Mar 15, 2023
When the economy is overheated and asset prices are inflated, pulling the interest rate strings is the economic definition of “pumping the brakes”. Believe it or not, this financial lever works. However, pumping them too hard or too soft, can create significant problems. Braking is as much an art form, as it is a science.
It is obvious to see the impact of raising interest rates, but what if rates were kept low over the long term?
Historically, these are the top 4 negative economic impacts of not raising interest rates.
History is littered with examples of when central banks did not increase interest rates. Let’s take an alternate look into our global financial futures to see the long-term impact of low interest rates.
When it comes to portfolios, it is important to remain hinged to the fact that equities have outperformed inflation significantly over time. A percentage of equity ownership within a retirement portfolio is a powerful tool to ensure that your capital keeps pace with inflation and the increase in taxes. In Canada, the TSX has outperformed inflation by roughly 5% per year over the last 50 years.
The most overlooked area of financial planning for business owners and incorporated professionals is the lack of integration between corporate and personal assets. When the majority of your assets are in your corporation you need very specific, specialized and personalized financial advice.
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