Quote:
Originally Posted by opendoor
Wouldn't capital flight from equities to things like bonds drive yields (and interest rates) downwards? The more money there is chasing fixed income investments, the lower the rates generally are.
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I think that basically depends on the net savings rate. If a large amount of capital starts seeing withdrawals instead of being left to compound that's a big headwind to capital formation.
Personally, I think millennials are entering our peak earning years and so you'll start to see savings from that demographic jump big time, so I think it'll work out fine. I also think the significant uncertainty millennials have experienced (2008-2009, covid) are likely to make us as a group bigger savers than maybe people are expecting.
The other big piece that affects that Canadian economy's access to productive investment is the huge amount of capital in housing. The share of the bank's balance sheet that goes to mortgage loans is much higher than in comparable countries, which crowds out loans to businesses.
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