Back on the financial front:
Because of comments made on the procurement threads (FWSAR, F-35, CSC et al) about the impact of exchange rates it got me to thinking about managing that volatility. In the private sector it is generally done by buying futures, ie, if a project requires the purchase of foreign equipment then the vendors currency is purchased when the exchange rate is low so as to buy the stuff when the rate is high. That way you lock in the price of the kit and make more money, or at least reduce your costs.
So that got me to wondering what the Canadian Government had been doing. It doesn't buy futures per se. It actually buys currency - foreign reserves.
It turns out that between 2008 and 2015 the
Government's holdings in US Dollars increased from a low of 19.257 BUSD in 2007 to the current level of 48.229 BUSD, or a 150% increase.
Likewise the gold reserves were increased and the IMF position was strengthened.
What this means is that on purchases, like the F-35 for example the Government has the option of paying for those aircraft with US dollars laid down in 2008 when the Canadian dollar was trading above par. Effectively taking that variability out of the discussion.
In reality much of that money is actually used to pay off interest on foreign loans. There are other demands on that money than just the defence budget.
But.
It is as I was reading the Department of Finance table linked above that I discovered this curious fact.
In 2005, Paul Martin's last full year on the job Canada held gold reserves equivalent to 56 BUSD based on December 2015 valuations.
In 2006, Steven Harper immediately started building all foreign reserves, including gold.
That reached a high point of 181 BUSD in gold by 2012.
Since then the Government has been drawing down the gold account, presumably to offset the depreciating dollar.
At the time the Liberals took over the reins in November there was still 102 BUSD in that account, as of November 30th.
By December 30th that account had nosedived back to 58 BUSD, or the same level it had been at when Paul Martin was making the decisions - effectively wiping out all the additional reserves that Harper had squirreled away against a rainy day.
One month. US$ 44,000,000,000.
Where did it go? What was it used for? I am not suggesting anything nefarious. Honest people can disagree on managing finances.
But what was the rationale? And what does it say about how the Liberals plan to manage the books?