Together, We CAN Save Greece!

With a second election and perhaps a further stalemate looming for Greece, the world awaits eagerly for the outcome. It has become about a Grexit or Not; The Euro or the Drachma; Right or Left.  The establishment has managed to stem the tide, which was pointing towards a very strong reprisal of the failed austerity, by using this debate to draw fictitious lines for the easily manipulated voting public. Fear of a ‘catastrophe’ was repeatedly used when Papandreou and his Lord Vader, Papakonstantinou, shouted that the Greek Books were on ‘fire’, watched as investors fled and then advocated 'austerity' (read: steal more from the little guy) as the cure. We, along with some others, argued vehemently against this course, due to its easily predictable failure and ill consequences.  

Fast forward two years later and nothing has changed in Greece, except that the situation has become far worse and seemingly hopeless.Nea Democratia is telling voters the same thing that Papandreou was telling the electorate 2 years ago. If we do not take Europe’s terms it will be a catastrophe.  People…in case you hadn’t noticed, it is already a catastrophe.  The definition of insanity is doing the same thing over and expecting a different result.  It was the old established parties of Pasok and Neo Democratia that took turns nudging Greece along this dark and desolate path. 

Their rhetoric was different, but try and point to any meaningful differences during their reigns and you are hard pressed to do so. One party wore red ties while the other wore blue but Greece continued unabated towards this cliff she now sits perched on, inching ever closer to the edge it now teeters on, due to those Pasok/Nea Democratia mismanagement and chicanery.  If those two parties combined come anywhere close to a majority, the nation of Greece will have lost its sovereignty forever. Do not suffer from Stockholm syndrome; does it make any sense whatsoever to put your faith back in the hands of those people who got you where you are in the first place?

Greece currently sits in the 5^th level of hell.  A vote for the old guard may result in a temporary elevation of that status (a lesser version of hell) with a slow and permanent decline soon thereafter into the abyss of purgatory in the 7th level, with no chance of redemption.  The shackles will have been secured and the noose ready for the executioner to pull at his will.  A vote against the status quo may result in a temporary setback, but is the only thing that can lay the foundation for a resurrection from the depths of Hades, while paving a path to the top of Olympus for Greece's sons and daughters to enjoy.

Make no mistake, Greece MUST change. There is no magic elixir; no cure-all. Hard work and change WILL be required immediately.  The choice is yours. Do you make the changes for Greece and the future of your children and grandchildren, giving hope to future generations that they will lift their heads high once again, or do you take a few crumbs now, in exchange for the eternal soul of Greece and its progeny?

Greece must play their hand.  While the German ‘power elite’ sits sipping cognac as the biggest benefactors of this union, they know that Greece holds an ace. If they let Greece go they are aware that two things will happen a) Greece’s condition, after a period of difficulty, will improve over the next few years and that b) the rest of Europe’s condition will worsen, with bond markets chipping away at the rest of the fringes. As a consequence those populations will begin to question their chosen path. It is for the people of Greece to hold up this ace. In order for this to be a winning hand it must be accompanied by true, real, marked and measurable change at home.

But how do we do this you ask. First and foremost the old guard must be voted out with a resounding OXI and a plan must exist to create stability and calm while the negotiations begin. With a mandate, the new guard must approach Europe with a real plan along the lines of below:

1) The debt is wiped clean

2) Medicine, fuel and food is sent immediately as a donation from our European neighbours

3) A $100Billion line at a fixed rate of 2.5% (I chose this rate as that is the rate the EuroBond will likely be at and the amount was selected so as to be sufficient to carry Greece through its metamorphosis providing a healthy balance of cash flow and investment dollars for accretive natural resource and manufacturing projects)

4) Current austerity programs would cease and be gradually reversed

5) A 5 year value add tax for imported goods where a good has less than a sufficient amount of Greek inputs

Greece would need to offer a great deal in return. The only way forward would be for those who took to give it back. The bankers and the multinationals will have given back some through the donations, the 5 year VAT, the line of credit and the debt forgiveness. Greece has been the laughing stock of the world and ‘this is how it is in Greece’ can no longer be tolerated. Austerity and reform are necessary, but not as has been imposed thus far.

I would propose creating an amnesty program for tax cheats. The identities of those that owe money are well known and those who have taken bribes can be easily tracked in today’s modern age. The amnesty would be a one year program available to all citizens (including politicians) and corporations with assets/income over a reasonable threshold whereby they would declare ALL their assets and income, whether offshore or not, and pay the back taxes on said assets (and income) without having to declare source or pay interest.  No legal action would be taken under the amnesty program.  Perhaps even an incentive for these Greeks to repatriate their capital and invest in Greece, along the lines of a modest credit for such repatriation.

Should they fail to pay, together with the assistance of our European brethren, the dead beats would be tracked down, pay all taxes, all interest and all penalties and face stiff legal ramifications. They would be branded as traitors and lose their citizenship and the citizenship of their heirs.  Their names would be there for all to see and throw shame on. 
Another thing that would be essential would be to put an end to the bribe state. Perhaps a whistle blower program for anyone taking or offering bribes, perhaps like what India has attempted to implement, together with stiff fines and prison for those that continue (much stiffer penalties for politicians given their positions of trust). 

In past posts we outlined the fraud that has been perpetrated.  Now a cleansing is required if Greece is to survive as a sovereign nation and eventually prosper. The above is not intended to be comprehensive nor are the numbers or ratios scientific; It is a suggestion with the significant elements needed that can be made into a real plan that will promote healing and restoration.

It is NOT Euro or no Euro…It is about the Establishment versus the People; It is about the continuation of the great Greek nation or ceding sovereignty to the banking cartels, Multinationals and the Greek Kleptocrats ; put in those terms the choice should be simple. On the eve of the Euro championship we should all be reminded that Greece, in the face of overwhelming odds and with all of Europe weighing against them, has emerged victorious before; we can again!

Why We Must Fight For Greece

Right now in Greece, countless brave journalists, scholars and patriots are frantically sending out an S.O.S. After spending laborious hours translating their message into English, they are begging and pleading the international media to take note. Something big has happened. Information has just come to light that makes all the pieces of the Greek crisis fall into place. Their cries are desperate, but falling on deaf ears. Will you listen?

As you will see within the pages of this blog, and the important information it links to, what is happening in our homeland is no accident. The Greek “crisis” is also not the result of profligacy, the welfare state, low-level fakela, or Yianni on the island taking cash under the table to avoid taxes. Rather, it is the culmination of a plan – one that has long been kept secret. In fact, it’s hard to see why any Greek should have paid a cent of their earnings in taxes to this disgusting cabal in the first place. I wouldn’t pay a mugger to take my wallet – what about you?

I can think of no better eye-opener than this video – please watch, and send to others: http://youtu.be/x8M-rJULXlo

A light of salvation has appeared for the struggling people of Greece. This has come in the form of revelations that the country has massive, provable reserves of oil, natural gas, rare earths, uranium, and a bounty of other valuable minerals and metals.

The news came as a surprise to the average person - to whom it has always been proclaimed that Greece had only negligible natural wealth - but it has been well-known in certain circles for years. Those circles are of Greece's corrupt generational elites, who have sought to hide this treasure from its rightful owners - namely, the people.

But don't take my word for it. This isn't an opinion - it's cold, hard fact.

In the various articles and videos linked to from this blog, you can read and see the testimony of respected scientists and government officials who were persuaded or ordered not to look deeply into Greek resources. Individuals who were stymied at every pass when they attempted to explore the minerals or metals that were known. And the economists who prove every step of the orchestrated bank, government and corporate fraud that intentionally crashed Greece's economy.

All the proof that any prosecutor could hope for is there.

Greece lies bleeding from the slow, painful death of a thousand cuts. It has been brought to its knees. Why? The same reason why genocidal wars are sparked in Africa. Why anti-democratic military coups are instigated in Central America. Why right now, the Middle East is being inflamed and Balkanized. It’s the old strategy of weakening a country so that its populace will beg for a solution, and allow foreign interests to steal their sovereignty and resources while making the people dependent on the crumbs they drop. What’s happening in Greece is business as usual for the powers that control our globe.

Those who fight it, take risks. But once you understand the brutal game that is being played, can you really close your eyes again?

I can’t, and I take the risk of speaking out to anyone who will listen. I do it because I think about the sweet smell of the flowers walking to the limani from my ancestral home; the home that a German captain took over, 70 years ago, while my grandmother was forced to flee her island.

I take the risk because of the village ladies, armed only with pitchforks, who stood and risked their lives to throw the Italians back into the sea.

I take the risk because I think of my grandfather, who as a young boy, nearly 100 years ago, was forced to march in bare feet hundreds of kilometers into, what is now, Greece proper, from Constantinople with only the clothes on his back.

I take the risk because the economic warfare being waged on Greece is an occupation of a different and more sinister sort and will have our cousins, aunts, uncles and grandparents begging for a scrap to eat, if they are not given a voice.

I take the risk because Greece now has the highest suicide rate in Europe (from the lowest) and because I heard that the desperate in Athens are already digging through the garbage to eat.

I take the risk because I can’t turn my back on the enlightened Greeks who are desperately trying to make this information known. What risks are you willing and able to take?

Take the risk of educating yourself and others. Below are links to information that will open your eyes and forever change the way you see the world, and you will understand the purpose behind the devastation being inflicted on our beautiful Greece. Let us stand in solidarity against this tyranny – together, we will shine the light of truth on this web of lies and take back what is ours.

http://legiongraeca.wordpress.com/

http://youtu.be/Y2vsYdReMCg

http://youtu.be/EqX8iemXFxk

http://tv.globalresearch.ca/2012/02/greek-austerity-measures-healthcare-doomed-army-booms

http://www.youtube.com/watch?feature=player_embedded&v=YnccQngx_AQ

And last, let us remember why we can never stand for such tyranny again: http://www.youtube.com/watch?v=BiuqXti8NuY

Who Sold Out Greece? The Answer Is Hidden in Plain View.

As a long-time advisor and former finance minister to George Papandreou, Giorgos Papakonstantinou was at the epicentre of the purported Greek “financial crisis” and the ill-fated acceptance of violent austerity measures. His advice, shall we say, was an unmitigated disaster. Eyebrows should have been raised, then, when this man was reappointed within the new, unelected regime of Brussels toady Lucas Papademos. It was just as the Minister of Energy, however, so what harm could he do there? It’s not like Greece is a major energy player.

Of course, there is far more to the story. As the Minister for the Environment, Energy and Climate Change, Papakonstantinou is not only responsible for the handing over of what’s left of Greek sovereignty to the EU central authority under the guise of “environmental treaties”, he’s also been given the task of privatizing state assets. Such as – surprise, surprise – the country’s vast, untapped, and heretofore unrevealed oil and natural gas reserves (link).

It’s just theft in plain view. Papandreou, Papakonstantinou and their cronies manufactured the urgent “crisis” in order to inflame public sentiment at home and abroad, and then manipulated the fear to institute an established plan to sell off Greece’s wealth, dismantle its weighty social welfare state, and ultimately, sell out their fellow citizens. Problem, reaction, solution. Create the problem, exploit the panicked reaction, and swoop in with a crooked, self-serving solution.

Here is a great analysis of how the “crisis” was manufactured from the ground up: link

Even for those with an economics background, the tale is a Byzantine labyrinth that can be tough to follow. And this lack of understanding can lead to Greeks being reluctant to take a strong position. However, just let the simple facts below fuel your anger.

In one of the country’s last, painful death throes, Greece’s pension funds are getting ready to take a massive hit on their bonds. This means one thing only: Greek pensions will now be stolen. Elderly people in Greece will starve on the streets. Most Greeks will never be able to retire. Greek children are at this moment being abandoned by parents unable to afford them (but maybe they'll be adopted by a nice German family). Food and medicine will become scarce luxuries – for some in the cities, they already are.

Guess what? It's nothing new or shocking, just the same old game played on a different board. This is exactly what has been happening to African, South and Central American and Middle Eastern countries for decades under the IMF and World Bank. See the fantastic book “Confessions of an Economic Hitman” by the former insider economist John Perkins.

Problem, reaction, solution. Create the problem with bad loans, and use the fearful reaction to the crisis to pillage the country for the benefit of the few and eliminate sovereignty. On this path, Greece is GUARANTEED to devolve into a failed state with increased crime, shorter lifespans, and government repression.

This hell on earth is what your homeland has in its future - and it's exactly what the elites want. All of this chaos and suffering, just to line the pockets of a corrupt cabal of oligarchs who masqueraded as “The People’s Party”, and to further a corporatist EU agenda of centralization, privatization, and ultimately, ENSLAVEMENT.

We're almost out of time. Greece's clock is drawing ever nearer to midnight. Rise up, educate yourselves and others, and let your voices of opposition to this theft be heard!

Bombshell! Greece's Secret Wealth Can Mean Real Prosperity, Not Austerity

I took an airport limousine home after a wonderful vacation in Cuba, one of the last bastions uninfected by debt and private central banking. The driver had the tell-tale accent of a Greek 'Dad' who had left his country’s shores long ago so, as I always do, I engaged my fellow compatriot in discourse. We got to talking and I found that he was extremely aware and enlightened – and opened my eyes to Greece’s true value.

While I had heard that Greece had some oil, I assumed that it was a limited amount of the difficult-to-access deep sea variety, and not of any real consequence. However, my driver told me that it was a vast quantity of easily drillable oil – on par with the biggest reserves in the world – and so when I arrived home I began researching. I came across this video that absolutely every Greek at home or abroad MUST view: Youtube

Have you viewed it? If not please go back. There. Are you mad yet? Well you better be!

As we neared my home, the discussion I had with the enlightened driver turned to former president Papandreou. We concluded that he could only be the dumbest Greek to have ever walked the streets of Athens or the most sinisterly corrupt to have done so. Which one was it?

At precisely 5:19 of the following video we had our answer: Video

But he did not act alone. Even in the official International Energy Agency paper 2010 it is the official global position that "Greece does not have significant natural reserves of crude oil and very little indigenous oil production (some 1 kb/d in 2009)."

“The individual is handicapped by coming face to face with a conspiracy so monstrous, he cannot believe it exists."

- J. Edgar Hoover

While we counseled in 2010 that the cocktail of austerity and IMF banker bailouts would not solve anything and simply worsen the situation, the talking heads prevailed. Using fear of the unknown, Papandreou, at the time, said it would be a "catastrophe" if the austerity was not approved and the IMF bailout funds were not taken. He was absolutely right; he just didn't say for whom it would be catastrophic.

The road was always going to be difficult for the people, but had the bailouts not been taken and had bankruptcy been the path, the sacrifices would have been for Greece and all of its citizens. But as it stands now, it was a catastrophe looming for the big banks, multinationals, power brokers, Greek elites and all the other sinister criminals that was truly averted. After all, what a shame it would have been for the chosen ones to have had to share Greece's natural riches with all of the Greek minions. Better to crush them, and let them starve in the streets while the country and its oil were sold off for pennies on the dollar to pay back “their” debts.

It has always been the Greek way to perform nobly, but at the last minute. Make no mistake that we are at the precipice and while the past several years have been a tragic waste every Greek life, present and future, depends on what happens NOW. Act and Greek roads can be paved with gold; Fail to act and you, your kids and all their kids will be slaves washing the dust filled streets so that your master’s leather shoes can be clean as they dine on your inheritance. The road must be paved today for a man to give the speech I wrote for Papandreou (link) or that will be the true Catastrophe.

Please send this to every Greek you know and insist that they do the same. Yia Tin Elada!!!!

Which Side Are You Really On?

“The 99 versus the 1” - this is both a convenient rounding and a misnomer about just who is battling who. The mainstream media and the Tea Party have been minimizing the Occupy movements as the actions of a few professional agitators with a handful of hippie soldiers. I was watching CNBC the other day, and while they did conduct an interview with Michael Moore, he was not allowed in the building. After the interview ended, one of the conservative on air personalities said, “I agree with one thing that Michael Moore just said; 2 years on and no one has been punished for the financial crisis.” He continued, “But I agree with absolutely NOTHING else."

There is some serious cognitive dissonance at work when someone can agree with the root of the problem polarizing America, and the world, but yet claim to completely disagree with the problem’s obvious origin, that there are any steps needed to resolve it, or acknowledge the devastating effects it has had on innocent people. This attitude is all too common, especially among the aspirational middle and upper classes (what few of them are left). What is the source of this massive disconnect? I believe the answer can be found in our class system; rarely is it discussed, but it plays a pivotal role in keeping different groups from seeing that they are all in the same boat. Here is the modern class system as I see it.

1. The Underclass

This class is easy to define and describe: they will be found working at minimum wage or low-paying jobs, or are just plain out of work. This class has members who were always poor but are increasingly being joined by the underemployed (those working as Walmart greeters who ‘left’ their careers as comfortable middle managers), the newly unemployed, and those working whose wages have not kept up with inflation and who dropped into the category of ‘poor’ by all known definitions.

There are now about 6 unemployed Americans for every new job opening in the United States, and the number of "chronically unemployed" is absolutely soaring. To put the jobs issue into perspective, Harvard University accepts roughly 7% of applicants. At a national “Hiring Day” in May, the apparently even more prestigious fast-food chain McDonalds only accepted 6.2% of applicants. There simply are not nearly enough jobs for everyone, and the poorest class is joined in alarming numbers on a daily basis.

2. The Middle Class

The middle class is less tangible: definitions vary, and the estimated size ranges from 25% to 65% of the population. A popular definition describes a comfortable standard of living, economic security, and work autonomy, but few of these seem to apply to anyone in America’s new reality. Certainly not to those making between $25K and $100K per year, the range for “middle class” income suggested by the Drum Major Institute. One thing is certain, however; despite this group's aspirations, their ranks are rapidly dwindling. The nebulous nature of its definition can only temporarily hide this fact.

Even a few of this article’s 22 statistics showing the destruction of this class are unnerving – for example, that from 2001-2007, 61% of all income growth in the US went to the top 1%, and most of that to the highest fraction. Similarly, the top 1% now own twice as much wealth as they did 15 years ago. Our polarization of wealth is now worse than during the Great Depression. Taken as a whole, the statistics are terrifying. It is now unequivocal that this vast part of the population is being rapidly eroded, yet there is a general refusal to face this fact. This pig-headed avoidance of the deep problems within the American economic system is exemplified by Republican presidential hopeful Herman Cain, who recently told the unemployed and poor, “Blame yourself!”

3. The Indentured Elite

I began this post with questioning the math of 99% vs. 1%. The reason I thought that this was oversimplified was because I, and a number of my peers, are considered ‘rich’ –this is a flawed perception, so I decided to break down the numbers even further. What I call the ‘indentured elite’ is a class that is rarely, if ever, talked about: so infrequently, in fact, that I may be coining the name here. They are lumped in with the ultra-rich but with an entry point of just $250K to the top 1.5%, their interests could not be more different. A nice house and car, the occasional luxury holiday, and access to credit may visibly differentiate them from other classes, but these are basically meaningless.

Their status is just as insecure as the other groups – perhaps more so, due to their ability to over-leverage – and they are just as powerless. Trapped, they do the bidding of the true corporate and banking elites, either by resigning or deluding themselves to it. If the other classes who side with the oligarchs are their foot soldiers, these are their sergeants and generals. Indentured elites, unlike the true rich, did not benefit from the financial crisis. Much like the middle class, while this group’s ranks have shrunk since 2008, those that remained actually became poorer in relative terms than the real rich, who made an absolute killing during the recent calamity.

4. The Top 0.01%

These are the money masters – the (often hereditary) uber-elites who make markets, give orders to politicians, and have been engaged in a decades-long campaign to actively siphon off wealth from all of the other classes. You have nothing in common with them. I have nothing in common with them. Most CEOs or multi-millionaires have nothing in common with them - even Warren Buffet and Bill Gates, people who made their wealth in one generation, have been pushing vigorously to redistribute for the greater good.

The top fraction are the people who have rigged the game hopelessly in their favor, grabbed everything within reach, and then used the media to convince the average person that America is a meritocracy and people who fall behind have no one to blame but themselves. They hide their theft by creating a system that benefits only them, all the while claiming that the whims of the markets and economy are inevitable, like a force of nature. They will not stop until someone stops them.

People need to stop deluding themselves about where they stand on the economic food chain and face the harsh reality. Americans are led to believe their country has the wealth equality of Sweden. It’s actually more like Nigeria, Uganda or the Philippines. If all of the underclasses – from the poor to the indentured elite – can’t unite on that common ground, then no one will be able to stop this runaway train.

It's Time for Unity - We're All Greeks Now

Two years ago, when the world’s ails were all being placed squarely on the shoulders of the lazy, deadbeat Greeks, we wrote that the plight of the common Greek was not dissimilar to the plight of the average person anywhere else in the world. We drew many parallels to other Western countries, in particular my beloved Canada. While some commenters were appalled that I dared to compare Canada to Greece, even in the best of the G7 nations the similarities are becoming discernable. With all that has changed in the world, I encourage the reader to go back to the post and see if it has a stronger resonance for you than it may have had last year.

It definitely does for me. Although the media continues to attempt to trumpet the ‘Blame Greece’ theme, it no longer rings as true for many people. For those Greeks that I encounter here in Canada who have adopted a timid and apologetic tone, I invite you to read the wonderful article published here:Link. In it, the author details the money flow and that those being both blamed and charged for the indiscretions of a profligate society, are not the culprits. Every Greek should read that article to be able to educate all those who continue to remain blind and who parrot the negative bull.

Hold your head high, as it is the Greeks that have been leading the charge, and whose Olympian torch is now sparking the ‘Occupy’ movement. In a previous post, we listed the benefactors of the Greek National debt and proffered the list of those who were being asked to pay for it, in order. The injustice of who made the money and who was left to pay was as obvious then as it is now, yet we still encounter the mass ignorance of the Tea Party, their followers, and those who rely on headlines and media sound bites to understand the world we live in.

It was just over two years ago that the fear started raging about Greece’s economy. A country whose GDP was just 2% of Europe’s was going to singlehandedly take down the E.U., and with it the world, if draconian austerity measures were not immediately adopted. All Prime Minister Papandreou could offer was, “If we do not adopt these changes it will be catastrophic”. They were forcibly adopted and the results have been catastrophic. Greece’s GDP grew in 2008, all be it modestly, at a rate of 2%. Since the magical cure-all of austerity was rammed down the throats of the Greek commoner, the Greek economy has shrunk at an increasingly alarming rate (2009/-3% 2010/-4%) and unemployment has reached the absurd (2011/14.85% 2011 est.).

Remember that austerity was preached as the solution to Greece’s economic ills, and that the financial spin doctors had forecasted that growth would inevitably follow austerity. Combined with lowered spending and the sale of state assets, this strict fiscal diet was the cure-all that would bring Greece back from the brink and save the modern world. It’s also not a coincidence that it was these same financial wizards who cooked the books to allow Greece entry into the Euro in the first place, and who stood to lose the most from the logical path of a structured default. Austerity was never going to work, as we had already learned from Argentina’s case and so many others. Austerity was always going to lead to further ruin, but the banks would be able to collect their due for a little while longer.

Just over a month ago, a small group of the disenfranchised – aka the ‘99%’- began a peaceful protest that was quickly dubbed “Occupy Wall Street”. While it is primarily a U.S. movement, its roots can be traced back to the fight that the Greek people have been waging for over two years, the same anger and frustration at an unjust global system that inspired the Arab Spring. The Greek protests were dismissed by the media and European elites as anger from a lazy people being deprived of their cushy welfare state – never mind that the indolent Greeks work more hours per year than the Germans. In the Arab world, the protests were spun as a simple plea for Western-supported democracy. Neither explanation was correct – the roots of the protests were about something much larger, and deeper.

When you ask people what Occupy Wall Street is all about, you get few concrete answers in return. Who are their leaders and what are their demands? It seems to be about nothing, the media complains, perplexed at how to explain the movement. Is it about political corruption and lobbying? Is it about greedy bankers and their golden parachutes? Is it about unemployment, and the growing inequality and income disparity in America? Is it about the iron grips of Big Oil and Big Pharma? It is about the loss of civil liberties and the multi-billion dollar surveillance state?

There are no easy answers. The movement has no one single leader and no single demand. But it would be a dangerous mistake to dismiss the protests as ‘about nothing’, especially as they have found a deep resonance, and spread like wildfire throughout the globe. If it was truly about nothing, would more and more people be joining daily, pitching tents, sending money, and, at least in New York, even ordering pizzas for the campers? The answer is simple yet wholly intangible; it is the global collective consciousness finally being awakened from slumber, throwing off the torpor induced by fear and lies and the distractions of the media. And as it awakens, it begins to see the world with crystal clarity, like a child who simply knows right from wrong.

In 2008, the whole world nearly collapsed and the prescribed tonic was just more of the same with a sprinkling of tax on the poor (directly or through increased deficits). Good people lost their jobs, the world’s youth has been robbed of its hope and all the while the rich just seem to get richer and continue to be rewarded for the carnage they have created. The movement is like a child that does not know what is wrong; it just knows that something is very wrong. It will cry until it gets what it wants, though it does not necessarily know what that is. Now picture a child that is 300 feet tall and weighs 500 tons…what happens when that child doesn’t get what it wants? Anger is usually not far behind the crying, so someone better figure out what the pacifier is, fast. It is everywhere and in front of us and it surely isn’t the same old thing.

And so, just as the Greeks, as the pioneers of this movement, have been screaming enough for over two years, the world is now saying it as well. ENOUGH! ENOUGH! ENOUGH!

Economic Overview of Toronto Commercial Real Estate

Thank you to everyone who continued to check my blog while I was on hiatus - I took a break intending to return after my busy summer, but it wound up being an even busier fall! One of the time pressures has been that overseas interest in Toronto commercial properties is growing swiftly, and I've been trying to fill the demand for foreign-investment oriented information. I prepared the following economic overview for a European investment bank who visited recently, and invite you to have a look. It focusses on both the micro and macro details of Toronto's downtown core, and you may find some of it very surprising!




Economic Overview for Investors

Commercial real estate in Toronto’s Downtown Core is ideally positioned to offer investors an increasingly rare commodity; secure and robust yields, in the safety of the G7’s strongest economy. After the global financial crisis of 2008, Canada’s position as a safe harbour from widespread economic downturns was undeniable, and the country has since been reaping the benefits of conservative banking policies, a powerful currency, and, buoyed by demand from emerging markets, a surge in production of its commodities such as oil, grain, precious metals and lumber.

At the epicentre of Canada’s thriving economic system is a small piece of land, measuring just 24 square blocks in size. Within this limited space, large multinational corporations vie to stake their positions in trophy buildings, and emerging companies hope to succeed with the help of their prestigious class-A locations. Canada’s economy will surely expand, but Toronto’s Downtown Core cannot grow with it. The following document outlines the myriad of ways in which this finite area is poised for rapid rises in both commercial real estate values and leasing rates.

1. Canada’s Strong Economy and Currency

Canada is the best-positioned country in the G7 on a multitude of levels. It has the healthiest banking sector, which resulted in a limited impact on Canada’s economy from the recent credit crisis. Found within it is the largest cache of raw materials of any country, including the second largest oil reserves in the world, and it enjoys proximity to the world’s largest market as well as exposure to growing emerging markets such as the BRICs. Of the G7, Canada also has the most advantageous debt/deficit to GDP ratio, allowing room for further economic stimulus if required, although the government has declared that no further stimulus is warranted. A recent round of interest rate increases has been executed, leaving its financial system in a favorable position to handle any further global turmoil, should it arise.

The robust Canadian Dollar has increasingly become a commodity currency. In fact, in June of 2010 Russia announced that it would begin holding CAD as a reserve currency. Over the course of the last year, it has also been widely reported that China has dramatically increased its purchase of the CAD. Both countries sparked international debate in 2009 with calls for a new world reserve currency to replace the volatile USD. With its inherent stability, and strong position in the G7, the Canadian dollar will continue to be a safe haven and climb against most currencies, and in particular those currencies that will have to enact further stimulus and/or maintain low interest rates for longer periods (namely the USD and EURO).



2. Canadian Banking Conservatism

Canada’s banking system maintained its status as a safe harbour throughout the tumultuous global environment over the past two years. Unlike foreign banks, Canadian banks maintained Tier One capital reserves in line with the original Basel Accords (7%) and were not permitted to hold off-balance sheet assets such as SIV’s. As global banks struggled to recapitalize to levels even sub-Basel Accord levels, Canadian banks were positioned to raise capital up to 14% (Royal Bank). Markets are now in a far safer position, and OSFI (the bank superintendant) has made foreign takeovers extremely difficult. Compounded by the targets Basel III has established for Tier One capital requirements at only half of current reserves by 2015, the bank’s excess capital is now set to be deployed domestically.

Canada’s commercial banks have not held significant levels of commercial real estate for the past 20 years, instead acting as an intermediary between the consumer and the ABCP (asset-backed commercial paper) market. However, evidence that this will change is mounting. Banks have historically held a weighted average of 20% of their assets in mortgages (residential and commercial). During the crisis, Canadian government purchased nearly $70 billion in mortgages from the banks through CMHC (Canada’s lesser-known equivalent to TARP). When it became clear that Canada would not be suffering the same fate as its G7 counterparts, the banks were unable to originate enough residential mortgages to return to their traditional weighting. Furthermore, new lending restrictions imposed by the government have further reduced the pool of available residential mortgages. This leaves only commercial real estate for the banks to recalibrate their asset mix.


3. The Scarcity of Yield

Since 2008, there has been a paucity of vehicles for investors to achieve safe, stable yields in excess of the nominal returns offered by financial institutions to depositors. Money has poured into bonds, resulting in low yields that do not justify their risks. For example, Mexico, which received a credit downgrade last year, has recently issued a hundred-year bond with just a 6% yield. This offering was quickly oversubscribed. Gold has also benefited greatly from the new high-risk, lower-return environment, and driving its emergence as an investment class is the hedge it offers against the threat of inflation, the outside risk of deflation, and as a sideline position in case of a further global economic crisis. Commercial real estate in stable venues is an ideal alternative, and will offer the same benefits and more.

This growing desperation for yield will only be compounded by slow growth (or further decline) in the economy of the United States, and additionally, the urgent need for yielding retirement investment vehicles for the more than 85 million “Baby Boomers” in North America. Canada’s REITs have seen this urgency. As of 2010, these trusts have taken on a record amount of capital and, in return, promised returns far in excess of bonds. These funds have remained largely un-deployed. Due to the predicted inflow of capital from both the REITs and major banks, there are calls for a significant cap rate compression.

4. The Microeconomics of the Downtown Core

Toronto’s Downtown Core is the sought-after financial centre of the Canadian economy. This market has undergone substantial changes during the last decade or so that have compounded the rise in property values. In the late 1990’s, there were approximately 130 owners of properties in the core. As of 2010, there are less than 20, of whom virtually all are major institutions such as Brookfield Properties, Cadillac Fairview, Slate Properties, and Oxford Properties. This dramatic consolidation has provided stability, but has led to far higher prices due to decreased competition from sellers, and a shortage of availability as these institutions tend towards long-term holdings. The high capital requirements and quiet nature of property sales have also posed an impenetrable barrier to entry for most non-institutional investors.

Current demand for commercial real estate heavily outstrips available supply, with a very small number of properties coming to market annually. Since 2007, just one or two Class A buildings have been on offer each year. Bidding wars have become common. This year, one building in the core (100 University Street) reportedly received more than ten bids, and is now said to be under contract at a cap rate of 5.75%, despite that half of the building will become vacant in 2011. Further limiting the supply of available properties, Canada’s current tax regime makes the holding of real estate assets more advantageous than selling.

This scarcity notwithstanding, Toronto is still the least expensive market for the purchase of commercial real estate when compared internationally to other major urban centres with a key stock exchange. By way of examples, 510 Madison Ave. (NY) sold for USD $1,000/psf (after cap-ex requirements); Mitsubishi Estates sold their 165,000/sf facility in London (wholly leased to the Bank of Ireland) for USD $212 Million ($1,284/psf) and the Aoyama Rise Square building in Tokyo sold for over USD $1700/psf.

The aforementioned consolidation of office buildings in the hands of major institutions has also limited the incentive for discounted rents, providing a steady upward pressure. However, Toronto’s commercial real estate market remains undervalued compared to other world-class cities. Occupancy costs in Toronto are less than one-fifth of those in London (West End), and this disparity is swiftly decreasing. Toronto is gaining prominence as one of the premier world financial centres, and already hosts the global mining exchange of choice. The growing requirements of international and multinational corporations for a substantial presence in Toronto will provide a strong upside on leases relative to other global centres.