In light of current market conditions, the Bank of Canada would like to assure financial market participants and the public that it will provide liquidity to support the stability of the Canadian financial system and the continued functioning of financial markets.Now correct me if I am wrong, but isn't this just the bank stating "don't worry, if interest rates have got you down, we'll just print more money to keep things flowing"?
These activities are part of the Bank's normal operational duties relating to the stability and efficient function of Canada's financial system. The Bank is closely monitoring developments, and will deal with issues as they arise.
I'm no economic expert. All of my formal economics training has come in the form of a single 300-level Canadian Political Economy course at UVic. But I don't see how this could possibly be celebrated as a good thing. Let's look at what's happened in markets over the past 5-6 years:
- Dot Com burst leads to liquidity issues
- September 11, 2001 creates market uncertainty
- US Fed, quickly followed by BoC, drop interest rates (in the US almost to nothing; Canada bottoms at 2.25%)
- Corporations and individuals borrow and spend
- Stock market rises considerably over a 3 year period
- Housing markets in the US and Canada go on a wild ride up where not only month over month inflation but year over year inflation numbers are so mind boggling that 24-year-old would be Donald Trumps borrow excessively, lie on mortgage applications and artificially inflate neighbourhoods
- Housing markets in Victoria go on a wild ride upwards fuelled by 65-year-old would be Donald Trumps spending like Victoria Beckham on third, fourth and in some cases even fifth speculative non-rental pool properties, thus artificially inflating property values
- 2007: bottom falls out of loose lending practices in the US, sub-prime market blamed
- Later 2007: sub-prime woes quickly blamed for foreclosures on properties held by prime mortgages (you know, the zero risk folks) who would simply rather not own a declining asset and get stuck paying for ridiculous over-inflated prices
- Cramer calls Armageddon, demands Fed drop rates, Fed doesn't, markets plunge
- Stock markets start bouncing around like a 2-year-old blowing raspberries on a jolly jumper; traders continue making money hand over fist
- BoC says: "don't worry, we'll print more money, nothing to see here, but we're going to raise rates none-the-less"
Forgive my tongue-in-cheek brief, historically inaccurate, based-on-truth synopsis of market activity into 12 points, but you get my meaning, non?