Canada Does the Global Economy a Favor

Canada is trying to become a model citizen to the rest of the world, but is only helping itself establish a sufficient running economy as it pursues a mix of monetary and fiscal policies. Prime Minister Trudeau intruduced a budget that will boost spending on initiatives from infrastructure and social benefits. From that stimulus the Central bank of Canada has refrained from cutting interest rates, which will strengthen the Canadian dollar. "The higher dollar will be a drag on Canada’s trade sector, diluting the budget’s stimulative impact. But Canada’s loss is the world’s gain. In fact, Canada is faithfully executing the formula that finance ministers and central bankers from the top 20 economies agreed to pursue at their just-concluded meetings in Washington: namely, rely less on monetary and more on fiscal policy to rejuvenate growth." 

"This is a situation where countries will end up worse off by pursuing their own interest than by cooperating. Central banks in the eurozone and Japan have cut interest rates into negative territory, for instance, in what others claim is an attempt to cheapen their currencies to bolster exports and inflation." Theorist hypothesis that  is an zero-sum game in “secular stagnation,” when interest rates are near zero and central banks can no longer restore full employment. Increased borrowing puts upward pressure on interest rates and the currency, drawing in imports. Therefore by pushing interest rates higher, it restores some of the potency that monetary policy loses when rates hit zero.

http://www.wsj.com/articles/canada-does-the-global-economy-a-favor-1461169055