The Bank of Canada governors met in Whitehorse, Yukon this week to deliberate on Canada’s economic outlook. The Bank Governor Stephen Poloz, said the Canadian economy would be “very choppy” through the summer. Canadians can look forward to low growth (sub-2%) in the years ahead.
Stephen Poloz stated that Canada’s economy will be flat or shrink in the second quarter and “show an out-sized recovery” in the third quarter. The economy is likely to be “very choppy” through to the end of the summer, he said. In a Q&A session at a Chamber of Commerce session Mr.Poloz likened the Bank of Canada’s efforts to keep interest rates low to Hercules preventing a giant bolder from rolling down the hill crushing the Canadian economy.
The same day US Fed Chair Janet Yellen indicated the US Federal Reserve has no desire to normalize rates. As columnist John Crudele noted “Interest rates will never be normal again, because the US economy is never going to get healthy. ” He somberly concludes “... the US economy isn’t just weak, it is broken — damaged beyond repair if the fixers continue to employ the usual tools. “
Meanwhile the price of gold jumped today to more than $1,300 per ounce.
Gold miners are beneficiaries of the higher price. Yukon has three attractive gold properties, so does NWT. Northern BC and Nunavut gold plays are looking better.
The central bankers like Mr.Poloz and Ms.Yellen believe they know better than the market as to what is best for the economy. Ultra low interest rates have sapped the dynamism from the capitalistic economy and the result is an economy flat on its back, with only weak growth prospects. The alternative of going to market interest rates is too scary for the timid central bankers, and the younger generation will pay the price for their actions.