The tools in the Federal Reserves’s and U.S. Treasury’s arsenal in the war against economic paralysis are limited to currency debasement through currency fabrication, and interest rate suppression. That the direct effect of these tools is to enfeeble the economies of trading partner nations to improve the relative performance of their own economy is the intended outcome that the trading partners are slow to uptake.
Consider, for example, that Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, wrote the following early in March 2014:
The Conference Board of Canada expects the Canadian economy to grow by 2.3 per cent in 2014 – up from a mediocre 1.7 per cent in 2013, but nearly a full percentage point slower than the 3.1-per-cent growth forecast for the U.S. economy. The U.S. private sector is in full recovery, and a two-year fiscal deal in Congress finally provides a stable policy backdrop.
A similar pattern of growth is expected in 2015. Indeed, Canada may grow more slowly than America for the decade to come.
He then goes on to outline the ‘positive’ reasons for this, stating that Canada’s fiscal policy, while resulting in anemic growth for Canada, is good because “budgets get rebalanced and public debt levels remain firmly under control.”
In the United States, there is virtually zero genuine impetus for balanced budgets and the control of public debt. The presidential focus is always on growth first, with sensible fiscal and monetary objectives taking a decidedly tertiary priority. What started as an emergency exercise in liquidity provision to banks has now become the floor on all asset prices in the U.S., and the GDP growth mechanism.
While quantitative easing is now arrested in Canada, it continues effusively in the United States, with the now $55 billion a month in Tier 1 capital fabrication manifesting as over $600 billion a month in nominal monetary and credit growth through fractional banking multiplication.
This point is apparently lost on Mr. Hodgson, who states,
“we are experiencing surprisingly slow growth in business investment, across many sectors.”
Surprising to whom? In the resource investment sector, it is obvious to anyone with an abacus that the ongoing US stimulus acts as a floor on U.S. equity and bond prices, and thus by extension, an incentive to invest in the U.S. as opposed to Canada.
While superficially, observers might conclude that the weakness in the Canadian resource sector is due to low commodity prices, these low commodity prices are themselves – at least in part – a result of currency debasement in the U.S.
How?
Well, if Tier 1 capital is exponentially loaned into $600 billion, you get massive capital pools who have no interest in investment or speculation – they’re just too big. So the only arena in the financial system for them is synthetic engineered derivative assets, that provide zero economic benefit except to the banks and funds playing monopoly.
So what used to be the driving force of employment and commerce – commodities and the products derived from them – has now become a ‘niche’ business with thin margins that nobody wants to be a part of.
There is no incentive for massive capital pools to invest in the real economy. Canada is still a real economy where everything is derived from commodities.
But institutional investors of a certain scale increasingly want nothing to do with such and economy. And if government continues to stand idly by instead of acknowledging the very real threat that is U.S. currency debasement, we’ll find ourselves with our assets under American ownership.
And the Canadian resource sector will die a slow death. Oh but wait a sec – thats already happening.
