Lower is higher in real world Less than two years ago, interest rates reached a post- Second World War peak.. Since then, they appear to have dropped significantly; in some cases, the quoted levels are only half what they were in 1982. By PAUL J. CICUREL The apparent level of in- terest rates, however, cam- mouflages their real cost. In fact, ‘‘real’’ interest rates are at an all-time high. MEASURE OF MONEY'S COST **Real’’ interest rates are the difference between the rate of inflation and the quoted level of interest rates. This difference measures how expensive money is after tak- ing into account its deprecia- uion in purchasing power. For instance, if inflation ts running at 12% per annum, a quoted interest rate of 17% means a real cost of 5%. This is less expensive than paying 12% interest when inflation is Only 5%; in the latter case, the real cost of money is 7%. Real interest rates are now nearly twice as high as they have traditionally been since 1945. Why is this the case? 1. Increased competition in the financial system in the United States. The level of Canadian interest rates depends primarily on the level of interest rates in the USS. Until recently, there were ceilings on the amount of in- terest that banks could pay their customers. Now, the banking system in the U.S. has been deregulated and the banks compete for deposits. it has been estimated that Where there's smoke THE DEATH rate from fire in Canada is the second- highest in the world. Approx- imately 85% of fire deaths occur in residential property — and most deaths are due to smoke inhalation, not burns. While a smoke detector won't prevent or extinguish a fire, it can save your life. There is a _ variety of models on the market to alert you and your family to the danger of fire in the early stages. Highly recommended is the photoelectric and ioni- zation chamber combination unit which detects flame, smoke and heat. DANGER HIGHEST AT NIGHT It has been determined that about 60% of all fatal household fires occur bet- ween 10 p.m. and 6 a.m., when occupants are asleep. It is therefore important to locate the detector between the sleeping area and other living areas so it can intercept smoke before it reaches the bedrooms. In multi-storied homes, detectors should be located on the ceilings of stair wells to separate the floor levels. Battery-powered, direct- wired models or combination smoke detector units are available. Some models have built-in) emergency escape lights as well; however, any unit’ purchased should be ULC/CSA-approved Most fires can, in the early stages, be successfully con trolled or extingujshed The most effective means of snuf ting @ula fire is the use of a fire extinguisher recommended for use around the home, cottage, boat or in vehicles. Available in 1.3 kg (2% Ib.) or 2.26 kg (5 Ib.) sizes, these extinguishers are rated for all three classifica-_ tions of fire: a) wood, cloth, Paper, rubber, b) flammable liquids, greases, gases; c)energized electrical equipment. ARE THEY EASY TQ GET? Extinguishers used in the home should be easily ac- cessible (i.e., kitchen and basement). They should also be checked regularly to make sure pressure is within Operating range. Once used, they must be recharged. Fire insurance rates are determined by fire losses. By reducing fire hazards, you can help reduce your in- surance costs. For additional fire safety tips write: Sixty Ways To Prevent Fire In Your Home, Insurance Bureau of Canada, 181 University Ave., Toron- to, OInt. MSH 3M7. this corresponds to some 1’%% increase in the cost of money to banks, which has a direct effect on the level of interest rates that banks need to charge to their clients. 2. Budget deficits. These deficits feed on the fear that inflation may be rekindled, and the funding of these deficits represents a huge de- mand for funds. 2. Past volatility in interest rates. The large swings in in- terest rates in the recent past cause lenders to desire more protection against possible future movements. This means lenders increase their ‘‘spread’’ — the difference between what they pay and what they lend at., 4. Continued desire of U.S. and adian monetary authorities to keep inflation under control. This means that they continue to main- tain a relatively tight rein on money. High ‘‘real’’ interest rates may well continue to be characteristic of our economy. The consequences could be a less speculative en- vironment, less inflation, and less growth. Investors should take these into account when deciding on their best course of action; the strategies that were suc- cessful in the 1970s could be unfavorable in the 1980s. Some of the largest com- panies were hurt by having too much debt supporting {oO many assets. For further information in investment recommenda- tions, write to: Paul J. Cicurel, Vice President - Special Projects, Wood Gun- dy Lid. B19 - Wednesday, April 4, 1984 - North Shore News PLAY IT SAFE! trom © Ey 5 “Poolowners™ : ¢ Is your heater efficient? ie wee a eS ¢ Is it safe? 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