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Bank of Canada - How a economic crisis can happen in Canada
Tue, 2016-12-27 16:20
#1
Bank of Canada - How a economic crisis can happen in Canada
Tue, 2016-12-27 16:27
#2
Just wacthed an interesting video on the Bank of Canada website discussing how a economic crisis can happen in Canada. It concludes that odds a low at the this time. This is something some of us discussed the chances of a crisis based on customer debt and overpriced homes. The bank of canada was nice enough to make a video on the subject. Scroll to the bottom of the page and video is there.
Wed, 2016-12-28 10:01
#3
As I mentioned elsewhere, we have no one to thank but the Bank of Canada for its continued negative interest rates, creating a culture of overwhelming indebtedness, which will all coming crashing down, when Central banks globally are forced to end quantitative easing of annually 2 trillion plus, not to mention bank bailouts as in the case of Deutsche and the Italian banks and with of course a market forced increasing interest rates, demonstrated by the ongoing collapse of the global bond markets....
Wed, 2016-12-28 11:03
#4
montrealer58
Canadian interest rates are not negative. But don't let that fact cloud your rhetoric.
Wed, 2016-12-28 11:20
#5
I disagree that this is all the fault of the Bank of Canada.
There are several problems in the economy that are unprecedented and past experience does not help much:
1) Policies of many developed countries have led to greater inequality
2) In the context of the first, work itself is an unaddressed issue. Technology offers humans the ability to do more work with less effort yet people are paid for their hours rather than the benefits of their work. As a result, there is less work while any additional efficiency is turned to capital profit rather than a benefit for the workers.
3) The environment no longer can sustain the status quo – never-mind growth. This means that policies that traditionally stimulated growth to get out of difficult economic periods are not viable or sustainable. As well any policies that are designed to protect the environment conflict with the growth model. A new model is needed but too many people are invested in the old and making too much money to leave it.
4) Demographic change may reduce the workers competing for jobs at one level but it also damages the present models of social policy and the economy. Demographic change also challenges the growth model which has not been replaced.
5) Globalization in the movement of people means that economic policy designed to address the needs of one community will be undermined by global forces. This explains the rise of nationalism and protectionist thinking. The world lacks any structures to make policy at the global level and as a result multinationals are filling the gaps to their benefit rather than the population of the world. Mass migration is coming due to environmental degradation. This will serve to create more negative cycles.
6) The growth model is the only lever the Bank really has access to and the fuel for this has been low interest money spent largely in real estate stimulating trades and consumerism. None of this is socially possible now both due to environmental limits (which have not only been met but surpassed) and a growth in inequality that makes it impossible for people to participate.
7) We are in a new energy crisis. The bulk of the energy we use is toxic to the planet. New technologies offer opportunities to move to it but inequality means that many cannot be part of that shift and those who can are overly invested in the previous technology. Put differently the energy problem is a social construct so severe that we are unable to benefit quickly enough from the change technology has made possible.
8) There is a conflict of interest in the population around interest rates and inflation. This is not new but it is aggravated by all the other issues here. Those with capital and no earning need high interest rates to get income from their money. Those without capital need access to it as they try to catch up. The reality is this is all linked to the failed growth model that no longer can sustain higher interest rates. This pits one generation and against another. Working people against capital owners who are sometimes wealthy and in the case of seniors sometimes not.
9) Laid over this is a complicated international trade context designed without respect for the value of people. This trade regime has eliminated tariff barriers in many cases leaving countries with currency values alone to mitigate the effects of globalization of capital. When interest rates go up the currency is in more demand and appreciates. This increases the cost of domestic product and services and decreases the cost of foreign product and services. With countries having given up any other powers to trade agreements, there are races to keep currencies low. Anything but low interest policies create export and employment difficulty.
10) The problem is seen as one of demand in markets but demand is not really the biggest problem. There are culturally supported unrealistic expectations in some segments of the population along with unsustainable deprivation in others. It is not unreasonable for a population to aspire to a home in a place where they can work and raise a family. Culture definitions of a need for too much space and consumption make this impossible for the entire population, however. Competition means that some will achieve overuse of resources while others lack fundamental basics. Policies are local but the competition is global so not only are the people who are struggling competing with people who are well off here but they are competing with the wealth flight from unstable economies. This can only lead to greater resentments as people who suck out the wealth of one country then spend it to maximize their lifestyle in another.
The Bank of Canada does not set the key policies that could be designed to fix any of this. It, and governments, have no working reference so they do not know what would work anyway. Both are designed by and for a political class that does not represent the population. They know that high interest did not work before and are less possible now in globalized economies without local mitigating powers so experiments with low interest remain one of the few tools. Other than that governments tinker with policies to stimulate jobs while trying to mitigate environmental damage and overheated real estate demand.
Many of the problems are global but there are no global powers other than those pushing in the wrong direction. Systems only work when the power is where it needs to be and without a conflicting interest.
Policies of growth must be curtailed globally, workweeks must be reduced to correspond with the amount of work required divided fairly among the people who need the work and resources must be directed to need rather than excess for some and privation for others.
In fairness if we expect the bank to fix this we are asking too much. Governments are refusing, their banks are unable. People are confused and you get things like the election of Trump as a result.
Wed, 2016-12-28 12:24
#6
who's going to reduce, divide and direct?
Wed, 2016-12-28 12:55
#7
Thanks Sean for your thoughtful analysis which demands a serious counter argument...when I have time...but my reference to the Central Banks is specific to their interest rate policy...which guarantees a trap for consumers who can borrow at negative interest rates to buy real estate and all financial assets, including of course the stock markets...this primarily is the cause of high real estate, huge debt and indebtedness in general...and which of course allows our government to not introduce policies to guarantee such as access to homes and education.....
and sorry Montrealer while the rate may be pegged at 0.50%...what about inflation, how about real inflation which may be 5% plus?
Wed, 2016-12-28 13:25
#8
montrealer58
0.5% is not a negative interest rate. No matter how you want to spin it.
Wed, 2016-12-28 17:58
#9
There are several problems in the economy that are unprecedented and past experience does not help much:......
....I suggest your lengthy article, yet with so much generalization and some dubious premises, at least forces one to clarify their ideas.......
I won`t go into specifics on so much I have problems with but focus on your main theme, the problem with the paradigm of growth as the essence.......
it is too general an idea...I agree that growthmust be curtailed, but the essential problem is that we are squandering the earth`s resources on so many parasitical agents...the banks and all the finance institutions in general, security forces, military forces and the entire industry of munitions fabrication....
and why these parasiticl agents? I suggest the answer lies in the process of globalization and overcentralization of the economies...
this is a problem with your article....it doesn`t provide specifics of solutions......
my suggestion offers the solution....a total revolution in the way we produce our needs, total decentralization of production and social organization...which will in itself eliminate so much pressure on growth...which is the vast system of transporttion...which must be reduced totally!
Thje focus must be not so much on growth per se but industrial hypercentralization and the parasitical agencies derived from this process
Wed, 2016-12-28 21:58
#10
0.5% is not a negative interest rate. No matter how you want to spin it.
Inflation is 1.2 to 1.5 % in Canada. The interest rate is 50 basis points or .50%.
But if you minus the the inflation rate 135 basis into interest 50 basis points.
050
-
135
you get a negative 85 basis points.
So when people speak negative interest rate they are referring to 50 basis positive set by the Bank of Canada or the inflation adjusted rate. I think that i1313 is referring to adjusted rate.
We are currently living in a situation that future economic historians will consider an outlayer situation. Generally the inflation adjusted rates should be positive. Interest rates should be higher than inflation because why should you purcahse a bond that plays less that inflation, your losing purchasing power. Why this happening is a more best guess answer than a solid answer, many people have answers but their explainations tainted by economic and political beliefs.
But negative interest rates or low positive rates have effects most people don't consider. An example ---- Many insurance companies and pensions funds are in a world of hurt. Generally both IN and PF will hold bonds are the basis of their asset mix, they invest in bonds because of the steady income and the guaranted positive cash generation because bonds are consider safe investments. These institutions use "bond lattering" strategy to manage their risk in portfolio when they buy bonds. They have a 20 year outlook, they will try to buy bonds in 1 year increments over 20 years. This means that a fictional portfolio that may look like this.
year 1 - bond yield average 700 basis with 5% of the wieghting in the bond portfolio.
y2-700
y3-700
y4-700
y5-600
y6-600
y7-600
y8-500
y9-500
y10-600
y11-400 crisis year 2008
y12-400
y13-350
y14-200
y15-150
y16-150
y17-150
y18-150
y19-150
y20-150
Now in year 21 the 700 basis point(from year 1) bonds mature and the company collects their booty and goes to the market and tries to go to the market and buy a bond 700 basis point bond to replace the matured bond. But the same quailty bond only yields 150 basis and they have to buy the bond to keep laddering their risk. Now another 10 more years of this of the IN and PF are deadmeat. Regardless their will be 10 year drought coming because they will be a gap of low yeild maturing bonds. This is important because IN and PF have many gaurantes that they will return 5 to 7 % to their clients. How are going a return of 6% when your bonds are maturing at 150 basis points. This a fictional portfolio but the laddering less than 20 years of more than 20 years exists too. The fundenmental problem is that IN and PF made commitments to their clients that are not going able to keep. This sitaution is much worse in Europe beacuse of lower interest rates.
Wed, 2016-12-28 22:06
#11
I disagree that this is all the fault of the Bank of Canada.
There are several problems in the economy that are unprecedented and past experience does not help much:
1) Policies of many developed countries have led to greater inequality
2) In the context of the first, work itself is an unaddressed issue. Technology offers humans the ability to do more work with less effort yet people are paid for their hours rather than the benefits of their work. As a result, there is less work while any additional efficiency is turned to capital profit rather than a benefit for the workers.
3) The environment no longer can sustain the status quo – never-mind growth. This means that policies that traditionally stimulated growth to get out of difficult economic periods are not viable or sustainable. As well any policies that are designed to protect the environment conflict with the growth model. A new model is needed but too many people are invested in the old and making too much money to leave it.
4) Demographic change may reduce the workers competing for jobs at one level but it also damages the present models of social policy and the economy. Demographic change also challenges the growth model which has not been replaced.
5) Globalization in the movement of people means that economic policy designed to address the needs of one community will be undermined by global forces. This explains the rise of nationalism and protectionist thinking. The world lacks any structures to make policy at the global level and as a result multinationals are filling the gaps to their benefit rather than the population of the world. Mass migration is coming due to environmental degradation. This will serve to create more negative cycles.
6) The growth model is the only lever the Bank really has access to and the fuel for this has been low interest money spent largely in real estate stimulating trades and consumerism. None of this is socially possible now both due to environmental limits (which have not only been met but surpassed) and a growth in inequality that makes it impossible for people to participate.
7) We are in a new energy crisis. The bulk of the energy we use is toxic to the planet. New technologies offer opportunities to move to it but inequality means that many cannot be part of that shift and those who can are overly invested in the previous technology. Put differently the energy problem is a social construct so severe that we are unable to benefit quickly enough from the change technology has made possible.
8) There is a conflict of interest in the population around interest rates and inflation. This is not new but it is aggravated by all the other issues here. Those with capital and no earning need high interest rates to get income from their money. Those without capital need access to it as they try to catch up. The reality is this is all linked to the failed growth model that no longer can sustain higher interest rates. This pits one generation and against another. Working people against capital owners who are sometimes wealthy and in the case of seniors sometimes not.
9) Laid over this is a complicated international trade context designed without respect for the value of people. This trade regime has eliminated tariff barriers in many cases leaving countries with currency values alone to mitigate the effects of globalization of capital. When interest rates go up the currency is in more demand and appreciates. This increases the cost of domestic product and services and decreases the cost of foreign product and services. With countries having given up any other powers to trade agreements, there are races to keep currencies low. Anything but low interest policies create export and employment difficulty.
10) The problem is seen as one of demand in markets but demand is not really the biggest problem. There are culturally supported unrealistic expectations in some segments of the population along with unsustainable deprivation in others. It is not unreasonable for a population to aspire to a home in a place where they can work and raise a family. Culture definitions of a need for too much space and consumption make this impossible for the entire population, however. Competition means that some will achieve overuse of resources while others lack fundamental basics. Policies are local but the competition is global so not only are the people who are struggling competing with people who are well off here but they are competing with the wealth flight from unstable economies. This can only lead to greater resentments as people who suck out the wealth of one country then spend it to maximize their lifestyle in another.
The Bank of Canada does not set the key policies that could be designed to fix any of this. It, and governments, have no working reference so they do not know what would work anyway. Both are designed by and for a political class that does not represent the population. They know that high interest did not work before and are less possible now in globalized economies without local mitigating powers so experiments with low interest remain one of the few tools. Other than that governments tinker with policies to stimulate jobs while trying to mitigate environmental damage and overheated real estate demand.
Many of the problems are global but there are no global powers other than those pushing in the wrong direction. Systems only work when the power is where it needs to be and without a conflicting interest.
Policies of growth must be curtailed globally, workweeks must be reduced to correspond with the amount of work required divided fairly among the people who need the work and resources must be directed to need rather than excess for some and privation for others.
In fairness if we expect the bank to fix this we are asking too much. Governments are refusing, their banks are unable. People are confused and you get things like the election of Trump as a result.
much to think about so I am going to think about a this list of issues.
Thu, 2016-12-29 09:42
#12
montrealer58
The bank of Canada rate of 0.5% is much lower than chartered bank interest rates for both borrowing and the dividend yield on bank shares which is between 3 to 5%. When you subtract the inflation rate, you still wind up with a real positive interest rate.
Thu, 2016-12-29 10:47
#13
The bank of Canada rate of 0.5% is much lower than chartered bank interest rates for both borrowing and the dividend yield on bank shares which is between 3 to 5%. When you subtract the inflation rate, you still wind up with a real positive interest rate.
yes, as maturity gets longer you bond yeilds go up. But i don't want nick pick but you mentioned the 0.5 rate so I used it as an example:)
As for banks, they get there money at maybe 2% probably cheaper, then lend at 3% for mortages, secured debt like home equity loan is a bit more, then unsured debt like line credit with no collerateral starts i think 7.5 if you have very very good credit. Then the bank get capital a 2% and sells loans with various premuims depending an preceived risk. The spread between what the banks pay for capital and rate they charge for loans is known as the "spread". This is the traditional fucntion of the bank and this were is main profit should come from. But most major banks sell equity, speculative in various asset classes, wealth management for the rich,etc to make a few more dollars in profit.
Old School Rule
What is the '3-6-3 Rule'
Slang used to refer to an "unofficial rule" under which the banking industry once operated, which alludes to it being noncompetitive and simplistic.
The 3-6-3 rule describes how bankers would give 3% interest on depositors' accounts, lend the depositors money at 6% interest and then be playing golf at 3pm. This alludes to how a bank's only form of business is lending out money at a higher rate than what it is paying out to its depositors.
http://www.investopedia.com/terms/1/3_6_3_rule.asp
Thu, 2016-12-29 17:06
#14
There are several problems in the economy that are unprecedented and past experience does not help much:......
....I suggest your lengthy article, yet with so much generalization and some dubious premises, at least forces one to clarify their ideas.......
I won`t go into specifics on so much I have problems with but focus on your main theme, the problem with the paradigm of growth as the essence.......
it is too general an idea...I agree that growthmust be curtailed, but the essential problem is that we are squandering the earth`s resources on so many parasitical agents...the banks and all the finance institutions in general, security forces, military forces and the entire industry of munitions fabrication....
and why these parasiticl agents? I suggest the answer lies in the process of globalization and overcentralization of the economies...
this is a problem with your article....it doesn`t provide specifics of solutions......
my suggestion offers the solution....a total revolution in the way we produce our needs, total decentralization of production and social organization...which will in itself eliminate so much pressure on growth...which is the vast system of transporttion...which must be reduced totally!
Thje focus must be not so much on growth per se but industrial hypercentralization and the parasitical agencies derived from this process
Let me be as polite as I can in describing why I cannot have any respect for your response.
You say I have generalizations. Yours is even more general -- objection without any new content other than a restating of one of the issues I raised.
Then you say that the idea of growth is too general. No, it is a problem and it is well-defended from many sources.
Then you say the problem is globalization and squandering of resources-- of course I can agree on that but I also say this squandering is part of the economic reliance on growth. The economy is considered only stable when it is growing -- even when resources, are more finite. Growth is created as an end in itself -- every country in this economic model aspires to growth -- even if what the economy is doing is not more useful or even sustainable. That model is broken.
Of course your post is a contradiction to your post that I was replying to: "As I mentioned elsewhere, we have no one to thank but the Bank of Canada for its continued negative interest rates" where you say the BoC is to blame -- the ONLY one to blame. Which is why I provided a list of factors.
You argue with me, contradict yourself and then admit that globalization is part of the problem (not just the Bank of Canada) -- like I say red and you say no, no, no you are wrong -- it is red!!! Or did you miss my point 5?
Specifically with point 5 countries gave up independent trade policy using tariffs. With that, they lose most levers to regulate demand for their currency. The only way to make you products competative is to reduce currency values when you cannot use tarrifs. The only tool left for that is interest rates. Low interest rates are a direct byproduct of trade deals that have taken away many national powers.
But you proclaim the ideas I thought out and listed as dubious and over general -- and then go no further than more or less agreeing to my point 5, contrradicting your original post and telling me you were too good to provide detail in the same breath as saying I did not provide enough, while being too long. That's a pretzel.
Then you go on -- after raising my point 5 -- again without any solutions of your own -- claiming that I did not provide solutions. I did not say I was -- I was reacting to a statement blaming one entitiy (BoC) saying there is more to it than that. I find it odd that you raise the standard of needing to offer solutions and you don't.
Of course on solutions my second-last and third-last paragraphs do attempt to speak to this even though it was not asked. They go further than anything you said. But I am not arguing that solutions are easy. In fact my point is that they are near impossible becuase the jurisdiction of the problem (global) does not have any power beyond the companies that did it. Local authorities (who you seem to think have the solution) have been stripped of their powers to provide their own solutions.
Now let's look at your paragraph where you say you offer a solution:
Total decentralization -- in other words let's undo what I described in 5. Well okay. Then you say this eliminates the pressure on growth. "which will in itself eliminate so much pressure on growth...which is the vast system of transporttion...which must be reduced totally!"
Good thing you did not commit to actually saying or explaining anything specific. We seem to agree (now) on the issue of centralization being a major problem except you are trying to say I did not raise it although I did. (Of course your original post just blames the Bank of Canada).
Then you end with this:
"Thje focus must be not so much on growth per se but industrial hypercentralization and the parasitical agencies derived from this process"
If you actually were forced to get into specifics you would see just how circular your argument is. It is the focus and competition for growth that instigated industrial centralization. When you say "this process" you don't connect that to anything but if you did one would think it would be back to growth -- bringing your argument around for another turn.
So: No, no no -- it is not about too much growth -- that is dubious -- I have trouble with it -- it is really the byproduct of (wait for it) growth.
I would have loved to engage with a response to these ideas -- and a challenge-- but based on some kind of content other than a restatement of just one of the issues I raised.
Yes that one is simplistic but it still is true -- when the space to grow is finite there are limits to growth. Of course it is not the only one I raised.
Thu, 2016-12-29 17:08
#15
who's going to reduce, divide and direct?
This is the problem isn't it.
In theory a population that sees itself heading to extinction. The problem is there is no authority to give the mandate to. The problem has globalized and the only thing else that has globalized is the trade deals to give companies the power over nations and even groups of naitons.
I was not being optimistic.
I was merely saying there is more to this than blaming the Bank of Canada.
Thu, 2016-12-29 17:19
#16
Thanks Sean for your thoughtful analysis which demands a serious counter argument...when I have time...but my reference to the Central Banks is specific to their interest rate policy...which guarantees a trap for consumers who can borrow at negative interest rates to buy real estate and all financial assets, including of course the stock markets...this primarily is the cause of high real estate, huge debt and indebtedness in general...and which of course allows our government to not introduce policies to guarantee such as access to homes and education.....
and sorry Montrealer while the rate may be pegged at 0.50%...what about inflation, how about real inflation which may be 5% plus?
You miss the point that the other tools -- than interest rates have been stripped away in global deals. You need to blame those deals for the pickle the Bank of Canada is in.
For the record -- this was predicted in 1988
Thu, 2016-12-29 17:25
#17
For those really interested in engaging the significant connections between the global finance system, growth, globalization, and the environment, here are a few other sources. Iryaste -- you will have to argue with a number of these people as well.
Pay specific attentio to those discussing banking, interest rates and globalization. Central banks are getting blamed but it is the sellouts who signded the trade deals that gave away the other national powers that have put these central banks in an impossible position. Blaming the banks alone is a waste of time.
Two books on that list I worked on as editor and I am very familiar with them. The rest of this list came from the recommended reading list of one of those.
I suggest a big picture view could be had by Life, Money and Illusion. The book is long. So you may want to start with the very short Planning for Seven Generations.
****
Atwood, Margaret. Payback: Debt and the Shadow Side of Wealth. House of Anansi Press, 2008.
Bacher, John. Petrotyranny. Dundurn Press, 2000.
Brown, Lester. Eco-Economy. W.W. Norton, 2001.
Brown, Peter G. The Commonwealth of Life: Economics For a Flourishing Earth. Black Rose Books, 2007.
Brown, Peter G. et Garver, Geoffrey. Right Relationship: Building a Whole Earth Economy. Berrett-Koehler Publishers, 2009.
Carey, Alex. Taking the Risk Out of Democracy: Corporate Propaganda versus Freedom and Liberty (History of Communication), University of Illinois Press, 1995.
Chossudovsky, Michael. The Globalization of Poverty. Zed Books, 1997.
Club of Rome. Limits to Growth. Universe Books, 1974.
Czech, Brian. Shoveling Fuel for a Runaway Train. University of California Press, 2000.
Dahrendorf, Ralf, et al. Report on Wealth Creation and Social Cohesion in a Free Society. The Commission on Wealth Creation and Social Cohesion, 1995.
Daly, Herman E. et Cobb, John B. Jr. For the Common Good. Beacon Press, 1989, éd. 1994.
Dillon, John. Turning the Tide: Confronting the Money Traders. Canadian Centre for Policy Alternatives, 1996.
Dominguez, Joe et Robin, Vicki. Your Money or Your Life. Penguin Books, 1992.
Douthwaite, Richard. The Growth Illusion: How Economic Growth Has Enriched the Few, Impoverished the Many and Endangered the Planet. New Society Publishers, 1999.
Douthwaite, Richard. The Ecology of Money. Green Books (for The Schumacher Society), 1999.
Douthwaite, Richard et Jopling, John (éditeurs). FEASTA Review: The Foundation for the Economics of Sustainability. FEASTA, 2001.
Durning, Alan Thein et Bauman, Yoram. Tax Shift. Northwest Environment Watch, 1998.
Fuller, Buckminster. World Resources Inventory: Human Trends and Needs (1965-1975).
George, Henry. Progress and Poverty: WhyThere Are Recessions and Poverty Amid Plenty — and What To Do About It! Robert Schalkenbach Foundation, 2006.
Greco, Thomas H., Jr. Money and Debt: A Solution to the Global Crisis. Publié à compte d’auteur, 1990.
Griffin, G. Edward. The Creature from Jekyll Island: A Second Look at the Federal Reserve. American Media, 1998.
Hamond, M. Jeff, et al. Tax Waste, Not Work. Redefining Progress, 1997.
Hardin, Garrett. The Ostrich Factor: Our Population Myopia. Oxford University Press, 1998.
Hawken, Paul. Natural Capitalism. Little, Brown, 1999.
Hawken, Paul, Lovins, Hunter et Lovins, Amory. The Ecology of Commerce: A Declaration of Sustainability. Harper Business, 1993.
Heilbroner, Robert L. The Making of Economic Society. Prentice-Hall, éd. 1985.
Heilbroner, Robert L. Twenty-First Century Capitalism. House of Anansi Press, 1993.
Henderson, Hazel. Beyond Globalization: Shaping a Sustainable Global Economy. Kumarian Press, 1999.
Henderson, Hazel et Sethi, Simran. Ethical Markets: Growing the Green Economy. Chelsea Green, 2006.
Homer-Dixon, Thomas. The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilisation. Souvenir Press, 2006.
Hunnicutt, Benjamin Kline. Work Without End. Temple University Press, 1998.
Jackobs, Michael. The Green Economy. University of BC Press, 1983.
Jacobs, Jane. The Nature of Economics. Random House Canada, 2000.
Kelly, Marjorie. The Divine Right of Capital. Berrett-Koehler, 2001.
Korten, David. When Corporations Rule the World. Berrett-Koehler & Kumarian Press, 1995.
Korten, David C. The Post-Corporate World: Life after Capitalism. Berrett-Koehler Publishers & Kumarian Press, 1995.
Krehm, William. Meltdown: Money, Debt and the Wealth of Nations. Comer Publications, 1999.
Lietaer, Bernard. The Future of Money. Century, 2001.
Lietaer, Bernard et Belgin, Stephen. Of Human Wealth: New Currencies for a New World. Human Wealth Books and Talks, 2003.
McDonough, William et Braungart, Michael. Cradle to Cradle: Remaking the Way We Make Things. North Point Press, 2002.
McMurtry, John. The Cancer Stage of Capitalism. Pluto Press, 1995.
Nickerson, Mike. Life, Money and Illusion. Bhakti Press, 1977.
Nickerson, Mike. Bakavi: Change the World I Want to Stay On. Bhakti Press, 1977.Nickerson, Mike. Planning for Seven Generations: Guideposts for a Sustainable Future. Voyageur Publishing, 1993.
Odum, Eugene. Fundamentals of Ecology, 3e édition. W.B. Saunders, 1971.
Papanek, Victor. Design for the Real World: Human Ecology and Social Change. Academy Chicago, 1985; 2e édition, 1999.
Roodman, David. The Natural Wealth of Nations. W.W. Norton & Co., 1998.
Rowbotham, Michael. Goodbye America! Globalization, Debt and the Dollar Empire. Jon Carpenter Publishing, 2000.
Schumacher, E.F. Small Is Beautiful: A Study of Economics as if People Mattered. Sphere Books, 1974.
Sheldrake, Rupert. Seven Experiments That Could Change the World. 1995.
Smith, Adam. The Theory of Moral Sentiments. Liberty Fund, 1759; éd. 1984.
Townson, Monica. Health and Wealth: How Social and Economic Factors Affect Our Well Being. The Canadian Centre for Policy Alternatives, 1999.
Victor, Peter. Managing Without Growth: Slower by Design, Not Disaster. Edward Elgar, 2008.
Vitousek, Peter, et al. “Human Appropriation of the Products of Photosynthesis,” BioScience, vol. 36, p. 368-373, 1996.
Waring, Marilyn. “Who’s Counting? Sex, Lies and Global Economics.” National Film Board, 1995.
Fri, 2017-05-19 22:52
#18
0.5% is not a negative interest rate. No matter how you want to spin it.
Inflation is 1.2 to 1.5 % in Canada. The interest rate is 50 basis points or .50%.
But if you minus the the inflation rate 135 basis into interest 50 basis points.
050
-
135
you get a negative 85 basis points.
So when people speak negative interest rate they are referring to 50 basis positive set by the Bank of Canada or the inflation adjusted rate. I think that i1313 is referring to adjusted rate.
We are currently living in a situation that future economic historians will consider an outlayer situation. Generally the inflation adjusted rates should be positive. Interest rates should be higher than inflation because why should you purcahse a bond that plays less that inflation, your losing purchasing power. Why this happening is a more best guess answer than a solid answer, many people have answers but their explainations tainted by economic and political beliefs.
But negative interest rates or low positive rates have effects most people don't consider. An example ---- Many insurance companies and pensions funds are in a world of hurt. Generally both IN and PF will hold bonds are the basis of their asset mix, they invest in bonds because of the steady income and the guaranted positive cash generation because bonds are consider safe investments. These institutions use "bond lattering" strategy to manage their risk in portfolio when they buy bonds. They have a 20 year outlook, they will try to buy bonds in 1 year increments over 20 years. This means that a fictional portfolio that may look like this.
year 1 - bond yield average 700 basis with 5% of the wieghting in the bond portfolio.
y2-700
y3-700
y4-700
y5-600
y6-600
y7-600
y8-500
y9-500
y10-600
y11-400 crisis year 2008
y12-400
y13-350
y14-200
y15-150
y16-150
y17-150
y18-150
y19-150
y20-150
Now in year 21 the 700 basis point(from year 1) bonds mature and the company collects their booty and goes to the market and tries to go to the market and buy a bond 700 basis point bond to replace the matured bond. But the same quailty bond only yields 150 basis and they have to buy the bond to keep laddering their risk. Now another 10 more years of this of the IN and PF are deadmeat. Regardless their will be 10 year drought coming because they will be a gap of low yeild maturing bonds. This is important because IN and PF have many gaurantes that they will return 5 to 7 % to their clients. How are going a return of 6% when your bonds are maturing at 150 basis points. This a fictional portfolio but the laddering less than 20 years of more than 20 years exists too. The fundenmental problem is that IN and PF made commitments to their clients that are not going able to keep. This sitaution is much worse in Europe beacuse of lower interest rates.
I brought back this issue in light of the following decision. This has huge implacations for potential retiress. If low interest continue then the position of pension funds to deteratoiate because 1)many old people retiring 2)not enough young people are the joining plan. 3 Bond returns are very low and potential laddering distaser continues. So the following news is not a surprise.
https://www.thestar.com/news/queenspark/2017/05/19/ontario-to-relax-solv...