The Bank of Canada’s biggest problem is they created an unnecessary debt bubble, All roads lead to a bizarre economy – October 29. 2019,
So, I’d like to remind Canadians that Stephen Harper, for the most part, created a demand for Justin Trudeau. The late Jim Flaherty like many financially conscious Canadians says the writing on the wall if the Bank of Canada lowered interest rates for political reasons. Canadians like Australians may forget this now, but the Canadian and the Aussie dollar reached parity with the U.S Greenback, and truth be told the Canadian dollar would have remained there had it not been for the hiring of Stephen Poloz.
Stephen Poloz, in my opinion, was installed as a puppet for Stephen Harper in hopes Stephen Harper could win another election, instead, the opposite happened, a fresh-faced politician with a familiar name started to make his presence felt in the political arena. Now, what really pushed Trudeau over the top from an Ontario perspective was his Marihuana ‘legalization’ and his openness about deficit spending. Trudeau stated on several occasions interest rates are low, now is the time deficit spend. Justin Trudeau used Stephen Harpers unnecessarily lower interest policies against him and it worked, Canadians said to themselves legal weed and easier access to consumer debt? sign us up and now here we are.
I’m extremely interested to see if Alberta separatism is a real thing, I’m actually planning a trip to Alberta to feel it out for myself. I’m not entirely sure if Canadians comprehend what a free market economy is, but I’ve noticed a pattern with Conservative voters, to pick and choose which socialism programs the government should implement and this, of course, is why Canada is getting progressively worse as far as debt levels go. Interest rates shouldn’t have been as low in Canada as they are now, in fact, there’s no reason for interest rates to be this low, it’s not like lower interest rates have helped Alberta rebound? If you’re investing in energy, I invest in energy, the cost of borrowing money isn’t that big a deal, being that there are other ways to make up any shortfalls.
The reason Poloz and the Bank of Canda lowered interest rates was because of the housing market an consumer debt. In Canada, because we have so many Leftist politicians scattered all over the country, any opportunity for them to grow the size of Government is rarely if ever squandered. The Liberals and the NDP have passed so many government interventions since Trudeau became Prime minister that in the event Canada does experience an economic downturn, I worry for the Canadian dollar.
I remind the reader that shrinking the size of government is called AUSTERITY measures and being that a large segment of Canada’s public sector is unionized, Canada will have some serious problems to answer for in the event these Trudeau derived Liberal ideas don’t fuel the type of sustainable growth that at the very least can manage the debt financing Trudeau has already done.
Now, the worst part about debt financing is what Ontario is experiencing now. Under the Ontario Liberals, Kathleen Wynne made Ontario the most indebted province in the world. Now, again living in Ontario a lot of us haven’t felt this right away, but in case people aren’t noticing public sector workers have been pushing back against Doug Ford with everything they got. What’s happening with Doug Ford is only a preview of what will happen to Canada when the time comes to pay back our debts.
The Cost of Living is Problem with Debt Financing
If you’ve ever been in CONSUMER debt before, here’s how the cycle works, typically prior to you receiving the loan, you as the borrower already have it worked out in your head how you’ll pay back the loan and how quickly you’ll pay back the loan, you possibly also have already calculated how you’d debt finance the loan, oh it’s only $600 per month you’ll say to yourself, I make that amount in a week, even if I can’t pay back this entire loan right away, all I have to do is make $600 payments every month, it’s not that big a deal.
Now, let’s imagine this retail consumer loan has been paid for 4 years, so four years have passed, let’s say your consumer loan was a car, well a car loan also requires insurance, in case you didn’t know, lines of credit, mortgages leases, rentals and credit cards all have insurance products, so even in the event that your minimum payments are low, those insurance fees eventually start to eat away you, then of course if the unexpected is going to happen, the unexpected will definitely happen while you’re in debt. Maybe your brand new BMW breaks down or gets into a car accident and you learn that your warranty doesn’t cover that, or maybe something you did in your past resurfaces and your job security is put at risk
Maybe that something from your past makes people question your ability to do your job, so now maybe your job security is challenged, maybe because you’ve been working 4 years in a row to finance loans and other debts, you’re burnt out, it won’t matter, because you still have to finance this debt, now after you pay off this debt, and the world has evolved, are you really better off? how much of your life did you lose how many opportunities did you miss because you had to debt-finance this loan? In Switzerland it’s illegal for Governments to run a deficit a politician can be jailed for running a deficit in Switzerland, The Swiss by the way do have their social programs but Minimum wages isn’t one of them, Why? Because in the event of deflation, the entire nation takes a hit, not just the private sector. Private Companies go bankrupt when the public sector is bankrupt, they use the government to debt finance their wages When people fight back against Austerity measures those people are basically fighting to protect a bankrupt, poorly managed government. People who fight back against austerity measures are usually fighting to maintain Government corruption.
I remind readers, that Canada Geographically is in the best places in the world if you know anything about the Canadian economy our problem is that we have to stop Americans from lowering our cost of living 😂. The argument made by Canadians is that we must protect Canadian jobs from Americans😂. It’s a hilarious argument, but it’s embedded into our culture and because it’s embedded into Canadian culture, the size of government in Canada is huge and without Austerity measures can’t shrink, in a market economy there are things called SALES in wage controlled, price-controlled economy where most Unionized workers have wages that keep up with inflation, there is no sale, because prices are artificially propped up.
Supply management, minimum wages, rental controls, price controls, limited options, limited competition when all of these government programs mature deflation is not permitted to happen, deflation can’t happen for a prolonged period of time, in fact if deflation happened in any capacity in the Canadian economy, about 90% of Canadians won’t know what happened or how to fix it, furthermore when a politician does figure out how to ix the problem that politician, as Doug Ford found out, will be met with fierce opposition.
I write a lot about Argentina, well several politicians in Argentina basically tried to do what Doug Ford has been trying to do and these politicians were met with the same type pushback, this also happened in Brazil. Once public sector workers can unionized, you better hope your socialist experiment works, because once cracks form good luck fixing it. Public Sector workers don’t work for free, they’re also entitled and don’t have to meet the demands of consumers, similar to Argentina Canada has these entities called Crown Corporations which aren’t included as the public sector but should be. The Bank of Canada(BoC) is a Crown Corporation and The CMHC(Canada Mortgage and Housing Corporation) is a crown corporation and both work in tandem to protect the other.
Crown corporations whether federal or provincial are all over Canada distorting prices and keeping foreign competition out, these Crown Corporations in most instances have unionized employees and the goal of a union is to address the needs of the people it represents and if this comes at the expense of the Canadian taxpayer, it doesn’t matter. Now, adding to this impending doom is the management of the Crown Corporation, which an use the power of Government to ward off competition which equates to a Crown Corporation having little incentive to push back against the union unless the what the Union is proposing will lead to the Crown Corporation going bankrupt.
Now, it’s very for a Crown Corporation to go bankrupt, but it can happen if its unionized workforce gets to large. After all, in most instances, the crown corporation is dependent on their consumers and if their consumers can no longer afford their prices or if the consumers consume less from the Crown Corporation because the consumer has less money to spend, this, of course, leads to the worst type of economic scenario.
In Argentina, the solution is for the Central bank to print money, In Canada, I don’t know if the Central bank will be as silly, because there does come a point, where money printing doesn’t work anymore. Money printing, after all, is a first come first serve game and money printing is expensive because it props asset prices up and if a retail purchase of an asset price is purchased at inflated prices using debt instruments, what ends up happening are wages can’t keep up with the ballooning retail prices. This is of course very normal in third world countries, but we’re entering the world of weird when a developed country engages in this type of behavior.
It’s clear to me what’s happening and what will eventually happen, but it appears when I read mainstream media articles, they have a different view for what the future holds.
‘Downward pressure’: Debt-ridden Ontario could see its credit rating cut, warns financial watchdog | financialpost.com
Net debt stands at $338 billion for fiscal 2018-19, the most debt for a sub-national borrower in the world
Interesting times ahead!