Economic – Returning To Source

The Disingenuous AI Hype

Being in the autumn of my life, I find that I cannot recall specific details like I use to. While I was pretty good at Jeopardy not so long ago, it is now largely become a spectator sport. An alert is immediately sent to my consciousness that I know the answer. But the answer just crawls along the neural networks, such that I might have to pause the game for a minute or so before the answer comes into full view. I am not taking this dying of the light kindly.

So, I will, or I used to seek a quick answer from AI to an inconsequential detail. However, I found more often than not that the answer given was wrong, at least using Microsoft’s Copilot. Sometimes, the COPILOT answer is quite absurd.

These are not the so-called “hallucinations” that one hears about. COPILOT is gleaning from documents within the Internet, some from dubious sources, some from biased sources. If one source gives a clear, even if erroneous, answer, it seems that COPILOT will select that one.

I wished to write a response to an article from Lorrie Goldstein (Toronto Sun). One of my arguments against his article is that America is not now the America that we knew in our youth. I wanted to make sure that I am on solid ground with regard to Goldstein’s age: hence, the search words ‘Lorrie Goldstein toronto sun age.’ The COPILOT response:

Lorrie Goldstein’s exact age is not publicly confirmed, but available reporting places him in the range of about 50–55 years old. This estimate comes from biographical coverage noting that he has not disclosed his precise date of birth, and no official public records list it.

What we can confirm

He has been with the Toronto Sun since 1978, working as reporter, columnist, bureau chief, city editor, senior associate editor, and comment editor.

He is currently Editor Emeritus and a long‑time political columnist.

He was inducted into the Canadian News Hall of Fame in 2019.

Goldstein is indeed Editor Emeritus at the Toronto Sun currently. Semantic reasoning intimates that he is at least 65 years old. Secondly, if Goldstein has been with the Toronto Sun since 1978 and he is, at most, 55 years old, he must have begun employment at the Sun at the age 7 or 8. The type of semantic reasoning, which would disabuse such ridiculous responses, is not built into the COPILOT model.

I also asked Google’s AI, which placed Goldstein’s age at 72, as well as that of Brave (“Lorrie Goldstein is approximately 73 years old (born circa 1952).” On the first page of the web search, I found this statement from the National Post, dated Nov 20, 2019: “Blatchford, 68, was inducted along with Postmedia journalist Lorrie Goldstein, 66, who has been a fixture at the Toronto Sun since 1978.” On the first page of a Google web search, I also found a Google Docs, placing his date of birth as 1952, making Goldstein 73 or 74 years of age, probably the former. However, COPILOT derived its info from the firm statement of a journalist nobody, without checking that error against any semantic logic. The search engines proved sufficient, even better.

Earlier this week I asked COPILOT, ‘US Economic Growth in 1987’ and ‘US Economic Growth in 1988,’ this in preparation to a response to some CNN shill claiming that the equity markets are fairly good predictors of future events. One of my best investment decisions was to go all in with my very, very little pot of gold on the day after the Bloody Monday crash of 1987. For unlike the 1929 crash, wherein a manufacturing recession was apparent by June 1929, the general economy was going gangbusters in early 1987.

For the year 1988, the hallucinated response was:

Do the same search today, and COPILOT spits out 2.8%, although citing the same Federal Reserve Bank of St. Louis source. Do the same search today and add an “in” between “growth” and “1988” in the query, and COPILOT spits out 3.0%, citing two sources. The other source better pattern matched the query apparently.

Syntax Versus Semantics

Using Large Language Models (LLMs), Generative AI operates at the syntactical level of “understanding,” which is no understanding at all. In Minds, Brains, and Programs (1980), John Searle posed a thought experiment, now named the Chinese Room argument, to demonstrate that gleaning from language symbols (syntax) is insufficient for genuine understanding (semantics).

In the Chinese Room thought experiment, there are two rooms, separated by a door with a small gap between the door and the floor. Messages in Chinese symbols are passed back and forth through this slit. A person in one room, who does not understand Chinese, is given a very large rule book on how to respond to any set of Chinese symbols. That person is able to produce a correct, or at least an internally coherent, response to any Chinese query from the other side, such that the other person thinks he/she is communicating with a Chinese literate person. However, that other person has no idea what he/she is communicating in return.

This is more or less what LLM models do, namely pattern match. In COPILOT’s model, because a journalistic nobody gave an answer in a form which best pattern matched the question, his erroneous answer won the day. LLM models, which depend on syntax alone, make too great an assumption that everything on the Internet is accurate.

If AI cannot perform small tasks reliably, it is far from the big time.

Frasier Institute and Biased Analysis

There presently exists a defining political disagreement in Canada between those who ache to retain Continentalism at all costs (re: Poilievre’s Conservatives) and those who perceive an irreparable and enduring rupture in trade relations between Canada and the USA (re: Carney’s Liberals). It makes for a more engaging politics than the typical pedestrian muddle.

In response to this ruptured understanding, Carney proposed to restructure the economy in October 2025, such that annual trade and services exports to non-American destinations would increase by $300B in ten years, nominally doubling from the current amount. Conservative pundits, relying upon a recent Fraser Report, itself a financially conservative and pro-American think tank, think “Mark Carney’s non-U.S. exports target far-fetched.”

Doubling non-US exports in ten years might seem like a pipedream if one does not consider compound interest. This target is merely 7.2% annual growth nominally. After accounting for 2% inflation, based upon government and central banker targets, this is merely a 5.1% increase annually.

The Fraser Report notes (p.2), “Canada’s merchandise exports to the United States jumped from $108 billion in 1988 to $206 billion by 1995, almost doubling (in nominal dollar terms) within the span of seven years.” The services component of Canadian exports more than doubled between 2014 and 2024 (March 2014: $9.235B; March 2024: $20.587).

Hence, I hardly think that this target is improbable and merely aspirational. Indeed, I suspect that Carney may have understated the likelihood. But let history be the true judge of such punditry, and let us then stone false prophets (LOL).

The Fraser Institute Fallacy

The Fraser Report’s claims are largely based upon the fallacy of what has been shall ever continue to be, facilitated by geographical proximity which reduce transportation costs, common language, and similar legal standards and business practices (p.3).

On the basis of trade patterns between 1999 and 2024, the Report found that “the total share of goods exported to the U.S. from Canada decreased only modestly, from 86.7% in 1999 to 76.3% in 2024.” This does not include services, in which presently the US share is only 50.2% ($109.3B out of $217.8B). In 2023, the US share was 53.2%, slightly higher in the years prior.

The Fraser Report does not “identify and evaluate policy measures that might reduce Canada’s high degree of trade dependence on the United States, particularly as an export market” (p.1). Considering that on both sides of the border, policy measures have already been and likely will continue to be instituted, which will reduce Canadian exports to the US, it makes the value of this Report dubious, at best.

For already, the US share of total merchandise exports has declined from 79.5% (Feb 2025), when Trump began his tariff campaign, to 66.4% in February 2024, this before the Iran War. (The higher than normal February 2025 share was extra loaded in anticipation of the coming tariff regime.) In this time, however, total merchandise exports to other non-American destinations increased from $14.3B (Feb 2025) to $22.3B (Feb 2026) on a monthly basis, a 50+ percent increase, consistent with a growing pattern in the last year. This growth, it must be admitted, is but low hanging fruit of any diversification efforts.

The Fraser Report and conservative pundits point out that Canadian governments have made periodic feints to diversify our trade patterns for 50 years (i.e. Trudeau Sr., Chretien) without much avail. But these seemed half hearted attempts to me at the time, especially compared to what Carney has achieved in this last year.

A smoker may know that his/her habit is detrimental to health and life all throughout life and make periodic feints to quit. But only when an X-Ray comes back, showing a tumor, might that smoker have serious resolve to quit. The peril of having over 20% of Canadian GDP dependent upon US exports has long been well known. But the Americans, until the last decade or two, operated upon a “first among equals” geopolitical principle. All allies benefit, even if America benefitted most by its rules-based liberal order. Consequently, allies became all too comfortable under their prosperous semi-vassalage to the U.S.

But when a geopolitical superpower feels its real loss of relative power and influence, it becomes less magnanimous, moving away from enlightened to unenlightened self interest, becoming self-serving and self-aggrandizing, duplicitous, even evil. Our own short Canadian history is witness to this dynamic of decadence with regard to the British Empire, the first to introduce concentration camps in the Boer War, making false promises to both Jews and Arabs during WW1, while conspiring to carve up the Middle East with France. Canadian and ANZAC abhorrence at the way the British conducted WW1, to which our semi-vassal states were subject, instigated further autonomy away from the UK (i.e. The Statute of Westminster, 1931).

Inadvertent Advantages of Still Being Hewers of Wood

Another analyst at the Fraser Institute, an American who works for the American right-wing think tank, Cato Institute, bemoans the natural cause-and-effect consequence of Trump’s tariff regime to American fortunes.

Yet the 50 per cent tariff and removal of the Canadian exemption in 2025 pushed major Canadian producers to divert exports to Europe. Aluminerie Alouette, North America’s largest smelter, shifted its European sales from 4 per cent to 57 per cent of production in a matter of months. Rio Tinto stopped selling in the U.S., and even Alcoa reduced cross-border shipments. The troubling consequence of this shift was increased U.S. reliance on Middle Eastern suppliers—the UAE and Bahrain together accounted for nearly one-quarter of U.S. unwrought aluminum imports—but these sources have now been disrupted because of the Iran conflict. With global demand for non-Gulf aluminum sky-high and Canadian smelters operating at full utilization, there’s little chance producers in Canada will redirect back to U.S. buyers in the near term.

Relevant to Canadian concerns, be damned American self-interest, the remarkable thing is how quickly Canadian aluminum companies, even one owned by Americans, could switch clients so quickly. Considering how wildly variable, US trade policies presently are and will continue to be for at least another 30 months, even this American understands that Canadian producers will not be soon returning to the US.

The advantage of still being a resource economy, at least from the perspective of exports, is that the market is global. If global supply and demand are in rough equilibrium, then the actions of one self-serving actor merely shifts trading patterns. This is not so true with other trade goods and services.

Commodities and refined commodities constitute about 40% of all Canadian merchandise exports. Build a few pipelines, even Canada’s greatest export type can be diverted from the US to new customers. Europeans are most willing to replace unstable Persian Gulf sources, for instance, with more secure and stabler Canadian sources, especially if it becomes coupled with defense contracts that replace American military contractors. Everybody wins but the Americans who are not at the table.

Conservatives in the Wilderness

Poilievre’s Conservatives would probably be competent managers of the nation in the style of Stephen Harper, certainly heads and shoulders above the inconsequential fop, Justin Trudeau. However, in the depths of their heart, Continentalist Conservatives still perceive that America is now what it was 50 years ago. Canadians could then go to Washington, placate American concerns, plea for amendments or exemptions, which it more or less acquired.

This is certainly not true of Trump’s America, which weaponizes its sizeable power and leverage, extorts its trading partners while deploying the lamest of pretenses, and openly humiliates those trading partners which they have just extorted. I do not believe, going forward, that American hubris will differ in kind after Trump, just in degree. America is not now the America that we knew in our youth.

Canadians, it seems, have no appetite for a semi-vassalage that is openly exploitative. They just might be willing to suffer a period of sacrifice while the nation undergoes necessary restructuring of its economic, military, diplomatic, and foreign policy to meet new realities.

This might also be Canada’s maîtres chez nous moment. Canada might have weaned off mother Britain after the First World War. But it seems that Canada merely began to suckle at the breast of America instead. Those breasts are drying up. There just might be a youthful appetite in this country to finally strike it on our own, to get out from under the shadow of the American Woman.

Poilievre and the whole conservative movement is behind the curve on this political development against one who is a conviction politician, a most unusual anomaly within a party whose only conviction has hitherto been to govern for its own sake.

They are losing my family of cultural, yet politically moderate, conservatives. They are losing me, who has never before voted left of center. For Carney’s Liberals are doing the very thing I proposed back in 2017, having been fully aware of the American zeitgeist at that time.

Roughly seventy-five percent of our exports go to the United States, constituting almost thirty percent of our economy. If there be economic disruption, whether because of social/civic or economic causes, those exports, just like happened in the aftermath of the 2008/9 Great Recession (re: a 25% decline), will be inordinately affected. Should not the diversification of our trade become first and overriding priority, especially with an American administration devoted to a Realpolitik bullying of other nations into a regime of permanent economic advantage for the United States? (Even apart from the present politicos, the existential economic sclerosis in the United States will incline them to increasing self-serving and myopic trade policy).

Pipelines, both east and west, must be approved; not because there are not environmental dangers and detriments to carbon-based energy; but because the welfare of the nation is dependent upon more than just one aspect of life. Oil and natural gas should be used as a trade lever (through long-term guaranteed supply) to open up foreign markets which are effectively closed through tariff and non-tariff barriers. An activist inculcation of extensive balanced trade deals with other nations of similar economic status should be pursued.

The goal should be the reduction of our exports to the United States to considerably less than 50% of total exports, not only for economic reasons of safety, but to reduce any threat to political autonomy by a more bullying American foreign and trade posture. There will be disruption. There will likely be economic loss, at least in the interim. However, such is the need for inoculation to make us less vulnerable to the most likely outbreak of American disease.

While we are thinking of the unthinkable; because America is showing itself to be a less reliable defense partner, and because conflict in the United States may induce military incursions into our country, we may need to acquire our own weapons of mass deterrence.

When the First Premise Is Meretricious

One of a league of failures in the discipline of contemporary economics is the failure to adjust true GDP of any nation by rationalizing the effects of fiscal deficits and lascivious monetary policy (or vice versa).

In an otherwise reasonable op-ed in the Financial Post regarding the current K-shaped economy, especially in the United States, an economist at some local credit union in Alberta, begins the statement, “the U.S. economy has been growing strongly since the pandemic, outpacing most developed economies.”

Certainly, at an apparent level, GDP in the U.S., as measured by aggregate demand, (not production), has outperformed most others. However, this is partly achieved by spiking fiscal deficits, and hence additional demand, to percentage levels which match the Great Depression. The deliberate purpose in the Great Depression was as means to spike aggregate demand (and break the viscious debt-deflationary cycle of the early 1930s). In this it largely succeeded, albeit at a cost. There is always a cost. So why would this not be the rationale and consequence now?

This is by no means an easy calculation, especially since the multiplier effect of such stimuli can be all over the map. Neverthless, in that the U.S. has been systemically priming their economy, far above the economies of their peers, it puts lie to the visage of relative economic outperformance.

A Major Cause of Economic Disparity and Class Schism

Moreover, the development of this so-called K-economy is many decades old. While caused by the ever increasing power and leverage that corporatists have, relative to labor, this increasing economic disparity has been abetted, perhaps deliberately so, by government and central banker policies of extreme fiscal deficits and loose money respectively.

Logically, such policies are inflationary by nature. However, in light of the economic leverage that corporatists have had over labor, wage rates have remained repressed. Global competition kept prices down, at least until COVID-19.

Nevertheless, that added inflationary air must go somewhere, which it did, namely into assets. Indeed, assuming that governments and central bankers would continue the madness of their loose policies, I anticipated back in 2011/2 (and told private individuals) that this very thing would produce a mother-of-all-asset bubbles.

My great irritation back in 2011/2 is that this lasciviousness would logically enrich the older generations at the expense of my children’s and grandchildren’s generations. Hence, while the present income of my youngest son and wife is equivalent in real terms to that of myself and wife back in 1991, the ability to purchase a home, the so-called North American Dream, is so beyond reasonable possibility that my son has lost even the aspiration and ambition to own one.

A one-bedroom apartment (low rise) set me back $140/month back in 1975. My weekly income was $140/week. The rent to income ratio was 23%. The ratio between that very same apartment, fifty years later, and the same job, albeit with better qualifications, is twice that now. Rentiers, not producers, are the chief beneficiaries of the present economy.

Whether deliberate or not, my father’s and my own generation have engaged in many facets of intergenerational theft. The scornful return, “OK Boomer,” is not without merit.

The Precious Metal Market Crash of January 2026

For it was the WGC report on Thursday, not Trump’s choice of Fed Chairman on Friday which provoked the crash in gold (8.5%) and silver market (25.5%) markets.

By the 19^th century, a “Common Sense” movement had arisen in America, wherein practical reason and everyday common sense sufficed to understand the world. Whatever its merits, common sense is certainly in short supply in the markets nowadays. A quip by a corporate or civic authority or a market “expert,” and “investors” are off to the races and on rarer occasions, heading for the exits.

The precious metal market has defied common sense for many months. Beyond fundamentals, this market, especially silver, has behaved in the classic pattern of a manic market top. Silver prices increased, usually on the upside, by two to three percent daily in the last months of 2025 and even greater in the last month. For this reason, the CME thrice raised its margin requirements in the last month. Moreover, the closing daily price of silver rose from around $70 USD per ounce in the beginning of January to $115 USD just two days ago.

Grady, you don’t have special powers. You don’t have the ability to look at a guy and “just know” because you’re a scout with special powers. I’ve watched you sit at kitchen tables for years and tell the parents of a 17 year old kid, “Trust me, when I know, I know, and when it comes to your son, I know” and you don’t.

– Moneyball (2011)

Scornful mirth arises when, on the eve of a crash, “experts” at big financial institutions, such as the Bank of Montreal or the Bank of America or Joseph Cavatoni, senior market strategist at the World Gold Council (WGC), promise the sky’s the limit. Not all institutional and self-anointed experts engage in shill boosterism.

It is especially irksome when the representative from the WGC promotes these claims on the very day that his organization publishes its annual year-end Gold Demand Trends report. For it was the WGC report on Thursday, not Trump’s choice of Fed Chairman on Friday which provoked the crash in gold (8.5%) and silver market (25.5%) markets. These were down as much as 12% and 33% respectively.

However, it was on Thursday morning, when the WGC released its report, that the gold and silver market fever broke. At 1:00 am (EST), when Reuters reported on the WGC release, February gold futures were over $5,600/oz. By 10:40 am, futures had plummeted to $5,100, a drop of 9%, before the ‘buy the dip’ momentum crowd restored the price to just shy of $5,500 by 7:40 pm. The price thereafter dropped to $4,700 by 1:30 pm on the following day before recovering to $4,909/oz.

The Pin Prick Trigger

The WGC report revealed that gold demand plummeted for end users, for jewelry by 19% year-over-year, and central bank and institutional accumulation by 37%. The slack was taken up by “investors,” who nearly doubled their purchases.

We in the GTA area observed this pattern recently in the Toronto condo market. During the FOMO mania, sales of condos, many on spec, climbed through the roof. Many condos were mere shoeboxes, perhaps livable as university residences, more useful as high-priced hookers’ lairs. Investors were pumping up condo prices among themselves, hoping to sell before they had to take possession. Inevitably, Wiley E. Coyote eventually found no terra firma under its feet.

If the real gold market was finding far fewer end users, this would be more so for the real silver market. Even the mid-year Interim Market Review by the Silver Institute had predicted that industrial use of silver in 2025 likely declined by 4% from 2024, 3.5% below earlier estimates that year. Decline was partly due to technological proficiencies (re: “progressive thrifting,” some substitution with copper). Another report expects “silver jewelry and silverware demand to decline by 4% and 11%, respectively.” But these prognostications were prior to recent price spikes in silver.

Economics 101 insists upon an inverse relationship between price and demand. While the silver market was entering its sixth year of supply deficit, extraordinary price spikes have an irritating habit of briskly reversing that trend as in the early 1980s.

Moreover, the gold to silver price ratio had declined from 104x (April 2025) to 46x on Thursday. The recent historical average is 68x. Just as excessively high ratios suggest a faster runup in silver prices in 2025, a corresponding excessive low ratio suggest a much greater reversal for silver in 2026.

A Little Gully

The shills are already out in force suggesting that yesterday’s crash was merely a typical and much needed correction. Something structural has changed according to them. (“And once something is anchored, the discussion changes.”) It is different this time.

“Buy the dip” momentum speculators will likely see this crash as opportunity, as their “ancestors” so thought in early 1930. A day trader might be wise to anticipate extreme volatility in the days to come, rather than heavily shorting the price of silver. There shall be many margin calls. With present margin requirements at 9%, many dealers will be hurt and demand higher margin rates going forward. This may instigate further prices declines.

Nevertheless, silver prices shall eventually decline to market equilibrium, if not below. If demand for gold by central bankers, financial institutions, and end users was precipitously dropping when the price of gold was $4,135/oz, how much more so when the price is $4,900/oz? If the price for silver has tripled in under one year, how sustainable is end-user demand?

Despite claims by shills, silver is not legal tender. It is not a currency and cannot be so if daily prices rise and fall by several percentage. The same is true of crypto currencies. The whole telos of currency is to provide financial and economic stability. If the complaint against 1970s style inflation was unpredictability, leading to less business investment, how much more so for a wildly fluctuating “currency?”

With supply deficit constraints, silver cannot be accumulated in bulk as a reserve. If countries are now accumulating silver, it is for the critical purpose of secure industrial supply. While there is a long-term business case for increased demand for silver, much higher prices incentivize technological proficiencies and open mothballed silver mines. There are reasonable economic limits to the price of silver. Anything above that limit is a plaything for the rentiers at the expense of the producers.