Anyone in Canada who tells you Consumer Price Inflation is coming down doesn’t understand the PETRODOLLAR; Consumer Price inflation will NOT retreat until the war on fossil fuels ENDS – October 30, 2022,
In my earlier predictions, I personally didn’t think the current Bank of Canada governor Richard Tiffany “Tiff” Macklem had it in him to raise rates; I actually thought he would have GONE NEGATIVE, which I KNEW would lead to RAMPANT consumer price inflation. Fortunately, I was wrong, and Tiff is doing what central bankers are supposed to do when the economy is DEFLATING, which is to FORCE the government to STOP SPENDING and overly regulating economic activity, something Justin Trudeau’s entire stint as Prime Minister revolves around.
Most people have a hard time comprehending that since AMERICA ended the Gold Standard, the MARKETS have instead imagined a PETRODOLLAR standard. America, in exchange for protecting countries like Saudi Arabia, offered them MILITARY protection if they would SELL Oil in U.S dollars; now, for people who only want to talk about CENTRAL BANKS being the root of all evil, it’s hard for them to imagine that money is backed by OIL.
I argue it is, and when you understand the PETRODOLLAR, you understand why the Canadian central bank fears DEFLATION if this war on fossil fuels is indeed the new normal going forward. When we talk about the EURODOLLAR and the information provided to us by Jeff Snider, you quickly figure out that GLOBALLY there’s a SHORTAGE of U.S dollars, now once you understand that there’s a SHORTAGE of U.S dollars, you’ll likely say to yourself, well, then why don’t Central Banks print money to solve this U.S dollar shortage problem?
Well, Private Banks are PROFIT DRIVEN, and Private banks are basically the DISTRIBUTION hub for fiat money. If a private bank imagines you as a RISKY borrower, no matter how LIQUID the central banks make things, the private banks will NOT change their lending behavior, meaning that spending under these OVERLY REGULATED circumstances lends itself to the government doing most of borrowing and SPENDING into the economy.
Canada’s central bank has been EXTREMELY friendly to Justin Trudeau since Trudeau became Prime minister of Canada, but NONE of Justin Trudeau’s INVESTMENTS have yielded POSITIVE cash flow; in fact, the opposite has happened; not only has Justin Trudeau increased Canada’s national debt, Justin Trudeau also made it harder for Canada’s private sector to pay back the money he borrowed.
Most people call it GOVERNMENT SPENDING, but it should actually be called Government investing; when the government starts to do things the Private sector usually does, the idea behind it is SUPPOSED to be that the Government can do it BETTER than the private sector. So when Justin Trudeau imposes a carbon tax as an example the concept behind is SUPPOSED to be that Justin Trudeau has these Wind Turbine, Solar, and Biomass companies lined up that can do POSITIVE THINGS FOR THE CANADIAN economy that Fossil Fuels NEVER could.
Well, what happens if Justin Trudeau is WRONG? What if it turns out that Justin Trudeau’s war on fossil fuels would allow him to replace fossil fuels, then what? Doesn’t that sound like DEFLATION to you? Remember, a war on fossil fuels means that you’re planning to get RID of it and replace it with something BETTER in the future. But suppose there is no replacement for fossil fuels?
How do you protect the integrity of the rule by fiat money if the prime minister of the country is engaging in what appears to be MALINVESTMENT? Regulations on something are basically BANNING it, as an example if let’s say I create a law that says the new FEDERAL minimum wage is $20 per hour; well, after I create that law, it will be ILLEGAL for anyone in the private or public sector to start a company that pays an hourly rate less than $20.
On the surface, you might say, wow, that’s great $20 per hour jobs for everyone, but all of a sudden, the Government workforce got a raise, and certain businesses in Canada that paid $18 per hour are no longer profitable because maybe the consumer doesn’t want to pay a higher price for something, thereby making certain businesses UNPROFITABLE.
An unprofitable business can’t pay taxes; I’m already reading a lot about people who don’t like paying higher prices at grocery stores; a lot of these people don’t Justin Trudeau for the price hikes at the grocery store; they instead blame the grocery stores, well, the truth is if these people keep complaining about high prices at the grocery stores, these grocery stores might EXIT the Canadian market.
Whether consumers want to admit it or not, having a grocery store is a LUXURY, and if grocery stores are raising their price UNIFORMLY, and nobody else wants to get into the grocery store business to make these record profits, one has to ask, why is this so? The answer obviously revolves around government policies, namely the war on fossil fuels, you see grocery stores have high ELECTRICITY COSTS and high transportation costs; it’s not like the food magically shows up at the grocery store; it has to be delivered to the grocery store and all the food producers because of the carbon tax are paying higher costs.
But one has to ask where is this carbon tax money going. And how long will it take for these Biomass, Solar panel, and wind turbine ideas to start bringing in Positive cash flow to where the carbon tax is no longer necessary because all of Trudeau’s INVESTMENTS are yielding positives for the economy? The answer to that question at the moment at least appears to be NEVER.
If the answer is NEVER, the central bank of Canada needs to give the markets a reason to hold onto Canadian dollars because, in case people aren’t paying attention, Canada’s private sector is SHRINK, meaning that Canada is becoming INCREASINGLY reliant on IMPORTS to sustain its standard of living, and also Canada has a GIANT welfare State.
Although this post is talking about MODERN regulations on economic activity, people forget about PRIOR regulations on the Canadian economy; PRIOR provincial minimum wage laws, for example, have led to private sector jobs LEAVING Canada for China. These MANUFACTURING jobs that used to be in Canada have, for the most part, been replaced with PUBLIC SECTOR or service sector jobs.
Instead of manufacturing a widget, you might have Canadian companies who have a call centre or service technicians for certain widgets, all well and good, but if the Canadian dollar becomes WORTHLESS because the central bank lowers interest rates and there’s NO demand for the Canadian dollar and heavily regulated Canadian economy that serves as a repellent for private sector job creators, well then you can see how consumer price inflation can dissolve into HYPERINFLATION!
To me, it’s still strange that nobody talks about the reality that Canada is not a major player in BUILDING Wind Turbines or solar panels; as a matter of fact, I don’t even know if Canada is a major player in biomass, I’ve talked about Marshall Medoff and Xyleco in other posts. But you see, the problem with Xyleco is the CURRENT regulations in place that would make Xyleco DEPENDENT on government subsidies, which are already being wasted on UNPROVEN technologies.
I bring this up because the PETRODOLLAR works; the market accepts the petrodollar; if you’re wondering why the fiat dollar hasn’t fallen yet, it’s because the financial infrastructure of the world as it stands today revolves around the U.S dollar. The Canadian dollar’s value revolves around the U.S dollar, so if the Canadian dollar falls to low in comparison to the U.S dollar, the cost of IMPORTS will shoot up, so if you think consumer price inflation is bad now, you can imagine what would happen if the central bank of Canada did what I initially thought they would have done, which was to go NEGATIVE.
Although the NUMBERS argue that Canada has a trade SURPLUS, I like to remind people that those numbers are inherently FLAWED because fiat money is based on CONFIDENCE. People can reject the petrodollar standard if the powers that be decide to create a NEW monetary world order. If, let’s say, the world decides to end the U.S dollar standard and return to a gold standard even temporarily, this would have a DEVASTATING impact on the WESTERN world’s standard of living.
A lot of people dependent on the government for survival would quickly find out that the government isn’t as powerful as they thought. Most countries know their government is POWERLESS, but in the developed world, we have a different perception; all I’m saying is that if the illusion is removed, it will be easier for people to see how important fossil fuels are to our standard of living.
Consumer price inflation comes down when the war on fossil fuels ends; it’s really that simple. Don’t the idiot who imagines the petrodollar is a myth; it’s very real!
Howard Levitt: Public sector jobs boom is a shell game that plays havoc with our economic future | FinancialPost.com
Ottawa is using the private sector’s tax dollars to choke off its growth — right under its nose
Interesting times ahead!