CANADA: FROM RICHES TO RAGS IN ONLY 30 YEARS By Eric S. Margolis 19 November 2000 NEW YORK - A leading Wall Street financier, who invests billions of dollars around the globe, observed to me over dinner this week, `It doesn't matter who wins in the US. Both parties are committed to the same centrist economic and political policies.' `But there's a huge difference in Canada,' he continued. `Canadians have a real political choice in their election...between the Liberals' tired, half-baked socialism, and the Alliance Party, which has some of the more exciting, sensible ideas for reform and modernization I've seen in North America. ' `Canada currently has the worst government of any major western G-7 industrial nation, except maybe Italy. Ottawa has totally bungled finances, wrecked the dollar, and turned Canada into an international mediocrity. Utterly unbelievable in a country with rich resources and a small population.' This view, widely shared on Wall Street and in Washington, is being reinforced as the calamitous Canadian dollar, known locally as the `loonie,' nears an all-time low of US $ .64. In three decades, the Canadian dollar, once as coveted as the Swiss franc, has declined in value by nearly 40% from $1.06. Impoverished Canadian tourists and their northern pesos are everywhere subjects of scorn and pity. This enormous loss of national wealth was purposely engineered by Canadian governments, Liberals and Tories, in order to keep exports competitive on world markets. Without currency devaluation, the government would have had to cut social spending, sharply reduce personal and business taxes, and slash regulation. Unions would have had to accept wages competitive with the USA. But a falling dollar also means all imported raw and finished goods, from chemicals and lettuce to cars, rise in cost. Because much of this increase is hidden, and comes over years in small increments, most people don't see the government's depreciation shell game. The net result: all consumers end up subsidizing a small number of inefficient, non-competitive industries. Citizens do not understand that devaluation causes inflation, a form of tax, or that it has robbed them of 40% of their savings - until they take a trip abroad to discover Canadians have become nouveaux poor. Back in 1998, Prime Minister Jean Chretien cheerfully assured Canadians the dollar's relentless fall `won't last,' and was caused by `speculators in red suspenders.' Liberal cabinet officials blamed the dollar's drop on falling commodity prices, Asia's woes, and the surging US dollar. Ottawa and its servile Bank of Canada continue to sing the same ditty today. Chretien, busy campaigning for re-election, now dismisses the dollar's meltdown `a reality of life.' Nonsense. All the above factors have only minor influence on the Canadian dollar. Over 85% of Canada's trade is with the US. Half its GDP comes from trade with America. Canada's economy is thus an adjunct of America's robust economy. Disarmed Canada has also become a virtual US protectorate, defended by US taxpayers. Accordingly, the Canadian dollar should have risen in tandem with the US dollar's upsurge. Instead it is crashing - maybe even falling to a horrifying US $ .60, warns the Canadian Imperial Bank of Commerce. If this happens, a panic could ensue as Canadians dump their near worthless bucks in favor of US dollars. Ottawa would likely react by imposing exchange controls to prevent citizens selling the northern peso. Why has the dollar crashed? *First, capital flight. Almost all of Canada's wealthiest people have steadily and stealthily sold Trudeau dollars and moved billions of assets out of Canada into hard currencies. They correctly foresaw the Socialist-Lite Liberals in Ottawa would debase and debauch the national currency. *Second, the key determinant of a currency's value is demand for it. No one anywhere wants the feeble Canadian dollar, now scorned as a wampum. No one wants to invest in Canada when its currency is being relentlessly devalued by the government. This has been done by printing too much money, keeping interest rates too low, running big deficits, and ignoring the huge debt overhang. A hundred dollars invested in Canada in 1970 is worth only $64 today(less if one factors in inflation ). All current growth in Canada's economy is wiped out by its eroding currency. For foreign investors, Canada has become a risky, Third World nation. *Third, the value of a nation's currency is determined by the consensus of world financial markets on the financial and economic management of its government. Washington is being given an A+. Canada's Liberals are getting an F for mismanagement from the international money market and bankers - in the form of the 64 cent dollar. This is the deepest cut of all. Canadians should be humiliated their once rich nation is viewed abroad as a financial banana republic. They, however, are too absorbed by the inane debate over doomed socialized medicine to note their country's national impoverishment. *Canada's still high taxes and monster $576 BILLION federal debt (servicing consumes 25% of all taxes you pay), further enfeebles the dollar. Attacking the debt means slashing the size of government, which consumes half the national income, and ending Ottawa's vote-buying programs. But Liberals, the party of government, won't move against their own political interests, or reduce armies of state employees and teachers who keep them in power. As Lenin declared, the best way to destroy a capitalist system is to debauch its currency. Canada's socialist-Lite Liberals are half way there: C$1.06 to 64 cents. Copyright: Eric S. Margolis, 2000 To send *personal mail* to Eric Margolis, please do not click reply, but use this link: mailto:[EMAIL PROTECTED] ************** To UNSUBSCRIBE to this list click the following link and enter the words UNSUBSCRIBE FOREIGNC in the body of the email. mailto:[EMAIL PROTECTED]
