My picture could have many connections to the Bank of Canada announcement today.Of course, as everyone knows, they stood 'pat' on rates. No increase, even though we know inflation is running at over 3%, we just cannot bring ourselves to even increase rates from 1 to 1.25%.
Would 0.25% make any difference? probably not. But it would at least send a very mild message that the B of C was not just all talk like that idiot Bernanke, but could actually inconvenience speculators a tiny little bit.
These low rates, are indeed like butter. Butter makes everything more tasty, even broccoli, but too much of it is bad for you.
These below-inflation rates are good for a pump, but long-term they completely distort the economy, as money flows away from prudent behaviour into risky speculative behaviour. Didn't they teach you that at Goldman Sachs Mr Carney?? That is the temple of speculation after all.
Think about it. He wants us to save. OK so we save $1000. So now you want to buy a GIC to at least keep up with inflation of 3% with a 30% tax rate.
So what do you do? Buy a seven year bond? I wouldn't advise it, because well before then we will be dealing with rampant inflation of maybe 7-8% a year, and 3% will look mild . However (Chad this one is for you) I think we have a year or two before we even start seeing that start to happen.
So you can spend it, buy property, throw it at the stock-market or...but why save it. The Bank of Canada is telling you that as a saver YOU have to bail out all the excess speculation. Meanwhile it will ask all the speculators, pretty please, pull your horns in..or we will..damn it we might just...stand pat!
