Canadian Personal Finance Blog

As usual on the day that the Bank of Canada is about to announce an interest rate change, I typically wait until that is announced, but today, I’ll simply “flash” that information when it is available at 9:00 AM ET. 

The prognosticators are saying this is most likely another 1/2 point drop, however, whether the large banks follow suit or reflect the entire 1/2 point drop, is another story completely, as we have seen, some banks are attempting to help their margins by expanding the working area for their borrowed moneys (Toronto Dominion for one).

Bank Rate Since 2000?

Here is an interesting graph, using the data from the Bank of Canada’s web site. It shows the key overnight rates over the past 8 years, interesting to see how low rates have been and yet still there is problems with high interest rates causing folks to have problems with their debt loads?

The graph is missing the last 1/2 point drop that happened earlier this month (apologies for the inaccuracy, I am just figuring out how to do this stuff on the web).

Bank of Canada Overnight Rates since 2000

Deflation?

Now that Gasoline prices have dropped by about 30% in Ottawa, here is an interesting question, are we now in a deflationary period? Will all the surtaxes and rate increases levied because of high gasoline prices be lowered now? Will I ever answer these rhetorical questions? Anyone care to comment?

Being Saturday we can look back on this past week and see a few of the burning issues that have bubbled out of the Financial Cauldron:

• A recovery may be on the horizon for equities, but this is only good news if you were out of the market, if you stayed in, this just means you might get some value back.
• Much talk of doom and gloom in terms of jobs and lay offs coming in all industries.
• Governments at all levels in Canada talking about deficit financing again, and how the downturn may force governments to start running deficit budgets.
• The RBC brain trust commenting that there most likely will be another 1/2 point interest rate drop next week from the Bank of Canada. Can we reach a negative interest position?
• An interesting posting talking about how only 45% of Canadians are thinking of getting TFSA accounts in the new year.
• Mutual Fund redemption at almost a “run” rate with funds being sold off at a very high rate.
• The Canadian Loonie which was at $1.10 in the early spring is now down to 84 cents to the American Greenback, due to commodity price drops.

On the positive side of things, lower interest rates is always a good thing if you are a debtor like me. Lower gas prices are very good (in Ottawa below 95 cents a liter has been seen), but what will this do to the consumer price index? Will we have a negative CPI soon? Deflation coming?

All interesting questions to think about in the coming week.

We most definitely live in very interesting times, and they are getting more and more interesting every day. With the U.S. government’s bail out plans going on hold and the markets not appreciating that (if you view a 700 point drop as “negative feedback”), I think we are most assuredly living in very interesting times.

Eerily Similar Commentaries

Now, I am not saying that this is time to panic, but I remember in 2000 when folks started wondering at Nortel whether the company could actually “collapse” from it’s $120 per share stock price I heard statements like:

• The government wouldn’t let it happen, it would kill the TSX and the Canadian Economy.
• If Nortel goes down, a lot of people are going to be hurting
• Nortel’s fundamentals are sound

Have you heard those same statements about the U.S. financial system? No, I am not saying this is in any way similar, I am merely pointing out that no one knows where this is going to go, and what the final fall out might be.

OMG I Almost PMP’ed

OK, that’s for my younger readers, for my reaction when I heard the Congress didn’t pass the “bail out” bill.  Speaking as someone with no income now, I am curious to see what happens, because if this causes an American recession or worse depression (anything is possible, I am not saying this is going to happen, simply I hope it doesn’t), finding a job in Canada is going to get a lot more interesting.

Is it time to buy in to equities? Don’t ask me! You should buy when you think the bottom has been hit, but I have no idea what “bottom” is any more.

By the Way Oil is Below $100 a Barrel

Remember two weeks ago when we were worried about Oil prices? Oil is below $100 a barrel, but I guess it’s kind of hard to notice that the hurricane is over if your house is on fire.

Now is the time to Panic?

No, but watching the financial pundits is more interesting than listening to the Election pundits, that is for sure.  In Canada Jack Layton is portraying the NDP as the official opposition to the Tories, if that happened, I would truly agree that we are living in interesting times, and the Devil is going to put in central heating, because it really is getting cold in hell.