Today we’re not going to be talking about technical analysis. We’re actually going to be talking about the economy. This is something that, because I am not an economist, I brought a very, very special guest with me today, and I can’t tell you how excited I am to have Maxime Bernier here today. Before anybody draws any conclusions about what this is going to be about, it is not a political discussion so it’s a nonpartisan discussion. We’re here to talk about the economy, but Maxime has a deep, deep background in economics. I’m just going to quickly read from his resume, so to speak.
But before that, I want to mention that the first day I ever met Maxime Bernier was in a coffee shop on John Street in Toronto. It was just before my BNN show at the time and so Maxime was, at the time, vying for the PC leadership. This was 2017. He and I met at the Simcoe Board of Directors. I was a member of the conservative party at the time and Alex Nuttall was our guy our MP. He said, “Oh, you have to meet this Maxime Bernier because you guys have a lot in common.” So I met with Max, and what was really interesting is that when Max and I sat down and he said, oh, I just flew in from, what was it, Sudbury? I think it was Sudbury.
And Maxim said, you know, I was talking to one of the unions and they were asking me to repeal, I can’t remember the act, I’m sorry, Maxime. It was a union disclosure agreement that during your Harper era you had helped formulate where the union bosses had to tell them what they were spending the money on. The union was sort of hinting around, I guess, to you at that time, that they would like you to reverse that and if they did, they would buy PC memberships and vote you in and you said you just wouldn’t do that. I learned at that time that Maxime Bernier is a person of very, very high integrity, and he’s a good guy too. We had lots of good conversations.
We both like Ian Rand and all that sort of stuff. So I’m bringing Max on because he’s got a deep background in finance, but he’s also a genuinely good person of high integrity. I’m a big fan of Maxime. Let me just quickly introduce his background. A lot of people will know who he is. Basically, he was with the PC party, he was Chair of the National Defense Committee, Minister of Foreign Affairs, Minister of Registrar General, whatever that is. I actually don’t know what that one is. He’s, of course, been a long-time MP in Beauce.
He’s got a business degree and a legal degree. He’s not a part-time drama teacher, but he does have those degrees. He has worked in the past in law, finance, and banking. So Maxime, welcome to the show.
Thank you, Keith. I’m very pleased to be with you. And yes, I watch what you’re doing and you’re doing a good job. Like you just said, our first meeting together was in downtown Toronto. I remember that and the bill that we spoke about at that time. The upper government and I was a minister with the upper government at that time, and we passed a bill for more transparency for the union dues. We wanted the unions to be more transparent for their members, and that bill passed. I had a meeting with a couple of union bosses, and they told me, absolutely right, you know we will support you for the leadership contest, it was in 2017 that I wanted to be the leader of the Conservative Party of Canada, like you said, but you need to repeal that deal.
I said, no, I believe in more transparency, and that’s it. So, I just want to go on with that story. After the election in 2019, I think, no, in 2015 the Trudeau government repealed that bill and worked with the big bosses from the unions. That was a good bill, but it’s not enforced anymore. So that’s a little bit sad, but that’s the reality of politics. I’m pleased to be with you and I’m a politician, but also, as you said in the beginning, I worked in the private sector, in the financial sector for 19 years before being in politics. I was elected at 43 years old in 2006, but before that, I was a VP of a bank in Montreal, National Bank; VP of an insurance corporation, Standard Life; and I was also VP of the Montreal Economic Institute. That’s a free market, a think tank like the Fraser Institute in BC. So yeah, I like the economy, I like businesses and when I decided to be in politics, it was, at that time, for smaller government that will respect the constitution and more free markets. So thank you for having me today. I’m pretty sure that we’ll have a very nice conversation together after all that time.
Yeah, well, this is great Maxime and free markets are what the stock markets are all about or they should be about. The people that read my blog and watch my videos know that I’ve literally been all over the inflation thing since 2020. At ValueTrend, we take a bit of a bow here because way back when they were calling both sides of the border for inflation to be transitory, we called BS at the time, and we stated it on my blog and through my videos. Basically, we were right, we traded commodities and made a lot of money. We sold them all earlier this year but we are still saying that we think we’re going to be trapped in an inflationary cycle, even if it’s not 7% anymore. Might be three or four, but it is not going to be 2% anymore. Therefore, there are different things we have to invest in. So, Maxime is not gonna talk about investing, but I’d like you, Maxime, to give a background on where we are and why we have the inflationary situation that we’re in right now.
Yes. First, I must say, Keith, that you were right and you are right about the inflation. When the central bankers were saying that, not only in Canada but in the US, in Europe, they were all saying the same thing, that inflation is transitory. You called it at that time. You said, no, it’ll be there for a long time, and yes, you are right. Inflation will be there for a long time. We have inflation everywhere, not only in Canada, in Europe, and in the US and we have inflation because, with COVID-19, we must start there. During COVID-19, all these establishment governments in Europe and in US and Canada decided to say to their people, “stay at home”. We will shut down the economy and we’ll give you checks. We’ll pay you for staying at home.
And as you know, all these governments didn’t have the money for that. So they had a huge deficit and these deficits were monetized by central banks. Central Bank, the Bank of Canada, bought our Canadian bonds, and the same thing in other countries. So for me, inflation, it’s always because of a bad monetary policy. If you have the same amount of money in circulation, and you don’t increase the money in circulation and the prediction, it’s about the same, you won’t have inflation. Maybe the price of one good will go up, but the price of another good will have to go down. So you won’t have general inflation. We had that inflation in Canada because of the huge deficit, of 450 billion dollars and now we are paying for that.
When Trudeau did this deficit, people were saying, oh maybe that will be bad for our children and grandchildren, they will have to pay for that. At that time I said, no, we will have to pay for it, and yes, our children, but we will pay by the inflation tax. Now we have an inflation tax of about 6.9% here in Canada and in the US about 7.1%. That’s why we have now interest rates that are raising in Canada and in US. It’s 4.25% here in Canada, the interest rate coming from the Bank of Canada, and in the US about 4%. That will continue to rise. The Bank of Canada and the Fed are in a very difficult position because if they increase the interest rate that will, I believe, have a recession, a very strong recession.
Because of these governments, US and in Europe and in Canada, we have huge debts, but also the private sector and individuals. So everybody, governments, private businesses, individuals, everybody have a huge debt all across the world. That’s why if they increase the interest rates, they will create a recession and we may have a stagflation, and if they don’t, we will have inflation. Maybe not around 7%, but for sure more than 2%. Right now, I look at the study coming from Statistics Canada in our country. Statistics Canada said that the average increase in income in our country in Canada this year will be about 4 to 5%. So if you have 7% inflation, everybody will be poor by 2%. That’s why inflation is a tax. We have that inflation, to answer your questions, because of bad fiscal policy, and because of that central banks printed a lot of money out of thin air, and that’s why we have inflation. I believe, like you, the inflation may be there for a couple of years.
Yeah, it’s amazing Maxime because a lot of people and, we promised not to get political so I won’t get too political here, but there’s a lot of excuse-making as to why we’re in the pickle that we’re in. The fact of the matter is I’m a technical analyst, so I look at stock charts and I look at price patterns and volume and all that stuff, but even I know the basics of economics and the basics are supply and demand. I mean, it’s like page one, the first day in class you learn supply and demand. If you’ve got a supply of money and ongoing demand then you now have too much on the supply of money and more money chasing less goods.
That’s really the pickle that we’re in. It’s amazing that anybody would suggest that by printing more money to fight inflation, and we’re not going to say who just did that but we know who just did that, that is going to give away all the free dental or whatever you want. It doesn’t maybe add to the inflation that month, but you just dumped a bunch more of that supply of money into the system, it circulates, and before you know it, inflation is sticky and it sticks around.
Yeah, like you just said, more money chasing fewer goods, you have inflation. Actually, one government in Europe understands that. Sweden. They publish their budget, I believe the last week of November, and so they said, we need to fight inflation and we are serious about it. So the central bank over there did raise the interest rate and they will, and the politicians said, we must work with our central banker, and at the same time, that’s why we will balance our budget, and next year they will have a surplus. Because of that surplus, they will help the central bankers because their central bank won’t have to buy bonds. So that will help. They won’t have to create more money out of thin air. That’s the only real solution to fight inflation.
You must have a fiscally responsible policy balancing the budget and adding surplus. So they will have a surplus next year, and they are saying in their budget, we will cut that, we will cut back expenses, and there is a list of expenses that they will cut to balance a budget. So that’s great. The central bank over there is serious also about it. So I believe that in Sweden, they may not have inflation for the next five years and they will be able to fight inflation. But here in America, the US is still having a huge deficit and for that, the Fed will have to monetize the deficit and they will do it. So the politicians here in Canada and in US, don’t help central bankers to fight inflation.
No, it’s crazy. As you just said, I just read a stat on the debt servicing in the States, and I’m sure it’s very similar in Canada, but the debt servicing is so intense that basically, they’re in a position where it’s almost inconceivable that they won’t be printing more money, just paying Peter. What is the expression? Paying Peter when you owe Paul, or whatever the expression is.
But to keep up with the debt servicing costs, it’s gotten out of hand even to a point where forget the debt, forget the deficit, it’s the debt servicing cost.
But it’s the same thing, Keith, in Canada. The interest on our national debt in Canada at the federal level, if you look at the last budget, it’s about 25 billion dollars. So 25 billion dollars is about the budget of the National Defense in Canada. But because of the interest rates that are higher than it was a year or two years ago, next year it may double, and only to pay the end on our debt in Canada will be about 40 to 50 billion dollars. Imagine what we can do with that money. We can be generous. We can have good social programs, but no, we will have to use that money to pay only the interest on our debt. So it is irresponsible. In the US it’s the same thing. That amount in a couple of years will double.
That’s why the situation is very, very difficult. I believe, like you, that recession that we have may be a stagflation, because I don’t believe the Fed or the Bank of Canada. The Bank of Canada said we increase our interest rate at 4.25%, and they said that may be the last increase because they know if they go more than that then the recession will be very bad. Very deep and bad. And it’s the same thing in the US. So I believe that these central bankers will stop and we will have that inflation. So it’s sad, but that’s the reality. There’s no such thing as a free lunch, like we said, we have to pay for that.
Yep. I’m going to bring you to a point you just brought up. It’s something that actually falls along the lines of what you’re talking about which is the idea of stagflation. So I’ll ask you to explain to the viewers what stagflation means and maybe I’ll let you just carry on without my two cents.
Yeah. It’s a recession at the same time with inflation. If central bankers were serious, they would have to increase the interest rate by more than a couple of points. The best example of that is what happened in the 1980s when we had a recession at that time. I remember that we had inflation at 12% at that time. To fight inflation at 12%, you need to be sure to have a positive interest rate. So the Fed in US and the Bank of Canada, they had to raise, at that time, the interest rate to 17, 19, 20%, and the inflation was at 12%. So today we have an inflation around 6.5 or 7%, and our central bankers in US and Canada will stop maybe at 5%. So we won’t be in a real positive interest rate.
That’s why I believe that we’ll have stagflation. We will have a recession with inflation. If you look back at our history after the Second World War, in the 1940s, we had inflation for 10 years. That was the way to pay for the debt during the war and I believe that will be the same thing. We’ll have inflation for the next couple of five or 10 years and it’ll be very difficult for central bankers to keep inflation at 2%. It may go down from 6.1 or 6.9 to 4, 5, or 3 but it will be very difficult because our government, in Canada and in US, they are still spending more money than they have and they are still creating a deficit and that’s more money chasing fewer goods. The inflation will be there, contrary to what I said in the beginning with Sweden, that they decided to balance the budget and have a surplus that will help to kill that inflation over there.
Yeah. Well, the problem with politics is that somebody’s got to be the adult and being the adult, just like when you’ve had kids and your kids were young and they say I want the chocolate bar as you walk through that damn supermarket checkout. They always put the chocolate bars right at the kid’s eye level. So he or she says, I want the chocolate bar and if you give the chocolate bar even once, from that point on the kid’s going to scream until they get the chocolate bar. That’s the issue of what you’re talking about. If you want to be fiscally like Sweden did, you’re going to have to be the adult in the room, and then there’s going to be some screaming and crying when they don’t get their chocolate bar.
Yeah. Politicians like to buy your votes with money that they don’t have and they like to please you. They’re looking at the short term just to be elected. That’s a big difference between them and us at the People’s Party. We have a strong policy and we are peddling the truth. It may not be popular today, but we believe that the more we speak about an idea, the more that idea will become popular because it’s all about common sense. If you look at our platform, that’s common sense. We want to appeal to your intelligence, not to your emotions, but traditional establishment politicians like to give you what you want. They’re doing polling and focus groups and survey, and they are telling you what you want to hear, and they are throwing money at you to be sure to have your vote. For us, we don’t play that game, and that’s why we are very different. But yes, that’s politics.
For me, the best compliment that I have is when somebody is telling me, Maxime, I’m looking at what you’re saying and I’m following you. You are not a real politician. For me, it’s a nice compliment because yes, we don’t wait until something is popular to speak about it. We believe that our strong ideas on the economy and other subjects will become popular because we will speak about it openly with passion and conviction.
Well, it’s interesting, the equivalent is, as a technical analyst and a trader, we look at the general populace of investors as very myopic. This is what we’re talking about, right? I want my chocolate bar now. As technical analysts, we study things like market sentiment and we look at, if a crowded trade, we’ll sometimes call it, so when everybody’s emotionally involved with believing that everybody’s going to have an electric car within three years then everybody buys Tesla stock as they did three years ago, and now Tesla’s roughly half of what it was. This is how emotions work. You get excited by an idea and that could be printing money, but I want to just carry this forward.
So let’s say we both buy-in. By the way, I do buy into the idea of a probable stagflation environment, so stagnant growth with 3, 4 or whatever, 5% inflation and for the reasons you explained and I’m glad you explained that. I wanted to cover something. At ValueTrend, we’ve never been gold bugs, but we have been adding gold over the past little while. Technically, the charts tell us that it’s a good place to be right now. But you have some ideas about gold in general, just as a currency reserve and all that sort of thing. What are your thoughts there? Do you have any thoughts there?
Yeah, for me, I don’t want to give any financial advice.
No, no, you’re not.
But I can tell you that I’m looking at what is happening right now, and I know that central banks are buying a lot of gold in Asia, Russia, and India. I believe that the time for the US dollar to be the only international monetary unit that everybody’s using for their transactions may end. I don’t know when but just look at what is happening right now in Saudi Arabia. The president of China was there a couple of days ago and they want to have a new deal together. Instead of buying gas and oil by paying with US dollar, they tried to have another currency that will be the competition of the US dollars and what the US did in the war in Ukraine, they used the monetary system to punish Russia.
So a lot of other countries are looking at that, and they don’t want to be too much dependent on the US dollars and with the Fed printing money out of thin air like that. I believe that in the near future, it can be in five years, in 10 years, that we’ll have a competition to the US dollar and maybe that new monetary unit maybe based on gold or commodities or both. We don’t know. If we look at history in the 19th century, we had a kind of a gold standard and everything was going well at that time. So I believe that it may come back and so we’ll see. For me, it’s a question of time. Actually, the dominance of the US dollar is a question of time.
Excellent. I had another guest who’s a bit of a market historian, and I know you’re not an investment advisor. I’m not going to give you an investment question. You just mentioned the US dollar and I’m a hundred percent on side with that. In fact, that’s why we started buying gold as well as the technical look of the chart. But beyond that, this market historian we had on he was talking about long, long cycles where different societies, different civilizations become dominant and fall out of grace and all that stuff. So one of the things that came along was the BRICS, like the emerging markets, China, India, whatever. What are your thoughts on, not from an investment point of view, but from a world perspective, where do you see the US?
Yeah, absolutely. You’re right. If you look at history a flat monetary money, a flat currency can be good for 100 to 150 years and after that, something happened because the government are creating too much of these dollars right now out of thin air. So I believe it may happen and it will happen, but I don’t know when. And yes, with the BRICS, Brazil, Russia, India, China, and South Africa, they are looking together and they are serious. They want to have their international transactions in another currency. If they’re doing that, that will put pressure on the US dollar also. Absolutely, we are in a very challenging or exciting time, if I can say it like that, because all that may change in the next 10 or 20 years, and we are in the middle of all that.
So it’s very interesting and I hope that this change will happen without too bad of an impact on our standard of living. But it may. So that’s why when you’re speaking about gold personally, usually gold is to keep your purchasing power and in a time like that, I can understand that more people are buying gold just to be sure to keep their purchasing power. If you buy gold, you won’t have any interest. In times like that, I can understand that people are looking at gold to protect their future.
Yeah. That’s actually one of the studies that I’ve done and I’ve presented on my blogs in the past and talked about this a lot, is that gold has actually got an almost perfect negative correlation to the US dollar. A lot of people think it’s a hedge against the stock market or hedge against the economy. It’s got some inflationary hedge qualities, but really it’s a dollar hedge. It’s a US dollar hedge. It’s almost perfect. It eventually moves in the opposite direction even if it’s delayed by six months or a year. So I think anybody that has a view that maybe the US dollar has extended too much, and that is a view that I certainly have, then it’s another way to start hedging against that possibility of a decline in US dollar.
I’m going to just finish up with one last question, and the last question is, given the stuff we’ve just talked about, the debt, the inflation, investment, productivity, and growth in the Canadian economy specifically, rather than talk about the US, what are your thoughts over the next few years? I know you’ve mentioned we got to have that Swiss way of looking at things where we control our debt and all that, but maybe that doesn’t happen for a while. Where do you see the risks as far as our economy goes?
Yeah, I believe that in Canada there are a lot of natural resources in our country, and gas, oil, and also rare, metals.
Oh, precious metals and rare earth, whatever they call it.
Yeah. Rare earth. So I believe that the future of our economy that will help our economy is our natural resources. That was that in the past, that will be that in the future. People will need oil. They will need also uranium. We have a lot of natural resources. The Trudeau government or another government, because we may have a recession and a stagflation, they will be more open to new projects for exploiting our natural resources. So I think that for our country, that’s very good that we have that. I must add also that our central bank in Canada doesn’t have any gold, and that’s the only central bank that doesn’t have any gold.
So that can be a challenge over there, because like I said in the beginning, central bankers right now are buying gold and more reserve of gold knowing that the international monetary system may change. So that can be a challenge for our country. But that being said, I believe in people. I believe in free markets. I don’t believe that the government is the solution. I believe usually the government is the problem. So if we can have more free markets, if we can reopen our economy, lower our taxes, but we cannot do that right now. We need to be serious about balancing the budget. And after that, that’s our position, the position of the people’s body, balance the budget and after that, with surplus, lowering our taxes. So if we can open the windows and more free markets, and the big challenge that we have right now in our country is healthcare. We have a lot of waiting times for surgeries and we need to have more private delivery in healthcare.
That may happen. That’s a big reform that we must do in our country. We are the only national political body that is proposing that. That’s the only solution to have a healthcare system that will be more efficient. Like in Europe, actually, they have a mixed system with private delivery and public delivery. But everybody has a universal coverage. I’m not speaking about the US system. We can have that in our country and I believe that it will come. But politicians need to understand that and right now they are not. We are the only party that is speaking about that. So we have a lot of challenges, but I’m optimistic for the future if we are doing the right public policies.
Well, I agree with you a hundred percent, Maxime. Your comments that Canada is actually in a great position. I’ve been talking about this for a while. We’ve been divesting a lot out of the United States, and we still have US stocks, but Canada has the resources and you’re right, it’s a forced issue. We’re going to be forced to by natural causes to actually have to utilize our resources. You said it yourself, uranium, chemical, those kinds of companies, they’re producing what is needed to make this clean energy in the future. The lithium batteries or the rare earth and all that. I agree with you a hundred percent. I really appreciate you coming on today and I think this has given us some real economic background as to how we have to posture ourselves as both people and citizens and investors. Thank you for coming on.
Thank you, Keith. I was very pleased to have this opportunity to be with you and I appreciate what you’re doing. And as you know, our role, and I’m seeing my role as a politician to try to inform the population and bring forward the best policies for a smaller government in Ottawa that will respect our constitution, will respect people, will have more choices. That’s the People’s Party and if I may add, if your viewers want to know more, they can go on our website, PeoplesPartyofCanada.ca to read our platform. Actually, it’ll be the same one when the next election will come at the federal level. We don’t change our platform. It’s always the same one. We are fighting on principles. So I hope that your viewers, if they like the platform when the time will come, they will know what to do. I want to thank you, Keith, for that opportunity.
Thank you, Maxime.
**I just wanted to make a quick note. In that I interviewed Max, because, in my opinion, he’s an extremely honest person, with a very, very high level of integrity. He’s got a strong background in finance, a deep understanding of economics, and education and work history in the field. He’s a guy that has a brilliant mind, in my opinion, and I wanted to feature him on the show for his opinion on the markets, the economy, and not just the Canadian landscape, but the worldwide landscape. And I think he did a good job. This video wasn’t a declaration of my support of the People’s Party of Canada, or for the Progressive Conservatives or any party in particular. It’s simply an interview with a person who, I think, can offer us real insights. And Maxime, I think you did that particularly when it came to the currency talk we had, so I hope you enjoyed it. Thanks for watching, and we’ll see you next week.