Canadian economic moves 101: preparing for US dollar parity

Hypothetical: You are a 58-year old woman who lives on a fixed income (poverty level) AND you have no assets at all.

But you do have a Canadian son who will inherit this planet.

You pay strict attention to the news, and even try to inform people of what you are seeing via a blog tutorial.

You watch economics with a very sharp eye .. and the globalization going on.

You want to see your son create a prosperous life, one in which his potential can be fulfilled and in which he can enjoy life with his friends.

So you get involved in watching Canadian politics like a hawk, mindful that it is a very new country and prone to make devastating mistakes. In the past while, you've seen a real lack of leadership and vision building for the future generations, but instead porkbarreling, kickbacks, arms dealing, nuclear industry lobbying, and the increased militarization and annexation of Canada. You wonder if your son and his friends can possibly avoid coerced conscription cuz they could get busted REAL easily if they don't stay 100% straight and are given the "jail or the armed services" option.

You watch to see what is happening with Canada's asset ledger at all times, a vast huge treasure house with terrain still being held to a large extent by the crown, but detect little effort to sort out who owns what, but suddenly the Arctic is up for grabs and it's not the indigenous peoples' who are benefitting, but the colonialists.

Then as the economic GLOBAL crisis hits, you notice that Parliament is not debating REAL issues; but playing polical games galore and NO MAJOR PARTIES actually has a platform, not really.

But as the Canadian dollar reaches a zenith against the US, suddenly interest rates are cut, so that more people who still have money go out and BORROW. The banks stay liquid (only places to stash money really), and everyone is commenting.

What would you hypothetically say if you were such a woman?

Well, I would say, based on her presumptions, and watching where the money is being spent, and the hidden (NATO, Pro-Israeli) agenda and the corruption rampant in the "justice" system, and the rank attempts to change the Senate before the SPP is adopted, and upset by hidden racism, that the decrease in interest rates absolutely sucks. AND further, that complaints will get her nowhere. NO ONE IS SERVING CANADIAN INTERESTS in Parliament for FUTURE GENERATIONS or even the poor living in the country now.

And that is the saddest thing I know.

Economics comes from the Greek for HOUSEHOLD, and no one is running the Canadian household very well - they just the McMansions and five-car garage construction to continue. And the rest can move into tents.

Oversight of the market is important, regulating the market is something else.

Veeger

Canada Unexpectedly Reduces Rate as Inflation Slows (Update7)

By Greg Quinn

Dec. 4 (Bloomberg) -- The Bank of Canada unexpectedly lowered interest rates by a quarter point after the Canadian dollar's rally slowed inflation and market ``volatility'' threatened to cool economic growth.

The bank is the second among the Group of Seven to reduce borrowing costs as officials try to keep August's credit collapse from spurring a global economic slump. Federal Reserve Chairman Ben S. Bernanke and Bank of England Governor Mervyn King expressed concern last week of a further deterioration in financial markets that threatens to hurt consumer spending.

Bank of Canada officials, led by Governor David Dodge, cut the target rate for overnight loans between commercial banks to 4.25 percent. ``The Bank now expects inflation over the next several months to be lower than was projected,'' the bank said today in Ottawa. The statement also cited ``global financial- market difficulties'' and an ``increased risk'' to exports.

Canada's dollar fell to the lowest since September after the decision, which brought the Canadian benchmark rate below the Fed's main rate. Dodge is concerned that the local currency's surge to a record high is making Canadian products uncompetitive. Bonds gained.

The change, which reverses an increase in July, was anticipated by 12 of 27 economists surveyed by Bloomberg News.

`Another Cut'

``We are likely going to see another cut,'' said Paul Ferley, assistant chief economist in Toronto at Royal Bank of Canada, the country's biggest lender. ``Going into the fourth quarter, our sense is the growth rate in Canada could get halved'' from 2.9 percent in the third quarter, he said. Ferley predicted no change today.

Policy makers didn't signal that they intend to act again at their next meeting on Jan. 22, saying they'll reassess the economy, financial developments and ``the balance of risks'' before making that decision. Fourteen of 16 economists surveyed by Bloomberg today said the bank will ease again next month, with four respondents predicting another cut in March.

Today was the second-to-last rate decision by Dodge, 64, before he retires Jan. 31 and is replaced by Mark Carney, a 42- year-old former Goldman Sachs Group Inc. investment banker.

The Fed lowered its benchmark rate twice since August and may do so again next week to ward off a recession in the world's largest economy. Across the Atlantic, the European Central Bank and Bank of England have so far resisted cutting borrowing costs, while trying to push down market lending rates by offering banks extra cash. The Bank of England and ECB meet on Dec. 6.

Canadian Dollar

The Canadian dollar weakened to C$1.0126 per U.S. dollar at 4:07 p.m. in Toronto, from C$0.9990 late yesterday. The currency reached an all-time high of 90.58 Canadian cents per U.S. dollar on Nov. 7.

The currency's advance this year slowed the exports that make up 30 percent of the country's economic output, and pushed the central bank's preferred inflation measure below a 2 percent target. Today's move heeds calls by companies ranging from Montreal jet maker Bombardier Inc. to Vancouver lumber producer Canfor Corp., as well as provincial premiers, who said the dollar's climb was crushing manufacturers.

If the dollar stays near parity, ``the entire forest- products industry practically is going to be in liquidation, bankruptcy, and there is going to be an enormous loss of employment,'' said Stephen Jarislowsky, a former Canfor director who is chief executive officer of Montreal-based Jarislowsky Fraser Ltd., which manages about $63 billion in investments.

Mills Closing

AbitibiBowater Inc., created in October from the merger of North America's two largest newsprint makers, said Nov. 29 it will close or idle mills in Canada and the U.S. Abitibi- Consolidated Inc., one of the firms that merged, had posted 21 straight quarterly losses excluding one-time items, attributing them to slumping demand and the rallying Canadian dollar.

The country's trade surplus narrowed to a nine-year low of C$2.7 billion in September, the same month the currency reached parity with the U.S. dollar for the first time since 1976. Canadian National Railway Co. said the currency led to a third- quarter profit decline.

Increases in the consumer price index, minus eight volatile items such as gasoline, declined to 1.8 percent in October -- the slowest since June 2006 -- from 2.5 percent in June. Policy makers use the so-called core inflation rate to gauge future trends.

Credit Conditions

Moreover, tighter credit conditions have ``worsened since mid-October, and are expected to persist for a longer period of time,'' the central bank said today.

Toronto-based buyout firm Onex Corp. reported its largest quarterly loss in three years last month.

``There is still a lot of difficulty in the financial markets,'' said Toronto-Dominion Bank Chief Economist Don Drummond, who forecast today's move and predicts another reduction next month. Growth in the current quarter and from January to March ``will be very weak,'' he said.

There are still signs that inflation may quicken. The unemployment rate fell to a 33-year low of 5.8 percent in October and average hourly wages rose 4.1 percent from a year earlier, the third straight month they gained more than 4 percent.

The central bank repeated today the economy is operating beyond full capacity. In recent months it has said the economy is strained by strong domestic demand and high prices for the country's energy and metals.

The decision was the fourth since the weeks after the Sept. 11, 2001, terrorist attacks on New York and Washington that Dodge has surprised the majority of economists surveyed. The last surprise was in July 2003, another time Dodge unexpectedly cut rates.

Carney is scheduled to appear at the House of Commons Finance Committee tomorrow to discuss his views on the currency's advance and other issues, the first-ever appointment hearing for a governor-designate.