“Our debt levels are at all-time highs, we need to embrace the practicality of our grandparents’ generation and up our savings rates.”

“Even though interest rates are at all-time lows, and will be for a while we don’t want you to borrow more money… you already owe too much.”

“We are keeping interest rates low today in order to encourage consumer spending and jump start the economy”

What do you want me to do with my freaking money already! I am beginning to get a real kick out of this new normal routine we have built up around any talk of interest rates. It is crazy on so many levels, and the insanely disproportionate amount of attention the whole affair gets is beyond my understanding completely.

The Magic of Mark

First of all, I don’t care what Mark Carney says, there is no way Canada’s interest rate can possibly rise much in the next couple of years. How much Canadians are in debt, or how much of their paycheque they are saving is almost totally irrelevant in the big picture conversation. The USA has fully committed to keeping rates low for the next two years at minimum. I’m not convinced that they won’t try to artificially keep them low for years after that in order to allow their housing market time to rebound. All those maxed out mortgages have no room for moving interest rates, and politicians know it. If the USA won’t raise rates, we simply have to follow suit to a large degree, because if we don’t, our manufacturing sector will have to close doors and raise the white flag. If Carney raised rates he definitely wouldn’t be invited to anymore nice parties in Ottawa circles. Besides, the inflation rate (which is all the Bank of Canada is really supposed to be concerned with anyway) is right in the target range, so there is really no impetus to raise rates anyway.

Just Was It Have To Do With Me?

The next piece of hilarity that always ensues when we get these earth-shifting interest rate announcements is the great discussion amongst the talking heads on TV about how much debt we are all in, and then a separate piece about how consumer spending will be key to powering us out of this recession. We can’t have it both ways last time I checked accounting principles 101. You can’t save money and spend it at the same time. If we listen to the experts we need to do both in order to save our future skins… so I guess we’re all screwed then?

Don’t get conned into buying a house or making another major purchase by listening to someone yelling that the sky is falling and interest rates are going to skyrocket. They can’t for at least another couple of years. Anyone that tells you they can predict where rates are going in 3+ years is either lying, or is working for a major investment firm getting paid millions of dollars. As with most things in personal finance and investing, simply staying calm, turning off the sensationalistic media (especially if it is an investing show), and staying true to your basic savings and investment plan, is almost always the best approach. For most people, the vast majority of what Mark Carney and the prognosticators say is irrelevant and should have little bearing on their personal situation. If you want to watch it for entertainment’s sake then be my guest, but please don’t embarrass yourself by becoming the next Chicken Little and yelling the “the rates are rising, the rates are rising” – unless CNN will pay you a few thousand dollars to say it on air of course.