What does the prime rate change?? Is it twice a year?

[someone]

BBKING - I understand your feelings about Trump, he comes off as a complete asshole, but the lifestyle................puleeeez, banging models, flying around on private jets, banging models in the jet, best golfing in the world, hell half the time you own the coarse. Hey, come on, we would all love that.

Someone - Every time you hit the keyboard you prove my point, you don't have the faintest concept of how the real world works. I don't work for a bank, I am a broker and private lending syndicator. My T4A was over half a million last year and you don't even know my profession exists.

The only thing that you are right about is that Dodge does come across as a normal person in a small group.

I think I had you all figured out the first time you responded to one of my posts and showed how upset you were over my correcting you misinformation. You were a third rate business student in university who found serious courses frustrating (hence the reason you went into business to begin with). The fact that you got so upset over my correcting the misinformation you posted just illustrates your insecurity. Now, you are just trying to get even for your past frustrations.

 

[Asterix]

What I don't get is how much importance you guys attach to arcane aspects of economics. BBKing and Fortunato got into something similar about a month ago and both came close to being tossed. You'd think your manhood was being challenged.

 

[someone]

What I don't get is how much importance you guys attach to arcane aspects of economics. BBKing and Fortunato got into something similar about a month ago and both came close to being tossed. You'd think your manhood was being challenged.

Until Peelcowboy launched his personal attack I really didn’t care, as it is not an area that particularly interests me. I realize that I should just ignore fools. However, I have never been one to suffer fools gladly.

 

[someone]

You don't know me but I do know you. You are clearly very insecure. If you were really that happy, it is doubtful that you would feel so threatened when you mistakes are pointed out. As I say, I figured out who you were when your launched your unprovoked personal attack over a minor issue.

 

[Fortunato]

Well it's nice to see that still have the ability to dance when you're wrong. Let see, you said:

"But neither of these things ties the chartered Bank Prime rate or rate change timing to the Bank of Canada overnight Bank rate."

Which is absolutely true. Every Chartered Bank maintains that they can change their Prime rate whenever they want, to whatever they want. Participants in a free market have that right, you know.

Then you said:

"Prime rates are set by market change in short term rates"

Gee I can't think of anything that is more short term than the Bank of Canada's overnight rate Again nice dance to get around the fact that you are once again dead wrong.

How is this "inconsistent", let alone wrong? The Overnight Target rate is not a "market", sport (although, kudos to you for recognising that it is short-term). It's a "target", for one market participant. You cannot borrow at it. Neither can Loblaws. Only banks can, and do so inconsequentially.

When they price their loans to their customers (like you, like Loblaws), the overnight rate is pretty irrelevant. If they want to price their products competitively to THEIR customers, they price according to the MARKET rates. Short-term paper markets (where BoC participates, and really does affect interest rates), other lenders' pricing, etc. Markets... you know... where the customers can actually borrow money. Get it?

You, on the other hand, seem to be arguing that these markets DON'T set short term rates, including Bank Prime rates. Curious - but then again, I've never been able to understand your "special" logic.

Now you claim that influence and tied are not related.

What? Did you have an aneurism?

A bizzare statement

To be sure... but it doesn't surprise me that you came up with it.

and a little like saying that if I set you on fire that action only influenced the injuries you recieved.

No. Announcing a target rate (telling everyone you are going to set a fire) influences behavoir. Open market actions buying and selling treasuries and effecting interest rate changes (setting the fire) causes the injury. If they don't "set the fire" (make the open market transactions), how exactly does the announcement hurt you? It doesn't. Now, most people (sensibly) take the announcement as being serious. But sometimes, not only does the "announcement" not work, but the open market transactions even fail to move short term interest rates to their satisfaction (remember in September 2001, Greenspan begging the markets to "loosen"? Why would he have to do this, if Central Banks "set" short-term interest rates...).

I repeat - the only impact changes in the overnight Target rate are influential, by suggesting what the bank is going to do to affect supply and demand (market terms) IN THE MARKET. MARKETS STILL DETERMINE INTEREST RATES. ALL INTEREST RATES.

The fact remains you claimed that the overnight rate was not tied to the CB rate which I believe most people would take as meaning unrelated.

You're suggesting all relationships are "ties"? The BoC overnight target is highly correlated to the Fed Funds rate... are they "tied"?

No - it means exactly what it says. The BoC overnight target is just that - a target that the bank has for short term rates. It is not "tied", meaning that - despite the assertions others have made here like (1) Bank Prime rates only change when the BOC target rate changes is FALSE; and (2) Bank Prime rates are set at some fixed premium to the BOC target rate is FALSE. Hence - not "tied" to the target rate.

If your argument is that there is a high correlation between movements in the BoC target rates and market short term interest rates - kudos for you. That would be correct. Like I've said, that is particularly true recently, due to incredibly loose monetary policy. But there is not a CAUSAL relationship.

No Bank is "tied" to changing its Prime Rate when (or by how much) the Bank of Canada changes its Overnight rate. You don't have to believe me. CALL ANY BANK. THEY WILL CONFIRM.


Now - I've been consistent and on message. Your position, however, seems to have changed, and I'd very much like it if you could explain. I quote you earlier:

"Your statement about Banks having the ability to raise or lower prime rates independent of the other Banks is in fact true in theory but market forces would not allow this unbalanced situtation to last long. So in the end your idea about market forces on short term rates being the sole determination is just wrong."

See - here you are arguing that the MARKET EFFICIENCY in determining prices somehow proves that MARKETS don't determine prices. Curious. I'd like to hear more about that theory. It sounds very, very clever.