There’s a Monetary Firestorm Coming | Capitalist Exploits – Frontier Markets Investing, Private Equity and IPO’s
By: Chris Tell
I’ve never been trapped in a fire before and trust me, I have had plenty of opportunity. Yes, I was THAT kid, the one who played with fire. The trick was, and still is to steer clear of the flames, to anticipate what and where. Fire is however notorious for doing what it wants and once its out of control even the best firefighters don’t stand a chance.
Each day that passes we come closer to the arrival of a monetary fire that threatens to dwarf anything in our collective living memories. Watching the Australian bush fires in New South Wales recently made me think of our monetary system. Funny that.
The Australian bush has been burning long before the Brits began exporting their best and brightest to the “lucky country.” Right now the fires are raging. It was inevitable. Like the business cycle nature too abhors excess and steps in to correct it, clear the dead wood and prepare for rebirth.
What is often forgotten is that nature has evolved to rely on bush-fires as a means of reproduction and new “birth.” Fires are an integral part of the ecology of the planet’s surface. Humans can try and prevent these inevitable fires by “controlled burnings”, clearing out much of the dead underbrush, but it’s not foolproof.
The fires now raging in New South Whales are in part due to an extensive build up of dry brush which is likely overdue a good burning. The longer the dry bush remains unburned, and the more that accumulates the greater the risk of an inevitable fire. The result will be much greater than that which would have preceded it should a fire have taken place sooner. This is a basic, easy to understand law of nature.
Financial markets are NO different. The dry brush of excessive credit, monetary stimulus, rampant fraud, and government interference, which has caused the largest sovereign bond bubble the world has ever seen, has not been cleared or burned to allow for regeneration. In contrast we’ve actually been ADDING to it, doing the exact opposite of the “controlled burn.”
The market, like nature, has attempted to correct these excesses many times, only to be met with central bankers fire hoses spraying liquidity at ever increasing volumes and velocity. As the outbreaks of financial fires increase so too do the tools and technologies used by the central bankers. This postponement of the inevitable leads to massive mis-allocation of capital.
That’s a lot of dead wood buildup there.
The above graph shows all the dead wood build-up. Quite a bonfire awaits us.
It is possible that the fires will continue to be contained, central bankers promise that this is indeed the case. We DO know however that it is not possible to contain it forever. This time is not different…or is it?
Let’s compare what’s different this time around in Australia and the world’s monetary system?
- The bush fires have invaded the suburbs. So too have the monetary bush fires directly impacted most western “suburbs”.
- The “tools” available to the firefighters are more advanced than at any time in human history. The tools that are at the disposal of central bankers are more “advanced” than at any time in human history.
What’s happening in New South Wales right now provides us with an instruction manual for how to proceed forward in a world of monetary madness. We need to BURN THE UNDERBRUSH. Simply hoping that the fires will fail to erupt simply defies history and mathematics. “Hope and Change” be damned.
The likely outcome is that we’re heading deep into asset confiscation mode. Government meddling will fail, it always has and it always will. The playbook from throughout history tells us that governments will steal anything and everything from the most productive before they default.
This happens either overtly (taxation, fines, penalties, asset seizure) or covertly via destruction of currencies (quantitative easing). Everything not nailed down is up for grabs. Don’t say you weren’t warned! If you need an example look at what’s happening in France. Hollande is insane, but he’s not unique.
As such, aside from structuring myself in order to protect what I have, which I hope I’ve done, ensuring that what I invest in going forward is structured properly is just as important. It makes no sense to invest intelligently only to have some thug steal the proceeds because I failed to set myself up to deal with the inevitability just mentioned.
So, how are Mark and I choosing to allocate our capital:
- Investing in private equity. We like businesses where we can get to know and deal directly with CEO’s and management, and where we are not at the whim of black box trading systems, plunge protection teams and assorted other “firefighters”. This is by far our most overweighted asset class. If you want to know more about how we do this, drop us a line.
- Trading the volatility created by these madmen. Our friend and colleague Brad Thomas, the new editor of our Trade Alert service, “The Capex Options Alert” is our guru in this area. You can get to know Brad a bit and sign up for this complimentary service for a limited timeHERE.
- Continuing to buy and store physical precious metals. This just seems a long-term no-brainer.
- Investing in agriculture. A guy’s gotta eat, right!
- Select real estate. Maybe some premium scorched earth in New South Wales, Australia. After all, the risk of a devastating fire is now significantly reduced! But seriously, a nice piece of land where you can escape the madness and “grow your own” if need be.
The above is neither a recommendation nor an endorsement of any particular asset class or strategy. Obviously everyone’s situation is different, and we don’t know yours. Some could probably do just fine with a couple hunting rifles, some ammo and a nice piece of land to grow food and run a few livestock. Albeit that’s not going to work for urban dwellers.
The bottom line is that we are just encouraging you to consider how to prepare for a monetary firestorm. Do it your own way, use common sense, but just don’t be the dupe who ignores the obvious.
“So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls.” – Martin Feldstein
- Fear that Australian bush fire turns into a ‘mega fire’. (caterinaess.wordpress.com)
- Australian Bush Fires To Be Among Worst Ever Seen (eurasiareview.com)
Growing visibly more angry with every allegation coming from a senator that he appointed, Prime Minister Stephen Harper said during question period on Tuesday that Mike Duffy has shown no remorse for claiming ineligible expenses and should be removed from the Senate.
Harper’s remarks came a day after the former Conservative dropped a second bombshell, saying there was not one but two cheques cut to him by Harper’s former chief of staff.
Duffy told the Senate on Monday that Nigel Wright, Harper’s former chief of staff, arranged to have his legal fees paid by the Conservative Party — in addition to the $90,000 cheque Wright gave Duffy to repay his ineligible expenses.
“The reality is,” Harper said on Tuesday, “that Mr. Duffy still has not paid a cent back to the taxpayers of Canada. He should be paying that money back.”
‘On our side, there is one person responsible for this deception. That person is Mr. Wright.’— Prime Minister Stephen Harper
“The fact that he hasn’t, the fact that he shows absolutely no regret for his actions, and the fact that he has told untruths about his actions means that he should be removed from the public payroll,” Harper said.
The prime minister has maintained all along that he knew nothing about the $90,000 cheque that his right-hand man gave to Duffy.
On Tuesday, the prime minister took direct aim at his former chief of staff, telling the Commons, “On our side, there is one person responsible for this deception. That person is Mr. Wright.”
“It is Mr. Wright by his own admission. For that reason, Mr. Speaker, Mr. Wright no longer works for us. Mr. Duffy shouldn’t either,” Harper said.
The prime minister did not, however, deny on Tuesday that the party cut Duffy a second cheque to cover his legal fees.
“That is a regular practice. The party regularly reimburses members of its caucus for valid legal expenses — as do other parties,” Harper said.
Duffy’s claim that he had paid back his ineligible expenses using his own funds was “the story of Mr. Duffy and Mr. Wright,” Harper said.
“Mr. Duffy should be removed from the Senate.”
NDP Leader Tom Mulcair continued to pepper the prime minister with sharp questions on Tuesday.
If Duffy’s expenses were “inappropriate,” as Harper said again Tuesday, why did the Conservative Party pay for the senator’s legal fees? Mulcair asked.
Harper did not directly answer the question, saying only that he has said “it was inappropriate all along.”
- Canadians believe Mike Duffy over Stephen Harper on Senate scandal: poll (globalnews.ca)
- Harper defends payment for Duffy’s legal bill, says senator should get the boot (sunnewsnetwork.ca)
- Harper to face tough questions in wake of Duffy revelations (globalnews.ca)
- Harper says chief of staff Wright ‘dismissed’ over $90,000 cheque, not resigned (calgaryherald.com)
- The Senate Circus Continues (emkaydeeblogs.wordpress.com)
- Senate scandal not on Canadian public’s radar (beaconnews.ca)
Authored by John Taylor, originally posted at WSJ.com,
It is a common view that the shutdown, the debt-limit debacle and the repeated failure to enact entitlement and pro-growth tax reform reflect increased political polarization. I believe this gets the causality backward. Today’s governance failures are closely connected to economic policy changes, particularly those growing out of the 2008 financial crisis.
The crisis did not reflect some inherent defect of the market system that needed to be corrected, as many Americans have been led to believe. Rather it grew out of faulty government policies.
In the years leading up to the panic, mainly 2003-05, the Federal Reserve held interest rates excessively low compared with the monetary policy strategy of the 1980s and ’90s—a monetary strategy that had kept recessions mild. The Fed’s interest-rate policies exacerbated the housing boom and thus the ensuing bust. More generally, extremely low interest rates led individual and institutional investors to search for yield and to engage in excessive risk taking, as Geert Bekaert of Columbia University and his colleagues showed in a study published by the European Central Bank in July.
Meanwhile, regulators who were supposed to supervise large financial institutions, including Fannie Mae and Freddie Mac, allowed large deviations from existing safety and soundness rules. In particular,regulators permitted high leverage ratios and investments in risky, mortgage-backed securities that also fed the housing boom.
After the housing bubble burst the value of mortgage-backed securities plummeted, putting the solvency of the many banks and other financial institutions at risk. The government stepped in, but its ad hoc bailout policy was on balance destabilizing.
Whether or not it was appropriate for the Federal Reserve to bail out the creditors of Bear Stearns in March 2008, it was a mistake not to lay out a framework for future interventions. Instead, investors assumed that the creditors of Lehman Brothers also would be bailed out—and when they weren’t and Lehman declared bankruptcy in September, it was a big surprise, raising grave uncertainty about government policy going forward.
The government then passed the Troubled Asset Relief Program which was supposed to prop up banks by purchasing some of their problematic assets. The purchase plan was viewed as unworkable and financial markets continued to plummet—the Dow fell by 2,399 points in the first eight trading days of October—until the plan was radically changed into a capital injection program. Former Treasury Secretary Hank Paulson, appearing last month on CNBC on the fifth anniversary of the Lehman bankruptcy, argued that TARP saved us. Former Wells Fargo CEO Dick Kovacevich, appearing later on the same show, argued that TARP significantly worsened the crisis by creating even more uncertainty.
In any case, the crisis ended, but rather than simply winding down its short-term liquidity facilities the Fed continued to intervene through massive asset purchases—commonly called quantitative easing. Many outside and inside the Fed are unconvinced quantitative easing is meeting its objective of spurring economic growth. Yet there is a growing worry about the Fed’s ability to reduce its asset purchases without market disruption. Bond and mortgage markets were roiled earlier this year by Chairman Ben Bernanke’s mere hint that the Fed might unwind.
The crisis ushered in the 2009 fiscal stimulus package and other interventions such as cash for clunkers and subsidies for first-time home buyers, which have not led to a sustained recovery. Crucially, the actions taken during the immediate crisis set a precedent for giving the federal government more power to intervene and regulate, which has added to uncertainty.
The Dodd-Frank Act, meant to promote financial stability, has called for hundreds of new rules and regulations, many still unwritten. The law was supposed to protect taxpayers from bailouts. Three years later it remains unclear how large complex financial institutions operating in many different countries will be “resolved” in a crisis. Any fear in the markets about whether a troubled big bank can be handled through Dodd-Frank’s orderly resolution authority can easily drive the U.S. Treasury to resort to another large-scale bailout.
Regulations and interventions also increased in other industries, most significantly in health care. The mandates at the core of the Affordable Care Act represent an unprecedented degree of control by the federal government of the activities of businesses and individuals, adversely affecting incentives to hire and work and eventually worsening the federal-budget outlook.
Federal debt held by the public has increased to 73% of GDP this year from 41% in 2008—and according to the Congressional Budget Office, it will rise to more than 250% without a change in policy. This raises uncertainty about how the debt can be brought under control.
Despite a massive onslaught of legislation and regulation designed to foster prosperity, economic growth remains low and unemployment remains high. Rhetoric aside, many both inside and outside the government quite reasonably seek to return to the kinds of policies that worked well in the not-so-distant past. Claiming that one political party has been hijacked by extremists misses this key point, and prevents a serious discussion of the fundamental changes in economic policies in recent years, and their effects.
- John Taylor Says It Was Obama’s Fault that the Tea Party Forced Republican Legislators into the Debt-Ceiling and Shutdown Debacles… (delong.typepad.com)
- The cause and cure according to John Taylor (longandvariable.wordpress.com)
- The dignity of John Taylor (cafehayek.com)
A number of people have asked me to expand on how the rapid expansion of money supply leads to an effect the opposite of that intended: a fall in economic activity. This effect starts early in the recovery phase of the credit cycle, and is particularly marked today because of the aggressive rate of monetary inflation. This article takes the reader through the events that lead to this inevitable outcome.
There are two indisputable economic facts to bear in mind. The first is that GDP is simply a money-total of economic transactions, and a central bank fosters an increase in GDP by making available more money and therefore bank credit to inflate this number. This is not the same as genuine economic progress, which is what consumers desire and entrepreneurs provide in an unfettered market with reliable money. The second fact is that newly issued money is not absorbed into an economy evenly: it has to be handed to someone first, like a bank or government department, who in turn passes it on to someone else through their dealings and so on, step by step until it is finally dispersed.
As new money enters the economy, it naturally drives up the prices of goods bought with it. This means that someone seeking to buy a similar product without the benefit of new money finds it is more expensive, or put more correctly the purchasing power of his wages and savings has fallen relative to that product. Therefore, the new money benefits those that first obtain it at the expense of everyone else. Obviously, if large amounts of new money are being mobilised by a central bank, as is the case today, the transfer of wealth from those who receive the money later to those who get it early will be correspondingly greater.
Now let’s look at today’s monetary environment in the United States. The wealth-transfer effect is not being adequately recorded, because official inflation statistics do not capture the real increase in consumer prices. The difference between official figures and a truer estimate of US inflation is illustrated by John Williams of Shadowstats.com, who estimates it to be 7% higher than the official rate at roughly 9%, using the government’s computation methodology prior to 1980. Simplistically and assuming no wage inflation, this approximates to the current rate of wealth transfer from the majority of people to those that first receive the new money from the central bank.
The Fed is busy financing most of the Government’s borrowing. The newly-issued money in Government’s hands is distributed widely, and maintains prices of most basic goods and services at a higher level than they would otherwise be. However, in providing this funding, the Fed creates excess reserves on its own balance sheet, and it is this money we are considering.
The reserves on the Fed’s balance sheet are actually deposits, the assets of commercial banks and other domestic and foreign depository institutions that use the Fed as a bank, in the same way the rest of us have bank deposits at a commercial bank. So even though these deposits are on the Fed’s balance sheet, they are the property of individual banks.
These banks are free to draw down on their deposits at the Fed, just as you and I can draw down our deposits. However, because US banks have been risk-averse and under regulatory pressure to improve their own financial position, they have tended to leave money on deposit at the Fed, rather than employ it for financial activities. There are signs this is changing.
Rather than earn a quarter of one per cent, some of this deposit money has been employed in financial speculation in derivative markets, or found its way into the stock market, gone into residential property, and some is now going into consumer loans for credit-worthy borrowers.
In addition to the government’s deficit spending, these channels represent ways in which money is entering the economy. Furthermore, anyone working in the main finance centres is being paid well, so prices in New York and London are driven higher than in other cities and in the country as a whole. They spend their bonuses on flashy cars and country houses, benefiting salesmen and property values in fashionable locations. And with stock prices close to their all-time highs, investors with portfolios everywhere feel financially better off, so they can increase their spending as well.
All the extra spending boosts GDP, and to some extent it has a snowball effect. Banks loosen their purse strings a little more, and spending increases further. But the number of people benefiting is only a small minority of the population. The rest, low-paid workers on fixed incomes, pensioners, people living on modest savings in cash at the bank, and part time employed as well as the unemployed find their cost of living has gone up. They all think prices have risen, and don’t understand that their earnings, pensions and savings have been reduced by monetary inflation: they are the ultimate victims of wealth transfer.
While luxury goods are in strong demand in London and New York, general merchants in the country find trading conditions tough. Higher prices are forcing most people to spend less, or to seek cheaper alternatives. Manufacturers of everyday goods have to find ways to reduce costs, including firing staff. After all if you transfer wealth from ordinary folk they will simply spend less and businesses will suffer.
So we have a paradox: growth in GDP remains positive; indeed artificially strong because of the under-recording of inflation, while in truth the economy is in a slump. The increase in GDP, which reflects the money being spent by the fortunate few before it is absorbed into general circulation, conceals a worse economic situation than before. The effect of an expansion of new money into an economy does not make the majority of people better off; instead it makes them worse off because of the wealth transfer effect. No wonder unemployment remains stubbornly high.
It is the commonest fallacy in economics today that monetary inflation stimulates activity. Instead, it benefits the few at the expense of the majority. The experience of all currency inflations is just that, and the worse the inflation the more the majority of the population is impoverished.
The problem for central banks is that the alternative to maintaining an increasing pace of monetary growth is to risk triggering a widespread debt crisis involving both over-indebted governments and also over-extended businesses and home-owners. This was why the concept of tapering, or putting a brake on the rate of money creation, destabilised worldwide markets and was rapidly abandoned. With undercapitalised banks already squeezed between bad debts and depositor liabilities, there is the potential for a cascade of financial failures. And while many central bankers could profit by reading and understanding this article, the truth is they are not appointed to face up to the reality that monetary inflation is economically destructive, and that escalating currency expansion taken to its logical conclusion means the currency itself will eventually become worthless.
- What is Money? (theepochtimes.com)
- Why You Don’t Feel Richer After Four Years of Recovery (safehaven.com)
- The euro is soaring. That’s terrible news for Europe. (washingtonpost.com)
October 28, 2013
Sovereign Valley Farm, Chile
You know the old rule of thumb about laws–
The more high-sounding the legislation, the more destructive its consequences.
Case in point, HR 3293– the recently introduced Debt Limit Reform Act. Sounds great, right? After all, reforming the debt seems like a terrific idea.
Except that’s not what the bill really does. They’re not reforming anything. HR 3293′s real purpose is to authorize the government to simply stop counting a massive portion of the US national debt.
You see, one of the biggest chunks of the debt is money owed to ‘intragovernmental agencies’.
For example, Medicare and Social Security hold their massive trust funds in US Treasuries. This is the money that’s owed to retirees.
In fact, nearly $5 trillion of the $17 trillion debt (almost 30%) is owed to intragovernmental agencies like Social Security and Medicare.
So now they basically want to stop counting this debt. Poof. Overnight, they’ll make $5 trillion disappear from the debt.
On paper, this looks great. But in reality, they’re setting the stage to default on Social Security beneficiaries without causing a single ripple in the financial system.
Remember, when governments get this deep in debt, someone is going to get screwed.
They may default on their obligations to their creditors, causing a crisis across the entire financial system. Or perhaps to the central bank, causing a currency crisis.
But most likely, and first, they will default on their obligations to their citizens. Whatever promises they made, including Social Security, will be abandoned.
And if you read between the lines, this new bill says it all.
Not to be outdone by the United States Congress, though, the International Monetary Fund recently proposed a continental-wide ‘one off’ wealth tax in Europe.
Buried in an extensive report about Europe’s troubled economies, the IMF stated:
“The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair).”
In other words, first they want to implement capital controls to ensure that everyone’s money is trapped. Then they want to make a grab for people’s bank accounts, just like they did in Cyprus.
The warning signs couldn’t be more clear. I’ve been writing about this for years. It’s now happening. This is no longer theory.
Over the last few weeks I’ve been having my staff revise a free report we put together two years ago about globalizing your gold holdings.
In the report I mentioned that capital controls are coming. And that some governments may even ban cash transactions over a certain level.
These things have happened. Cyprus has capital controls, France and Italy have limits on cash transactions. And given this new evidence, it’s clear there’s more on the way.
Every rational, thinking person out there has a decision to make.
You can choose to trust these politicians and central bankers to do the right thing.
Or you can choose to acknowledge the overwhelming evidence and reduce your exposure to these bankrupt western countries that will make every effort to lie, cheat, and steal whatever they can from you… just to keep the party going a little while longer.
It’s time for people to wake up to this reality. You only have yourself to rely on. Not the system. Not the government. And certainly not the bankers.
- Senate Dems call for automatic debt limit hikes… (news.yahoo.com)
- Don’t Give the President Control Over the Debt Limit, Eliminate It (fdlaction.firedoglake.com)
- How to Disarm Congress’s Suicide Bomb – Bloomberg (bloomberg.com)
- Should We Eliminate the Extraordinary Measures? (dmarron.com)
- Debt-ceiling disarmament should be next step for Congress (azstarnet.com)
TORONTO – Canadian corporate profits have declined in five of the past six quarters and are now 16 per cent below their post-recession peak in late 2011, according to a study released Tuesday by TD Bank.
“This decline is not as bad as during the last recession, but it is approaching the performance Canadian firms saw during the U.S. downturn in 2000-2001,” TD economist Leslie Preston writes.
Key export-driven sectors like manufacturing and resources have seen the most weakness.
The resource sector’s corporate profit performance has followed closely with commodity prices, which fell last year and remain below a post-recession peak in set in early 2011.
“So far in 2013, generally higher commodity prices have helped drive encouraging growth in resource sector profits, although the sector is still in the red over the past six quarters as a whole,” Preston writes.
Manufacturers face competitive challenges, not only from a relatively strong loonie but also because unit labour costs have risen in Canada since the recession but remain flat in the United States, TD says.
Profits in more domestically-oriented industries have held up better, although they too have seen their pace of growth slow dramatically compared to the pre-recession period.
Looking ahead, however, TD expects profit performance to show modest improvement over the coming quarters, led by the export and resource-oriented sectors, as stronger economic growth in the United States next year will help lift U.S. demand.
U.S. economic growth will be weaker than anticipated in the near-term because of the recent government shutdown, but TD expects that the lost activity will be recouped next year.
The bank says commodity prices should also improve, although further gains are likely to be modest, and domestic demand growth is also likely to be slow.
“Echoing the forecast for growth in the economy as a whole, corporate Canada should see better days ahead, but not a return to the heydays seen prior to the recession,” Preston said.
- No proof of job crisis in Canada, TD says (business.financialpost.com)
- Canada’s economic struggle seen in growing corporate pessimism (business.financialpost.com)
- WRAPUP 1-Canadian home sales, prices make further gains in Sept (xe.com)
- Report refutes claims of Canadian labour shortages (theglobeandmail.com)
Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced.
The global financial system will reset in 2014-2015, regardless of official pronouncements and financial media propaganda hyping the “recovery.” Despite the wide spectrum of forecasts (from rosy to stormy), nobody knows precisely what will transpire in 2014-2015, so we must remain circumspect about any and all predictions– especially our own.
Even as we are mindful of the risks of a forecast being wrong (and the righteous humility that befits any analysis), it seems increasingly self-evident that financial systems around the world are reaching extremes that generally presage violent resets to new equilibria–typically at much lower levels of complexity and energy consumption.
John Michael Greer has described the process of descending stair-step resets (my description, not his) as catabolic collapse. The system resets at a lower level and maintains the new equilibrium for some time before the next crisis/system failure triggers another reset.
There is much systems-analysis intelligence in Greer’s concept: systems without interactive feedbacks may collapse suddenly in a heap, but more complex systems tend to stair-step down in a series of resets to lower levels of consumption and complexity–for example, the Roman Empire, which reset many times before reaching the near-collapse level of phantom legions, full-strength on official documents, defending phantom borders.
In the present, we can expect the overly costly, complex, inefficient, fraud-riddled U.S. sickcare (i.e. “healthcare”) system to reset as providers (i.e. doctors and physicians’ groups) opt out of ObamaCare, Medicare and Medicaid; like the phantom armies defending phantom borders of the crumbling Empire, the vast, centralized empire of sickcare will remain officially at full strength, but few will be able to find caregivers willing to provide care within the systems.
Just as much of the collateral supporting the stock, bond and housing bubbles is phantom, many other centralized systems will reset to phantom status. As local and state governments’ revenues are increasingly diverted to fund public union employees’ sickcare and pension benefits, the services provided by government will decline as the number of retirees swells and the number of government employees actually filling potholes, etc. drops.
Local government will offer services that are increasingly phantom, as stagnating tax revenues fund benefits for retirees rather than current services. On paper, cities will remain responsible for filling potholes, but in the real world, the potholes will go unfilled. In response, cities will ask taxpayers to approve bonds that cost triple the price of pay-as-you-go pothole filling, as a way to dodge the inevitable conflict between government retirees benefits and taxpayers burdened with decaying streets, schools, etc. and ever-higher taxes.
As for phantom collateral–the real value of the collateral will be undiscovered until people start selling assets in earnest. As long as everyone is buying, the phantom nature of the collateral is masked; it’s only when everyone tries to get their money out of asset bubbles is the actual value of the underlying collateral discovered.
When assets go bidless, i.e. there are no buyers at any price, the phantom nature of the supposedly solid collateral is revealed. Price discovery is one way of describing reset; transparent pricing of risk is another way of saying the same thing.
When risk has been mispriced via state guarantees, fraud, willful obfuscation, complexity fortresses, etc., then the repricing of risk also resets the system.
Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced. The greater the manipulation and financial repression, the more violent the reset. What been manipulated, obscured or repressed? Virtually everything: risk, credit, assets, labor, currency, you name it. Everything that has been manipulated by central banks and central states will be repriced.
Trust is difficult to price. Every reset erodes trust in the capacity of the centralized status quo to manipulate/repress price to its liking. Once trust in the system is lost, it cannot be purchased at any cost.
- The Gathering Storm (theburningplatform.com)
Garth Turner, who served as both a Progressive Conservative and Liberal member of Parliament for the Halton region near Toronto, has called the monthly numbers released by the Canadian Real Estate Association (CREA) a “fraud,” because of the apparent practice of houses being counted multiple times when they are sold.
CREA’s monthly sales and price releases are among the most closely-watched measures of the housing market. Several industry insiders confirmed to HuffPost Canada last month that duplication of house listings across multiple real estate boards could be distorting sales data.
Turner, who runs a blog focused partly on real estate and is a financial advisor at Turner Tomenson Wealth Management Group, also suggested that something fishy could be going on at the Toronto Real Estate Board (TREB).
Speaking on BNN Monday, Turner said TREB’s house sales numbers “are almost always revised down” after their initial public release. That would mean that, when new numbers are released, they appear to show a larger increase from the previous reporting period than otherwise would have been the case.
Other housing market observers, such as analyst and blogger Ben Rabidoux, have also suggested that TREB may be revising its older numbers too far down, and creating the impression of a stronger real estate market than may really be the case.
This sort of thing matters, Turner told BNN, because people’s perceptions of the housing market affect house prices.
Turner didn’t speculate on how much house prices may be getting pushed up by potentially misleading data.
CREA economist Gregory Klump told HuffPost Canada last month that double-counted listings amount to a scant 0.8 per cent of housing supply on the market.
In an interview on CBC’s Lang & O’Leary Exchange on Monday, Klump said the double- or triple-listing of homes is largely concentrated in the Toronto area and Nova Scotia. But he described the effects of those listings as “statistically insignificant.”
“We remain completely confident in the reliability and accuracy of those statistics,” he said.
But real estate consultant Ross Kay, who is the original source for Turner’s arguments, suggested in an audit of housing data that sales numbers may have been over-reported this year by some 22,000 house sales so far.
He told HuffPost last month that the phenomenon of double-counted houses is having substantial effects on housing data.
“Statistically valid month-over-month comparisons on sales volumes are inflated as much as 15 per cent in some cities in 2013,” Kay wrote. “Average prices are skewed upward as much as 10 per cent some months.”
Noting that most Canadians’ net worth is in their homes, Turner suggested housing market data should be made reliable through regulation the way financial markets are regulated.
“We have complete regulation in the financial markets, and almost complete benign denial of the accuracy of numbers in the real estate market, which is so critically important to people,” he said.
“I hope it changes.”
- Accuracy of Canada’s housing data under scrutiny (theglobeandmail.com)
- Canadian home sales increase slightly in September: CREA (ctvnews.ca)
- Existing home sales edge up in September, surge 18% from year ago: CREA (business.financialpost.com)
- Canadian Housing Market Remains in Balanced Territory (theepochtimes.com)
cent in the past year, and more consumers are running into the red, according to Royal Bank’s debt poll.
Just 24 per cent of Canadians say they are debt-free, compared to 26 per cent in 2012. And those who are in debt have increased their non-mortgage burdens to $15,920 from $13,141 in the same time frame, RBC’s survey found. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior.
Canadians are taking advantage of the era of super low interest rates to finance more borrowing, a move the government has vocally discouraged.
Debt loads have skyrocketed in the years since the 2008-2009 recession, after the government dropped borrowing rates to near zero in order to stimulate consumer activity, the housing market and the economy.
The RBC poll found that the number of Canadians who are anxious about their debt levels has risen four percentage points in the past year, to 38 per cent. Still, the same number said they are comfortable with the amount they owe.
The household debt-to-disposable income ratio is at an all-time high, around 163 per cent. That means for every dollar Canadians earn, they owe $1.63.
However, in its latest monetary policy report, Canada’s central bank slashed its economic outlook for Canada for the next three years and indicated that a troubled global economy may compel it to maintain interest rates at the current near record low rate of one per cent, where it has been since 2010.
The announcement left many observers wondering whether the prolonged low interest rate environment will increase the likelihood of a housing correction or hard landing for borrowers when rates finally rise.
The RBC poll was conducted by Ipsos Reid from Aug. 22 to 27 through an online sample of 2,108 Canadians with an estimated margin of error of plus or minus two per cent, 19 times out of 20.
- Three-quarters of Canadians polled have personal debt: RBC survey (canadianbusiness.com)
- Average personal debt at nearly $16,000: poll (globalnews.ca)
- Three-quarters of Canadians are in the red with average personal debt of $16K: poll (o.canada.com)
Women lead a march at Elsipogtog. Photo via Twitter.
In the mid-1990s I moved to Mi’gma’gi to go to graduate school. I was expecting to learn about juvenile Atlantic salmon on the Miramichi River. I was naive and misguided. Fortunately for me, the Mi’kmaq people saw that in me and they taught me something far more profound. I did my first sweat in the homeland of Elsipogtog, in the district of Siknikt. I did solidarity work with the women of Elsipogtog, then known as Big Cove, as they struggled against imposed poverty and poor housing. One of them taught me my first song, the Mi’kmaq honor song, and I attended her Native Studies class with her as she sang it to a room full of shocked students.
I also found a much needed refuge with a Mi’kmaq family on a nearby reserve. What I learned from all of these kind people who saw me as an Nishnaabeg in a town where no one else did, was that the place I needed to be wasn’t Mi’gma’gi, but in my own Mississauga Nishnaabeg homeland. For that I am grateful.
Nearly every year I travel east to Mi’gma’gi for one reason or another. In 2010, my children and I traveled to Listuguj in the Gespe’gewa’gi district of Mi’gma’gi to witness the PhD dissertation defense of Fred Metallic. I was on Fred’s dissertation committee, and Fred had written and was about to defend his entire dissertation in Mi’gmaw (Mi’kmaq) without translation—a groundbreaking achievement. Fred had also kindly invited us to his community for the defense. When some of the university professors indicated that this might be difficult given that the university was 1,300 kilometers away from the community, Fred simply insisted there was no other way.
He insisted because his dissertation was about building a different kind of relationship between his nation and Canada, between his community and the university. He wasn’t going to just talk about decolonizing the relationship, he was determined to embody it, and he was determined that the university would as well.
This was a Mi’kmaw dissertation on the grounds of Mi’kmaw intellectual traditions, ethics, and politics.
The defense was unlike anything I have ever witnessed within the academy. The community hall was packed with representatives from band councils, the Sante Mawiomi, and probably close to 300 relatives, friends, children, and supporters from other communities. The entire defense was in Mi’gmaw, led by community Elders, leaders, and Knowledge Holders—the real intellectuals in this case.
There was ceremony. There was song and prayer. At the end, there was a huge feast and giveaway. It went on for the full day and into the night. It was one of the most moving events I have ever witnessed, and it changed me. It challenged me to be less cynical about academics and institutions because the strength and persistence of this one Mi’gmaw man and the support of his community changed things.
I honestly never thought he’d get his degree, because I knew he’d walk away rather than compromise. He had my unconditional support either way. Fred is one of the most brilliant thinkers I’ve ever met, and he was uncompromising in his insistence that the university meet him halfway. I never thought an institution would.
All of these stories came flooding back to me this week as I watched the RCMP attack the nonviolent anti-fracking protestors at Elsipogtog with rubber bullets, an armored vehicle, tear gas, fists, police dogs, and pepper spray. The kind of stories I learned in Mi’gmagi will never make it into the mainstream media, and most Canadians will never hear them.
Instead, Canadians will hear recycled propaganda as the mainstream media blindly goes about repeating the press releases sent to them by the RCMP designed to portray Mi’kmaw protestors as violent and unruly in order to justify their own colonial violence. The only images most Canadians will see is of the three hunting rifles, a basket full of bullets and the burning police cars, and most will be happy to draw their own conclusions based on the news—that the Mi’kmaq are angry and violent, that they have no land rights, and that they deserved to be beaten, arrested, criminalized, jailed, shamed, and erased.
The story here, the real story, is virtually the same story in every indigenous nation: Over the past several centuries we have been violently dispossessed of most of our land to make room for settlement and resource development. The active system of settler colonialism maintains that dispossession and erases us from the consciousness of settler Canadians except in ways that is deemed acceptable and non-threatening to the state.
We start out dissenting and registering our dissent through state-sanctioned mechanisms like environmental impact assessments. Our dissent is ignored. Some of us explore Canadian legal strategies, even though the courts are stacked against us. Slowly but surely we get backed into a corner where the only thing left to do is to put our bodies on the land. The response is always the same—intimidation, force, violence, media smear campaigns, criminalization, silence, talk, negotiation, “new relationships,” promises, placated resistance, and then more broken promises.
Then the cycle repeats itself.
This is why it is absolutely critical that our conversations about reconciliation include the land. We simply cannot build a new relationship with Canada until we can talk openly about sharing the land in a way that ensures the continuation of indigenous cultures and lifeways for the coming generations. The dispossession of indigenous peoples from our homelands is the root cause of every problem we face, whether it is missing or murdered indigenous women, fracking, pipelines, deforestation, mining, environmental contamination, or social issues as a result of imposed poverty.
So we are faced with a choice. We can continue to show the photos of the three hunting rifles and the burnt-out cop cars on every mainstream media outlet ad nauseam and paint the Mi’kmaq with every racist stereotype we know, or we can dig deeper.
We can seek out the image of strong, calm Mi’kmaq women and children armed with drums and feathers and ask ourselves what would motivate mothers, grandmothers, aunties, sisters, and daughters to stand up and say enough is enough. We can learn about the 400 years these people and their ancestors have spent resisting dispossession and erasure. We can learn about how they began their reconciliation process in the mid-1700s when they forged Peace and Friendship treaties. We can learn about why they chose to put their bodies on the land to protect their lands and waters against fracking because—setting the willfully ignorant and racists aside—sane, intelligent people should be standing with them.
Our bodies should be on the land so that our grandchildren have something left to stand upon.
Leanne Simpson wrote this article for the Huffington Post, where it originally appeared. Leanne is a writer, spoken-word artist, and indigenous academic.
- Another Story From Elsipogtog (in Opinion) (thetyee.ca)
- HPC: Elsipogtog Protest: We’re Only Seeing Half the Story (sacredfirenb.com)
- “FRACK OFF!” Elsipogtog First Nation announces major land reclamation in ongoing anti-fracking struggle (tworowtimes.com)
- MC: Elsipogtog: “Clashes” 400 Years in the Making (sacredfirenb.wordpress.com)