My mom and dad advised me never to lend money to friends and family. Give it freely as a gift and never expect to get it back or don’t give it at all. Money ruins more relationships than anything else.
Archive for the 'Economics' Category
The UK is preparing to launch its first Social Stock Exchange (SSE). Following those already in place in Brazil and Portugal, the system will provide a new source of funding for social initiatives. So far, founders Mark Campanale, a former fund manager, and Pradeep Jethi, a former new product development manager at the London Stock Exchange, raised £1.2m of the £2million they need to establish the stock exchange.
The stock exchanged is not aimed at large companies active in CSR; it is aimed at smaller companies that operate specifically for a social purpose. They are mature companies that need funding for growth and expansion. Start-up companies are not eligible. Campanale and Jethi hope that the SSE will attract investment from long-term, patient and strategic investors like pension funds, who might not typically have had contact with these types of businesses. (More reading on the SSE)
Meanwhile, other innovative movements in the financial world are targeting start-up businesses. A couple years ago in the UK, a company called Social Finance, headed by former Dresdner Kleinwort banker David Hutchison, launched the world’s first social impact bonds. The British government is currently testing the use of these bonds. Last month, the U.S. government decided to do the same, putting forth $100m across seven pilot programs under the name pay for success bonds. The idea is that private firms (usually philanthropic foundations) will pay the costs of a program in its early years and if they achieve a pre-determined set of measurable social outcomes, the government will pay back the money invested, plus a bonus. If the program fails, taxpayers pay nothing. So the bonds are not like ‘bonds’ in the traditional sense, but rather, are more like equity investments. The bonds aim to motivate entities to only introduce initiatives that have a good chance of thriving, and to ensure such programs are successful, in hopes of securing future private funding. (More reading on social impact bonds)
Taxes and those who collect them have never been popular. The Beatles, for example, had a song “Taxman,” one of the most memorable lines of which was “If you take a walk, I’ll tax your feet.” As social critic Jim Goad said in his book The Redneck Manifesto, even the “wimpy, peace-loving” Beatles sang about the evil taxman. In the 1980s comedy series Diff’rent Strokes, the character Willis explains to his brother Arnold that, “The IRA are the Irish terrorists. The IRS [Internal Revenue Service] are the American terrorists.”
Now, however, some people are not content to simply sing or joke about the evils of revenue collection. Here in Canada, we have seen the emergence of an organization called the Canadian Taxpayers Federation (CTF). It is headed by a gentleman named Kevin Gaudet, who writes columns for a number of community newspapers and occasionally appears on radio talk shows. The Canadian Taxpayers Federation describes itself as a “citizen’s advocacy group dedicated to lower taxes, less waste and accountable government.” It has a website, www.taxpayer.com, and in the past published a newsletter in print. I have to admit the newsletter is an interesting read and, unlike much social commentary, is actually humorous. For instance, did you know that one of the first revenue rebels in history was Lady Godiva, whose husband promised to lower the municipal taxes if she rode naked through the town on horseback? After she took him up on his dare, the taxes went down. (In her use of nudity as a form of social protest, the good lady appears to have pre-dated the People for the Ethical Treatment of Animals by nearly a millennium.)
The goal of the Canadian Taxpayers Federation is to, by their own admission, promote more responsible use of our tax dollars and, if necessary, collect less of them in the first place. Some of the subjects discussed on their site include political leaders’ salaries, government funding for institutions like hospitals, schools and public television stations, and spending on prisoners – all of which and whom they feel receive too much money from government coffers and, ultimately, our pocketbooks. The Federation recently reported a victory in helping end Old Age Security (OAS) and Guaranteed Income Supplement (GIS) payments to federal prison inmates like serial killer Clifford Olson.
They also ask why, for example, the people of Regina, Saskatchewan should be required to shell out money to repair the City’s Mosaic Stadium when the private sector could very well pick up the tab.
Needless to say, the CTF hasn’t been immune from criticism. They have often been portrayed as mere mouthpieces of the Canadian right. On one hand, a number of past and present Federation members have belonged to or worked for the Conservative and other right-wing political parties. The current CEO, Kevin Gaudet, served as Director of Opposition Research for Reform Party leader Preston Manning, while one of its former heads was Jason Kenney, now Citizenship and Immigration Minister under Stephen Harper. On the other hand, it’s perhaps a bit simplistic to dismiss the CTF as Tory toadies. The Federation has after all criticized Conservative administrations. A past issue of the CTF newsletter described the Ralph Klein regime as “my big fat Alberta government,” presumably in reference to its members’ bloated salaries.
Other critics imply that the Canadian Taxpayers Federation are against public financing of essential social services. In an article entitled “Top 100 reasons why I don’t take the Canadian Taxpayers Federation seriously,” a site owner calling himself “BCerinToronto” bashed the group for protesting federal funding to among other things the Canadian Television Fund and Toronto’s Hospital for Sick Children and Sunnybrook Health Sciences Centre. He ends by telling the CTF to “leave the sick children alone.”
Personally, while I am sympathetic to the Canadian Taxpayers Federation’s concerns and while it is probably true that our various governments waste money on many useless endeavours (such as the Canadian Television Fund), my emphasis would be on “less waste” and “accountable government” rather than necessarily “lower taxes.” I don’t mind paying taxes for legitimate social services like hospitals or educational institutions. However, what we hand over to the government should be used efficiently so that we get the best performance for our money.
Take the above-mentioned Sunnybrook Health Sciences Centre. I was a patient there nearly four years ago when I gave birth to my daughter. The nurse attending me was rude, both to me and to my mother; incompetent (she gave me contradictory and potentially dangerous advice); and utterly useless. So I would say yes, let’s fund Sunnybrook, but let’s also ensure that employees like the nurse in question – who by the way is not doing charitable work; as a recipient of my tax dollars she’s actually working for me – either shape up or ship out, so to speak.
So unlike Willis in Diff’rent Strokes, I don’t believe the Canada Revenue Agency (our equivalent to the IRS) are the Canadian terrorists. We do have an obligation in a democratic society to “render unto Caesar the things that are Caesar’s.” But we should make sure of what exactly it is we owe to Caesar and that Caesar is actually rendering it back to us to the best of his abilities.
Mark Steyn continues to be a fantastic inspiration for impromptu posts with his thoughts on the loss of liberty and the eventual decline of the American empire:
What happens when the policies that brought ruin to Detroit and sclerosis to California become the basis for the nation at large? Strictly on the numbers, the United States is in the express lane to Declinistan: unsustainable entitlements, the remorseless governmentalization of the economy and individual liberty, and a centralization of power that will cripple a nation of this size. Decline is the way to bet. But what will ensure it is if the American people accept decline as a price worth paying for European social democracy.
…
The United States now spends more on its military than the next 40 or so nations combined. Yet in two rinky-dink no-account semi-colonial policing campaigns, it doesn’t feel like that, does it? A lot of bucks, but not much of a bang. You can understand why the entire Left and an increasing chunk of the Right would rather vote for a quiet life. But that’s not an option. The first victims of American retreat will be the many corners of the world that have benefited from an unusually benign hegemon. But the consequences of retreat will come home, too. In a more dangerous world, American decline will be steeper, faster, and more devastating than Britain’s — and something far closer to Rome’s.
Steyn makes many good points but from an economic perspective America was slated for decline since the 1980’s when they essentially did a kamikaze strike on the USSR. Amid the celebration of Reagan’s low taxes, very few people paid attention to two critical problems -
- Spending was far outstripping revenues, despite the increased number of revenue sources and so-called trickle-down
- Alan Greenspan was rapidly devaluing American currency (i.e. lowering interest rates) to keep the value of the debt low and to stimulate economic growth
Ironically, currency devaluation -long hailed by capitalists as a way of stimulating expansion- amounts to a hidden taxation – on income AND pre-existing savings. Since the mid 1980’s it has made more sense for consumers to be in debt than have savings, as the value of those debts has decreased rapidly. George Bush I did nothing about this issue (ie fire Greenspan) and Bill Clinton benefited from circumstance when the dotcom boom led to a temporary American surplus.
U.S. Debt Trends (source - Wikipedia)
In the meantime, Japan and China bought American debt (e.g Treasury Bills) at a cracking pace – a trend that accelerated when Bush II decided to invade Iraq and will accelerate even more now that Obama has found health-care for 300 million people instead of 50 million. With China holding nearly $780 billion dollars of American debt, the United States has relegated itself to toothless observer in the largest economic/military growth spot in the world (East Asia). Not a good economic position given China is the major long-term rival and has shown little regard for playing by the rules of most industrial nations.
The final nail in the coffin will probably be when the military-industrial complex collapses and free market forces dictate that weapons are best bought from countries that can produce them for cheaper. Again this will be China, which has both the expertise and the cheap labour. The main reason we all aren’t speaking Arabic is because the Ottoman/Seljuk/etc paid little attention to weapon-making and ended up having to buy weapons from the same “barbarians” they sought to crush during their attempts to conquer Europe. An empire without the ability to produce its own war in-house is doomed to fall.
Macleans Magazine recently published an intriguing diatribe by Mark Steyn regarding the phenomenon of children living in their parents for increasingly long periods of time.
In Italy, a court has ordered, upon pain of having his assets seized, Giancarlo Casagrande of Bergamo to pay his daughter an allowance of 350 euros—approximately $525—every month. Signor Casagrande is 60. His daughter Marina is 32. She was supposed to have graduated with a degree in philosophy eight years ago but, though her classes ended way back at the beginning of the century, she’s still working on her thesis. So Signor Casagrande is obliged to pay up, either in perpetuity or until the completion of Marina’s thesis, whichever comes sooner. Her thesis is about the Holy Grail. Which it’s hard to see why Marina would have any use for, given that she’s already found a source of miraculous life-transforming powers in Papa’s chequebook.
Marina is what they call in Italy a “bambocciona,” which translates, roughly, as “big baby”—the term for the ever-growing number of young adults still living at home. Not their home—with a spouse and young kids and putting out the garbage and repainting the stairs and so forth—but at their parents’ home, in the same bedroom they’ve slept in since they were in diapers.
While there may not be a specific name in North America for kids who stay at home well past the age of 18 (which happens to be the start of college age and 2 years past the age at which a child can legally move out in some jurisdictions), Canadian culture has traditionally regarded such people as parasitic. Growing up in rural Ontario, one came across a small number of individuals who were in their 30′s and still sleeping in their childhood bedrooms. Society generally heaped scorn on such individuals, calling them lazy and unmotivated, and quite often they were correct. Many of the bamboccioni were involved with weed or harder substances, providing parents the opportunity to lecture their children about the dangers of drugs – after all, you don’t want to end up like ______ over there.
The North American bambocciona is also the butt of jokes, being ridiculed in television and movies as an unmotivated clown. New York rapper Thirstin Howell III parodied the plight of the long term dependent in the track “Still live with my Moms”
Trying to f*ck me while his mom’s home,
Free rent, light, gas and phone,
A momma’s boy even though my ass is grown,
Got the same bedroom, since third grade,
Still be living here when I’m eight hundred and eighty eight
…
I always say I’m moving out this year,
But it’ll be sooner if welfare finds out I live here,
Yo it’s cheap by my place,
I ain’t scared to open bills cuz non of them in my name,
Got kicked out, my mom said I could move back,
If I prove that I didn’t steal my sister’s food stamps
Much of the ridicule in North America can be seen as a function of at least two factors -
- America and Canada and both historically “frontier” nations that value individuality and being self-made. This contrasts with more bambocciona-friendly nations like Italy and Japan, which have much older and patriarchal cultures.
- As noted in Steyn’s article, housing and land are much cheaper in North America when compared to other developed regions. This is due in part to the vast amount of arable land in the United States and at least the southern part of Canada. Italy has approximately 1.7 times the population of Canada yet is contained in a land mass smaller than Newfoundland.
Where Independence Fails
However, the Canadian economy has transformed significantly over the past 30 years, resulting in conditions that may leave children who leave home before 30 at a serious disadvantage against their lingering counterparts. Firstly, a college degree is no longer a “nice to have” but the bare minimum required for anyone wanting to have a career. College and University are only partially subsidized in Canada, leaving students thousands of dollars in debt before their first career job. If the student doesn’t have the luxury of living at home, the debt could number in the tens of thousands.
But when school is over there is no excuse for the wee ones not the move out right? Not quite. The average house price in Canada was $332,000 as of September 2009 and rising steadily. Larger centers (where youth are more likely to congregate) paint an even bleaker picture:
Toronto: $407,000 (10.3% yearly increase)
Calgary: $395,000 (1.1% yearly increase)
Vancouver: $611,000 (14% yearly increase)
Back in the good ol days (ie before the 1990 recession) banks expected 10-20% down payment on a new home. Does the average youth have a spare $40,000-$60,000? Before you answer, consider that the median income in Canada was $63,600 as of 2006. Assuming that the median income continues to rise at the same rate as it has over the past 10 years, it can be assumed that the median income for 2009 (not yet available) will be around $66,800. Thus, the ratio of median housing price to median income is around 5 – considerably higher than years gone by (most middle class people I have spoken to quoted about 2-3 for their personal ratio during the 70′s and 80′s) and indicative that owning a home is getting more expensive even after correction for inflation.
Recently, the Canadian government, in an attempt to head off a housing bubble, tightened mortgage restrictions to make requirements even tougher for first time buyers. The new rules requiring buyers to be able to pay a five-year, fixed rate mortgage -regardless of the actual terms of the mortgage- will have the greatest effect on lower-income buyers. New graduates make up a sizable portion of this group and making a larger down-payment will once again be a primary concern.
Ultimately, it is easier to save for a down payment under mom’s roof than it is while renting (a practice ironically looked down upon as indicative of lack of financial responsibility). Thus, the bambocciona is in no danger of going extinct in Canada any time soon.
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