Monthly Archives: April 2009

The Great Depression – The Real School Of Hard Knocks

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Downturn is nothing like Great Depression as the Vancouver Sun reminds us.  Canadians are ‘light years’ away from the misery of the 1930s according to many observers.

H. Blair Neatby, Professor Emeritus in the History Department at Carleton University, knows what hardship is. He grew up during the Great Depression in Saskatchewan.  He acknowledges the current recession is hurting many Canadians. But he also says today’s economic troubles are nothing compared to the severe insecurity and adversity faced by Canadians during the Great Depression.

That is an opinion shared by McGill University economist William Watson, writing in the February issue of Policy Options magazine. He says likening our current woes to the Dirty Thirties trivializes the hardships of our parents and grandparents who lived through both it and the war.  “Nothing awaiting us in 2009 is likely to rival either the 1930s when the unemployment rate rose to I in 3 or [the] blitzkrieg,” he said.  (Link to PDF version of article)

Even though the current recession may deliver knocks of somewhat lesser impact than the Great Depression, it can still be a school for useful lessons.  Blair Neatby hopes that the recession may teach younger Canadians growing up in an age of debt and leverage, a simple lesson about the value of saving.

As he said, “People like me came home from the war and became a generation of savers.  And we looked with some concern at our children and grandchildren who didn’t seem to be as concerned with the importance of saving. They hadn’t lived, as we had, through a time of great insecurity.”

Saving so as to have reserves and choices during hard times is timeless advice that is always right.  Hopefully these lessons on saving from the past will not be lost on all as they now struggle during these difficult times.

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Credit Cards – Good News, Bad News

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Part of the solution to the recovery from the recession will be to restore confidence in US financial markets.  President Obama realizes that is a key task for him and is currently pulling out all the stops in the Confidence Game

The banking system and its willingness to provide necessary credit is critical here.  It is unfortunate that the system has been severely stressed over the past months so a variety of initiatives are being pursued.  Credit cards, which have exceptional consumer acceptance, are the subject of some good news items and some less good news items.  It all depends which side of the bank counter you are on.

Bill Tightening Credit-Card Rules Advances in House is good news for consumers.

The House measure, yet to be approved by the full Financial Services Committee would restrict card companies’ ability to raise rates on existing customers and ban certain controversial practices, such as applying payments to the portion of a borrower’s balance with the lowest interest rate. It would also prohibit issuers from charging interest on parts of the balance that were already paid on time, a practice known as double-cycle billing.

Although central bank interest rates may have gone down, Credit card interest rates are rising marginally.  The average annual interest rates charged on three popular types of credit cards inched up.

  • low-interest credit cards, offered only to customers with strong credit histories, 
  • balance transfer cards, which allow consumers to consolidate outstanding debt from one or more cards, and
  • cash back cards, which feature cash or other reward incentives and generally require a good-to-excellent credit rating for approval.

With such a variety of credit card arrangements, it is not surprising that they are widely accepted and can even lead to a troubling debt conundrum, where debt-to-disposable-income ratio in Canada is now close to 140% when it was about 86% in 1980 according to the Vanier Institute of the Family.   The US figures on debt and income are probably comparable.

Credit cards can be a great convenience if used wisely.  That can be true even when it may concern credit cards for bad credit applicants.  Some of those seeking bad credit credit cards may well have had an unfortunate series of mishaps that forced them to pay out perhaps unexpected medical bills.  Or perhaps they wish to consolidate a series of loans that may be at very high interest rates.  Finding a source of  bad credit loans can be the opportunity to get back on a sound financial footing.  The important discipline required as with all credit cards is to ensure the repayment plan is practical and livable within the overall family budget.

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Consumer Protection

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Consumer Protection Resources

Particularly in these hard times, it is even more important than ever that consumers know their rights and are protected from aggressive or even illegal business practices.  There are a number of resources that suggest they would be of assistance.  Here are some of them:

The list in the last portal has one resource where the link to the website is missing, somewhat surprisingly, at the time we write this.  That is the reference to the Business Practices and Consumer Protection Authority of British Columbia.  The website does exist and there you can learn that

The Business Practices and Consumer Protection Authority (BPCPA) is a not-for-profit corporation that delivers consumer protection services throughout British Columbia.  BC’s consumer protection laws provide the framework to help the BPCPA protect consumers and encourage a fair marketplace in the province.

There is even a Consumer Corner  and in the past, there have been some useful tips:

Buyer Beware

The interesting aspect of the above resources, almost without exception, is that they usually have two objectives.

  • To set out good business practices, which in some cases may have associated legislation.
  • To provide consumers with advice on how to take care of themselves.  In some cases, there is also a Complaints process.

What is rarely provided is a list of companies whose practices are questionable, or even the subject of complaints. This seems to be a field left to private individuals.  However via the Internet and through the social media such as Twitter such information is becoming more available.

Freedom of Information

Thankfully there is increasing openness in society and governments and their agencies must respond, even if it takes legislation to enforce this.  For example, Larry Pynn in the Vancouver Sun through freedom-of-information legislation learned that Collection agencies, retail outlets and travel agents easily led the top-10 list of consumer complaints received last year by the Business Practices & Consumer Protection Authority of B.C.

Collection agencies were the source of 2,591 phone and mail complaints/inquiries, followed by retail sales at 1,861, and travel agents at 1,008 (136 of whom involved unlicensed agents).

Other sectors on the dubious top-10 list: automotive sales, 551; funeral service, 447; telecommunications, 436; credit/financing 440; credit reporting, 390; contractors, 371; and telemarketing, 367.

You should consult the article for names if you are interested. The BPCPA defends this lack of communication and prefers to work directly with companies to ensure better behavior.  However in this age of Twitter, many ways of communicating what is known are having to be rethought and this area of consumer protection may well be one of them.  Nothing can ensure better business consumer practices faster than by the perpetrators knowing that everyone is watching.

Perhaps the new watchword should be Seller Beware rather than Buyer Beware. It is not something that is difficult to accept since satisfied consumers are the key to better sales growth.

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No Banking Bonanza And No Bankers Bonuses

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Bank Bonanza? Forbes Says Don’t Bet On It

Earnings season won’t be an apocalypse. But boom times? Hardly.  Don’t let a little accounting change fool you; banks will still struggle to eke out profits this year.  Rising loan defaults and the gloomy economic conditions are largely to blame, despite factors seeming to work in banks’ favor.

It may be that Forbes is missing the big picture.  After all we have just had the G20 summit.  The world’s press has given a largely positive reaction to the G20 summit’s efforts to tackle the global financial crisis.  But some newspapers express fears that the G20′s measures do not go far enough.

The London-based Financial Times described the detail on future fiscal stimulus and cleaning up the banks as “disappointingly thin”.

The weakest part of the package is the financial element. Banks are still gravely wounded. The financial crisis lit the fuse for this recession. It may also prolong the fire; the crisis will last much longer if major countries refuse to clean up their banks. Given the range of countries at the G20, a one-size-fits-all bank rescue policy was never feasible. But the absence of detail about a common approach to cleansing the banks of their toxic assets is extremely disconcerting. Stating vague commitments only serves to create fears that little substance lies behind the words.

Here is a brief rundown of the measures announced at the G20 meeting in London on April 2:

  1. An additional US$1.1-trillion program to restore credit, growth and jobs in the world economy
  2. To increase regulation and oversight to important financial institutions, instruments and markets, including hedge funds, and to focus regulators on “macro-prudential risks”
  3. Financial Stability Forum is renamed the Financial Stability Board and given wider mandate to promote financial stability, set financial guidelines and collaborate with the IMF
  4. Endorse and implement the new principles on pay and compensation and to support sustainable compensation schemes
  5. To take action against uncooperative jurisdictions, including tax havens
  6. To extend regulatory oversight and registration to credit-rating agencies
  7. To refrain from raising new barriers to investment or to trade in goods and services

Items 3 and 4 in that list may well have real teeth.  There is public outrage at the details that have been revealed about bonuses and the circumstances under which they are often awarded and paid out.  One might have hoped that corporate governance and individual morality might have made such bonuses the exception rather than apparently the rule. 

In that light it is most satisfying to see what Henry Mintzberg is writing on Executive Compensation: It’s time to call the bluff of those highrolling CEOs.  He is the Cleghorn Professor of management studies at McGill University. He suspects that when it comes to executive compensation, corporate boards are finally ready to take a stand.  He offers the following win-win advice:

Dismiss out of hand, without one second’s hesitation, any candidate for a CEO position who seeks a compensation package that would single him or her way out from everyone else in the company. In fact, terminate discussions immediately at the mere mention of the word “bonus.”

These prove the candidate has no business running a business of co-operating human beings. (Should this person not comprehend, cite his or her mention a few moments earlier of the importance of “teamwork,” and how “people are a company’s greatest asset.”)

This proposal will save tons of money and send a positive signal to everyone else in the company for a change, and the firm might just end up with a CEO who is a real leader. Imagine that.

Great advice.  It is a sad commentary on business when such wise words will be seen to be somewhat provocative. 

Nevertheless the outrageous behavior of some members of the financial communities in both the USA and the UK and the global publicity about them mean that the world can never be the same.  Banking bonanzas there may be in the future but it is essential that all stakeholders benefit rather than just a privileged and unworthy few.

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Seniors Travel More

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There are more seniors and they travel more.  These aging boomers are beginning to redefine the travel industry.

The ranks of seniors will swell with a vast generation that’s healthier, more active and more discerning about travel than any before them.  “They want new experiences, they don’t want the beaten track,” says David Cravit, vice-president of ZoomerMedia, which handles communications for CARP, the Canadian association for the 45-plus. “Obviously, there’s an age at which I can’t hang-glide anymore, and that age might be 40 or it might be 80. Eventually, the physical constraints rule, but that doesn’t mean the experiential component has to vanish.”

One in seven Canadians is over age 65 and driven by the boomers and falling birth rates, the fastest-growing segment of the population is 55- to 64-year-olds.

Population aging will lessen demand for strenuous activities like skiing, canoeing and fishing, particularly in the winter months. On the other hand, “low energy activities” like museum visits, live theatre, wine or culinary experiences and historical sites are expected to get a boost.

Boomers are now the first generation with the money and technology to travel widely and  there is increased demand for more specialized educational and experiential travel, including hobby vacations, cargo ship cruises, “voluntourism” and literary-themed travel.

If you are such a senior traveler, then it is important to be well prepared and there are some important Senior Travel Tips you should be following:

  1. Pre-Planning for your Vacation: be thorough and watch that insurance.
  2. Packing:  keep important items with you at all times.
  3. Travelling with a Disability: if so, ensure the necessary help will be there for you.
  4. Pre-Trip Medical Check-Ups: make sure you are fit enough for your trip.
  5. Travelling with Medication: cover all contingencies.
  6. Clothing: be comfortable
  7. Exercise: keep at it
  8. Crossing Time Zones: how does that affect when medications are taken.
  9. Extra Care: watch out for infections
  10. Key information: keep those telephone numbers handy.

In particular, remember there are important changes in travel regulations in crossing the US/Canada border as of June 1, 2009 so you should check that you have the appropriate Passport Cards if you are a US citizen.

Beginning in June, travelers will be required to present documents proving citizenship and identity when entering the US through a land or sea border.  If you drive to Canada or Mexico or take a cruise, but do not plan to fly abroad, the passport card is cheaper and  smaller than the normal passport.  It  is not valid for air travel.  They are good for 10 years and cost $45.

You should check the Canada Border Services Agency website if you are a Canadian citizen who wishes to cross the border.  Happy travelling.

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