THUNDER BAY – The summer has not been kind to the markets as economic worries loom over pending debt crisis across the globe. Domestically Canada is affected even though we have slightly diversified away from our largest trading partner, the US, over the years to mitigate risk.
Most of us are aware, though some care not to admit, the private sector supports or props up the public sector. Since 2008 the private sector has taken its lumps while the public sector has unsustainably chugged along the path to increase our public debt and jeopardize our financial flexibility into the future.
On a micro economic level, even families have begun spending much the same way as Government.
We have seen household debt levels rise to 151% of disposable income to maintain our ‘quality of life’. In a recent Maclean’s article, the objectives of Government programs to stimulate the economy include getting you and I to spend more money by lowering the interest rates and investing in our homes, but these policies take away prudent values Canadian’s built upon for years; which is saving for a rainy day or retirement.
With rates well below historical averages, Canadians are losing up to $40 billion every year in interest income from saving, especially those on fixed incomes.
In 1980, the personal saving rate peaked at above 20% and was around 13% in 1995. Fast forward today it stands at just 4.1%. With the markets in the tank, taxable GIC’s offering 2% interest pacing below 2.7% inflation, tax-free savings accounts with no interest to be had not living up to their billing no wonder people are spending like mad because their money does not have any vehicles to create future wealth like in the past.
In my opinion, Government acts in the best interest of its citizens so as a saver you might be the minority and will lose in a popular vote so you may as well invest in yourself to create future wealth as Government’s will be unable to raise interest rates without bankrupting the majority of families.
With many people jumping on the irresponsible spending bandwagon including Government officials, how can we ever raise interest rates? Is this type of careless spending the new normal?
Eventually our nation will be personally tapped out in debt and if we don’t raise the interest rates even the savers will be in trouble as inflation will lap them in the race to economic freedom. There are two ways in which to escape this crisis and the first is to accept a lower standard of living with higher tax rates.
Many believe that the post baby-boomer era will usher in a lower overall quality of life that we must all adapt to. The other way we can prevent ourselves from becoming a 3rd world country over time is to create wealth including making each person more valuable per hour to raise our income levels. Increasing production will not be the key, seeing as how the largest population with the most income will have come and gone.
The best way to do this is to create innovative new to the World products with a service component to continuously bring in revenues. In addition, these new offerings will require knowledge economy workers to work on complex projects whose skill set cannot be easily replaced by lower wage overseas employees.
It’s interesting how ideas and knowledge cost nothing to ship, but are going to be our most valuable commodity. With nowhere else to place your money, talented people out of work, there is no better time to initiate an innovative business to create wealth to sustain the quality of life for future generations. Your money is making negative value in the bank, get out there and make it work by innovating or investing in innovators.
The Innovation Centre acts as a pivotal player in growing Northwestern Ontario’s innovation capacity. We offer support to innovative entrepreneurs, businesses, and community projects in the region of Northwestern Ontario. In addition, the Centre seeks out new approaches to improve, enhance and invigorate a commercialization system in our region. By encouraging ongoing cooperation between business, education and government, the Centre is a driving force to improve economic vitality.