# The COMER lawsuit against the Bank Of Canada



## Canadian Glass (Oct 30, 2015)

I did a search on here, and the only mention of it I could find was in the archives:

http://canadianmoneyforum.com/archive/index.php/t-7755.html

I am putting a target on my back by posting this, considering the response it got last time, but a little derision doesn't scare me. Here is a press conference from earlier this year, about the ongoing action:

https://www.youtube.com/watch?v=ZhlCM7NcRxw


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## james4beach (Nov 15, 2012)

I have gripes about the Bank of Canada too, they're just not the same gripes as COMER. In other words I don't share the indignation about the interest payments. The COMERS effort seems centered on the push to provide interest-free loans to provinces, etc and that just does not resonate with me.

I have different gripes about the Bank of Canada. My primary issue is how they keep interest rates ridiculously low (irresponsibly low) for a long time, in an effort to spur people to take on more debt, inflate asset prices and specifically to inflate home prices. I think this is doing harm to Canada.

The Bank of Canada has _destroyed savings_ by reducing interest rates effectively to zero. They are doing this, not as an independently thinking central bank that operates in the best interest of Canada, but rather as one central bank operating with the same mandates as their bosses at the Fed and BIS. As such, they are not operating in our best interests, and may even be betraying us and harming us -- which is an act of Treason.

My second major issue with them is how they deliberately aim to keep the Canadian dollar weak through talking it down, and of course competitive devaluation with other central banks like Fed and ECB. This is not part of their job, yet they are trying quite hard to keep the CAD weak. They fail to raise rates to normal levels because they don't want the CAD to strengthen.

If the Crown can uncover evidence that the BoC is following policy decisions that are (1) directed by non-Canadian entities such as large commercial banks, Federal Reserve, BIS, and (2) harmful to Canada, then I'd like to see charges of Treason brought upon the current and past heads of the Bank of Canada, and the decision-making staff which carries out their operations.


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## Canadian Glass (Oct 30, 2015)

The crown is defending the BOC, not investigating them...
Low interest rates when loaning to the chartered banks does expand the money supply, causing inflation, devaluing savings, and debasing the currency. However, the interest you aren't bothered by Is a problem too. When money is "created" with interest attached, be it private individuals borrowing it or governments, there isn't enough in circulation to pay both principal and interest. We are left trying to live on the margins of a game of musical chairs for collateral.


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## Davis (Nov 11, 2014)

I am always amazed at people who have so much time and energy to tilt at windmills - people like COMER, the 9/11 "truth movement", the people who want to return to the gold standard, etc. If banks weren't able to create credit, then where we would go for mortgages? Where would businesses go to borrow money to invest? How would we get by after our credit cards have been cancelled? The Supreme Court of Canada is not going to throw our economy into disarray by taking out one of the foundations of all modern economies. The only countries where the central bank funds government activities in the way COMER is advocating, are countries where rampant money creation destroys the value of the currency through hyperinflation. The Bank of Canada's mandate is to manage the money supply to provide for "price stability", or CPI inflation of about 2% per year. The Bank of Canada has been doing this for the last 30 or more years. The result of this policy has been (a) price stability, and (b) changes in the interest rates and the value of the Canadian dollar to reflect changes in economic conditions. It isn't possible to achieve targets for both inflation and interest rates/value of the currency. 

While older people who are living on interest income _hate_ low interest rates, young people who are buying homes and businesses looking to borrow to expand _love_ low interest rates in equal measure. We shouldn't mistake our personal best interests for the best interests of the country. They aren't the same thing. 

As far as the value of the Canadian dollar - which was about at par with the US dollar until the end of 2013, what do we think is the main reason for the decline since then? The Bank "talking the value down", or the general economic conditions and the price of oil? I think that international markets are more likely to respond to economic data and the price of oil than talk from the Bank, but I think that international money trader are probably pretty smart because they have to be to be handling billions of dollars of investments. But that's just my opinion.


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## The_Tosser (Oct 20, 2015)

> The COMERS effort seems centered on the push to provide interest-free loans to provinces, etc and that just does not resonate with me.


Why? Do you like your province going broke and reducing the money spent on health care, education etc? What would help the users of the currency a lot would be exactly this. Have the issuer of the currency give it to the provinces to aid the people immensely. I'm not even talking a 'loan' either. I am talking 'give-away' (mark up your account using a keyboard), because they need it. It costs the Federal government nothing.



> Low interest rates when loaning to the chartered banks does expand the money supply, causing inflation, devaluing savings, and debasing the currency.


We are living so far beneath our means that these issues are off the table for a long time and in fact things like 'money supply' is essentially a meaningless data point. The last fool at the Fed that i am aware of that tried, and failed, to use "money supply" as a means of monetary policy was Volker. After he F-d it all up the Fed finally dumped the idea completely and all you hear from them now is 'interest rate control'. They don't talk 'money supply' anymore.



> When money is "created" with interest attached, be it private individuals borrowing it or governments, there isn't enough in circulation to pay both principal and interest.


Which is why the federal government needs to run a deficit and has what we call 'debt'. I am not fan of the control that Financial and Insurance sectors have gained over the system, but frankly that is what their job is. They are capitalists. The blame lies squarely on the idiots you elect to parliament. It's pretty clear they know nothing as the policies of the top three parties are "Balance the Federal Budget" What a retarded idea. Everything goes down hill from there. If they don't get that straight the rest is completely meaningless and not worth talking about. Their actions are proof of either willful deceit or complete incompetence. In either case useless to you.



> The Bank of Canada's mandate is to manage the money supply to provide for "price stability", or CPI inflation of about 2% per year.


See above. They no longer manage 'money supply'. They manage interest rates. The money supply will be what it will be. It's meaningless to track/control it. It's a failed idea which is why it has been abandoned as a tool. 

People worry way too much about inflation. Hell we are trying to stave off recession most of the time. The whole talk about inflation has been drilled so deep into everyone's brain it's all that ever comes out regardless of the facts.


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## Canadian Glass (Oct 30, 2015)

Perhaps it is just sour grapes om my behalf, as luxury items like glasswork are the first things to go when belts are tightened, but I feel like I am being robbed blind. 2% sounds low, I suspect closer to 3.5%. Prices go up for different commodities differently, but I think a 20 year doubling time is closer to the truth than saying it takes 35 years for prices to double.

Bottom line is, as a collective, we don't have enough money to pay off our debts, let alone buy back the fruits of our own labour.


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## The_Tosser (Oct 20, 2015)

Canadian Glass said:


> ........... I feel like I am being robbed blind..


Oh brother, we are. Indeed we are. 

The fault lies squarely at the feet of the elected representative that alone hold the power to direct fiscal policy and change the course. If we don't have that, everything else we do is pointless. The BOC can only do so much and they don't have the tools to direct fiscal policy, despite what their erroneous web-site seems to suggest.


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## Davis (Nov 11, 2014)

According to the Bank of Canada's website:
"The objective of monetary policy is to preserve the value of money by keeping inflation low, stable and predictable. This allows Canadians to make spending and investment decisions with more confidence, encourages longer-term investment in Canada's economy, and contributes to sustained job creation and greater productivity. This in turn leads to improvements in our standard of living. Canada’s monetary policy framework consists of two key components that work together and reinforce each other: the inflation-control target and the flexible exchange rate.... To achieve the inflation target, the Bank adjusts (raises or lowers) its key policy rate. If inflation is above target, the Bank may raise the policy rate."

So the Bank is managing interest rates in order to achieve price stability. In the 1970s, when the money supply was expanded to increase employment, inflation grew quickly, which screwed seniors who were living on fixed incomes. Furthermore, inflation provided only a temporary increase in employment -- unemployment returned to its natural rate, unless the Bank created more money and increased inflation further. Using inflation to support employment over the natural rate requires not just inflation, but ever-accelerating inflation. This is why economists now refer to the natural rate of unemployment as the NAIRU - the non-accelerating inflation rate of unemployment.

The Social Credit Party would be fully behind COMER's lawsuit if it hadn't gone the way of the woolly mammoth. COMER is just an even further fringe movement of a thoroughly discredited and now ridiculed economic theory.


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## HaroldCrump (Jun 10, 2009)

The_Tosser said:


> Have the issuer of the currency give it to the provinces to aid the people immensely. I'm not even talking a 'loan' either. I am talking 'give-away' (mark up your account using a keyboard), because they need it. It costs the Federal government nothing


Why stop at the provincial level...give _everyone_ whatever amount of money they need.
Where do we sign up?



> The last fool at the Fed that i am aware of that tried, and failed, to use "money supply" as a means of monetary policy was Volker. After he F-d it all up


Are you for real?
Paul Volcker was the best Fed Chairman they have had in last 40 years, probably the best in the post war era.

I suppose you prefer von Havenstein instead of Volcker.


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## The_Tosser (Oct 20, 2015)

HaroldCrump said:


> Why stop at the provincial level...give _everyone_ whatever amount of money they need.
> Where do we sign up?


Exactly. We should already be signed up.




HaroldCrump said:


> Are you for real?
> Paul Volcker was the best Fed Chairman they have had in last 40 years, probably the best in the post war era.
> 
> I suppose you prefer von Havenstein instead of Volcker.


Of course you believe that. So does the rest of the ignorant populace. This is the problem, exactly. If you knew what it was that was actually going on you'd know why Volker was a tool and why the Fed no longer attempts to manage the 'Money Supply' as a monetary tool. It ended with his disastrous attempt. As you can see, it's no longer managed that way for a reason.

Look guys here's the facts. The Fed and BOC don't have the tools they need to manage things as they should. You control things via Fiscal Policy as Monetary policy does not cut it. That should be obvious. The Fed/BOC can't do it alone and when fiscal policy is out to lunch as it is, Monetary policy will fall short. This was what Bernanke was doing his political neutral best to tell congress when he was there getting grilled.


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## The_Tosser (Oct 20, 2015)

Davis said:


> This is why economists now refer to the natural rate of unemployment as the NAIRU - the non-accelerating inflation rate of unemployment.


lmao. No i am not laughing at you, Davis. 

I am laughing at the ridiculousness of economists. Here's the problem with that figure. They can't 'figure out' what the number should be. All these fools end up doing is chasing the current level of unemployment and re-defining the 'NAIRU number' at every step.

It's laughable man.


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## The_Tosser (Oct 20, 2015)

Davis said:


> According to the Bank of Canada's website:
> "The objective of monetary policy is to preserve the value of money by keeping inflation low, stable and predictable. This allows Canadians to make spending and investment decisions with more confidence, encourages longer-term investment in Canada's economy, and contributes to sustained job creation and greater productivity.


Well they are always half-way there. Inflation is non-existent. However the exact same problem - the real one, remains. You find it in the second sentence. Canadians cannot spend when they're unemployed or underemployed so nix the 'spending and investment decisions'............ People have a net need to save. Therefore government needs to spend until the saving needs are met and the balance sheets are cleaned up and the 'consumer' is back up to snuff. A lot of taxes need to be cut. The Fed needs to give handouts to the Provinces to rebuild health care, education etc. We need the services and this employs people.

Job creation begins with sales, first. Sales require people to have clean balance sheets and the ability to borrow. There is no fiscal stimulus in the works that i can see, therefor it follows that nothing else will work, including monetary policy.


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## Davis (Nov 11, 2014)

But we have non-accelerating inflation. The NAIRU changes as labour market policies change, and as tax and benefits policies change. Give people reasons to work, and supports that they need to work (like training, job search assistance) and the NAIRU goes down. Make EI benefits more generous and accessible, and the NAIRU goes up. I'd rather throw my lot in with a bunch of economists that with people who cling to discredited and mouldy ideas like social credit. You believe what you want to believe. I think it's quaint to hear from people who believe in things like social credit, Marxism, or a flat earth. Kind of like visiting a pioneer village.


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## The_Tosser (Oct 20, 2015)

Davis said:


> Give people reasons to work, and supports that they need to work (like training, job search assistance) ............ Make EI benefits more generous and accessible


How ignorant are you?

This is EXACTLY what i have been prescribing.

All of it. It's a package deal. Put money in peoples pockets without credit attached, IE Federal Fiscal policy. that is the entire point. "NAIRU" is for retards, just like 'money supply'. It's a numerer. Nothing more.

Wake up dude.


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## s123 (May 3, 2015)

We can’t ignore the Iceland recoveries from the economic crises.
The information is out there.
---
Iceland is set to become the first Euorpean country to beat its pre-crisis economic output. Back in 2008 the country suffered the biggest banking collapse in history, seven years on - its one of the best country's for business. 
RT / Published on Jun 13, 2015

https://www.youtube.com/watch?v=oZ-DLIWCfAI


Lessons from Iceland's Economic Crisis :
As the first country to experience the full force of the global economic crisis, Iceland is now held up as an example by some of how to overcome deep economic dislocation without undoing the social fabric. Professor Stiglitz discusses lessons learned.
International Monetary Fund / Uploaded on Oct 26, 2011
https://www.youtube.com/watch?v=HaZQSmsWj1g


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## The_Tosser (Oct 20, 2015)

s123 said:


> We can’t ignore the Iceland recoveries from the economic crises.
> The information is out there.


If i could link it, i would. I recall back in 2005-2006 SPAIN was being touted as the perfect economy..... I kid you not. lol. The media doesn't understand economics so they come to conclusion such as you see here.

So,...... Iceland goes full Keynesian. Sounds about right. Fortunately they have their own currency - free floating. Another good thing.

Hmmm Rising GDP with a budget surplus....so i say give them a few more years of surplus as they have no choice but to dip into savings and run up currently good credit to keep GDP rising....before they fall into recession again.

If the government is pulling money out of their pockets (running a surplus) then there is no choice. If inflation is so low, why are they trying to kill the economy by sucking money out of it? Fiscal foolishness.

For those inflationistas, look at this situation. Look at how much 'better' Iceland currently is and is there any sign of inflation here? 

No! Exactly. 

Inflation needs to be wiped off the lips of people until we actually need to start talking about it for real, and that isn't any time soon.


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## Davis (Nov 11, 2014)

The_Tosser said:


> How ignorant are you?
> 
> This is EXACTLY what i have been prescribing.
> 
> ...


Wow. you sound like a really angry guy who probably has difficulty getting along with other people. I always imagined that fringe movements have a lot of people like you in them. First, who uses "retard" any more? I mean, really, It's 2015, not grade 6 in 1975. Second, using "retards" to describe the economics profession is kind of like criticizing all political leaders. News for you: these are people who have power and influence, while you're just some guy screaming crazy stuff on the internet. And I mean that in the most supportive and sympathetic way.


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## humble_pie (Jun 7, 2009)

s123 said:


> We can’t ignore the Iceland recoveries from the economic crises.
> The information is out there.
> 
> As the first country to experience the full force of the global economic crisis, Iceland is now held up as an example by some of how to overcome deep economic dislocation without undoing the social fabric.




i like hearing about countries that have creatively managed to solve severe problems. 123, could you do us a huge favour - well, me anyhow - & tell us in a nutshell how Iceland managed to do it?

the country acted so quickly. It seems it was only yesterday that all the big icelandic banks were collapsing.


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## HaroldCrump (Jun 10, 2009)

The_Tosser said:


> Exactly. We should already be signed up


So how come none of us have received any cheques in the mail?



> Of course you believe that. So does the rest of the ignorant populace


I see...so not only am I ignorant, the rest of the population is as well?
I suppose there are only a few enlightened souls such as yourself who have perfect solutions to all the socio-economic problems of our time.



> If you knew what it was that was actually going on you'd know why Volker was a tool and why the Fed no longer attempts to manage the 'Money Supply' as a monetary tool


I do happen to know a little bit about how it works...perhaps not as much as you, but I do know a thing or two.

BTW, it was not Volcker that ended "money supply management", it was World War-I.
Up until that time, most countries had gold-backed currencies, which means money supply is a factor of central bank/sovereign gold holdings.
Currency issued had to be backed by gold holdings and all external deficits had to be settled with gold.

That ended with the outbreak of WW-I.

The period between WW-I and WW-II was one of see-saw between different countries abandoning or restoring gold standards, or partial gold standards.
Currencies were devalued against gold, either up or down (Churchill's mistake on one hand vs. FDR's revaluation on the other).

This was also the period when your friend Rudolph von Havenstein became the most famous central banker of all times.

The outbreak of WW-II put an end to all the tip-toeing around gold standard as all major countries began running massive deficits to fund the war.

The Bretton Woods deal put an end to the gold standard for ever, and thus money supply management.

The US still ran the so-called "gold window" until August 1971.

Volcker, BTW, always believed that the gold window was being closed temporarily.
It was supposed to be temporary...until it quietly became permanent around 1975.

So money supply management has been abandoned since 1914 (give or take), long before Volker was even born.

What he did do was control rampant inflation in the United States.



> Look guys here's the facts. The Fed and BOC don't have the tools they need to manage things as they should. You control things via Fiscal Policy as Monetary policy does not cut it. That should be obvious. The Fed/BOC can't do it alone and when fiscal policy is out to lunch as it is, Monetary policy will fall short. This was what Bernanke was doing his political neutral best to tell congress when he was there getting grilled.


Both monetary policy and fiscal policy are policy tools, of very different kinds.
I agree with you that fiscal policy in the US, and to a lesser extent in Canada, is not encouraging economic growth right now.
Although I suspect we might disagree on what the right fiscal policy should be.

I also agree with you that NAIRU is a myth...it is a pure textbook concept that cannot be calculated or enforced in practice.

I don't mind having a discussion with you, but when you call other posters ignorant and retarded, you lose credibility.
Also some of your claims regarding distributing free money to all and sundry makes me suspect you may be part of the "All bank lending is usury" group, very vocal and active in social media these days.
We had some of those folks here on the forum 3 - 4 years ago, saying the same things.


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## HaroldCrump (Jun 10, 2009)

HaroldCrump said:


> What he did do was control rampant inflation in the United States.


I should point out that controlling inflation in the early 1980s had also to do with then President Reagan's economic policies, and not just by Volcker raising F/F rates.
Both monetary policy and fiscal policy are tools to achieve economic goals.
Just as monetary policy has limits (there are limits to NIRP before it destroys wealth and causes social unrest), there are similarly limits to fiscal policy.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> i like hearing about countries that have creatively managed to solve severe problems. 123, could you do us a huge favour - well, me anyhow - & tell us in a nutshell how Iceland managed to do it?
> the country acted so quickly. It seems it was only yesterday that all the big icelandic banks were collapsing.


I can't speak for s123, but in my opinion (and this is pure opinion), Iceland did 3 things that were remarkable, and very different from what other countries mired in debt crisis are doing (such as Greece, Italy, and even the US):

- They didn't use taxpayer money to bail out banks (i.e. didn't take private bank debt on to the public books)
- They arrested, tried, and jailed corrupt bankers (banksters)
- They said there is no cosmic rule that foreign creditors/bondholders have to be paid back 100% (foreign credits can take haircuts too).


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## HaroldCrump (Jun 10, 2009)

And oh btw, one more thing that Iceland is doing that no other developed economy is doing - they are *raising* interest rates.


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## james4beach (Nov 15, 2012)

HaroldCrump ... what, RAISING rates? The horrors! I've never heard of such insanity. Next thing you know they'll have a strong currency, everyone in the country will be wealthier vs the world, and their system will be resilient to normal interest rates. Surely that is a path to ruins!!


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> I can't speak for s123, but in my opinion (and this is pure opinion), Iceland did 3 things that were remarkable, and very different from what other countries mired in debt crisis are doing (such as Greece, Italy, and even the US):
> 
> - They didn't use taxpayer money to bail out banks (i.e. didn't take private bank debt on to the public books)
> - They arrested, tried, and jailed corrupt bankers (banksters)
> - They said there is no cosmic rule that foreign creditors/bondholders have to be paid back 100% (foreign credits can take haircuts too).



thankx HC. I think that stories like this - Stories That Work - need to be told & retold in these troubled tumultuous times. They are signposts & guidelines.

too many folks are focused on the problems. Me i like Stories That Work.


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## HaroldCrump (Jun 10, 2009)

james4beach said:


> HaroldCrump ... what, RAISING rates? The horrors! I've never heard of such insanity. Next thing you know they'll have a strong currency, everyone in the country will be wealthier vs the world, and their system will be resilient to normal interest rates. Surely that is a path to ruins!!


That's right...they are raising rates as they emerge out of the _Impossible Trinity_.
They are experiencing one of the highest nominal GDP growth rates in the European Common Market (EEA) zone.

They did the exact opposite of everything the Fed & ECB did (and are still doing), starting with charging and convicting financial criminals and holding foreign financial institutions accountable for the liar loans they made to Icelandic banks.


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## NorthernRaven (Aug 4, 2010)

The_Tosser said:


> So,...... Iceland goes full Keynesian. Sounds about right. Fortunately they have their own currency - free floating. Another good thing.
> 
> For those inflationistas, look at this situation. Look at how much 'better' Iceland currently is and is there any sign of inflation here?


Iceland is in some respects a city-state with rural outliers and has a population of around 300,000. It has imposed capital controls for a number of years, and will be looking to stabilize things to loosen them. They have quite good current economic growth, and I believe core inflation is actually running over target. So they are coming at rising interest rates from a rather different place than most countries. Even so, they won't want to be too out of sync with their major trading partners for too long, since they won't want a big flood of capital inflows or be on the receiving end of lots of carry trades or whatever.


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> That's right...they [Iceland] are raising rates as they emerge out of the _Impossible Trinity_.
> They are experiencing one of the highest nominal GDP growth rates in the European Common Market (EEA) zone.
> 
> They did the exact opposite of everything the Fed & ECB did (and are still doing), starting with charging and convicting financial criminals and holding foreign financial institutions accountable for the liar loans they made to Icelandic banks.



let's all take our savings & build a new island that's not part of any country. Maybe near st-pierre-et-miquelon, unless that'd make the new island french. 

some might want warmer waters, though

we could have a gold backed currency, guaranteed income for all citizens, no cars just bicycles, fresh vegetables, a de-salination plant, the works


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## james4beach (Nov 15, 2012)

I think citizens should be more critical of the central banks; people seem very complacent and trusting of the entities.

In the US for example, the Federal Reserve actively refuses and fights freedom of information requests. Their disclosure practices are very poor. Only when Bloomberg (media) sued the Federal Reserve, the courts finally forced the central bank to disclose some of their internal docs in 2010.

The resulting documents shocked the world, showing all the secret loans and emergency bail-out facilities the Fed created for domestic & foreign banks, including I may add, all the big Canadian banks. These were bail-out/liquidity facilities far in excess of what was known at the time and this information came out 2 years after the fact. _And only via lawsuits._

I'm not sure how the BoC compares, but I doubt they are much more transparent.

There's all kinds of highly suspicious central bank activity in the world today. For instance, central banks are known to trade US futures (very possibly stock index futures) yet no central bank steps forward and says they're doing it. These are practices which have big impacts in public markets, and warp all the investments we do. So who's doing it? Bank of Canada maybe?


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## Davis (Nov 11, 2014)

james4beach said:


> HaroldCrump ... what, RAISING rates? The horrors! I've never heard of such insanity. Next thing you know they'll have a strong currency, everyone in the country will be wealthier vs the world, and their system will be resilient to normal interest rates. Surely that is a path to ruins!!


Yes, a higher Canadian dollar benefits Canadian consumers who can now buy more imported goods and enjoy more foreign travel. It screws over people who are exporting commodities and manufactured goods, and those selling Canadian tourism to foreigners as these things are relatively more expensive. And it hurts the people who work in those sectors of the economy. So everyone in the economy being wealthier? Not those who work in resources, manufacturing or tourism, which is a big share of our workforce.


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## s123 (May 3, 2015)

More information about Iceland.

Iceland and U.S. Choose Different Paths
https://www.debt.org/blog/icelands-economy-heats-up/

And while here (US) at home we allowed millions of citizens to lose their homes to foreclosure, while making sure that the banks that foreclosed on them remained solvent with billions of dollars of taxpayer-fueled bailout money, the government that came to power in Iceland in 2009 immediately went to work bailing out its consumers, instead.

First, the country allowed homeowners to write off all mortgage debt above 110 percent of property value. It also provided means-tested subsidies to reduce mortgage-interest expenses giving the most generous support to those with lower incomes, more children and less home equity.

Second, the nation’s Supreme Court canceled all bank loans indexed to foreign currencies, allowing consumers to repay those loans in kronas, whose value had decreased by 80 percent during the country’s worst days. This gave the people more money to spend on things other than their foreign debts, whose costs had more than doubled after the crash.

Third, Iceland raised taxes and cut deductions for the most well-off, while safeguarding the country’s welfare system for its most vulnerable citizens. Pensions were raised for the old and disabled, unemployment benefits were increased and the minimum wage went up.

Did it all work? Well, the country’s deficit, which was 13.5 percent of its gross domestic product (GDP) in 2009, fell to just 2.3 percent last year. And IMF chief Christine Lagarde called the Icelandic recovery “impressive.”


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## peterk (May 16, 2010)

I know nothing about Icelandic banking other that what I just read above, but is it not a bit naïve and perhaps premature to think that what may work for a brief period of several years for an island country with the population of London Ontario, would also work for the rest of the world? Iceland is fairly unique, and it's possible that the outcome of it's particular actions are also unique and non-repeatable.

This is akin to the spurious argument that because Sweden has been able to have a couple decades (not a long time) of high taxes, strict regulation and welfare for everyone, without collapsing, it is "proof that socialism works".

It is merely a small data point, that should be studied and it's effects fully understood by economists and other very smart people as to whether there is any merit in applying it to other nation's fiscal policy.


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## james4beach (Nov 15, 2012)

Davis said:


> (higher CAD) It screws over people who are exporting commodities and manufactured goods, and those selling Canadian tourism to foreigners as these things are relatively more expensive.


This is what everyone repeats, but I don't think it's true in the long term. The export economy can adjust to it.

You just _can't_ get wealthy, as a nation, through competitive devaluation. It's a race to the bottom. What's the point in "keeping exports strong this quarter" if the whole country slips further and further into poverty? CAD is the fundamental valuation of all of our assets, for the whole country. Competitive devaluation will not make us wealthy.

The global thinking that "we all need a weaker currency" is a new notion and it's the current rage. But exporting happened throughout history, and definitely involving countries with strong (non-devaluing) currencies.


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## humble_pie (Jun 7, 2009)

s123, are you in the US of A?

re big countries vs small countries, it's not a question of following any model slavishly. It's a question of looking with interest & open minds to find separate valuable actions, one or more of which might be replicated or adapted locally.


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## humble_pie (Jun 7, 2009)

Davis said:


> Yes, a higher Canadian dollar benefits Canadian consumers who can now buy more imported goods and enjoy more foreign travel. It screws over people who are exporting commodities and manufactured goods, and those selling Canadian tourism to foreigners as these things are relatively more expensive. And it hurts the people who work in those sectors of the economy. So everyone in the economy being wealthier? Not those who work in resources, manufacturing or tourism, which is a big share of our workforce.



wondering how the low dollar argument is benefiting our resource industries at the present time though. In any way whatsoever.

resource industries are prey to world commodity prices. When everybody devalues, it's a race to the bottom, as james4 says.


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## Davis (Nov 11, 2014)

Canada isn't devaluing. Sigh. Our dollar floats freely, and the world market has devalued the Canadian dollar because we are a largely resources-based economy (especially oil), and raw material prices are low (especially oil). When oil prices were high, so was our dollar. Was Canada pursuing a revaluation policy then? Or does the strong correlation between oil prices and the Canadian dollar tell us something? 

Yes if all countries try to devalue, then no-one devalues. But all countries are not trying to devalue. Canada is not trying to devalue. It is trying to achieve price stability as per the Bank of Canada's mandate. And it is succeeding in doing that. If prices start to rise, the Bank will increase the interest rate to dampen inflation. And it will continue to allow the world market to determine the appropriate value of the dollar. 

You may not believe that a high dollar affects exports and tourism, but economists do. The Canadian Manufacturers and Exporters association does. World demand for resources continues to be depressed, but Canadian resources are now relatively cheaper because wages costs have fallen by a quarter compared to the US, but not compared to other resource economies whose currencies have also fallen against the US dollar as commodity prices have fallen (e.g., the Indonesian rupiah, which has fallen by about the same since the beginning of 2014).

Despite a 76 US cent dollar, Canada has not slipped into poverty by any definition of "poverty". 

The lesson from Iceland would appear to be that we should all give up banking and go back to fishing. That will solve our problems.


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## humble_pie (Jun 7, 2009)

Davis said:


> Canada isn't devaluing. Sigh. Our dollar floats freely ...
> 
> The lesson from Iceland would appear to be that we should all give up banking and go back to fishing. That will solve our problems.



thankx i shall study your full text above veree carefully even though it is somewhat beyond the ken of a poor dumb crumb.

i do feel strongly about the fishing remark, though, are we not supposed to be taking great pains to avoid sounding like bigots? :biggrin:


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## Davis (Nov 11, 2014)

Fishing is a noble profession. It is just impractical for those of us who don't live near the sea. ;-)

I'd ask anyone here to provide evidence - credible evidence, not crypto-social credit conspiracy rants - that the Bank of Canada is manipulating the price of the Canadian dollar, or that its policy goal is anything other than what it says it is - price stability.


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## HaroldCrump (Jun 10, 2009)

^ it's called jawboning.
A widely used technique in the world of central banking...Bernanke used it a lot, Yellen is using it currently.
But the real master of jawboning is Mario Draghi.

It has been said that Draghi is the best central banker (among current crew)...because...he says little, and does even less.

In this game, Poloz is a novice...his jawboning and trash talking of the loonie is so obvious that he should be ashamed.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> wondering how the low dollar argument is benefiting our resource industries at the present time though. In any way whatsoever


It is benefiting somewhat in boosting EPS numbers, not in generating any new demand for Canadian oil (or exports in general).
Canadian crude producers costs are denominated in CAD$, but their product is sold mostly in USD$.
I believe latest price obtained by Canadian producers is in the $31 USD range (Hardisty price).
Leaving aside WTI spread, a weaker CAD$ boosts EPS for companies reporting in CAD$.

For non differentiated products like pulp, etc. it probably increases demand slightly relative to competitors.

But weakening currency does not have any long term benefit to exports, without any changes in product quality, differentiation, labor productivity improvements, etc.
*Poloz pretends to not understand this*.

The reason central banks weaken currency is not to boost exports, but to import inflation.
Central banks are responsible for maintaining inflation target (which is 2% give or take in most countries, such as Canada, US & UK).
Devaluing currency is the easiest way to achieve that target.

Exports can seldom be improved by currency devaluation alone...it requires direct action by industry and govt. to reduce cost, improve labor productivity, reduce regulation, improve quality, etc.


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## james4beach (Nov 15, 2012)

Davis said:


> Despite a 76 US cent dollar, Canada has not slipped into poverty by any definition of "poverty".


True so far, and I hope we don't. But the Canadian dollar defines all of our personal wealth... the value of our home, our net worth, what our businesses are worth (versus world peers). We can't be reckless about letting it drop.

Look at the Swiss. Over the last decade, their currency is up 46% against ours. All else being equal, someone's house in Switzerland has become 46% more valuable versus one of ours. They are getting wealthier. A working age Swiss person, or retired one, can do more on the world stage. They can travel more places, enjoy a better quality of life, buy more foreign assets.

Why not aspire to the same thing? I want to be wealthier. Don't you? Here are Swiss exports. Am I crazy or are their exports strong, even while their currency strengthens?
http://www.wthejournal.com/images/pages/EN_Graph6_1.jpg

This global wealth thing is something you don't necessarily notice sitting at home, but it becomes blazingly apparent once you travel around. I want Canada to become wealthier, with a strong currency, so we live good lives and can buy good assets and companies elsewhere in the world.

The converse is frightening. If our currency weakens, others who are wealthier can come here and hollow out our country by buying up all the good things. Before you know it, foreigners will run our corporations, employ us, and control our resources.


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## james4beach (Nov 15, 2012)

humble_pie said:


> wondering how the low dollar argument is benefiting our resource industries at the present time though





HaroldCrump said:


> But weakening currency does not have any long term benefit to exports, without any changes in product quality, differentiation, labor productivity improvements, etc. *Poloz pretends to not understand this*.


I'm glad we're talking about this, because this criticism does not come up very often in the media. People seem to believe that weakening the currency has a magical effect to boost exports.

As humble_pie points out, now we have a low dollar... and exports are still very weak.


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## Davis (Nov 11, 2014)

james4beach said:


> Why not aspire to the same thing? I want to be wealthier. Don't you? Here are Swiss exports. Am I crazy or are their exports strong, even while their currency strengthens?
> http://www.wthejournal.com/images/pages/EN_Graph6_1.jpg
> 
> This global wealth thing is something you don't necessarily notice sitting at home, but it becomes blazingly apparent once you travel around. I want Canada to become wealthier, with a strong currency, so we live good lives and can buy good assets and companies elsewhere in the world.


I will be leaving the workforce soon, and want to spend my time an money travelling the world, so I would love to see a stronger Canadian dollar. It would make me better off. But I look beyond my personal circumstances when evaluating economic policy. Canadian exports for the four month June to Sept 2015 are significantly higher than in the first five months of the year. (Here)

You do understand that if the price of a normal product goes down, demand usually goes up, right? So if Canadian products become cheaper compared to equivalent products, then the world will normally buy more of them. That is a fundamental principle of economics. If you don't agree with the principles of supply and demand, there's not much point in having this discussion. 

A key problem that Greece is facing is that it cannot let its currency fall, so its products are not becoming more attractive, and its tourism industry is still charging high prices, so it isn't attracting the numbers of tourists it could with a cheaper currency.

Focussing on the wealth of seniors who want to travel and low prices for imported goods for those who can afford them is only one lens that we can look through. Considering younger people who want jobs in manufacturing, tourism, and commodity sectors is another. And while low interest rates hurt seniors, they benefit young people who are buying homes and businesses that want to invest and create jobs.

Saying that low interest rates and/or a low dollar make everybody worse off simply doesn't stand up. Not everybody is you (or me).


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## humble_pie (Jun 7, 2009)

Davis said:


> Canadian exports for the four month June to Sept 2015 are significantly higher than in the first five months of the year. (Here)



Davis you seem to be using a cherry-picked time frame to show that exports were up within that brief 4-month period. 

but here is the supporting quote, taken directly from your own link. It says that exports are down. Underlining is my own. 

_" Excluding energy products exports were up 0.2 percent. Year-over-year, total exports were down 0.7 percent. Exports in Canada averaged 20271.95 CAD Million from 1971 until 2015, reaching an all time high of 45537.80 CAD Million in July of 2014 and a record low of 1366 CAD Million in February of 1971."_


look, i'm just a poor ignorant pastry. But surely in canada, with its drastic climate, seasonality affects all economic figures, no?

surely it would be better to compare, not exports during 4 months to exports during the previous 5 months of the same year, but rather the 4-month time frame statistics to identical time frames of several previous years, in order to discern a trend?


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## HaroldCrump (Jun 10, 2009)

Davis said:


> You do understand that if the price of a normal product goes down, demand usually goes up, right? So if Canadian products become cheaper compared to equivalent products, then the world will normally buy more of them. That is a fundamental principle of economics. If you don't agree with the principles of supply and demand, there's not much point in having this discussion.


You are talking micro-economics textbook...but when considering a dynamic, global economy, you have to look at macro-economic factors.
The thing about relying on currency devaluation to boost exports is that everyone is doing it.
This is the _beggar-thy-neighbor_ strategy.
Country A devalues its currency (either by direct NCB action, or indirectly due to global market forces), then the trading competitors of Country A do the same...that creates a ripple effect among all trading partners that competitively devalue their currency.

Currency devaluation (either by one country or in aggregate) does not increase aggregate demand.
Keep in mind that currencies are a coin i.e. they have two sides...a weaker currency is always relative to something else...which means something else gets more expensive.

As an aside, there hasn't been absolute devaluation of all currencies since the WW-I era, when most(all) governments revalued their currencies relative to gold.

That aside, currency devaluation makes some sectors within a country temporarily competitive, while other uncompetitive.
Internationally, it gives a temporary advantage to the country, but it is fleeting at best and at worst, leads to trade wars and retaliation by trading partners.



> A key problem that Greece is facing is that it cannot let its currency fall, so its products are not becoming more attractive, and its tourism industry is still charging high prices, so it isn't attracting the numbers of tourists it could with a cheaper currency


Greece's problems go far, far beyond a currency valuation issue.
Are you seriously suggesting that Greece's problems would have been solved had the ECB devalued the EUR to accommodate Greece's needs?

Greece's problems are deeply structural in nature.

It is true that had Greece not joined the Euro, or had they left when the crisis first began in 2009, they would perhaps been in a better situation.
But their problems are not due to an overvalued currency.


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## Davis (Nov 11, 2014)

Harold, Canada does not have a strategy to devalue its currency to boost exports. It has a strategy to maintain domestic price stability. That drives our interest rates. Global economic factors, commodity prices, and yes, our interest rates are used by the global market to determine the value of the Canadian dollar. The point that I am making is that if we adopt a policy to revalue our currency in order to make it nicer for people to travel abroad and buy imported goods, it will hurt our export sector. Every time the dollar approaches or exceeds parity with the US dollar, manufacturers and exporters scream and call for devaluation, and the auto companies start shifting production from Canadian plants to US plants (and elsewhere), because it has become relatively more expensive to produce in Canada. And now that the dollar is low, the tourism sector is expecting more visitors from the US. 

I was responding to the unsupported claim that exports haven't risen, which they have in the past four months. I don't know if there are seasonal impacts on our exports, as agricultural products are probably a fairly small share of our exports (I don't know though). What would be the seasonality in export figures? And if there is seasonality, why are the figures reported on a seasonally adjusted basis? Employment figures always are because the summer job market, plus higher tourism in the summer, has a significant impact In order to determine the impact of the devaluation of the dollar on exports, you'd have to do a regression analysis to sort out the impacts of the dollar versus other global factors I've been too long out of university to do that. 

If anyone wants to argue that the change in the dollar, has not had any impact on Canadian exports, maybe they could do that analysis.


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## humble_pie (Jun 7, 2009)

davis this is getting serious. Now you saying for the 2nd time in a row that canadian exports have risen, you're saying again that claims exports are falling are "unsupported."

i've just gone over this. Here. Your own quoted link is declaring that exports are falling. Exports have been falling since july 2014. The cherry-picked 4 month time frame you are using is meaningless.


http://canadianmoneyforum.com/showt...Bank-Of-Canada?p=885841&viewfull=1#post885841


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## HaroldCrump (Jun 10, 2009)

Davis said:


> Harold, Canada does not have a strategy to devalue its currency to boost exports


I assume you meant to say Bank of Canada...
But it certainly does...it is a case of _watch what I do, not what I say_.

If that were not the case, why is Poloz repeatedly musing about the lack of export growth?
I posted a link above...there are many more from speeches made in last 2 years.

Secondly, Canada is not bordering on the edge of deflation or even lowflation...so why cut rates, not once, but twice in a year?
We have positive inflation, and in fact, accelerating inflation.

If _price stability_ were the goal, he should be raising rates, not cutting.

Another terminological euphemism in Central Banking parlance - _price stability_ is code word for _inflation_.
Most NCBs official target is 2%, including the Fed.

However, Fed officials, esp. the dovish ones, have said in their personal speeches and comments that even 3% would be acceptable before raising rates.
Some wouldn't mind seeing up to 3.5%.

Price stability has a very different meaning for central bankers and consumers.

Another euphemism in the world of central banking...the reason why devaluing currency provides a (temporary) boost to exports is not because it increases foreign demand significantly, but because it reduces real wages domestically.
Exporters pass on those savings indirectly to the foreign consumers via the exchange rate mechanism...that is the reason currency devaluation appears to boost exports.

Most central bankers know this and understand this, but never state this in clear terms.

_*The effect of currency devaluation is a reduction in real wages*_.



> The point that I am making is that if we adopt a policy to revalue our currency in order to make it nicer for people to travel abroad and buy imported goods, it will hurt our export sector


I am not suggesting we strengthen the CAD$ to help snowbirds and retirees.
I am not sure if James4B meant to suggest this, he can clarify, but I did not.

I am saying that firstly, weakening currency does not provide any sustainable boost to exports, and secondly, it reduces real wages and imports inflation.

There are far more serious long-term consequences to a weakening currency - it increases the price of productivity-boosting imports, such as machinery, technology, patents, licensing, etc.
This makes our exporters noncompetitive in the global market.

Therefore, the very action that was supposed to help them, ends up harming them in the long-run.



> and the auto companies start shifting production from Canadian plants to US plants (and elsewhere), because it has become relatively more expensive to produce in Canada


Yeah...about that...
There was a long discussion on that in another thread.

I had posted several thoughts, as well as interviews & opinions from market leaders that the weakness in our auto & manufacturing sector is not related to the strong currency.

There was an interview from the CFO of Ford Canada.
In that, he clearly stated that they are not looking at the level of loonie as a factor in decision making.
It had everything to do with productivity, labor costs, trade deals, etc.

It was remarkable that he said that in terms of fully loaded costs, production in the US is much cheaper than in Canada, even adjusting for a weak CAD$


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## Davis (Nov 11, 2014)

humble_pie said:


> davis this is getting serious. Now you saying for the 2nd time in a row that canadian exports have risen, you're saying again that claims exports are falling are "unsupported."
> 
> i've just gone over this. Here. Your own quoted link is declaring that exports are falling. Exports have been falling since july 2014. The cherry-picked 4 month time frame you are using is meaningless.
> 
> ...


HP: what I said what that exports rose in that four month period compared to the earlier part of the year. that is true. Exports started falling in July 2014, then rose in May, June and July 2015 back up to about the July 2014 level, then fell in August and rose in September. Saying that exports were lower in Sept 2015 than in Sept 2014 is cherry picking too. If you go back to the link I provided, and click on "5Y", you'll see that the middle of 2015 was a trough, and exports have recovered. You'll also see that there does not appear to be any seasonality to the figures (just eye-balling it). 

I am not going to argue that a lower dollar causes exports to rise from previous levels, only that it causes them to be higher than they would have been without the devalution. Similarly, a higher dollar would not necessarily result in lower exports compared to before the revaluation, only lower exports than would have been the case without the revaluation.

Because people normally buy more of something when the price goes down and less of it when the price goes up all other things being equal. In the real world, all other things are never equal. there are lots of other things going on. Other resource-based economies seeing their currencies drop, the fall in the price of oil probably had an impact because even if we are selling the same volume of oil, we are getting half as much money for it, and so on.


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## humble_pie (Jun 7, 2009)

Davis said:


> ... you'll see that the middle of 2015 was a trough, and exports have recovered



?? your link says, with the utmost clarity, that exports. are. down. from. record. highs. in. july. 2014.

nobody on here is interested in the twitches & the twerks.


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## Davis (Nov 11, 2014)

HaroldCrump said:


> But it certainly does...it is a case of _watch what I do, not what I say_. If that were not the case, why is Poloz repeatedly musing about the lack of export growth? I posted a link above...there are many more from speeches made in last 2 years.


The significance of this depends on whether you think that what the Governor of the Bank says is more important to world currency markets than commodity prices (especially oil), the health of the US economy, and other global economic factors. I think it's the latter. I understand that you disagree. 



HaroldCrump said:


> Secondly, Canada is not bordering on the edge of deflation or even lowflation...so why cut rates, not once, but twice in a year?
> We have positive inflation, and in fact, accelerating inflation. If _price stability_ were the goal, he should be raising rates, not cutting.


Percentage change in Total CPI has been between 0.8-1.3% each month in 2015, which sounds like price stability to me. The Bank's target is 1-3%, so we are definitely on the low, side, and were below the target in April and May. So it makes sense to cut the interest rate, not increase it. Cutting the rate is intended to spur consumer and business borrowing (because it is now cheaper to borrow money), and that leads to spending and investments and pushes prices up. This is why Japan has cut its rate to nothing in an attempt to get Japanese people to start spending and kickstart their economy. They haven't been very successful though. 



HaroldCrump said:


> the reason why devaluing currency provides a (temporary) boost to exports is not because it increases foreign demand significantly, but because it reduces real wages domestically. Exporters pass on those savings indirectly to the foreign consumers via the exchange rate mechanism...that is the reason currency devaluation appears to boost exports. Most central bankers know this and understand this, but never state this in clear terms. The effect of currency devaluation is a reduction in real wages.


That is exactly how it works. You'll find that in economics textbooks. It's not a secret. It's just that most people don't read economics textbooks because my god they so are so boring you wouldn't believe how mind-crushingly dull they are. 



HaroldCrump said:


> I am not suggesting we strengthen the CAD$ to help snowbirds and retirees. I am not sure if James4B meant to suggest this, he can clarify, but I did not.


james4B said "But the Canadian dollar defines all of our personal wealth... the value of our home, our net worth, what our businesses are worth (versus world peers). We can't be reckless about letting it drop." I am trying to get him to see that his interests as a person with wealth and a desire to travel internationally are not the same as those of people who are looking to find jobs or buy homes or borrow to invest in a business.



HaroldCrump said:


> I am saying that firstly, weakening currency does not provide any sustainable boost to exports, and secondly, it reduces real wages and imports inflation. There are far more serious long-term consequences to a weakening currency - it increases the price of productivity-boosting imports, such as machinery, technology, patents, licensing, etc. This makes our exporters noncompetitive in the global market.


I don't disagree with you here. Short-run and long-run effects are often different, but as you know, you have to get through a lot of short-run before you get to the long run. 

But let's look at what some here seem to be proposing:

1. Target a revaluation of the Canadian dollar, presumably by increasing interest rates.
2. Higher interest rates reduce domestic demand as consumers borrow less and focus on spending less to pay off debt, while businesses borrow less to invest.
3. Increased interest rates causes an in-flow of capital, and a rise in the C$ compared to the US, and probably other currencies.
4. The relative prices of Canadian commodities and manufactured goods is now higher, and the cost of travel to Canada is now higher.
5. Effects 2 and 4 cause employment to fall. As sales fall, business begin to lower their prices, and we could slip into deflation.

Deflation is necessarily the end of the world, but it does cause instability, especially as workers are loathe to accept pay cuts (they seem to be willing to accept pay freezes, even in inflationary times), especially unionized workers. I think what is more important here is the expected increase in unemployment, which leads to more government deficits as revenues fall and social spending rises. And more importantly, unemployment increases misery.


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## Davis (Nov 11, 2014)

humble_pie said:


> ?? your link says, with the utmost clarity, that exports. are. down. from. record. highs. in. july. 2014. nobody on here is interested in the twitches & the twerks.


You can shout all you want, but in interpreting data, shouting doesn't help. It's down by 2.3% from Sept 2014. I don't know what you think that proves. For that matter, it's up almost 8% since May 2015.

I don't think you (or I) can speak for other people here. You're better off just speaking for yourself.


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## HaroldCrump (Jun 10, 2009)

Davis said:


> The significance of this depends on whether you think that what the Governor of the Bank says is more important to world currency markets than commodity prices (especially oil), the health of the US economy, and other global economic factors. I think it's the latter. I understand that you disagree.


It is not a matter of personal agreement/disagreement.
Fact is that market pays attention to central bank statements.
If that were not the case, the world would not be obsessing over every single word, phrase, nuance, comma, semi-colon, etc. in Fed statements.

In technical terms, this is known as "_forward guidance_" - in non-technical terms, it is known as _jawboning_.

Remember the obsession over the word _*patient*_ in the Fed statements from 2011 - 2013?
That was forward guidance.
Remember _*whatever it takes*_?
That was forward guidance.

Of course, Poloz is jawboning, like every other central bank governor.

As the saying goes, _never believe anything until it has been officially denied_.

*Stephen Poloz tells G20 he isn't trying to talk loonie down*
and
*Bank of Canada bids farewell to forward guidance*



> Percentage change in Total CPI has been between 0.8-1.3% each month in 2015, which sounds like price stability to me


*Core CPI has been steadily accelerating in Canada since 2012/13 *(when the CAD$ peaked).
Currently sitting at 2.1% YoY.
However, note the steady increases since 2012/13.
This indicates inflation is splat in the middle of their target range - *actually it is bang on their target of 2%*



> leads to more government deficits as revenues fall and social spending rises


That is one of the reasons NCBs cannot raise rates.
Public debt burden is massive at all levels of govt. throughout entire developed world (E/Ms are worse because part of their debt is denominated in foreign reserve currencies like USD, CHF & EUR).

Look at Canada - Province of Ontario has a massive debt burden of $300B.
Annual debt servicing costs are $10B, which is interestingly equal to the amount of their deficit, give or take.
Any rise in bond yields (based on an increase in overnight rate by the Bank of Canada) will be a crushing blow for all levels of govt.

Situation is same in US - states and municipalities are struggling with unsustainable debt burdens and unfunded liabilities.


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## Davis (Nov 11, 2014)

HaroldCrump said:


> Fact is that market pays attention to central bank statements.


I don't disagree. I just think that jawboning provides only temporary changes to the value of the dollar, and the market will look at underlying economic factors to determine the long-term value. I don't think that the long-term rate is set by a lot of fancy talk from the Governor. 



HaroldCrump said:


> *Core CPI has been steadily accelerating in Canada since 2012/13 *(when the CAD$ peaked). Currently sitting at 2.1% YoY. However, note the steady increases since 2012/13. This indicates inflation is splat in the middle of their target range - actually it is bang on their target of 2%


"The Bank of Canada aims to keep inflation at the 2 per cent midpoint of an inflation-control target range of 1 to 3 per cent. The inflation target is expressed as the year-over-year increase in the *total consumer price index* (CPI)-the most relevant measure of the cost of living for most Canadians. The Bank also monitors a set of “core” inflation measures, including the CPIX, which strips out eight of the most volatile CPI components. These “core” measures allow the Bank to “look through” temporary changes in total CPI inflation and to focus on the underlying trend of inflation, which is a good indicator of where total CPI inflation is headed in the absence of policy action. In this sense, *core inflation is monitored as an operational guide* to help the Bank achieve the total CPI inflation target, not as a replacement for it." [Boldfacing added] 

To summarize, it's total CPI that they target. They use Core CPI as "an operational guide". (I had to look this up.) 



HaroldCrump said:


> Any rise in bond yields (based on an increase in overnight rate by the Bank of Canada) will be a crushing blow for all levels of govt.


So the Bank says that it's goal in setting interest rates is to achieve its inflation targets, and it is succeeding in doing so. But you think their goal is to protect government from spikes in interest rates. It is an interesting theory.


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## humble_pie (Jun 7, 2009)

Davis said:


> You can shout all you want, but in interpreting data, shouting doesn't help



i beg your pardon? 
where am i shouting?

you are twisting & squirming far too much here
plucking random dates out of nowhere
sophistically trying to cherry pick dates that are other than what your link confirms

what is it about your linked information that you are not getting?

to reconfirm:

- your link says the 43-year record high for canadian exports occurred in july 2014
- your link says that exports have declined since that july 2014 date

a previous record high is a record high. Today is today. A reader cannot opportunistically jump to a couple of intervening months & say Oh look it went up _here_ or it went up _there_.


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## Davis (Nov 11, 2014)

I acknowledged that exports are lower than July 2014. Will you acknowledge that they are also higher than May 2015? I agree that we should not isolate random points - we should look at all of them. July, may, January, September.... Exports went down a lot, then they went up a lot (but not by as much as they went down). I still don't know what point you are trying to make about the dollar. As I wrote many posts ago, to determine the correlation between exports and the value of the dollar, you would have to do the sort of regression analysis that I can't do any more (and really don't want to do anyway) to isolate the effect of the dollar from other effects like the price of oil and other commodities, global economic conditions, the state of the US economy, etc. There are many factors affecting exports, so you can't determine the correlation with the value of the Cdn dollar just by reporting two data points (or even eight -- and after than I run out of fingers).


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## HaroldCrump (Jun 10, 2009)

Davis said:


> I just think that jawboning provides only temporary changes to the value of the dollar, and the market will look at underlying economic factors to determine the long-term value


Sure, but keep in mind that interest rates are a big factor in capital inflows/outflows (assuming investment grade credit quality).
Secondly, currency rates are always cross rates i.e. relative to another currency.
All major NCBs are engaged in competitive devaluation.
Given that the Fed is the big dog in the fight, capital inflows/outflows into other countries and economic zones are heavily influenced by Fed policy.

The Fed has done _nothing but _jawboning since 2009.
It's been one strategy after another - forward guidance, operation twist, taper tantrum, etc.

Even now, the market believes Fed is going to raise rates in Dec.
They may (or may not), but that is what the Fed is saying.
This time last year, the market was equally convinced that rates will go up in Jan.
Then it was March.
Then June.
Then Sep.

Each time market is convinced this time it's for real.

That is one of the main reasons for dollar strength.



> So the Bank says that it's goal in setting interest rates is to achieve its inflation targets, and it is succeeding in doing so. But you think their goal is to protect government from spikes in interest rates. It is an interesting theory.


It's two sides of the same coin.

We all know that inflation is a friend of the debtor and an enemy of the creditor.
The biggest debtor is the govt. (across all 3 levels).

Inflation targeting is a way to keep the real value of debt manageable for the govt.

2% annual inflation targeting erodes the value of debt by ~ 50% in 25 years.
3% or more inflation compounds very fast when measured over decades (as most govt. debt is).

There is hardly any level of govt. in any country these days that can sustain its debt burden at 2% or 3% higher rates, let alone at 5% or 10%.


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## humble_pie (Jun 7, 2009)

Davis said:


> I acknowledged that exports are lower than July 2014


july 2014 was the crucial date of the record high. Record 43-year-high. There is no other record high. It was a one-time only statistic.

exports are down since the record high, said your link.





> Will you acknowledge that they are also higher than May 2015?


no, why should i be sideswiped to any old other month that you sophistically wish to pick? i'm sticking to the record high of july 2014.

wondering if you understand what the expression *record high* means?





> I agree that we should not isolate random points - we should look at all of them. July, may, January, September.... Exports went down a lot, then they went up a lot (but not by as much as they went down)


there you go again. Fog, fog, fog, more fog. Fog over the fact that exports. are. down. from. the. record. high. of. july. 2014.





> I still don't know what point you are trying to make about the dollar


well, you were saying a century or 2 ago that lower dollar is good for exports. Then folks including me began replying that it's not working out like that. Dollar is down while exports are also declining, folks said. I believe Harold has the explanation.

then you produced your link saying exports have declined since the record high 16 months ago. 

then you said don't bother with the record high, just look at a month here or another month there.

i should probably be overjoyed that you are not claiming the dollar has gone up each:


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## Davis (Nov 11, 2014)

humble_pie said:


> july 2014 was the crucial date of the record high. Record 43-year-high. There is no other record high. It was a one-time only statistic. exports are down since the record high, said your link. no, why should i be sideswiped to any old other month that you sophistically wish to pick? i'm sticking to the record high of july 2014. wondering if you understand what the expression *record high* means? there you go again. Fog, fog, fog, more fog. Fog over the fact that exports. are. down. from. the. record. high. of. july. 2014. well, you were saying a century or 2 ago that lower dollar is good for exports. Then folks including me began replying that it's not working out like that. Dollar is down while exports are also declining, folks said. I believe Harold has the explanation. then you produced your link saying exports have declined since the record high 16 months ago. then you said don't bother with the record high, just look at a month here or another month there. i should probably be overjoyed that you are not claiming the dollar has gone up each:


The record high is one data point. I am not proposing to dismiss that one data point. It is relevant. All the other data points are relevant. It makes no sense to dismiss data points just because they don't support your argument, which is exactly what you are doing. And it makes no sense to dismiss all of the other economic factors that impact exports. It would not be difficult to find data points the show that exports went up while the dollar went down, and that exports went down while the dollar went up, and vice versa. 

But I would never use that to suggest that exports are unaffected by the value of the dollar, because that would be exactly the same as saying that consumers are completely insensitive to prices. 

Lower prices stimulate demand for goods both domestically and internationally, but they are not the only determinant of demand. Choosing any isolated data points - like a "record high" - and saying that proves that a lower dollar has had no impact on exports simply would be laughed at by any economist. A record high is the highest point. Other than that, it isn't anything special. It's another data point.

And I will repeat - because it will annoy you and because it is true - that exports have gone up since May this year, which is as true as saying that exports are lower than they were in July 2014. That may in part be a result of a lower dollar, and there are probably other factors involved, like the US economy and world demand, etc. that would require regression analysis to determine (that a part of the field of econometrics, which is really complicated).

Saying "Fog, fog, fog, more fog" to dismiss statistical and economic argument seems to be a way of saying "I can't understand economics so it must all just be a government conspiracy to screw me over." Well, it isn't.


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## s123 (May 3, 2015)

humble_pie said:


> s123, are you in the US of A?
> 
> re big countries vs small countries, it's not a question of following any model slavishly. It's a question of looking with interest & open minds to find separate valuable actions, one or more of which might be replicated or adapted locally.


No I’m here in CANA of DAAA! :biggrin:

Well, 
The big population like USA is harder for working together because they have too many different interests. 
Canada is a huge country but Canada’s population is less than California states.

Probably it’s a good to start focus on to circulate the money within Canada for preparing the economic crash. 
The consumers are start supporting Canadian goods & local businesses that will help Canadian economies. 

As long as we have a good food on the table and energy supplies we can hunker down and survive. 

A lot of countries are deeply depending on those supplies from the foreign countries. 
The countries will dysfunctions without it when hit the economic Collapse.


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## Canadian Glass (Oct 30, 2015)

I haven't just posted on this and disappeared, rather I find have little to add... I am largely out of my depth, but it still seems to my mind the analogy of musical chairs for collateral holds true. Admittedly the COMER lawsuit only deals with one reason chairs come up short, and for the most part leaves the game intact. As long as money only exists with interest attached, we are doomed.


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## Canadian Glass (Oct 30, 2015)

HaroldCrump said:


> 2% annual inflation targeting erodes the value of debt by ~ 50% in 25 years.
> 3% or more inflation compounds very fast when measured over decades (as most govt. debt is).


2% is closer to 35 years, 3% is 23 years, or thereabouts, unless I am missing something...

100 times the natural log of 2 is 69 point someodd, so two percent gives a doubling time of just under 35 years, no? 50% erosion of the value of debt is the same as prices doubling, no?


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## james4beach (Nov 15, 2012)

Davis said:


> james4B said "But the Canadian dollar defines all of our personal wealth... the value of our home, our net worth, what our businesses are worth (versus world peers). We can't be reckless about letting it drop." I am trying to get him to see that his interests as a person with wealth and a desire to travel internationally are not the same as those of people who are looking to find jobs or buy homes or borrow to invest in a business.


Yes, I wrote that from my own concerns of preserving my wealth. That's one concern I have about a weak currency.

But I also share HaroldCrump's view, when he wrote:



HaroldCrump said:


> The effect of currency devaluation is a reduction in real wages.
> ...
> I am saying that firstly, weakening currency does not provide any sustainable boost to exports, and secondly, it reduces real wages and imports inflation.


In the big picture, for the whole country, I think that a weak currency hurts us more than it helps us. And that's why I think the Bank of Canada is harming the country by actively pursuing a weaker CAD.


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## HaroldCrump (Jun 10, 2009)

Canadian Glass said:


> 50% erosion of the value of debt is the same as prices doubling, no?


Yes, that is correct.
Thanks for fixing the math.


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## s123 (May 3, 2015)

Actually I wanted to point out about Iceland in this part so I will mention now.

Value of life > money

And all citizen (doctor, fisherman, business man, farmer etc. whatever belonging to the group + gov.) are working together for their nation.

--

After the crash, many Icelanders turned away from the world and global trade. They began spending more time with their families and children, in the outdoors and with Icelandic books. Alcohol consumption dropped among young Icelanders,
and the subjective feeling of happiness increased. 

And along with the demand for knitting yarn came an increased desire for traditional Icelandic dishes such as lamb offal, pickled sheep testicles and horrible-smelling fermented shark meat. You are what you eat, and the Icelanders wanted to be Icelanders again.

…Some 78 percent of the country's women are employed, the highest rate in the world.

…it is a generation that is extremely well networked and excellently educated. 
Fully 95 percent are connected to the Internet with one third in possession of a university degree.

Financial Recovery of Iceland a Case Worth Studying:
http://www.spiegel.de/international...f-iceland-a-case-worth-studying-a-942387.html


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## HaroldCrump (Jun 10, 2009)

*There is no inflation*.
We need negative interest rates because there is no inflation.










^ above picture courtesy of yours truly, taken at the local Wal-Mart Grocery Center this past weekend.


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## HaroldCrump (Jun 10, 2009)

*There is no inflation*.
We need negative interest rates because there is no inflation.

*Dollarama raising top prices to $4*


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## NorthernRaven (Aug 4, 2010)

HaroldCrump said:


> *There is no inflation*.
> We need negative interest rates because there is no inflation.
> 
> *Dollarama raising top prices to $4*


They are adding intrinsically pricier products (with higher price points), expanding their range. They've added price points from $1.25-$3.00 in 2009 and 2012 previously. This is not inflation (although if existing products moved to higher price points, that would be). Also note they are keeping their range of food items capped at $2 - the new prices probably give them scope for higher margin gewgaws and whatnots.

They have increased their reference price (presumably, the "everything not otherwise marked" price) from $1 to $1.25, as inflation has over the years pushed down the number of $1 items. But considering the 2002 CPI base year=100, that new $1.25 is pretty much exactly the inflation increase since then, at under 2% annually.


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## Davis (Nov 11, 2014)

NorthernRaven said:


> They have increased their reference price (presumably, the "everything not otherwise marked" price) from $1 to $1.25, as inflation has over the years pushed down the number of $1 items. But considering the 2002 CPI base year=100, that new $1.25 is pretty much exactly the inflation increase since then, at under 2% annually.


The reference price seems to be an internal accounting thing. They said that this would have no impact on the stores.


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## NorthernRaven (Aug 4, 2010)

HaroldCrump said:


> *There is no inflation*.
> We need negative interest rates because there is no inflation.
> 
> 
> ...


Noting the "Product of USA" for the cauliflower, a little Googling informs me that the vegetable barons in California and Mexico are experiencing drought (with Florida being overly wet), and that many veggie prices are spiking. One distributor notes that "_Cauliflower is currently in an Act of God_" and "_we also saw an EXTREME MARKET on strawberries, celery, and broccoli._" Someone has a reddit page complaining of cauliflower unavailability and high prices.

Seasonal or other variability for things like this is something separate from general inflationary trends, and is one reason various "core" inflation measures tend to be used when planning monetary policy.


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## HaroldCrump (Jun 10, 2009)

I circled the labeling for that very reason.
I am quite aware of the conditions in California.

The key thing to note is the devaluation of our currency, which is causing this situation for us.
Lonnie has depreciated ~ 30% from par in last 3 years, making all kinds of food products expensive.

This is partly due to jawboning policy being followed by our central bank.


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