Good morning, the Bank of Canada kept rates unchanged this morning with their scheduled rate announcement.  From the Bank’s release, the severe impact of Covid appears to have peaked & the gargantuan policy response has helped replace lost income & cushion the effect of the shutdowns. Right now the Bank’s forecast is for a sharp, partial rebound followed by a slower grind back to pre-crisis levels.  The grind part of that being the key element. 

Let’s remember that policy response was more life support than it was stimulus.  Debt, which was already at high levels pre-covid, is giving up future consumption for greater consumption today.  Unless that debt is used to create a new income stream that will help pay for that new debt, then it creates a drag on future cash flows.  If I take out a mortgage to buy a vacation property, then those payments are going to take away from what I can spend my money on & invest with otherwise.  If I use that financing to buy a rental property, I can acquire that asset without my monthly consumption being as impacted.   The economic gravity of what has happened in Canada & around the world the past few months is something that will weigh on us for a long time. 

What can you do?  If you’re able, use this as an opportunity.  Take advantage of low rates by creating another income stream, or by reducing your current debt load.  If neither of those are options & you are one of the millions turned upside down from has been the worst financial event in anyone’s memory, think about what you can do moving forward to help keep you brace for the unexpected.

I was thinking last night how, through most of my life, it has felt like we have been on a linear path of progress & of course, life is not linear.  Life is cycles of booms & busts, bright times followed by dark times.  Winston Churchill said never let a good crisis go to waste.  Find a way to emerge from this stronger than you were before.  If that means taking government help, education, a career change, using technology to improve productivity, re evaluating your monthly budgeting, investing, spending more time with loved ones, find a way to use this situation as a learning experience.  It is clear we have entered a darker time as humans.  Crisis’s happen & are happening more often than ever in our lifetime.  Find a way to better brace for the unexpected. 

I’m Ryan, glad to be clean shaven again & to have a reason to iron my dress shirts.  I hope you have a great day.

Here is a link to the Bank of Canada release.