{"id":9936,"date":"2015-07-11T07:00:49","date_gmt":"2015-07-11T12:00:49","guid":{"rendered":"http:\/\/olduvai.ca\/?p=9936"},"modified":"2015-07-11T07:00:49","modified_gmt":"2015-07-11T12:00:49","slug":"side-effects-include-household-debt","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=9936","title":{"rendered":"Side-Effects Include: Household Debt"},"content":{"rendered":"<h3><span class=\"blue\"><a href=\"https:\/\/mises.ca\/posts\/blog\/side-effects-include-household-debt\/\" target=\"_blank\">Side-Effects Include: Household Debt<\/a><\/span><\/h3>\n<p><a href=\"http:\/\/business.financialpost.com\/news\/economy\/stephen-poloz-compares-bank-of-canada-january-interest-rate-cut-to-life-saving-surgery\">Bank of Canada Governor Stephen Poloz fancies himself a surgeon.<\/a>\u00a0He compares cutting interest rates to life-saving surgery for the economy. I consider it more like bloodletting, a terrible practice that is now widely accepted as pseudoscience. According to Canada\u2019s central banker, if the interest rate cut resulted in an increase of household debt, that should be viewed as a necessary side effect.<\/p>\n<p>If the Bank of Canada has one job it\u2019s to focus on the 2 per cent inflation target and that means cutting the benchmark rate by 25 basis points when global crude oil prices tumble. Or at least, that\u2019s what Stephen Poloz said to the central bank of central banks, the Bank for International Settlements.<\/p>\n<p>\u201cIf the doctor says you need surgery to avoid death, the side effects usually don\u2019t deter you, you just go ahead and manage them somehow,\u201d Poloz said. \u201cOther issues must be subordinate and I think of them as side effects.\u201d<\/p>\n<p>Likewise, if a bloodletter tells me I need to balance my \u201chumors\u201d, the side effects of losing so much blood won\u2019t deter me. I\u2019ll just go ahead and manage them somehow.<\/p>\n<p><span lang=\"en-US\">Of course, what Poloz is really saying is that the Bank needed to intervene to prevent death, or rather, a contraction of credit and available money. The side effects of more household debt, the prospect of higher prices in the future, the misallocation of resources \u2013 those are all side effects where the alternative is deflation.\u00a0<a class=\"western\" href=\"https:\/\/mises.org\/library\/deflationary-spiral-bogey\">And we can\u2019t have that.<\/a><\/span><\/p>\n<p>\u201cWhen we cut rates to stabilize the economy we don\u2019t picture some heavily indebted household going out and adding to their debt pile, rather we picture a household with no debt at all deciding finally to buy a house and taking out a mortgage,\u201d Poloz said.<\/p>\n<div>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<p>&nbsp;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Side-Effects Include: Household Debt Bank of Canada Governor Stephen Poloz fancies himself a surgeon.\u00a0He compares cutting interest rates to life-saving surgery for the economy. I consider it more like bloodletting, a terrible practice that is now widely accepted as pseudoscience. According to Canada\u2019s central banker, if the interest rate cut resulted in an increase of [&hellip;]<\/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":[942,103,124,195,202,1154,7200,943],"class_list":["post-9936","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-canada","tag-central-banks","tag-debt","tag-deflation","tag-interest-rate-policy","tag-mises-canada","tag-stephen-poloz"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/9936","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=9936"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/9936\/revisions"}],"predecessor-version":[{"id":9937,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/9936\/revisions\/9937"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9936"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9936"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9936"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}