Banking Credit Specifics Amidst COVID-19

You’ll notice that your governments are speaking in code much of the time when it comes to addressing the financial impact, consequences to your household, and detail pertaining to your access to credit facilities in the context of COVID-19. Your Prime Minister is once again scheduled to address the nation at 11:30am EST. We’ll see if he get his “head of his a@s” and starts speaking in terms of your household cheque book.

While the Bank of Canada rate has been reduced over the past decade, margins between the “overnight rate”, “prim rate” and “retail lending” has widened. That’s right…the banking system has done very well because you my fellow Canadian has been too happy to pay interest in the wide margins. 

This crisis has hit while you are highly leveraged meaning that many more of you will now be faced with bankruptcy unless your government starts REGULATING THE BANKING SECTOR in terms that assist you in managing your debt. The board of directors of your chartered banks won’t be too warm to that idea especially in lieu of their confounding argument that masses of Canadians hold chartered bank stock in their registered investments.      

From what I can see so far, your government is going to be floating more “paper” in order to free up credit. The term “paper” refers to securities which may take the form of derivative contracts. Oh ya…you remember those – the ones that produced the financial crisis of ’08 / ’09 (mortgage backed securities). Of course your government will also be referring to the “purchase of bonds” which is code for creating new money out of thin air with a charge to your grandchildren’s future.