In a nutshell, why our economy sucks

cannuck · January 12, 2016

The economy will be geared to the rich as long as there are rich people. It would be that way even if there were no politicians and no bureaucrats.

We all get along (right now) in Canada because we can rape the phenomenal natural resources and rack up totally unsustainable debt to fund our cozy lifestyle. If we don't learn how to create wealth fairly soon, that will change.

The rich keep getting richer because the we (through government that is there to make and enforce rules in OUR interest) is able to follow the US example and give speculative gain a free ride on the tax system. Thus, the rise (from the ashes of 1929) of Casino Captialism. Think about it: if you are going to run a business that is actually DOING something to create wealth, you will be a hero if you can pay a 10% dividend, as you must compete to be successful. If you merely gamble on the outcome, you can make 10x rather than 0.1x on your money at risk. So, where to you think a greedy bank or individual wants to put his or her money? The strongest encouragement and endorsement by rulemakers is you can do so without a big tax bite, whereas productive business gets it up the hoop.

Want a daily example? Residential real estate. We think nothing about paying a half million dollars for what is justifiably maybe a $100k non-revenue asset. And we can trade into that speculative gain tax free. This in not just about the rich, but about the mindless masses who think they are going to be rich without doing any work. Paying the cost of big city residential real estate means that the second person in the family will spend their lives working to pay child care and mortgage - and kids will be raised by strangers. Just to pay for something there was no need to pay in the first place. Take away the tax free ride and watch real estate values fall to something closer to replacement value (as it should be). We laugh at the Yanks screwing people over for sick care, but then line up at the trough to screw our neighbour over for real estate.

Edited January 12, 2016 by cannuck

Argus · January 12, 2016

The economy will be geared to the rich as long as there are rich people. It would be that way even if there were no politicians and no bureaucrats.

The economy is not geared to the rich. It is geared, or should be geared, towards making the operation of businesses of whatever sort profitable so that they will employ a lot of people, generate a lot of economic activity, and result in a lot of taxes being paid to various levels of government.

Argus · January 12, 2016

The rich keep getting richer because the we (through government that is there to make and enforce rules in OUR interest) is able to follow the US example and give speculative gain a free ride on the tax system.

There is no evidence to support this. Several reports have shown that income inequality peaked in 2006 and has been in decline since then.

overthere · January 12, 2016

Want a daily example? Residential real estate. We think nothing about paying a half million dollars for what is justifiably maybe a $100k non-revenue asset. And we can trade into that speculative gain tax free. This in not just about the rich, but about the mindless masses who think they are going to be rich without doing any work. Paying the cost of big city residential real estate means that the second person in the family will spend their lives working to pay child care and mortgage - and kids will be raised by strangers. Just to pay for something there was no need to pay in the first place. Take away the tax free ride and watch real estate values fall to something closer to replacement value (as it should be). We laugh at the Yanks screwing people over for sick care, but then line up at the trough to screw our neighbour over for real estate.

Find another example.

Real estate prices in Canada are very regional. The costs are extremely high in Vancouver or Toronto, as compared to income. Yet in cities like Calgary and Edmonton housing is much more affordable- not just in actual dollars but in % of gross income. It is a reason people have flocked there in hordes. Not only can they get a job, they can and do afford to buy a house that is not a crushing debt.

bush_cheney2004 · January 12, 2016

...The rich keep getting richer because the we (through government that is there to make and enforce rules in OUR interest) is able to follow the US example and give speculative gain a free ride on the tax system.

Nope....has nothing to do with the U.S. or "free ride" on taxes. Canadian policies are explicitly different lest they be seen as "American style".

overthere · January 12, 2016

This is the actual root causes of the disasters you mentioned through history.

No. your beloved communism has failed because it ignores the reality of humanity, which is that we are not created equal. We are pack/tribal animals, and your system simply fails to acknowledge that fact.

You are a big proponent of eating the rich/ elevating the poor, which of course means we'd all be in the middle in every regard. .Nice theory, nobody has ever made it work on any large scale in the history of our species.. Best of luck with it.

cannuck · January 13, 2016

Find another example.

Real estate prices in Canada are very regional. The costs are extremely high in Vancouver or Toronto, as compared to income. Yet in cities like Calgary and Edmonton housing is much more affordable- not just in actual dollars but in % of gross income. It is a reason people have flocked there in hordes. Not only can they get a job, they can and do afford to buy a house that is not a crushing debt.

People flocked to Edmonton and Calgary because there was work there. They are trying to flock off but since the NDP got elected and oil crashed you can not sell a house - because due to the ridiculous over price ($500k is a nice starter home) you can't sell what you have. Take away the free ride on the taxpayer for speculative gain that the price goes back to replacement.

I can tell you are a realtor.

ReeferMadness · January 13, 2016

The economy is not geared to the rich. It is geared, or should be geared, towards making the operation of businesses of whatever sort profitable so that they will employ a lot of people, generate a lot of economic activity, and result in a lot of taxes being paid to various levels of government.

It's geared to capturing money and you can't get money from poor people. So, yes, it is geared to the rich.

overthere · January 13, 2016

People flocked to Edmonton and Calgary because there was work there. They are trying to flock off but since the NDP got elected and oil crashed you can not sell a house - because due to the ridiculous over price ($500k is a nice starter home) you can't sell what you have. Take away the free ride on the taxpayer for speculative gain that the price goes back to replacement.

I can tell you are a realtor.

Not a realtor, but I sure as s*** know some stuff about real estate.

I see you've been reading the baloney in the media. Calgary has been hit harder than Edmonton so far, another example of regionality of markets. Their prices have been quite a bit higher in Calgary(about $530k) than Edmnonton (about $430k) for a long time. Prices have dropped about 3% overall from a year ago.

\The statement you cannot sell a house is rubbish. It is harder indeed to sell homes in high price ranges, but average homes do sell. Very expensive homes are harder to sell, but they always are harder.

And my premise that you cannot apply the 'vastly overpriced, overheated' meme to Alberta cities, houses are nowhere near as expensive as they are in Toronto or Montreal. And disposable income is higher in AB than either of those places.

Smallc · January 13, 2016

Toronto or Vancouver, I would think you mean. Montreal is not in nearly the same price range.

Argus · January 14, 2016

It's geared to capturing money and you can't get money from poor people. So, yes, it is geared to the rich.

It's geared to creating and sustaining an environment in which business flourishes or there will be no rich to tax.

Hal 9000 · January 14, 2016

Any economy will suck without outside money streaming in, be it municipal, provincial or federal. Money cannot just keep going in circle, it will inevitably be siphoned off and the community will get poorer and poorer - especially in todays world. That's what we see when a mill or mine closes in a community and what were seeing happen in Alberta with the oil business. If outside money isn't coming it, then surely money is trickling out.

hitops · January 15, 2016

I'm not the one who applied the model. I'm just trying to imagine why the normal order of a beehive or a modern human civilization can be expected to be sustained without chaos breaking out in the face of unending economic disparity, shrinking resources, fewer opportunities and a growing population. Above all this in our society however is the ridiculous expectations that everyone else get by on less so the rich can keep on getting richer.

This is the actual root causes of the disasters you mentioned through history.

Uh no the root causes of communism were revolutions against unelected monarchs. Too bad the people got something even worse, exchanging one tyrant for an even worse one.

No it's not exactly why at all. You forget that social benefits are just as much for the benefit of the rich who don't do themselves any favours by getting all uppity because the help won't get with the program and work harder for less benefit, shittier environmental standards and a general race to the bottom with people who are even more desperate.

Speaking of analogies in the real world, nothing will get us on the track to to the shrinking water-hole and the meaner animals who'll be circling it faster than the rich not smartening up, getting with the program and allowing more wealth to trickle down faster...and a lot faster.

The rich will just look fatter and tastier the more they resist.

Social benefits can be described as benefiting anyone you want, but the rich pay far, far more in contributions than they ever use in social benefits, obviously. Rich people are the lowest users of social benefits.

Instead of a race to the bottom, we get a race to export all our jobs because so few are competitive.

Big Guy · January 15, 2016

I am surprised how pessimistic and negative people can be about the state of our country. I hear people complain that their investments are not yielding expected dividends, the high cost of taking vacations and the rising cost of food.

I believe that we are living in one of the greatest, safest and most stable countries in the world. There is every opportunity to earn extra money if you need it, you will not die because you cannot afford the health or drug costs and you have the lawful right to publicly criticize your government, other races and other religions.

Freedom plus guaranteed survival - does it get any better?

eyeball · January 15, 2016

I am surprised how pessimistic and negative people can be about the state of our country.

Sorry for the cliche but, "It's the economy...."

Freedom plus guaranteed survival - does it get any better?

I'd feel better if I owned the westcoast shrimp quota.

hitops · January 17, 2016

I'd feel better if I owned the westcoast shrimp quota.

That government-created cartel is a perfect example of how government intervention does not = better.

The more rules we add on big corps or wealthy people, the more the smaller corps or less wealthy people have to play by those rules as well. The result - the big guys use their accountants and lawyers (that they already have, incurring no extra costs) to deal easily with the regime, while the smaller guys suffer because the smaller business owner who is already owner/manager/cleaup crew/driver/merchandiser/customer service rep does not have time to also become a crack accountant and lawyer, and cannot afford to hire them.

The thing that I believe a good 60-70% of our population (including many here) does not understand about adding more regs, taxing the rich, trying to redistribute, etc, is that just because a chunk of the population might be brainless lemmings who accept whatever direction they are pushed in, does not mean everyone is. They assume (just like Trudeau) that if you just turn the tax dial, nothing else changes and the money rolls in. But lots changes. High-earning professionals and the rich did not get there because a magic fairy bestowed it upon them. They are smart, and know what they are doing. They change their habits, more their assets into different vehicles, diversify in various ways, or just defer income and wait it out until a more sensible government. There is no legislation that will turn talented, intelligent, innovative, creative and/or hard working people into being brainless lemmings who just hand you the fruits of their labor. Folks on the left really just don't see that.

Edited January 18, 2016 by hitops

Derek 2.0 · January 17, 2016

They assume (just like Trudeau) that if you just turn the tax dial, nothing else changes and the money rolls in.

Exactly, though you can't fault Trudeau for the dive in oil prices, you can look to policies enacted (and proposed) both at the Federal and Provincial level that deter investment in Canada........

They are smart, and know what they are doing. They change their habits, more their assets into different vehicles, diversify in various ways, or just defer income and wait it out until a more sensible government. There is no legislation that will turn talented, intelligent, innovative, creative and/or hard working people into being brainless lemmings who just hand you the fruits of their labor. Folks on the left really just don't see that.

Exactly, and I fully expect our economy to go full dumpster fire before it gets better.......Look at Alberta, and all the laid off O&G workers that will start seeing their EI benefits end in the near future.....which will result in further foreclosures in the Alberta market, which will depress construction, then spill into the other Provinces and their real estate and construction markets etc........won't be pretty.

hitops · January 18, 2016

Exactly, though you can't fault Trudeau for the dive in oil prices, you can look to policies enacted (and proposed) both at the Federal and Provincial level that deter investment in Canada........

Exactly, and I fully expect our economy to go full dumpster fire before it gets better.......Look at Alberta, and all the laid off O&G workers that will start seeing their EI benefits end in the near future.....which will result in further foreclosures in the Alberta market, which will depress construction, then spill into the other Provinces and their real estate and construction markets etc........won't be pretty.

The problem on the left, is that there seems to be this idea that the successful people just sort of 'should' do a whole bunch for poor people, even though those same folks on the left themselves do nothing for others. It is always 'somebody else' who should do it, or 'somebody else's' money that should be used. It is never about letting individuals help others (which they do), it is about coercing 'everybody else' into doing some thing whether it helps others or not.

Edited January 18, 2016 by hitops

Argus · January 20, 2016

The problem on the left, is that there seems to be this idea that the successful people just sort of 'should' do a whole bunch for poor people, even though those same folks on the left themselves do nothing for others. It is always 'somebody else' who should do it, or 'somebody else's' money that should be used. It is never about letting individuals help others (which they do), it is about coercing 'everybody else' into doing some thing whether it helps others or not.

Remember that we are in a state where progressive taxes mean the lower 50% of the population contributes just 4% of income taxes. What do they care if taxes are high? What do they care about high debt? They'll vote for whichever politician promises them the most stuff. That is generally the Liberals.

There is also a disconnect in the general understanding of what drives the economy - or impedes it. People don't look at a lack of activity, and blame it on obstructionism by government bureaucracy, high taxes, or high power rates due to government incompetence. They don't look at a lack of activity in the resource sector and attribute any of it to the insanely complex web of government regulations surrounding any sort of project. Just look at the multi years long process going on in the Energy East case. All this involves is reversing an existing pipeline, but the environmentalists are fighting tooth and nail against it, and government regulations will allow them to hold it up for years. We are importing oil from Saudi Arabia a $30 a barrel while western Canada is exporting oil to the saturated Midwest US market at $15 a barrel. It's insane!

Edited January 20, 2016 by Argus

eyeball · January 21, 2016

The problem on the left, is that there seems to be this idea that blah blah blah

The only problem on the left are conservatives.

Why don't you guy's just the off the planet if you hate it so much?

overthere · January 21, 2016

Toronto or Vancouver, I would think you mean. Montreal is not in nearly the same price range.

You are right, thank you.

overthere · January 21, 2016

I am surprised how pessimistic and negative people can be about the state of our country. I hear people complain that their investments are not yielding expected dividends, the high cost of taking vacations and the rising cost of food.

I believe that we are living in one of the greatest, safest and most stable countries in the world. There is every opportunity to earn extra money if you need it, you will not die because you cannot afford the health or drug costs and you have the lawful right to publicly criticize your government, other races and other religions.

Freedom plus guaranteed survival - does it get any better?

There is a simple reason for my pessimism. It is the lack of leadership both federally and provincially.

I agree that we live in a safe country.

But 'survival' is'guaranteed' only so long as we can afford the cost of the plump and very costly social contract we seem to now take for granted..

And we are losing track of that, in a time of tight money we once again have a great social engineer at the helm. He has pretty much spent the first 3 months travelling the world and talking to people who are largely dsinterested, while the economic wheels are slowly but surely coming off at home. His only fiscal policy that I can detect is borrow and spend. Oh,I forgot that he took a few weeks vacation between bouts of lecturing foreigners about how great Canada is...he is not going to charm Shell, Microsoft or Gerorge Soros into major investments.

The provincial and municipal leadership might be even more disappointing.

eyeball · January 21, 2016

61 people control as much wealth as the bottom half of humanity. The income gap grew wider last year.

That's it in a nutshell.

overthere · January 21, 2016

61 people control as much wealth as the bottom half of humanity. The income gap grew wider last year.

That's it in a nutshell.

What happens when you run out of other peoples money to spend?

Big Guy · January 22, 2016

There is a simple reason for my pessimism. It is the lack of leadership both federally and provincially.

I ...

The provincial and municipal leadership might be even more disappointing.

I just filled up my gas tank and the cost was $5 less than 2 months ago. I just watched a complete change in government of one of the largest countries in the world and not one shot was fired. I can afford all of my needs and many of my wants. I have been on this earth through 4 recessions and am doing very well.

I have lived through the leadership of :

Rt. Hon. John George Diefenbaker, 19 Rt. Hon. Lester Bowles Pearson, Rt. Hon. Pierre Elliott Trudeau, Rt. Hon. Charles Joseph Clark, Rt. Hon. Pierre Elliott Trudeau, Rt. Hon. John Napier Turner, Rt. Hon. Martin Brian Mulroney, Rt. Hon. A. Kim Campbell, Rt. Hon. Jean Joseph Jacques Chrétien, Paul Edgar Philippe Martin and Rt. Hon. Stephen Joseph Harper.

Some I voted for, others I did not. Every one of them were proud and dedicated Canadians who did what they thought best for Canada. I have no doubt the Justin Trudeau will be of the same dedication. Every one of them had people who considered them to be poor leaders and incompetent. They were wrong.

Our economy will get worse and it will get better. Things will happen that will make parts of our economy better and other parts worse. Tomorrow I hope to wake up and thank God that I live in this country and not in any other in the world.

It really does not get better than this.

Edited January 22, 2016 by Big Guy