Bank of Canada Warning About Low Interest Rates?

“Depression is the aftermath of credit expansion.” – Ludwig von Mises

According to Chaos theory, eventually a state of disorder will produce orderly results. I’m guessing that the chaotic Keynesian nonsense spewing from Mark Carney’s Bank of Canada must have produced something resembling reason and common sense. The Canadian Press reported yesterday that,

Bank of Canada governor Mark Carney is warning that its own low interest policies and those of central banks around the world are adding another layer of risk to the already stressed global financial system and economy. The Canadian central bank said Thursday near record level interest rates in place since the 2008-09 recession are taking their toll on insurance companies and pension funds.

Low interest rate policies are doing more than just agitating insurance companies and pension funds. When interest rates are disconnected from the market process of supply and demand, and instead are centrally planned and set artificially low, price signals are distorted and malinvestments are made. Of course on the ride up it’s a fun wealthy boom but eventually reality rears its ugly head. Recessions come not due to a “lack of consumer spending” or a “fall in aggregate demand” but because expanding credit is unsustainable. When producers and consumers start clashing over scarce resources, it becomes apparent that some of society’s wealth is a result of funny money.

The “monetary stimulus” that the Bank of Canada and other central banks around the world set in place during the ’08-’09 recession are the reason we had a recession to begin with. Nothing has been fixed. There is no recovery. All that’s been accomplished is a postponing of the necessary correction. Debts need to be liquidated. Resources need to be reallocated to their most valued uses. Simply put, the production of money needs to be returned to the market of voluntary exchange and the Bank of Canada needs to be abolished.

Hopefully that will be the next statement from the BoC, but I somehow doubt it.

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8 Responses to “Bank of Canada Warning About Low Interest Rates?”

  1. Francis Marion says:

    So what you are saying is "duck and cover"? :-)

    I listened to MP Pierre Poilievre speak here through a link on Zero Hedge.
    http://www.youtube.com/watch?v=wWkUaJId7pM

    Maybe they are starting to "get it". Maybe we start with guys like this? Maybe I am dreaming???

    Dunno. But that's a place to start. It's gotta be better than harassing the clovers at the Globe and Mail for fun.

    Food for thought.

  2. Jerry says:

    Sure. It's easy. Stop the spending and balance our budgets. Stop the handouts. Stop participating in wars (refering to our support of USA ). Eliminate the BoC and it's manipulaiton of interest rates. Fat chance in a democracy. You can count on one hand how many voters would support anything close to those suggestions. There isn't a politican anywhere even talking about it. This isn't the first time fiat money systems have collapsed. In fact from what I've read there have been something like 400 since the beginning of the development of money over a 6000 year period. Most are forgotten. If anyone ended peacefully and without hardship I'd like to know.

    When do you want to start?

  3. Francis Marion says:

    Still doesn't answer the question of how we get rid of our debt. I have a bit of hope for this country as opposed to most. There should be an answer – a method to this – at least at a theoretical level.

    I know this is a purely utilitarian way of thinking but however we move from a corrupt system to an honest system should involve methods that do not destroy the health and wealth of every human being in the country who does not see how far down the rabbit hole we have slid.

    WE know as Austrian thinkers what an honest and healthy monetary system looks like – the question is how do we get there? Or is all this talk simply an intellectual exercise?

  4. Jerry says:

    The current system or the Greenbackers if you choose will both end at the same place. The debts won't be paid or more acurately they will be paid with worthless money. Rather the debts will be paid in blood. There WILL be dire consequences. There is no free lunch. Possibly a major war, very high probability of civil unrest, further loss of liberty. Quite possibly end with a dictatorship for the next 75 to 100 years. Hopefully we can avoid a nuclear tragedy.

  5. Francis Marion says:

    Hi Caleb,

    Just read this. Curious question for you – I am all for getting rid of the Bank of Canada but how do you suppose we get rid of our deficit and debt when we are paying compound interest on it?

    Wouldn't it make sense to pay off our creditors with Bank of C money's at simple interest then allow competing currencies to enter the market place?

    Or do we just default on our debts and start from scratch? This seems to me like it may have some dire consequences internationally?? What are your thoughts?

    Sincerely,
    Francis

    • Caleb says:

      Hi Francis,

      My thoughts are that this is not "our" deficit and "we" are not paying compound interest on it. Wealth is being stolen by a predatory state that has hijacked the market for money and imposed a hegemonic fiat system. "We" do not need to default on "our" debts. Increasing our knowledge and working towards secession and individual sovereignty is more practical – I think – than trying to work with the BoC. That said, allowing competing currencies to enter the market would be a good first step. However, it's likely that the state would impose heavy regulations thus allowing the Big Five to conglomerate, leading us right back to the BoC's monopoly.

      We agree that the BoC needs to end. How can we realistically do this? I don't know. How will we build roads without the state? Butler Shaffer wrote on LRC that, "a creative understanding is to be found not in answers, but in refining the quality of your questions." This sums up my thoughts.

      Thanks for asking,

      -Caleb

      (Shaffer link: http://lewrockwell.com/shaffer/shaffer254.html)

      • Francis Marion says:

        Hi Caleb,

        Thanks for your reply. Secession (in all of its forms) is an option – one that generally grows in popularity as the government grows in size and power. I've seen a few secessionist movements come and go in the west over the past 20 years – they all lacked something – primarily a cohesive set of principles. People were more interested in replacing the feds with the same old thing closer to home.

        Though I would be all for it I am not convinced that Canadians at this time have the stomach or the moral principle/base to begin discussing it.

        Bottom line is things will have to get worse before they get better.

        Your organization should start organizing "Ron Paul" style seminars and talks here in the western end of the country. Colleges, service clubs etc. would be good places to start. The more educated people the better.

        Take care,
        Francis

  6. Trevor C says:

    There was recently a podcast done on econtalk.org with Steve Hanke, one of the foremost experts when dealing with hyper-inflation. He has been brought in to help resolve many of the inflationary issues during the past few decades.

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