Canada Just Warned That Negative Interest Rates Are Coming

Tyler Durden's picture

Moments ago, the Bank of Canada's chief finally said what we had been patiently waiting for over the past several months: admission that Europe's experiment with negative rates is about to cross the Atlantic. From Market News:

  • BOC POLOZ: NOW SEES EFFECTIVE LOWER BOUND FOR POLICY RATE AROUND -0.5%
  • BOC POLOZ: CANADN FIN MKTS COULD FUNCTION IN A NEG INT RATE ENVRIONMNT
  • BOC POLOZ: 'SHOULD THE NEED ARISE' FOR UNCONVENTIONAL MONETARY POLICY, 'WE'LL BE READY'

That, as they say, is "forward guidance" of what is coming.

And what is coming, is also precisely what Keith Dicker from IceCap Asset Management said in his latest monthly letter, would happen in Canada in the very near future. To wit:

Canada

Now that the election is over, the new government can quickly get down to work to missing all of their economic forecasts and budgets.

IceCap is apolitical – we support neither the left, the center or the right. Instead, we see the world with our global goggles and can confirm that despite any and all economic policies from the new (or old) government – the Canadian economy will continue it’s downward trend.

This negative outlook for Canada isn’t driven by an insular view or perspective. Rather, the global trend is downward. The economic and monetary foundation for the global economy has shifted and this is the reason for our downward view for the Great White North.
During the election campaign, we shared this view with the eventual winning party. The response was a slow yawn and disapproving look which suggested either we didn’t know what we were talking about or they were not really interested in our answer to their question.

This lack of empathy for the escalating global government debt crisis is also shared by many in the financial sector as well. Yes, increasingly more and more investment managers are echoing concerns similar to ours – but make no mistake, the majority, and especially the really big investment and mutual fund companies continue to see a recovery right around the ole corner.

Of course, this mythical corner continues to be just as elusive as unicorns, trolls, elves and dragons. In 2014, Canada’s top Bay Street economists were all clamouring for the Bank of Canada to begin raising rates – after all, these economists had very big spreadsheets, with all kinds of neat formulas and corporate logos that predicted the Canadian economy was about to shoot to the moon.

Yes, the good times were back.

But they weren’t.

At the time, IceCap stated that the global economy was beginning to roll over and that the Canadian economy would begin shooting in the opposite direction. As well, based upon our outlook for declining growth, we also expected the Bank of Canada to REDUCE interest rates, not INCREASE interest rates as predicted by Bay Street.

Naturally, our view meant that the Canadian Dollar would decline significantly relative to the US Dollar. This provided us with a great opportunity to add a significant USD currency strategy within every Canadian Dollar Client Portfolio.

Now here we are in 2015, and the Canadian Dollar (and other currencies) has in fact declined significantly, and the Bank of Canada has in fact REDUCED interest rates not once, but twice.

We share this investment success story for 2 reasons:

  • Taking an insular view of your Country’s economy will lead you to losing money.
  • The global economy and financial markets continue to move in the direction which we expect. And this direction is going to produce outcomes that are being completely missed by many in the investment community.

Which brings us back to Canada. Currently, both the Bank of Canada and Bay Street economists predict the Canadian economy to recover in 2016, and then to accelerate in 2017.

The ONLY way for this to occur is if the global economy sheds it’s government debt problem. IceCap places a 0% probability of this occurring.

Instead, everyone should expect:

  1. Canadian economy to be in recession in 2016
  2. Bank of Canada will be at 0% interest rates in 2016
  3. Bank of Canada will be at NEGATIVE interest rates in later 2016
  4. Bank of Canada will be PRINTING MONEY in later 2016

And for the Canadian Dollar? It’s headed lower, a lot lower. If you are not Canadian, just know that you are in a similar boat. And when it comes to boating, there is one simple rule – going against the flow is difficult, it’s exhausting, and it can be humbling.

* * *

So, in order to force the Bank of Canada's hand, is this what's coming next?

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Harlequin001's picture

Lets blame the muslims, eh...

coinhead's picture

Negative rates... nothing could be better for gold, silver, Bitcoin and reality in general.  The final push of a failed thought experiment.

SILVERGEDDON's picture

Well, I don't have faith in the crypto currency, but I can compliment you upon a clear, succinct, well mannered, and well thought out post.

My compliments to you, sir.

Diet Coke and Floozies's picture

Don't worry guys, a new tax will be coming online next year to shore up the budget... http://time.com/4137644/canadian-prime-minister-reaffirms-plan-to-legali...

Tom Servo's picture

Good, maybe they'll overwinter in Canada  instead of coming down to Florida and fucking up my commutes every day.  I swear to christ they don't understand that our speed limit is in MPH.

mtl4's picture

Hard to imagine how could 10 million canadians per year visiting provide any benefit to Floridians anyway.

nuclearsquid's picture

I guess there is fresh ($36 per barrel) blood in the water.

 

Deathrips's picture

Negative rates aint your buddy guy!

 

RIPS

nope-1004's picture

And some still think the US will raise rates - lmao

The BOC decisions of the past were always foresight into upcoming Fed decisions.

How's y'alls pension plans looking?  lmfao.  Sorry, I find destroying capital by the suits controlling the price of capital rather hilarious.  If there ever were a definition of policy failure, I think this may be it.

two hoots's picture

And Janet has us ready for liftoff (cause we are awesum).   

https://www.youtube.com/watch?v=ba97uvWmhEc

 

 

HowdyDoody's picture

The next step in the controlled demolition of the economy.

 

Divided States of America's picture

Who doesnt rule Canada? Canada is the lap dog of the west. btw Poloz is an Ukranian Jew. No wonder Canada hates Russia.

btw, so technically if interest rates are negative, the banks pay me to borrow more money to buy overpriced houses???

 

 

wanderer9641's picture

No - If interest rates are negative you pay them to hold your money whiule they create a spread so that if you borrow money, they get more out of you. - bankers get paid - not do the paying.

Canadian Made's picture

Canada is run by a bunch of fuckin psychopaths, its press is 100% propaganda, its central bank is run by a jew, and 95% of its citizens are brain dead. And its different in US, Britian, France etc...how?

HotelBread's picture

Most Canadians get their news from the CBC. The Collectivist Broadcasting Corpulence is a nonstop megaphone of socialist and anti-family propaganda. Other broadcasters largely follow its lead. Things are so bad, in a nationwide poll a few years ago to choose "the Greatest Canadian," the winner was Tommy Douglas, founder of Canada's socialized health service. One of the runners-up was climate whore David Suzuki.

PavlovPup's picture

Harper hated Russia, and there is a big Ukranian poulation here. We will simply and as ever perservere up here.

 

monk27's picture

Butt kissing the Ukrainian minority with his rabid anti-Russian stance didn't help him much in the last elections... Today, he's a nobody.

Lore's picture

There are lots of 2nd- and 3rd-generation Uke-Canadians east of Edmonton who feel no love for the puppet regime in Kiev. 

Joe Sichs Pach's picture

^ Ed Zachary!  US raising rates in December?  Good luck with that

Reichstag Fire Dept.'s picture

Pension plan looks great!

Sold the house at the top of the market in the summer and bought physical gold with the money.

I'm ready...bring the heat!

Kayman's picture

WCS at $26USD, not $36. No blood left.

nuclearsquid's picture

I guess there is fresh ($36 per barrel) blood in the water.

wooohoo.  ZH liked my comment so much they posted it for me twice!!

Squid-puppets a-go-go's picture

i might be a broken record on this, but so long as we are ostensibly a capitalist society it bears repeating: Negative interest rates are nothing less than the direct and deliberate destruction of Capital. Madness.

 

mtl4's picture

Agreed, government is trapped and they see it as their only way out (kick the can)........problems are that big cracks are beginning to show in the dam (pensions, insurance, etc) and all that water is eventually going to bust through at some point.

Bring the Gold's picture

The useful idiots are as you describe. Central bankers on the other hand are performing a controlled demolition of all economies and currencies to pave the way for a global currency similar to the SDR/Bancor.

Global government via trade agreements is the end game along with a one world digital currency to have everyone by the short and curlies.

MasterControl's picture

The politicians make it so.
The only useful idiot is you keeping the blame from them as mucha s possible. 

Bring the Gold's picture

If you live in the fantasy land where politicians are anything more than errand boys it is in fact you sir who is the useful idiot. The Nuremberg defense will not and should not shield the politicians, but they are following orders none the less.

LawsofPhysics's picture

Yes, unfortunately we have become a fascist police state...

Bring the Gold's picture

This! It's is the fascist wing of the collectivist ideologies that is our current problem. People rail against Socialist which is nowhere in sight and miss the Fascist policies such as Obama care which is NOT Socialist, it is as Fascist as the bank bailouts. Crony capitalism with state intervention in markets is the very definition of Fascism.

Sudden Debt's picture

It is! Here in Europe we've got 7% inflation in less then 6 months!!!!! You do the math if they keep it up for a decade.

DaveyJones's picture

lying about true inflation rates is the best way to have in reality, functioning negative interest rates when you claim it's still in positive territory

Radical Marijuana's picture

YES, Squid-, MAD Money As Debt systems, whereby governments enforce frauds by privately controlled banks, are INHERENTLY MADNESS!

http://www.conspiracyarchive.com/NWO/silent_weapons_quiet_wars.htm

Silent Weapons for Quiet Wars

Energy is recognized as the key to all activity on earth. Natural science is the study of the sources and control of natural energy, and social science, theoretically expressed as economics, is the study of the sources and control of social energy. Both are bookkeeping systems: mathematics. Therefore, mathematics is the primary energy science. And the bookkeeper can be king if the public can be kept ignorant of the methodology of the bookkeeping. ... In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. ... if balanced in no other way, will be balanced by the negation of population (war, genocide)... They must eventually resort to war to balance the account, because war ultimately is merely the act of destroying the creditor ... War is therefore the balancing of the system by killing the true creditors (the public ...) the economy has been transformed into a guided missile on target. ...

Negative capital

shall annihilate

any capitalism.

Negative interest rates are a "logical" development within systems that are fundamentally based upon MADNESS. While Canada is one of the few countries left in the world that is still only suffering from debt slavery, rather than has gone over the edge of MADNESS into debt insanities (because Canada still has enough natural resources left to strip-mine to sustain making "money" out of nothing as debts in order to "pay" for doing that), Canada is accelerating towards those kinds of globalized and privatized forms of MADNESS!

 

 

DavidPierre's picture

Hey RM:

I wait eagerly for legalization of the backyard herb now that "Just-In" and the Libtardals got the majority.

http://www.cbc.ca/22minutes/videos/clips-season-23/marijuana-party

Won't hold my breath... (well just a little bit when inhaling).

 

PS: That is you ?

 

 

Radical Marijuana's picture

No, that was not me, the guy in that amusing video interview was the Candidate in Hamilton Centre, Michael Baldasaro

ScottyGolf's picture

Not our fault your state is an old person haven. It's nothing to do w/ kph vs mph much less something inately Candian about slow driving...you're talking about senior citizens. Oh and you don't want us to spend our money at your local businesses? Smart guy you must be.

Mr.Sono's picture

Canadians are the cheapest when it comes spending in the local Florida businesses. To the point where its not even worth of having them there. Canadians need to stick with Mexico, they go together well. 

Tom Servo's picture

They don't patronize mom and pop business.  They all flock to Walmart, Applebees and Outback and do nothing but bitch about how crowded they are, and how much the locals are pieces of trash.

 

I wouldn't mind, if they would follow 1 rule: don't drive between 7-9 am and 4-6 pm.  That's when the makers are going to work...

 

greenskeeper carl's picture

I live in Florida and I don't see the driving as a Canadian problem either. The cars I see with Canadian plates are no worse than the ones from the northern US. It's old people. They drive slow.

Dinero D. Profit's picture

Many, many Canadians have been hit in the head with a puck.

TheDanimal's picture

I don't have faith in the crypto either. The NSA has backdoor access to devices. How many and which ones is impossible to know. They could shut down the network or disrupt it with potentiality great ease. Or the president could use his Internet kill switch authority. 

highandwired's picture

You don't need the Internet for Bitcoin to function.  Besides, by the time the Internet is shut off, you will have much bigger problems than not being able to send Bitcoin overseas. 

Bring the Gold's picture

Let me imagine a SHTF scenario. Internet is gone due to kill switch the dollar is tanking. I find an item I want I have in hand a USB thumb drive with three bit coins on it (~$1000ish) and my access password. I also have one ounce gold coin (~$1000ish). Which do I imagine the middle aged Asian shopkeeper is more likely to take?

I don't need likely alphabet soup agency or central bank shenanigans to realize that 6,000 years of history and physical material reality is going to trump the wonders of block chain. I'm agnostic on Bitcoin's long term value but vs gold or silver...? Bring the gold and I'll bring me sack.

slimycorporatedickhead's picture

negative rates and no bank run.... truly shows how stupid people are, good luck canada

Dinero D. Profit's picture

-----I’m sure this negative interest rate absurdity has a Red Shield babble champion to defend it

 

 

PavlovPup's picture

You might be surprised at the public reaction to this. 35 millon is still a relatively small poulation, and a 10% tipping point is all you need supposedly. Canadian politicians have to be very carefull, Harper made the mistake of underestimating the people and thinking they scare easy. there is still a strong element of frontier mentality up here. I hope its enough....

Lore's picture

You're joking, right?  Justin (very much his father's son) was marketed as the last, best hope for uninterrupted flow of statist pap, and Canada's drowning-in-debt, socialist-collectivist hordes sucked up the Kool-Aid, drooling at the prospect of "more free shit" and "taxing the rich" (i.e., decimating the middle class).  It's the same old stupid, juvenile formula.  At least Harper stood up to the Agenda 21 greenshirts, a little.  Now the barn doors are open and the long-awaited Rothschild consumption ("Carbon") tax wheels are in motion. You think some things were bad before?  We teeter on the verge of the greatest generational crunch in living memory, along with potential for big war based on false pretexts, and you think things are going to get better under an attention-seeking globalist-malleable lap-dog?  You had better hope that True Duh doesn't abort the Northern Gateway pipeline, because somebody has to pay for your geriatric pension, and it seems unlikely to come from much capital formation under this guy.