Declining Canadian economy, dollar mean investors should add protection to their portfolios

financialpost.com:

There is a lot of uncertainty for the average Canadian these days, including trying to navigate a complex macro-economic environment that is already starting to have a material impact on their overall financial well-being.

The glaring issue de jour is that the federal government is trying to keep pace with the current United States administration by running large deficits, but without the blessing of having neither the world’s reserve currency nor the tax base with room left to pay for it.

This is an issue because, until more recently, both governments were able to rely on their respective central bankers to print money to buy all the new debt required to fund their deficits. However, this has quickly come to an end because monetary policy has been forced into being restrictive to try to keep inflation in check.

As a result, instead of adjusting their spending programs, politicians are now looking for new ways to raise taxes given the market limitations on debt issuance. We don’t think it’s a coincidence that Prime Minister Justin Trudeau and President Joe Biden announced proposed capital gains changes a few days apart from one another.

But Canada could be in a lot more trouble than many think because its economy is a lot weaker and significantly less productive.

For example, from 2018 to 2024, U.S. gross domestic product per capita has grown by more than eight per cent while Canada’s has shrunk by well over two per cent. Many of us feel poorer, and that’s because we are. If the Canadian economy had simply stayed flat from where it was in 2015, we’d all be earning an extra $4,200, according to a Statistics Canada report.

Eventually, there will have to be a variance in monetary policy between the two countries’ central