Loading ...My advice to Trump is treat Canada as an enemy in all things financial. The fate of both countries depends on it.
Tom Luongo :
………
Tom has released his Monthly Essay and as usual it’s a Barnburner .
He explains that Now that “Davos” has installed their man Carney as PM in Canada
Europe and the UK can use Canada as their Piggy Bank now that their Best Friend the USA
is asking tough questions and imposing tough boundaries (aka Trumpism )
This is Paywalled for Subscribers …But it is Massively important to understand what Tom is saying here
I believe he is a one of a kind analyst in unravelling the grand Geopolitical “Game” in real time .
Buckle up….Mind Bending …but we Goldtenters are used to bending our minds .
CHART OF INTEREST RATE SPREADS CANADA VS USA
BLAME AMERICA
Donald Trump’s threats of trade war and tariffs, as well as his
refusal to bless Europe’s bloodlust against Russia in Ukraine, has
sparked more than uncertainty in financial markets.
It’s fully uncovered the deep animosity between the US and its
post-WWII partners, which has further awakened a wide swath
of Americans to the depth of the betrayal by those who pretend
to be our friends.
That animosity has transformed into a temper tantrum by the
US’s closest neighbor, Canada. Newly installed Prime Minister Mark Carney is now
blaming decades of ruinous domestic policy on Trump’s tariffs in order to secure
Canadian support of Davos’ plans for war.
This month’s issue explores these false friendships, the policies which will be used to
attack US financial independence, and what Trump needs to do to finally put an end
to this duplicity for good
DAVOS’ LAST STAND IN CANADA
DIVIDE AND RULE IS OVER
I’ve had a lot of people in my life who I thought were
my friends. I define a friend as someone who has your best
interests at heart and vice versa. They are the people who you
can count on to tell you what you need to hear, not what you
want to hear.
Everyone else, in the end, is just an acquaintance.
You each provide for the other a safe environment to air out
ideas, give advice, and provide a positive example to.
Sometimes that means reading or being read the riot act. You
share equally in the joy, pain, grief and pride of seeing that
person navigate all that life has to throw at them.
Most importantly, you wish each other only the best, even if you
each make terrible mistakes at times.
The hardest part of going through this life is realizing that
people who you thought were your friends really weren’t. That
there was always this imbalance in the relationship, for
whatever reason. Things are fine as long as you don’t talk
about certain subjects or question their decisions.
I’ve been in too many of these relationships in my life. And I
know when good-natured ribbing or healthy disagreement
masks deep-seated resentment or distrust.
Eventually, if we have any self-respect at all, we push the
boundary to find out where things actually stand. That’s when
the mask drops, and you find out that person was never really
your friend.
The biggest problem each of us face every day are these masks.
As T.S. Eliot put it, “to prepare a face to meet the faces that you
meet.” A true friend is someone you don’t do that with. You
are the same person in all circumstances. These masks are
sources of error leading to bad decisions, interpersonally,
professionally, and ultimately financially.
The Severing of Europe
The US has been the world’s piggy bank for the past 80 years.
Every day we see another story of what US taxes have paid for
and it’s appalling. The aftershocks of defunding USAID and
other Executive departments continue to occur around the
world. The relationships with neighbors like Canada and
Mexico, or friends like the UK and those of western Europe are
supposed to be supportive.
We’re supposed to be allies, engaged in mutual trade, travel,
defense, and cultural exchange which is predicated on a mostly
shared heritage. We’re supposed to have each other’s best
interests at heart.
But the minute Donald Trump made the argument that the
relationship was one-sided, that we were only friends with
Europe because we had shared purpose in defeating the
Communists, the real nature of the relationship began to reveal
itself.
It started during his first administration with him asking why
the US provided the overwhelming share of the money for
NATO. Trump asked the verboten question, “If Russia is such a
threat to European security, why doesn’t Europe spend money
defending itself?”
Their response was no different than that friend sleeping on
your couch who gets angry and refuses to clean the bathroom
while you’re at work.
But it’s worse than that. Americans have not only been asked
to furnish the house, buy all the food, and do all the
maintenance; they also paid the mortgage.
And the idea that this arrangement was fair because that’s what
friends are supposed to do is intolerable. Whenever Europe
gets in financial trouble or decides to embark on yet another
land grab, that’s when all we hear is hectoring about US
responsibilities to bail them out of geopolitical baby jail.
This whining has accelerated in his second term, with his
reassessing our border relationships with much clearer vision;
that they’ve been turned into US destabilization engines. The
same strategy employed to weaken Russia by sparking border
conflicts and regime change operations, subsidizing their
globalist aims, usurping local middle-class values and
traditional relationships is all there.
Justin Trudeau and company have run Canada in the same way
and at the behest of the same people who installed Mikheil
Saakashvili in Georgia to foment 2008’s war. Nikol Pashinyan’s
behavior in Armenia, sparking conflict over Nagorno-Karabakh
with Azerbaijan has weakened that country to spite the
Russians. There’s another play happening now over Serbia.
The color revolution model hasn’t died folks, it’s now in full
bloom both in Maple Syrup land as well as at Tesla dealerships.
And it’s always the same thing; sow division internally and
blame the major power on the border who is the real target.
There’s a dividing line culturally in the US that has always been
downstream of Reconstruction after the War Between the States
of 1861-65. And those tensions have always been exploited by
Europe, especially the UK. My article in Issue #82, June 2024
of this newsletter, discussed the main periods of trade flows
between the US and Europe. There I made the point that the
US has never been able to shake off its colonial roots because of
the strong dependence on Europe as a trade partner.
Moreover, those deep business and cultural relationships
implied by the sheer volume of trade have reflections here in
the US. Instability in Europe has caused multiple waves of
immigration here. It’s why I even exist, being the grandson of
immigrants fleeing Italy at the beginning of the 20th century.
What happens in Europe never seems to stay in Europe.
But the melting pot we were taught in grade school is a lie.
America is a fragile mix of regional cultures and sub-cultures as
a result. And it begs a lot of questions as to why anyone would
even continue to argue this or teach it to impressionable
children?
Why was baseball universally loved for a century, but NASCAR
always looked down upon? Both are uniquely American and
reflect American individualism and its heritage.
Why have they tried so hard
to make soccer a thing here in
the US?
We all have some of this
programmed into us. Turning
our ability to laugh at
ourselves into national shame
is no mean feat. None of us
are immune to it. I’m
ashamed to admit I fell into
the Formula 1 trap for a while
thanks to those cheerful limeys on Top Gear.
The implicit message has been to denigrate American
uniqueness and American culture, which is real. We’ve been
subjected to this nonsense about us not going to the moon in
recent years, for example. “Space is fake and ghey.” People
with a Wikipedia level of understanding of solar wind vote,
sadly.
This is encouraged at every level of our media. Europe good.
America bad. North wise. South stupid. California laid back.
Texas belligerent. British wise. Americans short-sighted.
Every day is False Dichotomy Day in this final push for global
technocracy.
What really irks them about Trump is that he’s not apologetic
about America. He’s not shy in saying the quiet parts out loud.
We do great things now. You, in Europe, did great things. And
we don’t have to play by your rules-based order anymore.
So, if that means redrawing the post-WWII borders, if it means
defunding the supranational organizations meant to subvert
national sovereignty, like the UN, IMF, WHO, and NATO, then so
be it.
I don’t believe any of us really understood what Trump meant
by “America First” during the campaign; that he understood it
Was past time to reject Europe’s vision of globalism, because
there was no place in it for the US other than as a servant.
But it’s on full display now, with his refusal to back down on
integrating Greenland into the US, and forcing Canada into
submission.
Now, it isn’t like the US doesn’t have its share of the blame for
the current situation in Ukraine and around the world. Of
course it does.
Under Bush, Obama, and the Biden Junta, the US worked hand
in hand with Europe, Canada, and the UK to create the war
they are all now demanding that we win for them.
But you’ll notice that none of them are arguing from the
perspective of, “You broke it, you fix it.” Because they know
exactly how Donald Trump would fix this war…by admitting it
was a mistake and ending it.
And that’s why the meeting in the White House with Ukrainian
President Volodymyr Zelensky was so important. It was a true
“mask off” moment where Zelensky’s disdain and entitlement
were on full display, as a reflection of the Anti-American
handlers of the Obama cohort that coached him and the
European leadership that continues to support him.
It was in stark contrast to the oily schmoozing and ham-fisted
flattery of French President Emmanuel Macron and UK Prime
Minister Keir Stalin early that week. Trump was having none of
it.
Everyone was Trump’s friend
—inviting him to a second
state visit with the British
Sovereign, for example—until
he said, “No,” to them over
Ukraine.
Then the knives came out in
force. Then the true nature of
our friendship with Europe
revealed itself. Within hours
of Zelensky being thrown out of the White House and sent back
to Europe with a bill for his stay, he was meeting with the heads
of the EU at a hastily called meeting by Starmer to address
America’s betrayal and show solidarity with Ukraine.
Zelensky, even in meeting with King Charles III, couldn’t be
bothered to shed his “tracksuit midget” persona so carefully
constructed by Europe’s top designers. In fact, Leisure Suit
Charles dressed down to match Zelensky.
So whose struggle session was this anyway?
The Financial Times then ran a cover story with the headline,
“America is now the enemy of the West” over a picture of the
Ukrainian flag. Who do these people think they’re kidding with
this petulant crap?
There’s always been a seething hatred for Americans embedded
in European politics. And they’ve worked long and hard to
convince certain aspirational Americans with impostor
syndrome to hate themselves and love them.
I’ve long argued that they’ve never been happy with losing their
most precious colonies, the ones that they knew could rise to
surpass them in the long run.
At every turn of history, Europe has chosen war to fix their
political and economic problems, rather than pursue peace and
trade. And 2025 is no different than the past
The Carney Problem
I hate to offend any Canadians in the audience but the transfer
of power from Justin Trudeau to Mark Carney this month only
underscores Trump’s points about Canada not working very
well as a country.
Trump’s rhetoric is crude and insulting, but it’s also not wrong.
In fact, it’s the opposite of divisive when you stop flapping your
heads. Trump is offering Canada an invitation to a club that
hasn’t been seriously considered since the 19th century, being a
full partner with the US. But Canada’s leadership, like ours
before Trump, was always working to bring them back to
Europe, to schmooze them with acceptance back into their club
rather than remain independent.
And Carney immediately made that offer explicit allowing the
idea to float that Canada should join the EU.
This has triggered a form of Canadian nationalism that could
backfire on Trump, if Canadians rally around his assault on
their sovereignty. Triggered is the right word here, this is a
purely emotional response rather than a rational one. And it’s
being used to distract from what’s
actually happening here.
Carney “won” a vote within in the
Liberal Party under incredibly
suspicious circumstances where twothirds of party membership were
disqualified on the eve of the
“election” which Carney, a verifiable
unknown in Canada, took nearly 90%
of those allowed to vote.
This looks like another moment
where Davos installed their preferred
person into power to govern a
country they were worried were
slipping from their control.
Carney’s ascension to leader of
Canada has echoes of how former
ECB President Mario Draghi became
Prime Minister of an Italian caretaker
government for more than a year
before proper elections brought the
more nationalist Giorgia Meloni to
power.
Canada was threatening to swing vaguely to the right with
Pierre Poilievre’s Conservatives leading the polls. But Poilievre
is no Trump. If anything, in speaking to Canadian political
experts, he’s, at best, a kind of George W. Bush figure.
But the machinations to put Carney, former head of both the
Bank of England and the Bank of Canada, in charge at this
point in history cannot be overlooked.
Carney as Prime Minister under these circumstances is nothing
less than a coup against Canada itself. He’s a globalist first, a
Davosian catamite of the highest standing; the high priest of
carbon original sin doctrine. He wrote an entire book about
this with the apparently unironic title of “Values” with a cover
image showing the entire earth ringed with scaffolding.
As a former central bank head he has an intimate knowledge of
how the funds flow around the world. So, his role is to ensure
that Canada continues to serve global interests, securing its
mineral and energy wealth for them, now that Trump has shut
down their plans to atomize Russia and take its wealth.
Carney will try to move very quickly to become the antiTrudeau to triangulate against Poilievre who seems to be
allowing himself to be cast in the role of Mitt Romney by
running a lazy campaign designed to alienate as many voters as
possible to ensure Carney wins a proper election.
To wit, Carney made a big show of setting the Consumer
Carbon Tax rate to zero which has deeply angered Canadians
across the board.
The Carbon Tax is the thing that ultimately cost Justin Trudeau
his job. As Kris Sims of the Canadian Taxpayers’ Federation
pointed out to me in Episode #210 of the Gold, Goats ’n Guns
Podcast, Carney will just transfer his carbon tax scheme to a
general transportation tax in a country where 80% of that
industry is owned by Indians.
Carney has taken a strong stance feeding Canadian nationalism
about Canada becoming a part of the US. I find it wholly ironic
that a committed globalist like him would use nationalist
rhetoric, but hey, any port in a storm, eh?
And maybe this is where Trump
outsmarted himself a bit here, getting
sucked into this macho 51st State
posturing giving Carney and Poilievre
something to actually run on that
Canadian shitlibs can agree about,
namely, “Screw Trump!”
The obvious ploy is to play up the
divide among the Ontario/Quebec
liberal elites and the US whose
affinity for Europe fuels their hatred
for their boorish neighbors to the
south.
Never has it been more obvious that
Canada was always meant to play the
role of Anti-US in the retreat of
British and French colonial interests
than it is right now.
The New Eurodollar Engine?
The big news for me, however, wasn’t
the blatant vote-buying by Carney. It
was the notice within 24 hours of his
winning the election the Bank of
Canada would issue a new round of
debt denominated in US dollars. They say this is for
diversification reasons, but of course, nothing like this happens
for the stated reasons.
Consistent with Trump’s tariff and trade policies has been
Federal Reserve policy under Jerome Powell during the years of
the Biden Junta. Powell has kept interest rates high because of
stubborn inflationary pressures in the US economy downstream
from ruinous COVID spending. It’s forcing Davos into ever more
desperate moves, like installing Carney into Ottawa without an
election.
That policy could end soon as the February CPI print came in
below expectations. The combination of uncertainty over
where Trump winds up on tariffs, how many government
employees are getting fired, how many executive departments
are going to be cut and/or merged has people pulling back on
spending along with the general freeze on payments for non-
essential services
We’re about to find out over the next few months just how
much of global GDP depended on leveraging up wasteful US
government spending. Cut off that flow of hundreds of billions
of dollars as, effectively, hard collateral for offshore dollar
lending and we should see a very quick slowdown in economic
activity begetting downward pressure on prices.
In addition, it means that there’s now a dearth of dollars and a
subsequent mad scramble for them once this effect kicks into
high gear.
If you need dollars you have to go get them from somewhere.
As the Fed has dried up access to dollars in general, it means
that new dollar-funding sources must be found otherwise that
person has to go to the Fed themselves and pay the Fed’s rate,
which is set by them, currently far higher than in Canada or
Europe.
The importance of the switch from LIBOR – London Interbank
Overnight Rate – to SOFR – the Secured Overnight Financing
Rate – is key to understanding this problem for the rest of the
world. SOFR allows the Fed to ignore tight liquidity in offshore
markets as long as US money markets remain stable.
That said, however, if the US runs a massive trade deficit with
Europe, the UK and Canada, there are plenty of US dollars
being pushed into the world to keep global dollar borrowing
costs in line. However, if that trade imbalance is removed, or
even significantly lowered, it means that relative to the size of
the dollar liabilities held overseas, the amount of dollars
available to service them is lower.
In the game of global liquidity, the flow of dollars at the margin
is far more important than the stock of them acting as bank
reserves, central or otherwise.
Canada ran a $124.5 billion trade surplus with the US in 2024.
The Biden Junta spent nearly $1.8 trillion more than it took in,
needing to issue an enormous amount of new debt. Trump is
right that that trade surplus is a result of both Canada,
“cheating on trade,” in addition to our profligate spending.
Trump is pledging to balance the budget to take that new
supply of Treasuries off the market. He wants tariffs to lower
The trade imbalance. And all of Canada’s political elite, like
Ontario Premier Doug Ford, are egging Canadians on with false
bravado in the face of Trump’s pointing this out.
Carney stating Canada will issue US dollar global bonds is
preparing Canada to be another source of dollars the world
needs, effectively becoming an offshore source of dollar
liquidity to blunt both tight US monetary and fiscal policies.
For as long as that trade deficit persists it limits the ability of
Trump and the Fed to regain real control over the supply of
dollars into the world.
Europe and Canada need to spend trillions to retool, rearm, and
rebuild their economies. They need still more trillions to figure
out how to write down their unmarketable debt without access
to cheap minerals and energy. Canada provides both of these.
Together the Davosians running these insane asylums have
already made it clear that they are willing to go it alone to
spend the money necessary to make the world safe from
climate change. Carney wants us to have a carbon budget oneeighth of that of when the Baby Boomers were kids.
A $10 billion per month trade deficit with the US finances a
whole lot of coupon payments in US dollars, $300 billion at
3%, to be precise. If the Bank of Canada goes back to the zerobound, then this number approaches infinity. There is an
obvious practical limit to what the market will bear, but if there
is a positive incentive structure in place to recycle these
Mapledollars into bank accounts around the world, then that
limit could be higher than anyone has considered so far.
Politically, that’s more than enough stimulus to bribe Canadians
with investment into their flagging economy even if it means
rampant inflation at home.
Historically the Bank of Canada has kept its policy rate 0.50%
below that of the Fed Funds Rate, which helps to fuel the trade
deficit, keeping the Canadian dollar weak. Since the threat of
Trump’s return to power starting in June 2024, the Bank of
Canada has been cutting rates far faster than the Fed (see
chart).
Chart posted in the main post
So, once I understood what was happening, I was not shocked
at all to see the BoC cut rates again this month, even though
the spread was the highest it’s been in well over a decade. And
despite a softer US CPI print than expected, bond traders still
correctly positioned themselves for no rate cut by the Fed this
month.
Why this fits into their strategy is that now the Bank of Canada
can issue these US dollar bonds at a non-market price, or submarket yields, to provide the ECB the support for their schemes
that Trump is taking away from them. It also sets up an avenue
for Canadian banks operating in the US to outcompete US
banks for lending, borrowing at the BoC’s rate rather than the
Fed’s much higher rate.
Carney is setting up a potential Mapledollar/USD carry trade
using the spread between the Fed and the Bank of Canada to
push US dollars into the global economy. The risks are
numerous, especially if Trump is successful in closing the trade
gap between Canada and the US.
I expect Carney thinks he can appeal to Trump’s transactional
nature by offering him concessions to keep the tariffs to a
minimum. But if Trump is wiser than he appears at times, this
will go over about as well as Keir Starmer playing to the
cameras about the US/UK special relationship, which ended
with Trump saying, “Okay, that’s enough.”
My advice to Trump is treat Canada as an enemy in all things
financial. The fate of both countries depends on it.
Because I think that is really the attitude which dominates in
Mar-a-Lago. Enough is enough. No more games. End the
wars, stop treating the US like your sugar daddy, and start
acting like men. Because the alternative is you fuck around just
long enough to find out how little this relationship means to
Trump.
WOW!
Holy shit!