Monday, February 25, 2013

Deflating the pillars of Canadian economic mythology

Canadians are jumping out of one lie and into bed with another. Buzz words like "bitumen bubble" pop up out of nowhere and are dominating Canadian news. The news which of course all "saw this coming" even though if you look at their headlines from a year ago they were all talking about economic engines leading Canadian economic growth, stable banking systems and consumer spending, etc.

The "bitumen bubble" is just a new lie to keep dangling carrot of prosperity seemingly within reach. All we need are a few tweaks here, and a few pipelines there and it's all fixed! Just keep supporting these brain dead plans and one day, some day, every thing is going to be just peachy.

For those not trapped by one bullshit term, they are trapped by another: dutch disease. The idea that somehow our shitty unviable oil industry is pushing the Canadian dollar up having all sorts of effects on manufacturing, etc, though with recent global economic reports our currency has for the moment depressed some.

Two bullshit terms designed to appeal to two different segments of an already divided population.

I'm not even going to bother linking the absolutely numerous articles filling the web even as we speak calling out the financial viability of the oilsands but for all the wrong reasons. Not properly understanding the reasons for what's happening to the Canadian economy, in entirety, allows for the easy manipulation of public opinion and policy purely on the promises these new directions will "fix the problem". You know, that whole "problem-reaction-solution" thing.

Isn't it convenient that the solution is to basically bend over backwards to get industry what they "need"? "Business trip", after "business trip", after "business trip" to act as, what, exactly? The public relations big oil can't afford? Why is the onus on the Alberta government anyway to prove that a private industry is viable, environmental, or ethical? Especially when Alberta's own roller coaster economy seems to scream that: "it isn't, they're not, ask China". It's getting harder and harder to figure out where the industry ends and government begins. These people have been lying for years now, it's become fully apparent there was never a long term plan, that what they are in fact doing is gambling on an extremely bad bet.

Almost two years ago I setup my Hellberta blog, and the reason I setup that blog was not to harp on Alberta's environmental record or to simply bitch, but to attempt to expose and warn about the economic troubles the oilsands will cause. What we're seeing now is just the beginning and it's not being caused by dutch disease or some nondescript bitumen bubble. Our leaders have been deliberately detracting people from the true effect the U.S. financial circus is going to have and how it is actually affecting our currency.

With the quickly changing landscape and the Federal Government's amazing ability to propagandize the fire-sale of it's assets as a "good thing" while somehow convincing everyone to forget everything it said about everything even 6 months ago; I currently see 3 'pillars' of fantasy economic garbage being shoved on Canadians carefully designed to keep you oblivious to the reasons of the crisis.

1) That there is a "bitumen bubble".
2) That our currency is "strong".
3) That the oilsands, fundamentally, are viable.

I believe most of the population believes at least 1 or more of these items is true, which aids the illusions we're being fed about our financial situation.

What "bitumen bubble"?

OMFG, LOOK OUT!! It's the.. bitumen bubble!!! Coming to destroy economic forecasts far and wide (across Canada anyway). I'm still a little fuzzy though on which part of our situation is the "bubble" aspect of the bitumen bubble.

I've realized now, thinking back, that Alberta didn't just gamble once, but they actually gambled twice, or gambled on the price of the wrong asset depending on your point of view. During the recent Alberta election notice that "oil price" was the topic of choice, and not "bitumen price", two separate assets. Alberta not only gambled the future on an unsustainable exponentially rising oil price, but Alberta also bet the future on an assumed relationship between the oil and bitumen assets. Forecasting the oil price was in other words "as good as" forecasting the price of bitumen.

So where is the "bubble"? Which asset is over-priced? oil? or was it bitumen that was over-priced all along? I've pointed this out before: if there ever was a bitumen bubble Alberta's problem now is that it's popping.

Have you ever wondered why Alberta over the years constantly referred to the "billions" in total reserves rather than production targets? Alberta always refers to it's reserves and then as a side note talks about it's rate of production. Targets like 3 Million barrels / day by 2030 of which we've been told by the elaborate ethical oil propaganda campaign that we could somehow replace the world's top "unethical" oil producers. Alberta refers to it's total reserves because out of context they seemingly support the fantasy prosperous future they've so carefully painted for you. Of course with world oil demand forecasts as they are currently our piddly 3 million barrels isn't going to be providing even a dent in the world energy demand bucket let alone providing anyone anywhere with "energy Independence".

These "leaders" will tell you literally anything so long as you keep chasing that dangling carrot at the end of fairytale rainbow. Whatever it takes, and when it comes to propaganda used to manipulate the public opinion money is never an object, is it?

How many public relations guys do you think it took to come up with the propaganda phrase "bitumen bubble" anyway? Oh, it's just a cute widdle bubbly wubbly!

The weakest link

OMFG, LOOK OUT!! It's the.. dutch disease!!! Making our currency all strong and stuff. I just did a massive post on hyperinflation in the U.S. which also describes why our currency is so "strong". In short, ours isn't strong, the U.S.'s is just a lot weaker. Everything is relative! If our oil is the reason for our strong currency then why is it that we only achieved parity with the U.S. directly before and ever since the crisis of 2008? Why not back in 2006 or 2005, during the height of our "bitumen bubble" (or at least what I believe was the real bitumen bubble)? Because it has nothing to do with it, it has to do with the interest rates and global currency devaluation war currently going on.

I don't really feel I need to expand any more here, our currency isn't strong it's just relatively stronger than the USD, period. Any questions? comment.

Oilsands prosperity is a lie

This is our grand lie, isn't it? Canada's whole economic dream revolves around the flawed idea that somehow with enough "R&D" we can overcome the 3:1 EROEI ratio of the oilsands and until then we're just not going to talk about it. We can't. It's not just the government budgets...

Low gas prices scuttle Synfuels carbon capture deal with Alberta government
Nexen reports loss ahead of CNOOC takeover
Talisman layoffs could be harbinger of pain ahead for other Canadian gas producers
Cenovus posts Q4 lossGrowth in fourth quarter may be softer than previously expected: Carney
GDP numbers expected to paint gloomy picture of a slowing economy

It's not the government or taxes; it is the very fundamental unviable nature of oilsands development and other extreme energy itself, and when it comes to Canada's economic crisis: this is just the beginning, up until now we've only been feeling the effects of other countries' financial disturbances. Now it's our turn.

A summer of fun

Expect protests. Lots of protests. EI protests, student protests, idle no more, occupy, all of it. Canada is now well into it's own decline and severe civil unrest is never far behind. These will likely cause Canada's GDP-Consumer Spending-Housing feedback loop to deteriorate even faster than it is now.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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