Are Canadians Financially Stupid?

An interesting comment was left on my post yesterday about Instant Income Tax Refund systems, which made the bold statement, “…the average Canadian is stupid about money…”, and I don’t think I like or agree with that statement, but I do wonder are Canadians financially stupid ?

While I have berated folks for using Pay Day Loans, Carrying Credit Card Debt, and various other “financial running with scissors”-type issues, I hope I haven’t made my readers feel “stupid”.

Are Canadians financially stupid ? I think we have many different issues with our money, and I might describe them as:

  • Are Canadians Financially Stupid

    All Those Who Agree I have a Hat for You too!

    Naive, would be a good adjective, since a lot of folks I have met, really don’t know much about the “science of money”.  What worries me is that they don’t want to know or learn about what they don’t know. You wouldn’t do this if you had a major disease, would you?

  • Mad Cap, or Whimsical, given that this generation (or at least the one behind me) really can’t remember the bad days of the 70’s and 80’s when interest rates for loans were over 20%. There is a naive belief that interest rates of 4-5% is actually high, and I can assure you, this is very much not the case (from a man who’s first mortgage interest rate was 12% for 5 years and it was a good rate (for a while)).
  • Indiscreet, I have been told a lot of really personal financial information by a lot of folks, and more than once I have told them that divulging this information to an acquaintance might not be a very good idea.
  • Uneducated, that really sums it up nicely. Many Canadians just have not taken the time to read, or learn about the “science of money”. I think high schools really should teach more about money, because the financial parasites try to catch folks very early.

I hope that if I have used the word “stupid”, folks have not taken it to heart. Think of it more of an aggravated utterance by a friendly teacher (yes, I am not friendly and I am a crappy teacher, but you can see where I might be coming from). I don’t think my readers are “stupid”, but if you are doing those things that I constantly rant about, you really need to get Educated!

Are Canadians financially stupid?

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Inflation Sky Rockets March 2011

No Really, You Can’t Afford That

After the past few days’ discussions of whether you can afford things, Stats Canada made the definitive statement, you can’t afford that when it published the monthly Consumer Price Index Numbers for March 2011. Inflation leaped up to 3.3% last month (year over year), up almost 50% from the February rate of 2.2% (year over year). This is the highest the rate has been since September 2008 (you remember before the entire monetary system debacle), so good cause to be concerned.

Inflation, Interest Rates

CPI the Past Year, With & Without Energy

As you can see without Energy everything is jumping in price in a nasty way. Without Energy in the equation, Inflation is running at 2.4% (year over year), but again that is a 71% jump from last month’s incrase of 1.4%, so this is a big jump relative to what we are used to.

Energy prices increased 12.8% during the 12 months to March, following a 10.6% advance in February. Gasoline prices increased 18.9% in March, following a 15.7% gain in the 12 months to February. Prices for fuel oil and other fuels increased 31.3%, while electricity prices rose 4.3%.

That is a disgusting but believable set of numbers, given gas prices have gone through the roof in the past month or two as well. This jump is now passing through the system and jacking up prices accross the board.

Inflation on the Rise

The one consolation currently is that the Bank of Canada’s CPI number is actually lower right now 1.7% (year over year), but again that number is up over 90% from last month when the year over year was only 0.9%.

What does all this mean? It might only be a single month bump and things will calm back down next month, but given gas prices continue to rise, I think that is being either naive or grossly optimistic. This could mean a summer of inflation.

Big Table

You can see from the big table exactly which are the culprits this month. This inflation is now causing an even stronger Canadian Dollar too, man that is worrisome.


Relative importance1 March 2010 Feb 2011 March 2011 February
to
March 2011
March 2010
to
March 2011
Not seasonally adjusted
% (2002=100) % change
All-items 100.002 115.6 118.1 119.4 1.1 3.3
Food 17.04 123.1 125.3 127.2 1.5 3.3
Shelter 26.62 121.7 124.5 124.6 0.1 2.4
Household operations, furnishings and equipment 11.10 108.3 110.1 110.4 0.3 1.9
Clothing and footwear 5.36 93.6 89.4 94.4 5.6 0.9
Transportation 19.88 117.1 122.6 124.8 1.8 6.6
Health and personal care 4.73 113.5 116.0 116.4 0.3 2.6
Recreation, education and reading 12.20 102.5 103.8 104.9 1.1 2.3
Alcoholic beverages and tobacco products 3.07 131.5 135.0 134.8 -0.1 2.5
Special aggregates
Core Consumer Price Index3 82.71 115.0 116.2 117.0 0.7 1.7
All-items excluding energy 90.62 114.1 115.8 116.8 0.9 2.4
Energy 9.38 134.5 146.3 151.7 3.7 12.8
Gasoline 4.92 147.6 164.6 175.5 6.6 18.9
All-items excluding food and energy 73.57 112.1 113.7 114.4 0.6 2.1
Goods 48.78 109.0 110.8 113.0 2.0 3.7
Services 51.22 122.2 125.3 125.7 0.3 2.9
2005 CPI basket weights at April 2007 prices, Canada, effective May 2007. Detailed weights are available under the Documentation section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/index-eng.htm).
Figures may not add to 100% due to rounding.
The measure of Core Consumer Price Index (CPI) excludes from the all-items CPI the effect of changes in indirect taxes and eight of the most volatile components identified by the Bank of Canada: fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuel; gasoline; inter-city transportation; and tobacco products and smokers’ supplies. For additional information on Core CPI, consult the Bank of Canada website (www.bankofcanada.ca/en/inflation/index.htm).

 

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Overnight Rate Jumps 50% More!!!

OMG, Think of the Children!!!

Yes,I am being fascetious again, playing with numbers, but the Bank of Canada raising their overnight rate from 0.50% to 0.75% is a 50% increase, and it sounds oh so much more exciting than a 0.25% increase, doesn’t it?

This increase was expected due to possible inflationary pressure on the economy, and an attempt to maybe put the brakes on any rampant spending about to start up too.

An interesting statement is:

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

The economy is recovering, but not as fast as everyone thinks it is, so we won’t try to be the buzz-killers for the growth (yet), but stay tuned, we may turn the “free money” faucets off soon.

What was the best comment by the Bank of Canada in their announcement?

Money, Money, Money

More Expensive to Borrow

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

My translation of this statement is, we really don’t know how things are going to go in the next little while, so we reserve the right to possibly increase the rate again, but we probably won’t. Yes, that is about as wishy-washy as I can make my interpretation.

Remember where the Bank of Canada thinks the CPI is at currently:

Moral of this rate increase? It is going to get harder to pay down those loans soon, because the interest rates will be going up soon, so maybe think about investing in paying off your debts now.

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Money Can Be The Root of All Evil

Not to Get all Christian but…

On Sunday I read a favorite bible quote:

1 Timothy 6:6-21.The love of money is a root of all kinds of evil, and in their eagerness to be rich some have wandered away from the faith and pierced themselves with many pains.

OK, let’s stay away from the religious aspects of this biblical quote and concentrate on the essence of what is being said by the writer (or God depending on your point of view).

Money is not the root of all evil as most folks erroneously like to quote of this passage, the love of money is a root of all kinds of evil, but sometimes it is easier to shorten the passage to fit your argument I assume.

I agree with this passage, you can easily fall in love with money, and that can really screw your life up, which is a simplistic rewording of this passage. The entire low rate mortgage scandal in the states can be summed up by this passage, as people fell in love with what money could buy (expensive homes), which then overextended them, causing them to default on the loans.

My guess as to what the authors are bringing across is a very Christian ethic, which is live within your means (OK, it’s not just Christian, I am sure many Buddhists, Muslims and even a few Atheists agree with this tenant as well). Don’t fall in love with money and the pursuit of it, and worse the things it can buy you, live your life, in a sensible way and you should be fine.

I am not saying, don’t watch your money carefully or make financial plans, on the contrary, I am saying plan so that you don’t have to keep pursuing money, as someone in love might chase a new object of their affection. Money is a tool, to get what you need to live a happy life, not much more, but no less.

Love your family, your friends, and your life, but don’t love money, show it respect as you would any good tool, and you should be fine. The other problem with money as a tool, is that it does not coming with an Owner’s Manual, but then again, most men wouldn’t read it anyhow.

If anybody knows where I can find the Money Owner’s Manual, please leave me a comment.

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Strong Loonies

Nothing Scarier than a Strong Loonie

The Canadian Dollar (aka the Loonie) is now at parity with it’s American Cousin, which means Canadians can spend freely in the U.S. and U.S. products in Canada should come down in price. The converse is Canadian products in the States are going to get more expensive, and less Americans will spend money in Canada, when it might be cheaper to go somewhere else.

Is this going to be the way things are going to stay? You never know, but the last time this happened in 2008, it stayed up for a while, but then the Loonie “… went off it’s meds …” and tumbled back down to below 90 cents in value compared to it’s saner American Dollar.

Useful things to do with a strong Canadian Dollar?

  • Buy an NHL franchise, but ask to pay in American Dollars, it’s cheaper. Jim Balsillie, I am talking to you!
  • Buy U.S. Index Funds or ETF’s they are cheap (but only if you think the American economy is going to rebound soon)
  • Start cross border shopping, but remember to have your passport handy. Is it cheaper now to get an American Cell Phone with a “North American Plan” and use it compared to a Bell or Telus cell phone?
  • Start using American Quarters in vending machines in Canada, because you are now saving money (unless prohibited by law, then do nothing of the sort)
  • Ask an American friend which is stronger a Loonie or an Eagle? When they reply an Eagle, just smile and nod at them knowingly (it’s not the Canadian way to be boastful, but we are aloud to be smarmy).
  • Buy a used car in the States and bring it back to Canada (but make sure you have read all the tariff rules, and whether the warranty is transferable to Canada, this is very important).
  • When you cross boarder shop dress up like one of the MacKenzie Brothers, and say “Eh?” a lot, if a shopkeeper makes a remark about your dress, ask them, “Who was it that won the war of 1812 again?”, or ask them if they have read any interesting stories about Laura Secord, but again, in a polite way.
  • If you are a Canadian Bank, buy a large American Bank, and then tell their upper execs that their bonuses will no longer be paid in U.S. funds, and when they get excited about them being paid in Canadian Dollars, point out that you meant they will be getting Back Bacon (i.e. Canadian Bacon) instead!
  • Start buying American Debt, no point in letting the Chinese hoard all of those great savings vehicles
  • Build a giant wall along our border to stop American Frostbacks from illegally entering Canada to get jobs. Hire Mexicans to build the wall, because they would appreciate the Irony.
  • Point out to our American Friends that a sock full of Loonies and Two-nies is much more dangerous than a sock full of Yankee Dollar bills.
  • Go to an American Medical Clinic and have a wart removed, and when you pay, say you’ll be sending more Canadians down soon, so don’t worry about Obama’s Nazi socialized Medicine, Canadians will pick up the slack.

The loonie is mighty but please remember you are Canadian, so don’t get all showy about it, but you can be as Smug as you wish.

Any other things Canadians can now do with our mighty loonie?

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