The Declining Canadian Dollar, No Gold, Big Debts, Low Rates and Lots of Entitlements!
As of May 8, 2018 the Canadian dollar has been declining and this time there’s no hopes of saving it, at least there are no immediate hopes of solving the systemic problems that are now associated with the Canadian dollar. The declining Canadian dollar is going to hurt those on fixed incomes the most, most notably those retired barely getting by now. Canada has a systematic problem that revolves around unions, entitlements and regulations. Donald Trump’s talks of renegotiating NAFTA, has really shone a light on the Canadian economy, not so much from outsiders but from the private sector within Canada, who for the most part have been suffering in silence for years.
Now by business in Canada I should mention that I’m talking about small businesses that have no government protections in place. Canada has some of the lowest business taxes in the world, primarily because so many of the larger corporations in Canada are for the most part protected by the government. In politics you’ll often hear Liberals talking about the rich using small businesses as tax loopholes, but those tax loopholes exist because of the big corporations like Rogers, Bell, Canada Post, Public school teachers etc. have such massive competitive advantages over everyone else in their respected industries that if there were no tax loopholes or credits the small business community would vanish.
Why this is becoming such a problem now is that the strength of Canadian dollar is being compromised as it’s relationship with oil is being severed in a time when Canadians are multiple types of debts. For the most part what Canadians aren’t realising is that we’re uncompetitive on multiple fronts. The BoC currently has its rates lower than America’s federal reserve. The Liberal party of Canada is running a deficit, they’re intentionally running a deficit, although Stephen Harper ran a deficit he was making an effort at least on the surface to shrink it. Justin Trudeau’s Liberals are making no effort whatsoever to shrink the deficit in fact they’re basing their increased spending on, investing for the future.
What this equates to debt on personal level and government level which comprises the Canadian economy. To make matters worse it’s important to note that Alberta and British Columbia are fighting over oil pipelines, Prime Minister Trudeau has been rather quiet regarding this issue. It’s not to say, he’s not doing anything, but what I’d say is imagine if Donald Trump were prime minister of Canada and he had the power to allow the oil pipeline to operate, wouldn’t he be on Twitter right now garnering support to get the Oil flowing? Trudeau has made his point clear but the sense of urgency isn’t there and it should be because if the Canadian dollar is no longer a petrodollar it will be considered a commodity-less dollar which could put the Canadian dollar in free fall, which will put more pressure on the BoC to raise interest rates, which equates to Trudeau’s deficit becoming a whole lot more expensive.
To add to this disaster are the Canadians already in debt, sure we can talk about the mortgage debt, but lets not forget about the other debts and lets not forget that items purchased using debt to depreciate and need repairs. These are events that lead to economic collapse. I wrote about this very topic when Stephen Harper was in power, while Harper was in power the real estate community wanted the Bank of Canada to lower interest rates while the Canadian dollar was rising, their excuse was that a lower loonie was good for Canada, in the business sector of Canada there were a few problems from the higher loonie, as an example Canadians taking their higher valued Canadian dollars to make purchases in the United States, which is what added more tariffs to American made goods coming into Canada.
But see when Trudeau made all his promises to his people he forgot that the market can change at anytime and Canada for the most part is still a small player because well… We have so many heavily regulated industries that are for the most part controlled by Unions, so as Unions and regulatory bodies seek to gain more control of an already fragile economy what happens is the weight starts to get to great. Picture an obese person with slim skinny legs and small feet. The problem with over regulation is what’s it crashes, nobody knows where to start to clean it up. That’s the problem with Venezuela, because Venezuela is so regulated and so anti-business, most business left and weren’t replaced, which meant the Venezuelan economy became dependent on imports, which also distorts the education system because the education within the economy wouldn’t be devoted to the demands of the free market, because the free market wouldn’t exist.
At this point Canada is becoming increasingly dependent on foreign entities, our major industry has shifted from oil and is now in the hands of bankers. Canada is not Venezuela but in comparison to other OECD Canada is becoming increasingly unstable and we’re able to hide it currently because America is our largest trading partner and 2 we have our own currency. If let’s say the U.S and Canada shared the same currency Canada would be way worse shape and there would be no way to cook the books.
Entitlements require the free market to fund it and when I listen to large chunk of the Canadian population what comes to mind for me is the JobLoft deal on Dragons Den where a few young kids created a business with massive potential only to have the deal screwed over by a public school teacher who never ran a successful business in his life. Consider watching the videos below:
http://www.cbc.ca/player/play/2384461270
http://www.cbc.ca/dragonsden/pitches/jobloft
Now, many will say the kids got $1 million in Cash and another million is stock, great deal right? Wrong, what you forget to mention is JOBLOFT LEFT CANADA. Try typing JOBLOFT.com into your browser, when you’re forwarded to a new website consider clicking the contact page to see where they’re located now.
This is the type of thinking that’s happening to Canadian oil, this is what’s happening to a lot of large businesses in Canada this is what’s happening all over Canada. Businesses, business people in Canada are leaving, Canada is having a brain drain, and it’s being replaced with a big government, service sector economy and everybody is thinking this is okay. This is not okay, big government regardless of incentives equates to less businesses wanting to be located in Canada. We are in a global economy, like it or not this is the world we live in.
I personally have nothing against crypto currencies, but when I look at cryptocurrencies what I look at is the mining process for cryptocurrencies, the maintenance. The moment you outsource maintenance you increasingly become reliant on outside entities to keep your operations afloat. As the brain drain continues, Canada is going to find itself in very compromising positions. I’ve often said that the Conservative party of Canada often keeps the seat warm for Liberals.
I personally think in Ontario Doug Ford has a good chance to win the provincial elections, but what bothers me most about Doug Ford is what bothers me about the progressive conservative party of Canada. Doug Ford said not a government job was lost when his late brother Rob Ford took over as Toronto’s mayor, that’s a horrible plan for a conservative if you ask me. It’s Stephen Harper’s lack of trying to change anything that’s lead to Justin’s Liberals assuming that economies fix themselves and if Andrew Scheer wins the coming federal election there’s a very real chance that the economic collapse will happen on his watch.
As Canada becomes more reliant on imports the value of the Canadian dollar not just to the United States but to other currencies will lose trading value as less people will want to hold it. This puts increased pressure on the Bank of Canada to raise rates and if the Bank of Canada raises rates and is forced to continue to raise rates to prevent hyperinflation Canada might become the Venezuela of the OECD!
Interesting times ahead
