Skip to main content

Mark Carney scared the crap out of me

Two days ago, the BoC governor spoke at the Economic Club of Canada (see here).  Several comments he made make me very nervous about the state of the world, or at the very least very nervous about the BoC’s world views.  Below are a few highlighted segments:
[…] by the recent extensions of unconventional monetary policies in the United States, Japan and Europe.
With currency tensions rising, some fear a repeat of the competitive devaluations […] countries left the gold standard in order to ease monetary policy, and the system became more flexible.  Today the process is working in reverse.
Ultimately, excessive [foreign currency] reserve accumulation will prove futile. Structural changes in the global economy will yield important adjustments in real exchange rates. If nominal exchange rates do not change, the adjustment will come through inflation in emerging economies and disinflation in major advanced economies.
Historically low policy rates, even if appropriate to achieve the inflation target, create their own risks. […] Canadian authorities will need to remain as vigilant as they have been in the past to the possibility of financial imbalances […].
First I should say that I largely agree with Carney’s world views.  I’m a little surprised how pessimistic his positions are with regards to the state of the world.  Foremost is Carney’s commentary about how Europe, America and Japan are all using unconventional (read: untested) policy tools.  Starting with America’s failed QE2 program: long term interest rates have actually risen back to their July 2010 level, to Europe which appears to confuse a solvency crisis with a liquidity crisis.  The BoC remarks that the insistence of all the players to maintain the status quo will lead to disinflation and deflation in the G7 counties and inflation in the surplus countries. 

Sounds familiar no?  China, India face rising inflation pressures, while America, Europe and Japan are facing disinflation, and deflation. 

Popular posts from this blog

what people get wrong about tariffs

 The issue is simple. What percentage of the economy is dependent on tariff goods? The truth, is that the US economy is far more closed than people understand. People genuinely believe that all manufacturing has ceased to exist in the United States all given to China on the altar of woke policy the truth can be further from That statement. Only about 15% of US GDP is related to foreign trade. Of that amount, slightly more than half is from Canada in Mexico. And half of that is energy. What that means, is that about 7% of US GDP is tariff dependent. The proof in the pudding, is how little money tariff generates. People think that 30 or 50 billion is a lot it’s not in an economy that has $3 trillion. The impact on the US economy will be less visible but not absent. Inflation hasn’t occurred yet first because tests have hardly started to bite, but more importantly it’s such a small percent of the economy. Now certain things are critical. The rare earth metals from China were critical....
Post a Comment
Read more

Trump and Venezuela...

The US now owns Venezuela…and not in a good way.  America is not known for its nation building skills, and yet it now owns the disaster that is Venezuela.   Starvation and exodus are the natural progression.   In addition it will become a haven for narco-terrorists, more so than it already was. I am sure that Trump and his friends really thought that little attack very well…I guess that he will now attack Iran now.  
Post a Comment
Read more

Demographics

 I am preparing a kind of family tree for our children so that they know where they came from.  In my family I am the only survivor, although my brother and sister died recently they were both in their seventies (a story I told already).    It was a fun process, but it provided more than that.  First, I married relatively young I was 26 when I married and nearly 30 when our first child was born.   I was looking at my ancestors.  On my mother's side, she had 6 siblings, Four died before the age of 30, two in war, and two from illnesses.  Only she and a single sister survived.   The two boys had a child each but they died in WWII, and the other sister died as an infant.   what is interesting is that every one of my mother's siblings had children in their early 20s.   I know that my mom was hardly 20 when my brother was born.    What is remarkable is that among our friends, we are the only ones to have fou...
Post a Comment
Read more