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Email this10:56 pm
February 17, 2013
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saw this on the news today so had to look it up. Bank of Canada expects to hold rate at .25% until at least 2023.
From https://www.bankofcanada.ca/2020/10/fad-press-release-2020-10-28/
As the economy recuperates, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In our current projection, this does not happen until into 2023.
5:48 am
September 30, 2017
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Something else Macklem said bothers me ...
“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time”.
Is he assuring the debtors ? or encouraging new debts ?
... am I seeing the letter "K" here again ?
6:32 am
August 10, 2018
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Is he assuring the debtors ? or encouraging new debts ?
... am I seeing the letter "K" here again ?
The way I read it is " we are in deep doodoo" Please start spending again so we can generate Government revenues to pay for all of Trudeau's promises. Unfortunately for them, faced with reckless spending, most people are now saving for the rainy days ahead.
8:18 am
May 27, 2016
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Bruford said
Is he assuring the debtors ? or encouraging new debts ?... am I seeing the letter "K" here again ?
The way I read it is " we are in deep doodoo" Please start spending again so we can generate Government revenues to pay for all of Trudeau's promises. Unfortunately for them, faced with reckless spending, most people are now saving for the rainy days ahead.
Which exposes one of the bigger flaws in modern monetary theory, i.e. that artificially lowering interest rates can create prosperity
11:02 am
October 29, 2017
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Londonguy said
Which exposes one of the bigger flaws in modern monetary theory, i.e. that artificially lowering interest rates can create prosperity
In the current predicament, interest rates weren’t lowered to create prosperity. They were lowered to avoid catastrophe!
12:32 pm
February 27, 2018
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As I've said in other posts. I agree something had to be done, the feds and the boc were between a rock and a hard place. That being said.
Stimulus is used start something, after an event. It's used to ignite a recovery, stimulus is a catalyst. Canada applied the fresh coat of paint before the hurricane even hit the shore. Do i need to say what colour of paint was used?
BOC rates were and are being held artificially low. During robust times, all governments across canada, forgot to save. It's a forgone conclusion, unless i bail out of this sinking ship and starting swimming for that distant beach, my tax dollars are going to be buying everyone but me, something really pretty.
Did i ever mention... i don't even have a doctor. I figure if i get sick, I'll go see Sally Struthers in Ethiopia.
Added edit (for Bill).
I'll do all of this while listening to Bill Monroe.
7:47 pm
October 27, 2013
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Ultimately, Canada likely has little choice than to follow the lead of central bankers of much bigger economies than ours. To do otherwise would just create economic havoc artificially disrupting the loonie's rightful 'strength' in the OECD. Our GDP and economic strength is highly dependent on us being a trading nation. It is what it is.
9:47 pm
November 18, 2017
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Borrowing right now is damn stupid, and encouraging mortgage growth will only worsen the housing affordability crisis. But if consumption increases production, that means creating more goods and services, which IS what we need to recover from lack of production. That's worked for many a financial crisis.
But, as we all know, it's hard to get people to pay their debts, and governments face that every time they borrow. The traditional supply-sider response is that population growth will eventually take care of that. Yeah, but population growth is what's killing us all!
RetirEd
RetirEd
8:33 am
August 10, 2018
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The eventual end result of all the government borrowing and spending (without additional production) will be monetary devaluation via hyperinflation. When the citizens wake up, people will rush to dump fiat in favor of other hard assets. China and Russia are doing that already, because they foresee the demise of the US dollar.
9:38 am
September 11, 2013
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Completely agree, Bruford, regarding devaluation, though I'm also betting that owning shares of certain companies (e.g. Bell Canada, as I don't see the Age of Entertainment/The Almighty Screen going away ever, at least in my lifetime) are another way to retain value in an asset.
Holding gold has been made illegal before, e.g. 1933 in USA you had to sell your gold to gov't and couldn't own any until 1975 again (is my understanding).
10:40 am
April 6, 2013
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We covered this before in Possible Inflation Outcome due to Government Assistance .
There will be no hyperflation from replacing people's incomes. That's because doing so creates no new demand for goods that could inflate the prices of those goods.
What do people think recipients are doing with their CERB money? Buying cottages? Renovating their homes? Buying more expensive cuts of meat?
People should also stop accepting those junk money supply arguments for inflation. One will definitely have hyperinflation if one grows money supply 200% per annum. But, inflation has not been a problem with increases in the 5% to 7% range.
Even with 5% to 7% increases in money supply, the central banks have been struggling to get inflation up to 2%. The US central bank has changed its inflation target to be a long term average of 2% and not 2%. That way, inflation can be allowed to drift above 2% to make up for all the time it has been under 2%.
10:49 am
November 18, 2017
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StatsCan has been reporting that the current pandemic has led to:
-a boom in home renovations (making home nicer in the absence of travel?)
-increased home-buying (extra money, lower expenses, near-zero interest)
-less consumer debt (paying off and not charging)
Car dealers say there are signs car buying may surge with the new model year, as 2020 models are sold off and more people can get cheap credit. (Remember that manufacturer's financing is usually cheaper than bank financing, and a LOT cheaper than dealer's-own financing.)
RetirEd
RetirEd
11:58 am
February 27, 2018
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Bill said
Completely agree, Bruford, regarding devaluation, though I'm also betting that owning shares of certain companies (e.g. Bell Canada, as I don't see the Age of Entertainment/The Almighty Screen going away ever, at least in my lifetime) are another way to retain value in an asset.
The issue bell media might experience comes on three fronts, content and advertising are two of them. Revenue from advertising is low, or so they say resulting in layoffs and channel merging. Content... anyone really interested in seeing captain Kirk save the universe for the millionth time? Do they have a program director they actually pay?
Streaming services that also make the "good" content, Netflix and Disney come to mind, they should grow as long as taxation from greedy governments doesn't kill them. Disney say they may bypass theaters and go direct to pay per view.
BELL'S sports division is the 3rd front. This area was a cash cow but without a live audience filling the seats and buying the overpriced licensed merchandise... along with reduced season schedules. Ouch. Go leafs go.
Something else that just came to mind... i believe this was on the back burner, weren't the crtc going to stop Canadian broadcasters from hijacking American signals, with the Superbowl being the first step?
Booze is a money maker, online shopping, health related crap might do well, if you pick the right one, xbox and ps. Groceries, we gotta eat.
12:26 pm
September 11, 2013
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As with most matters economic there are various views. Wikipedia says "the quantity theory of money (QTM) states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply." Others disagree. I think what Bruford and I are saying is that constant borrowing plus printing money has as its end stage hyperinflation. Clearly we're not near there now, we don't even have significant inflation. But historically there are examples of inflation gathering speed and moving to hyperinflation pretty quickly once no-one wants your currency any more (i.e. you can't borrow any more) because you just print more up whenever you need it - and not being able to borrow one day changes your life big time that day.
With Bell, regardless of content all I know is people today can no longer live without internet access, that's good for Bell. And I agree there are other staples (e.g. Metro's another solid dividend payer), a basket of such investments might do ok even during hyperinflation.
12:44 pm
August 10, 2018
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I recently came across another interpretation of what hyperinflation is, and I think it is germaine to the situation we now face.
Hyperinflation : the condition whereby monetary authorities accelerate the expansion of the quantity of money to the point where is proves impossible for them to regain control.
5:04 pm
April 27, 2017
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We are not in a condition of “hyperinflation”. In the future... Who knows? Could be deflation.
5:25 pm
April 6, 2013
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Bill said
As with most matters economic there are various views. Wikipedia says "the quantity theory of money (QTM) states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply." …
Bruford said
I recently came across another interpretation of what hyperinflation is, and I think it is germaine to the situation we now face.Hyperinflation : the condition whereby monetary authorities accelerate the expansion of the quantity of money…
Inflation and hyperinflation have to do with prices and not money supply. Those are just theories that are plain wrong. That's because no-one sets prices based on money supply.
When inflation in Canada surged in the 70's and 80's, it wasn't because of money supply. It was caused by oil supply disruption. North America got cutoff from Middle East oil.
Hasn't the EU been trying get its economy going for years? Quantative easing. Negative interest rates.
EU money supply M3 was up around 36% during the decade 2010 - 2019. That is a growth of around 3.1% per annum. There doesn't seem to be any matching 3% inflation in the EU.
I just checked. EU inflation is under 2% and seems to be oblivious of how it is supposed to be excited by money supply.
5:34 am
April 27, 2017
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Inflation is impacted by multiple factors, including shortages, money supply, saving rates, borrowing rates, demographics and public confidence in the monetary policy and how its executed. And its “sticky”. Once the confidence is broken, very painful to restore.
7:09 am
September 11, 2013
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"One will definitely have hyperinflation if one grows money supply 200% per annum" vs "Inflation and hyperinflation have to do with prices and not money supply" - which is it?
I agree with mordko, various factors influence the up and down inflation we in North America and Europe have been familiar with since WWII. But I also agree with Brudford's definition in post 15, hyperinflation is the (usually relatively brief) end stage when money supply growth is the last weapon you have. The cases I'm familiar with happen when a country's debts are so large it can't attract lenders any more so (assuming it has no way to generate sufficient wealth) the only option left is to print money. Clearly the western world has not been and is not there yet, e.g. USA, Canada & Europe so far have had unlimited capacity to borrow whatever they want.
7:46 am
September 30, 2017
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Canada needs immigrants to help growing GDP - World Debt Clocks
... note that our GDP counter is currently decreasing there
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