BMO Financial Center at Market Square in Milwaukee, Wisconsin. Donald Trump has said he wants to use "economic force" against Canada. In my previous post, I worried that one way this force could be wielded was through Canada's dangerous dependence on U.S.-controlled MasterCard and Visa. But there's an even bigger risk. Canadian banks with large U.S. operations may have become unwitting financial hostages in Trump's 51st state strategy. As recently as a few months ago, back when things still seemed normal, it was widely accepted that big Canadian banks needed a U.S. expansion strategy. If one of our Big-6 banks wasn't building its U.S. banking footprint, its stock outlook suffered. Canada is a mature, low-growth banking market, after all, whereas the U.S. market remains fragmented and ripe for consolidation. This motivated a steady Canadian trek into U.S. branch banking. BMO entered the U.S. in the 1980s and steadily expanded, most recently acquiring Bank of the West in 2023, making it the 13th-largest U.S. bank. TD Bank entered in the early 2000s and has since climbed to 10th place. Given this trajectory, by 2030 or 2035, one of the U.S.’s five largest banks could very well have been Canadian. This strategy hasn’t been without flaws. Royal Bank's first U.S. retail banking foray, its acquisition of Centura, eventually failed, though its second attempt has been more successful. TD just paid the largest anti-money-laundering fine in U.S. history. But overall, the move south has been profitable for Canadian banks and their shareholders, who constitute a large chunk of the Canadian population. The U.S. has benefited, too. Canadians have historically been decent bankers, having got through the 2008 credit crisis unscathed. Allowing a bigger slice of the American market to fall under the prudential management of Canadian executives probably isn't a bad thing, TD's money laundering gaff notwithstanding. But in just a few months, Trump has upended this entire calculus. Canada is now a U.S. enemy, or at least no longer a friend. We are somewhere on Trump's timeline to becoming the 51st state, against our wishes. Our existing border treaties are no longer valid, says the President, and need to be redrawn. Trump has threatened to use "economic force" as his weapon to achieve this. The attacks have already begun, beginning with tariffs to soften us up for final annexation. Next up? My worry is that Canada's banking industry may become a second front in this war, and the hint is a stream of strange pronouncements from Trump and his surrogates about Canadian banking. According to Trump, the Canadian banking system is stacked against U.S. banks: "Canada doesn’t allow American Banks to do business in Canada, but their banks flood the American Market. Oh, that seems fair to me, doesn’t it?" This grievance is false, as I explained last month, but accuracy probably isn't the point. A charitable reading is that Trump is laying the groundwork for U.S. banks to gain more access to Canada’s banking sector—a manageable concern. My worry is that it's the reverse. His complaints may signal a shift in how Canadian banks operating in the U.S. are to be treated. Trump may have teed up a financial version of the Gulf of Tonkin incident; an imaginary affront that can serve as a pretext for justifying aggressive action against Canadian banks' U.S. subsidiaries. After years of U.S. expansion, Canada’s largest banks now have relatively large American retail banking footprints, making them tempting financial hostages. Both TD Bank and Bank of Montreal now have more branches in the U.S. than in Canada. Nearly half of BMO's revenue (44%) come from south of the border while in TD's case it's 38%. Royal Bank also has deep ties. According to a recent Bank of Canada paper, half of the Big 6 Canadian banks' assets are now foreign, far more than the roughly 40% or so in 2014, with much of that chunk being American assets. Is TD just another bank doing business in Florida, or a financial hostage? By damaging their large U.S. subsidiaries, Trump would directly weaken the Canadian parent companies, potentially causing havoc with the overall Canadian banking system. And a weakened financial sector plays right into Trump’s stated goal of economically undermining Canada in order to annex it. How can Trump hurt Canadian banks' U.S. subsidiaries? Trump and his allies control much of the U.S. financial regulatory apparatus, and he has shown little regard for legal constraints. To begin with, he could set the FBI and Department of Justice on Canadian banks, increasing scrutiny of TD, BMO, and Royal Bank’s U.S. operations under the guise of enforcing anti-money-laundering laws. More surveillance would inevitably lead to a wave of fines. To avoid punishment, a Canadian bank operating stateside will have to spend much more on anti-money laundering measures than an equivalent U.S. bank. Another tactic could be limiting access to shared financial infrastructure, such as government liquidity programs or bank deposit insurance. Trump could also try to increase the hoops that TD, BMO, and RBC must leap through to maintain their all-important accounts at the Federal Reserve, which provides access to Fedwire, the U.S.'s crucial large-value payments system. Trump’s regulators could also impose higher capital requirements on Canadian banks compared to their U.S. peers, forcing the parents to divert ever more resources to their U.S. subsidiaries. If Canadian banks are squeezed hard enough, they may eventually be forced to sell their U.S. operations at distressed prices. Trump could worsen this situation by imposing punitive exit fees, ensuring that Canadian banks take even bigger losses on the sale of their U.S. subsidiaries. The impairments caused to the parents' bank balance sheets would weaken the Canadian banking system and might even force the Federal government to step in with financial aid. Meanwhile, the discounted assets of Canadian banks could be handed over to Trump’s preferred U.S. banking CEOs. Trump, after all, seems to be on course to building a kleptocracy, and key to that is the leader's ability to generate a series of gifts (i.e. acquisition approvals) that can be bestowed on business leaders who have demonstrated their obeisance. To limit the damage, Canada may need to act quickly. The first step is freezing any further U.S. investment by BMO and the others. If Canadian banks are already financial hostages, deepening their exposure would be reckless. Bank executives may very well have already halted their U.S. growth plans of their own accord, but if not, high-level discussions with Canadian officials should drive home the urgency of the situation. Instead of doubling down on the U.S., Canadian banks should pivot toward growth opportunities in Europe, the U.K., Australia, Latin America, and Asia. Our banks have histories dealing with these geographies. Bank of Nova Scotia, for instance, is one of the leading banks in the Caribbean and Central America. Finally, there’s also a case to be made for a preemptive retreat. Bank of Montreal, Royal Bank, and TD Bank could start selling off their U.S. operations today before things escalate. It's a terribly difficult step to take; Canadian banks have spent decades painstakingly building their U.S. franchises. But by exiting now, they could secure better prices and avoid becoming tools for harming Canada down the road. What was once a symbol of Canadian financial success—our banks’ expansion into what used to be a friendly U.S.—has become a national security risk. Hoping Trump forgets his fixation on the Canadian banking system and his dream of annexing us is not a strategy. There’s a high chance he won’t, and Canada must prepare accordingly.

We're all busy doing our best to boycott U.S. products. I can't buy Special K cereal anymore, because it's made in the U.S. by Kellogg's. But I'm still buying Shreddies, which is made in Niagara Falls, Ontario. Even that's a grey area, since Shreddies is owned by Post, a big American company. Should I be boycotting it? Probably. However, the disturbing thing is that I'm paying for my carefully-curated basket of Canadian groceries with my MasterCard. If we really want to avoid U.S. products, we can't just vet the things we are buying. We also need to be careful about how we are doing our buying. Our Canadian credit cards are basically made-in-U.S. goods. They rely on the U.S-based Visa or MasterCard networks for processing. Each credit card transaction you make generates a few cents in revenue for these two American mega-corporations. It doesn't sound like much, but when multiplied by millions of Canadians using their cards every day, it adds up. Vigilant Canadians shouldn't be using them. Canadians who want to boycott American card networks have two options. Go back to paying with cash, which is 100% Canadian. Or transact with your debit card. Debit card transactions are routed via the made-in-Canada Interac debit network.* We're lucky to have a domestic debit card option. Our European friends are in a worse position, since many European countries (Poland, Sweden, the Netherlands, Finland, and Austria) are entirely reliant on MasterCard and Visa for both debit and credit card transactions.  Unfortunately, going back to debit cards means doing without all of the consumer protection that credit cards offer in an online environment. Worse, you're giving up your credit card rewards or cash back. If you don't pay with your 2% cash back credit card, for instance, and use your debit card instead, which doesn't offer a reward, you're effectively losing out on $2 for every $100 you spend. This should illustrate to you, I hope, the golden shackles imposed on us by our U.S.-based credit cards. It's fairly easy to replace your American-grown tomatoes with Mexican ones or your U.S.-made car with a Japanese car. But networks, which tend towards monopolization, are not so easy to bypass. Which gets us into the meatier issue of national sovereignty. The difficulty we all face boycotting the MasterCard and Visa networks reveals how Canada has let itself become over-reliant on these critical pieces of U.S financial infrastructure. My fear is that our neighbour's political leadership is only going to fall further into authoritarianism and belligerence, eventually making a play to slowly annex Canada—not by invasion, but by "Canshluss". If so, this will involve using our dependencies on U.S. systems, including the card networks, to extract concessions from us. "Canada, if you don't do x for me," says Trump in 2026, "we're TURNING OFF all your credit cards!"  In anticipation, we need to remove this particular financial dependency, quick. We're already safe when it comes to debit cards; we've got Interac. But we need the same independence for our credit cards. More specifically, we need to pursue an end-goal in which all Canadian credit cards are "co-badged". That means our credit cards would be able to use both the Visa/Mastercard card networks and Interac (or, if Interac can't be repurposed for credit cards, some other yet-to-be-built domestic credit card network). With co-badging, if your credit card payment can't be executed by Visa because of a Trump freeze order, at least the Canadian network will still process it. This is how the French card system works. While much of Europe suffers from a massive dependency on MasterCard and Visa, France is unique in having built a 100% French card solution. The local Carte Bancaire (CB) network can process both French debit card transactions, like Interac can, but goes one step further by also handling French credit card purchases. Before paying for their groceries with a card, French card holders get to choose which network to use, the local one or the international one. THIS IS WHAT CANADA NEEDS: This French credit card, issued by Credite Agricole, is co-badged with the domestic Carte Bancaire (CB) network and the international MasterCard network. When incidents occur on one route (CB, for instance), traffic is automatically routed to the back-up route, MasterCard, and vice versa. I think that a Canadian solution to the Trump problem would look something like this French CB card. The incoming Carney government should move to co-sponsor a CB-style domestic credit card network along with the big banks (perhaps a simple upgrade to Interac will do?). All Canadian financial institutions that issue credit cards would be required to co-badge them so that Canadians can connect to this new network as well as Visa or MasterCard. Even if annexation never actually occurs, at least we've got a more robust card system in place to deal with outages arising from hacking or natural disasters. Along with France, we can take inspiration from India, which introduced their Visa/MasterCard alternative, Rupay, in 2012. Thirteen years later, RuPay is now a genuine competitor with the American card networks. I can't believe I'm saying this, but we can also use Russia as a model, which was entirely dependent on Visa and MasterCard for card payments until it deployed its Mir card network in 2016—in the nick of time before Visa and MasterCard cut ties in 2022. Europe will have to push harder, too. The EU has been trying to rid itself of its Visa and MasterCard addiction for over a decade now, without much luck. Its first attempt, the Euro Alliance of Payment Schemes, was abandoned in 2013.  (In fact, one of the reasons the European Central Bank is exploring its own digital currency is to provide an alternative to the American card networks.) As Canada builds out its own domestic credit card workaround, we can learn from the European mistakes. The U.S. is no longer a clear friend. Boycotting U.S. products is one thing. But if we truly want to reduce the external threat, we need to build our own card infrastructure—before it's too late. * In-person debit payments are processed by the Interac network. However, online debit card transactions default to the Visa or MasterCard networks. While Interac does allow for online purchases, many retailers don't offer the option, and when they do, the checkout process requires the user to log into their online banking, which is more of a hassle than using a card.

I have no idea if memecoins like dogecoin and fartcoin should be legally defined as securities, and thus come under the purview of securities regulators like the Securities Exchange Commission (SEC). Securities law is confusing. But what I do know is that the SEC's latest notion that memecoins are simply "collectibles" that people buy for "entertainment, social interaction, and cultural purposes" is naive, even dangerous. Here is the SEC's statement: Source: SEC The SEC's wording is dangerous because it effectively whitewashes memecoins into the same relatively benign social-economic bucket as baseball cards, postage stamps, and Roman coinage. Memecoins don't belong there. Dogecoin and its ilk are not collectibles—they belong to the same bin (a much more dangerous bin!) as HYIPs, chain letters, ponzis, bubbles, MLMs, memestocks, lotteries, pump and dumps, and casino games.  I don't think I'm alone in saying that I'd be okay if my 11-year old kid wanted to carefully build a collection of culturally-significant items they could fuss over after school. Comic books? Pokemon cards? Fossils? Sure, that's all good. But I'd be appalled if they went to a casino to play slots or threw away their allowance for HYIPs and MLMs. By characterizing memecoins as mere collectibles, and not as the gambling/ponzis devices they actually are, the SEC is anointing them as suitable for everyone, including our kids. It's gross that any government agency would do this. To me the differences between memecoins and collectibles are obvious, but for those still reading, including anyone at the SEC, here's my logic: Almost no one buys memecoins with the same earnest obsessiveness as a collector. Spend any amount of time in ancient coin collecting forums and you'll see what a true collecting mentality looks like, the immense amounts of sifting, classification, and curation that it entails, and the knowledge of cultural minutiae: "Why is Constantine I facing left on this coin, but facing forward on in this one?" By contrast, dogwifhat, SPX6900, $Trump, Pepe, Shiba Inu and other memecoins don't toggle the same grading and taxonomizing parts of our brains, nor do they invoke our instincts to build complete sets of culturally meaningful items. It's just frenetic buying, selling and number-go-up. And that's because ancient Roman coins and memecoins are fundamentally different economic goods. Memecoins are for the most part pure financial gambles with a facade of culture. Roman coins are cultural objects to the core, with a touch of financialization. As its justification for classifying memecoins as collectibles, the SEC relies on the fact that memecoins are "inspired by internet memes, characters, current events, or trends." Think Dogecoin's shiba inu theme, or fartcoin's fart meme. This somehow uplifts them into having the status of cultural artifacts. This is silly. If you read about the history of chain letters, for instance, you'll see that their originators often linked their letters to some sort of theme or meme. Even so, we would never say that chain letters are collectors items. Las Vegas slot machines often have themes (i.e. fruit, El Dorado City of Gold, or ancient Egypt), but let's not fool ourselves: having a theme doesn't transform a slot machine into something other than a slot machine. No, memecoin buyers—like chain letter participants and slot machine players—want to make money, quickly. Plain and simple. That a get-rich-scheme adopts a meme doesn't redeem or transform that scheme into a collectible. The meme is a mere superficiality that serves to differentiate one gambling machine from another. It's not something that most buyers actually believe in. I get that the line between collectibles and speculation isn't always clear—sometimes an item can be both. I lived through the early 1990s comic book collecting boom, and I can tell you that things got a little ponzi-ish. When 14-year old me bought all five covers of X-Men #1, I was only 50% motivated by a collector's maniacal desire to complete a set, the other 50% being a gamble on price. However, at the end of the day policy requires us to draw lines and make categories. For the most part, comic books have functioned as collectibles, not gambling, and deserve to be classified as such, and thus regulated as such. As for memecoins, while there are probably a few people who diligently collect sets of memecoins, for the most part they are all gambling and ponzi-ishness. And that's how they should be treated by policy makers—not as mere postage stamps.   I'm not saying the SEC should be in charge of overseeing memecoins. If the SEC wants to wipe its hands clean of memecoins, that's fine, I guess. Some other agency will have to take charge. But why is the SEC whitewashing memecoins as it is exiting the building? By using its platform to advertise memecoins as mere collectibles, the SEC just made them seem harmless. That's reckless.

Donald Trump has ordered the U.S. Mint to stop producing the penny because it is unprofitable, costing 3.69 cents to produce each one. In response, the lobbyists that earn big profits from the ongoing existence of the penny have come out in full force with dubious arguments for why the penny is still vital. Their newest bit of disinformation is that removing the penny will increase reliance on the nickel, which costs 13.74 cents to produce, thus putting the U.S. public in a worse position than before. This shift-to-nickels claim is wrong, but all sorts of media sources [CNN | Bloomberg | ABC News | TIME ] are repeating it without challenging it. While it's true that the nickel is unprofitable to produce, usage of the nickel will *not* increase when the penny is removed. I'm going to show why shortly, but first a quick comment on the general idea of ending the penny. For long-time penny critics like myself, Trump's idea is tragically undeveloped, even clumsy. All serious minds agree that the U.S. penny is pure monetary pollution and needs to be abolished. It's too small to be meaningful, yet society is forced to continue counting in pennies because the political mechanism for improving America's coinage system is broken, having been captured by the coin lobbyists and conspiracy theorists. (I wrote about the coin lobby in Pennies as state failure.) However, to liberate society from the hassles of the penny the U.S. government can't just stop minting it, as Trump seems to think, because this doesn't prevent the existing stock of pennies that has accumulated over the last century or two from continuing to pollute Americans' economic lives. To solve this, the government must establish a rounding rule for individuals and retail establishments. When paying for goods at the checkout counter, all amounts owed must be rounded to the nearest five cents in order to prevent already-existing pennies from infiltrating day-to-day shopping experiences.  What would this rounding rule look like? Say that your grocery bill comes out to $10.87. You pay the cashier $11 in cash. Instead of getting 13 cents change (a dime and three pennies) your bill would now be rounded down to $10.85, and you'd get a 15 cents in change instead—a nickel and a dime. If your bill came to $10.88, it would be rounded up to $10.90, and you'd get 10 cents change instead of 12 cents. Voila, the penny-infiltration problem is solved. No annoying one-cent pieces required in day-to-day economic life. Now that we've got rounding out of the way, we can tackle the big penny-to-nickel lie that the coin lobbyists are circulating. Mark Weller, director for the lobby group Americans for Common Cents, was quoted in CNN last week: "Without the penny, the volume of nickels in circulation would have to rise to fill the gap in small-value transactions. Far from saving money, eliminating the penny shifts and amplifies the financial burden." Weller goes on to caution that the U.S. Mint may be forced to make in the range of 2–2.5 billion nickels a year if it stops producing pennies permanently, far higher than its normal run-rate of 1.0–1.6 billion over the past decade. The implicit threat here is that it's better for America to have their throats slit by the penny than be mauled by the nickel. Keep in mind that Weller and his lobbying group are sponsored by Artazn LLC, the firm that sells coin blanks to the U.S. Mint for eventual stamping into pennies. The idea that more nickels will be required in day-to-day transactions if the penny disappears is superficially seductive, but it's wrong. That's because the removal of pennies does *not* require that nickels do any more transactional work than before.  First, let's rebut it with a real-life example. In 2012, Canada abolished its one-cent piece and implemented five cent rounding. No nation is more similar to the U.S. than Canada, so it serves as a great foil. Did Canada experience a doubling or tripling in nickel production in order to fill the gap left by the penny? Below is the Royal Canadian Mint's nickel production from 2005 to present: No, the amount of nickels didn't jump in 2013 or 2014, the year after the penny's abolition. In fact, since the penny ban in 2012, Canadian nickel production has remained well-below its pre-2012 level of 200 million to 250 million. Having rebutted Weller's fill-the-gap claim by working through an example, now we'll rebut it mathematically. Let's take a look at all retail transactions that end in 1 cent to 99 cents, and how these transactions differ in a penny and post-penny world. A store will want to have enough change on hand to facilitate each of these one hundred transaction types. In the table below, I’ve listed all one hundred transactions and, assuming the customer pays with the next whole-dollar amount (e.g., if $40.71 is due, they pay with $41), how much coin change is required. First, let's look at the yellow half of the table, which shows how much change must be returned to the customer when the penny is still in circulation. In total, 200 pennies will be required for all one hundred transactions, with the one-cent piece showing up in 80% of all transactions. As for the nickel, a total of 40 nickels will be required, with the customer getting a nickel back in 40% of all transactions. Now let's remove the penny and introduce rounding to the nearest five cents. Will more nickels be required to "fill the gap" left by the penny, as alleged by the coin lobby?  Take a look at the orange area, which shows the shopping experience in a post-penny world. In the first column, I provide the rounded amount that the customer must pay. The demand for pennies has obviously fallen to zero in this world, as the policy intended. But the total amount of nickels required in our one hundred transactions remains at 40, as before. Nothing has changed. Note that the total number of dimes and quarters required also stays constant in both worlds, at 80 and 150 respectively, with 60% and 70% of all transactions needing these larger coins as change. What is happening? If you look more closely, you'll see that certain transaction amounts that didn't require a nickel in change before, like $0.96, now require a nickel (since the amount due is rounded down to $0.95.) But other amounts that once required a nickel, like $0.92, no longer do (since the amount is rounded down to $0.90, for which dimes are the most efficient change.) In short, for every amount owed by the customer that now requires a nickel in change, another amount owed no longer requires a nickel.  So when lobbyists like Mark Weller say that "the volume of nickels in circulation would have to rise to fill the gap," their math is flat out wrong: the removal of the penny does not require more nickels as change.  In real life, these one hundred transactions may not be entirely random or uniformly distributed; shopkeepers may have certain preferred prices points, thus skewing the amount of coins required as change. But I doubt the effect is very large, as suggested by the Canadian example. So both mathematically and empirically, Americans shouldn't be afraid of dropping the penny because they'll be saddled with even more awful nickels. That's just lobbyist propaganda. In a post-penny America, you get all the benefits of zero pennies with no extra nickels required.