Central Banks Will Always Be Political: Bank of Canada considers raising interest rates at a slower pace, while Justin Trudeau Increases Spending – November 8, 2022,
I remember when Stephen Harper hired Stephen Poloz, Stephen Harper, wanted to make good on his promise to shrink the deficit, and Stephen Poloz, a dovish Central Banker, assisted Stephen Harper by lowering interest rates, which also lowered the Loonie and gave the Canadian economy a little boost, which did help Harper to achieve his goal, HOWEVER, the downside to this move by harper was that artificially low-interest rates, signaled to the markets to get into more PRIVATE debt, which is what a lot of people did, and home prices began to spike, the Toronto housing boom as an example occurred primarily because of the ARTIFICIALLY low central bank policies coming from Stephen Poloz.
People in Canada began imagining that Zero Interest Rate Policy would never end, so why not buy now, right? House prices had to go up forever. Well, this one bad decision by Harper help Justin Trudeau launch his political campaign; CANDIDATE Justin Trudeau stated that low interest rates was the perfect time for the government to SPEND more.
The Canadian people agreed and Justin Trudeau beat Stephen Harper in a landslide; eventually, central banker Stephen Poloz was replaced with Tiff Macklem, and as Pierre Poilievre likes to point out, Tiff Macklem has been very political in his decision-making. I personally think that Pierre Poilievre should avoid attacking Tiff Macklem because what Pierre Poilievre will likely do is hire a Bank of Canada governor who is aligned with the Pierre Poilievre vision for the country.
If you wonder why some of us want central banks to be abolished, it’s because they’re POLITICAL. The article below describes Justin Trudeau’s RECENT vote-buying schemes; it’s important to remember that Justin Trudeau hasn’t been POPULAR in Canada since he legalized pot; the only reason Trudeau is Prime Minister today is because of NDP propping up his government.
In order for Trudeau’s government to get the support of the NDP, Trudeau has to spend and enact NDP regulatory policies, which in a nutshell, is going to cause rampant inflation.
The writing is on the wall that the Canadian economy is likely headed for a MASSIVE recession., yet, I’m hearing word that the Central Bank of Canada is thinking about not being as aggressive with its rate hikes moving forward. For some people reading this, they’re probably like, “Yeah, the bank of Canada should stop aggressively raising rates; we’re headed for a recession, and the central bank should be stimulating growth by lowering interest rates.” Although I comprehend the argument that interest rates should be lower during a recession, I need to point out why the recession is happening.
Canada, as well as most parts of the world, is experiencing a SHORTAGES recession, meaning that the economy is actually DEFLATING. Now, one of the reasons we have RULE BY FIAT money and a central bank is to prevent DEFLATION. Under a gold standard as an example, if there’s no gold, the government nor the central bank can print money because then creditors can call in their gold, meaning that the paper money would have to be taken out of circulation and exchanged for gold.
Under a gold standard, it kept government spending and, therefore, GOVERNMENT REGULATIONS on economic activity in check. What people tend to forget about the great depression is what caused it in the UNITED STATES. In the past, WAGES were known as a fancy word for PRICES. Prior to Franklin D. Roosevelt (FDR) the main responsible for creating a FEDERAL minimum wage in the United States, whenever there was an economic downturn, instead of FIRING people, the private sector job creators would lower the price of their employee’s LABOR.
This is one of the main reasons why Karl Marx was so influential during the period of FDR. Capitalists often like to take Karl Marx out of context; although I’m not a fan of Marxism, I still have to give the man his just due because he did point out something about capitalism that allowed people to imagine a socialist utopia.
During periods of recession or economic downturn, the private sector would attempt to LOWER prices to get CONSUMERS to spend more money. Well, the FEDERAL minimum wage law changed all of that, as the Federal Minimum wage law made it ILLEGAL for employers to pay wage EMPLOYEES a price for the labor lower than the government claimed was acceptable.
The minimum wage was basically made up, and because it was made up out of thin air, it guaranteed the DESTRUCTION of the gold standard, and it also changed how private companies did business. The Forex markets were created about 500 years ago, and quite frankly, the forex markets are the main reason why the fiat monetary system works alongside the minimum wage law, because as an example, if China’s currency is worth less than the U.S dollar, employers will prefer to do business in China.
China being communist means nothing as long as the regulations in China are not as complicated as they are in the United States. Now imagine Justin Trudeau declaring war on fossil fuels and making it very difficult for fossil fuel companies in Canada to provide LOW-COST energy, but China makes it easier and cheaper to provide low-cost energy; Communist China becomes a better destination for investment than Canada.
Now, the right thing for the central bank of Canada to do is to raise interest rates on Canada’s Federal government so high that it gets their attention, but ofcourse the Central Bank of Canada doesn’t want to do what the MARKET would have done. Instead, the central bank seeks to provide STABILITY despite the reckless spending of the Federal government.
For some, they might imagine Tiff Macklem as a worse central banker than Stephen Poloz, but I’d argue they’re both the same; both were POLITICALLY motivated, sure they will tell you they’re not, but they were both hired for a reason, and that reason is to make sure the Prime Minister looks as good as possible, regardless of how BAD the policies of the politician in power.
So now, people like me wait in limbo to see what the central bank of Canada does in RESPONSE to Justin Trudeau’s willingness to tax, regulate and spend when all of his prior spendings created a shrinking private sector and record-high deficits. This a reminder that the government doesn’t really create anything but INFLATION, so as the private sector shrinks, it’s a clear indication that more inflation is coming and central banks are purely political.
Interesting times ahead!