Big bubble of 2017

Date:     6 May 17
From:    Frank Gue, B.Sc, MBA, P.Eng.,
              2252 Joyce St., Burlington, ON L7R 2B5,    905 634 9538
For:       Editor, The Spectator,
Re:        Home Capital’s free fall, today’s Spec
Dear Editor:
Let’s see – is this item from today’s Spec or from some letter of mine to you in October of 2007?  It’s hard to tell, the phrases are so familiar:
* stop the  bleeding at the Canadian mortgage lender
* misleading investors over fraudulent mortgages
* a rash of withdrawals … losing about $75M a day
* its woes could spread to other alternative lenders
* etc.
Ah, yes, today’s item is merely a wholly predictable rerun of the 2007 scenario.  I’ll file it in a safe place so that I can use it again when the occasion arises, which it inevitably will: all we don’t know is “when”.  I’ll bet that you, fingers and toes crossed, have done the same as you anxiously placed it on Page A19 rather than Page A!.
Rather than waste more of my time framing any “comment”, I’ll just paste-in below my recent letter to The Economist.
 
Cheers,
Frank Gue,
Professional Engineer.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Editors, The Economist, London, UK
Re:  April 29, p. 58
 
Yes  indeed, weren’t central banks “surprised” by the 2008 melt-down!  This was despite the readily observable fact, as I pointed out to you in several letters over several years, that razor-thin reserves were inviting disaster; and that if there was any one thing that would avert it, increasing reserves would have to be “it”.  That was true then: it remains true now.  It will remain true when the next bubble arrives, which it inevitably will, the only unknown being “when”.
 
Pray tell me (sorry, Sir Winston); what has been the history, since 2008, of the reserve positions of a representative group of big banks?  Could we have a graph?  Does this history possibly suggest, as I have said to you several times, that an institution “too big to fail” must buy an insurance policy “too big to ignore”?  And that such a policy is readily available in the form of a regulated minimum reserve ratio (others have suggested as high as 30%)?
 
If the authorities lose faith in the forecasts and suggestions of economists, which they should in view of their routine total failure to hit forecasts of any economic datum you care to name, perhaps they should try Professional Engineers instead.
 
Frank Gue,
Professional Engineer
 

Climate change, the “red-blue” debate

Date:          22 April 17

By:              Frank Gue, B.Sc., MBA, P.Eng.,

Burlington, ON L7R 2B5    905 7634 9538

For:             Whom it may concern

Re:              Climate change, the “red-blue” debate

This proposal is useful and thought-provoking.  One of the thoughts, unfortunately, is that the scientific-public-media-education-etc. milieu at present is so heavily biased against AGW skepticism that skeptics find it nearly impossible to be heard.  The evidence for this is so personally and publicly overwhelming (books are written) that I will not drag us through the endless proofs thereof.

Being a bachelor of science, I try always to find and fall back as far as I can reach for a scientific tool that may silence the chaos and enable clear thinking.  The Scientific Method is a robust, time-tested, and respectable candidate for such a tool.  So, taking a deep breath, let us charge in with it. It has four steps and an addendum from me:

1.  Collect and organize data.  Goodness, haven’t we just collected data!

2.  Form an hypothesis that might account for such a body of organized data.  Yes, we have as candidates solar cycles, AGW, CO2, etc.

3.   Test the hypothesis.  No, we have not and cannot ever test the hypothesis; because there are literally scores (hundreds?) of independent variables, and any result will be forever indeterminate.  (one failure invalidates the “law”  – Einstein)

4.  Write a law such as Ohm’s Law (current = voltage divided by resistance, which hasn’t ever failed).  No, since we didn’t do #3, we cannot do #4.

Gue’s addendum:

5.  Continuously challenge the law.  Note that, 100 years later, articles still appear attempting to defeat relativity.

We cannot do Steps 3, 4, and 5.  Therefore, although we have quite easily proven that there is climate variability, we cannot prove AGW or any other hypothesis.

– end –

How banks scoff your money

Date:         19 April 2017

By:             Frank Gue B.Sc., MBA, P.Eng.,

2252 Joyce St., Burlington, ON L7R 2B5

905 634 9538    <frank.gue@cogeco.ca>

For:            Producers, Metro Morning, CBC Radio 1

cc:              Letters, TheSpec, Hamilton

Re:             Your series re Bank processes –  my file TD Time to Pay

Dear Producers:

My Rebate Reward statement (TD Bank credit card) says in part in the Bank’s own words, (rearranged to make sense in terms of a householder’s budget):

New balance:                      $ 3,444.43

Minimum payment:            $      10.00

The estimated time 

to pay your new balance

if you pay only the 

minimum payment

each month is:                    41 years and 3 month(s)

The statement in bold italics above is not true.  In fact, the time to pay $3444.43 with the bank’s suggested $10.00 monthly would accumulate forever at the stated interest rate of 19.99% since the monthly interest far exceeds the bank’s $10.00/month minimum payment.

Further, since 53% of adult Canadians are innumerate according to StatsCan, a very large number of Visa credit card holders are unaware of what that 19.99% interest rate is doing to them.  This public ignorance is very helpful to the banks.

If you were to ask Mr. Frank Psoras, VP Credit Cards, TD Canada Trust, POB 3000, Toronto M5K 1K6, for a demo of how this $10/month payment would retire the  $3,444.43 decremented at $10 per month, you might get what I did, i.e. a long string of minus $10 entries which is arithmetically correct but is a trivial answer to a different question.

Small wonder the banks receive (note: not “earn”) profit by the billions through economic thick and thin without providing any service or incurring any cost whatever.

Since we must all use banks, it’s a classic “gotcha”; because they have other devices they can then use that I could detail.

You do good investigative work: this belongs with it.

Best,

Frank Gue,

Professional Engineer.

Date:         19 April 2017

By:             Frank Gue B.Sc., MBA, P.Eng.,

2252 Joyce St., Burlington, ON L7R 2B5

905 634 9538    <frank.gue@cogeco.ca>

For:            Producers, Metro Morning, CBC Radio 1

cc:              Letters, TheSpec, Hamilton

Re:             Bank processes – your series – my file TD Time to Pay

My Rebate Reward statement (TD Bank credit card) says in part in the Bank’s own words, (rearranged to make sense in terms of a householder’s budget):

New balance:                      $ 3,444.43

Minimum payment:            $      10.00

The estimated time 

to pay your new balance

if you pay only the 

minimum payment

each month is:                    41 years and 3 month(s)

The statement in bold italics above is not true.  In fact, the time to pay $3444.43 with the bank’s suggested $10.00 monthly would accumulate forever at the stated interest rate of 19.99% since the monthly interest far exceeds the bank’s $10.00 minimum payment.

Further, since 53% of adult Canadians are innumerate according to StatsCan, a very large number of Visa credit card holders are unaware of what that 19.99% interest rate is doing to them.  This public ignorance is very helpful to the banks.

If you were to ask Mr. Frank Psoras, VP Credit Cards, TD Canada Trust, POB 3000, Toronto M5K 1K6 for a demo of the arithmetic suggested by this $10 payment, you might get a long run-down of $3,444.43 decremented at $10 per month, which is arithmetically correct but is a trivial answer to a different question.

Small wonder the banks receive (note: not “earn”) profit by the billions through economic thick and thin.  Since we must all use banks, it’s a classic “gotcha”; because they have other devices they can then use that I could detail.

You do good investigative work: this belongs with it.

Best,

Frank Gue,

Professional Engineer.

Climate change hoaxes (2)

Date:        7 Oct 16
By:             Frank Gue, B.Sc., MBA, P.Eng.,
2252 Joyce St., Burlington, ON Canada L7R 2B5
For:           TVO and whom it may concern
Re:            Climate change – Steve Paikin today

Preamble: Facts are facts and are not arguable. Here are some facts:

0. The climate is changing because the climate is always changing.

1. CO2 is not a pollutant but is a vital plant nutrient upon which all life, including ours, depends directly or indirectly. Some scientists believe we are suffering a shortage of CO2.

2. There is no scientifically rigorous proof that man-made CO2 is contributing to climate change.

3. Several important geologic influences, such as the huge crustal Atlantic Rift that extends from Antarctica to Greenland, that is spewing trillions of litres of scalding water into the ocean every day, have not been evaluated for their contribution to ocean warming and acidification. Likewise vulcanism.

4. Many gases and particulates for which humans are responsible should and could be controlled rather than concentrating on CO2, which anyway would come along for the ride. Examples: dioxins, soot.

5. Water vapor (clouds) is a gas that is from five to 20 times as powerful a GHG as CO2, we are not responsible for it, and furthermore we do not yet know how to analyze and quantify its albedo. We do not, for instance, even know the algebraic sign of its albedo (whether it adds to or subtracts from warming.)

6. The often-cited target of 2 deg. C temperature rise came as a hunch out of one man’s head; there is no rigorously scientific cause-effect chain that leads to it, much less a mathematical formula leading to the precise mathematical result of 2 deg. C.

6. Humans could make a very large impact on the environment by concentrating on the obvious and provable rather than the indefinite and arguable. Example: Withdrawal of vast quantities of ground water to bottle threatens our aquifers; and the decomposing debris from the trillions of plastic bottles is threatening wild life worldwide.

I could go on and on. But I will stop and summarize by saying that we have our supposedly scientific environmental/climate change priorities hopelessly confused and unsupported scientifically. We suffer from the 180 degree syndrome (180DS), which states that sound principles are often reversed and applied backwards disastrously.

Frank Gue

Professional Engineer

Low grade China – Letters, Sept 3

Date:       12 Sept 16

By:          Frank Gue, B.Sc., MBA, P.Eng.

2252 Joyce St, Burlington, ON Canada L7R 2B5

905 634 9538

For:         Editors, The Economist, London, U K

Re:          Low grade China – Letters, Sept 3

Dear Editors:

Writer Flyvbjerg (Letters, Sept 3) has put his finger squarely on the fragility and unreliability of some of the numbers economists and politicians use routinely to develop such things as fiscal and monetary policy.

Example:  Qatar, per Wiki, has a per-capita GDP of $102,900.  Now, by no stretch of any imagination has anyone in Qatar “produced” $102,900 per year of anything; most of it is crude oil revenue.  The problem: a “product” is, per Merriam Webster, something that is made or grown to be sold or used.  Thus crude oil is  not a “product”, but a resource.  Only the costs of finding, recovering and processing it are authentic components of a “product”.

This line of thought suggests some logical conclusions:

1.  The above defined “cost” of crude oil should doubtless include a charge for the depreciation of this diminishing capital resource and,

2.  We should include in GDP not only Mr Flyvbjerg’s “decent assets that contribute positively to the economy” but also recognize that some expenditures destroy, rather than create, economic value.  Thus GDP should, quite arguably, be the net of Value Added (VA), minus Value Neutral (VN), and also minus Value Destroying (VD) elements.  Eg: High Frequency Trading (HFT), is clearly a VD element that should subtract from any declared GDP, and,

3.  Many, perhaps most, financial transactions, representing financialization (finance financing finance rather than finance financing production which was its original, proper function), should be seen as VN or VD, therefore also netted out of GDP.  We would thereby rid ourselves of the fiction that financial transactions are productive; because over 95% of them are not.*

– end –

*  Foroohhar, Rana, Makers and takers, Crown Business, NY, NY, 2016, and Stewart, Walter, Bank heist, Harper Collins, Toronto, ON, 1997, and other similar books; and also the daily media.

Brexit: not just a story

Date:     15 July 16

By:         Frank Gue, B.Sc., MBA, P.Eng.,

2252 Joyce St., Burlington, ON Canada  L78R 2B5    905 634 9538

For:       Editor, The Spec, Hamilton

Re:        Brexit: not just a story …. today’s Spec

Dear Editor;

Columnist Hunter identifies Britain’s deeply rooted island psche as being the source of her global reach and strength.  Perhaps.  But we might well consider an even more vital wellspring for these powers.

In a closed-door meeting of a certain think tank, we discussed the ground-breaking book by Hernando De Soto, Why capitalism succeeds in the West.  I asked the speaker, a prominent and respected politician who is neither Jewish nor a professing Christian, to put his finger, if he could, on one single socio-economic factor without which that success would not have been possible.  Without a moment’s hesitation he responded, “The Judaeo-Christian ethic.”

With due respect to other beliefs, we must think carefully about the politician’s instant and unqualified response.

The British globalized before globalization.  From Hudson’s Bay to Tasmania, Britain established missions, hospitals, and schools that were needed for the spiritual and material good of far-flung people.  Her traders established a network of land and sea routes that enabled free trade before there was free trade.

Britain covered the globe with English, a  flexible, graceful, cultured language that welcomes contributions from other languages, Sanskrit to Swahili.  It is linguistic free trade, in which is written the Magna Carta, one of the mightiest documents ever to issue from the minds of men.

Of course, as Ms. Hunter says, Britain at times also brought brutality, theft, exploitation and slavery.  But  in every society there are evil men in all professions from shoemaking to the priesthood; and when based on Judaeo-Christian ethics, that society can ultimately get rid of them as we did slavery (yes, Canada had slavery).  Read the papers: you will find that societies not based on Judaeo-Christian ethics or its equal are drowning in – guess-what? – brutality, theft, exploitation and slavery.

As a child, attending a church school, I started my day with the principal leading us in ten minutes of Bible reading and prayer.  He stood under a vast world map that stretched from corner to corner on the wall above his head: it was, of course, extravagantly pink everywhere, to illustrate the truth of its caption; “The sun never sets on the British Empire.”  I can feel still today the security, warmth, and comfort that crept in as I understood that I and my country were parts of such an Empire.  Help, Britain, help!  Where are you when we need you?

F.

Free speech

Date:          26 June, 16
By:              Frank Gue,
                   B.Sc. (Engineering, U of A, ’51), MBA, P.Eng.
For:             Dr. David Turpin, President,
                   University of Alberta,
                   116th St. & 85 Ave.
                   Edmonton, AB T6G 2R3
Re:             Free speech
Dear Dr. Turpin:
On a certain website, I find a long article headlined:
Student group takes University of Alberta to court over $17,500 “security fee” demanded in order to express views on campus 
If this article is accurate, I find it deeply disturbing.  As reported, it is a direct attack on free speech.
You may know that the world-renowned economist Hernando de Soto, in a book The mystery of capitalism, identifies free speech and private property rights as the two foundation stones of successful democracies.  The case for this is difficult to dispute.
I have today mailed a check for $1,000 to the organization opposing in court the University and its Students Union in this unpleasantly surprising and profoundly disappointing action.
Other related actions will be considered as events unfold in the immediate future, as in my discussions with Mr. Morrel Wax, Regional Director, Office of Individual Giving of the UofA, who visited me again last Monday.
Yours truly,
Frank Gue.