The practice of addressing national deficits with stimulus has, it seems, become a popular trend in almost every major country, leading noted investors such as Marc Faber to warn that unsustainable debts coupled with increased printing will lead to a “colossal mess” within the next five to 10 years.
And people like Faber may not be alone. In fact, the Bank of Canada, the country’s central bank and “lender of last resort,” has, in the words of Zero Hedge, “just fired a shot across the bow,” suggesting that maybe it’s time to ease off the, uh, easing.
“Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. Over time, some modest withdrawal of monetary policy stimulus will likely be required [emphasis added]," the bank said in a recently released policy statement.
“The timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of imbalances in the household sector,” the statement adds.
Wow. Well, that’s certainly a change of pace as far as central banks go.
“Surely they must be punished for this blasphemy in the holy church of Saint John Maynard and the apostles of collapsing fiat,” Zero Hedge jokingly writes.
Here’s a side-by-side comparison of BOC's September and October statements [via the Hedge]:
Now whether Canada's government will actually dial back on monetary policy stimulus is uncertain. What we can say, however, is that the Canadian "loonie" seemed buoyed by the news:
Don't understand what this chart means? It's simple: When the USD (U.S. dollar)/CAD (Canadian dollar) currency pair rises, it means the the U.S. dollar is getting stronger against the Canadian "loonie." When the USD/CAD currency pair falls, it means the "loonie" is getting stronger against the dollar.
As the above chart clearly indicates, there was a massive dip, meaning a strengthening in the "loonie" against the dollar, the same day Bank of Canada suggested the country revisit its monetary stimulus policies.
Follow Becket Adams (@BecketAdams) on Twitter