The Bank of Canada is right Deflation remains the bigger worry, not runaway inflation! – August 20, 2020,
It’s often confusing to most people all over the world to imagine that our fiat monetary system has a deflation problem and not an inflation problem, but make no mistake about it, the globe has a US-dominated deflationary problem because the U.S dollar is supposed to mirror a Gold Standard.
Canada like most other countries inflates asset prices to justify its fractional reserve banking system and at the same time to inflate taxation. The bank of Canada works in conjunction with the Canadian government and provides liquidity to the markets in the form of debt.
Now, this obviously and ultimately leads to a cash flow problem, because the truth of the matter is that Canada’s big government is consuming most of the money being loaned out by the bank of Canada and eventually, there comes a time when it’s clear that Canada’s central bank will have to print money to the Canadian government just to SERVICE our countries debts and you have to imagine that this would happen when Canada has near zero percent interest rates.
Now, this dollar-denominated debt problem manifests itself differently depending on the government of the country. In Japan as an example, they’re asset and savings rich, in Japan, they still do a lot of manufacturing, the Japanese people are savers and their economy is diversified, as an example, Sony PlayStations are all over the world as are Toyota and Honda cars, this is why Japan can survive with negative interest rates.
Yes, the Japanese economy is known as a zombie economy in the FINANCIAL sense, but if this U.S dollar global reserve currency system were to fail, Japan and Germany would have a different problem which would be who do they sell too? Because they’re asset rich.
Understanding Late Stage Socialism
In Canada, we’re heading for a zombie economy, however, our people are in debt, we’re losing our manufacturing, we have a growing service sector economy and because of our big expensive government, Canadian dollars are better used outside of our country.
Even Karl Marx wanted to control the means of production, Karl Marx never imagined that a country would be dumb enough to be reliant on other nations things it could produce at home. One of the reasons why Socialism can be more damaging than full-blown Marxism is that the central planners under a socialist system will veer off course without noticing it.
Naruhito is the Emperor of Japan, and I’ll write this again that I’m not a huge fan of Democracy, because in a democracy, the mob rules, and if the mob rules, all the socialists have to do is control the education system. Once the socialists control the education of your children, an entire generation can grow up without the comprehension of economics.
In my middle and high school in Toronto as an example, they removed woodshop and home economics. So a large segment of students in public schools imagine that machines and clothes are supposed to be made by foreigners, leave all of those difficult labour intensive jobs to those unfortunate people in other countries, we teach our public schools teach our children.
So of course as these Canadian children grow into adulthood, they grow up with a sense of entitlement, the government will fix problem ‘a, b and c’ Canadian adults convince themselves. This in case you’re not paying attention is DEFLATIONARY!
If money was backed by gold, we couldn’t do this, we would have to have something to trade with the rest of the world of equal value to demand the standard of living we enjoy today. All deflation means is that there’s a lack of money in the system, a lack of money in any country is usually the result of people spending more money than they make.
A reminder that not all Canadians are financially irresponsible, there are a lot of financially responsible Canadians, the problem is a lot of them might be working for or dependant on the Canadian government for their survival.
Without private sector growth, money flowing into the Canadian government shrinks, however public servants will still get paid, this is the money the Bank of Canada worries about the most because the Governments ability to service debts is reliant on private sector growth
Because Canada, unlike Japan, has a monarchy outside of its borders, it’s easy for our democracy to veer off course. Although the end result is ultimately the same, when I read some articles from mainstream media news sources, I’m a bit disappointed that they don’t understand the function of the Bank of Canada.
Canada hasn’t gone full-blown socialist yet, but we’re very close, inflation in Canada, will be the result of our big government spending more money than they’re collecting in taxes. That’s where the debasement comes into play, providing liquidity doesn’t mean that the Central bank is simply handing out money to anyone who asks for it, you’re ability to service debt and your history of servicing debt gets you a loan.
But because of all the regulations on Canadian industry, the barrier to entry has been raised so high that private sector growth will need to come from big businesses because for small and mid-sized businesses, growing in size especially in manufacturing as an example equates to being rewarded with a carbon tax.
I don’t understand how people can’t see the correlation between big government and central banks when Trudeau makes a regulation, the private sector pays for it and there are no guarantees of profits when you’re in the private sector. The central bank simply accommodates the demands of the government, I disagree with the notion that the central bank facilitates the Government, no, all of this is a function of democracy.
Via a lack of financial education, the democratic mob will demand a politician make their wishes a reality, which the politician tries to do. In the later stages of socialism, what happens is that the people assume that the economy isn’t important, then people will assume that the free market is a relic of the past and inevitably the politicians start to become overtly corrupt because the democratic mob demands easy answers and doesn’t care how their needs are met.
In Canada and America, the Liberals/Democrats can do no wrong in the eyes of their supporters, why? Because they’re convinced that the economy runs on autopilot! Because they haven’t experienced an economic downturn, they don’t imagine that one could happen.
What separates Canada from Japan is that if an economic downturn happened, it wouldn’t be surprising to the Japanese that entitlement spending would be cut, after all in Japan, individuals are responsible for their own retirement, whereas, in Canada, a lot of Canadians expect the government will take care of them.
This perception that the government is able to take care of you or provide you with security fuels a big government at the expense of the private sector and what Canadians are going to find out is that central bank liquidity has its flaws. Debasement and deflation aren’t a good mix and there comes a time in which there will be demands BY THE DEMOCRATIC MOB for the Canadian central bank to do the unthinkable! #LateStageSocialism
Deflation remains the bigger worry, not runaway inflation, at least as far as the central bank is concerned.
Inflation may be low for now, but here’s why it would be wise to keep a closer eye on it | financialpost.com
Interesting times ahead!