A Money Coach in Canada

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Today’s guest post is by Franklin Roosevelt.

He took office in 1933, as the great depression sank to its depth.  Here is his words to the American people in his inaugural address.   See if they don’t sound remarkably like words we need to hear today:

I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now…

…Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency.

There are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.

Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first consideration, upon the interdependence of the various elements in all parts of the United States—a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

In the field of world policy I would dedicate this Nation to the policy of the good neighbor—the neighbor who resolutely respects himself and, because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

We face the arduous days that lie before us in the warm courage of the national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.

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photo credit: Bast

I bet some of you have been in situations, work and otherwise, where the hard questions weren’t asked.   Where, out of fear of reprisal, consequences or even simply not wanting to appear dumb or the odd person out, no one spoke up or asked frank questions.   The elephant in the room – perceived or not- continued to munch away contentedly, unreferenced.  Here’s how this can play out:

Today the US Federal reserve had to bail out yet another financial company – AIG – to prevent an shattering impact not only on the US economy, but the global economy.  This means the American public is now an 80% shareholder of AIG (how ironic!  The US may become socialist, yet!).

This isn’t hyperbole:  we are at real risk of an economic shakedown the likes of which none of us have seen.   Follow the path:

1.  Lenders offer mortgages to people who did not have the means to keep up the mortgages.

2. Those lousy mortgages got bundled up with other financial  products and sold to investment firms/banks as packages.

3. The truth will out, and the mortgages started to default.

4. Because the mortgages were bundled, it took a while for anyone to realize they had a lousy package.

5. When  the horrible truth started to dawn,  and banks/firms realized they held a lot of lousy mortgages, they were unwilling to continue lending money to anyone but super-stars (if even them) with top-tier credit.

6.  This means your average decent joe can’t get a loan … to buy a home … to invest in a business … and the economy starts to slow.

7.  The US gov’t tries to encourage spending by giving away cash to everyone.   Central banks cut interest rates to encourage people to at least TRY to borrow.

8.  And meanwhile, stalwart companies like Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers and AIG get sucked under.

And as people are starting to bitterly remark, it’s your average person who is stuck holding the bag.

What does this have to do with Asking Hard Questions?

Well, a lot of people didn’t ask hard questions in the process above.

  • Which product managers did not ask whether 40-year, 0% interest etc. mortgages should be given?
  • Which mortgage brokers did not ask whether they should approve a mortgage to people clearly incapable of handling the payments?
  • Which investment dealers did not ask exactly what was inside the bundles they bought?
  • Which investment advisors also did not ask, before selling them to investors?
  •  Which governments, happy with laissez-faire did not intervene?

Well, the ones who didn’t were the ones probably happy to take the commissions and fatten their wallets.

It’s easy to be judgmental.  The fact is, we, in our little lives in our little spheres, don’t ask questions either.

I vote we start asking.  We start pressing even when it feels awkward.  Who knows — we might just save the world.

First, here are some cold facts.  Next, we’ll go into the implications.  REMEMBER, I am NOT A FINANCIAL PLANNER.  I’m simply speaking here as your average joe-ette Cdn making sense of things on her own.

The facts:

Lehman Brothers, a pillar investment firm in the US, declared bankruptsy yesterday. The filing is for $639 Billion.  The firm has been in business since 1840.  (Not 1940.   1840.)

Merrill Lynch was also in such dire financial straights that they hastily put together a plan over the weekend, allowing Bank of America to buy them out for $50,000,000,000.00.

And last, AIG (some of you may recognize the name from your mutual funds)  which started the year with a share price of $56.45  has been steadily falling, and took a nose-dive over the weekend to end up in the $5 range. Why did AIG tumble?  Well if I’m understanding this correctly (and I’m open to correction here!), they tumbled because they insured – and may themselves been tangled up in? – companies like the ones above who invested in those nasty mortgages — the ones people are defaulting on.

So.  What does this mean to you fellow Canadians?

Well for one thing, if you have a mutual fund/stock portfolio containing shares in the Big Banks, you may take a hit depending on how much the bank was exposed to this (ie. had invested in the above companies in any way).  Similarly, SunLife Financial is going to be forced to write down $334Million.  (“Write Down” essentially means, declare on the books that their worth has dropped by that much.   Sort of like, if your house price plummeted, your net worth would also go down).

For another thing, interest rates may get cut again (this keeps money moving in the economy) at a time we might be tempted to hunker down.

Beyond that, hard to say. But here’s something interesting:  Royal Bank of Scotland predicted this very thing would happen, pretty much right now.

If ever there were a time to read the financial pages, it’s now.  These are absolutely fascinating days, even for someone who’s a money coach, not an economist or a financial planner.

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Last spring I listened to Nobel Peace Prize winner Muhammad Yunus describe how micro-credit lending is helping to eradicate poverty in Bangladesh.  You may have heard of Grameen Bank.  I think there was not a dry eye in the room by the time he had finished.

Well, Vancity did it again:  took a great idea and brought it home to Canada.  Not only that, but they’ve created a community site where people can share resources and ideas: www.microfinance.ca

There are so many creative, life-giving ways we can structure ourselves economically. Props to Vancity for this.

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