The Fugue State

America, Chinese Government, and the Bank of Canada; a loop is formed
Firstly;
1) Canada has a CRAP/corrupt federal government, although held in check by opposition parties, limiting their damage, in theory, but in practice, the Liberal party has been what can only be described as chicken; refusing to even come to debate them in parliament on major issues, allowing the CRAP to push through all kinds of legislation they would never get through otherwise.
2) Saskatchewan has a “Saskatchewan Party”/corrupt provincial level government, which is *not* held in check(and are mostly the same people who trashed the economy about a decade ago)
I expected those two alone to drop my standard of living by 10%, right off the bat, and I was not disappointed.

I did not count, however on the following

China has in a series of announcements indicated that it’s going to be loosening the strings on it’s purse containing it’s 1+ trillion dollars of US dollars, and has indicated that it is going to be trading them in for loonies and euros. This would in effect increase the value of the Canadian dollar, and decrease the value of the american dollar. It would also gives certain signals as far as what kinds of things might be profitable in the future.

At the same time, The Bank of Canada, in it’s recent self-defeating stance, has vowed to continue to deflate the loonie if anyone tries to make it more valuable. There’s a few ways of doing this, but one way includes being willing to buy american dollars at below market prices(ie overpaying for american dollars, ie giving wealthy americans money for nothing in return), and creating(”printing”) more money. Although it’s not clear exactly what the inflation rate is right now in Canada(the Bank of Canada claims 1.5%. yeah, right. Even their own data gives this away—their other estimates range around 4-5%. This could be considerred an extreme low bound)

While this is going on, the US economy has some deep seated problems. Between printing their own money to pay off debt, trillions of dollars of worthless loans backed by worthless property, a federal government that is bankrupt all in name, and a costly war, along with a growing tendency to import from china(trading US dollars for yuan, and yuan for goods) — they have ensured that their economy will not recover for the time being, or at the very least, that there will be continual pressure on china to increase the value of the yuan.

However we’re back to China again. So there’s 3 competing tendencies here; The Chinese government inflating the US dollar and deflating the Canadian dollar, the Bank of Canada in inflating the canadian dollar and deflating the US dollar, and the US are merrily inflating their dollar. In effect, a loop is formed; this structure is much like a particle accelerator for money; the money moves, but the only effect is prices change, and social institutions which rely on a static value of money are affected.

So

1. All 3 countries should expect inflation to rise, although perhaps not immediately.
2. The locus of authority in the market is moving; from our pockets to closer to Bejing/Wall street. And we’re getting nothing in return for this. Okay, that’s not technically true; it’s a wealth-redistribution thing; Ontario vehicle manufacturing, and anything that deals with China/US export basically is taking subsidy money from the rest of us, whether or not we pay taxes. Especially those of us in Saskatchewan get the short end of this 3-nation stick, in effect making the deal we’re getting for ruining our environment, and selling our most valuable material resource(oil) a really poor deal.

Tags: america, china, economics, politics

This entry was posted on Sunday, April 20th, 2008 at 6:03 am and is filed under Unproductive. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.