Thank you, Canada
Posted: Fri Apr 11, 2025 2:22 pm
https://deanblundell.substack.com/p/car ... adas-quiet
The long and short of this story is that Canada, under their new PM Mark Carney, is the one playing chess while Trump is playing (and losing at) Go Fish. Carney, having on his CV stints as the boss at the Bank of Canada and the Bank of England, is a PhD (Oxford) economist. While Trump was raging and faffing about (no news there) Carney was talking to EU, Japanese and UK leaders and quietly buying more US debt aka Treasury bonds. Canada now has about $350 billion of US debt and the world outside US has about $8,500 billion of Treasury bonds.
And the threat to the US is that if Trump steps too far over the mark with his threatened tariffs, Canada will start to unload these bonds as will others. They all talked about it this week. And they wouldn't do it all at once thereby crashing the price and not getting what they were owed for what they had loaned in the first place. No, they'd do it in dribs and drabs. (I am not entirely sure what the technical difference is between a drib and a drab. But I never went to Oxford; or maybe I was sick the day we did those.). And as they hit the market, the bond price goes down (greater supply = price decrease) and interest rates go up. Canada started this ball rolling and the EU and Japan signed on.
Borrowing becomes more expensive and US debt increases and the value of the dollar goes down. The US economy swirls further and further down the toilet. And some of Trump's advisers who actually understand this stuff beyond a Grade 6 level tell their boss he'd better think again. (That sentence implies that there was an element of thought in the first place. Sorry about that.)
Earlier this week Carney called Trump. And explained basic economic theory to Trump. And Trump blinked. Thank you Canada.
The long and short of this story is that Canada, under their new PM Mark Carney, is the one playing chess while Trump is playing (and losing at) Go Fish. Carney, having on his CV stints as the boss at the Bank of Canada and the Bank of England, is a PhD (Oxford) economist. While Trump was raging and faffing about (no news there) Carney was talking to EU, Japanese and UK leaders and quietly buying more US debt aka Treasury bonds. Canada now has about $350 billion of US debt and the world outside US has about $8,500 billion of Treasury bonds.
And the threat to the US is that if Trump steps too far over the mark with his threatened tariffs, Canada will start to unload these bonds as will others. They all talked about it this week. And they wouldn't do it all at once thereby crashing the price and not getting what they were owed for what they had loaned in the first place. No, they'd do it in dribs and drabs. (I am not entirely sure what the technical difference is between a drib and a drab. But I never went to Oxford; or maybe I was sick the day we did those.). And as they hit the market, the bond price goes down (greater supply = price decrease) and interest rates go up. Canada started this ball rolling and the EU and Japan signed on.
Borrowing becomes more expensive and US debt increases and the value of the dollar goes down. The US economy swirls further and further down the toilet. And some of Trump's advisers who actually understand this stuff beyond a Grade 6 level tell their boss he'd better think again. (That sentence implies that there was an element of thought in the first place. Sorry about that.)
Earlier this week Carney called Trump. And explained basic economic theory to Trump. And Trump blinked. Thank you Canada.
