Western Cdn Select Oil Plunge

[ajl]

It does not seem that anybody understands what drives interest rates. Government never willingly raises rates, they always try to suppress them. Interest rates go up for 2 reasons: the first is in response to inflation. Canuckistan is in stagflation now just like the late 1970's. Inflation was close to 10% in 1981 and rates had to rise to prevent hyperinflation. Inflation, while not yet that high is on the rise today. The other thing that is driving up rates is demand for credit is way up. As people and governments need to refinance, the new loan is bigger than the old loan since there is denial that the borrower is broke. Happened in the early 1980's and again today. Another factor driving rates is the risk profile of the borrowers is shifting to more risk so the risk premium goes up as it did in the 1980's. Bottom line is rates have to rise regardless of the state of the economy like they did in 1980. All that blather about improving economic fundamentals is just BS. Does Poloz believe his own BS, I don't know.

[the big wheel]

It does not seem that anybody understands what drives interest rates. Government never willingly raises rates, they always try to suppress them. Interest rates go up for 2 reasons: the first is in response to inflation. Canuckistan is in stagflation now just like the late 1970's. Inflation was close to 10% in 1981 and rates had to rise to prevent hyperinflation. Inflation, while not yet that high is on the rise today. The other thing that is driving up rates is demand for credit is way up. As people and governments need to refinance, the new loan is bigger than the old loan since there is denial that the borrower is broke. Happened in the early 1980's and again today. Another factor driving rates is the risk profile of the borrowers is shifting to more risk so the risk premium goes up as it did in the 1980's. Bottom line is rates have to rise regardless of the state of the economy like they did in 1980. All that blather about improving economic fundamentals is just BS. Does Poloz believe his own BS, I don't know.

And what many don't understand also is that to counter the higher risk of people s situation adding higher cost to
Their situation is what does most in. That's what interest rates did in the past and will do again. It's s a money grab for
Lenders.
The real issue to deal with is not to
Let out credit so easy. The rate is not the problem and not the solution to raise it.

It will destroy us faster than anything else by raising it.

[farmaholic]

I doubt lenders want to be on the wrong side of an asset value curve of farmland, housing, commercial realestate, vehicles, luxury items(...not evaporated consumer debt where there is nothing to repossess...thats even worse) if there is a huge default on loans because of repeated interest rate hikes and a correction to the asset's value.

Will the current situation only "not end well"?

[ajl]

And what many don't understand also is that to counter the higher risk of people s situation adding higher cost to
Their situation is what does most in. That's what interest rates did in the past and will do again. It's s a money grab for
Lenders.
The real issue to deal with is not to
Let out credit so easy. The rate is not the problem and not the solution to raise it.

It will destroy us faster than anything else by raising it.

Rates are the signal to not take on more debt. Too much debt is the problem today. Mind you this is a theoretical discussion as the damage from rate suppression is already done. There is no way out from here and the ship will sink.

[bucket]

Even buying good used equipment to reduce or eliminate debt can be burdensome. ..repairs....or downtime....


Replacing equipment is a necessary evil....guys can chug along just fine. ...but for more perspective ....fuel prices were less 30 years ago with less chemical and fertilizer.....and grain prices have not adjusted accordingly. ....

Raising rates won't be good but primary production revenues haven't kept pace .....the survivors will be those with generations of money ....or well protected SM .....


Look at the young farmers nominees. ...generation farms or protected....

[FarmJunkie]

Good point bucket. Just got a quote on a new sprayer loaded up....... wait for it...........$669000! Ungoddamnbelieveable! This stupidity has to end sometime u would think. Needless to say I laughed at the price and said we will be looking else where. But like u mentioned u have to up grade sometime to something else someday. Either we gotta get paid more or I’m gonna quit.