Book Review – Break Through:  From the Death of Environmentalism to the Politics of Possibility


In 2007, at the end of the second term of President George W. Bush, America and the world stood at a crossroads.  The sovereign debt crisis and subsequent economic collapse of 2008 and the election of Barak Obama had not yet happened, but the seeds of their impact had already been planted and the cracks in the status quo were already starting to show.  The Kyoto protocol, the U.N.’s sweeping resolution to combat global warming was all but dead, America was mired in a seemingly endless war in Iraq and Osama bin Laden was still on the loose believed to be hiding somewhere in the mountains of Pakistan.

It was against this backdrop that two social scientists the directors of the economic research firm American Environics, Ted Nordhaus & Michael Shellenberger published “Break Through:  From the Death of Environmentalism to the Politics of Possibility”.

The politics of limits took hold in the 1970s and has dominated political debate for over 40 years now.  As the unprecedented economic expansion that marked the post-war era began to wane and the national embarrassment of Vietnam, Watergate, and the middle eastern oil embargo began to sink in politicians stopped talking about expansion and possibilities and started to couch their rhetoric in terms of protectionism and limits. President Jimmy Carter referred to America in the late 1970s as a nation suffering through a collective “malaise”.  On the campaign trail in 1980, then candidate Ronald Reagan seized on Carter’s comments and called for “Morning in America”.  The slogan promoted a sense of hope and possibility underpinned with a conservative “America First”, isolationist, us versus them agenda.

Nearly 40 years later little has changed.  Indeed, in the intervening decade since the publication of “Break Through”, American politics has become even more polarized.  Eight years under President Barak Obama, while strongly progressive in its approach to social issues like LGTBQ rights and health care reform, left many Americans feeling disenfranchised as they perceived a loss of economic opportunity and a deminishing “Christian” identity as a nation.  Economic concerns mounted while globalization continued to send more and more jobs to places like China and Mexico.  And anxiety over immigration and an increasingly post-Christian social landscape continued to take hold.  The time was right for another “Morning in America”, this time in the form of a bright red baseball cap emblazoned with the slogan “Make America Great Again”.  What exactly that meant and what mythical time it sought to return was unclear and left to the imagination of perspective voters.

Nordhaus and Shellenberger where writing at a time before both Obama and Trump but in reading their work today their analysis of the state of American politics and economics seems eerily prophetic.  With the exception of a few bumps on the road, most notably at the end of the 1970s, and between 2008 and 2011, economic expansion since the end of World War Two has continued pretty much unabated.  But as the authors assert, to keep people voting for the same old solutions you need to convince them that things are getting worse, not better.  When you are the party out of power you need to promote insecurity not contentment to get people to think about change.  According to Nordhaus and Shellenberger:

The rise of insecure affluence has caused social values to evolve in two directions simultaneously.  Rising insecurity has fueled the move away from fulfillment values and back toward lower-order, postmaterialist “survival” values, which tend to manifest as status competition, thrill-seeking, and hedonism, all of which have triggered a cultural backlash that conservatives more than liberals, Republicans more than Democrats, have harnessed.  At the same time, rising affluence has fueled a shift, over the past century and a half, away from traditional forms of religious, familial, and political authority and toward greater individuality.

But rising insecurity in the face of affluence is the construct of spin masters, it has little basis in reality.  If you have more money you should also have more security, but the political strategists have mastered the manipulation of fear based on the threat of loss.  Limiting beliefs that your affluence could be taken from you are what have kept people in survival mode and stunted progress even as affluence has continued to increase.

The authors go on and later remind the reader that:

Just as prosperity tends to bring out the best of human nature, poverty and collapse tend to bring out the worst.  Not only are authoritarian values strongest in situations where our basic material and security needs aren’t being met, they also become stronger in societies experiencing economic downturns…  This shift away from fulfillment and toward survival values appears to be occurring in the United States…  Survival values, including fatalism, ecological fatalism, sexism, everyday rage, and the acceptance of violence, are on the rise in the United States.

It’s that line about “authoritarian values” that caught my eye first.  At some point during the 1992 election cycle, the one that saw Bill Clinton gain the presidency I recall seeing a republican commentator refer to the two parties as the “Mommy Party” and the “Daddy Party”.  His point was that Americans tend to vote republican when they feel threatened and need a strong father figure to tell them what to do, they vote democrat after daddy has save them and they feel secure enough to go out and do their own thing.   The underlying point of his argument was that even when America votes democrat, it’s because the republicans are better at giving people the security they ultimately want.

What Nordhaus and Shellenberger propose is a move away from limiting beliefs and toward a more open and progressive society like the one that predominated in the years immediately following the Second World War.  Forget for a minute about the overtly racists, sexists and religiously conservative society of the era and consider more the fact that this was the era that gave rise to the reconstruction of Europe, the construction of the Inter-State Highway System, the expansion of world wide economic markets in places like Japan and the far east, the civil rights movement, and ended by putting a man on the moon.  These were great, progressive achievements that came about through expansionist politics and a belief in possibilities beyond limits.

It beings with an expressing of gratitude for how far we’ve come and an acknowledgment of how much we have yet to do.  As Nordhaus and Shellenberger put it toward the conclusion of their book:

Those of us who are fortunate enough to have met our basic material and postmaterial needs should feel neither guilt nor shame at our wealth, freedom, and privilege, but rather gratitude.  Whereas guilt drives us to deny our wealth, gratitude inspires us to share it.  It is gratitude, not guilt, that will motivate Americans to embrace the aspirations of others to become as wealthy, free, and fortunate as we are.

The politics of possibility begins by embracing human ingenuity and rejecting limiting beliefs.  Progress will come when we all recognized that nostalgia cannot be allowed to limit our longing for greatness.  “Make America Great Again” assumes that our best days are behind us and seeks to return to a mythical time when things were better than the are today.  It seeks to limit immigration because things were better before “those” people lived here.  It seeks to limit personal human rights for minorities, women and homosexuals because things were better before I had to compete for my job or think about what those two guys are doing in the privacy of their own home.  It seeks to limit imports of goods from other countries, block the development of green technology and prevent competition of any kind.

You don’t win by enforcing unfair “rules”, you win by getting better at the game or embracing a completely different set of circumstances.  And you win by changing the game completely.

That’s progress and the politics of possibility.

 

Why I Write This Stuff


The following is a excerpt from the introduction to my first book – Meekonomics, How To Inherit The Earth and Live Life to the Fullest in God’s Economy. 

I’m not sure why, I think it might have something to do with the current political climate around the world, but there has been a recent up tick in interest in my writing.  So I’m going to start republishing portions of my work on a semi-regular basis here.  Questions and Comments are always welcome, and feel free to click the link above to purchase a copy of the book…

I realize that it is an act of sheer hubris to attempt to write a book called Meekonomics. The meek don’t write books do they? Especially Mennonite kids from Southern Ontario with no formal education in either economics or theology.

I grew up in a small town surrounded by family farms and working class individuals. When I graduated from High School I wanted to be a record producer so I spent 19 years in the music business. In my mid 30s I read two books that unlocked my love of economics and theology; The Shock Doctrine by Naomi Klein and Simply Christian by NT Wright.  

There followed nearly 8 years of prayer, research and reflection on two things that have driven me for almost as long as I can remember; God and Money.

Although I have always held a strong faith my relationship with money has been an extreme roller-coaster from the highest of highs to the lowest of lows. I’m an entrepreneur. I started my first business at the ripe old age of the age of 10, I had an opportunity to become a millionaire before my 26th birthday only to fall victim to an unscrupulous fraudster and ended up bankrupt at 33.

My drive to understand money and reconcile economics with my faith started to take root in the fall of 2005 not long after I first filed my bankruptcy proposal. What I soon realized is that reconciliation of the God and Money issue is not just a personal question, although personal finance is a big part of it, it’s really required on both a micro and macro-economic scale if our society is to survive.

Call it what you will; estate or retirement planning, investments, pension plans etc. It all comes down to the storing up of treasures on earth just as Jesus warned us not to do.

Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.

The eye is the lamp of the body. If your eyes are good, your whole body will be full of light. But if your eyes are bad, your whole body will be full of darkness. If then the light within you is darkness, how great is that darkness!

No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money. [Matthew 6:19-24]

What you will find in the pages that follow is a journal of sorts. After my bankruptcy I set out to learn all I could about how this whole God and Money thing works. Anyone who has ever gone through something like that knows how devastating it can be. I was wounded, I needed healing and so I used the study of God and Money as the start of my healing process.

As I studied I took notes, those notes became a blog and that blog became this book. Most authors will tell you that they write for a specific audience, my friend Tim Day, author of “God Enters Stage Left” told me he first started writing for his kids as a way to help explain his faith in case he passed away before he had a chance to teach them in person. If I’m being honest I write just for myself, it’s a way to frame my thinking so that I can move forward in life secure and grounded in what I know to be true.

I first published the blog as a way to share what I was learning with my closest friends and family around the world, I never dreamed anyone else would be interested in what I had to say but I soon had over 100 readers on-line encouraging me to go deeper and publish more. The idea for the book came out of that interaction with the on-line community.

Lauren C. Sheil is a serial entrepreneur who has been in business for over 25 years. His latest book “Meekoethics: What Happens When Life Gets Messy and the Rules Aren’t Enough” is available on Amazon.com.

He can be reached at themeekonomicsproject@gmail.com or by calling 613-295-4141.

 

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7 Tips to Recover from a Financial Setback


why-meBad things happen to good people. Overcoming financial challenges – in whatever form – takes dedication, patience and planning.

In life, you will have trouble, that’s a given. This can include losing your job, going through a divorce, or experiencing a serious illness. Then there are all those unexpected expenses life throws at you. A leaky roof, flooded basement, major car repair – any one of these could cost thousand, with no time to waste and room to negotiate.

And to add insult to injury, often times, more than one of these situations occur at once. It’s fairly obvious to think that these challenges often affect your finances – so how do you recover?

Here are seven tips for getting back in track after a financial setback, as recently published in “Solutions for Financial Planning”, a periodical publication from Manulife Financial.

  1. Get Professional Advice – A professional perspective can be invaluable, no matter the size of your problem. An financial advisor can help you assess the impact on both your short-term and long-term plans, adjust your goals, and develop a plan that helps lead to recovery. Getting advice first, will help you avoid making bad decisions like, racking up a large credit card balance that could only serve to prolong your troubles. Your advisor should help you gain perspective, relax a bit and offer constructive solutions to your problem.
  2. Tighten You Budget – Your budget probably has some slack. Regardless of the cause of your troubles, it’s time to eliminate that slack and get your budget back in balance. Take a hard look at your non-essential costs. I encourage all of my clients to play a little game call “Every Dollar Has A Name” in order to find the margin in their budget. Are there free or lower-cost alternatives to the things you do on a regular basis? Borrowing books, magazines and videos from the library, activities in a local park or at a community centre, or the ever popular staycation versus expensive vacation can all help save thousands. You could even take a look at negotiating a better deal on certain products and services without cutting back.
  3. changesExplore Big-Ticket Cost Savings – If things look as if they could have a lasting impact, and a high cost, it may be time to make some significant changes to your lifestyle. Changes that go beyond simple trimming and include some of the biggest line items in your budget. Consider moving to a smaller home a more affordable area and can you make do with one car? Major changes are difficult, but they may be the key to helping protect your future.
  4. Earn Extra Income – Spending less can only go so far, can you bring in more money? Can you sell something of value like art, an antique or a collectible? Maybe you can work more hours or even take a second job. Or course, working more takes time away from other commitments and might increase certain expenses like child care. And don’t forget the tax implications of earning more income. Ask your advisor to help you run all the numbers to ensure your extra income will more than pay for those extra costs.
  5. Talk To Your Mortgage Provider – If you have a mortgage, you may be able negotiate more manageable terms. You could switch from accelerated to more standard payments or if you’ve made lump-sum prepayments in the past, you may qualify for a short-term holiday from payments. It might also be possible to lengthening your mortgage’s amortization and add any payments you’ve missed to your balance. Lastly, if you are close to the renewal date on your mortgage, a full scale consolidation and change of provider may be in order.
  6. Talk To Other Creditors Too – Don’t letting bills slide, call your creditors, explain your situation and ask to lower your interest rate or reduce your payments. Most companies recognize the value of keeping you as a customer long term and are willing to negotiate rather than take a hard line and risk losing your as a customer forever. This can give you the breathing room you need to get through the worst of a setback and help protect your credit rating.
  7. Borrow Sensibly – If you simply can’t find any more savings or increase your piggywaterincome and you’ve run through your savings, check into the lowest-cost sources of borrowing. This can usually take the form of a secured line of credit or the aforementioned consolidation loan. Your advisor can help you identify the best solution for you.

 

Recovery from a financial shock is a journey. It will likely take several months or even years to get back to where you once were. But with a little determination, patience, planning and hard work, it can be done!

As things start to improve, make sure you stick to a streamlined budget and put extra money towards your long term debts. Start building a substantial emergency fund (three to six months of expenses) so you have resources on hand the next time you hit a financial speed bump.

Once you are in a stronger position, with more a bit more margin, look at other ways to help protect yourself from future shocks, such as various forms of personal insurance including, health, dental, critical illness and disability coverage. Start to set some money aside for the future too in one of the many government sponsored tax advantaged savings vehicles like a Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP) or even a Registered Education Savings Plan (RESP).

After enough time has passed and you have recovered emotionally from the stress, take some time to look back and think about what you might have done differently. Hindsight is 20/20 so use it to your advantage. Learn from the experience, without assigning blame and make sure you’re in a stronger financial position in case another difficult situation occurs.

balancingLastly, and I can’t stress this enough, go back to the very first tip and engage the help of professional financial advisor. Strong financial advice means a strong financial future. Households with an advisor are more likely to:

  • Have enough money to live the life they want (61 per cent compared to 31 per cent with no financial plan)
  • Be able to take an annual vacation (74 per cent compared to 44 per cent with no financial plan)
  • Have enough money for splurges (65 per cent compared to 31 per cent with no financial plan)

It doesn’t “just happen.” But it does happen if you have the right plan and support.

Lauren C. Sheil is a serial entrepreneur who has been in business for over 25 years. He has operated a small farm, a recording studio and a music manufacturing plant, and has written 3 books on Economics, Ethics and Spirituality.  He has presented his ideas to business owners and leaders from all over the world. His latest book “Meekoethics: What Happens When Life Gets Messy and the Rules Aren’t Enough” is available on Amazon.com.

Mr. Sheil is currently a Financial Security Advisor and Business Planning Specialist with one of Canada’s premier financial planning organizations.  He brings to his work a passion for people and a desire to teach everyone to live life to the fullest while Eliminating Debt, Building Wealth and Leaving a Legacy.  

He can be reached at themeekonomicsproject@gmail.com or by calling 613-295-4141.

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Under pressure – 3 steps to making things better


Money worries are never far from mind – but did you know they can also affect your health?

Whether it’s a looming deadline at work or a race to get out the door on time, we all get stressed sometimes. But too much stress can be overwhelming – and according to the Canadian Mental Health Association, chronic stress can have an impact on our lives. Being stressed out affects our ability to concentrate and our self-confidence. It can even lead to sleep difficulties, headaches and more frequent illness.

While plenty of things in life may cause us to feel stressed, one of the biggest culprits is money. Before I faced facts and went bankrupt in 2005 I was losing a lot of sleep and it seemed like the headaches would never go away.

And far from just anecdotal, the evidence is strong. According to a national survey by the Financial Planning Standards Council, 42 per cent of Canadians now rank finances as their number-one source of stress. That’s not surprising when you consider how financially stretched we are. As we work to save for retirement and pay for our kids’ education, we’re also dealing with more debt than ever before. As I have noted many times, for the first time in our 147 year history, Canada’s consumer-debt-to-income ratio (total household debt compared to disposable income) topped 163.3 percent in 2014 as we take on debt to pay for homes, cars and vacations.

And these money worries are affecting our health. A recent study but Manulife and Ipso Reid shows that financial stress can take a toll on our mental and physical well-being – and even affect us on the job. Here are a few key findings:

  • 76 per cent of those who report high stress levels say the state of their finances is partly or entirely to blame.
  • Highly stressed individuals are significantly less likely to be motivated to do their best at work or feel they have a healthy work-life balance.
  • Those who are very comfortable with their current financial situation are almost twice as likely to say they are very happy and are 1.5 times more likely to report that they are in good health. They are also more likely to be exercising regularly.

While being in poor financial shape can cause a lot of anxiety, (I know, I’ve been there), the good news is there are ways to help fix it. In fact, making improvements to your financial health can have a positive impact on your personal well-being. If you’re feeling stressed because of money issues, here are three steps you can take to help make things better:

 

  1. Face it. Finding money to contribute to your retirement savings or dealing with a drawer full of unpaid bills can seem like monumental tasks. Even today, over a decade later I struggle with this one, it’s easy to set your bills aside and forget about them, especially if you don’t have the money right now. But if I don’t stay on top of my bills I know that there will be a painful reckoning in the not too distant future. The longer you ignore your financial situation, the worse your stress is likely to get. Facing the issue is the first step towards improving matters and alleviating your stress. Open up to your spouse, your advisor and others who can help you take control of your finances. Once you know what you’re dealing with, you can begin to tackle the issue head-on.
  2. Make a plan. Having a concrete strategy in place, such as a debt repayment plan, can help you feel more positive and in control of your future. I can work with you to assess your goals and put together a step-by-step plan to achieve them. Step one of my six steps to financial freedom is Dominate Debt.
  3. Have fun. Whether it’s a walk in the park or a nice dinner at home, make room for relaxation and fun. Laughter and friendship are excellent stress-busters. Find low-cost or free ways to let off some steam and enjoy life.

Remember: your finances don’t have to drag down your health. If you address your money worries, you might just find you have a lot more to be positive about than you thought. In fact, talking to someone and taking steps towards financial wellness can lead to a happier and healthier you.

Contact us today and start taking control of your finances for a better tomorrow.  Or as I say around here nearly every day, “Take Action Today That Your Future Self Will Thank You For.”

Stop Sharing My Videos! – No really stop it…


My second video in the series running up to the release of the rebooted 6 Steps to Financial Freedom Coaching Program is out.

 

I’m following Jeff Walker’s Product Launch Formula whereby marketers are told to release a series of “teasers” ahead of the official launch of a new product. So far I’ve released two videos in as many weeks. Each time I’ve sent announcements to an email list of about 140 subscribers, posted on twitter to my 3000 plus followers, linked to them on facebook, linkedin and pinterest for about 500 more people and of course blogged about them here.

As a result, according to YouTube I have received a grand total of 0 – count them ZERO views!

(If you go now and look at them the count is actually about 20 views between the two of them but all of those are just me going there to grab the link so that I can tweet it, post it or embed it in emails.)

What gives?

I can understand if you don’t like my videos, or they don’t resonate with where you’re at right now but to have no views at all, after posting to almost 4000 followers across all of my social media accounts? That makes no sense to me.

I’m following all the rules about Social Media Marketing.

  • I’m posting regularly
  • I’m using hashtags
  • And I’m following up on all my retweets and favorites

Actually that last one is the most mind-boggling of all. So far I’ve received about 20 favorites and retweets from people who haven’t even watched the videos themselves! What’s up with that? I even had one guy forward it to a friend with a comment “you should watch this”, how could he know?

There is something very wrong with the way we engage with new products on-line.

Social Media is a relatively new phenomenon when it comes to product marketing. We’ve been taught that the key to a good marketing campaign is the social share, the more people share what you are posting the better. I’m getting shares but the sad fact is sharing is not engagement. In order to sell a product you need people to engage with it, not just say, “hey this looks cool, check it out.”

What’s worse in my case at least, people are saying “check this out” without having checked it out for themselves! How can you endorse something if you haven’t used it? Not only is it killing your credibility it’s damaging my brand in the process!

So, I never thought I’d have to say this but: please stop sharing my videos, unless you’ve actually watched them.

The third and final video in the series will be posted next week. You can watch both of the current ones here – https://youtu.be/olaDR2KhPOE and here – https://youtu.be/FJ8rWYxLTGw

Please watch, then comment, then share if you are so inclined.

For more information on The Meekonomics Project and our newly re-launched 6 Steps to Financial Freedom Coaching Program write to themeekonomicsproject@gmail.com

Re-launch of Financial Coaching Service – Part One


“Back in 2005 I was a financial basket case!”

Coming sometime in the last week of October (exact dates haven’t been worked out yet) I am re-launching the “6 Steps to Financial Freedom – Financial Coaching Program”.

About 18 months ago I wrote a series of posts on this blog called “The 6 Steps to Financial Freedom” where I laid out what I believe are the most important things everyone must do if they hope to gain a life of financial security. Out of that series came the e-booklet “6 Steps to Financial Freedom – The Meekonomists Guide to Getting Out Of Debt, Building Wealth and Leaving a Legacy” and a clear focus on what it is I hope to accomplish with this site, my financial practice and indeed all of my writing.

It was through that blog series that I also began to develop my mission statement.

The Meekonomics Project exists to: Help people reconcile their relationships with God and Money, To Teach people to live Debt Free, Build Wealth and Leave a Legacy.

The animated video above is the first in a series designed to introduce you to the newly revised and re-packaged “6 Steps to Financial Freedom Coaching Program”, go back and watch it now if you haven’t already.

Next week I will release the second video in which I will go into more detail about what each of the 6 Steps are and how you too can live a debt free life while building wealth and planning for a lasting legacy. The following week I will release the final video where I will explain how to join me for some group interactive coaching on-line and possibly become a one-on-one coaching student.

Stay tuned! If you haven’t already done so, please watch the video now and send me a comment either in the comment stream below, on YouTube or directly via email at themeekonomicsproject@gmail.com

I love comments!  I read and respond to each and every one.

And if you would like your own copy of the 6 Steps e-book put, “E-Book Request” in the subject line of your e-mail and I’ll make sure you get a copy within 24 hours.

See you soon – Lauren!

PayDay Lenders – essential service or legalized loan sharks?


paydayloansYou see them on practically every street corner in lower class neighbourhoods across every city in the country. They promise cheque cashing services and “low cost” short term loans to people who fall through the cracks of the traditional banking system, people without bank accounts, new immigrants and social welfare recipients. Come January some will also offer tax preparation for these same, lower middles class “working poor”.

Over the last decade or so they have begun to creep into middle-class neighbourhoods as well with their slick contemporary designed outlets, prepaid credit cards, international wire transfer services and even more enticements to borrow now and pay next week.

Ask anyone who works at one of these outlets and they will tell you that they provide an essential service. They are the only place a lot of people without bank accounts can go to have cheques cashed and receive emergency funds. Most traditional banks will not provide service to people without an account and in order to get a bank account in most cases you must have either a Social Insurance Number, a job, Citizenship or other form of permanent residency status, in some cases all of the above. That puts a lot of people, refugees, new immigrants and social welfare recipients in particular, outside the traditional banking system and in need of financial services. I get that, but the fact of the matter is that these Cheque Cashing services and PayDay lenders don’t make their huge profits from cashing cheques for immigrants; they make their money by charging upwards of 500% annual interest on short term loans to the working poor!

loansharkThere was a time in my life when I fell into their trap. I was living beyond my means in a 1700 square foot town-house that I couldn’t afford but rather than take the necessary steps to reduce my expenses I sought the help of a payday lender. At one point I was playing two different outlets off of one another to the tune of over $700 every two weeks! I even bounced a repayment cheque to one of them and when I finally was able to repay it I was told “that’s okay, you’re one of our best customers”.

Ouch – that was the final straw, I knew at that point that I needed help and even though they thought they were giving me a compliment, I was insulted and never went back.   I shudder to think just how much I really paid interest and what they really thought of me.

Of course they don’t call it interest they call it a “convenience fee” and bury the true interest rate in the fine print. One PayDay Lender I used to deal with advertises “$300 for $20” but let’s take a look at what they really means in terms of the interest rate charged.

According to Ontario law payday loans must be paid in full every two weeks.   That means that the $300 you borrow, plus the $20 is due no more than 14 days from when you took it out. If you roll that over and take out another $300, plus $20 for another two weeks you will have paid $40 in fees on the same principle of $300 in a month, you haven’t actually made any progress on your debt, you’ve just paid the fee. But wait, that $300 for $20 deal is only good for your first loan, after that the actual rate is $100 for $20 so if you roll it over you are now paying $60 every two weeks to keep your $300 principle balance. Keep doing that and over the course of a year you will pay $1460 is “fees” on a principle balance of $300, which is an effective annual interest rate of 438%!

And those are the “reputable” guys, I’m sure you’ve seen their ads on billboards and television with their cute mascot and catchy jingle. They are a national brand owned by Multinational Corporation that trades on the TSX. But there are literally hundreds of other small players in the market with less than stellar reputations to protect. Do you really think these companies honestly believe they are providing an essential service to the working poor? It blows my mind how they can keep a straight face, and tell you that 438% interest is really just a convenience fee and an essential service for unbanked and working poor!

It’s no secret. I hate PayDay Lenders. They are nothing more than legalized loan sharks. We as a society need to find a better way to help the unbanked population. Cheque cashing services for immigrants, refugees and social welfare recipients is one thing but we don’t need to offer short term, high interest loans to anyone.

For more information on how I got out from under the PayDay Lender and my proven system for getting out of debt, building wealth and leaving a legacy – “6 Steps to Financial Freedom” write to: themeekonomicsproject@gmail.com

The Interest Rate Cycle


Long-Term

In 2008 the United States saw the beginning of the worst recession in a generation. It all started when broke people who had been given mortgages at artificially low rates started to default because they couldn’t pay their bills. In response, governments and lending institutions lowered interest rates to stimulate the economy.

It worked but now we have a new problem. People are so obsessed with low interest rates that they have leveraged themselves to the point where even a modest increase in the cost of borrowing will cripple the economy beyond anything we have ever seen before, or at least in more than 3 generations.

Everyone likes to say that interest rates are at an all time low. But that’s not true. The chart above shows the prime lending rate in the United States all the way back to 1790.  The rates in Canada show a similar pattern.

The prime lending rate set by the bank of Canada back in the early spring is 2.85%. Contrary to popular belief that is not the lowest it has ever been. From February of 1944 to December of 1950 the Bank of Canada held the prime lending rate at 1.5%. For almost 6 years at the end of World War II credit was so cheap even an unemployed returning war veteran could afford to buy a house, and that was kind of the point.

My grandfather returned from the war in 1946 and bought a house in Oshawa Ontario for $3000. His mortgage payment was $36 per month. In 1950 interest rates started a steady climb and peaked in 1981 at 14.14%, mortgages at the time were going for an average of 21%.  Thankfully rates have been on a steady decrease ever since.

There are a lot of reasons why interest rates peaked in the early 80s. They rocketed up quickly in the late 70s due to instability in the Middle East, The Cold War, Jimmy Carter, you name it. But the fact of the matter is the rates had been climbing steadily for 25 years before Carter took office. Why was that?

In a word – Risk.

It’s kind of like the Peter Principle. That’s the management theory in which people are selected for jobs based on their past performance, rising through the ranks until they fail.

thepeterprinciple

Once someone fails in a position however it is very difficult to demote them so people tend to stay working at “the level of their incompetence.” If you apply this principle to interest rates people will tend to borrow money until they are no longer able to make the payments. When that happens they default so in order to keep the economy from stalling the government and lending institutions lower the interest rates and encourage more borrowing. But interest rates cannot go to zero so eventually we have to be okay with a few defaults and let the incompetent borrowers feel some pain, so we start raising the rates. As more people default we continue to raise rates so that the rest of us don’t lose our shirts on the money we have lent them through our retirement accounts and stock portfolios.

That’s what started to happen in 1950. The risk of keeping interest rates low started to catch up as too many people who couldn’t afford to borrow money started to mount up too much debt.  It took the next 30 years before we reached the peak when no one could afford to borrow money. Well it’s been another 30 years and here we are, with interest rates hovering back around 2%. What do you think is going to happen next?

I’ve said it before and I’ll say it again.  Get out of debt while you still can so that when rates inevitably begin to rise you will be on the receiving end of the increased returns instead of paying more to keep that house you know you can’t afford.

A Voice Crying In the Wilderness


My dad once told me that the prophets aren’t always guys that hear voices or dream dreams and end every sentence with “thus says the Lord.” A lot of them are just ordinary people with an extra-ordinary ability to extrapolate the future based on history and current events.

I don’t know if I qualify as a prophet but this morning while flipping through social media and email feeds this chart caught my eye and it scared the crap out of me.

debt levels

This chart was prepared by a German economist as part of a presentation he made to international investors last week. He actually dedicated 9 of his 100 plus slides to the sorry state of the Canadian economy. The overarching message to the international investment community contained in those 9 slides, almost 10% of his entire talk, which when you think about it is a huge number for such a small country, “stay away from Canada”.

I consider myself a bit of an amateur economist. I work in personal finance and study behavioural economics for fun. I’m weird. But when I see a chart like that it creeps me out because what it tells me is that Canadians are behaving badly and nobody seems to care.

Last week the Bank of Canada lowered its prime lending rate to 0.75% with all indications being that it will lower the rate again in the spring. They say it’s to encourage businesses to borrow money to spend on expansion and hiring so they can keep the economy moving forward but this is short sited thinking that might create a little near term relief but a lot of long term pain. It’s just bad math. You can’t encourage people to go deeper into debt forever and expect it to drive the economic engine.

Have you ever pure ethanol in an engine? I had a Go-cart when I was a kid. We couldn’t get it to start so I sprayed ethanol in the carburetor. It ran fast and furious for about ten seconds before it conked-out again. That’s what debt fueled growth does to an economy.

Canadian’s debt to income ratio is 164%, (the chart above is a little off), and the bank of Canada just poured ethanol on our economic engine. How much debt do they think we can carry? How high does the ratio have to go before people realize they can’t pay and will be in debt forever? With the current interest rates, if we all stopped borrowing today, just lived on our income and made nothing but minimum payments the average Canadian would be in debt for the next 35 years!

In 2008, at the height of the financial crisis the ratio was 120%. Our American friends got it, made some hard choices and their economy is now booming. Canada went the other way and we are now standing on the verge of a financial crisis of our own that will make 2008 look like a kiddie party.

Here’s the bottom line.

GET OUT OF DEBT NOW!

The interest rates are low to encourage businesses to spend but I’m afraid the temptation will be too great for many consumers and they too will mount up more debt.  Don’t do it, instead consolidate your high interest debt like credit cards onto a lower interest line of credit or roll them into your mortgage and use the cash flow you save to throw at the principle on your debt. These interest rates can’t stay for long, they are simply unsustainable, and when the interest rates go inevitably up and the defaults start happening, our entire economy will collapse. Mark my words.

When that happens, it will be the people with the lowest debt to income ratio who will not only survive, but thrive.

For more information on how to get out of debt, build wealth and leave a legacy write to themeekonomicsproject@gmail.com

My Banker is Nuts


So here’s the story.

I need a new car. The details aren’t important but my car is getting up there in miles and is starting to need some major repairs. The transmission slips when it’s wet or cold and there’s a weird vibration in the front end. So last week when I took it in for some routine maintenance I went up front and talked to the sales team about what it would take to get me into a new(er) vehicle.

I’m not wealthy by any stretch of the imagination. I work hard and I am projecting some solid growth in my business over the next few years but I’m not wealthy. Nevertheless the bank approved me for a monthly payment of $700 on an 84 month term. Think about that for a minute. That’s $8400 a year for 7 years or $58,800. Working backwards, after financing costs that’s almost $40,000 for a guy who barely makes $50,000 a year, when the finance manager at the car dealership told me that I literally laughed in his face. That’s just nuts!

nuts

Financing is function of ratios. Most bankers will tell you that no one should pay more than 35% of their net income servicing debt, mortgages included. Personally I think the real number should be closer to 25% for the average person and as close to zero as possible the lower your income. $8400 a year is 26% of my net income, not to mention the rest of my debt and lifestyle choices. There is simply no way I can afford $700 per month on anything, let alone a depreciating asset like a car. Quite frankly the banker who approved this must be on crack.

Last week it was widely reported that the average Canadian household is 163% in debt. That means that for every dollar we make we owe $1.63. Everyone agrees this is crazy and yet not two days later I get approved for a loan that would throw my budget completely off the rails.

The economy is built on credit. People need to spend money so that others can make money. That’s a given and sometimes we need help and incentives to buy large ticket items. But when we are given the ability to spend beyond our means we are building a house of cards. One minor interest rate shock and the whole thing will come crashing down. We only need to look as far back as 2008 and the United States housing bubble to see what can happen to average people in that event.

At the end of the day I bought a car for about half of what that bank says I can afford and because I hate being in debt I’m going to pay it off about twice as fast as they want me to.  When the economy collapses under the weight of all this ridiculous debt I’ll be debt free again and the bankers who tried to bury me will likely be unemployed.

My advice to anyone considering a major purchase; only you know what your budget can bare, stick to your guns and don’t let the bankers and sales people seduce you into something that you may live to regret.