Oil Price and the Petro-Canadian dollar are on the rise, U.S dollar continues to retreat, Canadian debt very problematic – December 4, 2020,
So Justin Trudeau Canada’s current Prime Minister unbeknownst to him tends to forget that even prior to him becoming Prime Minister the Canadian dollar has been artificially priced down. Candidate Donald Trump was the only Presidential candidate I can ever remember who made currency manipulation a central theme of his campaign.
Now, most Americans, including American investors, don’t understand what currency wars are, because American consumers are often the beneficiary of currency wars, but currency wars sneak up on you, this is novel territory we’re in, and because there’s no Gold standard most people have a hard time comprehending the U.S Federal Reserve is the representation of a Gold Standard.
Under a Gold Standard, the Gold never loses, however, what a Gold Standard does is it controls government spending, A government can’t spend the way Justin Trudeau is currently spending if Canada was under a Gold Stanard, because investors would demand their gold back.
But because we’re under a fiat monetary system, governments can merely go to the U.S Federal Reserve to secure the value of their currency. The problem with this however is when the U.S debt becomes cheaper to pay back, why wouldn’t higher priced Loonies be used to pay back lower value U.S dollars you ask? Because MOST of the Canadian economy is based on attracting investment destined for the United States.
So $15 an hour USD differs from $15 per hour in Canadian dollars, if you’re a business which has most of its customers in the United States, Canadian labour is a lot cheaper than American labor and depending on the President and the State, along with USMCA the benefits for a large business to be in Canada are great with a devalued Loonie.
Now, this devalued Loonie relationship is often misunderstood by Leftist politicians who imagine debasing the Loonie as a means to grow the size of government. Justin Trudeau has openly proclaimed his stupidity several times by proclaiming that the lower interest rates equating to the Canadian government’s ability to spend more.
But government spending comes with liabilities, anyone who has ever been in debt, knows that unexpected and unforeseen things will happen when you’re indebted, in Canada’s case we now have the Coronavirus, this is of course in economic terms deflationary, but what’s being ignored is that productivity is down ALL OVER THE WORLD! and Donald Trump might lose the 2020 election.
Donald Trump is the first U.S president to work closely with middle eastern leaders, Donald Trump didn’t approach this middle eastern OPEC leaders from a position of weakness, he approached them from a business standpoint. Because of this standpoint, OPEC didn’t simply raise prices whenever it felt like it, during Trumps term the price of oil was an afterthought, well, Joe Biden if he wins is a return of the old ways of politics and with every passing day, it appears that Joe Biden is going to win, the U.S dollar continues to decline and the price of oil becomes a talking point.
I have to remind the reader lastly, that Joe Biden has promised to go back into the Paris Climate agreement which means American energy companies won’t be competitive, this also means that Alberta unless Trudeau unleashes more regulations will be competitive with American energy again.
But the clash between Western and Eastern Canada has always been the same, Western Canada doesn’t benefit from a lower Loonie, Eastern Canada benefits from a lower Loonie and if the Canadian dollar continues it’s ascension I can imagine Canada’s central bank intervening with lower interest rates that could go into negative territory!
What this means is if interest rates go down the Canadian cost of living will go up, during a period in which the Canadian Mainstreet economy is being ravaged by deflationary forces. This ultimately leads to an asset price boom at the expense of small and medium-sized businesses as well as renters! This is how the rich get richer and the poor get poorer!
Oil Prices Inch Towards $50 On OPEC+ Agreement | oilprice.com
Interesting times ahead!