I agree. The low interest rate for ‘stimulus’ has led to low ROI for the small saver, who sees home ownership as his ONLY vehicle for a high enough rate of return to retire. The mutual funds 2% does little to accumulate savings since inflation reduces real growth to zero. The wealthy have the leverage to demand 12% to 50% ROI and they profit from cheap money. But it is risky for the consumer because home pricing cannot ‘bubble’ forever and some will get caught in the burst. As well, it drives up rental prices (linked by cost of buildings) beyond the affordability of the lower 50% of income earners and that drives a host of other problems.

One problem is that the minimum wage/working poor have been so drained by the profits of the superrich that they are unable to handle the shock. This was a long time coming from the policy of keeping interest rates low (thus making it easy to borrow/expand and hard to save) which served the interests only of the wealthy and politicians. The long term consequences are now upon us, triggered by the panedemic but it really could have been anything. The longer it goes on, the smaller the trigger has to be. See the period BEFORE the ‘Great Depression’. Current policy is a bit better but may need to have a ‘floor’ to interest rates so as to prevent such ‘up and down’ cycles and make saving (capital accumulation) more viable for the average consumer.

Canada’s economy has been heavily dependent on housing for a number of years now. Higher interest rates >>> softening of the housing market >>> hard landing for at least some parts of the high-flying real estate sector. BOC has seemed very hesitant to raise interest rates, perhaps (at least partly) out of a fear of deflating the housing bubble. [?]

Unemployment will follow higher rates. People borrow less when it’s expensive, including businesses that need to service Dept. When people don’t spend, demand for everything goes down. As money stops moving around due to lower demand, inflation slows down. Converse to what we recently saw with QE and low rates.