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Protesters walk during a protest against Republican president-elect Donald Trump in Chicago, Illinois, U.S. November 9, 2016. REUTERS/Kamil Krzacznski

Protesters walk during a protest against Republican president-elect Donald Trump in Chicago, Illinois, U.S. November 9, 2016. REUTERS/Kamil Krzacznski

November, 2016

Donald Trump’s election as President of the United States has caused almost as much grief and consternation as Nelson Mandela’s death did – more, perhaps, because death is inevitable and Trump’s election was, even to his supporters, unexplainable, “a miracle.” The day after he won the election, protest demonstrations broke out in 30 US cities. Ten thousand demonstrators marched in New York, chanting, “We. Reject. The President-Elect.”  To all but the 25% of the US population that voted for him, Trump’s elevation seems a catastrophe.  “It’s like when your dad dies,” said comedian Trevor Noah.

To millions of women in the global “pantsuit nation,” Hillary Clinton’s loss was just like a death, the death of their dream of equality for US women. Even her fiercest opponents agreed that Secretary Clinton was the best qualified person ever to run for President. As Secretary of State, she helped solve some of the world’s toughest problems. At the Democratic Convention, Hillary sported her faith and her decency on her sleeve,  like every other speaker there. Wearing Suffragist white, she wore pledged to build a renewable economy, put a few limits on guns, and protect women and children. She reminded the nation that, “We are stronger — together!” Rejecting Hillary Clinton’s program was practically like taking an ax to motherhood.

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Moreover, the election itself marked the end of another Camelot era: President Barack and Michelle Obama’s eight years of modelling cultural awareness and family togetherness. Not only are they the first African-American First Family, they are the hippest, coolest, smartest, First Couple ever to come along. Allowing cameras into every part of their lives, they clearly practice what they preach: exercise, healthy food, faith and church attendance, and lots of music and dancing.

For the record, President Obama also rescued the Western economy after George W Bush crashed it in 2008. He negotiated hard with the banks and actually recovered all the money Bush gave them. He bailed out millions of jobs in the auto industry. He brought US troops home from Iraq and Afghanistan and sent a hit squad out after Osama bin Laden. He remained good natured when faced with constant Congressional obstruction, and managed to accumulate an enviable list of achievements through regulations, appropriations, Executive Orders, and other workarounds. He provided the Hispanic DREAM of youth access to citizenship, and pardoned more (non-violent) prisoners than all the presidents before him, put together.

“A strong majority of Democrats would cancel the 2016 presidential election between Hillary Clinton and Donald Trump if it meant President Obama could serve another term, a new poll found,” The Hill reported last summer.  Google shows 3.75 million hits on the question of Obama serving a third term.

In contrast, for decades Donald Trump has had a national reputation as a huckster and a public buffoon, often featured on the front page of supermarket gossip sheet for extra-marital sex scandals. The National Enquirer, where his friend David Pecker is CEO of the parent corporation, has actively promoted his candidacy and actively denigrated his opponents. Some of Trump’s wilder claims come right out of National Enquirer pages. A publicity hog, he’s been thrusting himself into the spotlight whenever he could, for example, since 2011, by questioning whether President Obama was really born in Hawaii. So far he’s enjoyed a Teflon immunity to being judged by normal standards of decency.

In this year’s Republican convention, Trump proudly introduced his family – five children by three different women. Can you imagine what would have happened if a person of colour had offered their convention five children by three different spouses? They’d have been thrown out, at best – stoned, at worst. America’s new First Lady, Melania Trump, presented a convention speech that included plagiarized passages, lifted from none other than Michelle Obama’s speeches. Unlike Michelle Obama, though, Melania’s nearly-naked photos are all over the Internet, from her modelling days before Donald Trump brought her to the US to marry. While most political spouses are self-effacing, Melania seemed practically robotic, a Stepford wife. The Republican crowd cheered.

Protesters walk during a protest in Chicago. REUTERS/Kamil Krzacznski

Protesters walk during a protest in Chicago. REUTERS/Kamil Krzacznski

Although Trump is nominally a university graduate (Wharton Business School, which calls itself a “private ivy” in Philadelphia), he usually speaks in words of one and two syllables, repeating and speaking louder for emphasis. In fact, if you squint at the screen and just listen to how his words erupt, he kind of resembles Tony Soprano.

As befits somebody who enjoys casino life, Trump has to work hard to avoid coming across as a thug in an expensive (rumpled) suit. But he doesn’t always succeed. “Once a thug, always a thug,” scoffed an April Salon article when Trump tried to appear presidential.

Therein may lie his appeal to middle Americans, many of whom aspire to own Harley Davidson motorcycles and secretly admire outlaw bikers.

Speaking of casinos, Trump spends a lot of time, um, overstating his business success. Estimates of how much he inherited from his father Fred Sr vary from $1 million to $200 million. Hillary says he inherited $14 million from his father in 1999.  Trump says he is worth “many, many billions,” although again, others dispute that figure.  He hasn’t released his tax returns, though, and in 2011, two New Jersey courts threw out his defamation suit against a journalist who said he was worth much less. “In a ruling issued on Wednesday, the appeals court affirms that Trump hasn’t demonstrated that author Timothy O’Brien committed ‘actual malice, by citing three unnamed sources who estimated the net worth of The Apprentice star to be between $150 million and $250 million,” wrote Eriq Gardiner in The Hollywood Reporter.  But Trump’s lawyer produced no financial evidence to support Trump’s that he is much richer and in fact “…Trump admitted that his sense of financial worth depends on his feelings day-to-day.”

Trump is famous mainly for putting his name on other people’s things – buildings, hotels, steaks, “educational” programs – and persuading them to pay him for the privilege. He used to own Trump Plaza in Atlantic City but it closed in 2014.  Its Atlantic City neighbour, Trump Plaza, owned by Carl Icahn, closed in October 2016.  In fact, most of Trump’s businesses have failed and six have filed for bankruptcy, if only for tactical reasons. More than 4,000 construction contractors have filed lawsuits against him for reneging on contracts.

All of which helps explain why “multibillionaire” Donald Trump had problems finding big sponsors for his campaign, which he seemed to stumble into. Filmmaker Michael Moore wrote that Trump announced his candidacy mainly as a publicity stunt for his reality TV show, “The Apprentice.”  Unfortunately, his opening off-the-cuff remarks about Mexican immigration got him fired instead. As Trump bumbled around during the primaries and refused to stick to script, even the infamous Koch brothers declined to fund him, preferring to send their money to “downballot” candidates. (They’ve also backed off funding the Tea Party.) Trump supporters claim he raised millions in small donations by crowdfunding, but of course those numbers aren’t available to the public. Fortune Magazine did report that by the end of October, Trump had donated only $56 million to his own campaign, not the $100 million he frequently claimed.

Therefore, Trump seems to have drifted to other resources. First, he drifted to the NRA  and private prison corporations,  but that didn’t last very long. Then reports appeared about financial and political links between Russia and his campaign manager, Paul Manafort.  These were disturbing, because the US has very strict campaign-financing laws that prohibit candidates from accepting small or large donations from foreigners – much less interfering in US elections with funding or media manipulation.

Coincidentally or not – mostly likely not! – the US has led the world in imposing sanctions on Russia for its aggression towards the Ukraine. Now Russian President Vladimir Putin has already announced he looks forward to undoing those sanctions with  President Trump.

After public complaints that accepting Russian money looked like treason, Trump looked for other support. He began to waffle about his connections to infamous Ku Klux Klan leader David Duke, whom he’d had no trouble denouncing a decade before. Finally, after the disastrous second debate, he replaced his campaign manager Paul Manafort’s Moscow connections with media savvy Steve Bannon’s white supremacist connections. As the second publisher of the Breitbart News website (after founder Andrew Breitbart died), Bannon steered the news service hard right.

According to the Southern Poverty Law Centre, “Since its founding in 2007, Breitbart News Network has grown to become one of the most popular news outlets on the right.  Over the past year however, the outlet has undergone a noticeable shift toward embracing ideas on the extremist fringe of the conservative right. Racist ideas. Anti-Muslim and anti-immigrant ideas –– all key tenets making up an emerging racist ideology known as the ‘Alt-Right.’

“The Alt-Right is a loose set of far-right ideologies at the core of which is a belief that ‘white identity’ is under attack through policies prioritizing multiculturalism, political correctness and social justice and must be preserved, usually through white-identified online communities and physical ethno-states…”

Now, Godwin’s Law says that as soon as someone introduces the word “Nazi,” the discussion ends. If only that were so in this case. Unfortunately, Donald Trump clearly has the enthusiastic if unwanted support of American Nazis and White Supremacists.

Here two ugly narratives come together into one stream. Republicans have relied on the “Southern Strategy” since 1965,  when Richard Nixon devised it in response to Lyndon B Johnson’s Civil Rights Act. In the 1980s, Ronald Reagan adviser Lee Atwater polished the turd to make the technique slightly more subtle.  The 1988 Willie Horton ad that defeated Mike Dukakis is one famous example of how Republicans simply linked a candidate with a person of colour (the face on the poster and ad) as a kind of smear. In the 2016 campaign, a similar ad appeared linking Democratic Vice-President candidate Tim Kaine with criminals – actually, people he defended as a lawyer, often pro bono.

Donald Trump launched his own venture into politics in 2011 with very personal attacks on  Barack Obama’s eligibility to serve – a loud and persistent claim that the first African-American US President was really born in Kenya, and therefore was not eligible to serve his first term, much less run for a second. Right-wingers had muttered questions since President Obama was first elected in 2008. Starting in 2011, for five years Trump charged that the President was not a real American born on US soil,  flogging that outrageous claim even after the President produced his long form birth certificate. In 2016, Trump finally acknowledged that the President was born in Hawaii, and then claimed that Hillary Clinton’s 2008 campaign had started the rumour.

“Donald Trump has won the presidency,” writes Jenée Jones in Vox, “despite an unprecedented level of unfitness and in defiance of nearly every prediction and poll. And he’s done this not despite but because he expressed unfiltered disdain toward racial and religious minorities in the country. The message his victory sent to nonwhites, Muslim Americans, immigrants, and their families is clear: Never underestimate the power of racism and bigotry…”

Let’s see: racism, opportunism,  business failures – perhaps Trump’s most disgusting failing is the way he treats and talks about women. While Republicans have conducted a vigorous War on Women since George W Bush’s days, Trump’s appalling casual misogyny apparently includes casual assault. “He likes to hang around beauty pageants,” Hillary Clinton said, conveying his sleaze factor. “You can grab them by the pussy,” Trump tutored a younger man, in a hot mic video seen by millions. When Anderson Cooper asked if he’d ever really done what he bragged about – forced himself on women – he denied it. Dozens of women came forward to testify that he had done it to them.

What the US has elected, in short, is a seriously compromised candidate, who is shocked to discover that most of the world finds his self-indulgences distasteful at best. Only two US newspapers supported Trump. Fifty-seven newspapers editorialized against him and endorsed Clinton, including papers that had never endorsed a presidential candidate, or not in a long time, or never endorsed a Democrat. Newspapers abroad did the same, including the Toronto Globe and Mail and the UK Guardian, which both begged Americans, “Don’t vote for Trump.” The Economist ran crossed fingers on its cover, with Hillary’s face drawn on the forefinger as “America’s best bet.”  Google gives 136 million hits for “Don’t vote for Trump.”

How could such a candidate have won? Should we read this election as another Republican White Man’s Revenge? On the surface, it seems that Trump did manage to pull the Republican (that is, white) vote across the South and into the new Republican strongholds of Michigan and Wisconsin. Still, Pew reports a 12 point gender difference each way. “Women supported Clinton over Trump by 54% to 42%,” says the report, while more men than women voted for Trump, by y 53% to 41%.

Women, Hispanics and African-Americans turned out for Clinton in numbers close to what President Obama pulled. TV news showed line-ups around the block in city after city. Yet, millions of Democratic voters seem to be missing. Maybe disgruntled Bernie Sanders fans stayed home, despite his call for unity. Or maybe they voted for “third parties,” such as Jill Stein of the Green Party or Gary Johnson of the Libertarians, as some 5,000,000 voters did.

Life with President Trump will bring Americans a sharp case of whiplash. Although his policies are ambiguous, some of his directions seem clear. He proposed $23 trillion in tax cuts. This would mean cutting essential social services to benefit companies like his that buy from overseas suppliers instead of creating jobs. The Republicans are likely to agree to that. Among his socially harmful pledges, Trump aims to dismantle the Obamacare health plan and to re-boot the fossil fuel industry, including coal. Nothing in Congress seems to stand in his way.

Some of Trump’s promises will come back to bite him. He promised to bring back Rust Belt jobs, but all the factories are overseas and many of the industries (like Kodak film) are obsolete. He pledged to deport millions of US Muslims and Mexicans, and build a wall between the US and Mexico. Perhaps he’s counting on his ties with private prison operators for those operations.

If you’re revolted by the idea of the government rounding up people according to their race or religion, join the terrified crowd.  Bill Maher used the F word the Friday before the vote: Fascist. A charismatic leader (to the Trump rally crowds anyway) meets a repressive political party. Brace yourselves, folks. There’s a storm coming, of measures aimed at maintaining control over women and people of colour.

A group of protesters gather outside of the White House after U.S. President-elect Donald Trump met with U.S. President Barack Obama at White House in Washington, U.S., November 10, 2016. REUTERS/Carlos Barria

A group of protesters gather outside of the White House after U.S. President-elect Donald Trump met with U.S. President Barack Obama at White House in Washington, U.S., November 10, 2016. REUTERS/Carlos Barria

When the Patriarchy re-asserts itself, the white supremacists aren’t far behind. Two days after Trump’s win, Daily KOS blogs are already lighting up with incident reports from people of colour who have been threatened, bumped in line, and ordered around by white people re-asserting their authority.

Republicans generally run on a promise to “shrink government.” They bring in demolition crews, starting by appointing department heads who hate the departments they run. Think of how George Bush appointed his crony Michael Brown as head of the Federal Emergency Measures Agency (FEMA) – and how in 2005 FEMA totally failed the city of New Orleans after Hurricane Katrina. President Obama spent 10 years rebuilding FEMA and when Baton Rouge flooded in 2015, FEMA was there, federal funding flowed quickly, and people in distress received help right away. Trump will probably follow Bush’s pattern.

President Donald J Trump? The mind reels. The gorge rises. In vain, many political observers have searched for a saving grace. They point out that the US three-point system of checks and balances, along with government’s constructive inertia, is designed to restrict even the most bumptious Executive.  That’s scant consolation when Trump’s party looks likely to control both the House and the Senate – and to appoint at least one Justice to the Supreme Court. Roe v. Wade (women’s right to abortion and reproductive control) is at risk, along with LGBTQ rights.

Washington’s less formal system of bureaucratic control may or may not tame Trump into some semblance of a gentleman.  He started staying on script after Steve Bannon became his campaign manager. Maybe he could even learn to be diplomatic, with the right handlers. There’s talk he might hire Steve Bannon as his Chief of Staff. The problem is, of course, Bannon promotes extreme views on his “news” website, including “a belief that ‘white identity’ is under attack through policies prioritizing multiculturalism, political correctness and social justice and must be preserved, usually through white-identified online communities and physical ethno-states…”

One last try: after John F Kennedy was assassinated, Lyndon B Johnson became President and faithfully carried out Kennedy’s civil rights plan, even though he was a Southerner and he knew that the Civil Rights Act would hand the South to the Republicans for at least two generations. Johnson never expected to be President. He never acquired the manners or social circles that Kennedy had. He won elections and rose to his position in Congress largely through dirty fighting. Yet he and Lady Bird became respected for their personal decency when they served. The joke at the time was that, if Johnson had known that some day he would be President, he’d have been a nicer person when he was younger.

Maybe the majesty of the office will change Donald Trump. Maybe he’ll surprise everyone again and prove to be a better person than anyone expected. Meanwhile, his first court date is coming up on November 28, as defendant in a class action suit charging that his privately owned Trump University is a fraud. After that – in the wings is an on-again off-again civil suit involving charges of a child sex procurement ring, the details of which should make Bill Clinton’s impeachment look as innocent as Mary Had a Little Lamb.  If civil, criminal or espionage charges don’t lead to Trump’s impeachement, the next four years should be verrry interesting. Let’s hope the country, and the world, survive them.

Copyright Penney Kome 2016

Contact:  komeca AT yahoo.com   Read more F&O columns by Penney Kome here



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Penney KomePenney Kome is co-editor of Peace: A Dream Unfolding (Sierra Club Books 1986), with a foreward by the Nobel-winning presidents of International Physicians for Prevention of Nuclear War.


Read her bio on Facts and Opinions.

Contact:  komeca AT yahoo.com




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Obama: The American people sent a message

Senate leader Mitch McConnell earlier this year at a Conservative Political Action Conference. Photo by Gage Skidmore via Flickr, Creative Commons

Senate leader Mitch McConnell earlier this year at a Conservative Political Action Conference. Photo by Gage Skidmore via Flickr, Creative Commons

The United States, which from afar seems to be in a frenzied, polarized and non-stop election battle, saw the Republican party prevail Tuesday over the Democrats in mid-term elections. The Republicans will now control both houses. For the country that often claims to lead the democratic world, voter turnout was shockingly low: slightly more than 25 percent of citizens bothered to show up at polls in Los Angeles County; only a few places roused more than 40 per cent. Nearly 60 per cent  of Americans cast ballots in the 2012 presidential election. However, as a historic chart from the Center for Voting and Democracy shows, low participation is common in mid term elections.

What does Tuesday’s election result mean?

“This is not a “Republican Revolution”, although it is clearly good news for conservatives and bad news for President Obama,” writes Tom Packer of the University of Oxford. “And yet, in some areas – particularly trade – there is a very real possiblity that the new majority may prove more helpful for President Obama than the divided Congress it succeeds.” …. read (at no charge* America’s midterm election: the view from Oxford.

Here is United States President Barack Obama’s full press conference responding to the election from the White House.


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Why Spy Scandal Stokes German Distrust of U.S.

Angela Merkel. Official photo by Armin Linnartz, Creative Commons

Angela Merkel. Armin Linnartz, Creative Commons

“Spy versus spy games are one thing, but spying on the work of a parliamentary committee of one of Washington’s closest allies is worse than stupid. It is very rude,” writes International Affairs analyst Jonathan Manthorpe, pondering the scandal which prompted Germany to ask America’s CIA’s station chief to leave. The incident stoked the “smouldering debate in Germany about the future nature of its alliance with Washington,” he warned in today’s column. An excerpt:

American spy agencies in particular seem unable to make the distinction between what they can do and what they should do or, more precisely, what they should not do. President Barrack Obama has pledged to reform the entire U.S. intelligence establishment, but going on some recent events, the agencies still seem to be operating on cruise control. They continue to gather up whatever information is obtainable without questioning the means involved or the likely value of the product. 

The current breech of fraternal relations between the U.S. and Germany is a context in point. Last year’s leak of NSA material by Snowden included information that the electronic surveillance organization had been bugging the cell phone of German Chancellor Angela Merkel.

Late last month, German outrage got another jolt when it was found that the Central Intelligence Agency (CIA) had been buying secret documents from an employee of Germany’s foreign intelligence agency, the Bundesnachrichtendienst. If that was not enough, on Wednesday, Germany’s Federal Criminal Police raided the home of a Defence Ministry employee, who is also suspected of spying for Washington. If true, this allegation is particularly heinous and embarrassing for Washington because it seems the CIA was buying copies of secret documents being prepared for a parliamentary committee investigating the implications of the Snowden revelations … read more (subscription*)

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Spy scandal confirms Germans’ growing mistrust of Washington

Jonathan Manthorpe’s columnist page is here.

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Putin vs Obama: who is in step with the times?

As the world focuses on Ukraine and the dispute between Russia and the “West,” let’s take a step back for a wider view. Democracy — as a system of representative and accountable governments, operating under the rule of law mediated by an independent judiciary – is struggling or under threat in much of the world, from former Soviet satellite states now in the European Union to the Caribbean to the countries washed by an Arab Spring that has largely failed to blossom. International affairs analyst Jonathan Manthorpe looks at the big picture. Excerpt of his new column:

One of the more unfortunate pronouncements by United States President Barack Obama in this Ukraine embroglio was that his Russian counterpart, Vladimir Putin, had put himself “on the wrong side of history.” Obama was not explicit, but his case appears to be that by intervening in the majority ethnic Russian eastern Ukraine, especially Crimea, Putin is pushing against advancing international values of respect for nation states, popular sovereignty and the rule of law. Yet as one looks around the world it seems it is Putin, far more than Obama, who is step with the times.

Log in first* to read the column, Putin more in tune with the times than Obama. Other recent Manthorpe columns on Ukraine and the state of global democracy include Beijing, not Moscow, is the home of imperialism, Europe carries blame for the Ukrainian violence, and Arab Spring still waiting to blossom.

*Jonathan Manthorpe’s columns are available with a modest subscription or a $1 site day pass to all work on Facts and Opinions. Independent, non-partisan and employee-owned, F&O performs journalism for citizens, funded entirely by readers. We do not carry advertising or solicit donations from non-journalism foundations or causes.

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Analysis: Iran and United States join forces against common foes

International affairs columnist Jonathan Manthorpe writes on the sea-change in the Middle East as Tehran and Washington find common cause and turmoil grows in Iraq and Syria. Excerpt:

As al-Qaida-linked groups hijack the anti-government insurgencies in Syria, Iraq and elsewhere, Washington is finding itself making common cause with its old enemy, Iran, and exciting the anger of its traditional ally, Saudi Arabia.

This tectonic shift in Middle Eastern alliances stems from two decisions made by the administration of President Barack Obama in the closing months of last year.

Washington is now finding itself in the previously unthinkable position of leaning more towards the Shiite factions of Islam, led by Iran, and turning away from the purist Sunni factions led by Saudi Arabia.

The first of Obama’s decisions that propelled this shift was his response after United Nations investigators claimed the forces of Syrian President Bashar Assad, an ally of Iran whose followers belong to the Shiite Alawite sect, had used chemical weapons against rebel insurgents and civilians.

Log in to read the column, Common enemies draw Washington and Tehran closer, here.*

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Default Settings: The Perils of Undischarged Public Debt

By Brian Brennan
Published October 10, 2013

On October 17, 2013, the American government could enter unchartered territory. If Congressional Democrats and Republicans cannot agree on raising the statutory borrowing limit known as the “debt ceiling,” the government could be forced to default on its financial obligations. What would that mean for the rest of the world? Nobody knows for certain. Such a crisis scenario is virtually without precedent in modern North America. Some analysts say a default could trigger a global financial heart attack similar to the one caused by the  2008 collapse of Lehman Brothers, a sprawling global bank. Others claim a default wouldn’t be that bad, because America always has enough tax money coming in to pay its debt service.

We do know from history that a government’s failure to meet its debt obligations can have ramifications well beyond the borders of the realm where the default takes place. At the very least, it means the defaulting jurisdiction is locked out of international financial markets. Argentina was shunned by capital markets for a decade after defaulting on $81.8 billon (U.S.) of sovereign debt in 2001. The western Canadian province of Alberta was an outlier for nine years after admitting its inability to redeem $3.2 million (Cdn) of maturing provincial bonds in 1936.

F&O default story photo

William (Bible Bill) Aberhart speaks at a rally before being elected as premier. Ernest Manning stands behind him, head lowered. (Photo courtesy of Brian Brennan)

Alberta, then with a population of 773,000, was the first, and to date only, Canadian jurisdiction to default on a maturing debt obligation. The ruling Social Credit provincial government had been swept into power in 1935 with a mandate to solve the economic problems of the Depression. However, the government didn’t realize until after it took office just how serious those problems were. The premier of the day, William Aberhart, put it in blunt terms when he stood up in the provincial legislature to announce the default. “We have no other alternative,” he said. “The government is broke.” Decades of financial mismanagement, excessively ambitious capital expansion projects, and rising demands for unemployment relief and other forms of public assistance following the onset of the Depression had left the province with an accumulated debt burden of $160 million (Cdn). Aberhart didn’t want to ask the federal government for help, because that would have meant surrendering autonomy, effectively forfeiting Alberta’s provincial status. Nor did he want to deal with Canada’s Toronto-based financial institutions, which could have bailed Alberta out, because he didn’t trust the chartered banking system.

As a first step toward pulling Alberta out of its financial quagmire, Aberhart announced in late 1936 that, when the province was eventually back in the black, the interest payable on provincial government bonds would be cut in half. This, needless to say, caused great consternation among the bondholders. But Aberhart stood firm. His successor as premier, Ernest Manning, would say in later years that it was simply a matter of priorities: “If it came to a choice between feeding people who were unemployed and paying 8 per cent versus 4 per cent, our choice was to pay 4 per cent on the bonds. Obviously, this antagonized every holder of an Alberta bond, and there were a lot of them.”

Alberta dismissed as a”stronghold of monetary cranks” by the Bank of Canada governor

If the bondholders had just been Alberta residents, the damage caused by the default might have been largely confined to that province. But many of the bondholders were British and American, and they wondered initially if Alberta’s problems might extend to all Canadian bond issues. They had purchased the Alberta bonds with the mistaken understanding they were a Canadian federal obligation, not a provincial responsibility, and therefore safe. Now they began to worry about the stability of other Canadian securities in their portfolios. To quell their fears, the governor of the recently established Bank of Canada, Graham Towers, moved quickly to assure bondholders in London and New York that Canada was still a safe place for them to invest. Alberta was an aberration, he said, because under Social Credit rule the province had become “one of the strongholds of monetary cranks.” This referred to the fact that the province’s principal financial advisor was an amateur economist from Stockport, Cheshire, Clifford Douglas, who had found little political support in Britain for his unorthodox monetary reform theories but was lionized in Alberta for what one commentator described as a mixture of “pre-Keynesian economics, social resentment, and untutored hope.” One of Douglas’s untested theories was predicated on his belief that an inefficient bank-controlled economy left people without enough purchasing power to avail of the goods and services produced by the free-enterprise system. It was the job of governments, therefore, to step in, smash the chartered banking system’s monopoly on credit creation, and distribute discount coupons and dividends – which he called “social credit” – to increase consumer purchasing power.

After Alberta defaulted in 1936, there was some concern the same might happen in the neighbouring western provinces of Saskatchewan and Manitoba, which were also carrying heavy debt loads. Bank of Canada Governor Towers outlined the potential ramifications in a memorandum to the federal government: “United States investors in Canadian western bonds constitute a very influential group. If a general western default makes them form an adverse opinion on Canadian securities as a whole, the situation would be extremely serious and damaging for the Dominion (of Canada).”

To avoid further defaults, the federal government pumped millions of dollars into the Saskatchewan and Manitoba economies for unemployment relief and the maintenance of interest payments on outstanding debt. The government also gave some money to Alberta, but gave it sparingly. “They didn’t want to deal with us because of the whole attitude toward the Social Credit government,” said Ernest Manning, who succeeded Aberhart as premier in 1943. “That forced us into a pay-as-you-go position until we could refinance our entire debt at lower rates of interest.”

In 1945, Manning moved resolutely to reach a settlement with the bondholders. Over the previous nine years, the province had racked up a total debt of $34 million in defaulted bond payments plus an accumulated $25 million liability for unpaid interest on those bonds. Combined with other obligations, the entire public debt now stood at $219 million – up from $160 million in 1936.

Manning knew that settling with the bondholders wouldn’t be easy. His predecessor, Aberhart, had made numerous attempts to settle during the 1930s, but the attempts always foundered because the bondholders refused to exchange their defaulted and unmatured bonds for new government securities paying much lower rates of interest. This time, Manning ramped up the pressure saying it was either lower rates or nothing. His government would no longer play the debt reduction game by the bondholders’ rules of the 1930s.

Alberta’s ultimatum to investors was, “take-it-or-leave it.” They took it, but it took a long time for Alberta to regain trust, and re-enter the investment community with its credit rating restored. 


After a series of meetings with a committee of institutional investors, Manning made what amounted to a final take-it-or-leave-it offer and threatened to put it into legislation with a deadline for acceptance if the bondholders tried to ignore it. Instead of paying off the old securities at the originally agreed interest of 8 per cent, the government would issue new 30-year bonds at the going rate of 3.5 per cent and give bondholders a cash bonus for co-operating. For the bondholders, this amounted to a Hobson’s choice. They could either accept what they saw as a minuscule rate of return on their investment or get no return at all. But Manning’s ultimatum brought them to the negotiating table, and eventually they accepted the deal. The next step for Manning’s government was to prepare a prospectus that would be accepted by the U. S. Securities Exchange Commission, and to strike agreements with the Wood Gundy investment house in Toronto and First Boston Corporation in New York City to underwrite the new bond issue of $219 million. When these were completed, Alberta re-entered the North American investment community with its credit rating restored.

Alberta never faced another default after that. Once oil and gas replaced agriculture as the principal driver of the provincial economy, it was only a matter of time before the debt accumulated during the Depression years became a forgotten chapter in Alberta history.

There’s little correlation, of course, between what happened in Alberta in 1936 and what might happen in Washington on October 17th. Alberta defaulted because the province didn’t have the money to pay its bills and didn’t want to be beholden either to bankers or to the federal government to stay afloat. If America defaults, it will be because two political parties couldn’t bridge their ideological differences.

But one thing is clear from the Alberta default, and from other defaults that have occurred around the world during the past 200 years: Whenever a jurisdiction loses its credit standing in the world’s capital markets, it takes a very long time to regain that trust.

Copyright © Brian Brennan, 2013 

Facts and Opinions feature writer Brian Brennan is the author of The Good Steward: The Ernest C. Manning Story


F&O Good Steward cover

The Good Steward, by Brian Brennan

Further reading:
The Good Steward: The Ernest C. Manning Story by Brian Brennan (Fitzhenry & Whiteside, 2008)
Politics and Public Debt: The Dominion, the Banks and Alberta’s Social Credit by Robert Laurence Ascah (University of Alberta Press, 1999)


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Take China’s threats against Taiwan seriously

This time, the world should pay attention to China’s threatening approach to Taiwan, warns Jonathan Manthorpe in his international affairs column today. An excerpt:

Xi Jinping is not the first modern Chinese leader to threaten the island nation of Taiwan with invasion if they do not soon agree to hand their sovereignty to the Beijing regime. 

Indeed, it has become a necessary ritual for Chinese leaders to establish their patriotic credentials by reiterating Beijing’s claim to own the island and its 23 million people.

Usually these pronouncements appear to be largely for domestic consumption, taking no account of the fact Taiwan has been an independent nation since 1949, and has made the difficult transition from a one-party state under martial law to a functional, boisterous democracy.

 Beijing has sometimes gone further than rhetorical bluster. In 1996 China’s People’s Liberation Army (PLA) fired unarmed missiles into the sea on the approaches to Taiwan’s main ports, as the island’s people prepared to vote in their first free and fair presidential elections.

But context is everything in such matters.

The column is available with a $1 day pass for the entire site, or by subscription.



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