“With economic recovery still looking shaky, the next move by the Bank of Canada may be to just start printing money. The price can be high. Devaluation of the loonie and run-away inflation down the road. But with economies running on empty, central bankers are inclined to focus more on solving the mess at hand than theoretical messes of the future.” — Canadian Press
The bank of Canada is forcing deflation by raising interest rates in an environment where:
1) The Canadian dollar is at record highs which is terrible for their trade balance and manufacturing. Their dollar should be around 75c according to economies of scale.
2) While the Canadian dollar is artificially kept high, prices for food and other goods have not dropped accordingly. Just look at the Big Mac index for proof.
3) Pressure from inflation is only existing in commodities like oil and gold which most canadians don’t produce and barely reap any reward from (multinational corporations do)
Again, why is the bank of Canada raising interest rates when the effect is deflation, a high canadian dollar, imbalanced trade, and stiffer competition from manufacturers? The reason the government is allowing the rates to go higher and higher is because the low rates were nothing more then punishment to those who saved money and it allowed those who were bad at money to then get more credit that they should not have gotten.
If you look at how all this economy of the globe got into the mess , you will see that we need to once again get back to fair value for saved money and reasonable credit and until we do that we are just fooling those who think they can get one over on the real facts of life. Prudent people would fully support raising the bank rates and would rather they [BoC] do so in full percentage points rather than the 1/4 point raise they are now doing. When they get back to where I can get my 6% on my money people can then again think about a better retirement [Baby Boomers anyway!], but at rates of 3% and locked in for 5 years to get that is just insane.
Are they trying to kill the economy on purpose?
Prudent advice would be to print the money needed to drop the Canadian dollar to 75c and use the extra cash to stimulate real sustainable growth and infrastructure in Canada. But then that would make too much sense for our government/banks. Where’s the profit in that?