FROLITICKS

Satirical commentary on Canadian and American current political issues

Jun 18

Respective Roles and Governance of U.S. Federal Reserve Bank and the Bank of Canada

by bcurry

The Federal Reserve Bank (the Fed) is the central bank of the United States.  It manages the nation’s money supply and interest rates to achieve maximum employment and stable prices (a “dual mandate”), regulates banks to ensure financial safety, and processes financial transactions for the U.S.government.  The president cannot directly control the Fed, as it operates as an independent central bank designed to be free from short-term political interference.  However, the president does hold several key powers and avenues of influence over the institution.  The president’s formal powers include the ability to nominate the seven members of the Board of Governors, including the Fed’s chair and vice chair.  However, these appointments require Senate confirmation.  The chair and vice chair have only one vote each, as do each of the other governors.  Governors serve 14-year terms, which are intentionally staggered to span across multiple presidential administrations to insulate them from political cycles.  The limitations on the president include the fact that he has no say over the Fed’s interest rate decisions or its monetary policy.  These decisions are made by the Federal Open Market Committee (FOMC), which includes the governors and regional bank presidents.  Also, by law, the president can only remove a Fed governor or the Chair from their position on the board “for cause”.  This generally implies serious misconduct or neglect of duty — not simple disagreements over policy.  Nevertheless, as definitely in the case of Donald Trump, presidents can use public statements, social media, and speeches to critique or pressure the Fed to adjust interest rates, though these actions carry no legal weight. 

Kevin Warsh became the Fed’s current chair, after being confirmed by the narrowest margin in its history.  Nominated by Trump, Warsh was officially sworn in on May 22, 2026, succeeding Jerome Powell.  Warsh has promised “regime change.”  However, under the new chairman, Fed officials voted once again on June 17th to hold interest rates steady for the fourth consecutive meeting, leaving their benchmark lending rate at a range of 3.5% to 3.75%.  This was despite Trump wanting to have interest rates reduced, and the result of another significant monthly increase in inflation.  Instead, according to their latest economic projections, Fed officials hinted at a potential rate hike later this year to combat the latest inflation spike tied to the war with Iran.  Interestingly, during his first post-meeting news conference, Warsh announced task forces in several areas that are central to the broad conduct of monetary policy.

Similar to the Fed, Canada’s central bank is the Bank of Canada (Bank).  Like other central banks around the world, the Bank promotes economic stability and supports the financial well-being of a country and its citizens.  Unlike the Fed leadership, the Bank’s governor (currently Tiff Macklem) and senior deputy governor are appointed by an independent Board of Directors. The Board provides general oversight of the management and administration of the Bank with respect to strategic planning, financial and accounting matters, risk management, human resources, and other internal policies.  The Board is composed of the governor, the senior deputy governor and 12 independent directors appointed to three-year renewable terms by the Governor in Council (the Cabinet).  The Bank sets policy independently within an agreed-upon monetary policy framework, without any direct interference by the government of the day.  However, the Deputy Minister of Finance can participate in Board discussions, but cannot vote on any Board decisions.  The Bank’s Governing Council reaches decisions by consensus and sets the policy interest rate on eight fixed announcement dates each year.  Given the Bank’s independent mandate and governance, the Prime Minister has little or no control over its mandate and composition, and in particular the determination of monetary policy based on current economic data.

Hopefully, given the legislative and independent authority attributed to each central bank, they will continue to carry out their vital operations utilizing economic data provided by independent and expert resources, including those within each country’s financial community and provided by impartial and objective government sources.

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Jun 10

Impact on Canadian Small Businesses of U.S. Tariffs on Their Trade with the U.S.

by bcurry

Trade by small and medium-sized enterprises (SMEs) with the U.S. ‘is an important part of Canada’s economy.  SMEs are defined as those with 1 to 499 paid employees.  According to Innovation, Science and Economic Development Canada, as of December 2024 there were 1.10 million employer businesses in Canada.  Of these, 1.08 million (98.2%) were small businesses, 16,953 (1.5%) were medium-sized businesses, and 3,380 (0.3%) were large businesses.  Also, as of 2024, small businesses employed 5.8 million individuals in Canada, or 46.6% of the total private labour force, and medium-sized businesses employed 2.1 million individuals (17.0% of the private labour force).  Moreover, well over half of the Canadian labour force (almost 64%) was employed by SMEs.  In the same year, Canada’s exports of goods totalled $712.8 billion, of which 37.9% was attributable to SMEs.  A total of 48,036 Canadian enterprises exported goods, the vast majority of which were SMEs (73.3%), with the main destination being the U.S.

SMEs are well represented in Canada, as evidenced by the Canadian Federation of Independent Business (CFIB) which represents about 103,000 small businesses and the Canadian Chamber of Commerce.  The Chamber is the national voice of business uniting over 400 chambers of commerce and boards of trade representing more than 200,000 organizations across every region of Canada.  Along with other G7 countries, these organizations stand ready to support the G7 governments in modernizing a much-needed multilateral trading system, for their mutual future prosperity and growth.

The United States’ trade and tariff war with Canadais disrupting decades of cross border cooperation.  On both sides of the border, this trade war has created havoc among SMEs who for years benefited from free trade agreements between the two countries, the latest being the Canada-US-Mexico free trade agreement (CUSMA).  Effective February 24, 2026, among the current tariffs affecting Canadian exports into the U.S., the Trump administration introduced a 10% tariff on non-CUSMA compliant goods.  This has added an additional cost on Canadian SME exports, whereby a number of businesses have simply decided to pay given the paper trail complexities associated with its current application vis-à-vis CUSMA.  In addition, effective August 29, 2025, the administration eliminated the U.S. de minimis treatment for low-value shipments, which affects goods valued at $800 or less.  This especially affects the exports by the smallest Canadian businesses which are now subject to all applicable duties, thereby raising the costs of their products for American consumers.  Without American consumer demand, many of the Canadian boutique class businesses will have not choice but to simply give up on exporting directly to U.S.customers.

Unlike the impact on larger companies (500 or more paid employees), such as those in the steel, aluminum, automotive and forestry sectors, SMEs on both sides of the border find it difficult to discover alternative markets for their products.  This situation implies that both American and Canadian SMEs will find it harder to export their products within the North American market. 

The impact on SMEs unfortunately is often forgotten in light of the majority of attention being given to those larger companies hit more extensively by tariffs.  This is unfortunate because SMEs often represent the best chance for employment growth in both countries.  In the past, SMEs were encouraged to expand their reach into the North American markets, resulting in the emergence of more and more franchises and increased business across our borders.  Now, the lost of open trade relations between the two countries has most definitely affected SMEs, and the potential for labour force growth in both.  This impact should not be discounted and ignored, especially since both Canada and the U.S. fundamentally support free enterprise and capitalism in all its forms.

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May 8

Trump Administration Info About Increased Credit Card Use Is All About Misinformation

by bcurry

This past week, a key economic advisor to the Trump administration provided a clearly wrong message about the rising use of credit card usage in the U.S.   Kevin Hassett, the director of the National Economic Council since 2025, suggested that despite the hyper-inflation brought on by increased fuel costs due to the Iran war, the rise in credit card use indicates greater consumer spending as a good indicator of a healthy economy.  Hassett stood outside of the White House and told Maria Bartiromo on Fox News that Americans are spending more money across the board.  Hassett said he had the head of one of the big five banks in his office go through credit card data.  Moreover, there is little doubt that Americans are relying more on credit cards than ever for everyday expenses such as gasoline, groceries, and rising living costs.  However, the primary reason is the higher costs of such staples and several other obvious reasons.

Even before the growing and full inflationary impact of tariffs on many products and services occurs, credit card use in the U.S. had increased significantly, often to manage daily expenses.  The result is that total debt had reached a record $1.277 trillion by the end of 2025.  However, much of the increased use was due to several reasons.  For example, it has been reported that Gen Z and Millennials are frequently using credit cards to build credit, while older adults (60+) have the highest ownership rate at 91%.  Furthermore, many consumers increasingly use credit cards for rewards or the security/convenience of not carrying cash.  Obviously, high inflation and rising costs for necessities like food and fuel have forced many households to rely on credit.  For example, since the Iran war started, business at gas stations alone rose by 15.5 percent from February to March of this year.

Suggesting that the higher usage of credit cards is an indication of greater discretionary consumer spending is totally misleading.  The reliance on credit is seen by most economists as a sign of stress for many working-class Americans facing higher rent, fuel and living costs.  Consequently, one of the negative results of greater credit card usage is an increase in delinquency rates (accounts that are past due).  Delinquency rates reportedly reached nearly 3% in early 2026, up from 1.53% in late 2021.  Indeed, increased delinquency rates are also a direct result of today’s high credit card interest rates.  For example, as of February 2026 the average credit card interest rate reportedly hovered around 21.52%, thus making debt progressively more expensive to repay.  More and more people are going into bigger debt then ever!

Once again, this is an example of the Trump administration highlighting economic information without fully explaining the whole picture as to what certain financial data really represents.  Nit picking information of this kind for obvious political reasons has been and apparently will continue to be the modus operandi of this administration.  As a result, one must be very concerned about the Trump administration’s biased and deliberate misuse of data to give a more positive account of the current economy.  The result is a blatant form of providing misinformation.  When I saw and heard Hassett’s conclusions about the implications of higher credit card usage, I immediately recognized another form of White House economic “bull shit”.  Moreover, one cannot help but see a pattern here.  Unfortunately, for many of us, this pattern will lead to increased mistrust in anything coming out of the White House and in particular from its economic advisors!

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Mar 6

Interaction Between the U.S. and Canada Summed Up in One Word: Confusion

by bcurry

When the Trump administration first introduced tariffs against specific industries in Canada (ex. aluminum, steel and lumber), it created a good deal of confusion and uncertainty because of the integrated market existing between the two countries.  The initial excuse was that Canada had failed to secure the border from the smuggling of fentanyl from Canada into the U.S., which only accounted for less than 1 percent of the total entering the States.  Secondly, Trump argues that Canada has long benefited from a trade surplus with the U.S., not accounting for the import to Canada of American services. Then, suddenly Trump was openly promoting the annexation of Canada, making it the 51st state: something neither the vast majority of Canadians or Americans have supported at any time in the past.

As a result of Trump’s tariff imposition, Canadians decided to elect Mark Carney, a Liberal, as the 24th prime minister of Canada in 2025.  Carney, a former head of Canada’s central bank, has had to take a careful and sensitive route in dealing with Trump on both economic and foreign policy issues.  Take for example, the current war initiated by the U.S.with Iran, which the Canadian government was not apprised of before American pre-emptive strikes.  Canadian support for the U.S. is a touchy and complicated matter, remembering that Canada is part of the North American Aerospace Defence Command (NORAD) which conducts aerospace warning, aerospace control and maritime warning in the defence of North America.  As is the U.S., Canada is also a member of North Atlantic Treaty Organization (NATO), and supports its allies in the defence of their sovereignty.  On the one hand, while Carney believes it is appropriate to support the U.S.; on the other hand, there are questions surrounding the legality of the attacks on Iran under international law and NATO’s non-involvement at the outset.  Also, the Trump administration’s primary motive for the attacks on Iran has been anything but clear from the outset, setting off confusion among NATO and other allies.  While NATO will defend itself against the resulting Iranian attacks on their bases in the region, there has been no indication to date that either Israel or the U.S. have sought the support of NATO military forces.  Once again, confusion reigns among the parties.

If any word can also express the current trade and foreign policy environment created by the Trump administration, it is “uncertainty”.  For Carney and other world leaders, this uncertainty has forced them to look at alternative economic, defence and trade arrangements, given the lack of American support for maintaining the normal global processes.  As a result, Carney has to seek alternative trade relations with other countries and has recently entered into formatting new arrangements with middle-power countries such as India, Japan and Australia — not to forget previous trips to several E.U. counties.  Indeed, just this week, Prime Minister Mark Carney and Japan’s Sanae Takaichi inked a new “strategic partnership” that signaled the next step in a recent drive to deepen military and trade co-operation between the two countries.  Just prior to that, Carney and his Indian counterpart announced what they’re calling a “new partnership,” a series of multimillion-dollar deals and a commitment to sign a free trade agreement by year’s end.  On March 4th, Australia and Canada signed new agreements on critical minerals as Carney made a landmark address to the Australian parliament, a sign of the developing bond between the “middle powers”.  The two countries will also deepen cooperation in areas including defence and maritime security, trade and artificial intelligence.

All if this is happening because of the political and economic policies under the Trump administration, which are confusing given that over 70 percent of Canada’s trade has always been with the U.S.  This close relationship with the U.S. has even been highlighted by the current Canada-U.S.-Mexico free trade agreement which Trump had negotiated and endorsed during his first term in office.  Now, it appears that he wants to replace this agreement with separate agreements with Canada and Mexico, which apparently would include new tariffs on their imports to the U.S.on selected products and services.  This has created a good deal of “uncertainty” and “confusion” within North American markets.

Moreover, when it comes to the U.S. policies, once can only foresee more confusion and uncertainty in the near future.  As Trump would no doubt brag, the ball now lies in the American court.

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Nov 21

Economic Impact of Current Decline of Canadian Tourists to U.S.

by bcurry

Few people really understand the importance of tourism on their economy, in particular with respect to employment, revenue and taxes.  The Gross Domestic Product (GDP) contribution of tourism to the U.S. economy went from $2.36 trillion in 2023 to $2.5 trillion in 2024.  In 2024, this represented about 9% of the U.S. economy.  By 2034, the industry estimates that tourism will continue to grow to represent almost a 10th of the country’s total GDP.  Total direct and indirect U.S. employment related to tourism is estimated at more than 20 million people, close to 10% of the labour force.  Many work in the accommodation, food services and travel sectors.  This compares with the manufacturing proportion of the labour force at 7.5% in 2024, representing about 13 million workers.

However, 2025 has so far seen a serious decline in the number of Canadian tourists visiting the U.S., largely due to the political and economic policies of the Trump administration which placed tariffs on a number of Canadian exports.  Let’s also not forget Trump’s assertions that Canada should become the 51RST state which angered a large number of Canadians.  In addition, tourism to the U.S. is already stressed by the continuing high exchange rate versus other currencies, including the Canadian dollar.  This decline is particularly pronounced in specific segments, with Canadian overnight land trips falling by 26%, indicating regional tensions affecting traditional travel corridors.  As a result of bordering with the U.S., there has always been a significant amount of travel between the two countries, most notably within the northern U.S. states which rely most heavily on Canadian tourists.

The World Travel & Tourism Council’s projection of a $12.5 billion loss in international visitor spending represents the most significant challenge facing the sector.  This decline affects not only major metropolitan areas but also rural communities that depend on tourism revenue for economic sustainability.  The most significant drop has been in Canadian visitation which has seen a 20.2 % decline so far this year.  In 2024, Canada had maintained its position as the leading source market with over 20 million visitors.  However, Canadian visitors returning from the U.S. by land plunged 31.9% year-over-year in March 2025, while air arrivals fell 13.5%.  In general, the tourism landscape in America during 2025 presents a complex narrative of recovery and decline. The projected annual loss of $12.5 billion in overall international visitor spending represents more than just statistical data — it reflects a fundamental shift in global travel patterns that directly impacts communities, businesses, and employment across the nation.

In both the U.S. and Canada, tourism is an important expanding sector, representing more employment potential than even in the manufacturing sector.  This fact appears to be something loss on members of the Trump administration, who fail to see the negative impact of their trade relations on this sector.  It’s difficult to say when a turnaround might occur with respect to Canadian tourists, particularly since governments and businesses in Canada are greatly promoting the idea that Canadians should travel and vacation in Canada.  In addition, Canada is currently promoting international visits by persons from other countries to Canada in lieu of visiting the U.S.  Since Canadians were number one in terms of visitors to the U.S. in the past, unfortunately there is little doubt that American tourism businesses are now feeling the direct impact of this decline.  Again and again, our southern neighbours, particularly in border states, have expressed their disappointment.  They have also expressed their understanding as to why more Canadians are holding off on visiting their country, given the current policies of the Trump administration.  All in all, the whole situation is truly regretful given the traditional, friendly and close relationship between the two countries and its peoples.

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Jun 17

Canadians Can Be Mad at the U.S., But Maybe We Had a Lot to Do With the Problem

by bcurry

Yes, Canada has every right to be mad at the Trump administration for reneging on the current trade agreement previously signed by then President Trump, imposing new tariffs on Canadian exports to the U.S., and promoting the concept of a 51st state.  However, I can’t help thinking that we had a lot to do with creating the current crisis situation.

Actually years ago, I briefly thought that there might be some merit in Canada becoming part of the U.S. After all, with the signing of the North American Free Trade Agreement (NAFTA), our economy became even more integrated into that of the U.S.  Take the automotive sector for example, it was and still is the most integrated industry under past and current trade agreements between the two countries.  The so-called Auto Pact has had a longstanding history and basically prevented Canada from developing its own automotive manufacturing sector.  Perhaps it made sense given that Canada’s population is one tenth that of the American population and our market also became flooded with Asian and European cars.  Basically, we are non-competitive.  However, no one objected given the workings of the global economy, which no doubt benefited the pocketbooks of Canadians through access to cheaper goods.

Other Canadian sectors such as lumber, steel, aluminum and minerals all grew primarily due to the access to American markets.  Our reliance on these markets may have made us a little lazy and not overly innovative in some areas, especially as it pertains to other trading blocs.  Internally, intraprovincial trade barriers further exacerbated the lack of industrial growth and weaker productivity within Canada itself.  Professionals and trades people could not move easily between and among provinces due to labour mobility restrictions.  One could also have done a lot more to promote tourism within Canada and to build the required infrastructure for a modern tourism industry.

In more recent years, the modern world came to see the ever increasing need for rare minerals to support the growth of computerized technologies.  Both Canada and the U.S. became overly reliant on China which supplies about 80% of the much needed processed rare minerals used in such areas as electronics.  Canada has long been aware of its large sources of rare minerals, but has done next to nothing in developing processing capabilities. 

As for energy, Canada has major oil and gas reserves.  However, previous Canadian governments have stalled numerous potential projects such as the construction of pipelines to transport oil and natural gas to British Columbia ports for export to Asia and the U.S. west coast.  The expansion of pipelines within Canada has also been negatively affected by intraprovincial disputes over economic benefits, indigenous and environmental issues. 

In terms of our cultural sector, Canada has become a major cheap source for the production of American films and television series.  However, except for the support of the Canadian Broadcasting Corporation (CBC) and various federally subsidies and tax breaks, the growth of Canadian content has been somewhat limited.  Instead, Canada became very dependent on American content as cable and steaming services steadily grew.  Quebec is the exception primarily because of the need to supply French content within the province through Radio Canada and other Quebec sources.  Moreover, we need to do a lot more to support Canadian culture, particularly through the CBC.

Today, I am a proud Canadian and object to Trump’s assertions about a northern 51st state.  I have seen positive social-economic trends in Canadian society.  With what is happening to the apparent attacks by the Trump administration on all aspects of American democracy, I clearly prefer to remain Canadian.  However, I would argue that much of what is happening economically is partly, if not mostly, our own fault.  As Canadians, there is a lot more that we can do to strengthen our nation.  This might indeed be a significant reversal of fortune.  So, stop complaining and let us demonstrate that Canada has a future of opportunities, with or without past ties to the U.S.


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