Post Canadian Election - Credit Crisis Realization

I haven’t posted in a while because like an idiot I forgot to renew the domain name. That has saved a lot of you the pain of ‘nut job right wing’ leanings throughout the Canadian election. Well the election is over, so I will go through some brief opinions.

The biggest winner in this election was the Liberal party. I had predicted this outcome when the election was called, and I was bang on. The Liberals took a huge hit, in the popular vote, and seat totals. Why is this a huge win? Because they can now cut loose the dead weight that is Stephan Dion. 

The NDP picked up some extra votes, by taking a naïve, but rosy looking view of increasing taxes of employers and reducing those of employees. Which I firmly believe would weaken our job market, and hurt the employees. Nice thought, just wouldn’t work.

Couple that with the fear mongering of comparing Harper to Bennett and thus comparing the current credit crisis to the great depression and the NDP picked up a decent share of the vote. The problem with the potential leader of the country taking this sort of action is that its a self fulfilling prophecy; the prime-minister (as Layton wanted to be) saying the economy was going in the crapper rocks investor confidence, they start pulling their money from the markets… and it goes in the crapper! 

Questionable NDP platform appeals to younger Canadians. NDP wins.

Conservatives lose. They didn’t get the majority government they wanted, and they blew a few opportunities. Some missteps alienated Quebec voters, and Harper completely failed to jump on some blatant lies from other parties.

I could not understand why he would not call Dion on some tax comments he made during the debate. At one point Dion said that a family with two children making less than 30k a year (27k I think, but certainly less than 30k), would receive a $2400 tax cut in the liberal plan. This is a blatant lie. A family making less than 30k a year with two children pay exactly $0 in income tax. The only tax that a family with income that low pays is sales tax, which the Liberals wanted to raise.

There were issues to debate and Harper let them slide. There were votes that could have been had there.

I won’t go into the Green Party or the Bloc Quebecois as they are not legitimate parties.

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On another note, the credit crisis in the US is pretty scary. I have heard some murmuring that Harper isn’t the person to handle the crisis. I have heard people say that Harper wants to implement the same Bush style deregulation that caused the crisis in the states.

I find this hard to beleive, since the sub-prime Canadian market is roughly equivalent to the US prime lending. The other thing is that a few months ago new regulations were put in place to prevent exactly this kind of problem.

Mortgage changes followed concerns about housing crunch in Canada

Basically 100% financing is gone, and so is 40 year terms. Doesn’t seem like de-regulation does it.

The other way more interesting tid bit, is that the US credit crisis wasn’t a 100% Bush error. Today a found a New York Times article that really marks the start of the credit crisis. It is about the relaxation of the lending policies by Fanny Mae (who along with Freddie Mac are the leaders of the credit crisis), in order to premote home ownership among visible minorities and low-income consumers. This was done at the urging of the Clinton Administration!

A quote from the article:

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

Here is the full article: Fannie Mae Eases Credit To Aid Mortgage Lending

This is very interesting as I thought that the deregulation and economic crisis was square on Bush’s shoulders. Now the Bush Administration is not guilt free right now, but certainly the start of the crisis lies with the preceding Clinton Administration.

It was a perfect storm of sorts. The Clinton admin wanted to get people to own their own homes, so they relaxed the lending laws. The Bush admin, tries to stay out of private sector affairs, so they didn’t step in to stop the Buy Now/Pay Later style of mortgages. Banks got greedy, and things fall apart. 

Very interesting stuff. Regardless it doesn’t look like Canada is heading down the same path.

 

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Posted by Tyler Posted in: Politics No Comments » October 2008

Afghan Mission Must Change?!?!?

I don’t get it. Stephane Dion the current liberal leader says the mission must change. I don’t get it. I really don’t. I know the optics of war are bad, but this whole movement from a combat role to a rebuilding role makes next to no sense. No in fact it makes no sense. What is the reason for the change in mission directives? Quicker change in Afghanistan? Less casualties to Canadian troops? Better politicking?

Lets be honest. The only answer is the last one. True change in Afghanistan can only happen when the Taliban is not destroying what you have been building. Its really hard to build a school with people shooting at you, or you build a bridge to have it blown up the next day. Regardless this is an old argument. I think more interesting is to reduce the casualties to Canadian soldiers. The challenge with this argument is that Canadian troops are not dying in combat operations. Look through the headlines and find out how Canadian soldiers are dying. Its road side bombs and suicide bombers. These are actions that attack rebuilding operations! So this is not an option… That leaves? Politicking.

If the only reason to change the mission is optics they you might as well take the incredibly naive JackLaytonesque view of war is bad we should go home, peace is good if we aren’t there there will be no war. *sigh*

The real honest to goodness truth is that Canadians need to take two views. Either we continue with the mission, which means fight when we need to fight, build when we are able to build, and give the country a shot. Or we abandon the Afghani people and go home, we say we don’t really care what is happening in their country because it doesn’t directly affect us.

I honestly see pros and cons to both options, but the whole idea of War vs. Peace seems like something you would hear a 4 year old say.

 

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Posted by Tyler Posted in: Everything, Politics No Comments » February 2008

The Joys of Utilities: All Hail Enbridge

It has been an interesting learning experience for me, in terms of freaking out over my first Enbridge bill. A few things I have learned:

• Enbridge reads your gas meter every two months
• The months in between are estimates
• You pay based on a Budget Billing Plan, which is roughly what you should be paying every month, so some months you run a deficit and some months you get a credit

On to my situation. Last night I get my first Enbridge gas bill. $267!!!!!! Not only that, but as I look closer, my gas charges are $334.06, but they have only billed me $210 so I have an out standing bill of $124.06 for next month. This is great. So I look closer, this is based on an estimated bill. What they are estimating it on considering that this is my first month of usage is beyond me…

A little aside here are the numbers:

On Dec 3^rd the meter reading was 508 m³

On Jan ^7th they estimate the meter reading was 1318 m³

This means my usage was 810 m³

I’m thinking to myself, this can’t be right. This morning I read the meter. 838 m³! So my actual usage was only 330 m³, until Jan 16^th not Jan 7^th. To put this in perspective, there daily estimated usage is 23 m³ per day, my actual usage is 7.5 m³. As well according to my estimates, my reading by the next billing date (Feb 11^th) should only be 1033 m³, less than there estimate of what my Jan reading should have been. Sheesh.

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I phone Enbridge:

Them: What is your reading?

Me: 838

Them: That is a big difference

Me: Uh-huh

Them: We will send you a new bill

Me: Ok that works

Them: But because of equal billing the amount you pay won’t change

Me: Come again?

Them: Your gas consumption charge will still be 210, but the actual amount you owe will change

Me: Then why do I want a new bill?

Them: Well I guess since we will read the meter in Feb, it really doesn’t make much sense

Me: No, I guess not?

Them: Well you could opt out of the Equal Billing

Me: Can I get back in after?

Them: I’m not really sure.

Me: When will the equal billing amount be revisited?

Them: It will get adjusted in April.

Me: Fine just leave me in it, I will accumulate a huge credit and leave it at that.

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Editor’s Note: Enbridge has been added to the list.

 

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Posted by Tyler Posted in: Everything, Personal Life, Politics 3 Comments » January 2008

Peaksaver: Big Brother Genius or Big Brother Lazyness?

My mom phoned me a few days ago asking what I thought about the Hydro Ottawa Peaksaver thermostat. She got a note in the mail asking if she wanted to participate in the pilot program. The gist of the idea is that Hydro Ottawa installs a $250 programmable thermostat free, the catch is that Hydro Ottawa would be able to control the thermostat remotely. They say that they will bump up the temp on the hottest days of the year by a maximum of 1-2 degrees which will ease the load during the peak times. You can get further details in this CBC article.

So all this sounds good right? Perhaps, but I have a few questions.

The first thing I want to know is whether you can override it. The answer is yes and no! When I first heard about this program, I had heard that if you didn’t want the temperature increase you could override it. According to the FAQ that isn’t true. You can’t override the increase, but you can mark yourself exempt from an increase on a given day, but you have to call and request the exemption, and you can only do it for 2 days a year. Not exactly would I call convenient.

My next question is whether you can tell that they have taken control of your thermostat. I can’t find an answer to this effect, but they do say that typically, most people do not even notice that the temperature has been raised. That makes it seem to me that they don’t really want the user to know when its being usurped. That bothers me, I would want to know exactly when its being used.

Based on those two issues, I would say at the moment its not worth precipitating.

On another hand I would like to look at whether this is really a good solution for energy concerns. The answer is NO! This is pure lazyness. This is not dealing with the root causes of Ontario’s energy problems.

There are some simple facts that need to be dealt with. First the cut backs made by consumers cause Ontario Hydro to raise rates, to ensure that they made the same amount of money. Great incentive to cut back right? The next issue is that cutting back does not deal with increasing population growth, and energy needs. What needs to be done is not to control peoples lives, but rather to improve the infrastructure to provide Ontario residents with an adequate grid. Controlling users thermostats doesn’t change the fact that Mr. McGuinty promised to do away with the old coal fired power plants, and did… well nothing.

The simple fact, is that this is an easy solution rather than an intelligent solution. Plans need to be put in place to provide incentive for smart usage:

1. Provide users with rate freezes provided that year over year energy usage is decreasing
2. Lower property taxes through the replacement of appliances with more energy efficient models, replacement of old air conditioners with more efficient models, and doing energy conscious renovations to homes -such as new windows-
3. Improve power grid through creation of new nuclear facilities that can support Ontario’s user needs, rather attempting to control users needs
4. Increase costs based on peak times, and make information readily available. Your meter should include readings of current dollar per hour, and price per kilowatt.

Doing one or all these things would encourage smart behavior rather than force acceptable behavior. If you really want to make a difference you need people work for you, rather than being controlled by you. Unless of course you’re a fascist…

***EDIT***

I just thought of another potential gotcha. When they raise the temperature by 1 or 2 degrees, is that an across the board change, or to a certain level. As in do they say, everyone’s temp is going up by 2 degrees or do they say that everyone’s temp is going up to 27?

My concern is as such:

• Person A: 23 -> 25
• Person B: 25 -> 27
• Person C: 27 -> 29
• Person D: 26 -> 28

So my issue would be that if they simply do an across the board raise in temperature then the person who is already being energy conscious is really getting punished. A better algorithm would be to raise all temperatures to 27 or by 2 degrees, whatever is the smaller change. Example:

• Person A: 23 -> 25
• Person B: 25 -> 27
• Person C: 27 -> 27
• Person D: 26 -> 27

Unfortunately I don’t have faith in Hydro Ottawa being that smart. From what I have seen there are still too many unknowns in letting someone else control your utilities.

 

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Posted by Tyler Posted in: Everything, Personal Life, Politics 2 Comments » December 2007

Long Gun Registry Back In The News

The long gone registry is back in the news. The conservatives are once again talking about scrapping it. Forget the fact that I have wanted this gone for some time -I mean criminals are not going to register their guns- the most telling fact in this is the second last paragraph:

Prime Minister Stephen Harper campaigned on a promise to scrap the long-gun registry, which was supposed to cost $2 million when the Liberal government introduced it in 1995. Its cost wound up being roughly $1 billion.

Two million ballooned to one billion?!?!?!?!? What the crap? I mean quite honestly if you paid someone $20,000 to renovate your house, and after the job was finished it had ended up costing $10,000,000 you would be uber pissed. If you weren’t uber pissed then something would be wrong with you. Very wrong with you, Liberal wrong with you…

 

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Posted by Tyler Posted in: Everything, Politics 3 Comments » November 2007

Best Buy Removed From “The List”

I have had an on-going battle with Canadian retailers. For months I have been arguing with Pier1 about a mirror that we wanted that was selling for $200 US and $280 CDN. They gave some stupid reasons in that it costs more to ship stuff from Texas. I asked them what the price was in their Alaskan store. Alright I will admit it, I was asking for trouble; and this was back in the summer before the Canadian dollar had broken parity. People thought I was somewhat crazy, but I insisted that this would become a huge issue the moment that the dollar reached parity.

I was right.

Now the Canadian dollar is hovering around $1.10 US and Canadians are still getting screwed by retailers. Things are still 30% more than the same item in US dollars. Just pick up a book or a magazine and its obvious.

Yet perhaps all that is changing. I am currently planning on a cross border shopping day down to Syracuse. -For the record I don’t think its wrong to hurt the Canadian economy, but rather the best thing to do to smarten up the Canadian retailers that are screwing us.-

Anyway, I am starting to do a bit of research of items that I may like to purchase and the cost differential.  So just out of curiosity I checked on the LCD TV I am longing for both from BestBuy.ca and BestBuy.com. Low and behold, SAME PRICE! This just goes to show that some research may prove worthwhile. That and at least some companies are making an effort.

 

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Posted by Tyler Posted in: Everything, Politics 3 Comments » November 2007

The Perils of Under-Taxation

For quite a while I have been a major proponent for Canada re-evaluating its policy on over taxation. I would still like for Canada to re-evaluate the necessity of dual taxation -paying 30-40% income tax and then be taxed 14% sales tax on the funds that have already been filtered by the government coffers. One of my main sticking points has been the lack of a tax break on mortgage interest. This is only half true as there are ways to be able to right off the interest -such as the Smith Manoeuvre-, which dictates that if the loan is for the purpose of investment then the interest is tax deductible. This is an interesting concept and one that may be worth looking into if you are interested in some taxation savings with corresponding risk. The problem that I have with the general taxation situation is that the status quo -without such loopholes- eliminates any tax break for the hard working middle class. The real status quo.

Canada has a history of allowing loop holes for the rich and handy out freebies (social housing etc) for the lower class, but completely ignoring the middle class which foot the largest portion of the personal income tax bill. So what is the answer? The socialists would say that the answer is to close the loophole on the rich, but that is a naive and ill thought out option. It is simply perpetuating the problem of taxing (read: punishing) those that have attained a degree of success -frequently through hard work. There are several other ideas that may work, the green party suggests that you pay what you burn, not what you earn philosophy, which is wonderful in theory but may be more difficult in practice. Another idea would be to look at some countries that have created a tax break on interest in order to promote intelligent spending such as owning ones on home. The most recent country to employ this sort of technique is the United States in which the interest on mortgages on a primary residence is tax deductible. This has been one of the contributors to the current sub-prime disaster.

Now there are several key factors at play in the sub-prime mortgage catastrophe such as the questionable lending practices, over borrowing, and tax breaks for large interest payments. This has caused me to re-think my personal ideas on writing off mortgage interest; the problem stems from the fact that the situation has turned on its head and is currently rewarding those that have over extended themselves. This falls into a similar category to people having more children to increase their welfare payments, it only perpetuates the problem.

To me a more realistic balance need to be found where the interest from a mortgage should be applicable to a tax credit up to a certain percentage of a persons salary. That is to say that you should be able to write up to 75-100% of the interest of a reasonable sized mortgage, for instance I would consider a reasonable sized mortgage to be a mortgage where the payments fall under 25% of your yearly take home -I think the Canadian banks actually use 40% of your salary for your maximum debt co-efficient- then the interest on the mortgage payments which fall under 25% percent of your yearly salary should be applicable the the tax credit. This would encourage people to make wise decisions when it comes to borrowing and investment. It would also ease the burden on those attempting to the real-estate world. It would also remove any sort of tax break for the dangerous real-estate speculation market (another huge contributor to the Subprime situation).

You could say that the current situation is people being protected from themselves due to the very strict taxation laws in Canada. While this has avoided a situation similar to that in the US mortgage market, there is also many other factors in play, such as Canadians decidedly more conservative lending practices. There are less mortgages that stretch beyond the borrowers means, there are less variable rate mortgages and almost no interest only mortgages. For this intelligent behavior I would like to see a well deserved and similarly intelligent tax break.

 

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Posted by Tyler Posted in: Everything, Politics No Comments » October 2007

The Student Loan Interest Swindle: CRA Style

I just finished paying the Canadian Revenue Agency $111.87. That is the amount I owed them after my mini audit; it was due to improper filing of some student loan interest. I realize now the mistake that was made while filing my taxes; the loan interest that I was using as a tax right off was not registered with the Canadian Student Loans service. That is fair enough, but as I dug a little bit deeper the Canadian tax system left me angered once again.

If you follow this blog enough (currently there are non of you), you will certainly come to know that I come from a single parent home. At the time of my starting university -2000- there was not a great deal of income. My mother had recently accepted a position with Transport Canada and had taken a significant pay cut. Affording the mortgage payments and food was difficult enough, so there wasn’t any extra income to pay for my tuition. I was lucky enough to have wonderful grand-parents who had helped by donating some funds to the cause. Regardless there was still a short fall that I was required to fill through loans and gainful employment.

When I spoke with the OSAP office I soon realized that the household’s meager income was enough to preclude me from obtaining a government loan. I managed my first year with the funds from my grand-parents and was lucky enough to get a very good summer job. Even with that extra income -and my perhaps my childish spending habits- it became apparent that I was going to require some sort of a loan to afford books and tuition for the winter semester. I knew full well that I was not going to get an OSAP loan so I proceeded to the Royal Bank to request a loan with them. I was applied with my mother as a co-signer and was quite surprised when I was declined. I found out that it was due to the fact that my $6,000 student line of credit application would push the household’s threshold above the 40% barrier allowed by the bank -see previous challenge of food and mortgage. The situation was ideal; the family income was too high to be granted OSAP but too low to receive a bank loan, talk about being stuck in no-man’s land. Through a little bit of finagling, and marking my summer income as something that could be considered solid employment, the bank managed to get me the $6,000 line of credit without a co-signer.

Throughout school I carried anywhere from $2,000-6,000 on the line of credit the whole time. The interest payments weren’t that bad since I was getting prime+1%. Over the 3-4 years I had the loan I payed roughly in the neighbourhood of $500 interest. When I finished school I closed the line of credit and opened one for non-students (which was required). While working at March Networks I was making enough that I was looking at paying significant amounts of tax. It was at this point that I used the interest of the student loan interest as a tax credit (17%). So I got about $100 back on the roughly $500 I paid in interest.

When I filed my tax return I had a few other deductions including some used tuition. Shortly after filing I received a letter that I was having my return reviewed and it may take an additional six weeks to have it returned to me, as well I would have to send them my tuition receipts. I sent the tuition receipts promptly as I was looking at a roughly $3000 tax return. After six weeks of hearing nothing I phoned them to find out that my return had been lost in the shuffle and that it would be another 6 weeks to receive my return. It was at this point that I started checking at which point they would be starting to pay me interest. Well it turns out that I would fall just short of the period when their refund was unaccetably late and I would not receive any interest. I really didn’t have any choice but to begrudgingly accept.

Well a month ago I received a letter saying that they (CRA) wanted proof that my loan was registered with the Canadian Student Loan Association -or some such. I was quite sure that since I had to provide RBC with proof of my student status it must be registered as a student loan. When I called RBC they informed me that the loan was not a Canadian Student blahblahblah… Regardless they provided me a letter that confirmed that it was a student only loan and that the loan was closed immediately after the termination of my student status.

I sent the letter knowing full well that CRA was going to discard it and charge me additional tax. Last week I received a letter confirming that my interest was not a tax credit applicable and that I would owe $108 plus $3.87 of interest. Apparently when I make an error I owe interest all the way back to the day that I received my funds, yet when they make an error they owe me no interest.

What all this tells you is that only way to receive the student loan interest tax credit is to receive your loan through the the government themselves. This seems a little fishy. What is even more unnerving is the interest rate being charged on OSAP loans; it is in fact prime + 2.5% if you will risk a floating interest rate, and prime + 5% if you want to lock in your interest rate. The prime + 5% rate would currently be in the range of 11-11.5%, and a comparable bank loan would be 8% -hell even my Visa is giving me a discounted and permanent 10%. The floating rate is a more reasonable prime + 2.5% which I will point out is higher than my RBC student line of credit which was prime + 1%. Now this is a bit misleading since OSAP does give you the benefit of not paying interest while you are in school. But when you figure that most students take a minimum of 10 years paying off student loans I would wager that 14 years of paying 7% is better than 10 years of paying 8.5%. Now it may turn to your favour when your factor in the 17% tax credit but this doesn’t offset the fact that it is not available to all students.

The fact remains that the government is only giving a tax break on student loan only if you are willing to pay their interest rates which are higher than any Canadian bank would give you. Thank you CRA for making things easy as possible for middle class to receive a post-secondary education.

 

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Posted by Tyler Posted in: Everything, Politics 3 Comments » September 2007