Some day this column may land me in some kind of re-education camp for recalcitrant humans, but I am going to go out on a limb and disagree publicly with Artificial Intelligence.
I asked ChatGPT what the Top 10 Trends for 2024 would be, ranked in terms of their likelihood to improve the life of a regular Yukoner.
It gave these 10: Indigenous-led economic development, telemedicine for remote communities, smart agriculture, cultural tourism, renewable energy, remote work hubs, sustainable mining, community-led climate action, wildlife conservation and a Yukon space exploration hub.
These all sound great. Who is in favour of dumb agriculture, for example? And though space exploration sounds like a stretch while we continue to explore the idea of having doctor’s offices with actual doctors in them, it would hardly be the most outlandish economic-development idea ever produced here in the Yukon.
However, upon reflection, the fact that the list sounds so good makes me worried.
ChatGPT got so smart by reading the entire internet and figuring out what humans want to read. It spends entire nano-seconds reading the entire corpus – going back to the dawn of the internet – of Yukon-related press releases, press conference transcripts, media backgrounders and news stories from every level of government, lobby group and pundit.
It never, however, hears the no-nonsense oldtimer mutter “Bullshit!” and turn off the pickup radio.
In effect, I fear that we have trained our future robot overlords on the same diet of glib nonsense that we have got used to hearing people spout unchallenged in public. Now they are feeding it back to us.
Any progress in 2024 on any of ChatGPT’s Top 10 Trends will be welcome, of course. But you may be in trouble if you sit in front of your screen waiting for telemedicine, remote work hubs or community-led climate action to save your bacon.
Let me change metaphors to a snowball fight at recess back in elementary school. There are lots of fluffy megatrends flying around, but what you really want to pay attention to is the slushball with the rock inside coming straight at your face.
Which for a lot people in 2024 is going to be something that wasn’t on ChatGPT’s list: interest rates.
Interest rates, like slush and rocks, are boring most of the time.
But not when headed right at you. The new year is going to give us a reminder of how omnipresent interest rates are in a capitalist society.
We got used to low interest rates. The one-month Canadian treasury bill rate dipped below two per cent during the 2008 financial crisis and stayed there for more than a decade. This rate even hit zero in December 2021, a few months before rates began shooting up to around five per cent now.
Mortgage rates made a similar journey. Last month, the Canadian Mortgage and Housing Corporation said the “mortgage holders of today are facing the fastest and largest increase in interest rates … in over four decades.”
With typical Canadian mortgage terms being five years or less, we can expect more than a fifth of Yukoners with mortgages having to re-finance in 2024 at much higher rates than they enjoy now.
Still sound boring? Take a family with a house worth $628,700, which was the average sale price of a Whitehorse single detached home in the second quarter of 2023. Suppose they had 20 per cent of that as equity and the rest as a mortgage. Their monthly payments back when mortgages were two per cent would have been $2,130 per month. Now, at the 6.5 percent rates posted at big banks, the monthly bill is $3,369.
That’s a hit of $1,239 per month or $14,868 per year.
Not everyone has a mortgage of course. But maybe they have a line of credit, which depending on your credit rating, might have a rate around 10 per cent these days. Or, even worse, credit card debt with an interest rate of over 20 per cent.
Not everyone has debt, but I called interest rates “omnipresent” for a reason.
That’s because debt is omnipresent.
Perhaps your employer is one of those businesses that binged on cheap debt during the good times? How ready are they for higher interest rates, or will they need to cut costs, cut hours and — hopefully not — cut jobs?
Or maybe you were thinking of investing in something important with a long-term payback, like an electric vehicle, heat pump or re-insulating the house. Or maybe borrowing some money to start your own business?
All of those ideas just got a lot more expensive. Similar to the math with mortgages, interest rate increases of just a few per cent can translate into punishing monthly payments.
Perhaps your debt and that of your employer is low. But do you rely on customers who are themselves indebted? They will be tightening their belts.
Even government is not immune. Higher interest rates on the national and territorial debt will mean less cash available for spending programs.
Not even ChatGPT knows how long interest rates will stay high. There is more than usual disagreement among economists on the topic. Some think high rates will last well into 2025. Some think they will start to come down later in 2024. A few think an upcoming recession will be painful enough that the Bank of Canada will cut rates sooner than most expect.
We shall see.
But I suggest you review your budget for 2024 and prepare yourself as best you can for a year of high interest rates. The Financial Consumer Agency of Canada offers thoughtful advice on how to make a plan to manage your debt, available at: https://www.canada.ca/en/financial-consumer-agency/services/debt/plan-debt-free.html
That’s not a very cheery message for the Friday before New Year’s. But hopefully a useful one. When we get through the interest rate cycle, we can talk again about the Yukon space exploration hub.
Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He won the 2022 Canadian Community Newspaper Award for Outstanding Columnist.