The Biden Administration Has a Tax, Spend, Regulate and Social Engineer agenda, This bodes well for Strengthening the Canadian Dollar. Negative Interest Rates Are Coming To Canada – May 14, 2021,
To date the current Governor of the Bank of Canada Tiff Macklem has been extremely accommodative to Justin Trudeau, buying up Justin Trudeau’s debt, I’ve read that the Bank of Canada has been pulling back, but that’s not what it looks like to me, what I see is the Ban of Canada positioning herself for negative interest rates.
At this point, especially with the incentives for Canadians not to work, the low productivity rates, the added regulations to the Canadian economy and the reckless spending of Canada’s federal government basically picking winners and losers, the debt I believe is going to be passed onto the private sector in the form of negative interest rates, which basically means that the private sector is going to have to take on more risk.
Now, by more risk, what it really means is that Canada’s private sector is going to be forced to raise prices because if the Bank of Canada goes negative the Canadian dollar is going to drop, the reason the Bank of Canada has been reluctant to have negative interest rates is that Canadian it hasn’t worked in Europe or Japan, but I argue that the Canadian economy doesn’t have the manufacturing capabilities to sustain negative interest.
Most of the countries that have embraced negative interest rates have a vibrant private sector, sure countries like Japan have zombie companies all over their economy, but their capability to produce is still there, Canada on the other hand, not only have politicians lied to voters, they’ve also assisted in shipping jobs overseas.
In countries like Switzerland, Denmark, and Sweden their governments support small and medium-sized businesses by as an example not having a minimum wage. In an ECB country like Spain, negative interest rates have a damning effect, because in Spain the regulations for small-medium, and large companies are insane. Recently in Spain decided to regulate Gig workers, which is obviously going to worsen their dire situation.
As most people know technology is the driving force of deflation, but believers in big government, assume that the best way to combat this deflation is to force private contractors to become wage slaves for the state. So as per usual, the socialists in Spain don’t think to cut the size of government, instead, they push to demonize the private sector. I write this because there’s no hope for Spain to get out of negative interest rates.
Sure the media can give these stories a spin that makes it seem like these regulations on gig workers are for the “Greater Good” but it’s all nonsense for these labour rights organizations with dwindling numbers in bed with the government.
Obviously, the fix to all of this socialist silliness is simple “Austerity Measures” but will it happen? Not without a fight from the Left. Typically things have to get really, really bad before austerity measures are even considered an option and usually austerity measures are negotiated meaning that a lot of the dumb ideas that are creating this stagnant economy, will be left into law.
How this relates to Canada, is that Canadians are being paid to stay home and it’s been more than a year now that Canadians are being paid to stay home, savings rates are up, asset prices are up, Canadians are making more Canadian fiat dollars today collectively than they were making when they working.
If the Canadian dollar was backed by gold, the Canadian dollar would be hyperinflation, but we have what I call a ‘confidence currency’ in which the assumption is that Canada is backed by resources and we can pay back our debts with the resources in the ground. The problem with this confidence currency is that via regulations, we can’t pay back our debts, it would be too expensive for our private sector to start a business that could help us pay back our debts.
Our current government has made the cost of living too high for the private sector, meaning that prices have to go up. Large corporations in Canada have been the beneficiaries of hoarding physical goods that have inflated in price. This welfare for the NON-WORKING-poor and the rich system revolves around shrinking the middle class.
You see welfare benefits the rich and the non-working poor, the free market revolves around the middle class, there is no middle class when there’s a big government picking winners and losers. As an example, the government-regulated small tobacco producers out of business, the market did destroy tobacco the government did, as is the case no, the market won’t destroy fossil fuel jobs, the government will do it.
The free market creates middle-class jobs, the government destroys the middle-class, any entity in bed with the government like a labour union for example is indeed destroying the middle class. Once the middle class is destroyed, fewer jobs are created because it’s too expensive for an entrepreneur to start a business, in Spain, their government is moving towards regulating the gig economy, which at the very least was keeping people productive.
When the government makes more people unproductive, years can go by without people having a job, meaning they’re taking more resources than they’re capable of producing, this accelerates the debt problems of society, furthermore, an accommodative central bank will make the problem worse by buying the debts of the government, lowering interest rates, thereby forcing businesses to borrow more and take on more risk as cash flowing an asset becomes increasingly more difficult.
In conclusion, the Joe Biden administration is making the cost of living in America more expensive and this is making America an unattractive place to invest in. Although people are currently fleeing the United States dollar, Canada has a problem in that its top-heavy private sector requires a lower-valued loonie to achieve profitability and because oil prices continue to rise, and Tiff Macklem is stepped back from quantitative easing, what looks like is coming next to me are negative interest rates.
I have yet to hear Tiff Macklem make a public statement warning Trudeau that his dovishness is ending, what I see is Tiff Macklem weighing the options he has available to him. Which tells me negative interest rates are on the table.
Interesting times ahead