February mid-month round-up: Greece burns, Alberta gambles & Canada trades soul for Pandas

Well it would appear that China has finally found a spot to park it's unwanted USD. That would be here in good old Canada and all it cost them was leasing us two Pandas. What a deal! Back in 2011 I wrote a quick post about why Canada's economy is good, bad and bullshit. A key portion of this post was that China was dumping the USD - but one year later with multiple countries such as Russia, India, and Iran writing off the USD as well one has to wonder, who exactly is taking it? Well it would appear the answer is Canada.

Now not only are we trading resources to the U.S. for a devaluing USD, no no.. now we will accept them from China as well. Many people are probably looking at our new trade relations with China and say to themselves: "well thats good isn't it? We're diversifying from dependence on the U.S. economy" - but this isn't really the case. Whether we are receiving USD from China, or USD from the U.S. it is still USD which is directly tied to the health of the U.S. and global economy. So are we breaking our dependence on the U.S.? When it comes to the actual physical trade: yes. When it comes to the value we receive for what we trade: no.

Are you a big coffee drinker? Have you noticed anything happening to the price of coffee? How about other imported foods? If you are conscious about your grocery bill you will probably have noticed it's gone up quite a bit. This is a direct result of piggybacking the CAD off the USD. Many analysts now claim the CAD is directly tied to resources now. They indicate that when resources go up, the CAD goes up, and when resources go down, the CAD goes down. However, the target for comparison always happens to be the USD. You may notice that if the CAD does exceed the USD, it's not by very much and not for very long. This is because while resource prices influence our dollar, a 1:1 ratio with the USD at most (approximately) is essential not just for continuing trade with the U.S. but also to continue trade with any country who trades using USD. The number of countries is large, albeit dwindling. It is really a match made in heaven: MAny countries around the world are looking for a place to dump their USD and Canada's valuable resources are "open for business". As most of our politicians are heavily involved in the U.S. stock market, they also have a vested interest in keeping the USD alive, even if the cost of food and gas for you and your family becomes unaffordable. This is the new measure for economic health, this is why the Euro was rising even as Greece was burning. On paper accepting austerity is great, but in reality it is destroying what's left of their physical economy. You know; the economy that feeds people, not HFT.

On top of Canada's "everything must go" fire sale policy it appears that we also are in a bit of a huff about proposed changes to the U.S. banking system. The take away paragraph from this article is:

The source of concern is a new U.S. regulation meant to deter deposit-taking institutions that receive backstopping from Washington from engaging in speculative trading for their own—not their clients’—profit, a practice known as proprietary trading. Risky trades by global banking giants were central to the banking crisis that compelled former U.S. president George W. Bush to launch a $700-billion bailout of Wall Street in 2008.

Translation: our banks engage in the same practices as in the U.S.

It goes on further:

“I think the impact could be very, very negative,” said Canadian Bankers Association President Terry Campbell. “If you interfere with the ability of governments and corporations to fund themselves, if you interfere with liquidity in the marketplace, which is necessary for funding, then you could have a very severe impact on our economy.”

Translation: Governments and Corporations fund themselves using risky and sometimes fraudulent banking practices and if we try to change that now then our "financial stability" is put at risk. Canada's complaints about these changes should confirm for all Canadians that our banks ARE NOT anymore stable than the U.S. or European banks. When you combine this fact with a world that uses the USD and a U.S. whose financial system is mostly dependant on foreign countries providing goods for that USD it should be no surprise the Fed's crisis fund bailed out non-US banks including Canada's TD.

The crisis in Greece is a preview of what's to come for all countries that engage in these practices as their ponzi economies rely on ever-increasing returns while peak oil ensures returns will be ever diminishing. It is the shortfall between leveraged value and real wealth which has Canada concerned as without riskier and riskier ways to leverage funds: profits dry up. For proof of this look no further than Alberta's latest budget which depends on a predicted 40% increase in oil revenue to meet expenses and bring Alberta out of a deficit (yet again).

Alberta's entire budget is based on a "bet" and betting is a feature of gambling. So Alberta's budget isn't really a "budget" at all now is it? When I budget for the month, I do not assume that sometime during that month I'm going to win the lottery and I certainly do not factor my theoretical lottery winnings into my budget. After you win the lottery and have the money in your hand then it is safe to include that in your budget. Now of course the odds of predicting oil price are a lot better than winning the lottery, but the cost of failure is the same.

Back in 2008, no energy analysts and no economic experts predicted a drop in oil price from $147/barrel to $38/barrel. No experts predicted that there would be a scooter revolution due to the price of gas at the time. Alberta has spent the last decade convincing Albertan's the oilsands were making them rich and yet wheres the money? The sustainability fund has been drained, infrastructure is crumbling or 20 years behind, the heritage fund in leu of their olympic train, $25m rebranding effort, and $2B for carbon capture is hardly sufficient to account for all of the resources given away in Albertan's names. With the latest budget and Alberta's continued campaign to pretend it has more money than it does - I expect a repeat of the 2008 situation in Alberta within the next 2 years.

Remember, at $147/barrel - and with cheap credit everywhere - debt could not be sustained. This time around all of that cheap credit has been used up and I believe the ceiling on oil demand is a lot lower. There is no more debt people (Americans) can get into to subsidize their ever-increasing cost of living. If oil hits Albertas targets and without some external crisis (Iran), it's highly unlikely it will be sustained any longer than the time it takes for those price changes to show up in the cost of consumer goods.

Further Reading: The Federal Reserve's Explicit Goal: Devalue The Dollar 33%: Forbes

Reflections on Occupy / My experience with Occupy Edmonton

"We Will Lead Every Revolution Against Us" -- Theodor Herzl

It's unfortunate I have to write this post as I have been an avid supporter of the Occupy Wall Street movement before it even began in the United States. During the first week there was a media blackout at which point I told many people that "there is an occupation of Wall Street going on right now". "Yea right", they said "I would have heard about it on the news.". Before Occupy Wall Street even started I have been writing about it abstractly. So before you assume I am an Occupy hater, realize that to me this movement isn't a prime time fad.

Sure enough, a few days after this embarrassing act by the NYPD, Occupy gained internet fame:

At this point mainstream media had no choice but to report on the growing protests and in the U.S. a new symbol of hope for America's youth has risen to create a uniting front against corruption and fraud. Most of what you see on TV regarding the movement is heavily doctored to sway your opinion regarding it. Following the original livestreams is the only true way to know you are not being lied to during this trying time.

In the U.S. the media made a fatal mistake, they attempted to ignore the message instead of control it in hopes that the movement would get bored and go home. In the week the media was ignoring the protests, hundreds of thousands found out about it and instantly lost all trust in anything media was telling them. Control is essential in public relations. This failure has ensured the U.S. movement became a success.

In Canada, it seems media and government learned from the mistakes of the U.S. We decided to control the message right away, taking this power away from Occupy itself and giving a heads up to any "activists" who always seem to end up where the cameras are. Articles like this showed up 10 days in advance. In fact on October 2nd I made a note of it on Twitter:

 

 From this point on I decided to be cautious until I could confirm it's legitimacy as it was obvious that parts of this movement were not naturally occurring as they were in the U.S. In the U.S. the people did not need the mainstream media to tell them about the event to make it successful and here they were practically promoting it. This is a red flag.

Sure enough when I discovered that there would be an Occupy Edmonton, Mike Hudema's name (the Greenpeace mouthpiece) showed up as one of the organizers. About a year ago I contacted Mike Hudema about a possible interview regarding his views on peak oil, he never did respond. Suffice to say, I don't think he has any interest in representing this:

It looks more like he's interested in stuff like this. Greenpeace stuff, it looks like. I'd like to direct your attention to this article put out by CSIS. Does that sound like a government that wants to promote Anti-Globalization to you? How much have you heard about Anti-Globalization and banking fraud in relation to Occupy Edmonton? I'm not talking about "Ending Capitalism" here. I'm talking about addressing events like this:

Some of the world’s strongest banks have profited from an emergency credit facility set up by the US Federal Reserve to shore up confidence in the global financial system, according to a Financial Times analysis of data released by the Fed..

Rabobank of the Netherlands and Toronto-Dominion of Canada, two of the only banks in the world with triple A credit ratings, used more than $20 billion in cumulative Taf loans.

Ed Clark, TD chief executive, said that using Taf was logical even though his bank never had a liquidity problem. “That wasn’t how we made a lot of money. But you make a dollar here, you make a dollar there. What’s the spread you make on a billion dollars?” he said.

My bet would be little or none. 

I don't know much about the other two media moguls of Occupy Edmonton. Mike Thomas (who blogs at adhdcanuck.ca) seems to be your run-of-the-mill environment activist. I know even less about Chelsea Taylor. I don't watch TV, so I haven't really been keeping up with interviews.

On Tuesday, I went down during the day, while taking a moment from work (If you don't get it yet, Occupy isn't about hippies who don't want to work contrary to the opinions of the likes of Michael Moore, and the other camera whores that pretend to be "alternative". Hey Michael, if you love socialism so much why are your documentaries *pay only* unlike pressfortruth.ca which is pro-capitalism and puts theirs out for free?) and during my time there some Greenpeace activists were across the street from the Occupy camp. With my megaphone I told them they should come over and join us, in response they smiled but decided to stay across the street. I made a mental note that this was fairly strange considering the Greenpeace spokes-person on oilsands was just across the street. Red flag number 2.

I also happened to witness a certain conversation between Mike Thomas and another participant at Occupy Edmonton. I will not release this persons name on this blog as he is not recognizable via media. Mr. Thomas was worried about some routine security problems and required a "chief of security". He assigned this position to the participant I was having a conversation with and told him he could gather volunteers. I offered to be a volunteer but due to my schedule I never actually ended up participating in any "security services". He went on to mention that it would be confirmed at the general assembly that night and consensus on the new position would be taken, but that in the midterm the position was required until then. I could not remain at Occupy long enough to witness the General Assembly myself, so I cannot say if that happened or not. For the moment I thought nothing of it and continued enjoying the protest until I left.

Throughout history revolutions have happened a lot, and yet they usually end up in tragedy. Take Egypt for instance. Often a desperate population will latch on to anything that even resembles a leader in the hopes it will bring freedom, even if they don't have their best interests at heart. Hitler, the Russian revolution, the list goes on and on. A disenfranchised population combined with demoralization and copious amounts of propaganda can easily be manipulated into following a Napoleon into their own battle of Waterloo, and that is exactly what I feel is happening to Occupy Edmonton.

By the time I got home Tuesday, I had a direct message waiting for me on Twitter from one of my followers asking if I knew what was going on with some incident involving a chief of security banning representatives from kikkiplanet.com. This was the first I had heard of it, and I had only passing familiarity with the Kikki Planet blog. I replied that I would look into it further.

Now one thing Occupy has been doing (for the most part) is taking the moral high ground. It's why they are winning. It's why the LAPD has a twitter account dedicated to supporting Occupy. Truth and honesty always win, and since this movement revolves around corruption it is ever more important. While the system puts out failures, the people stand united and outraged yet courteous and honest. New York avoided eviction by cleaning the park better than the company hired to clean it had. That's how you win against these assholes. That's how you avoid public relations nightmares. While media and big business plays friendly towards Occupy, they are just waiting for that big PR fuck up that will make their day!

I put on my sleuthing hat and away we went. First I had to catch up on the situation, reading Twitter, Facebook, comments on articles. I then decided to contact KikkiPlanet and see if I could get more details. At this point I was simply interested in avoiding a PR disaster. Occupy has enough trouble gaining support in Edmonton it certainly didn't need this. After conversing with Kikkiplanet.com and determining I had enough background on the situation, I decided to write a letter to act as a Proposal for the Occupy Edmonton General Assembly by proxy. I had too much work to do to make it down in person so I left the delivery to someone I felt I could trust regarding the subject matter. Kikkiplanet.com had positively confirmed to me that the "security chief" in question was the participant I met earlier.

Here is the proposal I wrote:

Good Evening Occupy YEG,

  This is a proposal by proxy and thank you to the one reading it.

  It's come to my attention that there has been a somewhat hostile exchange
between Occupy and the blog Kikkiplanet.com. While I was not directly involved
in any of the exchange I decided of my own accord to try and mediate a peace.

Occupy is very important for myself, and all of it's participants. We will
face many struggles and proper representation of what we are, and what our
opinion is very important. I think we can all agree that no one opinion
represents this movement. I think we can also recognize that with no leaders
we all are responsible for the movement's actions.

I therefore propose to the GA that a formal apology is constructed by the
group for the ill-will Kikkiplanet.com has received. I'd ask our participants
to hold no ill-will towards any media, as I am confident that when they see
what we are really about they will be fair.

I believe in our movement, and that the GA can properly address this issue,
and all parties can move on and focus on the important problems in society.

Kikkiplanet.com has requested to me to relay that they wish to publish an
unedited version of tonight's GA baseline minutes. Please oblige.

@RichardFantin

I waited for word of the result.

A few hours later the person I had asked to deliver my proposal returned. They told me that they had delivered my proposal to someone named 'Rob' and he promised it would be read. During their time at Occupy Edmonton they had a chance to talk with Mike Thomas. They asked him about the exchange between Occupy Edmonton and KikkiPlanet. His reply was that the security chief position has never existed and that Occupy is being set up. I then confirmed this response with KikkiPlanet who had been told the same thing by Occupy Edmonton even though she sent them emails from the "security chief" in question which proclaim her to be banned. I have been forwarded all correspondence, it is authentic.

So there is now a cover-up underway. Occupy Edmonton was facing a small bump in terms of PR stemming from a negative blog post from Kikkiplanet.com seemingly based on misunderstanding. They are now facing failure. The person I sent down to Occupy told me they were shocked how many times Mike Thomas said "I'm in charge".

Charging into Waterloo.

*ADDENDUM*

I hope OccupyYeg can work past this issue and truly respect the spirit of Occupy. Here's a hint about what that spirit stands for (we're better than politicians, aren't we?):

Oh and this has nothing to do with my post, but here is a true hero:

Canada: A country in economic denial

Well the market since the S&P downgrade of U.S. debt has been a fun ride huh? Gold continues to set what seem like daily records while stocks are "only slightly higher than a decade ago". But all of these lightning fast developments have not shaken the faith Canadians (and in particular, Albertans) have in the positive outlook on the economy. Canadians still believe that the politicians we call leaders had "no idea" this was going to happen. We are a country in economic denial.

Psychologically it is no different than when a wealthy business man looses their job, their house, and will continue to dress in suits even though they live in a car. This is becoming commonplace amongst the U.S. population whose jobless outlook is bleaker by the day. It is indeed a psychological issue, and is quite prominent amongst our population too.

No one believed the titanic could sink either...

For instance, last week when I tweeted that I had successfully predicted the Bank of Canada interest rate dilemma i received an overly rude message from a fellow Albertan which said "Being essentially the smartest man alive, I'm sure you've turned all your nostradamus like predictions into millions ". This is a typical reaction from someone that is in denial, and finds the topics I write about truly frightening. So frightening that to effectively deal with them he must fantasize about nostradamus like "fortune tellers", which normally are quite crazy to put his mind at ease. For it is simply impossible that Canada is not in the pristine economic shape it has been claiming and anyone with evidence or opinions to the contrary must be crazy.

My prediction wasn't the work of nostradamus. It was a simple conclusion based on a trend being set by current events; the outcome was obvious and I explained briefly the logic to reach the conclusion. All it takes to make such a prediction is to stay current with events, and to think for yourself. The sender of this message obviously hasn't actually read anything I've written, otherwise he would be well aware that millions in fiat money is just what I have been saying it is. Worthless. Why would I want it? I write what I write because it is what I think, and I strongly *hope* that at least a few Albertans and Canadians were inspired to prepare for their futures from my words; that is all, not money, nor twitter followers. I personally don't care if you listen to me or not -- ultimately we are all in charge of our lives, but what we all have in common is that we are on the Canadian economic titanic together. It is your choice whether you want to believe this ship isn't sinkable or not, I surely won't convince you otherwise if you believe it's unsinkable in the first place.

Of course, having provincial and federal governments that also are in denial are not helping matters. Alberta has announced that it's deficit is in better shape than first thought. Of course these numbers are all based on events before the U.S. downgrade during a period where oil was sky-rocketing. As I have reiterated over and over and over again; the oilsands can *ONLY* bring in a profit during large upward moves and it is unlikely with world-wide economic growth outlooks that we will see $120 oil again this year, and it will be rare that we see $100. I predict the price will remain between $80-$100 for the rest of the year. This of course means all of the profit predictions being made by the Alberta government are based on the Q1 run up in oil prices. again as I've explained many times though, input costs take longer to catch up to the price of oil than profits do and once the bar is set for $80-$100 input costs all of those market riding profits are going to dry up. We've already seen this happen once before, remember when $70 was "high and profitable"? Now the government dreads a $70 oil price. It's also a one way road, meaning that input costs don't come down. What happens instead? the projects shut down. The Alberta and Federal governments have been playing Russian roulette with the Albertan (and Canadian) economies with the full support of an uninformed population in economic denial. They are uninformed because an informed populace would have seen the direct connection between Alberta's "growth" in the last few years and the U.S. QE programs. An informed populace would have noticed how in 2008 we lost hundreds of thousands of jobs the moment injections of cash from the U.S. stopped flowing into American businesses in Canada.

As I often say to my friends "if Canada was any other country [without our vast natural resources], we'd be so broke we wouldn't know what to do with ourselves". We may quite possibly be the worst money managers in the first world. We simply don't realize it because theres always more "oil in the ground" or "fish in the sea" to replace the funds we squander and not to mention our number 1 trading partner can (for the moment) print all the money they need to pay us. If Canada properly managed it's resources, we'd all be living like kings. Instead we've opted to "sell the pond, instead of the fish" and at bargain basement rates at that. From the actual issuance of our currency, to the oilsands, to our nuclear industry it is safe to say that Canada is "For Sale" and it is through these bottom basement price sales that Canada has been able to lie about the amount of foreign business we are loosing due to global economic circumstances. At least up until now.

Canada, we are a country in economic denial. Time to face reality.

The next Alberta economic boom will be funded by faith

Good day to you Albertans. I haven't written on this blog for quite awhile, in fact I wasn't even sure if I was ever going to blog again. Things are moving too fast now to really spend any significant time on a particular subject however I feel Alberta's economy needs some special attention right now.

Just recently I saw an article proudly displayed on every frontpage: Alberta tops U.S. job creation. Apparently Alberta's job market grew by 22,000 jobs where as the ENTIRE united states only recorded 18,000. Naturally Albertans rejoiced, claiming that boom times were back and economic growth was on the way. Further it seems to be not a reason to be concerned but instead put even more faith the Alberta government is right "waiting for oil & gas revenue to rebound". Anyone remember Ed-TV almost 3 years ago? Anyone remember Alberta's "5 year economic action plan"? Yea, I didn't think so, apparently 3 years into this plan we are still on step 1 "waiting for oil & gas revenues to rebound". So lets look at when they will be rebounding.

Who buys our oil? Who is our largest trading partner? Well it happens to be the U.S. The same U.S. that had the remarkable drop in job numbers, and now today GDP data just kicked the U.S. while already down. One has to wonder exactly where all of this expected economic growth is going to come from? U.S. oil demand continues to stagnate, and lets be honest about how much time it takes for oil infrastructure to be set up for any profitable sales to China or other cross-continental markets. A long time. China certainly is pursuing this option though, and you can trust that China (the largest slave-wage market) really has Albertan's jobs and wages at heart.

Just wait for the day in the very near future where Alberta says "hmm, we really didn't see this coming". Because they will, of this I have no doubt. The forgotten 5-year plan will be revived and extended into a "10 year plan" and by the time Albertan's and the Alberta government take the global economic situation seriously we will not have the funds to do anything about it.

The new Alberta boom is based entirely on faith that Alberta "always has a boom". We simply expect economic booms to be thrown our way, and when we are not in one we are waiting for the next. There is no world-economic data to show any signs of a coming boom for Alberta. Yes, we had more jobs than the U.S., so what? That means a whole bunch of our clients will soon not afford our product. 18,000 jobs for an entire country is dismal, it does not point to an Alberta job boom, it points to a U.S.A. mega-economic failure and this will surely affect the Albertan economy in the not-to-distant future. Faith alone can't sustain us anymore.

Welcome to Hellberta

Arnold Lim, Edmonton Journal

That's it! I can't take it anymore, this province is so ridiculous I simply had to make a blog on the subject. No this isn't a happy blog, this is an upset blog; an upset political blog. I'm upset because many Albertan's live in a bubble built out of lies and deceit. Like many places around the world our politicians make promises that are never fulfilled and in fact are bold faced lies.

This province for the longest time has been no better than your typical dirty gambler. Remember back in 2009 Ed Stelmach presented his 5 step economic action plan alongside this budget? Now just a few days ago what do we see again in the news?

EDMONTON — While surging oil prices will deliver a financial windfall to the petroleum-powered provincial treasury, a series of major production hiccups over the fiscal year is expected to cost the Alberta government at least $340 million.

How many times before Alberta tries something new? The definition of insanity is to repeat the same thing over and over expecting different results according to Albert Einstein, are those bumper stickers about not pissing away the next oil boom not a clue for anyone? Does this sort of behavior remind you the reader of any other sort of personality? Maybe the sort that sits in front of the slots dumping money in, waiting for their next big break and not noticing the amount of money going in is either equal to or greater than the amount coming out?

The Alberta government lies constantly, and I'm sick of it. So welcome everyone to Hellberta.