Econ Ch 8 More Canadians saving money: survey

Although the recent economic downturns have not been as impactful in Canada, spending has, none the less, gone much lower, due to millions of Canadians saving a large percent of their income. A survey was released Wednesday of April 16th that over 84% of Canadians have money put away for the future or an emergency. Even though this may seem to be typical and no surprise to most people, this percentage was only at 67% two years ago. With over 88% of Canadian citizens considering the new tax-free savings account, and 68% already using one, saving is clearly a trend that will most likely to continue in the upcoming months.

http://www.vancouversun.com/business/fp/money/More+Canadians+saving+money/1501105/story.html

Although the general consensus is that saving will in turn cause a decreased amount of spending, and ultimately, an increased amount of unemployment, it is not as bad as most people theorize it to be. In the circular flow of money, it is shown that a lack of money going into a certain area will cause a domino effect on other areas. Luckily for most people, there is a trade off between unemployment and the inflation rate, shown in the Philip’s Curve. Because demand for products is down, inflation rates are also getting lower; therefore, products are much cheaper, which may be just as good as unemployment rates going up, in the eyes of many employed/ self-employed workers, who want the cheapest price they can get on products.

Pessimism and worry for the future of the economy is inevitable; however, with inflation rates also lowering, it may come as a relief to both employed and unemployed citizens. Even though I prefer a booming economy with a very high consumer confidence, and the complementary increase of inflation, an economic downturn is not the worst thing in the world, since there is at least a lowering in the cost of products. The worst case scenario would be a “stagflation”, which is what happened during the 1970’s. Canadian citizens should feel somewhat fortunate, considering the problems they have in the US currently, due to bad governmental decisions for the economy.

FAC Ch 5 Alberta small business most pessimistic about future

With the recent recession, businesses have felt the credit crunch, and the pressure of staying afloat amidst all the financial problems. Studies have recently shown that the small and medium businesses of Alberta have been the most pessimistic concerning future performance, while Newfound Land is the most optimistic. These results were posted in the Canadian Federation of Independent Business barometer. Although the overall optimism percentage has gone up, it is still far below the historical average. This lack of optimism is backed up by the fact that only 20% of businesses are financially doing better than they did a year ago.

http://www.financialpost.com/most-popular/story.html?id=1427430

With much less cash flow around the world due to the market failures in the US, small businesses should most definitely on the look out for how much to supply of a product, in comparison to the demand for it. This means the operating activities of a business' cash flow should be much more monitered, because chances are, demand will be lower, which should be counteracted through minimizing the amount of purchased inventory and expenses used. For most businesses in Canada, the indirect approach of recording the cashflow in the cashflow statement, rather than the direct approach.

Although Canada is not in as bad of a financial situation as the US is in due to the conservative and high regulatory banking system, there should still be no room for unneccesary spending from small businesses. At this point in time, it would not be the best of interests for anyone to start a business. With over 80% of businesses doing worse than they did a year ago, consumer demand is much too low to make a good profit through this recessionary period. For those who already own a business, not all is bad; with the interest rates for bank loans and credit card fees being lowered, spending is not a costly as it was months ago.

Econ Ch7 Retailers' pain in the cards

With the recent recession, many small and large businesses across North America have gone bankrupt. One of the smaller reasons for this is because of the excess usages of credit cards by businesses, and the additional fees that come along with them. Due to this, Senate and Commons have decided to probe credit card fees, in order to save small business from unnecessary expenses. Although very convenient, credit cards have a 2% fee, which has slowly gone higher in recent months, because of extra offerings for users. This will definitely alleviate some pressure from owners.

http://www.vancouversun.com/business/fp/story.html?id=1393636

There are many forms of payment: cash, cheque, and of course, credit. With a lowering of credit card fees, businesses will be more willing to use their cards, rather than be afraid of extra costs. In turn, this would help the cash in and out flows around Canada, with more spending across the board; moreover, this would benefit the unemployment issues currently, with more spending, no matter what it is spent on.

I believe this is a good plan by the Senate and Commons. Although credit card fees are not the biggest problem in this recessionary period, it is a problem none the less. This will hopefully increase consumer spending in Canada, which would ultimately decrease unemployment. However, one of the downfalls to this plan is that revenue made by card companies will drop. Even with more and more people using credit cards, the credit card companies would not make as much, without the original 2% fee. All in all, this is a great way to take the heat off of small business owners, looking to use their credit cards.