this post was submitted on 24 Jan 2024
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For me personally higher rates have been a net benefit. I have no debt and my capacity to save increased considerably over the period that rates were rising. It's been great to get better cash yields and to pick up longer dated bonds at generationally low prices.
That's one of the many tragedies of high-inflation + high-interests economies, those who are free of debt have plenty of opportunities to cash out with relatively low risk investments. That's about 30% of the population (debt-free), but really those who are truly able to take meaningful advantage is a subset of the ~4% of Canadians that have a maxed out TFSA. So yet again we're tilting the playing field towards the widening of wealth inequality.
As a counterweight to the widening of wealth inequality, rising rates lower the value of essentially all risk assets. So the ones who truly benefit the most are the ones who only acquired their assets after the hiking cycle.
This is partly why there are examples of periods with high inflation that also saw a narrowing of wage inequality. The post-war period in Europe was such an example. In that time the relative bargaining power of labour also helped because the high inflation was met with even higher pay raises. So working people were acquiring new wealth through their wages during a period of sustained low asset prices.
For 2023 wage growth in Canada actually exceeded inflation. I would bet that we'll see that trend continue this year as well as inflation comes down.