99 stupid things the government did with your money: Part III

By Jason Kirby, Tamsin McMahon, Rosemary Westwood, Nick Taylor-Vaisey, and Mika Rekai - Wednesday, January 9, 2013 at 10:52 AM - 0 Comments

For taxpayers concerned with out-of-control government spending, 2012 started on a bright enough note. Last January, the Department of National Defence announced it wanted to buy 20,000 custom-printed stress balls for its staff. Once Defence Minister Peter MacKay caught wind of the plan, he quickly cancelled the contract, calling it an “unnecessary expense of taxpayer money.” Noble words, but it was a brief reprieve. As Maclean’s found once again when researching this project, whether it was Ottawa, the provinces, municipalities or the organizations they oversee, governments couldn’t help themselves when it came to doling out cash. What follows is but a fraction of the foolish, wasteful and blatantly stupid ways governments found to spend taxpayers’ money. To uncover this year’s 99 items we pored over press releases and auditor generals’ reports, sifted through proactive disclosure statements and delved into media databases across the country, ferreting out examples of spending that occurred in 2012 or came to light last year. There will be those who take issue with some items on this list, arguing, for instance, that funding rock concerts boosts the economy. But the reality is that at every level of government, we’re in far worse fiscal shape than we were even a year ago, despite all the talk of cutbacks and austerity. And as this list makes clear, those who control the public purse have yet to really change their ways.

Here are the last 33 of the 99 ways the government spent your tax dollars in 2012. (Here’s Part I and Part II)

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Who’s suing whom

By Jason Kirby - Tuesday, January 8, 2013 at 2:00 PM - 0 Comments

British Columbia: A civil lawsuit has been launched against four manufacturers of gas fireplaces alleging their products are “defective and dangerous.” The lawsuit was filed in B.C. Supreme Court by Craig and Charity Cantlie. Their one-year-old son Owen suffered second-degree burns to his right hand when he touched their fireplace’s glass front.

Saskatchewan: Five inmates at Saskatchewan Penitentiary in Prince Albert, serving sentences for murders, rapes and home invasions, are suing the federal government, arguing their detentions are “inflicting extreme stress and nervous shock.” The group, seeking damages of $50,000, cites grievances such as sleep deprivation and a lack of a barber.

Manitoba: In 2011 Rodney McKnight was in a wheelchair inside the Brandon Regional Health Centre when a man jumped from a balcony four stories above and landed on him. The jumper later died, while McKnight claims in a lawsuit filed in December he suffered mental trauma and physical injuries. McKnight claims the hospital failed to make the area safe after a woman fell to her death from the same spot seven months before.

Ontario: Marineland, the Niagara Falls attraction hit by allegations of animal abuse last summer, filed a $1.25-million defamation suit against a former trainer turned critic. The suit alleges Christine Santos, who had worked at Marineland for 12 years before being fired, made false claims to the media about the abuse and neglect of Kiska, an Orca whale, and then refused to retract her comments when confronted by the company.

Quebec: A Montreal wine collector who stored his collection at a facility operated by the Société des Alcools du Québec filed a $1-million suit against the agency alleging it ruined his collection. Robert Chiraz stored 3,000 bottles at the facility in 2009, but the next year he discovered mould and harmful bacteria around the cellar and on the bottles, making them unsaleable. Jason Kirby

99 stupid things the government did with your money: Part II

By Jason Kirby, Tamsin McMahon, Rosemary Westwood, Nick Taylor-Vaisey, and Mika Rekai - Tuesday, January 8, 2013 at 10:38 AM - 0 Comments

For taxpayers concerned with out-of-control government spending, 2012 started on a bright enough note. Last January, the Department of National Defence announced it wanted to buy 20,000 custom-printed stress balls for its staff. Once Defence Minister Peter MacKay caught wind of the plan, he quickly cancelled the contract, calling it an “unnecessary expense of taxpayer money.” Noble words, but it was a brief reprieve. As Maclean’s found once again when researching this project, whether it was Ottawa, the provinces, municipalities or the organizations they oversee, governments couldn’t help themselves when it came to doling out cash. What follows is but a fraction of the foolish, wasteful and blatantly stupid ways governments found to spend taxpayers’ money. To uncover this year’s 99 items we pored over press releases and auditor generals’ reports, sifted through proactive disclosure statements and delved into media databases across the country, ferreting out examples of spending that occurred in 2012 or came to light last year. There will be those who take issue with some items on this list, arguing, for instance, that funding rock concerts boosts the economy. But the reality is that at every level of government, we’re in far worse fiscal shape than we were even a year ago, despite all the talk of cutbacks and austerity. And as this list makes clear, those who control the public purse have yet to really change their ways.

Here are 34 to 66 stupid things on our second annual list of waste that shows spending by all levels of government is still way out of control. Check us out tomorrow to see the last 33 stupid things your government did with your money. (And find 1 to 33 right here.) Continue…

99 stupid things the government did with your money: Part I

By Jason Kirby, Tamsin McMahon, Rosemary Westwood, Nick Taylor-Vaisey, and Mika Rekai - Monday, January 7, 2013 at 12:38 PM - 0 Comments

For taxpayers concerned with out-of-control government spending, 2012 started on a bright enough note. Last January, the Department of National Defence announced it wanted to buy 20,000 custom-printed stress balls for its staff. Once Defence Minister Peter MacKay caught wind of the plan, he quickly cancelled the contract, calling it an “unnecessary expense of taxpayer money.” Noble words, but it was a brief reprieve. As Maclean’s found once again when researching this project, whether it was Ottawa, the provinces, municipalities or the organizations they oversee, governments couldn’t help themselves when it came to doling out cash. What follows is but a fraction of the foolish, wasteful and blatantly stupid ways governments found to spend taxpayers’ money. To uncover this year’s 99 items we pored over press releases and auditor generals’ reports, sifted through proactive disclosure statements and delved into media databases across the country, ferreting out examples of spending that occurred in 2012 or came to light last year. There will be those who take issue with some items on this list, arguing, for instance, that funding rock concerts boosts the economy. But the reality is that at every level of government, we’re in far worse fiscal shape than we were even a year ago, despite all the talk of cutbacks and austerity. And as this list makes clear, those who control the public purse have yet to really change their ways.

Luxury hotels, hemp body cream and subsidized hip-hop concerts: our second annual list of waste shows spending by all levels of government is still out of control. Find 33 of those stupid things below. And check us out tomorrow to see 33 more stupid things your government did with your money. Continue…

Who’s suing whom

By Jason Kirby - Wednesday, November 14, 2012 at 6:40 AM - 0 Comments

British Columbia: A woman in Surrey is suing tech giant Apple Inc., alleging the company’s operating system, iOS4, enabled anyone with “moderate computer knowledge” to track her movements. While the suit by Amanda Ladas doesn’t seek a specific amount, it alleges Apple’s “deceptive acts” entitle anyone who joins the suit to “punitive” damages. Apple has yet to respond.

Alberta: During a rodeo event in Edmonton in 2010, Carol Edith MacKechnie claims she was in the front row when a bull, Rewind, threw its rider and lept into the stands, crushing her. In her $450,000 suit against the Canadian Professional Rodeo Association, MacKechnie, then 53, claims she suffered internal injuries, post-traumatic stress disorder, and an “accelaration” of Alzheimer’s disease. The allegations have yet to be proven.

Ontario: The keyboardist for the band Barenaked Ladies, Kevin Hearn, has sued a Toronto art gallery alleging it sold him a painting by Aboriginal artist Norval Morrisseau, which he believes is a fake. In the suit, Hearn says he became suspicious when “numerous individuals” raised questions about its authenticity. A lawyer for Maslak McLeod Gallery denied the allegation and said it will file a defence.

Quebec: Montreal clothing maker Gildan Activewear has been sued by U.S. giant Fruit of the Loom for trademark infringement. In the lawsuit, Fruit alleges the company removed labels of clothing made by a Fruit subsidiary, and sold it as its own. In a statement Gildan said it’s investigating the label switch, calling it an error and “small glitch.”

Nova Scotia: The family of the man who designed the Bluenose schooner is suing the province for copyright infringement after the launch of a restored replica, the Bluenose II. Descendants of William James Roue, whose design was the basis for the Bluenose in 1921, claim ownership of the design and are seeking compensation and to prevent use of the name Bluenose for the replica.

The ballad of Bob’s bonds

By Jason Kirby - Thursday, August 23, 2012 at 7:00 PM - 0 Comments

In his 1968 song Dear Landlord, Bob Dylan sang, “Please don’t put a price on my soul.” More than four decades later, the investment banking giant Goldman Sachs has not only put a price on Dylan’s soulful songs, but boasts to investors that the 1960s counterculture balladeer offers an attractive 5.25 per cent yield to boot.

Sesac Inc., a company from Nashville that owns the exclusive rights to the public performance of Dylan’s music, is preparing to raise US$300 million through an unusual bond offering. The bonds will be backed by the royalties Sesac gets any time someone performs songs by Dylan, or any of its other clients, including Neil Diamond and Canadian rockers Rush.

With central banks worldwide keeping interest rates at record lows of nearly zero per cent, all in a bid to jump-start the economy, investors are desperate for anything that promises a decent return. The offering, however, is available only to “qualified institutional buyers” with investable assets greater than US$100 million. The Bob Bonds haven’t necessarily struck a chord with the industry. The debt rating agency Standard & Poor’s assigned the bonds a rating just a notch above junk status because of the vagaries of royalty payments.

Econowatch: August 2012

By Jason Kirby - Monday, August 13, 2012 at 10:45 AM - 0 Comments

Bayne Stanley/CP

California likes Facebook. Well, it did when it looked like the social media giant was going to flood government coffers with desperately needed cash. When the state crunched its budget earlier this year, it took for granted that the company’s IPO in May would lead to a tax windfall as Facebook insiders cashed out. The bean counters banked on US$1.9 billion in tax revenue for the state. But then Facebook shares lost nearly half their value after the IPO. Officials now say the state may be out “hundreds of millions of dollars” as a result.

It would seem old habits die hard in the Golden State, where politicians can’t bring themselves to say no to more spending, but don’t have the money to meet those commitments. And so California spends beyond its means, and prays the manna (in this case Facebook riches) will fall from the sky.

There’s a lesson for Canada in all this. Substitute Facebook shares with barrels of oil or containers filled with minerals, and Canadian provincial governments have proven they’re every bit as dependent on wishful windfalls to make ends meet. Back in February, Alberta announced massive spending increases. Officials boasted that a “gusher” of revenue from the oil sands would turn this year’s $886-million provincial deficit into a $5-billion surplus in just two years. But oil prices haven’t co-operated. Amid a commodity sell-off, they fell from US$109 in March to around US$75 in June. Though the price crept back up to US$90, that’s still nearly US$10 shy of what the province wagered it would be this year. The Fraser Institute predicts Alberta’s deficit will rise this year. The province “bet the budget on overly optimistic oil and gas prices.”

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Who’s suing whom

By Jason Kirby - Monday, July 16, 2012 at 2:00 PM - 0 Comments

British Columbia: Residents on Gabriola Island sued a local shooting range, claiming the level of noise from the Gabriola Rod, Gun and Conservation Club is at “war-zone” levels. The amount of money being sought has not been disclosed, but the suit also names the B.C. government, which has a 30-year lease agreement with the club.

Alberta: A Calgary woman is suing a local concert promoter, Bryan Taylor of Concerts North, accusing him of fraud. According to the suit, investor Cheri Nichol sank $716,000 into Concerts North to put on 17 shows, featuring the Sheepdogs, the Doobie Brothers, Chris Isaak and others. Nichol claims the promoter misrepresented the revenues from the shows. Taylor has not filed a statement of defence but filed for bankruptcy protection last month.

Ontario: A group of Elliot Lake residents has filed a class action lawsuit over last month’s collapse of the Algo Mall roof. The $30-million suit names the owner of the mall, its controller Robert Nazarian, the City of Elliot Lake, the Ontario government and an unnamed engineer who approved the structure of the mall just prior to the collapse.

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Studies say: Lifting weights and playing video games help the brain

By Jason Kirby - Monday, May 14, 2012 at 11:35 AM - 0 Comments

British Columbia: Older women who perform physical exercises like lifting weights may be able to slow the onset of dementia, according to researchers at the Univeristy of British Columbia. After studying women aged 70 to 80 who were divided into three exercise groups—balance training, aerobics and resistance training—those in the latter group showed “significant” cognitive improvement.

Alberta: The way consumers respond to good or bad service or products comes down to whether they are pleasure seekers or pain avoiders, according to research from the University of Alberta. Pleasure seekers are hurt more when a product doesn’t work well, but also get more joy out of positive consumer experiences. Pain avoiders, on the other hand, don’t take it so badly when a product or service is poor, but they don’t enjoy good consumer experiences as much, either.

Ontario: Researchers at the University of Toronto have found that after playing action video games, even for brief periods, people experience changes in their brain activity and improved visual attention. The results arose from brainwave tests on subjects who had never played video games before.

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Mexico City offers free WiFi in exchange for doggie-doo disposal

By Jason Kirby - Monday, May 7, 2012 at 10:23 AM - 0 Comments

Mayu ;P/Flickr

It can be a challenge to get dog owners to pick up after their pets. So Mexican Internet firm Terra and ad agency DDB Mexico are using a reward system—free Internet access in exchange for properly disposing of doggy doo. Under the initiative, 10 Mexico City public parks have been outfitted with special dog-poo receptacles that also broadcast wireless Internet signals. Each time someone drops a bag of waste in the bin, it begins transmitting a WiFi signal to everyone in the park for several minutes. In an amusing online ad for the program, a dog owner shakes his dog’s rear end. “I need to send an email,” he says. As the marketing blog Creativity notes: “In an age when people are probably more interested in staring at their smartphone than watching what their dog is doing, this is a smart idea.”

The companies acknowledge the WiFi signal can be triggered by dumping any garbage into the bin, but they note that doing so still helps clean up the parks.

IKEA introduces the Uppleva entertainment system

By Jason Kirby - Thursday, May 3, 2012 at 10:07 AM - 0 Comments

It used to be that when Ikea adorned the display furniture in its showrooms with TVs and stereos, the company used hollow plastic props. How times, and cheap electronic components, change. Ikea has unveiled the latest product coming to its showrooms—furniture with the TVs and stereos built right in.

The pitch from the Swedish home furnishing giant is simple—already cramped living rooms are choked with wires and cables criss-crossing the walls and floors. The solution, says Ikea, is the Uppleva, an integrated unit complete with LED TV, sound system, wireless bass speakers and CD, DVD and Blu-Ray players, all internet-ready, at a price of around $960.

To be sure, this isn’t a system for audiophiles. And many will bristle at memories of trying to assemble those book shelves in their first apartments. But the company is betting enough people are fed up with the clutter that they’ll take a look. Oh, and it comes in beech, white, black, green and purple.

Japan asks B.C. for help to identify debris

By Jason Kirby - Monday, March 19, 2012 at 2:47 AM - 0 Comments

Over the past few months, debris from Japan has been washing up on the shores near Tofino, B.C., sparking debate over whether the bottles, planks of wood and other items constitute regular ocean garbage or were swept out to sea amid last year’s massive earthquake and tsunami. But as the country slowly rebuilds from the disaster, which left thousands dead and missing, Japanese officials aren’t taking any chances, and have reached out to residents along Canada’s West Coast to keep an eye out for personal items that may wash ashore.

Japan’s consul-general Hideki Ito recently invited Bill Irving, mayor of Ucluelet, and Tofino Mayor Perry Schmunk to discuss what can be done if more sensitive items show up on the region’s beaches. “There’s a very real possibility that we’ll have some stuff come ashore here,” says Schmunk. “His message to us was that if we see something that has some personal connection to somebody back in Japan, they will make every effort to get it back to their people.”

It’s not clear yet exactly how the process of returning personal effects to Japan will work. Schmunk says there will be questions of identification, storage and transportation that need to be worked out. For its part, the province has agreed to establish a task force to deal with the tsunami debris, the bulk of which is expected to begin arriving in 2013.

Schmunk says that in his talks with the Japanese, it became clear they see the return of any personal items as key to the long healing process the country has undertaken. “It’s not just about ad hoc litter that made it into the water,” says Schmunk. “[The consul-general] stressed that, all things considered, Japan is recovering quite quickly, but the emotional scars are still deep, and the connection to this material is of great importance to them.”

The “North Vancouver Tree Massacre”

By Jason Kirby - Tuesday, March 6, 2012 at 8:40 AM - 0 Comments

Chris Cheadle/Corbis

People in B.C.’s Lower Mainland take their trees seriously. When officials prepared to cut down a single hollow stump in Stanley Park a few years ago, residents raised $100,000 to reinforce it with metal. That arboreal obsession also explains the latest outrage to grip the city: someone took a chainsaw to a swath of trees in a wealthy mountainside enclave of North Vancouver because, it seems, the cedars were obstructing their view of the ocean.

Dubbed the “North Vancouver Tree Massacre” by one local TV station, and making the front pages of the local press, the incident saw roughly 35 trees felled, some of them second-growth cedars up to 60 years old. The trees were located in Capilano Park, and the cleanup costs are likely to hit $50,000 for the city. The RCMP is investigating, and the culprit, believed to be a resident in the neighbourhood where homes regularly fetch upwards of $2 million, will undoubtedly face steep fines.

That punishment may turn out to be nothing compared to the wrath of Vancouverites. In a region where homeowners are barred from removing trees from their own property, let alone public parks, those who engage in arboricide typically endure harsh public humiliation. Last year, Ratana and Arran Stephens, owners of Nature’s Path organic cereal, were pilloried when it was discovered they’d cut down several trees on their own property without a permit. Five years earlier, a 72-year-old woman who poisoned trees to get a better view of the ocean had to sell her home because of the backlash—some people threw eggs and dog feces at her house. Whoever cut down the trees in North Vancouver is likely to realize that some views, no matter how grand, just aren’t worth it.

Heroes: the Fukushima 50

By Jason Kirby - Tuesday, December 6, 2011 at 6:00 AM - 0 Comments

Nuclean AND/EPA/Keystone Press

In an age of 24/7 cable channels, news sites, blogs and Twitter feeds, it’s not unusual for the attention of great swaths of humanity to turn to the plight of a small number of souls, such as trapped miners or the survivors of mass shootings. When a 9.0-magnitude earthquake rocked Japan’s east coast on March 11, and a towering tsunami devastated the Fukushima Daiichi nuclear power plant, however, the world watched in horror, and with hope, as a small army of workers fought to prevent the plant’s nuclear reactors from melting down and filling the skies with deadly radiation. Rarely before did so many feel they had so much at stake in the success of so few.

They became known as the Fukushima 50, a nameless, faceless last line of defence against a full-blown nuclear catastrophe. They stayed behind when, four days after the earthquake and tsunami happened, spiking radiation levels forced the evacuation of 700 employees of the Tokyo Electric Power Company (TEPCO), which owned and operated the plant. That skeleton crew struggled to pump water into the reactors to keep them from overheating.

It was brutal work, and the threat of radiation poisoning was constant. A series of hydrogen gas explosions destroyed reactor containment buildings, sending 11 workers to hospital. Throughout the ordeal, workers were also constantly buffeted by aftershocks and the threat of yet another destructive wave washing through the power plant.

CLICK HERE TO READ ABOUT MACLEANS’ OTHER NEWSMAKERS OF 2011

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How unemployment is tearing America apart

By Jason Kirby - Wednesday, November 30, 2011 at 3:00 PM - 16 Comments

Shannon Stapleton/Reuters

Eight months ago, Deborah Burnley, an administrative assistant in Baltimore, suddenly found herself among America’s growing army of unemployed. Losing her job at a cash-strapped non-profit was a demoralizing and debilitating experience, she says, and to keep her spirits from crashing she’s sought solace in, of all things, the bleak arithmetic of her job hunt: 226 positions applied for, six temp agencies engaged, and countless miles travelled across the region for interviews. “I try to think of it as a numbers game, that each day is basically one more step closer to being employed,” says Burnley, 52. In other words, if she applies for enough positions, and meets enough prospective employers, some day— eventually—she’s bound to find work. But even as she clings to that hope, Burnley acknowledges she and her husband, who also lost his job as a facilities manager six weeks ago, have depleted their savings and almost maxed out their credit cards. “It can be hard to see the light at the end of the tunnel.”

Two-and-a-half years after the Great Recession was deemed officially over, that light has never seemed dimmer for the close to 25 million Americans who are either out of work or underemployed today. Like a gaping wound at the heart of the economy, the U.S. job crisis has cast a vast swath of the population into a state of semi-permanent unemployment. At the same time, America’s housing market is in a shambles and poverty is on the rise. Even if economists weren’t already once again warning of another global recession, a realization is slowly setting in: the United States is suffering from an outright economic depression, and it threatens to leave a deep scar on the American psyche for decades to come. As Robert Reich, a professor of public policy at the University of California at Berkeley and a former secretary of labour, put it recently: “America’s ongoing jobs depression, which is what it deserves to be called, is the worst economic calamity to hit this nation since the Great Depression.”

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Econowatch: November 2011

By Jason Kirby - Monday, November 7, 2011 at 9:30 AM - 1 Comment

“At least it’s heading in the right direction.” That was all the enthusiasm Ian Shepherdson of High Frequency Economics could muster when asked about the trajectory for the U.S. economy in the third quarter, when GDP rose at a rate of 2.5 per cent. If his observation was light on technical analysis, it nonetheless reflected the dim view many share about America’s prospects. The world has become resigned to the idea that the American economy is a stagnant, unstable mess.

It’s not hard to see why. The crisis in Europe threatens to push America, which is grappling with its own fiscal woes, back into recession. Consumer confidence has plunged off a cliff into a sea of despair. Meanwhile, unemployment remains shockingly high and house prices are stuck in the basement.

But as bad as all that is, glimmers of hope have once again begun to emerge. Against all odds, the leaders of France and Germany convinced European bankers to accept a 50 per cent loss on their loans to Greece as part of a massive restructuring deal to stave of a Greek default. The Obama administration also overhauled a program that allows American homeowners who are underwater on their mortgages to refinance at lower rates, a move which some analysts said could put a floor under the housing market. And when the latest U.S. GDP figures, modest as they were, beat expectations and showed that consumers were still willing to open their wallets, investors sent markets soaring.

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And I was “irresponsible” and “misinformed” how?

By Jason Kirby - Friday, September 30, 2011 at 4:24 PM - 11 Comments

In attacking my recent story What’s the Use of Saving Money? as “irresponsible” and “misinformed,” I’m not entirely sure Peter Aceto, the CEO of ING Direct Canada, read beyond the headline. If he did, he’d know it wasn’t a piece that “discourages Canadians from using savings accounts.”  Quite the opposite. While bemoaning and exploring the demise of the saving culture in this country, our story argued that around the world people are being discouraged from putting away their pennies by ultra-low interest rates and government programs that promote spending (Cash for clunkers, home reno rebates etc).

I won’t go over the content of the original story. I’m confident readers understood it simply aimed to give a voice to the frugal few and their frustration that low rates subsidize borrowers while hurting savers.

The main thrust of Mr. Aceto’s indignant letter is that Canadians who don’t want to buy a house or invest in the stock market have a choice—they can open an ING Direct savings account. It’s true that until ING came along, there were few options for Canadians to earn decent guaranteed rate on their deposits. ING popularized at least the idea of saving with that Dutch bloke and his accented “Save your money” catchphrase. ING pays 1.5 per cent with its standard high-interest savings account. Ally Financial, which in a past life was the financing arm of General Motors until a bailout came and washed away all its problems, offers 2 percent to its clients. (You can earn more with both if you put the money into longer-term GICs.—five-year GICs pay 2.5 per cent at ING and 2.75 per cent at Ally.)

That’s great, but in the year since ING raised its savings rate from 1.3 per cent to 1.5 per cent, there have been seven months where year-over-year increases in the Bank of Canada’s core consumer price index exceeded that rate. The core rate also excludes eight of the most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies). Excluding those items helps the Bank better determine the long term trend of inflation, but they’re still products Canadians buy and must pay more for. Much more in some cases. According to Statistics Canada, in August food prices were up 4.4 per cent.

Contrary to what Mr. Aceto claims, I didn’t say Canadians should be investing rather than saving. I made no suggestions whatsoever for what Canadians should do with their money, because there is no easy answer. The housing market looks like it’s in a bubble, the stock market is terrifyingly volatile, and savings accounts are not keeping pace with inflation. That’s just the sad reality for savers today. And it’s why many more savers are likely to throw up their hands and ask “What’s the point?” For the record, and for Mr. Aceto, I believe that’s a bad thing.

Here are some more thoughts on the topic from south of the border. Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, is retiring tomorrow and takes a parting shot at ultra-low interest rates:

“What you do when you artificially hold rates down is ask the savers to subsidize the debtors. In an emergency and a crisis that is justifiable, perhaps,” he said.

But to do it repeatedly and indefinitely risks distortions in the market and creating unintended consequences and eventually inflation, he warns.

“It would be better if we were not as accommodative so the market could function and send out proper signals,” Hoenig said. “I think interest rates would be low. I just don’t know how low.”

Before I finish I want to also take an opportunity to thank Garth Turner, the former MP and financial commentator for his help rustling up folks for us to talk to for our original story. After I asked Garth if he knew anyone who felt like a chump for being prudent in the face of all the incentives to borrow and spend, he put out the call on his popular www.greaterfool.ca site and sent me dozens of emails from people who responded to his message. The request clearly hit a nerve.

What’s the use of saving money?

By Jason Kirby and Chris Sorensen - Tuesday, September 27, 2011 at 9:30 AM - 40 Comments

Getty Images; Photo Illustration by Taylor Shute

Steven Patterson and his family moved to Vancouver from Cambridge, Ont., in mid-2008, just as the financial crisis hit. After years of scrimping and saving to pay off their first mortgage, they had earned a tidy profit when they sold the Cambridge house and put the proceeds into GICs, where the money would be safe and easily accessible should they decide to buy another home in B.C. Three years later, Patterson, a 42-year-old IT manager, is still sitting on the sidelines, renting, while real estate prices march ever upward in a city where a three-bedroom bungalow covered in warped siding can fetch $1 million.

That might seem like a prudent move in an uncertain economy, but Patterson says his cautious approach has come at a steep price: all his money is steadily being eaten away by inflation, which the meagre interest income from his GICs can’t cover—particularly after the taxman takes a cut. Meanwhile, several of Patterson’s friends have taken advantage of those same low interest rates, loaded up on debt, and bought into Vancouver’s frothy housing market in recent years. And they have enjoyed a windfall—at least on paper—as the value of their homes continues to climb. As for Patterson, “I’m only a few thousand dollars ahead—minus inflation,” he says, clearly frustrated. “So actually, I’m way behind, and I don’t have a house.”

Welcome to the world of ultra-low interest rates, where profligacy is richly rewarded and saving is, well, for suckers. Those who’ve opted to be austere with their personal finances have found themselves on the losing end as governments and central bankers have worked to get people to borrow and spend in the wake of the global recession. While emergency interest rate cuts were to be expected after the financial crisis seized up lending markets, it’s been nearly four years since central banks started slashing rates to the lowest levels in history. For that matter, over the last 10-year period, following the 9/11 terrorist attacks, the Bank of Canada’s benchmark interest rate stayed above four per cent for just six quarters (in 2006 and 2007), while the average headline rate of inflation over that time was 2.1 per cent.

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Is America in a depression?

By Jason Kirby - Wednesday, September 21, 2011 at 6:20 AM - 12 Comments

Shannon Stapleton/Reuters

Everywhere Darren Enns looks these days he sees the devastation wrought by America’s grinding employment crisis. As the treasurer of a construction union in southern Nevada, the state with the highest unemployment in the country, Enns has watched as friends and colleagues—the bricklayers, electricians and drywallers who thrived during Las Vegas’s housing boom—struggle to move on to other careers. Few succeed. Many have simply given up hope. “When you look at the unemployment rate during the Great Depression, we’re beyond that in the construction industry here in Las Vegas,” he says. “We’ve got close to 70 per cent unemployment, so for us, the economy is extremely depressed.”

When the financial crisis tipped America into a deep recession in 2007, it was tempting to draw comparisons to the Great Depression of the 1930s. Those fears subsided once the stock market pulled out of its nosedive and America’s economy began to grow again, albeit at a crawl. It was a brief respite. Four years later, American towns and cities remain overrun with millions of unemployed workers even as the economy risks slipping back into reverse. It raises the question whether the U.S. ever really emerged from recession in the first place. Instead, some are suggesting those early fears may have been justified after all: the United States appears to be in the throes of an outright jobs depression.

Earlier this month, Robert Reich, a professor of public policy at Berkeley and the secretary of labour in the Clinton administration, said the current crisis is an extension of the “depression” that began in December 2007. Meanwhile, Richard Posner, a high-profile judge in the United States Seventh Circuit Court of Appeals and regular political and economic commentator, said it’s time for America to give up any false hopes that the economy is on a path to recovery. “If we were being honest with ourselves, we would call this a depression,” he wrote in the New Republic. “That would certainly better convey both the severity of our problems, and the fact that those problems have no evident solutions.”

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Fine-feathered frauds

By Jason Kirby - Thursday, September 15, 2011 at 11:20 AM - 3 Comments

Kaine Doen/Laif/Redux

In the animal world, the closest thing to gold may be the fluffy underfeathers of the eider duck. The down, which female eiders pluck from their breasts to line their nests, is typically only found in parts of Iceland, Greenland and islands in the St. Lawrence River, and its warmth, softness and rarity make it a coveted filling for duvets—so much so that it costs $1,000 per pound. It’s why, after showing off a clump of eiderdown, Michael de la Place, president of industry group Downmark, gingerly plucks tiny plumules from the air before they float away. And it shows what’s at stake as companies in Canada’s close-knit down industry fight an onslaught of fakes and knock-offs flooding retail stores.

Down, the layer of fine feathers next to a bird’s skin, is nature’s most efficient insulator. It’s also expensive, with duck and goose down duvets, pillows and coats running from several hundred dollars up to more than $5,000. Money like that has spurred Chinese manufacturers to crank out cheap copies filled with low-grade materials. And while fake down goods make up a tiny fraction of the multi-billion-dollar market for knock-offs, the experience of those in Canada’s down industry shows how hard it is to battle the onslaught of cheap fakes. “The fraud against consumers that’s going on is mind-blowing,” says De la Place.

Last year, Canada Goose, famous for its winter coats, went on the offensive against fakes. Its jackets sell for $500 and up, but the company said a plague of knock-offs—stuffed with “feather mulch”—selling for under $100 has seriously cut into its business.

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Really bad investment advice

By Jason Kirby - Tuesday, September 13, 2011 at 10:35 AM - 5 Comments

These days, Richard Kelertas, a financial analyst at Dundee Securities, isn’t saying much about Sino-Forest, the beleaguered Chinese forestry company at the centre of a fraud investigation by regulators. “I’m not speaking with the press or anyone, unfortunately,” he says. That is unfortunate, because a lot of investors who followed Kelertas’s advice to buy Sino-Forest’s shares—either before the company got into trouble, when he insisted Sino-Forest was a “class act in timberland management in China,” or after, when he called the fraud allegations a “pile of crap”—no doubt have a few choice words for him.

The Sino-Forest debacle has the potential to be the biggest stock market scandal to hit Canada since the Bre-X gold-mining fraud in the mid-1990s. Until June, Sino-Forest was the most valuable forestry company on the Toronto Stock Exchange, with a market capitalization of $6 billion. Then Muddy Waters Research, a U.S. investment firm, issued a damning report that claimed Sino-Forest “massively exaggerated its assets” and is nothing more than a Ponzi scheme. Muddy Waters said it was short selling Sino-Forest, or betting that the company’s share price would plunge. It did. By the time the Ontario Securities Commission suspended trading in the stock on Aug. 26 and raised its own concerns about fraud, Sino-Forest had shed three-quarters of its value.

At this point none of the allegations have been proven. The OSC’s accusations of fraud at the company could ultimately prove unfounded. This still may turn out not to be “Tree-X.” Even so, investors would be right to wonder why a company with the potential to completely collapse on the basis of a single critical report was regarded so highly by analysts in the first place. Kelertas wasn’t alone in his effusive praise of the company in recent years. Of the 10 analysts covering Sino-Forest before the Muddy Waters report hit the street, nine rated the stock a “buy” or “outperform,” while just one considered it a “hold,” according to Reuters.

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Can the EU be saved?

By Jason Kirby and Michael Petrou - Friday, August 19, 2011 at 8:00 AM - 16 Comments

Reuters/Yiorgos Karahalis

Until recently, the tiny German town of Guben was best known—to those who knew it at all—for two things. With only the narrow Neisse river separating it from the Polish town of Gubin, it is one of few place where Germans and Poles live so close together. That, and Guben is also where the controversial anatomist Gunther von Hagens, famous for his museum displays of skinless human cadavers seated at poker tables, set up a factory six years ago to treat and preserve corpses.

Now Guben’s mayor, Klaus-Dieter Hübner, has set off alarm bells in Europe by calling for border controls to be put in place to stop Polish “criminals” from looting German businesses. Since 2007, when Poland joined the Schengen zone, a border-free travel area consisting of 25 European countries, Germans and Poles have freely criss-crossed into each other’s countries to shop, dine and work. With his call for security checks at the border, Hübner has challenged one of the pillars of modern Europe: the free movement of people and goods between nations.

Taken on its own, the border squabble in Guben is a seemingly minor concern, but it comes as the twin forces of economic stagnation and surging nationalism threaten to tear Europe apart. Even as European leaders struggle to halt the spread of the debt crisis—a task that they increasingly appear unable to handle—a wider backlash against European integration poses an existential crisis for the continent. Europe is failing, both economically and politically, leading to the question: can it be saved, or is Europe destined for the embalming slab in Guben?

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This may get ugly

By Jason Kirby and Chris Sorensen - Monday, August 15, 2011 at 10:00 AM - 16 Comments

Take all the time you want . . .

By Jason Kirby - Thursday, August 11, 2011 at 12:00 PM - 1 Comment

Jamie Grill/Getty Images

For tired, overworked employees, it sounds like a dream come true: a job that offers the potential for unrestricted holidays. Forget the era of saving up precious vacation days. Instead, a growing number of companies now offer unlimited time off for their employees. But as the trend catches on, workplace psychologists warn unlimited vacations may not be the unbounded perk they seem.

Over the past few years, more and more companies have cast off the traditional rules surrounding paid leave. That’s partly because the lines between work and personal time have blurred, thanks to mobile computing and other technologies, making it harder for companies to keep track of exactly when and where someone is working. So rather than spell out rigid limits for holidays, the companies are allowing workers themselves to decide how much time to take off, on the condition that employees excel when they’re on the job and meet deadlines. The practice dates back to the 1990s, but gained fame in the last decade when Netflix adopted it. Since then, many smaller social networking companies, as well as law firms and consultancies in the U.S. and U.K., have followed suit, though so far Canadian companies have eschewed the perk.

No doubt workers who have already used up their vacation time and face another five long months before the end of the year are envious, but the unlimited vacation has its drawbacks, say experts. It’s supposed to boost employee morale, but there are concerns it could have the opposite effect. In a new legal paper written for the digital journal Bloomberg Law, Daniel McCoy and Dan Ko Obuhanych of the Silicon Valley law firm Fenwick & West warn that unrestricted time off can actually hurt employee spirits. “Some employees may believe that an unlimited vacation policy is akin to a ‘no vacation’ policy, particularly if the company has a workaholic culture where taking time off is discouraged,” they wrote. “Employees may feel a responsibility to limit the amount of vacation time taken, to fit in with their co-workers and the corporate culture.”

So a novel perk doesn’t always translate into reality. “It can be a good policy on paper, but you have to look at how it’s put into practice,” says Merv Gilbert, an organizational health psychologist in Vancouver. “There can be an implicit expectation that a company has this policy on paper, but it really doesn’t want you to use it.”

While most managers are no doubt wary of offering unrestricted time off out of fear that workers will disappear for months at a time, some experts believe that with open-ended vacations, many workers could end up taking even less time off than they otherwise would. When a company has a set vacation policy, an employee knows exactly how much time off his or her colleagues are permitted to take. In the absence of structured holidays, a race to the bottom may ensue as the realization sets in that the overachiever in the next cubicle hasn’t missed a day of work.

Those types of gnawing mind games are made worse when the job market is in the dumps, as it is in the U.S. All but the most self-assured workers may feel pressure to limit their holidays in order to keep their jobs. “In tough economic times there may be a belief that if I want to get ahead or stay with this company, I’d better not act on [the unlimited vacation offer],” says Gilbert.

Of course, that’s already a problem even when companies do have strict vacation rules. Research has shown that many employees already forego a chunk of their allotted time off. A study by Ipsos-Reid in 2008 determined that Canadian workers neglect to take the equivalent of 41 million vacation days a year that they’re owed. For these workers it’s the equivalent of giving $6.3 billion back to their employers, which is the amount lost in unclaimed paid holidays. Workaholics are the worst at taking time off, says Dr. Barbara Killinger, a psychologist specializing in work addiction. “[Workaholics] see themselves through others’ eyes, so if they are away for long, they worry people won’t see them as hard workers,” she says. In a company with no set rules for vacations, workaholics, who make up 30 to 35 per cent of the North American workforce, are more likely to succumb to their paranoia and may in fact take even less time off. Killinger says unlimited holidays may also be a way for companies to save money, since they would not have to pay out for unused vacation time.

Experts stop short of saying the unlimited vacation perk is an attempt at reverse psychology, but few bosses are likely to be upset if their underlings opt to put in more time at work as a result.