Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Wednesday, October 29, 2014

Sliding toward Deflation

Think of the world as an engine designed and built to run in a certain way, and at a certain speed. The fuel of the engine is growth.  The chemistry of the fuel is debt. Then imagine one half of the world (the developed countries) running at full speed for 60 years, while the other half of the world (Asia, Africa, and South America) idling. Because our half of the world has been running full speed, we have used the most debt to power our engines, and the world economy has built itself around that fact. Now imagine that so much debt has been used to fuel the engine that it is almost depleted. Meanwhile the other half of the world is just warming up its engine and has plenty of potential debt to consume. What is the logical consequence? One falls while the other soars.

Now superimpose the unfolding China/Russia/BRIC economic order that is forming to reflect that reality. Let's call it the "New Club". Roughly designed to resemble the Soviet days of trading between countries to the exclusion of others, the New Club is rapidly building a new engine. One that attempts to capitalize on each countries strengths and satisfying each countries needs. If that sounds familiar consider Karl Marx's famous borrowed slogan " From each according to his ability, to each according to his need". Essentially, this is the new slogan of the New Club. China has the currency and the manpower. Russia has the natural resources, technology, and the know how. India has the population and science. South America has specific resources. Africa has population and need.

Together, these countries are forming a new world order. They have combined resources to create a new IMF that will compete with the old western IMF to loan money to areas like Africa and South America. They will control the debt that fires those engines. Russia, China and India (almost 50% of the world population) have entered into formal agreements to use their own currencies to pay for resources from each other. They are excluding the US dollar from their market place as an economic foundation. Making it obsolete. They are reaching deeply into Africa in fierce competition with the US to develop that continent as a place to do business. They are quickly becoming the savior for many South American countries who have tapped out their debt in the Old Club and need a rescue line.

Of course, when one grows the other dies, and the other would be the western world, or the "Old Club". Our ability to consume and pay debt has over reached its maximum. That is reflected in the over valued prices we pay for everything compared to what would be paid for the same object in the Club. In some European countries that has led to such things as inter-generational mortgages on homes. In the US it led to the "housing bubble" in 2008. The price we pay for fuel, compared to the actual price per barrel on the international market, is a good indicator of how skewed the economic reality is. While world oil prices plummet, prices at the pump don't. They stay artificially high. The same can be said for the stock markets. They are valued at more than their 2008 pre-crash worth, despite the indebtedness/under-performance of the corporations listed on them. In other words, there is a space between where they should be at in pure economic terms, and where they exist today. An artificial bubble. An artificial economy. Prices inflated to try and maintain our way of life, our government coffers, and our debt.

While there was only one game in town, that game of artificial economy could be maintained to one degree or another. There would be cyclical recessions to try and balance debt vs income vs prices from time to time, but the system could carry on. But, more dollars printed to maintain that growth created inflation in prices.Our system continued to grow fed on inflation rather than real economic wealth. We created a society based on the artificial. Now we are facing a New Club that, for the most part, will not. As the two realities start to compete the Old Club will lose market share for its products, and a glut will create deflation. 

As sales slide, and corporations within the Old Club try to adjust their production downward, each country's GDP begins to shrink - in other words deflate. That leads to serious consequences for an economic order built on growth fueled by debt. A good current example of this is Germany's recent slide. Germany is the economic engine of Europe, and as its GDP continues to fall so do the hopes of the rest of the continent. Another good example is long term bond costs. Muskrat Falls financing was secured for 50 years at less then 3% interest. Indicative that the banks understand what is coming. What else can explain that length of commitment for such a small return on investment. Perhaps one of the most clear examples of things to come is the Brazilian company Rio Tinto. While North American iron ore mines close, scale back or simply don't develop, Rio Tinto is increasing production by 25%. All these corporations compete on the international market, yet they have two starkly different approaches. Perhaps the key to understanding  this is one corporation is in a BRIC country, and a strong m,ember of the new club, while the others are stuck in the old. 

There are signs all around us if we choose to really see them. The world is changing - for the better for some, and the opposite for others. Reality, or deflation as a measure of it, is coming sooner rather than later. There is really no way for governments to prepare for it financially. Instead, and perhaps a very real indication of intent, police forces through out the western world have been armed like military organizations. Like the banks, our governments see the inevitable deflation of our economies, and understand the social chaos that must follow. At that point order will take precedence over rights. It will be a new world for the Old Club.   


Sunday, October 26, 2014

Lest We Forget

Lest we forget. That is the motto of the last two world wars. The question could be : "Lest we forget what?" Is it the men and women who died, were wounded and forever scarred by war that we are meant not to forget? Not likely, in the sense that we never knew them. Some of us had loved ones in the war, in my case a father, but I would never forget him in any case. Is it the mass destruction, the slaughter of civilians, the absolute firepower that these armies unleashed that we are meant to forget? I would argue it's all of these things, summed up in one word - sacrifice.

But, what was that sacrifice for? In different countries there were as many different reasons. For the Russians it was the "Great Patriotic War". For the British Empire it was "Empire War", and for the Americans it was the "Mess with us and die War". In the sixty odd years since the last world war we commonly see that struggle as the "War for Freedom". Freedom meaning our society would never become a police state as was the case with Nazi Germany. Personal freedom, democracy, and the rule of law would guide our nation. We prided ourselves on this, and the average person on the streets never questions it should be any other way.

Then, in a murderous, chaotic moment at the National War Monument, and then Parliament Hill, all that came into question. Or did it? As a young Corporal lay dying near the tomb of the Unknown Soldier, and as the young attacker who caused his death died in a hail of bullets in the Hall of Honour, national media were already saying "This changes Canada forever". If that sounds familiar it's likely your mind wondering back to the events of "911" and the rhetoric that came afterward from the politicians: the world is changed; America has changed; the Patriot Act; Guantanamo; wars in Iraq and Afghanistan; making the world safe for democracy; you are with us or against us. Yes, the ghosts of 911 immediately sprang to life in the Canadian national media.

But, is that really true? Perhaps I missed it? At what point did the Canadian people agree to abandon their freedom for "security"? Did we agree to forfeit our freedom that was guaranteed by the deaths of over 100,000 Canadians in two world wars over the deaths of two soldiers at the hands of two now dead ISIS sympathizers? Is our freedom, our way of life really that weak? Are we that insecure? Are we prepared to capitulate and surrender the gift of freedom, earned by the blood of our ancestors on foreign battle fields, so that we may know what it is to not live in a police state?

After the attack in Ottawa by a lone gunman the military was ordered not to wear their uniforms anywhere in the country while off base. Then, a day later, the decision was overturned. It was an immediate surrender of pride, freedom, and honour by politicians in a panic. An over reaction. What the might of Nazi Germany could not do, one lone gunman achieved - if only briefly. The national media, particularly the state-owned CBC, immediately began the call for restricting our freedom to our Parliament and greater state intrusions into our personal lives. All in the name of security. All in the name of the "greater good". Just like 911. Hopefully, that will face the same fate as the order not to wear uniforms.

The bigger lesson in all of this is just how ready "the powers to be" are to sacrifice our rights in the name of security. It was almost like they were looking for an excuse to do that, and once presented, they quickly grasped it. However, they ignore one very crucial thing. The blood of 100,000 dead earned us the right to keep that freedom. The hundreds of thousands of men and women wounded and altered by their war experience for life earned us that right. Rights that are guaranteed by our Constitution now. Freedom that is not subject to political whims or expediency. Freedom that is eternal as the flame that burns on Parliament Hill. It is paid for in full. It makes us who we are. Without it we are nothing.

The lesson for people like ISIS is that Canada can be rocked by the death of two soldiers at home. That the collective Canadian psyche is so weak that a lone gunman can bring it down by one moment of madness. Far from deterring another attack by the likes of ISIS, Canada's response must be mightily encouraging to them. Therein lies the danger. We are showing weakness. After all, ISIS doesn't care about our societal values. It cares about our personal values. It cares that we insist on freedom and equality for women, as an example. There are many others. The point is, they want to change us more than change our government. If we allow this attack to in any way alter us then they have won. When we should be giving a Churchill-like "some chicken, some neck", we instead give a Chamberlain-like "peace in our time".

Appeasing, even rewarding people like ISIS with the degradation of our freedom speaks more about us than them. It says we are weak, scared, and without courage of conviction. It says we do not find strength in the fields of Canadian crosses oversees, but rather we scurry to whatever system that will allow us to freely shop at Walmart. It says our society, and our belief system, is based on convenience rather than principle. Perhaps people like ISIS already suspect this about us. Perhaps it's even true. But, it doesn't have to be. We don't have to stand on a cold highway, and awkwardly (even bizarrely)  sing O Canada and clap as if we were at a hockey game as a lone hearse carries a dead soldier to a funeral home. Perhaps we could stand in steely silence, honour the man's sacrifice, and swear to ourselves and him that we won't trade off the freedom given by the men and women whose monument he had guarded. That would be the ultimate statement. The strength of our character and values was tested in two world wars. We prevailed. That mantle was given to us. Lest we forget.

Saturday, October 11, 2014

Newfoundland and Labrador's Revolution

This piece is my opinion, but may be shared by many.

It's been four and a half years since I returned to my ancestral home in Newfoundland and Labrador. A stranger in a strange land to be sure. The haunting, almost pre-historic beauty of the land and sea spoke directly to my soul: "this is where you're meant to be-this is home". However, as I was to find out, not all was well in Newfoundland and Labrador.

Awash in oil revenue, the likes of which it had never seen, and led by a "messiah"-like figure in Danny Williams, the Province was in  full blown party mode. Drunk on promises of never ending fortune and neo-nationalist calls by Williams to be "Masters in our own House" people were unwilling or unable to see, or didn't want to hear, that Williams was leading them into financial ruin. For those that don't know, this place has always looked to a "strong man" for leadership - likely dating to its Irish roots. Williams fit the bill. Local son done well, with gold in his pocket and a silver tongue firmly placed in cheek. "Danny" could do no wrong.

Williams cherished the role. Known for having an ego a mile wide and a mile long, Williams stoked the people's passion for a better place. A place where they were in absolute control of their destiny. The oil revenues that never existed before 2003 became 33% of a provincial budget suddenly and massively expanded. The economy roared to life and Newfoundlanders and Labradorians jumped on for the ride. New homes sprang up like grass in the spring. Every imaginable man-toy you can imagine popped up in every yard and driveway through the land. Businesses became enriched by government and personal debt-driven spending, and as long as that money kept coming from the provincial government the party would go on.

Unfortunately, Newfoundland and Labrador had never experienced a boom, and therefore never experienced a bust. It's the inevitable result of a resource dependent economy that exports to far away lands. Like any business, the far away lands are the customers, and when things go bad for the customers things also go bad for the suppliers - us. That was already happening back in 2010 when I first came home. China and Russia were pushing for a new world currency at the Davos International Forum on economy. They were already engaged in a financial, low-grade economic war with the US. Along with them were the BRIC countries - most notably India, Iran and Brazil. Also back in 2010 the US was massively expanding fracking to release natural gas and oil reserves which would put them in a position of energy independence. All these major, and very obvious foreign forces were already at play then, the result of which is starting to be seriously felt now. Yet, nobody in the government of Newfoundland and Labrador twigged on?

Despite all the external factors, Williams continued to sell people that somehow this Province could be "Masters of our own House". He knew better. In the world of global economies, no country is a master of itself. Not the United States, not Europe, not Asia - nobody. Williams knew this all too well being a businessman with international holdings. Yet, like the Pied Piper of Newfoundland, he led the people in a trance down a very murky road. One that was to his liking and his benefit.

He bragged of the investments in healthcare, but chose to have his heart-saving surgery done in the US. He railed against giveaways of provincial resources, but happily bought Crown Land (enough to build a small city) at a well under man-dated price of just over $300 an acre. He sold his offshore oil service companies to Quebec firm SNC Lavalin while they did work for the government on the Lower Churchill development - despite chastising the previous Liberal government for conflicts of interest. He appointed his former employees, supporters and friends to places throughout the hierarchy of the government, despite lambasting the Liberals for doing the same. In short, Williams behaved as Premier as if the rules of modern politics and economy did not apply to him. Unfortunately, it was ours, not his, money and destiny at stake. That was apparently lost on him.

And if you dared to stand up against him, well, there was a special place in hell for you. The best way I can describe this treatment for dissenters of Williams' will are the words now Finance Minister Ross Wiseman's Executive Assistant, Chick Cholock, leveled at me, in my home, and in front of my wife, with the kids playing upstairs. I had announced that I was considering running for the leadership of the Party, suddenly available after Williams' quick exit. The words were this:

" If you try and run for the leadership we will destroy you. We will destroy you financially. We will destroy you personally. We will destroy your name."

Then, just as he left my home, he turned at the door, and said:

" I am with the backroom, and we hope you make the right decision."

It's a personal story for me, but it's useful. In the Williams' era to dissent or deviate from the "backroom" was to invite ruin upon yourself any your family. Newfoundlanders of course already knew this. The idea that opposing meant losing everything did not appeal to many. In the nut shell, this was how Williams enforced his will. Reward is great, but so is punishment.

Four years later things have changed. The people are changing. Their expectations are changing. They are seeking answers to the questions that are now becoming obvious to them. Why are the roads still so bad after $16 billion in oil revenue has come into the coffers? Why are people still leaving? Why are the much vaulted iron ore projects in Labrador evaporating? Why are civil service jobs being cut? Is Muskrat Falls really the project we've been sold? What will happen to us as oil prices continue to fall? Why can't I sell my home?

Williams and, most recently new premier Paul Davis, continue to try and suppress dissent by filing lawsuits like confetti at dissenters. A desperate bid to keep control in a place spinning out of their control. Dissent is now loud. Dissent is unstoppable. Not just for the government in place now, but for the one to come next year. The political culture in Newfoundland and Labrador has under gone a massive and sudden change brought about by a sense of betrayal. A realization that somehow the all knowing Williams has lead them afar. Reality is crushing fantasy, and people are beginning to realize the cost to them personally may well be enormous. A moment in history, of a place 500 years old, has been squandered. That one of their own, a man they trusted and revered, may have betrayed them. Danny Williams often referred to people who refused to see the value of his actions as "traitors". Now, the same words may well be used against him. Such is the Newfoundland and Labrador revolution well under way.