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:
NEW REVENUE:
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
CUTS IN SPENDING:
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.
Tuesday, March 29, 2016
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.
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.
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.
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."
Thursday, February 18, 2016
Dumping Canadian Hydro Power in the US Market
Electrical power exports from Canada to the the United States have traditionally made sense. The Americans had a seemingly endless need for more and more power that they couldn't keep pace with from their own resources. Conversely, Canada had massive hydroelectric sites - tapped and untapped. However, that hydro power relationship no longer makes economic sense. It can be argued that hydro is severely damaging environmentally, and that far better alternatives like solar, wind and wave make far more environmental sense. However, the argument has never been made that Canadian electrical power sales, created primarily by hydro dams, actually break US law.
Consider the following quote from the US Department of Trade:
"What is Dumping?
Dumping occurs when a foreign producer sells a product in the United States at a price below that producer's sales price in the country of origin ("home market"), or ar a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the US market is called the dumping margin."
IN ADDITION:
"Countervailing duties. United States law provides that a countervailing duty (CVD) be applied to imports when a foreign government, person or organization is providing a subsidy conferring an economic benefit to a "class of kind" of merchandise exported to the US. Actionable subsidies may include benefits conferred directly on exports or benefits that indirectly subsidize exports."
So, the question is: Do Newfoundland and Labrador hydroelectric power sales to the United States constitute "dumping?". The answer is yes.
The cost of producing Muskrat Falls electrical power and transmitting it to the Soldier's Pond transit station for export, was estimated at 23.9 cents per kwh way back in 2012 when the project was at the DG2 process and he price was in the vicinity of $6 billion (see here). Since then the project is now estimated to be over $2 billion more that originally forecast, and we have yet to see another "cost per kwh hour to Soldier's Pond" estimate. Furthermore, Nalcor must pay transmission fees to Emera of Nova Scotia to use the Maritime Link sub sea cable in order to transmit that power to Nova Scotia and then to the US. It must also pay transmission fees to New Brunswick for using its lines. It becomes very obvious that the cost to produce Muskrat Falls hydro power is atmospherically high.
Then consider that the entire project is being built by a Crown Corporation which is solely owned and subsidized by the Newfoundland and Labrador government, and the same government is investing over $3 billion directly into its construction. Then there is the issue of the Canadian government's $5 billion dollar loan guarantee to build the project, which reduced Nalcor's 50 year bond costs to below 3%. All in all, this project is a state owned and heavily subsidized venture. That in itself isn't a problem, but when you want to take that same power and export it to the United States it becomes one.
In the US 69% of plants are owned privately, but public ownership controls 73% of production - in other words there are a lot of small plants, but the big ones are owned by governments - primarily the US federal government. That is one aspect, but here is another - natural gas generated electrical power in the US is 5 times that of local hydro power (see here). In other words, natural gas generated electricity is a dominant player on the domestic US market.
Is Canadian hydro power sold into the United States at a loss? Take Muskrat Falls power as a case in point. As stated earlier, the conservative estimate of a kwh of Muskrat Falls power to the export point in Newfoundland was 23.9 cents at DG2 - it's much higher now. Now consider that the average price per kwh in the US for 2015 was about 2.5 to 3 cents a kwh (see here). That means Newfoundland and Labrador would be exporting power for sale into the US at about an 800% loss. Clearly, that is dumping in the extreme. In fact, and more importantly, it could cause US producers of natural gas to be less competitive in their own market by artificially depressing the market, and restricting their profits to expand - ditto for solar power or other such production.
Combine the obvious dumping of this province's power with the provincial and federal subsidies used to create it, and it seems like a very strong case of dumping could be made with the US Treasury and Commerce Department. Will it ever come to that? Frankly, I'm surprised it hasn't yet. It seems logical that US private producers would resent Canadian power being dumped on their market.
Consider the following quote from the US Department of Trade:
"What is Dumping?
Dumping occurs when a foreign producer sells a product in the United States at a price below that producer's sales price in the country of origin ("home market"), or ar a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the US market is called the dumping margin."
IN ADDITION:
"Countervailing duties. United States law provides that a countervailing duty (CVD) be applied to imports when a foreign government, person or organization is providing a subsidy conferring an economic benefit to a "class of kind" of merchandise exported to the US. Actionable subsidies may include benefits conferred directly on exports or benefits that indirectly subsidize exports."
So, the question is: Do Newfoundland and Labrador hydroelectric power sales to the United States constitute "dumping?". The answer is yes.
The cost of producing Muskrat Falls electrical power and transmitting it to the Soldier's Pond transit station for export, was estimated at 23.9 cents per kwh way back in 2012 when the project was at the DG2 process and he price was in the vicinity of $6 billion (see here). Since then the project is now estimated to be over $2 billion more that originally forecast, and we have yet to see another "cost per kwh hour to Soldier's Pond" estimate. Furthermore, Nalcor must pay transmission fees to Emera of Nova Scotia to use the Maritime Link sub sea cable in order to transmit that power to Nova Scotia and then to the US. It must also pay transmission fees to New Brunswick for using its lines. It becomes very obvious that the cost to produce Muskrat Falls hydro power is atmospherically high.
Then consider that the entire project is being built by a Crown Corporation which is solely owned and subsidized by the Newfoundland and Labrador government, and the same government is investing over $3 billion directly into its construction. Then there is the issue of the Canadian government's $5 billion dollar loan guarantee to build the project, which reduced Nalcor's 50 year bond costs to below 3%. All in all, this project is a state owned and heavily subsidized venture. That in itself isn't a problem, but when you want to take that same power and export it to the United States it becomes one.
In the US 69% of plants are owned privately, but public ownership controls 73% of production - in other words there are a lot of small plants, but the big ones are owned by governments - primarily the US federal government. That is one aspect, but here is another - natural gas generated electrical power in the US is 5 times that of local hydro power (see here). In other words, natural gas generated electricity is a dominant player on the domestic US market.
Is Canadian hydro power sold into the United States at a loss? Take Muskrat Falls power as a case in point. As stated earlier, the conservative estimate of a kwh of Muskrat Falls power to the export point in Newfoundland was 23.9 cents at DG2 - it's much higher now. Now consider that the average price per kwh in the US for 2015 was about 2.5 to 3 cents a kwh (see here). That means Newfoundland and Labrador would be exporting power for sale into the US at about an 800% loss. Clearly, that is dumping in the extreme. In fact, and more importantly, it could cause US producers of natural gas to be less competitive in their own market by artificially depressing the market, and restricting their profits to expand - ditto for solar power or other such production.
Combine the obvious dumping of this province's power with the provincial and federal subsidies used to create it, and it seems like a very strong case of dumping could be made with the US Treasury and Commerce Department. Will it ever come to that? Frankly, I'm surprised it hasn't yet. It seems logical that US private producers would resent Canadian power being dumped on their market.
Saturday, February 13, 2016
Steps from Armageddon
Unfortunately, it now appears the world is heading to that long prophesized war in the Middle East that we have all feared - the battle of Armageddon. The Bible describes it as a massive war in the Middle East where millions of soldiers are consumed. It begins with Russia coming out of communism (Godlessness) and doing God's bidding by taking on the forces of the Eagle (the US). It predicts that Russia will defeat the combined might of the US at the battle of Armageddon, including the Israeli army, and then there will be a large earthquake which will consume the Russian forces there. Forgive me if the biblical interpretations aren't 100%, but you get the idea.
As a young fellow I used to wonder how the "Bear" (Russia) could possibly end up in the Middle East with massive armies. It didn't seem to make sense, However, today, we are mere moments from that exact circumstance. There is no denying it any further.
In my opinion the war in Syria and Ukraine and elsewhere around the globe has to do with one thing, and one thing only - the US dollar. Simplistic as that may sound, it has been obvious as the nose on your face that China and Russia have managed to undermine American world economic dominance. The replacing of the US dollar with the Chinese Yuan, or a Yuan backed world currency, has been an ongoing issue since at least 2010 when it was first publicly advocated at the Davos world economic forum in Switzerland. China's moves since then have shown a steady path toward that goal. The Eurasian economic, and in many ways military bloc, have developed to the strategic level. The Chinese and Russians are using their reserves of US dollars to purchase hard assets (ie: Chicago Stock Exchange, Canadian tar sands, etc), and more importantly to subsidize the economic consequences of their actions. For example, while the West applied massive sanctions against Russia for the Ukraine situation, Russia simply turned to China for financial backing. The Chinese used their US reserves for the purpose. And so it goes.
The truth of the matter is this: the West has lost the economic war. It's over. It has been for awhile. The West is simply "dog paddling". Signs of this are: negative interest rates by Western central banks; zero or near zero inflation rates and economic growth; and the inability of traditional stimuli to fire up economies. It's over. We simply sit on the very cusp of complete economic collapse. The same applies to the Eurasian economies, except they are far less indebted than we are (Russia's government debt to GDP ratio is 16%, Canada is 86.51 %, the US 102.98%) That part of the war is lost. The US/Saudi deal of the 1970's that allowed the US dollar to replace gold as the reserve currency is also undone. Saudi has been made redundant by technology for oil recovery, and by Russian and American production. In other words, the American cartel on oil has been irreversibly broken.
So all this leads us to today. One economically decaying super power facing the inevitable consequences of its own economic lack of discipline facing the rising contenders. The battlefield is switching to arms from dollars. The battlefields are the Middle East and the Pacific Rim. Turkey and Saudi Arabia, one a NATO ally, the other a US oil ally, are mere hours from starting the events that will lead to the battle that "consumes millions". A Turkish invasion of northern Syria is guaranteed. Today Saudi Arabia transferred fighter jets to Turkey to assist. That alliance also points to the almost certain invasion of southern Iraq by Saudi Arabia. That in turn will lead to the direct intervention of Iran against Saudi. If you ever watched Harry Potter, this is the real game of "Wizard's Chess". The Americans will come with their full military might to intervene (if you believe the Bible - which I do). Israel will for the most part stay pat and watch it unfold. However, even Israel will be turned on once the Americans have been defeated (if you believe the Bible - which I do).
The only question really left in my mind is: " Is this a bad thing, or is this simply God's will?". If it's God's will, and the Bible certainly says it is, then it's not a bad thing. Myself, I kind of hoped that humanity could rise above this kind of result, but that simply doesn't appear to be the case.
As a young fellow I used to wonder how the "Bear" (Russia) could possibly end up in the Middle East with massive armies. It didn't seem to make sense, However, today, we are mere moments from that exact circumstance. There is no denying it any further.
In my opinion the war in Syria and Ukraine and elsewhere around the globe has to do with one thing, and one thing only - the US dollar. Simplistic as that may sound, it has been obvious as the nose on your face that China and Russia have managed to undermine American world economic dominance. The replacing of the US dollar with the Chinese Yuan, or a Yuan backed world currency, has been an ongoing issue since at least 2010 when it was first publicly advocated at the Davos world economic forum in Switzerland. China's moves since then have shown a steady path toward that goal. The Eurasian economic, and in many ways military bloc, have developed to the strategic level. The Chinese and Russians are using their reserves of US dollars to purchase hard assets (ie: Chicago Stock Exchange, Canadian tar sands, etc), and more importantly to subsidize the economic consequences of their actions. For example, while the West applied massive sanctions against Russia for the Ukraine situation, Russia simply turned to China for financial backing. The Chinese used their US reserves for the purpose. And so it goes.
The truth of the matter is this: the West has lost the economic war. It's over. It has been for awhile. The West is simply "dog paddling". Signs of this are: negative interest rates by Western central banks; zero or near zero inflation rates and economic growth; and the inability of traditional stimuli to fire up economies. It's over. We simply sit on the very cusp of complete economic collapse. The same applies to the Eurasian economies, except they are far less indebted than we are (Russia's government debt to GDP ratio is 16%, Canada is 86.51 %, the US 102.98%) That part of the war is lost. The US/Saudi deal of the 1970's that allowed the US dollar to replace gold as the reserve currency is also undone. Saudi has been made redundant by technology for oil recovery, and by Russian and American production. In other words, the American cartel on oil has been irreversibly broken.
So all this leads us to today. One economically decaying super power facing the inevitable consequences of its own economic lack of discipline facing the rising contenders. The battlefield is switching to arms from dollars. The battlefields are the Middle East and the Pacific Rim. Turkey and Saudi Arabia, one a NATO ally, the other a US oil ally, are mere hours from starting the events that will lead to the battle that "consumes millions". A Turkish invasion of northern Syria is guaranteed. Today Saudi Arabia transferred fighter jets to Turkey to assist. That alliance also points to the almost certain invasion of southern Iraq by Saudi Arabia. That in turn will lead to the direct intervention of Iran against Saudi. If you ever watched Harry Potter, this is the real game of "Wizard's Chess". The Americans will come with their full military might to intervene (if you believe the Bible - which I do). Israel will for the most part stay pat and watch it unfold. However, even Israel will be turned on once the Americans have been defeated (if you believe the Bible - which I do).
The only question really left in my mind is: " Is this a bad thing, or is this simply God's will?". If it's God's will, and the Bible certainly says it is, then it's not a bad thing. Myself, I kind of hoped that humanity could rise above this kind of result, but that simply doesn't appear to be the case.
Monday, February 8, 2016
The Phoney War
We are living at a time of phoney war - at least that's my theory. A phoney war is a period where war-like moves are made, but the major powers of the day are not yet engaged in actual fighting. The most recent example of this was Hitler's moves in Europe before 1939 - like the Czech and Slovak Republics, etc. Acts that really ought to be considered acts of war, but for "pragmatic" reasons the world over looked them in hopes they would satisfy the aggressor. Those moves are happening today.
Consider Turkey for a moment. Turkey is at once fighting the Kurds on its own territory, and in northern Iraq, supporting ISIS and others against the Kurds in Syria. The problem in the geo-strategic sense is that Turkey is asserting its own perceived interest at the expense of world peace. It is breaking international law by fighting a "hybrid war" against Syria, and is on the verge of making that a very real conventional war in Syria - along with Saudi Arabia. Saudi Arabia is making similar moves in Yemen. In the Yemen case, Saudi has already invaded with conventional forces so there was not much pretense there of a phoney war.
In the big picture, however, today we are in a world scale phoney war. For some time I have thought on the reasoning the United States has "betrayed" its long time partner Saudi Arabia and allowed fracking to undermine the world price of oil. Purely examining today's events might leave you scratching your head. The US breaks its long time agreement with the Saudis, world control of oil for using US dollars in its purchase and sale. However, take a step outside the box, look at the many places of near war in the rest of the world, and a very real strategic move may be afoot.
My theory is this: the US is weaning itself off Saudi oil, and putting itself in a position of self-sufficiency, to insulate itself against a Middle east war that will see Saudi, Iraq and Iran lose the ability to export oil. Really its the only sensible conclusion to come to. The transition period was the last five years. Mass fracking in the US has resulted in over 4800 capped oil wells. Over production of oil has resulted in mass storage of oil reserves. Together, the result is a stockpile of strategic oil in the US, but also in Russia. The two big foes are insulating themselves against oil shortages at the same time in this phony war.
If that theory holds true, then I would expect a Middle East war to break out really at any time. Certainly the flash points are Iraq and Syria. Turkey, along with Saudi Arabia and some other minor allies will make a move on Sunni Iraq and northern Syria at the same time leaving rival Iran to address two fronts at once. Clearly that will bring in the Americans and Russians - although I would bank on the Russians being there in large numbers first. In any case, the damage to the oil fields of Iran, Iraq, Syria, and Saudi Arabia would be on a massive scale. Given the technology and weapons possessed by both sides, massive damage to oil infrastructure is only a logical result.
It's funny how today's phoney war eerily points toward the biblical prophecies of the Battle of Armageddon. It's something that nobody wants to think is possible, but the signs seem to be growing all the time. It's as if we have a little self-destruct mechanism and are programming ourselves toward this fate. Of course you could always argue it's the will of God as expressed in the Bible. We have a hard time seeing it from that point of view, because we can't believe God would wish that upon us. But, God is God for a reason. We have human minds which are but a spec in the big picture. That being said, I hope I'm wrong in my observations, and analysis. Nobody should want or thirst over a phoney war. They always lead to the bigger one.
Consider Turkey for a moment. Turkey is at once fighting the Kurds on its own territory, and in northern Iraq, supporting ISIS and others against the Kurds in Syria. The problem in the geo-strategic sense is that Turkey is asserting its own perceived interest at the expense of world peace. It is breaking international law by fighting a "hybrid war" against Syria, and is on the verge of making that a very real conventional war in Syria - along with Saudi Arabia. Saudi Arabia is making similar moves in Yemen. In the Yemen case, Saudi has already invaded with conventional forces so there was not much pretense there of a phoney war.
In the big picture, however, today we are in a world scale phoney war. For some time I have thought on the reasoning the United States has "betrayed" its long time partner Saudi Arabia and allowed fracking to undermine the world price of oil. Purely examining today's events might leave you scratching your head. The US breaks its long time agreement with the Saudis, world control of oil for using US dollars in its purchase and sale. However, take a step outside the box, look at the many places of near war in the rest of the world, and a very real strategic move may be afoot.
My theory is this: the US is weaning itself off Saudi oil, and putting itself in a position of self-sufficiency, to insulate itself against a Middle east war that will see Saudi, Iraq and Iran lose the ability to export oil. Really its the only sensible conclusion to come to. The transition period was the last five years. Mass fracking in the US has resulted in over 4800 capped oil wells. Over production of oil has resulted in mass storage of oil reserves. Together, the result is a stockpile of strategic oil in the US, but also in Russia. The two big foes are insulating themselves against oil shortages at the same time in this phony war.
If that theory holds true, then I would expect a Middle East war to break out really at any time. Certainly the flash points are Iraq and Syria. Turkey, along with Saudi Arabia and some other minor allies will make a move on Sunni Iraq and northern Syria at the same time leaving rival Iran to address two fronts at once. Clearly that will bring in the Americans and Russians - although I would bank on the Russians being there in large numbers first. In any case, the damage to the oil fields of Iran, Iraq, Syria, and Saudi Arabia would be on a massive scale. Given the technology and weapons possessed by both sides, massive damage to oil infrastructure is only a logical result.
It's funny how today's phoney war eerily points toward the biblical prophecies of the Battle of Armageddon. It's something that nobody wants to think is possible, but the signs seem to be growing all the time. It's as if we have a little self-destruct mechanism and are programming ourselves toward this fate. Of course you could always argue it's the will of God as expressed in the Bible. We have a hard time seeing it from that point of view, because we can't believe God would wish that upon us. But, God is God for a reason. We have human minds which are but a spec in the big picture. That being said, I hope I'm wrong in my observations, and analysis. Nobody should want or thirst over a phoney war. They always lead to the bigger one.
Sunday, February 7, 2016
The Muskrat Liberals
There are two kinds of Liberals in Newfoundland and Labrador right now - those that oppose the project (as was the case for the party officially til Dwight Ball took over), and those that support it. Basically, it boils down to business interests vs the peoples interest.
As much as Ball appears to be a flip-flopper of gargantuan proportions, as much as he appears to be deceiving the public even pre-dating his election, Ball is firmly in the "pro-business" camp on Muskrat Falls. Oh ya, remember that group of pro-business backers of Muskrat Falls :"I believe in the power of NL.ca ? Remember them? Created by Peter Woodward in Labrador and Leo Power on the Island. Yep, they believed in it so much that they took the website down and erased all evidence of it ever existing - including the list of names on it that supported the project so publicly. But, you can still find a page or two of it here thanks to Peter Whittle of Polemic & Paradox.
Bottom line is that it existed, and the people who created it still exist to. Take Nancy O'Connor, Director of Communications, Office of the Premier. Her profile is here. You will notice that she worked on Cathy Bennett's Liberal leadership campaign while she did her 6 month contract for Bennett's company. You'll also notice in her biography there is no mention that she worked for Nalcor on the PR campaign for Muskrat Falls. In fact, her firm was hired by the business crowd to create the "I believe in the power of NL" website and PR campaign. At the time I did a blog on Ms. Connor's involvement with the campaign and Nalcor (the blog). In 2015 she was given the cushy job of Senior Communications Officer to Ball - on the peoples' payroll. After the Liberals won she got her new job as "Director of Communication".
It's a telling sign of Ball's, and the Liberals pro-business voice, that this person was hired on even before the election. It's also a telling sign she worked for Cathy Bennett's leadership campaign first. Bennett of course has been a huge supporter of Muskrat Falls from the beginning, and was of course Chairman of Nalcor's board of directors. Then of course you have Al Hawkins, who sat on Nalcor's board as well, and was named by Ball as Minister of Transportation and Works. Not to be forgotten in all this is Shioban Coady, now Minister of Natural Resources, and theoretically in charge of the Muskrat Falls project. I did a blog on Coady before all this (here) . I would just add in the recent campaign she ran as "President of Novocom Inc" "an international resource procurement company with partners in Hong Kong, Australia and Singapore". (her Liberal bio) That's all fine and dandy, and sounds very impressive... until you find out that in fact Novocom is simply a numbered company run out of her very modest home in St. John's, which lists her husband as the only director, and is in fact "not in good standing" with the province's corporate registry. Talk about trying to pad your resume...
In any case, Coady was associated with Alderon Mining in Labrador. Remember them? Those are the folks that Danny Williams was with, joined their board as a "strategic adviser", etc. They were all the rage and now they are a penny stock (as predicted here). Coady belonged to the pro-Muskrat Falls business group "I believe in the power of NL". She's been a strong advocate for it from the get go. So have all her friends.
And now, shock of all shocks, Coady won't put the closure of the Muskrat Falls project as an option for dealing with the massive debt crisis in this province. Another shocker - Ball won't end it now either. Bennett, who is in charge of the province's destroyed finances, won't float the idea either. In fact, Ball and Coady gave us this disingenuous excuse of an "investigation" into the Muskrat Falls project to "open the books" on it. What a load. The company doing the "investigation" had contracts with Nalcor and the government even before it was named to do the study. In a supreme twist of irony, the same company that was in charge of creating the "independent oversight" process of the Muskrat Falls project is now doing the review of the project - one would assume that the oversight process would be a part of that. I contacted the company and asked for comment regarding the conflict of interest inherent in working for two entities that you're essentially doing a review of. There spokesman at first promised a response, and then, shocks of shocks, disappeared never to be heard from again. You cannot make this stuff up. This is what passes for politicians, policy and intelligence amongst Newfoundland and Labrador's "political elite" (b'ys, I say those two words with the sharpest tongue in cheek you can possibly imagine).
To put it bluntly, don't expect anything other than a white wash of Muskrat Falls by Dwight Ball and the Liberals. The Muskrat Liberals are bent on finishing Danny Williams' project. They don't care what it costs us. They don't care how many people lose permanent jobs in the public sector to help stabilize the budget. They don't care what programs they have to cut, or how much they will have to increase person taxes and fees. They don't care. The only thing they do care about is bullshitting you enough so that you believe they do care, and that they are People-Liberals. They aren't. They're Muskrat Liberals. To the core. It will come back on them just as it did for the PC's - perhaps worse. The first sign of their betrayal will be the next budget. Watch and see how many people fall before the ax, but Nalcor will remain untouched. That should make Ed Martin and Gilbert Bennett happy. Those two Danny appointments. Those 2 PC appointments. Oh wait, they're still there. I guess they're Liberals now. Muskrat Liberals.
As much as Ball appears to be a flip-flopper of gargantuan proportions, as much as he appears to be deceiving the public even pre-dating his election, Ball is firmly in the "pro-business" camp on Muskrat Falls. Oh ya, remember that group of pro-business backers of Muskrat Falls :"I believe in the power of NL.ca ? Remember them? Created by Peter Woodward in Labrador and Leo Power on the Island. Yep, they believed in it so much that they took the website down and erased all evidence of it ever existing - including the list of names on it that supported the project so publicly. But, you can still find a page or two of it here thanks to Peter Whittle of Polemic & Paradox.
Bottom line is that it existed, and the people who created it still exist to. Take Nancy O'Connor, Director of Communications, Office of the Premier. Her profile is here. You will notice that she worked on Cathy Bennett's Liberal leadership campaign while she did her 6 month contract for Bennett's company. You'll also notice in her biography there is no mention that she worked for Nalcor on the PR campaign for Muskrat Falls. In fact, her firm was hired by the business crowd to create the "I believe in the power of NL" website and PR campaign. At the time I did a blog on Ms. Connor's involvement with the campaign and Nalcor (the blog). In 2015 she was given the cushy job of Senior Communications Officer to Ball - on the peoples' payroll. After the Liberals won she got her new job as "Director of Communication".
It's a telling sign of Ball's, and the Liberals pro-business voice, that this person was hired on even before the election. It's also a telling sign she worked for Cathy Bennett's leadership campaign first. Bennett of course has been a huge supporter of Muskrat Falls from the beginning, and was of course Chairman of Nalcor's board of directors. Then of course you have Al Hawkins, who sat on Nalcor's board as well, and was named by Ball as Minister of Transportation and Works. Not to be forgotten in all this is Shioban Coady, now Minister of Natural Resources, and theoretically in charge of the Muskrat Falls project. I did a blog on Coady before all this (here) . I would just add in the recent campaign she ran as "President of Novocom Inc" "an international resource procurement company with partners in Hong Kong, Australia and Singapore". (her Liberal bio) That's all fine and dandy, and sounds very impressive... until you find out that in fact Novocom is simply a numbered company run out of her very modest home in St. John's, which lists her husband as the only director, and is in fact "not in good standing" with the province's corporate registry. Talk about trying to pad your resume...
In any case, Coady was associated with Alderon Mining in Labrador. Remember them? Those are the folks that Danny Williams was with, joined their board as a "strategic adviser", etc. They were all the rage and now they are a penny stock (as predicted here). Coady belonged to the pro-Muskrat Falls business group "I believe in the power of NL". She's been a strong advocate for it from the get go. So have all her friends.
And now, shock of all shocks, Coady won't put the closure of the Muskrat Falls project as an option for dealing with the massive debt crisis in this province. Another shocker - Ball won't end it now either. Bennett, who is in charge of the province's destroyed finances, won't float the idea either. In fact, Ball and Coady gave us this disingenuous excuse of an "investigation" into the Muskrat Falls project to "open the books" on it. What a load. The company doing the "investigation" had contracts with Nalcor and the government even before it was named to do the study. In a supreme twist of irony, the same company that was in charge of creating the "independent oversight" process of the Muskrat Falls project is now doing the review of the project - one would assume that the oversight process would be a part of that. I contacted the company and asked for comment regarding the conflict of interest inherent in working for two entities that you're essentially doing a review of. There spokesman at first promised a response, and then, shocks of shocks, disappeared never to be heard from again. You cannot make this stuff up. This is what passes for politicians, policy and intelligence amongst Newfoundland and Labrador's "political elite" (b'ys, I say those two words with the sharpest tongue in cheek you can possibly imagine).
To put it bluntly, don't expect anything other than a white wash of Muskrat Falls by Dwight Ball and the Liberals. The Muskrat Liberals are bent on finishing Danny Williams' project. They don't care what it costs us. They don't care how many people lose permanent jobs in the public sector to help stabilize the budget. They don't care what programs they have to cut, or how much they will have to increase person taxes and fees. They don't care. The only thing they do care about is bullshitting you enough so that you believe they do care, and that they are People-Liberals. They aren't. They're Muskrat Liberals. To the core. It will come back on them just as it did for the PC's - perhaps worse. The first sign of their betrayal will be the next budget. Watch and see how many people fall before the ax, but Nalcor will remain untouched. That should make Ed Martin and Gilbert Bennett happy. Those two Danny appointments. Those 2 PC appointments. Oh wait, they're still there. I guess they're Liberals now. Muskrat Liberals.
Monday, January 25, 2016
Liberals Breaking Faith
What, exactly, does the Liberal Party in Newfoundland and Labrador think it's doing. In all seriousness. When the people of the province went to the polls just a few short months ago, they were promised a change in all the ways and means the PC Party had been governing. A short two months later and it seems those lessons have all been lost, and "creative manipulation" is the phrase of the day, because "leadership" sure isn't.
Let's start with the election itself. Now anyone with a calculator and a copy of the budget estimates for 2015 would know that the province's current deficit would be about $2 billion. Yet, when the Liberals finally got their wish, and were elected, they trot out Dwight Ball and Cathy Bennett with the deer in the head lights look saying "oh, nobody could have known it was this bad". What a load of you know what. The truth is, unless the Liberals have the stupidest research staff on record, that they just outright misled the public to get their hands on the reins of power. Simple as that. Obvious as the nose on your face.
Then Ball and company come up with the beauty of cutting 30% from all government spending. They have to they claim, otherwise the province will be done for. Well, that may be true, but during the election they sold the people on not cutting government. They were just going to "manage better". Again, referring back to the calculator analogy, they just outright misled the public and for the same reason.
Oh, but they are conducting some kind of "review" of Muskrat Falls. The problem is that Muskrat Falls doesn't need a review - it needs to be stopped. While in Opposition Ball and his now Justice Minister decried the lack of legal grounds for the Water Management Agreement that made the project even feasible. Now? Now they continue to go forward with it despite the challenge to it's fundamentals in the Quebec Superior Court, and my own action here in our Supreme Court to have the matter examined for its constitutionality. The very same reasons why the Liberals questioned it in Opposition. Now I find myself fighting them in the Appeal Court, rather than having them jointly requesting the Appeal Court examine the agreement. Their disingenuous ways certainly aren't all that sunny for sure.
Finally, we have the case of a female fire fighter being sexually bullied by her peers. Brenda Seymour, volunteer fire fighter and councilor for Spaniard's Bay, has been subjected to porn during an otherwise all-male training session, as well as sexual commentary during the same session. She fought against it for which she was ridiculed and bullied by members of her community. Her fellow fire fighters resigned enmass to protest her protest. In other words, they circled the wagons to protect their own behinds, but they also tried to persecute the victim so to say. A small-minded, offensive action that matched the small-minded offensive treatment she suffered while in training. The story has made national news headlines.
The moral of the national story on Brenda Seymour is that Newfoundlanders are old fashioned bullies, sexist, and crazed enough to have their own children carry signs defending the men who refused to stand up for a fellow fire fighter being subjected to porn. An ugly and disgraceful mess. No doubt a time for a male Premier to stand up and show leadership right? Wrong. Ball disappeared into the wood work like Casper the friendly ghost, and instead had his female Finance Minister issue a memo saying "now-now boys, no porn during training". I twist the gist of it a bit, but you get the idea. The point is when leadership is required the Leader leads. That's not happening.
I suppose in some ways we shouldn't be surprised. Dwight Ball didn't exactly set the Liberal Party on fire when he became leader. Their was, and remains, no charisma in his bones. He's not that kind of leader, but what kind of leader is he then? The Liberal Party itself didn't set the province on fire with its visionary plan for the province. The opposite in fact was true. They weren't elected, the Tories were unceremoniously ejected. The Party, as a government, has just vanished into the weeds of the bureaucracy. It's readily apparent they don't have a clue about how to lead, or in fact how to govern. The 18 month public consultation on how the provincial deficits/debt can be tackled is a prime example. It almost reminds me of the PC's hiring a consultant to study if the government is hiring too many consultants. It's that ridiculous. And, that's the way they're looking - ridiculous.
All in all it looks like the Liberals might as well enjoy the next four years, because they're going to be a one term government. A one term government doomed to be mired in misery and ridicule as they pay the price of deceiving the electorate to gain those lofty heights of power. The price they will pay for breaking faith with the people.
Let's start with the election itself. Now anyone with a calculator and a copy of the budget estimates for 2015 would know that the province's current deficit would be about $2 billion. Yet, when the Liberals finally got their wish, and were elected, they trot out Dwight Ball and Cathy Bennett with the deer in the head lights look saying "oh, nobody could have known it was this bad". What a load of you know what. The truth is, unless the Liberals have the stupidest research staff on record, that they just outright misled the public to get their hands on the reins of power. Simple as that. Obvious as the nose on your face.
Then Ball and company come up with the beauty of cutting 30% from all government spending. They have to they claim, otherwise the province will be done for. Well, that may be true, but during the election they sold the people on not cutting government. They were just going to "manage better". Again, referring back to the calculator analogy, they just outright misled the public and for the same reason.
Oh, but they are conducting some kind of "review" of Muskrat Falls. The problem is that Muskrat Falls doesn't need a review - it needs to be stopped. While in Opposition Ball and his now Justice Minister decried the lack of legal grounds for the Water Management Agreement that made the project even feasible. Now? Now they continue to go forward with it despite the challenge to it's fundamentals in the Quebec Superior Court, and my own action here in our Supreme Court to have the matter examined for its constitutionality. The very same reasons why the Liberals questioned it in Opposition. Now I find myself fighting them in the Appeal Court, rather than having them jointly requesting the Appeal Court examine the agreement. Their disingenuous ways certainly aren't all that sunny for sure.
Finally, we have the case of a female fire fighter being sexually bullied by her peers. Brenda Seymour, volunteer fire fighter and councilor for Spaniard's Bay, has been subjected to porn during an otherwise all-male training session, as well as sexual commentary during the same session. She fought against it for which she was ridiculed and bullied by members of her community. Her fellow fire fighters resigned enmass to protest her protest. In other words, they circled the wagons to protect their own behinds, but they also tried to persecute the victim so to say. A small-minded, offensive action that matched the small-minded offensive treatment she suffered while in training. The story has made national news headlines.
The moral of the national story on Brenda Seymour is that Newfoundlanders are old fashioned bullies, sexist, and crazed enough to have their own children carry signs defending the men who refused to stand up for a fellow fire fighter being subjected to porn. An ugly and disgraceful mess. No doubt a time for a male Premier to stand up and show leadership right? Wrong. Ball disappeared into the wood work like Casper the friendly ghost, and instead had his female Finance Minister issue a memo saying "now-now boys, no porn during training". I twist the gist of it a bit, but you get the idea. The point is when leadership is required the Leader leads. That's not happening.
I suppose in some ways we shouldn't be surprised. Dwight Ball didn't exactly set the Liberal Party on fire when he became leader. Their was, and remains, no charisma in his bones. He's not that kind of leader, but what kind of leader is he then? The Liberal Party itself didn't set the province on fire with its visionary plan for the province. The opposite in fact was true. They weren't elected, the Tories were unceremoniously ejected. The Party, as a government, has just vanished into the weeds of the bureaucracy. It's readily apparent they don't have a clue about how to lead, or in fact how to govern. The 18 month public consultation on how the provincial deficits/debt can be tackled is a prime example. It almost reminds me of the PC's hiring a consultant to study if the government is hiring too many consultants. It's that ridiculous. And, that's the way they're looking - ridiculous.
All in all it looks like the Liberals might as well enjoy the next four years, because they're going to be a one term government. A one term government doomed to be mired in misery and ridicule as they pay the price of deceiving the electorate to gain those lofty heights of power. The price they will pay for breaking faith with the people.
Sunday, January 17, 2016
The Reckoning
For every action there is a reaction. Nothing could better describe the times we live in. There has been plenty of evidence around us for at least two years, and for the more in tuned even decades, that our way of life is coming to an end. Not our life, but our "way" of life. Our actions have caught up with us. Now comes the inevitable reaction.
While technology can build civilizations, it will also eventually alter them beyond recognition. For example, the automobile transformed the world, but it also cursed it. The car required gasoline to operate. Gasoline required oil. Oil required exploration. Exploration required environmental damage and cash. Cash required borrowing. Borrowing required capital. And therein lies the curse - there was never enough capital to cover the borrowing. Action, reaction, and on it goes. Eventually there must be a day of reckoning. A day when a house built of cards can no longer sustain another card being placed upon it. That day is today.
Today, the perfect storm, or the day of reckoning, involves unsupported financial instruments smashing against bottomed out interest rates, monopolistic oil cartels crashing against technologically caused oil gluts, grossly over inflated stock markets imploding over falsely supported bottom lines, and the world dividing between Eurasia and the Rest. There are of course other factors like demographics, and environmental concerns which are just as, or even more important. The bottom line is that all those fantastical instruments used to drive our society forward were never really built on anything at all. Imaginary sums of wealth, supported by paper contracts, but nothing else. A lawyers dream and an accountants nightmare.
In the days ahead we can expect to witness: a world-wide stock market crash; a world-wide currency crash; a world-wide crash in all goods associated with production (including oil); and mass deflation in economic activity, but mass inflation in costs. The last one is a bit of a kicker - mass deflation causing mass inflation. How is that possible? A good example of this is post-world war II Germany. At the end of the war it took a wheel barrel full of German marks to by one loaf of bread. All economic activity had essentially come to a halt. The economy had deflated. There was nothing left to value the German mark against, so it became valueless. As it became valueless, the amount of marks needed to by one item increased. The more valueless it became, the more marks were needed to buy that item.
Essentially the world faces the same today. The economies of the world are deflating. If they were measured by a standard that didn't utilize essentially paper to back their value, then they would have been completely deflated decades ago. In essence, the world borrowed time to grow by dropping the discipline of the gold standard. That allowed growth, but it was always a "phony growth". It was always a bubble waiting to burst, or a margin waiting to be called. Now China and Russia are calling that margin. They are establishing a gold backed currency economy that will cause the rest of the world's economies to collapse. It will initially cause their's to collapse as well, but they are in a much stronger position to survive the collapse (or economic war if you like).
Russia's debt to GDP ratio is an astoundingly low 16%. China is at 55%. India is at 65%. The United States government debt to GDP ratio is 89%, while Japan's is 250%. The story then becomes not who can win an economic war, but rather who can survive an economic war. Clearly, Eurasia is far better positioned to "rise from the ashes". It is that rise that is all important. Initially, every economy in the world will collapse. However, the "New World Order" that arises from what's left will be determined by those in the best financial position when the collapse happens. That's a logical assumption given a purely gold standard to restart would not take into account that which had been previously expended, debts that been previously owed, and the fact that gold is not everywhere in the world - and this is a new world on a world scale.
Suffice it to say that Eurasia is pulling the trigger on the "Old World". It claims it isn't and that it's suffering as much as any other nation, but that's simply a mask. A mask that will provide it the legitimacy to rise to the fore front of the "New World Order", and claim its leadership. That you can be certain of. So while Eurasia gives us a friendly slap on the back, seeking a spot to put the knife into, we should remember the reason it can do so is us. We collectively built our civilization on false pretenses, and we knew it. They simply used our own gluttony against us. They simply allowed us, even facilitated in us, doing it. If you can't stop the end you might as well learn from it.
In this province the cries are loud: "What can we do?" In truth, as I said to any number of people who have asked me that same question privately, the only thing left to do is suffer. We had a ten year window to make maximum use of oil revenues to address chronic, systemic debt. Instead, the government of the day spent like a teenager with a new, unlimited credit card. It placed us in a position of no return. As a very few of us urged people not to be kids in the candy shop, the "credible experts" said there was no tomorrow. Now tomorrow is here. It is the day of reckoning for everyone. That means you.
While technology can build civilizations, it will also eventually alter them beyond recognition. For example, the automobile transformed the world, but it also cursed it. The car required gasoline to operate. Gasoline required oil. Oil required exploration. Exploration required environmental damage and cash. Cash required borrowing. Borrowing required capital. And therein lies the curse - there was never enough capital to cover the borrowing. Action, reaction, and on it goes. Eventually there must be a day of reckoning. A day when a house built of cards can no longer sustain another card being placed upon it. That day is today.
Today, the perfect storm, or the day of reckoning, involves unsupported financial instruments smashing against bottomed out interest rates, monopolistic oil cartels crashing against technologically caused oil gluts, grossly over inflated stock markets imploding over falsely supported bottom lines, and the world dividing between Eurasia and the Rest. There are of course other factors like demographics, and environmental concerns which are just as, or even more important. The bottom line is that all those fantastical instruments used to drive our society forward were never really built on anything at all. Imaginary sums of wealth, supported by paper contracts, but nothing else. A lawyers dream and an accountants nightmare.
In the days ahead we can expect to witness: a world-wide stock market crash; a world-wide currency crash; a world-wide crash in all goods associated with production (including oil); and mass deflation in economic activity, but mass inflation in costs. The last one is a bit of a kicker - mass deflation causing mass inflation. How is that possible? A good example of this is post-world war II Germany. At the end of the war it took a wheel barrel full of German marks to by one loaf of bread. All economic activity had essentially come to a halt. The economy had deflated. There was nothing left to value the German mark against, so it became valueless. As it became valueless, the amount of marks needed to by one item increased. The more valueless it became, the more marks were needed to buy that item.
Essentially the world faces the same today. The economies of the world are deflating. If they were measured by a standard that didn't utilize essentially paper to back their value, then they would have been completely deflated decades ago. In essence, the world borrowed time to grow by dropping the discipline of the gold standard. That allowed growth, but it was always a "phony growth". It was always a bubble waiting to burst, or a margin waiting to be called. Now China and Russia are calling that margin. They are establishing a gold backed currency economy that will cause the rest of the world's economies to collapse. It will initially cause their's to collapse as well, but they are in a much stronger position to survive the collapse (or economic war if you like).
Russia's debt to GDP ratio is an astoundingly low 16%. China is at 55%. India is at 65%. The United States government debt to GDP ratio is 89%, while Japan's is 250%. The story then becomes not who can win an economic war, but rather who can survive an economic war. Clearly, Eurasia is far better positioned to "rise from the ashes". It is that rise that is all important. Initially, every economy in the world will collapse. However, the "New World Order" that arises from what's left will be determined by those in the best financial position when the collapse happens. That's a logical assumption given a purely gold standard to restart would not take into account that which had been previously expended, debts that been previously owed, and the fact that gold is not everywhere in the world - and this is a new world on a world scale.
Suffice it to say that Eurasia is pulling the trigger on the "Old World". It claims it isn't and that it's suffering as much as any other nation, but that's simply a mask. A mask that will provide it the legitimacy to rise to the fore front of the "New World Order", and claim its leadership. That you can be certain of. So while Eurasia gives us a friendly slap on the back, seeking a spot to put the knife into, we should remember the reason it can do so is us. We collectively built our civilization on false pretenses, and we knew it. They simply used our own gluttony against us. They simply allowed us, even facilitated in us, doing it. If you can't stop the end you might as well learn from it.
In this province the cries are loud: "What can we do?" In truth, as I said to any number of people who have asked me that same question privately, the only thing left to do is suffer. We had a ten year window to make maximum use of oil revenues to address chronic, systemic debt. Instead, the government of the day spent like a teenager with a new, unlimited credit card. It placed us in a position of no return. As a very few of us urged people not to be kids in the candy shop, the "credible experts" said there was no tomorrow. Now tomorrow is here. It is the day of reckoning for everyone. That means you.
Sunday, December 13, 2015
How bad is Newfoundland's Budget Crisis?
Newfoundland and Labrador is in the "mother of all" budgetary crisis. It is not a pretty picture. For those that don't quite get all the government lingo: a deficit is the annual loss caused by spending more than you bring in a fiscal year; the debt is the accumulation of all the money borrowed to finance those accumulated deficits over the years; operating budget is the base cost of running government operations in a year; capital budget is the cost of building facilities in a given year; and gross debt is the amount of all debt the government owes and must pay back. That's a bit of a simplification, but it does the trick.
Back when the 2015-2016 budget was crafted, the government projected $6,659,952 (billion) in operating expenses and $1,143,743 (billion) in capital expenses, for a total of roughly $7.8 billion in expenditures. To fund those expenditures the government projected oil revenue to be $1,157,671 billion based on a base price of $62 (US) a barrel for Brent Crude. With oil at that level, the government predicted a $1 billion deficit. As a result of the recent election defeat of the government, a new deficit figure of $1.8 billion was released. In other words, the new Liberal government is saying the province has lost approximately $700 million in revenue.
The problem is things are much worse economically then they were at budget time. Oil has hovered at roughly $40-45 a barrel for most of the fiscal year, and has been trending downward (at $37.70 now). Yet, despite the collapse of the province's largest single contributor to revenues, the government has done...nothing. Here is a very illuminating example:
2013/2013 - oil revenue $2.25 billion Total government spending - $7.6 billion
2015-2016 - oil revenue $1.2 billion Total government spending- $7.8 billion
If that set of numbers shocks, well, it should. Now, that figure for oil revenue above was based on $62 a barrel. Just shaving off approximately 30% from that number for oil's actual prices, and we are down approximately $360 million - which leaves oil revenue for this fiscal year closer to $800 million. You have to travel back to the year 2007 to find a time when oil revenue was this low in recent history. In that year, oil was budgeted to bring in $996.5 million. The kicker is this: total budgeted spending for that year, including operating and capital, was $5.2 billion - $2.6 billion less than what is being spent today.
All of this takes on a pretty ugly picture when you consider that debt servicing charges (interest,etc on our debt) was budgeted to be $652 million this year alone. Furthermore, our combined capital and operational gross debt is now $13.9 billion. That is only $1 billion less than the perilous period of 1997-98.
So what can be done? Or, what has to be done? Both nothing and everything. The nothing portion is capital expenditures. The province can no longer afford any capital expenditures. Sound radical? Consider that capital expenditures have been in the $1.1 billion range for a few years now. That's no longer doable. That means: no new hospital for Corner Brook (or anywhere else); no new Waterford mental health facility; no new penitentiary; etc. In other words, any election promises that were related to these projects are out - they were never honest in the first place.
Raising taxes of all kinds and types will be the feature of the next budget. Sin taxes. Income taxes, Taxes on your taxes. You get the idea. However, even taxing all these areas, the government can only pray to come up with maybe $150 million, and that would mean huge personal income tax increases. After all, Ball just vetoed increasing the HST by 2%, which could have meant about $150 million for the provincial coffers. Still, that would have been a drop in the bucket for what's necessary to keep this government where its at. Cutting civil service jobs has been ruled out by the Liberals. Salaries and benefits of provincial employees accounted for about $905 million in this year's budget. The salaries in the health sector and education sector are administered by the respective authorities. The word is they account for about 75% of the $4 billion that the province issues in grants to the authorities to run their health/education organizations.
It has to be a tempting, if not an absolute necessity, to review these employee expenses. The civil service is way too large for a province this size. The Liberals claim they will reduce it by attrition - which is a fancy way of saying once people retire they will eliminate those positions from the province's structure. Sounds great in the ideal world, but the budget crisis needs immediate heart surgery, not rehab. It can't wait that long.
Muskrat Falls is another one that must be looked at. The government has spent its part on the project already (not including over runs), so that $3 billion is gone from general revenues. However, Nalcor is holding $5 billion in investment accounts that it borrowed under the Federal Loan Guarantee. As far as I know that $5 billion hasn't been accessed yet. The province could cancel the Muskrat Falls project, work a deal with their new buddies in Ottawa to return the funds while avoiding default, and the gross debt of the province would shrink to about $8.8 billion. Such a move would dramatically improve the province's long term economic health, and perhaps forestall the otherwise inevitable credit downgrades coming our way. In addition, should Nalcor lose the current Quebec court case (now waiting for the Judge's decision as it was heard in October) Muskrat Falls annual revenue generation will drop by approximately 80% require a tripling of power bills to allow the project to break even year after year. All in all, Muskrat Falls needs to be the first victim of the financial sanity axe.
In summary, Dwight Ball is on the record as not wanting to harm the economy by instigating drastic tax hikes or mass layoffs. He's on the record as not wanting to shut down the Muskrat Falls project (he wants to "manage it better"). He's on the record for assisting iron ore companies to buy out other iron ore companies in Labrador. All these things are just pure fantasy. Complete non-sense. The truth is, bonding agencies will force the government to cut its spending - drastically. Banks will likely do the same. Newfoundland and Labrador was completely mismanaged during the years when oil revenues to the province numbered in the billions. Now, that luxury, as stupid as it was, is no longer available to politicians. Now the chickens have come home to roost. It's simple math. How bad is Newfoundland's budget crisis? It's systemic and it's catastrophic. That's how bad it is.
Back when the 2015-2016 budget was crafted, the government projected $6,659,952 (billion) in operating expenses and $1,143,743 (billion) in capital expenses, for a total of roughly $7.8 billion in expenditures. To fund those expenditures the government projected oil revenue to be $1,157,671 billion based on a base price of $62 (US) a barrel for Brent Crude. With oil at that level, the government predicted a $1 billion deficit. As a result of the recent election defeat of the government, a new deficit figure of $1.8 billion was released. In other words, the new Liberal government is saying the province has lost approximately $700 million in revenue.
The problem is things are much worse economically then they were at budget time. Oil has hovered at roughly $40-45 a barrel for most of the fiscal year, and has been trending downward (at $37.70 now). Yet, despite the collapse of the province's largest single contributor to revenues, the government has done...nothing. Here is a very illuminating example:
2013/2013 - oil revenue $2.25 billion Total government spending - $7.6 billion
2015-2016 - oil revenue $1.2 billion Total government spending- $7.8 billion
If that set of numbers shocks, well, it should. Now, that figure for oil revenue above was based on $62 a barrel. Just shaving off approximately 30% from that number for oil's actual prices, and we are down approximately $360 million - which leaves oil revenue for this fiscal year closer to $800 million. You have to travel back to the year 2007 to find a time when oil revenue was this low in recent history. In that year, oil was budgeted to bring in $996.5 million. The kicker is this: total budgeted spending for that year, including operating and capital, was $5.2 billion - $2.6 billion less than what is being spent today.
All of this takes on a pretty ugly picture when you consider that debt servicing charges (interest,etc on our debt) was budgeted to be $652 million this year alone. Furthermore, our combined capital and operational gross debt is now $13.9 billion. That is only $1 billion less than the perilous period of 1997-98.
So what can be done? Or, what has to be done? Both nothing and everything. The nothing portion is capital expenditures. The province can no longer afford any capital expenditures. Sound radical? Consider that capital expenditures have been in the $1.1 billion range for a few years now. That's no longer doable. That means: no new hospital for Corner Brook (or anywhere else); no new Waterford mental health facility; no new penitentiary; etc. In other words, any election promises that were related to these projects are out - they were never honest in the first place.
Raising taxes of all kinds and types will be the feature of the next budget. Sin taxes. Income taxes, Taxes on your taxes. You get the idea. However, even taxing all these areas, the government can only pray to come up with maybe $150 million, and that would mean huge personal income tax increases. After all, Ball just vetoed increasing the HST by 2%, which could have meant about $150 million for the provincial coffers. Still, that would have been a drop in the bucket for what's necessary to keep this government where its at. Cutting civil service jobs has been ruled out by the Liberals. Salaries and benefits of provincial employees accounted for about $905 million in this year's budget. The salaries in the health sector and education sector are administered by the respective authorities. The word is they account for about 75% of the $4 billion that the province issues in grants to the authorities to run their health/education organizations.
It has to be a tempting, if not an absolute necessity, to review these employee expenses. The civil service is way too large for a province this size. The Liberals claim they will reduce it by attrition - which is a fancy way of saying once people retire they will eliminate those positions from the province's structure. Sounds great in the ideal world, but the budget crisis needs immediate heart surgery, not rehab. It can't wait that long.
Muskrat Falls is another one that must be looked at. The government has spent its part on the project already (not including over runs), so that $3 billion is gone from general revenues. However, Nalcor is holding $5 billion in investment accounts that it borrowed under the Federal Loan Guarantee. As far as I know that $5 billion hasn't been accessed yet. The province could cancel the Muskrat Falls project, work a deal with their new buddies in Ottawa to return the funds while avoiding default, and the gross debt of the province would shrink to about $8.8 billion. Such a move would dramatically improve the province's long term economic health, and perhaps forestall the otherwise inevitable credit downgrades coming our way. In addition, should Nalcor lose the current Quebec court case (now waiting for the Judge's decision as it was heard in October) Muskrat Falls annual revenue generation will drop by approximately 80% require a tripling of power bills to allow the project to break even year after year. All in all, Muskrat Falls needs to be the first victim of the financial sanity axe.
In summary, Dwight Ball is on the record as not wanting to harm the economy by instigating drastic tax hikes or mass layoffs. He's on the record as not wanting to shut down the Muskrat Falls project (he wants to "manage it better"). He's on the record for assisting iron ore companies to buy out other iron ore companies in Labrador. All these things are just pure fantasy. Complete non-sense. The truth is, bonding agencies will force the government to cut its spending - drastically. Banks will likely do the same. Newfoundland and Labrador was completely mismanaged during the years when oil revenues to the province numbered in the billions. Now, that luxury, as stupid as it was, is no longer available to politicians. Now the chickens have come home to roost. It's simple math. How bad is Newfoundland's budget crisis? It's systemic and it's catastrophic. That's how bad it is.
Thursday, December 10, 2015
On the March to World War III
As hard as it is to believe, and as hard as it is to comprehend, we are quickly moving toward World War III. It's strange in a way that the causes and signs of the impending war are wrapped like an onion - in many layers. This post is dedicated to unwrapping some of those layers, and giving people a point of reference for what's happening to their world before their very eyes.
1. Economic Dominance equals Power.
Since the mid 1970's the US has dominated world power when it struck a deal with Saudi Arabia to have all world oil transactions conducted in US dollars. That caused currencies around the world to be valued against the US dollar rather than the previous gold standard. In recent decades the Russians and Chinese have positioned themselves to challenge Saudi's oil domination for exports and American domination in manufacturing and commerce. In 2010 the Russians and Chinese began aggressively pushing for a new world reserve currency that better reflected the strength of the world's economies (specifically the amount of debt countries carried).
After decades of a cheap manufacturing/labour policy in China, the US had become a "fat cat" living on the glories of past economic discipline. Its national debt, much of it held by China, has come as a result of capitalism's weakest flank - the race to the bottom of the "lowest possible price". US corporations built their profits on it over the last 25 years, and the Chinese were only too happy to accommodate American corporations greed. China has now turned those profits, held in US dollars (in the trillions) into a weapon, or what is commonly referred to as the "Chinese Nuke". While maneuvering to have their Yuan installed as the world reserve currency, and thereby overtaking the US in economic and political dominance in the world, China has held the threat of mass de-dollarization , and a fire sale of US debt, over the Americans head. In essence, the Chinese have placed the US, and the rest of the Western world in checkmate using capitalism - which is ironic considering it remains a communist country.
That leaves the Western world with two choices: 1. Accept that China and Russia have beaten them at their own game, and turn over world economic and political power; or 2. Engage China and Russia with the only possible advantage they still have - armed force.
2. Bi-Polar World
As a key part of its strategy to deny the US sole world power status, China and Russia have focused a great deal of their wealth on creating the "BRIC Alliance" or "Eurasia"(which I prefer). The core partners in this alliance are Russia, China, India and Iran. The lesser partners are Iraq, Syria, Cuba, South Africa, Argentina, and Brazil. Together they reflect the most demographically prolific regions in the world, which means they have the greatest markets to consume products, which further means that denying those markets to the West is fatal to Western trading and therefore quality of life and power. Having these regions trade together without the US dollar also necessarily relegates the US dollar to second place behind the Chines Yuan. The result is a bi-polar world. Two massive economies separated from each other - one built to grown and thrive on inter-trade and one destined to die from debt and lack of markets to support that debt.
A key developing feature of this new trading reality is military cooperation. Key to this is the gravitation of India into the Eurasian military sphere. Not only is Russia exporting its latest technology to China, India, and other Eurasian partners, but constant large scale military exercises between these countries have proliferated over the last few years. The relationships, both military and economic, now intertwine the Eurasian Community, and leave no doubt that their national interests lay with each other - not the West.
3. Might is Right.
The US is not reacting well to losing its international "top-dog" status. In fact, it has laid down the gauntlet - a bi-polar world is unacceptable. As it is incapable of attacking the Eurasian alliance financially, as to do so would immediately result in economic chaos for the West, it has chosen a military path in what can only be seen as a large scale, and very dangerous game of chicken. Notable challenges to Russia have included sponsored revolutions in Georgia, Ukraine, Syria, Iraq and to some extent former Soviet Republics on Russia's southern borders. Notable challenges to China have come in the form of economic warfare in Africa, and direct military and diplomatic measures in the South China Sea, and to a lesser extent South Korea. A large scale, but dubious economic challenge aimed at China is of course the "Trans-Pacific Partnership" (TPP) which excludes China, and is obviously intended to entice its neighbors toward the rewards of importing and trading with the American market.
Currently the epicenter of the "might will make right doctrine" is being played out in Syria, Iraq, and to a lesser extent Yemen. An escalating game of chess there is leading the "two solitudes" toward actual war. In a sense, it's a proxy war between Saudi Arabia and Iran - between Sunni and Shia. In reality, it's the purposeful use of centuries old hatreds between the two, with the goal of forcing either Eurasia or the West to accept the other's view of a "Brand New World Order". To that end, everyone is all in. Russia, despite having attempted to keep the conflict between the West and Eurasia on economic grounds (as its military is in rebuild mode with a finish date of 2020), has moved strategic and tactical forces into Syria. It has also promised to do the same for Iraq should the Iraqi government request it.
Turkey, a NATO partner, has shot down one Russian bomber, allowed ISIS forces to use its territory to conduct a "regime change war" against Syria, and now just days ago invaded Northern Iraq with a combat team of tans and infantry. According to the Iraqi government, the US has informed it that up to 90,000 Saudi troops and 10,000 US troops will be entering Iraq to "fight terrorists". In reality, both Saudi and the US have been accused of aiding, directly and/or indirectly, ISIS and other groups to overthrow the Shia governments of Iraq and Syria. Iran, the primary Shia power in the area, is already fighting in Syria, and would immediately enter Iraq, likely at the request of the Iraqi government, to fight any Saudi invasion of Iraqi territory.
In summary, it's quite easy to see where all this is leading - first the proxy powers and then the main powers. Neither side will blink. The die has been cast by both.
4. The Fall Out.
The result of the escalation we've seen is very predictable on the Middle East. Given the massive military buildup of Iranian and Saudi forces, we can expect so see a very quick and very deadly battle between the two. A battle played out from Iran to Egypt involving millions of troops, massive armour, and more importantly missile forces. While Saudi has the clear advantage in air forces, Iran has a clear advantage in missile technology to deal with them, so a land forces/ conventional war like early World War II is the likely result. In such a case, millions of fatalities can be expected. That is without the direct intervention of any super powers.
However, with Russia already in theater in Syria, and American bases scattered throughout the region, it would be naive to believe they would not be engaged. The clear advantage in such a scenario is to the Russians. Russia is closer to the area, so deployment of conventional forces there is much easier, and less fraught with intervention, than the US moving forces across the Atlantic or Pacific in large numbers. Also, in such a scenario, the US would have to deal with China on a stand alone basis in the Pacific area. Not an easy task considering China's conventional and strategic forces.
Then there is the "home front factor". In such a scenario Western Europe is bound to be drawn in immediately against Russia. It is very, very doubtful that western civilian populations have any stomach for war against the Russian people - no matter the sell to support it. Having lost untold millions in recent memory to large scale war, and the destruction of their countries, most Europeans are likely to rise up against such a proposition. Equally volatile is the American population. Notoriously inward looking, most Americans are consumed with their own country and have no stomach for foreign wars or any kind that involve casualties - let alone a war that would cause mass casualties in the US itself.
So, while the powers to be in the West maneuver toward world war, it is highly doubtful the population would support such an action. Conversely, the Chinese in particular have no such issues. The financial collapse of 2008 required 200 million Chines be sent back to their villages from urban centres in China, without so much as a peep. Such an action in the Western world would have resulted in revolt. So, that is the playing field. In all scenarios, the West can not win the battle it is formulating. It is unlikely that anyone would win from such a war, but it is certain that if there would be a victor that it will not be the US or the West.
5. What Should Happen.
In the ideal world, which could be this one, the West ought to admit economic defeat and take its place in a new bi-polar world. The rules of the game were set by the West, and the loss of that game ought to be accepted by the West. To change the rules to suit your own purpose simply destroys not just your credibility, but also that of the "world system" itself. History has ebbs and flows. Empires rise and fall. Economic systems collapse and are rebuilt. We know all of this from a simple study of our own recent history. It is the nature of the beast. To fight that result as if somehow your empire is more noble than any other of the past is arrogance beyond the pale.
The rationing of whatever resources the world has that we feel the need to consume has always been dictated by the efficient production and consumption of those resources - whatever the system. If the Chinese, Russian, Indian, etc countries are now in a stronger position to carry forward with that leadership in consumption, well, that's just natural selection really. They've shown discipline in consumption while we have not.
In the end, the only way to avoid what is playing itself out now in the world, the US and the West in general needs to accept that the Eurasian countries have worked their way up to likely dominate world trade and to some extent power. Perhaps it is a chance for all of us to renegotiate, or rediscover, the respect for sovereign nations and people that has been woefully discarded. Would that not make for a much better world for all of us? I believe it would. We don't need a Walmart to survive or be fulfilled.We do however need this planet.
1. Economic Dominance equals Power.
Since the mid 1970's the US has dominated world power when it struck a deal with Saudi Arabia to have all world oil transactions conducted in US dollars. That caused currencies around the world to be valued against the US dollar rather than the previous gold standard. In recent decades the Russians and Chinese have positioned themselves to challenge Saudi's oil domination for exports and American domination in manufacturing and commerce. In 2010 the Russians and Chinese began aggressively pushing for a new world reserve currency that better reflected the strength of the world's economies (specifically the amount of debt countries carried).
After decades of a cheap manufacturing/labour policy in China, the US had become a "fat cat" living on the glories of past economic discipline. Its national debt, much of it held by China, has come as a result of capitalism's weakest flank - the race to the bottom of the "lowest possible price". US corporations built their profits on it over the last 25 years, and the Chinese were only too happy to accommodate American corporations greed. China has now turned those profits, held in US dollars (in the trillions) into a weapon, or what is commonly referred to as the "Chinese Nuke". While maneuvering to have their Yuan installed as the world reserve currency, and thereby overtaking the US in economic and political dominance in the world, China has held the threat of mass de-dollarization , and a fire sale of US debt, over the Americans head. In essence, the Chinese have placed the US, and the rest of the Western world in checkmate using capitalism - which is ironic considering it remains a communist country.
That leaves the Western world with two choices: 1. Accept that China and Russia have beaten them at their own game, and turn over world economic and political power; or 2. Engage China and Russia with the only possible advantage they still have - armed force.
2. Bi-Polar World
As a key part of its strategy to deny the US sole world power status, China and Russia have focused a great deal of their wealth on creating the "BRIC Alliance" or "Eurasia"(which I prefer). The core partners in this alliance are Russia, China, India and Iran. The lesser partners are Iraq, Syria, Cuba, South Africa, Argentina, and Brazil. Together they reflect the most demographically prolific regions in the world, which means they have the greatest markets to consume products, which further means that denying those markets to the West is fatal to Western trading and therefore quality of life and power. Having these regions trade together without the US dollar also necessarily relegates the US dollar to second place behind the Chines Yuan. The result is a bi-polar world. Two massive economies separated from each other - one built to grown and thrive on inter-trade and one destined to die from debt and lack of markets to support that debt.
A key developing feature of this new trading reality is military cooperation. Key to this is the gravitation of India into the Eurasian military sphere. Not only is Russia exporting its latest technology to China, India, and other Eurasian partners, but constant large scale military exercises between these countries have proliferated over the last few years. The relationships, both military and economic, now intertwine the Eurasian Community, and leave no doubt that their national interests lay with each other - not the West.
3. Might is Right.
The US is not reacting well to losing its international "top-dog" status. In fact, it has laid down the gauntlet - a bi-polar world is unacceptable. As it is incapable of attacking the Eurasian alliance financially, as to do so would immediately result in economic chaos for the West, it has chosen a military path in what can only be seen as a large scale, and very dangerous game of chicken. Notable challenges to Russia have included sponsored revolutions in Georgia, Ukraine, Syria, Iraq and to some extent former Soviet Republics on Russia's southern borders. Notable challenges to China have come in the form of economic warfare in Africa, and direct military and diplomatic measures in the South China Sea, and to a lesser extent South Korea. A large scale, but dubious economic challenge aimed at China is of course the "Trans-Pacific Partnership" (TPP) which excludes China, and is obviously intended to entice its neighbors toward the rewards of importing and trading with the American market.
Currently the epicenter of the "might will make right doctrine" is being played out in Syria, Iraq, and to a lesser extent Yemen. An escalating game of chess there is leading the "two solitudes" toward actual war. In a sense, it's a proxy war between Saudi Arabia and Iran - between Sunni and Shia. In reality, it's the purposeful use of centuries old hatreds between the two, with the goal of forcing either Eurasia or the West to accept the other's view of a "Brand New World Order". To that end, everyone is all in. Russia, despite having attempted to keep the conflict between the West and Eurasia on economic grounds (as its military is in rebuild mode with a finish date of 2020), has moved strategic and tactical forces into Syria. It has also promised to do the same for Iraq should the Iraqi government request it.
Turkey, a NATO partner, has shot down one Russian bomber, allowed ISIS forces to use its territory to conduct a "regime change war" against Syria, and now just days ago invaded Northern Iraq with a combat team of tans and infantry. According to the Iraqi government, the US has informed it that up to 90,000 Saudi troops and 10,000 US troops will be entering Iraq to "fight terrorists". In reality, both Saudi and the US have been accused of aiding, directly and/or indirectly, ISIS and other groups to overthrow the Shia governments of Iraq and Syria. Iran, the primary Shia power in the area, is already fighting in Syria, and would immediately enter Iraq, likely at the request of the Iraqi government, to fight any Saudi invasion of Iraqi territory.
In summary, it's quite easy to see where all this is leading - first the proxy powers and then the main powers. Neither side will blink. The die has been cast by both.
4. The Fall Out.
The result of the escalation we've seen is very predictable on the Middle East. Given the massive military buildup of Iranian and Saudi forces, we can expect so see a very quick and very deadly battle between the two. A battle played out from Iran to Egypt involving millions of troops, massive armour, and more importantly missile forces. While Saudi has the clear advantage in air forces, Iran has a clear advantage in missile technology to deal with them, so a land forces/ conventional war like early World War II is the likely result. In such a case, millions of fatalities can be expected. That is without the direct intervention of any super powers.
However, with Russia already in theater in Syria, and American bases scattered throughout the region, it would be naive to believe they would not be engaged. The clear advantage in such a scenario is to the Russians. Russia is closer to the area, so deployment of conventional forces there is much easier, and less fraught with intervention, than the US moving forces across the Atlantic or Pacific in large numbers. Also, in such a scenario, the US would have to deal with China on a stand alone basis in the Pacific area. Not an easy task considering China's conventional and strategic forces.
Then there is the "home front factor". In such a scenario Western Europe is bound to be drawn in immediately against Russia. It is very, very doubtful that western civilian populations have any stomach for war against the Russian people - no matter the sell to support it. Having lost untold millions in recent memory to large scale war, and the destruction of their countries, most Europeans are likely to rise up against such a proposition. Equally volatile is the American population. Notoriously inward looking, most Americans are consumed with their own country and have no stomach for foreign wars or any kind that involve casualties - let alone a war that would cause mass casualties in the US itself.
So, while the powers to be in the West maneuver toward world war, it is highly doubtful the population would support such an action. Conversely, the Chinese in particular have no such issues. The financial collapse of 2008 required 200 million Chines be sent back to their villages from urban centres in China, without so much as a peep. Such an action in the Western world would have resulted in revolt. So, that is the playing field. In all scenarios, the West can not win the battle it is formulating. It is unlikely that anyone would win from such a war, but it is certain that if there would be a victor that it will not be the US or the West.
5. What Should Happen.
In the ideal world, which could be this one, the West ought to admit economic defeat and take its place in a new bi-polar world. The rules of the game were set by the West, and the loss of that game ought to be accepted by the West. To change the rules to suit your own purpose simply destroys not just your credibility, but also that of the "world system" itself. History has ebbs and flows. Empires rise and fall. Economic systems collapse and are rebuilt. We know all of this from a simple study of our own recent history. It is the nature of the beast. To fight that result as if somehow your empire is more noble than any other of the past is arrogance beyond the pale.
The rationing of whatever resources the world has that we feel the need to consume has always been dictated by the efficient production and consumption of those resources - whatever the system. If the Chinese, Russian, Indian, etc countries are now in a stronger position to carry forward with that leadership in consumption, well, that's just natural selection really. They've shown discipline in consumption while we have not.
In the end, the only way to avoid what is playing itself out now in the world, the US and the West in general needs to accept that the Eurasian countries have worked their way up to likely dominate world trade and to some extent power. Perhaps it is a chance for all of us to renegotiate, or rediscover, the respect for sovereign nations and people that has been woefully discarded. Would that not make for a much better world for all of us? I believe it would. We don't need a Walmart to survive or be fulfilled.We do however need this planet.
Tuesday, December 8, 2015
The Newfoundland Nightmare
Newfoundland's economic problems are all structural, and now those problems are all coming home to roost. The structural part is not new. In fact, they trace back to the "merchant" days here - which in many ways have not changed. A small group of select families have controlled everything from insurance to resources, and everything in between for centuries here. Looking through that prism it is easy to see "modern" Newfoundland and Labrador's key structural problems.
Everything that is worth anything is controlled privately. Now, pure economists or extreme capitalists will argue that isn't a structural problem, but rather the way it ought to be. However, a province with such a small population must have a revenue stream greater than more populated provinces in order to adequately support its operations. In Newfoundland's case, successive governments have sold that revenue generating capacity away. The province is at the point where its major streams of Crown corporation revenue, other than oil royalties, rests really in liquor and gaming, and to some extent Nalcor Energy/NL Hydro.
It is quite easy to see why NL Hydro and Nalcor are still in government hands. Firstly, NL Hydro is not a money maker. Its primary function is to generate power - not retail it (where the money is). In other words, taxpayers pay for the generation of power, and NL Power (Fortis Corp) sell the power at retail prices while avoiding the costly problem of infrastructure to produce it. It's a win-win for NL Power, and a lose-lose for the average citizen.
Another industry which should be nationalized, or never privatized as it was, includes the insurance industry. The provincial government sees almost nothing of the car insurance, house insurance industry revenues that regenerate annually.
Telecommunications is another example. There is no provincial phone/cable company that could generate annualized revenue for provincial coffers.
Now all this may sound a little socialist in its undertones, but the bottom line is all the worth while wealth of the province has been transferred from the public's hands. That means there is not sufficient cash flow returning to the provincial coffers to adequately fund a modern quality of life. This becomes glaringly obvious when the one gravy train,oil, falls on its face. That is exactly where we are at today, and where we keep finding ourselves in the future. Structurally there can be no other result.
However, it isn't just the "little" people that get hurt in this cannibalistic economy. Small and medium sized businesses, municipal governments, non-governmental actors, and even the provincial government suffer as well. Eventually the loss of revenue from the local economy results in: less consumption of goods and services; higher government taxes; and uneven business cycles. That makes economic activity and necessary governmental wealth unstable and inadequate. And all that combined puts Newfoundland and Labrador's economic and social existence on thin ice - which in turn results in out migration, which in turn makes the core problems even worse.
Eventually all this must come to a head and fail. I believe we are almost at this point now. With an accumulated deficit now reaching almost 9 billion dollars, and structural budget deficits of at least a billion dollars a year for the foreseeable future, there is no answer for this province's nightmare. Raising taxes further will kill whatever consumption economy is left here, while failing to do so will kill governmental activity. Cutting civil service jobs may make governmental activity somewhat more efficient, but it will also severely damage the one "stable" economic driver for consumption. In short, the economic elites in the province have managed to paint all of us into the proverbial corner. There are no immediate solutions left. Nationalization of key industries like power, cable and insurance would provide some long term stability, but would require putting out money now that the province doesn't have. All in all it's a nightmare - a Newfoundland nightmare to be sure.
Everything that is worth anything is controlled privately. Now, pure economists or extreme capitalists will argue that isn't a structural problem, but rather the way it ought to be. However, a province with such a small population must have a revenue stream greater than more populated provinces in order to adequately support its operations. In Newfoundland's case, successive governments have sold that revenue generating capacity away. The province is at the point where its major streams of Crown corporation revenue, other than oil royalties, rests really in liquor and gaming, and to some extent Nalcor Energy/NL Hydro.
It is quite easy to see why NL Hydro and Nalcor are still in government hands. Firstly, NL Hydro is not a money maker. Its primary function is to generate power - not retail it (where the money is). In other words, taxpayers pay for the generation of power, and NL Power (Fortis Corp) sell the power at retail prices while avoiding the costly problem of infrastructure to produce it. It's a win-win for NL Power, and a lose-lose for the average citizen.
Another industry which should be nationalized, or never privatized as it was, includes the insurance industry. The provincial government sees almost nothing of the car insurance, house insurance industry revenues that regenerate annually.
Telecommunications is another example. There is no provincial phone/cable company that could generate annualized revenue for provincial coffers.
Now all this may sound a little socialist in its undertones, but the bottom line is all the worth while wealth of the province has been transferred from the public's hands. That means there is not sufficient cash flow returning to the provincial coffers to adequately fund a modern quality of life. This becomes glaringly obvious when the one gravy train,oil, falls on its face. That is exactly where we are at today, and where we keep finding ourselves in the future. Structurally there can be no other result.
However, it isn't just the "little" people that get hurt in this cannibalistic economy. Small and medium sized businesses, municipal governments, non-governmental actors, and even the provincial government suffer as well. Eventually the loss of revenue from the local economy results in: less consumption of goods and services; higher government taxes; and uneven business cycles. That makes economic activity and necessary governmental wealth unstable and inadequate. And all that combined puts Newfoundland and Labrador's economic and social existence on thin ice - which in turn results in out migration, which in turn makes the core problems even worse.
Eventually all this must come to a head and fail. I believe we are almost at this point now. With an accumulated deficit now reaching almost 9 billion dollars, and structural budget deficits of at least a billion dollars a year for the foreseeable future, there is no answer for this province's nightmare. Raising taxes further will kill whatever consumption economy is left here, while failing to do so will kill governmental activity. Cutting civil service jobs may make governmental activity somewhat more efficient, but it will also severely damage the one "stable" economic driver for consumption. In short, the economic elites in the province have managed to paint all of us into the proverbial corner. There are no immediate solutions left. Nationalization of key industries like power, cable and insurance would provide some long term stability, but would require putting out money now that the province doesn't have. All in all it's a nightmare - a Newfoundland nightmare to be sure.
Thursday, November 26, 2015
It's Hard Being a Liberal Right Now
WHAT GOOD WILL IT BE FOR A MAN TO GAIN THE WORLD, YET FORFEIT HIS SOUL?
Normally, when your party is close to an electoral victory, a party supporter is quite happy with the state of affairs. That doesn't apply to me this time around. Back in 2011 when I joined the Newfoundland and Labrador Liberal Party it was a much different place. Back then a Liberal was a Liberal, was a Liberal. There were no Tories in sight. In fact there were very few Liberals in sight. It was the core supporters of the Liberals that came to meetings or conventions. A small core.The party rested somewhere around 14% in the polls.
Yet, it had soul. The people gathered had purpose and spirit. They were 100% against things like Muskrat Falls and duplicitous PC conduct. That was a principled group of people in it for the good fight. Today things are much different. It really began when Yvonne Jones decided suddenly, just before the 2011 election, to bolt and rather quickly become involved in federal politics in Labrador. There were plenty of rumours she had been offered a pay off to leave, but they were just rumours.
Then, with approximately 15 minutes left in the filing deadline, Brian Tobin faithful Kevin Aylward jumped into the race and filled Jone's place as leader.That was the first indication things were taking a backroom turn. Shortly afterwords a $10,000 a plate dinner in Toronto was set up by Tobin for Aylward to raise election funds. Mining interests in Labrador figured prominently, and their pitch for Muskrat Falls became a shove. Thereafter, the Liberal fight to halt Muskrat Falls began to whither.
Fast forward to today. Dwight Ball is now the leader, and with him has come an exclusive-type of leadership that centers on a very small circle within the party. Many Liberals, especially old-time Liberals, aren't happy with being virtually shut out of the Liberals "new vision" and campaign. There are whispers. Plenty of whispers. So many in fact that it has become hard to distinguish between genuine complaints of autocratic leadership, and not so upstanding attacks from internal leadership hopefuls like Bennett and Antle. Now of course all that will be denied from the highest mount, but it has become very real.
Layered upon the internal dissent of eternally ambitious people, is the stealth election campaign. Ball is doing his damnedest to dance around all the minefields laying before him. He hasn't been upfront with the people on the real state of the province's finances, even though an economics student with no access could clearly see the mess ahead. Instead, he has chosen to place power over honesty. Sad when you consider the people are jettisoning the PCs from power for the very same reason.
Yes, it's a sad state when the Liberal Party here is merely imitating the departing PCs. It's sad to see people like Paul Lane, disgraced stacker and fixer of on-line polls and radio shows, leave the PCs for the Liberals. It's harder yet to see him embraced. After all, wasn't he the most savage of all PC members and defenders? And that's just the tip of the proverbial iceberg. It's painful to watch the lawyers and law firms jockey for place within the Liberal Party. Down to a man (and woman), the vultures are circling for the crumbs that are left of what was an oil inheritance for the people of the province - now squandered.
Finally, as if by some Shakespearean twist, it was very painful to watch Ball offer empty promises, at best, during the last televised leaders debate. It had the aura of the future surrounding it. It had the leap of faith, even though you know full well there is nothing to have faith in, kind of feel to it. It had the "I'm taking power and I have no earthly idea how I'm going to fix this mess" kind of feel to it. It was disingenuous, and insulting to the intelligence.
Whatever the electoral result is come November 30th, one thing is crystal clear - there will be no Trudeau moment. The promise of a more just society isn't even on the cue cards, let alone the heart. There is no promise of "sunny ways". Nope, none of that. Instead there are tightly gripped jaw bones, fake smiles, red jackets, etc. You get the idea. The provincial Liberal Party, as it stands today, is a disheartening imitation of the PC machine it has ambitions to replace. Discarded are the lessons of the PC downfall by those that are tripping over themselves to grasp at the empty cookie jar. Man, it's hard being a Liberal right now.
Monday, November 16, 2015
The Tyranny of the Majority
It seems that Newfoundlanders and Labradorians are on the verge of breaking the old rule : "Insanity: doing the same thing over and over again and expecting different results - Albert Einstein". Over and over again people vote en mass for one party, get royally betrayed and disillusioned, swap colours, and do it all over again for the other side. Each time huge majorities are given to the winning side, while the opposing side sits with a rump of 3-5 MHAs. The old saying is that power corrupts, and absolute power corrupts absolutely. Yet, here we go again.
According to all the polls the Liberals have between 70-80% of the decided vote. What that means is 40 seats for the Liberals, 0 seats for the NDP and ditto for the PCs. When that happens the Liberals must pick, from among their members, MHAs to sit as Opposition. Imagine that. We are just coming out of one of the darkest periods in oppressive government here, and yet we are prepared to set ourselves up for another.
Some of my fellow bloggers have railed against the NDP for bringing this matter to the public attention as an issue to consider when voting. Terms such as "fear mongering" are being thrown out there. Yet, isn't it just plain common sense? Of course it is. It's also good political strategy. Many people here say we want an effective opposition - just not from my District. That's another hang over issue from the political culture of "road politics" that still pervades the province's mentality.
The truth is the NDP are really the only party well suited for Opposition today. Firstly, and most importantly, they aren't the PCs. PC party politicians have been responsible for fiascoes ranging from massive overspending that's left the treasury bust, to unresolved questions over the killing of injured worker (and injured worker advocate) Don Dunphy in his home on Easter Sunday at the hands of Premier Paul Davis's good friend and bodyguard Sgt Joe Smyth of the RNC. They brought us Bill 29. They disallowed any meaningful public scrutiny of Nalcor. They created a financial albatross on Muskrat Falls. Just this year they committed to borrowing $2 billion to have a budgetary deficit of $1 Billion. Yet, as we all know, those figures were based on $63 barrel for oil. It's now $20 less than that. The list goes on and on and on.
Strangely, perhaps, it was the PCs own unbelievable arrogance that finally brought them down. It blinded them from seeing what they were doing was wrong. It led to an assault on the government by a few bloggers, and some local activists on radio shows and social media. A switch in the national political scene brought the death nail as Trudeau's arrival as Liberal leader 2 years ago marked the moment the decline began in a hurry. There is a lesson in that for Dwight Ball. It wasn't anything he did that brought an end to the Tory Tyranny. It was a combination of a hearts and minds war conducted by a few on the ground, and a final coup de grace with a switch in national fortunes. He would do well to commit that to the forefront of his memory.
With the PCs ruled out as Opposition, by any measure of common sense, the NDP ought to be the default go to party. They are in some ways ideally suited given their roots in social activism and claim to represent the "working man". The next many years, let's just say the foreseeable future, this province is going to see public service cuts, spending cuts, and unemployment that it has not seen in decades - at the least. Given the way the PCs spent, and committed future funds, there is no realistic alternative. It will be a blood bath. A social voice is needed in those circumstances in any case. So, the need for an effective Opposition and an effective social voice should cause the people of the Province to elect at least a rump of an NDP Opposition - although somewhere around 10 or so seats would be better. The odds of this happening are in the hands of the NDP, and to some extent the Liberals. Ball ought to be cautioning people against a 40 seat landslide. I know that sounds politically iffy, but it also sounds statesmanlike and mature. The NDP ought to be selling the need for an effective Opposition, and one that is not responsible for the financial disaster unfolding in the Province. It's a no-brainer, right? I guess we will see if Newfoundlanders and Labradorians have learned much from the last 10 years, or whether they enjoy the tyranny of the majority - the absolute majority.
According to all the polls the Liberals have between 70-80% of the decided vote. What that means is 40 seats for the Liberals, 0 seats for the NDP and ditto for the PCs. When that happens the Liberals must pick, from among their members, MHAs to sit as Opposition. Imagine that. We are just coming out of one of the darkest periods in oppressive government here, and yet we are prepared to set ourselves up for another.
Some of my fellow bloggers have railed against the NDP for bringing this matter to the public attention as an issue to consider when voting. Terms such as "fear mongering" are being thrown out there. Yet, isn't it just plain common sense? Of course it is. It's also good political strategy. Many people here say we want an effective opposition - just not from my District. That's another hang over issue from the political culture of "road politics" that still pervades the province's mentality.
The truth is the NDP are really the only party well suited for Opposition today. Firstly, and most importantly, they aren't the PCs. PC party politicians have been responsible for fiascoes ranging from massive overspending that's left the treasury bust, to unresolved questions over the killing of injured worker (and injured worker advocate) Don Dunphy in his home on Easter Sunday at the hands of Premier Paul Davis's good friend and bodyguard Sgt Joe Smyth of the RNC. They brought us Bill 29. They disallowed any meaningful public scrutiny of Nalcor. They created a financial albatross on Muskrat Falls. Just this year they committed to borrowing $2 billion to have a budgetary deficit of $1 Billion. Yet, as we all know, those figures were based on $63 barrel for oil. It's now $20 less than that. The list goes on and on and on.
Strangely, perhaps, it was the PCs own unbelievable arrogance that finally brought them down. It blinded them from seeing what they were doing was wrong. It led to an assault on the government by a few bloggers, and some local activists on radio shows and social media. A switch in the national political scene brought the death nail as Trudeau's arrival as Liberal leader 2 years ago marked the moment the decline began in a hurry. There is a lesson in that for Dwight Ball. It wasn't anything he did that brought an end to the Tory Tyranny. It was a combination of a hearts and minds war conducted by a few on the ground, and a final coup de grace with a switch in national fortunes. He would do well to commit that to the forefront of his memory.
With the PCs ruled out as Opposition, by any measure of common sense, the NDP ought to be the default go to party. They are in some ways ideally suited given their roots in social activism and claim to represent the "working man". The next many years, let's just say the foreseeable future, this province is going to see public service cuts, spending cuts, and unemployment that it has not seen in decades - at the least. Given the way the PCs spent, and committed future funds, there is no realistic alternative. It will be a blood bath. A social voice is needed in those circumstances in any case. So, the need for an effective Opposition and an effective social voice should cause the people of the Province to elect at least a rump of an NDP Opposition - although somewhere around 10 or so seats would be better. The odds of this happening are in the hands of the NDP, and to some extent the Liberals. Ball ought to be cautioning people against a 40 seat landslide. I know that sounds politically iffy, but it also sounds statesmanlike and mature. The NDP ought to be selling the need for an effective Opposition, and one that is not responsible for the financial disaster unfolding in the Province. It's a no-brainer, right? I guess we will see if Newfoundlanders and Labradorians have learned much from the last 10 years, or whether they enjoy the tyranny of the majority - the absolute majority.
Monday, November 9, 2015
New Facts on the death of Don Dunphy
The tragic death of Don Dunphy has haunted me now for seven months. Don was a close friend on social media, and his plight at the hands of the Workers Compensation Board hit close to home. As a disabled veteran I could have faced the same life-long struggle if it were not for the fact that my injuries were sustained while serving the country in the army. But for the Grace of God... as the saying goes. Many of you will know that I've campaigned long and hard to get the truth out about Don's death - whatever that may be.
To show support for Meghan, Don's daughter, and to serve the memory of Don, my wife and I recently attended the March for Don Dunphy in Mount Carmel - his hometown. Afterwards Meghan and family invited us in for some coffee and biscuits. We had a good talk about Don, and the circumstances surrounding his death that night. The words were spoken in confidence as the details were not yet public. However, national columnist Michael Harris just released a story on Don where some of those details were exposed (here), so silence on those points no longer serves any purpose.
Fact #1
Sgt Joe Smyth, the Premier's personal friend and bodyguard, and officer in charge of internet surveillance for the Royal Newfoundland Constabulary (RNC) at the time, was the officer that shot Don Dunphy to death.
Fact #2
Smyth was alone at the scene for one half hour before other police forces arrived, and found wondering aimlessly around the scene.
Fact #3
Smyth did not write a statement on the shooting until two days after the fact.
Fact #4
Meghan was not allowed to view her father's body until two days after his death.
Fact #5
Premier Paul Davis spoke with Smyth BEFORE the officer had written his statement on the events surround Don's death.
Fact #6
Don was shot numerous times, including at least one shot to the forehead. He died at the scene and his body was not removed until 4:00 a.m. the next day - or roughly 14 hours after he was killed.
These are some shocking, absolutely shocking details of Don's death and the subsequent process. The fact that Paul Davis, the Premier of the Province, and former serving RNC officer with Smyth, would speak to him on the phone prior to Smyth writing his statement is beyond the pale. Given the recent revelation that RNC Sgt Buckle counselled a fellow officer to lie (here) the question becomes: Is the RNC corrupted? Whether it is or not, and whether Davis counselled Smyth or not, the bottom line is he spoke to an officer who killed a man before his statement was written, and that is an outrageous breach. One that should cause his immediate resignation as Premier.
Also, and extremely disturbing, is the fact the officer had two days to give a written statement. Aside from the fact that many details can be forgotten in two days, which is why a statement is normally done immediately, the time lapse gives the officer time to create a story to match the events should he be so inclined.
On a human side, it was very disturbing to learn that Don's daughter could not see her father's body for two days. According to her, the police said she could not see the body due to the Coroner's instructions. When Megan finally contacted the Coroner he stated there was nothing holding her back from seeing her father's body. Anyone who has lost a loved one knows that seeing the person's body is a critical part of the process of coming to terms with their death. This basic right was denied to Meghan for days, which I can only imagine must have been pure hell for her.
Of course it is now semi-public knowledge that Sgt Smyth, after writing his statement, and then sending an email that he had "no regrets" to his fellow officers (which was subsequently leaked to the media) hustled off to Florida for a vacation. As disturbing as Don's death was, and remains, to us all, the details thus far released are nearly as disturbing. One thing is for certain though, Premier Paul Davis must immediately resign as Premier, PC leader, and MHA. He has committed an inexcusable act by speaking with his personal friend and officer on the killing of a man without that officer first writing a statement on the events. That is how the truth looks so far in the death of our friend Don Dunphy.
Saturday, October 31, 2015
Death of the PC Empire in Newfoundland and Labrador
In 2011, when I left the Newfoundland Conservatives, their reign was supreme. A well oiled, impenetrable machine. A dynasty in the making. There was no other, and no other was in sight. Their popularity in the polls was hovering around 75%. They controlled all but 4 seats in the House of Assembly. It was a closed shop, and they went to great pains to keep it that way.
Four years later things have changed - sort of. In 2011 the Province had the worst, most oppressive access to information law in the country. Serious dissent now runs like the wind. People have become engaged and are forcing the political agenda in many ways. The PC Party has not. It simply has become worse at the tactics it used to suppress opposition and change in the Province. The people's core values have shifted, while the Party's tools of control remained entrenched in lip-service and really bad acting.
Four years later the Province has gone through five, count them five PC Party leaders - that must be a Canadian political record. Nothing remains of their "all-star cast" of Ministers that dominated the headlines of the Province. All that remains are the "Omega and the Alpha" - the "End and the Beginning". Current Premier Davis is the "end', and Stephen Kent hopes to be the "beginning". That is to say that while those forces that hovered within the PC Party shuffle over to the Liberal Party ever so quietly, people like Kent remain to be the caretakers that rebuild the PC Party after its defeat.
Yet, throughout its death spiral, the PC Party has operated itself as it operated the government - without accountability. There have been no lessons learned, because there has been no accountability rendered. There is a reason for that. Avoiding accountability of any type for actions has dominated Newfoundland politics, and in some ways Newfoundland culture for some time. What remains obvious to anyone who has been anywhere else, but cloaked within the political culture on the Island, is the immature way politics plays itself out here. Some have referred to it as "high-school politics". Others have been less generous. Whatever the case, it is the nature of the politics here that allows for a party like the PCs to do what they have done.
Let's call it the "It wasn't Me" mentality. It is always some other person, or organization, or province, or country's fault - never our own. To even suggest it was our own is to invite calls of "traitor". That's why politics here is referred to as "high school" or "immature", because adults take responsibility for their actions. The accountability allows them to grow and not repeat the same mistakes over, and over, while blaming others for all their short comings. The failure to accept criticism and mature is the birthplace of systemic immaturity. That's what we have here. The PC Party wasn't some kind of one-off government of despots. It was merely the latest reincarnation of a political culture that has refused to grow. It lies in the face of this place's 500 year existence.
The PC Party has not been able to change, because it doesn't know any other game. PCs aren't stupid. They aren't unusually corrupt. They are a product of their environment. The latest example being Davis's blaming of future cuts on the Liberals impending political victory. Ditto for his warnings to the Province's business community. "They will cut your jobs" he tells the unions. "They will take your customers money, and cause you to fail" he tells the St. John's Board of Trade. The reality is the actions of the PCs in power has left any future government no choice but to cut spending and jobs. Yet, Davis is already playing the "it wasn't me" card, and the election isn't even started yet. He is in fact laying the ground work for the same immature politics to continue a new cycle.
What we have here is not a "failure to communicate". What we have is a failure to learn. A failure to accept that: with great power comes great responsibility; accountability and accepting responsibility are the key stones of personal and systemic growth; and that public office is a sacred trust on behalf of your citizens. We see these things played out on TV and the Province's three radio shows every day of the year. They take different forms, and they involve different issues, but they are all related to the problems outlined above. Many suggest the Liberals will repeat the cycle, and be no different in their approach than the PCs were. In fact I would say that is the dominant opinion among people. What people fail to realize is the accountability for that lays with them. If no accountability is demanded for failings as they happen, then none will be voluntarily accepted. Therein lies the key.
So, while the PC Party twists in its death throws, and the Liberals quietly organize to take their place at the helm of power, it remains to be seen if either the people or the politicians have learned anything from their four year trial of fire. Time will tell.
Four years later things have changed - sort of. In 2011 the Province had the worst, most oppressive access to information law in the country. Serious dissent now runs like the wind. People have become engaged and are forcing the political agenda in many ways. The PC Party has not. It simply has become worse at the tactics it used to suppress opposition and change in the Province. The people's core values have shifted, while the Party's tools of control remained entrenched in lip-service and really bad acting.
Four years later the Province has gone through five, count them five PC Party leaders - that must be a Canadian political record. Nothing remains of their "all-star cast" of Ministers that dominated the headlines of the Province. All that remains are the "Omega and the Alpha" - the "End and the Beginning". Current Premier Davis is the "end', and Stephen Kent hopes to be the "beginning". That is to say that while those forces that hovered within the PC Party shuffle over to the Liberal Party ever so quietly, people like Kent remain to be the caretakers that rebuild the PC Party after its defeat.
Yet, throughout its death spiral, the PC Party has operated itself as it operated the government - without accountability. There have been no lessons learned, because there has been no accountability rendered. There is a reason for that. Avoiding accountability of any type for actions has dominated Newfoundland politics, and in some ways Newfoundland culture for some time. What remains obvious to anyone who has been anywhere else, but cloaked within the political culture on the Island, is the immature way politics plays itself out here. Some have referred to it as "high-school politics". Others have been less generous. Whatever the case, it is the nature of the politics here that allows for a party like the PCs to do what they have done.
Let's call it the "It wasn't Me" mentality. It is always some other person, or organization, or province, or country's fault - never our own. To even suggest it was our own is to invite calls of "traitor". That's why politics here is referred to as "high school" or "immature", because adults take responsibility for their actions. The accountability allows them to grow and not repeat the same mistakes over, and over, while blaming others for all their short comings. The failure to accept criticism and mature is the birthplace of systemic immaturity. That's what we have here. The PC Party wasn't some kind of one-off government of despots. It was merely the latest reincarnation of a political culture that has refused to grow. It lies in the face of this place's 500 year existence.
The PC Party has not been able to change, because it doesn't know any other game. PCs aren't stupid. They aren't unusually corrupt. They are a product of their environment. The latest example being Davis's blaming of future cuts on the Liberals impending political victory. Ditto for his warnings to the Province's business community. "They will cut your jobs" he tells the unions. "They will take your customers money, and cause you to fail" he tells the St. John's Board of Trade. The reality is the actions of the PCs in power has left any future government no choice but to cut spending and jobs. Yet, Davis is already playing the "it wasn't me" card, and the election isn't even started yet. He is in fact laying the ground work for the same immature politics to continue a new cycle.
What we have here is not a "failure to communicate". What we have is a failure to learn. A failure to accept that: with great power comes great responsibility; accountability and accepting responsibility are the key stones of personal and systemic growth; and that public office is a sacred trust on behalf of your citizens. We see these things played out on TV and the Province's three radio shows every day of the year. They take different forms, and they involve different issues, but they are all related to the problems outlined above. Many suggest the Liberals will repeat the cycle, and be no different in their approach than the PCs were. In fact I would say that is the dominant opinion among people. What people fail to realize is the accountability for that lays with them. If no accountability is demanded for failings as they happen, then none will be voluntarily accepted. Therein lies the key.
So, while the PC Party twists in its death throws, and the Liberals quietly organize to take their place at the helm of power, it remains to be seen if either the people or the politicians have learned anything from their four year trial of fire. Time will tell.
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