Chapter 7 - Money and the Canadian Banking System

http://www.vancouversun.com/business/Canadian+dollar+spike+likely+short+lived+analyst/2628852/story.html

Summary:

The CAD spiked as oppose to other currencies. The value of CAD against the USD has increased. The reason for that is because USA printed too much money, lowering their value while other currencies like CAD did not. The rise in value of CAD wouldn’t last very long because the Bank of Canada may increase interest rates on Tuesday. Whenever there is an increase in interest rates, the government is trying to remove money from the money supply. By doing that, it will be more difficult to borrow and lend money. Businesses that would need the money would slow down due to this problem and so will the economy because there isn’t money being spent enough. Signaling an increase in interest rates would cause people not to react well to the CAD because they would want the Bank of Canada to lend and borrow money freely.

Connections:

Signaling an increase in interest rates would cause people not to react well to the CAD because they would want the Bank of Canada to lend and borrow money freely. By lending and borrowing money freely, the Bank of Canada will have a shortage on money supply which will cause them to print out more money. If they print out more money, they are going to have the values of CAD decrease. The Bank of Canada would need the rates to help Canadians in the long run rather than right now.

Personal Reflection:

I agree with the decision with the Bank of Canada, people wouldn't want to see the interest rates going up again which will cause them to have tightened credit. Tightened credit will slow the economy down. So to help the economy they are going to have to adjust their interest rates and control inflation rates, letting Canadians spend more which will stimulate the economy. Sooner or later interest has to go up, they cannot have interest rates sitting near 0.