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.
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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