Last night I had a wonderful dinner cooked by a French chef while talking with a Canadian diplomat.  The food was delicious and the coconut crepe was a fitting desert.  The French know food.  I was in Paris during the riots of 2003 and even though the subway lines were inoperable and cars were burning in the streets the French still cooked their delicious crepes.

 As with most Canadians the dinner conversation soon turned to politics but we seemed to focus mostly on the American scene which I thought was odd given what is happening up in polar bear country.  I was surprised at this diplomat's knowledgeable of economics.

During this Kondratieff Winter, a financial storm of epic proportions, so far Canada has weathered the storm fairly well.  Perhaps they broke out the parkas, retreated inside by the fireplace and decided to wait it out with some hot chocolate or wassail.  Currently political mayhem is about to break out in Canada.

The opposition is ganging up with the Quebec separatists to try and remove the elected minority conservative government.  Prime Minister Steven Harper is expected to see the suspension of the Canadian parliament to prevent this from happening.  He was re-elected a mere six weeks ago.  

The Western Standard has a video where Mr. Harper told Canadian citizens he would use 'every legal means' to block plans by the opposition to topple his government.  This toppling is expected to happen next Monday when the Liberal Opposition Party, the New Democratic Party and the new found allies Bloc Quebecois, who were bitter grassroots rivals, put a vote of no-confidence to the parliament.

As the acting head of state Governor General Michaelle Jean is the only person who can agree to Harper's plans.  Mr. Harper asserts that the move by the opposition is undemocratic.  He also raises the issue that the Quebecois separatists seek independence for Quebec from Canada as a separate country.

 But Harper's arguments will probably not prevail.  Consequently, the constitutional lawyers and politicians will most likely rule the day and are busy drafting recommendations for what Michaelle Jean should do.

Canadian politics is usually dominated by minority governments that rely on defectors from other parties.  Canada has not been ruled by a coalition government for nearly a century.  Consequently, this coalition will most likely not last very long.  Within months there will be another round of elections and the left will most likely be discredited and defeated.

While the government would most likely be fairly temporary it would still rule until 2011, have the support of Bloc Quebecois until 2010 and control 18 cabinet seats while the NDP has only 6.

Ironically, this is perhaps the best time for Harper to be kicked out.  With the deflationary credit contraction and de-leveraging of the commodities sector the Canadian economy has been particularly affected with commodities export revenues.

 The Canadian Dollar has also taken a swan (no pun intended) dive going from 1.10 to .78.  During uncertainty one action is to buy gold bullion.  Not all of the decline is related to the commodities decline though.  These consequences will hit home in the coming months as the Canadian budget is due by the conservatives on January 27, 2009.  Therefore, if Mr. Harper keeps his nerve he will most likely be back in power with greater political capital after this short break.

However, not all is well in polar bear land as their banking system is facing some strains.  While not nearly in the precarious situations American banks are in the Canadian banks do have problems.  I received this chart from one of my readers, TS, who is CEO of a publicly traded Canadian resource company.

It appears that the Bank of Canada, like the Americans, is playing a game of hide and seek with their assets.  These most likely worthless assets on the Bank of Canada's balance sheet impact the value of the Bank of Canada's chief liability:  $51B of Canadian Dollars.

 Like the Federal Reserve the Bank of Canada is juxtaposing government issued T-Bills with 'other' assets at an alarming rate.  This weakening of the Bank of Canada's balance sheet is disturbing for counter-parties of the Canadian government.  As a result, the distrust of fiat currency is increasing.

As the distrust of all fiat currency increases gold will continue to reassert itself as the currency of choice.  Fiat currencies, like the USD, CAD, EUR or GBP or perhaps a California Dollar in the future and they have trillions of dollars of promises to break.

 Gold is not subject to counter-party risk and is not a liability.  As political machinations and economic law ruins the stability of nations gold will shine brighter than ever.

GoldMoney allows gold to function as a currency in ordinary daily transactions.  Additionally, USD, CAD, EUR and GBP can be held and earn interest in customer segregated funds accounts in savings accounts with the safest banks in the world.

 GoldMoney functions as a bridge between monetary systems.  The more I learn about digital gold currencies the more I am convinced of their role as a phenomenal monetary evolution of epic historical importance.

 They will change the world forever. Sound money is an individual's essential protection against despotic inroads by government.  Digital gold currencies will act as a substitute and then replacement of the currently fundamentally broken, unethical and immoral currency system.

 Digital gold is exploding onto the world financial scene and governments are powerless to stop it.  The giant States will be shaken to their core and the world will be a freer and wealthier place.  We are etching history.