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.
Sunday, April 26, 2009
Tuesday, April 7, 2009
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.
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.
Friday, April 3, 2009
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.
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.
Monday, March 9, 2009
Econ Ch6 Carney May Cut Canada Interest Rate to Record 0.5% as GDP Drops
With the economy the way it is, many companies and businesses are not only doing what it takes to survive this recessionary quarter, but also to do what it takes to help keep us from a recession. It was reported on March 3, 2009 The Bank of Canada has slashed their 1% interest rate to an all-time low of 0.5%. This cut in the interest rate was decided upon by the Bank of Canada governor Mark Carney, which was only two days before the European Central Bank and Bank of England were going to cut to new lows as well.
http://www.bloomberg.com/apps/news?pid=20601082&sid=ay1nAkWkn47M&refer=canada
Because the unemployment rate is high, spending among consumers is very low. By lowering the interest rate, this would hopefully increase loans given, and give people more of a reason, which would ultimately increase spending, because in the end, the way to get out of this recession, ironically, is to spend. This is part of the monetary policy, whereby this will eventually be implemented among chartered banks all across Canada. Another reason for this interest rate would be the hopes of the money being loaned to be used to invest in businesses; this would help to slow down the unemployment rate, because there is more money in businesses to be expended.
Although I feel this plan is overall a good idea, there are many different ways people may spend this borrowed cash that may cause even more economic problems in the future for Canada. Remember, the whole reason for the US economy in turmoil is because of loaned cash from the government that was unable to be paid back by borrowers, because of bad investments. There will obviously be more changes to be made, but this was a much needed move by the Governments of Europe, England, Canada, and possibly the US.
http://www.bloomberg.com/apps/news?pid=20601082&sid=ay1nAkWkn47M&refer=canada
Because the unemployment rate is high, spending among consumers is very low. By lowering the interest rate, this would hopefully increase loans given, and give people more of a reason, which would ultimately increase spending, because in the end, the way to get out of this recession, ironically, is to spend. This is part of the monetary policy, whereby this will eventually be implemented among chartered banks all across Canada. Another reason for this interest rate would be the hopes of the money being loaned to be used to invest in businesses; this would help to slow down the unemployment rate, because there is more money in businesses to be expended.
Although I feel this plan is overall a good idea, there are many different ways people may spend this borrowed cash that may cause even more economic problems in the future for Canada. Remember, the whole reason for the US economy in turmoil is because of loaned cash from the government that was unable to be paid back by borrowers, because of bad investments. There will obviously be more changes to be made, but this was a much needed move by the Governments of Europe, England, Canada, and possibly the US.
Monday, March 2, 2009
FAC Ch 4: BMO buys AIG's Canadian life insurance unit
It is essential to evolve one’s business; in order to do such a thing; you must make acquisitions that benefit the company. This is the case for BMO financial group, which, on Tuesday January 13th, purchased American International Group for $375 million cash. This purchase is undoubtedly going to help BMO expand financially, and will assist in it being one of the top four largest banks in Canada. According to John Aiken, an analyst at Dundee Securities, this deal was a steal for BMO, as they bought it for less than 1.1 times AIG’s book value, which actually had an average industry valuation of 1.3 times.
http://www.financialpost.com/news-sectors/trading-desk/financials/story.html?id=1171778
By, purchasing AIG, BMO has insured itself more potential of earning revenue in the future. This will give them more diverse selling activities and collections of revenues from customers, now with a $375 million entity in their hands. For the former AIG shareholders, however, this was the complete opposite. Although they had acquired sufficient revenue, it had to be sold, in order to pay off a $60 billion loan from the US government. Because BMO now has two very different sources of income, they may need to have two separate earnings management meanings, so as to run the operation section of the business more accurately.
Although the cost of AIG was quite high, especially when we think of the economy the way it is today, I believe this is a wise decision by the BMO financial group. $375 million is a lot of money, but it the cost of AIG may have been much higher, if not for their $60 billion loan from the US government. This will give BMO a wider range of customers, and more sources for revenue. Even with quite a bit of money already used for the purchase of AIG, with the right selling activities, like proper promotions, much higher revenues will be produced.
http://www.financialpost.com/news-sectors/trading-desk/financials/story.html?id=1171778
By, purchasing AIG, BMO has insured itself more potential of earning revenue in the future. This will give them more diverse selling activities and collections of revenues from customers, now with a $375 million entity in their hands. For the former AIG shareholders, however, this was the complete opposite. Although they had acquired sufficient revenue, it had to be sold, in order to pay off a $60 billion loan from the US government. Because BMO now has two very different sources of income, they may need to have two separate earnings management meanings, so as to run the operation section of the business more accurately.
Although the cost of AIG was quite high, especially when we think of the economy the way it is today, I believe this is a wise decision by the BMO financial group. $375 million is a lot of money, but it the cost of AIG may have been much higher, if not for their $60 billion loan from the US government. This will give BMO a wider range of customers, and more sources for revenue. Even with quite a bit of money already used for the purchase of AIG, with the right selling activities, like proper promotions, much higher revenues will be produced.
Thursday, February 26, 2009
Economics Ch5: Canada Lost 129,000 Jobs in January: Statscan
With the bad economic conditions we are currently under in North America, job losses are at an all time high, seeing unemployment numbers growing to be more than those of the early 1990's and 80's recessions. The unemployment rate increased from 6.6% to 7.2% in the month of January, which is about 129,000 lost jobs, totalling over 213,000 since October of 2008. This number has already surpassed the previous expectations by economists of 44,000 lost jobs, and who knows when this trend will slow down. BMO economists predict that by the end of 2009, the unemployment rate will have broken through the 8% barrier.
http://www.cbc.ca/money/story/2009/02/06/januaryjobs.html
These rates were obtained through the Labour Force Survey, which takes the number of unemployed workers in Canada, and divides the number of the labour force. Although some may see this unemployment incline as nothing more than a temporary issue, it has and will affect the many markets in North America. Consumer confidence and spending will be much lower, as potential customers would not want to spend their little amounts of cash on unnecessary products. This, in return, has and will continue to cause a very low cash flowed- quarter for most markets.
With the demand for workers getting lower and lower, there is bound to be some more lay offs to come. For those who own their own business, it is important to realize that because unemployment is high, products/ services being sold will be much lower in demand, equalling a very difficult quarter of operation for businesses. When it comes to working citizens, alternative jobs should be thought of, because job losses are at a very high rate, and to be more prepared for a lay off, it’s good to look at other options for your career. At this point in time, no single person is at an advantage, and struggle is as high as it can be.
http://www.cbc.ca/money/story/2009/02/06/januaryjobs.html
These rates were obtained through the Labour Force Survey, which takes the number of unemployed workers in Canada, and divides the number of the labour force. Although some may see this unemployment incline as nothing more than a temporary issue, it has and will affect the many markets in North America. Consumer confidence and spending will be much lower, as potential customers would not want to spend their little amounts of cash on unnecessary products. This, in return, has and will continue to cause a very low cash flowed- quarter for most markets.
With the demand for workers getting lower and lower, there is bound to be some more lay offs to come. For those who own their own business, it is important to realize that because unemployment is high, products/ services being sold will be much lower in demand, equalling a very difficult quarter of operation for businesses. When it comes to working citizens, alternative jobs should be thought of, because job losses are at a very high rate, and to be more prepared for a lay off, it’s good to look at other options for your career. At this point in time, no single person is at an advantage, and struggle is as high as it can be.
Tuesday, February 3, 2009
Economics 12- Article: N.B. Government Charts Plan with Deep Corporate Tax Cuts
With the economic troubles, some of Canada’s provincial governments have taken action on cutting certain taxes, and making an easier lifestyle for their citizens. One of these provinces is New brunswick. The government plans to cut corporate income tax to single digits, which would give them the lowest corporate tax level in Canada. A flat 10% income tax has been recommended by the Select Committee of Tax Reform, which would begin in 2009, and fully shape up to its full potential by 2012. With this, New Brunswick would have one of the best investment climates in Canada, claims Niels Veldhuis, the director of fiscal studies at the Fraser Institute.
The big picture here is taxes. With a decrease in income taxes from a non flat tax of a maximum of 18% to a flat tax of 10%, spreading the wealth among the province would be of major concern. Although this new tax would help out many working-class citizens in NB and increase the financial position of the province among Canada, a lot of people in need of extra health care may find it troubling that the lack of taxes paid by much wealthier people may not be able to cover their healthcare costs, as they once did. This system has been used by the US for years, and clearly, has not worked. There is a huge gap between the rich and the poor now, because the main goal of the Republican government in the past has been to keep taxes fairly low, which helped the rich get richer, but made the poor helpless in their financial needs. With the help of Barack Obama as president, their tax rates will soon become much more progressive, mirroring most of the provinces in Canada.
This new plan by NB, I believe, will not be beneficial to the province in the long run. Even though it will help out the province through this harsh economic time, government funds will be much lower, by 2011/2012. These funds could be used for better healthcare, funding for less fortunate families, and rebuilding certain areas in the province that need it. I believe the entire country should stick to one system only, which is progressional tax. Although I do not enjoy the thought of paying higher tax rates as income goes up, this system has been implemented for many years, and has been working since. So, why change a good thing?
http://www.cbc.ca/money/story/2008/12/17/nb-tax-reform.html
The big picture here is taxes. With a decrease in income taxes from a non flat tax of a maximum of 18% to a flat tax of 10%, spreading the wealth among the province would be of major concern. Although this new tax would help out many working-class citizens in NB and increase the financial position of the province among Canada, a lot of people in need of extra health care may find it troubling that the lack of taxes paid by much wealthier people may not be able to cover their healthcare costs, as they once did. This system has been used by the US for years, and clearly, has not worked. There is a huge gap between the rich and the poor now, because the main goal of the Republican government in the past has been to keep taxes fairly low, which helped the rich get richer, but made the poor helpless in their financial needs. With the help of Barack Obama as president, their tax rates will soon become much more progressive, mirroring most of the provinces in Canada.
This new plan by NB, I believe, will not be beneficial to the province in the long run. Even though it will help out the province through this harsh economic time, government funds will be much lower, by 2011/2012. These funds could be used for better healthcare, funding for less fortunate families, and rebuilding certain areas in the province that need it. I believe the entire country should stick to one system only, which is progressional tax. Although I do not enjoy the thought of paying higher tax rates as income goes up, this system has been implemented for many years, and has been working since. So, why change a good thing?
http://www.cbc.ca/money/story/2008/12/17/nb-tax-reform.html
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