Juggling Dynamite

Canada has a low-household-savings, stagnant income, high debt, aging boomers, slowing economy problem.  The Bank of Canada will no doubt cut its policy rate soon but in present conditions, more consumer debt-stimulus will not help.  Pushing lines of credit and housing prices a little higher is not going to aid what’s binding here.  Doubling down on new technology–food, energy and transportation systems–while retrofitting our buildings and infrastructure are the best bet to lower friction costs and rejuvenate the economy.

Benjamin Tal, deputy chief economist of CIBC Capital Markets, explains on BNN Bloomberg. Here is a direct video link.

Hard assets like gold and silver bullion have always been negative-yielding once owners pay for insurance and storage. Real estate is often negative-yielding when it does not generate income sufficient to pay for its carrying costs. Stocks and corporate bonds are always at risk of negative yields when their value can fall more than any income received in dividends and interest.

Cash equivalents and government treasuries are supposed to be the only assets guaranteed to generate some income while ensuring the return of principal over the holding period.

Today the infliction by central banks of negative policy rates in the banking system not only thwarts the risk-free presumptions upon which all capital markets are priced but works to drive cash out of the banking system completely.  This reduces bread and butter spread profits for financial intermediaries but also works to erode the base capital on which the entire banking system depends.  In short, self-defeating.  This clip offers a simple, effective explanation of negative rates.

CNBC’s Geoff Cutmore explains the consequences of negative interest rates for banks and savers.  Here is a direct video link.

Here’s how negative rates impact banks, savers and the economy from CNBC.

Saw this last night at our local film festival with a room full of baby boomers. So much fun. Well worth watching and now available for rent on iTunes.

Echo In The Canyon celebrates the explosion of popular music that came out of LA’s Laurel Canyon in the mid-60s as folk went electric and The Byrds, The Beach Boys, Buffalo Springfield and The Mamas and the Papas gave birth to the California Sound. It was a moment (1965 to 1967) when bands came to LA to emulate The Beatles and Laurel Canyon emerged as a hotbed of creativity and collaboration for a new generation of musicians who would soon put an indelible stamp on the history of American popular music.  Here is a direct video link to the trailer.