Joe Biden, Gridlock in Washington, Taxes and The Canadian Dollar: Why I expect Negative Interest if the Canadian dollar continues to rise – June 12, 2021,

The master educator on the Eurodollar system is Jeffrey P. Snider, although his conclusions differ from my own, he is a great person to follow if you want to know what’s happening to the Canadian dollar. For most people, they have a hard time grasping why countries rich and poor volunteer themselves to the U.S dollar standard?

The answer as I like to point out is simply, socialism doesn’t work, and the U.S dollar standard allows countries to avoid austerity measures. If countries and decentralized forex markets didn’t fall in line under the U.S dollar standard, money would be forced to back into a REAL commodity standard.

Most people prefer the gold standard, but nothing forces a country to abide by a Gold Standard, I think this is also what most people in crypto-currencies don’t understand. The private sector ultimately decides what money it wants and if your government is hostile to the private sector, the private sector will react by not investing in the hostile countries economy.

What I’m getting at here is that the Welfare State, Socialism, and Communism are complete and utter failures, as is Keynesian economics. From an economics standpoint, democracy in most countries is a complete failure as most people who imagine the Government to be God, will inherently vote for the politician who promises voters the most free stuff.

In a nutshell, this has created the demand for the Euro-dollar system we have today, which most people want to protect. Canada’s role in this Eurodollar system is that when America is in economic chaos, the forex markets will often reward other Western Nations with respectable currencies and also countries with favorable tax loop-holes

People tend to forget that valuations don’t always equate to liquidy, when an investor puts money into real estate as an example, the only guarantee that an investor has for price stability or price appreciations are Government regulations.

Because Canada has a giant welfare State which basically protects the wealth of government dependents, international investors in Canada, imagine us a safe haven from economic stupidity south of the border. Canada currently has one of the lowest corporate tax rates. If a person were to research Justin Trudeau as an example, he is a known Trust Fund baby.

Most wealthy people know that Trust Funds are a means to avoid paying taxes. Not only will trust funds help a person to avoid paying taxes, but it can also equally protect a person from inflation. So far the Prime minister of Canada Justin Trudeau has created a carbon tax, while at the same time growing Canadian voters dependence on a Government welfare check.

Everyone knows this leads to DOMESTIC fiat price inflation, but why then has the Canadian dollar been rising in the decentralized forex markets? Well, the Canadian dollar is still imagined to be a petro-dollar and the price of oil continues to rise. Now, for some, they imagine that the price of oil is going to retreat as it did under Obama, I disagree with this, the economy isn’t open yet and via Joe Biden and Justin Trudeau, both Canada and America will be more dependent on foreign oil, while at the same time both countries have embraced the Paris Climate Agreement.

This has a higher CANADIAN dollar and inflationary FIAT prices written all over it, but it also screams DEFLATION for the Canadian economy. Because higher prices equate to consumers purchasing fewer goods and services. Now, luckily for the Canadian consumer COLLECTIVELY they’re not having to spend the same amount of money on transportation to go to and from work and possibly buy at fast-food restaurants on their breaks from work because if that were to occur, deflation in the economy would be more obvious.

But as is always the case, the private sector where it can, will hide price inflation(for example shrinking the size of things while charging the same price) but it’s going to get really hard for Canada’s private sector to hide price inflation when the Canadian economy opens up because each sale for the private sector is going to buy them less as the cost of living and cost of doing business rises.

Most people tend to forget that most of the private sector is in debt When Trudeau as an example looked to stimulate the economy, he gave Canadian businesses loans. Below is a brief description of what Trudeau provided for Canada’s private sector

The Canada Emergency Business Account (CEBA) provides interest-free, partially forgivable, loans of up to $60,000, to small businesses and not-for-profits, that have experienced diminished revenues due to COVID-19 but face ongoing non-deferrable costs, such as rent, utilities, insurance, taxes and wages.

Canada Emergency Business Account (CEBA) interest-free loans | Canada.ca

furthermore and this is often ignored the Canadian government offered this for Landlords:

The Canada Emergency Rent Subsidy (CERS) provides a direct and easy-to-access rent and mortgage subsidy of up to 65% of eligible expenses to qualifying businesses, charities and non-profits. This support is available directly to tenants.

Canada Emergency Rent Subsidy (CERS) | Canada.ca

So the real question in all of this is why would the Forex markets reward the Canadian dollar it’s quite clear that Canada will not be able to pay back its debts? My answer is the Euro-dollar system, which exists outside of the US Federal Reserve. I’ve often written that it wouldn’t surprise me if the Federal Reserve outlived the United States.

The DECENTRALIZED Forex markets care little about the interals of a Western country, what the forex markets care about is the purchasing power. It’s a pure confidence game because as I like to point out, Canadian dollars are often worth more OUTSIDE of Canada than they’re worth inside of Canada.

Who the Canadian people vote for to manage their economy is their own business, all the forex markets want to know is that a countries currency will be a SOMEWHAT store of value. Now, as the Canadian dollar continues to rise, which I suspect it will, I believe the Bank of Canada will go to negative interest rates.

Why the Canadian dollar has stopped rising in my opinion is because there’s gridlock in Washington. Currently, Joe Biden is attempting to shame fiscally responsible Democrats into signing up for his spending bills. The Democrats control everything in Washington right now, but not every Democrat is a Democratic Socialist.

Bill Clinton as an example was a corporatist he wasn’t big on raising taxes, with the exception of the Carbon Tax, Justin Trudeau hasn’t raised taxes either. Most politicians in the center prefer the inflation tax, Joe Biden who I personally think has to be one of the dumbest U.S Presidents in history, doesn’t understand that raising taxes and adding more regulations to the U.S economy has a deflationary economic outcome that will need require bank liquidity to finance.

Well, currently the U.S Federal Reserve is sitting at near zero percent interest rates. Now, what this means for Joe Biden is that if he gets his spending bill, the private sector if it doesn’t dump dollars, will simply move into other currencies, because Joe Bidens spending has nothing to do with investments that will yield anything positive for the U.S economy.

If Joe Bidens’ spending propositions get through, I’d expect the Canadian dollar to go up and possibly reach parity with the U.S dollar. Now, because Joe Bidens spending has little to do with any infrastructure spending in the U.S a higher valued Canadian dollar will be a complete disaster because one of the benefits, private companies have operating in Canadian market is selling into the U.S Market, with cheaper Canadian dollars.

Well, Canada assumed that with all of its tariffs and other socialist measures it has against the U.S, that it thought would make the Canadian dollar less attractive, unfortunately, similar to Barack Obama, America under Joe Biden might look more socialist than Canada, and to prevent a complete economic crash to the Canadian economy, I suspect that the Bank of Canada will drop interest rates to negative territory.

When Barack Obama was President, Canadians remember that the Canadian housing market did not crash, but yet, our central bank lowered interest rates. The reason our central bank did this was that first off the housing market was getting stagnant and secondly, the private businesses in Canada do not like a strong Canadian dollar, because taxes are much higher in Canada and these businesses lose all of their benefits and profits with a stronger Loonie.

The economic insanity is even worse now for Canada’s private sector as many of them are basically on government welfare and if they fail those government loans go bust also.

Now the article I point to below, obviously has a difference of opinion from my own and that’s fine. But I trade on the forex markets and everything looks normal to me. I’ve written about 2022 as a period in which interests me and so far everything is aligning in the way I imagined it would.

The Canadian dollar is the most overnight currency in the world: FX strategist | bnnbloomberg.ca

Interesting times ahead