Canada's Loonie Assassin Strikes Again! 12 comments
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On February 1, 2008, the day that Canadian Prime Minister Stephen Harper appointed Mark Carney as the new Governor of the Bank of Canada, Canada's currency was soaring at a multi-decade high – well above par versus the U.S. dollar.
Carney immediately began to sabotage the “Loonie” - claiming that it was overvalued, and making it clear that this Goldman Sachs Stooge would do nothing to defend the currency which had been entrusted to his care. In just eight months, this currency-assassin had caused the Loonie to plunge close to 40%.
Economic data clearly shows that Canada's economy derived no benefit of any kind from this gross (intentional) mismanagement of Canada's currency. Even as the Loonie crashed last fall, so did Canada's trade surplus. The entire justification for destroying the Loonie was that this was supposed to protect exports.
Yet, between them, Harper and Carney had managed to simultaneously destroy one of the world's strongest currencies while still managing to squander Canada's entire trade surplus – with the trade balance actually moving into a deficit.
Meanwhile, the plunge in the value of the Canadian dollar has crippled households all over the country – by unleashing punishing inflation, which is still working its way through the Canadian economy.
Earlier this year, Carney engaged in reckless rhetoric which was totally unprecedented in the history of central banks. Carney promised he would leave Canada's benchmark interest rate at essentially zero, for the next 18 months.
Keep in mind that this vow comes at a time of the greatest economic turbulence and uncertainty since the Great Depression. To illustrate this, Prime Minister Harper (who calls himself an “economist”) scoffed at the mere possibility of a fiscal deficit for Canada in 2009 – while campaigning for re-election in October of 2008.
Three months later, Harper was bragging about how he was going to rack up a $35 BILLION deficit – through trying to play catch-up to the global slowdown, because he was the last leader of any major economy on Earth to understand the severity of the global economic crisis.
Three months after that, Canada's Finance Minister announced the 2009 deficit would explode to roughly $50 BILLION. This is the largest deficit in Canadian history, exceeding even the fiscal incompetence of the infamous, Mulroney regime – the last Conservative Prime Minister which Canadians were foolish enough to elect.
Essentially, Carney has vowed to continue to sabotage the Loonie with 0% interest rates, irrespective of what happens in the Canadian economy. One might ask what is the point of employing a central banker who has promised to do nothing for 18 months?
Not so fast! Monday Carney demonstrated that he could still find a way to sabotage the Loonie even more – through “quantitative easing”, otherwise known as “monetizing debt”. This is the desperation measure which insolvent governments (i.e. the U.S.) engage in when they lack the revenues to pay their bills and are unable to attract enough foreign capital to cover the current deficit.
However, Canada has (by far) the lowest debt (relative to GDP) of any G-7 nation. Even during the worst of the crash last fall, Canadian banks were able to raise capital in the private sector – meaning that the government, itself, would have no problem raising whatever capital it required.
What this means is that there is no purpose of any kind in engaging in the most reckless policy option at the disposal of central bankers. In other words, there can no possible economic benefit to Carney's actions. It is purely the act of a currency-assassin – in this case, undertaken by a Goldman Sachs Stooge who takes his orders from U.S. masters, rather than the Canadian government for whom he supposedly works.
Under normal circumstances, we might expect such a reckless failure to be immediately fired for his incompetence. However, Harper himself spends most of his time taking orders from Washington rather than attempting to provide good government to the Canadian people who made the mistake of voting for him. Harper's careful imitation of U.S. policies toward North American auto-makers being the most recent example of such behavior.
For the last decade, Canada had the strongest economy in the G-7 – based on the stellar economic management of the previous, Liberal administration. That former government inherited the economic catastrophe caused by former Conservative Prime Minister Mulroney.
In just two years, the Liberals engaged in one of the most dramatic economic turn-arounds of the 20th century – essentially going from worst-to-first among G-7 economies during that time. Now, all the good accomplished by that previous government is on the verge of being completely undone – with the principal culprit being yet another member of the Goldman Sachs cabal.
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On Jun 16 09:51 AM 5142152-337 wrote:
> Thanks for another lesson, Jeff. Some politicians will NEVER learn,
> others are just hell-bent on doing what is best for THEM, and to
> hell with the people who entrust them with the keys to their house!
> Keep up the fine work!
Are "liberals" in Canada different from our own? I don't know what they did better than ours routinely do, ie swallow as much private sector business as possible, and raise taxes.
I guess the short answer is "yes" - although the Canadian political spectrum and the U.S. political spectrum are so different that comparison is difficult.
In Canada, the "Liberal" party is the "center" party in Canada - and has been our government for close to 2/3 of our history.
Perhaps a much closer parallel exists between our "Conservative" party and your "Republican" party.
On Jun 16 02:40 PM awake09 wrote:
> Jeff:
> Are "liberals" in Canada different from our own? I don't know what
> they did better than ours routinely do, ie swallow as much private
> sector business as possible, and raise taxes.
You Canadians are being thrown under the bus for the larger US financial interests.
" conservative" any more. Seems they have all turned into RINO's (republican in name only) for those that dont know, and speeeenddd!! man can they spend.
Great article, feel your pain. We share the same pain unfortunatly. I was hoping I could run to Canada with my gold if I needed to but they might be confiscating it there too if they are keeping in step with US of A.
Canada is a parasitic socialist nanny state to a degree that Americans can only imagine.
The Canadian government defines it’s citizens as “rich” as soon as they make about $60,000/a. This is the income level where the highest marginal tax rates kick in. Once you exceed, $60,000/a, that government takes roughly half. (50%)
This “progressive” taxation dates back to a time when $60,000 was actually a pretty good income. Thanks to inflation, particularly in housing and energy, this income level doesn’t go very far anymore. Not surprisingly, many “rich” Canadians drive economy cars that are five to ten years old.
A full 25% of Canadians are employed by the public sector, in some capacity. There are far too many people living off other people’s taxes.
Central bank manipulation keeps the Canadian dollar artificially low to support exports. As a result, Canadians pay much higher prices for a broad range of consumer goods.
Weekend shopping trips to the US for bargain hunting are a national pastime on par with hockey. I grew up in a small town, five minutes from the US border. On Friday nights during the summer, line ups at the border to enter into the US would sometimes stretch for miles. (This was pre 9/11, at a time when CAD/USD was near par.)
Excessive regulation forces up the price of dairy and poultry products. Four litres of milk (roughly one gallon) will run you around $7. The best sale you’ll ever see on boneless skinless chicken breast is $8.80/Kg, which is about $16/pound. (This would be a half price sale.)
Thanks to high taxation, the price of gas is much higher in Canada. In my area, gas is currently selling for .99 cents/litre. This translates into roughly $4/gallon.
In most provinces, alcohol can only be sold in government run stores, where the cashiers make $15 - $20/ hour. Where I live, a case of 12 beer is around $22. A forty ounce bottle of hard liquor approaches $50. Cigarettes are $10 for a pack of 25. Black market cigarettes are quite readily available and go for $20/carton of 200. Home brewing of beer and wine is becoming increasingly popular.
Medicare is a joke. Many Canadians are on a waiting list to get a family doctor, myself included. Wait-lists for elective surgery and diagnostic testing are beyond reason. Affluent Canadians will travel to the US and pay out of pocket to avoid onerous waiting lists.
My local ER closes occasionally, due to lack of available physicians. Many of our doctors and nurses emigrate to the US for better pay, lower taxes, and better working conditions. What Americans pay in the form of health insurance, Canadians pay in the form of income taxes, and the service is $hit.
What passes as a “conservative” in Canada would be considered a flaming liberal in the United States. Very few Canadians have any understanding of how all this government stifles individual initiative and acts as a drag on the economy. They’re even talking about nationalized day care. (Ideological indoctrination works best on the young.) Single mothers “earn” more on welfare than they could working for minimum wage.
I almost forget to mention sales taxes. Everybody pays a 6% federal VAT, combined with provincial sales taxes that hover around 10% in most areas.
For my American friends, this rant should be seen as a glimpse into the future of life in your own country. For those who believe that the CAD will be a safe haven from a sinking USD, I say think again. Considering that 80% of Canada’s exports go to the United States, I’m quite confident that our government will trash the CAD proportionally to any declines in the USD. I’m considering a position in Australian dollars/equities.
Like all parasites, government grows until it exhausts the host. Canada, the USA, Britain, Australia, Europe and New Zealand are near that very point, to the extent that now they have resorted to the printing press.
If the political will to solve it is not found, the immutable laws of economics will come into play to fix it for us. Not a pretty prospect but a good reason to hold a little gold as insurance.
Nothing about his fiscal policies are conservative. The liberals (I hate them too) were more conservative with money under Paul Martin than the conservatives, though I have no illusions and realize they would be spending just as much or more right now if they were in power. Now every party seems to be on the spending bandwagon... I hate it.
My definition and style of conservatism is 100% fiscal... DON"T SPEND more than you earn. It's a simple formula that has worked well for my province. Unfortunately, my province is abandoning that too...
Sadly, if the left got in power, they would have to spend more money than the conservatives to prove they are more left...
I'll vote for the party that promises NO CARBON taxes and to REDUCE the budget so we are back to surplus territory. Sadly, I don't think any of the parties now satisfy that simple metric.
My comment was about Canada, not the United States. I'm not sure how my post reflects any lack of knowledge about the US.
My comment was not intended as a criticism of your article. I agree with 90% of what was said.
Given the direction that things seem to be heading, I thought readers in the US might appreciate a taste of how government involvement distorts an economy.
I also wanted to cast doubt on the notion that Canadian dollars will be a safe haven in the face of a slowly sinking US dollar.