Despite what many want you to believe, central banks exist for the benefit of their FEDERAL governments. The Foreign Exchange Markets(Forex Markets) don’t care about the fiscal mismanagement of a nation.
The Forex markets only care about a currency’s popularity. The USD reigns supreme globally primarily because of PROPERTY RIGHTS. Unlike countries like China, in which their currency isn’t imagined as property, the US dollar is imagined globally as property worth cherishing.
Why this relationship exists, is because America promotes itself as a CONSUMPTION-based nation, meaning that if I produce something and I want CAPITAL for what I produce, I can sell my product in the U.S. market from a non-US country and get more US dollars back than I invested.
This simple relationship makes the U.S. dollar worth HOADING. Now, Joe Biden is bad for this relationship because of his fiscal policies, in which he imagines that no matter what he does to the U.S. tax code or regulations on economic activity, the economic result will be the same.
In Canada their Prime Minister Justin Trudeau imagines the same, and this is bad fiscal policy, and it’s SUPPOSED to be the responsibility of the central banks to keep this check.
If the fiscal policy of Federal leaders equates to the federal government being ENTIRELY reliant on printing money to pay the bills of the Public Sector/Welfare State, that means that the LEDGER of the Federal government is not only bankrupt but promoting a culture of BANKRUPTCY.
In Canada for example:
Insolvency Statistics in Canada — January 2024 (Highlights) Bankruptcies increased by 22.2% and proposals increased by 20.1%. The total number of insolvencies in January 2024 was 27.4% higher than the total number of insolvencies in January 2023.
and in the United States:
Bankruptcies Rise 16 Percent Over Previous Year(Highlights)Bankruptcy filings rose 16 percent during the 12-month period ending March 31, 2024. That is a similar rate of acceleration as in the Dec.
This should be a clear indicator of the FISCAL health of the economy under Justin Trudeau and Joe Biden; if the central banks of both countries want to REWARD incompetent FISCAL policy, one has to expect that the federal leaders of both nations will rinse and repeat what they’ve been doing.
In the real world, if I’m bankrupting my business and I go to a bank, it’s unlikely that a profit-driven private bank is going to reward my financial mismanagement. But in politics, a lot of people, or believers in Keynesian economics, imagine that politicians should be rewarded for fiscal mismanagement because it’s for the “greater good” of the Western world.
Obviously, as a believer in Austrian economics, I disagree with that.
Interesting times ahead
