Bank of Canada takes proactive measures.
Below is an article that was forwarded to me by mortgage broker Michael Ledingham. I’m lucky enough to know a handful of people who have a good handle and things economic because the media tends to focus on the negative rather than the big picture. By askign the right questions to such people I can get a more balanced view.
I forward this article along as an indication that the Bank of Canada is willing to take some proactive measures during these extremely volatile times. It is seen as a move to help build confidence. What is lacking in ALL the markets right now is a lack of confidence. It doesn’t matter whether it is the stock market, where prices are all over the map, regardless of how solid they are, or lending markets where investors are reluctant to extend credit. Investing into anything…be it a house, a car, a stock, a money market fund, life insurance….it all takes a degree of confidence that what you are doing is going to be a prudent financial decision. If that confidence is lacking, things grind to a halt. What the Bank of Canada is doing, what the US bailout is supposed to do, what is happening in the European Banking sector are measures that are to help stabilize the rapid fluctuations, take out some of the uncertainty, and ultimately restore confidence to markets.
Hope this helps,
Bank of Canada opens money spigot in $4-billion lending arrangement
Last Updated: Tuesday, September 30, 2008 | 11:49 AM ET
The Bank of Canada plans to inject cash into an increasingly shaky credit system on Wednesday by lending as much as $4 billion to commercial banks and investment dealers through what are called purchase and resale agreements.
The step is being taken “in light of increased pressures in term lending markets,” the central bank said Tuesday.
It is the latest in a series of efforts by governments to pump cash into markets, revive commercial lending and keep businesses from wilting. Whether nervous bankers will be emboldened to lend remains to be seen.
The Bank of Canada’s move involves buying government bonds and other high-quality securities from the banks and dealers, then selling them back at pre-set prices 28 days later.
Such transactions are in effect 28-day loans. In commercial money markets, they would be called repurchase obligations or repos.
The prices are to be set by auction Wednesday. The deals run from Oct. 2 to Oct. 30, when a new batch of deals is scheduled to start.
Michael Ledingham – Licensed Mortgage Broker
Tel # 250-755-3014 Ext:224
TF # 1-877-750-3014
Fax # 250-755-1608
Email: email@example.com # 101- 1801 Bowen Road, Nanaimo B.C. V9S 1H1