Is Canada the new Switzerland?
We have all have heard how solid the banking system in Canada is! But are we told the truth? Since I live in Canada, I thought I should take a deep look at how “Safe” Canada really is and how deeply imbedded government and banking propaganda is in Canadians Paradigms.
I recently read a great article that pokes holes in the propaganda Canadians are fed on a daily basis and I wanted to take a deep dive into this article and not just write about it, but give you series of real proof of the dangers lurking in Canada. How Canada become this solid as they haven’t in most cases gotten hit and hurt by the 2008 recession unless you had stocks which 90% of Canadians investing had.
Here are 12 points that I want to go through. They are very important as the truth about these points are not told to the public.
1. Bank Leverage
2. Bail In
3. Deposit Insurance
4. Central Bank Reserves
5. The Way Government in Canada Borrow Money
6. Banking and investment fees
7. Money Supply
8. Real Estate Construction as a Part of GDP
10. Commodities and Real Money
11. The CRA (Canada Revenue Agency) The Tax collectors
12. CPP (Canada Pension Plan)
So lets dive into the facts and numbers that will make you think a second time about how solid the Canadian banks are and how much the government control your life.
First, bank leverage is calculated on how much money have the bank created vs. how much deposits from customers do they have on their books. To clarify as soon as you make a deposit into a savings or deposit account with your bank, you now borrow the money to your bank and the money is not yours anymore unless you choose to withdraw it from your bank and stuff that money into your mattress.
Here is an interesting piece of info that you might have not known. Canada is one of the few countries where banks have zero capital requirements meaning that when you deposit your money into the bank. The bank does not need to keep any money in order to keep your deposit safe and they can borrow 100% of your money to whomever they feel fit or invest it in whatever they want bad or good investments or even leverage their already leveraged money.
Here is an exert from a working paper that the Bank of Canada has issued: Working Paper 97-8 / Document de travail 97-8 : Implementation of Monetary Policy in a Regime with Zero Reserve Requirements : by Kevin Clinton You want proof we are here to give you The Economic Truth
1 Introduction and summary
Monetary policy can be implemented effectively with zero reserve requirements. A number of countries now have no requirement, such as Australia, Belgium, Canada, Sweden and the United Kingdom. In others, including the United States and France, the level of minimum deposits at the central bank has fallen to very low levels, in large part because banks have found ways to avoid reserve requirements.
This paper outlines a general framework for implementing monetary policy in a regime with zero reserve requirements, focussing on the case of Canada.
Reading that, you might be astonished and think I am making it up, but here is the link to the document if you want to delve deeper into the Bank of Canada’s policies: Click Here
So we looked at the bad leverage that Canadian Banks can occur now how much have they racked up? Here is a 2009 overview over how big of a leverage Canadian banks have.
As you can see this was in 2009 and Canadian banks didn’t de leverage like most other banks did and today some Canadian banks are leveraged as high as 50-60:1 meanwhile the average consumer has zero clue about what is going on as Canadian banks continue to become weaker and weaker through ZIRP from Central Banks and cheap money leveraged into derivatives which are set up to be further sold and leveraged and will fail and what will happen? Bail Ins or Bail Outs? Is your money safe in the banks? If you have under $100k your money should be safe right?
Bank Bail Ins
Before we get into the so called safe deposits you should know that the Government of Canada has prepared legislation to take care of any bank failures. We are not talking about bank Bail Outs, no we are talking about bail ins or haircuts as the governments like to refer to them as or a tax. It sounds more humane than deposit confiscation to save a overleveraged failing bank which couldn’t care less about your deposits in the first place.
I’ve spoken to lots of Canadians that have no clue that this strategy is set and a Cyprus style “Saving a Failing Bank” is ready to take place at any time it might be needed to keep the failing banking system alive and help bankers take home their commission checks.
If you are not aware of this legislation here is a quick exert from the legislation that should send chills down your spine.
The Government proposes to implement a bailin regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bailin regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants. Systemically important banks will continue to be subject to existing risk management requirements, including enhanced supervision and recovery and resolution plans. This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are “too big to fail”
The banks are ready to take your deposits, but how about the depositors insurance? Isn’t it supposed to protect savers up to $100k? Maybe you should think again?
In Canada the CDIC Canada Depositor Insurance Corporation is supposed to be the insurer of bank deposits of $1ook and lower. How well protected are these $100k and lower bank accounts? If we had a full fledged destruction of the Canadian banking system and the big 5 were on the cusp of massive failure could the CDIC cover the losses of millions of Canadians who think their bank deposits are safe with their bank?
The CDIC has over $622B+ deposits that are eligible for coverage, but only a mere $2.22B is in the fund pool to cover any of those losses. That is only 0.39% coverage of the total deposits eligible for their insurance. They might be there for minor losses, but if one of the big 5 banks goes under there might be a massive shortfall. Not to worry they can borrow up to $19B from the federal government but the sum of $21B+ only amounts to a 3.37% coverage which isn’t even close to cover one major bank failure. And if that money was taken fraudulently you will never be able to get it back as it is not insured for fraudulent activity. The second point to also make is that these numbers are from 2012 and are now 2 years old and the number might have worsened! Here is an exert from CDIC’s web page. Here is a link to the 2012 annual report if you might not believe me!
Does CDIC insure losses occurred because of fraudulent activities?
CDIC is a federal Crown corporation created in 1967 to insure eligible deposits at member financial institutions in case of their failure.
CDIC does not cover fraud.
It is getting quite clear that they are almost lying to you as most deposits in a major failure are not insured and they are not protected from financial sector looting!
Does the Central bank have any reserves to back up a failing Canadian Economy? Lets take a look!
Next post I will be taking about Banking Reserves and many other issues.
The Economic Truth