Tuesday, January 31, 2006

Conservatives embrace Corporate Welfare

All may not be lost for Buzz Hargrove yet. As I reported in my article on Mittal, Buzz was worried that state capitalism in Canada was threatened by the election of the Conservatives. It appears that they may be changing their tune now that they are in government and the Canadian dollar has slapped them into reality.Loonie soars to a 14-year high

Ian at Tilting at Windmills says Monte Solberg is singing a different tune about the crisis in trade between Canada and the U.S.

Oh Canada. Oh Subsidies:
Why the Conservatives have decided to subsidize manufacturing

What is driving the Canadian dollar is the increase in commodity prices, oil, minerals, etc.and the foreign take over of several large scale Canadian businesses. And of course another rate rise on the U.S. dollar, Canada will follow suit with Bank of Canada President David Dodge playing 'me too'. Something he has been rightly criticized for by Jim Stanford of the CAW.

Loonie soars to a 14-year high

Indeed, commodity prices surged again yesterday, with zinc hitting a record, gold trading at a 25-year high and silver near a 22-year high. Oil reversed an earlier decline and natural gas prices jumped, with many analysts predicting energy prices this year will surpass the lofty levels of 2005.

With oil and other commodities accounting for about 35 per cent of Canadian exports, this all bodes well for economic growth. Crude oil prices have risen 10.2 per cent so far this year, on top of last year's 44.9-per-cent advance.

But there's another positive for the loonie, namely foreign takeovers of Canadian companies, which boosts short-term demand for the currency.

Yesterday, Saudi Prince al-Waleed bin Talal's Kingdom Hotels International and investment firm Colony Capital LLC offered to buy Toronto-based Fairmont Hotels & Resorts Inc. for $3.3-billion (U.S.).

Last week, U.S. billionaire Jerry Zucker sealed a deal to buy Hudson's Bay Co., Canada's oldest company, by adding $28-million (Canadian) to his $1.1-billion bid.

Dofasco Inc. was also up for grabs. If Arcelor SA's bid is successful, the Luxembourg firm will spend $5.6-billion on Canada's largest steel maker. And Swiss bank UBS AG said it will pay $173-million to buy the rest of its Canadian operations it didn't already own.

"An announcement of a merger or acquisition can definitely lend short-term support," said David Powell, currency analyst at Ideaglobal in New York, especially because it's less liquid than other global currencies. He stressed that traders were reluctant to place big bets ahead of today's announcement by the U.S. Federal Reserve, marking the last rate decision with chairman Alan Greenspan at the helm.

"This may be the calm before the storm," he said. "That's going to be the defining event of the day, the week, if not the month, the quarter and the first half of the year."

With the Canadian dollar being strong the Bank of Canada could afford to drop interest rates, in order to drop the cost of the dollar and make it all the more attractive against the U.S. dollar. The commodity index appears to be increasing thanks to pressure from China for resources. Resources it needs from Canada and elsewhere. So with high prices for copper, nickel, oil, gold, platinum, potash, uranium etc. which we are rich in
the Canadian dollar will increase, what it doesn't need is to be artificially helped by Dodge. Nor does Canada's manufacturing industry need corporate welfare from the Conservatives.

What we need is tripartite investment in industry, and securing it for trade purposes in the global market, that is institutional investment funds/ federal and provincial governments/union pension funds investing with ownership buy in.


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