Prime Minister Stephen Harper demolishes value of the Canadian dollar to boost chance of reelection

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      The headline above this article might seem a bit harsh. But that's exactly what Prime Minister Stephen Harper is doing with his determination to keep a balanced budget in an election year.

      The Canadian economy is clearly on the skids. The Bank of Canada has forecast that the gross domestic product will shrink in the first two quarters of this year. It shouldn't come as a surprise, given the collapse in most commodity prices.

      Normally when the economy contracts, governments loosen up their fiscal policy to stimulate the purchase of goods and services. This is how western industrialized countries clawed out of a brutal meltdown in 2008.

      But this time, Harper insists on keeping the budget balanced because it's an election year. He knows that his supporters are too stupid to realize that running a government is not like running a household—cutting back on public-sector spending in hard times merely exacerbates the pain.

      So because Harper and his finance minister, Joe Oliver, want to crow about a balanced budget on the campaign trail, the governor of the Bank of Canada has had to take action.

      Today, Stephen Poloz cut the overnight rate to a record low of 0.5 percent to try to bring about lower borrowing rates. The hope is that cheap and easy money will cause Canadians (rather than the government) to spend more, lifting us out of a recession.

      Once the central bank reduced the overnight rate, the Canadian dollar went into a freefall. The world realized that the export-oriented governor wasn't going to go to the ramparts to protect the loonie. It ended the day at US$0.7740. That was off $0.0109 from the previous day's closing exchange rate.

      The result will be higher food prices for Canadians if the dollar doesn't recover.

      Had Harper run up a deficit, it would have forced the Canadian government to borrow money. This would have put upward pressure on interest rates. This, in turn, could have kept the Canadian dollar at a higher value vis-a-vis the American greenback.

      But Harper is a dogmatic believer in the ideas of free-market zealots Milton Friedman and Friedrich Hayek. So our prime minister would have none of that, especially in an election year. Harper is going to keep a balanced budget even if it busts the life out of the economy.

      The end result is that Canadians will end up paying the price for his anti-deficit zealotry at the supermarket checkout counter. Let's hope they realize that on election day.



      True North No Cons

      Jul 15, 2015 at 6:34pm

      Spot on with the added points...

      In addition to current Balanced Budget after running huge Deficits since 2008,

      1. the Loonie is being pushed down as Corporate Welfare for Big Oil due to low US Dollar prices,

      - Bog Oil sells it's Oil in US Dollars so this helps them given the low global Oil Prices,

      2. The Cons don't really believe in Free Markets, they provide Corporate Welfare to Big Oil & Big Banks as well as other Big Corporations (Car Corporations),

      But when it comes to development for the average Canadian they cut back and Balance their own Deficits of our backs.

      3. By overcharging on EI (a payroll tax) using the surplus to bring down the Deficit while cutting EI Benefits to needy Canadians by making it hard to get EI and not increasing the rates paid to match inflation on a current yearly basis.

      4. By Cutting back tens of billions in Health Care for Canadians,

      5. By being generally stupid and ignorant.

      The Government ought to be involved in massive infrastructure and stimulus especially in Green Energy (like Germany has) to diversify and grow the Canadian Economy.

      Instead they are cutting back on Canadians and the Canadian Economy.

      I'm voting anyone but Cons.

      However in Ontario it appears the same idiots who voted for Ford will be voting for the Cons keeping them in power even in a minority.

      Unfortunately we have a lot of ignorant idealogical nut bars in Canada who gave us this lot.

      White Canada

      Jul 15, 2015 at 7:02pm

      Is all Steven Harper represents....Except...Oh yeah ...Sell out to White Europe...And white...Every place else...

      in awe

      Jul 15, 2015 at 7:31pm

      Thank God we have nobel prize caliber macroeconomists on staff here at the Straight.


      Jul 15, 2015 at 10:50pm

      A lower Canadian dollar will better stimulate the Canadian economy than governments running deficits to artificially stimulate the economy. A lower dollar makes our goods and services more attractive to other countries, which will lead to more sales of Canadian goods and services and more inflows of foreign money into the country, making us wealthier. Getting deeper into debt to keep the Canadian dollar high makes little economic sense and adds to the debt burden that future taxpayers will have to bear.


      Jul 16, 2015 at 1:17am

      Finally, someone who knows what the heck they're talking about. This article and the comment made by "True North No Cons" are right on the money! Unfortunately, it will take decades to reverse the damage done by this government.

      Please tell me what country has ever cut its way to prosperity? For that matter, what country has ever prospered under unregulated laissez-faire capitalism? Somalia?

      While I could write endless paragraphs about how wrong our current leaders are on their handling of the economy and environmental concerns, I think this article sums it up nicely. These people are foolish libertarian ideologues put into power by an ignorant (i.e., stupid) segment of the voting public.

      In response to Frank282, you're partially correct. A low dollar is not necessarily a bad thing because it encourages saving while theoretically decreasing imports and increasing exports. China is a good example of this. So yes, trade deficits are not a good thing. However, there's one glaring problem: Canada has practically no manufacturing sector left. The only thing we export now are dirty tar sands oil and trees. Neither of these industries trickle down enough to help the majority of Canadians, and we've always sold our resources for pennies on the dollar anyway.

      The reality is most of our food and household products are imported from other countries, like the United States. Obviously when the dollar goes down, the price of goods goes up for the average working-class citizen (who already spends 100% of their income).

      Personally I'm sick of this. I live in Vancouver, which has some of the highest house prices on the planet. I work in the tech industry, where I see my American colleagues being paid at least 30%+ more than we're paid here for the same job. And almost all the food, products, and services are 15, 30, 50, or 100% more up here than in the US.

      For years I've avoided the idea of moving south for work because of their horrendous healthcare/insurance industry. However, if Harper has his way, we'd all have private health insurance and there would be no Canada pension plan either.

      I'm NO fan of the Liberals or the NDP. I think the Liberals have destroyed BC. That said, I laugh when I see Harper's ad trashing Trudeau for lack of experience. I'll take him ANY day over Harper!!! But my first choice would be Green.

      experts from Vancouver BC should run the fed and imf imho

      Jul 16, 2015 at 1:55am

      Some of the esteemed commentators here have so many great ideas, that they should found their own country and run their own economy with the money press and everything. I hear Syria has a power vacuum...

      and to follow up...

      Jul 16, 2015 at 2:01am

      If the country has nothing to sell besides sour oil, lumber and fish, then it DESERVES to have its currency depreciate when the market contracts. That's the best way to build up other sectors of economy: through low wages. So stop complaining and create some jobs in the manufacturing/tech sector if you're so industrious. Can't do that? Then stick to service and real estate jobs in Whistler and Banff and don't forget to smile to rich tourists.


      Jul 16, 2015 at 7:11am

      Canada has a rich and vibrant economy full of educated smart people growing businesses in a multitude of industries including food, clean tech, film, digital production in addition to our older export oriented forestry, oil & gas industries. But, we need the government to be responsible, to make decisions appropriate for our time like investing in roads and fixing bridges to keep our society on track. We need them to see our reliance on fossil fuels will and must wane and invest in building the newest, most exciting segment in the world - sustainable technologies. We need them to use our scientists to help educate the masses, to adopt personalized health care as this massive shift in genetic knowledge has the ability to reduce health care costs and increase treatment efficacy by leaps and bounds.

      Choosing to support these antiquated, theologically driven, ultra right wing goons one more time may lead to a real brain drain as I and other educated people who want a future may just see it as a large nail in the coffin of a liberal Canada!

      Someone in central Canada

      Jul 16, 2015 at 8:16am

      Harper made one big mistake. He cut the GST/HST by 2 %. If he hadn't cut the GST/HST, he would have revenue to have surplus. The average Canadian probably save a 1-200$ a year, the poor save almost nothing (since food and housing are tax free) while the rich save thousands of dollar... During a recession, people stop buying thing, they stop paying the GST/HST. That creates a stimulus package on it's own.

      Don't mix federal and provincial gov... Check the liberal vs conservative track record for borrowing money. You'll see quickly who borrows the most....

      Business/the economies works well when there is regulation. Everyone knows the rules of the game. Everything is predictable. Bad thing start to happen when you temper with this rules. IE check the real estate track record since the CON's are in power... They had to revert every rules they had themselves introduce (40 years mortgage, 0% down, etc...)

      Steve Y

      Jul 16, 2015 at 10:19am

      This is a complete lunatic theory with no basis in reality and its not a good look Charlie. When the dollar was above parity with the US dollar Harper was blamed for damaging our manufacturing base and giving the entire country "dutch disease". Now that it is falling it is a conspiracy to hurt the poor. Markets fluctuate and our dollar floats to help cushion the country from economic shocks. While he COULD start spending freely as he did in 2008 at the behest of the other parties, I don't see why he would do such a thing when this is the mildest recession for a long time. Keep the gun powder dry for when we have a real problem on our hands. Harper looks on his way out without all the histrionics. There is no need to invent news here Charlie.