Justin's Folly - Selling Death Wagons to a Despotic Regime Going Broke

You remember the Saudi death wagon controversy when the Trudeau regime gave the go ahead to the sale of 15-billion dollars worth of armoured fighting vehicles to Saudi Arabia.

Well, what if those death wagons fall into the hands of the very people we've been over there fighting, radical Sunni Islamists? Justie would have a little egg on his face then, wouldn't he?

For two years now reports have been coming out about the Saudi's fiscal woes. Some say the monarchy is teetering on the edge of bankrutpcy, a function of profligate spending and low, low, low world oil prices. It's the old story - too much going out, not enough coming in. Even the IMF has predicted that the Saudi regime could be bankrupt within five years.

The Saudi royal family, the House of Saud, for whom the country is named, have managed to hold onto power thanks to what had been mountains of cash. Academics suggest that a fiscal crisis could mean the end of the monarchy and trigger anarchy and violence possibly exacerbated by Russia and Iran.


The consolidation of the Shia Belt and the destabilization of Saudi Arabia will have one of two outcomes for the Islamic State of Iraq and Syria (ISIS). In the first, it will be inevitably destroyed by the Syrian army, who will be bolstered by an increase in Russian and Iranian forces in the theater. With U.S. and Western attention being drawn towards a destabilized Saudi Arabia, the Russian Federation as well as Iran will be able to increase military operations within Syria, increasing the likelihood that Assad will remain in power and both ISIS and the Free Syrian Army will be crushed.

The second scenario would be the rise of radical Salafism in a destabilized Saudi Arabia. With Wahhabism being one of the most popular forms of Sunni Islam in Saudi Arabia, it would seem only logical as this would be the immediate threat in the Kingdom. ISIS would undoubtedly take advantage of the destabilization of Saudi Arabia in the same manner as in Syria, Iraq, and Libya. As radical Salafism is the widely practiced form of Sunni Islam in both al-Qaeda and ISIS, it would only be a matter of time before the two powers took a more active role in the country.

Iraq and Syria have taught us what it means when al-Qaeda and ISIS take a "more active role" in a country. We can imagine what form that might take in a country where they're basically the home team.

Pulling the Pin on Good Business

Bankers are funny types. In an economy awash in bad debts, some have an instinctive impulse to add more to the pile.

The New York Times reports on banks calling loans on companies that have perfect loan repayment records. This is what often happens when credit shrinks and banks no longer need compete for borrowers.

The article focuses on Dave Brown of Tempe, Arizona, a home builder who had been in business, successfully, for 33-years. That came to an end when his bank, panicked at his company's declining revenues, demanded additional collateral for its loans - assets Brown simply didn't have. Even though not one payment had been missed, the bank simply called its "demand loans." That left Brown unable to complete his current projects which rendered them unmarketable and which led the bank to step in and foreclose.

Banks do this and they do it here in Canada as well. Every now and then something happens and the banks go "medieval" on their borrowers (h/t Pulp Fiction). When this develops into a trend it ripples through communities and, eventually, entire societies.

Here's what I mean. In the 80's there was a recession in Canada. In Vancouver, car dealers were particularly hard hit. The lenders - banks and automaker acceptance companies - panicked. They called their notes and hired bankruptcy lawyers and trustees (oh, the gravy!).

One particular trustee seemed to get most of the many car dealers, one by one, on a particular thoroughfare. He would move in and throw the dealer's inventory on the market at firesale prices. Basically he went into competition with every other car dealer in that market and they couldn't afford to match those prices and service their own debts. Like dominoes, one by one they fell as the market got saturated with below-cost inventory.

It wasn't just car dealers who fell victim to these debt realization Berserkers. Commercial auction houses were flooded with inventories of companies that fell into receivership. It was not atypical for assets to be blown out at ten cents or less on the dollar. Out of the paltry recovery the lawyers, trustees and disposal experts would all have a fine feast. They were often creating the conditions for the next company's failure. Buzzards are supposed to eat carrion, not manufacture it.

Then the recession passed and, once the hangover cleared, the banks noticed that they had little to show for their efforts, pennies on the dollar, in large part because of their counterproductive approach to debt realization. They had been pulling the trigger but the gun had barrels pointed at their own head as well as the debtor's.

That finally ushered in the era of "work outs," recognizing when a debtor was in trouble and concentrating on how to maximize recovery which in some cases meant keeping that company in business by writing off debt or deferring repayment. The bank got more than it would by shutting down the company, the business sometimes managed to keep operating and the employees kept their jobs and paycheques and kept contributing to society.

But this is a pendulum that can swing back again. We're going into a recession. Even Harper has finally grasped the need for a stimulus plan. But the devastation the feds need to offset should be addressed by the feds and the provinces. Preventing Kamikaze debt realization ought to be explored - now. It's much harder to force banks to extend credit than it is to restrict their freedom to shrink existing credit facilities.

I think we need to look at measures to protect borrowers during this extraordinary time. There's no point blaming them and saying they ought to have known better when our banks and our government utterly failed to see what was coming. Keeping as many companies as possible in business during this recession makes good sense. It continues economic activity and it reduces unemployment and all the consequent ills that flow from that.

Let's face it, we've got billions to bail out banks but, in terms of employment, they're small change.

Now, if the interim leader of the Liberal Party wants to look progressive, there's something he can chew on.

Bankruptcy - Canada's Growth Industry

Personal bankruptcy filings in October were up more than 20-per cent from a year earlier. The good news is it could've been worse, I suppose. The bad news is that it's bound to get worse.

With about 71,000 new unemployed last month and far more workers at risk of the same fate, they'll start working their way through the system soon, very soon. As a former bankruptcy practitioner, I know how this unfolds.

The good news is that corporate bankruptcies increased just 1.4% over the previous month. The bad news is that corporate bankruptcies typically slow down during the holiday season and then skyrocket as retail businesses close down in the new year. Watch as those stats come rolling in beginning around February.

The good news is that this would be a great time to review the efficacy of Canada's banking and bankruptcy laws. The bad news is that Harper and the Governor-General thought this would be a dandy moment to shut down parliament.