The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent. It’s the first hike since July 2023. The central bank wants to control inflation by reducing the risk that high fuel prices could spill over and seep into the overall economy.

OTTAWA — OTTAWA - The Bank of Canada raised its policy interest rate by 25 basis points to 2.5 per cent. It’s the first hike since July 2023. The central bank wants to control inflation by reducing the risk that high fuel prices could spill over and seep into the overall economy.

  • DeadEndLink ( DeadEndLink@lemmy.ca ) 
    9·
    2 days ago

    Almost any European, Asian, African or South American country, this would fuel a surge in left wing interest, left wing ideology, revolutionary thinking.

    Here in the United States of Canada, we think that blowing billions on foreign military contracts, foreign owned pollution pipelines and taxpayer subsidized foreign owned data centers, untouchable property acquisition corps are great!

    Keep cranking up the inflation, spending and interest rates!

    Elbow’s up!!!

      • definitemaybe ( definitemaybe@lemmy.ca ) 
        3·
        1 day ago

        FWIW, I think variable was the right choice for you. My term is up soon, and we’re going variable.

        Over investment in AI is unsustainable. There’s no path to profitability for the industry. There is going to be a major market correction soon—and it must be soon because the increasing costs of investment are burning through capital at an unsustainable rate.

        This will directly put downward pressure on rates, as liquidity rapidly contracts as the circular investments in AI suddenly collapse.

        And also indirectly, as a major driver of BoC rates is inflation, and one driver of inflation is chip prices exploding due to AI.

        And also indirectly from stock market wealth losses: when investment valuations collapse, that reduces wealth, which in turn puts downward pressure on the housing/construction/materials markets (b/c affordability drops) and, hence, inflationary pressure from those industries.

        And then, even more indirectly, the US will be in a politically untenable situation wrt their very expensive war of aggression triggering energy price spikes during a crash and recession. They will be forced to back down, which should stabilize energy prices.

        So, I think you’ll do very well on variable, even if it rises a bit in the short term.

          • definitemaybe ( definitemaybe@lemmy.ca ) 
            1·
            1 day ago

            No, it’s not. Housing doesn’t require much to sustain value, while AI valuations require the market to continue to believe it is a “growth industry”, which means it will have explosive, exponential profit growth in the future. That is not possible, and the longer the market remains irrational, the more expensive it becomes.

            Housing is, literally, unique. Every home is brought to market independently, and homeowners are unwilling to accept a lower price, so they sit on inventory.

            There is also a lot of political pressure from homeowners to sustain valuations, especially from aging homeowners who are depending on the home valuations to fund retirement. And this is the demographic that votes.

            vs. AI: in the coming months, when OpenAI, Anthropic, or any other smaller player needs to pay $billions to a supplier or default, and they can’t raise more capital, they instantly go bankrupt. Then the whole house of cards comes tumbling down.

            • SaveTheTuaHawk ( SaveTheTuaHawk@lemmy.ca ) English
              1·
              13 hours ago

              in the coming months, when OpenAI, Anthropic, or any other smaller player needs to pay $billions to a supplier or default, and they can’t raise more capital, they instantly go bankrupt.

              and those companies have no assets. They are worthless.

            • quanin ( quanin@lemmy.ca ) OP
              2·
              1 day ago

              I do admire your optimism, but a couple knits to pick.

              1. Real estate in Canada has been a growth industry since we decided that 0 or near-0 interest rates were the way of the land. That’s why we’ve been in a housing crisis for 20 years.

              2. Assume you’re right and Anthropic and OpenAI both go bankrupt. Microsoft has its own AI. Nvidia has its own. Canada’s government just bought into Cohere. Google has its own. Apple will have its own if it doesn’t already. Amazon has its own. Assuming the AI bubble pops, maybe one or two of the big boys fail. What more than likely happens instead or also is the survivors get a lot bigger than they are.

              • definitemaybe ( definitemaybe@lemmy.ca ) 
                1·
                1 day ago

                I didn’t address your point about housing. You’re right that low interest rates have exacerbated the problem, but the bigger upstream causes are more that:

                1. It’s political suicide to run on a platform of reducing housing prices. People who vote are, disproportionately, homeowners who don’t want numbers to go down.
                2. The missing middle. We’re building the wrong kind of housing, and zoning bylaws are preventing unit densification where people want to live.
                3. The lack of non-market-rate housing options. Affordable housing options have a disproportionate effect on housing costs. Canada hasn’t invested in, basically, any affordable housing since the 70s, and we have some of the lowest non-market-housing rates in the developed world.
                4. Housing being held as investments first, and housing second.

                To be affordable, housing needs to drop 50%. Interest rates being low contribute, on the margin, but don’t account for that big of a difference. You’ll notice that housing prices barely dropped at all, and even continued to rise in some areas, when rates skyrocketed 4 years ago.

                • quanin ( quanin@lemmy.ca ) OP
                  1·
                  1 day ago

                  It’s political suicide to run on a platform of reducing housing prices. People who vote are, disproportionately, homeowners who don’t want numbers to go down.

                  It’s never actually been done, so we don’t know that. Even Singh didn’t run on reducing housing prices last year.

                  The missing middle. We’re building the wrong kind of housing, and zoning bylaws are preventing unit densification where people want to live.

                  Speaking as someone who currently rents an apartment, if I can ever get to a point where I can own something, I sure as hell don’t want to own one. The only thing worse than renting your individual unit is owning your individual unit and fighting with the other individual owners about maintaining the common areas.

                  The lack of non-market-rate housing options. Affordable housing options have a disproportionate effect on housing costs. Canada hasn’t invested in, basically, any affordable housing since the 70s, and we have some of the lowest non-market-housing rates in the developed world.

                  And the non-market housing that does exist is in such disrepair that you couldn’t pay me to live in it. Because in this country, non-market housing means controlled by the government, and that’s a political football.

                  Housing being held as investments first, and housing second.

                  Which is why I said it’s a growth industry. They bought low. They’re not about to sell lower.

                  To be affordable, housing needs to drop 50%. Interest rates being low contribute, on the margin, but don’t account for that big of a difference. You’ll notice that housing prices barely dropped at all, and even continued to rise in some areas, when rates skyrocketed 4 years ago.

                  Canada’s population also skyrocketed 4 years ago, and only stopped skyrocketting (at least, as much) in the last year or so. There were two different demand levers being pulled. BoC pulled theirs to reduce, GoC pulled theirs to increase.

              • definitemaybe ( definitemaybe@lemmy.ca ) 
                1·
                1 day ago

                What more than likely happens instead or also is the survivors get a lot bigger than they are.

                No. No, they won’t. They’re all losing money hand-over-fist. And they’re all circularly invested with each other. Microsoft owns OpenAI, and OpenAI uses Microsoft compute which they pay for with ownership. Microsoft valuation is inflated because of OpenAI, and when the bubble bursts, they’re going to lose a lot of money.

                If you’re interested in economics/finance, I suggest reading about the circular cashflows and investment in the AI space.

                To make it even worse, they’re effectively lying in their accounting, claiming the compute they’re giving away as a “marketing expense” instead of operating costs, while booking the value as revenue. The profit : cost ratio is even worse than headline numbers suggest. They are burning through multiples of all of their revenue on operating costs, before they even start to pay for expansion.

                In other words, it’s fucked.

                Sure, AI is here to stay—small to midsize models are already trained and cheap to run. But it’s also not going to make significant profit for anyone.

                • quanin ( quanin@lemmy.ca ) OP
                  1·
                  1 day ago

                  Like I said. I admire your optimism. But I think you need to fact-check yourself. Microsoft owns at most 27% of OpenAI. And Microsoft is currently working on its own internal AI (MAI). Even in the unlikely event that OpenAI goes bankrupt, Microsoft and its own AI products will be just fine.