Sunday, February 21, 2010

Dumb and Dumber

Ah, the hypocrisy of politicians.  Jim Flaherty has been adamant that there is no Canadian housing bubble.  Then why do we need a  task force studying why Canadians are financially illiterate?  Maybe because you know there's a massive problem, but it's easier to blame the stupidity of Canadians (I'm not disputing this is a problem),  than admit any of the retarded policy blunders that have encouraged this reckless behaviour in the first place.
The task force will release its “Leveraging Excellence” consultation document Monday as a starting point to discuss issues including managing debt, saving and investing, retirement planning and pension reform.
That's an awesome name for the report, must be an inside joke...since leverage is precisely why many Canadians are racking up monstrous debt levels.  Has a better ring to it than "Borrowing away our future".  But that's why these guys get elected I guess.

Let's be clear, the government realizes there is a massive housing bubble, and retirement savings debacle coming but they're scared to actually admit it, lest it cause consumer confidence to plummet.   So instead, they lie, and assume we're retarded (which I guess is accurate, based on the actions we're seeing). 

Not only are consumers piling up debt at record levels, many also have virtually no savings.  When reams of boomers start moving into retirement, the government is going to have it's own problem with mounting government commitments to social security, as well as mounting health care costs.  They don't need to worry about the prospect of people not having anything saved for retirement on top of that.
The group is examining a survey of more than 15,000 Canadians that suggests that one-third of the population is struggling financially. The data also suggests that Canadians don't fully grasp their financial picture, or are overly optimistic. Half of them say they are confident that they will enjoy a comfortable retirement, but very few can explain how they plan to get there.
Most peoples "plan" involves their principle residence appreciating rapidly in value. And that has happened largely due to rates being cut to zero and the Canadian taxpayer assuming the risk of all of these high-ratio loans due to CMHC.  CMHC might as well stand for "Can't Make Houses Cheap"...since it has basically managed  to do the polar opposite of what they are mandated to do - increase housing affordability for Canadians.  It's bad enough they've ramped housing prices, but the fact they've done so by protecting banks from mortgage defaults on the back of Canadian taxpayers is unconscionable.  This pig needs to be slaughtered - Canadian bacon time.
“Time and again we see behaviour by people – we are talking highly educated, high income people – who are making less than ideal financial decisions for themselves and their families,” said one source. “Other countries that have developed a strategy have focused on education in high schools. This task force has come to the early conclusion that, while enhanced financial education is vital over the long term, it is insufficient.”
The task force is delving into behavioural science and looking for ways to nudge Canadians into adopting better financial practices, such as saving more. Committee members have had discussions with experts on the psychology of money, such as Richard Thaler, the author of “Nudge,” in the hunt for ideas.
The task force is also concerned that if it limited its strategy to education in school, it would not help immigrants or aging Canadians who are struggling with retirement.
Tell me, how does cutting consumption taxes like the GST in place of cutting income taxes provide a "nudge" in adopting better financial practices?  How does engaging in ridiculous Keynesian stimulus plans encourage Canadians to save?  How does interfering in the market forces for mortage rates?  The only people potentially more ridiculous with their finances than average Canadians are Canadian politicians. 

As for the education argument, you can't rule out providing better education because it doesn't help seniors and immigrants.  We need to show the next generation how utterly incompetant the previous generations were and why they're being asked to pay for their parents and grandparents retirement.  We need to tell them that they're going to be taxed at higher rates than previous generations, and the services they'll receive will be in decline because the government cannot afford otherwise.  People need to realize that retiring at 65 may not be the norm anymore (hell when I grew up everyone talked about freedom 55).  People need to realize that there's a big difference between having to save enough to fund 10 years of retirement vs 20-25 years.

In short people need to do a bit of math and actually start thinking about their own situation and then start doing something about it, instead of ignoring the problem and hoping it will go away.

Or we can fill a Samsonite briefcase with IOUs...after all, those are as good as cash!

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