Thursday, December 9, 2010

This Old Economist: There is always so much to learn

Someday I’ll be 70 years old (really, a long, long way off) but I still won’t know much about how The Bank of Canada (the big kahuna) and other Canadian banks operate.

I don’t even know why I received $0.01 interest at one particular month’s end a few years ago.

Never mind. I press on. I learn a bit here, a bit there. And it’s all very fascinating.

Did you know that banks lend or borrow money amongst themselves overnight, seek or make payment the next day, then do much the same the next night, every night?

They don’t charge each other very much. 1.00 percent right now, says the Bank of Canada (the big muscle), the rate-setter. And the rate hasn’t changed since Sept. 8, 2010 (from May 2000 - Jan. 2001 the rate was 5.75%: the economy must have been huge!), for many of the same reasons rates on my line of credit haven’t changed.

The economy and other factors must be in the toilet if the banks can’t charge each other very much to exchange money, even for 24 hours.

According to latest news:

“The Bank of Canada left changes to borrowing costs on hold Tuesday, saying Canadian growth was slower than expected and risks to the global recovery have increased.”

Well, that got the attention of this old economist. (“What about my savings? What savings? Gaaahhh!”)

“The central bank cited weak exports and the sovereign debt crisis in Europe as being among the key concerns...” (Dec. 8, London Free Press)

Only two ‘key concerns’?

I’d add growing debt in the USA and Canada, if I were you. And future costs related to environmental change and damage.


["Reduce spending, pay down debt, feed the pig"]

Fortunately, to help me end on a more positive note, I learned that “on the upside, Canadian household spending and business investment remained strong...”

Thank goodness Christmas is coming and there are still a few Canadians with room on their credit cards!

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This Old Economist spouts off again here.

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