Alberta Down

Why Wounding the Golden Goose of Canada is Good for East

The Bank of Canada (BoC) is more than the bank of the federal government, it is the bank of the economy and as such performs a number of critical balancing roles. Many are very complex and difficult. One of those is to target and attain a specified rate of inflation within the economy. The methods for doing this are complex including everything from managing bank reserve ratios to controlling the complex labyrinth of banking policy to conducting open market activity like quantitative easing and controlling foreign exchange reserves. It's all a fascinating dance with global markets as well as our own internal Canadian financial markets but where it gets really interesting is when the central bank of Canada uses its force for the political gain of a federal party like the Liberals. None have been better at this game of manipulated finance then the Liberal party and I'll give you one brief peak into how the game is played far from the prying eyes of the general public.

Another target that the central bank manages, of which there are a few targets both public and secret, is the employment rate. If the employment rate gets too high, then people will have too much money and they will start driving up the prices of goods and service (or more accurately companies will naturally raise prices in high demand markets because they can and people will pay). This causes overall inflation to rise and that impacts interest rates which in turn impact foreign exchange, etc., etc. It's a very complex and intertwined world. In the past, the Bank of Canada has used broad monetary policy to control things like employment by increasing or decreasing the rate of capital available to invest in businesses. It does this through a number of mechanisms that I will not go into in this article (but will in a future article). Needless to say, the idea is to encourage or discourage business investment and more specifically jobs and thereby affect the employment rate.

You may think that the government (and Bank of Canada by proxy) wants everyone employed but you would be very wrong. In the Bank of Canada's convoluted thinking, full employment means full on rising inflation and to the BoC, anything outside the inflation target of 2-2.5% is evil and must be stopped at all costs including stopping full employment. To the bank, an unemployment rate (lovingly renamed the 'employment rate' similar to how 'unemployment insurance' was renamed 'employment insurance' in a distinctly 1984 wrongspeak kind of way) is to be held around 4-5% but an unemployemnt rate of 6-7% is better as it gives the BoC more room to play. The government helps the bank by taking people out of the stats used to define the unemployment rate by only counting people on unemployment....sorry 'employment insurance' as unemployed. So the real unemployment rate or people out of work that would like to work in Canada is closer to 10%.

This is where the federal government steps in because the Bank of Canada tends to make broad policy decisions and actions that affect the whole of the country, although not necessarily equally given that to distribute the policy to the average Canadian requires the regular chartered banks to do the heavy lifting of distribution. These chartered banks are beholden to the central government so while the BoC makes broad policy, the chartered banks control the distribution of that policy by region. Even more politically powerful is the federal governments role in manipulating....sorry...managing the economy. The Bank of Canada takes its orders directly from the government and more specifically the Prime Ministers Office (PMO) and it does this through directives from the PMO as well as through general government policy like the budget. This allows the federal government to also impact the distribution of BoC policy. For example the government could order the BoC to increase the money supply and then implement an infrastructure bank to receive that new money and direct the proceeds to build infrastructure in Quebec as opposed to Alberta. I'll cover the underhanded work of the infrastruture bank in a future article.

Another thing the federal government can do is manipulate the unemployment rate in one part of the country to benefit another through the use of policy. For example if the BoC is targeting a 5% unemployment rate, the government can create policy to undermine Alberta's economy while encouraging investment in other parts of the country like Montreal. This has the effect of creating jobs in regions where the government receives support while reducing it in areas where it does not have support. Across the country the rate of unemployment stays within the BoC target range while the Liberals shore up support in places like Quebec and southern Ontario. To achieve this, the federal government crafted policy to dampen the economic growth of Alberta through Carbon taxes which not only had minimal effect but affected other Canadians making them angry. As a result, the feds had to go after something more significant to bring Alberta down, the infrastructure underneath Alberta's economy.

Infrastructure is a vital piece of any economy. Without it you will be relegated to the backwoods of the global economy but with a top notch infrastructure, the world is yours to own and economic prosperity is easily attained. A simple example is two villages both producing the same goods. One has roads and a port and the other has neither. Trade in the port village will be an option using the roads and the port to distribute goods and services world wide while the other village will not be able to get its goods to market efficiently and will suffer economically. The best way to cripple the Alberta economy is to simply make policy that undermines the infrastructure needed by the province to succeed. Since carbon taxes did not achieve a fast enough result, the federal government needed a more targeted approach. All of the negatively restrictive economic policy the federal government has enacted over the last few years has been solely targeted at Alberta's resource sector. Everything from emission limits, to carbon taxes, tanker bans, tougher environmental standards, pipeline cancellations to increased rights for groups opposed to pipelines. Every move the government has made with respect to limiting economic growth has come at the expense of the Alberta economy. This also has a knock on effect of limiting the growth in population in the west, which over the past few decades of Western growth was directly undermining the eastern political power base.

These policies also have the effect of drawing investment money away from Alberta's resource sector and back toward the east. It is a very smart trick and doubly so because few people within Canada or Alberta will read this far into the article and even fewer will do anything about their angst. Separatist movements like #WEXIT simply do not have the mental fortitude to effectively stand against a sophisticated and seasoned federal juggernaut and its wealthy eastern power base. Just ask the leadership of any separatist party to explain the comprehesive mechanics of how the BoC controls inflation to get a healthy view of the problem. Economics is not easy and secretive government dirty tricks in economics is even harder to identify and attack.

The current world of Canadian politics is unlikely to change. Trudeau's puppet masters know that western separatism doesn't possess the intellectual power to be a threat given the fact that WEXIT tried to start a federal political party to ??????? gain as much power as the Bloc.... which is very little? Groups like WEXIT play right into eastern hands by splitting the vote and ensuring that the status quo remain in control. It would not be surprising if the eastern powers behind Trudeau are helping WEXIT along with favorable media coverage and even a bit of cash.

The surest way to win a war is divide and conquer and splitting the votes with the PC's is WEXIT's only viable federal strategy. The same in Alberta where they will split the separatist vote among three or four groups and then with the conservatives if they ever do suceed in uniting the far right. If you are starting to get a sense of impending doom then I can assure you that all hope is not lost. There is a way through but not on the path that is currently being followed in the west (future article).

Use of the Bank of Canada in conjunction with damaging government policy is only one of the many dirty tricks in the Liberal political policy arsenal that is being used to undermine Alberta. There are more dirty tricks far deeper into the federal labyrinth and as long as voters in the three primary metropolitan areas support Trudeau, the power brokers will have a mandate to do whatever they wish.

Short of full separation there are very few options open to the people of Alberta.

#thealbertaindependent