Wednesday, January 8, 2014

The Crazy Economics of Canuckistan

Well! That was short lived. The Bank of Canada's new "policy of honesty" seems to have hit a snag: Bets are at all time highs against the Canadian dollar and so like any good confidence backed central bank they've changed their story.
Poloz said he believes a long-term rate rise wouldn’t greatly hurt the Canadian economy as the housing market appears to be heading for a soft landing and consumer spending, which has kept the economy strong these last few years, must come down to bring down household debt levels.

The Bank of Canada kept its
benchmark interest rate at one per cent in December, but there was an uptick in mortgage rates last summer after bond yields rose.

Poloz said he’s not worried about international calls for Canadian rates to rise, as Canada's Finance Minister Jim Flaherty suggested on Sunday. Flaherty warned in an interview that Canada will face global pressure to raise rates in 2014 as the Fed pulls back on its stimulus efforts.

Canada has to make its interest rate calls based on Canadian economic factors, including the unemployment rate, consumer spending and the low inflation rate, Poloz said.

Canada’s inflation rate – about 0.9 per cent annually in November – remains one of Poloz’s chief concerns. He said his target rate of closer to two per cent makes it easier for businesses to make investment decisions and wages to rise.

“I would say I'm most worried about inflation and how it's underperforming. It's a difficult one to explain right now; that always makes you worry,” he said.

Poloz said the signs for the U.S. and Canadian economy in 2014 seem positive, but there are still many "question marks" in his outlook, including why exports are not rebounding as quickly as expected.
Yes. Question marks. I thought that's why the bank of Canada's new "policy of honesty" was going to steer clear of "forward guidance"? That because the "central bank" oddly just can not explain continued "low inflation", even though everyone should know simply by living their daily lives that's complete bullshit and that real inflation is being subsidized and hidden or exported with tax dollars and free trade low wage labour exploitation while real unemployment is hidden with arbitrary restrictions on who is considered unemployed by simply discarding anyone no longer motivated enough to look for work as no longer unemployed.

But that's not all the confidence driven and always intentionally wrong central bank got wrong this time. From the same article as I quoted earlier:
"The export side does seem to be at least firming and the U.S. economy’s looking a little better around the edges so with that we expect to see that kind of positive cycle begin," he said.
And what a positive note the cycle began on, right?

U.S. trade deficit drops to 4-year low

Meanwhile... Canada hit by big trade deficit, low purchasing activity
Market analysts have long predicted that Canada will benefit from an increasingly strong U.S. recovery. But the Ivey Purchasing Managers Index showed activity in Canada contracted sharply and unexpectedly in December, its second straight dismal monthly performance.

The seasonally adjusted index fell to 46.3 from 53.7 in November, contrary to analysts' expectations for a rise to 54.5. A figure below 50 shows a fall in purchasing activity.

The news did little to cheer a currency market already unnerved by news that Canada had posted a November trade deficit of C$940 million ($879 million). The deficit - the 23rd in a row - was significantly bigger than the C$140 million shortfall forecast by market experts.
This of course then triggers another confidence building P.R. move by the government itself:

Canada could have larger-than-expected surplus, says finance minister

Crazy right? I mean you can take anything the central bank or the government says about the economy at any time and pretty well consistently the opposite is the truth! Everything they say is about building or deflating confidence, not based on the realities of the glorious Ponzi-conomy we're all subject to.

Take inflation for example. Inflation never rises evenly across the board, it spikes and builds up in certain areas and is clearly fast on the rise. The government simply excludes any undesirable spikes.

Cost of camping going up in Saskatchewan

If inflation is so low why are government's struggling to keep up with cost increases?

Real estate boom continues in Canada's largest cities
Average Toronto prices up 5.2%, Vancouver up 2.1% and Calgary up 8.6%

If inflation is so low what is continuing to drive up real estate values?

"Low inflation" is nothing more than a manufactured excuse to ensure interest rates remain low. Central Banks are looking back at the mortgage rate rises in 2013 now as though it was all "part of the plan", but if you remember mortgage rates began rising last year in spite of central bank easing, it was not what they wanted especially in an economy which as they themselves state "consumer spending, which has kept the economy strong these last few years, must come down to bring down household debt levels". Of course as Mike Maloney explains in his excellent presentation on the fraud we call a monetary system what the central bank claims it desires is inherently deflationary. Again, I then have to ask, if what the central bank wants is deflationary but their main argument for keeping interest rates low is a desire for higher inflation (which requires even more loans, more debt) then what's really the truth?

This is the confidence game they're playing with you all. It's bullshit and it's completely detached from everyday reality and as for the government and their "deficit reduction": Anyone can have a "surplus" if they don't spend anything. If I cut food out of my life I'd have a huge surplus! I mean sure it's essential, sure I'll be paying for it in the long run, but the fact remains if I simply don't spend the money on food (despite the clear necessity to) then a surplus is easy.

The government will get their surplus, but at what long term cost? What safety and maintenance checks are being excluded due to tighter and tighter economic margins and a need to find "efficiencies"? And what of disaster spending? Already this "cold snap" looks to be throwing government budgets for a loop. The Alberta flood threw government budgets for a loop. What, do they think the frequency of these types of events are going to slow down? But the real kicker is, they still expect you to believe that they have your best interests at heart:
There's no time frame for when crews will be able to move in. CN hazardous material experts were flying in from Moncton, Montreal and Toronto overnight. Feeny said senior managers were also en route to direct the operation.

He said the safety of the public is the top priority.

Feeny said it's too early to determine what caused the derailment.

He said none of the train's crew was injured. There's been no word of other injuries at this time.

Meanwhile, RCMP Cpl. Marty Van Dijk said emergency crews are working with the train's conductor to identify the cars and determine whether they contain hazardous materials.
The safety of the public is not the top priority, the transportation of oil is. Remember the great rail vs. pipeline debate of 2013? Where a you must choose the "lesser of two evils" argument was made? Yea, the public becomes their top priority after their top priority fucks up. The fuck ups are just going to increase as more and more "economic efficiencies" need to be found to counter ever growing debt service payments and the diminishing of energy ratios due to peak oil and continue to present the illusion of a "growing economy". The people will be paying the price for this "growing economy".

Cold snap and surging energy demand signals brighter future for natural gas

The lunacy of the economy is becoming all the more apparent. Cold snaps and surging energy demand is now a great thing! Nevermind the suffering it causes, the power outages, the loss of business, and the affordability of the common person to afford energy. That's not important. What's important is that the central bank feels that inflation (the devaluation of your purchasing power) is good 'nuff. Am-I-Right?

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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