The financial world cheered when Bernanke announced QE3 until it works (which is essentially forever, because it never will work).
Bruce Stewart, writing for the Winnipeg Free Press, is one of few who figured out QE for what it really is: A Beggar-Thy-Neighbor competitive currency debasement policy hoping to sink the US dollar.
Not that QE would work anyway, but one problem for Bernanke, is most of the rest of the world is doing the same thing.
Please consider Bernanke declares war on Canadian economy
Did you smile or cheer when U.S. Federal Reserve Chairman Ben Bernanke announced Quantitative Easing III (and the markets went up)?
He just declared war on your job, and the whole Canadian economy.
Of course, so did the European Central Bank, the central bank of the Peoples’ Republic of China and others.
All of them are engaged in the same practice. They’re printing money. Gobs of it, in programs that have no end point.
Some are doing it to apply stimulus to revive their economies. Some are doing it to play extend-and-pretend games to hold their banks together.
For a country like Canada, with an economy in reasonably good shape, a government that’s not out of control, banks that are healthy and dependent on exports, it’s a declaration of war.
The game everyone else is playing is “beggar thy neighbour.” All this excess cash, whatever its stated purpose, is designed to bring their currencies down.
Well, we could play the game: Mark Carney could drop our interest rates to zero, and print money like it’s going out of style. The government could launch a larger Economic Action Plan II and rack up the deficits. Both would lower the Canadian dollar.
It would also send the price of a litre of gasoline and a week’s groceries through the roof – food and fuel have gone up 35 to 40 per cent in the countries that are playing the “print and hope” game — and anyone living on a fixed income, or anyone planning to collect their pension, would be in deep trouble. It’s hard to live on zero interest.
But there is something else we can do.
Think quality. Follow, in other words, the model the Germans used to become a high wage, high prosperity country.
It means running our businesses differently. You don’t have to compete with call centres parked in Asian countries on cost if your business answers the phone and its employees are empowered to provide service on the spot. You don’t have to compete with low-cost labour in other locations if you produce a product of such high quality and strong features that labour costs are a tiny fraction of its worth.
High service — high quality products. These have a market in Canada (where the value of the Canadian dollar is a plus, if some components or tools must be imported), and as well as abroad because of their quality. …
Global Beggar-Thy-Neighbor Currency Debasement
It’s an interesting article well worth a read in entirety. However, Stewart dramatically underestimates what a housing bubble crash will do to Canada, and what a European collapse in trade will do to Germany.
Nonetheless, Stewart hits the nail on the head with his thesis about beggar-thy-neighbor tactics.
Economists in general do not howl about Bernanke, but they all bitch about China pegging the yuan to the dollar. It’s all blatant beggar-thy-neighbor manipulation, and a great reason to get rid of central banks.
None of these tactics will create a single job.
New home sales in Canada plunged 64% in the wake of government’s changes to insured mortgages (30yr to 25yr) and home equity line of credit restrictions (80% max to 65% max) which took effect in July.