Monthly Archives: March 2013

A Love Letter to All Canadians from Your Government: “This Is How We Are Going to Screw You”

We compliment the Canadian Government for its forthrightness and honesty about how it is going to screw its citizens. Unlike the officials and authorities in the EU, the ECB and the IMF who have fumbled the economic rape of Cypriots through a tangle of subterfuge and lies, Canadian officials are much more upfront and direct. Hopefully this essay will help you understand how ruthless and nasty your government is.

We begin with a section on current events – notably Cyprus – that motivated this essay. In Section 2, we highlight certain aspects of the 2013 Canadian budget that may affect bank depositors. In Section 3 we examine the Financial Stability Board’s policy proposal on bank resolution and “bail-in”. Section 4 looks at the Canada Deposit Insurance Corporation in terms of what it insures and what its coverage capability is. We look at the Bank of Nova Scotia in Section 5 to get an understanding of the capital structure of a bank and where the risks reside. This is generalized in Section 6 to a model that allows us to explain the notions of illiquidity and insolvency. Finally, in Section 7, we conclude with  some summary remarks and recommendations on how Canadian citizens might attempt to protect themselves from the depredations of their sovereign. For all figures, click to open in a new window to allow enlargement.

under construction

Flash Point: Those !#!$#$!!$ …

Having pointed a gun at their foot without knowing whether or not it was loaded, pulled the trigger, and shot themselves in the foot, the eurocrats in charge of the EU have suddenly noticed that they have another foot. And pointed the same gun: EU to push for losses on big savers at failed banks: lawmaker. And pulled the trigger. The English language may lack an adjective suitable to describe the degree of stupidity of these people
They just destroyed the banking system across the entire European periphery. And we thought that scorched-earth was an obsolete policy alternative – but apparently not.
And in case you didn’t get the implication, imagine you are a depositor with more than $100,000 in a Spanish/Portuguese/Irish/Italian/French (soon) bank. You will:
A) Shrug your shoulders and go to lunch,
B) Phone your investment advisor at your bank for reassurance that your money is safe, receive the reassurance, and go to lunch.
C) Wait and see if this is going to affect you. In the meantime, go to lunch.
D) Ignore the fact you just spewed coffee all over your desk, call a cab, go to your bank and arrange to transfer all except a few dollars of your money to a new account in the Cayman Islands, Liechtenstein, Canada, or some other much safer jurisdiction.
E) None of the above. This means you are a eurocrat or part of the monied elite that supports eurocrats, and will never have to worry about what’s coming next because you create it on a whim.
This is a self-marking quiz. You will receive the correct answer on your own shortly.

Flash Point: We Didn’t Have the Green Thing Back Then

This came to us as one of those viral emails. It is so on the mark that we have decided to publish it. The unknown author has done a wonderful job of positioning the green movement in a historical context providing an excellent indictment of it. We simply weren’t progressive.

Hugo Chavez’s Vision

Here is an essay from Paul Merkley: Hugo Chavez’s Vision, reprinted by permission of Paul and from The Bayview Review. See the links at the end for direct access to the rest of Paul’s work.

The Presidency of Hugo Chavez had a shaky beginning, to say the least, and came close to crashing down several times along the way. His career as an army officer went off the rails in 1992 when he was imprisoned for two years following his attempt to remove by coup President Carlos Andrés Pérez. After that, it took several years of aggressive politicking for him to build a new political movement and win his first election as President of Venezuela in 1999. Re-elected in 2000 and again in 2006 he survived a coup against himself in 2002, a referendum in 2004, and public relations backlash from two failed marriages and unending rumours of infidelity. He was well  into his third term when doctors discovered the cancer for which they could offer no cure but only the palliating benefits of radiation therapy in Cuba. In spite of this clear scientific verdict, on  July 9, 2012, Chávez declared himself fully recovered from cancer and turned to the people to give him an eternal mandate, winning a fourth term in October 2012. It was only after he secured that mandate that the public was given something resembling the truth about his health. The National Assembly bent the constitution so that he could postpone his inauguration  (due to occur in January, 2013) and so it was left to his Vice President, Nicolas Maduro,  to continue as Acting President, pending elections which, following the present constitution, will take place on April 14.

Flash Point: Neanderthals Sack Cyprus

Long thought to be extinct, an obscure tribe of Neanderthals, mostly from the Brussels region but reinforced by other neolithic tribes, notably the International Monetary Fund and the German Bundesbank, fresh from their looting  of Greece, combined this weekend for a raid on the state of Cyprus. From Zero Hedge we read that the news site Ekathimerini reports (emphasis ours):

Socialism: The Wage Ghetto Created By Obamacare

We have already written about how social programs trap people in employment ghettos (Socialism: Wage Ghettos Created By Marginal Tax Rates, Socialism: More on Education and Wage Ghettos, Socialism: “When Work Is Punished: The Tragedy Of America’s Welfare State”). We now describe how Obamacare, or more formally, the Affordable Care Act (ACA), is turning out to be extremely destructive to low-income employment.

Japan: Is This a Windshield Which I See Before Me …

Consider the fate of a bug, one quarter inch long, hovering over a highway and facing towards a windshield approaching at 60 miles per hour. Ignoring the effect of slipstream effects coming off the windshield, it will take 237 microseconds for the bug to be converted completely into a splat (the math is simple). In his January 22, 2011 essay titled The Unsustainable Meets the Irresistible, John Mauldin said that Japan is a bug in search of a windshield. Which brings us to this seminar with Kyle Bass (58:18 minutes). Kyle Bass is the smartest man we read. We recommend you listen to the whole seminar.

Click the image below from Zero Hedge for the full presentation (unembeddable):

Flash Point: A Game Changer. Japan Extracts Methane Hydrate

As Ambrose Evans-Pritchard reports: Japan cracks seabed ‘ice gas’ in dramatic leap for global energy. Just as the shale gas revolution was taking hold we appear to be on the verge of a much larger energy revolution. Methane hydrate, a methane molecule trapped in a molecular water cage, is thought to exist in appropriate temperature and pressure environments, such as deep sea deposits, that comprise more than half of the theoretical carbon fuel sources in the world. Figure 1 is a chart of the breakdown of the global occurrence of carbon energy sources with methane hydrate comprising more than half. This is a resource much larger than shale gas.

Figure 1. Distribution of organic carbon in the earth.

Source: .

Of the known occurrences, Japan has an exceptionally rich potentials as shown  in Figure 2.

Figure 2. Worldwide distribution of methane hydrate [5].

Source: Science Direct.

As Evans-Pritchard notes, Tokyo hopes to bring the gas to market on a commercial scale within five years. This is a very short time frame for a new energy source to come onto the market. If it is realized, it will have immense impact on select national economies that have the resources to develop. The geopolitical implications are also enormous. This is the early stage of the revolution and commercial exploration has not really begun yet. The current energy superpowers such as the OPEC countries and Russia will find their influence waning. The loss of energy income may destabilize parts of the Mid East.

Japan’s economy in particular may be revitalized. Countries such as Canada that are net energy exporters and that have no appreciable alternative base of revenue such as manufacturing will go into decline.

Socialism: France and Its Race to the Bottom

We have viewed the percentage of GDP contributed by government spending as a measure of the government adoption of socialist economic principles – entitlement programs. France’s global ranking in 2011, according to Wikipedia, was eighth (highest) at 52.8, superseded only by a number of small island nations including Iceland. Another estimate from eurostat which we consider more reliable and shown in Figure 1, places France as second highest in the EU at 55.9, ahead of Iceland at 47.3 and just behind Denmark at 57.9.

Figure 1. Government spending as a percent of GDP for EU nations and other non-EU European countries.

While a high percentage of GDP does not equate to crisis conditions (the Scandinavian countries have high percentages but no crisis yet) France is rapidly entering crisis territory. Below is a chronology of events created by the current socialist government that are pushing France to the brink of failure.

 Chronology of the Death March

  • 20141212 We have lately ignored France’s plight since it far from unique and not as advanced as the disintegration of other Socialist paradises such as Argentina and Venezuela, but to assure you it continues, read Fitch Downgrades France To AA: Full Text.

Socialism: Wage Ghettos Created By Marginal Tax Rates

Since we published our earlier essays on wage ghettos, Socialism: More on Education and Wage Ghettos and Socialism: “When Work Is Punished: The Tragedy Of America’s Welfare State”, we have become aware of another case of ghettoization that social programs create through the tax system.

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