Bernanke Declares War on Canadian Economy- Rest of the World Too

Townhall.com ^ | September 25, 2012 | Mike Shedlock

[Kaslin]

The financial world cheered when Bernanke announced QE3 until it works (which is essentially forever, because it never will work).

Bruce Stewart, writing for the Winnipeg Free Press, is one of few who figured out QE for what it really is: A Beggar-Thy-Neighbor competitive currency debasement policy hoping to sink the US dollar.

Not that QE would work anyway, but one problem for Bernanke, is most of the rest of the world is doing the same thing.

Please consider Bernanke declares war on Canadian economy

Did you smile or cheer when U.S. Federal Reserve Chairman Ben Bernanke announced Quantitative Easing III (and the markets went up)?

He just declared war on your job, and the whole Canadian economy.

Of course, so did the European Central Bank, the central bank of the Peoples' Republic of China and others.

All of them are engaged in the same practice. They're printing money. Gobs of it, in programs that have no end point.

Some are doing it to apply stimulus to revive their economies. Some are doing it to play extend-and-pretend games to hold their banks together.

For a country like Canada, with an economy in reasonably good shape, a government that's not out of control, banks that are healthy and dependent on exports, it's a declaration of war.

The game everyone else is playing is "beggar thy neighbour." All this excess cash, whatever its stated purpose, is designed to bring their currencies down.

Well, we could play the game: Mark Carney could drop our interest rates to zero, and print money like it's going out of style. The government could launch a larger Economic Action Plan II and rack up the deficits. Both would lower the Canadian dollar.

It would also send the price of a litre of gasoline and a week's groceries through the roof - food and fuel have gone up 35 to 40 per cent in the countries that are playing the "print and hope" game -- and anyone living on a fixed income, or anyone planning to collect their pension, would be in deep trouble. It's hard to live on zero interest.

But there is something else we can do.

Think quality. Follow, in other words, the model the Germans used to become a high wage, high prosperity country.

It means running our businesses differently. You don't have to compete with call centres parked in Asian countries on cost if your business answers the phone and its employees are empowered to provide service on the spot. You don't have to compete with low-cost labour in other locations if you produce a product of such high quality and strong features that labour costs are a tiny fraction of its worth.

High service -- high quality products. These have a market in Canada (where the value of the Canadian dollar is a plus, if some components or tools must be imported), and as well as abroad because of their quality. ...Global Beggar-Thy-Neighbor Currency Debasement

It's an interesting article well worth a read in entirety. However, Stewart dramatically underestimates  what a housing bubble crash will do to Canada, and what a European collapse in trade will do to Germany.

Nonetheless, Stewart hits the nail on the head with his thesis about beggar-thy-neighbor tactics.

Economists in general do not howl about Bernanke, but they all bitch about China pegging the yuan to the dollar. It's all blatant beggar-thy-neighbor manipulation, and a great reason to get rid of central banks.

None of these tactics will create a single job.

[Jonty30]

Go ahead, Bernanke, we’ve got Harper.

[jacknhoo]

http://www.speak-read-write.com/grammar1.html

[Former Proud Canadian]

Let's see if Carney will follow a different path.

Canada can afford to wait it out, at least for a while. The world needs our agricultural products and our oil and other natural resources. Manufactured goods will suffer. Inflation will be low. Foreign capital will flood into Canada. I say, tough it out. Don't follow the rest of the world over the cliff.

[therightliveswithus]

We don’t need any of their oil, anyway....

[Sun]

Do you think it’s a good idea to put some of our money in a Canadian bank, if we travel there frequently anyway?

[Former Proud Canadian]

I've got my money in a Canadian bank. Haha.

Seriously, the banks are very safe in Canada. You might consider just obtaining a safe deposit box and putting cash in it. Also gold and silver Canadian coins. They come in full ounce and fractional ounce denominations. Gold bars from Swiss foundries are even suspect these days.

[familyop]

Without American men working in a large manufacturing base (men—not the more visible contemporaries trying to pass as men), Americans will not be able to afford to maintain radical trade deficits. Matter of fact, we’re now in the process of seeing the economic deposition of the American, bipartisan, socialist political/regulator class and the bond collapses, repudiations of debt, etc. So they won’t be buying, either. We Americans won’t be buying much of anything for long.

So the loonie and Canadian economy can follow the dollar and the US economy into the abyss, if fans of Camilla want to try that. Or get back to producing more commodities, wood products, etc., and let the loonie float. And yes, that’ll mean putting the likes of S.O.W. out of the socialist rackets.

As for US politics, no-vote! We’ll simply watch the rest of the great show from the fringes. And oh, yes, there will be currency “wars.” There’ll be trade wars, too. The country that produces the least per capita right now will win those so-called wars very handily, and the political class, government-supported folks know it.

That’s why they go on so much about their various end-of-the-world scenarios and all sorts of threats against their perceived enemies (threatened violations of rights): we who produced and are waiting to produce again pending the abolition of many of their socialist regulations at every level.

[Alberta's Child]

I disagree with the basic premise here, at least as it relates to the U.S. and Canadian currencies. A currency debasement policy is aimed primarily at undercutting a trading partner to place your own products and services at a competitive advantage against theirs. Canada’s economy is so small compared to ours (there are almost as many people living within 60 miles of New York City than in all of Canada) that it isn’t likely to drive this kind of policy for the U.S. dollar. And most of Canada’s exports to the U.S. are things that are difficult for the U.S. to produce anyway under increasingly onerous Federal regulations (crude oil and lumber, for example).

[Para-Ord.45]

Less to do with Canada and more to do with debasing the dollar in order to service their debts and a desperate hope to boost exports at the expense of inflation. BOTH Europe and the USA are done. There is no way they allow their beast system to crash so the only alternative is too print money. "Guido Mantega, Brazil’s finance minister, has warned that the US Federal Reserve’s “protectionist” move to roll out more quantitative easing will reignite the currency wars with potentially drastic consequences for the rest of the world. “It has to be understood that there are consequences,” Mr Mantega told the Financial Times in an interview on Thursday. The Fed’s QE3 programme would “only have a marginal benefit [in the US] as there is already no lack of liquidity . . . and that liquidity is not going into production.” He said it was instead depressing the dollar and aimed at boosting US exports." http://www.ft.com/intl/cms/s/0/69c0b800-032c-11e2-a484-00144feabdc0.html

[Sun]

Thanks for the info..

I have relatives, who are U.S.A. citizens, but visit their side of the family in Canada all the time, so why not at least put some money there as a back up.