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Are you ready for 6 rate hikes


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Again what the USA does is very relevant to what happens to us here in Canada.  The Federal Reserve has communicated that 6 rate hikes can easily be handled by the USA economy.  Knowing how much debt is held by Americans I think they will seriously be hurt by rate hikes.  And if we want or currency not to plummet in Canada we will have to follow America's lead.  So where does 6 rate hikes put you?  

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6 rate hikes will put me and everyone else in a world where a lot of negative things will be exacerbated.

Fighting inflation by increasing the cost of everything seems particularly counter-intuitive.  Like doing the same thing over again and expecting a different result.

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  • 3 weeks later...
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So here we are after, what is it, eight rate hikes?  What if the only way to get inflation down to 2% ends up flatlining the economy?

https://www.adesa.ca/price-index/

Annybody heard of ADSA?  I thought not.  They have sales figures on autos in Canada, and the numbers for 2022 have been the worst since 2009.  The crash.  

Here’s a deeper look:

 

Edited by sharkman
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On 1/29/2023 at 11:58 AM, sharkman said:

So here we are after, what is it, eight rate hikes?  What if the only way to get inflation down to 2% ends up flatlining the economy?

https://www.adesa.ca/price-index/

Annybody heard of ADSA?  I thought not.  They have sales figures on autos in Canada, and the numbers for 2022 have been the worst since 2009.  The crash.  

Here’s a deeper look:

 

Used car prices down 3%…. Not alarming at all.  Still 50% higher than a couple years ago.  Of course there will be a correction, especially once new vehicles become more available.  Plus, interest rates should slow down sales.  
https://www.consumerreports.org/buying-a-car/when-to-buy-a-used-car-a6584238157/

Why would this cause alarm?  Isn’t a correction expected after the massive jump in prices?

Edited by TreeBeard
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On 1/31/2023 at 9:39 AM, TreeBeard said:

Used car prices down 3%…. Not alarming at all.  Still 50% higher than a couple years ago.  Of course there will be a correction, especially once new vehicles become more available.  Plus, interest rates should slow down sales.  
https://www.consumerreports.org/buying-a-car/when-to-buy-a-used-car-a6584238157/

Why would this cause alarm?  Isn’t a correction expected after the massive jump in prices?

We are at the beginning of the decline, so there is no telling how severe it might get.  What one needs is forward looking data.  But when you see that the numbers for 2022 are the worst since 2008, that tells you something.  

It's not that this should cause alarm.  It's that this should warn people to not buy a vehicle just now.  Wait and see how things develop into the spring.  Used vehicles could become cheaper yet, and you could save yourself some coin.  Also, manufacturers might roll out big discounts to sell vehicles.  It's about being armed with knowledge.  Be prepared, not scared.

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Since this also certainty affects Canada, I’ll add this here.  A report on the Canadian real estate market expects a deep decline, up to 50%, before this is over.

https://betterdwelling.com/canadian-real-estate-prices-to-fall-lower-worst-case-is-a-return-to-2014-values-oxford-econ/

“ Oxford Economics(Ox Econ) updated its housing outlook for Canada today, with a key insight being home prices are still projected to fall further. They say Canada is only about half through the correction—if things don’t break. If things get really bad, the firm warns that home prices can be cut in half, and fall back to 2014 levels.”

 

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  • 2 weeks later...

And here's another story on the tough situation of the auto market in Canada.  It's a car bubble, much like a housing bubble.  People getting behind in their car payments due to the higher cost of living(inflation), higher interest rates(on their variable rate mortgage, credit lines and or credit cards), and higher cost of the used auto purchased in the last 18 months

https://ca.style.yahoo.com/more-canadians-falling-behind-car-payments-after-big-run-up-auto-prices-170916778.html

"Typically, when consumers are in a very tight spot financially, they stop making payments on things like credit cards, lines of credit and personal loans long before they would ever do so on secured debts like a mortgage, their rent, or a car loan," said Scott Terrio, a certified credit counsellor and manager of consumer insolvency at Hoyes, Michalos Licensed Insolvency Trustees.

"But given the choice between making your shelter payment and your car loan, the car loan will always go delinquent first."

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