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Email this6:51 pm
December 12, 2021
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savemoresaveoften said
If u remember ur Eco101 (assumed u did take that), then you will recall it’s either fiscal or monetary policy to ‘influence’ the economy. Monetary policy is what Bank of Canada is practicing, nothing wrong with that.
No one put a gun to the homebuyer’s head to take on a mortgage that they can’t afford when refinancing comes. Homebuyer’s pure greed and believe in ‘buy high sell higher’ mentality to blame.
I am glad our central bank is not setting rate policy based on how many home buyers will be in hardship. Central bank sets interest rate high enough with the hope that the economy rebalances itself nicely (aka soft landing). The balancing act almost always fail. A mild economy is really what they wish for so that they can bring inflation down to 2%. Even after they think rate has peak (maybe 3-6 months from now), they will be on the sideline longer than most would think and won’t be in a hurry to cut. Mind you market will start pricing in cuts tho.
Agree with you well said...
and those days of near zero interest are gone and now widely discussed last week and hinted at by Powell is the idea that interest rates could stay higher for longer as an alternative to more hikes.
7:55 pm
April 27, 2017
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We can be reasonably confident about Spt 2023 but nobody has any idea about the next year. Pundits’ predictions and actual interest rates for next year have zero correlation.
And CBs have little real influence over overnight rates. Yes, they decide what happens today or tomorrow but within a very narrow margin. They can delay or expedite a change but in the end economic developments and markets will always force their hand and then some. A good example was when during the early Covid outbreak CBs swore to keep interest rates near zero at least through 2023.
1:39 am
November 18, 2017
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gicjunkie: The upside of letting the post-COVID-19 economy run fast includes:
1. The economic production infrastructure was up and producing very quickly.
2. Shortages were more quickly dealt with.
3. Inflation reduced hoarded wealth. (Mixed blessing)
cgouimet: I think the homeowners who took the low-rate mortgages for 5-year terms took a good bet and it paid off for most of them. They were protected for at least a few years and reduced their debt rapidly while rates were low. If they were cashflow-short at renewal time, they'd at least have a lower mortgage amount, and as a backup they could reset their amortization period.
The losers were, as so often, those who got the timing wrong.
"Gooder?" You've been listening to those commercials too much! 😀
(Yes, I do know humor when I read it, but the straight man has a role to play.)
I've got a maturity to re-invest this month. Guess what I'm wishing for today! ;{) The two-year peaks work for my ladder and the rates, so I'll go compounded to maximize returns rather than take a payout that can only be reinvested next year at a likely lower rate.
RetirEd
5:43 am
March 30, 2017
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mordko said
And CBs have little real influence over overnight rates. Yes, they decide what happens today or tomorrow but within a very narrow margin. They can delay or expedite a change but in the end economic developments and markets will always force their hand and then some. A good example was when during the early Covid outbreak CBs swore to keep interest rates near zero at least through 2023.
CB has 100% influence over the economy. Market does not force their hands, its the other way around. It is just that CB policy always end up undershoot or overshoot when they try to get to the 'appropriate interest rate level' that foster growth and low inflation. As a result the market behaves not what the CB intended and has to readjust, thus the cycle of economic growth follow by recession, recycle and repeat.
As for CBs promising low rate till end of 2023, I did not recall seeing that promise either explicitly or implicitly. All they said was they will keep rate low as long as possible to help the economy, but I dont remember anyone putting a 2023 reference in their statements. Maybe you can share the one you found / read.
5:57 am
April 27, 2017
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savemoresaveoften said
CB has 100% influence over the economy. Market does not force their hands, its the other way around. It is just that CB policy always end up undershoot or overshoot when they try to get to the 'appropriate interest rate level' that foster growth and low inflation. As a result the market behaves not what the CB intended and has to readjust, thus the cycle of economic growth follow by recession, recycle and repeat.As for CBs promising low rate till end of 2023, I did not recall seeing that promise either explicitly or implicitly. All they said was they will keep rate low as long as possible to help the economy, but I dont remember anyone putting a 2023 reference in their statements. Maybe you can share the one you found / read.
“CB has 100% influence…” Of course it has “influence”. Adding 100% to the word “influence” is 100% meaningless.
Let me refresh your memory:
“Federal Reserve sees interest rates near zero, at least through 2023“.
BoC’s wording was a little different but also fundamentally wrong.
https://www.bnnbloomberg.ca/bank-of-canada-keeps-key-interest-rate-on-hold-1.1514208
6:11 am
April 27, 2017
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A lot of factors have “influence” over the real economy. Population growth. Government’s fiscal policy… Taxes. Handouts. Immigration. People deciding to quit. Workforce education. Trade. Productivity. Business environment. Entrepreneurship. Technological development. Events in other countries. Taylor Swift’s concerts. Psychological factors. Weather. Lots of other factors.
CBs react to what happens in the real economy. And while they attempt to look forward and use models, all they REALLY know when making decisions is old data. By the time inflation stats are known, they are already obsolete. Same with economic growth, employment, etc. CBs day to day decisions do have short term impacts - among other factors, but these decisions are forced and have to be made sooner or later.
And that’s why neither the CB itself, nor anyone else knows what monetary policy CBs will set next year. A system impacted by billions of people can’t be predicted with any degree of accuracy.
6:21 am
March 30, 2017
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mordko said
“CB has 100% influence…” Of course it has “influence”. Adding 100% to the word “influence” is 100% meaningless.
Let me refresh your memory:
“Federal Reserve sees interest rates near zero, at least through 2023“.
BoC’s wording was a little different but also fundamentally wrong.
https://www.bnnbloomberg.ca/bank-of-canada-keeps-key-interest-rate-on-hold-1.1514208
Fed says "expected"
BoC says 'likely"
Neither ever "swore" low rate till end of 2023. Big difference in 'expected' vs ' swear / promise'. You 'expect' to get an inheritance, vs you are 'promised' you will get one....
And speaking of using "old data" to shape policy, that is 100% meaningless. of course they have to use known data which by definition is "old", may be you can help them and show them some "new data' that are from the future, that no one knows for 100% certainty except perhaps you 🙂
6:21 am
February 7, 2019
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mordko said
“CB has 100% influence…” Of course it has “influence”. Adding 100% to the word “influence” is 100% meaningless.
Let me refresh your memory:
“Federal Reserve sees interest rates near zero, at least through 2023“.
BoC’s wording was a little different but also fundamentally wrong.
https://www.bnnbloomberg.ca/bank-of-canada-keeps-key-interest-rate-on-hold-1.1514208
Yes, the speed and magnitude of the economy's recovery was a huge surprise to everyone. And the "pressure" on governments to spend spend and the CB's to keep rates low never abated. All were begging for more more more inflation through spending and rates, except consumers ...
| CGO |
6:42 am
April 27, 2017
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cgouimet said
Yes, the speed and magnitude of the economy's recovery was a huge surprise to everyone. And the "pressure" on governments to spend spend and the CB's to keep rates low never abated. All were begging for more more more inflation through spending and rates, except consumers ...
Several significant voices at the time said that combined fiscal and monetary policies during late 2021 and 2022 were wrong and would spark heating of the economy and inflation. Larry Summers is the one I recall.
Now CBs need to work that little bit harder to restore credibility. My guess is that Bank of Canada’s job is a bit easier because housing makes up such a big chunk of our economy and its more responsive to high interest rates.
9:06 pm
November 19, 2022
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No rate change on Wednesday, now it’s almost guaranteed.
Ontario Premier Doug Ford calls on Bank of Canada to halt rising interest rates
https://www.cbc.ca/news/canada/toronto/doug-ford-letter-bank-of-canada-1.6956538
1:36 am
February 7, 2019
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UkrainianDude said
No rate change on Wednesday, now it’s almost guaranteed.
Ontario Premier Doug Ford calls on Bank of Canada to halt rising interest rates
https://www.cbc.ca/news/canada/toronto/doug-ford-letter-bank-of-canada-1.6956538
LOL!
Unless, Dougie restores the Greenbelt ...
| CGO |
5:27 am
November 19, 2022
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cgouimet said
LOL!
Unless, Dougie restores the Greenbelt ...
What is the deal with this Greenbelt ? Do they have any in the US ? As far as I concerned trees can grow anywhere, build the houses and plants new trees further from Toronto.
5:31 am
February 7, 2019
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UkrainianDude said
What is the deal with this Greenbelt ? Do they have any in the US ? As far as I concerned trees can grow anywhere, build the houses and plants new trees further from Toronto.
Some of the best farmland and wetlands in ON ...
| CGO |
7:20 am
April 27, 2017
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UkrainianDude said
What is the deal with this Greenbelt ? Do they have any in the US ? As far as I concerned trees can grow anywhere, build the houses and plants new trees further from Toronto.
The amount of land where you can produce food in Ontario is very limited. That aside, the issue is with how the government of Ontario transferred Greenbelt land to developers. Developers were consulted privately, had prior info and made circa $9bn by purchasing this land just in advance of the announcement.
Right now Ontario government is sending silly letters to BoC but if they thought they could create a better distraction by writing letters to the King of Invaders from Mars, we would see that letter within seconds.
7:24 am
September 11, 2013
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The southern part of Ontario has some of the best soil for farming anywhere on earth. And I've got my property already, so please save the Greenbelt!
10:36 am
March 30, 2017
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mordko said
Developers were consulted privately, had prior info and made circa $9bn by purchasing this land just in advance of the announcement.
Thats what make me sick. Also how do we know that helps bringing housing prices down ? Esp if yeah there will be more supply but developers just price it sky high ?!
The whole thing should be reversed, and restart from scratch will price cap on new houses built on the greenbelt land etc.
10:48 am
September 11, 2013
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Developers have to price houses at market prices, which I agree might be "sky high" to some people, or else the houses sit unsold. And if you put a "price cap" on new homes built in a certain geographical area then it might be the case that developers might not be interested in constructing there.
11:31 am
March 30, 2017
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Bill said
Developers have to price houses at market prices, which I agree might be "sky high" to some people, or else the houses sit unsold. And if you put a "price cap" on new homes built in a certain geographical area then it might be the case that developers might not be interested in constructing there.
well they get the land for cheap, yet selling at comparable market price ? Totally wrong !
12:34 pm
February 7, 2019
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savemoresaveoften said
well they get the land for cheap, yet selling at comparable market price ? Totally wrong !
So, you buy or build a house. Maybe live in it a while. Maybe not.
You decide to sell. Are you going to ask what you paid or market value? Probably the higher of the two although the buyer would rather the lower of the two ... 🙂
| CGO |
12:37 pm
September 11, 2013
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That's true (I assume they got a deal), though none have been sold yet, maybe some might choose to factor the cheaper land into their selling price to grab business from competitors or because they need money badly that month or because the market's declined due to higher interest rates or recession, etc, etc, you can't assume yet how it's all going to play out. But I agree, like many of us here who move our money when we can make more elsewhere or sell our own house for max dollars the developers will seek the highest return they can.
Please write your comments in the forum.