Throne Speech.

[Smoky buck]

Months ago I started exploring my options and setting the wheels in motion to make a change if needed. I don’t like the direction Canada has been going and last election I lost faith in its citizens desire to change paths. The west won’t separate and we will likely see a repeat come next election

Unfortunately once you throw Covid19 into the mix it is tough to do anything though. Presently travel restrictions and the uncertainty in all countries at this time it basically leaves you trapped riding things out at this time

Hunker down it’s going to be a crap storm and there is nothing that you can do at this time

[DiabeticKripple]

we are screwed in AB. Good luck to all in the energy sector.

[Masterchief]

Originally Posted by Grizzly Adams

"Low interest rates mean we can afford it. " Trudeau must have missed that financial management course posters here were arguing about.



Grizz

“We took on debt so Canadians wouldn’t have to.”



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[CaberTosser]

Pity the throne speech wasn't interrupted by a trio of dragons...

[bdub]

Originally Posted by Masterchief

“We took on debt so Canadians wouldn’t have to.”



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Yeah, we should be so thankful. Get ready for the transfer of wealth so we can all be equal, aka. a further slide into more socialism.

The governments assume we can handle the debt due to low interest rates. They forget that they don't really control interest rates once debt becomes overwhelming/unsustainable and bond buyers don't believe the risk of lending is worth the risk. All governments are in the same boat and I don't think anyone knows where this ends but i suspect it won't be pretty.

[cody j]

If I was close to retirement and had some large assets to sell I’d be even more concerned, he’s gonna be coming for all the money he can get, to pay for this huge debt and to give away to people who do t want to work for it.

[Reeves1]

Originally Posted by cody j

If I was close to retirement and had some large assets to sell I’d be even more concerned, he’s gonna be coming for all the money he can get, to pay for this huge debt and to give away to people who do t want to work for it.

This would be me........65 in a few months.....

[jrowan]

Originally Posted by raab

How so?

I'll pickup here. Inflation is not controlled by tax rates. Inflation is controlled generally by adjusting the overnight interest rate that the BoC sets, raising interest on everyone's loans and credit and encouraging people to spend less and puts a downward pressure on inflation. The BoC controls the country's monetary policy which is specifically centered around the overnight rate (which is an indirect way of deciding how much money to print).

Fiscal policy would be what the government of the day has power over and while it is somewhat better at influencing the economy in the short term it does not make as huge of an impact in the long run as people think.

That aside I do think people need to look the macro economics of our oil and gas industry. Right now oil is at $55 per barrel. Earlier this year there was so much over supply that the price went negative. In AB the break even price is about $55-$60 per barrel. This is primarily due to the fact that in AB we have high labour costs and produce low quality oil that requires additional processing in order to be used (we mix it with dilutents so that it will actually flow down a pipeline). Unless the price climbs higher, which it might not, AB will continue to see oil and gas companies downsize and reduce investment. Prices are mostly controlled by total demand and OPEC and due to the size of the total demand cannot really be impacted by any Canadian government.

[JB_AOL]

Originally Posted by jrowan

I'll pickup here. Inflation is not controlled by tax rates. Inflation is controlled generally by adjusting the overnight interest rate that the BoC sets, raising interest on everyone's loans and credit and encouraging people to spend less and puts a downward pressure on inflation. The BoC controls the country's monetary policy which is specifically centered around the overnight rate (which is an indirect way of deciding how much money to print).

Fiscal policy would be what the government of the day has power over and while it is somewhat better at influencing the economy in the short term it does not make as huge of an impact in the long run as people think.

That aside I do think people need to look the macro economics of our oil and gas industry. Right now oil is at $55 per barrel. Earlier this year there was so much over supply that the price went negative. In AB the break even price is about $55-$60 per barrel. This is primarily due to the fact that in AB we have high labour costs and produce low quality oil that requires additional processing in order to be used (we mix it with dilutents so that it will actually flow down a pipeline). Unless the price climbs higher, which it might not, AB will continue to see oil and gas companies downsize and reduce investment. Prices are mostly controlled by total demand and OPEC and due to the size of the total demand cannot really be impacted by any Canadian government.

Not sure where you're getting your $/bbl, but your off by alot.

And even at today's prices ($40/bbl) most oil companies are making money, albeit not alot. If the company you're working for isn't breaking even til 55-60, you better jump ship fast.

[jrowan]

Originally Posted by JB_AOL

Not sure where you're getting your $/bbl, but your off by alot.

And even at today's prices ($40/bbl) most oil companies are making money, albeit not alot. If the company you're working for isn't breaking even til 55-60, you better jump ship fast.

From the AB government: https://open.alberta.ca/dataset/13ab...-spotlight.pdf

Even still our costs per barrel aren't close to the Saudis where it costs them less than $5/barrel.

[JB_AOL]

Originally Posted by jrowan

From the AB government: https://open.alberta.ca/dataset/13ab...-spotlight.pdf

Even still our costs per barrel aren't close to the Saudis where it costs them less than $5/barrel.

Oh that makes more sense... (Ab govt)..

(Don't believe everything u read).. very few companies at $40/bbl are loosing money, if that was the case, there'd be alot more producers going bankrupt, but that isn't the case. Yes, construction and expansion has slowed, but that's more due to our govt scaring off investors.

[jrowan]

Originally Posted by JB_AOL

Oh that makes more sense... (Ab govt)..

(Don't believe everything u read). very few companies at $40/bbl are losing money, if that was the case, there'd be a lot more producers going bankrupt, but that isn't the case. Yes, construction and expansion has slowed, but that's more due to our govt scaring off investors.

Again as an investor if I have the option between investing in an operation making $45 per barrel of oil versus $10-$15 per barrel I'm going to choose $45 all day every day, especially when demand is experiencing a downward pressure (COVID) or the market is oversupplied (OPEC per barrel fee cuts). Both happening pushes money out of AB.

[JB_AOL]

Agreed, but most people know that the Saudi number are anything but accurate. Kind of like China's covid numbers.
When one family runs the country, it's pretty easy to "control" information.

Ftr I know many people working over there in O&G, and they're all making more money than here (by far).

[Rig-Rat]

Originally Posted by cody j

If I was close to retirement and had some large assets to sell I’d be even more concerned, he’s gonna be coming for all the money he can get, to pay for this huge debt and to give away to people who do t want to work for it.

Well I'm only 51 and have some time, but my kids are now 21-18 so they are pretty much on their own. This is the stretch where I am to able to really pile it into Retirement, well that pile may be pretty small if things don't improve. My end game is not looking the same as it did in the past. Yikes

[raab]

Originally Posted by TreeGuy

From a macroeconomic perspective, inflation is managed through interest rates. Taxation/production would only play a factor within the capitalistic supply/demand model if we existed in an isolated bubble. Even then that potential effect on inflation rates is purely speculative.

Tree


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That's not my understanding of modern monetary theory. My understanding is that when cash is created the Government of Canada buys it from the Bank of Canada with bonds adding to the national debt. This money is then lent to banks and other institutions, or used for government programs. So the national debt can be looked at as the amount of Canadian currency in circulation. The same can be said of other nations with a central bank.

The strength of the Canadian currency is directly related to the goods and services we provide. Therefore when the Canadian economy is strong and were producing lots, our currency is worth more, when the economy suffers it's worth less. Think of it as money = all goods/services. The interest rate also plays a role in currency rate.

Therefore when money increases and we see no change in goods/services. We see inflation as theres now more money to buy the same amount of good and services. When you increase the amount of goods and services and keep money the same, there is deflation as you now have the same amount of money for more goods/services. If you have a increase in money and a decrease in goods/services you run the risk hyper inflation. As you have a lot of money competing for limited supply.

So in saying that how does the Government of Canada control the money supply? They increase it by running deficits and issuing bonds, they decrease it by paying off the bonds and taking the money out of circulation. So if they want to pay off a bunch of debt quick(to reduce money supply), they need to raise taxes. This is the reason your taxes must be paid in Canadian currency. Interest rates primarily effect unemployment from what I know, but do have an effect on currency pricing for reasons mentioned by other posters.

[raab]

This is video better explains modern monetary theory https://www.youtube.com/watch?v=5baKgv7Zl5g

[6.5 shooter]

The little turd will get interest rates above 21% just so he say to his daddy... see I done better

[fishnguy]

Originally Posted by raab

The strength of the Canadian currency is directly related to the goods and services we provide. Therefore when the Canadian economy is strong and were producing lots, our currency is worth more, when the economy suffers it's worth less. Think of it as money = all goods/services. The interest rate also plays a role in currency rate.

You can produce all you want and think of the supply curve anything you want (Keynesian or neo-classic), it will be demand that will dictate the price. Always. Ultimately, your production has nothing to do with “currency strength” (it does in a way that “currency strength” determines the cost of input materials, etc). Just like any other good, “price” of money is determined by the demand and supply. Government spending increases -> borrowing goes down -> interest rates fall -> decrease in investment -> decrease in demand for currency. On the other side of it, increase in government spending -> higher demand for goods -> higher prices (due to a shift of the demand curve) -> inflation -> profit increases on the supply side -> supply adjusts by either higher production or new players entering the market -> prices go down -> deflation. In between, increase in production (either existing or new players entering the market) requires new capital -> interest rates go up -> increase in demand for money -> increase in the price of money. And this is an extremely simplified and very exclusive of many other factors way to show what happens. In reality, the process is very complicated and your inflation really depends on your interest rate, which the Bank of Canada has the power to manage. This is why we have the Bank separated from the government and so do all other “developed” nations.

In other words, government spending simulates the demand, while the Bank control of the interest rate allows for access to capital and stimulus for demand. Then come international players with their demand for the local currency, which depends on the interest rates and global demand for products we produce. And so on.

Furthermore, I am not going to quote the other part of your post, but it is the government that issues/sells the bonds, yet it is the Bank that buys them back at their discretion. The government doesn’t have an ability to buy back the bonds, per se. Again, this why we have the Bank operating separately from the government. It’s a very complicated system, but the basics are fairly easy to understand. The government sells and services the debt/bonds, the Bank is the one that buys them back.

Also important to note, if you look at any banknote here in Canada, you will notice the words “Bank of Canada” not the “Government of Canada”. In contrast, if you look at Soviet rubles, you would see something like “Government issued note”.

Your understanding of the system is not entirely accurate.

[TreeGuy]

Originally Posted by raab

That's not my understanding of modern monetary theory.

Then you don’t fully comprehend modern monetary theory.

Your post is in the correct forest, but it’s wandering around in the dark bumping off of trees. Podcasts featuring the economic advisor to Bernie Sanders won’t help shed much light either imho.

I say this because it’s clear you don’t quite grasp how important a tool interest rate manipulation is in regards to its relationship with inflation and currency valuation. Also, you continue to base your model as if the nation functions within a bubble, immune to international influences.

You’re a smart guy. Learn about those things. It’ll change your perspective. I’m probably done with this derail though. Topic for a different thread.

Tree


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[fishnguy]

To add to my previous post, when the Bank buys back the bonds, it increases the money supply, not reduces it. Essentially, the issuance and the buy back both increase money supply.

[raab]

While the bond thing is technically correct, I was using it as an example. The big thing to understand about MMT is that the government issues dollars through bonds, and they reduce them through taxation. The dollars have value due to the government requiring you to pay tax. You can check out Walter Mosler for more information on how the system currently works. To note I'm not an advocate for MMT, I just understand it. A lot of guys have the old view of economics based off a fixed interest rate system, not the variable interest rate system were in.

[fishnguy]

What do you think happens to the dollars the government collects in taxes? Do they burn them?

I will repeat this one more time because this is key: this is why we have the Bank operating independently from the government. You don’t want the government controlling money supply, which they can’t.

[bdub]

Originally Posted by fishnguy

What do you think happens to the dollars the government collects in taxes? Do they burn them?

I will repeat this one more time because this is key: this is why we have the Bank operating independently from the government. You don’t want the government controlling money supply, which they can’t.

The quaint idea that Central Banks operate independently from governments is no longer true. The influence of politicians around the world during the GFC and the Covid Crisis has killed the idea of Central Bank independence.