6/11/09

End badly

Peacenik is reading more and more articles that suggest the papering over of financial problems isn't working. Long term interest rates are rising. The price of oil is going up. The value of the U.S.dollar is falling, and as it falls the Canadian dollar approaches parity.

The consequences are confusing. Charles Hugh Smith has a nice readable article about interest rates going up and what might happen. Mish has something about the mortgage market freezing up. And Garth Turner's article below adds some local flavour. Peacenik guesses that the price of oil going up might goose the TSE, and strengthen the Canadian dollar. But it is all bad for the economy, which seems to Peacenik to be in some kind of death spiral. Even Canada's forest industry, a backbone of the economy, needs a billion dollar bailout. Is there any private sector economy left?

End Badly

by Garth Turner

Some days ago, I made three predictions. In a year…

* The prime rate will have doubled.
* Oil will be $100 a barrel.
* The dollar will be at par.

Since then, mortgage rates jumped for the second time in as many weeks. A lot, actually. Sixth-tenths of a point in a few days, taking a five-year closed term to 5.85%.

Oil closed Wednesday in excess of $71 US. This means the black stuff has risen 100% in price in the last three months. If these were normal times, that would be shocking and consequential news – especially since gas will again be $1 a litre in a few days.

Read on...