A trade tariff imposed on Canada could cause an immediate economic slowdown leading to production and employment losses, especially in oil, energy, and auto industries.
However, the Covid epidemic delivered a similar economic shock, yet we prevailed because government stepped up and supported affected businesses and households until more normal conditions returned.
As owner of the Bank of Canada which issues the fiat Canadian dollar, our federal government can take similar action today until businesses can adjust or tariffs disappear.
American economist Dean Baker explains, "if Donald Trump is determined to act like an idiot in dealing with international trade, he can cause short-term disruptions. But in the longer term, the rest of the world could do just fine without the U.S. market. In that story, the U.S. economy will be the big loser."
Excellent!!!. If only our politicians had this history which shows us that we sometimes abandon what we learn in the past, and have to rediscover it.
Can you readers name the person who made this enlightened commentary on democracy?
"Our form of government is called a democracy because its administration is in the hands, not of a few, but of the whole people. In the settling of private disputes, everyone is equal before the law. Election to public office is made on the basis of ability, not on the basis of membership to a particular class. No man is kept out of public office by the obscurity of his social standing because of his poverty, as long as he wishes to be of service to the state. And not only in our public life are we free and open, but a sense of freedom regulates our day-to-day life with each other. We do not flare up in anger at our neighbor if he does what he likes. And we do not show the kind of silent disapproval that causes pain in others, even though it is not a direct accusation. In our private affairs, then, we are tolerant and avoid giving offense. But in public affairs, we take great care not to break law because of the deep respect we have for them. We give obedience to the men who hold public office from year to year. And we pay special regard to those laws that are for the protection of the oppressed and to all the unwritten laws that we know bring disgrace upon the transgressor when they are broken. .... Even people who are mostly occupied with their own business are extremely well informed on political matters. We do not simply regard a man who does not participate... as one who just minds his own business, but as one who is good for nothing."
As a central banker, would Carney be able to listen and appreciate these arguments? There may be no choice if Canada is to prosper through the coming shocks. With a greater than zero possibility of complete blocking of softwood and oil, what rational approach other than this could exist? Scary stuff, but only a calm and strong leader with street cred would be able to actually lead the rest of us.
Thank you for your sane description of the floating-exchange monetary system. I have been ponding the table trying to educate people. Nobody seems to know what money is or where it comes from…not even the heads of the central banks. Sovereign budgets are not like household budgets. In fact, the former make the latter possible.
Excellent points but perhaps it's better to refer to the 50 states as the "US" where the Trump regime rules for now. "America" includes number of well-behaved countries, Canada among them.
I agree 100%. A country that has human capital and resources to put to work can never go broke. A trade war would cause some pain at first, and that is the point of course. But if handled correctly you would come out the other side better off, less dependent on the U.S which would be a good thing.
I am a U.S. citizen, and would support Canada any way I could. I have stopped purchasing anything I don't absolutely need from our corrupt economy, but would be very willing to invest in yours. And I am not alone, I think there are millions of us over here that feel the same way. I plan to stay here and fight from the inside. I hope the rest of the free world continues to do as much damage to the U.S economy as they can. The only way this ends well is if we shock enough Americans into waking up and acknowledging what we have done.
Ask Germany what happened to the Weimar Republic when they decided that a country who printed their own currency could never go bankrupt. Or Zimbabwe. Or Argentina.
You clearly don't know what you're talking about. Maybe read the article - which directly addresses those points - before you comment.
Not all countries are monetarily sovereign. To be monetarily sovereign, it means that you have your own currency, a floating exchange rate, and the government's obligations are in their own currency. The US, the UK, Japan, Canada and a few other countries are monetarily sovereign.
Countries whose currencies are pegged in value to another currency, or who do not have their own currency (like the EU), or small countries that borrow in currencies other than their own are not monetarily sovereign.
Virtually every instance of hyperinflation is caused by a country borrowing in another currency during a commodity boom, then when the commodity boom ends the value of their currency drops, which massively increases their payments as well as the cost of imports.
It specifically addresses the hyperinflation Weimar republic, citing the IMF and German officials who ended it.
Hyperinflation in Germany was not caused by goverment money printing. The central bank had been privatized, and banks were printing credit that was being converted on demand to cash. When a new currency and controls were introduced, inflation ceased and Germany had the fastest growing economy in the world.
As for Zimbabwe "all 56 recorded hyperinflations found that hyperinflations only occur under extreme conditions such as war or a complete collapse in the productive capacity of a country. Hyperinflation has never been a consequence of monetary policy or politicians turning on the printing press just before an election; rather, hyperinflation is a symptom of a state that has lost control of its tax base."
Due to a series of catastrophic decisions by the Mugabe government that contributed to the collapse of the Zimbabwean economy, the government printed its own currency in order to buy U.S. dollars.
Government spending is Ok, provided someone is really responsible - both for the spending and for the result. Your argument that money dissipate in Canadian economy anyway has one important flaw. There is too much waste. Like money spent on DEI consultants and training. It would be great if we cut waste and build two roads instead of one. If a permit would take one week to obtain instead of one month. The list can be very long as Elon Musk shows. Our farmers are careful with every dollar, and the government should act alike. Do you agree?
Nothing the US government is doing has anything to do with waste, fraud or abuse. It’s about destroying the ability of government to function.
They fired the people in charge
Of bird flu and handling nuclear weapons.
The US government is the same size it was in 1970, and the people being fired include inspectors, scientists, air traffic controllers.
Musk is a liar and a government contractor who embodies everything wrong with the system. He’s lying about waste fraud and abuse when he himself is getting government contracts and the US government is firing people in charge of enforcing the law.
There is no comparison between running a government and running a farm, a business or a household.
Canada’s governments all have plenty of oversight and audits. The waste and abuse tends to happen out of reach of those audits.
I agree there’s ALWAYS room for judicious trimming. I’d love to see building permits easier to come by too. But regarding musk, he has so far been unable to produce an audit, a spreadsheet, or indeed anything at all to show he’s actually doing what he says he’s doing. All the so-called savings figures he’s made up in his head. It’s shocking. What we know for sure, is he’s fired and/or dissolved all individuals or institutions that had been investigating starlink or neurolink, for safety, legal, or unlawful practices. Poof. All resistance gone. The level of corruption is breathtaking.
I don't disagree, but I do believe a lot of a sovereign country's wealth comes from prescription. So long as we have sober, responsible leadership, we can make this work.
I'm pretty sure Zimbabwe was monetarily sovereign, too. 😂
The almost 100 year-old example you give from the 1930's is completely outdated, and wholly irrelevant to modern economics. Your example is not only pre-IMF...pre-Basel I & II accords...heck it's even pre-Bretton Woods!
The example you gave was only possible due to two factors, which are non-existent today:
1. Despite rarely ever being on the gold standard, our largest trading partner: the US, generally accepted our dollar at par, primarily based on the fact that we have so much known gold available to be mined that it was essentially accepted as being backed by gold (when it wasn't). This acceptance gave Canada the same purchasing power, as the most powerful nation in the world.
2. Back then the Canadian government played a much greater role in the money creation process. We ran the printing presses, but even then, due to fractional reserve banking 90% of "money" was created by banks in the form of ledger entries for loans. (At the time there was approximately a 10:1 loan to reserve requirement). Today, the government has almost no role whatsoever in the creation of Canadian dollars! Canada has absolutely no loan to reserve requirements whatsoever...the Canadian government prints at most 0.01% of the money supply!
I'm not going to say your theory holds absolutely no water, but essentially your plan would require us to dust off Canada's historic use of Social Credit monetary theory. Which honestly would be great for us...and we'd no longer be debt slaves...but there's absolutely no way the international banking system would allow us to do it. There's a reason why we were forced off that system.
Fun fact: almost everything meaningful we built in this country; all the great early 20th century works project...the St. Lawrence Seaway, etc...were only possible essentially due to social credit-type policies. A monetary policy that allowed people to create unlimited currency for any project we wish...with zero inflation...because we created it debt free...spent it into the economy...then destroyed the same amount of currency when we got it back in taxes or revenue. This allowed Canada to essentially create assets for free... significantly creating wealth...and like I said...that's why we'll never be allowed to do that again.
You have less than no idea what you are talking about.
Zimbabwe is and was not monetarily sovereign.
We have been living in a post-Bretton-woods era for more than 50 years, and Canada was never on the gold standard. Even under the gold standard, the price of gold was fixed by government.
The idea that “modern economics” - which is supposed to be a scientific discipline - somehow makes it impossible to enact policies that have been effective is an indictment of economics. It’s about a political rule, not about what can or can’t be achieved.
Letter to G&M:
Re: Do trade deficits matter? How economists think about Trump’s obsession, Mark Rendell, February 14, 2025
https://www.theglobeandmail.com/business/economy/article-trade-deficit-trump-us-canada/
A trade tariff imposed on Canada could cause an immediate economic slowdown leading to production and employment losses, especially in oil, energy, and auto industries.
However, the Covid epidemic delivered a similar economic shock, yet we prevailed because government stepped up and supported affected businesses and households until more normal conditions returned.
As owner of the Bank of Canada which issues the fiat Canadian dollar, our federal government can take similar action today until businesses can adjust or tariffs disappear.
American economist Dean Baker explains, "if Donald Trump is determined to act like an idiot in dealing with international trade, he can cause short-term disruptions. But in the longer term, the rest of the world could do just fine without the U.S. market. In that story, the U.S. economy will be the big loser."
As the daughter of a farmer and historian, I've said for decades that they can always print more money, but they're not building more land.
Yes, land is finite.
Excellent!!!. If only our politicians had this history which shows us that we sometimes abandon what we learn in the past, and have to rediscover it.
Can you readers name the person who made this enlightened commentary on democracy?
"Our form of government is called a democracy because its administration is in the hands, not of a few, but of the whole people. In the settling of private disputes, everyone is equal before the law. Election to public office is made on the basis of ability, not on the basis of membership to a particular class. No man is kept out of public office by the obscurity of his social standing because of his poverty, as long as he wishes to be of service to the state. And not only in our public life are we free and open, but a sense of freedom regulates our day-to-day life with each other. We do not flare up in anger at our neighbor if he does what he likes. And we do not show the kind of silent disapproval that causes pain in others, even though it is not a direct accusation. In our private affairs, then, we are tolerant and avoid giving offense. But in public affairs, we take great care not to break law because of the deep respect we have for them. We give obedience to the men who hold public office from year to year. And we pay special regard to those laws that are for the protection of the oppressed and to all the unwritten laws that we know bring disgrace upon the transgressor when they are broken. .... Even people who are mostly occupied with their own business are extremely well informed on political matters. We do not simply regard a man who does not participate... as one who just minds his own business, but as one who is good for nothing."
If you guessed Pericles who made this speech 2,500 years ago... You were right!
Wishing Mark Carney is reading you!!
Haha, I’m hoping the same!
As an American….. I’m happy to help Canada any way I can!
As a central banker, would Carney be able to listen and appreciate these arguments? There may be no choice if Canada is to prosper through the coming shocks. With a greater than zero possibility of complete blocking of softwood and oil, what rational approach other than this could exist? Scary stuff, but only a calm and strong leader with street cred would be able to actually lead the rest of us.
Thank you for your sane description of the floating-exchange monetary system. I have been ponding the table trying to educate people. Nobody seems to know what money is or where it comes from…not even the heads of the central banks. Sovereign budgets are not like household budgets. In fact, the former make the latter possible.
Excellent points but perhaps it's better to refer to the 50 states as the "US" where the Trump regime rules for now. "America" includes number of well-behaved countries, Canada among them.
I agree 100%. A country that has human capital and resources to put to work can never go broke. A trade war would cause some pain at first, and that is the point of course. But if handled correctly you would come out the other side better off, less dependent on the U.S which would be a good thing.
I am a U.S. citizen, and would support Canada any way I could. I have stopped purchasing anything I don't absolutely need from our corrupt economy, but would be very willing to invest in yours. And I am not alone, I think there are millions of us over here that feel the same way. I plan to stay here and fight from the inside. I hope the rest of the free world continues to do as much damage to the U.S economy as they can. The only way this ends well is if we shock enough Americans into waking up and acknowledging what we have done.
Your words are deeply appreciated.
Ask Germany what happened to the Weimar Republic when they decided that a country who printed their own currency could never go bankrupt. Or Zimbabwe. Or Argentina.
You clearly don't know what you're talking about. Maybe read the article - which directly addresses those points - before you comment.
Not all countries are monetarily sovereign. To be monetarily sovereign, it means that you have your own currency, a floating exchange rate, and the government's obligations are in their own currency. The US, the UK, Japan, Canada and a few other countries are monetarily sovereign.
Countries whose currencies are pegged in value to another currency, or who do not have their own currency (like the EU), or small countries that borrow in currencies other than their own are not monetarily sovereign.
Virtually every instance of hyperinflation is caused by a country borrowing in another currency during a commodity boom, then when the commodity boom ends the value of their currency drops, which massively increases their payments as well as the cost of imports.
It specifically addresses the hyperinflation Weimar republic, citing the IMF and German officials who ended it.
Hyperinflation in Germany was not caused by goverment money printing. The central bank had been privatized, and banks were printing credit that was being converted on demand to cash. When a new currency and controls were introduced, inflation ceased and Germany had the fastest growing economy in the world.
As for Zimbabwe "all 56 recorded hyperinflations found that hyperinflations only occur under extreme conditions such as war or a complete collapse in the productive capacity of a country. Hyperinflation has never been a consequence of monetary policy or politicians turning on the printing press just before an election; rather, hyperinflation is a symptom of a state that has lost control of its tax base."
Due to a series of catastrophic decisions by the Mugabe government that contributed to the collapse of the Zimbabwean economy, the government printed its own currency in order to buy U.S. dollars.
https://positivemoney.org/archive/hyperinflation-how-the-wrong-lessons-were-learned-from-weimar-and-zimbabwe-a-history-of-pqe-part-2-of-8/
Government spending is Ok, provided someone is really responsible - both for the spending and for the result. Your argument that money dissipate in Canadian economy anyway has one important flaw. There is too much waste. Like money spent on DEI consultants and training. It would be great if we cut waste and build two roads instead of one. If a permit would take one week to obtain instead of one month. The list can be very long as Elon Musk shows. Our farmers are careful with every dollar, and the government should act alike. Do you agree?
Nothing the US government is doing has anything to do with waste, fraud or abuse. It’s about destroying the ability of government to function.
They fired the people in charge
Of bird flu and handling nuclear weapons.
The US government is the same size it was in 1970, and the people being fired include inspectors, scientists, air traffic controllers.
Musk is a liar and a government contractor who embodies everything wrong with the system. He’s lying about waste fraud and abuse when he himself is getting government contracts and the US government is firing people in charge of enforcing the law.
There is no comparison between running a government and running a farm, a business or a household.
Canada’s governments all have plenty of oversight and audits. The waste and abuse tends to happen out of reach of those audits.
I agree there’s ALWAYS room for judicious trimming. I’d love to see building permits easier to come by too. But regarding musk, he has so far been unable to produce an audit, a spreadsheet, or indeed anything at all to show he’s actually doing what he says he’s doing. All the so-called savings figures he’s made up in his head. It’s shocking. What we know for sure, is he’s fired and/or dissolved all individuals or institutions that had been investigating starlink or neurolink, for safety, legal, or unlawful practices. Poof. All resistance gone. The level of corruption is breathtaking.
I ❤️ MMT
Very informative!
Though Trump has other tools available to him besides the economic.
https://blackcloudsix.substack.com/p/annexation-by-any-means-available
Extremely informative and comforting. Thank you.
Very helpful!
I don't disagree, but I do believe a lot of a sovereign country's wealth comes from prescription. So long as we have sober, responsible leadership, we can make this work.
I'm pretty sure Zimbabwe was monetarily sovereign, too. 😂
The almost 100 year-old example you give from the 1930's is completely outdated, and wholly irrelevant to modern economics. Your example is not only pre-IMF...pre-Basel I & II accords...heck it's even pre-Bretton Woods!
The example you gave was only possible due to two factors, which are non-existent today:
1. Despite rarely ever being on the gold standard, our largest trading partner: the US, generally accepted our dollar at par, primarily based on the fact that we have so much known gold available to be mined that it was essentially accepted as being backed by gold (when it wasn't). This acceptance gave Canada the same purchasing power, as the most powerful nation in the world.
2. Back then the Canadian government played a much greater role in the money creation process. We ran the printing presses, but even then, due to fractional reserve banking 90% of "money" was created by banks in the form of ledger entries for loans. (At the time there was approximately a 10:1 loan to reserve requirement). Today, the government has almost no role whatsoever in the creation of Canadian dollars! Canada has absolutely no loan to reserve requirements whatsoever...the Canadian government prints at most 0.01% of the money supply!
I'm not going to say your theory holds absolutely no water, but essentially your plan would require us to dust off Canada's historic use of Social Credit monetary theory. Which honestly would be great for us...and we'd no longer be debt slaves...but there's absolutely no way the international banking system would allow us to do it. There's a reason why we were forced off that system.
Fun fact: almost everything meaningful we built in this country; all the great early 20th century works project...the St. Lawrence Seaway, etc...were only possible essentially due to social credit-type policies. A monetary policy that allowed people to create unlimited currency for any project we wish...with zero inflation...because we created it debt free...spent it into the economy...then destroyed the same amount of currency when we got it back in taxes or revenue. This allowed Canada to essentially create assets for free... significantly creating wealth...and like I said...that's why we'll never be allowed to do that again.
You have less than no idea what you are talking about.
Zimbabwe is and was not monetarily sovereign.
We have been living in a post-Bretton-woods era for more than 50 years, and Canada was never on the gold standard. Even under the gold standard, the price of gold was fixed by government.
The idea that “modern economics” - which is supposed to be a scientific discipline - somehow makes it impossible to enact policies that have been effective is an indictment of economics. It’s about a political rule, not about what can or can’t be achieved.