Dear Reader, you probably said to yourself that the premise of this article is absurd and preposterous. Canada is a paragon of fiscal responsibility. It is a bastion of good governance in a confused world of financial instability. It is a shining beacon of democracy, the envy of the world. I would have agreed with you until I received a very disturbing early morning phone call from Gustavo Laframboise-Pierre, the Director of Statistical Creation, at the European Central Bank [ECB]. My relationship with Gustavo LaFramboise-Pierre went back many years. He had been my bookie since 1980 when I began my career in the investment industry. His life took a significant turn for the better when a senior member of the European Central Bank [ECB] bet large and incorrectly on the outcome of the 2010 World Cup. The only way the senior member of the ECB could settle the debt was to offer Gustavo a high paying sinecure at the ECB. Overnight, Gustavo found himself living in Paris, with the responsibility of fabricating fictional statistics to support whatever policies were being propagated by the world's central banks. Whether the need of the Central Banks was to convince Main Street that 'Perpetual Money Printing was a valid monetary policy or inveigle the world to continue to surmise that Japan, with a national debt more than twice the size of its economy is anything but a failed nation state, Gustavo creates a veritable blizzard of data that purports to support whatever alternate reality bankers desire the public to believe. His prowess at inventing new words such as 'tapering', ring fencing, and 'Euro Stability' made him invaluable. Gustavo's almost sociopathic desire to enrich himself personally outweighed any qualms he might have felt about perpetuating a fraud on the entire world. Hence he excelled at his job. His performance even had some very influential people encouraging him to consider politics. Gustavo clearly had the 'Right Stuff' to be a leader.
Why would the ECB care about Canada?
Gustavo sounded desperate, "David I need your help, I have just been handed a top secret report that expresses deep concern about Canada's financial stability. The report indicates that Canada could default on its debt and trigger a global meltdown in the world's debt markets". I laughed and asked Gustavo how much wine he had consumed with breakfast." He was not amused. "I am serious David; this report indicates that Canada is on the edge of the abyss and ready to step off. I need you to do some research for me and help disprove this report." Gustavo, why does the ECB care about Canada, isn't that a little out of the ECB's purview. Shouldn't you be worrying about Germany, Greece, Italy, Spain, Cyprus and France?" "David, if Canada's economy has a meltdown and its debt becomes a problem, it will trigger a domino effect around the world. Canada's meltdown would be catastrophic to the global debt markets. Europe would be dragged into the abyss".
Standard consultants fee of $10, 000 [USD] per day to a maximum of $500,000"
I thought he was being preposterous but as a consultant to governments and their agencies I had a keen eye and I saw an opportunity to make some money. I sounded sincere and indicated that I agreed that it was an important issue that merited analysis. I enquired delicately on the subject of remuneration. Gustavo was quick to respond. "We will pay you the standard consultants fee of $10, 000 [USD] per day to a maximum of $500,000". [I always found it amusing that the ECB insisted in doing business in USD. Did they know something we do not know?] Gustavo continued, "As usual I expect you to hire my sister and my son as your assistants and pay them each $2,500 per day." I groaned, Gustavo always did this to me.
His son was 4 years old and had already accumulated enough money from these types of contracts to put himself through Harvard Medical School. His only contribution would take place if a client wanted the report done in crayon or finger painted. However that still left $5,000 a day for me so it was 'game on'.
The crack of noon
Gustavo, this project will be difficult and time consuming but I will squeeze it in to my busy schedule. I hung up and got ready to work. I went out my front door and took my neighbor's recently delivered copy of the Globe and Mail, Canada's National Newspaper, so that I could begin my research. Dear Reader I was not stealing the newspaper from my neighbor. My neighbor was a Member of Parliament. He never awoke until the 'crack of noon'; I would return the newspaper long before then. I sat down at the kitchen table, prepared my breakfast, [cold pizza left over from a party I had last week end], poured some coffee in my glass of whisky, [Jack Daniels, of course] and opened the newspaper to begin my research. Dear Reader we can, I am sure, all agree that in order for a country to step over the edge and into the abyss of the debt crisis six key elements must exist as a precondition to economic disaster.
Six preconditions for disaster
- 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 expense] I ever made. Canada is the world's leader in good governance and efficiency. Everyone knows this fact except the anarchists at the ECB that produced the report that had Gustavo so upset.
Prorogation, there is a word you do not see very often
However I got a little queasy when I read the first headline in the Globe and Mail, Canada's national. The gist of the headline was that Ontario's unelected Premier was considering calling an election to legitimize the Liberal party's hold on power. This curious circumstance was enabled by a little known aspect of Canada's laws. In Canada, governments are allowed to suspend democracy at their leisure by using something called prorogation. Prorogation of Parliament, is usually activated by a ruling party when the 'scandal du jour' is proving to be too intense. In Ontario democracy was temporarily suspended in 2013. A new premier was appointed by the ruling party without consulting the electorate. Only now, is Ontario's unelected Premier considering scheduling a pesky and tedious election to see what the opinion of Main Street might be on this issue. Prorogation is an abuse of power. Prorogation should not be confused with Pierogi, [which as we all know is a tasty dumpling.] Prorogation of Parliament is a procedure to discontinue the meetings of a legislative body without dissolving it. This would be akin to a publicly traded company shutting down its head office for 6 or 7 months to avoid explaining disappointing financial results. Ontario is Canada's largest province. It owes 280 billion dollars, and its deficits are out of control. It is currently being lead by an unelected Premier. Prorogation helped the ruling party in Ontario avoid difficult questions about corruption. The federal government was so impressed they decided to suspend democracy for a period of time by prorogation to avoid any oversight on their own corruption problems. Fortunately for both levels of government the outrage one would expect from the people did not occur as Canada's 'Main Street' was transfixed' by the chaos in Toronto, Canada's largest city. Like Ontario, Toronto is now governed by an unelected leader. The elected mayor had his powers suspended after, well it's hard to describe, Dear Reader just Google Mayor of Toronto and any one of the following terms, 'crack cocaine', 'drunken stupor, 'rant video,' 'Jamaican patois obscenities,' 'drug lords' 'disgusting sexual innuendo' 'viral videos, and 'drunk driving'. Any one of these searches will, I am sure describe adequately, the dysfunctional state of democracy in Toronto.
Thank goodness this was not happening in Quebec, Canada's second largest province, whose debt issues are even worse than Ontario's. Oh wait Dear Reader methinks I spoke too soon. Quebec's only issue is that, like Spain's reluctant province of Catalonia, Quebec's government has separation as its main objective. To achieve this goal, Quebec's government is pursuing an agenda that involves suspending the "Freedom of Religion" currently enjoyed by its citizens. It has introduced legislation deceptively called, the Charter of Values . This legislation will ensure discrimination against individuals who have religious beliefs. This legislation is an attempt to secure primacy for the 'pure laine' of Quebec, by encouraging anyone who is not 'pure laine' to leave the province. The separatist Quebec government is attempting to secure 'Fortress Quebec' prior to the next attempt at separating from Canada.
By capable I mean not currently in jail
There is an understanding in Quebec that one must move quickly. Quebec's Charbonneau Commission, tasked with investigating government corruption is discovering abuse of power on such a massive scale that one wonders if there will be anyone left capable [By capable, I mean not currently indicted or not currently in jail] of governing the province. At least Quebec will not need to worry about Canada's Senate interfering. Canada's Senate, the people's unelected body of sober second thought, tasked with the responsibly of protecting the people's interest is currently the subject of myriad investigations relating to corruption, abuse of power, fraud, theft, stupidity and hubris.
How do you spell boondoggle?
I then googled boondoggles over a billion dollars in Canada and came up with a startling number of hits. Gun registry, E-health cards, energy plants, G-20 summit, Pan Am Games and I realized maybe Gustavo had a reason to be concerned. OK, so Canada's governments are dysfunctional, corrupt and inefficient. One precondition met and five to go.
That was quick
Dear Reader I did not need to do any research on the second precondition, huge debts and deficits. By now we are all familiar with the global debt clock. Canada's accumulated debt, when one considers provincial debt as well, is almost two trillion dollars and rising. Two preconditions for disaster achieved and four preconditions to go.
I owe I owe, It is off to work I go
I was no longer queasy I was distinctly dizzy. I reached for my cold pizza and took a long sip from the bottle of Jack Daniels as I viewed the next article. It related to the third precondition required for a country's economic meltdown, high household debt. Canadian's debt soars into the danger zone screamed the headline. Canadian's household indebtedness is now worse than our American cousins debt level was just before they jumped off the subprime cliff and into the abyss. Canadians it seems have a very, dare I say it, American appetite for debt. In December 2013 Canada's household debt reached a new record. The third item on our list, hopeless amounts of household debt, had been achieved. I placed a thick check mark beside it on my list.
Why are bubbles easier to identify after they burst?
I dipped my pizza in my whisky and turned to the next page. Surely there was some good news. Yikes, I thought as I looked at the next headline. Canada's real estate market has been fantastic for the last few years. Prices have soared. There is no way that Canada's real estate market could be a bubble that would soon burst. However the research and comments from Deutsche Bank stating that Canada's real estate market was overvalued by as much as 60% was shocking. There clearly is trouble in paradise.
I could make Gustavo's son work for his fee
Canada's real estate market was showing all the signs of a classic bubble ready to burst. It also occurred to me that I could actually make Gustavo's son work for his portion of the fee. He could use his crayons and draw me a nice picture of a bubble bursting for my report. In any event, I put a checkmark beside the fourth precondition, a classic real estate bubble formation.
Don't tell me I am in denial, I refuse to believe you
Gustavo's sister, a psychiatrist in Ireland might help me with the fifth precondition for Canada's economic Waterloo. 'Denial' is a very complicated issue. It is the reason that so many diseases and disorders are not treated. In order to get better one must first recognize the problem. If my AA meetings taught me anything it is that you must recognize the problem before you can fix it. Imagine my consternation when I read the next headline. Canada's debt problem, the numbers just do not add up . Canada's debt [almost 2 trillion dollars] when one considers the additional burden of provincial debt is actually one of the most appalling realities in the world. Like governments around the world the Canadian government will proclaim to all and sundry that the problem will be solved within the next ten years.
You want your banker to laugh.
Dear Reader should you wish to amuse your banker, try telling your banker not to worry about all the money you owe them because you have a ten year plan, not to reduce the debt, but to simply stop adding to your debt at the end of 10 years. You can increase the volume of your bankers hysterical laughter by indicating that the cornerstone of your plan is to increase your income by 30% each year by, well, really, let us be honest, like most governments plans to solve its debt problem, your plan is just a dream, similar to Canada's debt reduction plan.
My most recent AA meeting
My emotions as I read the article reminded me of the reaction of the audience at my most recent AA meeting when I announced that I had reduced my alcohol consumption by 10%. No words were said, but it was clear that everyone in the room was saddened, worried and disappointed with my declaration. Unfortunately denial is still the main component of Canada's economic strategy. [Dear Reader I appreciate your concern, it is possible that I have my own denial issues to resolve'] However I had to admit that fifth precondition for a country preparing to cross the 'Debt Rubicon' had been met. Denial was alive and well in Canada.
The Big Owe
Prior to my research I would never have believed that Canada had challenges with corruption. However, and I am not clear whether these items should fall under the category, as previously discussed of dysfunctional government or in their own separate category. I knew now that corruption was not just an inconvenient truth; it was permeating the fabric of Canada's democracy. From the senate scandals, the corruption inquiries on Quebec, to the abuse of power oozing though countless government boondoggles it is clear that Canada is "in trouble plenty." Government overspending and corruption has existed in Canada for years. Even Canada's smallest province, Prince Edward Island is trying to see how far it can go in denying its citizens 'Freedom of Information' There is a reason Canada, in addition to inventing the term 'Eh' [pronounced 'A'] also invented the term 'the Big Owe' a reference to the 'Mother of all Corrupt Boondoggles', the multibillion dollar construction and collapse [well sort of a collapse] of Montreal's Olympic Stadium. [The Big Owe]
Ka-ching, significant paydays would be coming my way
While I was now thoroughly saddened by the fact that sixth and final precondition for a country's sudden economic tailspin had been met. I must admit I was also a little excited. It was times like these that governments reach out to consultants for thoughtful research, analysis, and recommendations. I sensed there would be some significant paydays coming my way. I looked at my watch. I had been hard at work for almost an hour. My only challenge now would be to delay submission of my report for 49 days so that Gustavo's sister, his son and I could collect the full $500,000 fee.
Wasting away in Margaritaville
I called Gustavo, he was almost incoherent. The luncheon he indicated I was interrupting was clearly taking place in the town made legendary, by a song extolling its virtues. Margaritaville is a popular destination for many bankers. He was quite drunk. "Gustavo, I just want to clarify something. If I do this research and find out that your internal report is actually correct will I still be paid?" Gustavo, angry at being interrupted in the middle of his luncheon said, "David, if your analysis supports the findings of our internal report and indicates that Canada is quite possibly going to implode and drag Europe and the rest of the world along with it, you will not receive a penny. Are we clear?" Crystal clear, I thought to myself, I can handle the truth. Gustavo screamed into the phone in exasperation, "We want an honest, in depth analysis that concludes that Canada is great shape and that there is no cause for alarm. Now stop bothering me and 'Just do it'". As Gustavo had not seen the inside of gym in 20 years I found his reference to the Nike slogan amusing.
I am a consultant not an idiot
Dear Reader, I am a consultant not an idiot. I must ask that you disregard and forget everything you have just read. I am putting the finishing touches on my report, that much to Gustavo's delight will declare Canada as the world's most economically stable and well governed country. You must view some of the facts that you have just read as rare exceptions [no matter how many times these exceptions occur.] Furthermore you must not ask yourself the following question? If Canada is in such precarious shape how many other countries that are believed to be stable, are actually staring into the credit abyss.
Move along, nothing to see here
Please dear Reader, if anyone asks you about Canada's economic circumstances please just tell them to 'move along, nothing to see here, just keep moving.' I wiped the pizza crumbs off the newspaper, folded it neatly and returned it to my neighbor.