Your focus on the current bond overlooks the market’s forward looking nature. Yields are stable because they reflect a consensus that the Fed will eventually cut rates to avoid a recession which is a precarious assumption. The moment inflation proves stickier than expected or the US debt trajectory worsens, we could see a violent repricing happening. It would lead to a bond vigilante reaction where yields spike suddenly and crater the value of existing holdings.
The whole idea that interest payments cushion import costs only works if the Canadian dollar doesn’t weaken alongside or faster than the USD in a crisis, and that is not at all guaranteed. When a crisis hits, all assets correlated with the US including our bond portfolio would suffer together. Meanwhile, the only sector of the US economy that’s doing well are the tech stocks, and that’s just a handful of companies passing IOU notes around in a circle. The rest of the economy is showing deep imbalances with weak consumer savings, shrinking industrial output, and persistent inflation in services.
The US is funding massive deficits in a high interest rate environment, and that can’t go on forever. The war on Iran could act as a catalyst for the whole house of cards to come crashing down because it’s driving the price of energy through the roof. The resulting economic crash in the US could be far worse than 2008, and at that point we’d be left holding the bag.
We as in the working class in Canada. That’s who always pays the bill when there’s an economic crash.
I generally agree with what you’re saying regarding the US and China. However, I’d note that the actual split is between G7 and BRICS, and BRICS have already surpassed G7 in terms of PPP measure. BRICS represents the Global South, and it happens to be where majority of human population is, where the resources are, and where most of the industry is. Majority of Global South economies economies are aligned with China now.
What Carney appears to be focusing on are former vassal states that were under the tutelage of the US. Now that the hegemon is fading, the vassals are in trouble. What Carney seems to be trying to do is to rally Europe and Australia to form a bloc without the US, but one that’s not directly aligned with the Global South.
And of course GDP alone is not useful measure of anything. The quality of development matters. Western economies are focused on stuff like software industry and service economy. They’re not producing things people actually need to live. China is where all the manufacturing happens. They’re the ones who build solar panels, EVs, and high speed rail that developing world needs. That’s what makes China such a key economy for the world.
I also expect that the US is headed for collapse, and it’s likely going to be far worse than what happened to USSR. That said, it’s not at all clear that countries that hold US debt will be able to claw anything back once that happens. For one, the US is still full of nukes, so whatever states emerge out of it eventually will be nuclear powers.
The problem for Canada is more immediate though. Our economy is heavily dependent on the US right now. And unless we diversify and become more self sufficient, then we will be dragged down along with the US. Unless Canada takes steps to insulate itself then it will become one of these failed states itself when the western order finally collapses.
Yeah, that’s just completely false. The whole point of BRICS, and what actually makes it effective unlike G7, is that it’s not an ideological alliance. It’s a framework for countries to do trade. And trade within BRICS has been exploding.
Meanwhile, the EU is very clearly dying at this point. Energy prices were already sending European industry into a terminal decline, and Iran war has put the whole thing into an overdrive. Not to mention the fertilizer crisis during the planting season which could easily result in food shortages by fall. GDP is a completely meaningless metric because the quality of development is what matters. European countries do not produce things their people need to live. And what’s actually happening in Europe right now is that nationalist parties like AfD, RN, and Reform are dominating their politics. All these parties are extremely nationalist, and they are openly hostile to the whole idea of EU. The liberal center in Europe is collapsing along with the standard of living.
It’s very much not exclusively in automotive sector. Chemical industry, steel production, and all other sectors are affected. The reality is that manufacturing require energy as input, and with higher energy costs manufacturing in EU becomes uncompetitive compared to China because China is getting cheap energy from Russia. Europe basically made itself entirely dependent on American energy now, and that’s only getting more expensive for them. The US is also actively trying to poach European industry to boost their own economy.
China would be the natural trading partner for Europe, but Europe is still unable to break from the US and act in its own interest. Before the war in Ukraine started, Europe was becoming increasingly integrated with the east economically. They were getting cheap energy from Russia, and manufacturing from China. This allowed European economies to thrive. Now that relations with Russia are broken, and relations with China are now tense.
And you continue to misunderstand the nature of BRICS. As I already explained above, their interests are economic. It has little to do with politics or America. Countries in BRICS see mutual win-win trade relations that boost their economies. That’s why India does a huge amount of trade with China while having little in common politically. As the US continues to decline, more and more countries will necessarily flock to BRICS because that’s where economic development is happening right now. And China is at the centre of it all because they’re the world’s factory building things everyone needs. They help countries build infrastructure like ports, high speed rail, and clean energy production. They supply cars, phones, and other electronics. And as the Global Majority develops, the demand for the things China produces will continue to grow. That’s the real glue that holds BRICS together.
The EU is absolutely not in a recovery, and there are no reasons to expect it to be in a recovery because structural problems are still there. The elephant in the room is that Europe lacks cheap energy, and until that problem is solved, there’s no reason for companies to manufacture anything in the EU.
What we’re actually seeing in the EU is essentially a structural wipeout of its industrial core. Out of 18 flagship sectors only aerospace and defense are still globally competitive. Everything else from automotive and steel to chemicals and solar is losing ground fast to the US and China right now. And it’s not some temporary dip because 83% of industrial indicators are either stagnating or actively deteriorating.
The chemical sector is doing even worse than automotive industry. Over 20 major plants have closed in the last two years wiping out 20k jobs and pushing production volume nearly 8% below pandemic levels. The math just does not work for these firms when their energy costs are 4x higher than what their American competitors pay, who in turn pay 3x energy costs in China.
This distress is now moving into infrastructure and utilities too. Bloomberg is writing that those sectors will be among the most distressed by late this year. Meanwhile gas reserves are ending the winter at record lows and refilling them will be incredibly expensive now. So we are seeing a permanent relocation of industry to lower cost regions rather than a standard market cycle.
Here are some links on how things in the EU are going, it’s grim as fuck:
Now, Europe is looking at Canada for future off-oil energy supplies. and is returning to nuclear, but using small scale nuclear reactors.
These things will take years to do. Canada can’t just magically create a huge increase in oil production, nor is there even infrastructure to ship stuff to Europe. Meanwhile, nuclear takes decades to build out. Also, not clear where the fuel for that is coming from now that Europe has been kicked out of Africa where France has been plundering uranium.
No, I am not misrepresenting BRICS.
Yes, you are because the reality of BRICS is that it’s basically running circles around the G7 right now when it comes to raw growth. According to the latest IMF numbers, these countries grew by about 4% last year and are on track for another 3.4% in 2025. That easily beats the global average of 2.8% and makes the G7 growth rates of 1% to 2% look pretty stagnant by comparison.
Most of this momentum is coming from heavy hitters like India and China, but even newer members like Ethiopia and Indonesia are putting up huge numbers. Because of that, the bloc now controls about 40% of the global economy based on PPP. It is a massive shift in where the world’s money is actually moving.
The whole thing is being fueled by a mix of massive populations and a ton of natural resources. Countries like Russia and Brazil are leaning hard into their energy and grain exports while others like India are just capitalizing on shifting trade routes. While the West is struggling with slower growth, BRICS is using its demographic edge and domestic stimulus to turn into a serious heavyweight counterweight. And it’s a self feeding cycle. As western economies become less attractive, more countries are driven where growth is further accelerating the growth of BRICS.
My bet is on the Euro or some offspring as becoming the next global currency. I think the world now trusts Europe more than they trust America or China, now that Europe is ‘coming of age’ again.
If anything is going to replace the dollar it’s going to be the yuan because everybody imports things from China, and holding the yuan means you can always trade it in for something you need. This is basically the logic that underpinned the petrodollar in the past.
China is quickly losing the reputation of the world manufacturer.
[citation needed] seems like the exact opposite is happening as you can clearly see from the links above
China is instead turning to domestic markets.
That’s incorrect. China is pursuing a dual circulation strategy
Meanwhile, you’re right that countries like Vietnam are rapidly growing their industrial base, but they’re not doing that independently of China. It’s all one ecosystem.
Your focus on the current bond overlooks the market’s forward looking nature. Yields are stable because they reflect a consensus that the Fed will eventually cut rates to avoid a recession which is a precarious assumption. The moment inflation proves stickier than expected or the US debt trajectory worsens, we could see a violent repricing happening. It would lead to a bond vigilante reaction where yields spike suddenly and crater the value of existing holdings.
The whole idea that interest payments cushion import costs only works if the Canadian dollar doesn’t weaken alongside or faster than the USD in a crisis, and that is not at all guaranteed. When a crisis hits, all assets correlated with the US including our bond portfolio would suffer together. Meanwhile, the only sector of the US economy that’s doing well are the tech stocks, and that’s just a handful of companies passing IOU notes around in a circle. The rest of the economy is showing deep imbalances with weak consumer savings, shrinking industrial output, and persistent inflation in services.
The US is funding massive deficits in a high interest rate environment, and that can’t go on forever. The war on Iran could act as a catalyst for the whole house of cards to come crashing down because it’s driving the price of energy through the roof. The resulting economic crash in the US could be far worse than 2008, and at that point we’d be left holding the bag.
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We as in the working class in Canada. That’s who always pays the bill when there’s an economic crash.
I generally agree with what you’re saying regarding the US and China. However, I’d note that the actual split is between G7 and BRICS, and BRICS have already surpassed G7 in terms of PPP measure. BRICS represents the Global South, and it happens to be where majority of human population is, where the resources are, and where most of the industry is. Majority of Global South economies economies are aligned with China now.
What Carney appears to be focusing on are former vassal states that were under the tutelage of the US. Now that the hegemon is fading, the vassals are in trouble. What Carney seems to be trying to do is to rally Europe and Australia to form a bloc without the US, but one that’s not directly aligned with the Global South.
And of course GDP alone is not useful measure of anything. The quality of development matters. Western economies are focused on stuff like software industry and service economy. They’re not producing things people actually need to live. China is where all the manufacturing happens. They’re the ones who build solar panels, EVs, and high speed rail that developing world needs. That’s what makes China such a key economy for the world.
I also expect that the US is headed for collapse, and it’s likely going to be far worse than what happened to USSR. That said, it’s not at all clear that countries that hold US debt will be able to claw anything back once that happens. For one, the US is still full of nukes, so whatever states emerge out of it eventually will be nuclear powers.
The problem for Canada is more immediate though. Our economy is heavily dependent on the US right now. And unless we diversify and become more self sufficient, then we will be dragged down along with the US. Unless Canada takes steps to insulate itself then it will become one of these failed states itself when the western order finally collapses.
Removed by mod
Yeah, that’s just completely false. The whole point of BRICS, and what actually makes it effective unlike G7, is that it’s not an ideological alliance. It’s a framework for countries to do trade. And trade within BRICS has been exploding.
Meanwhile, the EU is very clearly dying at this point. Energy prices were already sending European industry into a terminal decline, and Iran war has put the whole thing into an overdrive. Not to mention the fertilizer crisis during the planting season which could easily result in food shortages by fall. GDP is a completely meaningless metric because the quality of development is what matters. European countries do not produce things their people need to live. And what’s actually happening in Europe right now is that nationalist parties like AfD, RN, and Reform are dominating their politics. All these parties are extremely nationalist, and they are openly hostile to the whole idea of EU. The liberal center in Europe is collapsing along with the standard of living.
Removed by mod
It’s very much not exclusively in automotive sector. Chemical industry, steel production, and all other sectors are affected. The reality is that manufacturing require energy as input, and with higher energy costs manufacturing in EU becomes uncompetitive compared to China because China is getting cheap energy from Russia. Europe basically made itself entirely dependent on American energy now, and that’s only getting more expensive for them. The US is also actively trying to poach European industry to boost their own economy.
China would be the natural trading partner for Europe, but Europe is still unable to break from the US and act in its own interest. Before the war in Ukraine started, Europe was becoming increasingly integrated with the east economically. They were getting cheap energy from Russia, and manufacturing from China. This allowed European economies to thrive. Now that relations with Russia are broken, and relations with China are now tense.
And you continue to misunderstand the nature of BRICS. As I already explained above, their interests are economic. It has little to do with politics or America. Countries in BRICS see mutual win-win trade relations that boost their economies. That’s why India does a huge amount of trade with China while having little in common politically. As the US continues to decline, more and more countries will necessarily flock to BRICS because that’s where economic development is happening right now. And China is at the centre of it all because they’re the world’s factory building things everyone needs. They help countries build infrastructure like ports, high speed rail, and clean energy production. They supply cars, phones, and other electronics. And as the Global Majority develops, the demand for the things China produces will continue to grow. That’s the real glue that holds BRICS together.
Removed by mod
The EU is absolutely not in a recovery, and there are no reasons to expect it to be in a recovery because structural problems are still there. The elephant in the room is that Europe lacks cheap energy, and until that problem is solved, there’s no reason for companies to manufacture anything in the EU.
What we’re actually seeing in the EU is essentially a structural wipeout of its industrial core. Out of 18 flagship sectors only aerospace and defense are still globally competitive. Everything else from automotive and steel to chemicals and solar is losing ground fast to the US and China right now. And it’s not some temporary dip because 83% of industrial indicators are either stagnating or actively deteriorating.
The chemical sector is doing even worse than automotive industry. Over 20 major plants have closed in the last two years wiping out 20k jobs and pushing production volume nearly 8% below pandemic levels. The math just does not work for these firms when their energy costs are 4x higher than what their American competitors pay, who in turn pay 3x energy costs in China.
This distress is now moving into infrastructure and utilities too. Bloomberg is writing that those sectors will be among the most distressed by late this year. Meanwhile gas reserves are ending the winter at record lows and refilling them will be incredibly expensive now. So we are seeing a permanent relocation of industry to lower cost regions rather than a standard market cycle.
Here are some links on how things in the EU are going, it’s grim as fuck:
Iranian oil is a small portion of the energy mix, and it hasn’t changed at all because Iran continues to ship oil to China.
These things will take years to do. Canada can’t just magically create a huge increase in oil production, nor is there even infrastructure to ship stuff to Europe. Meanwhile, nuclear takes decades to build out. Also, not clear where the fuel for that is coming from now that Europe has been kicked out of Africa where France has been plundering uranium.
Yes, you are because the reality of BRICS is that it’s basically running circles around the G7 right now when it comes to raw growth. According to the latest IMF numbers, these countries grew by about 4% last year and are on track for another 3.4% in 2025. That easily beats the global average of 2.8% and makes the G7 growth rates of 1% to 2% look pretty stagnant by comparison.
Most of this momentum is coming from heavy hitters like India and China, but even newer members like Ethiopia and Indonesia are putting up huge numbers. Because of that, the bloc now controls about 40% of the global economy based on PPP. It is a massive shift in where the world’s money is actually moving.
The whole thing is being fueled by a mix of massive populations and a ton of natural resources. Countries like Russia and Brazil are leaning hard into their energy and grain exports while others like India are just capitalizing on shifting trade routes. While the West is struggling with slower growth, BRICS is using its demographic edge and domestic stimulus to turn into a serious heavyweight counterweight. And it’s a self feeding cycle. As western economies become less attractive, more countries are driven where growth is further accelerating the growth of BRICS.
If anything is going to replace the dollar it’s going to be the yuan because everybody imports things from China, and holding the yuan means you can always trade it in for something you need. This is basically the logic that underpinned the petrodollar in the past.
[citation needed] seems like the exact opposite is happening as you can clearly see from the links above
That’s incorrect. China is pursuing a dual circulation strategy
Meanwhile, you’re right that countries like Vietnam are rapidly growing their industrial base, but they’re not doing that independently of China. It’s all one ecosystem.