Canada Strong Fund is many things, but not a sovereign wealth fund

The Carney government has made a big song and dance around the announcement last week of the Canada Strong Fund, which it calls "Canada's first sovereign wealth fund". Unfortunately, Canada's new Parliamentary Budget Officer says that the announcement "raised more questions than it.answered".

A soveign wealth fund is not in itself a bad idea. Other countries have them, although the only one that is ever referenced in practice is Norway's, which is the biggest and the best. The idea is to store and invest surplus profits from resource extraction industries to provide funds and a buffer for when those resources finally, inevitably, run out. The ever-sensible Norway has done that in spades.

The Canada Strong Fund is not that.

Norway has a largely (although not completely) state-owned oil industry, so it was in a position to salt away large surpluses over the last several decades, while taxing people heavily to provide everyday services. Alberta could have done something similar by salting away tax revenue from its lucrative oil and gas industry, if it had had the foresight decades ago. But, for ideological reasons, it preferred to use those funds to massively reduce its taxes - the political equivalent of a spoilt kid choosing instant gratification.

But, as Andrew Coyne argues in the Globe and Mail, more eloquently than I ever could, the Canada Strong Fund has hardly any of the characteristics of a sovereign wealth fund. For one thing it has been set up using existing government funds, which, given that it doesn't actually have any surplus funds, means that it has borrowed $25 billion on the open market. Or, if you prefer, taken $25 billion out of the pockets of taxpayers in order to invest it on their behalf.

It's not at all clear when and how the fund will be used. Presumably, it is not being invested just for the hell of it, although, as the government tells it, it's for "generating strong, commercial returns". Umm, OK. It's not even clear that it can make more money than the additional national debt interest that has been incurred to create it. We are told that we can invest in it ourselves (although we are warned that returns may be "limited"). But government bonds of various types already exist; do we really need some kind of goverment mutual fund as well.

If it is intended to fund those "nation-building projects" the government keeps talking about (although not actually acting upon, as far as I can see), then there are already a plethora of government investment and infrastructure banks, funds, guarantee corporations, etc. We don't really need more, do we? It is envisaged as complementing the existing efforts of private industry, but, as Mr. Coyne points out, if the projects are commercially viable, then they probably don't need the government to invest in them.

Mr. Coyne has described it as a leveraged private equity fund, rather than a sovereign wealth fund. Is that really where we want to be parking $25 billion of much needed national capital? Wouldn't it be better utilized actually spending it on things we need? Aren't we experiencing a "rainy day", right now? Or - radical idea - directly spending it on people in need?

Mark Carney is a money guy. He knows how national finances work better than most. We are probably lucky to have him. He's certainly much better than the alternative: angry man Pierre Poilievre and the lacklustre Conservatives. But Carney seems to have converted into a consummate politician in a just a few short months, adept at telling people what they want to hear, and promising the moon while delivering a balloon. (And, in the process, largely abandoning his commitment to the environment, which was once a major plank of his philosophy.)

This is not one of his great ideas.

Winners and losers from the US-Israeli war on Iran

An analysis of the winners and losers in the US-Israel war on Iran involves a long list and a short list.

Among the losers can be listed: the Iranian people, the Iranian regime, the Lebamese people, the Gulf countries, the American people, the global economy and consumers everywhere, Donald Trump, Israel and Bejamin Netanyahu, Ukraine.

Winners? China, Russia, fossil fuel companies, drone producers and the weapons indistry (which, coincidentally, includes Ukraine!), and maybe the renewable energy industry.

Good job, Donnie!

Proof that Canada's economy is too dependent on the USA

I came across.an interesting graph - I do like a good graph! - in an article about how maybe Justin Trudeau was not the economic Antichrist the Conservatives paint him as, but how external events were at least as important as home-grown policies in the challenges Canada's economy has had to face over the last decade or so. This is not an attempt to rehabilitatee Trudeau - the article is quite critical of the man and the policies, unfairly so I would say - merely an attempt to remove the spin and look at the Canadian economy dispassionately.

Anyway, the graph, above, shows the extent to which American tariffs and other US trade policies have affected employment in Canada, by splitting out employment in industries dependent on US demand from other industries.

The glaring difference is of course greatest since Trump 2.0 began in early 2025. But the effect has been in force since at least 2016 (Trump 1.0), and even continued apace during Joe Biden's administration (Biden, lest we forget, was also a keen America First guy). Employment in other industries has actually been very strong (and increasingly so) throughout the whole period.

If ever anything justified our current attempt to diversify our trade away from America, this chart is it.

Trump selects a Surgeon General nominee purely based on merit

And now, right back to... Donald Trump. 

Trump's new nominee for the vacant position for Surgeon General is someone called Nicole Saphier. You probably won't have heard of her unless you watch Fox News. She's a radioligist (so, almost a doctor) who does an occasional segment on the right-wing news show in which she mainly engages in culture war issues, and only incidentally in "medical" matters, where she espouses some rather iffy stances on vaccinations and transgender ideology, among other things.

But you only have to see a picture of Ms. Saphier to get a pretty clear idea of why Trump selected her. The man has a certain recognizable style. Are you seeing a trend here?

I kind of feel sorry for the poor woman in some ways. How is she supposed to head up a huge medical bureaucracy with zero experience and not much medical knowledge? What could possibly go wrong? There again, she could always say no...

UAE leaves OPEC - should we care?

As of tomorrow, the United Arab Emirates (UAE) will officially leave the Organization of Petroleum Exporting Countries (OPEC), the cartel that has historically exerted a strong influence over global oil prices through its ability to impose production quotas over its members. This is probably not going to change your life overnight. In fact, you're probably not even going to see any change in gas prices, at least in the near term, and certainly not while the Strait of Hormuz remains effectively closed. But in terms of geopolitics and the global economy, it could be significant in the longer term. It has been called "the beginning of the end of OPEC".

UAE is OPEC third or fourth biggest crude oil producer after Saudi Arabia, Iraq and maybe Iran, and has been a member of OPEC (and the expanded OPEC+ group) since 1967, soon after the group's inception in 1960. 

Crucially, though, the UAE's "spare" oil capacity is second only to Saudi Arabia's, making it an important "swing producer". It has a sustainable production capacity of 4.85 million barrels a day, but due to its OPEC quota it only actually produces 3.4 million barrels a day. OPEC (effectively Saudi Arabia) is therefore causing it to lose a lot of potential revenue which, given that oil accounts for about a third of its GDP, has always rankled. 

The UAE must also be painfully conscious that, as hydrocarbons are substituted by other energy sources, oil will not always be such a sure source of income. It makes sense, then, for the UAE to maximize its income from its oil reserves now, before demand craters.

UAE's exit widens its rift with Saudi Arabia, the de facto leader of OPEC, and deals a considerable blow to the influential oil producers' group and its ability to dictate oil prices. Freed from the constraints of OPEC, the UAE will almost certainly increase its crude oil output, which could have a significant effect on global prices.

The move is also seen as a win for Donald Trump, who has long railed against OPEC and its price-fixing. Trump needs gas and diesel prices to fall before the mid-term elections, and increasesd oil production by UAE could help with that.

UAE has long been a valued ally of the US, and even of Israel in recent years. UAE's decision to move now, with a US-Israeli war against Iran going on, can be no coincidence. (It has publicly complained that Saudi Arabia has offered it no support during Iran's bombardment, while Israel cleverly extended its protective Iron Dome to the Emirates.)

OPEC has gradually been losing influence for some years now. Back in the 1970s, it controlled over 50% of the world's oil; today, with the huge production increases in the USA, Canada, Russia and China, among others, that figure is closer to 30%. Several members have already defected: Indonesia left in 2016, Qatar left in 2019, Ecuador in 2020, and Angola in 2024. UAE's exit is a much bigger deal than any these. 11 members remain. And next? Almost certainly Venezuela.

Two tech billionaires face off

The press is fairly salivating over the prospect of two tech-bro billionaires facing off agaist each other in court in California. It involves betrayal, deceit and unbridled ambition. And lots and lots of money.

Elon Musk and OpenAI CEO Sam Altman used to be best buddies. Musk actually bankrolled much of OpenAI's early research in the heady days of 2015, back when it was an idealistic not-for-profit looking to save AI (and the world) from the rapacious designs of the less caring technology companies that were starting to emerge.

It soon became apparent, though, that a lot of money could be on the table for Altman and OpenAI, as the company's ChatGPT became the world's go-to AI platform, and Altman's altruistic vision wobbled. The company converted to a for-profit corporation last year, and is now valued at nearly a trillion dollars. Altman, OpenAI president Greg Brockman, and many others in the organization have become very rich indeed. (Altman's own fortune is estimated to be around $3 billion.)

Musk, the world's richest man, whose own net worth is heading inexorably toward the trillion dollar mark, has accused Altman and Brockman of double-crossing him, and of abandoning the company's founding vision of "an altruistic steward of a revolutionary technology". The picture of Musk, not known for altruism himself, taking the moral high ground is a confounding one. Plus, Musk now has his own AI company, xAI.

It's not going too well for Musk thus far. He has abandoned his original bid for $100 billion in damages after a series of pre-trial.rulings went against him. He is now seeking an unspecified amount of money to be paid into the charitable arm of Open AI (which still exists). He is also looking to oust Altman from OpenAI's board because, after all, this is personal.

The trial is expected to provide some riveting theatre as the two larger-than-life characters face off. As US District Judge Yvonne Gonzalez Rogers says, "Part of this is about whether a jury believes the people who will testify and whether they are credible". In his opening remarks, Musk laid out his views: "The fate of civilization is at stake". Altman, for his part, gushed about Musk: "You're my hero". Yikes!

Musk has other ongoing legal challenges too: he was recently held liable by another jury for defrauding investors during his $44 billion takeover of Twitter in 2022. Altman and OpenAI are also being sued by residents of Tumbler Ridge, BC, after a mass shooting that they claim should have been prevented by OpenAI. It's a messy old (new) world out there.

Maybe we shouldn't really care that two such uncongenial figures are having at each other like slightly grubby quondam titans. But it is hard to look away.

How bad is the Iranian economy?

Here's an eye-opening article about the parlous state of Iran's economy after two months of battering by American and Israeli forces. Spoiler: it's substantially worse than I thought.

At least a million jobs have been lost directly due to the war, and 10-12 million - almost half of Iran's labour force - are at risk from the ripple effects.

Although Israel claims to have landed precision strikes on Iran's paramilitary Revolutionary Guard facilities early in the war, in fact their air strikes destroyed or damaged some 20,000 civilian factories, hobbling about 20% of the country's manufacturing capacity, particularly in the essential pharmaceuticals, petrochemicals, aluminum, cement and steelmaking sectors. This has crippled Iran's main non-oil exports, and raised domestic prices for everything from plastics and pipes to fabrics, packaging and construction materials. There was little or no military targeting involved in this; this was an opportunistic Israel gleefully moving to incapacitate its arch-enemy's economy under cover of US bluster, while it thought it could get away with it.

Iran's internet has been largely shut down since the start of the war (or even before, during the domestic protests that preceded it), gutting all the small- and medium-sized businesses that rely on online sales. 

Before the war, Iran made about $98 billion in exports, just under half of it from oil. A good proportion of that is now gone, mainly due to the US blockade on exports, with no end in sight (although actually about half of Iran's non-oil trade goes overland and through Caspian Sea ports, and not through the blockaded Strait of Hormuz).

Pre-war, Iran relied substantially on the United Arab Emirates for up to a third of its imports. Since the US strikes, it has had to retaliate however it can, including strikes on UAE, leading that country to cut off all trade with Iran. No more imports.

The city of Kashan, where most of Iran's lucrative carpet production was centred, has all but closed down. Exports have plummeted and domestic sales petered out. Prices for synthetic fibres have surged by 30-50%, largely due to ongoing hits on Iran's petrochemical facilities.

Most new construction has ground to a halt, with priority going to the reconstruction of essential infrastructure. The price of iron sheeting has more than doubled. Savings of individuals and companies alike are starting to run out, those that had any.

Even with all that litany of grimness, Iranian officials are however still trying to reassure the public that the country can withstand all the economic pain. Certainly, if any country could, it is Iran. After decades of sanctions, the country has built up a lot of resilience, and is well-prepared for "worst case scenarios". It maintains large reserves of vital supplies, and even resources like electrical machinery, cement, iron and steel, for just such an emergency. The US has clearly been shocked by how resilient Iran has proved, although a bit more inquiry and less hubris could easily have alerted them to that.

Such reserves and resilience are not, of course, unlimited. While it is thought that Iran could still bounce back once the war ends, that would largely depend on whether international sanctions were lifted, and that in turn depends on a whole load of other things, things that are currently unknown. Whether Iran can outlast the United States - which has its own constraints and determining factors - is an open question.

Alternative climate conference gets under way in Santa Marta

I have neglected to mention it thus far, but I would be remiss to ignore the First International Conference on the Just Transition Away from Fossil Fuels, happening right now in Santa Marta, Colombia.

With all that they need to come up with a more succinct name or acronym (FICJTAFF?), this seems like a wholly laudable attempt to rescue the climate action movement from the tyranny of the majority. While great things were once hoped for from the UN Climate Change Conferences (or COPS - Conference of the Parties), in recent years they have been increasingly taken over by oil-producing countries that either don't believe in, or don't care about, climate change.

The Netherlands and Colombia have been at the forefront of this new initiative. Over 50 countries are attending the Santa Marta conference, a so-called "coalition of do-ers", representing almost 50% of the global population. Sub-national actors, Indigenous Peoples, social and youth movements, and invited non-governmental organizations will also be represented. 

The USA, under the climate-denying Trump administration, is not even invited, and neither are a whole swathe of other potentially obstructive countries like Middle Eastern oil producers. There is no China, no Russia, to veto promising motions. 

Despite its embarrassing back-pedalling on climate issues under Mark Carney, Canada is indeed attending, although it is sending a team of negotiators rather than higher level government ministers. Along with Nigeria and Australia, it is one of the few oil and gas producers at the summit.

The concept is to see what progressive climate action ideas can be developed without the constant drag and naysaying of the more regressive elements. There will be no flashy binding global treaties, but instead is focussed more on actionable, non-consensus-based pathways. It is seen as a precursor to future negotiations, rather than a final decision-making body. It hopes to set targets and advance concrete pathways to transition away from fossil fuels, which increasingly seems like the only real solution to climate change.

Should we expect much from the conference, other than virtue-signalling and bromides? Is it just a choir preaching to itself? Maybe this first conference might not produce too much, but it will be interesting to see what momentum it generates. And, anyway, do you still expect anything from UN COP conferences?

To tell you the truth, it's nice to be reporting on something other than the United States right now. That feels like a win in itself.