Higher Oil Prices Haven’t Helped The Canadian Dollar, the Numbers for the Canadian economy continue to worsen (2011 Loonie and Gas Prices vs Early 2022) – February 22, 2022,
The debt numbers for Canada are looking horrible and if you’re living or investing in Canada, you’d be wise to pay attention, because all signs point to a recession, which I’d argue could quickly accelerate into a depression based on current regulatory policies by the Federal government of Canada. Usually, the Canadian dollar rises as oil prices rise, but this hasn’t happened yet, and why I think this isn’t happening has to do with how the Canadian economy looks on paper.
On paper what I see is a country with a currency that could be on the verge of collapse. As I’ve stated in other posts, regulations on the energy sector put more pressure on other sectors to raise their prices, when companies are forced to raise their prices, domestic consumers have less purchasing power and making matters worse are the levels of debt in Canada.
It’s one thing to be paying higher prices when you have savings, it’s something entirely different when you’re paying higher prices and you’re deeply in debt? Even in the event of a great reset, it’s unlikely most of the regulations that exist today will disappear, which ultimately means that the new normal in Canada could very well be a DEFLATIONARY economy.
Deflation tends to equate to shortages of certain things because if the seller can’t make a profit, the seller won’t bother to invest. The loonie usually benefits from a higher oil price, but so far that hasn’t happened.
The exchange rate between Canada and the U.S. is often strongly correlated to the price of oil. Over the long run, when the price of oil rises, the value of the Canadian dollar (also called the loonie) also usually rises relative to that of the U.S. dollar. That correlation can be directly attributed to the way Canada earns most of its U.S. dollars—from the sale of crude oil—and the percentage of Canada’s revenue that this constitutes.
How & Why Oil Impacts The Canadian Dollar | investopedia.com
Now, based on my data, that I use to invest, Canada is headed towards a crisis, by crisis I mean a hyperinflationary crisis, as our reliance on imports continues to rise and we’re basically tapering over our problems by boring money that’s also being malinvested. I think what most people tend to forget when the government borrows money is that the government is supposed to get a return on investment. If the government fails to get a return on their investment, their deficit not only balloons, but it puts more pressure on the central bank to raise interest rates.
Canada posted a trade deficit of CAD 0.14 billion in December of 2021, the first trade gap since May, from a downwardly revised surplus of CAD 2.47 billion in November and compared to market estimates of a CAD 2.5 billion surplus. Imports jumped 3.7 percent to a fresh record of CAD 57.7 billion, largely boosted by electrical equipment and parts due to improvements in the supply chain of smartphones and components. Purchases also grew for motor vehicles and parts, as Canadian auto plants are typically closed during December. At the same time, exports decreased by 0.9 percent to CAD 57.6 billion, led by the first decline in energy product sales in eight months due to lower prices for crude oil. Sales of coal also lost ground, largely due to interrupted supply chains amid rail disruptions in Western Canada.
Canada Unexpectedly Reports Trade Deficit | tradingeconomics.com
If you read the blockquote above it mentions declining crude oil prices? If you visit any oil chart you’ll notice that oil prices have been doing nothing but rising since 2021 and ok let’s make the argument oil prices dipped in December, which the data shows it did, what’s with this steady lower loonie with record-high oil prices?
Weekly Brent, OPEC basket, and WTI crude oil prices from December 30, 2019 to February 14, 2022 | statista.com
The Canadian dollar reached $1.06 (US) on July 21, 2011, why? Because oil prices hit record numbers? The Average Closing Price of Brent crude oil in 2011 was $94.88, close to where it is now in 2022, however during that period the Canadian dollar reached parity with the Greenback?
At the height of the commodity boom, the Canadian dollar reached $1.06 (US) on July 21,
2011. It then experienced its fastest decline in modern-day history as commodity prices rapidly
BRIEF HISTORY OF THE CANADIAN DOLLAR | Peter Muldowney cclgroup.com
Currently, as of today’s date February 22, 2022, the price of Brent Crude oil is $93.54? It currently costs a Canadian about $1.28 to purchase $1.00USD? As of today’s date, the Canadian dollar is nowhere near parity with the Greenback, why that is? I don’t know, but the charts are telling me Canadians should brace for ANOTHER spike in consumer price inflation, which by all indicators looks like a recession and I’m not only talking about a small recession, the numbers resemble a potential depression.
In response to what’s coming I expect more stimulus, but because of the existing government regulations, I suspect this will only accelerate the problem. Canadians should contact professionals only for their financial advice.
Interesting ties ahead!