# Rate cut!



## Ihatetaxes

Stock market likes it, dollar hates it.


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## Synergy

Not a huge surprise, some have been predicting this as a possibility over the last 6 months. Should help my REITs and some of the interest sensitives a little! I figured gold might have gotten a little boost from the announcement but it hasn't so far.


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## CPA Candidate

Remember when everyone sold their REITs, utilities and dividend stocks in 2013 because they had to position their portfolios for higher interest rates. I hope this illustrates why you shouldn't make moves based on what the street thinks will happen.


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## gibor365

Will GIC rates go down?


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## 1980z28

Time to buy some utilities ?????


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## Guban

Wow, the rates keep dropping!

It feels like there is a global race to devalue currencies. The easy money keeps on coming.


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## Synergy

gibor said:


> Will GIC rates go down?


Better off to join the party and buy some dividend paying stocks, REITs, etc.:biggrin:

Elderly savers are really being punished with these low rates...


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## gibor365

1980z28 said:


> Time to buy some utilities ?????


Strange why CU down almost 3% ..


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## newfoundlander61

Media as usual goes over board: "shocks, plummets, plunges" don't bother me in the least.


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## GOB

Well, time to pile into utilities and REITs. Worry about rates rising was the only thing holding me back from increasing my exposure to these great income assets.


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## 1980z28

Synergy said:


> Elderly savers are really being punished with these low rates...


I am not that old


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## the_apprentice

Great news! Although did not expect this.


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## 1980z28

gibor said:


> Strange why CU down almost 3% ..


Only hold FTS for a long time

Cu just hit there high yesterday


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## gibor365

1980z28 said:


> Only hold FTS for a long time (2520 shares)
> 
> Cu just hit there high yesterday


I hold only FTS and EMA in Canadian utilities...CU always had toll low yield for my liking...
Will buy more AX.UN


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## 1980z28

aw.un

wjx


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## Synergy

1980z28 said:


> I am not that old


It was a generalization. Everyone with money to "save" will get punished to some degree but I'm talking about those in retirement homes, long term care, etc. living year to year, month to month, etc. off of their savings / fixed income - barely making it...


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## peterk

Great... So prudent savers and old people get punished, while reckless 25-40 year olds who overpaid for a house that they couldn't even afford continue to get rewarded?


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## 1980z28

Synergy said:


> It was a generalization. Everyone with money to "save" will get punished to some degree but I'm talking about those in retirement homes, long term care, etc. living year to year, month to month, etc. off of their savings / fixed income - barely making it...


OH!

at 54 I am not there yet

Thanks

and

Enjoy your day


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## Squash500

Great news. XTR and XDV just went up in price today.


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## leeder

Good news for ppl looking to sell. Bad news for ppl looking to buy.


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## Electric

the_apprentice said:


> Great news! Although did not expect this.


Really? They are doing this because the economy is screwed. It is not good news.

This is how it started in Japan in the 1980s. They are still in it. The whole world may be Japan'd right now; it is too terrifying to contemplate.


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## 1980z28

Electric said:


> Really? They are doing this because the economy is screwed. It is not good news.
> 
> This is how it started in Japan in the 1980s. They are still in it. The whole world may be Japan'd right now; it is too terrifying to contemplate.


So sad you think that the whole planet is under the influence of lower interest rates


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## swoop_ds

Somewhere up-thread it was mentioned that gold didn't seem to be effected. Looking at my "gold app" it says that gold is now worth $CAD1600ish.


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## rsyl

Gold wasn't really affected, what you are seeing is the 2% drop in CDN Dollar.


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## atrp2biz

Gold (typically referenced in USD) was unaffected--the CAD was affected. 

When a fly splatters on one's windshield, did the car hit the fly or did the fly hit the car?


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## Synergy

leeder said:


> Good news for ppl looking to sell. Bad news for ppl looking to buy.


I've been waiting to buy some PPL, so I feel the pain a little. Still way off it's highs however and my IPL position is quite content with the rate cut.


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## james4beach

Well there you go. As I've said for over a year on these forums, the Bank of Canada is way closer to cutting than raising rates. This economy has always been on thin ice, and especially with our housing bubble, the BoC really can't risk bursting it.

To everyone who benefitted from my posts on this topic, "you're welcome".

Now do you guys see why those 5 year GICs weren't such a crazy idea?


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## Causalien

james4beach said:


> Well there you go. As I've said for over a year on these forums, the Bank of Canada is way closer to cutting than raising rates. This economy has always been on thin ice, and especially with our housing bubble, the BoC really can't risk bursting it.
> 
> To everyone who benefitted from my posts on this topic, "you're welcome".
> 
> Now do you guys see why those 5 year GICs weren't such a crazy idea?


Someone explain to me why utilities should go up if utilization will be going down due to crap economy?


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## HaroldCrump

Causalien said:


> Someone explain to me why utilities should go up if utilization will be going down due to crap economy?


Most regulated utilities make a certain % of profit above their costs.
They are generating & re-selling power.
If there is lower demand, they will simply produce less.
Debt servicing costs is one of their highest expenses.
Lower rates reduce that cost, and thus increase profitability.

Then there is the yield chasing by investors - both retail and institutional.
Utilities are often used as bond proxies in low rate environments.


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## swoop_ds

I realize that gold hasn't moved and we are just seeing the lower canadian dollar buy less gold, but if you buy (and sell) your gold in CAD, gold 'has' moved. In a manner of speaking anyways.

I only deal with physical gold, which I have always paid for in CAD.


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## 1980z28

HaroldCrump said:


> Most regulated utilities make a certain % of profit above their costs.
> They are generating & re-selling power.
> If there is lower demand, they will simply produce less.
> Debt servicing costs is one of their highest expenses.
> Lower rates reduce that cost, and thus increase profitability.
> 
> Then there is the yield chasing by investors - both retail and institutional.
> Utilities are often used as bond proxies in low rate environments.


Well done,

Fortis has a 2% INCREASE for the 2014 -2015 year


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## fatcat

james4beach said:


> Well there you go. As I've said for over a year on these forums, the Bank of Canada is way closer to cutting than raising rates. This economy has always been on thin ice, and especially with our housing bubble, the BoC really can't risk bursting it.
> 
> To everyone who benefitted from my posts on this topic, "you're welcome".
> 
> Now do you guys see why those 5 year GICs weren't such a crazy idea?


no, i don't james ... all fixed income is doing well ... my ZCM just wet it's pants with joy

the problem with your gic's is that they haven't changed in value, they _can't_ change in value
gic's give one thing, safety, but to look at them as an investment relative to interest rates doesn't make sense
you need equities to take advantage of economic strength

you need fixed income _and_ equities
you only sell one side of the equation

you are in your 30's and as far as i can tell so risk averse that you are going end up much poorer at age 70 than you could be
savers are getting killed man

my condo strata fees are going up 20% this year ...

and you want me to buy a 2.8% 5-year gic ?


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## gibor365

leeder said:


> Good news for ppl looking to sell. Bad news for ppl looking to buy.


it's good if you have big % of US stocks... Just came through my trans spreadsheet ...less than 4 years ago , bought MO with FX 1.05 ... only on crushing CAD % it 30% gain


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## james4beach

Yes I did want you to buy a 5 year GIC at 2.8% 

And by loading up on 5 year GICs in the last few years, I've locked in high fixed income rates. I hold GICs that are accruing interest at 2.6%, 2.8%, 3.0% -- even CDIC ones -- that will continue paying this out for many years.

And market GICs have changed in value. They're just debt instruments. I bought them at a lower price (higher yield), and today their price is higher and the yield is lower. I "bought low" ... and repeatedly posted on the forums about how it was good to buy 5 years out. Everyone: you're welcome.


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## james4beach

Gold is certainly up in CAD terms. Look at IGT.TO as a proxy for this.

Today: gold in CAD up +2.1%
Last 6 months: up +13%
Last 1 year: up +17%
Last 2 years: down -5%
Last 3 years: down -6%

Note that in the last year, gold is up much more than the TSX index. I added to my precious metal holdings a couple months ago, and posted here when I did (using CEF.A) as I thought the steep discount was nice. I also noted earlier that gold is thoroughly hated and very out of favour, which I thought made it attractive for accumulating... as opposed to stocks, which are heavily in-favour and if anything, way too popular for their own good


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## fatcat

james4beach said:


> Yes I did want you to buy a 5 year GIC at 2.8%
> 
> And by loading up on 5 year GICs in the last few years, I've locked in high fixed income rates. I hold GICs that are accruing interest at 2.6%, 2.8%, 3.0% -- even CDIC ones -- that will continue paying this out for many years.
> 
> And market GICs have changed in value. They're just debt instruments. I bought them at a lower price (higher yield), and today their price is higher and the yield is lower. I "bought low" ... and repeatedly posted on the forums about how it was good to buy 5 years out. Everyone: you're welcome.


but you can't sell them and book a profit ... they aren't liquid like bonds or bond funds

gic's are only "up" relative to current rates 

the question is how will do they over the life of the term _relative to inflation_ and they will do badly

i'm not saying that gic's aren't an appropriate investment (i have a chunk in gic's)

i am saying that the mere fact that you own 3% gic's when today they are paying 2.5% (or whatever it is) doesn't necessarily make them a good investment

for what it's worth i have 2 5-year gic's maturing this year at 4%

gic's are an asset that delivers essentially one prime benefit - safety and certainty ... nothing wrong with that but that's pretty much _all_ they offer (in todays environment anyway)


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## My Own Advisor

"Well, time to pile into utilities and REITs. Worry about rates rising was the only thing holding me back from increasing my exposure to these great income assets."

Already done


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## Fraser19

Since I am still new to this I am wondering how this will effect the various companies. Do they use fixed rate or variable rate for there debt?

The way I see it, which I do not know if this is correct or not is. 
Lower dollar = more Canadian dollars when we sell oil
Lower interest debt = faster repayment

While this is still not ideal doesn't this take a slight bit of the sting away from the oil companies?


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## GOB

Yes, I believe it does.


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## larry81

Portfolio is up 50k today, thanks you BoC !


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## Underworld

Nice larry!

What are you holding?

EDIT: Oh I see from your signature


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## larry81

Yes, a basket full of plain and boring broad-index ETF. HBB being the most exotic.


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## My Own Advisor

Have you ever thought about debundling your REITs larry81?


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## Janus

Electric said:


> Really? They are doing this because the economy is screwed. It is not good news.


I agree 100%. The bank of Canada saw the early numbers of what low oil will really do to our economy, and they sh*t their pants. This is a signal that things are about to get bad in Canada.

Every day I'm thankful I'm holding 75% of my assets in USD.


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## Synergy

Janus said:


> I agree 100%. The bank of Canada saw the early numbers of what low oil will really do to our economy, and they sh*t their pants. This is a signal that things are about to get bad in Canada.


The BOC is reacting proactively to help prevent things from getting "bad". Some form of insurance or assurance. This doesn't necessarily signal that things are going to get "bad". Nobody really knows what oil will do in the short or long term, not even the BOC.


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## james4beach

Today I bought some 5 year GICs at Outlook (MB credit union) at 2.8%. That rate hasn't changed in a couple months.

I bought today because Outlook may respond to the rate cut by reducing their rates. The open market-traded GICs, visible through discount brokerages, have all seen their rates slashed. I like that the Outlook GICs are cashable so in a few months if I decide my purchase was a stupid idea, I can always cash it out for virtually nil penalty.

I have never actually had to cash out any Outlook GICs


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## Edgar

Fraser19 said:


> Since I am still new to this I am wondering how this will effect the various companies. Do they use fixed rate or variable rate for there debt?
> 
> The way I see it, which I do not know if this is correct or not is.
> Lower dollar = more Canadian dollars when we sell oil
> Lower interest debt = faster repayment
> 
> While this is still not ideal doesn't this take a slight bit of the sting away from the oil companies?


The lower dollar is good for domestic purposes when selling oil, but plenty of companies carry foreign debt. Seeing the Canadian dollar drop by two cents is not good for those companies. I have a pretty neutral stance on the low dollar for the oil companies...

With regards to your second comment, this is how I can tell that you are probably going to be ok in life. Low interest does mean that more of your money *COULD *go towards your principle debt, but that is not the way it works. Instead, this means that you need to pay less interest, and in turn, you can afford to spend more. The $300,000 house that you could barely afford with a mortgage of 3.5%, well now there is no point in buying that because you can now buy a $330,000 house. The lower interest rate stimulates the economy by giving average people more purchasing power, but it also can be a precursor to a bubble, and that is what scares me. I don't think we are in any immediate danger, but I will be watching the government's monthly reports a little more closely now.


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## larry81

My Own Advisor said:


> Have you ever thought about debundling your REITs larry81?


Yes i did, i hold a good chuck of REIT and the MER is expensive...

The only reason i did not pull the trigger is that i would have to track each REIT DRIP manually. Suppose 10 position, since most REIT have monthly distribution, that's 120 DRIP to manually enter in excel/quicken each year !


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## NorthKC

So lower rate = lower mortgage rate = higher house prices = I'm never going to be able to buy a decent house at a fair price at this rate!


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## james4beach

You will be able to afford a house when these home prices finally crash. Just stay liquid and keep lots of cash around; that's what I'm doing.


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## larry81

Janus said:


> Every day I'm thankful I'm holding 75% of my assets in USD.


i second !


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## NorthKC

james4beach said:


> You will be able to afford a house when these home prices finally crash. Just stay liquid and keep lots of cash around; that's what I'm doing.


Assuming the home prices finally crash! I've been staying liquid. Just a little tired of waiting!


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## Edgar

NorthKC said:


> So lower rate = lower mortgage rate = higher house prices = I'm never going to be able to buy a decent house at a fair price at this rate!





james4beach said:


> You will be able to afford a house when these home prices finally crash. Just stay liquid and keep lots of cash around; that's what I'm doing.


My 'spirit wolves' advice is to watch Australia. I think they are in a very similar state as us, except their housing prices are a little less affordable than ours, so I kinda expect them to go under first. That should probably be a good indicator of when our prices will be ready to plummet.
This is just speculation, but I think they will be the precursor.


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## HaroldCrump

Synergy said:


> The BOC is reacting proactively to help prevent things from getting "bad". Some form of insurance or assurance.


That is all central bank trash talk.
Cutting interest rates by 25 bps does not provide insurance against anything.
It does not provide assurance of anything.

If this move is indeed led by oil price decline (as Poloz claimed), reducing rates by 25 bps aint going to make energy companies invest & expand.
It does not boost exports at all (export what & to who, exactly? no one's buying).

All this is going to do is further inflate the housing bubble.
And cheapen the currency to create inflation.
That is the only objective of such a move.

Governments & central banks keep dishing out all this gobbledegook & the media keep swallowing it and regurgitate it to the sheeple.


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## Feebz13

NorthKC said:


> Assuming the home prices finally crash! I've been staying liquid. Just a little tired of waiting!


In the same boat. How liquid? We've been holding a lot in a HISA waiting. Our TFSA/RRSP spud is performing well. With these bumps wish I were in the market.


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## Getafix

I've only been here two months, the moment i start thinking i know what to do with the savings i brought over, something new happens! Right now it's sitting in CAD. Do you guys think it's wise to change it over to USD, since i've got a TD borderless account, or wait and see if the situation improves.


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## hboy43

fatcat said:


> you are in your 30's and as far as i can tell so risk averse that you are going end up much poorer at age 70 than you could be


James and I are both trained as engineers if I am not mistaken. He likes gold and GICs, I like neither. I have been quite forthright over the years in why I hold stocks exclusively and decline to hold FI and gold and RE. I have indicated that I tend to hold positions for a very long time, sometimes adding, sometimes trimming, but for the most part doing SFA. I presented my long term total portfolio return which I think is completely adequate, no more than adequate. I have suggested elsewhere that perhaps he might also present his long term results for our education. If gold and GICs is the way to go long term, I suggest he "show me the money".

hboy43


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## Edgar

Getafix said:


> I've only been here two months, the moment i start thinking i know what to do with the savings i brought over, something new happens! Right now it's sitting in CAD. Do you guys think it's wise to change it over to USD, since i've got a TD borderless account, or wait and see if the situation improves.


Unless you have a reason to buy USD and are risk-averse to a further declining dollar, I would keep it in CAD. Making the move to USD is based on speculation since their are tons of factors at play that could effect the CAD either positively or negatively. My largest piece of advice is to not suddenly panic because of a minor change, but rather look into forecasts and made an educated decision from there.


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## sags

HaroldCrump said:


> That is all central bank trash talk.
> Cutting interest rates by 25 bps does not provide insurance against anything.
> It does not provide assurance of anything.
> 
> If this move is indeed led by oil price decline (as Poloz claimed), reducing rates by 25 bps aint going to make energy companies invest & expand.
> It does not boost exports at all (export what & to who, exactly? no one's buying).
> 
> All this is going to do is further inflate the housing bubble.
> And cheapen the currency to create inflation.
> That is the only objective of such a move.
> 
> Governments & central banks keep dishing out all this gobbledegook & the media keep swallowing it and regurgitate it to the sheeple.


Since the TD Bank said they won't be lowering their rates in lockstep with the BOC, and the other banks will probably follow their lead, you could add this is free money to the banks, and meaningless to the consumer.

If they are not passing on the lower rates to consumers...........what was the point ?

An interesting timeline recently............

1) Harper announces 20 Billion in pre-election spending.

2) Oil prices plunge.

3) Oliver announces the surplus will be intact.

4) A couple of days later, Oliver announces the budget will be delayed until April, due to volatility.

5) Employment Minister Kenney announces there will have to be cuts in spending to maintain a balanced budget.

6) BOC lowers the overnight rate.

Spending cuts after announcing 20 Billion in new spending ?

It is starting to look like a full scale panic attack in Ottawa.


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## gibor365

My Own Advisor said:


> Have you ever thought about debundling your REITs larry81?


ZRE is equal weighting ... so instead of debundling , togethet with ZRE, I have positions in REITs I like most: REI, HR, AX, CUF and DRG


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## gibor365

NorthKC said:


> Assuming the home prices finally crash! I've been staying liquid. Just a little tired of waiting!


 Those rumours I hear more than 10 years....my wife's sister is waiting for crush those 10 years ... and houses' prices doubled or tripled


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## james4beach

hboy43 said:


> James and I are both trained as engineers if I am not mistaken. He likes gold and GICs, I like neither. . . . I have suggested elsewhere that perhaps he might also present his long term results for our education. If gold and GICs is the way to go long term, I suggest he "show me the money".


Right, we're both engineers. I work as a consultant in very volatile sectors. So I'm extremely conservative with my money because I can literally be jobless and income-less tomorrow, in the blink of an eye. I also avoid stock-style investments more because I think it's a cesspool of crooks in a dangerously leveraged casino that's tilted against me.

I'm working in the US and the I.R.S. imposes horrible restrictions/burdens on certain types of investments. I liquidated all of my Canadian ETFs as a result. I can't use the TFSA any more either. This is entirely due to my tax scenario so it doesn't make a good comparison point... these are not the allocations I would hold if I lived in Canada.

But if you really want to know, as of today
3% stocks
6% precious metals
91% cash and fixed income (mix of HISA, govt bonds, GICs)


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## Guban

Wow, with an allocation like that, you'd love a stock market crash! A housing bust would look pretty good to you too.


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## carverman

HaroldCrump said:


> That is all central bank trash talk.
> Cutting interest rates by 25 bps does not provide insurance against anything.
> It does not provide assurance of anything.
> 
> *All this is going to do is further inflate the housing bubble.
> And cheapen the currency to create inflation.*
> That is the only objective of such a move.
> 
> Governments & central banks keep dishing out all this gobbledegook & the media keep swallowing it and regurgitate it to the sheeple.


In a nutshell, that is it...propaganda for the sheeple who will earn even less on their savings accounts, unless they are locked
in through GIC.

Made-in-Canada Mini-Recession coming up?


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## banjopete

And our dear government is still maintaining their stance of being able to balance the budget. Good things politics isn't getting in the way of politics.


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## swoop_ds

I really wish they'd just face this head on and put in some austerity measures. Instead, lets just pile on more cheap debt.... 

I know Harold wants a lot of government cuts, which I think are needed pretty badly.


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## HaroldCrump

This situation cannot change until money reaches the hands of real people, not banks or hedge funds.
The problem is people (households, individuals, families) are not getting any new money in their pockets.
QE, LSAPs, Repos, etc. do not put money into the hands of people - it simply creates leverage and arbitrage opportunities for banks & hedge funds.

They can print another $10 Trillion, and it will not have any affect on society.
All it will do is further inflate asset bubbles.

To put money into the hands of people, we need tax relief.
All types of taxes, all across the board.
Retail taxes, income taxes, payroll taxes - every type of tax needs to be cut to put more money into the hands of people.

None of this progressive taxation, income re-distribution nonsense will work.

All it will do is further consolidate wealth in the hands of the 1%.

Once new money starts flowing into the hands of people, they will pay off some high interest debts like credit cards & car loans i.e. reduce leverage.
Then they can spend & invest the rest for more productive purposes.
And this is where higher interest rates come into the picture.
Higher nominal rates encourage investment - ZIRP & NIRP kill investment.

Central banks can print any # of trillions, but until money makes its way into the hands of people via tax cuts, the financial condition of the middle classes will not improve.
And in order to fund those tax cuts, we need to cut govt. spending significantly.
Mostly wasteful social programs & lobby group driven spending.


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## Guban

The idea of cutting rates and stimulus like QE is to ramp up the economy. Companies will be more comfortable borrowing to expand. New jobs will be created. Money will flow into the hands of the newly employed/promoted. A tax cut is one way to get money into the hands of the people, but it is not the only way.


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## HaroldCrump

Borrowing from who? No one is lending.
All the banks are over-leveraged.

Secondly, both the US as well as the EU have created massive capital controls via regulation by requiring banks to hold certain levels of capital, cash, and only certain types of securities qualify (mainly IG sovereign bonds).
Dodd-Frank, Basel-III, FSB regulations, etc.

This is like tying fetters to your ankles, and asking you to sprint 100 meters and beat the world record.
That is why lending to SMEs are at all time lows.

Also, keep in mind that companies will not borrow, expand, and create jobs unless there is a demand for their products.
Where will the demand come from? Who is buying?
A family doing 2 jobs @ $10/hr. and with 165% debt aint creating any demand.

The problem is household leverage & aggregate demand destruction.
Can't be solved with QE.
Square peg, round hole.
This is a fiscal/structural problem, not a monetary policy issue.


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## Synergy

HaroldCrump said:


> Central banks can print any # of trillions, but until money makes its way into the hands of people via tax cuts, the financial condition of the middle classes will not improve.
> And in order to fund those tax cuts, we need to cut govt. spending significantly.
> Mostly wasteful social programs & lobby group driven spending.


1+


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## GOB

Canada is a commodity based country. A large number of the good jobs are in oil & gas and mining. With commodities low across the board (except gold for now) companies are cutting spending and cutting jobs. A 0.25% rate cut is not going to change anything for them.


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## hboy43

james4beach said:


> Right, we're both engineers. I work as a consultant in very volatile sectors. So I'm extremely conservative with my money because I can literally be jobless and income-less tomorrow, in the blink of an eye. I also avoid stock-style investments more because I think it's a cesspool of crooks in a dangerously leveraged casino that's tilted against me.
> 
> I'm working in the US and the I.R.S. imposes horrible restrictions/burdens on certain types of investments. I liquidated all of my Canadian ETFs as a result. I can't use the TFSA any more either. This is entirely due to my tax scenario so it doesn't make a good comparison point... these are not the allocations I would hold if I lived in Canada.
> 
> But if you really want to know, as of today
> 3% stocks
> 6% precious metals
> 91% cash and fixed income (mix of HISA, govt bonds, GICs)


Thank you James for the reply.

I can certainly agree and allow that your personal circumstances have certain needs quite different from me and others. You have to do what you have to do.

My point of displeasure is when in one thread you are thumping your chest about your brick of gold returning just under 12% PA for the last decade while by the way stocks are a bag of **** over the same period, and in another congratulating yourself for advising people to buy 5 year GICs at whatever interest rate it was (2.8%? 2.4%) but then cannot demonstrate a reasonable 10 year personal total portfolio total return based upon acting upon your principles, but I can demonstrate a nice long term result based upon my principles which are based upon those evil dividend paying stocks run by CEOs that are all a bunch of crooks? Do you see what I am getting at? You pound away at **** stocks when my (and many other people's) real life **** stocks smell like roses. If doing what you believe has merit, you should be able to provide a long term return figure for our consideration and comparison and contrast to other philosophies.

You can believe and do what you want, and you can even hard sell it here, but I suspect and hope sensible people see the truth of it. What you do for yourself may make complete sense for your situation, but it has no generalized lessons for everyone.

hboy43


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## Guban

HaroldCrump said:


> Borrowing from who? No one is lending.
> All the banks are over-leveraged.
> 
> Secondly, both the US as well as the EU have created massive capital controls via regulation by requiring banks to hold certain levels of capital, cash, and only certain types of securities qualify (mainly IG sovereign bonds).
> Dodd-Frank, Basel-III, FSB regulations, etc.
> 
> This is like tying fetters to your ankles, and asking you to sprint 100 meters and beat the world record.
> That is why lending to SMEs are at all time lows.
> 
> Also, keep in mind that companies will not borrow, expand, and create jobs unless there is a demand for their products.
> Where will the demand come from? Who is buying?
> A family doing 2 jobs @ $10/hr. and with 165% debt aint creating any demand.
> 
> The problem is household leverage & aggregate demand destruction.
> Can't be solved with QE.
> Square peg, round hole.
> This is a fiscal/structural problem, not a monetary policy issue.


I wasn't aware that the banks are over leveraged. This chart seems to say that RY's debt levels are pretty low: http://www.wikinvest.com/stock/ROYAL_BANK_OF_CANADA_(RY)/Data/Debt_to_Equity

Under what situations would monetary policy work then? I am not an economist, using the interest rate lever is the traditional way that the BoC controls how fast the economy runs. 

QE and QE 2 seems to have worked for the US. Their economy seems much better these days.


----------



## lh0628

HaroldCrump said:


> Once new money starts flowing into the hands of people, they will pay off some high interest debts like credit cards & car loans i.e. reduce leverage.
> Then they can spend & invest the rest for more productive purposes.


Or they will spend those money and pile on more debts because of lower rates and easier lending.


----------



## sags

There is too many layers of regulation, especially on small business and start up companies.

The problem though, was well illustrated by recent rants by the CEOs of big US banks and the terse reply from Barney Frank.

As he said.......The layers of regulation followed the big banks...........after they veered from the normal business of banking, and into a wide range of other financial activities. 

The different regulators could either follow the securities they are to regulate into the banks, or regulate the securities while outside the realm of the banks, leaving them unregulated if it was being done within a bank.

Which came first.............the chicken or the egg...........the expansion of banks into other areas or the different regulators that followed them ?


----------



## sags

Everyone wants to see their tax dollars spent wisely, but in an expanding economy with a growing population, it is likely to cost more to produce the same service.

As the highways become clogged with more cars, we need wider highways. As water systems become strained...........we need better water systems.

As new subdivisions spring up on the outskirts of every village, town and city............we need more police officers.

Unless people want to make do with less.............the cost of the governments providing services will continue to rise.

PC Tim Hudak was honest in his election platform. He proposed major cuts to public services and workers. Voters didn't agree with him.


----------



## Synergy

sags said:


> PC Tim Hudak was honest in his election platform. He proposed major cuts to public services and workers. Voters didn't agree with him.


He had my vote!:hopelessness:


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## HaroldCrump

sags said:


> Voters didn't agree with him.


You mean the approx. 32% of unionized public sector workers among the voters didn't agree with him.

Voter turnout = 50%
Public sector workers ~= 22%
Other unionized voters (auto, manufacturing, etc.) ~= 10%
Liberal vote % = 38%


----------



## HaroldCrump

Guban said:


> I wasn't aware that the banks are over leveraged


I was referring to Eurozone banks, not Canadian.
I know, thread is about BOC rate cut, but discussion went to ECB QE.
European banks are in a bad shape relative to Canadian, and even US banks.
Italy, France, and Spain have the worst banks in the Eurozone.



> Under what situations would monetary policy work then?


Monetary policy is basically about controlling the demand & supply of money via interest rate mechanism (i.e. the cost of money).
So, for example, if there is a lot of demand within the economy but not enough goods & services are being produced by businesses, that could indicate a tight money supply.
In that case, central bank can reduce interest rate to "incentivize" businesses to increase production.

Rate cuts can, in certain circumstances, create net new demand, assuming consumers, businesses & governments are not over-leveraged.

But the problems most of the developed G7 countries are having is not monetary, but structural.

These are things are labor force rigidity (over-unionization), trade barriers (Obama's "Buy American" for instance), unnecessary govt. social welfare programs (retirement pensions for all & sundry), govt. spending on useless wasteful programs, driven by lobby groups (G20 Summit, Pan Am games), war & conflict related spending, over-regulation (Dodd-Frank, Basel-III) etc.

These are structural problems that can only be solved via legislation (which requires political will).

There are other issues that can be solved by fiscal policy, such as over-taxation of middle classes.
Our tax rates are way too high, incl. retail taxes (13% HST in Ontario for example, on anything you dare to touch).



> I am not an economist, using the interest rate lever is the traditional way that the BoC controls how fast the economy runs.


Sure, if the issues are monetary in nature.
No amount of monetary policy can solve structural problems.

Take Japan for instance - they have a huge demographic problems.
Their birth rate is too low, and they are ideologically opposed to immigration.
Their health care & retirement costs are through the stratosphere.

What can monetary policy do in this case?
They have been cutting interest rates for 20+ years now.
It is no longer a _lost decade_ - it is more like a _lost score_.


----------



## sags

Of course Harold.............unionized people vote in their own self interest, just like everyone else does.

Due to the changed circumstances, PM Harper should apply the brakes to his announced 20 Billion in new spending. 

The money isn't going to be there, and it will be more debt piled onto the national debt.

Think he will cancel the spending ? It would be the prudent thing to do.

Perhaps, if it is in his own self interest to do so.


----------



## andrewf

HaroldCrump said:


> You mean the approx. 32% of unionized public sector workers among the voters didn't agree with him.
> 
> Voter turnout = 50%
> Public sector workers ~= 22%
> Other unionized voters (auto, manufacturing, etc.) ~= 10%
> Liberal vote % = 38%


You're making/implying a claim here (that 100% of unionized workers voted and voted Liberal), which I believe you have no evidence to support.


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## larry81

I just want to step-in and mention that my portfolio is up 5.37% since the start of the year :|


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## HaroldCrump

andrewf said:


> You're making/implying a claim here (that 100% of unionized workers voted and voted Liberal), which I believe you have no evidence to support.


They all voted, there is no doubt about that.
There was a relentless campaign by the various union leaderships (CUPE, CLC, ETFO, etc.) to "_get the vote out_".

Members were told to "_vote for your jobs_".
I have seen some of the union pamphlets/handouts.
Not only did all the PS union members vote for the LPO, but their spouses did too.


----------



## sags

HaroldCrump said:


> They all voted, there is no doubt about that.
> There was a relentless campaign by the various union leaderships (CUPE, CLC, ETFO, etc.) to "_get the vote out_".
> 
> Members were told to "_vote for your jobs_".
> I have seen some of the union pamphlets/handouts.
> Not only did all the PS union members vote for the OLP, but their spouses did too.


And their kids, families and friends............I would suspect.

Unionized workers have the ability to listen and read to election platforms. I doubt they needed much urging from union leaders to reject Hudak's platform of cutting their jobs and benefits, and creating a "right to work" anti-union atmosphere in the Province.

If by "relentless campaign" you mean that unions provided further information and recommendations to their members, that is what their membership pays them to do.

It is no more the job or duty of union leaders to support policies that hurt their members, than for business lobby groups to support policies that hurt their affiliated businesses.

Sitting on opposite sides of the bargaining table fully illustrates their respective positions and obligations.


----------



## CPA Candidate

There was an article by Gordon Pape in the G&M today about positioning your portfolio for rising interest rates. He was talking about US interest rates and US investments, but still....just stop making predictions about interest rates.


----------



## MrMatt

sags said:


> Everyone wants to see their tax dollars spent wisely, but in an expanding economy with a growing population, it is likely to cost more to produce the same service.
> 
> As the highways become clogged with more cars, we need wider highways. As water systems become strained...........we need better water systems.
> 
> As new subdivisions spring up on the outskirts of every village, town and city............we need more police officers.
> 
> Unless people want to make do with less.............the cost of the governments providing services will continue to rise.
> 
> PC Tim Hudak was honest in his election platform. He proposed major cuts to public services and workers. Voters didn't agree with him.


The cost of government will increase, but it shouldn't increase by more than inflation. Population growth should cover the less.

When you put in a new subdivision, those new residents should pay for those police, and they likely will pay more than their own share. The new subdivision likely has higher per capita taxes to begin with. 
If anything costs should go down as the fixed costs are spread over a larger pool.


----------



## Guban

HaroldCrump said:


> They all voted, there is no doubt about that.
> There was a relentless campaign by the various union leaderships (CUPE, CLC, ETFO, etc.) to "_get the vote out_".
> 
> Members were told to "_vote for your jobs_".
> I have seen some of the union pamphlets/handouts.
> Not only did all the PS union members vote for the LPO, but their spouses did too.


I find it odd that you have no doubt about this. This is especially true for something that you CAN NOT know to be true. You write as someone who has a religious conviction about this. There really is no point in having a rational discussion when it gets down to this level. Harold, does this really describe you?


----------



## Davis

Guban: +1.

I find that when someone won't provide evidence and asserts that they _know_ something to be true, I am usually inclined to believe the opposite.


----------



## HaroldCrump

My evidence is indeed anecdotal i.e. in talking to associates, family, friends, etc.
I do have some insight into this sector, and routinely work/associate with people that work in unionized public sector jobs.

It is equally polarizing when the union/public sector apologists & sympathizers vehemently deny the political realities of their lobbying & anti taxpayer campaigns.


----------



## HaroldCrump

sags said:


> And their kids, families and friends............I would suspect.
> Unionized workers have the ability to listen and read to election platforms. I doubt they needed much urging from union leaders to reject Hudak's platform of cutting their jobs and benefits, and creating a "right to work" anti-union atmosphere in the Province.


All it has done is polarized the voters (and workers).

A small subsection of workers (approx. 25%) have unionized against the other 75%.
Keep in mind that the union does not work against "evil businesses" but against the workers in those sectors.

This is reflected in our pathetic voter apathy.
Less than 50% turnouts at both provincial and federal levels is pathetic.
More than 50% of voters are feeling disenfranchised because they believe their vote will not matter.

When one powerful lobby group monopolizes civil government, and by extension, all economic and policy decisions, this is the outcome.
And, of course, it becomes a self-fulfilling cycle.


----------



## Guban

HaroldCrump said:


> My evidence is indeed anecdotal i.e. in talking to associates, family, friends, etc.
> I do have some insight into this sector, and routinely work/associate with people that work in unionized public sector jobs.
> 
> It is equally polarizing when the union/public sector apologists & sympathizers vehemently deny the political realities of their lobbying & anti taxpayer campaigns.


We all have insight into this sector. How many of us don't have family, friends, associates, etc. that work in the public sector? As you, correctly, point out, this is a very large fraction of the population. You know that I don't necessarily disagree with you in a fundamental sense, but I do disagree with the absolute nature, volume and vehement nature in your posts.

I don't know who denied the political reality of the lobbying. As sags pointed out, Hudak was quite clear in his objectives. I will also point out that the campaigns weren't anti taxpayer, since union members and public servants are taxpayers, so much as self serving. Who among us can't be accused of being self serving?


----------



## Guban

HaroldCrump said:


> Also, keep in mind that companies will not borrow, expand, and create jobs unless there is a demand for their products.
> Where will the demand come from? Who is buying?
> A family doing 2 jobs @ $10/hr. and with 165% debt aint creating any demand.


Income tax reductions won't help these people, since a family doing two jobs @11+/hr won't benefit. They aren't paying income taxes. They may benefit from interest rate reductions on their 165% debt, though.


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## HaroldCrump

Guban said:


> Income tax reductions won't help these people, since a family doing two jobs @11+/hr won't benefit. They aren't paying income taxes. They may benefit from interest rate reductions on their 165% debt, though.


Tax policy is not just income taxes.
I am implicitly including other forms of taxation, sorry if that wasn't clear.
Esp. retail taxes, and the taxation built into regulated prices such as utilities, hydro, gasoline, etc.

Interest rate cuts inordinately benefit those that can borrow large amounts of money.
Banks won't be eager to lend to the lower & lower-middle income folks.
They won't be able to (and probably shouldn't) leverage up with large mortgages, car loans, credit cards, etc.
Therefore, cutting rates by 25 bps does not benefit them.

They will benefit far more by reductions to retail taxes, and other fiscal policy measures such as direct subsidies (CCTB, UCCB, fitness credits, etc.).


----------



## HaroldCrump

Guban said:


> We all have insight into this sector. How many of us don't have family, friends, associates, etc. that work in the public sector? As you, correctly, point out, this is a very large fraction of the population. You know that I don't necessarily disagree with you in a fundamental sense, but I do disagree with the absolute nature, volume and vehement nature in your posts.


What is it that we are really disagreeing about?
That public sector workers (and their family/friends) overwhelmingly voted for the OLP?

If you disagree with the "volume" and vehemency, sorry can't help you there 
I feel this is creating a major financial drag for our economy, and there is no political will to address it.
Anyone that dares to even raise a voice gets run all over.

BTW, I didn't bring up Hudak or the elections.
I am merely responding to a topic that was already in-flight.
sags brought up Hudak, and Synergy mentioned voting for him.


----------



## Addy

NorthKC said:


> So lower rate = lower mortgage rate = higher house prices = I'm never going to be able to buy a decent house at a fair price at this rate!


Listening to CBC Radio after the announcement, the bank reps they spoke with "insist" the mortgage rates will not be going down as a result of the rate cut. I can't see how they can't go down, but I'm due for renewal on our primary residence in July... so I'm hopeful regardless!


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## swoop_ds

I just don't see how reducing the interest rate by 0.25% will do anything. It's not significantly different than 1% to be at 0.75%.

Sure if you have a gigantic debt it'll help, but maybe you shouldn't have gotten such a huge debt.


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## james4beach

What we learned from the US example from a few years ago is that when you have a financial system trained with low interest rates that operates right at the edge of solvency -- as we have with 163% debt-to-income ratio here in Canada -- that even tiny changes in interest rates matter.

This is because people: homeowners, businesses, etc, are operating right at the edge. Living paycheck to paycheck, highly leveraged in their homes and stock portfolios.

I think small changes in interest rates do matter in this scenario because it has a *large % effect* on debt servicing costs. For instance, a rate cut from 100 bp down to 75 bp has reduced interest costs by a whopping 25%. In past history, if a cut from 600 bp to 575 bp happened, that's only a 4% cut to interest costs.

See the difference? Sure it's only 25 bp, but it's a huge % change in resulting cashflows.


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## Cal

swoop_ds said:


> I just don't see how reducing the interest rate by 0.25% will do anything. It's not significantly different than 1% to be at 0.75%.


It sure is a shot in the arm to a lagging economy months before a Federal election though isn't it......I was surprised by the rate drop, but more surprised that OSFI hasn't tightened mortgage or lending rules considering the intent is to stimulate economic growth, not further indebtedness.


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## marina628

I think putting a cap on credit card interest rates would do more for economy than this .25% cut .Real life example my daughter has a low interest card at TD ,the one most of us have emerald with 4.5% interest rate ,pays her bill on time and although she owes $6000 on a $7000 credit limit ,she has never gone over limit or been late and very good fico.Last week they sent her a notice they will be increasing that interest rate by 10.75% the end of March to 15.25%.Lucky for her she graduates in 3 months and will soon have ability to wipe this out fairly quickly but not everyone in same situation.


----------



## sags

Debating union vs non union, public service worker vs private business worker, are convenient distractions thrown into the mix, by the powers to be, to deflect from the real problems.

Making unions illegal or eliminating public service workers aren't going to solve the problem of wage stagnation that is suffocating, and has forced many into debt to survive.

Minor adjustments to the interest rates or the tax rates will have little or no effect.

None of those solutions are going to solve the problem of the wealth accumulating among a very small number of people.

Many studies and reports have been done that show how much wages have stagnated. 

Adjusted to inflation..........the minimum wage should be $21.00 an hour and average wages should be $90,000 instead of $50,000.

One person working 40 hours of labor used to provide enough income for a family. Then it became 2 people working 80 hours a week.

Interesting to note.............the CEO of Target Canada......a failed enterprise that is entering into default, will take home several millions in severance pay.

The amount is equal to more than all of the severance pay that was paid to all Canadians who lost their jobs...........combined.

Jamie Dimon, the CEO of JP Morgan earns $20,000,000 million dollars a year in salary and he is now eligible for millions more in bonuses.

He may be smart...........but he isn't THAT smart...........and lots of people who are smarter than he is are earning a whole lot less.

Income and wealth inequality must be addressed or the capitalist system will collapse into itself. 

What started out as a economic system that allowed people to work hard, advance and improve their lives, has been taken over by ruthless, selfish people who buy political power to do their bidding. It is rotten to the core, with hedge funds and vulture capitalists ruling the day.

We can debate the small things, but there isn't much we can do about the real problems, except maybe join the protests when they start happening.


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## sags

OFSI did make some recent changes, including considering LOC as a loan and ordering the banks to calculate a monthly payment that would be the appropriate loan payment. This will affect income qualifications for people with large lines of credit, who are making interest only payments I believe.


----------



## MrMatt

marina628 said:


> I think putting a cap on credit card interest rates would do more for economy than this .25% cut .Real life example my daughter has a low interest card at TD ,the one most of us have emerald with 4.5% interest rate ,pays her bill on time and although she owes $6000 on a $7000 credit limit ,she has never gone over limit or been late and very good fico.Last week they sent her a notice they will be increasing that interest rate by 10.75% the end of March to 15.25%.Lucky for her she graduates in 3 months and will soon have ability to wipe this out fairly quickly but not everyone in same situation.


I don't want a cap on interest rates for credit cards, let them pay.
Like you point out, there are very reasonable loan rates available, anyone too lazy to transfer a 29% CC to a low rate card or LOC DESERVES to overpay.


----------



## protomok

^ But where are these low rate credit cards? According to http://creditcards.redflagdeals.com/t/Low-Interest-Credit-Cards/ the lowest rate I saw was 9.9% and as marina mentioned these rates are subject to large changes, and many don't have access to low interest HELOCs.

I'm also not convinced the gov't has the ability / competency to cap CC rates. It perhaps may be popular with some voters but banks will just recoup the difference by jacking up rates/fees elsewhere.

One trend I am watching closely is p2p lending like Lending Club [link] Since lender's capital get split into many small loans to numerous borrowers the risk to the average joe lender drops significantly. If p2p lending takes off CC rates could be pushed lower.


----------



## GuzzlinGuinness

I'm a unionized public sector employee and I voted for Tim Hudak's PC Party.

Boom anecdotal dissonance.


----------



## MrMatt

protomok said:


> ^ But where are these low rate credit cards? According to http://creditcards.redflagdeals.com/t/Low-Interest-Credit-Cards/ the lowest rate I saw was 9.9% and as marina mentioned these rates are subject to large changes, and many don't have access to low interest HELOCs.
> 
> I'm also not convinced the gov't has the ability / competency to cap CC rates. It perhaps may be popular with some voters but banks will just recoup the difference by jacking up rates/fees elsewhere.
> 
> One trend I am watching closely is p2p lending like Lending Club [link] Since lender's capital get split into many small loans to numerous borrowers the risk to the average joe lender drops significantly. If p2p lending takes off CC rates could be pushed lower.


Get a LOC instead of a card, or look. Redflag deals isn't really a financial site.

But they exist, this was on the first page of google results.
http://www.tdcanadatrust.com/products-services/banking/credit-cards/view-all-cards/emerald-card.jsp

Disclosure I don't have it, and I do own TD stock.


----------



## SkyFall

The interest rate on the Emerald is tight to your credit score. And also careful guys TD will increase their annual interest rate on credit cards at the end of March, I cannot disclose the figures now though... but it's not good at all if you have a large balance on your credit card or/and you don't have the Emerald.

Disclaimer: I work for TD and I don't own any TD stock.


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## marina628

My daughter's is a emerald credit card and to prove the point fico dont matter , i pulled hers this morning she has a 758 fico , owes $368 on a scotia bank card with 1000 limit , owes $258 on td gree with $1000 limit , these 2 are paid in full monthly.She has a $5944.12 owing on the emerald card with $7000 limit and yes end of march the interest rises.She is full time student ,rents and no assets really except $2800 in a savings account.But as I stated May 1 she graduates and she has a 1 month internship already lined up which will likely lead to a full time job so her worst case is to live with the 15.25% new interest rate for 3-6 months.I could pay it out for her and have her pay me but rather she solve this one on her own.


----------



## protomok

I'm not too familiar with LOCs since we don't have non mortgage debt but my understanding is LOCs are only available if a certain credit rating is met, and the rate widely varies based on the credit rating. For sure a lot people are just lazy or don't have enough financial understanding to switch out of high CC debt but I think many just don't have access to low interest loans.

The bigger issue though is the root cause of Canada's debt crisis - stagnating wages, out of control house prices, out of control tuition prices, AND spending / lack of desire to live within people's means, etc. I know people in their 20s on their second or third new house with low income and giant debt...this can't last forever and the BOC's rate cut only delays the inevitable.


----------



## SkyFall

marina628 said:


> My daughter's is a emerald credit card and to prove the point fico dont matter , i pulled hers this morning she has a 758 fico , owes $368 on a scotia bank card with 1000 limit , owes $258 on td gree with $1000 limit , these 2 are paid in full monthly.She has a $5944.12 owing on the emerald card with $7000 limit and yes end of march the interest rises.She is full time student ,rents and no assets really except $2800 in a savings account.But as I stated May 1 she graduates and she has a 1 month internship already lined up which will likely lead to a full time job so her worst case is to live with the 15.25% new interest rate for 3-6 months.I could pay it out for her and have her pay me but rather she solve this one on her own.


I am no expert on the credit bureau and the technicality on how exactly the Emerald's interest is calculated, but I can tell you that everytime I apply for the Emerald for a client.... those with so-so credit get the higher end interest rate and those with almost perfect/very good get the lower end....

Like I said I am no expert, but that is what I see and this is what ''they'' told me it was calculated... I don't know if its the recuring balance on the Emerald, but I am completely speaking off the record and don't want to pretend to know exactly your daugther's situation.


----------



## marina628

She has this card over 3 years now and always paid prime plus 1.5% , this year is the first year she has been using it ,she has had some very expensive cost with school ,for example $1000 in printing expenses last semester for getting her book printed.


----------



## SkyFall

protomok said:


> I'm not too familiar with LOCs since we don't have non mortgage debt but my understanding is LOCs are only available if a certain credit rating is met, and the rate widely varies based on the credit rating. For sure a lot people are just lazy or don't have enough financial understanding to switch out of high CC debt but I think many just don't have access to low interest loans.
> 
> The bigger issue though is the root cause of Canada's debt crisis - stagnating wages, out of control house prices, out of control tuition prices, AND spending / lack of desire to live within people's means, etc. I know people in their 20s on their second or third new house with low income and giant debt...this can't last forever and the BOC's rate cut only delays the inevitable.


Most HELOC are around the prime rate.... I rarely see HELOC above 4.5% (and thats high)

You can have access to a ULOC with some very fair level of credit score.... but on a ULOC the interest rate can vary widely from around 4.5% to 12.5%.... lets say you get a ULOC around 7.5%.... you can transfer right away as much CC's debts on it and save on interest. 

But I agree with the TOO high debt level...


----------



## Guban

GuzzlinGuinness said:


> I'm a unionized public sector employee and I voted for Tim Hudak's PC Party.
> 
> Boom anecdotal dissonance.


I have been waiting for a public servant in Ontario to come clean. It's shocking that it took so long.


----------



## gibor365

Yesterday heard on business report that rate will be cut again in March..... Time to buy US$ and equities?


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## sags

marina628 said:


> My daughter's is a emerald credit card and to prove the point fico dont matter , i pulled hers this morning she has a 758 fico , owes $368 on a scotia bank card with 1000 limit , owes $258 on td gree with $1000 limit , these 2 are paid in full monthly.She has a $5944.12 owing on the emerald card with $7000 limit and yes end of march the interest rises.She is full time student ,rents and no assets really except $2800 in a savings account.But as I stated May 1 she graduates and she has a 1 month internship already lined up which will likely lead to a full time job so her worst case is to live with the 15.25% new interest rate for 3-6 months.I could pay it out for her and have her pay me but rather she solve this one on her own.


She has a high debt used to debt available ratio in total (all 3 cards).....9000 total limit and roughly 6700 outstanding debt. 

She has a good credit score and pays her bills promptly, and no late payments or defaults...........but any "excuse" will do to raise interest rates........and this is probably what they are using.

Oddly enough, if a person had a $40,000 limit and owed $10,000 on it..............they would be considered a better risk.

This is how the working poor get trapped into high interest rates. They get approved for a $500 credit card and owe $490 on it......and their rates get jacked up.

Owe considerably more........but have higher limits.........and you are golden to the bank.


----------



## sags

What I wonder..........is how banks will react if home values fall below the mortgages owed.

There is no clarity on the issue, and there have been isolated instances where certain banks demanded the difference when the mortgage was renewed.

Many people assume the banks will ignore the situation and renew the mortgages. 

Unless there is legislation governing the situation, I think different people may well experience different scenarios from different lenders.

I think legislation that required the lenders to renew, regardless of the appraised value of the property, and providing the borrower is current in all payments, would be a good idea to prevent future unknown problems.

We wouldn't want a situation develop similar to the US, where good borrowers were forced out of their homes, because they couldn't pay the difference.

That situation severely aggravated the housing crisis and left the banks will millions of empty homes, and borrowers with trashed credit ratings.


----------



## MrMatt

SkyFall said:


> I am no expert on the credit bureau and the technicality on how exactly the Emerald's interest is calculated, but I can tell you that everytime I apply for the Emerald for a client.... those with so-so credit get the higher end interest rate and those with almost perfect/very good get the lower end....
> 
> Like I said I am no expert, but that is what I see and this is what ''they'' told me it was calculated... I don't know if its the recuring balance on the Emerald, but I am completely speaking off the record and don't want to pretend to know exactly your daugther's situation.


Of course people with poor credit should pay more.
Poor credit is those who are more likely to not pay their debts.


----------



## HaroldCrump

sags said:


> Debating union vs non union, public service worker vs private business worker, are convenient distractions thrown into the mix, by the powers to be, to deflect from the real problems.
> Making unions illegal or eliminating public service workers aren't going to solve the problem of wage stagnation that is suffocating


No one is suggesting _eliminating public service workers_ - you are making straw man arguments.
The issue is the % of govt. spending going towards total compensation, incl. pensions, benefits, post-retirement benefits, etc.
Add in underfunded or unaccounted deficits, which will have to be paid out of future tax revenues.

That problem cannot be solved by raising revenue because the unionized compensation will simply expand to absorb the increased revenue.


----------



## sags

I doubt significant savings could be reached, without eliminating some positions.

The public service has bloated under the Harper government. I am not sure what they all are doing..........or the reason for the huge increase.

Speaking of a bloated government............London, Ontario has a population of 366,000 residents who are represented in the Provincial Legislature by 3 MPPs.

Calgary, Alberta has a population of 988,000 and is represented in the Alberta Provincial Legislature by 25 MLAs.

Maybe Harper learned to love big government while he was in Calgary.


----------



## HaroldCrump

I am not denying the massive expansion of the public sector during the Harper administration since 2006 onwards.
But the fact is that across all 3 levels of govt., across all provinces, there has been a massive increase in public sector staffing levels & compensation costs, incl. deferred compensation costs (pensions & post-retirement benefits like extended health care coverage, etc.).

ON has experienced an inordinately large expansion of public sector headcount under the "governance" of McGuinty & McWynne.

In Harper's own province, there has been *a massive expansion of the public sector*, which is largely responsible for Alberta's deficit situation (prior to the oil price crash).


----------



## fatcat

TD Bank cuts its economic forecast due to low oil, predicts another rate cut - 

yikes ...


http://www.timescolonist.com/cmlink...-forecast-predicts-another-rate-cut-1.1742373


----------



## marina628

sags said:


> She has a high debt used to debt available ratio in total (all 3 cards).....9000 total limit and roughly 6700 outstanding debt.
> 
> She has a good credit score and pays her bills promptly, and no late payments or defaults...........but any "excuse" will do to raise interest rates........and this is probably what they are using.
> 
> Oddly enough, if a person had a $40,000 limit and owed $10,000 on it..............they would be considered a better risk.
> 
> This is how the working poor get trapped into high interest rates. They get approved for a $500 credit card and owe $490 on it......and their rates get jacked up.
> 
> Owe considerably more........but have higher limits.........and you are golden to the bank.


Yes you got that right Sags her % are high but in big picture that is not a big amount of debt.She has a couple things to work on this week and hopefully one will work out , first option is calling TD and see if they will at least keep her rate the same 3-6 months ,the 2nd is she probably can get a credit line to pay it out by end of marchas she starts working in 3 months so can knock this out in about 6 months .


----------



## nobleea

sags said:


> Speaking of a bloated government............London, Ontario has a population of 366,000 residents who are represented in the Provincial Legislature by 3 MPPs.
> 
> Calgary, Alberta has a population of 988,000 and is represented in the Alberta Provincial Legislature by 25 MLAs.
> 
> Maybe Harper learned to love big government while he was in Calgary.


How is that bloated? London, ON has 2.7% of Ontario's population and 2.8% of the MPPs
Calgary has 23.8% of Alberta's population and 28.7% of the MLAs. Maybe you're suggesting AB should have the same MLA/pop ratio as ON? I guess that would save us 54 MLA's. In that respect, PEI is ridiculously bloated.


----------



## marina628

Well seems somebody at TD has a heart ,my daughter called VISA explained she is finishing her studies and has been using this card for expenses related to school .They have given her a 12 month extension on her 4.5% interest rate and there was really no explanation why they were going to raise it to begin with.


----------



## Synergy

Looks like RBC was the first to cut it's mortgage rates.
http://www.theglobeandmail.com/repo...-rates-as-bond-yields-plunge/article22639128/

However, the prime rate is staying put at 3%


----------



## HaroldCrump

If the banks don't cut their prime rate, BOC will lower another 25 bps in March.
Then the banks will be compelled to lower the prime.


----------



## sags

marina628 said:


> Well seems somebody at TD has a heart ,my daughter called VISA explained she is finishing her studies and has been using this card for expenses related to school .They have given her a 12 month extension on her 4.5% interest rate and there was really no explanation why they were going to raise it to begin with.


Good on her for standing up for herself. Most people would have just shrugged and paid.


----------



## sags

HaroldCrump said:


> If the banks don't cut their prime rate, BOC will lower another 25 bps in March.
> Then the banks will be compelled to lower the prime.


Yes, leaving the BOC with two more rate cuts of 0.25% left in their quiver..........and then they pay us to borrow money.

What does this do to HISA and GIC rates ?


----------



## My Own Advisor

http://www.theglobeandmail.com/repo...-rates-as-bond-yields-plunge/article22639128/

RBC is first to cut mortgage rates as bond yields plunge...Royal Bank, the country’s second-biggest lender by assets, offered a five-year fixed rate of 2.84 per cent on Jan. 24, down from 2.94 per cent last week, according to rate-tracking website Ratespy.com. That’s below RBC’s posted rate of 4.84 per cent. The bank also trimmed its three-, seven-, and 10-year rates, according to CanadianMortgageTrends.com, an industry news website.


----------



## Davis

> ON has experienced an inordinately large expansion of public sector headcount under the "governance" of McGuinty & McWynne.


According to Stats Can figures, http://www.fin.gov.on.ca/en/budget/ontariobudgets/2014/ch1e.html, Ontario has the lowest per-capita program spending among provinces and the lowest total government revenue per person among all Canadian provinces, including funding from federal transfers. I'm sorry that the facts don't support your prejudices.


----------



## HaroldCrump

Davis said:


> According to Stats Can figures, http://www.fin.gov.on.ca/en/budget/ontariobudgets/2014/ch1e.html, Ontario has the lowest per-capita program spending among provinces and the lowest total government revenue per person among all Canadian provinces, including funding from federal transfers. I'm sorry that the facts don't support your prejudices.


Welcome to the Duncan/Souza misleading rhetoric, Davis.
The OLP has been parading this "lowest per capita spending" nonsense for the last several months.

- Ontario has the highest nominal debt among all the provinces (they just passed QC late last year)
- Ontario has the highest per capita debt among all provinces
- Ontario has the highest debt to GDP ratio
- Ontario's debt servicing costs as a % of GDP is highest among all provinces (11% at this point)
- Ontario's public sector hiring as a % of workforce in last 8 years the highest, above even Alberta's which has become notorious for its public sector compensation spending

*Some more details and charts here*.

I'm sorry that the facts don't support your prejudices.


----------



## HaroldCrump

My Own Advisor said:


> RBC is first to cut mortgage rates as bond yields plunge...Royal Bank, the country’s second-biggest lender by assets, offered a five-year fixed rate of 2.84 per cent on Jan. 24, down from 2.94 per cent last week, according to rate-tracking website Ratespy.com. That’s below RBC’s posted rate of 4.84 per cent. The bank also trimmed its three-, seven-, and 10-year rates, according to CanadianMortgageTrends.com, an industry news website.


RBC has not cut its Prime rate for VRMs, just the fixed rate.
I guess the banks are waiting for March to cut their VRM rates.


----------



## Davis

HaroldCrump said:


> Welcome to the Duncan/Souza misleading rhetoric, Davis.
> The OLP has been parading this "lowest per capita spending" nonsense for the last several months.
> 
> - Ontario has the highest nominal debt among all the provinces (they just passed QC late last year)
> - Ontario has the highest per capita debt among all provinces
> - Ontario has the highest debt to GDP ratio
> - Ontario's debt servicing costs as a % of GDP is highest among all provinces (11% at this point)
> - Ontario's public sector hiring as a % of workforce in last 8 years the highest, above even Alberta's which has become notorious for its public sector compensation spending
> 
> *Some more details and charts here*.
> 
> I'm sorry that the facts don't support your prejudices.


Umm, Harold, I have not claimed that Ontario has not been increasing its debt. I don't dispute that. Ontario has a deficit problem. We are agreed on that. Are you actually claiming that Stats Can is wrong in saying that Ontario has the lowest per capita spending of any province? Can you provide any evidence to refute Stats Can's claim about Ontario's spending? My point is that it is hard to claim that Ontario has a spending problem, when it has the lowest per capita spending of any province. 

It is easy to reduce the deficit by cutting spending: close hospital beds, push kids into overcrowded classrooms, and cut water safety testing, right Mike Harris? Ontario learned from that disaster, and that is why Mike Harris Jr. couldn't get elected.


----------



## HaroldCrump

Davis said:


> Ontario has a deficit problem.


Deficits are never a problem, per se.
They are the _symptom _of a problem, or problems.
It could be a spending problem, or a revenue problem, or both.

FWIW, I don't believe Ontario's deficit is a problem, or that bad, actually.
I would say the debt is a far bigger issue for Ontario.
It is growing at the fastest rate among all provinces.
Used to that QC was the fiscally insane among provinces, but thanks to McWynne & Souza, that baton has passed to Ontario.

Keep in mind that the official debt numbers do not include unfunded retirement liabilities for Ontario's massive public sector workforce, incl. pension solvency deficits, post-retirement health care, etc.

The deficit is the least of all problems - it is "only" about $12B.
A carbon tax here, and a rich tax there, and it can be probably be paid off.

But the debt is the scary number, expected to hit $300B within the next couple of years.

The most recent AG report was most critical of Ontario's fiscal (mis)management.



> Are you actually claiming that Stats Can is wrong in saying that Ontario has the lowest per capita spending of any province?
> Can you provide any evidence to refute Stats Can's claim about Ontario's spending?


No, of course not, but note that I did not even refer to it.
Lowest per capita spending is irrelevant in the face of these massive debts.
There are several other _per capita_ numbers that are worse.



> My point is that it is hard to claim that Ontario has a spending problem, when it has the lowest per capita spending of any province


So basically you want to raise taxes?
That is where you are going with this?



> It is easy to reduce the deficit by cutting spending: close hospital beds, push kids into overcrowded classrooms, and cut water safety testing, right Mike Harris?


Hilarious how any suggestion of spending problems brings up this FUD around people dying on the streets, third world like hospitals, Communist China style classrooms with 60 kids, etc.
And of course, the usual customary reference to Mike Harris...

No, how about we bring the unions under control, cut public sector compensation costs, control the runaway pension & post-retirement liabilities, and re-consider wasting a billion here and a billion there on corrupt, greasing schemes like eHealth, Ornge, gas plants, Pan Am Games, and Presto cards.

Would the OLP be kind enough to spare us this billion $ per year scams & scandals?
That would be a good start.
Then, we can at least have a sensible discussion about fiscal policy & taxation.


----------



## andrewf

How much room do you think there is for savings on public sector compensation? I'm skeptical that it is going to solve Ontario's fiscal woes, and pragmatically speaking, labour laws tie the hands of governments in dealing with public sector unions. See the rapidly rising public sector compensation costs at the federal level as well.


----------



## Davis

You (in #130): "Welcome to the Duncan/Souza misleading rhetoric, Davis. The OLP has been parading this "lowest per capita spending" nonsense for the last several months."

Me (in #132): "Are you actually claiming that Stats Can is wrong in saying that Ontario has the lowest per capita spending of any province? Can you provide any evidence to refute Stats Can's claim about Ontario's spending?"

You (#133): "No, of course not, but note that I did not even refer to it."

Umm, yes you did. You called it "misleading rhetoric" and "nonsense". I was challenging you to provide some evidence to back up your claim. Now you disavow it.

You: "Hilarious how any suggestion of spending problems brings up this FUD around people dying on the streets, third world like hospitals, Communist China style classrooms with 60 kids, etc."

Nope, I didn't bring up people dying in the streets, Communist China or 60 kids in the classroom. It was actually 35 in the Mike Harris years. (John Snoebelen wanting to "create a crisis" in education and all.)

The reason cuts to education and health care are brought up is because they are by far the biggest provincial expenditures. You simply cannot make significant cuts to public spending without cutting those two, as MIke Harris found out. 

I too would like to see an end to money being wasted buying votes through gas plants and subways where there isn't the traffic to support them, but not at the cost of trashing out education and health care systems. I don't think giving kids lousy educations and sick people lousy health care is "hilarious". 

You: "Then, we can at least have a sensible discussion about fiscal policy & taxation." 

I doubt that you can since you can't seem to keep track of your own rants.


----------



## HaroldCrump

andrewf said:


> How much room do you think there is for savings on public sector compensation? I'm skeptical that it is going to solve Ontario's fiscal woes, and pragmatically speaking, labour laws tie the hands of governments in dealing with public sector unions. See the rapidly rising public sector compensation costs at the federal level as well.


There is a lot of scope for savings on public sector compensation.
Defined Benefit plans can be converted to Defined Contribution or G/RRSP plans.
Employee contributions can be mandated to be at least 50%
Banked sick days can be reduced/eliminated, standard working hrs. increased from 37 to 40, other kinds of AWOL & furlough days eliminated (such as WLBs).
Health care cost can be shared in a 80/20 or 90/10 ratio like most other organizations, etc.

There are many ways.

No laws dictate specific benefits.
Law only calls for negotiated collective bargaining.
And if there are any laws that are getting in the way of implementing correct fiscal policy, those laws can be changed.
That is what majority governments are for.


----------



## HaroldCrump

Davis said:


> You (in #130): "Welcome to the Duncan/Souza misleading rhetoric, Davis. The OLP has been parading this "lowest per capita spending" nonsense for the last several months."
> 
> Me (in #132): "Are you actually claiming that Stats Can is wrong in saying that Ontario has the lowest per capita spending of any province? Can you provide any evidence to refute Stats Can's claim about Ontario's spending?"
> 
> You (#133): "No, of course not, but note that I did not even refer to it."
> 
> Umm, yes you did. You called it "misleading rhetoric" and "nonsense". I was challenging you to provide some evidence to back up your claim. Now you disavow it.


I did not say that metric is factually incorrect.
I said it is not relevant to the debt situation.



> Nope, I didn't bring up people dying in the streets, Communist China or 60 kids in the classroom.


So what was the purpose of bringing up crowded classrooms and cutting hospital beds?
If you are not concerned about over-crowded schools & less # of hospital beds, why bring it up?



> I too would like to see an end to money being wasted buying votes through gas plants and subways


Great, when do we start?



> I doubt that you can since you can't seem to keep track of your own rants.


So expression of dissatisfaction with the fiscal situation of a govt. is a rant?
Suggestions to cut spending is a rant?
And you re-hashing the same official rhetoric is not a rant?

Invoking "hospitals" and "schools" does not give you a moral high ground.


----------



## Davis

You: "I did not say that metric is factually incorrect."

You called it "misleading rhetoric" and "nonsense". It is relevant to the spending situation, which is where the discussion began. 

You: "So what was the purpose of bringing up crowded classrooms and cutting hospital beds?"

I bring up hospitals and schools because, for 2104-15, 42.0% of Ontario's program expenditure is in the health sector, 27.4% is in education, post-secondary and training sectors, and 12.6% is in the children's services sector (total: 82.0%). You cannot talk about cutting spending seriously without cutting those sectors.

Mike Harris claimed he would cut waste and bureaucracy, but he had to cut those sectors in order to make any progress on the deficit, and that resulted in overcrowding in hospitals and schools that Tim Hudak paid for at the polls. 

You: "And you re-hashing the same official rhetoric is not a rant?" Just a moment ago you said that it was not factually incorrect, now you call it "official rhetoric"?

The fact is that Ontario does spend less per capita than any other province. Claims that Ontario's public sector is bloated are not supported by this comparison. Bloated compared to where?


----------



## andrewf

HaroldCrump said:


> There is a lot of scope for savings on public sector compensation.
> Defined Benefit plans can be converted to Defined Contribution or G/RRSP plans.
> Employee contributions can be mandated to be at least 50%
> Banked sick days can be reduced/eliminated, standard working hrs. increased from 37 to 40, other kinds of AWOL & furlough days eliminated (such as WLBs).
> Health care cost can be shared in a 80/20 or 90/10 ratio like most other organizations, etc.
> 
> There are many ways.
> 
> No laws dictate specific benefits.
> Law only calls for negotiated collective bargaining.
> And if there are any laws that are getting in the way of implementing correct fiscal policy, those laws can be changed.
> That is what majority governments are for.


Ban collective bargaining (or just put up with year-long strikes)? Provincial governments might run into the limits of what can be achieved, legally. They can't unilaterally tear up agreements with unions and impose your new regime.

Edit: I say this as someone who is not sympathetic to unions. Harris learned what it is like to play hardball with unions, as did Chretien. Harper. McGuinty and now Wynne has taken the opposite tack and bought labour peace. And what you propose is more extreme than the reforms implemented by Harris and Chretien. It would not be unreasonable to expect a decade or two of continual labour disruptions in the course of implementing it.


----------



## Davis

Andrewf makes sound points. Further, in the Ontario government I see good people leaving in frustration - five years of salary freeze for management, cuts to post-retirement benefits, and little prospect for improvement for a long time. Young managers often have to put their families first be leaving for the private sector, or other levels of government. It is getting more difficult to recruit quality talent. You know the old saying, if you pay peanuts, you get monkeys. In the fantasy world of Toronto Sun readers, these people wouldn't be replaced. But in the real world, you need people to collect taxes, manage budgets and pay salaries if you want education and health care and policing. 

The standard work day is 9-5, just like in the private sector, which means 37.5 hours per week with half an hour off unpaid for lunch. 37.5 hours does not mean shorter work days.


----------



## Emjay85

Private sector is for the most part 40 hour weeks consisting of 8.5 hour days. Half hour of unpaid time during the day for lunch/breaks. 

Private sector goes through cut back all the time. Cuts to pension and benefits are what need to be done to be sustainable in the long term. I went through them in the private sector. The public sector should be no different but always seems to be quite the opposite.


----------



## protomok

HaroldCrump said:


> There is a lot of scope for savings on public sector compensation.
> Defined Benefit plans can be converted to Defined Contribution or G/RRSP plans.
> Employee contributions can be mandated to be at least 50%
> Banked sick days can be reduced/eliminated, standard working hrs. increased from 37 to 40, other kinds of AWOL & furlough days eliminated (such as WLBs).
> Health care cost can be shared in a 80/20 or 90/10 ratio like most other organizations, etc.


+1

I don't know a single person in private sector who gets a DB plan or banked sick days. Perhaps in certain private sectors like resource focused industries DB pensions exist but I doubt this is a high % of the population.

Unfortunately we've already made commitments to the govt workers and I don't think it's fair / possible (unions would block / destroy any political party who attempts) to cut existing pensions since people have already factored in DB plans to their savings goals / financial planning.

What needs to happen is for a courageous government to declare that as of today government pensions will transition to DC or RRSP match or equivalent. People who have already "earned" gold plated pensions can keep them but going forward all govt employees will switch to a more sustainable DC or RRSP match model.


----------



## HaroldCrump

^ Most large corporations that used to offer DBP plans have been gradually moving to DCP or GRRSP models.
This process was already well underway prior to the financial crisis, but got accelerated due to the financial crisis.

For instance, all the Big 5 banks are no longer offering DBP plans to new employees (although existing employees get to keep their membership in those plans).
*RBC is the last of the Big 5 to switch to a DCP*.

Manulife Financial switched to DCP in 2009.

DBPs are still offered by regulated utilities and big telecom companies like BCE.
However, those plans are not gold-plated like the public sector ones.
Accrual rates are lower, indexation is not provided or lower than PS plans, early retirement benefits either do no exist or are a lot lower than PS plans (i.e. higher penalties for early retirement).
The private sector DBPs are a pale shadow of the gold-plated plans in the public sector.

The main reason private sector companies are changing the model is the unpredictability of future liabilities.
Drastic changes in discount rates throws these plans into deep solvency deficits, the demographics are brutal, and companies cannot operate profitably with such strong fetters against their future costs.
Public sector does not care about any of this because of the unlimited funding provided by taxpayers.


----------



## HaroldCrump

andrewf said:


> Ban collective bargaining (or just put up with year-long strikes)? Provincial governments might run into the limits of what can be achieved, legally. They can't unilaterally tear up agreements with unions and impose your new regime.


I am not suggesting that at all.
Collective bargaining is heavily weighted in favor of the public service unions because of their threats to strike, work to rule, etc.
However, taxpayers do not have the option of refusing to pay the higher taxes demanded by the so-called negotiated settlement.

The changes I suggested above are not mine alone.
Several other policy advocates mention the same, more or less.

Also, I didn't say all of these must be implemented on exactly the same day.
These can be phased in over a period of time.
DBP members should of course keep their existing membership - but plan can be changed for future hires.
Some plan features can be scaled back, such as inflation indexation reduced, employee contributions increased etc.

These changes do not mean "_tearing up contracts_".
Such changes are already underway in the private sector, and in a few selected instances, even in the public sector (New Brunswick, St. Johns NFLD, certain SK DBP plans, etc.)

Ontario is the outlier that is steadfastly refusing to reform its public sector compensation system.
They are not even willing to start the conversation of reform. Complete denial that a problem even exists.


----------



## Guban

HaroldCrump said:


> What is it that we are really disagreeing about?
> That public sector workers (and their family/friends) overwhelmingly voted for the OLP?
> 
> If you disagree with the "volume" and vehemency, sorry can't help you there
> I feel this is creating a major financial drag for our economy, and there is no political will to address it.
> *Anyone that dares to even raise a voice gets run all over.*


We are disagreeing about some of the absolutes in this discussion:
1. That ALL union/public servants members voted
2. That they ALL voted Liberal in Ontario in the most recent election.
3. That tax cuts is the only way to get out of this mess.

BTW, I am prepared to concede the last point given sufficient evidence. I will publicly apologize and say that you are correct when the governing party in Ontario or Canada cuts our taxes, and the corresponding debt decreases in the long term without a major drop in the quality of life ... say for 20-25 years. I hope that you are prepared to reciprocate if any of the above governments can accomplish the same thing using a different way, other than only tax cuts.

I certainly respect your right to emotion, but feel like any other view expressed, other than tax cuts "gets (us) run all over", as you put it. Hence my reference to volume and vehemence. Plus, I thought that the alliteration was nice.


----------



## HaroldCrump

Guban said:


> 3. That tax cuts is the only way to get out of this mess.


I did not say this.
Can you quote a post where I said tax cuts are the _only_ way forward?

What (I believe) I have been conveying is that these are _structural_ problems vs. monetary (i.e. money supply related) problems.
That is how this discussion started a couple of pages back...

I agree that lowering interest rates _can _stimulate economies _to some extent_.
However, such stimulus is (1) limited, (2) short-term & short-lived, and (3) benefits certain sectors unevenly, such as financial services, real estate, etc.

Structural changes are not just tax rates, although that is a part of it.
Structural changes involve fiscal policy, labor laws, immigration policy, subsidies, and other types of targeted incentives.

Europe & Japan are the best examples of countries (or set of countries) trying to solve structural problems with monetary solutions.
It is not working, clearly.
Not only is it not working, it is creating a lot of hardship for most ordinary people.

Many problems in US & Canada are structural in nature.
Canada cutting overnight rates by 25 bps (or another 50 pts during the rest of 2015) do not solve those problems.

I do believe that tax cuts are required in Canada - of all types (income, retail, payroll).

FWIW, I do not agree with the current federal govt's implementation of tax cuts, and I have said so several times on other threads.
These surgically targeted, marginal cuts are not the way to go.
Broad based, across the board tax cuts are required.
Such as a 2% cut to all income tax tiers. Another 1% GST cut. etc.
Provinces should do the same.

But at the very least not kibosh federal tax cuts by raising their own taxes.

But tax cuts are not enough.
It is probably not even 1/4th of the structural changes required.

Consider the developing countries that really emerged in the last 10 years with double digit % GDP growth - China, India, South Korea, Brazil, etc.
They underwent massive structural changes.
Monetary policy was part of it, but toying with interest rates, deposit rates, repo rates, etc. did not create their impressive growth.

In the US, the states that made structural changes i.e. labor laws, reducing corporate tax rates, subsidies for businesses to relocate, etc. were the first to emerge from the recession.


----------



## sags

The last Canadian governments who balanced the budget and actually paid down the debt, was the Liberal Jean Chretien/Paul Martin governments.

Martin was the main architect as he was the Finance Minister in Chretien's government, before becoming the Prime Minister himself.

In addition to that huge accomplishment, Martin also revamped the CPP and put it on a sound financial path for the next 75 years.

Introduction of the GST (portrayed by Conservatives as a job killer), and raising CPP contribution rates (portrayed by the Conservatives as a job killer) were two big changes that made it possible.

Harper cut the GST and reduced corporate taxes, while cancelling tax reductions for the lowest earnings Canadians.

His changes immediately wiped out the surplus, and Canada's national debt has been rising to record levels ever since.

Tax cuts to corporations didn't provide any jobs and hasn't kept manufacturing in Canada. It was a total failure.

In my view, the Liberals plan (higher taxes and contributions) was a success, and the Conservative plan (cut taxes and corporate welfare) was a failure.

Edit.........

In fairness to the Conservatives, they have also been dealing with the increasing negative effect of free trade deals with China. Those deals were early in implementation during the Chretien/Martin era and the negative effects weren't as prevalent or visible as they are now.

Former US President Bill Clinton has stated he was a free trade advocate, but the negative effects have been much worse than he believed they would be.

The free trade deal with China should be either revamped or rescinded. Either they open their doors to Canadian goods or we shut our doors to their goods.


----------



## HaroldCrump

sags said:


> Introduction of the GST (portrayed by Conservatives as a job killer)


GST was brought in by Mulroney in 1991, a conservative leader.
Mulroney was voted out in 1993 in no small part because of a public backlash against the GST.

During the 93 election campaign, Jean Chrétien had promised to repeal the tax (which the federal liberals had opposed).
Of course, he did no such thing...


----------



## HaroldCrump

Here is an _excellent_, easy to understand write up on structural fetters to economic growth from the IMF.
This is the kind of stuff I was referring to.

Where they say _Price Controls_, think of our various supply management 
_Public sector enterprises_ refers to our state owned crown corps (federal and provincial) such as CBC, Metrolinx, etc.
Paper also refers to underfunded pension liabilities in public pension plans under the section _Social Safety Nets_.

*What Are Structural Policies? Finance & Development*


----------



## Guban

HaroldCrump said:


> I did not say this.
> Can you quote a post where I said tax cuts are the _only_ way forward?


http://canadianmoneyforum.com/showthread.php/33257-Rate-cut!/page7
Post 67


> To put money into the hands of people, we need tax relief.
> All types of taxes, all across the board.
> Retail taxes, income taxes, payroll taxes - every type of tax needs to be cut to put more money into the hands of people.
> 
> None of this progressive taxation, income re-distribution nonsense will work.


http://canadianmoneyforum.com/showt...limiit-go-up-to-10000-dollars-in-2015/page10:
Post 99


> We need across the board income tax rate cuts. At least 2% minimum at each tier.
> And an increase to the personal exemption limit.
> 
> We also need a mechanism to prevent provinces from kyboshing federal tax cuts by raising provincial rates.
> Ontario did that with income tax rates, and some Atlantic provinces did that with the GST cut.


Perhaps I misunderstood your usage of "need". As this is the case, I withdraw the "only" in my post. I stand by the rest of what I wrote:
BTW, I am prepared to concede the last point given sufficient evidence. I will publicly apologize and say that you are correct when the governing party in Ontario or Canada cuts our taxes, and the corresponding debt decreases in the long term without a major drop in the quality of life ... say for 20-25 years. I hope that you are prepared to reciprocate if any of the above governments can accomplish the same thing using a different way, other than tax cuts.


----------



## HaroldCrump

Those are all addressing specific questions/comments as part of a discussion.

On the thread about TFSA increase, I am saying that I do not support surgically targeted tax cuts, such as fitness credits, home renovation credits, etc.
Exactly the same point that I made above.

Regarding post #67, I am saying that QE, LSAPs, etc. do not put more money into the hands of people.
Direct tax cuts are more efficient in doing so.
I stand by that statement.

I am in favor of tax cuts vs. QE or overnight rate cuts.
I prefer broad-based tax cuts vs. targeted tax credits to specific groups.
But that does not mean that tax cuts are the _only _stimulus mechanism I am advocating.


----------



## HaroldCrump

RBC just announced a cut to its Prime rate, but by 15 bps only.


----------



## lightcycle

TDB8150 1.25 -> 1.00
TD Prime Rate 3.00 -> 3.00

:chargrined:


----------



## HaroldCrump

lightcycle said:


> TDB8150 1.25 -> 1.00
> TD Prime Rate 3.00 -> 3.00


Financial Repression :biggrin:


----------



## SkyFall

BMO cutted their prime rate as well!


----------



## HaroldCrump

Regarding the rate cuts vs. tax cuts issue, *here is an excellent interview with Richard Werner*, the economist credited with coining the term _quantitative easing_ back in the early 1990s.

He discusses how interests rates are not permanently stimulative in nature, and also how lending rate changes by central banks are a trailing indicator, and not a leading indicator, of economic direction.
He explains how ultimate credit creation by the banks is stimulative, and explains how interest rate cuts and/or quantitative easing (in its current form) does not work given the regulatory restrictions and deposit requirements placed on the banking system.

He refers to _data_ but does not provide any during the interview (probably due to time constraints).
But I know where to find the data.
Refer to _Code Red_ by John Mauldin, Chapter 5 - _Arsonists are running the fire brigade_ & Chapter 6 - _Economists are clueless_.

Anyway, regarding Ontario tax rates, it is extremely unlikely that the current administration will ever reduce income tax rates.
They are clearly going the other way.

However, businesses, individuals, and households are resilient, and over time, change their behavior to avoid the brunt of these tax increases.
At least those that can, do so.

So-called "rich" executives and professionals will re-structure their affairs to drop just under the top MTRs.
Corporations will do things like tax-inversion to avoid higher corporate tax rates.
Or, hire part-time and/or contract workers to avoid payroll taxes like ORPP.
Or, re-locate/re-structure their supply chains to avoid carbon disclosure.

It is a constant struggle to work around govt. policies designed to help some imaginary "cause" - a new one every term.
Or, prop up some or the other lobby group.

The govt. will muddle through the economic cycles - always claiming full credit for even the slightest good economic data, and always deflecting criticisms and making excuses for bad economic data.
Even the most incompetent governments, like every recession, eventually bottom out.

Thanks for the good debate, and keeping it clean & stimulating.
That is all I have time for tonight, will reconvene later.


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## andrewf

Isn't advocating for tax cuts just Keynesianism? I fail to see how running large deficits will not exacerbate structural problems. Japan got itself into deep water using fiscal policy to stimulate demand. And if you do not advocate for running much larger deficits, you are by consequence advocating large cuts in public spending--ie job losses in the public sector.


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## 0xCC

Looks like Scotia and TD have fallen in line with the prime rate cut now. TD is at 2.85, I didn't check the Scotiabank announcement but I assume they are also down to 2.85.

Interesting to see this rate cut and the PC Financial and Tangerine special offer rates of 2.5%. Not too much of a gap there...


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## lightcycle

The 2.5 at Tangerine ends March 31st. But the regular rates for their ISA is still 1.3 compared to TDB8150 at 1.00. Wonder if Tangerine will cut the regular rate as well.


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## 0xCC

lightcycle said:


> The 2.5 at Tangerine ends March 31st. But the regular rates for their ISA is still 1.3 compared to TDB8150 at 1.00. Wonder if Tangerine will cut the regular rate as well.


I would expect that they will. We should see 1.05% on those accounts by Easter is my guess.


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## HaroldCrump

andrewf said:


> Isn't advocating for tax cuts just Keynesianism?


LOL, I don't know what _ism_ it is.
Tax cuts are similar to direct transfer social payments i.e. puts cash directly into the pockets of individuals, households & corporations, but without the stigma attached to social transfers.



> I fail to see how running large deficits will not exacerbate structural problems.


Yes, running large structural deficits will exacerbate problems.



> And if you do not advocate for running much larger deficits, you are by consequence advocating large cuts in public spending--ie job losses in the public sector


I am indeed suggesting cuts to public spending, however, what _form_ it should take it up for debate.
Job losses will result only from the wage & benefits rigidity of public sector unions.
Job losses are per se not required to reduce spending - the cost of compensation can be reduced as well to achieve same end goal.


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## Pluto

Anyone think the US could actually surprise with a rate cut too? Once all the (mostly deserved) razzle dazzle over aapl fades, we may be back to worrying about US $ too high and eating into corporate profits of multinationals. What are they going to do if their economy loses steam? Plus, they too have to digest the problems caused by lower oil - job losses, and capital spending down.


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## HaroldCrump

Pluto said:


> Anyone think the US could actually surprise with a rate cut too?


What rate cut?
Their rates are already at 0.


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## Pluto

discount rate is 0.75%


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## HaroldCrump

Okay, you meant the FDR at 0.75%.
It would be a surprise for sure if they cut that.


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## Synergy

Fed minutes



> To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation





> Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.





> The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.


http://www.federalreserve.gov/newsevents/press/monetary/20150128a.htm

Blah, blah, blah....


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## GOB

I predict a hold through the year.


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## fatcat

Synergy said:


> The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run
Click to expand...

that bit is the news i think ... read: we're a little nervous still, hold on to your bonds


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## Synergy

No bonds for this cat! They are trying to sugar coat both moves so they don't startle the markets too much whether they move on rates sooner than later or stay lower for longer.


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## james4beach

Back on Jan 21, I wrote:


james4beach said:


> Today I bought some 5 year GICs at Outlook (MB credit union) at 2.8%. That rate hasn't changed in a couple months.
> 
> I bought today because Outlook may respond to the rate cut by reducing their rates. The open market-traded GICs, visible through discount brokerages, have all seen their rates slashed.


This forum has repeatedly given me a hard time about my 5 year GIC purchases. Here's how it goes every time I bring it up:
_me:_ there's a great 5 yr GIC rate here, above market norms
_forum:_ you're crazy who in their right mind would buy a 5 yr GIC?
_and then the yield drops further_

And then the cycle repeats. You guys would have helped yourselves out much more if you had just listened to the good advice I've been giving on GIC rates for many years now and *how rates were not guaranteed to rise*. About a year ago, Scotia had 3.0% on 5 year. I loaded up.

On Jan 21, I loaded up on Outlook's 2.8% rate. I bought $10,000 that day and was nice enough to come here and tip you off before Outlook got around to adjusting to market rates.

Today: Outlook's 5 year is down to 2.65% (down 15 bp since Jan) and Scotia's 5 year is down to 1.85% (down 115 bp from year ago)

Congratulations to everyone who was open-minded enough to listen to my tips.


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## gardner

Oaken/HT dropped all their rates on Monday -- after already dropping in December (at expiry of the 0.25% bonus program)
I got caught out by the rate pullback because I have a wodge of cash waiting to set up another set of ladders at 6-month offset. I was listening to the "rates will be rising imminently" chorus and held back in hopes of catching an upswing.


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