When Joe Biden’s predecessor was President of our southern neighbor, he liked to point to rising stock prices as evidence of his overall brilliance and financial acumen.
It wasn’t the best of moves, as anyone with even the slightest experience knows that stock markets can fall just as quickly as they rise, and just as unexpectedly. They are also not very useful as indicators of a country’s overall economic health, as they often have extreme short-term reactions unrelated to national fundamentals. A sudden, startling move by Elon Musk could easily rock Wall Street, even when every other indicator is showing good times.
So unless you’re an investment advisor with nervous clients or a speculator on the brink every day, it doesn’t mean much that the TSX, Canada’s leading stock market indicator, fell like a stone. It briefly surpassed 22,000 in March and investors were dizzy; it fell below 18,400 on Friday and smalltimers feared to control their losses. If ever there was proof that what you don’t know can’t hurt you, it’s in piling up paper waste that could be gone by Christmas.
What the stock index does well is to serve as a vehicle for reflecting fears. In this respect it is very similar to the Canadian dollar: a cheap dollar often has psychological as well as material repercussions. It makes people feel that something somewhere is not as it should be. Why wouldn’t the world want Canada’s currency, what are we doing wrong? When investors start selling stocks en masse, concerned observers believe something is wrong, even if they’re not sure what.
Fair or not, politics must deal with the mood of the population as it is, and not as it would like it to be. The Trudeau administration has signaled that it appreciates Canadians’ economic concerns and is committed to addressing them, but so far its approach has been to lay out more spending plans on top of the many previous spending plans that are partially blamed for causing the problem.
Politicians have to deal with the mood of the population
In June, Treasury Secretary Chrystia Freeland detailed $8.9 billion in financial endorsements that she said would “put more money in Canadians’ pockets when they need it most.” Earlier this month, Prime Minister Justin Trudeau unveiled a $4.5 billion “bailout package” and claimed, “These are things that are going to change people’s lives now.”
The benefits, he said, are “sufficiently well targeted that we are confident they will not contribute to increased inflation.” Unfortunately, this is one government that has shown its targeting skills are far from impressive: Its spate of COVID programs has churned out money so liberally that Canada’s Internal Revenue Service has spent months recovering much of it through overpayments, fraud, or sloppiness to bring back in. High-income earners benefited the most, while lower-income Canadians struggled to pay rent when clawbacks began to pour in.
In any case, bailout plans to offset higher prices will not help cure inflation itself. Most of the time they only promote the Scourge. This is what Canada’s union leaders hinted at – unintentionally no doubt – when they recently asked Bank of Canada Governor Tiff Macklem to stop fighting price hikes with higher interest rates so they could have a break to campaign for higher wages.
The message Liberals have been sending so far is yes, they understand that people are grappling with a range of pressures — prohibitive housing costs, rising prices, escalating interest rates — but they have yet to get to the stage where they willing to change their habitual approach to governance, particularly where this could impact their favourability rating. Their preferred approach, as Freeland and Trudeau reflect, is to convey a sense of activity while hoping that the factors behind the problems will somehow subside, if not disappear.
That seems unlikely. There is a prevailing sense of disorder in the world right now that shows no signs of peaking. Russia’s war against Ukraine is going so badly that Vladimir Putin, the autocrat who started it, has cornered himself and is openly threatening nuclear attack. Germany is so afraid of a winter of gas shortages that it has started to take control of suppliers and take over importers. Voters in Sweden and Italy are both fed up with the same old politics and recently took away a flyer about the new and untested. The US dollar’s rise is not being caused by excitement about the upcoming midterm elections – which are showing every indication of being as chaotic and unsettling as ever – but by a feeling that America is still the best place to park is so crazy it often seems your money when the world goes haywire. Much safer than Canada, if our own dollar is any indication.
Dodging and weaving can be an effective way to dodge questions in Ottawa, especially when Canada’s parliament is one of the last to require members to appear in person and the Liberals prefer members to continue to forego attending in favor of Zoom allow. It’s an avoidance strategy that can go on indefinitely, so long as voters are patient and accommodating enough to accept it.
The key is to hope that they don’t become restless and irritable and look for an alternative.
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