Will The Forex Markets Punish The Canadian dollar? In The Face of Record High Consumer Price Inflation and Higher Interest Rates, Deputy Prime Minister Chrystia Freeland is reportedly set to unveil a $7 billion STIMULUS package – June 16, 2022,
I’ve been saying for years that what separates the United States from countries like Canada, is that with all the rhetoric, the United States still has Fort Knox. Canada has no such equivalent, now I imagine in the event people and countries start rejecting Fiat money, The Royal Canadian Mint which is a FEDERAL Crown corporation of Canada will find their largest buyer being the Canadian Federal government, but even confiscation of The Royal Canadian Mint wouldn’t be enough to finance Canada’s giant welfare state, which let’s be clear is the real problem here.
Canada by no means is an insolvent country, the financial problems in Canada stem from too much government stealing too many resources, usually via the INFLATION tax. Prior to consumer price inflation, it was asset price inflation, well, a rising interest rate environment, puts asset price inflation at risk, a person’s net worth is often a WORTHLESS measure of wealth, that only applies to assisting individuals in having greater access to capital.
a smart BUSINESS person is cash flow positive in an up and down market, whereas a financially illiterate person is usually heavily dependent on asset price appreciation. In countries like Argentina, Venezuela etc, the governments often hyper-inflate the currency to pay for expenses, they can’t collect via taxation.
Now, what makes Argentina different from Canada, is first of all history, but secondly, the Canadian dollar is RESPECTED on the global stage, the Foreign exchange markets, think well of the Canadian dollar, which the Canadian government often uses to not only run perpetual deficits but to also endorse failed communist ideas like Supply Management.
Supply management works in Canada because the forex market doesn’t punish us for trade practices, furthermore, the United States is our largest trading partner(a huge benefit), and China also helps in driving the cost of living down for Canadians. I remind you that prior to the European Union, a lot of Western European nations, employed a lot of the Socialist-Communist schemes, Canada has been employing for decades, why these schemes work in Canada and don’t work in places like New Zealand, is our close relationship with the United States.
Canada’s Private Debt to GDP is among the worst in the world – Let’s Talk about Canadian household debt to GDP and why it’s so high
New Zealand’s economy crashed because of Supply Management in the 1980s, Canadian consumers are still willing to pay inflated prices for a lot of things, why? Well, I argue it’s because we manipulate our currency, but the truth is, it’s because of Canada’s willingness to take on PRIVATE DEBT. Canadian banks are rather liquid, Canada is known for having a pretty good banking system, and the ease with which PRIVATE citizens can go into debt in Canada allows the flourishing of Crown Corporations like the Canada Mortgage and Housing Corporation(CMHC).
I’m the rare writer in Canada, that talks about the differences between the United States Postal Service(USPS) and Canada Post. In the United States, Americans are paying for the USPS, Americans know they’re subsidizing the entire operation, in Canada, Canada Post is a Federal CROWN CORPORATION, it’s not included in Canada’s Gross domestic product (GDP).
So when Canada Post is insolvent, it’s similar to The Royal Canadian Mint is insolvent, it’s not on the balance sheet, it’s merely considered an ASSET, the government can sell off as they did with Petro-Canada, the last time Canada had austerity measures. If you’re not following me here, I’m referring to why most CANADIAN private citizens are in debt in the first place.
Most Canadians are indebted because they’re paying an artificially high cost to their government. The USPS even has a tracking number for postage mail, Canada Post doesn’t, why? Because why should they? They don’t have to answer to Canadian consumers and they have the protection of the Federal Government. In America, USPS although INEFFICIENT are part of the political cycle, if postage workers want to keep their jobs, and voters have DEMANDS they expect the post office to meet, the post office better damn well meet the demands of the American people.
Household debt to disposable income ratio
One common way to measure household debt is the household debt to income ratio. This measures the value of a household’s total debt against its disposable income. In the fourth quarter of 2021, Statistics Canada reports that the household debt to income ratio rose to 186.2, meaning that for every dollar of household disposable income, Canadians owe $1.86 on average.Canada household debt to GDP ratio, inflation and interest rates: putting it all together | canadianrealestatemagazine.ca
Canada’s supply management system for example doesn’t go to the Canadian people to raise their prices, they go to bureaucrats, and until Maxime Bernier brought this to the forefront, most Canadians didn’t even know they were paying inflated costs for certain foods. I also bring this up because not only is Canadian household debt to GDP on the rise, so is Canada’s government Debt to GDP.
The article I’m pointing to below is referring to The Liberal Government of Canada’s plan to stop inflation. Their plan is to give Canadian people and entities they imagine as worthy, more fiat money? Now, I want to remind the reader that it’s not a guarantee that raising interest rates is going to stop consumer price inflation, but it’s likely to bring down lower asset price inflation, which greatly affects Canadians’ ability to borrow money.
Because consumer price inflation is running rampant, it also equates to government borrowing and PURCHASING fewer goods and services. Do you follow me here? So even though Justin Trudeau and Finance Minister Chrystia Freeland imagine they’re buying votes, the truth is they’ll either be buying fewer votes or they’re going to have to spend more to buy the same amount of votes, and because interest rates are higher, it’s going to be more expensive to pay back their debts.
I remind you that Justin Trudeau has also declared war on fossil fuels, Canadians are still paying carbon taxes and Trudeau is still overly regulating Oil and gas and other energies Liberals imagine as dirty. So taxes that would otherwise be coming from these industries via PRODUCTIVITY is now coming to the government via mostly taxation.
The taxation is getting to the government via Canadians paying more for the exact same services, thereby equating to other industries in Canada losing market share, which is the real reason why the Canadian government feels the need to ship out more stimulus spending. If you’re not paying attention, the U.S is aggressively raising interest rates, likely to bring them back down again in the not-so-distant future, but you’re starting to see the gap widening between the U.S dollar and the Canadian dollar.
Japan Households Debt To GDP
Now, the Yen I believe is also falling, as well as other currencies, but this is where most people don’t understand how bad the problem is in Canada. In Japan a few years back, I think it was their finance minister who said to Japan’s elderly population, “hurry up and die” because Japanese people live long and the government didn’t like the strain it’s elderly were the government, well do yourself a favor and compare Japans Household debt to GDP and compare it Canada’s.
Now if you listen to most experts, you’d think Japan would be higher than Canada correct? I often write about Japans 100 year amortizations, now, with 100-year mortgages, you’d assume Japanese people would be in more debt than Canadians? Nope, Canadians are in more debt than Japan is, and I’d argue Canada has a much larger welfare state than Japan.
The Japan Private debt numbers haven’t been updated recently, but you’ll notice for how long a period Canadians have been carrying more debt than the Japanese. It’s not like Canada has a flourishing private sector either, and I have to remind you one of the main reasons, Japan’s numbers look so bad in recent years is because of their government’s extreme measures regarding the pandemic.
Canada’s private debt numbers were steadily rising without the pandemic, whereas you say fluctuations in Japan. I think the article below has the right idea, the Liberals plan on fighting inflation with more inflation because in their minds, I assume they imagined their prior plans worked? The way I see it, Canada is headed for a serious crisis, especially if the Forex market decides to dump our currency.
Japan is WELL AWARE of its dependence on IMPORTS, but Canada isn’t, I don’t think the Canadian government comprehends how dependent Canada has become on imports, meaning that I f the Canadian dollar on the global markets starts to fall, the Bank of Canada might be forced to JACK UP interest rates, which as I’ve been saying for years now, will trigger FORCED austerity measures.
Yes, sure the housing markets might crash and all that other stuff, but what people aren’t understanding is how PRICE CONTROLS work against you during an economic downturn. The Canadian dollar shouldn’t be valued less than the U.S dollar? Why is the Canadian dollar debased? Because if it wasn’t Canada’s economy the way it’s designed now would be even more UNATTRACTIVE to private sector investment than it is now.
yes, Canada has a lot of natural resources, but the various levels of the Canadian government make it very difficult to mine for the resources. Canada’s appeal over the United States primarily stems from our ability to sell into the U.S market either tariff-free or a small number of tariffs, while at the same time rewarding our private sector with the depreciated loonie, which allows them to pay less for labor, good banking and prior to Justin Trueau less bureaucracy than the United States.
That’s all changed and if Joe Biden loses the mid-terms and the Republicans can at the very least put a halt to the reckless behavior of the Biden administration, Canada under Trudeau could be headed for a world of hurt! Then again, to be fair, the Canadian government could be ahead of the curve, because if the world is playing this RACE to the bottom game, Canada has definitely taken the lead!
Interesting times ahead!