Mod Note: This is a syndication from Jared's Daily Dirtnap daily market newsletter. WSO readers qualify for a $100 discount...just email [email protected] and mention "WSO Monkey Discount" You can follow Jared on twitter at @dailydirtnap

There I go thinking again, but I was thinking the other day about all these housing bubbles around the world (U.S., Spain, and now Canada and Australia), and I’m telling you ahead of time that this is not going to be a rant about the evils of central banking; you can go read that on a blog. Really what this is about is the evils of low interest rates, regardless of whether they are determined by market or by fiat.

Low interest rates are bad. Bad bad bad. They encourage people to take stupid risks. Of course there were a lot of catalysts and causes for the housing bubble here, including poor incentives surrounding lending standards, but most of it stems from the fact that interest rates at the front end were one percent for a long time, which, in hindsight, turned out to be a huge mistake, because the 2002-2003 recession turned out to be very mild. The response to that recession was all out of proportion to the severity of it. Easy for me to say, Mister Monday Morning Quarterback, because at the time, the stock bubble had just blown sky-high and people were talking about a depression. But then again, you could make the argument that the stock bubble was a product of low interest rates, too.

Mod note: Feel free and ask Jared anything and he will be on today answering your questions.

Jared is also going to be the keynote speaker at the 2013 WSO Conference (discounted tickets almost sold out here -- Josh Rosenbaum, MD of UBS and author of Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions will also be speaking again).

Mod Note: This is a syndication from Jared's Daily Dirtnap daily market newsletter. WSO readers qualify for a $100 discount...just email [email protected] and mention "WSO Monkey Discount" You can follow Jared on twitter at @dailydirtnap

At great risk of alienating any and all Canadian housing bulls, the more I read and study, the more I am convinced that the housing market is about to drop a daisy cutter on Canada.

I don’t even know where to begin. Why don’t we begin here: these guys have had rates at one percent (just like we did) for a long time (just like we did) for really no good reason (just like we did) because they had some maestro central banker that everybody trusted (just like we did) and the country is coming off of years of economic growth, really a gilded age (just like we did) which has resulted in a 10-year property bull market (just like we had) which is of course quite extended in some local areas (just like we had) and prices were up triple digit percent in some areas (just like what happened here) and now people are flipping houses and condos (just like what happened here) and there are tens of thousands of units being built (just like what happened here) and household debt is at all time highs (just like what happened here) and of course the real estate industry is more bullish than ever (just like what happened here) and are constantly going around telling people that there is no bubble (just like what happened here) and homeownership rates have reached all time high levels (just like what happened here) and the quality of construction is starting to decline (just like what happened here) and home prices have gone down for five months straight and people are saying that it’s different this time and that the high prices are justified by immigration or X, Y, and Z (just like what happened here) and the banking industry is trying to tighten lending standards ex post facto (just like what happened here) but the genie is already out of the bottle (just like what happened here) and people are going around saying that houses are a better investment than stocks or bonds (just like what happened here) and the smart guys, like Shiller, are ringing alarm bells (just like what happened here) and it’s different this time and it’s different this time and it’s different this time, but let me tell you how the situation is different, you want to know how it is different? Canada is different because they have no room to lower rates, so they are even more screwed than we were!

This is a syndication from Jared's Daily Dirtnap daily market newsletter. WSO readers qualify for a $100 discount...just email [email protected] and mention "WSO Monkey Discount" You can follow Jared on twitter at @dailydirtnap

Q: How do you know when a day trader is losing money on a position?

A: When he starts researching the company.

It is funny because it’s true. But it’s also true that you (the generic you) get to know things really well when you have a position in them, and the larger the position, the better you get to know the company/country or whatever.

So I have a sizable position in MXN, and therefore I pay a lot of attention to what is going on in Mexico. I pay a lot of attention to Carstens. He is an interesting guy. He is a smart guy. So he said something recently that made the hair stand up on the back of my neck; he said that all of this “unconventional monetary policy” (if that’s what you want to call it) and competitive devaluation going on has the potential to create asset bubbles in emerging market countries. I can’t say that I disagree with him, but the reason that hair is standing up on the back of my neck should be obvious. Are emerging market countries (like Mexico) going to take steps to forestall an asset bubble? I hope not. I like asset bubbles.

I remember doing informational interviews on the Merrill trading floor back in 1999. Now, that was one great trading floor, have you ever been there? It was like a big bowl in the financial center, with different levels of desks, so you could achieve something of a vista across the floor. It looked like what a trading floor should look like. So some guy from credit was pointing out the various groups on the fixed income floor, rates over here, mortgages over there, and I saw, in the top row, a bunch of guys packing up their stuff, putting it in boxes, and leaving. “Who are those guys?” I asked. “Oh,” he said, “Those are the commodities guys. We don’t need them anymore.” Like I said, it was 1999.

Wall Street is notorious for hiring on the top and firing on the bottom. In 2001, when I joined Lehman Brothers, the associate class was the biggest ever, over 300 MBAs. Even Joe Gregory knew it, and had a laugh at our expense. “You guys are the last ones in,” he said; it was a known fact at the time that stocks were already entering a bear market.

And now , banks are blowing out people (especially equities people) left and right. The employment situation on the Street is as dire as I have ever seen it. Banks are in ruins. And, just like before, people are saying that the jobs are never coming back, owing to market microstructure changes in the market.

This is a syndication from Jared's Daily Dirtnap daily market newsletter. WSO readers qualify for a $100 discount...just email [email protected] and mention "WSO Monkey Discount" You can follow Jared on twitter at @dailydirtnap

People go back and forth on this: government is too big, government is too small. Well, if there is one thing that most people on Wall Street have in common, it is that almost none of them have worked in government. I have. I have an opinion on the size of government, for sure, but at least mine is an educated one.

So let me tell you a couple of government stories, leaving aside all the ones from the Coast Guard Academy (or maybe we will get to those later). So I graduate from the Academy, and I go to a ship. A white one. White ones do law enforcement. I was stationed in the Pacific Northwest. There are a lot of fish in the Pacific Northwest. At least, there used to be a lot of fish. Maybe we will get to that, too.

So I report aboard the cutter, and the first thing they do is make me Weapons Officer. I have a gunner’s mate working for me. Before long, he is scooped up by CGIS (yes, like NCIS) for being a bigamist. Well, it is not as bad as it sounds. He got drunk and got married, a second time, in a blackout.

It is first-order, stupid humor to make fun of this trillion dollar coin idea with a Dr. Evil joke. But I can’t resist. I also can’t resist calling it the Diet Coke of evil.

So I’m sure by now everyone has heard of this ridiculous trillion dollar coin idea, and while I don’t think anyone understand the mechanics of it (certainly not anyone in Congress, whose members don’t even know how a bond works), what the dummies do understand is that it is an end-around on the deficit, and that’s all they care about. So let me walk through this step by step and try to deconstruct what would happen if we actually did this.

So the Treasury has the authority to mint whatever they want to mint. For background, let it be known that the silver bullion coins that Treasury mints are a $1 denomination (interestingly, they are $5 in Canada) and the gold coins are a $50 denomination. Currently, platinum coins are a $100 denomination (paradoxically, because platinum is cheaper than gold nowadays), but have not been minted in the U.S. since 2008.

Now, Treasury can make bullion coins whatever denomination they want (leaving aside the whole discussion about how dimes and quarters are essentially made of junk and the whole seigniorage phenomenon). So, yeah, if they want to mint a trillion dollar coin, they can mint a trillion dollar coin.