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

U.S. President Joe Biden signs the guest book during a meeting with Ukrainian President Volodymyr Zelensky at the Ukrainian presidential palace on February 20, 2023, in Kyiv, Ukraine

From LifeSiteNews

By Bob Marshall

Joe Biden’s direct military support, coupled with ignoring peace efforts and sidelining containment principles, could spark global conflict.

To understand why a congressional budget fight over continuing or possibly expanding the Ukraine-Russia war is so fraught with dangers, some background of the relevant history and politics must be considered.

Ukraine-Russian hostilities

On February 24, 2022, Russian President Vladimir Putin initiated what he designated as his “special military operation.” He undertook this action in Ukraine which was an extension of the hostile acts that started in February 2014 with a U.S.-supported coup of the Ukraine government. But, recall that Putin approached Biden in late December 2021 through mid-February 2022 with proposals to forestall or avoid Russian military action mainly centering around assurances that Ukraine and other countries would not join NATO, an expansion policy which had its proximate beginnings at the end of the Cold War right after the reunification of Germany.

Putin did not approach Ukrainian President Volodymyr Zelensky with such proposals because the United States, and specifically President Biden, was the sine qua non for making such a decision regarding Ukraine’s entrance into NATO both for the U.S. and NATO. Basically, Biden told Putin there was nothing to talk about, especially with regard to reaching any agreement on Ukraine not entering NATO.

Biden rejects Ukraine-Russia peace agreement

Biden and British Prime Minister Johnson refused to accept bona fide peace agreements reached and worked out between Ukraine and Russia during the first weeks of this unnecessary conflict achieved  with the assistance of Israel’s 13th prime minister, Naftali Bennett. Former Fox News commentator Judge Andrew Napolitano wrote that Biden and Johnson urged Zelensky to reject a more than 100-page peace treaty, “each page of which had been initialed by both sides, and its essence accepted by the Kremlin and by Kyiv,” and that by trusting the U.S. and Britain for military assistance, eastern Ukraine could be protected and Ukraine would not have to make concessions to Putin.

For these reasons, Biden and Great Britain own this war and bear partial responsibility for the Ukraine, Russian, and other lives lost as well as other war costs incurred after the treaty’s rejection.

So, American, Russian, and Ukrainian citizens now suffer the political, economic, and military consequences of the myopic and imprudent judgments of Joe Biden, Boris Johnson, and perhaps much less so by Volodymyr Zelensky who apparently believed promises of continued economic and military support from Biden and Johnson.

Biden trashes Kennan Containment Doctrine

In one feckless and politically vindictive act, Biden put our troops and the American homeland in harm’s way. He obliterated George Kennan’s highly successful “containment” policy, which our country has skillfully employed since 1947 in Europe and East Asia as a means of avoiding a direct military confrontation with communist governments across several conflicts and near conflicts and the resulting horrors of nuclear exchanges with Russia, China, and North Korea.

Containment worked! America avoided nuclear war.

Direct U.S./NATO Attacks on Russia

The headlines, of course, say that “Ukraine fires UK-made missiles” and that “Russia says Ukraine attacked it using U.S. long-range missiles.” Not so fast. Zelensky may have given the order to fire, or maybe even pushed the buttons, but the White House needs to explain to the American voters who paid for these weapons, who guided the missiles to their targets in the Russian homeland, and why it is not constitutionally and morally irresponsible for Joe Biden and U.K. Prime Minister Keir Starmer to risk a much wider or even a worldwide nuclear holocaust to call Vladimir Putin’s bluff.

On November 24, Rebekah Koffler, a former Defense Intelligence Agency official, told Fox News that “we are now on the escalation ladder inching towards a nuclear war. Those ATACMS do not fire by themselves.”

Even if Ukrainian soldiers technically pushed the button, “the targeting of the weapons systems, ensuring that there is a proper flight trajectory of the missile, that it destroys the right target, and the actual battle damage it achieved that we wanted it to achieve, all requires U.S. personnel and U.S. satellites. This is why the Russians have stated that the United States and European targets are now in the crosshairs. In every wargame that we conducted back in the intelligence community ended up in a nuclear war.”

This is direct engagement.

In September, Vladimir Putin explained why a decision like Biden’s is radically different from all other “redlines.”

[T]his is not a question of whether the Kiev regime is allowed or not allowed to strike targets on Russian territory. It is already carrying out strikes … using Western-made long-range precision weapons. … This can only be done using the European Union’s satellites, or U.S. satellites. … [O]nly NATO military personnel can assign flight missions to these missile systems. … Therefore … It is about deciding whether NATO countries become directly involved in the military conflict or not. If this decision is made … this will mean that NATO countries – the United States and European countries – are at war with Russia.

Biden finesses radical policy change

Biden has still refused to take public ownership of his radical departure from George Kennan’s Cold War containment policy of communist powers when he committed the one cardinal sin of American diplomacy: authorizing the direct military attack of a nuclear opponent, however “small.”

The initial press coverage from the Associated Press on November 17 announced that President Biden had authorized Ukraine, for the first time, to use U.S.-made long-range missiles for use by Ukraine inside Russia, “according to a U.S. official and three people familiar with the matter…. The official and the people familiar with the matter were not authorized to discuss the decision publicly and spoke on condition of anonymity.”

The stark refusal of even one Biden official to put their name to this monumentally dangerous and radical policy change is astonishing. Senator Mike Lee (R-UT) noted on X that, “Joe Biden just set the stage for World War III[.] Let’s all pray it doesn’t come to that[.] Otherwise, we may never forget where we were [t]he moment we received this news.”

AP also noted that “Biden did not mention the decision during a speech at a stop to the Amazon rainforest in Brazil on his way to the Group of 20 summit.”

Press disguises Biden policy switch

Biden’s “see no evil, hear no evil, speak no evil” approach to not acknowledging the political-military consequences of his own actions was received with favorable “silent” coverage from the nation’s compliant mainstream media.

Indeed, none of the following news organizations told readers that Biden has converted American military personnel and civilian employees into warfighters who are directly engaging Russian troops, equipment, buildings, and territory by his direction: Associated Press, New York Times, NBC-Washington, Los Angeles Times, Bloomberg News, ABC-News, Public Broadcasting, Seattle Times, Minnesota Star Tribune, Miami Herald, and The Hill.

Checking the White House, the State Department, and the Defense Department websites for this period reveals no press releases, fact sheets, or acknowledgments about the unprecedented and radical missile policy change with Ukraine or any of its particulars. However, Biden’s White House website posted a note on November 20 expressing sympathy with the Transgender Day of Remembrance but is silent on the possible escalation toward World War III.

Even a week later, National Security Advisor John Kirby still did not acknowledge that Biden has authorized direct attacks on Russia in obvious disregard of Kennan’s successful policy of avoiding nuclear war by avoiding direct military to military conflict with nuclear powers. Below is an exchange between National Security Advisor John Kirby and a reporter at an “on the record” press gaggle:

QUESTION: In the past, you kind of downplayed [the] potential impact of the ATACMS on the battlefield and warned that allowing Ukraine to strike deep into Russia could lead to escalation by the Kremlin. How do you see it now?

KIRBY: Right now, they are able to use ATACMS to defend themselves, you know, in an immediate-need basis. And right now, you know, understandably, that’s taking place in and around Kursk, in the Kursk Oblast. I’d let the Ukrainians speak to their use of ATACMS and their targeting procedures and what they’re using them for and how well they’re doing. But nothing has changed about the – well, obviously we did change the guidance and gave them guidance that they could use them, you know, to strike these particular types of targets.

Biden’s war escalation ladder

At this point, in light of the grim statistics about a completely avoidable war killing and maiming young men and women, Americans are entitled to the truth, not to a rehash of tired legalisms about Ukraine’s right to defend itself.

On November 25, Judge Andrew Napolitano cited 27-year veteran former CIA analyst Ray McGovern, a frequent guest on Napolitano’s “Judging Freedom” podcast, as confirming that Biden made the decision to let Ukraine use the ATACMS missiles without any input from his Defense Secretary Lloyd Austin, which is highly unusual.

Biden and weakening Russia

Previously, Austin admitted on April 25, 2022 that the point of the war is “to see Russia weakened,” and Zelensky told The Economist on March 27, 2022, that “there are those in the West who don’t mind a long war because it would mean exhausting Russia, even if this means the demise of Ukraine and comes at the cost of Ukrainian lives.” As Leonid Ragozin wrote in May 2024:

The West has crossed many red lines and is willing to try even more, but it is impossible to predict how the close-knit group of criminally inclined individuals which rules Russia will act if their country begins losing. It has always been a tough proposition to play chess with a guy who is holding a hand grenade. And it makes no sense, as Biden’s predecessors knew very well during the Cold War.

Biden initiated direct but “lower level” hostilities with Russia on November 19, and Biden ally, British Prime Minister Keir Starmer, followed suit with similar hostile bombardments of Russia on November 20, partially fulfilling the goal of British and American war hawks attempting to push Russia into larger hostilities under Biden’s lead, or that of his “handlers,” to turn the second cold war with Russia – the aspirations of Washington and London’s armchair generals – into a conflict more likely in their minds of bringing Putin into a more contentious and uncontrollable situation that would relieve Putin of power.

This article is reprinted with permission from the Family Research Council, publishers of The Washington Stand at washingtonstand.com.