{"id":24128,"date":"2017-06-11T18:56:45","date_gmt":"2017-06-11T23:56:45","guid":{"rendered":"http:\/\/olduvai.ca\/?p=24128"},"modified":"2017-06-11T18:56:54","modified_gmt":"2017-06-11T23:56:54","slug":"the-inconvenient-truth-of-consumer-debt","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=24128","title":{"rendered":"The Inconvenient Truth of Consumer Debt"},"content":{"rendered":"
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The Inconvenient Truth of Consumer Debt<\/span><\/a><\/h3>\n
It\u2019s acceptable to build infinitely high levels of household debt — as long as rates never rise.<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n
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Ready for a rainy day?Photographer: Anoek De Groot\/AFP\/Getty Images<\/span><\/p>\n<\/figcaption><\/figure>\n
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Oh, but for the days the hawks had a hero in Sydney. Against the backdrop of a de facto currency war, the Reserve Bank of Australia stood as a steady pillar of strength. The RBA held the line on interest rates, maintaining a floor of 2.5 percent, even as its global central bank peers drove rates to the zero bound and beyond into negative territory.<\/p>\n

The abrupt end to the commodities supercycle drove the RBA to join the global currency war. The mining-dependent nation\u2019s economy was so debilitated<\/a> that policy makers felt they had no choice but to ease financial conditions. In February 2015, after an 18-month honeymoon, the RBA reduced its official rate to 2.25 percent, marking the start of a cycle that ended last August with the fourth cut to a record low of 1.5 percent.<\/p>\n

The Bank of Canada has taken a similar journey in recent years. It embarked upon a mild tightening campaign in 2010 that raised the overnight loan rate from a record low of 0.25 percent to 1 percent in September 2010. The bank maintained that level until early 2015. Two weeks before the RBA\u2019s first cut, the Bank of Canada lowered rates to 0.75 percent. The January move, which shocked the markets, was followed in July 2015 with an additional ease to 0.5 percent, where it remains today.<\/p>\n

Bank of Canada Governor Stephen Poloz, who replaced Mark Carney after he departed to head the Bank of England, explained the moves as necessary to counter the downside risks<\/a> to inflation emanating from the oil price shock to the country’s economy.<\/p>\n

Two resource-rich economies reacting similarly to body blows is intuitive enough. They eased the pressure on their given economies.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Inconvenient Truth of Consumer Debt It\u2019s acceptable to build infinitely high levels of household debt — as long as rates never rise. Ready for a rainy day?Photographer: Anoek De Groot\/AFP\/Getty Images Oh, but for the days the hawks had a hero in Sydney. Against the backdrop of a de facto currency war, the Reserve […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[942,56,83,3158,13492,195,1935,431,3086,943],"class_list":["post-24128","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-bank-of-england","tag-bloomberg","tag-consumer-debt","tag-danielle-dimartino-booth","tag-debt","tag-household-debt","tag-interest-rates","tag-reserve-bank-of-australia","tag-stephen-poloz"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24128"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24128\/revisions"}],"predecessor-version":[{"id":24130,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24128\/revisions\/24130"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}