Why Canadian Debt Levels Are Going To Be Problematic – April 12, 2018
The talk in Canada is housing bubble this, housing bubble that, but that’s not really the problem in Canada. The real problem in Canada is REAL INFLATION. Real inflation is a country being dependent on imports to survive. The reality is Canada like Venezuela shouldn’t be dependent on imports to survive, but slowly and surely it’s beginning to look like it is. Americans often talk about a two party system, but Canada’s Republic party is called the Progressive Conservatives, keyword being progressive. In America the word “Progressive” is used to describe a Liberal democrat. In Canada Conservatives added the word Progressive not to spook voters and in the process embraced Liberal policies in the form of we would change much of what the Liberal Party created.
What this means for the Progressive Conservatives is that they will forever get caught holding the sh*t bag caused by the Liberals. Here’s a fact Progressive Conservatives of Canada have to embrace, it was Paul Martin(Liberal) that cleaned up Pierre Trudeau’s mess not Brian Mulrooney. While Stephen Harper was in power he made little to know change in the education of voters of what a Conservative is all about. In fact on his way to defeat he offered Canadian homeowners some free stuff, which in turn made Justin Trudeau’s offers of a lot more free stuff more appetizing to voters.
Had Harper simply said no we’re not giving anything free and we’re going to get out of this economic mess they way the conservative way, at the very least Canadian voters would have understood the Conservative approach to economics, but no for the most part if you listen to Andrew Scheer(The new leader of the PC’s) he attacks the Liberals with talking points that the average Canadian who cares nothing about economic will brush aside as social issue.
In America it’s quite clear the differences between Liberals and Conservatives, in people minds the Republicans are for the rish and Democrats are for the poor. If you want government handouts vote Democrat if you want to protect and grow your middle class income vote Republican. Even if Republicans spend just as much as the Democrats if not more, people are still aware of what each party represents and because of that as an example a Libertarian has a platform. Because the opposite is true in Canada, Canada actually has 4 dominant left leaning parties the Liberals, NDP, Green party and the Parti Québécois. This fact puts fear into the hearts of Conservatives and until they change this debt will be a huge problem in Canada.
Understanding Canadian debt levels
I liked Stephen Harper but he had a chance to speak up, personally I think one of the reasons former finance minister Jim Flaherty(RIP) often looked so stressed is that he could see the problems ahead and there’s nothing he could do to stop it. Jim Flaherty a Conservative was hired in Liberal strongholds, a heavily unionized riding in Ontario. When you deal with Unions you learn the truth of human nature. To negotiate with Unions and come out on top as a Conservative means you would have had a grassroots following. With that said when you reach to the federal level and see the corruption first hand, it’s draining to your soul. Especially if you’re a well meaning person.
Jim Flaherty warned Canadians about rising debt levels, and he was a real conservative voice. But the merger of Insurance and Banking and then to add CMHC all this private debt now belongs to the public, but what’s not being understood is the unsecured credit. Or the credit with assets that were made to depreciate, the only way to keep the value of an active car up is to devalue the currency. The only way to make it easier to pay back unsecured debt is to devalue the currency. Now when is this going to become a problem you ask?
This is going to become a problem when America continues to raise interest rates. One of the reasons America is leaving Bitcoin alone is because in my opinion they’re not going to stop raising interest rates, especially with Trump in office they can’t. Donald Trump is spending money like crazy while negotiating with other nations, in many ways bullying other nations for a fair economic playing field. Well, the push back in all of this might be other nations not purchasing U.S treasuries. If Trump gets his way and other nations comply with his requests they may decide to purchase U.S treasuries only if the interest rate goes up, meaning the U.S will have to pay more to other countries to maintain their standard of living. What does higher interest rates mean for Canada? Well at current debt levels it means more defaults, also because of the current regulations already in place, it could mean higher prices for everything.
Because Canada is becoming more and more reliant on Imports what this in turn equates to is the BoC’s low interest policies meaning little to nothing in the financial sector. Financial companies might raise their rates regardless of what the BoC does. Meaning the BoC might keep rates at Canada where they are and because companies have to import goods from other countries financial institutions may just charge Canadian companies more to borrow, this could lead to a decline in the Canadian dollar in a domesticated form.
Canada has already separated itself from the United States in regards to interest rates. Currently(April 2018) the BoC has its interest rates lower than the Federal Reserve’s, with that said a lot of Canadian companies hold U.S dollars. If what the BoC is expecting is that when companies purchase goods in U.S dollars only to change those higher interest U.S dollars for lower valued, higher risked Canadian dollars without passing those speculative fears back onto consumers I think the BoC is sadly mistaken.
This is just one of the causes that could lead to financial institutions leaving Canada, because the obvious fact of the matter is when this happens being that bigger government and regulations are at a high in Canada, if the Government in turn tries to remedy the coming economic disaster with more socialization of the private sector, well there might be less options to find credit in Canada.
I don’t think people get how this stuff works. When there’s an economic crisis those sub-prime lenders will stop lending and eventually exit the Canadian market. When they exit the Canadian market what that means is, there will be less options for businesses and consumers to borrow money. This causes entire industries not to exist. Don’t forget Canada already charges tariffs on goods into Canada. Call Trump a protectionist all you want Canada’s been protectioning their industries since the creation of NAFTA.
In closing…
That’s how this stuff works and that’s why in a global economy it’s important especially if you’re not America to remain competitive and leave yourself with as many options as possible. Canada is exhausting it’s options while growing the government. Based on what I’ve seen by the Conservatives they tend not to get rid of the government jobs created by Liberals, that’s how the cancer spreads and that’s why based on what Justin Trudeau’s Liberals have done, the only way out of this is an economic collapse, which is not as bad as people think, but it is bad if you’re a politician that has it on his resume. As much as I’d prefer a conservative government, this collapse is coming unless somebody tells Canadians the truth.