The war on savers

Johnny O pointed out this CBC feature on ‘the Monarchs of Money‘.

Central Bankers pulled the global economy back from the brink of a debt laden collapse by printing money.

Where does this lead and who benefits?

Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations.

These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.

They are the world’s central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert.

The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do.

In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.

Read the full article over at the CBC.

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patriotz
Member

Temporary foreign workers? More like permanent government nuisance

So why do we need a Temporary Worker Program?

Flooding the market with workers from elsewhere, year in and year out – even during a major recession – is not about an acute labour shortage. It is nothing more than a wage subsidy to low-paying firms, a subsidy that stunts the reallocation of goods, capital, and labour that is the basis for efficient markets.

Our “Conservative” government is actually addicted to central planning in an effort to keep prices away from what a free market would determine. Keep RE prices too high, and the price of labour too low. In each case to please their political constituencies.

jesse
Member

CBC has a series of these articles. Sorry to say this, but that’s some serious clown school reporting by MacDonald.

Aggregator
Guest
Aggregator

@jesse Sorry to say this, but that’s some serious clown school reporting by MacDonald.

How so? Did he forgot to post his econometric models?

Many Franks
Guest
Many Franks
And filed under News That Doesn’t Surprise Anyone: Canadians not following through on debt paydown resolutions [T]he majority of respondents (63 per cent) said they intended to cut their debt levels last year. But fewer than a quarter of those who said they were making the effort to reduce their debt (23 per cent) actually reported that had any real success in doing that. More than a quarter (26 per cent) said they were completely unsuccessful. Noting that the current debt-to-income ratio sits at more than 160 per cent, the consulting firm called the trend to higher debt levels “unsustainable” for consumers. The article is basically an advertorial for PwC using a web survey as a vehicle, but whatever. It just reinforces the obvious — surveying consumer intentions and surveying consumer actions are very different things. Meanwhile, available consumer credit… Read more »
Ok...
Guest
Ok...

“My point was that the rental market is not consistent with these claims of “undocumented” growth.”

and my point is that such a claim is baseless since the ‘evidence’ to support it, rental prices haven’t gone down, isn’t evidence at all and doesn’t prove your point because rental prices could have gone down if it wasn’t for foreigners…

Fleck
Guest
Fleck

Jesse

I guess you didn’t know about the drinking game. Any time someone said “money printing” you had to take a shot. I got totally hammered.

pinada
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pinada
Almost Homeless
Guest
Almost Homeless

Has anyone ever wondered why one’s childcare expenses aren’t considered material when applying for a mortgage? For my family, it will soon be our biggest monthly expense

Some Guy
Guest
Some Guy
You can vote Jesse down, but he’s right, that’s some weak reporting. I like how an article about the ‘war on savers’ casually mentions in passing (as support for its argument!) that the richest 10% of households are doing fine. Of course that top 10% of households holds the majority of savings and makes all the important decisions! Central banks were set up by and for ‘savers’, also known as ‘creditors’. Belief in a ‘war on savers’ is a belief that the world’s wealthy elite (who hold the vast majority of global savings, savings = wealth) have conspired to set up a series of unaccountable institutions, all with the aim of hurting themselves and benefiting the poor of society who are the borrowers. Believing there is a global elite conspiracy to benefit themselves is a stretch. Believing there is a… Read more »
Anonymous
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Anonymous

“Just got an email from Rennie marketing promoting some CALGARY developments. I never mentioned I am interested in anything out of the Lower Mainland. Are they desperate or what?”

It’s Calgary: a world classed city hemmed in by mountains on one side and prairies on the other and they’re not making any more land there. Everybody wants to live there because they had the Olympics in 88. And, if Bob is involved, Calgary must be the new Shaughnessy

qbert
Guest
qbert

I stopped reading the MacDonald piece when I read that QE is “a large-scale transfer of wealth from older people to younger people”.

Of course, it is these older people who dis-proportionally hold the very assets which have dis-proportionally been affected by QE’s effects on nominal interest rates.

So, its message boils down to what is a poor boomer to do with all that excess cash garnered from the sale of their house in a time of historically unprecedented low interest rates.

But thankfully, it does address the pressing question of what a poor boomer is to do with a reduction in their defined benefit pension (whatever the hell that is).

jesse
Member

Aggregator, Macdonald stated ” it’s caused a massive shift in wealth, from savers to borrowers, and is taking money out of the pockets of almost everyone approaching or at retirement age”

Some of the retirees I know have done rather well for themselves since 2008, despite all the CB intervention. MacDonald’s apparently annoyed because real interest rates are negative, like it’s some God-given right they remain positive, and he claims it’s the cabal of central bankers who are to blame.

I guess zerohedge level theories have finally hit the mainstream, thanks to good old Neil Macdonald. Where would we be without the likes of him.

Not much of a name...
Member
Not much of a name...

@Almost Homeless #8

Has anyone ever wondered why one’s childcare expenses aren’t considered material when applying for a mortgage? For my family, it will soon be our biggest monthly expense

It does when you pay child support.

Short'em High
Guest
Short'em High
The Temporary Foreign Worker Program critique by Miles Corak sounds like the ghost of Milton Friedman in places. Too bad there’s nobody speaking up with the same authority along the line of Friedman’s natural rate of unemployment idea. Central banks, the US Fed in particular, should probably accept that today’s economy has a higher natural rate of unemployment whether they like it or not. What’s missing from Neil Macdonald’s piece on central bankers was exactly this point. Bernanke should have stopped after injecting liquidity into the credit crisis. Instead, like Greenspan before him, he decided that unemployment was too high for his personal taste and it was his responsibility to “print up” some jobs the economy itself cannot create. Without Bernanke’s protracted meddling in US unemployment, other central banks including Canada’s would have had a freer hand since 2009. Concensus… Read more »
Anonymous
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Anonymous

Short em high, you still short the C$?

bubbly
Member
bubbly
Jesse, of course real interest rates should be positive. In sane world, interest is the reward for deferred consumption and for taking the risk of lending your money to someone else. With central bank manipulation (and only with it), you can get negative interest rates. Only an ignorant fool would claim otherwise, when central banks themselves keep saying that this is what they are doing. And of course, there IS a war on savers. People who claim that there can’t be a war on savers because the rich would be losing more money do not understand two things: 1) The rich (not top 10%, but the real rich) don’t have the majority of their wealth in cash and 2) The rich (not top 10%, but the real rich) have first access to newly created money, before inflation lowers it’s value.… Read more »
patriotz
Member

“The biggest losers in this system are small savers who are not well connected”

Not at all, the biggest losers are the people who buy assets at inflated prices, enabled by the low rates. When asset prices inevitably fall they get wiped out.

Sure some small cash savers are taking a hit on their income due to low rates. But that’s minor compared to the above.

qbert
Guest
qbert

bubbles writes: “In sane world, interest is the reward for deferred consumption and for taking the risk of lending your money to someone else. With central bank manipulation (and only with it), you can get negative interest rates. Only an ignorant fool would claim otherwise…”

Count me as an ignorant fool. But what do I know? I am only currently looking at data on US long-term yields back to 1800 (that is, 113 years before the establishment of the Fed). That 11.4% of those years were associated with negative interest rates is probably “a coding error”.

Aggregator
Guest
Aggregator
@jesse “Some of the retirees I know have done rather well for themselves since 2008, despite all the CB intervention.” I believe Macdonald’s point was intended to be forward looking as retirees begin losing their wealth in real estate assets and future pension benefits. Although negative rates may not be a God-given right as you state, they are, in terms of pension payments, a promise to return savings with interest (to maintain purchasing power) that have been earned and paid for. Ask those retirees you know what they could buy with a dollar when they started working in their younger years — then compare it to now. The missing difference is what’s being robbed by money printing. “I guess zerohedge level theories have finally hit the mainstream, thanks to good old Neil Macdonald. Where would we be without the likes… Read more »
shock_minus_control
Guest
shock_minus_control

@Aggregator – so we should be running contractionary monetary policy, which would push unemployment higher and generally punish the economy, so that baby boomers can earn a little extra on their savings?

With regard to ‘purchasing power’, inflation is running at a trend rate of just over 1%. I don’t think anyone’s purchasing power is being seriously impacted by central bank easing.

bubbly
Member
bubbly

qbert, before Fed, there were other government mandated entities/banks in existence that fulfilled the roles of a central bank. They were all great at creating inflation when “necessary”.

Aggregator
Guest
Aggregator

@shock_minus_control “With regard to ‘purchasing power’, inflation is running at a trend rate of just over 1%.”

Do you shop?

Q
Guest
Q

$3.1 billion unaccounted for in federal anti-terrorism funding, according to the Auditor-General. Wow! That’s a lot of dough to be unaccounted for! I thought the Conservatives were supposed to be smart money managers.

http://www.cbc.ca/news/politics/story/2013/04/30/pol-auditor-general-spring-report-federal-spending.html

qbert
Guest
qbert

Please name one of these “other government mandated entities/banks”.
And please don’t let facts get in the way of your analysis as the average rate of inflation in the period from 1800 to 1913 for the US was -0.04%.

Burbs Boy
Guest
Burbs Boy
It is certainly possible for periods of time to exist (as they currently do right now) where there is an excess of savings in the system. Right now we are awash in savings (from a macro standpoint)in the world… eg. a significant portion of Corporations sitting on idle cash because they do not see the market existing right now to support expansion (it really says something when a corporation sits on cash making 1% instead of investing in capacity or productivity that can reward at 10-20%), large pension funds all over the world looking for places to invest are also another example, countries (such as China) sitting on large reserves that can be invested. No one wants growth/risk because everything looks so uncertain. While that situation exists it will be difficult to get a rate of return that compares favorably… Read more »
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