The article in the Financial Post and Reuters both stated rates could stay at 0.25% until 2010. By 2010-11 the bank rate could rise to 2%. This would mean the prime rate would rise to 4%. These rates are still very low, but no where did I see the 0.25% rate lasting beyond 2010.

Personally, I don’t see how rates can remain that low for a very long time due to the amount of debt that will need financing and refinancing around the globe. Higher rates will be needed to attract sufficient capital.

According to Mish Shedlock, governments are trying to reinflate the bubble by keeping interest rates low. It’s a race to the bottom. Yeehaw!
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Understood. This is why I mentioned emerging markets. There’s incentive to keep rates low when you don’t have anything going on. Some countries have been reasonably fiscally responsible and can bail out of that game sooner than we can. A stronger dollar makes our exports less attractive, but a weaker dollar makes our imports more expensive.

Dave; it’s a game of ‘beggar thy neighbour’ by all governments. If we raise our interest rates faster than other countries, then our dollar rises, causes our goods to be less competitive than our neighbours.

According to Mish Shedlock, governments are trying to reinflate the bubble by keeping interest rates low. It’s a race to the bottom. Yeehaw!

Could you please expand on this Garth? It certainly was not high interest rates and tough credit policy that created the housing bubble and illusion of wealth this decade.
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i think it’s impossible for rates to stay this low regardless of the economic environment. Regardless, high rates or low rates, the consumer is maxed out. Even though people are purchasing with 5% down, its not like these people have buckets of cash. They’re living on a budget. I know this because they’re my colleagues and I see their spending patterns and know they’re living on very tight budgets.

Rates and currencies move together. Garth can explain this better. You have to figure, if we have extremely low interest rates, well, the value of our currency will be extremely low. If our currency is extremely low, you better hope interest rates in places like China, Singapore, Japan or anywhere else we might import from are low as well or we’ll be purchasing goods from them for much higher prices.

So lets say rates stay low in Canada because our government wants to continue running our economy, what happens to the over-leveraged consumer then? I’ll tell you, they’re still doomed! Virtually everything we buy is produced in another country. We’d be paying a premium for these goods from countries with higher rates/ stronger currencies. How would this effect consumer expenses in Canada considering the massive debt load that exists amongst the average citizen?

You see, there’s no win here. Raise rates, people stop “buying” real estate. The market drops along with demand. Panic sets in, real estate is yesterdays news, people want out, and the herd loses. Keep rates low, well, most of the goods we purchase are from other countries. Surely, we can’t depend on emerging markets to be non-productive and consumption based just because we are. We will be paying higher prices for goods from them. Again, this hits people’s pocketbooks.

Those with tight budgets will be introduced for experiences they never planned for.

Oh yeah, umm, how about taxation?

Excellent post

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thank you sir

One of the best posts on this blog ever! Its need to be said is long overdue.

http://bit.ly/8Usreh

-Camping out over night for 900k Yaletown shoeboxes
-Reserving the upper half of the tower for “international investors” expected to appear during the Olympics
-bankrupt municipality praying for an indefinite RE bull market when they try to unload the athlete’s village

[shakes head]