BANK OF CANADA INTEREST RATE INCREASE
(JULY 2017)

 

“What is good for Canadian business is good for the Canadian public,” seems to be the mantra of Canada’s Central Bank executives. But they appear to misread the fact that their inflation-fighting rate increase strategy will have little to do with consumer spending as most family budgets are consumed by price increases in necessities and not discretionary goods and services.

Banking Sector

Obviously, the big winners of higher national interest rates will be the banks. As businessmen they feel, regardless of the social cost, it entitles them to raise their rates and incomes on mortgages, commercial loans, credit card balances and car loans. It will also empower all the other oligopolies across our industrial and consumer goods sectors to raise their prices again as their capital costs rise.

It appears that the past relatively stable cost of borrowing has done a lot to keep Canada’s GDP on a relatively modest growth rate, which one should consider a wise and prudent policy. In fact, a .25% increase will slow nothing down, even though it will amount to almost a 10% increase in interest payments and possibly a 15-20% decrease in principal payments on a large portion of Canada’s mortgage portfolio. With housing comprising one of the most significant components of Canada’s GDP, this interest cost increase braking affect will be like locking all four wheels and could put our housing markets into a tail spin. And for what possible purpose? Banks will add to their bottom lines and home owners will accrue less home equity.

Home Equity

If Canada is going to swerve away from a gigantic increase in elderly care costs during the next 15 years, baby boomers and their siblings need to grow their home equity and net worth as fast as possible. Low interest rates are indeed the best way to accomplish this because wages are meagrely managed, essential goods and services have incurred huge inflationary price increases and foreign controlled oligopolies fix prices on an hourly basis. Families and mature citizens will be hurt the most from this arbitrary meddling and experimenting with interest rates.

In spite of the mass media’s pronouncements to the contrary, the large house price increases in our major cities has nothing to do with interest rates. As Canada develops global cities, where most residents rent their houses as densities escalate, people with adequate cash flows will do their best to purchase these increasingly valuable income-generating housing units. Small interest rate changes will have minimal impact on this present transition phase for our cities.

$CDN Value

The recent rise in value of the Canadian dollar is likely influenced by American currency speculators who have finally accepted that oil prices aren’t a huge factor in Canada’s currency value. Also, they speculate that Canadians will pay more for $CDN denominated loans in the future, thus demand for $CDN’s by gigantic investment and sovereign wealth funds will nominally increase.

The egregious 35% discount in value of Canadian goods and services imposed by their capitalist mentality of Wall Street speculators has been no different than the imperialist domination of colonial possessions of the 19th century. The ultimate affect in Canada has been a large increase in family debts as prices of everything, (even Canadian goods) have been adjusted to $USA equivalents. This has produced an across the board 35% inflation of Canadian prices for everything.

Canadians should be rightfully annoyed by this financial exploitation by the Americans who regularly discount our dollar and monetize their debts every time they mismanage their own economy. This is the slavish position we are in, having sold out over 60% of our industry to American foreign owners during the past 150 years.

$CDN Capital Development

Canadians have never understood how to create our own capital and finance our own expansion. By allowing massive public service growth, financed by expansion of taxation, we have denied real capital growth within Canadian self-employed families in favour of foreign owned wage slavery. By using mostly foreign borrowed capital to develop our industries, we have never nurtured our economic autonomy. Nowadays the Canadian paradigm of American financial control, is almost complete as foreign oligopolistic control over most business sectors has almost wiped out real competition.

American Monetary Imperialism

Canadians should see this interest rate increase as another knee-jerk reaction to American monetary imperialism. It is time now to move out of our exploited comfort zone and form strong new alliances with our economic and moral/ ethical equals around the globe. We mustn’t blame our American brothers for our present circumstances, for they are huge and have great needs and will negotiate the best deals for themselves. However, we need to empower our middle classes to create a new more autonomous economy that will gradually regain market share from the oligopolies.

Canadian 100 Year Vision

Hopefully, this interest rate increase, or at least the next one, will awaken Canadians to our monetary, economic and financial realities. Our future should not be one of financial slavery, but one of financial autonomy. Our future doesn’t mean we have to “Throw out the baby with the dirty bath water”. We don’t have to make drastic cuts to any existing programmes or policies. But we do need to define our new Vision and the gradual steps and transitions we need to get there. Canadians need to stop battling change and instead embrace the changes that will balance our family finances and stimulate our cultural development.

May GOD bless Canada.

Jim Reid Founder: CFP- Canadian Federalist Party