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Banking system should increase interest on savings

Ron Walter takes a closer look at inflation
BizWorld_withRonWalter
Bizworld by Ron Walter

One of those bank executives was on the boob tube the other day being questioned about the current inflation situation.

His response: The government needs to take action to help out people struggling with inflation

“Whoa! What a hypocrite!” was my reaction.

The Canadian banking system can play an important part in combating inflation, which is currently running at 7.7 per cent a year.

The Big Five banks could make saving worthwhile by substantially increasing interest rates on savings.

There is no valid reason for the banks to hold down interest rates other than excessive greed.

With interest rates at one-tenth of one per cent on savings there is no incentive to save. Why not blow the savings at these 7.7 per cent inflated prices to buy before inflation goes higher?

After inflation, your savings will only buy 93 per cent of what they could last January.

Do you buy a new car at these high prices or wait and see the value of your savings fall?

The banks previously claimed interest on loans was so low they couldn’t afford to pay better interest on savings.

The net interest margin — what is left after expenses — amounted to about 1.45 per cent. That was when the Bank of Canada rate was one-half per cent and the prime lending rate was 2.45 per cent.

Today’s prime rate is 4.7 per cent. The net interest margin should have doubled, leaving lots of room for higher interest rates on savings.

Savers can get more than the piddly .1 per cent rate if they go through the hoops.

Last time I asked about getting a better rate I had two options: open a new account and guarantee a monthly savings deposit, or place the money in a term deposit with penalties for cashing it in early.

By the way the Big Five banks – Royal, TD, BMO, Commerce and Scotiabank — had combined net income of nearly $31 billion in the first six months of this year and returned between 15.2 per cent and 18.4 per cent on equity by cheating savers.

The banks have used money that savers should have earned to buy more banks.
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The risks involved in tapping into the province’s helium resources became clear when Helium Evolution announced the results of two helium exploration wells in the McCord district south of Moose Jaw.

The results were disappointing — insufficient quantities of helium to warrant even testing for production.

Since nitrogen is the main gas in these wells they are virtually worthless.

The company still has $10 million cash to complete four more wells and has a deal with North American Helium which will drill five wells for a percentage of production.

Helium Evolution has accumulated 5.5 million acres of leases to look for the gas.

Former premier Brad Wall is a Helium Evolution director, evidently not as successfully as he was in politics.

Ron Walter can be reached at ronjoy@sasktel.net

The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.