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Interest Rates - 2021 -
February 14, 2021
8:17 am
canadian.100
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For those of you who read the Wall Street Journal, you probably noted:

........"The Federal Reserve has pushed down long-term interest rates by buying bonds and committed to keep short-term interest rates at near zero through 2023."

So the outlook appears for interest rates to keep reducing and stay low (perhaps even to 0). Those who prefer GICs might want to lock in now. Would not think that interest rates are likely (IMO) to get any better for years! 2023?

February 14, 2021
9:19 am
Doug
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2023? Try 2030. sf-cool

Give or take a few years.

Cheers,
Doug

February 14, 2021
9:36 am
Dean
Valhalla Mountains, British Columbia
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.
Given that the world will Still be dealing with the COVID's (four and counting), well into next year (2022), I see 2023 as the 'Earliest' that things will start to turn around ... IMHO.

      Dean

sf-cool " Live Long And Prosper " sf-cool

February 14, 2021
9:38 am
topgun
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We have no way of knowing where interest rates will be in the coming months. The most important thing is today. I have a friend that has large short term GIC. It may be a ridiculous low rate. He is doing fine.

Have a Great Day

February 14, 2021
10:27 am
Bill
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I see ultra-low rates continuing for the forseeable future. Either that, or else the constant, chronic money-printing turbocharges inflation so rates go way up. Or maybe something in between. It's all guesses.

No matter, there are always certain asset classes or industry sectors that benefit from either scenario.

February 14, 2021
12:28 pm
canadian.100
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Bill said

No matter, there are always certain asset classes or industry sectors that benefit from either scenario.  

In many Canadian cities house / real estate prices really shot up during 2019 and accelerated right through 2020 - thanks to low and lower interest rates. New infill projects are all over the place - good for the trades and retail furnishings.
On the other hand, the travel industry is kaput!

February 14, 2021
2:14 pm
Alexandre
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canadian.100 said

In many Canadian cities house / real estate prices really shot up during 2019 and accelerated right through 2020 - thanks to low and lower interest rates. New infill projects are all over the place - good for the trades and retail furnishings.

Good for property tax collectors. You own the same house, you pay more in taxes.

February 16, 2021
8:04 am
canadian.100
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Scotiabank is offering a Special Limited Time offer for Lunar New Year.

I am advised today - The special rate is 0.78% p.a. for 388-Day GIC.

I am not interested, but several of you may be.

February 16, 2021
8:22 am
Dean
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canadian.100 said

Scotiabank is offering a Special Limited Time offer for Lunar New Year.

I am advised today - The special rate is 0.78% p.a. for 388-Day GIC.

I am not interested, but several of you may be.  

That rate is Unusually High for a Big Bank, these days ❗

But like you, I'm not interested either. Especially when we still have access
to these rates https://www.highinterestsavings.ca/gic-rates/

    Dean

sf-cool " Live Long And Prosper " sf-cool

February 16, 2021
10:08 am
topgun
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My response to many special rates. "I have no money". Another way of saying this. "I am not interested". I have NEVER bought a GIC from the big banks in my lifetime. I started buying GIC's from trust companies in the 1970's. Their rates were better than the big banks.

Have a Great Day

February 16, 2021
10:33 am
davidgeorge
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Luckily, I purchased a new house in June 2019, and the closing date is next month. I planned to sell my old house when I purchased the new one. As the housing market is so hot and interest rates are so low (for both savings/GIC and mortgage), I decided to keep my old house as a rental property. Therefore, my money goes to real estate, not savings/GIC or any other investment accounts.

February 16, 2021
10:51 am
RetirEd
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I don't ignore GIC offerings from big banks; though there have been none I cared for in the last five years, I fondly remember a 5-year at 3% from Scotia that beat everyone else at the time.
RetirEd

February 16, 2021
7:04 pm
Loonie
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davidgeorge said
Luckily, I purchased a new house in June 2019, and the closing date is next month. I planned to sell my old house when I purchased the new one. As the housing market is so hot and interest rates are so low (for both savings/GIC and mortgage), I decided to keep my old house as a rental property. Therefore, my money goes to real estate, not savings/GIC or any other investment accounts.  

Yikes! You have no diversification whatsoever.

February 16, 2021
8:01 pm
Jon
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I have previously mentioned that there are structural problems why the whole world (or at least developed countries) have low inflation. However, I also believe inflation will spike up (my opinion have pivoted). This is because:
1. the massive liquidity injected into the economic system by the central bank, implying it that the economy only need to partially recover to have massive inflation impact (velocity of money * money supply = price level * real GDP).
2. the massive reduction in capital expenditure in the oil and gas industry cause output to fall significantly, in addition, President Biden's policy on fracking will further constrain the output of oil and gas. This means the oil price will increase significantly when the demand return partially to the pre-COVID level.
3. as something that is previously mention by Bill, we live in a world where producing locally become fashionable (started off as a hipster thing, but it has become mainstream mostly due to national security reason). This is a violation of David Ricardo's Law of Comparative Advantage. This means the growth of economic output globally will slow down as countries fail to specialize in things that they are good at producing.
4. the rise of China and the comparative fall of the US have ushered in a dangerous era (as suggested by scholar of international relation), this will further exacerbate the previous problem (point 3), but it will also pose physical danger to the global supply chain. This is especially true because modern day Sarajevo is the Republic of China (Taiwan), which make more than 50% of the world's computers chip. As the US seeks to block China's intrusion into the ICT world, which is the bread and butter of the US economy, an adventurous Chinese leadership will seek to attack (unify) the island in order to capture Taiwan's computer chip manufacturing capacity. THIS IS WORLD WAR THREE.
5. lastly, even if WW3 is not materialized, the lack of trust between countries will make international cooperation in handling climate change and environmental degradation become impossible (we already have a taste of this, thanks to COVID). Continue degradation of environment may cause food shortage in the future, which will cause spike in inflation in the developed countries (while it leads to humanitarian catastrophe in the global south).

P.S: I really believe the future is bleak and ugly, but as a Christian, I simply think this is the second coming.....

February 17, 2021
4:28 am
Kidd
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Jon.

I just want to say, i read your post #14. I may not agree but i did read it.

February 17, 2021
9:49 am
Bill
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Jon, I agree with much of what you say, but don't worry about the 2nd coming, i.e. it's usual for folks whose civilization is over to think the entire world is ending but there are always other rising civilizations (e.g. Asia, as you indicate) where days are getting sunnier. And China has no need of a WWIII, in fact its rise is based precisely on strategies that deliberately exclude catastrophic military conflict.

February 18, 2021
9:01 am
Vatox
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As long as human nature drives people to acquire more and better things, the modern societies will degrade. Accepting a lower standard of living and being happy with less is the only way modern society can survive. The only thing that would offset that outcome, is a clean, limitless, and close to free source of energy. One other thing could change that outcome, remove 7 billion people from the planet.

February 18, 2021
9:41 am
Oscar
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Vatox said
As long as human nature drives people to acquire more and better things, the modern societies will degrade. Accepting a lower standard of living and being happy with less is the only way modern society can survive. The only thing that would offset that outcome, is a clean, limitless, and close to free source of energy. One other thing could change that outcome, remove 7 billion people from the planet.  

Said Mr Gates from his 666 thousand square foot home by the lake.

February 18, 2021
9:46 am
Bill
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Vatox, you're articulating the standard narrative, but I'd say check out what's happened to reproductive rates in 1st world in a few short decades of women being truly liberated via (big-pharma created, thank you!) the Pill, now not even at replacement level - e.g. Quebec went from an average of 10 kids or so to under 2 in not much more than a generation. Canada now needs lots of immigrants. Turns out the ladies prefer careers, money, working out at the gym, etc as much as the guys. We're on the right track, won't take long for global population to begin its decline, it'll be fine.

February 18, 2021
11:15 am
Vatox
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