Comments on: Canadian inflation: 2.2%

By: bcubbins

bcubbins — Sat, 21 Jun 2008 09:19:54 +0000

“Historically variable rates almost always beat fixed rates in terms of total borrowing cost.” Going forward, as rates rise from 4% to x%, it is more likely that fixed rates will be your friend. Why do think this would be the case?? With a variable rate, the borrower bears the interest rate risk. With a fixed rate, the lender takes on that risk and will charge a premium for doing so. So going forward from any point in time, I'd expect that on average a variable rate will end up costing the borrower less. Whether that actually turns out to be true in hindsight depends on how accurately the lender had predicted future interest rates.

Current score: 0 (to vote for this comment, please visit the site)

By: well said

well said — Sat, 21 Jun 2008 06:58:49 +0000

I have faith that the market may be indicating nothing more than incompetence and greed at any given moment. Most people attribute intelligence to the market. Aetakeo has correctly articulated what many (most?) refuse to recognize.

Current score: 0 (to vote for this comment, please visit the site)

By: patriotz

patriotz — Thu, 19 Jun 2008 23:31:19 +0000

If a student needs a laptop computer for their university education they’d buy a system twice as good today as they would have two or three years ago They also have the choice of buying that 2 or 3 year old computer way, way cheaper than it was new. That's an apples to apples comparison. Technological advancement in new goods drives down the price of used goods.

Current score: 0 (to vote for this comment, please visit the site)

By: jesse

jesse — Thu, 19 Jun 2008 21:54:28 +0000

"Listen, it’s well documented that many gov’ts use a variety of techniques to under-report “inflation” (wrongly defined, btw) - the are reporting price changes, not inflation (an increase in supply of money/credit" You can look at TIPS and RRB yields to see how well the CPI compares to what the market expects for inflation. You are welcome to know better. Driving constituents into poverty is not always the best policy for getting re-elected, right now especially true if you're the British government.

Current score: 0 (to vote for this comment, please visit the site)

By: cashisking

cashisking — Thu, 19 Jun 2008 21:02:53 +0000

If CPI was calculated as it was in the early 80's our annual rate would be 10.4% ... interest rates are going higher, long bond yields are going up, as are mortgage rates ... But not in Vancouver, it's different out here!

Current score: 0 (to vote for this comment, please visit the site)

By: Alpha_Bear

Alpha_Bear — Thu, 19 Jun 2008 19:30:11 +0000

"If farmers innovate and figure out how to produce twice as much wheat at the same cost, prices would drop..." Farmers currently maximize production by adding as much fertiliser, pesticides, and other 'inputs' as necessary to produce the maximum yield. With rising oil, natural gas, and potash prices, farmers will have to calculate how much fertiliser to add in order to maximize their profit. Wheat production is not likely to rise.

Current score: 0 (to vote for this comment, please visit the site)

By: aetakeo

aetakeo — Thu, 19 Jun 2008 19:28:18 +0000

By corollary you are saying government bond rates determined on the open market by tens of thousands of bond traders and in direct competition to other similar instruments from around the world are not correct. Given the DotCom meltdown and the subsequent insanity of the sub-prime derivatives trade, and given that tens of thousands of economists and traders believed in the housing boom, I've become really comfortable with the idea that tens of thousands of anybodies can be radically incorrect. The herd seems to move based on really local indicators of potential profit, which means that Tulip Mania makes sense for some value of sense. Seriously, having watched two bubbles, both times scratching my head as to WTF people were thinking, I have faith in the market correcting over time, and I have faith that the market may be indicating nothing more than incompetence and greed at any given moment.

Current score: 0 (to vote for this comment, please visit the site)

By: blueskies

blueskies — Thu, 19 Jun 2008 18:32:01 +0000

when satv is backing up rob a you just know the end is near! price will effect the buyers the affection for the effect affected the effective effect

Current score: 0 (to vote for this comment, please visit the site)

By: scc

scc — Thu, 19 Jun 2008 18:30:22 +0000

"As for government bonds, if yields are off base, the currency moves to make the market." My comment was a bit off. Central banks work off of their target rate which affect the general rates offered in the economy. In the states, treasury bonds are auctioned setting their yield. The currency moves as a function of the demand which is affected by the relative yields.

Current score: 0 (to vote for this comment, please visit the site)

By: Anonymous

Anonymous — Thu, 19 Jun 2008 18:07:26 +0000

Historically variable rates almost always beat fixed rates in terms of total borrowing cost. Impossible to justify such a conclusion. Adjustable rate mortgages weren't even legal in the US until 1982, meaning our entire history with them has been during a 2 decade long secular bear in interest rates.

Current score: 0 (to vote for this comment, please visit the site)