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June 9, 2019 | Politicians

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

A scant four months until the next federal election. Just two days more chances for the Bank of Canada to change interest rates – July 10th and September 4th. Financial markets have now booked in rate cuts for both Canada and the US by the end of the year. Given the latest jobs numbers (28,000 last month, lots of self-employed), it’s a reasonable bet the cost of money will dip.


Lots more people are working, but wage gains have been miniscule. As a result, household debt is rising as tons of families borrow more to maintain what they’ve got. The economy is slowing, despite the labour market. GDP growth in the last two quarters was 0.3% and 0.4%. Compare that to the States, at 2.2% and 3.1%. We suck.

Canada been caught in the trade wars. NAFTA uncertainty raged for over a year. Then we were nailed by the Trump tariffs on steel and aluminum. The US assault on China has helped slice that country’s growth to the lowest in memory, impacting our flow of goods. Now the housing sector has weakened, especially in BC, and the oil patch is on hold. After all that yakking about pipelines, none have been built. No shovels.

Sadly, we now have frosty relationships with both of the world’s two biggest economies. Trump would throw us under the bus in a heartbeat (as he did Mexico), while China is cutting off our imports and has locked away a couple of our citizens. Governments in Ontario and BC have passed xenophobic anti-foreigner, anti-Chinese laws penalizing foreigner buyers of real estate. Ottawa is increasing to $1.4 billion a year the money it gives for women’s health and abortions just as Washington cuts off funding. Clearly, paths are diverging.

Meanwhile, as Ryan referenced here on the weekend, we are a world steeped in debt. Successive governments have chosen to kick the can down the road while they increase spending now based on more borrowing. If future economies aren’t robust, taxes will have to swell to deal with debt servicing costs. But in Canada the Liberal government has slightly cut middle-class taxes, heavily increased social programs (free money for having kids) and now four in ten households pay no net income tax whatsoever. This is a huge political issue, since no government’s going to be elected promising to balance the books by giving less and taking more.

What would the Tories do to fix this path to fiscal oblivion?

Beats me. We have yet to hear a comprehensive economic plan from young Andrew Scheer. But it’s likely that between now and the October vote that the Bank of Canada will slice the prime by up to half a point, with five-year mortgages will drifting a little lower than the current 3% range. The Liberals might engineer some softening of the stress test, and the shared-equity mortgage will be rolled out in September, offering Mills a way to buy more house for less money.

There’s no room in Canada for expanded taxes. And there’s no appetite for reduced services. Nobody can ever take away the Canada Child Benefit and hope to stay in office. With an aging and ill-prepared cohort of Boomers, politicians won’t gut the tens of billions flowing to OAS. And yet it is here – in pensions – that we face the biggest threat.

Today Old Age Security payments – which nobody directly supports through their taxes – costs the government about $50 billion a year. By the time the Millennials start collecting, the bill will explode to $247 billion a year, pushing federal finances against the wall. The ranks of the seniors are growing at the fastest rate in a century, and the biggest cohort is that of the moisters. In forty years there’ll be 12 million wrinklies, living longer, vaping up a storm. But the system cannot support that  without structural changes that must be made now.

So, it’s in the naked self-interest of all the kids to vote for less. Without restraint over the next couple of decades – lower spending on fewer programs – plus a reigning-in of deficits and broad-based taxation reform, their golden years will be rust. OAS payments will be unsustainable. So, reduced. Corporate pensions will continue to erode. The need to fatten RRSPs, TFSAs and non-reg portfolios will be extreme. And that means spending the next thirty years of your life wiggling out from a crushing mortgage is a failed plan.

Alas, ain’t happening.

The current prime minister gives. He does not take. The contenders know voters like it that way. The only fair tax, everyone agrees, is one the other guy pays. We are a nation of citizens whose loyalty is for sale. In a little more than a hundred days, we sell it again.

Ask a few friends why they vote as they do. That should be enough to scare you into saving, investing and sheltering against what lies ahead. And I didn’t even mention climate change.

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June 9th, 2019

Posted In: The Greater Fool

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