Bank of Canada Governor Tiff Macklem says that interest rates are going to be low for a long time, which could mean the opposite is true – July 16, 2020,
I’ll be the first to admit that I can personally imagine, interest rates in Canada going negative, but I can also imagine the Canadian dollar going into free fall once, it’s understood by the world that Canada has a cash flow problem and the only way for us to pay our bills is via printing money.
The cost of living in Canada is already very high and therefore raising taxes while so many people are already in debt, would trigger more defaults. Canada has entered into the zombie economy, the difference with Canada compared to Japan, is that our Zombie economy would be an easy fix, which would be to cut regulations, the problem with cutting regulations in Canada is that there are so many to cut and for me, I think the problem in Canada is the economic culture of our working class.
Canada obviously has a Welfare problem, but the welfare problem stems from Canada’s protectionist culture and this is why interest lower interest rates probing up asset prices is going to lead to a cash flow problem because real inflation is headed Canada’s way. Canada has a lot of UNNECESSARY dependence on imports.
We priced ourselves out of our own labor market and call it for it is, in many instances in Canada, it makes more financial sense to be on Welfare than it does to work for a low wage job. Via the Coronavirus, Canada’s already big government got bigger, government workers don’t work for free, their paychecks come from the private sector, as it stands now, it’s not a guarantee that Donald Trump will win the 2020 election.
I personally think Trump will win, but I’ve been wrong before, and Canada’s number one trading partner the United States will be reshaped under a Biden administration. The first thing that would obviously happen if Joe Biden won would be a market crash, which would deflate asset prices, the market crashed under Obama until Obama bailed out industries, but why did Obama bailout industries?
It’s because Obama openly talked about higher taxes and more regulations, Justin Trudeau, for the most part, has added more taxes(The carbon tax) and he’s added more regulations on business, COVID-19 is also a regulation. Obama had to pay the captains of industry to remain loyal to him, that’s what Liberals do, they buy friendship.
Trump didn’t have to bailout Wal Street, Trump simply cut the cost of doing business, cutting the cost of doing business is not something the Liberal Party of Canada has any plans of doing, which for me equates to Canada’s central bank being an afterthought.
I wrote a lot about Canada’s central bank when Harper was PM because the Canadian economy was getting so good and the Canadian dollar so strong that Harper had to coordinate with the Central bank to make the Canadian economy look weak.
Well, as Harper artificially made the Canadian economy look weak to prop up asset prices, candidate Justin Trudeau was campaigning to regulate the economy and hand out free cash. The Trudeau name has power in this country and Justin Trudeau beat his rival and went on to do his damage a Prime Minister.
Well, Justin Trudeau has made so many financial obligations while at the same time raising taxes and adding regulations, that Canada’s central bank has lost control of inflation targets. Remember, inflation targets? the BoC doesn’t have to worry about artificial inflation targets with Justin Trudeau, inflation targets will be met as long as Trudeau is Prime minister, the problem is cash flow, because the main reason the cost of living is so high in Canada now, stems from Liberal Spending that came from Former Prime Minister of Canada Pierre Trudeau.
If the U.S suffers an economic downturn, Canada has some challenging times ahead. Of course, theoretically, interest rates are going to remain low in Canada to infinity, that’s not the problem, the problem is as asset prices ballon, the money to service debt will go up, actually what people should be talking about is qualifying to purchase Canadian assets, because this will be more challenging in the years ahead!
The winners of Canada’s future economy have already been chosen, they will be the owners of essential cash flow producing assets, the domestic devaluation of the Canadian dollar is inevitable, prepare yourselves accordingly!
Interesting times ahead!