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Declining Canadian dollar could stifle productivity growth in Canada

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From the Fraser Institute

By Steven Globerman and Lawrence Schembri

The Bank of Canada’s decision last week to lower its policy rate by 50 basis points increases the gap between the U.S. Federal Reserve’s policy rate and the Bank of Canada’s rate to approximately 130 basis points. While this gap might close somewhat if the Federal Reserve lowers its rate at its meeting this week, a substantial U.S. premium will still exist.

Since borrowing rates are tied to policy rates, interest rates in Canada will remain well below those in the U.S. for the foreseeable future. This gap will continue to put downward pressure on the value of the Canadian dollar against the U.S. greenback, as investors favour higher-earning U.S. dollar-denominated assets over Canadian dollar assets. President-elect Trump’s threatened trade actions against Canada could also exert further downward pressure on the loonie, especially if the Bank of Canada responds to Trump’s actions by making additional rate cuts. For context, it took $1.33 Canadian dollars to purchase one U.S. dollar on January 1, 2024, compared to $1.43 Canadian dollars on December 13, 2024. This represents a substantial depreciation in the Canadian dollar’s value of approximately 7.6 per cent over the period.

What effects will a declining Canadian dollar have on the Canadian economy?

In short, it will increase demand for domestic output and labour and put upward pressure on inflation via higher import prices, and it could also lower productivity growth and further hurt living standards.

Why the impact on productivity?

Because Canada imports most of its machinery and equipment (including information and communications technology) from the U.S. and other countries, and investment in this type of physical capital helps drive productivity growth. A declining Canadian dollar makes capital equipment imports more expensive, thereby discouraging investment and slowing productivity growth. A declining Canadian dollar may also shelter domestic firms from foreign competition, which could dampen their incentive to invest in productivity-enhancing assets, even if they price their output in U.S. dollars.

Hence, if the Canadian dollar remains weak against the U.S. dollar and other currencies, it may be more difficult to reverse Canada’s productivity woes. Again, productivity—the amount of GDP per hour of labour the economy produces—is key to improving living standards, which have been on the decline in Canada. From July to September of 2024, the economy grew by 0.3 per cent yet per-person GDP (an indicator of living standards) fell by 0.4 per cent (after adjusting for inflation).

Canada also indirectly imports technology via direct investments made by U.S.-based companies in their Canadian subsidiaries. While a declining Canadian dollar makes it cheaper for U.S. companies to buy assets in Canada, it also reduces the U.S. dollar value of profits earned over time in Canada by American-owned companies. This phenomenon, combined with an unstable Canadian dollar, might discourage inward foreign direct investment and associated technology transfers by increasing the financial uncertainty of such investment.

To be clear, this is not a criticism of the Bank of Canada’s move last week to help lower domestic interest rates given the Bank’s primary mandate to meet its inflation rate target of 2 per cent. Rather, governments—including the Trudeau government—must enact policies to encourage business investment in productivity-enhancing assets.

For starters, policymakers should reduce business tax rates and the tax rate on capital gains, to encourage innovation and entrepreneurship. They should also dramatically reduce the regulatory burden and other barriers to entry and growth, especially those faced by small and medium-sized businesses. And the federal and provincial governments should increase competition in the domestic economy by reducing interprovincial trade barriers.

For example, the provinces could adopt a policy of “mutual recognition” so the standards and licencing requirements in one province would be accepted by all provinces. Provinces can also unilaterally eliminate self-imposed trade barriers (as Alberta did in 2019 with grazing permits for livestock). Of course, due to resistance from special interest groups that benefit from internal barriers, such reforms will not be easy. But the economic risks to the Canadian economy—from even the threat of a trade war with the U.S.—could generate support among Canadians for these reforms. Indeed, reducing interprovincial barriers to trade and labour mobility might be the single most important thing that governments in Canada could do to improve productivity.

With Canada’s lower inflation rate, weaker labour market and weaker economic growth outlook compared to the U.S., lower interest rates in Canada seem appropriate. Bank of Canada Governor Tiff Macklem wants to see economic activity pick up to absorb slack in the economy and prevent inflation settling below the bank’s 2 per cent target. Clearly, the Bank should focus on inflation and domestic economic conditions. But policymakers must do their part to create a better environment for investment and innovation, the keys to productivity and increased living standards for Canadians.

Steven Globerman

Senior Fellow and Addington Chair in Measurement, Fraser Institute

Lawrence Schembri

Senior Fellow, Fraser Institute

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Mark Carney’s Misleading Actions and Non-Disclosure Should Disqualify Him as Canada’s Next Truly “Elected” Prime Minister – Jim Warren

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From EnergyNow.Ca

By Jim Warren

If Mark Carney simply told the truth, he wouldn’t have to remember if what he says in Quebec matches what he says in Western Canada.

When speaking in Kelowna on February 12, Mark Carney left the impression he’d been converted from environmental zealot to missionary for an Energy East pipeline.

Carney said he would “use all of the powers of the federal government, including the emergency powers of the federal government, to accelerate the major projects that we need in order to build this economy and take on the Americans.”

Five days later Carney told CBC those emergency powers wouldn’t apply to Quebec. The government of Quebec would have veto power over any pipeline to the east coast. To clear up any possible confusion he repeated his pipeline veto pledge to Quebec at the French debate for the Liberal Leadership.

Apparently tough measures like the “peace, order and good government” clause in the Constitution and the Emergencies Act can be used by Liberals to arrest and seize the bank accounts of truckers who honk horns and cause traffic jams in Ottawa. But they can’t be used to build pipelines across Quebec even if it will reduce the impact of US tariffs on Canada’s economy. Like any good Liberal, Carney knows the interests of Maritimers and the West are of little consequence when his party needs to boost its support in Quebec.

Ironically, the second national poll in the past few months shows a majority of Quebecers support the construction of an East/West pipeline through their province. It is the Central Canadian political elite based in the major cities of Ontario and Quebec and excessively zealous environmental activists who oppose pipelines. And the Liberals are, of course, the party which represents that environmentally sanctimonious elite.

You read it here first.

On January 28, EnergyNow ran a column with the headline: Trump’s Wake-up Call to Canada, Politicians & Activists… The column outlined how the “peace, order and good government’” clause in the Constitution and/or the Emergencies Act could be employed to override regulatory barriers and court injunctions to ensure new pipelines to tidewater are built. The column says the first step in that process will be booting the Liberals from office. That condition still applies, given that Carney’s one-time mention of using “emergency powers” in support of a West to East pipeline turned out to be just one more Liberal lie to Western Canada.

Pierre Poilievre has aptly pegged Mark Carney as a hypocrite whose corporate interests and behavior are in substantial conflict with his environmental virtue signaling. At a House of Commons committee hearing in 2021, Poilievre spanked Carney for supporting the cancellation of the Energy East pipeline, while Brookfield Asset Management, the company he chaired, had bought pipelines in Brazil and the United Arab Emirates.

Poilievre admonished Carney, “You make billions of dollars off foreign pipelines and you shut them down here at home, putting our people out of work.”

More recently Carney misled Canadians about the role he played in moving Brookfield’s head office from Canada to the US. Carney claimed he had absolutely nothing to do with the move despite the fact he was company chairman at the time.

No less egregious is the fact Carney has used a loophole in federal legislation to avoid the financial disclosure rules for cabinet ministers including the prime minister. The disclosure rules help Parliament determine when ministers are involved in conflicts of interest. Carney will soon be crowned prime minister by the Liberals and will technically be exempt from the rule.

Carney is technically exempt because he’s never been elected as an MP. He will be able to avoid making his financial disclosure until 60 days after he is appointed prime minster. This means there is a good chance Carney’s financial information won’t be available well into the run up to a possible spring election.

Poilievre rang the alarm regarding the loophole and plans to introduce legislation as soon as Parliament reopens to fix the problem. He pointed out that there was nothing preventing Carney from being transparent and voluntarily providing the necessary information to Canadians prior to the Liberal leadership vote.

Poilevre was being too kind. A lack of integrity is what’s holding Carney back.

Carney is on record as a firm believer in carbon taxes. In the book he published in 2023 he wrote, “Meaningful carbon prices are the cornerstone of any effective [environmental] policy framework.”

Now, in support of his campaign to become prime minister, Carney promises to get rid of Canada’s unpopular carbon tax. The claim is clearly deceptive. He intends to replace the current tax on consumers with an upstream tax on oil producers and industry. Carney must think Canadians are too dumb to realize the increased upstream tax burden will be passed on to consumers in the form of higher prices for virtually everything they purchase.

When Carney is pressed to explain his carbon tax 2.0, he mumbles his way through an incomprehensible word salad worthy of Kamala Harris.

Also like Harris, Carney avoids campaign events where non-supporters might show up or media appearances and interviews where he might be asked a tough question. His appearance on US late night talk shows hosted by uber-liberals like Jon Stewart are unlikely to generate hard ball questions—the hosts are ignorant about Canadian politics and wouldn’t have a clue about what to ask.

I think Carney knows how bad the Kamala campaign tactics look. He was clearly taken aback by an incident at a campaign event in Regina. A member of the Liberal party who was somehow identified as a closet Conservative was accosted by two security agents and police who ejected him from the meeting. The guy had done nothing untoward—he hadn’t so much as raised his voice. It seems Mark Carney is very precious and must be protected from the public– including Liberal party members who are potentially dangerous because they supported another party in the past.

Where Carney really stands on environmental issues

Mark Carney didn’t just drink the climate alarmist Kool-Aid, he helped make it and wants to serve it to you.

“He’s the father of net-zero on a global basis,” according to Catherine Swift, President of the Canadian Coalition of Concerned Manufacturers and Businesses of Canada.

Carney has been a steadfast supporter of the environmental dogma underlying the Liberal assault on the fortunes of the oil and gas industries including the legislation preventing new pipelines. For years now, he’s been working on the inside of international organizations dedicated to climate change mitigation and greenhouse gas (GHG) emissions reduction.

In December 2019, he was appointed as the very first UN Special Envoy for Climate Action and Finance.

Prior to, during and after his time at the UN Carney has found time to hobnob with the billionaires and national leaders who presumably constitute the global elite. He’s been a regular at the annual World Economic Forum conferences in Davos, Switzerland.

As a member of the forum’s Foundation Board he is a duly qualified member of the modern day Illuminati. He associates with the international bankers who presume to know what’s best for the little people. His promotion of the radical green agenda dovetails nicely with the environmental virtue signaling of the world’s rich and powerful at Davos. They are dedicated to conquering global warming no matter what it costs the rest of us.

At the COP26 conference in 2021 Carney proudly proclaimed he was part of the same social movement as Greta Thunberg. Carney praised Thunberg as the “catalyst” who inspired the youth wing of the environmental movement. I haven’t heard if he’s gone off Greta and her wing of the movement now that she has announced her support for Hamas.

Don Braid recently wrote an insightful column in the Calgary Herald where he proposes that Carney is too deeply embedded in environmental activism and too publicly committed to climate change mitigation and the anti-oil agenda to run away from it when he becomes prime minister. Braid reports what Carney had to say about the environment and the need to abandon natural gas and petroleum in the 600 page door-stopper book he published in 2021, Value(s): Building a Better World for All.

In 2021, Carney was deluded enough to imagine the world’s virtuous emissions cutters would prevent the planet’s average temperature in 2050 from being any higher than 1.5O above what it was in the middle of the 19th century.

Not even serious climate change alarmists like Gwynne Dyer believe that’s remotely possible. The goals of climate zealots like Carney include fanciful, overly ambitious emissions reduction targets. They want change to happen too fast to be affordable for virtually everyone except the sorts of people who hang out at Davos.

In his book, Carney identifies what he believes should happen to the fossil fuel industries. His goals don’t bode well for the future of Canada’s petroleum and gas sectors and can’t help but harm the country’s economy.

Carney writes, “To meet the 1.5o C target, more than 80 per cent of current fossil fuel reserves (including three-quarters of coal, half of gas, one-third of oil)” will need to “stay in the ground, stranding these assets.”

Steven Guilbeault, Canada’s most infamous and politically dangerous environmental extremist backed Carney in the Liberal leadership contest. Guilbeault’s support is in recognition of Carney’s radical record on environmental issues including climate change mitigation.

Nothing to say about Liberal corruption

One of the most disturbing omissions from Carney’s political platform and media coverage of his campaign is any mention of plans for dealing with runaway Liberal cronyism and corruption.

He hasn’t promised to open the books and jail the crooks. He hasn’t promised to release the unredacted evidence of Green Slush Fund corruption. He hasn’t promised to release that evidence and turn it over to Parliament and the RCMP. He hasn’t announced plans for a thorough forensic accounting of Liberal backroom deals. And he hasn’t promised investigations into sweetheart contracts and looting in cases like the ArriveCAN scam.

He can’t do any of the above because it would implicate a number of Liberal insiders and he needed them to support him in the leadership contest. And how will he be able to work with the government caucus if he suggests he wants to get tough with the hogs at the trough? Given that he won’t release his financial information, it could be he doesn’t want to limit his own access to the gravy train.

In the final analysis, you’d have to say Mark Carney is a committed environmental zealot except when it interferes with his business interests or political ambitions.

He appears comfortable giving preference to the environmental extremism of the Davos set over the harm overly zealous climate change policies do to the livelihoods of ordinary Canadians and the country’s economy.

He appears comfortable with hypocrisy and misleading Canadians which clearly qualifies him to lead the Liberal party, but makes for a bad prime minister.

 

 

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Biden Admin Spent A Trillion Taxpayer Dollars To Embed DEI Across Government, Study Says

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Center For Renewing America

Digging for DEI Dollars: Watchdog Report Identifies 460 Programs Across 24 Federal Agencies

The Functional Government Initiative and the Center for Renewing America identify at least a trillion dollars’ worth of divisive, identity-based programs and policies among the federal thicket and make suggestions that could ensure they don’t come back.

On his first day back in office, President Trump issued an executive order to eliminate “radical and wasteful” Diversity, Equity, and Inclusion (DEI) “programs and preferences” from the federal government. The Biden administration embraced this “woke” agenda and embedded it across the executive branch. Ensuring these programs do not make a comeback will take a sustained effort.

To help the administration in this task, and to help educate the public on the scope of the problem, the Functional Government Initiative (FGI) and the Center for Renewing America (CRA) have published DEI Spending in the Biden Administration. This report traces the Biden administration’s web of DEI programs and influence throughout the government, provides numbers on how much money these programs and initiatives wasted, and offers options for Congress to consider that could root out DEI ideology permanently.

A crucial guide to uncovering the myriad DEI expenditures, both small and large, were the “Equity Action Plans” (EAPs) that President Biden demanded across the government. The Biden administration claimed that these plans were designed to identify and remove barriers keeping federal resources from “marginalized” or “underserved” communities, particularly in areas like procurement, contracting, and grant opportunities. In reality, the systemic focus on DEI poisoned federal governance, contributing to the substantial increase in related spending and diverting resources toward controversial policies, away from agency missions. The Biden administration forcibly inserted the language of DEI into every corner of the executive branch.

The study identified 460 programs across 24 government agencies that diverted resources to DEI initiatives. At least $1 trillion was infused with DEI principles. Here are some examples taken from various EAPs:

  • The Defense Department planned to “Integrate environmental/economic justice tools.”
  • FEMA found the need to “Install equity as a foundation of emergency management.”
  • The Department of Labor “must embed equity in a sustainable manner that recognizes the multiple and overlapping identities held by workers.”

President Trump’s swift actions and executive orders stopped these efforts. To ensure a future president can’t just reverse course upon taking office, Congressional action could banish DEI philosophies for good. Our report includes suggestions for lawmakers to consider for eliminating DEI and other radical ideologies—detailed legislative proposals that could prevent the resurrection of poisonous ideas and practices in our national government.

Wade Miller, Senior Advisor for CRA, issued the following statement:

“DEI is deeply rooted throughout all aspects of the federal government, and it needs to be eliminated completely. Thankfully, the Trump administration has already embarked on a vitally necessary complete audit of each and every government program. We offer, in this report, what we hope are additional resources and tools that the new administration and Congress can use to identify, destroy, and permanently remove DEI from the federal government.”

Roderick Law, spokesman for FGI, issued the following statement:

“The dual study could both expedite the elimination of DEI from the executive branch and show just how quickly pernicious ideologies can spread inside the government. The nature of DEI is both divisive and anti-American, so why force it onto the military, the Commerce Department, or the EPA? After President Biden lavishly funded and pushed these controversial principles into every possible area of government, our hope is that raising these questions and offering Congress and responsible executive branch officials tools and suggestions can keep it from happening again.”

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