I spoke with Andy Bell at BNNBloomberg yesterday for a wide-ranging interview about the state of global markets and what will happen in a cyclical downturn. I also touched on the disruption caused by artificial intelligence and why central bankers are wrong about inflation.
Some highlights:
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Canadian Dollar and Interest Rates:
- “Canada is a country that relies heavily on housing and immigration, and those two legs of Canadian growth are in deep trouble right now.”
- Up until that point, the Toronto Bureau of Real Estate revealed today that Toronto home sales last month were the lowest since June 2000.
- “If the Bank of Canada is wise enough to see the cyclical slowdown now hitting Canada and the rest of the world, it will start cutting interest rates sharply.”
- “It’s about taking the medicine now and accepting some currency weakness, and then hoping for economic strength later this decade.”
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Challenges facing the Canadian economy:
- “There’s not a lot going on in the Canadian economy right now. We’ve seen enough numbers now to know that inflation isn’t going to be a problem for long.”
- “This is not the time to invest in Canada or to be a Canadian company.”
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Intervention in the Japanese Yen:
- “Their currency boss went out and spent about $60 billion to prop up the currency. The market shrugged it off and went to its lowest levels in 30 years.”
- “The market will continue to buy the dollar and the yen on dips or sell the yen on any kind of rally until we see a reversal in global trade.”
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The British pound and the British elections:
- “The next deal with Britain is that it is an island of stability. Yes, we are about to see a big change in the Labour Party… but they are not promising anything in the form of corporation tax increases or anything that is not business friendly.”
- “There may be some positives to this, but the problem is that the economy is not very dynamic.”
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European political and economic challenges:
- “There will be more and more elections in Europe now because the winds of change are blowing. It is really hard to see how things will develop in a really coherent way.”
- “We have continued to fight, we have not come up with a coherent energy strategy, we have not come up with a coherent growth strategy, we have not come up with a regulatory strategy. This makes it very difficult to buy the euro.”
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Artificial Intelligence and Shrinkage:
- “AI is going to be a major deflationary force. The next thing AI is going to impact is heavy industry… It’s very deflationary as workers are pushed out of the labor force.”
- “We are heading towards an unemployment rate of about 20%. I think the idea that we are in a new era of inflation because of deglobalization is somehow completely wrong.”
This article was written by Adam Bouton on www.forexlive.com.
