but only under the condition that interest rates stay constant.
Yes, this was covered in the earlier comment. Was there some reason to not read it?
Credit is not a free market thanks to central banks.
I have no idea where you think a free market enters the picture – there is no free market found in Canada – but yes, the central bank responds to the market behaviour. We already went over this. Why not just read the earlier comment?
In practice, high enough interest rates asphixiate demand
Yes, high enough rates would. The BoC has been afraid to go there, though. Right now they’re focused on maintaining equilibrium. They still hope inflation is a transitory COVID-19-related issue.
Which is not unwarranted. There is still a lot of evidence of that being the case. The farm gate price of food, for example, is down ~50% over last year. That takes some time to work its way through the supply chain into the grocery store, but it is highly likely that food is going to face a reckoning in the coming months. The inflationary impact of higher rates will be no match for deflation in food.
But what if that deflation in the rest of the consumer economy doesn’t happen? For example, a lot of people think the USDA is misreporting the food situation that has caused prices to drop so significantly. That has happened many times before. It doesn’t take much to see that 50% drop return with a 100% climb once final harvest numbers are in.
This has happened many times before
Yes, we have responded with 20% interest rates before. But can that happen this time without sending us into depression? Housing, and the mortgages associated with them, has become central to the Canadian economy. The BoC was created during the Great Depression to prevent future depressions. The inflation target mandate is important, but it does not supersede the mandate to keep Canada’s economy reasonably healthy.
Are you referring to where one @frostbiker kept repeating the same thing over and over and over again, wasting everyone’s time for no reason? That was pretty rude, I agree, but there was still enough interesting things to discuss that I don’t know that we have to throw the baby out with the bathwater.
Yes, this was covered in the earlier comment. Was there some reason to not read it?
I have no idea where you think a free market enters the picture – there is no free market found in Canada – but yes, the central bank responds to the market behaviour. We already went over this. Why not just read the earlier comment?
Yes, high enough rates would. The BoC has been afraid to go there, though. Right now they’re focused on maintaining equilibrium. They still hope inflation is a transitory COVID-19-related issue.
Which is not unwarranted. There is still a lot of evidence of that being the case. The farm gate price of food, for example, is down ~50% over last year. That takes some time to work its way through the supply chain into the grocery store, but it is highly likely that food is going to face a reckoning in the coming months. The inflationary impact of higher rates will be no match for deflation in food.
But what if that deflation in the rest of the consumer economy doesn’t happen? For example, a lot of people think the USDA is misreporting the food situation that has caused prices to drop so significantly. That has happened many times before. It doesn’t take much to see that 50% drop return with a 100% climb once final harvest numbers are in.
Yes, we have responded with 20% interest rates before. But can that happen this time without sending us into depression? Housing, and the mortgages associated with them, has become central to the Canadian economy. The BoC was created during the Great Depression to prevent future depressions. The inflation target mandate is important, but it does not supersede the mandate to keep Canada’s economy reasonably healthy.
Hey, I’ll be happy to maintain a civil conversation but I won’t entertain rudeness. Have a great day!
Are you referring to where one @frostbiker kept repeating the same thing over and over and over again, wasting everyone’s time for no reason? That was pretty rude, I agree, but there was still enough interesting things to discuss that I don’t know that we have to throw the baby out with the bathwater.