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.

Canada Donald Trump Economy Economy Federal Government Federal Government Global Economy Trump US

Leave a comment »
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!

Donald Trump Economy Media Protectionist Trade Policies Trump US

Leave a comment »
Oct 31

When Will the High Tech Stock Market Surge Slow Down?

by bcurry

Here are a couple of interesting stats about American high tech companies.  Market concentration has never been greater than in past decades, as the one created by Artificial Intelligence (A.I.).  According to senior index analysts for S&P Dow Jones Indices, Nvidia alone, which makes A.I. chips, makes up more than 8 percent of the S&P 500.  Nvidia is now worth $5 trillion as it continues to consolidate power in A.I. boom.  Apple and Microsoft now top $4 trillion. Those companies combined with Meta, Amazon, Alphabet and Tesla make up more than a third of the entire index.  According to Harvard’s economic faculty, spending on data centers, which are filled with the Nvidia chips, accounted for 92 percent of the country’s gross domestic product (G.D.P.) growth in the first half of 2025.  Chip technology is a powerful technology that can be used to develop advanced weaponry and drive economic opportunity.  Companies like Microsoft and the software company Oracle are pouring hundreds of billions of dollars into building data centers for A.I.

Now the question becomes: “What is the high tech impact on main street versus wall street?”  Most analysts are concerned particularly about the impact of current and future A.I. investments on the labour market for example.  While the current situation continues to produce more millionaires and billionaires, there is already evidence that companies are looking at ways of reducing labour costs through A.I. and A.I. assisted robotics.  For example, it concerns me that Amazon has been aggressively looking to do more with less.  It also concerns me that Amazon recently announced that it was laying off 14,000 corporate employees partly due to its use of A.I.  It is further reported that Amazon spent more than $34 billion on capital expenditures in the third quarter of this year, in large part to set up data centers that power cloud computing and A.I.  It should be noted that the company’s sales totalled $180.2 billion from July through September of 2025, up 13 percent from the same time in 2024.  Profit was $21.2 billion, up a whopping 38 percent.  Furthermore, as an obvious future cost cutting initiative, the New York Times reported that Amazon’s automation team has ambitious goals to use robotics to avoid hiring more than half a million workers by 2033.

Apple’s iPhones are fuelling record sales and profit so far this year, despite raising prices on its latest iPhone and having largely avoided the A.I. arms race.  However, the company still accounts for about 6 percent of the S&P 500 index.  While Apple is not pouring billions of dollars into data centers, developing expensive A.I. systems or building its own chatbot, the company continues to collect payments from Google.  Apple also charges A.I. companies to reach iPhone customers.  Most importantly, instead of bringing its manufacturing home to the U.S., Apple shifted some production from China to India, Vietnam and Thailand.  Almost nothing is made in America, and an estimated 80 percent of iPhones are still made in China.

All said and done, some investors have questioned whether A.I. will actually increase productivity and sales.  This is the trillion dollar question given that the short-term returns have not been all that great in light of the billions of dollars of current investment capital.  Nevertheless, it’s clear that the stock markets are apparently very optimistic.  Only time will tell. 

In addition, there is still the expected negative impact on the labour market as evidenced by recently announced employee cutbacks by several high tech firms using A.I.  A.I., complemented by enhanced robotics, is seen as a tool that could replace people in many jobs, including those in white collar occupations. The jury is still out on this one.  Today, youth unemployment in North American is at its highest rate and recent college graduates in several fields, including in the computer sciences, are experiencing a great deal of difficulty in obtaining employment in their field of study.  Higher unemployment may be one of those areas on main street that would be the result of the potential direct impact of what’s happening on wall street.  Of course, the billionaires would argue otherwise.

Artificial Intelligence Artificial Intelligence Economy Labour Force US

Leave a comment »
Blog at WordPress.com.