Yellow Pea Chart

[AlbertaFarmer5]

Very well said, wheatKing.

I would add; that what you described, expanding the money supply faster than population expands, worked fairly sustainably as long as that money was being used to increase productivity in general. But in recent times we are using the same theory except using it to discourage productivity, by paying people not to work, by using it to fuel real estate bubbles and other bubbles in non-productive assets.

Which is starving the productive industries of capital and labor, and driving up their costs.
You almost couldn't come up with a worse plan to destroy productivity. Well actually you could, you could tax energy and overregulate everything else, oh wait, we already do that too.

[wheatking16]

Very well said, wheatKing.

I would add; that what you described, expanding the money supply faster than population expands, worked fairly sustainably as long as that money was being used to increase productivity in general. But in recent times we are using the same theory except using it to discourage productivity, by paying people not to work, by using it to fuel real estate bubbles and other bubbles in non-productive assets.

Which is starving the productive industries of capital and labor, and driving up their costs.
You almost couldn't come up with a worse plan to destroy productivity. Well actually you could, you could tax energy and overregulate everything else, oh wait, we already do that too.

I like to consider how the low-interest rate environment has encouraged investment and debt at the expense of savings.

Why save?

Chasing returns via speculation has been an effective investment strategy for the past 30 years.

Buy a house or land.

Refinance and use that equity for additional asset accumulation.

Rinse and repeat.

My first loan was on a 1994 Dodge pickup with an interest rate below 10%.

I remember thinking how smart I was to get that low of an interest rate.

The interest rate has been on a downtrend ever since and that was a 28-year high.

This chart is a 10-year Canadian Government Bond Yield chart to get a perspective.



Canadian Deposit Interest Rate



Why save? Speculate!