By André Faust (July 12, 2018)
Today in a press release the Bank of Canada has announced that it Is increasing lending rates to 1.5% to the retail banks. (“Bank of Canada raises overnight rate target to 1 ½ percent”, 2018). So what does that mean for the average Joe/Jane on the streets, well it means that if you are taking out a loan or credit today your interest payment will increase by 1.5 % and if you add it to compound interest then that number becomes significant.
Before going on, let’s turn the pages back and look at the role of the Bank of Canada before I get into today’s announcement.
Let’s go back to 1938 to the year 1974, Canada was borrowing from itself at interest-free loans, which allowed Canada to be very prosperous. So as a result of these loans Canada developed quite substantially, with the money created being used to build highways such as the McDonald-Cartier freeway, public transportation systems, subway lines, airports, the St. Lawrence Seaway, funding the universal healthcare system, and the Canadian Pension Plan and so on.
In 1973 Trudeau’s government decided to stop borrowing from the Bank of Canada at interest-free to the retail commercial banks who charge interests. Here is where it gets crazy because of it the Bank of Canada who sets the interest rates. How rational is that?
After Canada started to borrow from the commercial banks is when we see Canada’s debt load increase to where it is at today.
Obviously, Trudeau did not follow the wisdom of Mackenzie King himself who had once said,
“ Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of sovereignty of parliament and of democracy is idle and futile.
So here we are at today’s announcement, basically, the Bank of Canada said it would increase the interest by 1.5 % which means that the Federal, Provincial and municipal government will now even pay more interest on interest. For Canadians especially those seniors on Fixed income and if their mortgage is up for renewal there is a likely hood that they will not be able to pay the new rates, and lose their home to the banks.
Both Trudeau and Gallant inject a considerable amount of money into the economy which did stimulate economic growth people had more money so they were spending more.
This interests increase is going to remove money and buying power from the people which we should see all of the efforts to strengthen our economy go down the toilet bowl. It is expecting that the bank of Canada will have another rate increase in September.
The only winners in this are the banks. Let follow Mackenzie king approaches to economics where the country, the provinces and the manipulates don’t pay interests on interest but pay the Bank of Canada like the old day’s interest-free.
Bank of Canada raises overnight rate target to 1 ½ per cent. (2018). Retrieved from https://www.bankofcanada.ca/2018/07/fad-press-release-2018-07-11/
Household debt-to-income ratio edges lower: Canadians now owe $1.70 for every $1 earned. (2018). Retrieved from https://business.financialpost.com/news/economy/statistics-canada-reports-household-debt-to-income-ratio-edges-lower
Prudent Press | The History of the Bank of Canada. (2018). Retrieved from http://prudentpress.com/finance/history-bank-of-canada/
Remember when: What have we learned from the 1980s and that 21% interest rate?. (2018). Retrieved from https://www.theglobeandmail.com/real-estate/the-market/remember-when-what-have-we-learned-from-80s-interest-rates/article24398735/
Trade tensions the ‘biggest issue’ on the horizon as Bank of Canada hikes interest rate | CBC News. (2018). Retrieved from https://www.cbc.ca/news/business/bank-of-canada-rate-decision-1.4742063