Wednesday, January 21, 2015

Update-1: Sorry folks, "the recovery has been delayed until the end of next year"

Another year of non-recovery now 7 years on from the "great recession" which it seems few remember was caused by a combination of Wall-Street and financial elite exuberance and hubris, derivative trading, and most importantly $147 / barrel oil which quickly ate through the middle class's credit as bank breaking high gas prices made scooters an appealing mode of transportation.

Today the Bank of Canada lowered it's overnight lending rate "unexpectedly" (for some people it seems, not for anyone who is well aware that Canada's one trick pony of extreme energy production known as the oilsands has now become completely reliant on these low rates just as U.S. energy production has) and also declared "the recovery has been delayed until the end of next year". Yup, delayed again, fancy that eh?
The Group of Seven’s biggest crude exporter is already feeling the effects of crude oil dropping below $50 a barrel, as companies such as Calgary-based Suncor Energy Inc. reduce staffing and investment. The central bank said today said the economic recovery will be delayed until the end of next year and the needed rotation from indebted consumers to growth fueled by business spending is less certain. 
Of course everyone is pointing to the decline in oil prices as the culprit for why the "recovery" has been delayed (this time) completely ignoring the fact that no recovery can happen with expensive energy prices either. But here is the best part: "needed rotation from indebted consumers to growth fueled by business spending is less certain". This has been a central theme on this blog, for all the talk of how "strong" the Canadian economy is and how well we "weathered the storm of the recession" very little attention is being paid to the fact that the way in which Canada decided to "weather the storm" was by pumping up it's own housing bubble to extents beyond even where America's debt-to-income ratio was in 2007 which has provided the illusion of a "growing middle class".

Of course try and tell Canadians that their housing is in a bubble and you're quite likely to get an earful of the talking points they've heard on TV. "It hasn't happened yet" or "something, something something, stable banks and regulations and Jim Flaherty". Most Canadians still believe our banks don't engage in the same sort of derivative trading that has destabilized the financial world and prevented true wealth and price discovery to take hold as in the U.S. where as in reality there is no difference in terms of their operations.

Canada's ability to weather the storm can be chalked up to nothing more than circumstantial chance and the fact that our housing bubble has been buoyed by abnormally expensive energy, and the velocity of the increase in the price of oil (not the price itself, see: When it comes to #oilsands a stable price is a low price no matter how high it is), as well as an accommodative interest rate policy meant to encourage more lending to supposedly "boost inflation" (in reality to prevent a collapse of the credit market as old debt requires new currency to pay off as there is always more principal + interest owing than there is currency to pay it in our "growth" oriented ponziconomy).


It's very simple to understand why whether with high oil prices, or "low" oil prices, the "economic recovery" just isn't going to happen and that is because what we now refer to today as a low price of oil was extremely high just 10 years ago in 2005, the year that conventional peak oil occurred and thus the world faces a growth conundrum in that consumption requires a cheap price (not an expensive price which is relatively cheap) and that production requires a relatively more expensive price far beyond the sustainable price of consumption. Looking at historical economic situations won't provide any answers for growth today. Today things are different.

It's almost hilarious, if it weren't so sad, that even though North America is screaming about how this "cheap price" is too cheap to support extreme oil production on one hand, then on the other the same people are saying "peak oil doesn't exist, that it was a hoax". T. Boone Pickens the U.S. oil tycoon certainly believes and understands peak oil, and the media talking heads certainly don't.

It is not a coincidence that since 2005 the price of oil skyrocketed. It is not a coincidence that since the price of oil triggered the beginning of the collapse of the U.S. (and western) economies (yes this is only the beginning still) growth has been at a standstill despite the historically lowest and prolonged emergency interest rates ever. These facts are just glossed over in your daily media as the tiring mantra of "recovery" is front and center. For everyone but the richest 0.1% there isn't ever going to be a recovery as your wealth is based on a return on your work, and their wealth is created by being close to the source of inflation.

Anyone can be a "job creator" when practically free currency is "loaned" to them. The magic and entitlement to free currency the "job creators" proclaim is based on the absurd idea that nobody but them can create jobs. I could hire numerous graphic artists and bloggers to write these posts I make and do a much better job of it then I do and maybe even a few people would see value in that but overall none of the jobs I created would be generating new wealth. They'd be paid by loans, I'd pay the loans by taking out new loans so I could roll over the old loans, and so on. Job creation? Yes. wealth creation? no. So when you see "job creation" being touted as a sign of economic health remember that those jobs are simply existing on the fumes of wealth generated prior to 2005, the year of conventional peak oil, and on borrowing from the future with no chance it can ever be repaid robbing our children and grand children of their inherited wealth. They will be left with nothing, and nobody really seems to care.

The only peak oil hoax is the hoax that relying more and more on extreme low quality, low EROEI energy production can ever hope to reproduce the wealth and prosperity experienced in the lead up to 2005. Instead what we're getting are empty promises, year after year, "the recovery will take hold for main street next year". Next year the recovery will be delayed again, the year after it will be delayed again, and each and every year the real economy on the ground, the one that feeds you and me, will continue to deteriorate. You don't have to be an economist to know that, in fact it's probably better that you're not, all you have to do is realize the return we're getting on energy today pales in comparison to the returns of yesterday and that prosperity is not growth and growth is not prosperity; they are mutually exclusive. It is only the excess energy bounty which has allowed for both growth and prosperity to occur simultaneously.

We have entered the great deflation of the biggest bubble ever blown by central bankers in history. The banks themselves are out of ammo and Canada will soon join them as we don't have very far to fall now to 0% interest rates, and then negative interest rates. Worrying about what the financial landscape is going to look like when interest rates finally do rise is pointless as by the time banks are forced to raise them bigger economic stability troubles will be on our doorstep. Low rates have now become normal, and required, for the continued stability of the western poonziconomies and so long as some form of illusion of financial stability is maintained they will remain low for that reason. For the last few years economists and the Bank of Canada have been continuously warning about the "imminent" rate hikes and I've called bullshit on them every time. Not a hard call to make when you understand the fundamentals of a market adverse to the reality of fundamentals.

Those in charge of course are not as stupid as they appear, they're well aware of all of this and it's again no coincidence that despite the public reasons proclaimed for their policy choices all of the policy choices from monetary to security reflect this deterioration.

The explosion of "terrorism" is also a part of this. Frankly if you believe that the operation carried out with military precision and ice-cold-blooded murder at the Charlie Hebdo office was done by some early twenties kids who went for a few months of Jihadist training (and not western intelligence lead mercenaries as many foreign politicians are claiming) and you're now calling for more security, more surveillance, and denouncing the Muslims then you're playing right into the system's hands and you're so far gone I doubt I can help you. Everywhere I turn now I see "suspected homegrown terrorists arrested". charged with.. traveling, or "sympathizing with terrorism". Free speech be damned I guess as we all rally around supposed free speech. No it's only free speech, protected speech, when you're saying what the system likes to hear. I was reading some letters to the editor yesterday on the subject in the National Post and the opinions of the "tolerant Canadians" are downright scary. If you want to understand how the German people could allow the rise of Hitler look no further than the kneejerk fear oriented reactions of your fellow citizens.

Here are a few excerpts but pretty well every single letter is equally disturbing in their blind faith that terrorism is what we're being told it is on TV, notice how all of the talking points are just regurgitation of the junk heard on TV:
Canada has done a very good job to date of intercepting and stopping terrorist attacks at home. Our military has done yeoman’s service overseas and continues to make a very solid contribution. It is time, however, to take the kid gloves off and start arresting and rounding up all those known to be planning domestic or overseas terror attacks, as well as those who mentor, encourage and finance such attacks.John Moodie, Bobcaygeon, Ont.
The Harper government has already taken a step in the right direction by strengthening the powers of CSIS to closely monitor the activities of militant Islamists. CSIS should be in close liaison with border security and the RCMP to prevent known terrorists or their supporters from entering Canada in the first
place. If they leave Canada, every effort should be made to prevent radicalized potential terrorists from returning. Canadians must also report any suspicious behaviour or activity to the authorities. Educate the public, including school children, on how not to fall into the terrorist trap.
Fred Perry, Surrey, B.C.
Canada should rearm to both defend ourselves and project power to confront the likes of ISIS. We are a shadow of our former selves. Our RCAF contribution to the ISIS war is laudable but almost invisible. Long forgotten are the days when the RCN was the world’s third-largest fleet, and one in every five soldiers landing in Normandy was Canadian. Canada is uniquely qualified to field highly trained, bilingual specialty forces to confront militant Islam’s barbarians. We only need public willingness to man up for this decades-long task.Francis Patrick Jordan, White Rock, B.C.
There are many, many, many, more just like these calling for roundups, praising the surveillance state which it seems few remember that intelligence agencies have far more power than they were ever letting on thanks to the Edward Snowden leaks, yet apparently they need even more. The insanity has reached all new extremes. We're now going back and charging regular criminals as terrorists (now that it's popular to do so) because they supposedly were trying to aid a terrorist group or some other fucking bullshit none of which will ever be proven and could easily be fabricated in our kangaroo terrorist courts.

Stephen Harper just recently said that "the terrorists have declared war on Canada" but Canada has been at war with "the terrorists" for 14 years. Nobody even bats an eye at the fact you can only declare war once and then guess what? YOU'RE AT FUCKING WAR! We're so propagandized that we believe we should be able to kill them, but they shouldn't be able to kill us. If we kill them it's freedom and democracy, if they kill us it's terrorism, not unlike the Israeli/Palestinian conflict. This is just an extension of that mentality.

You may not believe me today, and with the level of highly advanced propaganda bombarding Canadians everyday on every matter you may never believe me even being an actor in exactly what I describe but you ARE ALL the home grown terrorists. One day in the near future as the economic situation deteriorates further and you're no longer willing to believe in the fairy tale of a delayed recovery and realize that a massive robbery and wealth transfer has taken place right under your nose and that you're a victim and that the government was never looking out for your best interests in their pursuit of "jobs and growth", you might just decide you need to fight back.

You might realize one day that the sham of democracy we cling on to for dear life as some form of mental ground of stability and sanity doesn't exist either in any way shape or form and that the only way to provide a country reminiscent of the freedom we've all enjoyed prior to the "war on terror" (whose propaganda an entire generation of children have now grown up under) to our children will be to fight for it. On the streets if necessary, and when that day comes if our mental state hasn't been warped to the point of no return what you will find waiting for you is an advanced security apparatus, paid for with your hard earned currency, that will label you the terrorist for fighting the system that has been rigged and stacked against you in an effort to return to feudalism. Maybe "being anti-government", etc. That day is coming, will you realize when it's here?

Update-1

It's really too bad I didn't see this link before I wrote this post as it really fits right in but I couldn't resist adding it now as it really illustrates the situation the entire world is dealing with. It's delicate description of the modern feudalism the people in the formerly known as middle class class are to find themselves in is just exquisite. The last two paragraphs summarize it nicely:
"With two thirds of the world's wealthiest being first generation wealth creators, the coming years will be the first time they have been involved in wealth succession planning," the report said.

"Those in the second or third generation of wealth will have had greater experience with wealth transfers, and will have most likely had the opportunity to learn about wealth succession planning from their parents."
Meet the new royalty, with more assets than governments and all the citizen plebs in their lands. The "first generation".




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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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