Canadian Personal Finance Blog

Jim Flaherty came through with an interesting and I would say very optimistic Economic Update (mini-budget, whatever), yesterday that took aim at something that all voters love to see under financial siege, Government Agencies and MP’s. 

No Debt Financing?

With some very creative and optimistic accounting the Finance Minister is promising to try to have either balanced budgets or very small surpluses up to 2013, which is very contrary to what most economists are saying is possible in the current economic instability (i.e. Financial Apocalypse). 

Flaherty did couch his optimism with the following cold statement:

“Any additional actions to support the economy will have an impact on the bottom-line numbers in our next budget. These actions, or a further deterioration in global economic conditions, could result in a deficit.”

So he isn’t saying there isn’t going to be deficits, just that there will be measures taken to avoid a deficit if possible.

Take that Ottawa Fat Cats

Not Really an Ottawa Fat Cat

No that is not a real Ottawa fat cat, it’s my cat from when I lived in Kitchener, but he is a good Metaphor for the “Fat Cats” in Ottawa.

Some of the measures against the “Ottawa Fat Cats” taken will be:

• Elimination of the $1.75 per vote allowance to support political parties that receive more than 2 per cent of the vote, staring April 2009. I really like this one, because all of the politicians are howling about it, so it must be a good thing. 
• Wage controls holding increases to public servants, including MPs and senators, to 2.3 per cent for last year and 1.5 per cent for each of the next three years. I really like this one, because the MP’s are mad about this as well, and the public service doesn’t like it either.
• Slash cost overruns on government travel, hospitality, conferences, exchanges and political services, this sounds like something they should have been doing already? What exactly were they doing before this, wait, I don’t want to know the answer to that one, so please don’t answer.
• Provincial equalization payments are gauged to the average GDP growth over a three-year period. Can’t wait to hear Dalton McGuinty tirade about this one.
• No mention of any extra taxes, but since this is not a budget, then I guess nothing has to be mentioned about that (yet).

Some pro-active steps being taken are:

• Giving $350 million in equity into the Export Development Canada and another $350 million in equity into the Business Development Bank of Canada. Interesting, guess I should send my resume in there since they might be hiring soon.
• A scary one for soon to be pensioners is allowing federally regulated pension plans to spend 10 years instead of five to make solvency payments if necessary. This is a slippery slope I think and it could end up like some of the private pensions that are woefully underfunded these days.
• Only allowing seniors to withdraw $7,500 instead of $10,000 from their Registered Retirement Income Funds (RRIFs), which is supposed to slow the cashing in of stocks and mutual funds I guess. 

Good Graphic to Show Canada is Doing Better than Most:

Canada Doing Not Bad with Debt

Special Report: Federal Speech from the Throne

My Kind of Throne

I’m sorry I just could not resist the picture, since every time I think of the Throne Speech my mind naturally moves to the water closet.

The Speech From the Throne

You can find the complete speech on this link, have a read it’s a lot of fun to read something that implies so much and says so very little.

• A Fiscal statement is coming next week from Jim Flaherty (mini-budget? budget? whatever).
• We are going to try not to run a deficit, but we make no promises.
• Support of workers in transition. Does that mean they are going to give me an athletic supporter, money or training? Support is a generic term, training is implied, but not sure.
• Quoted Warren Buffett, who quoted Wayne Gretzky who said we should “to skate to where the puck is going to be, not to where it has been.”, commenting about how we need a Dynamic economy. I always liked Yogi Berra’s “Hit ‘em where they ain’t..” as a colloquialism.
• More effective government, that’s kind of like promising to eat right, words are interesting, actions are the telling part of it.
• One very interesting statement about Electric Power generation:
  “Our Government will set an objective that 90 percent of Canada’s electricity needs be provided by non-emitting sources such as hydro, nuclear, clean coal or wind power by 2020. ” 
  Interesting target to have, given a lot is already Hydro and Nuclear how close are we to that number already?
• Improving the UCCB, no real statement what that improvement might be, but I like that idea.
• Lots of motherhood statements about funding the military and the police to keep us all safe (not bad things, just fairly standard stuff).
• “May divine providence guide us in our deliberations.” Really not sure what that is supposed to mean, but it reads well, that is for sure.

There was hopeful statements from analysts that there might be a “honeymoon” for the new president elect and that the death spiral that the Stock Exchanges have been doing might slow down or stop, but that does not seem to be the case, as stocks continued to drop for another day. Looks like the president elect will be handed the rancid entrails that is the U.S. economy and that will be his first job to clean up. I get the feeling that the “good will” from the election is not going to last long if there is an extended downturn in the economy (who said recession?).

More Given by Less

Stats Canada reported an increase in the total amount that tax-filers reported as charitable donations, however, fewer people actually gave that money.

Canadian taxfilers reported making charitable donations surpassing $8.6 billion in 2007, up 1.4% from 2006. At the same time, the number of donors fell 0.9% to just under 5.7 million. Data are based on income tax returns filed for 2007.

I am happy to see that I am above the Median of $250 for givers (i.e. I am in the upper half), remember with the holiday season coming, that means your fiscal end of year is coming for charitable donations and you might want to think about giving a little more?

More Given by More

When we look at the Stats Canada data on RRSP contributions by Tax-filers you see a different picture.

Just under 6.3 million taxfilers contributed to registered retirement savings plans (RRSP) in 2007, up 1.6% from 2006. Their contributions rose by 5.3% to $34.1 billion. These data are based on tax returns filed for 2007.

More money going into Mutual Funds and such, the data for this year will be very interesting, given the stories of Mutual Fund flush outs (i.e. folks selling big time), what this might show in the RRSP world. I actually have given more than any other year this year, but that has more to do with my lay off than any other reason.

The RRSP silly season doesn’t really start until February, but you could put more money in now and it would have longer to start growing? Just a thought.

End of Year Financial Plan

Do you have an end of year plan for your finances? Might be time to figure out what needs to get done before December 31st, since it is usually hard to get anything done after December the 15th. I have pointed out RRSP, but remember the TFSA is coming too, how will that change next year’s plans? The TFSA may well cause a big change in how Canadians save, let’s hope.

Eight two cents a Litre for Gasoline in Ottawa

Last night I was astounded and thought, “What a difference six months makes”, when I filled up my van with 50 litres of gasoline and it cost me $41.00 . Six months ago that exact same amount would have cost me over $60.00 . The dramatic drop in the price of gasoline in the past few weeks has been astounding and now I wonder whether this is the anomaly or whether what happened in the past year with the price spike is the anomaly. My guess is gasoline prices are going to be manipulated a great deal over the next 10 years and we will all be paying for it.

Remember to check gas prices in Ottawa at Ottawa Gas Prices.

I am not sure what the price of fuel is in Toronto, however, if I make a round trip there, these prices could mean a savings of over $70.00, which is significant, and shocking.

I am now very curious to see what the Consumer Price Index will reflect with this price drop, in the next month or two. What will this deflationary drop of a major consumable do to prices? What will it do to all of those new projects in the Resource Industries, now that gas is cheap? What was the break even price for extracting gas from the tar sands again?

It was Oil Prices All Along

More interestingly there was an article this week that blames sky rocketing oil prices for the economic collapse (in the Financial Post). Jeffrey Rubin from a Chief Economist at the CIBC stated:

“By any benchmark the economic cost of the recent rise in oil prices is nothing short of staggering, a lot more staggering than the impact of plunging housing prices on housing starts and construction jobs. And those energy costs, unlike the massive asset writedowns associated with the housing market crash, were borne largely by Main Street, not Wall Street, in both America and throughout the world.”

Other economists disagree like Frank Atkins from the University of Calgary who said:

“The inconsistency in his story is that he had oil prices going to US$200 and the TSX going over 15,000,” Mr. Atkins said. “He did not have in his original speech oil prices destroying the economy.”

I think I agree with Mr. Rubin somewhat, but I think the housing collapse in the U.S. helped out as much as oil prices to create a “Perfect Economic Apocalyptic Melt Down”.

Congrats President Obama

Interesting results in the Presidential race in America the question most Canadians are going to ask is, is he really going to re-open the North American Free Trade Agreement (NAFTA)? I really hope not, unless it would be to make trade even fee-er. In these interesting economic times, I would think the last thing anyone wants to do is restrict trade in any direction, but then again, if it somehow appears to create American jobs, that may be exactly what happens.

Quebec Election Cometh

Just when you get bored with politics, Quebec his about to announce another election, and will the Separatism Leviathan appear to scare the rest of Canada? Who knows, but if Quebec politics is one thing, it is most certainly not boring! Stay tuned this could get interesting again folks.

Ontario a Have Not Province

For the first time ever Ontario will be receiving equalization payments from the Federal Government and everyone is having a good laugh about it. The more interesting part of the equation is that Newfoundland and Labrador are now a “Have” province, and will be paying into the system more. This certainly is a changing financial landscape here in Canada.

Carnivals

• Living Almost Large is hosting the 37th Carnival of Money Hacks where my post I Should Divorce My Wife is mentioned.