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Posts Tagged ‘Bank of Canada’

During the 2015 Canadian federal election campaign, Liberal leader Justin Trudeau, now Prime Minister, promised to borrow money (at interest) to pay for $60 billion in new infrastructure investments, as opposed to the NDP’s plan to balance the budget in their first year.

It was, and remains, a false frame of having to stay in a deficit and grow the debt by borrowing at interest for infrastructure investments when the government of Canada, all its provinces, and its municipalities, have the statutory authorization under the Bank of Canada Act to borrow money, effectively, or, in actuality, interest-free.

For instance, money can be borrowed effectively interest-free when the Bank of Canada issues bonds that are held by the government, and when it buys its own bonds, as the government of Canada is the sole shareholder of the bank, and all profits, after expenses, will go back to the government.

But even better, the federal government can borrow money, interest-free, by requesting interest-free money, to borrow for infrastructure investments today.

So, despite Trudeau seemingly one-upping the NDP in saying that he would invest in critical infrastructure by borrowing today, as opposed to putting off such investments in favour of immediately balancing the budget, he bought into the typical false frame that we have to borrow the money at interest as opposed to borrowing it interest-free.

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On the February 14, 2015 episode of Exposing Faux Capitalism with Jason Erb, I discussed:

Important monetary reform victory in Canada, the call for Congressional authorization for ground troops in Syria and Iraq, the bogus Islamic State, Niqab ban during Canada’s citizenship oath, kosher conservatism and the twin sisters of multiculturalism and sustained, mass immigration from around the world.

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Here’s monetary reformer Bill Still on an important monetary court case victory in Canada by COMER (the Committee for Monetary and Economic Reform), concerning the power of the federal and provincial governments to borrow money from the Bank of Canada interest-free (or effectively interest-free, by the federal government receiving the Bank’s profits).

My comment:

Great news, indeed, and very important, since cases like this are usually thrown out due to standing issues, with the bogus claim by judges that the petitioners aren’t eligible to have their case heard due to reasons like not being directly affected, etc.

And unlike a direct constitutional challenge, they are actually pointing to a statute, which is very important, since the court can’t say that it’s just the petitioners’ interpretation of the constitution, but it’s right there as active law because unfortunately these judges and lawyers have been trained to treat statutes more seriously than plain-meaning interpretations of the Constitution itself.

What I do wonder is how they can force the government to get loans from the Bank of Canada, and also how they can be made interest-free, since the provision just mentions loans, but not the interest rate, and of course the banksters will not want them to be interest-free.

But there is a nice way that the loans become effectively interest-free if the federal government does the borrowing, since the government is the sole shareholder of the Bank, and all profits return to the government.

For my interview with Bill Still about his documentary, Jekyll Island, see here.

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History shows that when the CAD was in the low 60-cent USD range in 2002, it was a great time for those holding USDs to convert some of them into CADs, as in just five years, the CAD reached parity with the USD, for an annualized gain of over 12%.

Then there was the 20% drop in the CAD in less than a full month from September to October 2008, which made it another great buying opportunity.

However, given a CAD in the mid 90-cent USD range, I don’t see many gains coming from the CAD in the medium or long-term, and the reason is the historical policy of the Bank of Canada in intentionally keeping it below parity with the USD.

Here is an article from January about the Bank’s current governor, Mark Carney, chiding a reporter expressing comfort with a 96 cent CAD. The Bank governors, prime ministers, and unfortunately, most Canadians, have this unfortunate notion that the CAD should stay below the USD in value, since it “hurts exports,” despite the fact that exports account for less than half of Canada’s total GDP.

For short-term hedging, it’s possible for the CAD to go on a tear, up to $1.10 USD, as it reached in November 2007, but personally, I wouldn’t count on getting many gains from that versus other investments, until the CAD is down into the 80-cent and low 90-cent USD range.

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In 1996, the Progressive Conservative government of Ontario scrapped rent controls for new tenants.

According to the Bank of Canada’s Inflation Calculator, core inflation from 2007 to 2009 was 2.95%.

As an example, one apartment I know of went from $850 a month in rent to $935, after only two years — an increase of 10%. The controlled rent increase over that same period was 3.2%.

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http://news.bbc.co.uk/2/hi/business/7921580.stm

The article reports that “Canada has cut interest rates by four percentage points since the cost of borrowing peaked in December 2007.”

Despite still having a slightly higher central bank rate than the U.S., the Canadian dollar is currently trading at 78 cents USD, down 20% since December 2007. (see xe.com for historical tables)

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