*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Slava]

Lol, David Rosenberg. Is he still predicting a depression or has he dialled back to just a recession? I always wonder how these guys stay in business.
Eventually we'll have another recession. I guess if Rosenberg predicts it every month, he's eventually accurate?

[bizaro86]

Originally Posted by Slava

Lol, David Rosenberg. Is he still predicting a depression or has he dialled back to just a recession? I always wonder how these guys stay in business.
Eventually we'll have another recession. I guess if Rosenberg predicts it every month, he's eventually accurate?

You've got to remember, he isn't in the business of making accurate predictions, he's in the business of making saleable predictions.

Nobody would hire his consulting firm if he said "most likely the market will be up 6-9% this year".

[The Fisher Account]

Peter Zeihan has argued that we are in for a decade of high interest rates. He's attributed this to Boomers all entering retirement in the first half of the 2020's and their retirement portfolio's shifting to more stable investments and out of equities.

He argues that this massive capital flight will tighten lending markets for at least a decade until the Boomers' kids (the millennials) start to enter into their peak earning years and huge swaths of capital return and depress lending rates.

Does this make sense?

[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.

[bizaro86]

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.

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.

https://www.theglobeandmail.com/opin...as-prosperity/

[Azure]

Originally Posted by Bill Bumface

Remember that whole Modern Monetary thing that says when this happens after you've been printing money like crazy, to raise taxes?

It's a seriously easy and effective lever to take money out of the economy. Such a shame they're too afraid to touch it.

Raise taxes, promise to throw it in the Heritage Fund or something (ha!). Done.

Especially corporate taxes.

Corporate profits are high.

Raise corporate taxes.

[The Fonz]

Canada CPI release coming tomorrow. Forecast to come in @ 3.4%.

Last year has been:

May 4.4%
April 4.3%
March 5.2%
February 5.9%
January 6.3%
December 6.8%
November 6.9%
October 6.9%
September 7.0%
August 7.6%
July 8.1% (peak)

[Slava]

The release was as expected. Also, the largest contributor is mortgage interest...alas the rate increases are pushing inflation higher at this point.

[you&me]

Originally Posted by Slava

The release was as expected. Also, the largest contributor is mortgage interest...alas the rate increases are pushing inflation higher at this point.

Surely when looking at inflation rates and deciding on a next move, the BoC will take that into consideration... right?

[blankall]

The prices of oil is also down 40%, from a year ago... The price of gas is not down though.

[calgarygeologist]

Originally Posted by you&me

Surely when looking at inflation rates and deciding on a next move, the BoC will take that into consideration... right?

Based on the articles I've read this morning it seems like many experts believe that the BoC will go ahead with another 25bps increase next month.

[Yoho]

Good thread on it.

https://twitter.com/user/status/1673680334183968768

[Slava]

Originally Posted by calgarygeologist

Based on the articles I've read this morning it seems like many experts believe that the BoC will go ahead with another 25bps increase next month.

Well there are two more data points to come before their next meeting on July 12. Jobs and GDP. I would think that this is in line with expectations, and moving in the right direction so it should help them consider not raising. At the same time though, if those items come in hot, the raise is still on the table.

[Sliver]

I swear I took econ in university, but I honestly don't understand how this #### works. Anybody have a very basic explanation of what all this means?

Interest rates go up. People spend less, I assume? Then what? I don't get any of it, TBH.

[nik-]

Originally Posted by blankall

The prices of oil is also down 40%, from a year ago... The price of gas is not down though.

The price of gas is absolutely down. It's a good 40 cents cheaper a litre.

[Jason14h]

Originally Posted by Sliver

I swear I took econ in university, but I honestly don't understand how this #### works. Anybody have a very basic explanation of what all this means?

Interest rates go up. People spend less, I assume? Then what? I don't get any of it, TBH.

Borrow less so less money into the system as well

In theory

[GGG]

Originally Posted by Slava

The release was as expected. Also, the largest contributor is mortgage interest...alas the rate increases are pushing inflation higher at this point.

Those affects though will predictably decline as the delta between todays rate and last years rate drops.

It’s also sort of a good area for inflation to be occurring in as that money is directly not completing for consumer goods and services which means reducing demand which reduces growth which reduces wage pressures which is the goal of these changes.

It’s almost a measure of success.

I don’t know what happens in the world of the banks though when the banks get this excess money. I suppose it flows back to Bond Holders which then makes its way back into the economy?? So maybe then that component is relatively neutral and it’s just making money more expensive slows growth.

[Torture]

Originally Posted by The Fisher Account

Peter Zeihan has argued that we are in for a decade of high interest rates. He's attributed this to Boomers all entering retirement in the first half of the 2020's and their retirement portfolio's shifting to more stable investments and out of equities.

He argues that this massive capital flight will tighten lending markets for at least a decade until the Boomers' kids (the millennials) start to enter into their peak earning years and huge swaths of capital return and depress lending rates.

Does this make sense?

Aren't boomers' kids already in their peak earning years or pretty close to it? Millennials are old and have kids nowadays.

[bizaro86]

Originally Posted by GGG

Those affects though will predictably decline as the delta between todays rate and last years rate drops.

It’s also sort of a good area for inflation to be occurring in as that money is directly not completing for consumer goods and services which means reducing demand which reduces growth which reduces wage pressures which is the goal of these changes.

It’s almost a measure of success.

I don’t know what happens in the world of the banks though when the banks get this excess money. I suppose it flows back to Bond Holders which then makes its way back into the economy?? So maybe then that component is relatively neutral and it’s just making money more expensive slows growth.

Higher returns on capital transfer money from poor people to rich people. Rich people save a much higher percentage of their income than poor people. That reduces consumption/demand a little bit, but mostly it's just making money more expensive slows growth because you get less borrowing for consumption/investments.

[blankall]

Originally Posted by Sliver

I swear I took econ in university, but I honestly don't understand how this #### works. Anybody have a very basic explanation of what all this means?

Interest rates go up. People spend less, I assume? Then what? I don't get any of it, TBH.

Main issue is controlling money supply. With interest rates up, there's less money in the system as people can borrow less. Theoretically, that should cut down on the amount of money people can throw at any single good or service, which should hamper inflation.

Interest rates aren't the only thing that drives inflation though.

IMO, Canadian inflation is no longer about borrowing. Increased fuel prices, supply chain issues, property investors, lack of housing supply, increased population, etc... are all bigger drivers of inflation now.