*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Azure]

Originally Posted by GGG

If what your saying is the case why did we have decades of low inflation?

I think in large part because of decades worth of policy to offshore every single possible thing where it was cheaper to do production in China or other cheap labour countries, and huge advancements in agriculture & fossil fuel technology that allowed food & energy to be remain cheap.

But as soon as the supply chain ran into problems, where practically everything we lived on because an issue to transport, inflation went crazy.

Low interest rates are an issue, and they should have possibly been raised quicker, but I think its pretty clear that there are other issues going on as well.

One example where government policy has been very slow to adapt to reality is with housing prices. Its pretty clear that money laundering, criminal activity, excessive foreign investment, multiple property ownership, etc has led to our real estate market very likely being a massive bubble. Why has the government not stepped in HARD to deal with this?

I don't even know if housing is tied into inflation numbers, but the fact that so much of our money is GOING into real estate means that there is less money for other good & services, which also drives up prices.

You can find many examples like this.

That is why continuous rate raises is just a short sighted policy.

[CroFlames]

So once the rate hikes settle down, which will surely happen this year, are we expecting typical non-high ratio mortgages to be about 5-6%?

[Azure]

Originally Posted by PeteMoss

Pretty sure the vehicle thing is exactly what the interest rates are trying to influence. There was supply issues with chips but that is quickly fading as many electronics (PCs, etc) markets are being hit hard already. Companies are trying to catch up to the backlog from past supply issues, but raising interest rates also lowers the demand. https://europe.autonews.com/automake...023-some-risks

Barring another world changing event - inflation will be back to normal at the schedule opendoor posts above. Just looking at the container rates to ship from Asia to North America - they are down to basically pre-pandemic rates after increasing like 500% from 2020-2022.

Container rates are mostly down because large corporate buyers like Walmart are sitting on tons of inventory on shore that they need to get rid of. Everyone know that was coming.

It doesn't necessarily mean that the supply chain has gotten better for things like computer chips, nor does it mean vehicle prices are coming down.

Now, I do expect that if you hammer away at this long enough, the economy will basically blow up, which seems to be what the BoC is going for.

But man, such a terrible policy if you have an economy with record immigration levels, housing prices that don't want to come down like they should, housing shortages, low unemployment, rising wages, and private sector job growth.

[Monahammer]

Originally Posted by CroFlames

So once the rate hikes settle down, which will surely happen this year, are we expecting typical non-high ratio mortgages to be about 5-6%?

Personally I think the economic sweet spot is like 3-5%

[Harry Lime]

Originally Posted by CroFlames

So once the rate hikes settle down, which will surely happen this year, are we expecting typical non-high ratio mortgages to be about 5-6%?

5 year closed on non-CMHC covered mortgages are already at around 5.35 posted, and it goes up from there based on selection. So it probably settles around 6 or just over at peak.

[blankall]

Originally Posted by Azure

Container rates are mostly down because large corporate buyers like Walmart are sitting on tons of inventory on shore that they need to get rid of. Everyone know that was coming.

It doesn't necessarily mean that the supply chain has gotten better for things like computer chips, nor does it mean vehicle prices are coming down.

Now, I do expect that if you hammer away at this long enough, the economy will basically blow up, which seems to be what the BoC is going for.

But man, such a terrible policy if you have an economy with record immigration levels, housing prices that don't want to come down like they should, housing shortages, low unemployment, rising wages, and private sector job growth.

A major issue is that the interest rates aren't affecting everyone equally. For example in the housing market, because there's not enough supply, anyone with cash is fine. Anyone who needs to borrow gets F-ed. The prices aren't coming down the way they should, but the payments for those who need to borrow are going up. With record immigration levels, far in excess of new housing builds, the problem will not rectify itself.

We actually need the immigration, because our labour force is so poorly trained for positions Canada needs. Maybe this is less of an issue in Calgary, but in Vancouver construction and maintenance workers are very hard to find. Getting simple repairs done is ludicrously expensive. For example, I needed a drain flushed out. The companies all charge $300 just to show up and then $150/hr once they arrive.

The fundamentals in the Canadian economy just seem way off. I don't place blame on the Liberals solely, this is a problem decades in the making.

[Johnny199r]

Originally Posted by Azure

I think in large part because of decades worth of policy to offshore every single possible thing where it was cheaper to do production in China or other cheap labour countries, and huge advancements in agriculture & fossil fuel technology that allowed food & energy to be remain cheap.

But as soon as the supply chain ran into problems, where practically everything we lived on because an issue to transport, inflation went crazy.

Low interest rates are an issue, and they should have possibly been raised quicker, but I think its pretty clear that there are other issues going on as well.

One example where government policy has been very slow to adapt to reality is with housing prices. Its pretty clear that money laundering, criminal activity, excessive foreign investment, multiple property ownership, etc has led to our real estate market very likely being a massive bubble. Why has the government not stepped in HARD to deal with this?

I don't even know if housing is tied into inflation numbers, but the fact that so much of our money is GOING into real estate means that there is less money for other good & services, which also drives up prices.

You can find many examples like this.

That is why continuous rate raises is just a short sighted policy.

Politicians didn't want to mess with the golden goose. All those home owners seeing the value of their homes exploding through the stratosphere, untouchable.

Politicians aren't so worried about the concerns of 20 year olds who don't vote as much as homeowners.

Bonus points - a huge number of MPs own multiples properties.

Interest rates should be been raised a long time ago. Low interest rates encouraged people to tap the equity in their houses and purchase multiple properties. It also encouraged people to pay pretty irresponsible amounts for houses.

People going absolutely FOMO during the pandemic didn't help either. "I've got to have more room for my family, I don't care how much it costs!, also remote work! Let's move from Toronto to Halifax and inflate their real estate market!"

[bizaro86]

Originally Posted by Azure

but the fact that so much of our money is GOING into real estate means that there is less money for other good & services, which also drives up prices.

Less money available for something lowers the price of that something, it doesn't drive it up.

[Azure]

Originally Posted by bizaro86

Less money available for something lowers the price of that something, it doesn't drive it up.

You are talking about the consumer side in terms of spending money.

I am talking about companies investing money into producing those goods, starting businesses to provide those goods or people starting businesses to provide services.

A high proportion of Canadian investment money goes into real estate. That means there is less being invested or even spent in other areas.

[GGG]

Originally Posted by Azure

I think in large part because of decades worth of policy to offshore every single possible thing where it was cheaper to do production in China or other cheap labour countries, and huge advancements in agriculture & fossil fuel technology that allowed food & energy to be remain cheap.

But as soon as the supply chain ran into problems, where practically everything we lived on because an issue to transport, inflation went crazy.

Low interest rates are an issue, and they should have possibly been raised quicker, but I think its pretty clear that there are other issues going on as well.

One example where government policy has been very slow to adapt to reality is with housing prices. Its pretty clear that money laundering, criminal activity, excessive foreign investment, multiple property ownership, etc has led to our real estate market very likely being a massive bubble. Why has the government not stepped in HARD to deal with this?

I don't even know if housing is tied into inflation numbers, but the fact that so much of our money is GOING into real estate means that there is less money for other good & services, which also drives up prices.

You can find many examples like this.

That is why continuous rate raises is just a short sighted policy.

I think that is an interesting theory that offshoring savings offset the money printing activity however if that were the case and didn’t occur with a corresponding replacement of GDP you would have had currency devaluation especially in the US. Would be interesting to see how it affected the overall system as you are correct that the basket of goods would get cheaper in that scenario.

I think you are looking at the supply chain issue incorrectly. I see it as supply chain reduced the supply of goods therefore to prevent inflation you need to reduce the dollars chasing those goods. By forcing more money into interest payments you reduce demand and therefore the supply chain problems is reduced. Once the supply chain issues work their way through we should see lowering rates which Opendoor outlined very nicely in his post of what currently is happening.

Money laundering in BC is something like 5% of the housing increase per the BC government so a part of but again not a significant affect.

I go back to this one being pretty simple. People with jobs didn’t spend people without jobs didn’t produce and were given money. Then everyone started spending again while productivity was crushed due to a variety of factors. Then inflation occurred. In hindsight it seems pretty obvious and the solutions seems to be working.

Yes it sucks for people and yes the ongoing problems in Canada of competitiveness and corruption still exist.

[bizaro86]

Originally Posted by GGG

I think that is an interesting theory that offshoring savings offset the money printing activity however if that were the case and didn’t occur with a corresponding replacement of GDP you would have had currency devaluation especially in the US. Would be interesting to see how it affected the overall system as you are correct that the basket of goods would get cheaper in that scenario.

I think you are looking at the supply chain issue incorrectly. I see it as supply chain reduced the supply of goods therefore to prevent inflation you need to reduce the dollars chasing those goods. By forcing more money into interest payments you reduce demand and therefore the supply chain problems is reduced. Once the supply chain issues work their way through we should see lowering rates which Opendoor outlined very nicely in his post of what currently is happening.

Money laundering in BC is something like 5% of the housing increase per the BC government so a part of but again not a significant affect.

I go back to this one being pretty simple. People with jobs didn’t spend people without jobs didn’t produce and were given money. Then everyone started spending again while productivity was crushed due to a variety of factors. Then inflation occurred. In hindsight it seems pretty obvious and the solutions seems to be working.

Yes it sucks for people and yes the ongoing problems in Canada of competitiveness and corruption still exist.

Indeed. So far nobody has come up with a macroeconomic policy that allows society as a whole to consume more than it produces...

[GGG]

Originally Posted by bizaro86

Indeed. So far nobody has come up with a macroeconomic policy that allows society as a whole to consume more than it produces...

The first law of thermoeconomics.

[PeteMoss]

Originally Posted by Azure

Container rates are mostly down because large corporate buyers like Walmart are sitting on tons of inventory on shore that they need to get rid of. Everyone know that was coming.

It doesn't necessarily mean that the supply chain has gotten better for things like computer chips, nor does it mean vehicle prices are coming down.

Now, I do expect that if you hammer away at this long enough, the economy will basically blow up, which seems to be what the BoC is going for.

But man, such a terrible policy if you have an economy with record immigration levels, housing prices that don't want to come down like they should, housing shortages, low unemployment, rising wages, and private sector job growth.

Did you read the article I post about Toyota's expected output increase this year?

The chipset issue is basically over. PC/tablet sales are down wildly year over year - https://www.idc.com/getdoc.jsp?containerId=prUS49918522 - which also means all the accessories that go along with that (docks, etc that hold chipsets are also way down). Last year - you'd get held by vendors saying if you want this product with a chipset - you have to pay a huge premium or its going to the next guy who will. That's over now.

Now its just a catch up in markets where you can't just boost production tenfold to catch up to the pent up sales - like vehicles. That is a supply chain issue where you can't keep up with demand - but its more of a demand issue now as its not a situation where you can't build up to capacity because of parts, now you can build up to capacity but you're catching up from the time where you couldn't do it.

[Azure]

Originally Posted by GGG

I think that is an interesting theory that offshoring savings offset the money printing activity however if that were the case and didn’t occur with a corresponding replacement of GDP you would have had currency devaluation especially in the US. Would be interesting to see how it affected the overall system as you are correct that the basket of goods would get cheaper in that scenario.

I think you are looking at the supply chain issue incorrectly. I see it as supply chain reduced the supply of goods therefore to prevent inflation you need to reduce the dollars chasing those goods. By forcing more money into interest payments you reduce demand and therefore the supply chain problems is reduced. Once the supply chain issues work their way through we should see lowering rates which Opendoor outlined very nicely in his post of what currently is happening.

Money laundering in BC is something like 5% of the housing increase per the BC government so a part of but again not a significant affect.

I go back to this one being pretty simple. People with jobs didn’t spend people without jobs didn’t produce and were given money. Then everyone started spending again while productivity was crushed due to a variety of factors. Then inflation occurred. In hindsight it seems pretty obvious and the solutions seems to be working.

Yes it sucks for people and yes the ongoing problems in Canada of competitiveness and corruption still exist.

We do have currency devaluation.

The value of the United States dollar has fallen considerably in recent years, raising questions over the dollar’s long-term viability as a safe-haven currency.

According to data presented by Finbold, the U.S. dollar has depreciated sixfold over the past 50 years. In 1972, the worth of one dollar was $1, but by 2022, the value of a dollar has dropped by an incredible 86%, to $0.14. The dollar depreciation data is derived from statistics supplied by the United States Department of Labor and calculated by the researchers at officialdata.org.

https://finbold.com/real-value-of-on...last-50-years/

Again, I am not saying that controlling interest rates should not be done. I am saying that the feds are literally sitting on their hands when it comes to these issues.

Also not a Liberal Party versus CPC Party issue. This behaviour has been going on for years all across North America with every elected government.

[GGG]

Originally Posted by Azure

We do have currency devaluation.


https://finbold.com/real-value-of-on...last-50-years/

Again, I am not saying that controlling interest rates should not be done. I am saying that the feds are literally sitting on their hands when it comes to these issues.

Also not a Liberal Party versus CPC Party issue. This behaviour has been going on for years all across North America with every elected government.

I meant currency devaluation relative to rest of the world. The above link appears just to be a measure of inflation.

I think we agree a lot on this because my contention is that Todays inflation problem isn’t Caused by the items you are identifying because they existed before and after unchanged. That said it doesn’t mean they aren’t significant issues that need to be dealt with.

[Azure]

Originally Posted by PeteMoss

Did you read the article I post about Toyota's expected output increase this year?

The chipset issue is basically over. PC/tablet sales are down wildly year over year - https://www.idc.com/getdoc.jsp?containerId=prUS49918522 - which also means all the accessories that go along with that (docks, etc that hold chipsets are also way down). Last year - you'd get held by vendors saying if you want this product with a chipset - you have to pay a huge premium or its going to the next guy who will. That's over now.

Now its just a catch up in markets where you can't just boost production tenfold to catch up to the pent up sales - like vehicles. That is a supply chain issue where you can't keep up with demand - but its more of a demand issue now as its not a situation where you can't build up to capacity because of parts, now you can build up to capacity but you're catching up from the time where you couldn't do it.

Expected output information is Toyota higher ups trying to tell people that everything is getting better, but in reality the lead times for new vehicles are still bad.

https://evto.ca/toyota-vehicle-wait-time-guide/

Almost every model listed is 3-6 months + wait.

PC sales are indicative of basically nothing because there are a half dozen reasons why sales could be falling or rising.

As an example, BTC prices are slowly rising again which means there we again be increased demand from the crypto mining broz. Plus summer is coming so heating costs are going away as winter starts winding down in the next month.

[Azure]

Originally Posted by GGG

I meant currency devaluation relative to rest of the world. The above link appears just to be a measure of inflation.

I think we agree a lot on this because my contention is that Todays inflation problem isn’t Caused by the items you are identifying because they existed before and after unchanged. That said it doesn’t mean they aren’t significant issues that need to be dealt with.

I guess my point is if the feds would use their legislative power to deal with issues that are under their purview the BoC wouldn't be hammering away at interest rates trying to get inflation down.

[Sliver]

Originally Posted by Azure

Expected output information is Toyota higher ups trying to tell people that everything is getting better, but in reality the lead times for new vehicles are still bad.

https://evto.ca/toyota-vehicle-wait-time-guide/

Almost every model listed is 3-6 months + wait.

PC sales are indicative of basically nothing because there are a half dozen reasons why sales could be falling or rising.

As an example, BTC prices are slowly rising again which means there we again be increased demand from the crypto mining broz. Plus summer is coming so heating costs are going away as winter starts winding down in the next month.

The fricken Tundra is a 12-month wait right now. I went to buy one and was just like, fata it. I'll wait to purchase.

[bizaro86]

Originally Posted by Azure

I guess my point is if the feds would use their legislative power to deal with issues that are under their purview the BoC wouldn't be hammering away at interest rates trying to get inflation down.

Do you mean trying to subsidize domestic production of semiconductors like the US and their CHIPS act? Because that's likely to be an expensive boondoggle if we tried it here (and it probably will be there as well, but at least Intel exists there). This stuff will almost certainly be solved by the time a new Canadian facility could be built anyway, and the supplies needed are all at huge premiums because Taiwan is building fabs at break neck speed.

Their other legislative initiatives related to inflation can be summarized as giving people government money, which is actually quite inflationary. There is a compassionate argument in favour of that, but it does make the problem take longer to solve.

[PeteMoss]

Originally Posted by Azure

Expected output information is Toyota higher ups trying to tell people that everything is getting better, but in reality the lead times for new vehicles are still bad.

https://evto.ca/toyota-vehicle-wait-time-guide/

Almost every model listed is 3-6 months + wait.

PC sales are indicative of basically nothing because there are a half dozen reasons why sales could be falling or rising.

As an example, BTC prices are slowly rising again which means there we again be increased demand from the crypto mining broz. Plus summer is coming so heating costs are going away as winter starts winding down in the next month.

Yes - the auto wait time is catch up to the back-up. They aren't restrained in production (or are minimal).

Tech companies in the stock market are all taking a beating and laying off a bazillion workers in the past month. The pent up demand for this stuff that built up during the pandemic is ending (as people are spending their money elsewhere or more likely running through the money they saved while everything was shutdown)