Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Canada Debt Crisis, Economic Meltdown, Why the ECB Cares

Economics / Canada Jan 31, 2014 - 03:23 PM GMT

By: David_Hague

Economics

Dear Reader, you probably said to yourself that the premise of this article is absurd and preposterous. Canada is a paragon of fiscal responsibility. It is a bastion of good governance in a confused world of financial instability. It is a shining beacon of democracy, the envy of the world. I would have agreed with you until I received a very disturbing early morning phone call from Gustavo Laframboise-Pierre, the Director of Statistical Creation, at the European Central Bank [ECB]. My relationship with Gustavo LaFramboise-Pierre went back many years. He had been my bookie since 1980 when I began my career in the investment industry. His life took a significant turn for the better when a senior member of the European Central Bank [ECB] bet large and incorrectly on the outcome of the 2010 World Cup. The only way the senior member of the ECB could settle the debt was to offer Gustavo a high paying sinecure at the ECB. Overnight, Gustavo found himself living in Paris, with the responsibility of fabricating fictional statistics to support whatever policies were being propagated by the world's central banks.


Whether the need of the Central Banks was to convince Main Street that 'Perpetual Money Printing was a valid monetary policy or inveigle the world to continue to surmise that Japan, with a national debt more than twice the size of its economy is anything but a failed nation state, Gustavo creates a veritable blizzard of data that purports to support whatever alternate reality bankers desire the public to believe. His prowess at inventing new words such as 'tapering', ring fencing, and 'Euro Stability' made him invaluable. Gustavo's almost sociopathic desire to enrich himself personally outweighed any qualms he might have felt about perpetuating a fraud on the entire world. Hence he excelled at his job. His performance even had some very influential people encouraging him to consider politics. Gustavo clearly had the 'Right Stuff' to be a leader.

Why would the ECB care about Canada?

Gustavo sounded desperate, "David I need your help, I have just been handed a top secret report that expresses deep concern about Canada's financial stability. The report indicates that Canada could default on its debt and trigger a global meltdown in the world's debt markets". I laughed and asked Gustavo how much wine he had consumed with breakfast." He was not amused. "I am serious David; this report indicates that Canada is on the edge of the abyss and ready to step off. I need you to do some research for me and help disprove this report." Gustavo, why does the ECB care about Canada, isn't that a little out of the ECB's purview. Shouldn't you be worrying about Germany, Greece, Italy, Spain, Cyprus and France?" "David, if Canada's economy has a meltdown and its debt becomes a problem, it will trigger a domino effect around the world. Canada's meltdown would be catastrophic to the global debt markets. Europe would be dragged into the abyss".

Standard consultants fee of $10, 000 [USD] per day to a maximum of $500,000"

I thought he was being preposterous but as a consultant to governments and their agencies I had a keen eye and I saw an opportunity to make some money. I sounded sincere and indicated that I agreed that it was an important issue that merited analysis. I enquired delicately on the subject of remuneration. Gustavo was quick to respond. "We will pay you the standard consultants fee of $10, 000 [USD] per day to a maximum of $500,000". [I always found it amusing that the ECB insisted in doing business in USD. Did they know something we do not know?] Gustavo continued, "As usual I expect you to hire my sister and my son as your assistants and pay them each $2,500 per day." I groaned, Gustavo always did this to me.

Game on

His son was 4 years old and had already accumulated enough money from these types of contracts to put himself through Harvard Medical School. His only contribution would take place if a client wanted the report done in crayon or finger painted. However that still left $5,000 a day for me so it was 'game on'.

The crack of noon

Gustavo, this project will be difficult and time consuming but I will squeeze it in to my busy schedule. I hung up and got ready to work. I went out my front door and took my neighbor's recently delivered copy of the Globe and Mail, Canada's National Newspaper, so that I could begin my research. Dear Reader I was not stealing the newspaper from my neighbor. My neighbor was a Member of Parliament. He never awoke until the 'crack of noon'; I would return the newspaper long before then. I sat down at the kitchen table, prepared my breakfast, [cold pizza left over from a party I had last week end], poured some coffee in my glass of whisky, [Jack Daniels, of course] and opened the newspaper to begin my research. Dear Reader we can, I am sure, all agree that in order for a country to step over the edge and into the abyss of the debt crisis six key elements must exist as a precondition to economic disaster.

Six preconditions for disaster

  1. A dysfunctional and inefficient government
  2. Huge government debt and deficits
  3. High household debt level
  4. A bubble formation in the real estate market
  5. A state of denial must exist in the country
  6. Corruption must be pervasive throughout all levels of government

This was going to be the easiest $500,000 [less expense] I ever made. Canada is the world's leader in good governance and efficiency. Everyone knows this fact except the anarchists at the ECB that produced the report that had Gustavo so upset.

Prorogation, there is a word you do not see very often

However I got a little queasy when I read the first headline in the Globe and Mail, Canada's national. The gist of the headline was that Ontario's unelected Premier was considering calling an election to legitimize the Liberal party's hold on power. This curious circumstance was enabled by a little known aspect of Canada's laws. In Canada, governments are allowed to suspend democracy at their leisure by using something called prorogation. Prorogation of Parliament, is usually activated by a ruling party when the 'scandal du jour' is proving to be too intense. In Ontario democracy was temporarily suspended in 2013. A new premier was appointed by the ruling party without consulting the electorate. Only now, is Ontario's unelected Premier considering scheduling a pesky and tedious election to see what the opinion of Main Street might be on this issue. Prorogation is an abuse of power. Prorogation should not be confused with Pierogi, [which as we all know is a tasty dumpling.] Prorogation of Parliament is a procedure to discontinue the meetings of a legislative body without dissolving it. This would be akin to a publicly traded company shutting down its head office for 6 or 7 months to avoid explaining disappointing financial results. Ontario is Canada's largest province. It owes 280 billion dollars, and its deficits are out of control. It is currently being lead by an unelected Premier. Prorogation helped the ruling party in Ontario avoid difficult questions about corruption. The federal government was so impressed they decided to suspend democracy for a period of time by prorogation to avoid any oversight on their own corruption problems. Fortunately for both levels of government the outrage one would expect from the people did not occur as Canada's 'Main Street' was transfixed' by the chaos in Toronto, Canada's largest city. Like Ontario, Toronto is now governed by an unelected leader. The elected mayor had his powers suspended after, well it's hard to describe, Dear Reader just Google Mayor of Toronto and any one of the following terms, 'crack cocaine', 'drunken stupor, 'rant video,' 'Jamaican patois obscenities,' 'drug lords' 'disgusting sexual innuendo' 'viral videos, and 'drunk driving'. Any one of these searches will, I am sure describe adequately, the dysfunctional state of democracy in Toronto.

Fortress Quebec

Thank goodness this was not happening in Quebec, Canada's second largest province, whose debt issues are even worse than Ontario's. Oh wait Dear Reader methinks I spoke too soon. Quebec's only issue is that, like Spain's reluctant province of Catalonia, Quebec's government has separation as its main objective. To achieve this goal, Quebec's government is pursuing an agenda that involves suspending the "Freedom of Religion" currently enjoyed by its citizens. It has introduced legislation deceptively called, the Charter of Values . This legislation will ensure discrimination against individuals who have religious beliefs. This legislation is an attempt to secure primacy for the 'pure laine' of Quebec, by encouraging anyone who is not 'pure laine' to leave the province. The separatist Quebec government is attempting to secure 'Fortress Quebec' prior to the next attempt at separating from Canada.

By capable I mean not currently in jail

There is an understanding in Quebec that one must move quickly. Quebec's Charbonneau Commission, tasked with investigating government corruption is discovering abuse of power on such a massive scale that one wonders if there will be anyone left capable [By capable, I mean not currently indicted or not currently in jail] of governing the province. At least Quebec will not need to worry about Canada's Senate interfering. Canada's Senate, the people's unelected body of sober second thought, tasked with the responsibly of protecting the people's interest is currently the subject of myriad investigations relating to corruption, abuse of power, fraud, theft, stupidity and hubris.

How do you spell boondoggle?

I then googled boondoggles over a billion dollars in Canada and came up with a startling number of hits. Gun registry, E-health cards, energy plants, G-20 summit, Pan Am Games and I realized maybe Gustavo had a reason to be concerned. OK, so Canada's governments are dysfunctional, corrupt and inefficient. One precondition met and five to go.

That was quick

Dear Reader I did not need to do any research on the second precondition, huge debts and deficits. By now we are all familiar with the global debt clock. Canada's accumulated debt, when one considers provincial debt as well, is almost two trillion dollars and rising. Two preconditions for disaster achieved and four preconditions to go.

I owe I owe, It is off to work I go

I was no longer queasy I was distinctly dizzy. I reached for my cold pizza and took a long sip from the bottle of Jack Daniels as I viewed the next article. It related to the third precondition required for a country's economic meltdown, high household debt. Canadian's debt soars into the danger zone screamed the headline. Canadian's household indebtedness is now worse than our American cousins debt level was just before they jumped off the subprime cliff and into the abyss. Canadians it seems have a very, dare I say it, American appetite for debt. In December 2013 Canada's household debt reached a new record. The third item on our list, hopeless amounts of household debt, had been achieved. I placed a thick check mark beside it on my list.

Why are bubbles easier to identify after they burst?

I dipped my pizza in my whisky and turned to the next page. Surely there was some good news. Yikes, I thought as I looked at the next headline. Canada's real estate market has been fantastic for the last few years. Prices have soared. There is no way that Canada's real estate market could be a bubble that would soon burst. However the research and comments from Deutsche Bank stating that Canada's real estate market was overvalued by as much as 60% was shocking. There clearly is trouble in paradise.

I could make Gustavo's son work for his fee

Canada's real estate market was showing all the signs of a classic bubble ready to burst. It also occurred to me that I could actually make Gustavo's son work for his portion of the fee. He could use his crayons and draw me a nice picture of a bubble bursting for my report. In any event, I put a checkmark beside the fourth precondition, a classic real estate bubble formation.

Don't tell me I am in denial, I refuse to believe you

Gustavo's sister, a psychiatrist in Ireland might help me with the fifth precondition for Canada's economic Waterloo. 'Denial' is a very complicated issue. It is the reason that so many diseases and disorders are not treated. In order to get better one must first recognize the problem. If my AA meetings taught me anything it is that you must recognize the problem before you can fix it. Imagine my consternation when I read the next headline. Canada's debt problem, the numbers just do not add up . Canada's debt [almost 2 trillion dollars] when one considers the additional burden of provincial debt is actually one of the most appalling realities in the world. Like governments around the world the Canadian government will proclaim to all and sundry that the problem will be solved within the next ten years.

You want your banker to laugh.

Dear Reader should you wish to amuse your banker, try telling your banker not to worry about all the money you owe them because you have a ten year plan, not to reduce the debt, but to simply stop adding to your debt at the end of 10 years. You can increase the volume of your bankers hysterical laughter by indicating that the cornerstone of your plan is to increase your income by 30% each year by, well, really, let us be honest, like most governments plans to solve its debt problem, your plan is just a dream, similar to Canada's debt reduction plan.

My most recent AA meeting

My emotions as I read the article reminded me of the reaction of the audience at my most recent AA meeting when I announced that I had reduced my alcohol consumption by 10%. No words were said, but it was clear that everyone in the room was saddened, worried and disappointed with my declaration. Unfortunately denial is still the main component of Canada's economic strategy. [Dear Reader I appreciate your concern, it is possible that I have my own denial issues to resolve'] However I had to admit that fifth precondition for a country preparing to cross the 'Debt Rubicon' had been met. Denial was alive and well in Canada.

The Big Owe

Prior to my research I would never have believed that Canada had challenges with corruption. However, and I am not clear whether these items should fall under the category, as previously discussed of dysfunctional government or in their own separate category. I knew now that corruption was not just an inconvenient truth; it was permeating the fabric of Canada's democracy. From the senate scandals, the corruption inquiries on Quebec, to the abuse of power oozing though countless government boondoggles it is clear that Canada is "in trouble plenty." Government overspending and corruption has existed in Canada for years. Even Canada's smallest province, Prince Edward Island is trying to see how far it can go in denying its citizens 'Freedom of Information' There is a reason Canada, in addition to inventing the term 'Eh' [pronounced 'A'] also invented the term 'the Big Owe' a reference to the 'Mother of all Corrupt Boondoggles', the multibillion dollar construction and collapse [well sort of a collapse] of Montreal's Olympic Stadium. [The Big Owe]

Ka-ching, significant paydays would be coming my way

While I was now thoroughly saddened by the fact that sixth and final precondition for a country's sudden economic tailspin had been met. I must admit I was also a little excited. It was times like these that governments reach out to consultants for thoughtful research, analysis, and recommendations. I sensed there would be some significant paydays coming my way. I looked at my watch. I had been hard at work for almost an hour. My only challenge now would be to delay submission of my report for 49 days so that Gustavo's sister, his son and I could collect the full $500,000 fee.

Wasting away in Margaritaville

I called Gustavo, he was almost incoherent. The luncheon he indicated I was interrupting was clearly taking place in the town made legendary, by a song extolling its virtues. Margaritaville is a popular destination for many bankers. He was quite drunk. "Gustavo, I just want to clarify something. If I do this research and find out that your internal report is actually correct will I still be paid?" Gustavo, angry at being interrupted in the middle of his luncheon said, "David, if your analysis supports the findings of our internal report and indicates that Canada is quite possibly going to implode and drag Europe and the rest of the world along with it, you will not receive a penny. Are we clear?" Crystal clear, I thought to myself, I can handle the truth. Gustavo screamed into the phone in exasperation, "We want an honest, in depth analysis that concludes that Canada is great shape and that there is no cause for alarm. Now stop bothering me and 'Just do it'". As Gustavo had not seen the inside of gym in 20 years I found his reference to the Nike slogan amusing.

I am a consultant not an idiot

Dear Reader, I am a consultant not an idiot. I must ask that you disregard and forget everything you have just read. I am putting the finishing touches on my report, that much to Gustavo's delight will declare Canada as the world's most economically stable and well governed country. You must view some of the facts that you have just read as rare exceptions [no matter how many times these exceptions occur.] Furthermore you must not ask yourself the following question? If Canada is in such precarious shape how many other countries that are believed to be stable, are actually staring into the credit abyss.

Move along, nothing to see here

Please dear Reader, if anyone asks you about Canada's economic circumstances please just tell them to 'move along, nothing to see here, just keep moving.' I wiped the pizza crumbs off the newspaper, folded it neatly and returned it to my neighbor.

David Hague
Funny Business

David can be reached at davidhague@rogers.com

David has divided his time unequally for the last 30 years between the financial services, education, writing and comedy. He has spent time in financial services as an investment adviser, financial planner, sales trainer, corporate entertainer, and as a teacher of investment courses. He has also taught numerous financial courses. His work in comedy includes numerous corporate events and performances at comedy clubs. His background allows him to seamlessly move between the business world, higher education and the world of comedy and sometimes, to bring the two worlds together.

© 2014 Copyright David Hague - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules