interest rates in 5 years - Garth Turners predictions

[Sandro]

Just wondering what people have to say about Garth Turners predictions that interest rates can go as high as 11% by 2014. You can read his article below.

thanks for your input.....


http://www.howestreet.com/articles/index.php?article_id=8972

 

[mortgageman]

QUOTE (Sandro @ Apr 2 2009, 01:15 PM) Just wondering what people have to say about Garth Turners predictions that interest rates can go as high as 11% by 2014. You can read his article below.

thanks for your input.....

I`d say he`s absolutely right that rates will go higher in the medium to long term because: A there`s not much room to drop further and B, the increase in money supply that is happening right now will eventually create inflation. When and how much rates will increase is a mug`s game. But for Garth Turner, there`s little risk in picking a rate that scares the living daylights out of you since no one is going to hold him to account in 2014 if his prediction of 11 percent mortgage rates is incorrect.
And if he happens to get it right then he can say, "See, I told you so." In the meantime he sells books either way.

 

[invst4profit]

Yes they will go up but **11%**. Right or wrong he is only attempting to grab headline attention nothing else.

If he is right this site and many others like it will have far fewer members by 2015.

(I just said that to grab attention)

 

[DanBarton]

QUOTE (mortgageman @ Apr 2 2009, 01:13 PM) I`d say he`s absolutely right that rates will go higher in the medium to long term because: A there`s not much room to drop further and B, the increase in money supply that is happening right now will eventually create inflation. When and how much rates will increase is a mug`s game. But for Garth Turner, there`s little risk in picking a rate that scares the living daylights out of you since no one is going to hold him to account in 2014 if his prediction of 11 percent mortgage rates is incorrect.
And if he happens to get it right then he can say, "See, I told you so." In the meantime he sells books either way.

So true. Love it.

 

[jamurphy]

Garth Turner is a swear word to me.

Anyone who does their best to keep an economy spiralling down - through shouting negative predictions as loud as possible (73% of Canadian GDP driven by the domestic spending)......so they can sell more books - should be put in stock in the town square.

I hope he spares a thought for all of the Canadians he may have put out of work...while he`s counting his pennies gained from his marketing prowess of "harnessing the power of fear" and abusing the status gained from a political position.

Maybe these poor souls are the same ones who were suckered into voting for him back in Surrey.

 

[Goodstuff]

Here`s something to think about:

If mortgage rates are indeed at 11% five years from now, that will mean that inflation is very high, probably around 15% a year.
That means that wages will be increasing on average at 15% a year, as well as most other items. Houses may not jump at that rate when the interest rates are high, but in the long run they will increase to meet the rate of inflation. So people may indeed have incomes of $139,000 / yr, which will just seem normal after the bout of inflation, just like a wage of $69,000 seems normal today.

Remember, a house price of $30,000 seemed normal 40 years ago. Now $400,000 seems normal.

It`s all relative folks.

Just remember, if inflation is high, so is the price of everything else. Your $200,000 mortgage will seem like a $100,000 mortgage after the inflation, plus your income will be higher.

Turner is trying to scare everyone by projections using today`s dollars but future rates of inflation. Not gonna happen.

 

[mortgageman]

QUOTE (Goodstuff @ Apr 2 2009, 08:36 PM) Turner is trying to scare everyone by projections using today`s dollars but future rates of inflation. Not gonna happen.

Just think how much he`ll be making thanks to his inflation-adjusted MP`s pension, assuming he`s not still in office!

 

[lanedry77]

QUOTE (mortgageman @ Apr 2 2009, 09:33 PM) Just think how much he`ll be making thanks to his inflation-adjusted MP`s pension, assuming he`s not still in office!
Thankfully, he`s not in office anymore.
Unfortunately, that just gives him more time to spew his hot air into the media.

David.

 

[Thomas Beyer]

QUOTE (Goodstuff @ Apr 2 2009, 08:36 PM) Here`s something to think about:

If mortgage rates are indeed at 11% five years from now, that will mean that inflation is very high, probably around 15% a year.
That means that wages will be increasing on average at 15% a year, as well as most other items. Houses may not jump at that rate when the interest rates are high, but in the long run they will increase to meet the rate of inflation. So people may indeed have incomes of $139,000 / yr, which will just seem normal after the bout of inflation, just like a wage of $69,000 seems normal today.

Remember, a house price of $30,000 seemed normal 40 years ago. Now $400,000 seems normal.

It`s all relative folks.

Just remember, if inflation is high, so is the price of everything else. Your $200,000 mortgage will seem like a $100,000 mortgage after the inflation, plus your income will be higher.

Turner is trying to scare everyone by projections using today`s dollars but future rates of inflation. Not gonna happen.
indeed .. one reason for the very high inflation in the early 80`s (and thus high interest rates) was boomer induced spending and very strong economic growth .. sth. that is unlikely to happen again in the near future due to ageing boomers and more cautious consumers !

 

[Mike56]

I would say that Garth Turner is way out of line with his estimate. The main factor that will drive interest rates will be the price paid for US securities. Now US securities can not afford to rise by more than two to three percent over the next three years as the US debt will not be reduced by the amount required to allow for US rates to climb any higher than this. Rates cannot move higher until they can reduce the amount of debt in the US to a level they can afford. In addition the quickest way for the world economy to crash and burn would be through high interest rates globally. Something else to think about, this year in the US over 25% of the mortgages are being refinanced as the result of lower rates and to allow people to hold on to their homes. If Garth is correct with his assumption, just think about all of these people renewing their mortgages when rates are over 10%. It will be welcome back to 2009. The leaders of the countries can be stupid at times but I don`t think they are that stupid.

Mike

 

[Thomas Beyer]

QUOTE (Mike56 @ Apr 4 2009, 07:41 PM) I would say that Garth Turner is way out of line with his estimate. The main factor that will drive interest rates will be the price paid for US securities. Now US securities can not afford to rise by more than two to three percent over the next three years as the US debt will not be reduced by the amount required to allow for US rates to climb any higher than this. Rates cannot move higher until they can reduce the amount of debt in the US to a level they can afford. In addition the quickest way for the world economy to crash and burn would be through high interest rates globally. Something else to think about, this year in the US over 25% of the mortgages are being refinanced as the result of lower rates and to allow people to hold on to their homes. If Garth is correct with his assumption, just think about all of these people renewing their mortgages when rates are over 10%. It will be welcome back to 2009. The leaders of the countries can be stupid at times but I don`t think they are that stupid.

Mike

not quite ... no one "sets" long term interest rates !!

interest rates are determined by markets (supply and demand) and one party with a high demand will be various debt issueing governments.

Interest rates will rise .. but not as high due to more modest consumer loan demand due to weaker world-wide growth, UNLIKE the early 80`s !!

 

[wealthyboomer]

QUOTE (thomasbeyer2000 @ Apr 4 2009, 08:55 PM) not quite ... no one "sets" long term interest rates !!

interest rates are determined by markets (supply and demand) and one party with a high demand will be various debt issueing governments.

Interest rates will rise .. but not as high due to more modest consumer loan demand due to weaker world-wide growth, UNLIKE the early 80`s !!
Why, in a supposedly free, capitalist country, do centralized economic planners set interest rates? Where is the `market` in that?

 

[housingrental]

They don`t directly re Thomas post above ? Market determines bond price... boc sets a lending rate ... and wealthyboomer what is the better alternative do tell ?

 

[ChrisDavies]

I think everyone should take Econ 101 and 102, even if you`ve never been to university. Just audit the course.

The main monetary control in Canada is the overnight rate, which impacts other rates. However, the only direct impact is how much it costs the banks to borrow cash for one night. (At the end of every day, banks have to balance cash on hand against the balance sheet and the difference is borrowed from the BOC for a night) The US has more tools, although their overnight rate is still central to the system. They also do move lending, and have more control over the sale of goverment securities and foreign exchange.

Both banks have an indirect hand in the economy by controlling the relative cost of capital as it applies to this relatively small aspect of banking. It doesn`t dictate the interest rate for other types of borrowing, but it can influence it. Consider the last couple years where they spread between the bond rate and variable rates.

 

[Thomas Beyer]

QUOTE (wealthyboomer @ Apr 4 2009, 10:34 PM) Why, in a supposedly free, capitalist country, do centralized economic planners set interest rates?
they don`t ..

they set the SHORT TERM prime rate for inter-bank loans .. that`s it !!

and they manipulate markets by buying or selling loans .. or selling debt .. but the price of debt, i.e. interest rates are NOT set by the government .. they are set by the market i.e. buyers of debt.

recently teh US sold their debt for almost 0% .. i.e. T-Bills .. they were even trading below 0 for a few weeks in late dec 2008 !!

 

[Mike56]

Let me put it another way, if the US wanted to see rates remain low they could effect the market rates by flooding the market with liquidity as they are currently doing. With a surplus on capital in the markets this would put presure on interest rates in the US to keep rates low. If they removed liquidity from the market things would tighten up as they did in October and November which would cause short term money to rise even though interest rates were low.

Mike

 

[Thomas Beyer]

QUOTE (Mike56 @ Apr 5 2009, 06:20 PM) Let me put it another way, if the US wanted to see rates remain low they could effect the market rates by flooding the market with liquidity as they are currently doing. With a surplus on capital in the markets this would put presure on interest rates in the US to keep rates low. If they removed liquidity from the market things would tighten up as they did in October and November which would cause short term money to rise even though interest rates were low.

Mike
indeed ..

The US has two choices: raise interest rates to attract more money for its debt .. or lower the US $ !

Let`s assume no one has an interest in high interest rates .. as it negatively affects the economy .. so the better choice is a weaker US $, as it benefits the US economy much more than high interest rates.

Thus, investing in the US is very risky right now with a US $ = Can $1.20 !

HOWEVER: with all this G20 stimulation .. it means: higher interest rates down the road .. but not as high as Mr. Doomsday aka Garth Turner predicts !!

 

[Mike56]

Thomas,

Well put.... agreed

Mike

 

[dcres]

In 1998 Mr Turner was promoting that everyone with build up equity in their homes should use it to purchase equity stocks & mutual funds. Anyone in the markets at that time will remember how long it took for these stocks to come back.
Anything to sell your books ea!
The man now sits as an Independent in Parliament, as no party wants him. A far cry from being Minister of Finance at one time.

 

[bigbabba]

Interest rates can very easily hit 11%. They hit 18% or so back in the late 80s. What`s so hard to believe? Many people believe that we are in a rougher situation now then we were back then..the only thing to put us over unanimously would be the interest rate..I agree with Turner, it`s coming..how much? Who known’s but, anything is possible.