U.S Federal Reserve signals no Rate Hikes in the Foreseeable future and the Canadian Dollar Still Depreciates – March 21, 2019,
More and more signs of a recession are heading Canada’s way and I want to make it clear to the reader that Canada and the United States shouldn’t be viewed as equal economies, both of these economies function differently and if you live in Canada and the U.S central banks signals slower growth forecasts and a large chunk of the Canadian economy functions on selling its goods and services in the U.S market, you ought to be concerned, but what’s more concerning is the transformation of the Canadian economy under Justin Trudeau.
Let me make something clear, dating back to Jean Chretien’s Liberals, Canada was losing its manufacturing jobs, Liberals no matter how you cut it are a job-killing political party, Left-leaning Liberal policies lead to stagnation in the economy because their policies artificially raise the cost of labor which actually accelerates poverty. In the United States ever since Nancy Pelosi who is the Speaker of the United States House of Representatives to the house, the projections for the U.S economy have gotten worse and will continue to get worse, because at the very least with Donald Trump at the helm there’s economic optimism.
Democrat policies aren’t based on economic prosperity, they’re based on Social justice, Social justice is expensive to administer and requires an excessive growth of the public sector to enforce, this obviously leads to an increase in the cost to doing everything, which obviously worries investors and how they invest. So wisely Jerome Powell has changed the economic outlook for the United States, which doesn’t bode well for the U.S economy long term.
Popular internet and television personalities who I follow like Peter Schiff and David Stockman have been critical of the President, for his ownership of the economy, however what they don’t seem to be able to comprehend is that a vast majority of humans in general put little to no emphasis on sound economics and instead would prefer to hear optimism, so whether Trump was truthful or not once the economy crashes, regardless of what Trump said the people who’ve been financially irresponsible won’t take personal responsibility regardless of any education current President-elect Donald Trump would have given to them.
The real point I’m trying to make in all of this is that Jerome Powells move to stop raising interest rates in my opinion has less to do with what Donald Trump said and more to do with the economic outlook for the U.S economy with Speaker of the United States House of Representatives Nancy Pelosi trying to thwart almost every action being pursued by the 45th U.S. President of the United States. How this reflects Canada is, first off the USMCA deal, which is worse than NAFTA, NAFTA was a bad deal for Canada and the new USMCA deal is even worse.
Canada forgets that Donald Trump signed a free trade deal with Korea, which now makes South Korea a competitor of Canada’s, furthermore Trump is also fighting for the United States Reciprocal Trade Act, which obviously in the long term doesn’t bode well for the United States but in the short term would be damning to the Canadian and world economies as it would force structural trade with the U.S Structural trade meaning that as an example, recently Justin Trudeau’s cabinet announced that it would be giving some subsidiaries to Canada’s supply management cartel because as everyone knows, Trudeau had to make concessions during the USMCA deal, which are obviously going to it supply-management cartels bottom line.
What will be worse for Canada is our exports into the U.S, U.S farmers have a larger voice now, which again if USMCA passes mean more competition for Canada. These events haven’t even been calculated into the value of the Loonie yet, but still, the Loonie after almost reaching 76cents USD is now back to 75cents USD. This should be alarming to Canadians, because under Stephen Harper when the U.S Fed signaled trouble ahead, the Lonnie shot up to parity with the Greenback.
The real issue Canadians better start paying attention to is the deficit, there’s an assumption being made by the Liberals that interest rates in Canada will remain low for the foreseeable future, but as I’ve been trying to explain to Canadians that if you look at the job numbers and this is even something BoC chair Stephen Poloz alluded too, Crown Corporation jobs are being included as Private sector job growth when they shouldn’t be.
Supply management as an example ar Crown Corporations, Canada Post is a Crown Corporation, CMHC is a Crown Corporation and there are a number of Provincial Crown Corporations who’ve also done more hiring, Crown Corporations in Canada have no competition, which means any price or value they put on anything whether it be priced they charge consumers or wages they pay themselves can’t be measured by a competitor, which is why Canadians as an example pay a ridiculous amount of money for dairy, poultry, and eggs.
If Canada didn’t have supply management or crown corporations in so many different sectors of the economy, the truth is the prices for almost everything in Canada would decline more than 100%. Crown Corporations also fuel Canada’s tariff system which is why even under Harper when the Loonie reached parity with the Greenback, Harper ad to put additional tariffs on Canadians hoping to save money by purchasing Cars in the United States, where the cost would be cut by 75% in many instances. Canadians honestly aren’t understanding how rich this country would be if our government wasn’t so large.
Anyway, the market for now at least is giving us the benefit of the doubt, but if the Loonie keeps sliding, there will be a lot of pressure for the BoC to raise interest rates, sure the BoC might drop interest rates first, but Canada has become very reliant on imports and this is a serious cause for concern if Trudeau continues his reckless deficit spending.
Interesting times ahead.