Debasement
Understand and Consider The Trade
Understand and Consider the Trade
Definitions
Debasement is defined as the action of reducing the quality or value of something. A decline in their intrinsic value.
Government currency and bonds are Fiat-based (1), meaning they are not backed by anything tangible. Thus, they are subject to loss of intrinsic value.
Debasement of currency and bonds occurs when governments repeatedly increase deficits and debts, ultimately increasing its money supply.
Timeline and Effect
Over time, often decades, traders of the currency start to lose faith in its ability to retain value. Concurrently, buyers of government bonds become increasingly concerned about getting their money back when the bond matures.
Debasement is a long-term, slow-moving trend developing over decades. At a point in time owners of fiat currency and fiat-denominated bonds start to look for alternative places to store their savings and wealth.
Today
In a recent interview (2), Asset Manager Adam Levinson is blunter about the current scenario. He called ‘The Great Debasement Trade’ an anti-fiat currency movement. He goes on to state a lack of trust of governments who are continuing to operate with out-of-control budgets.
The debasement is global in nature, with high government debt and deficits being commonplace everywhere, including Europe, Asia, the US and Canada. The UK and France are two current European examples where bond rates are showing signs of trouble.
Impact on Us?
First, 30-50% of Canadians investments and pensions are held in government bonds. Second, the Canadian currency is fiat. Our bonds and currency have been debased for decades. Our federal Government Debt (3) is growing ever larger.
Keith Dicker, discussing bonds in a recent podcast (4) titled The Great Debasement Trade Continues, comments that the probability of a bond market liquidity crisis is high. He notes that due to our global economy, a crisis in a European or Asian nation will impact Canadians as well. A bond market liquidity crisis will rip a hole in a lot of older people’s assets:
· The bond market will decline in value
· The stock market will decline, then later rebound
· Banks will be more reluctant to lend money
Along with the decline in bond and stock markets and increasing costs or difficulty getting or renewing a mortgage, there will be a relative increase in inflation.
So, what’s the Trade?
The Great Debasement Trade is a move by governments, investment firms and individuals towards holding less bonds and currency, replacing it with assets having intrinsic value.
In plain language, ownership of gold, silver, and Bitcoin are growing in proportion to fiat currency and bonds.
Dicker and his co-hosts suggest gold prices ripping higher this year is indicative of this ongoing trade. Reports are now out (5) stating foreign central bank reserves now hold more gold than US Treasury bonds for the first time since 1996.
Do your own research, decide for yourself if debasement is legit. If you decide it is, join the trade. Be Prepared.
1. Be Prepared blog, 25 October 2024
2. Bloomberg Insight, Adam Levinson, The Great Debasement Debate is Rippling Across World Markets, 14 October 2025
3. Be Prepared blog, 9 June 2025
4. Loonie Hour, Episode 209, October 2025
5. https://www.visualcapitalist.com/central-banks-now-hold-more-gold-than-u-s-treasuries/
Own Goal
Canadian investment in Canada
Canadian investment in Canada
For months now, our news sources have kept reminding us of the trade war ongoing with the US. More recently, we’ve been hearing how some of us are spending less on US made food and drink, and how less of us are travelling to the US. Canada vs US is the economic flavor of the day.
But did you realize the trade war is far from being our longest standing economic problem? We, individually and collectively, are choosing to invest our savings outside of Canada at a growing pace. Two examples:
CPP
The CPP Investment Board has reduced their Canadian investments to just 12% in 2025, down from 16% in 2021. (1) What about your pension plan?
Statistics Canada
Stats Can reports investment in Canadian industrial machinery grew from 1981 through 2009 but has been on a steady decline through 2025. It’s now less than half the 2009 peak and 30% lower than 1981. (2)
How did we get here?
Our advisors, investment managers, pension managers are all required to make the greatest return for each of us from our invested savings. Investing more outside Canada was delivering you somewhat greater return. The advisors were just doing their job.
Our Own Goal
So, what’s our own goal? The unintended consequence is we’ve inadvertently scored on team Canada’s goal with this individual greatest return requirement. Our governments are struggling to maintain healthcare, education, defense and infrastructure, let alone fight a trade war.
Investing anywhere but Canada has created strong personal returns, at the expense of a weaker Canadian economy. This weaker economy means less government corporate income tax, and less government personal income tax from fewer, lower paying jobs. Hence the struggle to maintain our public services.
What can be done?
We can vote for governments (at all levels) that encourage investment in Canada through lower regulations. We can also contact our pension plans and voice our opinions.
To act directly and proactively, we can go to our advisors and tell them (remember, they work for us) we want to shift a greater portion of our investments into Canadian business and markets. It could be 2%, 5%, even 10% more of your total. Every bit helps.
To be more proactive, be specific to your advisor. Ensure they move your investments to productive Canadian business. This means focus on resources, energy, agriculture and manufacturing business. They are the producers of more and better jobs that in turn produce more personal and corporate income tax.
The Simple Choice to Be Prepared
· The greater good (strong economy & government services) via Canadian investment
vs
· Your personal good (maximizing your savings) via non-Canadian investment
What Canada do we want to leave future generations? How will you stop the Own Goals and balance between these choices?
1. Katusa Research, https://x.com/KatusaResearch/status/1961447556363555165/photo/1
2. NBC Economics and Strategy, https://x.com/Jkylebass/status/1967906751958880345/photo/1
Its Been A Year
Or, What A Year Its Been
Or, What a Year It’s Been!
The first Be Prepared blogs were posted early last July. History Rhymes introduced the readers to the big picture perspective that a storm is coming for our finances over the next 5-10 years.
The blog explored some ongoing macro trends and events supporting this thesis. These included Fiat money and its evolution toward a Reset, along with Canadian Government Debt – Knowledge and Impact, and the US initiated trade wars through Tariffs, Boycott, Symptoms, and Economic War.
Mixed among these trends and events we circled back to the thesis looking to deepen our knowledge and gain insights into how the thesis – if proven true – will impact ourselves and our families. We explored the generational Inequality resulting from decades of prioritizing short-term gain over long term pain. We learned how that inequality occurs through Debt Cycles Explained. We learned that Inflation is the probable outcome and that there is Good News at the end of this financial storm.
Personal Strategy for the Storm
Scattered in amongst the theses, their trends, insights and the knowledge they offer us, the blog undertook to present ways and means to implement a personal strategy to protect you from the storm. Where to Start kicked us off, emphasizing the need to invest in your own knowledge. Then, Real Assets combined with investment Diversity and personal Debt management were introduced as means of protection for the next 5-10 years.
We dug deeper into real assets by exploring Real Estate – Home, Farmland and Investment, followed by exploring gold to Beat Inflation. We considered investment cost management with The 1% Rule and methods for Owning Stocks. I provided you with a Baseline to ensure you knew we practice what I preach.
Archive
The Be Prepared blogs are all readily accessible at bepreparedcanada.net. Please visit.
Going Forward
A year ago, who imagined tariffs and trade wars, military rearmament in Europe and even Canada, and the resulting government debt growth. I remain confident in the probability of a financial storm within the next decade, which we can Be Prepared for by respecting that history rhymes.
The blogs will continue to follow the developing storms’ Big Picture concurrent with proposing Personal Strategy to best weather the storm.
Thank you for joining me on this journey.
Government Debt - Impact
What it means to us and our families
What it means to us and our families
Following the Symptoms and Government Debt – Knowledge blogs, let’s examine some impacts of high and growing government debt.
Quantify the Challenge
Our federal and provincial governments spent $82 billion on interest payments during 2024. (1) Roughly $46 billion (56%) is federal and $36 billion (44%) is provincial. For context, what does $82 billion mean?
· This is almost 8% of total government revenues
· This is $1750 per Canadian person per year
· A third of the $264 billion public spend on healthcare (2)
· Over 2.5x the $31 billion federal childcare expense
· Over 2.5x the $30 billion spent on national defense (though we know this is headed higher, to $150 billion in 10 years)
Impact: How does this $3 trillion plus debt (3) and $82 billion annual interest expense impact on us and our families going forward?
Taxation
Governments could choose to increase taxes, in turn increasing their revenue and choose to use it to pay down the debt. As a result, our families and our private sector employers will pay higher income and corporate taxes.
A federal tax increase of $61 billion would be enough to create a break-even federal budget. About $2000 per taxpayer per year going to the government instead of household expenses and savings. Every year. This would be on top of the $1750 per person taxes already consumed on interest for the existing debt. This doesn’t consider balancing provincial and municipal budgets. Negative impact!
Spending
Governments can choose to decrease spending on their expenses to balance the budget. A Canadian version of US DOGE would need to reduce federal spending by $61 billion, back to a break-even federal budget. That’s a 12% reduction in spending across the board, affecting health, education, childcare, social service, security, defense, roads, public sector employees and more. As a result, each member of our families receives $2000 less of these government services each year. Negative impact!
And let’s remember, break-even budgets just pause the interest expense at its current level. Paying down the debt is a whole different discussion.
Another Option?
Other than higher taxation or lower spending, the only real option available to our governments is to encourage growth of our economy. This means finding a realistic middle ground where we more rapidly develop our natural resources, Canada’s primary real asset. If successful, the result will be more and better paying jobs. Positive impact!
All Three Impacts at Once?
That’s likely. Economic growth, through resource development and nation building projects, takes several years until our country reaps the benefits of incrementally better paying jobs, healthier companies, and the resulting higher taxes received by our governments.
From now until then (maybe 10 years, if all goes well), we may have to accept higher personal taxes and lower service levels to just maintain existing government debt and interest payments.
Basically, we need to accept short term pain for long term gain.
Or we can continue to enjoy short term gain for long term pain.
This is a generational issue. We are short term, the next generations are long term.
What are you and I prepared to sacrifice now for the long term gain of our children?
Let’s help the next generations Be Prepared. Create economic growth. Be proactive and Invest in Canada.
2. https://www.cihi.ca/en/national-health-expenditure-trends-2024-snapshot#:~:text=Total%20health%20expenditures%20in%20Canada%20are%20projected,reach%20$372%20billion%2C%20or%20$9%2C054%20per%20Canadian.&text=Canada's%20per%20capita%20spending%20on%20health%20care,in%20Australia%20(CA$8%2C073)%20and%20New%20Zealand%20(CA$7%2C463).
3. Government Debt – Knowledge, Be Prepared blog, 9 June 2025
Government Debt - Knowledge
Understanding the Facts
Understanding the Facts
Canadian government debt was mentioned in Symptoms recently. Let’s take a two-part look at our debt by first building our Knowledge, then looking at its Impact.
Basics
Government debt discussion is typically centered around the Debt to GDP ratio, taking our total debt and dividing it by our total Gross Domestic Product. The International Monetary Fund (IMF) definition for country comparisons uses gross (total) general (includes federal & provincial/territories & local governments) debt. (1) This includes all the debts we are required to pay principal and/or interest on. Canada’s gross general government debt is 108% of its GDP.
In total dollars, our debt is CAD $3.2 Trillion. $3,200,000,000,000.00.
Comparisons
Many will be used to hearing the federal government tout ‘best in the G7’ but that is misleading. Why? Unlike most countries, our provinces also have large debts. It’s naïve to not consider them in comparisons. Thus, ‘best in the G7’ is an apples-to-oranges measurement of only modified net federal debt/GDP (ours is 69%) against other countries’ gross general debt/GDP. (2)
Using the IMF comparison, 108% places us 33rd (6th worst) among 38 advanced economies. 26 of the 38 nations are below 70%. (1) (3)
Referencing Canadian history since 1870, our debt is higher than the 1990’s debt crisis, higher than WW1 and below only some of the WW2 years. (5)
Federal and Provincial
The Federal government is 53% of our total gross general debt, while province-territory-local combine for 47%. (4) (2022 data, gross). 1960-2020 net debt/GDP (A):
· Federal ±50% mean, ranging from 35% to 75%
· Provincial starting under 20% and trending up to over 50%
Provinces are most of the non-federal portion and are growing as a % of GDP over the last six decades while federal debt is relatively consistent within a range. (5)
There is a substantial difference between provinces. Debt/GDP is highest in NL, QC and ON (at 37-42% net debt/GDP), double levels in the lowest provinces being AB, SK and BC (at 9-19% net debt/GDP). (6)
Deficits
Our long-term debt burden comes from running deficits year after year. Looking at the federal government, a revenue of $460 billion and expense of $521 billion delivered taxpayers another $61 billion deficit (2% of GDP) last year. (7)
Can we turn away from deficits back to surplus or at least balance? It seems unlikely. Even if we stop all new incremental spending on healthcare, education, social service, security, and infrastructure, we still must spend more on national defense. The 2025 defense estimate is $41 billion (1.4% of GDP) per year. The Parliamentary Budget Office suggests $82 Billion (inflation adjusted) per year by 2032 to achieve the 2% goal. (8)
That’s tens of billions more annually on an already $61 billion per year deficit!
Further, the NATO meeting this summer is expected to move the target up to 3.5% or even maybe 5%, according to Scott Clancy, retired RCAF Major-General and NORAD director. (9)
Next
Knowledge is the best way to Be Prepared.
The next Government Debt blog will address the impact of government debt on our lives.
Note A: 2024 data used unless noted otherwise. The blog switches from gross to net debt when discussing provinces, due to data availability.
Note B: This blog is my best attempt to take nerd-level financial data and boil it into some basic facts we can use as reference points to discuss government debt. Sorry if I bored you senseless and/or ran too long.
1. https://www.imf.org/external/datamapper/GG_DEBT_GDP@GDD/SWE
2. https://www.fraserinstitute.org/studies/caution-required-when-comparing-canadas-debt-other-countries
4. https://en.wikipedia.org/wiki/Canadian_public_debt#External_links
5. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.trevortombe.com/files/tombe_CTJ_debt.pdf
6. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.fraserinstitute.org/sites/default/files/growing-debt-burden-for-canadians-2024.pdf
7. https://www.canada.ca/en/department-finance/services/publications/annual-financial-report/2024.html
9. The Line Podcast, On The Line, May 27, 2025
Reset
of the Global Currency
of the Global Currency
The recent Symptoms blog investigated government debt as an underlying reason for the US trade war. Another reason was teased in the Fiat blog last fall, discussing eventual reset of the US dollar as the global currency. Let’s dig a little deeper on the fiat USD.
Regarding the US dollar, Lyn Alden reports “The cost of the Petrodollar system, from 1974 to the present, is that by having so many entities around the world hold dollar-denominated assets (US Treasury bills) for lack of a better alternative, it artificially increases the purchasing power of the US dollar. The extra monetary premium reduces the US’ export competitiveness and gradually hollows out the US industrial base.” She then continues with “To supply the world with the dollars it needs, the US runs a persistent trade deficit. The very power granted to the reserve currency issuer is also what, over the course of decades, begins to poison it and render it unfit to maintain its status.”
In plain English: The US dollar can’t maintain its status as global currency.
Does this indicate there’s a method behind the madness of the US trade war? Here’s what a couple key players in the US had to say:
Stephen Miran, Chairman of the US Council of Economic Advisors (aka the economist who has Trump’s ear), published a paper (2) last fall titled “A Users Guide to Restructuring the Global Trading System”. The paper considers tariffs as a tool the US government could use to reorder the global economy while retaining the world’s reserve currency. Financial thought leaders are now pointing to this person and his paper as an example of method.
In plain English: Tariffs are part of a plan to try and save the US dollar.
Scott Bessent, US Secretary of the Treasury, stated in an interview last summer “In the next few years, we are going to have some kind of grand economic reordering. Something equivalent to a new Bretton Woods. There’s a very good chance that happens in the next four years and I’d like to be a part of it.” (3) Bretton Woods refers to the world economic order initiated in 1944 as WW2 ended and later replaced by the Petrodollar in 1974.
In plain English: There will be a reset of the global currency soon.
What does this mean for Canadians? It means we should Be Prepared for a global currency reset. As mentioned in Fiat, currency resets historically mean a return to tangible assets to back the global currency. Gold, other commodities (oil, copper, silver, etc.), and/or Bitcoin may all have a role to play in backing the future global currency and their value will probably go up when this reset occurs.
I recommend you think about including some portion of one or all these tangible assets in your portfolio. We have.
1. Broken Money, Lyn Alden, 2023
2. A User’s Guide to Restructuring the Global Trading System, Stephen Miran, Hudson Bay Capital, November 2024
Symptoms
Understand the Illness, not just the Symptom
Understand the Illness, not just the Symptom
The trade war escalated to the next level last week. Is it simply chaos from leadership or might there be something more to it? Is there a plan or at least a general direction?
“We’re gonna tariff everyone” is what we’ve been hearing since the US election last fall. Day by day there seems to be little or no method to the madness, but over the longer period you can start to see there is direction.
“The tariffs are a symptom of a bigger problem. The problem is the US has too much debt, it’s out of control” according to Keith Dicker (1), a Canadian smart money thought leader.
Let’s break this down:
· The illness (problem) is excessive US government debt
· Three treatments for this illness are higher taxes and lower interest rates
o higher taxes, collected by the government
o lower interest rates, lowering debt service costs for the government
o reduced government spending
· How do you apply these treatments?
o Start a tariff-based trade war, for the taxes and interest rates
o Start DOGE, for the spending reduction
· We see the symptoms (tariffs, DOGE) while they attempt to treat the illness (debt)
US government debt is at 122% of GDP/person. (2) Why is that excessive?
· Debt/GDP ratios above 77% can hinder economic growth (3)
· Since 1820, 98% of countries that hit 130% debt/GDP have defaulted (4)(5)
Canadian government debt, at 108% of GDP/person, is nearly as bad as the US.
We need to remember Trump didn’t create the problem in the US just like Carney or Poilievre didn’t create the problem in Canada. Debt growth is decades old in both cases. They are attempting to solve a problem not of their creation, one that will persist beyond the Trump era.
I’m not a fan of Trump’s tendency to use sledgehammers instead of scalpels to address problems, but at least the US has some initial direction in trying to do something about their excessive debt. Canada isn’t doing anything about it yet.
To Be Prepared, I encourage you to:
· Always dig past the headline chaos into the underlying facts. Don’t get stuck on the symptoms, keep going until you diagnose the illness
· Use your vote and voice, encourage governments to increase GDP and reduce debt
· Use your investments to increase GDP
1. Loonie Hour podcast #182, 4 April 2025
2. tradingeconomics.com/country-list/government-debt-to-gdp?continent=g20
3. worldpopulationreview.com/country-rankings/debt-to-gdp-ratio-by-country
4. https://www.lynalden.com/does-the-national-debt-matter
5. reddit.com/r/CryptoCurrency/comments/nnwpl1/since_1821_98_of_countries_that_hit_130_debtgdp/?rdt=49783
Economic War
Hope for the Best, Prepare for the Worst
Hope for the Best, Prepare for the Worst
I try very hard to be unbiased in the Be Prepared blog. However, I do have a bias. My bias is pro Canadian and has been for decades. Socially, I believe in our sovereignty. Economically, I believe in our natural resources as our real assets, the economic foundation for our sovereignty.
The US has started an economic war against us. Tariffs are getting the headlines, while issues like rebuilding our military and reduced international investment in Canada due to the chaotic news cycle will cause considerably more economic pain and volatility for our families and ourselves.
A recent NY Times article (1) documents Trump's approach to annexing Canada through 'economic force.' Renegotiation of borders and great lakes treaties have been put on the table by the US.
Although we likely don't face US invasion or outright annexation, Andrew Coyne (2) suggests a more probable outcome if we lose the war: 'incremental surrenders of our sovereignty .. a vassal state (3) in the end.'
I take this seriously. As a result, I now have a second bias - against the US economy.
What can we do?
1. Understand the scale or risk:
This is the largest external threat to Canada in our lifetime. Since World War 2.
2. Understand the timeline:
Be prepared for the worst, assume this economic war will last 2, 4 or more years.
3. Act. Our actions include:
· Accepting some sacrifice will be necessary
· Maximizing Canadian investment and eliminating US investment
· Maximizing pro-Canada and anti-US household spending
· Maximizing safer, defensive savings and investments, considering the timeline
· Looking for other ways to fight this war. Ideas?
4. After preparing and acting, then we will hope for the best.
5. Be Thankful:
This is an economic war not a shooting war. We may suffer economic hardship, but our children won't have to go to war.
What are you doing to fight for our country?
1. Matina Stevis-Gridneff, NY Times, March 7
2. Andrew Coyne, Globe & Mail, Tariffs are only the start, March 7
3. Vassal state: a state with varying degrees of independence in internal affairs but dominated by another state in its foreign affairs and potentially wholly subject to the dominating state (Merriam-Webster)
Boycott
Sending a Message or Not?
Sending a Message or Not?
With a pending trade war between ourselves and the US, common conversation often leads to whether you stop buying US products as a form of boycott. Buy the Mexican peppers instead of the ones from Texas. Buy BC or Ontario wine instead of Napa Valley. What I never hear discussed are our investments.
Most of us have a passive, hands-off approach in trusting our advisor to do the best thing with our savings and investments. We don’t often think of trade wars when we’re having the investment advisor meeting. Do you realize that your RRSP, TFSA, RRIF or other investments in any type of ‘balanced’ or ‘growth’ fund will typically have 20% to 30% of the entire fund invested in US stocks and bonds? For example, if you have $100,000 in a RRSP mutual fund, it’s likely $25,000 of that is invested in the US.
If you’re serious about boycott, moving that $25,000 investment away from the US would send a much bigger message than $50 groceries and $50 alcohol each week. And moving your investment to a different fund will take your advisor less time than it takes you to read a few labels at the stores each week.
On the other hand, ask yourself why 25% is invested in the US. Well, frankly, the US market has provided better returns than the Canadian market for years. For the last couple years, however, the US market has more resembled Canada except for the ‘Magnificent 7’ stocks. Apple, Microsoft, Google/Alphabet, Amazon, Nvidia, Meta/Facebook and Tesla.
Basically, your 25% position in the US market is supporting the growth of ‘love to hate’ icons such as Musk, Zuckerberg and a few other US billionaires. Who amongst us is boycotting Twitter or Facebook?
So what?
· There’s a good argument to be made that your investments should focus exclusively on maximum return without regard for social or political issues. Profit first and no boycotts.
· There’s an equally good argument to be made that your investments should focus largely on your beliefs. ESG funds, boycotts when needed, and profits are tertiary.
· Where do you sit?
We continue to be over 95% invested in Canada. I believe in our countries’ fundamental strength in natural resources (Canada’s real assets) and back that up with our investments.
It’s your choice to make. But do it with all the facts. And if you’re going to boycott US food and drink or infamous billionaires, do it where it hurts them the most – through your investments. Avoid hypocrisy, Be Prepared with good information to do it right.
Tariffs
What they are and what they mean to us
What they are and what they mean to us
If you follow current politics, you will know tariffs are a favorite talking point for incoming US president Donald Trump. In case the threat becomes reality, let’s understand this a bit better and see how they may affect us.
What is a tariff?
Let’s assume the US imposes a 10% tariff on Canada. That means:
· The US government immediately receives an income of 10% for everything Canada sells to the US. An alternative to raising taxes
· The US citizen pays up to 10% more for Canadian goods, immediately or within a few months. This is inflation via oil, cars, car parts, potash, aluminum, some foods, etc. (1)
· The US economy will shift more purchases to other countries, over time measured in months or years
· US companies may begin to produce goods that were previously imported, increasing US employment over years
· Canadian companies lose sales and react by lowering profits and/or selling more to other countries and/or laying off Canadian employees over an indeterminate time
Typically, a US tariff will be responded to by a Canadian counter-tariff:
· The Canadian government immediately receives an income
· The Canadian citizen pays more for US goods, immediately or within a few months.
This is inflation via cars, car parts, oil, tractors, machines for industry, some foods, etc. (1)
· The Canadian economy will shift more purchases to other countries, over time measured in months or years
· Canadian companies may begin to produce goods that were previously imported, increasing US employment over years
· US companies lose sales and react by lowering profits and/or selling more to other countries and/or laying off US employees over an indeterminate time
The governments are initially better off, but at the expense of their citizens and companies. In time, the government also becomes worse off as inflation, unemployment and lower incomes reduce their tax receipts in an economic recession. A stock market downturn could also be expected.
Types of Tariffs and Their History
There are two main types of tariffs. Targeted tariffs are applied to a few specific items and are much more common. Blanket tariffs are applied to a broad range of commodities and goods and are uncommon.
Targeted tariffs from recent history include the ongoing US softwood lumber tariffs and Trump’s tariffs on steel and aluminum during his first presidency. Even more recent are the new US, Canadian and EU tariffs on Chinese electric vehicles.
What about blanket tariffs? Is there a historical reference relevant for this type of strategy? Yes, according to a recent Paul Wells podcast (2).
In 1930, the US President Hoover imposed the Smoot-Hawley Tariff Act, despite widespread opposition from economists. Existing tariffs increased by about 20%. Then new US tariffs were applied like a blanket to 25 countries including Canada. The trade war was on. WLM King and the Canadian government responded with counter-tariffs on US products. By the following year, RB Bennett replaced King as Prime Minister and Canada pushed through further tariff items and increases to counteract the growing US tariff blanket.
Sanity began to prevail when FD Roosevelt defeated Hoover in 1932, as he began working to reduce tariffs and succeeded with a new Trade Agreements Act in 1934. Canada followed suit and the four-year trade war with the US ended.
There is consensus among economists that the 1930s tariff war made the Great Depression worse than it needed to be in Canada and in the US. How much worse has never been determined. (3)(4)
Is this History Rhyming?
It looks that way. The last blanket tariff and trade war between the US and Canada occurred in the same era as the last Fourth Turning and Debt Cycle bottom.
What does this mean for us?
Any form of trade war - such as tariffs - makes the risks of this cycle bottom more certain and more imminent. Review and adjust your debt, savings and investment positions to Be Prepared.
PS. What if the tariff threat is just a bargaining tactic? Maybe Canada avoids tariffs by securing our shared border and/or increasing defense spending for NATO. The increased Canadian government deficits and debt to accomplish this – in the $10’s of billions per year – could be just as financially painful as a trade war.
PPS. This is an unusually long blog. I just couldn’t squeeze it down anymore.
1. https://oec.world/en/profile/bilateral-country/can/partner/usa
2. North America faces the Trump tariff, Paul Wells, Substack, November 27, 2024
3. https://www.fraserinstitute.org/commentary/history-clear-high-tariffs-and-trade-wars-devastate-countries
4. https://macleans.ca/facebook-instant-articles/what-we-can-learn-from-a-disastrous-1930-u-s-tariff-on-canadian-goods/