Why did the Bank of Canada just raise rates again?

Message from Tom & Nick

Who says Canada's Wonderland is for kids?

That's Nick and Diana at Wonderland last week riding the bumper cars!

They did the unthinkable and took the kids out of school for a day before the summer crowds roll up to Wonderland.

And from the reports I was hearing the next day they all had a blast.

Nick's oldest daughter now rides the large coasters, so it was game on for Nick.

And truth be told I'm not sure who is the bigger kid, Nick or his two daughters, LOL!!

The next day, they all reported being completely exhausted so it must have been a wildly successful day.

This past weekend I was having some of my own fun at a Bocce Ball tournament.

About 40 of us got together in Etobicoke to test our skill. It's been a long time since I've played bocce but it all came back to me quickly.

My partner was a buddy from high school, the one and only ex-WWE superstar, Santino Marella.

He was the Intercontinental Champion of the WWE for a while...accomplishing a huge dream he announced to all of us in our teens.

We didn't become champions on this Bocce day, but we're primed to win it all next year!!

OK, enough fun stuff.

Let's get serious...

Why the heck did the Bank of Canada raise rates yesterday?

Weren't they "pausing"?

First off, you can't centrally plan a complex system like an economy.

So these central bankers are behind the 8-ball at all times.

They told us they wouldn't raise rates back in the summer of 2020 until at least 2023 or 2024 even...remember that?

That all went out the window in February of 2022.

And now they've done something like nine separate raises.

Incredible. We definitely didn't think they would do it.

But here we are.

So why did they raise again now after saying they would "pause"?

In one word...inflation.

They are petrified of it.

Like very, very, very scared.

You see, although economists and the media call what is going on "inflation", that's not really what's happening.

Inflation is really just a tricky little economic word for "decline in the value of money".

They literally call it right out on the Bank of Canada's website next to their "inflation calculator" (circled in red):

Source

Nice of the bankers, eh?

They provide us with a calculator to figure out how much our money is going down in value each year.

And that's the official rate based on a basket of goods which doesn't truly reflect the average person's daily life.

When you compound the rate of decline in money life gets pretty expensive quickly.

It's madness.

But back to the rate hike...

So why did they increase rates again after telling us they would "pause"?

Because they're scared of the decline in the value of the dollar.

They are petrified that the value of the almighty dollar is going down too fast.

Which it is.

And when inflation hits hard, and the decline speeds up, it's like a train wreck that's hard to stop.

They MUST STOP INFLATION at all costs.

If they don't, the confidence in our dollars evaporates and the system dies.

Done. Baked. Over.

So they have to stop it...no exceptions.

But with this much debt that Canada has, aren't high rates a problem?

Yes, they are.

A big problem. These high rates are likely going to lead to more bank failures in the U.S., and here in Canada there is going to be some serious economic pain.

Where it hits first no one knows. But it's coming.

The central bankers know it. They're not that silly.

So then why are they doing this?

Well, they're stuck.

You try and raise rates for as long as humanly possible and PRAY that inflation comes down before the next financial crisis hits (where you then have to cut rates again).

Because if a crisis hits AND inflation is still high...well then, it's game-set-match. Monster inflation results. And that train wreck is all but guaranteed.

Not pretty.

So they're spinning plates right now, hoping that all the plates stay spinning and nothing comes crashing down before they slow down inflation.

It's wild.

And funny enough, people outside of Canada see it more clearly than Canadians.

It's why you see uptick in things like gold and Bitcoin in South America and Africa.

It's why the BRICS are talking about a new currency (more on that soon!).

They have been so battered by the global financial system, they know what's coming.

Canadians have not seen this.

No one alive today has seen a global reserve currency system in crisis. No one has lived through a period like this...with global debt this high and inflation not going away.

Where do we go from here?

We still think inflation slows down. That doesn't mean that things get cheaper. They don't...they just get more expensive more slowly.

Sounds ridiculous, LOL!

But that's the game.

And it's why we study the game...to stay ahead of it as best we can.

We're actually at the Canadian Bitcoin Conference next weekend talking about all this stuff. If you haven't checked it out yet you can do so canadianbitcoinconf.com.

And we're preparing for a presentation about all of this tonight to Rock Star VIP members. Fun stuff!!

That's it for the week.

Remember to have some summer fun!! Wonderland, bocce...whatever works for you!! Life is short, live it on your terms!

Tom & Nick

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