now," he said. "Companies can only be cost-effective so much. When you get to the point when the market is flooded with wood and it's not selling, you've got to do something."

Nobody is making money on commodity lumber right now, said Canfor Corp. president Jim Shepard.

"There's no doubt about it; when you've got an entire industry losing money -- and I mean hundreds of millions of dollars -- this is a critical situation," Shepard said in a conference call this week with financial analysts.

The industry is in the depths of what could be a two- to three-year downturn and the cash bleeding can only go on for so long. Some companies, like Pope & Talbot, which operated four sawmills and two pulp mills in B.C., have already gone broke. Others, like Canfor, are shedding workers by closing mills and cancelling shifts in a bid to preserve what cash they have during the lumber meltdown, the worst anyone in the industry can recall. Lumber prices collapsed in late 2006 and got worse throughout 2007.

The downturn began in late 2006 when U.S. housing starts, which had peaked at 2.1 million a year in the summer months, began to falter. Lumber prices tumbled in response as producers, who had ramped up production to meet the record demand, continued to pump unwanted wood into a shrinking market.

But problems deepened in 2007 when subprime mortgages -- loans given to buyers who would not qualify under traditional banking practices -- came up for renewal. Those buyers were stretched to the limit and many defaulted on their mortgages. The extent of the damage done to the U.S. housing market -- and the length of time it would take to recover -- became more evident. Mills in B.C. began cutting production.

By January this year, housing starts had dropped to one million and lumber demand in the U.S. had shrunk by 13 billion board feet, the equivalent of removing a year and a half of B.C.'s total U.S. sales from the U.S. market.

And the housing statistics industry executives monitor every day show no indication that this is the bottom. The most recent numbers from the U.S. show January new-home sales down 34 per cent year over year and down 2.8 per cent over December. Prices are down 15 per cent and new home inventories are up 10 per cent over December.

"We are bringing our costs down but the problem is the market is dropping faster than our ability to get our costs down," said Canfor's Shepard, explaining how Canfor lost $199 million in 2007. "This is a situation that I have never witnessed before and in speaking with my colleagues in the industry it's nothing they have witnessed either. We are dealing with a tsunami here."

Canfor alone has shed almost 1,000 jobs in the last year.

Most CEOs are expecting markets to remain depressed until mid- to late 2009. By then, the B.C. forest industry will be in the hands of fewer players, with the small, independent sawmills being devoured by larger, integrated companies, further concentrating the ownership of sawmills and timber tenures in fewer hands.

"Only those with very deep pockets can survive a significant downturn of two years or longer in duration," said John Elmsley, president of Prince George lumber company Winton Global, which is currently shut down.

He said large integrated companies are the ones most likely to survive. They are the ones likely to buy up the capacity and timber tenures of companies that can't withstand a two-year downturn, he said.

"It should come as no surprise to the people of B.C., but that is going to change the face of the industry in B.C. through rationalization. We will likely see larger integrated companies, less local ownership and less local autonomy."

The consolidation has already begun. Coastal lumber company Interfor strengthened its position in the Interior this year by buying two sawmills from insolvent Pope & Talbot. More recently, it joined with West Fraser Timber in picking up Weyerhaeuser Co.'s Kamloops forest licences when that company shut down its Kamloops sawmill.

Shepard expects Canfor to be one of the survivors. Financial statements show it ended 2007 with $295 million in cash. It is ready to pounce when opportunities arise to buy up competitors who have run out of cash.

"We want to be absolutely sure that we have money in the bank when opportunities arise," Shepard said in an interview.

"I think it will end up in consolidation and those companies that entered this storm with a decent bank balance and have prudently managed that bank balance through this period, hopefully, those ones will be able to come out of this with something left in the bank." he said.

But independent producers say the large integrated companies often have more going for them than fatter bank balances. Specifically, provincial forest policies, no matter how well intended, are tilting the balance in favour of some companies over others.

Tolko Industries and Winton Global say companies like Canfor and West Fraser have a government-approved two-month head start on a new way of lowering wood costs: warming the logs in kilns before they are scaled for value in order to better identify cracks and flaws that winter moisture disguises. It's a legitimate practice, but the head start given Canfor and West Fraser has created inequities.

The province now permits other companies to use the method. But the winter logging season is almost over and Canfor and West Fraser already have logs in their inventory graded as salvage logs that cost them only 25 cents a cubic metre. Similarly-flawed logs in their competitors' inventories could have cost $10 a cubic metre.

"There are some current policy issues that have created some inequities and tend to have more impact on the independent than on the integrated [sawmill-pulp-paper] sectors," said Mike Harkies, Tolko's general manager of southern Interior operations.

"The industry has been working hard with government to try to balance those inequities. But the time it sometimes takes to get them corrected can cause that [shutdown] threshold to be triggered sooner for an independent firm than an integrated firm. That is the case today."

And west along Highway 16, at Kitwanga, Mike Mitten, of Kitwanga Forest Products, said because of the way the stumpage system works, when one company pays less, other companies pay more to maintain a steady flow of provincial revenues. It's called the waterbed effect. A drop in stumpage in one sector is like pushing your finger down on a waterbed. The depression causes the water level -- the price of logs -- to rise everywhere else.

"There are a few things the government needs to address. One of them is the disparity in the stumpage structures. If somebody is paying a lower stumpage rate in the province, the government is looking to somebody else to pick up the slack. It's those of us who are still operating that keep seeing our stumpage going up," said Mitten.

Kitwanga is the last surviving sawmill in the province's northwest and having its stumpage rate climb makes survival all that much harder, he said.

"The market is affecting us like everybody else," Mitten said. "Through March we are going to play it week by week.

"Right now we are still buying logs so we are supporting the logging community as best we can and they are supporting us as best they can. Kitwanga is a very small community and we are the only operating sawmill in the entire region."

Kitwanga isn't the only company looking at its sales a week or two out and deciding whether to operate or not.

Tolko, the province's largest privately held forest company, is doing the same.

"We are playing it week by week. Every Friday we will make a call on the next week out," said Jim Baskerville, regional manager of Tolko's plywood operations.

Last week Tolko announced a two-week shutdown at its Okanagan plywood and veneer mills, sending 300 workers home. But the two weeks has already been extended to three. A second two-week shutdown at four sawmills begins Monday, affecting 1,100 workers. It's uncertain whether two weeks will be sufficient.

"What we have announced is a two-week curtailment that will be re-evaluated week by week depending on how the market is," said Rob Fraser, Tolko's general manager of Cariboo and Alberta operations. "Unfortunately the current economic conditions do not support the continued operations of our mills at their current levels."

Baskerville said it will take "a fundamental demand-driven correction in the marketplace," before plywood operations resume. The market right now is too over-supplied.

"It's like telling somebody 'I've got this wood to sell, will you buy it?' and the person says: 'Well, I don't need it, but if you really need to sell it, here's the price.' Those market dynamics just don't work."

ghamilton@png.canwest.com

AN INDUSTRY IN CRISIS

The map circles below detail 6,155 jobs lost to permanent, long-term and indefinite B.C. mill closures that The Vancouver Sun has identified since January of 2007. When you add the impact on loggers, wood re-manufacturers and losses due to shift reductions, total jobs affected in the province total almost 10,000.

NORTHERN INTERIOR

Fort Nelson: Canfor Polarboard OSB mill to close indefinitely this summer - 235 jobs

Fort St. James: Pope & Talbot (indefinite) - 272 jobs.

Stuart Lake Lumber (indefinite) - 100 jobs

Chetwynd: Canfor sawmill (indefinite) - 188 jobs

Terrace: West Fraser sawmill (indefinite) - 80 jobs

Mackenzie: AbitibiBowater 2 sawmills, 1 paper mill - 550 jobs

Prince George: Winton Global (indefinite) - 220 jobs

McBride: McBride Forest Industries veneer mill - 120 jobs

SOUTH COAST

Metro Vancouver:

Western Forest Products sawmill - 279 jobs

Fraser Pulp Chips - 45 jobs

Canfor Panel & Fibre - 126 jobs

Interfor sawmill - 110 jobs

Port Alberni: WFP planer (indefinite) - 21 jobs

Campbell River: TimberWest sawmill - 257 jobs

SOUTHERN INTERIOR

Williams Lake-100 Mile House: Tolko

Industries four sawmills (temporary) - 1,100 jobs

Kamloops: Weyerhaeuser sawmill - 196 jobs

Lytton: Lytton Lumber - 55 jobs

Canoe: Federated Co-Operatives (indefinite) - 160 jobs

Armstrong: Tolko plywood plant and veneer plant (temporary) - 300 jobs

Salmon Arm: Coe Newnes McGehee equipment supplier (indefinite) - 30 jobs

Enderby: North Okanagan Cedar - 28 jobs

Kelowna: Tolko Plywood Division - 151 jobs

OKANAGAN FALLS:

Weyerhaeuser sawmill - 224 jobs

TSW Laminating - 15 jobs

MIDWAY:

Pope & Talbot sawmill (indefinite) - 118 jobs

Midway Forest Products (indefinite) - 85 jobs

Grand Forks: Pope & Talbot sawmill (indefinite) - 288 jobs

Castelgar: Pope & Talbot sawmill (indefinite) - 362 jobs

CRANBROOK:

Tembec planer (until Oct.) - 40 jobs

Galloway Lumber (indefinite) - 150 jobs

Adams Lake: Interfor sawmill, being re-evaluated week by week - 250 jobs

SHIFT REDUCTIONS

- Feb. 15/08: West Fraser Timber's Pacific Inland Resources mill at Smithers curtails graveyard shift - 25 jobs

- Feb. 15/08: West Fraser Timber's 100 Mile House sawmill. Indefinite curtailment of graveyard shift - 51 jobs

- Feb. 1/08: Tembec reduces work week; implements work-share program at Elko, Canal Flats sawmills and Cranbrook fingerjoint mill - 400 workers lose a day a week, 80 job equivalents

- Jan. 10/07: West Fraser Timber's Houston sawmill indefinitely curtails graveyard shift - 70 workers

- Dec. 28/07: Springer Creek Forest Products, Slocan, cuts two shifts to one - 85 jobs

- Dec. 21/07: Fingerjoint manufacturer East Fraser Fiber indefinitely drops a shift at Mackenzie - 45 jobs, and in Quesnel, 8 jobs

- Dec. 5/07: Hampton Affiliates to cut production by 40 per cent for both Babine Forest Products and Decker Lake Forest Products at Burns Lake effective Jan 2. - 300 workers on three days, receive EI benefits 2 days a week; 120 job-equivalents

- Nov. 28/07: Canfor to move from three shifts to two at Rustad, Clear Lake, Polar, and Mackenzie sawmills - 300 jobs

- Oct. 25/07: Apollo Forest Products, Fort St. James sawmill on four-day work week, planer on 3-day work week indefinitely - 24 job equivalents

- Oct. 22/07: Tolko cuts from three shifts to two at Creekside Division, Williams Lake and Lavington Planer Division, Lavington - 75 jobs

- Sept. 04/07: Tolko to move from three to two shifts at Armstrong - 20 jobs

- July 27/07: Canfor to operate only one production facility at Mackenzie mill - 130 jobs

- July 6/07: Winton Global Prince George cuts from three shifts to two - 78 jobs

- June 15/07: Tembec to indefinitely shut down third shift at Elko sawmill, Cranbrook planer mill and second shift at Cranbrook fingerjoint. Most employees are relocated within the company - 21 jobs

- May 22/07: Tolko's Nicola Valley Division in Merritt moves from three shifts to two until market fundamentals improve - 22 jobs.

- January/07: Louisiana-Pacific curtails graveyard shift at its Golden plywood and laminated lumber plant - 75 jobs.

TOTAL: 1,229 jobs

THE IMPACT ON LOGGERS

A selected sampling in four communities where companies have failed or shut down sawmills shows:

- 650 loggers are expected to be out of work as a result of the Mackenzie and Fort Nelson mill closures.

- 500 loggers are out of work as a result of the failure of two major two contracting businesses in the Cowichan Valley.

- 250 loggers are out of work in the West Kootenay as a result of the Pope & Talbot insolvency.

Total: 1,400

WOOD RE-MANUFACTURERS

Layoffs, curtailed shifts and indefinite closures:

- Metro Vancouver: 34 companies, 356 jobs.

- Vanderhoof: one company closes. 90 jobs.

- Okanagan: eight companies, 119 jobs.

- Vancouver Island: 15 companies, 242 jobs.

- Kootenays: one company, six jobs.

Total: 59 companies, 813 jobs

TOTAL: 9,597 jobs

IMO this is fantastic news for all who have their mortgage with a credit union. It makes financial sense for a financial institution to keep the mortgage on its books rather than foreclosing. If they foreclose on a property in a community that has hundreds of properties for sale, they will not be able to sell and regain their money. It will be better for them to collect the interest only. Let the home owner look after the maintenance and insurance on the property. When good times return, which they will, then the regular mortgage payments continue.

Good on the credit unions. I've been a member for years and wouldn't change. They won't "DING" you either.

According to this article, people are going to need a lot more than a four month extension.

I wonder if they'd be willing to do the same for all those poor guys out there with logging trucks and equipment that isn't worth a dime anymore? There's no one that has the "deep pockets" that Sheppard was talking about....not to last that long!