Bank of Canada Leaves Rates Untouched

Article: 


http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/04/bank-of-canada-leaves-rates-unchanged-yet-again.html#more

Summary:

This article states that the Bank of Canada is keeping its key lending rate at 1.00%.  This has been the fifth consecutive meeting and the Bank of Canada has definitely surprised many.  The current prime rate is 3.00%.  This is good news for everyone with a mortgage.   Many people foresee that bank increasing its bank rate by the time summer rolls around.  Financial markets and major economists predict 2011’s first bank rate hike to happen on July 19^th. Other forecasts state that the hike will be pushed back to September or October. 

Connections:

This article is related to Chapter 7 because it talks about chartered banks and the bank rate.  A chartered bank is the term used to describe a financial institution operating under the authority of Parliament that accepts deposits and lends money to businesses, government, and households.  The chartered banks in this article are borrowing money from the Bank of Canada.  The bank rate is the rate of interest paid by chartered banks on money borrowed from the Bank of Canada.  The key lending rate is currently lower than the current prime rate. 

Reflections: 

I think that mortgage holders must be extremely happy with the current lending rate at a low of 1.00%.  With a low lending rate comes a low prime rate.  With both being quite low, interest rates on savings accounts would without a doubt decrease. This would cause people to spend more compared to save more because they would be getting less interest on their money.  With all the spending in the economy, there would be a decrease in the level of demand-deficient unemployment.  The persistent strength of the Canadian dollar will certainly help to decrease inflation and in the long run, help restore the economy to capacity by the middle of 2012. 

Virtual Wallets

How long do you think it's going to take to get to all virtual cards? How many years? (1 point)
Why? (1 point)

I think that it will take atleast 10 - 20 years before we get to all vitrual cards.  I think this is the case because we still need to make sure that these virtual cards are safe.  With everyone using virtual cards; credit, debit and identification fraud will definitely be a big factor.  That is why safety and legitimacy is extremely important before these virtual cards actually come into effect.

Who will not be on board with this new virtual wallet? (2 point)

I believe that people who do not like change will be against the new virtual wallet.  To transition from cards and paper money to nothing is actually not an easy task. Many people alike will be against this idea because the change would definitely be too dramatic for them. 

What companies are going to be affected negatively by this? Name 3 (3 points)

I think that small, privately owned companies will be affected greatly because they will not have enough money to purchase the machines for the virtual wallets.  Companies that sell wallets will also suffer because wallets will no longer be needed. 

Which industries are going to make money from this? Name 3 (3 points)

I think that retail companies will benefit from the virtual wallet because consumers will be carrying their entire "bank account" with them through the virtual wallet.  This is cause consumers to spend more because they have all the money they need.  The bank will also benefit because people will be using their virtual cards everyday and the banks will be able to charge fees on activation and transactions.  Lastly, I think that the industries that created this virtual wallet idea will benefit.  They will benefit because they were the ones who created this idea and many people will be buying the machines from them.