CRACKS IN THE DAM Doug Noland has been writing the Credit Bubble Bulletin since 2000. Nobody tracks systemic financial risk better. This week he updated his famous “little town on the river” fable. Here’s the short version. They built a town beside a flood-prone river. Insurance companies started selling flood policies. Profits were good. That attracted speculators pretending to be insurers. Nobody held reserves. A reinsurance market boomed. Construction exploded. Then it flooded. The market collapsed. But the government built a dam. Then another. Then another. Each crisis. Another bailout. Each new dam allowed the building boom to continue further downstream. The river never won. The town forgot it could. But then an earthquake. Not a big one. But enough to crack one of the upriver dams. The villagers didn’t notice. The river wasn’t rising yet. Only the most plugged-in players knew the dam had started to crack. Sound familiar? Doug’s been writing about the bailout barrage for twenty-five years. The Fed did QE in ‘19 when markets wobbled. The Bank of England nuked QT in ‘22 when UK gilts imploded. The Fed injected $500 billion when SVB collapsed in ‘23. The BOJ talked markets off the ledge during the yen carry trade unwind in August ‘24. And when Liberation Day broke everything in April, the “TACO put” saved the day. Trump Always Chickens Out. He paused tariffs, markets ripped, crisis averted. For every new crisis. A new dam. The problem is that they built those dams on a fault line. The engineering is subpar. And the big one is coming. It’s not if, but when. Share The Iran war is another earthquake. Strangled the Strait of Hormuz. Oil is spiking. Bonds getting goofy. Ten-year UK gilts broke above 5% for the first time since ‘08. Italian yields jumped 19 beeps in a day. Australian yields hit a 15-year high. EM currencies got crushed. Credit default swaps spiked to levels not seen since April. The MOVE index measures bond volatility. It jumped 24 points in a single session. Double the Liberation Day move. That’s the river rising. Meanwhile Donny the Disruptor dropped the idea of winding down the war. Markets exhaled for twelve hours. Then reality returned. Marines are deploying. Israel keeps bombing. But the IRGC still controls the chokepoint. They showed they can throw energy markets into chaos whenever they want. So the “TACO put” has a problem. Because the Orange Man can’t control wars. Every previous bailout involved a policy lever. Rate cuts. QE. Liquidity facilities. Reassuring press conferences. Those tools work when the crisis is financial. They don’t work when the crisis is an oil tanker sitting sideways in the Strait of Hormuz. Noland’s conclusion: central banks will respond slower and smaller than markets demand. The “whatever it takes” era is meeting its match. Here’s what it means for your portfolio. The levered speculating community is on their heels. Carry trades are blowing up. Risk parity strategies are sucking wind. The crowded trades that worked for a decade are unwinding. Gold knows. Bitcoin is figuring it out. Stocks remain resilient. But the dam has cracks. And the villagers still think it’s just another Monday. What if it isn’t?

MILLENNIAL VILLAGE “Inflation is when you pay $45 for a haircut that used to be $15 back when you had hair.” I went to a restaurant in Cambie Village. Which is realtor speak for the gentrified area between Broadway and 25th. They even have their own Insta page. Which refers to the area as “one of Vancouver's primary heritage boulevards”. The girl at the front Jess, holds her clipboard like it’s the Epstein list. She tells us at 5:07 that we were too early for our 5:15 reservation. And she said it with a straight face. When asked if we could have a drink at the bar, she quips that the bar is for walk-ins only. Yet the 20 seat bar was 100% empty. First sign that we weren’t in Kansas anymore. So we stumbled down to the adjacent hipster joint for a drink. Where Adam described the $29 Prosecco as having "hints of pear essence”. And said that it "tiptoed near the champagne region but with softer bubbles”. I must be in St. Tropez now. When we returned to Jess’ place it vibed with Mills spending $30 on cocktails and $40 on crab dip. The food was good but not great. The service was adequate but not stunning. And driving to Cambie Village in rush hour is a pain. More striking than the prices was the ease with which most Mills pay them. Molly Millennial is ok with paying $15 for bread. And waiting in line to hand over $200 for dinner. Then it occurred to me. This demographic has never seen cheap prices. Because they were born into inflation. They’ve never paid four bucks for a Bud at Bar None or five bucks for endless wings at Carlos 'n’ Buds. Which is why it doesn’t bother them the way it bothers us. So what does it mean? Humans are adaptable. Inflation is not a new thing. It’s just new to us. People in Argentina, Venezuela, Turkey and Cyprus have been adapting for decades. They cope by learning to store their wealth in houses. Or U.S. dollars. Or gold. And now on their phone in Bitcoin. How did we get here? Because politicians change the rules mid game to suit their narrative. To wit, the Orange Man fired the BLS economist in charge of the jobs data. Because he didn’t like the employment numbers. He cajoles the head of the money printing cabal daily. Two of his potential replacements for Fed chief abstained from holding rates steady. (One abstention is unique. Two is a unicorn.) Folks this is Banana Republic type stuff. What you’re witnessing is the Argentinisation of economic data. And it’s a slippery slope where trust erodes fast. Trust in our institutions is already at all time lows. And next comes a loss of trust in our money. The downstream effects are starting to appear. There’s no rush for Molly to get married. Or have kids. Birth rates in the western world are dropping to a point that we aren’t replacing ourselves. The percentage of married 30 years olds who are also home owners has dropped to 75 year lows (see chart below). As Martin Pelletier said on X, “What we did to a whole generation is shameful.” In a word, we took away their hope. Hope of having a home. Hope of raising a family. And when there is no hope, your time preference shrinks. Might as well spend $58 on two ounces of Wagu. Take that $10k trip to the Amalfi coast. Why not. You’ll never be able to afford a house. Let alone a family. So what’s the point in saving? But those non-savers end up leaning into the state for housing. Which is why Nova Scotia is building affordable housing that looks like army barracks. Not shocking that it’s actually on an old military base. Affordable, sure. But sole crushing and sad. Back at the basement hipster joint “La La”, the DJ plays vinyl records from behind the bar. A hint at a desire for something real. Molly the Mill pays for her drinks with a tap of her $1,800 iPhone. And the Gen-Z waiter knows to split the bill without even asking. They uber everywhere and plan their sick days around long weekends. It’s early, and yet it feels like the joy has left the room. We couldn’t get out of their village fast enough.

MEET THE NEW BOSS “Meet the new boss... same as the old boss.” -- The Who, Who’s Next 1971 Mark Carney is now the Prime Minister of Canada. A change, it had to come. So our prorogued parliament did its job. By anointing a new king. Without an election. That’s right folks. For the first time in history, a parliamentary democracy is being led by an unelected elite. A system that harkens back to the Magna Carta in 1215. Now we’re led by a globalist bankster with ties to the World Economic Forum. Same as the old boss. Carney the Technocrat (CTT) sailed through the Lib leadership race like Kessler’s AAA team. Stomping Chrystia The Impaler’s political career into the ground in the process. He did so without having a seat in parliament. And never having held an elected office. So where’s the outrage? Can you imagine if the Cons had done something like this? And yet, our mainstream media smile and grin at the change. Our national rag, The Globe & Mail contains no such outrage this morning. Check the front page. Only selective indignation about the orange man. Because that’s what sells newspapers. By the way, if you’re offended by Elon owning X, who do you think owns the Globe? That’s right. The wealthiest billionaire in Canada. Share I may risk offending my paying subscribers (zero). And losing my Facebook followers (also zero). But I’m compelled to take a tack aberrant from my usual miserable missives. Folks make no mistake. We are witnessing a ‘new' revolution. Let me strip mine it for you. Half the world has become unhinged, and the other half is celebrating. Red vs. Blue. Con vs. Lib. America vs. everybody. Donny the Divider is doing what he said he’d do. And 86 million Americans voted for his protectionist policies. Now Rocket Boy and his A.I. posse are putting government spending under a microscope. And that’s got anyone who’s been taking the dole scared stupid. Rachel Maddow, Alyssa Milano, and the hosts at The View have lost their minds since the pugilist with the pompadour got in. They can’t comprehend how fast the pendulum swung backwards and hit them in the derrière. I know the hypnotized never lie, but here’s a crazy idea. Maybe we’ve been gaslit by the captured media. The same media that told us that Sleepy Joe was "sharp as a tack", and Kamala was "polling well”. And that the jabs would stop the beer flu. But none of that turned out to be true. Up here in Snow Mexico, we’re outraged at a 25% tariff. Yet to quote Brittany, we’re not that innocent. To wit, American cheese faces a 245.5% tariff, butter gets taxed at 298.5%, and over-quota milk incurs a duty of up to 292.5%. And rest assured, these taxes do not exist to protect consumers. They’re there to protect the interests of a few wealthy families. The chicken and egg industries (whichever came first) operate under the same framework. With tariffs as high as 238% on chicken, 154% on turkey, and 170% on eggs. That stifles competition and results in higher prices for beavers like you and me. Our hypocrisy is blinding. We’re outraged at China putting 100% tariffs on our pork and beef, but say nothing about our 100% tariff on US bourbon. Folks, this isn’t about left or right. The parting on the left is now parting on the right. And we all deserve better. But how? King Carney will call an election soon. He’s basking in the afterglow of his victory and will strike while the iron is hot. What should we do? Demand answers from both sides. Then get on your knees and pray. We don’t get fooled again.

Blue Horseshoe loves Bitcoin. Got it?

GM Nostr and happy first transaction day. Oh and this is cool:

GM Nostr. Zap before you tap. #zapitome

GM Nostr. Stay classy and send zaps. #zapitome.

GM @nat brunell completely orange pilled my wife thanks to God Bless Bitcoin. Our anniversary is the same day as the genesis block ... so it was inevitable.

HBD #Bitcoin. Oh and happy anniversary to my wife. #blessed

ET TU, CHRYSTIA? "Judge me, you gods! Wrong I mine enemies? And if not so, how should I wrong a brother?" -- Brutus, Julius Caesar Chrystia the Impaler finally did something to affect change. Minutes before I dispatched last week's dismal diatribe, CTI quit as Finance Minister. Impaling Mr. Socks' minority government in the process. Setting the stage for Tik-Tok Jag to bring down the Lib government. Her experience as a journalist meant she knew how to insert the blade to inflict the most damage. Resigning mere hours before she was set to deliver the fall economic update. That left poor JT and his minority government twisting in the wind. As a former cabinet minister said this week "there's a reason we still read Shakespeare". And how did T2 respond to this crisis? In the same languid way that we've come to expect from his rudderless leadership. He hid. First in his SUV. And then behind closed doors. For hours the country was without a Finance Minister. Who would deliver the speech? Would there even be a fall economic update? The Libs were making the Keystone Cops look like Nobel laureates. Share So with no one willing to jump on the grenade, the bad news sat on the table like an unopened brown envelope from CRA. Because theres no way to sugar coat the biggest budget miss since Kevin Costner's Waterworld. A cool $20 Billion and 50% over budget. I predicted it. In fact, my exact words were "would it surprise me if it was, I dunno, $60 Billion? Not in the least." A bold call that turned out to be as prescient as it was precise. And now T2's chances lay impaled by one of his most loyal merry men. To be fair folks, the political landscape is changing around the world. The fall of incumbent governments has been accelerating. And points to a greater sea change. In every democratic nation to hold an election this year, the incumbent got crucified. To wit, the French government couldn't get their budget through parliament and fell. South Korea's President got impeached. The German government fell. And now our laughable Libs are on life support. Why the wave of anti incumbency? Because in a debt bubble, governments drown in a tax and spend system. No matter how grandiloquent their rhetoric. They can promise the world, but they will fail to deliver. Those unfulfilled promises pile on more debt. Like the $61 billion bill the Libs handed us. That debt and its concomitant carrying costs hamstring future growth. Slower growth makes it tougher to balance the budget. And that forces governments to make one of three choices. Raise taxes, cut spending or inflate away the debt. John Rapley, author of "Why Empires Fall" concurs. "This is how empires fall. Any one of these solutions hurts one political constituency or another. Politicians promise they'll magic away the problem by making the economy grow faster." Even new government can't cure what ails us. Because the disease has already infected the lifeblood of our economies. And that disease is easy money. When central banksters can print $60.9 billion out of thin air, who cares what we spend? Because too much morphine kills even the healthiest patient. And now a dollar of spending no longer equals a dollar of growth. Because a full quarter of each new dollar has to go to pay the interest expense on the old debt. That disease has our government on their knees. And someone’s always waiting in the wings, shiv in hand. Mr. Socks just didn’t think it would be his deputy. Et tu, Chrystia? #BTC

GM. Merry Christmas Nostr! A great day to buy BTC and never sell.

Another reason I love BTC is that I continuously learn new things. Like the US has 261 million ounces of shiny rocks. Think of all the sats that could buy...

GM Nostr Bring value & stack sats

GM Nostr. One sat is one penny at one hundred thousand. But 1 BTC is still 1 BTC. @walker

GM Nostr. Satoshi's last post was on the Bitcoin forum was 14 years ago today. Also my bday. Also 12x12=144 blocks per day. So basically I was born for this...

The difficulty adjustment might just be my favourite part of #Bitcoin.