Savings? What savings?

Great Reset It's Probably Nothing 40 Comments

If the Bank of Canada insists on doing what these authors insist it will, the result could be a lot worse than rising prices.

Money growth has slowed from its peak a year ago but is still robust. And with pandemic uncertainty declining, this big pool of money is now beginning to move. Over the last few decades, the velocity of money’s circulation — the rate at which a given stock of money moves through the economy — has gradually but steadily trended downward, in large part because low global interest rates have reduced the opportunity cost of holding more liquid assets. Then, during the pandemic, the demand for liquid assets soared and velocity plummeted as people willingly built up their bank account balances.

Are we now facing a situation like that of Russian savers at the collapse of the Soviet Union, when supposedly huge Ruble savings accounts could not buy a fraction of what consumers were led to believe they could?

The “miracle” of zero percent interest rates is actually pummeling the capital structure of the economy into dust. A brief period of rising rates will not undo any of the damage but actually compound it. Buckle up.

40 Replies to “Savings? What savings?”

      1. You should be so lucky to be Argentina. I suspect you will end up closer to Mexico or Colombia.l

  4. I have been working from home for 4 years now and I love it. I don’t have a boss standing over my shoulder and I make my own hours. The tips below are very informative and anyone currently working from home or planning to in the future could use these…

    check The Details……… http://Www.WorkJoin1.com

    1. The Karens are ahead in that poll, better get busy for the good guys.

      1. Another poll in dire need of help:

        https://www.ctvnews.ca/

        Scroll down, it asks how many people will still wear a mask when they’re no longer mandatory. The results are very depressing.

      2. It’s already been pulled. They got the result they wanted. Wait until the bankruptcy court gets overwhelmed.

        1. No, it’s hidden in a sidebar now. I found it using a ctrl-f search for “poll” — it’s currently 41% always; occasionally 28%; and never 31% with IMHO the “occasionally” leaning to Never’s side in the real world.

    2. I’d not only shun a business that continues vax mandates, I would actively seek to bankrupt it and send its owners to flip burgers at McD’s under a pimply 19yo shift manager.

  6. My understanding is these “big pools of money” are concentrated in the top 10% or so of income distribution. The other 90% are feeling inflation in a much more painful way. Spending more and more money on essentials and interest payment means people will tighten their belts and reduce non-essential purchases as food, shelter and energy continues their double digit rise.

    We actually did save money due to being denied travel and denied entry into most public venues. But, we didn’t let it sit in accounts. We put it into education savings and TFSAs and paid off all remaining debt, except the mortgage. After Trudeau’s account freezing we moved everything except enough to cover monthly bills out of the Big 6 Canadian banking division. We plan on completely removing our money from the Canadian banking system as our next step.

    Economists and weatherman are two professions where being wrong doesn’t matter. Economist recently said inflation was going to be transitory. They are government employees regurgitating narratives from their political bosses, just like most Canadian professions.

    1. There are no pools of money. If you wade into the weeds the “savings rate” includes loans that show up on our books as “savings”. From the article…

      “When a bank lends, the loan shows up in the borrower’s bank account as a deposit, which increases the money supply.”

      Also, not mentioned in the article is the 28.2% savings rate was for 1 quarter back in 2020 – at the start of the pandemic. The most recent quarter shows the savings rate collapsing to 6.4% and probably headed back to 3% where it was pre-pandemic. So we didn’t save any money, we went more heavily into debt, and now inflation is raging. Aren’t we lucky.

    2. Question: What am I to do with my RRSP? I’ve already cashed out my other accounts, but I’m worried that there’s a tidy sum in my RRSP that’s vulnerable.

      1. Over a period of years, I converted my rrsp into a tfsa. But I had no income while raising our kids so there was minimal tax implications. You have to read the rules carefully though and/or talk to a tax person. I still have a small lira but I’m willing to lose that, if necessary. Plus look into having a self administered tfsa instead of a bank managed account.

  8. It’s not going to be just us. If you can afford it you might want to grab some physical precious metals. Govts are stuck, they can’t raise interest rates and they can’t stop creating currency out of thin air. We’re so screwed.

    1. Governments want inflation, it reduces their debt at a magically fast rate. It also makes others poorer, but who cares.

    2. I’m not an expert in precious metals but when I looked into it you have to pay 13% HST. That’s a hell of a return to earn back. There may be a work-around. If you buy silver with greater than 99.9% purity it is considered a precious metal and not subject to HST. Coins rarely have this purity. Do your own due diligence because they are always changing the law. But my 2 cents worth says don’t buy coins as an investment unless you’re a coin dealer.

      1. Bought bullion for years, Maples, always 999 or better. No tax. Silver is still well below its highs and the way they’re depreciating the currencies it’s only a matter of time before people catch on.

  9. Ignore polls, ignore garbage media. Their entire existence is to make people think their idiocy is the prevailing opinion. It’s not. About money, we are entering into something far worse than the last two years. Anyone remember when major retail outlets were refusing $50 and $100 bills. Legal tender money that by law they are not permitted to refuse? Any noise about that? I like to think we’ll ever see that again so hold cash, lots of it.

  10. You know, I have measured three times, cut twice and this board is still too short.

    I keep printing money because the value keeps dropping and inflation keeps going up.

    Same idea.

    1. The thing about printing money is … if you can get it and convert it to an asset (like real estate) inflation doesn’t matter to you. The problem is if you already have money and want to hold onto it then you’re screwed.

      1. There’s no tax on gold, it is legal tender, “equivalent” to money.

        The premium on silver, percentage wise, is much higher than gold, ~30% vs %5 for gold. Silver is more challenging to store, since it takes a lot more to be worthwhile investing in than gold.

        Don’t buy the 16:1 ‘historical’ ratio to gold, those days are over. Gold will always be GOLD, the favoured precious metal. Russia, China, India, and Japan, have been adding to their gold reserves for years, its security. Notice they haven’t been buying silver.

  11. Clearly alternatives must be found to currency and wealth, alternatives beyond the reach of goernment.

  12. Whatever the subject is I now view it through the lens of “you will own nothing and be happy…”. That stated goal must be factored in.

  13. Friendly reminder that above-target inflation is no longer the Bank of Canada’s worst-case scenario.

    The only way to hedge against nuclear war is to move well off grid, and master a skill that society will always value, if humanity survives at all.

    For the Virtuals, it’s probably too late to do anything, except pray the God they swore didn’t exist to grant that they don’t suffer long. All the bank-confetti in the world won’t save from the consequences of their actions.

  14. Oil is now over 125 a barrel. Too bad we can’t sell any overseas or get it to market in Canada.

    1. Every dollar it goes up is roughly about 1 cent or a little more per litre.
      On our way to $ 200 a barrel US.

  16. I’m a regular reader of SDA and one of the coauthors of the article. This is my first appearance on the blog. I’m flattered. It’s hard to know who exactly did the saving (we only have data for the economy as a whole), but the household saving rate was extraordinarily high in 2020. Our main point is that inflation may remain high for quite a while. As a previous comment points out, inflation erodes the value of the debt, making governments happy. Consumers, not so much.

    1. I can tell you my spending increased as I had to pay the way for my better half who was basically dis-employed.
      But my saving stayed the same = X amount to RRSP and X amount to TFSA every 2 weeks.
      BUT my TFSA was used to finance a home improvement to the tune of aboot $25,000 over the last 11 months.
      Everything is all over the map while the government prints money like madmen.
      It will take austerity + civil war to fix this shit as the neo-Marxists are goose stepping.

Proudly powered by WordPress & Skyrocket Themes

MENU

Navigation