mises.ca / By Caleb McMillan / Sunday, September 8th, 2013
I don’t understand Stephen Poloz’s appointment as the successor to Mark Carney. Nor do I understand why Mark Carney was so popular to begin with. Are artificially low interest rates policies supposed to help Canadians? Before he took off for England, Mark Carney sat down for an interview with the CBC. When asked about this absurd low interest policy, Carney responded that the goal is to get people investing into more volatile investments where there’s a higher return. I guess the idea is that the central bank can create bigger returns on riskier investments and this creates genuine wealth. I call it absurd because this policy targets middle-class Canadians that wish to save and invest their money responsibly, conservatively and constructively. The Bank of Canada – under both Carney and Poloz – are, in effect, trying to centrally plan economic growth. This didn’t work for Russia and it’s not going to work for Canada.
The problem in a nutshell is low interest rates. Typically, investments like savings accounts and government bonds are stable and offer a solid return. By manually lowering these rates, the Bank of Canada (as well as every other central bank in the Western world) are deliberately shooing people away. When savings accounts don’t offer a meaningful return, what’s the point of depositing one’s money into them? Canadians are more apt to either spend their money, or invest it into something that is offering stability and capital accumulation – such as gold or silver. However if Canadians spend their money, according to the central bankers and Keynesian economists, this will create economic growth. Not spending 100% of one’s income is considered a “savings glut” or “dead money.”
Thanks to BrotherJohnF