Dear reader, you probably said to yourself self that the title of this article is absurd and preposterous. Canada is a paragon of fiscal responsibility and is a bastion of good governance in a confused world of financial instability. 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 ECB bet large and incorrectly on the outcome of the most recent 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.
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 your purview. Shouldn't you be worrying about Greece, Italy, Spain 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. Do 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.
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 neighbours 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
- A dysfunctional and inefficient government
- Huge government debt and deficits
- High household debt level
- A bubble formation in the real estate market
- A state of denial must exist in the country
- Corruption must be pervasive throughout all levels of government
This was going to be the easiest $500, 000 [less expenses] 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 newspaper. 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. In simple terms, all elected members of a government go on a paid holiday for an undetermined period of time. There is no one in charge. Unbelievable as it sounds this is Ontario's reality. Due to prorogation, the legislative arm of Ontario has decided to shut down indefinitely while one of the political parties shops around for a new leader. This would be akin to Citigroup shutting down head office for 6 or 7 months while they searched for a replacement for Vikrim Pandit. Ontario's is Canada's largest province. It owes 280 billion dollars, and its deficits are out of control. It is now sailing towards the debt abyss with no rudder, helmsman or crew.
How do you spell boondoggle
Thank goodness this was not happening in Quebec, Canada's second largest province, whose debt issues are even worse than Ontario's. Quebec's only issue is that, like Spain's reluctant province of Catalonia, Quebec's government has Separation as its main objective. I googled 'government boondoggles over a billion dollars in Canada' and came up with a startling number of hits. Gun registry, E-health cards, energy plants and I realized maybe Gustavo had a reason to be concerned. OK So Canada's governments are dysfunctional 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. It shows Canada in a very bad place. Canada has .0048% of the world's population and 3% of the world's debt. Two down 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. Canadians 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. The third item on our list has been taken care of.
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 headline condo sales plunge, prices stagnate made me think perhaps there was trouble in paradise. Canada's real estate market was showing all the signs of a classic bubble bursting. 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 precondition #4.
Don't tell me I am in denial, I refuse to believe you
Gustavo's sister, a psychiatrist in Ireland might help me with precondition # 5. 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 barely misses deficit targets, Finance minister points to strong economic fundamentals
Canada's finance minister is declaring it as a remarkably positive achievement that Canada was unable to achieve this years budget targets. 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 precondition # 5 had been met. Denial was alive and well in Canada.
The Big Owe
I cheered up a bit as I knew that corruption was not relevant in Canada. Our government and our citizens are honest and hardworking There is no corruption of government in Canada. I did not need to worry about the final precondition being met. But wait, the next page of the newspaper turned my world upside down. City engineer admits to taking kickbacks on public work projects 'The article detailed massive, pervasive and long lasting corruption in Quebec's construction industry. It makes one realize that the taxpayers of Quebec have paid hundreds of million of dollars for work that should have cost a fraction of the amount. The speculation is that this behaviour is rampant throughout Canada. Government overspending and corruption has existed in Canada for years. 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]
While I was now thoroughly saddened by the fact that precondition #6 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 Jimmy Buffet's Margaritaville, 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, like Tom Cruise, 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 worlds 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.