Increase in the Bank of Canada interest Rate

There will be rumblings, guesses, and prognostications what an interest rate increase will mean for you, your company and the country over the next few weeks. For some, this will be a good thing (your bank deposit may actually earn enough interest to pay your monthly bank fees, or your purchases from the USA just got cheaper). For some, it will be bad. That new house you were going to buy just went out of reach because you can’t afford the payments now. Others won’t be affected at all because the market they sell to (and buy from) is local so the exchange is inconsequential (farmers market?).

It will be interesting to watch the papers, magazines, and TV to see if media think this is a good thing or not?

By the way, when one writer mentioned that ‘Canadian households and companies are piling up debt faster than any other developed nation in the world, adding $1 trillion since 2011. A dubious honor, to be sure.’ I wonder if he really understood what he was saying? Did he consider that Canada was the best-performing economy of the G7 over the last several years? Does he know HOW we did it?…we financed it. Yes, now is time to pay the piper but at least we are not bankrupt and homeless while we do it.

What higher interest rates mean for real estate, debt, and the economy

 

wages stagnant while unemployment at its lowest level

Supply is affected by two dimensions….investment in capital and labour…this is first year economics. The cost of capital is interest (lending rates). When we invest in capital or labor we increase supply. The balance is between adding capital (long term, it will take months to order/build a new machine) and labor (short term, I can hire another guy next week) vs what I can sell my widgets for. Here enters two more dimensions…efficiency and time. We have tweaked our existing capital to get maximum output and have now hit the wall using all the labour in the market. One of two scenarios are going to play out now. 1) Investment in new capital (because interest rates are so low) but few assets are available so the few go to the highest bidder (prices will go up/ inflation) or 2) there will be more jobs than potential employees so we will see rising wages / signing bonuses and foreign workers competing for jobs.

The opportunity for government to invest in infrastructure (crumbling bridges, roads and ancient subways) at historic low interest rates for the last decade will soon be gone.

Here comes the prophecy…take heart, wages will soon be going up.

http://www.cbc.ca/news/business/inflation-canada-outlook-1.4167888?cmp=news-digests-canada-and-world-morning

Lithium and economics 101

Lithium is the key ingredient to batteries today. Its extraction, refinement, and entry into the supply chain is wonderful example of economics 101 with three countries holding half the world’s deposits. This is a fascinating story on multiple levels.

http://www.economist.com/news/americas/21723451-three-south-american-countries-have-much-worlds-lithium-they-take-very-different

We all need a little help from our friends…

I think these should be the goals of all businesses…public sector or other although I would put moving to the cloud as the last priority.
“We will be rolling up our sleeves and working through the hard issues of how to provide better services to citizens, how to use technology to enable better government decision-making, how to reduce fraud and waste, and how to accelerate moving to the cloud,” Safra Catz, co-CEO of Oracle and a member of Trump’s transition team, said in a statement provided to CNN Tech.

The markets are quiet. Too quiet?

HAN SOLO, a hero from the Star Wars movies, has a habit of saying, at tense moments, “I have a bad feeling about this.” Many commentators are echoing this sentiment after a recent fall in the Volatility Index, or Vix, below ten. Their fears deepened on May 17th, when the Vix lurched above 15 and American stock markets had their worst day in eight months. Incessant turmoil in the White House at last seemed to take its toll.

http://www.economist.com/news/finance-and-economics/21722181-low-level-popular-measure-volatility-causes-alarm-markets-are