Cutting of Interests Rates - So What?

Election 2008 (Canada)

With a cut in the prime interest rate by a half a point, Banks get to make more money, as they have all only passed on half of that added cut. In short if the prime rate for borrowing money from a bank was 5%, well now it is 4.75%. On the other hand, the bank was paying 3% now only pays 2.5%.  So just what has the cut done?

GIVEN BANKS A BETTER RETURN, PROFIT PICTURE.

Jack Layton is screaming blue murder, and Dion isn’t saying too much. Who is right? See, to you and me, unless you are a really good triple A customer, that prime rate means diddly to you. It isn’t like you got that PRIME RATE anyhow, so what has banks done to their other rates? Have they too been lowered by a quarter of a per cent?

DON’T THINK SO.

The whole concept of cutting rates, is to free up more cash for loans. Problem is that this free up isn’t going to solve the current problems, nor could it. Too much credit, is basically what has gotten the world into trouble, specially as it was being given to the more advantaged, and not to the people who truly need a break on interest rates.

In a co-ordinated move to free up credit and ease the financial crisis, central banks around the world — including Canada, the U.S., the U.K. and Sweden — cut short-term interest rates.

The Bank of Canada reduced the rate by half a percentage point, but the seven biggest domestic banks passed only half of that on to consumers in prime lending rates, saying the troubled markets make it more expensive to raise money.

Speaking in Thompson, Man., on Wednesday, Layton expressed “profound disappointment” that customers won’t enjoy the full benefits of the cut and accused the banks of gouging consumers to protect their fat salaries and huge profits. (source - CBC News)

The real deal is that Banks have given out credit to people that shouldn’t have it, or at least not at the levels given. I am serious, because if you give someone a $3000 credit limit, who can’t manage their money, who doesn’t have a guaranteed income to afford it, you are asking for trouble. Course the banks look at that as these are higher risks, they get to charge more than Prime which makes them more money, assuming they get paid.

And if they don’t, well by the time the person goes under, the bank has pocketed a lot more than the $3000 in interest, which covers the money they loaned out, plus the initial capital. In addition, they usually get assets, of some value. So while they claim a loss, which gets them a tax break, they actually make money, because well Government has cut the rate they have to pay for that money.

You and I don’t get it, but we pay a high rate, simply for that privilege. Well, they push the cards on us, push the higher mortgages, and we let them, which results on us over extending ourselves, insted of living within our means. That means we are forced closer to the edge, but the banks increase their bottom lines. AT OUR EXPENSE.

Is Jack Layton right? NO.

The truth is that extra credit isn’t the answer, that pushing more cards at us, isn’t the solution. The solution is to return to sensible old fashioned money values. It means that we buy what we need, when we can afford them. It doesn’t mean everyone needs a new car every year. It means we make do with the old one, while we save some money for our senior years. It means putting money aside for the kids, not in buying them cel phones and new computers every year. It means they can sit and watch what is on the television, instead of having an XBox and Computer and Gameboy.

We don’t need more credit, we need to re-establish the old fashioned notion that you buy what you need, that you save money for those things you can’t afford. You re-establish the old fashioned notion that you build something to last, not be thrown out after a year’s use. You build cars that save money, that save fuel, by being efficient, by being environmental friendly and you don’t trade them in every year.

You get business to stop exporting jobs, and then require the government to give tariff reductions for importing the machines needed to produce what little is being produced within the nation’s borders. It is time to hunker down, to build what we need, and to use our tax dollars to support those industries that support our country. Not to support those that move out of the country, that do nothing but use our country as a raw resource pit.

Harper is willing to add $200 million to the aerospace development industry, while Volvo cuts 500 jobs, and moves to the USA. Tell me again, how does that help US? IT DOESN’T, but don’t tell Stevie, he is too busy telling people that now is a great opportunity to cash in on the misfortunes of everyone else.

Credit Card interest rates need to be indexed to the Prime Rate, and if someone isn’t capable of being worthy of that rate, then maybe they shouldn’t have that credit card? Mortgages should also be indexed, and the amount given should be determined by their real income, not an inflated figure, and values of properties needs to be based on the real market, not an inflated price simply to boost sales.

Those are measures Jack Layton should be seeking, not giving people more money to spend, but giving people the ability to earn more money, to manage their money better. ATM fees is bullshit, it is no different than Harper’s 2¢ cut on diesel fuel. It is a gimmick, not real, not valid, and certainly not effective.

Ian @ October 9, 2008