Thursday, January 22, 2015

Unexpected rate cut no coincidence

Our Glorious Leader, Emperor Harper, has just received what must be very a very welcome boost courtesy of the Bank of Canada's unexpected interest rate cut. Who knew that a quarter-of-a-percent reduction in interest rates could have quite such a large economic effect, but I am reliably assured that it does.
The shock measure is supposedly justified as "insurance" against the falling price of oil (now languishing at about $46 US, down from around $110 as recently as last June), which is currently decimating government budgets and potentially marring the Conservative brand. But what it really looks like is a rather desperate emergency measure intended to kick-start a faltering economy, to encourage Canadian consumers and businesses to spend and invest (hopefully without further increasing household debt, which is already at near record, and probably unsustainable, levels).
After going though a pretty rough patch politically (and in an election year!) - what with allegations of mission creep in Iraq as Canadian soldiers carry out on-the-ground operations which were supposed to be specifically excluded from their agreed role there, and the recent controversial $15 billion arms deal with egregious human rights violators Saudi Arabia, among other setbacks - the unanticipated announcement by BoC director Stephen Poloz (yes, a recent Harper appointment) has played neatly into Harper's hands.
The expected main winners from the Bank of Canada's actions (at least in the short term)? The banks and the stock market and its wealthy (largely Tory) investors. Coincidence? I think not.

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