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Bank of Canada increases overnight rate target to 1 per cent

bankofcanada.ca

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Re: Bank of Canada increases overnight rate target to 1 per cent

#81

Post by ericd »

scarhill wrote: post #32
SimbaOnSteroids wrote: post #14

Earlier quoted context omitted.

Why would any entity buy bonds that when matured will not have kept up remotely with inflation? Obviously I'm missing some key idea here, I just have no idea what it is.

Canada's consumer price index hasn't exceeded 4% since 1990 and has averaged 1.74% since then. So investors who are buying those bonds could reasonably see things differently than you do.

I don't get how that could possibly be true, given that the CAD has depreciated something like 30% in the past few years vs USD?

Re: Bank of Canada increases overnight rate target to 1 per cent

#82

Post by lurker456 »

SilasX wrote: post #63
rjtavares wrote: post #38

Earlier quoted context omitted.

When you're talking about billions: If you hold it physically, you have to store it and secure it, which costs money. If you deposit it in a commercial bank, it'll be less safe than German bonds.

Wait, what? Isn't most money electronic anyway? How does it cost (O(n)) money to keep an entry in a digital record?

The odds of a commercial bank going bust is higher then Germany going bust. Commercial banks only need to keep a few % of the money deposited at them on their books (its called fractional reserve banking), the other 95% or so can be invested or lent out elsewhere. There are regulations that restrict the risk, require hedging, insurance, etc but those don't help much if the insurer or a significant amount of the borrowers go bust as well due to systemic problems.

Re: Bank of Canada increases overnight rate target to 1 per cent

#83

Post by School-Cotton »

astrodust wrote: post #34
X86BSD wrote: post #22

Earlier quoted context omitted.

Like gold and silver?

Those aren't as valuable in a crisis as you might think. Pure gold and junk gold are largely interchangeable. If you want to be ready for some societal meltdown, load up on junk gold. A small gold ring is easier to barter with than a gold brick.

I bet drugs, canned food, and weapons/ammo are an even better thing to stock up on if you want to be ready for a TRUE meltdown, where civilization descends into total anarchy/lawlessness.

But there is a pretty wide spectrum between that and what we have now. Gold is a hedge against something like what happened to Yugoslavia, even if it's not a good hedge against the apocalypse.

Re: Bank of Canada increases overnight rate target to 1 per cent

#84

Post by ericd »

astrodust wrote: post #34
X86BSD wrote: post #22

Earlier quoted context omitted.

Like gold and silver?

Those aren't as valuable in a crisis as you might think. Pure gold and junk gold are largely interchangeable. If you want to be ready for some societal meltdown, load up on junk gold. A small gold ring is easier to barter with than a gold brick.

You can buy much smaller denominations too. There's something called the combibar which is a bar with a bunch of scored 1 gram pieces that you can snap off, like a chocolate bar.

That said, I agree that gold is probably not that useful in a collapse.

Re: Bank of Canada increases overnight rate target to 1 per cent

#85

Post by nickik »

dmix wrote: post #43

The commonwealth countries are all facing a property bubble (Canada, New Zealand, Australia, etc). The household debt levels and property prices didn't taper off nearly as much following the 2008 US housing crisis and has pretty much continued unabated: http://www.huffingtonpost.ca/stephen-punwasi/real-estate-bub... Which is fascinating to consider that the Bank of Canada, et al, have let this happen for so long and…

I'm sorry but you seem to have no idea about the what and why of montary policy.

A central bank has to conduct montary policy for the economy as a hole. Attempts by central banks to 'clamp down' on bubbles have generally been catastrophic.

Also the low interest rates are simply not just 'artefically low' because of central banks. The montary effect of the interest a central bank sets is determained by the difference to the natural rate.

Propery bubbles or any other bubbles by themselfs don't relay cause much problems beyond the markets in question if montary policy stays on target.

Aditionally the idea that all these things are bubbles is quite suspect in a lot of places there is real demand for property.

Contracting montary policy in order to fight a property bubble would lead to the hole economy going into a recession.

The last time the 'fighting bubble theory' was really popular was in 1929. I'm not saying that was the only reason for the Great Depression, but its one of the major reasons.

Re: Bank of Canada increases overnight rate target to 1 per cent

#86

Post by icebraining »

devrandomguy wrote: post #42
ethbro wrote: post #27

Earlier quoted context omitted.

Because you need somewhere to park $xxB. What are your other options?

Build nation-scale infrastructure? Surely a major bank would benefit greatly, if indirectly, from any improvements in the national economy.

Right, George Parker.

Re: Bank of Canada increases overnight rate target to 1 per cent

#87

Post by myth_drannon »

tostitos1979 wrote: post #74
myth_drannon wrote: post #61

Earlier quoted context omitted.

They are. You can check the prices by categories. Detached houses -20%, condos are still holding up. Houses went from 960K to 720K since April

Sorry. Your info doesn't match the same reality I live in. As the parent said, sales went down (don't know about mix). Prices for detached homes have not. We were seriously putting offers in March and got outbid for INSANE sums. e.g. 720K offer in Milton .. property went for 100K over. In Mississauga, homes listed for 850K went for 950K-1million. I am looking at data now and it has slowed but not gone down yet.

Sorry my mistake, that was the average sale across all categories. According to https://beta.theglobeandmail.com/real-estate/toronto/toronto...

"From the market's peak in April this year, the average price for detached homes in the GTA has fallen 19.6 per cent to $968,494 in August from $1,205,262 in April, bringing the average detached home price back below $1,000,000 in the region."

From 1.2mil to 1mil in five months

Re: Bank of Canada increases overnight rate target to 1 per cent

#88

Post by SilasX »

lurker456 wrote: post #82
SilasX wrote: post #63

Earlier quoted context omitted.

Wait, what? Isn't most money electronic anyway? How does it cost (O(n)) money to keep an entry in a digital record?

The odds of a commercial bank going bust is higher then Germany going bust. Commercial banks only need to keep a few % of the money deposited at them on their books (its called fractional reserve banking), the other 95% or so can be invested or lent out elsewhere. There are regulations that restrict the risk, require hedging, insurance, etc but those don't help much if the insurer or a significant amount of the borro…

Banks are allowed to loan out the money, but they don't have to, and could take business from the negative-yielding government bonds by just leaving the money alone, in their electronic reserve account.

Re: Bank of Canada increases overnight rate target to 1 per cent

#90

Post by devrandomguy »

icebraining wrote: post #86
devrandomguy wrote: post #42

Earlier quoted context omitted.

Build nation-scale infrastructure? Surely a major bank would benefit greatly, if indirectly, from any improvements in the national economy.

Right, George Parker.

Who is George Parker?
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