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)

Tuesday, March 29, 2016

A Budget plan for NL 2016

In two weeks from now the provincial government will roll out its budget for fiscal 2016-17. In what can only be described as a political and economic nightmare, the government is facing a budget deficit of about $2.4 billion from last year, and likely higher for this year. Key factors in calling the deficit higher this year are: a continuing decline in oil prices well below even the Liberals preliminary projections for the year just months ago; recessionary pressures caused by global economic slowdown and localized economic implosion; increasing unemployment; and curtailing of discretionary spending in the economy as a whole. Not a pretty picture.

So how to tackle the budgetary crisis? Well, the first step is realizing that it is not a spending problem or a revenue problem - it is both. That means the budget solutions need to come in both areas. In effect, the government needs to go into a defensive shell in order to preserve what financial integrity is left of the province. To show how difficult and painful that will be I've drawn up a rather draconian plan, illustrated the dollars saved, and hopefully give a sense of just how radically we must transform ourselves in a very short period of time - just to survive.

The plan goes like this:


1) Drivers Licences - renewed annually at a rate of $50 per year -       $19,000,000.00

2) Gas Tax - 20% increase in gas taxes -                                               $37,150,000.00

3) Tobacco Tax - 20% increase in taxes -                                              $31,415,000.00

4) Alcohol Tax - 20% (new tax)                                                            $31,575,000.00

5) HST - 2% increase                                                                           $200,000,000.00


1) 4 day work week for all government employees                              $192,800,000.00

2) 10% cut across all government operations (incl health care)           $826,000,000.00

3) 20% cut in all professional service contracts                                     $96,375,000.00

4) 20% cut in all purchased goods                                                         $63,501,000.00

5) 20% cut in all MHAs salaries                                                             $1,000,000.00

6) Dissolving meaningless government offices/bureaus                       $60,000,000.00

7) Suspending the Muskrat Falls project                                              $600,000,000.00

TOTAL REALIZED                                                                          $2,160,191,000.00

PROJECTED DEFICIT                                                                    $2,400,000,000.00

DEFICIT AFTER THESE MEASURES                                             $239,809,000.00

So, there it is. A very draconian set of measures that would deal with both the deficit and the bloated size of our government's operations. One is an immediate tool for an immediate crisis, and one is a tool for surgically re-sizing our government for the future. A budget such as this is bound to create a deeper recession for the short term, but we are heading into one in any case - if we aren't there already. As painful as it is, in this type of plan everyone suffers. The 70% who don't pay any income tax at all are forced to share the burden with those that do. That's key, because there are far too many people in the province sitting back in the weeds, and surviving on black market jobs, etc. These people need to pay their fair share - especially now. It also forces business to take a hit by reducing professional service and supply contracts as well as sustaining the effects of an increased HST and diminishing disposable income.

Now everyone will argue they can't take the hit, but the reality is that everyone must take the hit. There is no longer a choice. But, and it's a huge but, the government can't even think of implementing an austerity budget without suspending the Muskrat Falls project. To ask the people to suffer in this way while allowing the completely irresponsible expenditure of funds on Muskrat Falls is beyond the pale, and would likely result in large scale social unrest - as if we don't have enough problems as it is.

Wednesday, March 23, 2016

Nalcor Steals From the Upper Churchill 2015

Now you won't find a single Newfoundlander who thinks taking power from the Upper Churchill dam is stealing. It's just taking our power that the Quebecers are stealing from us under the guise of the Power Contract 1969. Simple as that. Well, it's not as simple as that. Emotionally perhaps, but legally not so much.

For some reason, as yet unexplained to the public of this province, Nalcor, via its wholly owned subsidiary Newfoundland and Labrador Hydro, and its majority controlled CFLCo, has stolen power from the Upper Churchill. A lot of power. Way more power than it is allowed under the Power Contract. Yes, the contract the Supreme Court of Canada has already found is binding (1984 Reference Question).

For fiscal 2014, 2014 sales from the Upper Churchill to Newfoundland and Labrador Power (NLH) were $6, 067,000.00 according to CFLCo's financial statements. However, and it's a huge however, in fiscal 2015 NHL was sold $43,610,000.00 worth of power from the Upper Churchill representing almost 30% of CFLCo's sales for that year. According to the Power Contract, NLH can only buy about 6% of the power generated at the Upper Churchill. That means that NLH took 500% more power in 2015 than it was lawful to do. In other words, they stole it.

Correspondingly, Nalcor lost $51 million in oil sales revenue on the year. Was that massive power grab of Upper Churchill power an attempt to make its balance sheet look better than the $19 million over all it did lose? Hard to say, and legally speaking makes no difference. The bottom line is Nalcor, presumably with the approval of the Davis PC government, stole $37,000,000.00 in power (once you subtract the ordinary $6,067,000 from the gross sales for 2015 of $43,610,000.00.

What does that mean for us? It means the taxpayer/ratepayer is now liable for that in damages - plus interest, plus costs, including special costs. It also means our provincial utility is stealing. Shocking as it may seem, and yet to be discussed in the public for some reason, the quiet release of Nalcor's 2015 Business and Financial Report here says it all. 

Sunday, March 20, 2016

Going Negative (Rates)

It started in Europe, has spread to Japan, and sits on the horizon for other central banks across the western world - negative rates. Historically, central banks used their interest rate setting power to curb inflation. When the national economies became too hot central banks would continuously raise their interest rate that banks had to pay in order to borrow money. Banks would then increase their interest rates to clients. Eventually, interest rates would reach a high enough point that economic activity would slow down and typically a recession would take place. That's been the traditional way to containing too much growth too fast.

But what happens when the problem is the reverse? What happens when deflation can not be stopped, and no matter how low the central banks decrease their interest rates the economy does not reengage and bounce back to growth? That is the precise problem facing central bankers across the western world. I say western world, because Russia, and to a lesser extent China, still have fairly high national interest rates - 11% and 4.5 % respectively. Other countries like Brazil and Argentina have extremely high interest rates based on their position versus the US dollar - 14.5 % and 25 % respectively. Deflation is an issue primarily facing western economies. Economies of South America typically have excellent demographics for growth with some of the youngest populations in the world, but they can't consume due to cost of borrowing, or if they do their ability to continue borrowing will be severely restrained by interest costs.

The European Central Bank, as well as Switzerland kicked off the idea that negative central bank rates were the way to go. In reality, they had very little choice. Deflationary pressures had caused the ECB to drop rates to zero, and as the ECB was not willing to allow a recession to take place in order to correct the balance, they were forced to take the other course - negative rates. Now the Central Bank of Japan has jumped on board. These central banks now charge, rather than give interest, to banks they hold cash for. The intended effect is to create a "quantitative easing" at the central bank level. When the US economy crashed in 2008, and much of the world followed, central banks infused massive sums of money into banks to "create liquidity", or in other words give banks money almost free to spur them to lend money and get the economies growing again. However, many banks around the world horded the new money, credit remained difficult to get, and interest rates continued to tumble as national economies deflated (shrunk).

The purpose of negative rates is to act as the stick in the carrot and stick game. The carrot was the "quantitative easing" of extremely low or free interest rates charged to banks - so they would lend. They didn't, or at least not in enough volume to spark the economies. So, now the central banks have brought out the stick - negative rates. The hope is that rather than lose money to the central banks by way of negative rates, the banks will lend out cash far faster and in much greater volume - thereby spurring economic growth. The possible downside to that strategy is that banks may simply take the negative rate cost to their bottom-line, write it off at tax time, and keep their money out of a deflating economy thereby avoiding risk. Accordingly, central banks have warned they will continue to increase the negative rates they charge banks until the banks finally let their fingers off their cash stores. The gamble is that the banks will do as their told, the economy will respond to essentially free cash, and the debt ridden western economies will continue to grow.

Quite a switch in roles. The central banks used to be the place of discipline. If economies became over burdened with debt they would have recessions create by imposed higher rates. Central banks were the voice of discipline and reason in the money market. Banks on the other hand, especially the litany of them in the US, were notoriously reckless in their lending. That's how sub-prime mortgages torpedoed the US economy in 2008. Now it's the banks, once recently burned, who are holding fast to some sort of economic discipline. The crucial thing here is that central banks have abandoned their role as dealers of reality, and become essentially instruments of policy that properly belong in the hands of national governments. In other words, central banks have crossed the line, and are becoming lost in their purpose.

My bet is this: negative rates will wholly fail, and fail miserably. First off, there is nowhere left to go after negative rates. That line has been crossed. A great deal of unsupported wealth and debt is being created without interest reward - which really means the value of that wealth and debt has no real value. That's a very dangerous Rubicon to cross. It's actions like this, completely undisciplined, that are creating massive uncertainty among investors, and pointing toward gold as the only real safe haven in this deflationary period. The Chinese and the Russians know it. They've been stocking up on gold for a decade. The Germans know it. They have recalled all their gold from the US, with the final delivery scheduled for 2020.

In many ways the central banks have failed us by their own greed. Rather than forsake profit now, or even more so back in 2008, they simply took on a social role and abused their power by not holding the big companies and banks to account. They bailed them out and upset the balance of nature in the finance world. They haven't stopped crossing the line since. Their role is to let nature take its course, have businesses fail if necessary so that wealth and debt have meaning. They are meant to control consumption, not encourage it. My advice to folks is the same as always, invest whatever cash you can in gold, because the central banks have left that as the only safe bastion in these deflationary times that aren't going away any time soon.  

Friday, March 11, 2016

Mr. Wakeham Saves the Day

A tribute in kind…

Mr. Wakeham saves the day

Where in the name of the
Newfoundland tabloid gods would
we be without Bob Wakeham?

And no, I’m not like some of the clueless readers who might describe Wakeham as a bombastic has-been or one of those herpes like sores that you think has receded from your lip, only to erupt once more each week on that same lip.
Because those crude and intellectually challenged readers, ladies and gentlemen, simply have failed to realize that the day little Bob picked up his first crayon was the day journalism in our fair province took that final step to legendary. Indeed, our people should hail the wisdom of Wakeham’s words not just with a provincial holiday each year, but a cast lead statue with his ferocious eyebrows gracing every school in the land as a reminder to the very young of the land that the crayon is mightier than the sword – a Newfoundland Messiah.

And don’t pay a bit of attention to the nasty naysayers that question Bob’s Newfoundlandness.  After all, he managed to heroically fight his way back to our shores from a youth corrupted by the darkness of American culture and the hallowed halls of the University of North Dakota’s journalism college.  
And never was the inescapable evidence of Mr. Wakeham’s profound influence on our tabloid newsprint more than when, as a young fella, he refused to resign as a scribe when the Telegram killed his story on the Mount Cashel scandal. No, young Bob was as determined as his stoic jaw line to carry on the good fight.

After a decade covering fires, kittens in the trees and other exciting happenings across the province, middle-aged Bob entered the hallowed halls of the CBC. Now most of us can only look in awe at the profound influence on our national debate that fellow Newfoundlanders have had. Whether it be Marg Delahunty or the equally ferocious Mark Critch, our impact cannot be discounted in those places of power. But, no surprise to anyone that has tasted his quill, Wakeham transformed the journalistic profession by bringing court room TV to our very living rooms. Think on it. Without Bob’s unwavering influence we wouldn’t have seen OJ trying on that glove that didn’t quite fit, or the perp walk we’ve all come to embrace as the gold standard of journalism in our province.
I put it to you: We owe a debt to Mr. Wakeham that can never be met. He managed, in just one life time (that we’re aware of) to transform the boring reporting of news stories to the joyousness that graces our TVs and newsprint every day. He set the standard for online radio shows that shake our senses three times a day. I’ll grant you Mr. Wakeham has not managed to go where other great minds have gone before him – historical performers like Jerry Boyle, or Mrs. Enid. It seems downright unspeakable that his insight at the CBC has been passed over for the likes of Johnny- come- lately Rex Murphy. How is it the mother corporation can’t see the striking similarities between the two – the singular raised eyebrow of Horus and the piercing eyes to match.

 Now it seems more than unfair, indeed even unjust, that poor old Bob has been relegated to a miserly Saturday column at his old haunt. So, before you think of jumping on the band wagon that says Bob is just a crusty old fella etching out his final days in sarcasm and the rage of being passed over, remember, without that dash of Wakeham we would all be a little less Newfoundlander (Labrador is just attached b’y) 

Thursday, March 10, 2016

Political Appointments Commission DOA

It's hard to know for certain if Dwight Ball thinks people in this province are really stupid, or that because he's new to the reins of power people will blindly trust his moves, or what, but his first attempt at democratic reform is bordering on hilarious. During the last election Ball campaigned on taking the politics out of political appointments. In this province appointments have been used to reward political friends from the highest directorships to the kids raking the lawns in the parks. Patronage here isn't an art form, it's a way of life. That's common in Atlantic Canada give the historical lack of industry and jobs here.

However, to trot Bill 1 out as some sort of democratic reform is just plain insulting to the intelligence. For starters, the five unpaid members of the Commission are appointed by Cabinet. In other words, they are political appointments and the discussion surrounding their appointments will be secret as Cabinet Confidence requires. That's the poison pill. Now, if the Commission was appointed by a group of MHAs from all three parties, in an open forum, that might be something more along the lines of independent - as long as the choices had to be made unanimous consent. Given our system of government, that's probably as independent as it could get. Then, once the 3 MHAs had chosen the Commission it could be ratified by the House of Assembly, and given the status of Officers of the Legislature - like the Auditor General for example. That might grant them some immunity from political push back on appointments.

The next fatal flaw is that the contenders for the specific appointment will be kept secret and only the chosen appointee will be published. Well, in the private sector some privacy for human resources may be necessary, but they're called political appointments for a reason. They're political. They're public by nature. If a potential appointee has a problem with public scrutiny of their application, then perhaps they're not meant for public service. In any case, as the discredited PC Opposition has already pointed out, the Commission, appointed by Cabinet, may just put appoint whomever they like and cloak it in the secrecy of the Commission process. In other words, the Commission acts as a front for the Cabinet giving them someone to take the flak while they appoint who they wish. Good examples of this are health boards. They make the decisions, but those decisions are largely dictated by the government funds transferred to them. So, they become the fall guys - not the government.

Finally, the Minister in charge of the department that the appointee is going to decides from the "three finalists" who will be appointed. Well, that's just straight politics. The Premier says that the Minister must have the final say. That's not true at all. The Commission, once properly constituted, could have that say and the Minister can respect the apolitical decision. It's out of his hands. There is nothing unlawful or unethical about that. In fact, it takes away some of the ministerial accountability which may reduce the stress of his/her job. A Ministerial appointment is a political appointment, period in Canada. To say it is otherwise is to open yourself up to ridicule. And that's exactly what the Liberals have done with Bill 1.

The Liberals were already on the tightrope of credibility when they suddenly changed their tune on layoffs, P3's in health care, and the HST. They will quite literally fall from that tightrope when the budget is announced. Furthermore, this attempt to "depoliticize" the appointment process is quite frankly laughable. Literally, that's all you can do is laugh at it. Unfortunately for us, it's our democracy and institutions that bare the brunt of this foolishness, but we should be used to that by now. Bill 1 is just another attempt to deceive the people of the Province by a government that has just started its mandate, and is sailing into hurricane waters in a bathtub. That's the truly scary part.

Wednesday, March 9, 2016

Newfoundland's Political Bully Mentality

Newfoundland has a bully problem, and it's not just in the schools. In truth, Newfoundland's biggest bully problem is with the adults - especially when it comes to politics. Now the saying in Newfoundland is that politics here is a "blood sport". Nothing could be further from the truth. In country's like Saudi Arabia, or Iraq, or Lybia, etc, politics is a blood sport. Call in a team, take out a politician, etc, you get the idea. People are murdered and assassinated constantly over their political beliefs. So, for Newfoundlanders to call what passes as politics here a blood sport is giving it far more credit than it's worth. Politics in this province is more along the lines of high school cliques.

The first problem in Newfoundland politics is frankly nobody here understands how a normal democracy is meant to function. That's the simple truth that most Newfoundlanders will be truly offended by, but it is what it is. The province has been held together by a few families, bolstered by every law firm that can get its foot through the door, and then sprinkled down to those willing to do anything for a few scraps of public money. That's what passes for politics here. Nobody gets that politics is an order, and the purpose of the order is to maintain orderly human existence. I should say they get that part, but they don't get the part that rules come with the order. The first, and cardinal rule of exercising power is:

"Power, use it, but abuse it and lose it."

That's the Golden Rule. It applies to the front room politicians, the backroom politicians, the gatekeepers, the mentors, and even the black side of politics. It applies to European Presidents and Canadian Prime Ministers. It applies. Their collective purpose is to support the order by doing their jobs in accordance with the above noted rule. Not in Newfoundland though. Here it's might makes right - or in other words the bully mentality. Codes of Conduct sworn to are ignored by MHAs and Cabinet Ministers alike. Blatantly lying to the public on a daily basis is so obvious, and so insulting to the intelligence that it's hard to fathom. It has all devolved now into one gigantic mess with zero public accountability. A mess caused by political corruption, political stupidity, and allowed to happen by the bully mentality.

The seeming inability of Newfoundlanders to understand how badly their system of government has become speaks largely to 500 years of political bully mentality. It's the norm. It dates back to the "merchants" and the "fisherman". That however is no longer an excuse. There are now plenty of educated young Newfoundlanders who can step up and make a difference. No doubt many of them are sitting in their political science classes and observing the implosion of their province. And it's not all about oil. In fact, very little of it has to do with the collapse of the oil price. The political implosion began well before the oil implosion began. 

Over the past five years a political revolution has been happening in Newfoundland. It's been happening on the airwaves to some degree, but mostly it's been happening behind the scenes. A dark war, a quiet war, where the political and economic casualties just keep piling up publicly - yet nobody here seems to get it. So here it is: The political families, and their cohorts, have abused their power and now they're going to lose it. In fact, that is already happening between some families, and has for a short while now. You are either onside with the change to a proper democracy for Newfoundland or you're on the side that needs to be destroyed for the betterment of all Newfoundlanders. That's the bottom line. It blows me away that so called "credible" people in this province haven't been able to see what's been happening over the past five years - let alone where it's coming from. Of course, "credibility" in Newfoundland politics is defined by the clique and broadcasted by the local media. The days of the Codfather are over, and a new order based on the rules is coming.

So, if you're one of the fat cats in Newfoundland politics that thinks democracy is just a vote every four or five years, and you can do what the hell you want in between, your days are over. Get out the sun tan lotion, and enjoy your retirement in Florida. See if you can pull off your bullying routines with the locals down in the trailer park down there. 

And for everyday Newfoundlanders, start to understand that you are entitled to dignity, respect, and the truth. Demand it. It's your right. Stop watching politics as a soap opera that you can bitch about, use as a form of entertainment because you're bored, and insist on a form of politics that respects you and respects your governmental institutions. Don't worry about being made to look stupid or wrong. Worry instead about the consequences of what you are witnessing now.

Truth is, the so called backroom in Newfoundland has been getting smoked badly for awhile now. Their little clubs are being torn apart and their powers eroded. They skate on very thin ice. Now their power to intimidate people has been taken away they don't know how to make the system work. They don't have an ever loving clue. It reminds me of a time when I belonged to a weekly breakfast club of backroom boys and they couldn't understand for the life of them how Brian Mulroney wasn't worshiped for everything he had done. That constantly brought to mind another old saying: "There are none so blind as those who refuse to see."