A loonie named Icarus

Here are just a couple of reasons we believe that the recent spike in the C$ is temporary and our current expectation is for C$ reversion to levels between 91-85 area.

Worldwide austerity due to over consumed debt-laden countries will and has created a dearth of spending that China can ill-replace.

Canada’s outlook like many other nations is pegged to the hopes that China will pickup the slack for the gap left by slower global consumption rates as China itself attempts to slow its own economy. See:  Canada Inflation unexpectedly eases Also: Caterpillar (note second to last para)

Global growth is decelerating  from the short-term effects of QE’s and bailouts to reveal the true glide path of money velocity (real global GDP). When all the re-adjustments and reality set in and private investors are forced to take a hit (Greek Sovereign debt is a good start), then we will get true price discovery. See: German Business Morale

The market is slowly coming to grips with the idea that we are in a deflationary cycle that is the other side of the over-consumption credit bubble that pulled in huge amounts of marginal buyers.

Central banker’s have always tried to alter the business cycle, but alas they cannot. The sugar always wears off and the after-effects are undeniable.

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