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Looser Money, Plummeting Loons and #BestThisWeek

The Bank of Canada threw us all a knuckleball this week when they announced a quarter point drop of their key overnight rate (on Wednesday). The rate is now at 3/4%, dropping a 1/4, and it seems the Bank assumes the economy needs even more stimulus.

The telling statement from their announcement is the final paragraph of their statement:

The oil price shock increases both downside risks to the inflation profile and financial stability risks. The Bank’s policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projection horizon.

Money RESP
Shrinking Money (never machine wash money)

This suggests that the very commodity-reliant, Canadian economy is going to take a hoof in the “lower abdomen” thanks to plummeting oil prices. Lower inflation, but higher unemployment seems to be on the event horizon.

The Canadian dollar continues to plummet, thanks to very low oil prices, which may slow down the cross-border shopping insanity that has been going on for a while. Maybe we shall see more of our American family dropping by in Canada this summer? Is this lower interest rate simply going to accelerate the drop of the Dollar’s value? Some experts feel this is going to cause a Canadian dollar back around the 70 cent level (compared to the US dollar), we shall see whether that comes to pass.

My Writings for Week Ending January 23rd

The cold of Ottawa in January constantly begs the question, why do we live here?

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Canadian Economy on the Edge, Frigid Temps and #BestThisWeek

It’s evident that the Canadian economy is on the verge of a major bust due to the sharp decline in the price of oil. The situation is dire, and there’s a high probability that it may plummet soon. Layoffs in Alberta are just the beginning of the ripple effects that will soon be felt across the country. The US economy could experience a surge due to the lower oil prices, leading to a significant divergence in the neighbouring economies’ trajectories. This scenario poses several challenges that need to be addressed urgently.

  • A quickly weakening Canadian Dollar means many imports are going to get very expensive (very quickly). The other side of that sword is Canadian exports (that are not commodity based) suddenly get cheaper (to the rest of the world).
  • American investments in your RRSPs will strengthen with the weakening dollar, but Canadian stocks may take a hit, due to the weakening economy.
  • Interest rates? Could go either way really, given imports will increase in price, but gas prices continuing to drop may offset.

Buckle up folks this is going to be a very rough (economic) ride ahead.

In Ottawa we have been having our standard bitter cold (not bitter cold like in Alert, but still cold), which means the Rideau Canal skateway is open, and driving is quite exciting with all of the black ice. Too bad it’s going to cost more to vacation down south this winter (again with the weakening Canadian Dollar).

Repeat Site note: If you feel so inclined my site now has a cert, so you can now read if you so choose. I am still knocking the kinks out of things, but it should work just fine for you.

My Writings for Week Ending January 16th

I turned 54 this week, life continues on, but I am 1 year closer to my retirement. Maybe (and more likely, maybe not):

Read More »Canadian Economy on the Edge, Frigid Temps and #BestThisWeek
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