Originally Posted by 4444
if i may, here's a thought on interest rates going up.
i was always thinking they'll go up in step with the US.
The US is slowly, but surely recovering. The fed is committed to tapering. QE is ending, and after that ends, the next tick is for interest rates to go up. If people don't understand the tools used in QE/at the disposal of the fed, i strongly recommend you learning, it's really important to know how the economy works.
i figured canada would follow suit, but then, over the last year, as commodities tanked (this trend won't change for a long time now - lower commodity prices are probably here to stay, relative to 2010-2012 levels)... unfortunately, outside of commodities and real estate, canada has become a service economy - our manufacturing is gone, dead, never to return, all thanks to terrible policy decisions that created an at par US/Cdn $.
with a strong currency (partially drive by demand for our commodities), manufcaturers were killed, as most manufactured product goes to the US, however many inputs are in US $ - hopefully you can get why manufacturing either went to asia, or to a degree, south - the currency risk was just that, too much risk.
the average idiot loved a US/Cdn dollar at par, they can go shopping for cheaper, however, now we are returning to normal life, US/Cdn quickly up to 1.12, likely up to 1.20-1.30 long term (potentially more if the cdn economy is as ugly as i think it is), and the reason is, is lack of demand for Cdn currency.
Canada cannot raise rates, if they did, it would kill an already stagnant economy (higher rates decrease economic activity), but on the other hand, low rates are keeping a bloated real estate market bloated... but we know the market already knows that canada can't raise rates, as reflected by the quick rise to 1.12 in the US/Cdn - the market knows the US will decrease liquidity and raise rates, but that canada, if anything, will have to start stimulating the economy with funds / no raised rates (they can't really cut much more).
so, with that, i don't think we'll see a net decrease in liquidity until beyond 2015 in canada - it's already begun in the US.
how people can be so confident in housing is beyond me - but what this will do is keep housing bloated a little longer, not seeing prices rise, but not seeing an 'event' to burst the bubble.
also just know there's another problem coming to canada. as the dollar weakens more and more, inputs increase in price - things will get more expensive (fuel, goods, etc) - inflation - but with the economy stagnant, pay won't keep up with inflation, so you will get poorer in real terms.
this is one of the worst situations to be in. there's a reason flaherty just left - he's not stupid and sees writing on the wall.
of course, this is an overall view, some people will make loads of money in this time, some people will grow their career hugely, but in general terms, the economic conditions in canada are quite poor and fraught with risk.
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