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Bank of Canada waves a red flag at Trump’s trade threat

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By: Graham Lane
Published: Winnipeg Sun, January 27, 2017

Depreciating Canada’s currency is a poor strategy when our economy is growing (albeit slowly) and oil prices are in recovery. Bank of Canada’s governor Poloz is talking our dollar down in the face of a newly-installed American President that has walked away from the Trans-Pacific Partnership and threatens to throw out NAFTA. Canada’s exports to the United States support our standard of living, employing hundreds of thousands of jobs.

Trump has put the U.S.-Canada-Mexico comprehensive quarter-century trade agreement in doubt, noting Mexico’s weak currency while also accusing China of currency manipulation. It has been a year since Poloz last made a concerted effort to talk down our dollar. Then he surprised economists, bankers and the general public by lowering rates when our economy was not in recession and American interest rates were headed up. That time the loonie tanked, falling at one point to 68 cents U.S. (Our dollar briefly hit $1.10 U.S. in 2012, oil was then selling at over $100 a barrel.)

Trump promotes “America First”, towards increasing jobs in America by dragging them away from countries America trades with. Trump’s anti-trade tirades include claims that America’s trading partners manipulate their currencies to the detriment of American manufacturers and exporters. Well, Trump need not just look at China, Mexico and the EU, with Poloz’s latest stunt he can accuse Canada too of currency manipulation.

When the loonie falls up goes prices for everything we import from the United States. As to Canadian snowbirds, a higher US dollar reduces or even ends retirement time in the warmer south in the winter. More importantly, exceptionally low Canadian interest rates keep mortgage rates at unjustified historic lows, combining with our low dollar to propel foreign house buying pressure in Toronto, Vancouver and other cities – pricing our young and even the middle class out of the market. And, lower interest rates starve revenue for seniors relying on GICs and bonds for their retirement income while punishing the solvency of pension plans.

So, why really is Poloz talking down our wounded loonie again? Because he notes weakness in Canada’s industrial base. Low productivity and successive energy boondoggles (such as Ontario’s liberal provincial governments pushing up electricity rates beyond the breaking point). Self-administrated blunders significantly damage our industrial production and exports. Making a bad case worse, talking down our dollar depreciates everything we own and sell. In short, Poloz seeks to rescue Ontario through actions damaging households and other provinces..

Poloz’s actions risks Trump seeing Canada as a habitual currency manipulator, fulfilling the role of a trade enemy of his new administration. Poloz has to be reined in before he damages us all by questionable policies and inept statements.

What we should be concentrating on is not depreciating out currency but being more productive and reducing the cost of government. Our enormous tax burden needs to be cut, particularly with coming massive U.S. tax cuts. Instead, what madness are we headed for: a naïve climate angel dancing-on-a-pin carbon tax.

Trump wants a fairer trade partner, a reasonable objective for us as well.

Start by stopping currency manipulation.

Graham Lane leads Manitoba Forward, seeking sensible public policies (

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