BONOKOSKI: If you were governor of the Bank of Canada, what would you do?
So, just for a moment, pretend you are Stephen Poloz, governor of the Bank of Canada.
Are you pulling your hair out yet? Are there bags under your eyes the size of steamer trunks from lack of sleep?
You look south of the border and there is U.S. President Donald Trump on his tweet machine (again), revving up the rhetoric and doubling-down on his push for tariffs on steel and aluminum which, to Canada’s flattening economy, represents $18 billion in annual trade.
You, like many Canadians, were hoping and wishing that Trump would exclude Canada from these tariffs, which would be the neighbourly thing to do if the main target is the commies in China, but Trump says nope.
In fact, Trump then tweets out an addendum accusing Canada of being unfair to American farmers, thereby dragging NAFTA into the mess as the seventh round of negotiations close down in Mexico.
What’s a Bank of Canada governor to do?
Poloz no doubt read through the 370-page budget document tabled last week by Finance Minister Bill Morneau and, like former parliamentary budget watchdog Kevin Page, found absolutely nothing about contingency plans should the economy start to tank.
Not only is there no Plan B, there is no Plan A.
In fact, NAFTA rates no more than a single paragraph.
Ditto with massive household debt that has Poloz worried about raising the interest rate a decimal point or two.
But the Justin Trudeau Liberals are so enthused with debt that they are going to borrow another $21.5 billion to spend over the next five years on whatever their progressive little hearts desire.
With their gender parity goal, it seems the Liberals want to ensure that the future of Canadian women will be as equally mortgaged to the hilt as it is for Canadian men.
A balanced budget is not even in their dreams.
On Wednesday, Stephen Poloz will be making his scheduled announcement on interest-rate changes.
According to some 30 financial analysts polled last month by Reuters, Poloz is expected to hold the federal bank’s benchmark rate at 1.25%, with it rising to 1.75% by the end of the year.
Canadians not watching the churning of the news would not be wrong in thinking that NAFTA negotiations were going along swimmingly, that Foreign Affairs Minister Chrystia Freeland, our lead trade envoy, had everything well in hand, and that no one need worry.
If budgets can balance themselves, as our prime minister seems to believe, then trade deals are a piece of cake.
That might be the case if Donald Trump were not president of the United States, and tweeting that “trade wars are good, and easy to win.”
If only it were that simple.
As Bank of Montreal economist Sal Guatieri told the CBC, “Tariffs will only fan concerns about inflation and interest rates, while also undercutting U.S. growth if spending power takes a hit and other nations retaliate.”
So, you’re Stephen Poloz, governor the Bank of Canada, and Wednesday is the day you tell those 30 financial analysts polled by Reuters whether they are right about maintaining the current lending rate, or as out to lunch as much as Donald Trump appears to be out of his mind.
Canadians, for example, can’t seem to stop using their homes as “piggy banks,” with lines-of-credit debt hitting a record $230 billion on the premise that the housing market will not falter.
Tighter mortgage lending rules earlier this year have somewhat slowed the home resale market, but not in a way that a hike in interest rates would.
What to do, what to do?