🇨🇦’s financial system may be just weeks away from a crisis.

It’s probably more lucrative to not explain this to you normies, but f*ck it—no one’s going to change the trajectory.

Let’s talk about 🇨🇦’s upcoming credit crunch. But first, a primer on credit.

<thread> 🧵👇
2/ some people assume the central bank just picks an interest rate. Nope, credit is based on supply & demand.

When supply exceeds demand, costs falls. If everyone wants to lend you money, you don’t pay a lot. That’s why Zuck’s mortgage is only 1%.

The opposite is also true.
3/ if you need more money than the market wants to lend you, the cost rises higher. Think of payday loans.

When the Global Financial Crisis hit, everyone wanted to lend stable democracies money. This led to the era of low rates—cheap loans for all!
4/ the reason this was attractive was due to decay control, aka inflation.

The bonds investors bought were issued in more stable currencies, which managed inflation well. 🇺🇸 is the global reserve, & usually the biggest winner.

But 🇨🇦 also has a very stable banking monopoly.
5/ cheap loans for all! In 🇨🇦, there’s two main types of bonds that attract investors—Gov & mortgage bonds, guaranteed by the gov but they pay a higher yield.

Now let’s circle back to inflation. That *is* something the central bank tries to control.
6/ it’s another supply & demand sitch.

Too weak? Central bank cuts rates to stimulate demand faster than supply chains, and create inflation.

Too high? Rates rise to slow consumption, slowing inflation.

Got it? Hopefully you do, because here’s where shit goes sideways.
7/ so in Feb 2020, inflation was a healthy 2.2%, 0.2 ppt above target.

It drops to 0.9% in Mar based on declines in crude, travel, restaurants, & car rentals. Cheap credit doesn’t stimulate consumption of physically restricted products, so it inflates other areas.
8/ 🇨🇦 went on an borrowing spree, not just for emerg related issues but full on helicopter money w/no scrutiny.

If inflation doesn’t rise to target, the central bank will engage in quantitive ease—QE. It expands its balance sheet to create excess credit to boost inflation.
9/ Except inflation was 3.4% by April 2021, over 50% above target in a year.

Remember transitory inflation? It wasn’t in transitory segments.

A year later, I was invited to parliament to testify & explained the BoC was still buying bonds to absorb gov borrowing.
10/ For good measure, I found out the BoC studied what to do if the gov is borrowing so much that they can’t conduct proper monetary policy.

The gov was borrowing because it was cheap. The central bank was making it cheap because the gov kept borrowing.

A circle jerk of idiots.
11/ the week before, Tiff testified it was foreign countries. The week after, he said it was them.

That was thankless, I should have just bet against the currency & watched it collapse. Maybe next time.

Anyway, fast forward to Freeland’s pressure to politicize SWIFT.
12/ remember in 2008 how the 🌎 piled into Western bonds?

🇨🇳 took the opportunity to explain to countries why they need to diversify, since they can be shut out of the global financial system for non-NATO conflicts.

It’s hard to shed 🇺🇸’s $, but 🇨🇦? Not so much. A lot to this.
13/ Remember those mortgage bonds? Well, the gov never tried to solve its housing bubble. It was generating reasons to give developer friends subsidized loans.

After they inflated home prices, they piled in easy immigration. Record prices occurred at record low immigration.
14/ immigration ramped up a year later to create a cover, & generate more state-subsidized loans/handouts.

They would crowd the market further, explain they need to build more for lower prices. Behind your back they explained higher prices are needed to build more. Whoops.
15/ now here’s the problem. There’s record low demand for CAD denominated bonds.

Mortgage bonds fund this two-bit scheme. Good thing the million IQ gov had this idea—the gov will borrow to buy the mortgage bonds itself.

Even the CMHC warned against this.
16/ not just because the gov is issuing, guaranteeing, & buying its own debt.

Mortgage bonds have higher yields, so it attracts different investors.

The gov assumed it could pocket the difference. It just lost that capital, lowering demand further.
17/ Now this is where it gets comically bad. Let’s circle back to the bonds the BoC bought that I warned about.

QE is balance sheet expansion. To prepare for the next recession, it needs to engage in QT—quantitative tightening. This is the process of removing liquidity.
18/ the BoC lost $6B last year dumping these. Borrowing on behalf of others has a cost, either higher rates or monetary weakness.

They know you don’t understand it, & that’s what they love about you most.

But now no one wants bonds, so now the BoC has a problem.
19/ since all credit competes, this distorts short term markets.

At least one bank is complaining how unloading QT is crowding the market, causing higher short term borrowing costs.

It’s unlikely the BoC will deleverage before the next recession, so the recovery won’t be easy. Image
20/ the liquidity issue is becoming even more apparent.

The BoC dropped a notice they’ll increase short term facilities by 200%… on a Friday afternoon, effective before market on Monday.

Increases in short term liquidity are normal. Emergency increases in liquidity are not.
21/ this isn’t to say 🇨🇦’s banks will fail & you’ll wear barrels w/ straps on the street.

🇨🇦 has G-SIBs, so the world will grind you up to sell as soylent green to create liquidity before a bank fails.

But virtually no one understands how much stress is about to hit the system.
ps before the, “but inflation is so low” crowd wakes up.

If prices rise in the woods and no one is around to hear it, do you still lose purchasing power when you try to buy stuff there?
pps remember when I said it doesn’t matter if I explain these issues, no one is going to change the current trajectory?

It’s because #PredatoryLoansMatter (aka partisan hacks) will pretend that criticism of predatory policy is being negative. I’m sure it makes me a racist too. Image

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More from @StephenPunwasi

Jul 3
Have you noticed smart people are suddenly irrational—ignoring facts & embracing narrative?

It’s not your imagination—it’s a biological phenomenon exploited by leaders & we’re all vulnerable to it.

Let’s talk about amygdala flooding & neurobiological hijacking.

<thread> 🧵👇
2/ Bonhoeffer, a Lutheran pastor executed for trying to kill Hitler, famously touched on this in his theory of stupidity.

Stumped by the normal people he knew suddenly becoming Nazis, he concluded they’re not evil—they’re stupid.

Stupidity is way worse than you think.
3/ to him , stupidity is surrendering one’s ability to think, making one incapable of self-reflection or moral judgment.

It’s not greed. People are so stressed they’re outsourcing thinking.

This is why facts have no impact—there’s no consideration.
Read 16 tweets
Apr 23
🇨🇦’s wild these days.
- Money laundering capital of the world
- the global fentanyl “command & control center”
- home to transnational organized crime heads
- at least 1 in 7,800 residents are members of organized crimes.

How did this happen so fast?

<thread> 🧵👇
2/ first of all, most folks in 🇨🇦 don’t realize how bad things are yet, they’re just dealing with the consequences.

Soaring housing costs. Rising car thefts. Unaffordable housing, Overdoses in your hood. Violence in your streets.

All related.
3/ 🇨🇦’s home prices soared in the mid-2010s due to laundering.

Fentanyl proceeds were washed in casinos, then layered w/housing. It’s now called the Vancouver model.

Home prices surged since comps were skewed, & launderers WANT to pay more.

Dive into this later.
Read 11 tweets
Apr 22
Funny story. About a year ago I was crunching 🇨🇦’s immigration data & found a really neat issue.

… over 1 in 6 of 🇨🇦’s claimed immigrants don’t actually exist in the country.

<thread> 🧵👇
2/ I was looking at immigrant cohorts from the 1980s & forward, & noticed an interesting pattern: 1 in 7 would disappear from taxfiler data.

They drop out faster in recent data, but still consistent. In finance a predictable pattern usually means 1 of 2 things: fraud or error.
3/ so I contact Stat Can & inquire to make sure I understood the data correctly. I did.

About a month later, Stat Can conducts a study & concludes *drumroll* 1 in 6 immigrants probably left the country… since 1980.

🇨🇦 isn’t sure because it doesn’t track departures.
Read 11 tweets
Apr 13
🇨🇦 just busted 3 fentanyl labs in 2 days.

All well equipped, industrial scale facilities within a short-drive of each other in BC. All to produce the fentanyl 🇨🇦 totally doesn’t have.

Tragically I’m not your fentanyl czar, but here’s what I’d notice if I were. 😉

<thread>🧵👇 Image
Image
2/ this is a fun photo. Nothing brown is used to synth fentanyl. Precursors are clear or white.

But aniline, an essential manufacturing chem, is light brown & darkens as it oxidizes.

Only problem is aniline isn’t used in fentanyl production. wtf, eh? Image
3/ However, aniline is used to make fentanyl precursors. RCMP said 2 of 3 labs in the fentanyl bust were manufacturing fentanyl.

What was the 3rd? I’m not a fishing license expert like 🇨🇦’s newly appointed fentanyl czar, but it sure looks like a precursor lab.
Read 13 tweets
Feb 24
Is 🇨🇦’s healthcare system failing due to socialism or capitalism?

Neither. The math is pretty clear—this is just straight up greed, facilitated by crummy people.

<thread> 🧵👇
2/ first off, everyone forgets it's hard to be a doctor.

Most people can't finish a book.

A doctor in 🇨🇦 is the result of a 13 year old who decides they'll top their class & do 12-years of post-secondary training to start their career.

Let this point REALLY sink in.
3/ I mean, really sink in. You're delusional if you think you could do it. I couldn't.

The folks in charge didn't need that training. Ontario elected a high school drop out (about to be re-elected). 🇨🇦 elected a high school teacher.

My point isn't to make fun of politicians...
Read 19 tweets
Feb 12
Folks in 🇨🇦 keep explaining to me that we don’t have 🇺🇸-like crime.

It’s true. Here’s a brief list of the 🇺🇸 crime that never happens in 🇨🇦.

<thread> 🧵👇
2. in 🇺🇸, their anti-money laundering & enforcement budgets are soaring to deal with crime.

In 🇨🇦, we’re so confident that there’s no laundering that politicians confidently slash the budgets. Image
3. In 🇺🇸, defunding the police is extremely controversial.

In 🇨🇦, we don’t hesitate. Ontario immediately cut its financial crimes unit. Image
Read 9 tweets

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