With surging unemployment, rising debt, and an economy that is heavily trade-dependent in a world where countries are turning more inward, Canada’s economy is beset by serious challenges.
The new Governor of the Bank of Canada Tiff Macklem has begun his term as the head of Canada’s central bank.
The seven-year term is underway at a time of immense economic challenge for Canada, with unemployment and debt surging as a result of the CCP Virus pandemic.
Notably, Canada was already facing serious economic problems, with the Liberal government imposing a damaging carbon tax, making Canada less competitive, deepening our reliance on trade with China, and strangling our energy sector.
On top of that, we already – before the pandemic – had half the country with less than $200 of savings, and job security collapsing.
Now, we add to that massive unemployment, economic contraction, and a surge in the national debt.
Macklem only has control over the things on the monetary side, not the fiscal side, and outside of the current emergency situation his influence will be limited mostly to interest rate decisions. However, that could end up being quite notable.
There is a possibility that Canada will face the prospect of negative interest rates, something that is being discussed in many countries. If governments respond to the surge of debt by simultaneously raising taxes and cutting spending (even though tax cuts, more economic self-sufficiency, and pro-growth policies are a better way out of debt), we will end up with even more long-term economic damage and a huge decline in demand.
If that happens, the Bank of Canada may be forced into imposing negative interest rates in a desperate attempt to get people to spend money. Of course, that will be devastating for savers, and could easily backfire – leading to a temporary surge in demand followed by an even bigger decline after the initial response.
With all of that in mind, Macklem certainly has a lot to deal with.
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