Mark Carney, Prime Minister of Canada (2025 - ?)

 I hardly ever write here anymore, but you already knew that (if you - readers, that is - still exist).

But, I wanted to scribble down a few thoughts about our new Canadian prime minister and the ongoing fentanyl/tariff/NATO spending/governor Trudeau/that woman/51st state dispute with the US.

First, it's the first full day of Mark Carney's time as Canadian prime minister and these are some immediate thoughts on the landscape:

1. I've seen otherwise-sympathetic media commentary talking about how "boring" or "politically unskilled" he seems. The latter is understandable, although I don't know how you have the career that he's had, working across the political divide in different political cultures, without being politically-skilled. Maybe they are talking about his abilities in retail politics. But it nags me that some people are looking for our prime minister to be entertaining. Donald Trump is entertaining. Boris Johnson is entertaining. Javier Milei is entertaining. Surely there is room for leaders that are not entertaining. Entertainment is cheap but good leaders are not; can't we just have leaders that are good leading and trust them to get on with it?
   
   
2. Why is he so euro-centric? I found it difficult to accept that, while running to be Liberal leader, he was off giving more substantive interviews to places like the BBC in the UK than he did to any of the Canadian media. And now, as leader, his first trip as Canadian prime minister is to the UK and France when most Canadians barely know him at all. How about touring Canada before going abroad (again)?
   
   
3. The only thing that I can really call out as being different about his plans to date are those about splitting the budget into operational and capital buckets. Without deep operational (government administration) cuts, that doesn't change anything unless you are going to use it to blow out the deficit even more, but justifying it by saying that it's for growth. Even then, we've had infrastructure banks in various forms for a long time that have not been highly-effective. But, if anyone has the ability to surprise in this area then I think it must be him (though this is tempered by point #5).
   
   
4. The expediency to which he came to this position is mysterious to me. The conspiratorial part of my brain wonders if there's a non-democratic national desire to have this man in power to restore a business-as-usual-in-Canada program. The Conservative party were starting to sound a bit too populist. The frequent presence of Jean Chretien around Mark Carney when he was not visible around Justin Trudeau is a symbol to me, like a raven in winter. As a result, maybe the Canada/US divisions were amped up to give him a cause? I don't know. It was very neat.
   
   
5. I've become more conscious recently that hardly anyone I listen to about anything is actually involved in primary production of anything. They are either from thinktanks, news organizations, academics, content creators, political organizations, or banks. The number of people making money just writing and talking about stuff must be unbelievable. Do most of these people understand the real world, I wonder... and when the real world diverges from their understanding, how long does it take for them to realize it?

Second, on Canada/US relations:

1. I think it's a mistake to try and forge closer relationships with the UK and EU than we have with the US. The US is on the same continent as us, the easiest to trade with, are critical to our mutual defence, and are not going anywhere. While true that the current leadership is looking difficult to deal with (and it's not just one man; it is a movement), we should recognize that the UK and EU have never seen Canada as a peer or critical nation and if they run into critical political and/or economic problems (as they seem to be doing), Canada will be an afterthought. We have to make the US relationship work and it has to be our most important relationship. But, it still is and will continue to be; a lot of what's going on is temporal political and media noise (it's also jingoistic).
    
   
2. It is hard to understand what will improve the soured trade relationships with the US. It is an erratic and volatile conversation. Via tariffs and the resultant economic cost, the US are essentially putting a price on various perceived transgressions such as imbalanced trade (which is not as imbalanced as they say, but has become less-balanced since the pandemic), insufficient commitment regarding NATO spending, drug control, and money laundering. Now that these things have a price, we are more incentivized to tackle them. That's a very business-centric approach to relations.
   
   
3. Based on the more serious commentary I've seen on this, the US are trying to tackle an out-of-control deficit that will get more out of control the more the government is forced to refinance cheap, short-term debt taken on during the pandemic at higher rates or longer terms. That is what the tariffs are ultimately about; they are a new revenue source. And it's not a mystery because Trump created the External Revenue Service early on his presidency to collect them. Although the US has made their own political decisions that what social programs they provide to their citizens, why would anyone expect another country that is faced with such a problem to subsidize the defence and trade of countries that have more generous social programs? It bothers me that there isn't much visible self-reflection in Canada or Europe about their own role in this rift.
   
   
4. The notion that deficits don't matter has bothered me since it came into the scene because I know that they don't matter until they do. When deficits do come to matter it requires a drastic response that too many people will not acknowledge was tied to their not caring about deficits for so long. Canada and Europe are able to afford social programs that the US doesn't have because they rely on the US to disproportionately foot certain bills, with defence being the main one. It reminds me of the Alberta-Quebec imbalance to some extent, where the latter has many social programs that the former doesn't have because they are able to wield national political influence that forces proceeds of Alberta energy to subsidize Quebec while also criticizing Alberta for the things that provide that subsidy.
   
   
5. I can send $800 US worth of goods to the US without incurring duties or tax. I can only bring $40 CAN worth of goods from the US into Canada without incurring tax. There's an imbalance there, just as there's an imbalance that lets Canada collect HST on digital services that Canada had no hand in producing. The US would be right to have concerns about that. But, regardless, I have never liked the idea of cross-border shopping, and never do it (unless it is online and for something I can't get in Canada). It was never good for Canada to shop cross-border so you don't get kudos for stopping it for the time being. Many people that do it exhibit the characteristics in the above point: criticizing the US and talking up Canada while shopping in the US because it's cheaper because of many of the underlying currents in the country that you don't like. Unreliable narrators.

So, ultimately, I wonder if the US having put a price on non-compliance, whether it's going to be cheaper to move toward compliance. If our GDP is going to suffer by 1-2% because of tariffs, as some economists predict, then would it be better for Canada to simply make their 2% NATO defence spending commitment sooner? And since much of any defence spending will go to the US military industrial complex and feed needed revenues into the US (not to mention supporting their industrial base and improving the perception of fairness, which are two other key interests of the Trump presidency), would something like that be enough to make the tariff situation mostly go away? I would not be surprised if it did. The fentanyl issue is just the basis for emergency moves that allow the president to act unilaterally.

I assume that's why Mark Carney is going to the UK and Europe first: to get the background (scuttlebutt) on their very active US negotiations over NATO and Ukraine. In that light, it makes sense and it's the right priority. I just wonder why he would not be transparent about that. There's no reason for secrecy. I hope that he has an interest in Canada for Canada's sake and not mostly as a chess piece in a global chess game. Given his background and the natural inclinations of someone involved in global finance, I don't have a lot of reason to hope, but he can still be good for Canada wherever his allegiances lie.

Whatever happens, I won't demand that he be entertaining.

Burning more fossil fuels to enable renewable energy

The opening paragraph in a recent EnergyNow article on energy export from Canada's east coast was interesting:

Providing clean hydrogen to Germany and the rest of Europe is a better opportunity for Canada than trying to build liquefied natural gas (LNG) terminals as the world moves away from fossil fuels, said Canada’s natural resources minister late on Thursday.

"As the world moves away from fossil fuels"?

Germany is dealing with their current energy issues by importing more liquefied natural gas and burning more coal. They are EU leaders in renewable energy but their renewable footprint does not deliver consistently year-round and its benefit is concentrated in the summer months. They will extend the life of nuclear plants that are currently running but will not restart those that have been retired. They make much of their renewable "biomass" generation, but it's largely fed by clear-cutting forests in the US with fossil fuels, turning the wood into pellets with fossil fuels, and shipping it across the ocean using fossil fuels. EU carbon accounting tricks do not require them to record the carbon created when supplying the fuel.

France is heavily-nuclear but is having issues with corrosion and with the water temperature of some of the rivers that feed their plants. The water has become too warm for some of the plants to function and after the reactor is done with it, it exits at a temperature harmful to aquatic life.

In Ontario, Canada, the government has confirmed that its Pickering nuclear plant will be shut down in a few years and will be replaced with natural gas generation. They are refurbishing other plants, to their credit.

Is the world really moving away from fossil fuels?

Nuclear is the only practical option that gets us off fossil fuels. Renewables do not have the reliability and consistency required to run a stable grid. Battery installations can smooth the supply curve, but there aren't enough resources in the world to build batteries that would be required to store large renewable surpluses to match supply and demand over a longer timescale of days.

And, besides, batteries, solar panels, and wind turbines are made using metals harvested using fossil fuels and by processes that run on fossil fuels. This can be a net benefit, however, if used judiciously - we must get more energy back than we invest and must be careful not to induce demand with "guilt-free" renewable energy. All renewable energy requires fossil fuel inputs, ultimately.

Renewable energy might be cheap to produce when the sun is shining or the wind is blowing, but it's not cheap when you attach a cost to supply stability and reliability, which any electrical system has to do if you value having electricity when you need it and not only when it is available. The grid also needs to become more sophisticated to accommodate the inconsistent supply.

If renewables were a great business - if it was really a matter of just capturing free sun and wind and selling it on to people for a price like Nestle bottles up spring water - businesses would be in it without hesitation rather than needing to be subsidized or ESG'd into it.

But what is the western world doing about nuclear? Very little. 

Some US states and Canadian provinces are doing trials with small, modular nuclear reactors. Maybe that will lead to something. But nuclear planning generally takes decades, and we seem to be planning more decommissions than new builds at this point.

But what about China? China has the largest manufacturing base for renewable infrastructure but they are planning or building scores of nuclear reactors. Why would they be doing that if renewables were such a sure thing? They are doing it because they do not have secure supplies of fossil fuels in the quantities needed to supply their massive population; they don't yet have the capacity to go and invade oil-rich countries to take their oil and protect the new supply chain back to China; because using coal is finite and dirty; and because once you have decided to choose electricity over fossil fuels, nuclear is a big part of the answer to clean electricity.

What does our position seem to be in Ontario Canada? That we will increase our use of renewables - optimistically to the extent that we can replace a nuclear plant here or there - and plug the hole with dynamic natural gas generation. If the renewables don't materialize, we'll just be burning more and more natural gas. Thankfully we have that option, but are we really "moving away from fossil fuels"? It sounds more like we want to ensure that we have enough to burn for ourselves within a fixed carbon footprint that we have imposed on ourselves.

Thoughts on Russia / Ukraine

 I know very little about this conflict and I'm not about to start posting pithy declarations about what must be true. If you want that, go to Twitter!

But, there seems to be a clear communications exercise in play that, despite very little concrete information about what is going on on the ground, paints the Russian invasion as an abject failure. The contrarian side of my mind doesn't like a wholly one-sided story.

The media coverage of this situation is confusing. Long periods of time go by without any real news for such an allegedly active conflict, and much of it is devoid of context. There's a lack of significant photography - significant because the worst possible photos are quick to make it to the fore when they are available - and some of it is said to be fake,  misinterpreted, or from prior conflicts. It's almost as if there is no meaningful long-term foreign media presence (or interest) in the country.

So, there are some of the factors that interest the contrarian side of my mind:

1. If you don't know what Putin's goals are (as almost everyone says that they do not), how can you say that he has failed?
1. He has not yet invested serious firepower in the conflict.
2. It was always and still is unreasonable to expect that an army of 150K people would invade and occupy/hold a country as large as Ukraine - especially inclusive of multiple, large urban centres. That's why nobody expected it to be done.
3. What if this is a "mowing the grass" exercise? Or one with explicit targets that are not easily understood or not tasty enough to report on?
4. The idea that Putin "would not have realized" how hostile some parts of Ukraine were to Russian involvement and misjudged the effect of this on their ability to advance seems laughable. I knew about this hostility and I know hardly anything about Ukraine. The whole premise for the invasion (faulty or not) was on hostility toward pro-Russian areas of the country.
5. Extend #4 to the idea that the difficulty of taking urban areas was misjudged. Russia has been active in Syria for years, and Syria is a very urban country.
2. Russia's government debt as a % of GDP is under 20%. Impressive.
3. China now knows what to expect if they have designs on Taiwan. Most Western hands have now been played, and have been shown that they can be cohesive in a hurry. Sanctions on China would more directly affect US prosperity and would presumably therefore be less severe (though military involvement may be on the table there, whereas it is not here). The sanctions against Russia presumably expose the worst case.
4. Canada has cut off Putin's funding. He must be as dangerous as those protestors that occupied Ottawa a few weeks ago. It puts it into perspective how extreme that "go after their money" aspect of the move against the protestors really was.
5. Hopefully Russia doesn't have technological backdoors into US or European infrastructure. This is the time you hold those types of things in reserve for.
6. Russian gas supply to Europe. It'd be a shame if something was to happen to that. I'm sure it'd be an accident if it did.
7. Unlike Donald Trump, Putin has not yet violated Twitter's terms of service and the Russian presidential account is still active.

I generally believe that, if you are dealing with smart people and something doesn't make sense to you, then it's because you don't understand their perspective or don't have the same aims or value system. That is to say, what they are doing makes sense only when you figure out how to look at it properly.

And on top of that, I say all of this recognizing that autocratic rule as exists in Russia is of a very different nature to democratic rule. The power dynamics are different; the personal costs and risks of failure to the leader are different. I recognize it, but I don't understand it. I can barely identify the real motives of democratic governments most of the time!

COVID-19: federal election, and low-interest / high-inflation

COVID-19 messaging and the federal election

The upcoming federal election timing seems to be based on the idea that lockdowns will be over, borders will be reopened, and citizens will be vaccinated.

We're then just waiting to give the government that made this possible a majority mandate so that they can lead us into the genuinely and truly unknown. Really: I don't know, and nor does anyone else.

So, that is the strategy, but they'd better get going on a parallel strategy to bring people onside with the idea that rising case counts are OK in a world where people who wanted to be vaccinated have had the opportunity.

First: the Federal government doesn't control lockdowns to a large extent. That's up to the provinces and PHUs.

In Ontario, we have no date for full reopening, and further reopening is conditional on vaccination targets that may never be met. There is no visible plan beyond the current stage of partial reopening.

The message pushed by the media continues to be that case counts are the primary concern.

Since the vaccine doesn't prevent infection, it's reasonable to expect that case counts will start rising again in September and October like they did last year. However, you'd expect the cases to be mostly non-serious for the vaccinated. It seems clear that this virus is not going away, unless it naturally weakens and goes away on its own.

We haven't yet brought people onside with the idea that high case counts are OK as long as other metrics are under control. To be fair, other countries are struggling to do this as well, but I expect the UK to arrive at a proposal. They have gone full steam ahead on the reopening as of mid-July, removing most if not all restrictions, and are seeing major case count increases but low death rates. They have been about 2 months ahead of us on reopening.

For our messaging, I'd propose focusing entirely on the actual hospitalization and death risk to under-12s and the vaccinated. Everyone who wants both vaccine doses will have had the opportunity very soon, so presumably the unvaccinated are happy to take the risk, and we'll have the healthcare resources to handle them.

This will need to become like the flu, where plenty of people get an uncomfortable case periodically; some people get hospitalized; some people die; but largely it does not affect most people beyond an uncomfortable few days of symptoms.

So, unless they the Federal government gets going on working that messaging through the system, the narrative come Election Day may be "well, they opened the borders to US travellers in August; and then they opened the borders to foreign travellers in September; and look at our case counts! We can't reopen and he wants an election?!". Other countries have had elections during the pandemic, but this one is not mandatory and as a feature of our minority government would need to be instigated.

Low-interest / high-inflation

At some point, I have a feeling that it's going to become obvious (rather than be revealed) that this low-interest / high-inflation world we are growing into is not transitory, but is a new normal to be managed by a stronger state.

I can't say I'm 100% confident about this, but how can anyone be at this point? I just don't think it's a sure thing that "high inflation means we will raise interest rates to bring inflation back on target". That was just what we did yesterday.

Part of the "great reset" narrative is about moving from asset ownership to asset rental, and low interest / high inflation puts assets out of reach for many while providing an opportunity via wage inflation to rent more of what you would otherwise have owned.

Another reason high inflation is wanted is to inflate away the piles of debt that have accumulated during COVID-19. Not only does it inflate away the debt, but it also increases taxes through the back door, because higher receipts and/or higher wages both lead to higher GDP and higher taxes, even if the tax rates stay the same.

It also transfers wealth from savers to debtors. Savers get lower returns on their capital and debtors get higher prices on assets purchased with cheap debt.

The notion that monetary policy is a science where you have rules that you apply consistently to get a result is not true. Monetary policy is bent toward what society needs from the monetary system at any given time. We need something new because the old tools aren't working anymore.

We haven't done inflation targeting forever, so it's perfectly reasonable that we'd change course if it's not doing what we'd want anymore. It will screw up people who are rigidly attached to the old system, however, and anyone that made assumptions based on it (i.e. retirees). I assume Millennials will be fine to let retirees (Boomers) sweat a little bit.

I think many people could have seen this coming. It has been decades in the making. We're just now getting confirmation of what many suspected was the case - that is, that governments and people are far too indebted for significant interest rate hikes to be a reasonable response to excess inflation.

The part that's missing from the picture is the part where governments have to control the flow of capital in other ways. Less "invisible hand" and more "nasty government hand". For example, the stress test on mortgages, which makes you qualify at a higher rate than the market demands in order to borrow to buy a house. Essentially, this is a government-influenced qualification that is higher than the market rate and applies only to houses. This type of thinking would be perfectly in line with the general economic shift away from "one size fits all" systems and toward crafting solutions for specific purposes and use cases.

I didn't say anything about yield curve control, which is presumably a necessary part of this if it is in fact a thing. I don't want to think about that yet.

Electric vehicles and what they mean to me as at July 28th, 2021

So here are the mental notes I've made over the past couple of years on this electric vehicle experiment:

1. You have to drive an EV around 30,000km before you break even on the carbon emissions required to build the battery over and above the emissions required to build the common components between gas and EV. That is, when you drive an EV off the lot you have to drive 30,000km before the lower carbon emissions of driving on a battery have offset the emissions required to make the battery. After 30K, you pull ahead.

2. With the exception of Tesla, fast chargers are on multiple networks, in odd locations, and there is no reliable source of charger availability. You can find charger locations easily enough and it contains availability data, but the data on whether or not they are working or occupied is not reliable.

3. EVs are more expensive up-front but their maintenance and operating costs are much lower.

4. EVs are heavier than their gas equivalents due to the battery, and as a result they contribute more to wear and tear on roads (which is primarily driven by weight-per-axle). Presumably they will also turn out to be more fatal in collisions. Example: the forthcoming F-150 Lightning truck is 1800lbs heavier than the gas version.

5. Fast chargers may only work at half-speed if someone is charging in the bay next to you.

6. Unlike gas vehicles, you get less mileage on the highway than in the city. The range drops fast if you drive the car fast, and you can't take advantage of regenerative braking if you aren't braking. If you're one of those people that drives 130km/h on the highway, you are going to get less range - maybe significantly less - than going at 100.

7. This isn't fully clear yet because the market hasn't been fleshed out with larger vehicles, but with chargers having a fixed supply rate, I imagine that larger, heavier vehicles like crossovers, trucks, and SUVs with less-aerodynamic postures are going to take longer to charge to achieve the same range as a smaller car.

And this leads me to these conclusions:

1. My personal focus is on driving as little as possible and using transit where I can. Driving less in any car is better than driving more in an EV. As an infrequent driver, the carbon emission reductions are not going to be significant for me.

2. EVs are better for the environment in some cases, but not good for the environment. Mining battery metals is not a clean process, all things considered, but the impact will be more on things that you never notice, like polluting someone else's local environment, employing someone else's child labour, dragging a deep ocean floor you never see, or depleting someone else's groundwater than about carbon emissions. We seem to be on track to prioritize carbon emissions over all else.

3. There is no such thing as a car that is "good for the environment". All cars are made from mined metals, coated with toxic paint, have plastic interiors, and ride on rubber tires. All cars require roads that are usually made from asphalt or concrete.

And I'm reminded that one of the arguments for diesel cars was that they had fewer carbon dioxide emissions than gasoline cars, at the expense of emitting more pollutants that had a more direct, localized effect on the people that lived around them.

"Healthy in moderation" is an exclusive statement

It occurred to me the other day that if your diet is mostly made up of things that "can be part of a healthy lifestyle" then you must have a very unhealthy diet indeed.

How quickly the ways to listen to music have changed: Luka Bloom, etc.

I recently went to look up an artist to whom I listened to quite enthusiastically when I was in University, but to whom I haven't listened to in some time.

I don't like to bucket musicians into genres because, whether true or not, I secretly suspect that they hate it. But, Luka Bloom was the artist I went to look up, and he would fall roughly into the "Irish folk singer-songwriter" genre. I first heard Mr. Bloom on one of those Windham Hill collections that were popular in the 1990s, and went on to admire his back catalogue.

I was happy to find that he was still active and had released some new material. But, I could not believe that it was not on Spotify.

I pretty much listen to everything on Spotify now. I have muscles that have memorized how to listen to music in any given situation and they have only been fully-trained on Spotify.

Back in the day, I was one of those people who amassed stacks and stacks of CDs organized into multitudes of CD towers. As time went on and I moved from place to place, it got to the point where I didn't get them out of the moving boxes anymore, and they stayed in storage.

Initially, the reason they stayed in situ was because I had converted the purchased CDs into MP3 files as soon as I added them to my collection. Over time, the CDs had been mostly been for display. For many years, I listened to most of my music digitally using the Squeezebox line of digital music players, many of which were scattered around the house. Squeezebox eventually got discontinued, though I still have a number in use.

But, then came Spotify. In most cases, it became easier to listen to all of my music - purchased or not - through Spotify.

So, coming back to Luka Bloom, I was surprised to find that he'd made an executive decision to not release his latest music on Spotify and to make it available only on his website, where all of the money goes directly to the people that made the whole package possible.

I fully respect with and agree with this decision. I don't understand how great artists with loyal but modest followings manage to make any money off the platform. It seems optimized for superstars with millions of plays each month. Beyond just respecting this decision, I like it a lot. But it nonetheless threw me a curveball: I've mostly forgotten how to listen to MP3 files that I own in all the places I listen to Spotify.

I've figured it out, of course, and found a way to make it accessible wherever I am - I'm one of those technical people - but the point is that there must be many people out there who have no idea how to listen to music that's not on Spotify (or Apple Music, YouTube Music, etc.), and people who risk their visibility and income by not using that platform may be shut out of an audience altogether.

Regardless, I bought the albums blind. Another moment of discomfort occurred when I couldn't actually listen to them before I bought them. I used to visit record stores regularly and buy albums unheard, but now it feels like a huge risk even as I spend less money than ever on music.

Anyway, the albums are great and I highly recommend them:

• Out of the Blue
• Bittersweet Crimson

On music in general, I still follow the general approach to paying for music that I wrote about in HMV Canada bankruptcy and thinking about digital music and Spotify streaming, which is:

• Spotify is a discovery and convenience tool, not a replacement for buying music.
• I still buy a fair amount of music, but it is mostly digital now, via iTunes.
• After I've purchased music, I still tend to listen to it on Spotify for convenience.
• In my mind, that supports the artists twice (to the extent that you can call Spotify streams "support").
• During the pandemic, I bought a number of concert livestreams to support artists I like.

I have bought only one physical CD this year: Steven Wilson - The Future Bites

Here's one from the new Luka Bloom album: