Juggling Dynamite

The Bank of Canada, as with other central bankers in the world is finding itself at the end of its monetary slack options. Given the weak pace of the Canadian economy the usual go-to policy would be to lower interest rates…but everyone has already been doing that for years now, and at 1% on the overnight rate and Canadian consumers that are already restrained by record levels of debt, further monetary slack is hard to find. Maintaining the now status quo of rock bottom rates and large asset purchase programs(QE et al) is no longer stimulative. See: Household imbalances keeping BoC from setting lower rates

“After 18 months of telling consumers and markets that its key interest rate would eventually be lifted from 1%, close to rock bottom, the Bank of Canada shifted gears into neutral…

If it were not for the concerns about household imbalances, the BoC would have cut its policy rate at last week’s [policy] meeting,” says Nomura Securities economist Charles St-Arnaud.”

Despite central bank efforts to force inflation, deflation is taking the upper hand in the global economy once more. In Canada inflation is stubbornly at the low end of the bank’s 1-to-3% target range and the economy is growing at a disappointingly slow pace in the absence of stronger corporate investment.

But lower prices are part of the healing process to restore consumer purchasing power in the absence of job and wage growth. The longer central banks try to keep prices unduly inflated, the longer the malaise of weak demand, low growth, superfluous capacity and supply . See this video of the Bank of Canada’s press conference yesterday.

Honest financial advice and management can only serve those who wish to hear the truth and understand math. The world is therefore full of people who put their faith in advisers and financial products who make the most unrealistic and even fraudulent representations. The truth: that people need to spend less, save more, work longer and avoid over-valued financial markets that are destined to implode savings, is not a popular message.

“Today, we hear from two people who offer ways to keep Canadian pensions strong not only for the bubble-of-boomers ready to cash in but for their grandchildren. They say politicians, businesses, unions and taxpayers need to stop sniping and start re-thinking”. Here is a direct audio link.

Also on this topic, Frontline ran an encore presentation last night of “The Retirement Gamble”. For anyone that missed it last time, it is well worth the watch. Here is a direct video link. Imagine how the math of all this will look once the next bear market takes a bite out of today’s bubbling stock markets once more.

This week’s segment: A conversation with organic farmer and community-shared agriculture(CSA) producer, Maureen Giffen of Edencrest Farms.
Here is a direct audio link.

“Community-shared agriculture is a locally-based economic model of agriculture and food distribution where subscribers pay at the onset of the growing season for a share of the anticipated annual harvest from a farm or group of farmers in the form of a weekly box of fresh farm produce.

The origins of the model in North American can be traced to Swiss and German farmers who brought biodynamic farming ideas to the US in the mid-80’s. Since then the model has spread to more than 13,000 CSA farms operating throughout North America bringing fresh, local, usually organic produce to thousands of families from the heart of New York City to Phoenix, Quebec City to Central Ontario.

The prepaid subscription to whatever the harvest year brings in season, offers a unique “shared risk and reward” agreement between farmers and consumers that reduces risks and costs for the producers while allowing them to focus on quality care of the soils, crops, animals and workers. The model also helps to level the playing food in what has otherwise become a massive, industrialized food market favouring large scale, industrialized agriculture ahead of local food and health for consumers and the environment.

My guest today worked for many years in business development for a national phone carrier before leaving the corporate world to found Edencrest Farms a certified organic, CSA partnership.”