As the U.S. economy tilts toward recession, The Canadian dollar Goes Up in value – June 20, 2019,
In an effort to save his Presidency, Current U.S President Donald Trump has been doing everything he can to push interest rates down to prevent the inevitable words recession to be tied to his name as President-elect. There are still many economists who will claim Donald Trump lucked out as President, claiming he’s the beneficiary of the Obama Presidency and basically all the successes of the U.S economy are the result of what President Barack Obama did.
If lean more to the Keynesian economic thinking, you’d come to the conclusion that Barack bailing out of the corporate sectors, as well as Helicopter Bens money printing, created a stimulus that really started to take effect when Donald Trump became President. If you subscribe to this thinking, you’re expecting a rate cut and more quantitive easing in the future. Now, this obviously serves as a temporary stimulus to the Canadian dollar, but its effects will be horrible on the long-term stability of the Canadian economy, which currently does most of its trade with the United States and is heavily dependent on keeping the loonie low to get a profit.
I doubt Canadians are ready for austerity measures anytime soon, well the unfortunate truth for Canadian consumers is that consumer prices in Canada won’t deflate even if the Canadian dollar rises in value. Recently Canada Post announced its plans to raise prices, Crown Corporations in Canada are still public servants and fall under the legislation, most of the people in Canadian parliament that vote to raise prices do not subscribe to Austrian economics.
I say this because Keynesians believe in government intervention into the economy, unfortunately for Keynesians, Canada has Public Sector Unions, I’m not against Labor unions the problem you run into with public sector unions is that they don’t do Deflation. At the very least Private Sector Unions will eventually cause a company to go bankrupt, with Public Sector Unions they’ll often cause an entire Province/State or Country to go bankrupt. Minus Austerity, what argument can you make to a Public Sector employee to take less money or accept stagnant wages? Current Ontario Premier Doug Ford hasn’t cut the size of Government and only asked for a little fiscal responsibility and he’s being treated like he’s Hitler.
Doug Ford was even booed during the Toronto Raptors parade. This gives you an idea of the thinking behind a lot of Canadians. There’s a feeling that we have an unlimited supply of financial wealth and this is why I’ve been saying over and over again that if the U.S economy tilts into recession Canada could be in a world of trouble
Because of the economic game, Canada has been playing, there’s a disaster that’s going to smack us in the face regardless of what the Bank of Canada does. I’ve said for years, that Stephen Poloz is the worst BoC governor in Candian history, well I’ll also make the argument that Justin Trudeau is the worst Prime Minister in Canadian history. Justin Trudeau is the vote-buying king, I don’t even think Canadians remember that Canada is running a deficit, I don’t think the markets are even paying attention to it. But yes, Canada is running a deficit and it’s an intentional deficit so in my own mind, it’s hard for me to comprehend why Don Pettis would write an article with the following title.
As the U.S. economy tilts toward concern, Canada’s is on the upswing: Don Pittis – CBC
Consumer debt is at historic levels, stagnant wages, low-interest rates, an already ridiculously high cost of living all over Canada and a growing Public Sector that requires a dwindling Private Sector to finance it? Even Poloz understands that Crown Corporations aren’t income producing, Crown Corporations are income consuming, in the example of Canada Post, their higher prices aren’t based on any competition, their price inflation is based on their employees demanding higher wages and more benefits. Another Crown Corporation CMHC hasn’t helped the rental market or the poor, it’s actually helped to inflate housing prices and rental prices, which is helping to increase consumer prices all over Canada and increase poverty.
Now, the truth of the matter is that by international standards, Canadians enjoy a higher standard of living than do Americans, so ask yourself the question, why is the Canadian dollar so low to begin with?
Well, for this answer you’d consult Stephen Poloz who effectively has Canadian interest rates lower than U.S Interest rates, why are rates so low? The answer he’s preventing a debt crash! Raise rates, Canadian debtors which included the Federal deficit spending Liberals will be in more debt, lower interest rates there’s a potential for hyperinflation.
But wait let me take about Canadian inflation in the right context, when a public servant has a pay scale that keeps up with inflation, any stimulus the Canadian economy gets will be consumed by the public sector, which hurts consumers. When governments talk about inflation targets what’s often ignored are the increases in prices that poorer Canadians have to pay for. Not every worker has a union that fights for them and as the cost to do business in Canada rises, there will be fewer PRIVATE companies hiring and the companies that do hire will have much higher expectations for the person(s) they’re hiring which ultimately leads to more job vacancies and an economy where only particular industries dominate. The end result for this is an increased demand for welfare.
The free enterprise system revolves around lower people having the financial ability at any time to start their own business. In Thailand as an example, their food prices, their cost of living is pretty low, why? Because as an example in Thailand their minimum wage is $220 USD per month or $10 per day, sounds like Starvation wages by our standards but have you actually been to Thailand? Businesses are everywhere and I don’t mean large corporations I mean small businesses, because when their government intervenes into their economy, there’s more consideration of the poor. In Canada, a Union representative helped to shape the NAFTA deal with the United States and Mexico, meanwhile, that same Union Rep. has seen the GM plant in Oshawa shrink in size every single year since he’s been representing them.
The GM workers don’t seem bothered all that much by the Union Representative, instead, their focus is greedy GM focusing on profits, not people, at least that’s how the Unionized workers think. I say this because Canadians don’t seem to understand the type of economic turmoil we’re heading for. Our economy will suffer greatly if the United States has a recession, the Canadian Public Sector is growing faster than Canadians realize primarily because Private Sector jobs creators are disappearing while Public Service positions are on the rise, furthermore with bailouts in the mainstream media for example as well as subsidies for many of Canada’s largest wealthiest corporations, Canada seems less friendly to economic growth.
Compounding the problem are carbon taxes and proposals for more regressive taxes and ending to supposed corporate tax loopholes. There’s a myth in Canada that I hope gets debunked when the U.S goes through a recession because I’ll say this again Canada is doing what Argentina did and what many parts of Europe did which resulted in the creation of the Euro Zone. Our public sector is huge, and price controls are all over the Canadian economy. The moment our Private Sector can’t turn a profit in Canada, we’re heading for a world of trouble!
Interesting times ahead!