How Joe Biden and Donald Trump’s stimulus packages will affect the Bank of Canada – November 3, 2020,
I’ve read from a lot of different sources that Joe Bien and Donald Trump will be the same because both will be offering stimulus, I disagree. All stimulus is not made equal, ever since Government became a business meaning in many instances the public sector of a country whether it be individuals who get paid directly from the government, private entities protected by the government, or contractors dependent on government contracts the government is now a business and therefore taxes and regulations play an important role in central bank policies.
Now, because American dollars are exported and even used in countries all over the world, the appreciation of other currencies can become very problematic if the U.S economy becomes stagnant. So to start I will write about what I expect will happen to Canada’s central bank if Joe Biden wins the 2020 U.S Federal election and what will happen to Canada’s central bank.
If Joe Biden wins the 2020 election
If Joe Biden wins the 2020 election, a few things Canadians should be aware of is that, nothing might happen for months, everything will appear the same, the media will be boring again, all media outlets ill be trying to get an interview with Donald Trump, Donald Trump will be a bitter for former President will be pointing out everything Joe Biden does wrong and I genuinely think Trump will have a cult-like following which will turn their frustrations on Joe Biden and Kamala Harris.
I also don’t think Joe Biden will be a good representative of the modern Democrat Party, which has gone further left, but Joe Biden would be wise to do nothing during his 4 years in office, but if he begins to add on regulations and raise taxes, this will equate to money fleeing the U.S. I don’t see how any Joe Biden or Kamala Harris announcement about the U.S economy could be good for the U.S Forex markets and what this means, in my opinion, is that the U.S dollar is going to be debased.
We’re on election day and the U.S dollar is already down, nobody expects Trump supporters to riot, people expect the Far Left to riot, so there’s only one reason the U.S dollar is down on election day and that reason is that the markets think Joe Biden will win the election.
Now, for Canada, a devalued U.S dollar and a Joe Biden U.S economy with higher taxes and more regulations will push the Canadian dollar higher. Why is this problematic for the Canadian economy? Because Barack Obama’s economy only became to rebound when the rest of the world began devaluing their currencies as the U.S dollar was debased.
In Canada, the then Canadian Prime minister Stephen Harper turned his back on Alberta and bailed out the Canadian housing market when the Canadian dollar reached parity with the Greenback. The Bank of Canada under Stephen Poloz made up a ridiculous reason to lower interest rates when while the Canadian housing market was already booming.
This lowering of interest rates by Poloz was absolutely necessary to keep Canada’s economy afloat as it made the U.S and U.S products a lot cheaper for Canadians to buy. Canadians even began attempting to purchase cars with now higher valued Canadian dollars, all of the protectionism in Canada that is used to make Canadians pay more for things was being destroyed by the stronger Canadian dollar and therefore the Bank of Canada did everything in its power to bring the purchasing power of the Canadian dollar down.
Joe Biden Stimulus
Now, if Joe Biden wins, expect a stimulus package with higher taxes and more regulations which equates to the Canadian dollar rising again, however, this time things are far worse in Canada than they were under Stephen Harper, Canadians and their governments are in historic amounts of debts and Canada has a cash flow problem, so to stop the Canadian dollar from rising the Bank of Canada will have go to negative interest rates.
The problem with negative interest rates in Canada is that unlike Japan and Switzerland which have strong manufacturing based on policies which support small, medium, and large businesses, Canadian industry has already been undermined by government policy and this is why I believe inflation in Canada will run red hot, because we’re heavily reliant on exports, but our government policies are geared to made in Canada, which is going to trigger a MAIN STREET economic collapse.
I also think when the bank of Canada goes negative the U.S federal reserve won’t because I doubt the Republicans are going to simply roll over and die when Joe Biden becomes President, the Republicans will attempt to block everything Biden does and what this means is that the stagnant U.S economy will be exported to Canada. This means Canada will have a cash flow problem which I think will trigger an economic collapse.
If Donald Trump wins the 2020 election what happens to Canadian Central Bank
The Canadian central bank will benefit from Donald Trump, but it will come at the expense of Justin Trudeau who will find fewer people willing to invest in Canada’s economy. This poses an entirely different scenario. Donald Trump was talking down the U.S dollar, Trump wanted the U.S dollar to go down to make made in America more appealing, this economic tactic by Trump to talk down the U.S dollar has proven disastrous for the rest of the world because Trump’s tariff policies are geared towards countries like Canada in which Trump believes is manipulating its currency.
What Canadian Prime minister Justin Trudeau may or may not know is that Canada’s private sector is at a breaking point and in order to fix the Canadian economy, Trudeau will have to cut the size of government because under Trump the Canadian dollar will most likely fall and what this means is that negative interest rates with an already falling Canadian dollar will be a boneheaded mistake, what might happen is interest rates might be forced to either remain where they are or forced to go up.
Otherwise, inflation in Canada will run red-hot because as I’ve pointed out Canada is heavily reliant on imports and more regulations on the Canadian economy equate to fewer PRIVATE SECTOR jobs being created. Also, a lower-valued loonie equals higher consumer prices, so Trudeau if Trump wins will be a disaster for Canada’s Mainstreet economy, if he continues to overspend and overregulate Canada’s economy.
Both Biden and Trump are bad for Canada’s central bank but I’d argue Joe Bidens America will be much worse, because, Biden will put Canada’s central bank in a position where it’s forced to go into negative interest rates.
Canada is no Japan and we are no Switzerland, both Japan, and the Swiss go negative because their small, medium, and large companies are prioritized by their various levels of government, Canadian governments prioritize big businesses, small and medium-sized business are not prioritized in any province in Canada.
Canada has a strong union culture and unions prefer big businesses. Small and medium-sized businesses in Canada survive fr the most part by hiring family and friends or only hiring a small number of people, also in Canada, medium-sized businesses especially are punished for growth, so most medium and small businesses in Canada intentionally don’t grow in fears they might be the next business targeted by the socialist government.
I say this because getting Canada’s private sector in more debt isn’t going to work with Trudeau’s policies and this is why Trump also poses a potential problem for the Bank of Canada. Now Trump’s stimulus package differs from Bidens in that America’s small and medium-sized businesses, need not worry about the heavy hand of government. Biden will spend in a similar manner that Trudeau spends, Biden will spend money and regulate, meaning that Americans lose their purchasing power, Trumps spends and cuts regulations, meaning that when an American businessperson spends money on equipment, he/she won’t have to worry to worry about being regulated out of existence by the federal government.
one of the reasons the Democrat-run U.S States are in so many economic problems with Trump as President is that Trump by cutting regulations lowered the cost of living, but the Democrat-run states in order to pay for pensions and other big government initiatives have not cut regulations and therefore republican states which are better aligned with Donald Trump’s regulation cuts have benefitted greatly.
Now, with Joe Biden even the Republican States are going have problems, because the Federal Government, under Joe Biden will more than likely reward badly Democrat-run U.S States, with stimulus spending which isn’t investment worthy for the private sector. This is going to push the U.S dollar downward pushing the Candian dollar upward and this is what will separate Donald Trump from Joe Biden in stimulus spending.
Now, who knows maybe things go left for Canada regardless of who wins the U.S Federal election but those are my thoughts based on the policy proposals of both presidential candidates.
Interesting time ahead!