If she wins

Nothing, it seems, is more important now than the cost of debt.

So the news today is: (a) most economists think the US Fed won’t cut rates by a half point next month – sticking with a mere quarter point despite market volatility – so it can spit in Wall Street’s eye. (b) Canada’s jobless rate is mired at 6.4% with modest losses and growing odds the Tiff Bank will cut here on September 4th. Three in a row, baby. (c) Trump gave a presser yesterday and says he wants to diddle in monetary policy. If he is the next president, he expects “a say’ in how rates are set. Oh, boy.

This brings us to the most important current global event, which is the orange guy vs the is-she-black? woman. Nothing will be more consequential to the economy of America, Canada and the globe (as well as geopolitical tensions and war) than what happens in the first week of November.

We’ve told you concerns economists have about Trump.

They include a trade war, protectionism, economic nationalism and the inflation + higher interest rates that would engender. As well, Trump wants even-lower corporate levies, tax cuts for seniors (no tax on govy pensions) and big hikes in military spending, leading to (again) more deficit, debt and inflation. The deportation of millions of migrants would also disrupt the labour market, cost a fortune, increase wages and, yes, be inflationary.

So, as reported here, the forecast for Canada would be (a) recession and (b) an increase in rates of about 2%. Big, bad news for real estate.

But wait. What about her?

If Trump poses economic threats to Canada, does that mean Kamala would be good for the land of moose and goose?

Nope. “She is no moderate,” says Scotia’s cowboy chief economist Derek Holt. “She has been a highly divisive voice with natural tendencies aligned toward the far left end of the Democrats along with the likes of Elizabeth Warren, AOC and Bernie Sanders.”

What mayhem might a Harris presidency bring?

Lots, apparently. Like on trade – since Kamala objected to the Canada-US-Other guys treaty on the grounds it did not offer enough environmental protections. “This could be a risk in upcoming negotiations when NAFTA 2.0 expires in July 2026,” warns Holt. “Canadians are gushing over her connections to the country, but her stance on trade agreements could well make her no friend to Canada.”

Speaking of the environment, in the past Kamala has backed a $10 trillion green strategy, “multiples larger than Biden’s plan,” but without a structure to actually afford it. And when it comes to revenues, is Harris just another tax-anything-that-moves Democrat? Dunno. But she’s on record as goosing the squeeze on higher-income earners and supporting a financial transactions tax. Additionally, she would reverse Trump’s corporate benevolence by taking the corporate rate back to 35% from his 21%. That’ says Holt, “would be highly destabilizing to markets.”

Harris would also restore many regs Trump chopped, as well as impose tighter controls on AI, and spend a whole bunch of money on expanding the health care system to look more like the one we have (good luck with that…). So economists worry about deficit, debt, inflation and the impact on GDP, productivity, profits and employment. “Her tax proposals don’t sound like they would be sufficient to fund her spending bias. That could put further upward pressure upon fiscal deficits, inflation risk, and bond supply pressures that risk higher borrowing costs.”

In short, perfection eludes Americans. And us. It seems America’s on a slippery path towards increased debt, inflationary pressures and varying degrees of recklessness. If that’s the case – with the Bank of Canada following the Fed 93% of the time – we might have to live with 5-7% mortgages for years to come. Sorry, kids.

So who’s going to win?

Harris has the momentum now. Trump has the base. Kamala seems destined to secure more of the popular vote. Donny is focussed on the Electoral College. She is bringing some joy. He is all about intensity. Her VP guy likes piglets. His VP guy hates cat women.

“Both candidates represent big risks,” says Holt. “Trump is a bigger danger to the outlook in my view.”

About the picture: “Here you go Garth.  Love the blog,” writes Fred. “My dog Maggie will sell her soul for a cheerio. But Oreo is a blue Russian male that is not impressed with anything.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/08/09/if-she-wins/