What’s Going on with the Bank of Canada’s Assets?

It looks like the Bank of Canada is slowing the growth of the monetary base.

The Bank of Canada has been printing money like crazy in the last few years, beating up the dollar to artificially juice up exports, which supposedly, according to Keynesian-mercantilists like Poloz, stimulates the economy. (It doesn’t — it just means Canadians have to sell more stuff to buy the same amount of imports, which actually makes the country poorer.)

So a slowdown, or flattening, of the BoC’s frenzied asset buying is definitely a good thing. Especially as the American dollar is strengthening considerably.

South of the border, the Fed looks like it might be reversing its recent deflationary actions, where it had sold off a surprising 10% of its assets.

fed deflationMaintaining the “boom” phase of the business cycle requires an ever-increasing rate of monetary expansion. So these actions will put huge strain on their respective economies.

It often takes about a year for the effects of monetary policy to really be felt throughout the system. If the stabilization path continues, then Canada will probably go into a recession later this year.

HAPPY NEW YEAR!

 

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Carney vs. the British Pound

UK citizens are running out of time before Mark Carney takes over their central bank.

Carney got the Bank of England job because he was a friend of bank bailouts and has shown no reluctance when it comes to printing money.

Mike Amey, head of sterling bonds at PIMCO, believe that’s what Carney plans to do when he takes over the BoE. He predicts Carney will devalue the pound by as much as 15%. That’s because Britain is desperate, and central bankers don’t really have any solutions other than “MOAR PRINTING.”

I’m so glad Carney’s going to be gone, not that I expect Stephen Poloz to be any better. But we should feel bad for the citizens of the UK. The pound has already lost significant value in recent years.

— Read more at The Telegraph —

 

Mark Carney - HERE I COME BRITAIN YOU SHOULD SELL YOUR POUNDS BEFORE I GET THERE

Poloz Prepared to “Nourish” Economy. Translation: He Will Inflate

Poloz thinks it will be necessary to “nourish” the economy.

To a Keynesian central banker from the EDC, this means “buy assets” i.e. inflate.

The boneheaded idea that this strengthens the economy is characteristic of cranks throughout history.

Currency depreciation cannot ever boost the economy. If Poloz were to announce that he will start expanding rate of growth in the money supply, the outcome on the foreign exchange market would be for other currencies to appreciate versus the loonie. Domestic producers would want to increase exports due to increased international demand, and would borrow from commercial banks to fund production at interest rates lower than otherwise. Resources would shift away from other industries into Canadian export industries. Exporters would record higher profits, but in real terms, the citizens of Canada would be getting fewer imports for each export. Basically, Canada would gain more foreign exchange, but they would get getting fewer real goods in exchange. Canadians in general would therefore become poorer.

And those higher exporter profits? As time goes by, monetary expansion would cause prices to rise and those artificial, subsidized profits would disappear. The end result is a weaker economy where resources have been misallocated due to credit expansion and interference with market exchange rates, and along the way some politically-connected export industries would make a bit of extra money.

Poloz needs to read Mises:

The much talked about advantages which devaluation secures in foreign trade and tourism, are entirely due to the fact that the adjustment of domestic prices and wage rates to the state of affairs created by devaluation requires some time. As long as this adjustment process is not yet completed, exporting is encouraged and importing is discouraged. However, this merely means that in this interval the citizens of the devaluating country are getting less for what they are selling abroad and paying more for what they are buying abroad; concomitantly they must restrict their consumption. This effect may appear as a boon in the opinion of those for whom the balance of trade is the yardstick of a nation’s welfare. In plain language it is to be described in this way: The British citizen must export more British goods in order to buy that quantity of tea which he received before the devaluation for a smaller quantity of exported British goods.

The Canadian dollar will surely suffer under Poloz’s governance.

Economic Ignoramus Stephen Poloz to Replace Carney as Bank of Canada Governor

So far, we don’t know much about Mr Poloz on a philosophical level.

Based on the little we do know, I think he is a bad choice. He has a PhD in economics, so he likely knows very little about economics.

We also know he has spent most of his life as a bureaucrat. Most of his career has been “public service” (cough cough) at the BoC and Export Development Canada. I’m sure he made lots of friends in the export industry there. Friends who will really appreciate a subsidy in the form of monetary inflation.

Back in late 2008, he wrote a commentary on the financial crisis. In essence, he appeals to animal spirits, like all Keynesians who are baffled by economic law. He blames it on nothing more than a change in psychology following the 9/11 attacks. Everyone had a “live for the moment” attitude, he says, and ultimately this created the housing bubble.

The first sign of failure in economic analysis is a reliance on nonscientific pop-psychology. He completely fails to identify the source of bubbles and account for why business cycles occur. The culpability of central banks is nowhere challenged. He pleads agnostic about the ability of economists to understand the cause of bubbles at all. He does not understand the Austrian theory of the business cycle.

Based on these facts, I can safely conclude he is an Keynesian/inflationist/mercantilist. Sort of like, well, all central bankers. He may prove to be better or worse than Carney. Only time will tell.

Ultimately, it matters only a little who is the head of the Bank of Canada. The system as such is the problem, and not so much the individual people in charge.

— Read more at BoC’s website — 

Australia to Join the World’s Orgy of Currency Debasement?

Australia’s mining boom is fading. Demand from China is slipping. The economy is going to contract. Yet their dollar is strengthening.

Central bankers are Keynesian-mercantilists that get bent out of shape when their own currencies are “too strong.” Especially when the economy is threatening to slow down. The bureaucrats at the RBA are no different.

What are they going to do? Try to hold down the price of the Australian dollar. They will join Europe, Japan, China, America, and the Swiss in the frenzy of currency debasement.

This is… a bad idea. Yet it is to be expected, as are the negative consequences it will create.

It might be best to start trading your Aussie dollars for something better. For other currencies, few good choices exist. I used to like the yen before Abenomics. Now I like the Singapore dollar.

Hardly any central bank  can resist racing to the bottom. I don’t think Australia’s can resist.

— Continue reading at Sunday Morning Herald —

Mini-Review: CBC Documentary “The Secret World of Gold”

On April 18, CBC aired a documentary called “The Secret World of Gold.” Though flawed, the program was interesting and covered many issues.

Here are some things talked about in the documentary:

  • The Bank of Canada has sold almost all our country’s gold over the last 30 years.
  • Underwater treasure hunts for gold.
  • Secret government deals to control gold.
  • Futures market manipulation (this was by far the weakest part of the show — the futures market is not explained and the case made for manipulation is very thin).
  • Buildings with gold windows.
  • Wars for gold.
  • How Chavez got all Venezuela’s gold back from the US and Europe
  • Gold shifting to the East from the West
  • Death gold from Nazi extermination camps (some of which was used to fill Hitler’s teeth — WTF).
  • Allocation of central bank gold holdings — who owns the gold? Is the gold even there?

Think about taking 45 minutes out of your weekend to check it out. You can watch it here for free, the only drawback is there are a few dumb CBC ads.

UPDATE: You no longer need to watch it at CBC. The copyright police got to “The Secret World of Gold” on YouTube, so it looks like you have to watch on CBC…

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