Canada finds itself in a much deeper economic hole than the United States which says a lot about the future of the Canadian dollar – February 12, 2021,
Canadians tend to hold their heads high believing that they have a better country than the United States and who can blame them. In Canada, we have a higher standard of living and better quality of life than Americans, but this exists primarily because of the Federal Reserve which to date allows America to export its debt, which allows countries like Canada to manipulate their currency to finance public spending while hoarding U.S dollars.
When I look at Canada’s trade deficit I laugh, because it’s an artificial creation that wouldn’t exist if the Fiat monetary system was abolished. It should be noted that this funny economic system that exists in the world today equates to Japan being light years ahead of the rest of the world as they’ve been in recession since the 1990s as their governments have basically nationalized their private sector, HOWEVER, Japan hasn’t destroyed their ability to manufacture things in favor of their Fiat monetary system.
Instead, the Japanese model is to simply inflate the price of everything, which since this government intervention has led to not only a population decline but an aging population as Japanese youth are living through what we in the West are about to live through now.
What’s that you say? The answer is an artificially high cost of living, which stunts private sector innovation in favor of a bigger government. In Canada, we have a pretty good banking system, but banking doesn’t necessarily equate to productivity, currently, the best way for a bank to spend money in Canada is to build housing or handout inflated mortgages.
In my opinion, this is going to lead to a massive economic collapse, but who knows, maybe things are different, I can be optimistic, maybe the money printer going Burrr is the new normal and we should just get used to this.
The problem however is that money is usually tied to productivity and regardless of what you want to back the money by, people are going to want to know how the government pays for itself, because if let’s say Canada is paying for its government exclusively by printing money, other countries and individuals will ask, why can’t they do the exact same thing, especially if they’re getting massive inflation by hoarding U.S dollars while countries like Canada enjoy the benefit. Remember if you don’t have wholesale access to U.S dollars outside of the United States, inflation is going to hit you really hard!
If you’re wondering how the scenario of dumping the U.S dollar can come to fruition Canada is the perfect example, of how. Now, if the U.S dollar monopoly is threatened, it really does become every central bank for themselves, meaning that the U.S dollar if threatened might see an UNEXPECTED spike in interest rates.
This fiat system works until it doesn’t and what I’m noticing when I read most Canadian writers is that they don’t understand why countries hoard U.S dollars. Canada has been very irresponsible with its money printing during the pandemic, now, I don’t know, maybe things are all well and good, but in an effort to control out-of-control inflation, it wouldn’t surprise me if countries all over the world begin dumping U.S dollars.
If this happens in massive waves, the Federal Reserve will be forced to react and if this event occurs, Canada, which has a dwindling private sector(REAL trade deficit) is in horrible shape. Most people don’t understand austerity measures and the true cost of things being realized in an environment in which there are wage and price controls all over the Canadian economy.
Because America currently doesn’t have a transfer payments system, when one U.S States raises taxes and adds on regulations, people simply move to another U.S State. Biden’s non-market-based economic decisions could create a dire situation for the U.S economy, which could trigger countries all over the world to dump the U.S dollar.
Now if you’re an American who isn’t overleveraged, the U.S dollar in free fall could be the best thing to ever happen to you, because not only will SOME asset prices be going up, but there will be fire sales everywhere because in a market economy, people forget it’s a ZERO-SUM-GAME!
One person going bankrupt equates to huge opportunities for financially responsible people. However, the reaction to inflation running red hot is that people will assume the government can easily fix the problem, well it’s been almost a decade since the Venezuelan government lost control of their economy, it’s been even longer since the Zimbabwe government lost control.
But don’t be confused, there are still people who live very well in both Zimbabwe and Venezuela, crashes destroy the poor and the middle class, because it’s usually the poor and middle class who vote for Big Government and will continue to vote for Big Government even when the economic evidence suggests they shouldn’t.
I repeat, it appears to me after reading the article below, that a lot of financial experts in Canada don’t understand what happens when the U.S dollar gets dumped and what that would mean for Canada.
Interesting times ahead!